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

Good day, ladies and gentlemen, and welcome to Bidvest Annual Results presentation. [Operator Instructions] Please note, this event is being recorded. I will now hand over to the Corporate Affairs Executive, Ilze Roux. Please go ahead, ma'am.

Thank you, Judith. Good afternoon, everyone, and good morning to my colleagues towards the west of us. My name is Ilze Roux, the Corporate Affairs Executive, and I have the pleasure of welcoming you on the call today. Thank you for your interest in Bidvest. I understand it's a busy time for the 1 in the market. These results are underpinned by excellent cash generation and show delivery against our communicated priorities. And we would love to share them with you today. As customary, Mpumi Madisa, Group CEO, will make some high-level remarks before Mark Steyn, Group CEO delves deeper into the numbers. Mpumi will then follow with a detailed review of each division's performance and close with some outlook and priority coming. There will be an opportunity to ask some questions at the end of the session. But before I hand over to Mpumi, the Bidvest Chair, [indiscernible], would like to say a few words. Sorry for stopping that up.

Good day, colleagues, and I kindly add my appreciation to all of you for joining this results conversation this afternoon. This time of year is always very important and exciting for Bidvest as we get to share our hard work, our significant efforts and improved over the course of this year. But we also take this opportunity to share our future prospects. And the many and varied external effect as currently played in the world today. Once again, the team has always has delivered a strong performance. It is pleasing to see that this performance reflects this management team, starting clarity, power and pesos, clear delivery against our FY 2026 commitment. The simple and clear strategy implemented over recent years is too well and in unison to continue to deliver well. I remain in all on houses non-fuel and her leadership team continually demonstrate agility, resilience in repositioning our business for access, especially in response to the most difficult dynamic and often confusing well around today, always advancing best attractive prospects. I send everything solidly one of you for making time in your busy schedule to join us for the important conversation. I now hand over to my boss, [indiscernible].

Thank you very much. Thank you to my boss. Good morning, and good afternoon, everyone. Thank you very much for joining us today, and thank you, Elsa, for the introduction. We're proud today to present a solid set of results for the 2026 financial year. Over the past years, we've invested substantially in growth platforms, both locally and internationally. We expanded our international footprint, particularly in hygiene services. We focused on diversifying our automotive portfolio and also amplified our government engagement to secure extended tenure for our terminal operations. This reporting period demonstrates that these investments are now contributing meaningfully to profit growth, margin uplift and earnings delivery. We delivered ZAR 13 billion trading profit, up 8.4% and this compares to a relatively flat profit growth in the prior year. Our trading margin reflects a step-up in quality of earnings rising to 10% from 9.5% in the previous year. continuing headline earnings per share has advanced from a 3.2% contraction last year to a 6% increase in the period. and in line with our dividend policy of 2 to 2.5 cover, the group declared a final dividend of ZAR 4.83 per share, up 6.6% on the prior year. Moving to the next slide. 12 months ago, we told shareholders our priorities were clear: improving organic growth, strengthening cash generation reducing leverage and rebuilding returns. The results demonstrate meaningful delivery against these commitments. I've already referenced between profit performance, but what makes this result particularly pleasing is not only the level of growth achieved, but its quality. Growth was broad-based across the portfolio with every operating vision increasing trading profit. demonstrating both the resilience of the Bidvest model and the benefits of our diversified strategy. Our most important feature of the results is definitely cash. Cash generated operations after working capital was strong, increasing 17% to ZAR 17.2 billion. Free cash flow at ZAR 12.5 billion was outstanding, up 27% and cash conversion improved to 109% from 95% in the prior year. As promised, we used the free cash to pay on debt, reducing our leverage from 2.2x to 1.9x. Our gross debt is down ZAR 3.9 billion and net debt down ZAR 4 billion. The focus on rebuilding returns remains a key priority. ROFE is moving in the right direction, increasing to 38.6%, and ROIC remains unchanged from half year at 13.4%. We remain focused on driving our full invested capital return back to the 14% range. Moving to the next slide. There are a number of advancements that we've made as we focus on executing our strategy. The acquisition of Citron U.K. and North America was key in advancing our international hygiene strategy. Citron U.K. has now been fully integrated into PHS and the expected synergies have been realized. This integration is a game changer for PHS. Arnold America Citron operations have finalized the sales structure and optimization and have expanded our branch network into New York in the United States and Winnipeg in Canada. I'm extremely happy to report that we finalized the renewal of our 25-year bulk liquid terminal operator license and lease in the Durban port. This is a major achievement for the Fred division, setting our annuity bulk liquid operations up for another strong 25-year growth cycle. Two terminal operator agreements under negotiation, and we hope to finalize these soon. The disposal process for Bidvest Bank remains underway. Negotiations are active and as previously communicated, the proceeds will be used to reduce debt. given the current negotiations, we will refrain from providing too much detail on the bank sale, and so I request that you keep this in mind when it comes to the Q&A. Our people focus remains. And this year, our focus on succession planning was amplified. We made progress in achieving most of our sustainability targets and for the first time, 10% of the group's energy requirements come from renewable energy sources. Another key highlight this year is the rollout of our medical insurance benefit through GayeloHealth to just under 14,000 employees and their beneficiaries. Through this half benefit we're bringing more employees into the private health care system in South Africa and change in book lives. Lastly, technology deployment and innovation also ramped up in India, with a number of AI-driven initiatives implemented across the group. Given the nature of our operations, a seamless integration of technology and AI into our labor-intensive portfolios is key. At this point, I'd like to hand over to Mark for the financial overview.

