Tongaat Hulett Limited (TON) Earnings Call Transcript & Summary

Well, good morning, ladies and gentlemen. I'd like to assure you that all COVID-19 protocols are being observed. And we have our spray and all sorts of wonderful things around us here. Let me welcome -- extend a warm welcome to all, and a big thank you for joining us this morning as we release our financial results for year ending March 31, '20. As all of you are acutely aware, Tongaat has had a turbulent 18 months, but we are really excited to be releasing results, which demonstrate both the significant improvements and alignment to our previous commitments. Today, Rob Aitken, our CFO, and I will be presenting the results. And at the outset, I'd like to thank Rob and his team and our auditors, Deloitte, for the significant efforts and sacrifice they have made to ensuring we are able to release our results today. Thank you all. Our agenda is short and to the point. I'll handle some of the high level communications, whilst Rob delves into the financial and divisional performance. We will then allow for Q&A. I think it's also appropriate to extend mine and the Tongaat team's thanks to firstly, the Board of Directors under the leadership of our Chairman, Louis von Zeuner. I thank them for their support and engagement. I would also like to welcome the 2 new non-exec directors to the board, Ms. Louisa Stephens; and Mr. David Noko. We appreciate your commitment to Tongaat, thus strengthening our Board and providing additional oversight and stability to the Board. I would equally like to thank our shareholders, our lenders, our key stakeholders and our valued customers, your patience and ongoing support is much appreciated. Then to my executive team and the overall Tongaat leadership and every employee in Tongaat, who have been instrumental in us being able to move the needle. We thank all of you. We continue strengthening our skill set. And here, I wish to welcome the latest member to our Exco, Sashir Milne, who joined us as Human Resource Executive. I'm confident that we have the very best team for Tongaat at present. I think I've got to remind everyone that we are a leading player in the sectors in which we operate. We're a leading agri business in Africa, a leader in the starch and glucose, sugar, ethanol, cattle and animal feeds markets. We own one of the largest portfolios of premier commercial land in KwaZulu-Natal and, in actual fact, in South Africa. If just briefly go through the 3 divisions. We start with the starch business, with revenue of ZAR 4.2 billion across the 4 plants, 3 in Gauteng and 1 in the Western Cape. With an excess of 850,000 tons of maize processing capacity, our sizable sugar business with revenue in excess of ZAR 15 billion across the 13 production facilities in SADC, capacity to produce 1.7 million tons of sugar per annum, capacity for 40 million liters of ethanol per annum, and capacity for in excess of 400,000 tons of animal feed per annum and farming in excess of 45,000 hectares of land. Our property business with just under 20,000 hectares of land, of which 11,700 hectares of land is prime commercial land in KwaZulu-Natal, with an indicative fair value of around ZAR 11 billion and developed value of land in excess of ZAR 55 billion (sic) [ ZAR 35 billion ]. In the last 12 months, we have seen significant improvement, and I'd like to share just a few of these with you at the onset. We've strengthened our governance and our financial control across the business. We've strengthened our internal audit, discipline and assurance. We've improved decision-making at all levels of our organization, and we've improved our compliance to King IV. At the management level, we've improved transformation at the Board and of Exco. We've deepened our relationship relationships with our stakeholders in all the markets in which we operate. We've strengthened implementation of our policies and procedures. And bearing in mind where we come from, this is absolutely crucial for us. We've anchored and improved our people processes. We employ in excess of 30,000 employees. This is fundamental for us and the success of our business moving forward. And we continue with our launch of our values, as we indicated during the last presentation. From a business perspective, we continue focusing on improving our health and safety in our workplaces. Sadly, we did have 1 fatality in our Zimbabwe operation during last year when employee was killed in a motor vehicle accident. Our Total Injury Frequency Rate has declined from just over 2.04%, down to 1.63%. So we are making progress, but safety remains at the top of our agenda always. We've repositioned and revitalized our assets, and we've step changed all operational metrics, and I'll share some of that with you in a moment and Rob will talk to you some of the detail straight after my presentation. We've equally improved and better positioned our human capital. Today is about finance. So you're going to see a lot more color around our financial results, but we have enhanced our cash position. We've met our debt reduction milestones to date and we've improved our financial metrics across the board. We [ can't forget ] where we come from and the accounting irregularities that we uncovered last year. And you'll remember that we called for PwC to do a forensic investigation. And they uncovered key findings, sort of 8 key findings, and I won't go into the detail of these, but I can assure you that we've unpacked each one of these buckets that they've uncovered. And we've ensured that we've changed the discipline, the processes within our organization to deal with this, and we're making progress. We fixed and improved our corporate governance. There's always work to be done here, but we have made a significant step change. We've implemented comprehensive ethics governance, and we've restated our historic financials. We are cooperating with the regulators in South Africa, many of them, and we are cooperating with regulators in Mozambique and Zimbabwe to assist with the investigations into these accounting irregularities. The regulators have been in contact with some of the former directors, so we know that the wheels are slowly turning. Our criminal investigation is SA -- in SA is well advanced. We have been working with the NPA, and we expect a decision from the NPA within the next 3 to 6 months. And equally, the criminal investigation in Zimbabwe is well advanced. And then finally, the civil claim against former executives are imminent, and we're expecting that in the next weeks. Last year, we set ourselves a strategy, and we firmly believe that our strategy remains fit for purpose. It's anchored on 4 pillars. The first 2 are about driving efficiencies within our business and rightsizing the fundamentals of our business. It's about taking cost out of the business and repositioning our business as a low-cost producer and enabling us to service the significant debt that we have. The third is about top line growth, which is creating a platform for sustainable, profitable growth. And then finally, this is about building capability and capacity in our people and our processes, which includes elements like IT, reporting, et cetera. We firmly believe that our strategy is delivering the desired results. And I'll share with you some of the operational highlights. The first 2 are dealing with reducing our cost and improving our efficiency. So I'll start at the top left. We see Mozambique refinery, which is only commissioned sort of in the middle of last year, reaching 60,000 tons, which is around 70% of its capacity. Our milling costs in South Africa are down in excess of 31%. The refining costs down by 24%. We've seen Zimbabwe, the refinery and the ethanol output, up by 11% and 30%, respectively, significant improvements in that business. [ We see ] the South Africa sugar farming business being completely optimized, and there has been a lot of traction in the space. We have had to reduce headcount by in excess of 10,000 people. The business was sort of one might call fat in terms of headcount. Our Mafambisse