KAL Group Limited (KAL) Earnings Call Transcript & Summary

Welcome to shareholders, investors and other interested parties joining us for the results presentation. This is a prerecorded results presentation. And as per normal, with webcast, I would ask you to start sending questions as soon as you are ready, and we will try our best to answer all of them at the end of the results presentation or we'll follow up with you on any specific matters we are unable to handle appropriately. The presentation of our full year results could take about 45 minutes. I am supported by our financial director, Graeme Sim. We are excited to deliver these results today as we believe we have outperformed expectations during this challenging year. Today's agenda is on the screen covering strategy, milestones, operational updates, financial performance, segmental reviews and any with certain balance sheet movements, after which questions will be handled. COVID impact, where applicable, is included in all the slides. Although our purpose and strategy remained largely unchanged year-on-year, we have adjusted for the times, and I would like to highlight a few of these changes starting on the left with our growth initiatives and moving to the right to digitization initiatives. So firstly, on the left-hand side, in the growth quadrant. A more conservative approach and measured approach to footprint growth, especially in the fuel company space. Secondly, a refocus on customer relations and market share. The third highlight is maximizing niche service offerings to build on our virtual store trading growth. Fourthly, a move from a quantity drive to a drive inclusive of value add in terms of EVA. Fifthly, in the optimization quadrant, an increased focus on return on invested capital and economic value add and funding optimization or in other words, capital allocation. A sixth highlight in the third quadrant would be our continued leveraging of culture and diversity, especially performance acceleration. And lastly, in the last quadrant, an increased drive on numerous digitization initiatives, especially our ERP modernization project, which has kicked off. Outcomes include annually adjusted growth target for each year, catching for a CPI plus a reoccurring headline earnings growth target, whilst keeping our long-term very audacious goal of ZAR 1 billion profit before tax by the year '25 in mind, which includes M&A. Lastly, having received quite a bit of feedback from the market over the last 2 years, you will note that additional executive measures we have added in terms of return on invested capital and economic value add. The group's structure and shareholding has not changed since our previous presentation, the TFC BEE ownership status is 47.2% on a modified flow-through basis for both TFC operations and TFC properties, and 40.2% on a direct block basis, well above the current requirement of 25% as required by the liquid petroleum fuel charter, although this requirement is expected to increase soon. For those seeing the presentation for the first time, please note Kaap Agri Namibia is a 50-50 venture with Pupkewitz in Namibia, and furthermore, that Kaap Agri has a right to buy out the minority shareholders in Partridge Building Supplies, which we call Forge at the end of 2021 based on specific earnout clauses, which would seem highly likely at this stage. The business segment and trading brands slide remains relevant to understanding how we differentiate the business in terms of income streams and trading brands in each 1 of those income streams and excludes the corporate division. The largest division on the left-hand side is still our Trade division consisting of 135 business units contributing about 60% to group profit before tax, and includes Agrimark brands, New Holland agency business and Forge brands. You might notice we have completed a branding refresh on our Agrimark trading brand over the last year. The second largest division is The Fuel Company, we refer to as TFC, consisting of 47 business units, of which 43 are retail fuel service stations contributing a further 25% improvement in profit before tax, and now operate all major Oilco brands in South Africa. Our Grains Service division consists of 15 silo and seed complexes and focuses on silo grain handling as well as wheat and [ potato seed ] processing and trading. The last division is the Manufacturing division consisting of 5 business units hosting Agriplas which focuses on the manufacturing of irrigation products as well as Tego, which focuses on manufacturing large injection molded products. Our Supply Chain division access support service for the acquisition, distribution and logistics of products for the group. All of the above are supported by our Corporate and Financial Services department with 2 offices and 13 financial service units spread across Africa. In total, there are currently 217 business units in 107 locations in South Africa and Namibia. This slide is a geographical heat map of all the business units. On the left, the whole Kaap Agri Group and on the right, just the TFC business units. The concentrated exposure in Western Cape is diminishing year-on-year as a result of footprint expansions in the rest of the country. But exposure in the rest of the country remains low, which bodes well for growth. Group now operates 104 retail fuel licenses sites in South Africa and Namibia, of which TFC operates 43 in South Africa. Whilst the Agrimark footprint has largely been focused on water-intensive areas of South Africa, the TFC equipment has focused on clusters in specific provinces in order to achieve economies of scale in terms of management and support services to their network. We continue to grow our footprint with most of the business unit growth since 2015 being in the Agrimark and TFC divisions indicated by the blue and red bar graphs, having grown to 182 business units