Morning, good afternoon, good evening, everybody. Hopefully, you can all hear me loud and clearly. I can see we've got some participants on the line, so that's great. They're all joining, so I can see the number increasing, so maybe I'll just talk to myself for a few more seconds. Firstly, up front, I just want to give my apologies. I'm not feeling totally great. I got a bit of flu, so, or a chest infection, so I might cough in the middle. So if I do, just mute myself in the middle, it's because I don't want to subject you to some hideous, horrible noises of me coughing. But it's wonderful to talk to you all again.
The last time we spoke was, I believe, the end of February, and I will update you as to how Bidcorp's traveling, as at the end of, approaching the end of May and, approaching the end of June, June 30th being our year-end. So I don't really have a whole lot to say, which I guess is a good thing, because we're on the right path. I think we're doing excellently, in the reality of the world we find ourselves. There is a lot of change going on in the world. There are a lot of things happening in the world. And overall, our business has continued to perform very strongly, and the trajectory is pretty similar to what we spoke about at the end of February, and what we reported for the six months to the end of December.
So in terms of the big picture, what we're seeing, just some highlights, lowlights, is inflation cooling exceptionally rapidly, and we've seen food inflation, food price inflation, probably cooling a little bit more than general inflation. So the food price inflation on our weighted basket has come down from about 15% in a year ago, to 2.6% at the end of April. This was from a decline to about 2%, and that's on a weighted basis across our basket. Please don't ask us for the breakdown. So across the basket, we've seen food inflation come down really dramatically. So when you start looking at numbers, you need to take into account the fact that inflation has cooled rapidly.
Now, obviously, there are some jurisdictions that are deflationary at the moment, but the bulk of our, the bulk of our, our business actually is in developed markets, where you've got the same dynamic of, of, inflation getting into that 2%-3% type of area, and food inflation being somewhere between 0%-2%. So you've got this cooling inflation on one hand. On the other hand, you've still got some inflationary pressures or some, some input pressures, particularly on labor. So you've still got developed market economies running at full employment with wage, with wage pressure, and we're obviously having to, to, to balance that. So we have to retain staff. We have to pay people more. You've got minimum wage, wages that have been legislated.
We've spoken about them then before in many geographies, and the minimum wage increases are substantially in excess of what inflation is at the moment, and although we generally pay above minimum wage, that moves the market up for everybody. What we do realize is that a good, stable, long-term workforce is a great asset to the business, and we don't want to lose that great advantage we have. And therefore, it might just cost us a little bit more in the shorter term. So we're absolutely seeing wage inflation. We're seeing energy pricing probably come down on average, although there's anomalies in various different geographies. The oil price is coming down. Price of fuel and diesel is most probably.
I don't know the number, and David might be able to say, but I think we're actually less than we were this time last year, so that's a little bit of a help. But then on the other side, we are seeing big cost increase pressures on the, the asset base, on replacement trucks, replacement material handling equipment. New facilities are much more expensive to build than they were a year or three or five ago. And that's just the reality of the world. That's not gonna change. What we're also seeing in most markets is very anemic economic conditions. Now, we don't spend too much time worrying about the economy because we still think we've got lots of runway, lots of potential, lots of market share growth, lots of exciting things to do in every single geography we operate in.
But we don't operate in a bubble, and we're totally aware of that, and economies are tough. Many economies we operate in are in recession or in technical recession or in per capita recession. However, these things get looked at. It certainly isn't beer and skittles out there in the geographies that we operate in. The consumer is under pressure with high interest rates, where you've got a mortgage crisis, you've got a rental crisis, accommodation is costing a whole lot more, inflation's eating into people's pay packets, even though there's still full employment. So demand isn't incredibly strong. It's fine, and we'll talk about the sales line in a while, but it's not incredibly strong out there. We really are fighting for what we achieve.
That's certainly not coming easy, and it's, it's a, it's an interesting environment, and I want to say challenging, but it is, it, it's tougher than it was a year ago. The, the post-COVID boom has certainly subsided a little bit. You can see it in, in, in airlines, travel companies, et cetera, that are talking about a flattening of, of demand, and it's just not the boom that it was a year ago. So in the context of all of that, which I don't want to harp on from a negative point of view, I think it's a, it's a very positive picture, that in the context of all that negative, our businesses continue to be exceptionally resilient, strong, and continued its, its growth path.
Our sales top line is growing at a pace greater than inflation, so we've seen real volume growth in stagnant economies, generally. For some reason, I think it's because of the structure of our business and the nature of our customer base, which is very deliberate, and our product base, our product mix, we've been able to maintain margins even though there's a lack of inflation. And it's probably easier to make opportunistic gains in margin in an inflationary environment than a non-inflationary environment, which we're in now. So our cost base has held up.