mill in Mozambique, last year probably at this time, we were looking at closing the mill. And the team, under leadership of Simon, have done a fantastic job in reducing the annual loss of around ZAR 100 million and brought that down to breakeven. We certainly see upside in Mafambisse moving forward. In Zimbabwe, we see an increase of cane supply by 4,000 hectares through Project Kilimanjaro, a project we launched last year with the government and the President and many stakeholders in that country, a significant project, which will add significant feedstock to our business. And then equally in Zimbabwe, we've also been able to pay down a significant amount of our U.S. dollar loan in that country, and Rob will talk to that in a moment. But at the same time, we've been able to declare dividends out of Zimbabwe. If we look at the top line, we see white sugar market in South Africa share grow to about 35%, a great improvement. And then the overall sugar to in excess of 27%. We see strong sales growth in Mozambique, sugar sales growth in Mozambique. And we're improving our power generation revenue opportunities in all the plants in which we operate. Our diversification projects are well advanced. And I mentioned 2, we talked about ethanol and we talked about bioplastics, to name a few. There are many that we are busy with and the team are working hard to bring those to fruition. And then on people, we see ourselves leveraging our internal talent. As I mentioned, we have in excess of 30,000 employees. And we have significant talent and caliber of people amongst our own ranks, and we certainly are leveraging that talent where we can find it. We continue driving our ambition to become an employer of choice. And this is for 2 reasons: the first is to retain the talent and the people that we have; and the second is to attract external talent to complement the mix of our internal talent. And then we continue driving change management programs. Remember, this business has been through a huge amount of change over the last 18 months so we need to bring every one of our employees along on the journey with us. We're absolutely focused on our debt reduction initiatives and we've initiated, identified and closed some deals to the tune of ZAR 6.4 billion. We had a legacy pension fund with no employees, DC pension fund, which we were able to liquidate just over ZAR 500 million. As you all know, we sold our Namibia packaging operation, generating ZAR 110 million. And then we've concluded deals for land sales for around ZAR 100 million. We've recently signed the SPA for the sale of our Tambankulu Estates in Eswatini for ZAR 370-odd million, and you'll see that closure in the coming months. And then finally, many of you will know that we signed a sales agreement to SPA with Barloworld at the beginning of the year to sell our starch business for ZAR 5.35 billion. Shortly -- or certainly at the beginning of the first lockdown, Barlo believed that it was a MAC event, which is a material adverse change, due to the impact of COVID and the lockdown on the country. We obviously disputed that, and the dispute, as per the SPA, was referred to a third party. We jointly selected Rothschild and Co. to manage the dispute on behalf of both parties. If we look at some of the MAC key dates, we've completed the first submissions, where Barlo submitted on the 18th of July and Tongaat in the 3rd of August. We're in process with the second submissions. Barlo submitted on the 10th of August, and we will be submitting our submission on the 17th of August, which is Monday. Both parties then get an opportunity for oral presentations to Rothschild on the 22nd of August, which is next Saturday. Rothschild then have more or less a month for their final and binding ruling, which will be on the 21st of September. Tongaat remains optimistic that there hasn't been a MAC event. Last year, we also made a commitment that we would improve our cash flow by ZAR 3 billion in 2 years. We set ourselves an ambitious target in the last year to achieve ZAR 1 billion cash flow improvement. And in the sort of 8 or 9 months to the 31st of March '20, we were, in actual fact, able to deliver. I'm very proud of the fact that we were able to deliver ZAR 1.57 billion of cash flow improvement, driven through cost reduction initiatives and working capital improvement initiatives. We still have ZAR 1.5 billion for this financial year, and we will continue delivering ongoing cost reduction and working capital improvement with some interest savings as we pay down our debt and we firmly believe that we'll meet the milestone that we've set ourselves. I think this sort of gives context to probably the most important slide that I'll share with you today, and that's really our financial results. And we really are very proud of our financial results, and Rob will give you all a lot more color in terms of these results. We see revenue up 18% to ZAR 15.4 billion. Our cash flow from operating activities up 62% to ZAR 2.1 billion. Our operating profit up 491% to ZAR 3.3 billion driven largely through our sugar operation, with a significant improvement from ZAR 350-odd million to ZAR 3 billion. Starch is -- has always been a very consistent business, and they've delivered hundred and ZAR 616 million, and we see a nice improvement in our property business to ZAR 658 million. Our adjusted EBITDA, up 397% to ZAR 3 billion. And again, with the sugar business contributing a significant amount, up from ZAR 400 million to ZAR 2.7 billion, starch consistently delivering at ZAR 729 million in the property business up to ZAR 660 million. Sadly, still a headline loss, but we've seen a significant improvement by 80% to a loss of ZAR 285 million. And before I hand over to Rob, I would like to share a taste of a new campaign we are launching for our sugar business, our focus being proudly South African and in amplifying support for local product. Please join us as we celebrate South African heritage and voice our pride. Please find the Hulett's National Anthem. [Presentation]

I think that's something we can all be very proud of. And thank you, [ Bruce ], for sanitizing up here. Good morning, everybody. I'm going to take you through the financials. If -- can I just get the slide? Sorry, apologies there. It's still the Hulett's packaging, which is very pretty to look at, but it's a bit hard for me to talk to. Thank you very much there. So moving on to the financial results. If I look here and where we find ourselves is in quite a fortunate position relative to where we were when we presented in December. And I think one of my roles here is to obviously unpack the results for you in a fair bit of detail and give you the flavor and the color that underlies the performance and make sure that you can see the turnaround strategy coming through in those [ streets ]. I think this is all set in quite a difficult context though for the company. We have a high amount of debt, and we have been in the process, over the last financial year, of -- with 2 debt restructures, both in SA and Mozambique, which have been ongoing. And those have obviously added to some of the challenges and some of the difficulties that the business has faced. And we'll get into those as well. Just to set the scene, though, and it's important to do this. We are undertaking a number of asset disposals. And so this is the first set of results that we've had to -- that reflect the starch and glucose operations separately as a discontinued operation. And so while we go through the results, I think it's worth noting that we have not effectively had all of our results exclude the starch and glucose operation, both in the current year and in the comparative. And so it's something that we still get used to because it's still very much a key business. And I think just to make sure that, that doesn't detract from a very solid performance in that business over the year. But just to make that point for everybody. And if I look at some of the other dynamics we faced, we had hyperinflation in Zimbabwe, which we adopted for the first time this year. And