UAC of Nigeria PLC (UACN) Earnings Call Transcript & Summary

Good morning and good afternoon, ladies and gentlemen. Welcome to UAC of Nigeria PLC's Half Year 2024 Results Conference Call. Please note that this call is being recorded. This conference call will be hosted by Fola Aiyesimoju, the Group Managing Director of UAC of Nigeria PLC, and Funke Ijaiya-Oladipo, the Group Finance Director. Following prepared remarks by UAC's management team, there will be an interactive Q&A session. I will now hand the call over to Fola Aiyesimoju. Please go ahead.

Thank you, Temitope. Good day, and welcome to UAC's Half Year 2024 Results Call. The Group Finance Director Funke and I will go through the presentation and take questions thereafter. We will try to refer to relevant pages of the document as required. Starting on Page 5. UAC recorded revenue and profit before tax of NGN 83 billion, and NGN 15 billion, respectively, in the first half of 2024. Our profit before tax is on account of the mix of operating performance and the results from our treasury operations. Over the course of today's discussion, we will cover operating conditions in the first half of the year, provide insight on our performance and touch on the outlook for the business. The foundations for the growth we've recorded and profitability that we've just talked about, were laid over the last few years, via efforts to attract talented leaders for our businesses, simplify our group structure, clarify strategy and invest for technology. We continue to pursue initiatives today that will drive future growth. Over the course of the first half of the year, we paid particular attention to balancing volume growth with proactive pricing. We aggressively sought areas to drive efficiency and optimize costs with the objective of passing on value to the consumer. We continued to focus on strengthening controls. Our risk management and working capital efforts enhanced our balance sheet strength, which contributed to the treasury gains we have reported. We are thankful to have retained some of our most talented leaders. Please turn to Page 7. As has been widely reported, operating conditions in the first half of 2024 remain tough. Broad economic growth was muted, pressure on the naira continued, inflation reached record levels and borrowing costs spiked. This combined to present meaningful headwinds to businesses in Nigeria. On Slide 8, we outlined the experienced inflation in our businesses. And the chart on the page depict input cost progression for key raw materials across our operating segments. You will observe that in many instances, costs for key raw materials increased far in excess of the reported headline inflation numbers. Many of these input costs have increased further between the end of the period and today. On Slide 10, we show the revenue and profit contribution by operating segment. And you would note that group performance continues to be largely driven by our Packaged Food & Beverages business, our feeds and edibles businesses and our paint business. We are pleased with the growth trajectory of each of these segments. Slide 12, touches an initiative we implemented to navigate operating conditions over the course of the first year of the first half. And I will take us back quickly to Slide 11 because it's important in terms of one of the most important things that we did over the course of the year. Now to protect margin in light of rapidly escalating input costs, we have to be very disciplined and proactive about pricing. And we're only able to achieve this on account of the strong market positions we have in our respective operating segments, our brand strength and extensive distribution network. Many of you will be familiar with the brands highlighted on Slide 11, and also aware that in many of the segments we operate we are the market leaders. I would just like to call out 2 relatively new brands on this page, Kingsway, a sausage roll that we launched at the back end of 2023 and Gala Chin Chin, a new product in the UAC Foods portfolio, which we launched just over a month ago. So I think the brands and the distribution reach highlighted on this slide, go to the core of UAC's strength and were instrumental in the most important initiative we implemented over the course of the first half which is being able to leverage pricing power to protect margin in light of rapidly escalating input costs. And back to Slide 12, please. Other things that we worked on where -- I mean we're very cognizant of the reduced consumer spending power, until we try to expand our product portfolio to provide affordable alternatives without compromising margin. I've talked about the Kingsway sausage roll under the snacks portfolio. In the Paints segment, we did some expansion, in the mid-tier segment, again, to provide further offering to our consumers. And in the Feed segment, we clearly differentiated, again, a slightly cheaper option whilst protecting margin to give consumers and our customers a choice. We spent a lot of time and invested a lot of efforts in trying to reduce conversion costs and manage operating expenses. And I would say the most impactful areas here. We're changing the energy mix, particularly at our feeds business, introducing biomass to reduce the cost of firing boilers and we also tweaked the distribution model, which brought down meaningfully distribution expenses. We responded to the higher cost of living by implementing salary increases across the group. We continue to monitor the impact of current headwinds on our employees. We leverage our strong credit rating and balance sheet strength to optimize finance costs via a mix of our banking relationships and accessing the capital markets. On Slide 13, highlighted a few more initiatives we executed. I've talked about broadening our product portfolio. We launched Kingsway, a sausage roll, under the UAC Foods table. And also Gala Chin Chin, a new snack under UAC Foods. For those who followed us for a while, you will know that we prioritize human capital, our people, and we launched UAC Academy to equip our managers for future leadership roles. We also initiated an excellence award to celebrate outstanding employees across the group. We continue to tighten controls, building our internal audit function and are very pleased with ending results. And you'll see on Slide 14 that these efforts translated to meaningful revenue growth, 57% from NGN 83 billion in the first half of 2024, NGN 23 billion in the first half of this year. We recorded meaningful expansion in gross margins, 600 basis points, from 16.3% to 22.5%, on account of the pricing initiatives and efforts to manage conversion costs. And you will also note that we recorded a very meaningful expansion in our operating profit margins. I will now hand over to Funke, who will take us through a bit more detail around our financial performance in the first half.