out of the total of 217. Further to note, that with our creation of The Fuel Company, TFC, we migrated 20 retail fuel service stations from the Trade division to TFC in 2017, and have since added 23 additional retail fuel service stations, bringing the total TFC retail fuel business units to 47, of which 43 are retail fuel service stations. Key milestones for the year are that we -- our real group revenue grew by 5.4% after deflation of 3.9%, and our estimates are that we lost 6.6% revenue due to COVID. We believe we will maintain our Group 3 BEE status this year. We also achieved real group retail revenue increase of 3% even after COVID. Our Agrimark Grain has maintained a high profitability off a 30% lower wheat harvest, an amazing performance. Our New Holland agency has improved profitability for 3 years on the trot. Our Total Support service cost to serve as a percentage of GP is reducing. Our group fuel liter growth was 2% for the year on managed and owned sites, although highly impacted by COVID, as you will see later in the presentation. Our trading profit contribution from retail categories continues to grow and is currently 56% despite the COVID impact. We have seen only a marginal increase in working capital requirements and net interest-bearing debt has only increased by 1.8%. This slide is a quarterly turnover growth year-on-year trend graph, the blue graphs being our retail sales and green graphs being our agri sales movements. Firstly, in terms of retail, one can clearly see the COVID impact in quarter 3 of F '20. In this regard, there are 2 points to note. The sales drop was not as severe as with other retail players in the general retail sector, and secondly, the V recovery was very quick with us being able to sell all general retail goods except the [ back only growth ] from Level 3. The quarter 4 retail strength was strong and off the back of cement sales picking up versus prior year, off a very low base, having had 2 poor years in the building sector, and due to 2 new TFC sites coming on stream in that quarter as well. In terms of agri, the green graphs, COVID impact was relatively low. We did install to experience some supply chain issues, but more importantly, the quarter 4 decrease has to do with animal feed sales drop in the Northern Cape due to drought relief of prior year not being duplicated, and mechanization seeing a slight drop off from the last quarter due to COVID jitters. And then we've also seen fertilizer where we have had a slight drop in market share in the [ Swaziland ] area in the Western Cape, which is being reviewed and will go back on that. Our Western Cape food farmers have had a record-breaking 2020, which bodes well for their ability to spend with us during F '21. In general, economic factors still weigh heavily on the trading environment, CPI is low, not what return is like at all. And fuel remains at deflationary levels with the rand seemingly range-bound at this stage. Drought has mostly dissipated except in the Eastern Cape, some parts of Western Northern Cape and Limpopo. And as we said last year that performance remains a concerning issue and has impacted capital investment expansion improvements by farms. We thought it appropriate to actually include a TFC COVID recovery for you as -- with the shareholders seeing that this area of our business was mostly impacted by COVID. So as at 30 September, this slide illustrates the TFC specific COVID recovery, both in fuel liters as well for the QSR and deli environments. You can clearly see that the rolling 30-day liters have returned to pre-COVID 400,000 liters per day by the end of June already. Subsequently, we are beating the 400,000 liters per day due to new sites that we added and recovery in the like-for-like sites. The Fuel Company, QSR and deli performance has outperformed the industry food and beverage performance with September being almost 30% down year-on-year as well. TFC like-for-like convenience retail was still down 21%, driven by a decrease in like-for-like liters below. OpEx adjustments include savings in salaries due to short time, reduced franchise fees and lower variable costs such as bank charges. The like-for-like fuel liters, down by 9.5% driven by specific locations such as our [indiscernible] branch on the [ mining Limpopo ] affected by cross-border travel restrictions. Total liters, however, are up 16.5% on September last year. We have been able to cut back on salary cost to [indiscernible] for example, short time. Continuing on with the trading environment. In terms of revenue growth, our group revenue has grown by 1.5% overall. This has been off the back of deflation of 3.9%, and COVID loss sales equating to about 6.6%. Actually, a very healthy picture in the most challenging year we've had. We are picking up a trend of lower transactions while basket size is increasing. And the like-for-like revenue decrease of a minor 0.6% is mainly being driven by TFC like-for-like signs. Inflation, excluding the fuel price impact was only 1.1% this year. The revenue growth has been made up of a strong performance from the Trade division, in which agri gave us 4.5% of load, retail 4.1% of load and Forge had a breakout year growing by 46%. In terms of manufacturing, Agriplas contributed 4.1% to that 5.6% [ of Manufacturing ] by year-end. Quite remarkable, actually, given that COVID led to a drop of 38% in the sales in April. Grain ended up having a good year, even though the weak volumes were over 30% down. And TFC, the business unit most affected by COVID, actually delivered only an overall 6% drop in revenue while experiencing 9.4% fuel price deflation. Still a great achievement in an absolutely crazy year with some service stations to 95% down on fuel volumes for many months during various levels of lockdown. I'll now hand over to Graeme to take us through the highlights of the year and financial performance.