that has really a pervasive impact on our business. And some of the effects are obviously unique and not all that familiar. And so we'll try our best to explain that and pull out those key elements for you in the results. And I think really the story of the improvements and the substantial recovery in the results, it does end up being offset, to a large extent, by the finance costs and also the hyperinflationary loss in Zimbabwe. And that's something that we'll get into as well. But it's just to say that I think the business -- the strong performance obviously is hampered by the debt burden that the business carries. And so before we get into that, I think -- and deal with some of the dynamics, it's probably worth touching on the group financial results overall. Now this is the last time that we'll have a group results in this presentation with the starch business in, but our EPS overall improved 109% to ZAR 0.89, and our HEPS improved 111% to ZAR 0.90. And that's both relative to losses in the previous year. Obviously, there was no dividend declared, and that's really in line with where we find ourselves in terms of gearing and overall debt. And I think really, you can't really go a day without mentioning or being affected by COVID in a number of respects. With the timing of the lockdown and with our year-end being the 31st of March and the lockdown being the end of March, we haven't had a major financial impact in this set of results. I think what has been evident, though, is we've undertaken a lot of procedures to make sure that we have assessed our asset values for impairments and being robust about those asset impairment testing and the cash flows in the various scenarios. We've also assessed our credits and exposures and a number of items around our property business, particularly the land inventory value that we have in our balance sheet. So while it hasn't directly impacted our results, we have done a lot of work to make sure that the results do stand up to what is actually unfolding now in terms of the economic environment we find ourselves in. And the major challenge with COVID, though, for the year-end was the fact that we did it remotely. And then I think I will express my gratitude to my own teams out there for the long hours and some very challenging dynamics to work through as well as the auditors for going through us. But I think we've made it through and probably a little bit later than I'd hoped, but I think we've got to a good landing here today. So to get into the salient features of the business, and this is all again our continuing operations. And Gavin has touched on a lot of the numbers here in his overall side. And I think my role here is to just unpack 2 things here. Obviously, our operating profit is up 491% to ZAR 3.3 billion. And I think it's easy to sort of stand back and say, "Oh, it's hyperinflation in Zimbabwe." And I think that would be almost missing the underlying performance improvement that we've seen here. So we have and we are flagging that our operating profit, excluding Zimbabwe, is up ZAR 1 billion year-on-year. And that is something that's very important. And I hope we do enough to pull that out in the presentation. And the other thing in there, there's a lot of green on the slide. And the other thing to highlight is obviously the net monetary loss of ZAR 1.3 billion, and that's a direct effect of hyperinflation, and we'll get into that. And then the adjusted EBITDA is up 397% to ZAR 3 billion. And if we look at that, that's obviously lower, and that really is a concept that Tongaat Hulett has adopted in how we report internally. And that adjusted EBITDA simply removes the fair value adjustments of our biological assets. And those are noncash in nature. And effectively, we're trying to get to manage operating profit that's as close to cash as possible, and that's an important measure for us, and I'm sure you understand the dynamics behind that. So if we get into the hyperinflation specifically, we adopted IAS 29 Financial Reporting in Hyperinflationary Economies from -- effective from 1 April of 2019. And that requires us to obviously do a number of things with our results. And effectively, we rebase them for the impact of inflation and restate the transactions as if they happened in the purchasing power at the end of the financial year. So the inflation rate that we use to do that is obviously very important as is the timing of when transactions happen. And the inflation rate that we've experienced in Zimbabwe over the year is 676%. So general, Zimbabwe is a very challenging economy. And I think -- my hats off to the team in Zimbabwe, therefore, for navigating it as they do so well and sort of keeping our prize on almost a daily basis on the changes that happen there. In terms of those who have followed our [indiscernible] results, and you would have seen that they would have -- they restated the comparators. In South Africa, we don't restate the comparators because they're reported in rands, and rands is obviously a stable currency. And so there's no impact of restating our comparators for hyperinflation. The other thing to note there is our fair value movements, obviously, all quite susceptible to inflation. And therefore, in Zimbabwe, the valuation of cane improved by some ZAR 870 million. So a significant contribution from the cane valuations in there, which is one of the reasons why we're adopting the adjusted EBITDA measure as well. Just moving on to sort of the sensitivity. And there's a big dynamic in the exchange rate to use. There is the official rate, the interbank rate in Zimbabwe, and that, at the end of the financial year, with ZWL 25 to the U.S. dollar. And what materialized over the year was a parallel rate within the country that was being used more for informal trading and the like. And that rate, at the end of the financial year, was ZWL 38 to the dollar. And so we've adopted the official rate for reporting purposes, and that's in compliance with IFRS and is the right thing to do. But at the same time, we -- in the back of our mind, just keep in check what would the results be using the unofficial rate. So just as a sensitivity to the results, by no means, part of the results, we've put the table on the side there that indicates if we had translated our results at the weaker unofficial rate, they would have been [ specific ] in the bar with 35% lower. And I think what is encouraging though is the new auction system that's been implemented. With that coming on board, we are seeing an aligning of the rates with the official rate moving a lot closer towards the unofficial rate. So that gap is closing. So therefore, this dynamic won't have as big effect on our results if that trend continues. Specifically, at the moment, I think yesterday, that rate was quoted at ZWL 82. So it's come quite a long way from the March position. Just moving to the statement of profit or loss, and I think this is really the summarized income statement. There, our operating profit, we see, is at ZAR 3.3 billion, and that's effectively a strong operational progress and an improvement on the previous year. We do have some land sales in that as well year-on-year [ related ] to past and specifically strong segmental performance. And we'll get into that divisional performance a bit later. But what is true, and we touched on a bit earlier, is how quickly that operating profit is eroded by our net finance costs and this monetary loss. So the number at the profit before tax level was ZAR 365 million with ZAR 1.6 billion in finance costs and a ZAR 1.3 billion net monetary loss. The finance costs, they're up year-on-year relative to the past year -- ZAR 1.3 billion in the past year, and that's really a few reasons. And the first is the repricing of the debt that occurred as sort of the news unfolded over the course of the year. We've also applied IFRS 16. And one of the dynamics is a portion of rentals is now split and shown in finance costs. And that's in the region of about ZAR 45 million. And also, we had some early cash outflows, which was really to normalize some