Bid Corporation Limited (BID) Earnings Call Transcript & Summary

[Audio Gap] Management under Bernard and David. Dave's leadership have done a phenomenal job navigating the organization through a difficult few years, enabling Bidcorp to take advantage of the opportunities out there to deliver these excellent results. I take this opportunity in front of many of our stakeholders to congratulate and thank Bernard and Dave, and the management teams from all over the world, for this great achievement. I would also like to thank our nonexecutive directors for the role they play in enabling the organization to remain entrepreneurial and living its culture and values. I specifically thank Helen Wiseman, who chairs the Audit and Risk Committee; Tasneem Abdool Samad, who chairs the Social and Ethics Committee; Paul Baloyi, who chairs the Acquisition Committee; and Nigel Payne, who's the Senior Independent Director and chairs Remco. Also thank you to Keneilwe Moloko, who joined our Board in the not -- in the recent past. And Cliff Rosenberg for their continuous dedication and support. And last but not least, I'd like to thank our founder, Brian Joffe, who laid foundations -- the foundations and defined and developed a culture that enables Bidcorp to grow and develop and prosper. He continues to question and challenges in meetings, keeping all of us on our toes. I'm now going to hand over to Bernard to take you through the final details of the results, followed by Dave. Thank you very much for attending.

Thank you, Stephen, and hello, everybody. It really is a pleasure to talk to you all today, and to put some color to these results and to talk about, more importantly, what we see the future looking like. Before going on, there are just a few more thank yous. So firstly, to Stephen for his continued guidance and support and leadership of the Board and chairmanship. It very is much appreciated. And I think most importantly, my thanks go to our team, our senior team, our management team around the world, as well as all 28,000 people in 35 countries who make this all happen. It might look simple when you look at it on a few pieces of paper and a few Power Points slides, but there's a lot of stuff that happens in the background. I'd also just like to thank all those people involved with actually getting these numbers out as quick as they do, and the qualities that they do. And I'm sure David will thank people in more detail when he gets to talk. So you all know, hopefully you know who Bidcorp, which is a great thing, or else you're probably in the wrong meeting. So let's just go straight ahead and understand what happened last year. And like I said, I don't want to dwell too much on last year, that was 2 months ago. We're already nearly 20% into next year. But to understand the future, sometimes you need to understand what happened in the past. The numbers for last year are, in my opinion, truly spectacular and are a testament to the management teams and the culture with which we run our business. So they weren't an accident. They weren't just a lucky victim of circumstance. Obviously, conditions were favorable for us. But I think the structure and the strategy that we've adopted for many years and haven't really strayed very far away from, other than to refine the strategy, has put us in a very strong position. But when conditions did change after the few dark years of COVID and we started seeing the bounce back, our teams around the world, our people, were able to quickly adapt to new circumstances. And we're able to in very difficult -- under very difficult conditions and circumstances, we're able to suddenly change from a business that was struggling with low volume and low consumer activity, for no reasons other than COVID, to suddenly a consumer out there that was spending a lot of money and was out for vengeance to make up for the last few years of COVID. So I think these results are very, very strong on a number of levels. Most importantly, I think we need to look at our peer competitor activity, wherever possible. And there's no doubt that many of our peers have done reasonably well. I'm sure you analysts out there will know more about that than I do. But certainly, the impression we are getting from our suppliers, from our customers more importantly, is that we are gaining market share, but we did seem to be a little bit more nimble out the blocks than a lot of our competitors, that we had less repairing to do after COVID. We had left the muscle intact, the business was in good shape and was able to continue on the trajectory from 2019, 2020. When we look at the comparative of FY '22. There were 2 halves to FY '22. The first half from July '21 to December '21 was significantly COVID impacted. And the second 6 months of '22, I'm talking -- so from January '22 to June '22, were not COVID impacted, and we started seeing the recovery happening in about February and March of 2022. So clearly, this year, is also a story of 2 halves. The first half of the year, we were cycling through the COVID impact of the year before. The second half of the year, we were cycling against a strong recovery in the previous year. And that sort of mirrors in the results we've achieved, which is a much stronger percentage performance in the first 6 months compared to the second 6 months, which is a normalization of activity out there in the marketplace. So what we are seeing, and we have seen it for many months, and we've spoken about this before, I spoke about it in February, I spoke about it in early June, is we are over a year through this recovery now and we are seeing a normalization back to reasonable levels of activity. So we had a very, very strong bounce back when borders reopened, international travel started happening again, people could move around, businesses got back to work and things just got back to a reasonable level of normality. Then we were hit with this inflationary environment from about March of last year. And now what we're seeing is a normalization. And I'm picking my words very carefully because I don't want to -- I don't want to create the wrong impression. I don't want to create a negative impression. All we're seeing is that the absolute strength and frothiness of the -- of maybe a year ago is more normalized now. And that's more a market that's easier to understand and to rationalize. So David will take you through the financial components of FY '23. We've given you a whole lot of detail in the back by division. But suffice to say, the numbers are very, very strong on all levels. Revenue growth is strong. Margins -- gross margins held up. Expense control was particularly good. Cash flow generation was exceptionally good. We continue to invest for future growth, both in capital investments and acquisitions of new businesses. We bought 9 bolt-on businesses. And interestingly, since 2016, we've bought 70 bolt-on businesses, which obviously all continue to building the foundation, the large structure that we have that enables future growth. These acquisitions are all small individually, but add to that, there's a whole lot of compound benefits that you get from them. So