The Bidvest Group Limited (BVT) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Bidvest Annual Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I'd now like to hand the conference over to Ilze Roux. Please go ahead, ma'am.

Thank you, Judy. Good afternoon, everyone. Thank you very much for joining the Bidvest team today. With me in the room are Bonang Mohale, our Chairman; Mpumi Madisa, Group CEO; and Mark Steyn, Group CFO; and Jill McMahon, one of our Executive Directors. The team are proud of these results and appreciate you taking the time to participate in the presentation today. Without further ado, I'd like to hand over to Bonang, our Chairman, to make some opening remarks. At the end of the presentation, we'll take Q&A. Bonang, over to you.

Thank you, Ilze. Good afternoon, everybody, and thank you for joining us today for the Bidvest Group's results presentation. I'm very proud and honored to be introducing truly spectacular results, especially in the wake of these unusually deadly times, one with a pandemic, recession, subdued economic environment and social unrest that were all operating headwinds. There's an African proverb that says, "For tomorrow belongs to the people who prepare for it today." It aptly describes the real reason for these excellent results, since Nompumelelo Thembekile Madisa and her team have done a considerable amount of strategic streamlining of the Bidvest portfolio, which has included asset sales, considered acquisitions, improving costs and efficiencies whilst ensuring trading competence collectively resulting in a Bidvest that is positioned to outperform even in challenging markets. The real determination and dedication from all our dedicated management team as well as the over 120,000 people employed in the group must be acknowledged as a key reason for these results. This team perfectly describes that part of our vision that says, people create wealth, companies only report it. With that, it gives me great pleasure to hand over to the Bidvest Chief Executive Officer, Nompumelelo Thembekile Madisa to take us through these results.

Thank you very much, Chairman. Good afternoon, everybody, on the line. It's really with a lot of pride and humility that I present a truly stellar set of results. Bidvest has had an exceptional 2021 financial year, reporting strong operational and financial performance, notwithstanding the ongoing impacts of COVID-19. Management's actions to stimulate trading, manage margins, contain operating costs and convert profit to cash have resulted in an incredible set of results and an even stronger balance sheet. What we did really well this year is take a very strong trading profit result of ZAR 7.9 billion, translate that into ZAR 13.6 billion cash and use it to pay off debt. And at the same time, we kept our eyes above the water, focused on growth and concluded 4 offshore acquisitions. At Bidvest, our people, our most important asset. So let me take this opportunity to pass our condolences to the families, friends and colleagues of the 122 Bidvest employees who sadly succumbed to the virus. We continue to support their respective families in various forms. The progress of vaccination programs globally and, in particular, in our key operating territories, South Africa, U.K. and Ireland is very encouraging. We're running a group-wide COVID-19 vaccine awareness program to encourage all our employees to be vaccinated. We're also improving access to the vaccine through the use of mobile vaccination clinics. To date, we've dispersed ZAR 230 million to our employees to supplement salaries for those who are unable to work and also to fund COVID-19-related community support, which amongst others included the distribution of food hampers to 37,000 households in the Eastern Cape, Northern Cape, KZN and Gauteng provinces. It gives me great pleasure to report that 98% of our employees are back at work, from 75% who were unable to work in April 2020. Our 200-plus businesses continue to implement COVID-19 health and safety protocols, and this is now our normal way of working. It's been approximately 18 months since COVID became a significant part of our lives. And reflecting on the past 18 months, one cannot ignore how much the environment in which we operate has changed, and in particular, how the risk environment has changed. To ensure that the group remains cognizant of this change and positions itself to make a positive contribution to the 3Ps: people, planet and profit, it gives me great pleasure to report that we have significantly enhanced our ESG framework. Our ESG priorities have been amplified and these priority areas have been cascaded into the divisions and obviously further into our individual businesses. We've introduced ESG-specific targets and taken a very bold step to roll these targets into our incentive for the 2022 financial year. Lastly, as I close out the introduction, it would be amiss of me not to touch on the recent riots in South Africa. Whilst outside of this reporting period, the rise in KZN and parts of Gauteng [ doused ] South Africa a devastating blow. The group was fortunate to have suffered no loss of life. We had limited damage to infrastructure and all impacted operations have returned to normality. This incident reminds us how easily systemic inequality can be used for political point-scoring, very, very sad and very unfortunate. As business in general in South Africa, we must come together to, in a more cohesive manner, amplify the fight against the scourge of poverty, inequality and unemployment. As business at the end of each year, we must ask ourselves, what have we done to reduce poverty? We must ask ourselves, what have we done to reduce inequality? And we must ask ourselves, how many more jobs have we been able to create? I truly hope that the incidences over that 1 week in July never ever repeat again in South Africa. If I move to the highlights for -- of the performance of the year. Group revenue at ZAR 88 billion increased by 15% and from ZAR 77 billion in the previous year. Trading profit at ZAR 7.9 billion is up 48% on prior year and the trading margin improved from 7% to 8.9%, really, really excellent. Best ever performances were produced by commercial products, services, automotive and branded products. Freight and Financial Services delivered strong second half performances, propelling the division into a fantastic full year turnaround. PHS, which is now in the numbers for a full 12 months, exceeded expectations, delivering in constant currency double-digit profit increase. We've made some fantastic offshore acquisitions to enhance Noonan scale in the U.K., and I'll provide more color on that later in the presentation. Headline earnings per share from continuing operations at ZAR 1.183 is up 114% and normalized HEPS from continuing operations, which excludes COVID costs, acquisition costs and customer contract amortization increased by 26% to ZAR 1.292. Our normalized HEPS indicator this financial year is a very, very important indicator, because this shows the underlying performance of the business. Assuming that we didn't have COVID, for the group to be up 26% is very, very strong. Cash generated by operations at ZAR 13.6 billion, was higher by ZAR 4.5 billion, mostly due to the increase in operating profit and a significant working capital release that Mark will talk to later. Cash conversion improved to 145%. The balance sheet remains strong. And having paid down some debt, the group's net debt-to-EBITDA has reduced to 1.8x. And in this calculation this time around, the restricted cash in Bidvest Bank has been excluded. ROFE improved to 31.6% versus 23% in the prior year. Our ROIC at 14% is comfortably above our WACC, which is 10.5%. A final dividend of ZAR 0.310 will be paid, bringing the total dividend for the financial year to ZAR 0.600 cents up 113% on prior year. If I move to the next slide, just on our Bidvest journey and exactly unpacking a little bit in terms of what we've achieved since we are unbundling of Bidcorp in 2016. We've managed to execute a very focused and simple strategy. We've grown the group organically. Our businesses have been rightsized for current demand, and we remain confident that as demand and volumes increase, we won't need to increase the cost base significantly. We've streamlined the portfolio and simplified it, having exited over the last couple of years, Comair, [indiscernible] mile this year. We exited our listed operations in Namibia, bought out the minorities and delisted that structure, and our operations in Namibia now are branches of the South African businesses. We increased our shareholding in Adcock, moving it from an associate to a subsidiary, and we now consolidate Adcock back all our other subsidiaries. We disposed of BidAir services and Bidvest Car Rental. And through this process, we banked ZAR 1.2 billion in the current financial year from these disposals and cumulatively since 2016, we've raise ZAR 4 billion. We continue to enhance the diversification of the group and at a trading level -- trading profit level, 62% of our businesses are in services and 38% in trading and distribution. The U.K. and Ireland are now material geographies for us with 20% of trading profit now offshore. If I move to the next slide and just talk about our growth strategy and what we've been able to do specifically from a facilities management perspective. We acquired Noonan. Noonan what's our first acquisition from an FM perspective. And at the time, in 2017, Noonan was the #1 facilities management player in the Republic of Ireland with a very small footprint in the U.K. In fact, they just only had 1 office in the U.K. At the time of acquisition, Noonan was already looking at a security business in the U.K. to acquire. So once we've concluded our transaction, the team was able to conclude their acquisition of Ultimate Security. In July 2019, we acquired Future Cleaning, a specialist cleaning service provider specializing in cinemas and the broader HoReCa sector. February 2021, we acquired the Axis Group, a majority security service provider with a small cleaning footprint. In March 2021, we acquired Interact, a technical facilities management services company in Ireland. And in May 2021, we acquired Cordant, a security and cleaning business in the U.K. And all of these acquisitions has basically taken Noonan in the U.K. from having 1 office in 2017 to now having 17 offices in the U.K., a fantastic scale that we've been able to build, and we're expecting strong organic growth from this team going forward. We now have a facilities management business that's #1 in Ireland, top 5 in security in the U.K. and top 10 in FM in the U.K. Also just to note that the bolt-on acquisitions that I've just spoken through were done at about half the multiple that we've paid for Noonan and so have been very accretive. I'm going to hand over to Mark to talk through the financial review.