extended creditors, particularly in our property business. And that, obviously, then has a sort of a year-on-year interest impact as well. And I think that's really, really the unpack. But it does sort of show you the burden of the debt again and highlight that in terms of operating translating to the bottom line. So just zooming in a little bit more into revenue and where we're up 18%. If I look at that, that's just continuing operations. We've got starch on the side there, which is 7% on its own, a very strong performance there. Overall, in the sugar businesses, we experienced an improvement in our local sugar sales, so a better mix during the course of the year, particularly in SA and Mozambique. And those, as everyone should know by now, are the lifeblood of the organization. A strong local market for sugar is very important to your profits overall. So that was a very encouraging sign, and we look forward to that continuing. If we exclude Zimbabwe, we see our revenue increase by 7%, which is above inflation, but probably a little bit more closer to the underlying performance of some of the businesses, which were solid. Zimbabwe revenue was up 37%. And that's, again, the hyperinflation dynamic coming through there. And the ability in Zimbabwe to price sort of sugar relatively quickly with it being a commodity and effectively holding on against the inflation there. If we look at the unofficial rate, had we used that to translate, obviously, the revenue overall would have been about ZAR 2.1 billion lower. So that's a dynamic that we point out. But still, excluding that 7% growth in very challenging times is good on the revenue side. Diving into operating profit. Operating profit, we've got all the segments there in the group in the various bars. You can see some big, red, tall towers there. And with the currency results in Zimbabwe, obviously, the impact on the group and also on the margin side there. We had a very good operational performance on a number of fronts. I think what's very notable here is the turnaround in Mozambique and South Africa. If you look there and the loss in SA sugar reduced from ZAR 482 million to ZAR 150 million (sic) [ ZAR 130 million ], and we saw the loss of Mozambique convert into a profit overall for the year, which is very impressive there. Obviously, the hyperinflation number is inside the Zim numbers, but that's because we look in operating profit includes the cane valuation. So there's that ZAR 870 million I mentioned earlier inside the ZAR 2.8 billion to ZAR 2.9 billion of the Zimbabwean numbers. And the land sales, we'll get into that. A good performance, and where we've seen some new sales and some concluded deals coming through in the current year. And this is all almost a sort of in spite of a notable increase in one-off costs related to the restructuring. And I think just before we move on to those costs, I think it is important just to note the property margins there. And I think it's probably a couple of people out there are scratching the head and saying, "Well, 70%. What's that about?" And I think that's really highlighted there were 2 large land sales that happened during the year. And those large land sales effectively [ agri ] land, not land that we're developing. And those don't come with an obligation or requirements to store any infrastructure. So they're literally sitting at historical cost and basically at an exceptionally high profit margin as a result. But I think that's the dynamic pull out there. And the previous year you had none of those sales. And I think that then is the dynamic that shifts it. So just worth noting for those who might have been asking the question. If we look at how adjusted EBITDA moves, the 397%, through operations. We start here on the left, the black is obviously the previous year at ZAR 606 million. And what we've done there is take you on a site journey and to what we almost call a pre-Zimbabwe subtotal. And that number there is the ZAR 1.375 billion. But in between, we've seen a year-on-year improvement of ZAR 385 million in SA sugar, ZAR 321 million in Mozambique, and other SADC had also a very strong performance, increasing ZAR 24 million, which relative to this slide, is impressive. And then the property, obviously, benefiting from some of those higher-margin sales. With the one red being the corporate, which has got the ZAR 214 million once-off cost. But what is good to note or pleasing to note, there are a number of once-off costs in each of those operations, and they're not insignificant, and we don't expect those to continue nearly to the same extent in the current financial year. So that's just a point to note, and we've tried to pull that out for you. If we look at the corporate cost because it's a very big number and so it needs to be explained. And if we start there at the previous year, we had costs of ZAR 68 million. And that previous year was -- it benefited from a once-off adjustment to our leave and retirement policies, which resulted in a gain and we recognized at ZAR 57 million. So it is an artificially low point of comparison, but just to highlight that, that ZAR 57 million should have ultimately been added to get to a normalized level. And we obviously had some retrenchments. We have seen an increase in, obviously, the penalties, and that penalties are associated with various regulatory investigations that are either pending or [ where there's a high ] or completed. And we've had to accrue for those penalties as well at the moment. And I think really, the big number on there is the group-wide -- sorry, the restructuring cost there of ZAR 176 million. And we've tried to split that up between the different things. We had the forensic investigation. We've had a number of asset disposals, investigated in terms of various transactions and looking through opportunities to reduce debt. We obviously had some prep in terms of equity raise and around that dynamic and then treasury, legal and costs associated with the restatements. But these are -- the substantial increase is really transitioning in nature. And I think we will expect some of these costs to continue in the New Year, but not nearly to the same extent. And I think that's the message that comes home. Just looking at the comprehensive income, and I enjoy this graph because it shows you a number of very big movements. But it does highlight, in a graphical sense, where our operating profit has gone and what's almost left over in terms of building the net asset value of the company, which is the ZAR 1.4 billion on the right. So we started with our ZAR 3.3 billion operating profit, again, highlighting the extent of the finance cost and the non-monetary loss that absorbs just about all of the profit of operations there. We obviously pay tax still in Zimbabwe. We pay tax effectively everywhere, but in Zimbabwe in particular. And effectively, we've seen that come down that expense. Often, our dynamics around our tax loss is that where we've got uncertain tax positions, we haven't losses. We haven't recognized those losses and this is some probability. And I think it's probably this point to just flag that with the pending starch sale during the year, we did recognize a deferred tax asset for about ZAR 213 million. That is improving our earnings, and it's just worth flagging that now. But in some of the other operations, we haven't, at this stage, recognized the full losses. But our financials contain the full details of that tax loss, which is significant, and obviously, a benefit in terms of debt reduction proceeds coming in from asset disposals. Just moving on to sort of the discontinued operations in line there. ZAR 393 million is the net result of the starch business. Obviously, there's a few dynamics with -- that's what is discontinued and what doesn't, what stays with us. So there's a few dynamics in that number. And then we move on to the FX translation of ZAR 1 billion. And really that is a combination of an improvement in the exchange rate or strengthening of the exchange rate in Mozambique against the rand, particularly over the year-end, which