that's definitely a strategy that is paying more for us. Obviously, we never got everything right in the year. I think you have to be a pretty brave person to say that everything went right. And obviously, we made 1 or 2 missteps, which is totally understandable in a portfolio type of business like we have, 21 operating businesses across 35 countries. But in all our businesses, we still see upside potential, opportunity and a positive runway. Some of them will take a little bit longer, some of them might be a little bit of frustrating. But in every market we operate in, we see the opportunity to expand our share influence and to continue growth. Obviously, in some markets, we have more markets shared than in others. We are more mature on the spectrum of growth rates will, of necessity, be more moderated. But we are confident that we're operating in environments around the world where we can continue to see sustained growth. So that was last year, the record -- the results are at a record level in absolute numbers in, in ratio numbers, whichever way you want to look at them. They really are a very solid, strong set of results. And maybe what I can do is very, very briefly talk about the segments because they are different in their nature. And I'm going to talk about the past. I'm going to talk about the future as well at the same time. So if we start off in the U.K., and I'm actually in London at the moment. I think the U.K. is -- which probably, in terms of the developed economies that we operate in, the U.K. has had a very challenging economic time with a lot of political economic volatility across the living crisis, the political crisis, lots of other things. And under the circumstances, I think our business has performed particularly well. And I'm sure I'm going to get lots of questions asking why the margins in the U.K. are lower than the rest of the world and when do we expect them to be at a different level. Each country is different, and each of our businesses operate in a slightly different manner. In the U.K., we have a particularly strong position in the national account, in the larger account space, that's historical. And I think it's also a factor of the structure of the market in the U.K. And we've taken some very good market share. We've seen some very strong revenue growth. Unfortunately, our margin growth has lagged in some of that revenue growth, which we will anticipate there will be a rebalancing of that in times to come. And it's probably our cost base has been quite difficult to control -- not to control, but to moderate in the U.K. They face particular cost pressures which might be a little bit more severe than in other markets. We're very comfortable with where our U.K. business is. We've redefined the business over a few years into 3 divisions. We've got the wholesale business, which is the bulk of the business, the traditional business. We've got the fresh business, which is the traditional seafood business coupled with meat as well. And then we've got the cater food group, which is businesses targeted towards the independent free trade HoReCa market, which is doing particularly nicely in this environment. The U.K. at the moment, I think, is going through reasonably challenging times. Summer in the U.K. wasn't great, because the richest summer for however long and the cruelest summer for however long. So the summer season wasn't particularly fantastic. These things happen. We can't control the weather. But volumes are holding up relatively strongly and the future in the U.K., in our mind, is not diminished and we're still confident that we can increase the operating margin in the U.K. Maybe in the short term, they're not going to get to some of the others, let's be pragmatic. Structurally, there are some differences in the market. But there is some upside still in the U.K. market. And we will see the benefit of the volume gains that they have picked up over the last year coming through in the next year or 2 as they get down. So we're very comfortable and content with where we are in the U.K. Europe has had a phenomenal year. I think they were particularly -- a particular beneficiary of global travel opening up and the pent-up demand going through the roof. We saw a strong summer season last year, which was July, August, September 2022. Volumes held up for the rest of the year. In almost -- in fact, in every geography we operate in Europe, we achieved very, very strong results. Our Dutch business and our Belgium business are now approaching levels of operating profit that we thought they were capable of. So those teams have done a phenomenal job getting those businesses in a very short period of time up to optimal levels. The Czech Slovakian business continues to perform very, very well. We do have a greenfield business in Hungary that we've opened. It's about 2 years old now, and it's actually profitable already, operating out of the Czech engine, and we will do something more local in Hungary, but we have built the foundation now that will enable us to roll that business out. The Polish business continues to go from strength to strength. And It's a remarkable story. It's one of those textbook case studies. From a business that was loss-making 10, 11 years ago, the business is now sustainably profitable at very acceptable margins, with a whole lot of growth still embedded in that business and very well structured for the future. The Italian business, once again, has had a great time. There's no doubt that tourism has boosted that. But it's not just about tourism, it's obviously a whole lot of factors, but tourism is one. Operating margins are absolutely back to where they were pre-pandemic. We have some capacity issues, and we'll be investing in more -- we are currently investing in further capacity to fuel that growth. Yes, I think -- when we bought that business in 2016, it was doing about EUR 250 million. They are almost at EUR 1 billion of revenue now. So we see phenomenal growth in that business over the last period. The Baltics doing absolutely perfectly. We made a reasonably sizable, for them, both on acquisition in Estonia, which is working well. And we'll have a nice -- we have got a nice business in that part of the world now. Spain, we've seen good progress. We have a refreshed management team to take that business forward. Profitable, it's profitable at reasonable levels. Obviously, we scaled the size of the business back, but the profitability is now doing well. Portugal remains a great opportunity for us to scale up and we've got some construction in progress as well as some acquisitions. And Germany, whilst not causing us any real problems, it's a profitable business now, gives us the opportunity of where we go from here. Now once again, I'm sure I'll get asked the question when are you going to do something in Germany, so I'll cut that one at the past. We'll do that when the time is right and the right opportunity arises, the right targets are available, and we certainly will endeavor to make the right decision and not a hasty decision. Emerging markets is a more interesting collection of businesses in terms of what's eclectic