Thank you, Mpumi, and good morning, good afternoon, everyone. This has been a year of delivery. We set specific objectives, which saw M&A austerity coupled with targeted deleveraging and improved organic returns. It's pleasing to see these all come through. The standout clearly are the cash metrics, which exceeded expectations. This creates further capacity and flexibility going into FY '27. While we came out of the first half with a lot of positive momentum as a business in South Africa and more broadly, events worldwide have certainly shifted. The second half has proved to be a more difficult business environment. And yet despite that, the group outperformed, trading profit growth moved from 6.9% at half year to 8.4% for the year. This is a 9.9% growth for the second half. this was done while releasing working capital and materially strengthening the balance sheet. From an earnings perspective, top line growth was harder to come by in the second half that gross margins were improved, Expense control was strong and trading margins improved by 50 bps. Specifically on the cash generation, the second half release was particularly good. Overall cash conversion was 19% and free cash flow is up 27% to ZAR 12.5 billion, which is exceptional. Strategically, it's been a good year, too, and I promised much work has been done on our funding structures. This is evidenced in our net debt reducing by ZAR 4 billion, the debt maturity profile extending and our average debt cost holding. This was particularly pleasing given the ratio from the old Eurobond to the new one and the step-up in borrowing costs at this brought. We've also reduced our net debt-to-EBITDA to 1.9x and our targeting lower still in FY '27. There were no acquisitions completed in the second half. As Prime mentioned, the disposal of this bank continues, there's a new process which has commenced and is progressing. And SBA has been signed for Bidvest Life, which has been concluded, and we await the final SAB regulatory approval. These 2 entities continue to be disclosed as discontinued operations. There are 2 subsequent events to highlight. The first being the sale of 13.25% of Adcock Ingram, together with a portion of our investment in associate which was completed just after year-end and brought in proceeds of ZAR 1.8 billion. These will be used to repay a portion of our old Eurobond, and we retain a 51% majority control in Adcock. The second is that we've added an additional ZAR 20 million working capital facility in the U.K. With this as a backdrop, let's have a look at the more detailed results. From a revenue perspective, revenue up 2.9% to ZAR 130.3 billion, supported by a pleasing improvement in the organic growth of 1.5% with a contraction last year. improved revenue was led by growth in automotive, underpinned by higher retail volumes and in Commercial Products with a strong turnaround in the electrical cluster, improved renewable energy sales and continued plumet growth. Acquisitions contributed 1.4%, mainly in the Services & International and Services South Africa divisions. We'll unpack the divisional results, though later in a bit more detail. In terms of our gross profit, gross profit up 5.2%, the 61 bps improvement in the margin to 28.3%. Margins were well managed across the divisions, but strongly up in freight due to higher terminal volumes and lower CNF revenues. Service International margins benefited from a stronger hygiene contribution. And the automotive margin was under pressure, but this is industry-wide. Our expense performance was very pleasing. Operating expenses up 3.8%, with an organic expense increase of just 2.9%. In certain of the services businesses, wage inflation continues to exceed CPI, which is impacting margins. A number of the businesses, though, did benefit from completed restructuring processes in the first half. Overall expense ratio remained similar to last year at 18.7%. And the overall -- the expense performance has been very pleasing. In terms of trading profit, as Mpumi mentioned, trading profit up 8.4% to ZAR 13.1 billion, with organic growth at 5%. The turnaround in the organic growth is very, very pleasing. Commercial products produced excellent and excellent results. Freight and Adcock were very pleasing, closing with very strong quarter 4 results. Services SA was impressive, supported by an expanded TIC business and inbound travel through the lounges. Banner products in automotive did well given the constrained consumer environment and margin pressures, and Services International was also pleasing with strong hygiene results, offsetting a weaker FM contribution and ForEx translation impacts. Overall effective tax rate at 25.4% is broadly representative of our geographic mix. And the growth in the tax expense is due to the prior year release of prescribed taxes of about ZAR 215 million. Our acquisition costs are significantly down due to the lower M&A activity, and those costs that were incurred primarily relate to the Adcock delisting and the Aquatica acquisition. HEPS is up 6% on a continuing basis, which was a very pleasing turnaround. Now Group EPS is up 1.3%, impacted by impairments in Bite Bank and associate investments. Moving now to our cash generation. Cash flow for the year has been exceptional. The underlying cash generated by operations before working capital is up 7.2% to ZAR 17 billion. We have released with ZAR 0.2 billion in working capital, which is ZAR 1.4 billion in the outflow in the prior year. In terms of the mix, inventory has come down nicely totally in commercial products and branded