Thanks, Sean. Looking at the highlights for the period, we believe the group has delivered a respectable trading performance under exceptionally challenging conditions. Revenue has grown by 1.5%, with like-for-like comparable sales declining by 0.6%. This is despite a 2.9% decrease in the number of transactions, and I'll refer to that below. EBITDA has increased by 6.8% to ZAR 587.6 million. However, excluding the impact of IFRS 16 as it is noncomparable year-on-year, EBITDA increased by 1.1%. Recurring headline earnings has grown 4.4% with recurring in line earnings per share growing by 4.6%. Group fuel volumes have grown by 2%, with TFC growing volumes by 3.7%. As mentioned, we saw a 2.9% decrease in the number of transactions during the period. Retail Fuel and Convenience was hardest hit in terms of reduced footfalls during the various lockdown levels and excluding a 5.9% reduction in the number of transactions in this area, the remaining business grew transactions by 2.3%. This is a clear and strong indicator of continued market share growth. No interim dividend was paid. Taking the various employee salary sacrifices as well as the business performance during this COVID period and the status of COVID into account, the Board approved a final dividend of ZAR 0.50 per share, being a decrease of 44.4% on last year's final dividend. As such, the total dividend per share for the year has decreased by 59.5%. Regarding segmental performance, you will see Trade and Grain Services delivered good results year-on-year with Retail Fuel and Convenience and Manufacturing showing declines. The largest focus area of the company's activities remains in the Trade sector. This sector is also the greatest income contributor and where the majority of earnings are made. Trade income grew 6.9%, with profit before tax increasing by 15.9%. The Trade segment now includes our [indiscernible] subsidiary Forge on a comparable basis, and this business grew revenues by 46.5%, as mentioned by Sean. The Retail Fuel and Convenience segment was hardest hit by COVID, but still managed only a 6% decline in revenue, remarkable when considering fuel price decreases, the COVID-related reduction in personal and business travel as well as transportation of goods combined with restrictions on the sale of tobacco and related products and the closure of quick service restaurants. Profit before tax ended 12.8% down year-on-year. Grain Services or Wesgraan as we previously referred to the segment as, delivered pleasing results despite the weak harvest which was more than 30% down year-on-year. Although revenue decreased by 9.7% off the back of lower grain handling volumes, operating profit before tax grew by 11.9%, courtesy of good expense management, the timing of nonrecurring surplus wheat sales and alternative product handling income. Irrigation manufacturing experienced a slow start to the year and COVID negatively impacted farm infrastructural expansions. We did, however, see a strong recovery during the last few months of the year. Bulk print production is expected to increase in the new year as the product development and enhancement phase has now been completed. Revenue in this segment grew 4.4%. However, PBT reduced by 44.9%, largely due to start-up costs in Tego. Corporate houses all support services and treasury and includes internal interest recoveries from operating segments on certain working capital elements. Profit before tax was down due to a combination of lower interest rates, increased interest paid on higher average borrowings and lower internal interest received on working capital. Just as a reminder, in Trade and TFC, gross assets include stock and trading fixed assets and net assets reflect the impact of trade creditors, whilst the corporate gross assets include debtors and corporate fixed assets and net assets reflect the impact of group borrowings with intercompany loans eliminating in the segmental analysis. I'll go into more detail around data in a later slide. This is a graphic representation of the previous slide, showing contributions by segment. The trends have not changed since interim results. It's evident that Trade is still the core of the business. Retail Fuel and Convenience growth has been impacted by COVID, but still contributed around 23% to group PBT. The Grain Services contribution was significant for this year and remain strategic in maintaining strong customer relationships. And lastly, that Manufacturing remains the smallest segment contributor to group PBT at this stage. Looking at the income statement, revenue grew 1.5% and gross profit increased by 4.7%. GP has grown at a rate higher in revenue due to the impact of a changed sales mix and improvement in agri trading margins as well as lower fuel prices. A number of concerted cost reduction initiatives we implemented during the year with a large focus on the optimization of salary-related expenditure and associated costs. This, combined with specific COVID-related cost interventions resulted in expenditure growth of only 2%. As mentioned earlier, recurring headline earnings grew 4.4% with recurring headline earnings per share of [ ZAR 0.39252 ] growing by 4.6% for the year. Return on equity ended at 13.8%, down 0.8% on last year. The total dividend per share of ZAR 0.50 per share decreased by 