and operates across multiple parts of the world. South America is economically challenged for the last year or so. Notwithstanding that, Brazil, we're showing some real good opportunities and real growth coming out of that. Argentina, we're doing very, very well. And Chile, although we're growing our top line, we've had a few internal issues which are all part of the growing pains. Bearing in mind, once again, that is a greenfield operation that we only started maybe 10 years ago. So we built a business of significant scale that we now need to and we are building the back end to support this very strong growth that did happen. Australasia continued its phenomenal performance. Both Australia and New Zealand exited their largest customers in about October of 2022. They were QSR customers and both of them accounted for roughly 5% -- and is 5% to 7% of their revenue. And we can see that the impact on that has been positive. And as we predicted, it created the capacity to fill with the right volume, the right customers, where you can mutually benefit out of the relationship. So those businesses continue to do particularly well, good opportunities for growth. We are continuing to invest substantially in capacity for the forward look, and those businesses like I said, operating at world-class margins, which is reflective of the strategy of not only being a distributor, but being an integrated food business, where we are importing and we're manufacturing as well. So that's -- you've got the dynamic of those components working symbiotically to enable you to maximize the margin that you get, whilst offering customers great solutions and great value. Which I suppose brings me on to the next point, that we are seeing inflation taper off quite quickly now. And we are seeing consumers who might have been more accepting of price increases a year ago are now pushing back, and we're in a great position to offer them alternatives. Because of that house brand strategy, because of our manufacturing strategy, we were able to offer value propositions that keep us exceptionally competitive in the market and are a benefit to our customers. I don't want to talk about the economic outlook of the economies we operate, because I'm no economist. And I think there's a lot of negativity out there, and we're not really seeing that negativity portrayed in our volumes. Now obviously, it's more difficult than it was a year ago. I mean that's just obvious. And many economies are at very low levels of growth. They might even be in a recession. And then the circumstances are very different than they were a year ago. But we're still seeing growth in all -- I'm going to say, all -- in almost all markets that we operate in. Our revenue for July and August, we're still up somewhere between 12% and 15% on a currency -- on a constant-currency basis in that period. And when you look at inflation, you know that the base effect continued, and you can see inflations coming down quite dramatically. I think Australian inflation released today was 4.9% year-on-year. So the fact that we're getting double-digit growth, to me, tells me that our growth is in excess of inflation and there's real volume growth in the business as well. So where we are at the moment, we're very confident that we've got a great team of people in place. So generally, it's the same group of people that have been out there in -- with us for a long period of time, and the strategic building blocks are exactly we've spoken about for a few years with minor changes. And I think, possibly, that's the differentiating factor in our business, is that we spend more time focusing on what we can do for our customer and not looking at ourselves and restructuring our business and having to change what we're doing midstream. We've got a very coherent straightforward strategy. It's very simple. Our teams are fully committed to that. That's what we've been doing, it's what we continue to do. And clearly, it's given the correct results. Just on a couple of 1 or 2 negatives, I must -- just spoke about. Our China/Hong Kong business is going to possibly struggle a little bit because the -- and you read all about it. China didn't experience the bounce back that the rest of the world did when it came out of COVID. And in fact, China is in a little bit of an economic difficult situation. And not only did we not see consumer demand pick up when they released restrictions, we've actually seen a decline. So it is a challenging time in China. You've got deflation. We specialize in imported product, primarily out of Europe and Australia, New Zealand and America, where you've got product inflation, and the consumer who is not willing to accept inflationary increases. So that's a challenging environment. Once again, that will change. We've got a great infrastructure. We are in 27 different cities, notwithstanding the negative that our revenue is relatively flat year-on-year, which we think is a great outcome based on the doom and gloom that you do hear about in China. Hong Kong, obviously, is impacted by the Chinese slowdown to a degree. But Hong Kong is also impacted by the fact that you've got an outflow of Hong Kong people, on a temporary basis, and very few is coming back in. So they haven't achieved that balance yet of tourism flooding back to Hong Kong. And Hong Kong is very dependent on inbound tourism, inbound business, et cetera. So the Hong Kong business will also have a few tougher months. But once again, I don't want this back to be seen as a huge negative, it's just a reality. And these things always do change. We've got a great business, great brands, great people, great infrastructure, and we're doing very, very good volume. So, once it does turn, we'll be absolutely well poised to ride the wave once again. I think it would be remiss if I didn't talk a little bit about South Africa,seeing a lot of you are based out of South Africa. And phenomenally, our South African business had a record performance again last year. The food business, the food service business, in particular, had a great year as the recovery kicked in. The Crown business struggled a little bit with load shedding, and the fact that they were cycling through an incredibly strong year the year before. They were a beneficiary of COVID and sales to retailers, and they were paying the price for that last year. But to show record performance in South Africa off a record base the previous year in a tough environment, I think it's full [indiscernible] and credit to the team. I'd also like to pay special tribute to Klaas Havenga who is retiring in a few weeks' time. Klaas has been with us for 12 years and has been an integral part of our journey in South Africa as well as in the Middle East and Turkey. So we wish him all the best and lots of good health and happiness, and thank him for his great contribution to our group and the development of our business over the time. So I think I'm going to hand over to David, who can take you through the numbers in great detail. There is a Q&A facility. Submit your questions and we'll attempt to answer them once David has done his bit. So thank you, everybody.