Thank you, Mpumi, and good afternoon, everyone. As per normal, I'd like to say a special thank you to all those involved in producing these results. They are a reflection of a lot of hard work in a challenging environment, not least of which was having an enhanced national COVID lockdown at the commencement of our audit process. A big thank you to all our Bidvest teams as well as our auditors, PwC, for the long hours in completing a successful year-end process. As Mpumi has already indicated, we are pleased with these results, really pleased, not just because of the obvious improvement in earnings. More important is the portfolio effect of having improved profitability, translating into very strong cash generation, which was then deployed to reduce debt and thereby strengthen our balance sheet. There's been a conscious focus on streamlining nonperforming businesses, which has extended from actions taken last year. And similarly, the process of disposing of noncore assets, which commenced back in 2016 is now largely complete. The active management of the assets of the group has been a standout feature of the last year. Before we jump into the details, it's important to also contextualize this result in particularly with respect to COVID-19 and its impact. 2021 gave rise to ZAR 180 million in direct COVID-19-related costs, which is much reduced from last year. The trading impact, though, continues to be felt in certain sectors, specifically in travel aviation and related businesses which have all been appropriately resized to absorb this new low cycle. Similarly, the extension of work from home and the delayed educational return has created pressure. And there's now also a noticeable supply chain impact, which is evident in some of our trading businesses as well as in our container freight movements. All these areas, though, will present opportunities in the next year. The strong steps we took last year to protect our financial position continue to bear fruit. Our liquidity and solvency have improved with a significant reduction in debt and an improved maturity profile. Expenditure control has been good and cash management exceptional. In terms of acquisitions, Mpumi mentioned we concluded 4 bolt-on acquisitions in the Noonan FM cluster, which significantly enhanced Noonan's scale in the U.K. and will enable them to target a far greater market. From a disposal perspective, we reported last time on the disposal of our Mumbai Airport investment. We've now also finalized the disposal of Bidvest Car Rental, which was shown as a discontinued operation previously, as well as the disposal of BidAir services and a number of other smaller noncore operations. Fortunately, from an order perspective, this year did not bring any new material IFRS changes. We did, however, complete the PHS PPA, which gave rise to a reclassification between goodwill and intangible assets on the balance sheet in the prior year. With this as the backdrop, let's have a look at the detailed results. From a revenue perspective, revenue up 15.4% to ZAR 88 billion, enhanced by PHS now in for a full year. We had 2 months in the prior year and the new Noonan acquisitions. From an organic perspective, we've had good revenue growth at 6.6%. Very pleased with that, and we've seen steady revenue growth improve through -- post last year's hard lockdowns. Obviously, to properly understand the group's overall revenue position, we need to unpack the individual divisional performances, which we'll do later in the presentation. But overall, we've had 4 divisions produce good revenue growth with 2 divisions slightly down. From a gross profit perspective, and specifically, our margin, our margin is up slightly to 30.8%, which is obviously -- we're obviously very happy with. We've had good margin growth in freight commercial products and services, with automotive maintaining margin in a declining market. The Financial Services margin was impacted by lower FX activity and interest rate cuts. While in Branded Products, we had a decline in margin due to higher cost of imported products, imported goods and a changing -- and a changed sales mix. From an expense perspective, I mean, expenses are always a highlight in Bidvest's presentation. On a gross basis, operating expense is up 6.6%, on a like-for-like basis, up just 3.3%. We continue to benefit from the quite extensive restructure programs that were taken in the previous year, and we continue to -- with a strong focus on cost containment. From a trading profit perspective, trading profit up 48% to ZAR 7.9 billion. Very, very comfortable and very happy with this performance organically, strong growth. We've had excellent results, particularly from our Commercial Products division with underlying trading performing well, improved factory recoveries and well-managed costs. Services have performed particularly well overall with the PHS business, the acquisition exceeding expectations. The services profit now interestingly is equally balanced between both SA and offshore. In terms of automotive, there was a particular focus on margin rather than market share in the current year. And together with better efficiencies and cost management, they've significantly improved their performance in what is, at the moment, a declining market. Freight handled more bulk exports and the results from these more than offset the constrained import and export container volumes that we're seeing. In terms of Branded Products, including Adcock, we produced a good result given -- especially given the changed working environment. Financial Services produced a reasonable result in what is a difficult environment. We had no ForEx from international travel. There were reduced interest rates coming from last year's COVID adjustments, and we've had delayed fleet decisions. In terms of our other costs, acquisition costs down significantly just because we didn't do any major acquisitions last year. In the prior year, we had the PHS acquisition. To counterbalance that, we had a significant increase, though, in the amortization of acquired customer contracts, and that relates to the PHS PPA, which is now completed in then the new Noonan acquisitions. In terms of our capital items, significant reduction from the previous year, where we incurred ZAR 2 billion in capital items largely related to the COVID impact. This year, ZAR 180 million to date, largely related to closure of certain businesses, specifically on-time automotive in the U.K. and the disposal of BidAir services. And these costs were partially offset by certain insurance claim proceeds. Moving now to our finance charges. Overall finance charge is up 2.9%, including IFRS 16. Very happy with where that's landed. In terms of pure borrowing costs outside IFRS 16, those were up 4.9%. We did, through the year, have a higher average debt level. And that's as a consequence of the PHS bridge that we raised last year. Obviously, we dealt with that at the year-end, and I'll talk to that just now. But we also had lower average interest rates through the period. Our average borrowing cost for the group reduced from 5.7% last year to 4.6%. Very happy with that. Our interest cover remains strong at 9.4x. In terms of associate income with the exit from Comair last year, the only material JVs are now within the Adcock stable. And the prior year, in terms of our associate income, included the Comair losses, which have now obviously gone away. Our tax expense, if you exclude the impact of the Mumbai Airport ForEx impairment, which is now closed out following the disposal and our capital items, our tax expense is broadly in line with the statutory rate in South Africa, and that's our core effective rate for the group. We do note, however, that there are new proposed tax rates, both in South African environment for next year and in the United Kingdom for 2023. Our noncontrolling interest on minorities is -- or almost exclusively Adcock now, and we have an effective shareholding within Adcock of 57.9%. From a HEPS perspective, HEPS up 114% to ZAR 1.183 cents. Very pleased with that result. But maybe more importantly, and as Mpumi referenced earlier, the real measure of our performance is in our normalized HEPS, where you strip out the impact of the COVID costs from last year, that's up 26%. We're really, really happy with that as a baseline. In terms of dividends, we declared a final dividend of 310 cents, which is up 7% from the 290 cents declared at interim, total dividend of 600 cents, which is 113% up. We paid the dividend within our cover ratio of 2 to 2.5x normalized HEPS. The actual ratio we used was 2.15x this time. From a debt and funding perspective, we maintain a conservative and consistent approach. Our net debt after cash and equivalents is down to ZAR 13.3 billion from ZAR 19.2 billion last year. Very comfortable with our covenants. We're comfortable within both interest cover, as I mentioned earlier, at 9.4x, last year was 8.4x and net debt-to-EBITDA at 1.8x, last year in 2.7x. We've repaid a total of ZAR 4.9 billion in debt. Of our gross debt, 74% of it is long term, and we've achieved that through some restructuring in terms of the underlying debt portfolio. And more specifically, in July this year, we raised a new offshore syndicated facility of GBP 400 million, comprising an RCF of GBP 240 million and a term loan of GBP 160 million. This will assist, not only in lowering overall cost of debt, it also extends our debt maturity profile and creates improved flexibility via the RCF. We've used the proceeds of this facility to completely repay both the euro loan and the balance of the PHS bridge. Our current funding facilities, both locally and offshore, are more than adequate to fund our working capital requirements. In terms of the interest cover graph, you can see the stability of our interest cover over the period. It's been consistent for the last few years. The impact in terms of net debt in 2020 was the PHS bridge, which we brought on board to buy PHS, and this has now been repaid in full in July. In terms of our debt maturity profile, we presented 2 pictures. One is the existing picture as at 30 June and the other reflects the post offshore syndicated facility position. Essentially, what's happened with this new facility is our maturity profile has been significantly extended. We've got a balanced domestic maturity profile through the time frame and all our international maturities have been pushed out for at least a further 3 years. Moving now to cash flow, and cash flow is always -- it's a big focus for Bidvest. It's part of our DNA. And so we're exceptionally happy with where we landed from a cash conversion perspective at 145% versus 138% last year. I think this was an exceptional result. Our cash generated by operations at ZAR 13.6 billion versus ZAR 9.2 billion last year was enhanced by a working capital release of ZAR 2.4 billion, driven mainly by reduced inventories, which is a COVID -- partially a COVID-19 impact and also partially a supply chain constraint and also increased accounts payable, which is a result of improved trading. While we're very pleased with the inventory release, we are monitoring inventory levels quite closely in the light of exacerbated supply chain constraints in certain markets. Our CapEx spend continues in South Africa. We produced strong free cash flow of ZAR 10.1 billion. And as mentioned earlier, we've had net debt repayments of ZAR 4.9 billion. Cash generation graph, I'm pleased to say that the second half HY 2 now reflects a resumption of our normal cash flow and working capital cycle for the group. We've had very good working capital management across the divisions. As the business cycles continue, though, to normalize, we are expecting an absorption of working capital, which would be normal as business levels improve to take place in the first half of 2022. Just some final concluding thoughts. It's very encouraging to see the improvement of COVID-19 vaccination stats, especially in South Africa. This will stimulate an acceleration of the return-to-work scenario as well as enhance international travel, both of which will obviously benefit the group. Our business has been appropriately rightsized for our current demand levels, and so we expect upside as trading levels improve. Our financial position is strong with good capacity for growth. We are actively engaged in seeking out new acquisition opportunities. Thanks, Mpumi.