Good afternoon, ladies and gentlemen. Please turn to Slide 16, which provides an overview of the group's financial performance comparing 2024's half year results with 2023. UAC Group recorded consolidated revenues of NGN 83 billion in the first half of 2024, which is 57% higher year-on-year than the NGN 53 billion recorded in 2023. It's important to note that the comparable period in the first quarter of 2023 was impacted by the elections and cash scarcity which reduced trading days and constrained demand. From a segment-specific perspective, our Edibles & Feed segment comprised of Grand Cereals and Livestock Feeds Plc recorded revenue of NGN 40 billion. This increased 30% year-on-year, and growth was due to price increases implemented to offset rising raw material costs. Our Packaged Food & Beverages business, UAC Foods' revenue was NGN 28 billion, which is 127% higher year-on-year and the growth in this segment was on account of strong volumes recorded in all categories, so snacks, spring water and dairy as well as price reviews across board. Snacks growth was supported by existing brands as well as Kingsway Pastry Roll, which was launched in August 2023. The additional capacity installed to our spring water bottling line in 2023 supported water volume growth this year. Our Paints business, CAP PLC, recorded revenue of NGN 16 billion. This is 60% higher year-on-year and was achieved as a result of the positive impact of the company's growth strategy on volumes as well as price increases. The Quick Service Restaurants segment revenue declined 24% to NGN 1.5 billion, and the performance is reflective of 2 things. The first is our strategy to rationalize on profitable stores, and the second is the impact of high inflation on the discretionary income of consumers. In terms of operating profit, UAC Group recorded 6.7 billion compared to an operating loss of NGN 35 million in the first half of 2023. The improvement in operating profit is attributable to two things: The first is the strong double-digit top line growth across all our key operating segments. And the second factor is the expansion of our gross profit margin, particularly in our Packaged Food & Beverages segment, and the Edibles & Feed segment. The gross profit margin improvement was a result of the dynamic approach to pricing of our products with a focus on protecting margins in the Packaged Foods segment and implementing production efficiency and cost-saving initiatives, such as changing the energy mix to reduce conversion costs in the Edibles & Feed segment. Across the group, operating expenses were NGN 13 billion for the period, and this is 42% higher than the NGN 9 billion recorded in 2023. This increase reflects the impact of inflation on operating costs as well as the effect of the naira depreciation on expenses that are pegged to foreign currency. The most significant increases were in distribution expenses, electricity and power costs and personnel costs driven by higher haulage rates, electricity tariffs and diesel prices, as well as the cost of living adjustments implemented to alleviate the impact of inflation on our employees. We also recorded meaningful increases in IT costs as a large proportion of these costs are tied to foreign currency. The group's profit before tax for the period was NGN 15 billion compared to NGN 3.2 billion recorded in 2023. Profitability was supported by improvements in finance income which was positively impacted by higher cash as well as gains in the treasury portfolio. Other key points to note are that UAC's share of profit from our associate companies, UPDC Plc and MDS Logistics was broadly flat at NGN 475 million. We generated NGN 6.3 billion in free cash flow and recorded 28% return on invested capital. Please turn to Page 17, which shows a snapshot of the group's financial position as at 30 June 2024. The group has net assets of NGN 62 billion, which is NGN 8 billion higher than what we recorded at the end of 2023, and the increase is a result of increased profitability of the group. Total debt across the group was NGN 25 billion and cash of NGN 33 billion, resulting in a net cash position of NGN 7.9 billion. The debt in the group is largely short-term and used to support working capital across our businesses, particularly the Edibles & Feed segment. We're conscious of the impact of finance cost on profitability, especially given the recent increases in the monetary policy rate. And so we continuously seek to optimize funding costs across our businesses. Capital expenditure was NGN 2.2 billion across the group in the first half of 2024, and this amount was spread across our operating companies and largely maintenance CapEx to replace and upgrade existing assets. The group's cash cycle improved to 71 days, from 83 days recorded at the end of last year. This takes me to the end of the financial highlights. So I will now hand the call back to Fola to take us through the next section of the presentation.