59.5% compared to the prior year. As mentioned, the decision was taken at half year to forgo the interim dividend and the final dividend has been calculated taking into consideration the performance of the business, its balance sheet position as well as the financial impact of group-wide employee salary sacrifices made. 3 graphs again illustrate the continued strong 5-year performance of the business, albeit that performance was impacted by COVID in the current year. Looking at the balance sheet. Noncurrent assets continue to increase as we executed on our format optimization and footprint expansion strategy. During the first half of the year, a decision was taken to slow down further TFC footprint expansion across the business and to focus on delivering returns on previously invested capital. The onset of COVID has reinforced this decision. However, the business will continue to investigate value-enhancing opportunities, albeit with a more conservative approach. During the year, ZAR 313 million was spent on capital expenditure and acquisitions. I'll deal with CapEx in more detail in a later slide. Working capital has been exceptionally well controlled, increasing by only ZAR 20.4 million year-on-year. Debtors have grown slightly ahead of credit sales. However, out-of-term debtors, excluding wine and grape customers have remained almost constant year-on-year as a percentage of debtors. Wheat overdues relating to the 2019 season will be settled from the current above-average wheat harvest and wine grape overdues relating to alcohol sale restrictions during COVID lockdown have almost been fully paid up. Management views this debtors book as being very healthy and adequately provided for. Stock levels have been proactively managed throughout the COVID period, and inventory days have remained constant year-on-year, aided by the continued increased participation of our centralized distribution center. Creditors days have increased slightly. The debt-to-equity ratio of 64.9% calculated on average balances is in line with expectation with net debt-to-EBITDA reducing to 2.3x from 2.4x last year. Net asset value per share continues to increase, albeit that assets are historic values. Interest cover has remained constant at 5x. In summary, the balance sheet remains strong and has been robust through the challenging COVID months. Gearing levels are within our internal thresholds and sufficient headroom is available to meet the coming year's requirements. Looking at the impact of COVID on the business, conservative management estimate shows that turnover reduced by ZAR 554 million, resulting in lost GP of ZAR 69.2 million. COVID-related expenditure of ZAR 3.5 million was incurred, largely personal protective equipment, sanitizers and the like. Expense savings amounted to ZAR 47.8 million, driven by salary and lease sacrifices, reduced traveling costs and other variable cost reductions such as bank charges, transport, et cetera. Additional interest paid of ZAR 6.5 million was incurred of lower cash sales and slower stock turn. In total, ZAR 22.5 million recurring headline earnings was lost due to COVID, a negative recurring headline earning growth impact of 8.4%. This slide reflects the recurring headline earnings waterfall from 2019 to 2020. Gross profit growth was strong and ahead of revenue growth, as mentioned. The reduction in other income year-on-year relates to income reflected in 2019 relating to put liability revaluations. The current revaluation impact was small, hence, the large year-on-year effect. This also explains the nonrecurring add-back of similar value. Expenses grew by only 2%, a very impressive performance. Interest received reduced due to lower interest rates on customer accounts. Interest paid increased due to higher average borrowings offset by lower rates and lower grain financing plus the effect of IFRS 16 amounting to ZAR 20.8 million reflected in interest. In total, recurring headline earnings grew by 4.4%. However, when adding back the estimate impact of COVID, recurring headline earnings would have grown by 12.8%. If we then also add back the impact of IFRS 16 in the current year, a noncomparable year-on-year impact, recurring headline earnings would have grown by 15.4%. Given our expansion and acquisition strategy, and the increase in gearing in the business, we've prioritized return on invested capital, or ROIC, and EVA as key performance indicators to measure our efficiency of allocating capital within the business. We have seen significant investment in the business over the past few years, both in upgrades and expansions as well as in acquisitions. At the same time, we've seen subdued economic conditions and drought, which have reduced returns, particularly in our like-for-like space. Added to this, we've had COVID in 2020 and expect our 2021 first 6 months results to also be impacted by COVID to a degree. Invested capital has largely generated the desired returns, except for Tego, which has experienced a difficult first 12 months as we have developed our footprint. Certain TFC acquisitions have also been problematic. The challenge we have experienced is the timing mismatch between capital invested and returns generated. By example, a number of fuel acquisitions require upfront payment of sizable deposits as well as Tego, which