Thanks, Mark. And before I go into the individual divisions, I'd like to talk through how we manage the businesses to achieve these results. So in the first half of the year, the focus was on monthly revenue recovery from the extreme lockdown month of April, May and June. Most of the restructures had been completed by the end of the 2020 financial year, so we knew that as long as we could get the top line up expected profitability.

Ladies and gentlemen, please remain online. The main venue will be rejoining us shortly. [Technical Difficulties] Ladies and gentlemen, thank you for your patience. We have been rejoined by the main speakers. Thank you.

Okay. Apologies for that. So I'll start with my previous paragraph before. So before going into the individual divisions, I'd just like to talk through how we managed the businesses to achieve these results. In the first half of the year, the focus was on monthly revenue recovery from the extreme lockdown month of April, May and June. Most of the restructures have been completed by the end of the 2020 financial year. So we knew that as long as we could get top line up, the expected profitability would follow. And if you recall in the half year presentation, we showed the month-by-month revenue growth to demonstrate this top line recovery. Going into the second half of the year, we focused on growing on 2019. The 2020 comparative base is low, so it was important for us to ensure that trading profit in the underlying businesses net-net is above 2019. We monitored this, pushed business by business. Bidvest is the sum of the parts, so we knew that this approach would get us the desired results. So I talk -- as I talk through the divisional review, I'll also touch on trading profit performance by division against 2019. If we go to Bidvest Services, revenue is up 31% to ZAR 28.9 billion. Trading profit up 55% to ZAR 3.3 billion. Trading margin at 11.4%, increased from 9.7% in the prior year. EBITDA, up 51% to ZAR 4.1 billion. Funds employed down 25% at ZAR 1.3 billion and roughly at 206% is now more than double the 84% ROFE in the prior year. The services team has really, really delivered an extraordinary set of results bolstered by additional months of PHS and the Noonan bolt-on acquisition. But notwithstanding this, underlying organic growth has also been strong. Noonan performed well, especially in Ireland. Noonan's Ireland operations delivered excellent growth, mostly relating to higher margin COVID cleaning contracts. Noonan U.K. was negatively impacted by the closure of cinemas and the partially open HoReCa sector. PHS recorded an impressive set of results, increasing revenue by 9.3% and increasing trading margin to 16.3%. You'll recall that PHS' trading margin at point of acquisition was 14.7%. This profit growth, despite the substantial number of contracts that remain suspended, is really excellent. The Services SA delivered good growth, notwithstanding the year-on-year decline in the travel cluster and BidAir launches. The facilities management cluster performed well. Allied services was slightly down year-on-year, but the laundry business has performed well, and the contract pool in Aquazania continues to grow. The travel cluster was loss-making as it continues to be negatively impacted by significantly reduced international travel volumes due to lockdown restrictions globally. Domestic travel has improved, so that's a good sign. But to see a turnaround in this cluster's results, we need an increase in international travel volume. The security and aviation cluster delivered superb results with standout performances from BidTrack, Protea Coin, BidAir Cargo and GPT. Cash generation and conversion was exceptional. This division also successfully disposed of BidAir services to a black-owned consortium and existing management are also shareholders in this new consortium. A key highlight for this division is that the offshore trading profit is now half of the division's total profit. Compared to 2019, the Services division increased trading profit by 50%. If I go to Branded Products, our revenue is up 3% to ZAR 17.8 billion; trading profit, up 4% to ZAR 1.5 billion; trading margin, slightly up on prior year at 8.2%; EBITDA, up 2% at ZAR $1.7 billion; funds employed, down 3% at ZAR 5.6 billion and roughly at 24% is up from 21.7% in the prior year. A really solid performance from the Branded Products team given that the current year for them continue to be dominated by the pandemic, resulting in a very complex and unpredictable business environment. The division faced ongoing challenges relating to the absent flu season which impacted Adcock, constrained consumer spending, reduced occupancy levels in buildings and education facilities, supply chain challenges and a negative impact of exchange rates. Notwithstanding these headwinds, this team executed a massive turnaround in the second half of the year, shifting a 19% decline in trading profit at half year to a 4% growth in trading profit by year-end, which is really, really fantastic. Operating expenses were exceptionally well managed, decreasing by 1.4% and cash generation was outstanding. Adcock delivered a resilient result. And with the exception of a decline in the OTC business unit, consumer prescription and critical care were all up on prior year. The Plush acquisition and the Roche renal portfolio were integrated into the business and Adcock also acquired a portfolio of generic products from Aspen as well as the 51% share of the Novartis ophthalmic JV. Excellent profit growth came from the print, packaging and electronic products. However, Bidvest Data did decline due to significantly lower print-to-post volumes. Office products cluster was marginally up impacted by low occupancies as clients work-from-home policies remained in place, but Waltons delivered a very good performance. The Consumer Products cluster delivered a fantastic trading profit increase, driven by demand for basic essential products. Compared to 2019, the Branded Products division increased trading profit by 55%, driven primarily by the consolidation of Adcock. If I move to Bidvest freight, revenue is down 2% to ZAR 6.2 billion; trading profit, up 12% to ZAR 1.3 billion; trading margin at 20.9% increased from 19% in the prior year; EBITDA, up 12% at ZAR 1.5 billion; funds employed down 9% at ZAR 3.8 billion; and ROFE at 31% is up from 28.9% in the prior year. The freight team delivered an excellent performance off the back of increased bulk agric and mineral volumes and an 8-month contribution from the LPG terminal. Bidvest tank terminals delivered growth in both volume and profitability. The LPG terminal is operating well and profitability is exceeding expectation. The balance of the fuel and chemical volumes were lower than prior year. SABT delivered an outstanding result. Overall volumes at 3.1 million tonnes were 12% up on prior year, comprising mainly maize export volumes at 1.2 million tonnes, wheat import volumes at 1.4 million tonnes and rice import volumes at 356,000 tonnes. Bulk Connections produced an excellent result. Volumes grew by 17% with a record 4.6 million tonnes handled, comprising 2 million tonnes of manganese, 2.1 million tonnes of chrome and iron ore was handled for the first time, and that accounted for the remaining volume. BPO had a really spectacular year, driven by a 72% increase in bulk volumes, again, mainly export minerals. The team's ability to