Thank you, Funke. I think this brings us to the conclusion of the prepared remarks, and we will then take your questions. Our focus remains very much on investing to drive growth. We recorded over 100% growth in our Packaged Food & Beverages business in the first half of the year, more than 60% growth in our Paints business, and very meaningful growth in profitability in our feeds and edibles business. And as a management team, we're going to keep a laser focus on trying to maintain high levels of growth going forward. We will continue to invest in talent. We spend a lot of time on this and to drive operational improvement across the businesses, which we hope will translate into improving margins. And we are also increasingly investing in technology to optimize our business processes. And thank you, and we will now take questions.

[Operator Instructions] Your first question is from Uthman Ojulari.

My name is Uthman, I'm calling from Stanbic Pensions. I just wanted to ask your management, if you guys can kind of expand a little bit about your new Paints segments, especially the niche one around the maritime business. Could you just expand how much penetration you've been able to acquire through H1? And how much you guys have been able to increase in terms of revenue in that Paints sector as a result of entering that new niche market?

Thank you, Uthman. I think your question is around new Paints segments for -- new segments of our Paints business. And I will split this in 2 because you specifically touch on maritime. When I talked about new Paints segments, what we -- what I was specifically referencing was expansion of the decorative into the mid-tier. And I would say that those businesses currently -- those segments currently account for probably about 1/3 of the revenues of the Paints business now, and they will be down from -- and that's up from probably about 10%, if I go back -- 18, 24 months. It's interesting that you touch on the maritime segment because we see meaningful opportunity in that space. And importantly, because most of the sales are to the oil and gas industry, they are scoped to a dollar, or dollar-linked revenues. We have only recently recruited a very senior executive to drive growth in this space. He joined us about a quarter ago. And so we only expect to see the impact of this sort of investment in talent play over the next sort of few months. So I was referencing specifically the mid-tier decorative, but it's interesting that you touch on the marine and protective, because we recently focused on that [indiscernible] and to drive growth in that space.

Your next question is from [ Michael Lelay ].

My question is really around, you mentioned something about -- you made some tweaks to your distribution channel. Just a bit more -- if you can just provide a bit more color on what that means? Just for me to understand a bit more.

Okay. Thank you very much, [ Michael ]. I would say this -- we did two things. We had two objectives. One was to improve reach and drive sales. And the second was to minimize distribution expenses to revenue. Now to increase reach. This was done largely in the Packaged Food & Beverages business. We identified white space. So areas that were not being covered by existing trade partners. We discovered that we had trade assets, so [ vans ]. And so what we did was we began to supply directly from the factory to sub distributors and retailers in areas where we have white space, and it has been incredibly successful. And I would say that, that unit -- as a unit is probably the biggest -- that unit as a distributor, it will be the highest contributor of revenue in that business. To minimize costs, I would say that the biggest things that we did are to optimize costs where we found that in engaging with customers, particularly in the feeds business. They were able to self-collect cheaper than we could deliver to them. And so we're engaged with these customers and then sort of provided the option and said to them, look, we either deliver to you and here is the surcharge, or you self-collect. I mean we found that in very many instances to avoid the surcharge and because the customers could manage it cheaper than we could, they self-collected, and we saw a meaningful reduction in distribution expenses to revenue in that segment. And then the final thing we did, which I would say is a very distant third from an impact perspective to the first two, was being very thoughtful about where to serve in the country. Because we found that if you take the distribution expenses to revenue, selling -- you need to be very careful about which locations you sell from which plant. Although you could find that the cost of getting to market began to erode margins. So I would say that in summary, the direct filling of white space and giving customers options to self-collect versus some company deliver were the two -- by far, the 2 most impactful and then just being thoughtful about what regions to sell from what plants would be distant third under that header.