products. Debtors growth is aligned to our revenue and creditors growth reflects a more normalized inventory cycle. Our cash generation after working capital is up 16.9% to ZAR 17.2 billion, our cash conversion, as Mpumi mentioned earlier, is at 109% nicely up from 95% last year. The bulk of our cash generated has been applied to debt repayment and normal CapEx with limited M&A investment in the year. In terms of our cash generation graph, you can see the second half reflects the seasonal cash inflow, which is consistent with our normal working capital cycle. It is pleasing, though, to reach a neutral cash working capital position for the year. This is something we've been targeting for quite a while. Operating cash generation remains very strong. Moving now to the next slide and our balance sheet. Our debt reduction program, which we signaled last year, is progressing nicely. Our free cash flow is up to ZAR 12.4 billion, which is exceptional. And this has enabled us to reduce our overall leverage ratio by 0.3x to 1.9x. Our operational leverage was better than expected, particularly in quarter 4. Our net debt has been reduced by ZAR 4 billion. We anticipate being able to further reduce our gearing in FY '27 with the capital proceeds from the Adcock and Bidvest bank monetization. We will settle the remaining old Eurobond of $186 million, about ZAR 3 billion in September this year from ZAR 2 billion in available cash and ZAR 1 billion from our RCF funding line. Our current available funding for the Group is ZAR 545 million and ZAR 10 billion domestically. On the right, you can see the impact of the slowing M&A on the reduction of our net debt as well as the related net debt-to-EBITDA ratio. If we turn now to the work we've done on our debt maturity and our interest costs. A lot of work has gone into both the debt maturity and cost mix. We materially shifted out the overall maturity profile with the addition of longer dated with addition of the longer-dated 7-year Eurobond together with new 5- and 7-year domestic bonds, and these were all added tighter spreads. We have repaid more expensive debt, mainly the older preference shares of ZAR 2.1 billion to improve the debt cost mix. Our weighted average cost of debt has stabilized at 6.3%, which is just 10 bps higher than the 6.2% from last year. This is very pleasing given that the new Eurobond interest rate of 6.2% is materially higher than the 3.65% of the outgoing Eurobond. Our expectation for the FY '26 year was that we would end at 6.7%. We remain overweight on variable rate debt at 60%. Our overall interest cost, if we exclude the impact of IFRS 16 and the hedge accounting adjustments is up just 4.3%. Our net debt-to-EBITDA at 1.9x remains comfortably within our covenant of 3x. And obviously, we're targeting to reduce this further into FY '27. Our EBITDA interest cover at 6.1x is comfortably in excess of the covenant of 3.5x. And we continue to add new and cheaper funding sources into the mix. If we now move to look at returns, we remain very cognizant of return levels, managing these over time in alignment with our M&A and CapEx investments. This year, the focus has been on driving organic trading profit growth. and will continue into FY '27. We have clear plans for the previously completed M&A and CapEx to drive up the returns over the medium term with specific targets per business, and we track this actively with more work to do in the coming year. The graph alongside shows how we've maintained ROI returns through the buildup of capital investments over 2023 to 2025 with roughly now growing into 2026. As previously communicated, we're not targeting any material M&A in 2027. Our objective continues to be building and growing businesses for long-term value. We have returned metrics which are appropriate for each business acquired or CapEx completed with a glide path to meet these targets, which we set it at inception. We balance these growth objectives with appropriately aligned sustainability targets so that the growth is multidimensional. Moving lastly now to our capital recycling. Disposing process of our Financial Services division is making steady progress. We have signed the SPA for bites life and have received [indiscernible], we are now waiting for the final SAR regulatory approval. The disposal of Bidvest Bank continues with the new process underway. From an operational perspective, Bidvest Bank experienced some top line pressure with slower capital deployment, lower noninterest revenue and further ECL impairments Expense management, though was good. The deposit book remains stable and all regulatory ratios are healthy. Bidvest like delivered a good outcome. These 2 entities have been separately disclosed as discontinued operations as per. In terms of the standard, depreciation amortization continue to be suspended as part of this disclosure, and this has been adjusted for in our normalized headline earnings. We have also impaired the net asset value of the bank to reflect the FY 2025 closing position. As was the final -- a few final completing thoughts. The world we saw 6 months ago has much changed with volatility in the order of the day, geographically, politically and financially. Midwest decentralized operating model gives us flexibility to adapt to these shifts and appropriately repositioned as required. A stronger balance sheet with low average and more funding capacity creates headroom for growth as well as resilience. We'll continue to focus on utilizing free cash flow to further deleverage An efficient margin management remains core to our DNA. Thank you.