secure cargo volumes in the second half of the year and the reduction in operating costs boosted this exceptional performance. Bidvest SACD, Bidvest International Logistics, Naval and Manica, unfortunately experienced a very, very tough trading year. Trading were characterized by significantly low volume, shortages of containers and exponential increases in sea and IFRIC costs. A key highlight in this division is that SABT Bulk Connections and BPO reported ROFEs in excess of 60%. For capital-intensive businesses to report returns this high is really just outstanding. Compared to 2019, the freight division decreased trading profit by 5%. This is really primarily as a result of the depressed trading in 2 businesses, but with International Logistics and SACD. Outside of this, the rest of the trading result was up. If I move to commercial products, revenue is up 17% to ZAR 14 billion; trading profit up 135% to ZAR 922 million; trading margin at 6.6% doubled from 3.3% in the prior year; EBITDA, up 98% at ZAR 1 billion; funds employed, down 14% at ZAR 3.2 billion; and ROFE at 26% is up from 9.5% in the prior year. The Commercial Products team produced a really superb set of results. This exceptional performance is largely due to significant market share gains in all key markets in which they operate, outstanding gross margin and expense management, restructuring and optimization of the electrical cluster and excellent inventory management. The trade clusters performance was outstanding as the renewal plan implemented at Bidvest Electrical is yielding positive results, and Plumblink's phenomenal trading year was driven by a substantial increase in turnover. The catering cluster posted an impressive trading profit increase despite major challenges the hospitality industry faces. Vulcan's export revenue growth was strong and King Pie's results increased considerably over the prior year. The DIY tools and workwear cluster produced a fantastic trading result, boosted by the increase in DIY demand as people are now predominantly working from home. Exceptional market gains were also evident in this cluster as new product lines were launched in Academy Brushware. But the leisure cluster grew profit exponentially as consumer spending patterns shifted and sales of luxury products increased. This is apparent from the terrific results reported by Yamaha. Supply chain constraints are concerning, but we're expecting this to improve over the next coming months. The industrial cluster delivered a really good set of results with the business securing significant market share from their competitors. A key highlight in this division is that Plumblink, Electrical, Academy Brushware, Matus, Yamaha, Afcom, Burncrete, and Vulcan, all reported high double-digit profit growth off the 2019 financial year. Overall, for the division compared to 2019, commercial products increased trading profit by 25%. If we move to the Automotive division, revenue is up 16% to ZAR 21 billion. Trading profit is up 267% to ZAR 652 million; trading margin at 3.1% is up from 1% in the prior year. EBITDA is up 201% at ZAR 685 million; funds employed, down 35% at ZAR 1.5 billion, and ROFE at 38% is excellent, up from 6.9% in the prior year. The Automotive division has produced a spectacular set of results. These results reflect strong strategic and operational achievements in a very challenging period. The team focused on margin rather than volume, yielded material benefit. Despite the 15% decline in new vehicle volumes, gross margin improved and trading profit increased by 20%. The used vehicle market was strong, delivering a solid set of results, boosted by profits generated on limited stock supply. The ratio of retailed used to new vehicles has improved to 1.2 used vehicles sold for every 1 new vehicle. And furthermore, McCarthy retailed 1.1% more new vehicles and 7.2% more used vehicles. In terms of after sales and parts, service throughput is at 86% of pre-COVID level, so we are not back to pre-COVID levels yet, and fleet sales also remained depressed as clients hold back on major procurement decision. The balance sheet is strong and cash generation was exceptional. The team also successfully sold Bidvest Car Rental, which we've taken as a discontinued operation in the FY '20 financial year, and this business is now in the hands of a black-owned consortium, and existing management are also shareholders in the new consortium. The supply chain remains at heightened risk in this division given the global shortage of chips, new vehicle stock and automotive parts. Compared to 2019, the automotive division increased trading profit by 23%. This is a really good performance, keeping in mind that in 2019, we had a contribution from Bidvest Car Rental, which is not in the 2021 number. So really, really fantastic performance from this division. If we go to Financial Services, revenues flat at ZAR 2.6 billion; trading profit up 9% to ZAR 332 million; trading margin at 12.5%, up from 11.5% in the prior year. EBITDA is up 11% at ZAR 605 million; funds employed, down 7% at ZAR 3.3 billion; and ROFE at 9.1%, unfortunately, is disappointing, even though it is up from 8.2% in the prior year. The 2021 financial year was exceptionally difficult for this division. Notwithstanding the negative impact of the pandemic and our cautious approach to accounting for expected credit losses, the division executed a very strong second half turnaround, turning a 59% decline in trading profit at half year and 29% full year increase in trading profit, and that's very commendable. The bank's overall result remained adversely affected due to interest rate cuts, resulting in lower interest yields, lower lending growth in fleet and personal and business banking. A declining lease asset book significantly reduced FX trading income due to international travel restrictions, and fee and commission income was also negatively impacted by a low branch transactional income due to the reduced branch network. The bank's balance sheet remains strong and liquid and all the key ratios are well above the [ sought ] minimum requirements and deposits continue to grow and investment securities were significantly up in the prior year. The insurance cluster grew gross written premiums. Claims are stable and client retention has been very good. Compendium acquired Genesis Insurance Brokers and the investment portfolio also performed while boosting the cluster's results. Trading profit comparisons to June 2019 reflects a 43% decline. This division is really still operating in a very, very tough environment. We expect recovery, but the recovery is going to take some time and it's likely to be uneven. Moving to corporate and properties. Despite revenue declining as a result of rental reductions and increases in vacancies, the property portfolio did well to limit the negative impact on trading profit with only a 3% decrease to ZAR 561 million. The portfolio's value remained stable at ZAR 8 billion and comprises 136 properties. The trading loss in the [ corporate ] office improved by 22% from ZAR 813 million in the prior year to ZAR 636 million in the current year. Going to strategy and outlook. Just to provide some progress in terms of what we've achieved in FY '21 based on our kind of main blueprint. From a leadership perspective, our entrepreneurial leadership, really just, as it always does, it gives us agility. It gives us flexibility. It enables us to