despite requiring significant CapEx, has not yet generated any returns due to its longer than anticipated product development and enhancement process. Collectively, all the above factors have contributed to a reduced ROIC of 10.4% versus 11.8% last year and compared to our average WACC of 9.9%. A perception exists that TFC acquisitions are responsible for the group rate decrease. This is not entirely correct. A detailed strategic analysis has shown that excluding TFC, group ROIC has followed a similar trend. That said, TFC Investment Committee is currently engaged in a detailed portfolio review, during which site specific turnaround plans are being formulated. Failure to deliver the required returns may result in these sites being earmarked in action for potential disinvestment. Excluded in the process of starting up the TFC business, we have acquired certain sites that have underperformed as well as being new in the market, we may potentially have overpaid on a few sites to gain a foothold in the marketplace. And lastly, the strategy to acquire dealer-owned dealer-operated sites to secure tenure has been capital heavy. Going forward, we'll balance the TFC portfolio with more company-owned dealer-operated sites, which require far less capital as well as drive organic growth from capital already invested. We also expect Tego to contribute during 2021. The new financial year will see a cautious approach to capital spend. This will further stabilize and improve our debt levels and allow for debt repayment, ultimately contributing to an improved ROIC and EVA position. We have also looked at ways to include EVA into the executive long-term incentive scheme and will include details of this in the remuneration report that's presented at the AGM. As mentioned, the short- to medium-term focus is on driving returns on capital already invested and on freeing up underperforming capital. I'll now hand back to Sean for segmental reviews.

Thank you, Graeme. The next few slides will inform you of our segmental strategy, reviews for the year and outlooks looking forward. Firstly, our Trade division. In terms of this last year, strategy has remained largely unchanged and is focused on organic growth, a selective build expansion, maximizing sector consolidation opportunities and improving our share of the building materials sector, optimizing retail with increased DC utilization, combined with lower DC cost to serve and implementing centralized optimization initiatives in terms of assortment, pricing and replenishment. The fruit sector has had a great year. While we take this plan to grow similar to the prior year, weather conditions were vastly better this year. We therefore find farm inputs growing at 4.5%, with us capitalizing on good fruit holders with packaging material up 8.3%, while fertilizer sales were actually down 3.5%, and infrastructure spend at farm level initially negatively impacted by COVID during April and May. Retail revenues grew 3.2% in this division being slightly less impacted by COVID than initially expected, and we experienced strong growth of 13.4% in pet categories, 15.6% FMCG categories, while COVID impact building materials negatively by only 5.3% and hardware alike was only 3.2% down. This division really came to the barge this year. It's flat year-on-year operational expenditure off the back of salary sacrifices and travel expense savings, while seeing working capital improvements in the form of structural management. The DC cost to serve has also dropped by 12% off the back of increased throughput and prudent cost management. Forge just contributed significantly to revenue growth, has kept OpEx growth low and has had a standout year. In terms of the outlook, looking forward, we aim to gain further market share in [ initial ] [indiscernible] areas as well as other selected areas. The fruit sector outlook is very positive for the new year, and we can confirm that an above average wheat harvest is expected by the end of this year. We, therefore, expect farm infrastructure spend to increase on the back of these forecasts. Our retail diversification will continue, and we expect cash contribution of 29% contributing 44% of divisional GP to continue improving year-on-year. Our continued focus on central pricing, assortment and replenishment optimization bodes well for margin improvements over the short term. Our Tego agency business, which [ only mark ] -- packaging handles and is the marketing of products manufactured at the Brackenfell factory should improve into the new year. The segmental review for the Retail Fuel and Convenience division, better known as The Fuel Company, and which holds 43 retail fuel sites as at the end and 4 additional QSRs and convenience stores. In terms of the F '20 review, strategy has been reviewed and we have moved into a phase of consolidation with more conservative footprint growth feasibility threshold being applied. We remain focused on Oilco collaboration, centralized support services while leveraging diversity to solidify on markets in Africa. We've added 4 new retail fuel sites, managed and owned, during the year. COVID had the biggest impact on this division within our group with ZAR 260 million worth of revenue lost due to COVID lockdowns. We clearly show a very positive product trajectory on a later