Thanks, Bernard, and good afternoon to all. As Bernard indicated, it's only a pleasure to be able to talk about the numbers as we presented them, but really as a tribute to all the teams around the world. And I just especially like to make thanks to the finance teams and, obviously, the central finance team. The central corporate team that we've got is -- goes through quite a lot of help at this time of the year. Cognizant, obviously, the finance presentation is a bit backward-looking. But as Bernard said, you don't know where you're going to unless you know where you've come from. So let's just understand that. All the present -- all the numbers are presented in terms IFRS, as we understand it. Their policies are consistent, consistently applied, and there's nothing new that has popped out this year. All the information is online. So if you do need presentations and the like, you're welcome to pick it up from there. We just look at the highlights. And I think in a few words, it's exceptional, both in terms of earnings and cash flow, quality and quantum. So yes, we really can't say much more than that. Revenue was up 33% to nearly ZAR 200 billion. Gross margins were down a little bit, and I'll talk a little bit about that and what the drivers of that were. EBITDA margin of 6%. Trading margin of 5.4%. Headline earnings up 35% to ZAR 7 billion, and constant currency up 25%. And as we've indicated, there was some benefit from the rand, particularly into the second half. The numbers do have hyperinflationary accounting, and we've term normalized HEPS, and that really just takes out the effects of hyperinflation accounting in Turkey. And those, if you look at that on a normalized basis, that was 37% up. Working capital on a quarterly average to the year-end is at 7 days, favorable against the 2019 comparators of 13 days. I'll talk a little bit about that later. Cash flow was exceptional across the board, ZAR 13.2 billion, up 66% against F '22. And that's really reflected, I guess, in the free cash flow of ZAR 3.4 billion, which is significantly higher than the ZAR 1.5 billion of '22. But the auditor's sitting here [indiscernible], so I just want to note that have an unmodified audit opinion for Bidcorp, which is good. And the final dividend of ZAR 5 a share, which takes a total dividends for '23 to ZAR 9.40, up 34%. Absolutely in line with our cover. As Bernard indicated, real growth and market share gains through the business over and above the inflationary impacts. I mean we measure inflation, it's not an exact measure against the basket of goods that we sell, because they vary across the world. But I think that sort of came for the year at around 12%. So if you take that out of the constant-currency growth, you're seeing that almost 50% of the of the growth is coming out of market share gains and real volume growth. So very good results. Then that's really, I suppose, driven by the recovery that we've seen particularly in the discretionary spend sectors. As Bernard indicated, the quarterly sales into the first quarter of '24, about 15% ahead of comparative period, largely to the end of August and consistently above on a constant currency basis, ZAR 4 billion a week. Gross profit did come down a little bit compared to the prior period. There were some conscious and maybe not-so-conscious decisions. Some of the decisions were to sacrifice margin to maintain volumes. We did have pockets of overstocking, where we had to trade through those positions and that costs some of the businesses some margin. And as Bernard indicated, in the U.K., we do have a big proportion of national accounts exposure, which in a refreshing environment has been more difficult to pass through price increases, where -- other than in -- if you compared it to other businesses. We're expensively well managed. And if you look at the efficiencies in terms of cost increases versus revenue increases, there's still some sort of gap there. And that's just about, obviously, there have being massive cost pressures through the system. Trading profit of 38% to ZAR 10.5 billion, first time the group topped ZAR 10 billion, so good result. And I think notwithstanding the gross margin was a little bit under pressure, the trading margins came out higher and because we've got cost efficiencies through the businesses. So overall, very happy with the trading results. I guess the one area where we have seen quite a big increase in uptick is in the interest line. But that, I think, is very reflective of a number of things. Firstly, because of the activity levels. The amount of working capital through the year has been significantly upscaled. And we've invested quite a lot, as you can see through capital investments. Obviously, higher dividend payments as well. And I guess the big thing is really being the impact of interest -- in the interest rate environment around the world, which has ticked up over the last 18 months significantly. Capital items really are comprised of few -- a little bit of goodwill write-off in some businesses in Greater China. And headline earnings, up 35%. And I've spoken a little bit about the normalized, which takes out the impact of hyperinflation. The final dividend, as I said, basically largely in line with our policy of just over 2x covered in terms of normal HEPS. In terms of cash flows, cash generated from operations, both before working capital and after working capital were both impressive. Before working capital at 37%, and after working capital absorption, up 66%. So we're very happy with the performance of the businesses there. In terms of the working capital, we absorbed just under -- or just about ZAR 0.5 billion in this period versus ZAR 2 billion in the prior period. And as I said, the net working capital days on a quarterly basis. There's not a real right measure in terms of looking at days. This largely is a backward-looking measure. But I think on a quarterly basis, the businesses have done pretty well relative to activity levels. And that's compared to pre-COVID, which we assume is sort of 2019, where the levels were around 13 days. So the businesses are significantly more efficient relative to the pre-COVID levels. In terms of, I guess, our working capital, receivables provisioning is high in absolute terms, but not in relative percentage terms in terms of the book. I guess it is a little bit conservative, but I think realistic in terms of potentially what the outlook could be, assuming economics do get tighter. So we don't really have an issue with that. Inventory provisioning, likewise, very consistent with the prior year, although it is up on basically a high absolute inventory levels. And payable terms have normalized from the pandemic periods. They're still basically better than pre-COVID. But the nature of the business is incrementally changing. The businesses are doing more importing, so the payables nature will change incrementally over time. Because it's importing, we don't necessarily get the same credit terms that you do with buying locally. In terms of investing, as I said, quite a significant step-up. Largely because of 2 things. I think in terms of maintenance CapEx, that is up versus, I guess, what we look at the depreciation charge. And I think that's really reflective of the cost of new equipment versus old. And that, obviously, as we've indicated before, has stepped up significantly. We're investing significant amounts into new capacity. We have in the past year and we'll continue to do so as we go into F '24. It remains our intention to, where we can, own our properties. And 73% of our property portfolio is owned, and that's valued at over ZAR 18 billion in current terms. So investments and acquisitions, as Bernard indicated, we did 9 in the period. Very much in line with bolt-on inorganic growth, as we sit, across each business. And their contributions to revenue in absolute terms were pretty small, but over time, basically add to the growth algorithm of each of the businesses. And over a while, certainly aid -- expanding the footprint or the product range that we're selling. Net debt in rand terms is ZAR 2.1 billion. But I think if you look at it in a proper currency, basically flat with the prior year, and that really indicates that the cash flow through the business has been particularly strong. And with cash equivalents of ZAR 12.5 billion, significantly up on the prior period. Balance sheet remains strong. We're not going to really dwell too much here. I think just in looking at the balance sheet and looking at the individual components, one just needs to bear in mind that the closing rates '23 versus '22 were significantly higher. I think in sterling, it was about 20% up. So it's not all bad news. Really, it's just a reflection of the rand reporting. As you know, we did a refinancing exercise in February and March of this year. Accessed additional liquidity through the USPP market. Fixed rates of 4.6-odd percent for 5- and 7-year terms. Certainly, one interesting thing was anything that really changed from a year before that was the base rates that we were pricing over, the credit spread is for the quarter remained absolutely the same, notwithstanding the turmoil that the markets had seen over the prior year. Most of our debt now is turned out between 4, 5, 6 and 7 years. Around 83% of that is fixed. Largely at blended rates of around 2%, 2.8%, 2.9%. Significantly from a group perspective to be able to invest organically or inorganically, and we've got about ZAR 26 billion of headroom as we end the year. No change in risk management and solvency ratios and all those things are well within the group's covenants, and very, very low. In terms of guidance, as Bernard said, we're operating, I guess, in a more normalized world. But we certainly got the wherewithal -- financial wherewithal to deal with what comes down the track. As I indicated, group sales are tracking well into July and August. Despite, I guess, the poorer, wetter Northern Hemisphere summer, as we heard particularly in the U.K. through July and August. As I said, we've got the financial strength to the businesses' requirements and growth requirements. We expect to remain cash generative into the next year. Inflation is moderating. But as you know, the food inflation remains a little bit stickier than core inflation. We will expect with normalization of working capital absorption into the first half of the next year. And as I said, we are aiming further capital investments into facilities and depots in many parts of the world. Australasia, particularly New Zealand, the U.K., Europe and the emerging markets, South Africa and Malaysia, in particular. We think that the strength of the group remains a competitive advantage. And we're able to deploy. Relatively quickly, capital to take advantage of opportunities, and that's a great place to be in. ESG, the business has continued to invest into a lot of energy efficiency through new depots, refrigeration, vehicles and the like. And it's a big focus and absolutely will be taken on board by the businesses. No change to our philosophies of hedging and risk management, as I indicated. Obviously, I guess the very constant is volatility, not necessarily negative, but that's where the world, I guess, finds itself in. But our provisioning and look-forward absolutely is appropriate for potentially a tougher economic environment going forward. Currency volatility, absolutely we reported on rands. We tell you what the constant currency effects are, but currency volatility will have some impact into this year. Our investor base is stable. But I guess we have seen a little bit of risk of sentiment in emerging markets, but probably a little more particular in South Africa. Q1 is starting off as expected, and we are budgeting for real growth into the next financial year. So that's for me, and I hand back to Bernard and we can take Q&A.