Your next question is from Samuel Makinde.

I have three questions. And my first question is about how you were able to manage your FX risk? It was a popular trend in the consumer goods space. We observed then declining FX losses. While the inverse was the case for UACN. Can you provide the color to how are you able to manage the FX losses? Then the second -- my second question is -- so if naira strengthens, maybe in the next quarter or I mean, next 2 quarters, what should we expect? And third question is you can please provide colors to how quarter 3 and quarter 4 is going to look like?

Okay. Thank you, Samuel. If I just recap your 3 questions. It's how we manage FX risk. What happens if the naira strengthens and how Q3 and Q4 would look like. I will start with the third question. We do not provide earnings guidance. So unfortunately, I cannot comment on how quarter 3 and quarter 4 would look like. I would say you can take the broad guidance I gave, which is that as a management team, our focus is on continuing to drive growth. And I think I said at the very beginning that we try to drive growth being very mindful of protecting margin. In terms of the two questions I can go into some depth on, to manage FX risk, I would say -- I would comment on a few things, and Funke please jump in if I miss any. One is avoiding foreign exchange denominated liabilities. So we don't have any dollar debt. And I don't see a circumstance in which we would take that on because we were very mindful of the potential for meaningful losses in the event that a foreign currency-denominated -- of the current value of naira foreign currency denominated liability, if the naira devalued, which is what we saw happen over the last sort of 12 months. We are also, I guess, partly fortunate, and I guess it is partly by a decision to have operating industries that have a meaningful portion of domestic procurement, which I think probably supported the first point. Not needed to take on foreign exchange liabilities to continue operations. So just by nature of the industries we operate in, we have a benefit -- a slight benefit there. In terms of what naira -- what happens if naira strengthens. The way we think about foreign exchange is we think about it directly related to the running of our businesses. So we would seek and hold foreign exchange if we need to incur -- to procure capital equipment, procure spares and for the limited direct importation we do. So because these things are linked to dollar needs, we are not overly -- the cost in dollars is going to remain fixed. So whether the naira -- if the naira strengthens we benefit massively because we're a naira earning business, which generated NGN 83 billion in revenues in naira. So our company becomes a lot more valuable. And then the dollar cost for the few things that we feel that we need to procure will remain the same in dollars. So that's the way we think about currency. We don't try -- we don't aim to make or lose money on the currency. We manage risk in terms of not taking foreign exchange liabilities. We hold dollars to buy the things that we need to buy. Those costs are fixed in dollars. And then if the naira appreciates, we will be delighted because our earnings, which are predominantly in naira become a lot more valuable.

Your next question is from [ Brad Webitsky ] who wants to know how the introduction of Chin Chin and Kingsway are going and what the potential for those snacks are.

Okay. And thank you very much, [ Brad ]. I will take them one in turn. Kingsway is a bit more mature. I would say we're about a year into that launch, and it's gone on very well. It's currently between 10% and 15% of the portfolio of UAC's Gala -- sausage roll portfolio. So it's doing what it needs to do, has very good customer acceptance, and it's very well established. So we're very pleased there. I will say, if anything, it's gone meaningfully better than we expected. Because we did so with not that much expenditure in terms of marketing. We just rolled on our sort of parent brand and distribution reach. Chin Chin is a month in, so it's very early to tell. I will say that on the back of what is a very, very short period, we need to gather any data, It's gone better than planned. So we're quite pleased with that as well.

Your next question is from Sunmisola Ikoli from CSL...