is always entertaining when you have that sort of volatility over the year-end. But at the same time, it's also got an impact of the sort of Zimbabwe adjustment that comes through in hyperinflation as well. And ultimately, that leads us to where we sit on the comprehensive income of ZAR 1.4 billion. So you would have seen our net asset value has improved year-on-year, and it's very much a goal to get that into the positive. If we look at the headline earnings overall, we have a loss for the year of ZAR 286 million, substantially improved compared to the previous loss of ZAR 1.8 billion. In the previous year, we had some reversals of impairments that came through in that financial year. And that saw quite a big difference between our headline earnings, our headline loss and the loss for the full year. And this year, it's been thankfully relatively tame. And that there's no major difference between our earnings and our headline earnings. So that's a positive. And that means, obviously, the results per share are obviously closer together. And overall, our loss per share was ZAR 2.12 relative to a significant number in the previous year. It's an 84% improvement. And what is also impacting our share -- earnings per share and performance measures is also the weighted average number of shares, and I'll just highlight the 20% increase from deconsolidating our BEE SPVs. Okay. Moving on now to the cash flow, which is obviously the part. And I think we all live and breathe cash flow in these times. So that's particularly true here. If I look at it, the operating activities generated a significant amount more cash of ZAR 2 billion compared to ZAR 1.3 billion. So a very strong conversion of our operating profit to cash flow. It is worth pointing out here at this point, the impact of how cash flow works with hyperinflation. And ultimately, what our cash flow is doing, it -- the hyperinflation requires us to almost present the cash flow as if all the transactions happened at the end of the financial year. So all of them get rebased into, effectively, an inflated amount at the end of the financial year. And if I use just a simplistic example of how that works, if I sell, and let's call it, a widget for ZWL 10 on the 1st of April. I receive the ZWL 10 on the 1st of April, and that sits in my bank account. When we report the cash flow statement, we'll show it at, if we use assumed assumption, an inflation of, let's call it, 100%. You will show that transaction at ZWL 20 in your cash flow, but you still only ever had the ZWL 10 in your bank account. So the difference comes through as a loss in the hyperinflation effect. And I think before we move on, is it worth just flagging that loss in the current year was ZAR 1.9 billion. And there's 2 impacts to that. There's obviously the hyperinflation accounting. But at the same time, that just also measure of some of the loss of the value in our cash balances that has happened because of inflation when reporting in rand terms. But that sort of step aside, I think it's worth jumping back just do the rest of it, but it's just to give some context to the operating cash flows so that you can understand that in terms of your analysis of the results. Looking at the additions for the year. In the previous year, we had a large amount of expenditure on the Xinavane refinery, and that was significantly reduced. We have obviously confined our capital program to essential placement items only. In time, we will step that up over the next, I'd say, 2 to 3 years more towards a [ depreciation ] type level. But obviously, bearing in mind that depreciation is a bit lower with some of the impairments we took in SA sugar. So at this stage, it was tight, but we spent the money where we needed to and we spent it very wisely. And what is included in that ZAR 538 million is about ZAR 350 million related to Project Kilimanjaro. And during the year, we controlled the trust -- the vehicle that did the project. And so we had to consolidate that into our results. If we go down, the other sort of dynamic that we've had to -- impacted really a normalization of our working capital cycle, but we'll show that in a bridge a little bit later. But the 1 sort of thing that might also leave people scratching their head a little bit is around the increase in borrowings and how that comes to be given sort of reduced CapEx and improved operational performance. And that is a dynamic of our debt restructure. And we've lost the ability to cash manage and as a result, we're sitting with ZAR 700 million worth of cash that off the year-end was applied to borrowings. But with the notice periods to repay them, we couldn't get that in for the year-end. So there's a bit of a gross-up on the balance sheet, which is not something we like, but it is just to know that there's ZAR 700 million of cash in South Africa and can be applied and was applied to the debt over the year-end period. So that's just to explain that dynamic there. I think we've touched enough on the ZAR 1.9 billion, which sort of drives the movement in our cash overall. So if we move into how does that look at a net debt level. And that net debt, we're looking at it really because of the ZAR 700 million cash in there, and to give a fair reflection of how the business has performed. You'll see there a reduction as we move the debt associated with the starch percentage through to that business. Obviously, it reduces the operating profit with the cash component. Working capital, it's worth pausing there, ZAR 1.355 billion outflow, ZAR 900 million of that related to effectively the developments business and some ZAR 300-something million of that was for supplies around deferred -- with deferred credit terms. And we had to normalize those cycles and also to some extent in the Mozambique business as well. And then in Zimbabwe, the other driver there is that with some of the challenges of getting sugar to port and they couldn't get any export cargo out, and that's really driven by the cycle. But we'll touch on that later as well. Obviously, you'll see the CapEx spend going up. The ZAR 591 million inside there is our first debt reduction milestone of the pension fund liquidation, where we received some ZAR 512 million to apply against our debt. Obviously, the finance costs are significant, and then -- and it leads us to the last block, which is the sort of other side of that ZAR 1.9 billion on the cash element, which is increase in our debt. So that's really just to show the profile of how the performance and how we get from the ZAR 10.5 billion in March to ZAR 11.4 billion at the end. And then just to delve into the SA borrowings, and this is a big -- this is where the majority of the borrowings are and obviously, where we've been very busy and hard at work with our lender group. On the 10th of March, we managed to conclude and close out that debt restructure in South Africa. And that was really -- it took an extensive period of time, and but it was [ complete ] in the same terms that we dealt when we released results in December on it. And we drew down on those new facilities and used those facilities to repay the existing facilities. Those facilities had a maturity date of the 31st of March 2021, and it also required us to reduce our debt by the ZAR 8.1 billion target that we've talked about in previous results presentations and now. We have met and exceeded our first debt reduction milestone. And basically, our asset disposals include the 2 transactions totaling ZAR 6.4 billion. And that is before the deduction of the ZAR 400 million for starch debt that's slightly outside of the target. But to date, we've banked ZAR 630-odd million from those transactions and look forward to banking more as well. In terms of where we sit, though, just with a number of challenges and uncertainty, which we'll touch on a bit later, we did obtain a waiver in terms of our covenants and also our September 30 and December milestones, which is really just to avoid an event of default in the event that something is delayed or it takes a bit longer to obviously work through the disputes