make decisions quickly and management has been able to be very, very decisive and that's what's fed into all the divisions. I've spoken in some of the divisions around what the subsidiary performance has been like, and that's really just our entrepreneurial management doing what they do. From a diversity perspective, we've made a lot of progress in just 12 months' time. Our Board, today, is 80% black and 70% female, and our Exco team is 50% black and 42% female, and that's setting the tone for the rest of the group. In terms of our growth strategy, PHS, as I indicated earlier, has exceeded expectations. We did a post-acquisition review, and we're very, very, very happy with how PHS is performing. We've obviously acquired Axis, Cordant and a couple of other bolt-on acquisitions for Noonan, and we'll continue looking for more acquisitions, both internationally and locally. From a people perspective, health and safety has obviously been top priority. We rolled out a group-wide wellness program last year. To assist our employees' mental wellness is something that is a key priority, not just for us, I think just globally, and our wellness program is providing the required support. Over and above that, we spent ZAR 250 million, to date, on employee and community support. From a technology perspective, we remain focused on technology. Innovation is very key for us. We've rolled out call center robots. We've rolled out payment robots. We've elevated digital assurance with ALICE. There's a lot of tech that's happening across the group. And obviously, with the kind of work-from-home policies that are being implemented, IT governance in general, is an elevated risk. And so our focus on technology and, in particular, digital assurance is important. From a structural perspective, we want to stay focused. We want the group to be simple. We have exited our noncore assets. The 2 businesses that were significantly impacted by COVID that we wanted to dispose of, that's been done. We're very comfortable with where the portfolio is at the moment. Our code of ethics continues to underpin the culture within this organization. We work all the time to make sure that we live our values of honesty, integrity, accountability and respect, and ethical behavior is part of the way that we run this business. I spoke, earlier in my introduction, on the ESG framework. I don't intend on going into too much detail on the slide, but just to give you a little bit of color in terms of what our thinking is from an environment, social and governance perspective. I would request that once our governance report and our remuneration report comes out, more detail will be in there in terms of how we're going to be thinking more broadly around ESG for the FY '22 financial year. And also, we'll also show how the ESG KPIs are going to move through into our incentives, but ESG definitely getting a far more heightened focus and for the right reasons. I mean, I think it's important for us to create value, but it's also important for us to be cognizant of how we do business. And that's why we've spoken with innovative ESG. And then also from a portfolio perspective, no change. We've got our business services and our trading and distribution businesses. We will be looking for organic opportunities for growth across these 6 divisions. We'll also look for opportunities to make acquisitions that fit this portfolio, both in South Africa and offshore. And even from an offshore perspective, we have said that we're not trying to duplicate Bidvest in its plus 200 businesses across very different industries internationally. We've chosen 3 niches. We're going to stick to those niches. We're going to grow our hygiene business globally. We're going to grow our facilities management business, and we're still looking for an acquisition on plumbing and kind of related areas. Moving to the outlook. We are and remain very bullish about the 2022 financial year. We've already identified areas for additional organic growth opportunities in each of the divisions for the coming year. So we're very comfortable with the next financial year. As the global vaccine programs progress, the world will start gravitating towards a more normalized way of living and working, and this will definitely increase demand in volumes in sectors where recovery has lagged, and this will obviously certainly benefit the group. The 2021 GDP growth forecast in our key geographies, South Africa, U.K. and Republic of Ireland are all in excess of 4.5%, again, creating opportunities for the group to enjoy real underlying organic growth. Infrastructure spend is critical for the growth of our trading businesses. We have already seen private sector spend increase as mines build new shafts, upgrade existing ones. We're seeing good opportunities as independent power producers come on stream and the recent announcement by the President that the cap on soft generation without a license will be raised to 100-megawatt will also catalyze CapEx projects, availing further opportunities for our trading businesses. There are unknowns on the pace of recovery in international travel. We need this. We need it for the bank. We need it for the travel cluster. We need it for launches. The second unknown is the extent to which occupancies will improve from the current 10% to 15% occupancy we're seeing specifically in South Africa. I don't think there's any way that having 85% of your workforce working from home is sustainable, so I'm sure there will be some level of increase, how much and when is -- remains an unknown. The one risk we are actively managing is our supply chain. Global supply chains have been materially disrupted, and we're seeing significant shortages across various parts of the business. We've streamlined the portfolio, as I said, exited our noncore assets, and the remaining businesses have been optimized for growth. Our international expansion strategy remains a key focus and now that borders are starting to reopen, we are now able to travel and start acquisition discussions. I'd like to thank the Exco team for delivering a truly spectacular set of results. The business did not just rebound from the 2020 financial year, but demonstrated just how powerful the Bidvest people are and how resilient the Bidvest business model of diversification and decentralization is. During good times, all businesses do well. It's in the bad times that business models are truly tested. And these results bear testament that at Bidvest, we have a formula that works and remains relevant even after more than 30 years of operation. More importantly, these results are not just an indication of the group's financial strength, but a reflection of how well we've looked after our people. We would not have been able to produce these results if our employees working in our factories and warehouses were not confident that they're working in COVID-safe environment. We couldn't produce these results if we hadn't provided our employees reporting for work at external client premises with adequate PPE and related protective gear. These results reflect the amount of work the management teams across all our operating territories have put into creating a safe, working environment and for me, that's by far our biggest achievement this year. So to our 120,000-plus employees in Southern Africa, the U.K., Republic of Ireland and Spain, I thank them very much, and we'll do this again. Thank you.