Thank you very much, Mark. So now we move to the divisional review. Starting with Services International. Revenue at ZAR 44 billion is up 2%, supported by Hygiene poor growth rental asset expansion, improved price recoveries and the full year integration of Citron. Top line and margin pressure did come through the facilities management portfolio, and this did moderate revenue growth somewhat. The gross margin expansion in the division is due to a change in mix as the higher-margin Hygiene operations gross profit contribution increased year-on-year. Cost control was excellent with expenses increasing only 1%, excluding acquisitions. The division delivered ZAR 4.4 billion trading profit, up 4.3% and the positive mix impact referenced earlier, resulted in a trading margin expansion from 9.8% in the prior year to 10% in the period. Roughly at 146% is an excellent return and 100% cash conversion is outstanding. Turning to the operations. Our hygiene businesses sustained their momentum from half year delivering exceptional profit growth. In constant currency, our hygiene businesses across Singapore, South Africa and the U.K. are Group profitability. Such in U.K., as I said earlier, has been successfully integrated into PHS and the synergies that we had expected to realize have come through. Our Citron North America operations increased their sales capacity in Canada and the U.S. and 2 additional branches have been opened. Notwithstanding this additional growth investment in branch and sales capacity site delivered in line with business plan and on budget. Our Hygiene operations profit now account for 54% of the division's trading profit. Our facilities management operations contracted slightly due to lost business, contract restructures and lower ad hoc revenue. The South African cleaning business maintained its half year momentum delivering a standout double-digit profit result. I'd like to congratulate the services international team for recommendable performance. Moving to freight. Revenue at ZAR 9 billion was up 2%, driven by annual rate increases, improved capacity utilization and higher bulk grain and mineral volumes. This growth was countered by lower international logistics volumes, customer down trading and lower commodity volumes in Namibia. The gross margin expanded due to positive mix reduced lower-margin disbursements and clearing and forwarding and improved efficiencies, whilst high activity levels in the terminal operations drove up expenses. Fred delivered an exceptional turnaround from prior year lifting trading profits to ZAR 2.3 billion, up 10.3% and expanding the trading margin to 25.3%. Roughly improved to 42.4% and as profit growth outpaced the increase in funds employed and 94% cash conversion in this division was excellent. Turning to the operations. While grade volumes increased 15% due to higher May, rice and wheat handled, resulting in a phenomenal profit increase in this terminal operation. The bulk liquid terminal delivered a solid performance driven by annual rate escalations, higher tank rental and a 10% volume increase. The bulk mineral terminal delivered an excellent profit result off the back of a 6% volume increase annual rate escalations and more cargo moving on rail. The multipurpose terminal delivered an outstanding result as volumes increased 29%, driven primarily by increased exports of chrome, manganese and iron ore. The container operation delivered a significant turnaround in profitability as solar and steel volumes increased. Additional cargo has also handled and rental income also improved. The South African clearing and forwarding operation delivered a much improved second half performance. disruptions in logistics caused by rates diversions, fuel volatility and higher costs were partially offset by the strong performance in overland logistics, which is supported by new customers efficiency improvements and fleet growth. Tough trading conditions are now Mozambique and Namibia operations persisted. In Namibia, lower volumes, increased competition, port bottlenecks limited transport capacity and softer oil and gas activity impacted profitability. On the other hand, Mozambique delivered a significantly improved result but remains constrained by lower volumes. A ZAR 2.5 billion CapEx has been approved. And at a high level, the fit of this CapEx is as follows: ZAR 1.6 billion has been approved for a second LPG terminal in Roche's Bay and this is the biggest capital allocation. The balance of the CapEx has been allocated to expanding our grain capacity in Durban port adding additional bulk liquid tank capacity in Durban port and also increasing warehouse capacity in Namibia. As is customary, we'll advise once construction has started and then closer to commissioning will provide further information related to returns, payback period, et cetera. Overall, I'd like to congratulate the Freight team for an excellent result. Moving to Services South Africa. Revenue at ZAR 13.6 billion is up 7.5%, driven by new contract wins, improved recurring income and strong growth from our newly formed testing, inspection and compliance cluster. This was further boosted by the acquisition of a quote that came into the numbers for 9 months. The gross margin was stable as margin pressure in security and travel services was offset by margin expansion in the TIC and hospitality clusters. Operating expenses increased 5.8% due to investments in tractor capacity inclusion of expenses from acquisitions and material increase in fuel costs as a result of the war in the Middle East. Trading profit at ZAR 1.6 billion was excellent, increasing 8.3% and the trading margin increased slightly to 11.5%. Roughly at 101% is slightly down on prior year due to increased factory CapEx and the inclusion of a capital cash conversion at 96% was excellent. Turning to the operations. The hospitality and catering cluster delivered phenomenal growth driven by a record performance from