Thanks, David. That was very comprehensive. I'm not sure if you did mention, I'm sure you did. But just to note that our tax rate going forward is higher, it is going to be -- we estimate about 26% compared to around about 24% historically. Primarily because of the increase in the corporate tax rates in the U.K. as well as the mix of the businesses that are contributing, we've seen very strong growth out of those that are possibly at a higher tax rate than others. So when you do your fancy spreadsheets, you absolutely need to plug in the fact that the tax rates are going to increase. Just a few other comments that I didn't speak about before. I'll keep it brief. We don't operate in isolation. Obviously, we operate in the economies we operate and the economic realities that they face. But one thing that we are comfortable with is our ability to adapt and react to circumstances as they change. And volatility, whilst it's difficult, presents opportunities. And sometimes you don't see those opportunities straight upfront. But if you've got a nimble enough team who understand that out of any circumstances, opportunity, I think you can benefit out of it in the medium term. So we are heading into a period -- we are in a period, probably, of lower growth, of inflation changing its nature and decelerating, of labor availability coming back into the market, of supply chains easing up, of higher interest rates. So there's a lot of dynamics that are very different to what they were a year ago. But a year ago, the dynamics were very different to what they were the year before. And I think as long as you're nimble, flexible and you have the right strategic objectives you can maximize your opportunity. And there's no doubt in my mind that our business, because of the people we have and the experience they have, the philosophy by which we run the business, will enable us to maximize our opportunity in the markets as they make themselves as they make yourself known. So once again, it's a big shout out to our teams around the world across all our businesses. They really have done a phenomenal job. They understand what we're about to outstand the culture. They drive their business at a local level on a global strategy. We have the absolute synergy of acting independently to local market conditions, but taking the learnings of other markets and understanding going on. And having the support of people in the same industry who can -- if you're willing to, you can actually learn very quickly as to what's right, what's wrong and what works or it doesn't work and change your core supportingly. So we remain very enthused about the future prospects. The medium-term certainly looks good. There's a lot of talk -- and you look at statistics mainly out of the U.S., where the out-of-home market growth is way outstripping that in retail. They're talking about it. We've mentioned this before, that eating out is no longer a discretionary spend, it's becoming a staple, a commodity type of spend. It's just what people do now. The changing demographics, the millennials and the Xs and Ys and Zs, they all look differently to the way, us, old boomers used to live. So the world is changing, and I think our business is fortunate in that in an industry with great prospects and growth dynamics. And our business is exceptionally well positioned to take advantage of those opportunities. And we'll carry on doing what we're doing. There's no huge change in our strategy. There's no huge need to change things and restructure and do things differently. Like I say, we're a really boring story, that somehow seems to deliver the results. And I was just flicking through the -- some of the supporting documentation that David put in here. And when you look at our HEPS when [indiscernible] in 2016 was almost exactly half of where we are. Now obviously, the rand has had a little bit to do with that, but I don't think the rand has [ halved ] in value over that period of time. So for our teams around the world to double the size of the HEPS of the business over that period of time, I think it's a true testament to them. I'm going to go through the questions that have been sent. I'll try and answer them as best we can. Some will get my typical response, which is we don't know. But let's go.