Brad had one more question, apologies to interrupt, but he asked what the potential for those businesses are. I would say that they are very different. So Kingsway, we viewed as complementary to the sausage roll portfolio to provide the consumer choice. So we think that the potential for that product is needed to the -- what we see as overall potential for the sausage roll segment. We still see very strong growth. That segment is up, from last year, probably between 80 -- actually is probably closer to 100% growth compared to last year. So we strengthened our position in a segment in which we're already strong and in which we still see meaningful growth. For us, Chin Chin we would be pleased if it begins to account for around 10% of the basket in the Foods business. So it has quite some way to go to achieve that, given how big the other segments are, the snacks segment, the water segment and the ice team segment are, but that's what we'll be pushing for in that for our product launch.

Your next question is from Sunmisola Ikoli from CSLS. What FCY assets do you currently hold?

Thank you very much, Sunmisola. I think as I commented on this with [ Michael's ] question. We hold foreign currency assets for 2 primary reasons. Actually 1 reason, we split into 2 strands. One is where we need to buy equipment and most of the equipment we need is dollar, euro denominated. And the second is where we have direct FX procurement. And this is mostly in our Paints segment, where we import resins, titanium dioxide. Also we hold FX assets for, and it varies. It varies quite meaningfully from time to time. Right now, we have sort of overhauls for lines coming up. We're going to buy quite a bit of raw materials for our Paints business and lead up to the peak season at Q4, and then we will rebuild or reduce depending on what our needs are.

Uthman Ojulari asked another question. On average, by how many percent have you increased product prices to protect margins?

The short answer across the board and as you know, Uthman, we have so many different products and so many different segments, would be between 75% to 100% on average. But it varies quite meaningfully the way you go about doing this, but I would say, on average 75% to 100%.

[Operator Instructions] Your next question is from [ Michael McCockey ]. He says, can we please get a comment on Q2 2024, versus Q1 2021 results and outlook for H2 2024.

Thank you, [ Michael ]. I think the overall conditions, I think the split is on Page 26 of the deck. Overall conditions Q1, Q2, I would say, were similar. I mean the headline numbers would have been worse in Q2, but the direction of trouble in terms of inflation spiking, FX devaluing would have -- would have been very, very, very similar across both quarters. Q2, I would say we made marginal improvements. You see revenue was a little bit bigger. Margins improved by 100 basis points from a gross profit perspective. So I'll say similar with the overall market trajectory getting a little bit worse and our underlying performance getting a little bit better. But the specific numbers are outlined on Page 26.

Next question is from [ Chukude Ogugu ]. Do you have any plans to introduce any products using groundnuts as a raw material?

[ Chukude ], I think the answer to that well, I was going to say the answer to that is no. But it won't be a complete response. Our animal feeds businesses are quite meaningful consumers of groundnut cake. One of the things you need to produce animal feeds is a protein source and then you can -- and you switch between soya meal or soya cake. But I know that right now, we're meaningfully relying on groundnut cake given what's going on in the soya industry. So we already do consume quite a bit of groundnut-linked products, but a specific product with -- a specific new product that is based on groundnuts, the answer is no.

Your next question is from [indiscernible]

Am I loud and clear?

Yes [indiscernible] I can hear you clearly.

Great. So my first question is on the QSR unit. Is there an update on the expansion plans? It's still loss-making. So I'm wondering, did you take any price increases during the period? Was there some price resistance? My second question is on CAP, Page 33 of financial statements, [ 17 ]. The inventory write-downs [ in stocked ] slightly, not materially, but it's still significant because if I remember correctly, we probably had a [ 70-ish billion ] of -- in finished goods in inventory. And about NGN 0.5 billion was written down. So I'm wondering if the strategy to kind of bring that down during -- at least over time? Then for [indiscernible] a latter half of [indiscernible], there was -- write-offs were rather small. So I'm wondering is it because there's expectation that the be a write-back or I'm also wondering, wouldn't it be better to have a more aggressive write-off? And so you know that slate is clean. Then for livestock feeds. I see that the [indiscernible] segments of livestock feeds has -- happens to have smallest top line and bottom line. So I'm wondering why is that the case? And over time, what can be done to kind of increase both of them, because it's very smaller compared to all the other geographical segments. Yes. So those are my questions.