the lounges as passenger volumes increased and the restructuring in catering also improved profitability. The security cluster was slightly down due to pricing pressures loss of high-margin work, higher fuel costs and wage under recovery. Outside of this contraction, excellent performances were reported by the cargo warehouse management, tracking and payment technology businesses. The travel cluster struggled this corporate volumes continued to decline, and the fourth quarter was further impacted by lower inbound volumes and lower rebate income due to traveling city created by the war in the Middle East. The Allied cluster improved from half year due to strong recurring revenue in the water business and contractual sales in the indoor and outdoor plants businesses. Operational and margin challenges in the Laundry and amenities businesses did taper performance in this cluster. And lastly, our TIC services per delivered a standout profit results, driven by solid revenue growth, record samples processed and the inclusion of Aquatic I'd like to congratulate the service South Africa team for an excellent result. Moving to Branded Products. Revenue at ZAR 13 billion was relatively flat reflecting subdued demand across several markets. The gross margin improved due to positive product mix, production efficiencies and favorable pricing. Similarly, operating expenses were exceptionally well managed, declining 1.9%, reflecting strong cost discipline, restructure benefits and operational efficiencies. This margin and expense management translated into a trading profit increase of to 1.2 billion and a trading margin expansion from 8.6% to 9.2%. ROFE in this division continues to increase and is now at 38% and cash conversion was excellent at 105%. Turning to the operations. The data print and packaging cluster led with solid performances from the print and packaging businesses, driven by acquisition synergies, resilient demand, pricing discipline, factory efficiencies and tight cost management. The office product cluster also delivered a good result driven by a record performance from the furniture business, higher profitability in office automation and a resilient performance from the stationery business. And then lastly, the Consumer Products cluster delivered a mixed result. Revenue was impacted by lower TV and satellite accessory sales, price deflation and lower retail demand as international travel volumes came under pressure in the second half of the year. This was countered by a solid performance from office and leisure due to the inclusion of Alka products and disciplined margin and expense management. well done to the branded products team for a solid set of results. Moving to Commercial Products. Revenue at ZAR 18.3 billion is up 8.2% and reflecting resilience in a very challenging bidding environment. Growth was led by the trade cluster, benefiting from smart meter sales, improved renewable sales and continued branch expansion. The gross margin increased slightly to 27.4% due to a favorable product mix and active margin management across the businesses. Operating expenses increased 4.9%, which is a low revenue growth. And this increase is notwithstanding additional costs incurred related to the opening of new branches. Strong operating leverage resulted in an impressive 27% increase in trading profit to ZAR 1.2 billion, and the trading margin also improved from 5.5% to 6.4%. Roughly a 22% is up from prior year's 16% and cash conversion at 144% is spectacular. Turning to the operations. The trade cluster made a material contribution to profit growth as Plumblink delivered a record result, driving its branch network from 50 at point of acquisition to 166 in the period. The turnaround in Electrical was driven by the large smart meter order, stabilization of renewable sales and the rollout of additional and revamped Baltic branches. Pressure was still felt across the packaging, catering, warehousing and DIY and tools businesses due to softer volumes, margin compression and manufacturing efficiency. -- the workwear, leisure and the general industrial businesses delivered excellent results as volumes remained robust in certain markets. Overall, market share growth was a key focus for year for the division with the opening of 8 new [indiscernible] stores, 10 new plumbing stores and 42 new [indiscernible] outlets. I'd like to congratulate Commercial Products division for a stellar set up as well. Moving to automotive. Revenue at ZAR 28.7 billion is up 5.5%, supported by a 12% increase in new vehicle volumes. This excess supply of new vehicles did, however, contribute to considerable discounting and substitution, resulting in reduced demand for used vehicles. Fleet sales were materially up on prior year and our secondhand motor retail business produced excellent top line growth. The gross margin declined primarily due to a decline in both new and used vehicle margins. Operating expenses remained tightly controlled at a marginal increase of 0.4%. Restructures in the prior year, cost-saving initiatives and lower variable costs all contributed to the cost containment. Trading profit grew 7% to ZAR 966 million, boosted by the proceeds from a long outstanding insurance claim. And the trading margin remained broadly stable at 3.4%. The division is roughly a 23.7% is slightly down on prior year due to elevated inventory and receivables. However, cash conversion at 98% was excellent. Turning to the operations and the franchise motor retail cluster, the increase in new vehicle volumes was partially offset by a decline in used vehicle volumes. Our traditional OEM brands grew ahead of the market, whilst our multi-franchise strategy continued to gain momentum with Chinese brand growth materially ahead of the market. On the downside, pricing pressure resulted in a 0.8% gross margin contraction across both new and used vehicles. Our non-franchise motor retail cluster continues to gain momentum