This is from an anonymous attendee. "Hi, please could you provide an idea of your medium-term growth algorithm? Is it fair to expect nominal GDP plus 1% or 2% top line growth for incremental margin expansion leading to high single-digit constant currency earnings growth as a space -- strong constant currency earnings growth as a base case?" On the conservative end, that's correct. We see that the out-of-home market will grow in excess of GDP growth, 5% or 2%. You've got GDP growth on top of that. You've got a bit of market share on top of that. You've got to put inflation on top of that. You've got some operational leverage and efficiency on top of that. So as long as the economies don't tank and we don't see consumer demand going back at a rate or not, that's more or less the algorithm. We're not as fancy as that. We don't have artificial intelligence. In fact, we don't have any real intelligence either. Like I said, we're just baked bean salesmen. But overall, that is the algorithm of the business, and I think that's what we've been doing over the years. It's from Paul Steegers, "What is the outlook for gross and trading margin in the current year given lower food inflation?" When you look at our gross margin, that actually hasn't moved that much over the years and it's pretty constant and moves by a couple of points of a percent, and we expect that to continue on average across all the businesses. Now obviously in some businesses, there's more of an impact than others. But fundamentally, we see those numbers as being sort of where they are and there's incremental gain to come out of that. And for many years, we operated in an exceptionally low to 0 food inflation environment and still managed to grow our operating margin on gross margin staying relatively similar. Now gross margins are also a factor of your customer mix. And on the other things you do like manufacture, house brand, et cetera. So it's not a simple answer that margins are only attributable to the price of product and inflation. There's other levers as well that have an impact. In the constant currency revenue growth of 23.5% in FY '23, how much was organic growth, i.e., excluding acquisition contribution? So of 23.5%, 22% was organic. So the acquisitions really didn't contribute a whole lot. And that's because they were relatively small in the scheme of things. That doesn't all happen on the 1st of July. They happen throughout the year, so you don't have a full year effect in either. But fundamentally, like we've said these acquisitions are small and in isolation, they don't shift the needle. But you add them all together, you aggregate them, you get the synergy out of them after a year or 2 or 3 or 4, and that's where you can see the leverage coming through. From Brent Madel, I hope I said that right. Margins increased in Australasia and Europe in the half food inflationary environment during FY '23. Could you provide margin guidance in these 2 regions if we shift into a deflationary environment? Look, I don't think we're going to deflation, I think we're going to disinflation. Whereby, we're just not going to see the rapid increases that we saw, but we -- I don't think the base is coming back to any significant amount. So I think the base price is higher, and that's where it's going to stay and it's going to inflate to that much lower rate than it happened before. So we don't see any reason to think that our margins are going to be under significant pressure as a result of the lower inflation. And to some degree, it actually makes it easier to manage the business in a lower inflationary environment. We've always said that a small amount of inflation is the sweet spot. Once you get to high inflation, it becomes difficult. And I should mention, what we are starting to see is a little bit of, how do I say it, almost irresponsible behavior from some of our competitors in some markets. Now I'm not going to give any detail. I'm not going into anything. Whereby, some of them are -- I think they missed out on this wave of the last year or so. And they're trying to play catch up and they're a little bit irresponsible in the way they're pricing some contracts going forward. We've always said that volume is only good if it's the correct volume at the correct price. It's not good to adding volume, if you can't [Audio Gap]