over the starch disposal. So that is something we'll get into detail because [ it's a bit ] important. But we signed that revised term sheet on the 31st of July. And I think one thing to note is, obviously, we're very thankful for the reduction at prime interest rate of 2.75% in [ date ] because that reduces our cost significantly and that's very important for us. And then just look at sort of our average borrowings in SA just before moving to Mozambique. I think everyone has been looking at these curve graphs, and this is sort of what we've been doing for a while now is trying to flatten the curve. I mean this just gives you a stretch of our borrowings from March 2014 through to March 2020 and some of the trajectory. So I think the point to note here is, obviously, as your borrowings increase on an average basis, that interest rolls and accrues and so it is a bit of a battle to make sure that we generate positive cash flows to cover the interest costs. And as you'll see a lot better picture in the last sort of 18 months. If we look now at borrowings in Mozambique specifically and where we've got the debt standstill agreement. During this last sort of 6 months, we've extended the standstill agreement from December 2020 to June 30, 2021, so it's an extra 6 months. We're very close to finalizing the restructure in that business, and we expect that to be done for our interim results. So we'll be able to report the dynamics and the update on that. I think on the back -- on the left there, you'll see the ZAR 1.4 billion of debt inside Mozambique. I think the thing which is a bit unusual, the difference between the SA sugar context and the debt and working capital profile and the Mozambique one is that the sugar business in South Africa has all this cash at the end of the season. And the Mozambique business has all its cash sort of in the middle of the season. So over this period, we're quite lean in terms of facilities over the shutdown, and you get paid for your sugar on production. And so when you're not producing, you don't have the cash inflows. And so we've had to bring in a short-term liquidity facility just to get us through that period between effectively March and sort of June where the proceeds start flowing together flowing again. The interest reduction of 2.5% in Mozambique is also very favorable for us, and we're very grateful there. And looking at Zimbabwe, and we'll touch a little bit more on this, but just to highlight there, we reduced our foreign currency borrowings from $17 million to $6.7 million during the year. And this is really probably a point to just highlight the key slide. And this is our debt reduction glide path. If we look at the top one, we've got the original debt reduction milestones. So those, again, familiar, ZAR 500 million in cash by June 2020 and September 2020, required us to have ZAR 4 billion in the bank, December 6 and March, ZAR 8.1 billion. There were also some financial covenants around leverage ratios at 30 September. And I think just with all the uncertainties around our results and COVID and what the outcome would be around various -- the MAC disputes and other asset disposals, we have negotiated with the lenders a revised set of milestones. And that, in effect, gives us 2 things. It gives us a 6-month extension to September 2021 to repay that ZAR 8.1 billion. And it takes out some of the interim milestones as well. So we've tried to flag those to there with the circles to show the changes in relative positions. But I think what that does mean, though, and especially with the PIK interest and the like, is that we will result in additional finance costs for that because we're revising the default milestones that we don't default on our loans, but there's still the milestones in place for our pricing. So as we miss a milestone, if we miss the milestone, our interest rate will increase, and that's obviously payable when the facility matures. And that's really the reason why we've just flagged there that a capital raise still remains a consideration for the group. And then just delving into the divisional performance in a little bit more detail, just to pull out the cover and the color in each of the operations. Starting with the Sugar division. Obviously, my background's very familiar there. If I look at the South African sugar business, and I'll just spend a few minutes just to explain the graph on the left there. It's sort of a waterfall tipped on the side, where the starting point in the black bar is the 2019 adjusted EBITDA results and the bottom, that blue bar, is the financial results for 2020. And obviously, the reds and greens are self-explanatory in the middle. If we look at the operating profit, which is in graph there, we see a reduction in the loss to ZAR 130 million and relative to the previous year's loss of ZAR 482 million. But on the adjusted EBITDA basis, so adding back depreciation, amortization and adjusting for fair value of cane, you actually see a small profit, which is something we're very proud of in terms of our results. So I think well done to SA sugar team for that. It's somewhat extraordinary what has happened in that business. If you look at the sugar mills, they had one of the best performances in recent years. The sugar production was marginally up. That was really in light of a lower cane supply to the mills. So the factories performed very well. We exited, as Gavin mentioned, a number of our direct farming activities. And the way we did that was we established Uzinzo Sugar Farming and also some other third-party growers. And they took over the farming of Tongaat Hulett land for their own benefits and for their own accounts, effectively, from about halfway through the season, by and large. And effectively, that then takes the cost that we were incurring on farming and it shifts to the third-party growers. And by doing that, they're actually able to farm it a lot more productively and cost efficiently than us. And that's ultimately resulted in a sort of annualized benefit of ZAR 160 million, which is a significant number to realize from the [ source and ] effective of that. And we continue to now earn a lease fee from that land. And obviously, we hold a title to that land. So that's the dynamic around the sugarcane farming. The local market sales were up 24,000 tons. The commercial also obviously, positively, we've got a 6.5% price increase [ away ] in November. And I think the Health Promotion Levy does still continue to impact on the industry in terms of historical levels of demand, and which are now, even though we've seen the uptick in local sales, they're still lower than they were historically. And our export sales were down at 21,000 tons, and but that is really -- we still got the benefit there of weaker exchange rates and improved world sugar prices. So a ZAR 96 million benefit coming through there. And if you add up all the cost-saving initiatives in green, you actually get to a ZAR 408 million benefit saving. And that attracted an investment or a once-off cost of ZAR 164 million. But I think that's, as we said, was extraordinary in terms of what has happened there. And with the mothballing of the Darnall sugar mill that will benefit our capacity utilization going forward. And I think that's probably for the benefit of all. And if we look at the Zimbabwe sugar business, a very, very big green bar there for revenue. Just delving into some of the underlying dynamics there, the sugar production was down. And year-on-year , Triangle did very well. Its yields were improved from 96 tons of cane per hectare to 110. But overall, what we did was we created a bit of space to shift our replant program to a March-April position, and that has a longer-term benefit for our yields, but it did come with an immediate short-term reduction in the harvest [ here ]. So that's why the production, by and large, is down year-on-year. Our local sales volumes were down 13% to 324,000. And that's really due to customer affordability and challenges and the need to control our supplier of sugar to prevent sugar going across the border and into