with material revenue and gross profit growth achieved in the period. The plan communicated at half year of having all our branches nationally operating at full capacity was achieved. However, this investment in operational capacity impacted the bottom line. Whilst the secondhand retail operations improved profit performance from last year, our business plan wasn't met. With full capacity and infrastructure now in place, we're confident that our profit ambitions will be realized in the coming year. And lastly, in the Allied Services portfolio, our vehicle inspection and body building businesses delivered acceptable results despite significantly higher fuel costs that reduced CapEx spend and demand for services across large fleets. Our short-term insurance business delivered a standout record performance and the investment portfolio was also ahead of the prior year. I'd like to congratulate the auto team for a robust result in a very challenging operating environment. And the last operations being Adcock Ingram, revenue at just under ZAR 10 billion is down 0.5%, driven by an average price realization of 1.8% and a 1.47% SCP increase and volume growth of 0.9%. Repatriation of certain portfolios moderated growth. The gross margin improvement was due to stronger factory recoveries, a favorable portfolio mix and exit of lower-margin products. Expenses were exceptionally well managed, increasing only 1.2%. We flat revenue growth and outstanding margin and expense management resulted in an impressive ZAR 1.3 billion trading profit, up 9.4% with all divisions reporting profit growth. I would also like to welcome our newly appointed CEO of Adcock Ingram. Gulani brings more than 25 years of pharmaceutical and health care experience across South Africa, sub-Saharan Africa and international markets, including the U.K. He joins Adcock from Pfizer, where he served a sub-Saharan Africa cluster lead and South Africa Country Manager. I'm delighted to welcome relining to Adcock and the broader business family and wish him every success in this new role. I'd like to congratulate the ADCO team for a solid set of results. Moving to our Hygiene services. We remain focused on building a leading international hygiene services business. Our 2026 financial performance amidst global geopolitics and macro volatility demonstrates that structural drivers such as urbanization and growing health and wellness awareness remain intact and will continue to support future growth. Off year trading profit is up 18% in constant currency, whilst profit margins have accelerated above the industry norm of around 15% to 18.7%. Our Washrooms service have increased from 6.ZAR 5 million sites in 2024 to ZAR 7.5 million in 2026, and our client base is in the thousands with extremely limited customer concentration. We're really proud of the size of the global hygiene portfolio, scaled up in just 6 years with a strong future growth path. Moving to the closing slide, 2026 for the year of restoring momentum and 2027 will be a compounding achievement of the current year. We enter our second phase of capital discipline and our commitments remain improve organic growth, strengthen cash generation, deleverage and rebuild returns. All divisions will focus on delivering the best organic growth possible. Our international operations have cycled through contract restructures and contract losses. New business wins awarded in the second half of the year will be mobilized and the strong momentum in the hygiene operations is expected to continue. Our Southern African operations will benefit from structural growth from hospitality and tourism demand and improved TIC and water volumes. We expect increased bulk grain and mineral volumes, though the current mine does introduce some uncertainty. The uptick in infrastructure spend, ongoing demand for office products and a turnaround in our second-hand motor retail business will drive growth in the trading operation. A step up in what is an already outstanding cash position will be supported by continued disciplined working capital management, no material M&A and cost discipline. Free cash will again be used to pay down debt, advancing our ambition of ending the year with the net debt -- with our net debt-to-EBITDA closer to 1.5x. We've got a range of about 1.5x to 1.8x that we're working towards, but we're hoping to end closer to the lower part of that range. Rebuilding our return requires a step-up in organic growth, especially of recently acquired businesses. To further port returns, our large businesses need to deliver ahead of business plan and budget. Our teams are responding with innovation, operational focus and renewed energy, initiatives and technology, data, AI, sustainability, while the skill development and customer-led solution. are already helping us improve resilience, enhance productivity, create social value and open new commercial pathways. Our 2026 results is a team effort with all divisions contributing to improved profitability and earnings. I'd like to extend a big thank you to the executive team for their exceptional leadership as we navigated through a period of unpredictability, escalating global tensions and weak macroeconomic conditions across multiple territories. The year was tough and our teams comprising 130,000 employees across 14 countries and 750-plus branch locations or rose to the occasion. From myself, Mark and Joe, I acted a big thank you to our teams all over the world who have again demonstrated the resilience of the Bidvest portfolio and their ability to find growth opportunities and is changing conditions. To our shareholders, thank you for your continued support. The Group has restored earnings momentum, demonstrated the cash generative quality of the portfolio and taken decisive action to sharpen capital allocation. Our focus remains firmly on execution and on delivering sustainable long-term value for all stakeholders. Thank you very much.