slide. Even after this severe COVID impact, liter growth was overall positive at 3.7%, with like-for-like sites only dropping by 3.6% liters in the year. Profit before tax was therefore impacted negatively by 12.8%, with COVID actually making up 25.5% of that impact as well as in IFRS implementation, another 2.7% impact. Fuel deflation of 9.4% impacted profit before tax in this division further due to price changes and a negative impact of 2.1% year-on-year in the profit before tax. This division, therefore, actually had a standout year. Site tenure remains high due to the high percentage of properties we own in the TFC portfolio. From an outlook point of view, our petrol mix percentage will continue to improve in the new year as we increase our urban footprint and due to the COVID recovery as we experienced lower petrol sales during COVID period, and we, the above, therefore, expect to see a result in improvement in margins. We have only 1 pipeline retail fuel site at this stage. This is by choice as we consolidate our portfolio and review sites not contributing to an acceptable return on invested capital. Investigations are following a more conservative approach as our base is established now and we can move our preferences to more select sites. Therefore, our forward-looking liter growth should reach growth of 26% by the end of the next financial year, off the back of COVID recovery and the sites analyzing. A huge focus on expenses we see in this division during F '21, and this is one of the most won battles. We still believe our strategically placed TFC direct black ownership of 40% bodes well for our ability to secure top quality sites going forward. And our forward-looking site tenure is expected to be above 25 years. Although this will slowly reduce over time due to our reviewed strategy of balancing the portfolio with less property-owned sites in our mix. We have added this slide, in terms of the fuel price change. In fact, we often get questions from the market as to how does the fuel price impact us. So on the left-hand side in the graph, you can see that in rand fuel price for petrol and diesel and how it has fluctuated throughout the year. Left-hand bottom, you can see the impact on margin in terms of fuel price changes. So as at 30 September, our selling price average was ZAR 59.17 per liter. Our average margin per liter was ZAR 2.02, margin percentage will be 13.3%. But if there was a ZAR 1 decrease in the selling price, one must note that the rand per liter margin stays the same as it is regulated, and the margin percentage that would increase, you make more money, therefore, not due to the change in selling price value, we make more money due to the volume change. So this business is about chasing the volume. TFC fuel price adjustments during the year led to a ZAR 0.5 million loss versus a ZAR 1.7 million profit in the year. We move on to the Grain Services division review. This last year, in terms of the strategy, it has remained focused on market share, facility optimization and being a regional role player. Although the 2019-2020 wheat harvest was down by 30%, the division was able to make up that loss in grain handling income with alternative product handling and storage as well as optimizing wheat grain differentials during the year. Profitability of the division ended up 12%, a marvelous performance. In terms of the outlook, as you can see on the right-hand slide, the wheat is expected to end higher than the 2018-'19 season, which was a pretty decent harvest itself. And as you can see on the graph, we should cross over that large harvest within the next week. We have also had 15% increased canola tonnes handled installed in our silo complexes this year. And wheat prices have been favorable over the last year, allowing us to fix our wheat sales results earlier this year. In terms of the Manufacturing division, which is made up of Agriplas and Tego, Agriplas producing irrigation products for the agricultural sector, in particular the food sector, and Tego currently producing bins for harvest and storage in that same sector. The review in the year is that strategy has remained unchanged, except for a decision not to include any one-way plastic products due to our eco-friendly drive. Agriplas grew revenue by 4.1% despite negatively being affected by COVID during quarter 3 and we have seen a strong recovery in quarter 4 with 13.5% growth in that final quarter. Profitability was still a negative impact for the whole year with a reduction of 17% for the year. Although [ T1 ] commissioning occurred in November '19, Tego has had to do additional R&D work on its product offering and was only fit for use in September this year. Some delays have been exacerbated by COVID. From an outlook point of view, Agriplas is investigating export markets for the sprinkler range of products. The new executive manager has made a positive impact to forward momentum in this business. And based on the sterling performance during quarter 4, very healthy targets have been set for the team during F'21. Tego's performance will remain subdued during the new financial year with additional R&D required to serve the pome industry, while we maximize alternative toll manufacturing options in the short term. Graeme will now cover cash flow and capital spend and debtors.