different markets. Ethanol sales, up 30%. And I think, obviously, a very opportune time to have an ethanol business in Zimbabwe. And our export sales were a key focus. That's where we generate our foreign currency exports proceeds. And those volumes were 22% of our sales, which is in line with the previous year. But as I said earlier on the working capital side, we had seen that outflow related to stock because we couldn't get an export cargo away, and that cargo subsequently went in the new financial year. What do we do with the export proceeds? We prioritize those to repay debt. We did that in the previous financial year, and that's when we reduced the debt by ZAR 10 million. And we will continue to now allocate our proceeds between debt reduction and dividends going forward. Just Mozambique. I think here's a notable turnaround to highlight. Our sugar production in Xinavane was pretty much flat year-on-year. But we did impact -- well, the Cyclone Idai, it did impact our Mafambisse operation considerably with production almost halving to 27,000 tons. The big story in Mozambique really is the local market sales. At industry level, they were up from 150,000-odd tons to 185,000 tons, which is a very strong performance year-on-year. And that was really a deliberate sort of strategy there to delay price increases and almost allow the local market volumes to recover. And that is paying dividends now and well, it did pay dividends in these results. The new Xinavane refinery also had its sort of maiden year of full production. And [ it produced ramping ] itself up to its capacity, but it produced 39,000 tons and generated an incremental profit of ZAR 119 million. There were also significant cost savings. You can see there, if you -- to pull out the 2 sort of the manpower costs and the cost savings of ZAR 57 million. And that came with a once-off cost of ZAR 72 million and effectively almost broke even in terms of the savings this year, but will benefit the current financial year. And then the last sort of point to note on Mozambique is material, and that's the adoption of IFRS 16 leases. And by and large, Tongaat leases are not material at its other operations, but in Mozambique, it leased its cane haulage fleet. And we've now had to recognize that as a right-of-use asset on our balance sheet. And the lease cost gets split between depreciation and interest. And so what we have got there at an EBITDA level, not as much as operating profit, is an increase of ZAR 109 million related to that. So that's probably the biggest change of IFRS 16 that resulted. So that covers the sugar division, and we'll move now to property. And if we look at the property side, revenue was flat year-on-year but operating profit was up 134%. And I think that, for us, is really a focus on concluding legacy deals. But one of the big dynamics, which we mentioned earlier, was those 2 large land sales. And you can see them there on the slide, Tinley South of 62 hectares and Sibaya 213 hectares finalized. Those generated ZAR 316 million of revenue. And as I said, the costs associated with that are incredibly low and, therefore, very high margins. Our Township property sales increased over the year. We sold equivalent of 239,000 square meters of floor area. And that was -- so a lot of that was legacy deals, but I think not to detract, as I said, in September, from the effort to get the planning rights in place and therefore, conclude those deals is a significant amount. And it's worth noting that, that is not just something that happens by default. A lot of intervention in that space. Cost savings for the business, they obviously had a significant reshape of their staffing complement and so cost savings realized were ZAR 46 million. And on the graph there, you'll see sort of the legacy debtors’ balance, which we have been tracking from the ZAR 2.6 billion that was reported. We've recovered ZAR 1.3 billion in proceeds and we've unfortunately had to cancel, for various reasons, our ZAR 933 million of those deals, of which I think ZAR 373 million happened in the current financial year. And just in terms of the pipeline, the deals worth ZAR 222 million are currently under negotiation. And yes, but obviously, COVID is a very significant impact on the property business. Just looking at Tongaat Hulett starch. And as I said, still getting used to the concept of this discontinued operation. It's a business I'm very fond of as well. If we look at the operating profit number, it was down to -- from ZAR 656 million to ZAR 616 million. That is as intended and largely due to the pressure caused by higher maize prices. So if we look at the crop year-on-year, it was 10% down. It was 11.3 million tons of maize, and that does obviously place pressure on margins. And that really undid -- so that's the big red bar, but you'll see the big green around volumes and price, and that's really our increased sales. We saw a recovery in our domestic sales volumes by 4.2%, that's really into alcoholic beverages. Demand at that point wasn't constrained by restrictions. At the same time, we saw growth in coffee creamers and recaptured some imported glucose volumes as well. So significant strong commercial performance there, which was offset by the pressure on maize. And so that led to the [indiscernible] results. So I think just also worth to note, the improved co-product sales mix contributed as well. And then, yes, I'll hand back to the CEO.

Rob, thank you very much for a very comprehensive overview of our financials. When we get to the outlook, I think the starting point is COVID-19 and it's obviously changed the world in which we operate. I don't think there's anyone that's listening to this webcast that hasn't been impacted by COVID-19. I can assure you though that we take it very seriously at Tongaat. We put together a dedicated team right at the onset of the lockdown. And this team has been working independently and literally full-time to ensure that we were doing the very best for both our employees, our stakeholders and, again, the communities in which we operate. We are an essential service provider. So we've continued to operate during the lockdown restrictions. And we have maintained very stringent health and safety protocols. On average, we are screening more than 20,000 people every single day throughout our operations, both when they arrive and when they leave the operations, on a daily basis. We also remain cognizant of the fact that our operations in Zimbabwe and Mozambique are remote and in rural parts of these countries, and we have provided additional support to those areas considering the location of these operations. I'm not going to take you into too much detail here, but just to highlight again that supporting our employees and our communities has been at the forefront of the efforts we are making. We are very comfortable that the significant contribution we've made in excess of ZAR 60 million, which has been allocated to COVID since the lockdown began, has ensured that we're able to continue operating as a company. Whilst, yes, we do have infections, we are managing those, and we are minimizing the impact as far as possible. I think if we look forward, progress has certainly been made, but I think we're not resting on our laurels. Much remains to be done. And our plan, if we look at the sugar space, we will continue to build on the current momentum. It is an exciting business, and we believe there is still significant upside. We continue to increase local sales and market share in each of the markets, and Simon and his team have very, very ambitious targets, and I have no doubt that they will achieve these metrics. We'll continue to deliver on our cost commitments. And we are making a commitment that we will be the lowest cost producer of sugar in the countries in which we operate. So let me carry on. We continue to deliver on our cost commitments and our ambition is to be the lowest cost producer of sugar in the markets in which we operate. In terms of diversification, as I've mentioned, we've got 2 key focus area, one being ethanol and the