Thank you for me, for those comments and a very clear outlook and prospect statement for the way forward. Judith, maybe you can just repeat instructions on how to put questions in the queue before we start with the Q&A session.

[Operator Instructions]

Thank you, Judith. Well investors go through those motions. Maybe what I can see here on the webcast, there's a few questions around Bidvest Bank. You did make a comment at the start of your remarks. Questions around timing, NAV and all those types of things. Maybe you just want to reiterate that point. Okay.

Thanks, Ilze. Yes. So because we're busy with negotiations, we do need to be careful about what we say. So everything really related to the bank becomes quite sensitive. What we will do is that once we have got SPAs in regulatory approval through and we've made what we believe to be material progress and the call it, the finishing line is in sight. We will issue a sales announcement. We'll give you a full view of the nature of the transaction and will also provide a full breakdown in terms of the accounting treatment that you should expect. So we'll make that commitment. It will come up through a sense at the appropriate time so that you really don't have to guess around nature of transaction, accounting treatments, et cetera. So we'll do that at the right time.

Thank you -- thank you for me. So it deals with those questions related to discontinued operations as they were posed. Mark, maybe one for you. One investor. Just wanted to clarify whether the normalized HEPS was adjusted for the associate loan write-off. If not, what the growth might have been if 1 did exclude that abnormal event?

Can work it out before. But -- so was it adjusted for? No, it wasn't. Okay. I'll have to do the math on it, and we'll come back to them now.

Thank you, Mark. So it be clear, we did not adjust for that write-off in the normalized headline earnings.

You can actually see it the associate line. Yes, you can actually see that non-adjustment on Page 10 of the announcement.

All right. Probably, maybe one for you that relates to Services International, and I'm combining 2 investor questions here. It's around synergy extraction in Service International. It talks about what the underlying constant currency growth rates were in that division and whether there were any specific countries that in constant currency went backwards? And what do you feel about the momentum of the new business wins that have been flagged in some of these areas that's been under pressure, okay? That's specifically hygiene. That is hygiene and the Services International or all in Services International. So suppose organic is around the Citron acquisition, inorganic and then constant currency in a division that's largely offshore.