Bernard, you've gone on mute.

Sorry, from James Twyman. Could you give an estimate of CapEx in 2024 and maybe some examples of the capacity growth you are doing? This is a constant fight between David and myself. If he had his way, we'll be spending less than we do spend. But we've always guided that a 2% to 3% of revenue, bearing in mind revenues now at ZAR 200 billion, growing at 10% to 15%. So you can do the arithmetic on that and work out that we're going to spend ZAR 3 billion, ZAR 4 billion, ZAR 5 billion. Of which the bulk of it is in real estate, it's in infrastructure capacity to enable growth. And this is happening in all the markets where the opportunity arises for us to grow our footprint. And it's happening in Portugal. It's happening in Spain. It's happening in the Czech Republic, in Holland, in the U.K., in -- and I've got to miss out a few, In south Africa, we're investing in new depots. We remain confident that we can continue to grow our business. It's certainly happening in Australia. In New Zealand, we're opening new depots, new geographies. It's happening in Malaysia, where we see significant opportunity to grow from where we are at the moment. So we definitely are going to continue on this path. It is fundamentally an enabler of growth over the medium term. Might have a short-term impact, but it's got positive impact over the medium term, because if you don't have capacity, you're not going to grow. We believe we run the business relatively efficiently. And hence, we don't have a huge amount of capacity, of idle capacity. There's a little bit of surge capacity, but there isn't idle capacity of 20% or 30% in our infrastructure and infrastructure does take 2, 3, 4 years to bring online. It's not a quick act. What we also are going to see for the next year or 2 is still a catch-up of the coverage years on some motor vehicles and some MHE, materials handling equipment, where there were shortages. Because of trip shortages, we couldn't get new trucks. The fleet has aged. The fleet does need to be changed. And that's just the case of the manufacturers catching up with the backlog. And although you're spending the capital on that, there's absolutely a saving on the running cost. And the older fleet is costing us a lot of money. In off-road, in terms of cost of the fleet being off the road, not available for use, as well as maintenance costs. So that is going to happen for the next year or 2 while we still play a catch-up. Also let's bear in mind that we think our volume growth over the last year, which is absolute volume growth compared to 2019, is probably 10%, 15% higher and that needs capacity to handle. It needs things. Now here's a big question. Okay, sorry. I think I've answer this from Paul. What is your CapEx investment guidance for FY '24 and the next 3 years? How will this investment likely impact return on capital? Look, there's no doubt that as you put in this long-term capital investment, your returns might come down by a very, very small amount. But what we've actually seen is our returns going up, because the profit we've generated is greater than the cost of the capital of putting that in and the return has been quicker than maybe we anticipated. But you're buying 20-year assets, so you're not going to get the benefit in the first year. But we don't see any large dilutive impact on that. And David might want to talk to that a little bit later. So I just got to download the rest of these questions. Bear with me for 1 second. How does the company track and evaluate its progress in achieving its ESG objectives? Are there specific benchmarks or metrics that are monitored and reported on to measure the company's progress in this area? Absolutely. And there's a lot of opinions on ESG. There are a lot of experts out there. There's a lot of people who think they know the answers. There are a lot of different ways that you can measure. There's a lot of talk that goes on. But in reality, it's area that is rapidly changing, developing, becoming a little bit more refined and a little bit more different. A lot of people pay lip service to it. They say we'll be net zero by 2050, which, like I said before, we can say that as well. Because it won't be my problem. But we prefer to be real, realistic, honest, transparent and accountable. We set a target of 25% reduction on base emissions, I think it was in 2017, 2018, 25% reduction by 2025. And we are absolutely confident of achieving or overachieving on that objective. We do measure our Scope 1, Scope 2, Scope 2-Plus emissions. It's very difficult to measure Scope 3. We are starting to. Some of that is compulsion because of the geographies we operate in. Some of the geographies we operate in make it very complicated to measure it. Bearing in mind, we're across 35 countries. But ESG is absolutely an important part of how we operate, and we have made significant progress. And as I've said before, in Scope 1, Scope 2, there are 2 primary issues. Firstly, there's electricity consumption, because we do run large warehouses with large refrigeration plants. And we've made excellent progress in that in terms of adding sustainable, renewable energy, of solar generation where possible, but also sourcing green energy. And in Netherlands, for example, if we're not already, very soon, we will use 100% green energy. In New Zealand, for example, our energy is almost 100% green, and that's attributable to the country, where most of the power generation is green. Unfortunately, in some of the emerging markets, and I'll pick on South Africa, the electricity is exceptionally unclean and has a very high emission factor. And as long as we're running big warehouses in a place like South Africa, our emissions are going to be relatively high. And so that can only do a certain amount. So once again, we don't act in isolation and we have to, I guess, pressure authorities, governments whoever provides the electricity, to go down that sustainable green path as well. And we can participate in that as appropriate. From a vehicle point of view, it's been far more difficult to achieve huge savings. We run a large fleet of relatively heavy vehicles that do large distances that need to run refrigeration. And at this point in time, the electric vehicles aren't up to the job. That can handle some inner city deliveries in small vans. But certainly, the economics of the bulk of our distribution doesn't yet work. And there isn't a credible alternative to diesel at this point in time. And I'm sure there will be at some point. We haven't stopped trying. We're trying with biofuels. There is a trial that's going to commence relatively soon, I believe, with the hydrogen vehicle. We are trying various different solar vehicles. But to date, the results have been frustratingly disappointing. What is your vision and your strategy about the Vietnam country? Thank you very much for the question. It's a very, very small business for us. And it's one of those that we need to determine whether we can actually be a player of scale, and we'll go through that at the moment. Vietnam is a great -- it's a great country with a great future, I have no doubt. But it might be one of those that you've got to pay some school fees and make some investments. I'm not sure where we are in that. It's -- like I said, it's a very small investment at this stage, and we will make a decision in the next year or 2 of scaling up or going the alternative way. Are you comfortable with your impendent national mix in your different regions? Like I said, every country is different. The dynamics of the markets are different. Overall, we're comfortable because our results are great. So I'm not sure how we could say we're uncomfortable. Obviously, whatever we're doing has yielded the right result. But it's a dynamic issue that doesn't stay the same way. And sometimes you get nationals growing at a much more rapid rate. Sometimes you get independents growing at a higher rate. Sometimes you get independent taken over by nationals. Sometimes you get nationals slipping up and becoming independents. So it's something that you always need to have a look at. And there's a time and place for everything. The QSR business that we do have suits us at this point in time. But that's always up for assessment. It's just part of what we do going forward. What caused the drop in trading profit in the second half for emerging markets? I estimate around 10% year-on-year down in constant currency. I don't know if that's correct. I might get Charlie to check that. Because if we look at the year-on-year, I think what we had was South Africa was certainly up year-on-year in the second 6 months. South America would most probably be down because we had a poor performance of Chile in the second 6 months, which has probably dragged South America down. Singapore, Malaysia, I think, performed well. Hong Kong, China almost probably down year-on-year slightly. The Middle East is definitely down year-on-year, where we tracked through some very high results from the year before. If you recall, they had Expo 2020, which happened in 2022. Sorry, I'm getting confused with my years. I think it was '22, which we're now cycling through. So the emerging markets, like I said, was challenging. But therein is the opportunity for next year. So once you cycle through that, you get a kicker. Did you have any regions, businesses which you could flag that performed poorly in FY '23, that you would expect to turn around in FY '24? Look, the only softer performance that we have, and I don't want to use the word, the only real soft performances that we had in the year were probably Chile, which we absolutely expect an improved performance from. There were some endemic issues there in some of the new business that they acquired that needed to be fixed, which was done and we're already seeing very positive results coming out of Chile. The Middle East was cycling through some very strong years the year before, which pulled their performance down last year, which we should see at the end of this year of. The Crown business in South Africa, like I said, had a poorer year last year, which probably mean they'll have a better year this year. But overall, yes, it's very difficult to fault the performances from last year, which does create a challenge for this year, because it really was a spectacular year in almost every geography, and I think the business did fantastically well. So I don't think we've got any further questions, and we're just on an hour. Hopefully, we've answered as much as possible. David, I'm not sure if you've got anything else that you need to add?