Thanks, Sean. Moving to the cash flow performance. One can see that the group continues to generate strong cash flows from operations through improved -- through improved cash profits and effective working capital management. Net working capital movement has utilized only ZAR 20.4 million cash in the period, a significant achievement. Investment has been made into the business to drive growth in terms of increased capital expenditure and acquisitions. This will be dealt within the CapEx slide that follows. Cash flow from financing activities is predominantly interest paid in the previous year payment of the dividend. Important to note is that during the period, ZAR 450 million of short-term debt was converted to 5-year term debt to better align expected returns of repayment terms. Net outflows on leases and borrowings was only ZAR 8.7 million. The ongoing diversity strategy of the business continues to increase the cash component of turnover, which bodes well for periods going forward. 37% of total turnover is now cash compared to 36.8% last year. 3 years ago, this cash turnover portion was about 30.2%. With regard to capital expenditure, during the year, we spent ZAR 313 million on CapEx, including acquisitions. Of this amount, 55.6% went towards TFC acquisitions. 37.5% was allocated to expansions, largely in TFC and Tego, and 6.8% was spent on replacements and upgrades, including various modules of supply chain software as well as manufacturing execution system for the manufacturing environment. Spend by division remains heavily weighted to our strategic growth areas and TFC continued to receive the bulk of capital allocation. As mentioned, the decision was made pre-COVID to curtail capital spend, except for acquisitions and projects already committed in an effort to focus on driving returns from previously invested capital. This has proven to be the right decision and has contributed to our ability to weather the COVID storm. Just a bit of detail on our debtors book. We have a clear strategy to continue growing our debtors book by means of responsible credit extension for the purposes of enabling revenue growth by increasing the consumers' ability to purchase from our various offerings. As you know, credit granted can only be used for purchases at the various Kaap Agri and TFC outlets. So we provide production credits, not consumer credit. Our credit vetting process takes into account a number of variables including a range of financial and nonfinancial considerations as well as the nature and value of any securities available. The resulting credit rating is used to determine the size of the facility that is approved as well as the interest rate charged to that account. Our debtors book grew 0.8% during the period, and has created a compound annual growth rate of 7.4% over 5 years and now totals almost 15,000 accounts. Roughly 23% of these accounts are seasonal accounts with payment periods linked to the cash flow cycle of the underlying product. These seasonal accounts could have payment terms up to 12 months. Debtors by product type has remained similar to last year. However, out of terms have increased by 1.5% of debtors. The largest impact has been in the previous season wheat carryover of about ZAR 18 million and a small portion relating to wine grape debt. Excluding these carryovers, the not within terms portion has increased by only 0.1%. The current wheat harvest looks to be above average, so we expect full settlement of wheat overdues in the coming months. Our bad debt write-offs bear testimony to the quality of the underlying accounts with only 0.16% of the debtors book being written off during the current year and 0.23% over the last 5 years. Let's look at our out-of-term debtors, in other words, debtors that are overdue. This graph shows the monthly 4-year trend of overdue debtors as a percentage of total debtors and highlights the following: August to February trends are closely correlated across all years, except for the large drought-related wheat overdues that increased in 2017. In the current financial year, the out-of-term ratio improved on previous years for the months through to March. February wheat overdues were not significant. During April, we saw a large increase in Northern Cape Raisin and [indiscernible] table grade overdues. During June, we experienced an increase in wine grape overdues resulting from COVID lockdown restrictions on alcohol sales. July saw late payments being received from certain Western Cape table grape farmers. We are waiting on export payments. And then we had good payments coming in during August and September, which brought out of terms back in line with previous years. So in summary, given the challenges we and our customers have faced over the past months, our book has been resilient, is in a very healthy state and is well secured by various securities. We are well positioned given the favorable agri conditions being experienced in our areas. Sean will close out from here.