other one being bioplastics. But there are many other opportunities that have been identified by the team, and we'll continue driving those to fruition. We -- our ambition is -- our commitment is to return to profitability in South Africa, and I can see -- if you saw the graph that Rob presented, you'll see that we're heading in the right direction, and we certainly see that in this year. And then in regards Zimbabwe, we will extract consistent dividends from Zimbabwe. And our commitment is for this year to extract in excess of ZAR 250 million of dividend. We'll continue to remain strong growth in revenue and EBITDA in Mozambique. For our property portfolio, property market will remain depressed in the short term, and I think we anticipate that. But that doesn't mean that there isn't a lot of interest in our land parcels, and we continue dealing with potential suitors for our land parcels. We are prioritizing PropCo and large land sale opportunities at the moment. And during these trying times, we're working with our local authorities to accelerate approvals of the properties that have been sold. And then we continue fulfilling our infrastructure obligations of the land that has been sold and the developments that are underway. In the starch space, we're expecting the crop estimate to be up some 35% this year. And what's important for starch now is to continue navigating the impact of the alcohol ban on starch and glucose sales. At a group perspective, first and foremost, is improving our health and safety metrics and our people processes. We'll continue to improve our corporate governance. As mentioned, we made a significant step change but we believe there's always opportunity in terms of governance. And then we focus on finalizing our core and our noncore asset disposals, as has been presented early on. And then there is significant focus on our overall debt reduction, and Rob spoke to some of that in his slides. If we look at further debt reduction initiatives, we have 2 big initiatives that we are well progressed on, being MillCo and PropCo. In the MillCo space, we're looking at a strategic equity partnership in our SA sugar assets. We look to a debt reduction of ZAR 1 billion through these initiatives and a completion in March 2021. And then on PropCo, certainly a great opportunity. And here, we're looking for strategic equity partners in the ZAR 11 billion property portfolio. Here, we look to reduce our debt by ZAR 1.5 billion through these initiatives and the completion date also in March 2021. And then obviously, there will always be a consideration for an equity raise, and we will discuss that as and when appropriate. Now I certainly -- I'm a firm believer in Tongaat, the Exco, the management team, the Board are all firm believers in Tongaat Hulett. Our strategy, we believe, remains fit for purpose. Our cost savings and our cash flow improvement initiatives are delivering results, and we are meeting the obligations that [ we met ] over the last year. Our critical indicators are moving in the right direction, and we've shared some of that with you today. We have streamlined the business significantly over the last year, and we continue navigating our COVID-19 challenges. And I think as we entered COVID-19, we were fortunate that we had a streamlined fit-for-purpose business, and we were able to endure the impact of COVID-19 a lot better than many companies out there. We're actively focusing on diversification and innovation, and we believe this is a topline growth opportunity as we move forward. And then very importantly, for myself and our team, is the rebuilding of the trust in Tongaat Hulett. Thank you very much for listening. I will now take some questions.

The first question comes from [ Chris ] from [ 91 ]. And his question is, how fast can the company reprice the debt downwards to take advantage of the significant fall in the SA interest rates?

Thanks, Chris, for the question. So we have an option to choose between a 1-month and a 3-month [ ZAR ZWL ] rate. When we started, we selected the 3-month ZAR ZWL rates. And so the facility was going to be repriced every 3 months. But obviously, with the downward cycle in our interest rates in South Africa, with some consent and concession from the lender group, which we appreciate, we will manage to almost refinance it again earlier and move ourselves from a 3-month [ JAWA ] to a 1-month [ JAWA]. And what that means is, effectively, we'll get the benefit of any further reductions in the same month effectively by the end of that month. So it's a very short turnaround. So basically, if the rates announced on the tenth of the month are anywhere between the 20th and 30th when our facilities mature on a monthly basis, we will get that benefit now.

The next question is from [ Yurin ] from [ MIBFA ]. His first question is on the potential ZAR 35 billion development value of land, about how much would be needed to be spent from Tongaat Hulett to put infrastructure in place?

Yes, thanks for the question. Yes, certainly, we can't afford at the moment to spend any money on infrastructure, and that's why we're looking at the PropCo option. But in terms of realizing the ZAR 35 billion, we probably need to spend between ZAR 12 billion and ZAR 14 billion in infrastructure costs to realize the ZAR 35 billion plus. And I'm using the ZAR 35 billion as a base case scenario, obviously, depending on the type of development and the area of that development. So between ZAR 12 billion and ZAR 14 billion, I would say, but we certainly don't have the resources to do that, sadly.

The next question is from -- also from [ Yurin ], is which period is the period of measurement for MAC, and how does the current alcohol ban impact potential MAC issues?

So the way the MAC is calculated, it's for the year -- full year '21, March '21. So the impact would mean that we would have to drop below 82.5% of our previous year's EBITDA for the full year ending March '21. Obviously, the reason the MAC was called is because of the impact of the alcohol sales to our starch business. And we don't see it as a material impact. It's certainly not as material as would indicate a MAC event. So well above the 17.5%.

His last question was how are Zimbabwe sugar operations being impacted by COVID and political protests post the financial year end?

Yes, very fortunate. As I mentioned in our COVID slide, we've put additional resources into Zimbabwe. We have 2 big hospitals at our plants in Zimbabwe and many clinics. So we haven't fortunately in touch with -- we haven't been operationally impacted by COVID in the country at the moment. And certainly, whilst at the beginning of the year, the first quarter, there was some minor impact, I suppose, more in terms of sugar sales in the country because of the protest. But our operations haven't been impacted whatsoever to that.

The next question comes from [ Peter ] from [ Better Market ]. His question -- some of them may have been answered, but he says, to what extent does an equity raise depend on the successful sale of the starch business? And when is Tongaat likely to decide on the size and timing of an equity raise?

I think -- I mean that's an interesting question. At this point in time, we remain optimistic that the MAC will go in our favor in terms of the starch business. So I don't -- I think it will be premature to comment on what the exact right time is for an equity raise. At this point in time, we continue with our process, the MAC. As you know, we've got a submission due on the 17th. And then our oral submission on the 22nd. And we're bringing our best foot forward, and we believe that we'll be successful at this point in time. And I think we will return back to the market after the 21st to answer that question in more detail. But you better believe that we are working on Plan B, Plan C and Plan D in terms of other alternatives before we get there.

Anthony Geard from Investec had a number of questions. The first one is, what was the average interest rate in South Africa in the FY '20? And can we assume 275 basis points lower in FY '21?