Thanks, Mpumi. With those strong words there at the end, operator, we are ready for some Q&A. And maybe while you give instructions on the voice line, we can just have a look at some of the webcast questions. So maybe you just...

[Operator Instructions]

We think we'll start on the webcast line and then we'll go to the phone line. And so team, the first question on the webcast is PHS margins are well above pre-acquisition levels. Where do you see a normalized trading margin? And then secondly, also relating to acquisitions, Cordant and Axis, everyone looks at the acquisition note at the back of the booklet. The margin on those businesses look low. Is there opportunity to improve those margins? It's still with those 2.

So PHS margins, normalized level. We think that where they're at now is probably a normalized level. I mean one of the things that we had said when we acquired PHS is that we'd like to get their margin as close to the Rentokil margin as possible. And Rentokil's margin is in the mid-16s, I think it's about 16.5%, 16.8% somewhere there. So that kind of midrange is -- that is the normalized margin. They obviously got there far sooner than we had expected. We didn't think that it would take kind of a 12-month cycle. There's reason for that. But we're also very comfortable that even though that margin has been boosted by kind of noncontractual work that's come through at higher margins, we should be able to hold that margin going forward.

And there are opportunities to also improve that...

Ladies and gentlemen, unfortunately, we have lost the main venue again. Please remain online. They will be rejoining us shortly. [Technical Difficulty] Thank you for your patience. We have been rejoined by the main speakers. Please go ahead.

Apologies for the line dropping. We were saying that there are additional synergies that we identified pre-acquisition for PHS that we haven't yet had the opportunity to fully implement, particularly because we can't travel internationally and our thinking of some of the product range extensions and some of the supply development opportunities that we have, we'll bring those onstream hopefully within the next 12 months or so once we are able to travel. But there certainly is opportunity to take the margin, which has improved significantly, even further.

Thanks, Mark. Cordant's and Axis' margins low, that is true. And in fact, in general, the margins in the facilities management in the U.K. are lower than the margins in FM and Ireland. So we expected that. Is there an opportunity to improve that? Absolutely. At point of acquisition, the Noonan team had already delivered a paper on synergies and how they'll be able to get that margin in line with a more Noonan-U.K. tap margin. So yes, we'll be able to do that. Very comfortable that the team will be able to deliver that. That shouldn't be a problem.

Right. Thanks, Mpumi and Mark. The next question, I suppose it should not be unexpected. Adcock has derated to a 11x multiple. Is taking out the minorities looking increasingly attractive? If not now, when and why? Mark?

It's always an interesting question, and it gets asked in every single analyst session that we have. It's not just a function of the transaction being accretive. And while it is marginally accretive at where share prices are at the moment, it's more a discussion around capital allocation decisions and what other opportunities there are. So I mean it would be a sizable check, call it ZAR 3.5 billion or there or thereabouts. At this point, there are other opportunities out there, which we believe are more accretive. So no decision to take an active step at this point.

But maybe to add, there is a question around this Bidvest position still, in [ Britain ], still remains to own businesses 100%.

That absolutely remains and would always be the case.