Okay. Thank you [indiscernible]. On QSR, we have not expanded as quickly as we would have liked. We expect it to have been at around 60 company-owned stores. By now, we're still at around 30. And primary reason for that is -- I mean it's a slightly different kind of business, is balancing like our margin and growth. One of the biggest shifts in this -- in the QSR segment has been power costs. So restaurants require a decent amount of power for ovens, air conditioning and it must be left on for most of the day. I mean what we've seen with energy costs and frankly, in electricity costs, the business plan assumptions around energy costs increased meaningfully, I would say, at least 3, 4, maybe fourfold in certain instances. And so we slowed down the expansion there to ensure we make the relevant changes so that each unit, which is each store is profitable before we ramp up expansion. Unfortunately, the consequence of this is that until we get to scale, we don't fully cover head office costs and the segment remains loss making. So we are laser focused on trying to fix each unit. And when we get comfortable there, there will be the confidence to continue to deploy capital to roll out and meet the targets that we set for ourselves. So it's not where we want to be, but that's the context of what slowed us down. I will also say that it is perhaps the segment of our group that has been most impacted by the stress on the consumer because it's one of the more discretionary parts of our offering. So those are the two things that caused us to slow down there. On CAP, very well noted around the inventory write-downs. And I think our strategy there is to gradually bring down overall inventory holding levels because [ the degree ] to reaching write-down, which is things getting damaged and so on and so forth, is tied to the aggregate volume of inventory that you hold. Now going back 2 or 3 years to the COVID days supply chain disruptions, the paint industry was particularly affected. And so we had a strategy to increase inventory holding days, we're gradually trying to bring that down. So the strategy to try to reduce write-downs is to bring down the overall levels of inventory that we have. For livestock feeds, I would confess to not having the specific notes that you referred to off hand. But if you reference [indiscernible] and we can triple check this after the call, Livestock Feeds has 3 manufacturing plants, Lagos, Kano and Aba. So anything livestock feeds does, [indiscernible] would be outsourced manufacturing, which is why it's a much smaller contributor than any of the other 3. But this is -- if you reference [indiscernible] specifically, that's the reason why it will clearly be much smaller than the areas in which the business actually has plants.

Your next question is from [indiscernible] who works with Iris Capital Management. He has three questions. The first one is, during the presentation, you attributed a decline in QSR business to 2 strategies. The decision to maintain owned stores and inflationary impact. Could you give a bit of context to the first strategy of owned stores? And what is the way forward? The second question goes, there was a marked improvement in the operating margins in the animal feeds business, both in Q1 and Q2. I understand that there were pricing initiatives done during the 2 quarters. So I want to clarify if it was just pricing or if there were other operational strategies that played out? What is the outlook of operating margins in the near term? And finally, what is the competition like in animal feeds business and how are customers responding to your products, given the heightened inflationary pressures in the economy?

Thank you very much, [indiscernible]. I think I touched very briefly on QRS while responding to [indiscernible] question. I think for those who followed us for a while, they will understand the shift from large franchise network out from memory about 165 stores to a predominantly competent own store network. And the reason was trying to ensure that we could deliver quality to the consumer. And we found that with such a widespread and fragmented franchise network it was very difficult to maintain standards. So that was what informed the strategic shift. In terms of the stores, you're correct that we had intended to roll out many more stores than we have thus far. So we're behind our targets there. And I've touched on some of the reasons why, which is trying to ensure that the unit economics of each store work, and some of the biggest things that have impacted the unit economics thus far have been overall consumer sentiment. It's probably the most discretionary segment of our business and then the second being energy costs. In terms of the margins in the feeds business, when we talk about operating margins, there are 3 things that informed the meaningful expansion in operating profit margin. The first being pricing, and I would say balancing volume and pricing is perhaps the most impactful. We've been very disciplined there. The second is conversion costs. I talked about being very thoughtful around the energy mix in that segment to bring down the overall energy consumed. And this is also the segment where in response to an earlier question, I talked about the shift from -- about working with consumers, to optimize distribution expenses to revenue. So those 3 things are what contributed towards the improvement in operating margin that you've seen, and we expect to continue to run the business in this manner going forward and eke out improvements where we can. The Animal Feed segment is very intense. Consumers respond well to our products because it's a performance industry. We sell feed to farmers who are trying to either grow birds or produce eggs. And those -- this is B2B and they are laser focused on the yields they get on eggs and the wait and time for the birds and they punish businesses severely where performance slips and reward businesses where performance -- when the product delivers performance. So we're very focused on the quality of the feed we deliver to our consumers and the -- we're seeing the response come through with some of the improvement in performance you've seen in that segment.