So the underlying -- so let me start with the hygiene operations first. all the hygiene operations in constant currency to profitability, our hygiene business in Australia is very, very small. So not really even worth a comment. It really gets lost in the rounding. So the Australia comment will be more on FM. So outside of that, Hygiene operation is very strong. PH is particularly strong because of the integration of Citron, we had communicated that there would be a lift and shift. We did exactly that. We closed all the branch infrastructure. We took out all the costs that we didn't need and really, it was like a gross to net benefit into PHS. And so PHS is performance at a profit level in pound was very strong. From a Citron perspective, as I indicated, we're very comfortable with the profit performance they delivered in line with budget, notwithstanding the fact that they were quite a significant upstep in working capital deployment as they opened up 2 more branches and also took additional costs as we increased that sales infrastructure. So very happy with the organic growth that we delivered that across -- the South African business was excellent. So just by the way, if they also delivered a very strong hygiene performance. And there, from a facilities management perspective, we had indicated that we have indicated thta we impacted by contract losses and contract restructures. Those were in our South African FM business in Nunan and in Australia, and that overall kind of defers the overall FM performance, and they were slightly down. On a go-forward basis, we're comfortable that's now in the base, we don't have any more contract restructures that we are anticipating going into the new financial year. We mobilized -- or actually new contracts rather was awarded in the latter end of FY '26. Those will be mobilized in the first half of FY '27. And I think you'll see a nice contribution coming through in the second half of the year. That's right. And then just the synergies around citrin North America, whether those are material last year. So the main synergies that we've spoken about were from a procurement perspective. in terms of the buying across all of the then guess for some of their products across the rest of the hygiene network that we have. We started drilling out only 1 product line I recall from Allen Faiman, I think it is only 1 product line at the moment that we started drilling out. We still have quite a bit to do in terms of their procurement basket. So I would probably say that in FY '26, the procurement synergy is limited, only because we're still rolling through their existing stock. So as soon as we roll through the existing stock, we've pulled through on product line. And then in FY '27, as we roll out of the existing stock, they'll start going into the kind of more price-optimized buying that we have across the space and consumable.

Thank you. Mark, you'll go back to you.

Yes. Thank you. Just to revert on the impact of that associate net impairments. And if we'd adjusted for it in normalized headline earnings on a continuing basis would have gone from 5.9% to plus 8.7%. So the impact is plus 2.8%.

Thank you for that, Mark. Then there is can share the question around transmit, are looking more and more towards the private sector, for partnerships and concessions? Do you see opportunities in import and rail for Bidvest with transmit?

Yes. So I mean I think the fact that we are bold enough to deploy ZAR 2.5 billion CapEx already. We are moving forward with building a second LPG terminal. We have got CapEx approved already for additional capacity in our grain and bulk liquid operations in Durban port already signaled the fact that we're confident in the rail reform, and we're very close to transit. So we also have a sense of what is to come. from a rail perspective, you'll recall that 11 private sector operators were awarded concessions. My understanding is that 6 of those operators will come on stream in 2027, early 2027. So that's as of the latest coming out of transmit. So that's going to be -- that's going to be great. we obviously don't participate on the rail side. Ours is port terminals. We handle the product on and off the ship. And really, that's where we're at. So the big opportunity for us is the extension of our leases, which we're securing with 2 more that we're still negotiating and obviously, being able to secure new leases, and we have secured on new lease, and there are a number of tenders out at the moment. And so you can already see the activity that is there from a transmit perspective. The bulk mineral that is out in Richards Bay, they're looking for private sector participation there, and it's very clear in the terms and conditions. There's others also in Capetown. So I mean I would concur with a view that the appetite from Transnet to bring in more private sector is digitally strong. And in terms of where we're at, we're really confident it further progress being made with regards to rail reform and more cargo moving on rail over time.

Then there's another sort of batch of questions, and I'm going to put together, it's around -- specifically towards the automotive division. -- question about whether we can quantify the insurance claims payout impacting the results. And then also noting that rebuy cars move away from [indiscernible] terms of its testing results and whether this has had a major impact on [indiscernible] and how the business is doing in June?

Yes. I'll talk to Detra, and then Mark will talk to the insurance piece. So when we acquired Detra, through the due diligence process, were very implicit in ensuring that Barco has made away that Bidvest, I guess, is the acquirer side, and that was communicated and whether we buy cars would stay on as a customer. Through the DG, we by cars had indicated to us already that they would be starting their own vehicle testing service. And so we accounted for that in the valuation. So the valuation for the revenue portion of Detra was taken down materially. In fact, we only paid a because our expectation was that we would only retain that contract for a year. We ended up retaining it for closer to 2 years. So we got a little bit more earnings out of it. but we are told for it in the valuation, and we were expecting it to exit in the period as it did.

Thank you. Thank you for me for that. I suppose there's many rebuy shareholders on the line. So that's where that coming comes through.

The increase on the insurance claim was ZAR 149 million. Thank you.

Thank you, Mark, for that. And then -- can we go to we have a question around the gearing. So the net debt-to-EBITDA target towards the 1.5x, does that include proceeds from the sale of Bites bank to get there?