Bernard, there are 3 or 4 more questions that have come through.

That's unfortunate. Okay. Let me just find where I've got to. Can you talk a bit about growth in private label products and growth of independent customers, and how much can this benefit margins in the medium term? Look, I've got nothing more to add to that other than it's what we do all the time. It's not something that's going to be a major step change, because it's constantly being addressed and it's a small micro adjustments on an ongoing basis. But it does add to the margins in the medium term. We've got no idea where it goes, but it is just something that gets focused on. We don't know where you take is. We actually don't know what the right answer is. And sometimes you go down a private label path and you get great results. Sometimes the brands that you're competing with are too strong and you've got to track back on it. So it's a balancing act, but absolutely fundamental to what we do. But the benefit is incremental now and not revolutionary. What acquisitive opportunities are you seeing in your operating geographies? Is ZAR 1 billion to ZAR 1.5 billion spend expected to sustain over the coming years? Yes, hopefully. Like I said, we've made 70 bolt-ons since 2016. We've just announced a acquisition in Australia. There's one that will be announced in Western Europe relatively soon. Once again, none of them are huge. None of them are going to shift the needle. There are a few others in the pipeline. The time for acquisition probably isn't right at the moment because vendors want to sell on historical performances, maybe of the last year, and many want to sell before they see any economic slowdown coming through in the numbers. So we need to be a little bit aware of that. We're not seeing any huge plethora of opportunities being thrown at us. We're not seeing a whole lot of operators and real buyer straits needing to sell. But we're talking to various different businesses in various different geographies. We remain opportunistic, alert. And our teams around the world are very good at seeking out these opportunities. There is nothing that we're looking at out of our geographies that we currently operate in. So there is nothing of any scale that's currently being pursued or is being offered on the -- in the market in a process that we know of, and I think we know of most of them. So it's very much at this point in time, bolt-on strategy. And if anything opportunistic comes out, out of that, we'll certainly have a look at it. Also, any geographical diversification plan. Sorry, I just answered that question without realizing it. Not unless the right opportunity arises. We've got enough on our plates. We've got enough geographies to operate in. We've got enough businesses that aren't yet at scale that need to operate at scale. It's an interesting dynamic. Market [indiscernible] is a little bit wrong now. We've got 21 operating businesses in 35 geographies. Out of those 21 businesses, I think 5 businesses account for 70% of our operating profit. I think it's 5, David, 5 are 70%?

That's correct.

5 are 70%. And I think 10 businesses is 95% and 11 businesses are 5%. So if we can make some of those 11 businesses into large -- from certain small acorns, big oak trees grow. If we can get a couple of trees out of those 11, we'll be doing well. So there's a lot of opportunity out of those 11 to see something spectacular come out of 1 or 2 or 3 or 5 of those businesses. But there's enough for us to focus on and operate on in the shorter term. And one more, Ashley. All right. You referred to a historic period of very little food inflation, what was the reason for this? Do you think we might be heading into an extended period similar to that given the higher base of food prices? That's a very good question. I don't have the answer to it. And for many presentations, which you really can't -- got nothing to do on that, I often said I don't understand why there was zero food inflation in those previous years. It's just not something we could understand. You had a growing world population, you have demand increasing, but yet food price inflation for many, many, many years following the GFC. And maybe this -- what we see now is just that catch-up. Maybe it was just an elastic band that is so tightly wound, that when it unwound, it left with great figure. I'm not sure we're going to get back to 0 inflation quickly. You've got other impacts, which are having an effect now. You've got climate change. You've got crop failures. You've got drought. You've got flood. You've got increased demand. You've got a lot of other issues. With the Ukraine war, which is also having an impact on certain things. So in the short term, I don't think we're getting back to 0 food inflation. But possibly, I think we've just seen a reset of the base of food pricing to maybe where it should have been over those years and we just woke that up. But we definitely are seeing a relatively quick cooling of food inflation, although it is sticky, and it isn't coming down as quick as some of the other things. But to a degree, it's also embedded in the price of oil. There's a huge impact to the price of food because most food needs to be processed, needs to be transported, and energy pricing has an impact on that. So hopefully, that answers that question. I think we've done them all, Ashley? No more questions. Thank goodness. David, I don't know if you've got any final comments?

No, not from my side, Bernard. Thanks.

Okay. Well, thank you, everybody. We look forward to updating you, I think, in November. Hopefully, yes, that's -- we can give you an accurate and objective assessment of where the world is heading. You certainly can see we're living in interesting times. We continue to live in interesting times. And the circumstances are pretty different now to what they were a year ago, which just means we need to approach things slightly differently and do things slightly differently. And this year will look different to last year. and that's the way it is. We remain confident. We remain enthused about our business and the prospects. Stephen, I don't know if you want to just wrap up and say a few words. Thank you.

No, I think you've covered everything. Well done, Bernard and Dave. And I think it's a great set of results. And hopefully, we can deliver again next year. I know there will be more challenges, but it is a great set of results. So well done.

Okay. Thanks, Stephen. Thanks, David. Thank you, Ashley and the team. Charlie, everybody else involved. Thank you all for your attendance, participation and interest. And take care, we'll talk to you soon. Thanks.

Thanks.