Sorry, our gross margins have held up relatively well, and we're seeing a slight increase in the cost base, which we're perfectly happy with, and we're happy to invest in that because that will give us continued long-term growth. We could possibly take some short-term decisions, which would be very foolish to do, to try and pull some or minimize some cost increases over the short term, but I think that would have a very detrimental effect relatively quickly on top line, through margin and on bottom line. So we've got to maintain that balance, which I think the business has done relatively well over the last 10 months and continuing into May. So if we just take you through the geographies very quickly, and once again, we'll do Q&A in the normal way.
Submit your Q&A, and we'll answer the questions afterwards. I'm sure there'll be some duplication of questions, but we'll try to get to as many as possible. Can we try and not focus totally on the U.K.? I understand it's an important part of our, of our market, and it's a huge amount of potential upside for us, but it is 20% of the business, and there are many other geographies that have interesting dynamics and great potential and carry the business along as well. So firstly, starting with Australasia. New Zealand's in a recession, a real recession, technical recession, whatever you want to call it. Australia's in a per capita recession, which means that if you strip out migration, they're in a recession as well. So both economies are pretty average.
Notwithstanding that, the businesses have done well. We exited some QSR customers in the comparable period last year, so they're still in the base for four months to October 2022. So those haven't rolled through yet. So if you strip that out, our sales growth is very, is very acceptable where we are, with the focus, as always, of focusing on the correct customer segment, the correct customer base. Our customer count numbers are up, and our margins have held relatively well. So we've seen trading margins maybe even slightly improving, maybe, in both Australia and New Zealand, but relatively stable on increased sales growth. So, you know, those two businesses continue to power along even though the economies are pretty, pretty ordinary. They're very well, well-managed, mature, stable businesses. They take advantage of opportunities as they arise. It is getting tougher in both those markets.
I think those economies are lagging the U.K. and Europe a little bit in terms of coming out of the worser times. But there's no doubt that will start turning. Both economies still have full employment. House prices are still relatively strong in both, which is a positive and a negative, and our businesses continue to do well, gaining market share, fighting for what they do, adapting to the reality of the economic situation. Europe continues to impress and surprise us, because I think if you read a lot of financial publications, as most of you do, you'd say that Europe's a pretty sick place. And looking at our sales numbers, both for the 10 months and May, that paints a slightly different picture.
So we continue to be impressed by our European business, and that's across almost every single one of our businesses. There's one business that's not performing all that well, which is a very small component. The rest of them are all performing very well, and following the same pattern. The one thing I just need to try explain is the impact of Easter this year, which was a little bit earlier than the prior year, and does impact some of the performance, particularly from a sales point of view, because Easter in the Northern Hemisphere is normally the kickoff of the spring-summer season, but that didn't really happen this year. The weather was pretty ordinary. I think it is still pretty ordinary in many parts of the...
Of Europe and the U.K., although the U.K. has had one or two decent weekends. And that basically meant that Easter was not a great overall trading period and certainly didn't kick off the spring-summer season like it should have. And maybe we're seeing the late kicker of that coming through in May now. So we're not negative about that. It's just a reality that summer's a little bit later in coming, but the sales are certainly holding up, and our businesses are confident about what the summer period looks like.
They don't see too many, too many new or different challenges beyond what we've already spoken about and identified. In the U.K., I'm gonna go on a limb a little bit here and say we're definitely starting to see some green shoots of improvement coming through in the economy and certainly in our business. It's definitely starting to improve. The sales growth hasn't been a problem, and we're very comfortable with where the sales growth is. It's now a very controlled sales growth and a very targeted growth, but the management team there have done an excellent job of stabilizing margins, both gross margins as well as the cost base, which is resulting in the business heading in the correct direction as to where we think it will go.
And I think the economy, well, certainly from what I'm hearing, the economy is improving in the U.K. It's certainly not getting worse, and it will get better. There is a general election on the July 4th. Who knows what the impact of that will be? If anything, you know, I think my guess would be that there'll be absolutely zero impact in the short to medium term to our business. People will carry on doing what they're doing, irrespective of the politics. So, yeah, we don't really see that as a major issue that should be in any way disruptive, positive or negative. Emerging markets overall is fine. However, it's a mixed basket in there.
South Africa continues to outperform, notwithstanding a very tough economy, load shedding, political uncertainty, and whatever other challenges they're facing. So they continue to do exceptionally well. South America is just economically tough. Those economies are really struggling a little bit at the moment, but we are holding our own. And it's interesting because in a place like Argentina, we're actually doing exceptionally well, where we've got creative, entrepreneurial people running the business who understand this inflation and this volatile environment, and therefore, are making hay while the sun shines. But that's a very small component, but it is an educational process for us, to see what can be done in challenging times. Then the Middle East is definitely on the improve.