All right. Let's take one last one here from the webcast before we go to voice. Is there an exclusive arrangement between Automotive division and the disposed car rental business with regards to the purchases and sales of new and used vehicles?

No.

No.

Just maybe let's go to the voice lines to take questions please.

[Operator Instructions] We have a question from Roy Campbell of RMB Morgan Stanley.

Just one on the automotive, if you don't mind. Would you be able just to maybe relay the message that you're getting from the OEMs as to the supply chain challenges and when, in their opinion, the supply of new vehicles will improve? And maybe from your point of view, is that more in the premium sector or is it across the board that you're seeing some of the supply issues being challenged? And then in terms of the overall results in the automotive, it was a record result. So does that maybe speak to more consolidation rather than growth within automotive? I'll leave it there.

Thanks very much. I mean, the supply chain challenges are interesting. I mean, I think you would have all seen the announcement from Toyota International. They've cut international production by 40%. It's a big step. We are seeing supply chain issues through a number of the other OEMs, as you're aware. It's across the spectrum. So while it started off more on the high end, we're now seeing it right across the board. As to when it's going to normalize, we're not entirely sure, to be honest. We're seeing certain product lines coming back on stream now. The chip challenge is particularly problematic, because the problem is that doesn't impact just your high end, that impacts right through the range. And so my guess, it's not just going to be in the next 6 months, I would reckon the next 6 to 12 months. In terms of the automotive results themselves, not so much of a consolidation. You'll recall that last year, we did quite significant restructuring in terms of the cost lines of the businesses. There were unfortunately quite a lot of job losses within that environment. But we streamlined that cost structure significantly. We kept, roughly, the same number of dealerships. So we didn't lose a lot of dealerships in that mix. But the big focus for this year on top of a base, which is a lower cost base, has been chasing a higher margin sale. So what we've done is we sacrificed a little bit of market share. It wasn't a lot, but focused much more on the sales, which held much bigger margin. As a consequence, you've seen that drop through to the bottom line spectacularly. So it's a combination of lower cost base coming from restructures last year and then chasing higher margin individual sales this year as opposed to volume.

Does that then mean that it's -- just in terms of the sustainability of that, if the supply chain challenges do free up then, because obviously, in this environment, you're able to sell quality used cars at a higher margin, but potentially, those new vehicles as well. So once the supply becomes a lot more current, then maybe the competition is there and so that result is not sustainable.

Well, yes, but then you're going to be able to retail more volume again. Because at the moment, that's what the supply chain is constricting. I mean we could definitely sell way more cars if we had that supply. We just don't have it at this point. So yes, you may sacrifice a margin at that point, but you get the volume back.

At this stage, we have no further questions on the lines.

Thank you. So let me go back to the webcast. There is a question around the sustainability of the acquisition pace. It clearly picked up considerably in the second half of the financial year. What does the pipeline look like? How does one deal with acquisitions in the current environment?

Okay. So it feels like it picked up because we announced 4 offshore acquisitions at the same time. But in a normal environment, we would have actually done these acquisitions last year. So we picked up on these acquisitions in 2019. All the due diligence work, et cetera, was done in 2019, and then COVID hit last year. And so we then put a freeze across the group on all acquisitions. We then allowed the teams to go back and start relooking around October. And essentially, because due diligences had been done already, you were really just looking at trading, call it COVID months and how those businesses have performed in those COVID months. So it just happened that we then, therefore, then announced kind of all 4 within a 2-month period. And so that, I mean, just gives a bit of background. How is the pipeline looking? Look, we've got a nice pipeline. We just haven't been able to travel. I think Mark spoke to it earlier. We're not going to do due diligences on teams and remotely -- you can't buy a business like that. So whilst we've had a pipeline, we really just unfortunately, haven't been able to engage. We do have plans towards the end of the year to start traveling and go see some of those potential acquisitions, but these would be phased. First, intro meetings, right? So whatever we're starting now is really starting from 0, but we do have a nice pipeline. These targets in Europe, these targets in Australia, we'll see what we'll be able to do.

Thank you, Mpumi. Then just as we are still on M&A, there's a question on once the disposals of BidAir and car rental, do management consortiums done on a loan provided from Bidvest? Or did you receive cash?

So we didn't bid to finance those. We did receive cash for both those transactions.

Thank you, Mark. Mpumi, maybe this one is for you. Please, can you provide more color on the financial impact of lower office occupancies in South Africa and offshore?

Okay. So where should I start? Let's start offshore. Occupancies and impact -- look, what we've got from a services perspective is we've got the ability to get noncontractual revenue in our facilities management businesses. And in the hygiene businesses, we've had quite a significant increase in sales, whether in PHS, because of services that we're providing into vaccine sites, into testing sites, et cetera. So this kind of one-off business that's increased quite significantly. And so the impact of that from an international and offshore perspective is that it's more than offset the decline in the contractual revenue because of the lower occupancy. Coming to South Africa, we are looking at occupancies that, as I indicated, around 10% to 15%. Again, in SA, we have the ability to do the same. So our cleaning businesses have gotten COVID cleans, extra one-off work, and that's more than -- far more than compensated for the decline in the contractual revenue. Steiner, also similarly -- similar to what I've explained in terms of what PHS has done. We've seen similar in South Africa with Steiner. The only place where the office occupancies have really had a negative impact that we could not offset is in branded products. In branded products, there's no one-off work or noncontractual stuff that you can bring in. Either you're able to sell in furniture, either you're able to sell stationery, either you're getting the clicks from Konica in terms of office automation or you're not. And so in that environment, the impact of kind of work from home and learn from home has been far more material. And we just, unfortunately, haven't been able to replace that with something else. So that division, in particular, really any kind of uptick in people coming back into the office will at least be able -- to be able to sell more office products and related products into the workplaces.

Thank you, Mpumi. Let's shift to freight. And the question is a little bit like, asking for a little bit more color around the 10-year extensions and what's happening on leases in the ports of -- in the port of Durbin. And then secondly it looks like we've managed it quite smoothly, but what is the view on how serious is the general logistics and the trade issues globally and how that's affecting us?

Thanks, Ilze. From a freight perspective, and obviously, the relationship with transit and lease tenure is a key dynamic for that business. We have successfully renegotiated our rental increases which we're in discussions with Transnet for a little while now, very happy that certainly all the Durbin leases we've got over the line. In terms of ongoing lease, 10-year extensions, I think everyone has seen the announcement in the press from Transnet in terms of the port master plan that has been in circulation for a little while and then a further submission more recently with a -- I guess you could call it a ZAR 100 billion funding discussion. I think all these 10-year extensions are going to fall part of that mix. We're going to need clarity in terms of how the master plan will actually be rolled out because there's obviously an interplay between this fundraising program and bringing new investors into the port mix with the master plan. And how those 2 gel together, we're not exactly clear at this point. And that's part of a discussion we're having with Transnet. We have established a working group with senior Transnet executives or TNPA executives and our own team. They're busy dealing -- starting with the master plan and working through that, and then that will evolve into the other investment opportunities in that mix. The second part of that question was?