Your next question is from Fisayo Adetayo from CardinalStone. Your Q3 and Q4 appear better than Q1 and Q2 for 2023. Should we expect the same trend this year?

Fisayo, I unfortunately have to repeat that we don't give specific guidance. I will say that Q4 in particular, has historically been the strongest season for most of our businesses, and I see no reason why that would change this year.

Your next question is from [indiscernible].

Yes. This is [indiscernible] from [indiscernible]. I would like to appreciate the group's good performance in the first half of the year. But my concern is on exchange gains. So looking at the numbers, I would say that what was termed as exchange gain and the results is about 80%, or over 80% of net profit. So this is actually a cause of concern. So if that is the issue the numbers we have seen in net profit would -- might not be as much as we are seeing. Can you just speak to this?

Okay. Thank you, [indiscernible]. I think if you please turn to Page 26, so we can at least align on the numbers we're looking at. So Page 26 on the far right outlines our financial performance. And I would just say we should focus on 2 lines. One is operating profit and the second is finance income. So those are the 2 big components, everything to do with FX, treasury, sits in finance income. If you look at last year, you will see that the bulk of our profits, I agree with you, they came from finance income. But this year, I mean the mix is certainly not, it's roughly 50-50 between operating profit and finance income. We do not run the group to make finance income. We run the group to grow operating profits I would say that the operating profits were delivering as of the half year ahead of our targets for this year. This is where we continue to focus. We have cash on our balance sheet. So we earn some income, we've always done so, for those who followed us historically. But the bulk of the driver, if you look at the improvement in performance, is the operating profit line versus the finance line. So I'm not sure where the 80-20 mix comes from.

[Operator Instructions] Your next question is from [indiscernible].

Am I audible?

Yes, you are.

Okay. All right. Thank you for the response about the QSR business. I gather that this business is on the decline. But if you could please give [indiscernible] based on the circumstances you [indiscernible]. In my opinion, I see those challenges present in [indiscernible]. So ask this one, what is the management going to do, how do they intend to execute within [indiscernible] and what exactly is the management planning to do [indiscernible] ?

Okay. I think what we're trying to do, I can simplify on the two broad headers, which is increasing the revenue per store. So there's a bigger revenue base to cover the high energy costs and optimizing energy mix. So we are at very early stages of trialing to see what impact solar has. We are trialing between gas-fired ovens and electric fired ovens. This is all about blend and energy mix. And we're also working on a new offering to increase the overall revenue per store. So those are the things that we're working on when we execute. We are certain that the initiatives would improve the unit economics of the store, the degree to which the improvement is we would see once we are through with implementation, and that will inform the degree to which we continue to aggressively roll out these stores.

There are no more questions. I will now hand the call back to Fola Aiyesimoju for his closing remarks. But before you give your closing remarks, there's one more question from Fisayo Adetayo. Should we expect bumper rewards for shareholders this year, considering impressive numbers and strong cash flow?

Fisayo, I will interpret your question to mean dividends. Is that fair? Or is it bumper rewards? Look, I think we have outlined our dividend policy, and that policy is to provide stability and clarity to shareholders. And I think what we've said is that we would maintain a level of dividends until we decide to change it. So that we step it up or step it down depending on 2 factors. And I'd say those -- maybe 3 factors. One is the group's performance view on the outlook for the environment. And the third is the capital needs for the group. No decisions have been taken. But that is -- the policy remains the same. We maintain a level until we change. I mean, we change -- we maintain again until factors make us change and then a number of things that would come into the mix and our outlook for the economy, our performance and our capital needs. So we would focus on delivering performance and how that performance is allocated. No decision has been taken at this time.

I will now hand the call back to Fola Aiyesimoju for his closing remarks.

Thank you very much, Temitope. And thank you to our investors, analysts and the investing public for participating in the call and for the very thoughtful questions. And I wish everyone a wonderful rest of the day.

That concludes the UAC of Nigeria PLC Half Year 2024 Results Conference Call. Thank you for your participation. You may now hang up.