The issues around global -- general logistics and supply chain and how that's affecting trade volumes.

So the supply chain issue, I mean, we've touched on it in the presentation itself. I think it's exacerbating from what we saw, call it, 6 months ago. And what we talked about previously on the call is obviously there's a significant east-west supply at the moment in terms of containers going from China to the U.S. to resupply the U.S. and back. What that's done is caused a significant lack of availability for lines coming south. As a consequence, you've seen freight rates triple, quadruple in some instances, and supply time line significantly delayed. So we haven't seen that significantly release in the last 6 months. It is still continuing. You can see it in the results of both BIL and SACD. I'm hoping that at some point soon, it will start coming back. But obviously, isn't helping that you've got certain major manufacturers like the motor manufacturers who are also having supply chain issues of their own. So at the moment, we're hoping that sort of beyond the next 6 months, we will start to see that easing. It isn't easing at this point in time.

Thank you, Mark. And just sort of let me just somewhat attach this question onto the freight one is, what is the capacity utilization of our freight assets? And does it differ massively between the first half and the second half?

It's a really interesting question, because it's all about mix. So if you think about our grain facilities, the utilization was exceptionally high in the first half of the year, and that's really around maize. And then you move into wheat and then it eases off a little bit. And then you start getting -- the grain is starting to come back in the latter part of the year. So sort of -- call it, the middle part of the year is quieter with extreme volumes at both the beginning and the end of the year. Whereas if you're in, for example, the liquid scenario, it's a lot more of a constant supply. We've seen obviously a bit of an uplift for ourselves because of the LPG project, which came online. That came online in October last year, towards the end of October, and those volumes from an LPG perspective have been steadily increasing beyond expectation through the year. So we've seen an uptick in that. We have seen a little bit of a drop off, though, in both chemical exports and vegetable oils. From a minerals perspective, I think everyone knows where sort of bulk mineral pricing is at the moment. We've seen quite extreme volume exports, iron ore, manganese, chrome, all heading east. Those volumes have been really strong through the year and continue to be strong at this point.

Thank you, Mark. So let's give commercial products a lot bit of time in the sun. The question is how big is DIY within the Commercial Products division? And why is that specifically an influence in that division?

Yes. So I mean it's difficult to say how big it is, because it's spread across multiple businesses. I mean there's DIY in Academy. There'll be DIY in Matus. There'll be -- it's spread across a number of the businesses. So it's difficult to give you a number in terms of how big it is. But suppose a better way of answering the question is that our Commercial Products division provides basic essential trade required products. And so as kind of the DIY market increased, we were able to see that uptick. But we were also seeing uptick just from an industrial perspective. I think -- I don't know if I spoke about it in my presentation, but we've certainly seen an uptick in private sector spending, whether it's mines through or upgrading shafts. We're seeing benefits from the IPPs, so the whole focus on alternative energy. We're picking that up in our Electrical division. And so I mean it's a mix. We've got the DIY stuff in there that's pushing the numbers. There's a definite uptick in industrial demand, and we're picking that up. If anything comes back from a public sector spend perspective, that's going to be good. And there have been significant market share gains. We've really taken a lot of market share from our competitors. And more importantly, we've had the stock. So I mean, the one thing that this team has done exceptionally well is just managed stock supply. And so as we've had the excess orders, we've been able to supply into that extra demand. And we've then kept some of those new clients, because they haven't gone back and reverted back to the guys who can supply them during a difficult time. Those are really the main drivers in terms of what you're seeing in commercial product.

Thank you. I've got 2 more questions here on the webcast, but Judith, maybe we can have a look at the voice whether there's any questions on the line.

Thank you. At this stage, there are no further questions. [Operator Instructions] Ilze, back to you.

Okay, thanks. One last -- one question that's -- that we have here relates to the branded products division. There has been some margin erosion in the second half with 1 split that out in a sequential downturn from the first half to the second half. What could sit behind that, Mark?

I think -- I mean it's not a simple question. There are a number of elements to it. The big one is Data print-to-post, which has come off significantly, particularly in the second half of the year. Then in terms of the educational system and obviously, work from home, et cetera, there's quite a lot of print room work within the branded products environment. Essentially, those are large print rooms that sits at universities, et cetera. And obviously, with the students not being at university, the print room work has dropped off quite a lot. Then within our Home environment, Home of Living Brands, we have seen some gross profit margin depletion, if you like. That's a function, I guess, of ForEx rates worsening, so the cost of our imported goods has gone up, and we haven't been able to move the pricing quite in line with the increase of the import costs. But it's -- there are a number of elements that have led to it.

All right. Thanks, Mark, for that. And then Mpumi, you spoke just now when you spoke about the M&A pipeline about Europe and Australia. The question is, do you need something with critical mass there? Or can you do smaller deals in a roll-up consolidation type of approach rather than a PHS if we have to put it that way?

Yes. So maybe let's answer that question directly, no, we're not going to do another ZAR 11 billion transaction now. Definitely want to do a more roll-up consolidation type approach. Just thinking about the size of the businesses that we've got in the pipeline. Nothing like PHS, nothing at all in terms of that quantum or size, but certainly, roll-up, consolidate acquisition by acquisition.

Thank you very much for that. I think with that, we have -- wait, there's one on the infrastructure spend that's just come through. Is it -- so our infrastructure exposure, is it more focused on Afcom and the municipality spending? Or is it on other infrastructure spend more general?

It's more general. So yes, Afcom and municipality spending will be good for us. That comes on stream nicely. But for example, I mean, we're seeing data centers go up. I mean that's general infrastructure. So if buildings are going up, if dams are being built, all of that kind of general infrastructure, we're able to supply into that. It's not only public sector infrastructure.

We've seen quite a lot of development on the mining side. Obviously, as export volumes have significantly gone up, we've seen the mines reinvest in maintenance and in shafts, et cetera, et cetera. So there's quite a lot of money going into those environments. That also helps as well.

So on that positive note that we have been earning in South Africa for a while, thank you very much for joining us on the call this afternoon. We appreciate the interest and the questions. And we'll talk to you all soon. Thank you very much.

Thank you. Cheers.

Cheerio. Thank you.