You may recall last year we had a bit of a challenging period in the second six months of the year, which we're fortunately cycling through that now, and they're on the improve and doing fine. We are impacted a little bit by some consumer boycotts of Western consumer brands, and we supply some of those Western consumer brands. Boycotts because of the geopolitical situation in the Middle East. So it's got nothing to do with us. It's just got to do with the fact that we supply these brands, and they're being boycotted by their consumers. But that seems to be easing up quite a lot as well and getting back to some type of normality. So that's the Middle East. Turkey, for us, is very much in the investment phase.
We've opened a few greenfield operations in Turkey. We see that as an exciting potential market, a big tourism market, a big eating out market, and the best way that we sought to grow the market in the absence of any suitable acquisitions was to do greenfields rollouts, which are expensive. We take the costs on the nose, so nothing's capitalized. It's all just out there. And notwithstanding all of that, our Turkish business is profitable. It's not hugely profitable yet, but it will grow into profitability. Moving over to Asia. China, Greater China is sluggish. Hong Kong isn't what Hong Kong was a few years ago. It's very much a changed place. There's very little inbound tourism. It's just not what it was, and our business is adapting accordingly.
Our Hong Kong business is doing fine. We've pulled some cost out and streamlined some things and demand is holding up relatively well in a very flat, unexciting economy. China's got a few different dynamics. Firstly, the economy is not, I'm sure it's still growing, but it's not growing at the boom rates that it was before. And coupled with that, there's deflation, there's food deflation, there's a move away from Western products, which is something we've traditionally focused on. And there's also, because of that, a lot of our principals out of Europe, Australia, New Zealand, America, are seeing their volumes decline, and they're trying to do what they can to build their volumes up. So they're moving from a sole agency model to a multi-distributor model.
Which is, there's a positive and negative in that, in that we're not the sole distributor of every product in China. So we might lose some sole agencies, but we'll gain access to a whole lot of others as well. And we're expanding our portfolio to include more local, both Chinese or more Asian type of products into the portfolio, and that's going relatively well. We're also simplifying our business in China. We're exiting one or two small ventures that don't really make sense and are a little bit adjacent to our core food service business. But overall, the business is still very profitable, unlike many of our peers that we do get some information on, and unlike many other companies who are operating in that part of the world.
So we still think that will turn at some point, and it's a big market, and it's a lot of potential. Malaysia's doing very well. It's a nice market. We're getting good experience in the market, and I think we can hopefully expand our presence in Malaysia quite significantly in the future. Singapore, we went through a very necessary management change, which happened, I think, in about September last year. It's been a painful six months, but we seem to be over the most of it and have regrouped. We've got a great team in place. They're doing fine. I don't wanna put a bleak look on it. They'll most probably come close to last year's numbers, maybe even exceed them a little bit.
But we're just not going to take advantage of the potential in the Singapore market for a short while still. But then I think we're gonna see some very reasonable growth prospects coming out of Singapore. We'll be doing things differently. We are doing things differently. The business is structured differently, and I think we're gonna see some exciting growth come out of that part of the world. So I think that covers off all the geographies. In terms of acquisitions, since we last spoke, it's been relatively quiet. And that's not because we've been lazy. We made a small acquisition in Germany, which is really tiny. We made a small acquisition in South Africa of a seafood business.
We are working on a couple of larger acquisitions in Europe and the U.K., which we've given some detail on. I won't give any more detail on those as to what the breakup is or where they are. They are commercially sensitive. But as you can see, the ZAR 1.8 billion purchase price is relatively significant. I know in the scheme of things, it's not all that big, but in terms of bolt-on, our bolt-on strategy, it's relatively large. We're also working on some acquisitions in other geographies. I don't wanna go into any detail because these things happen when they happen. Sometimes you get to the altar, and the bride runs away for various reasons, or the groom sometimes runs away as well. And that's happened a little bit.
I think vendor expectations maybe are becoming a little bit more realistic, as interest rates go up, and we've seen possibly multiples, coming down a little bit. So there will be some acquisition happening in the new year. We continue to invest in capacity. When you're growing your sales at 7%, 8%, 10% real every year, the only way you can accommodate that in two, three, five years' time is by having more infrastructure. We've always said we'd prefer to own as much as possible. Even if we don't own, we still own the internals, the really expensive part, the refrigeration, the paneling, and the stuff that makes our business work, which isn't just simple warehousing. For us, these decisions are 20-year decisions, with a long-term horizon. So we'll continue to invest.
I think there's no doubt that our investment over the last few years has enabled us to carry on great. I think if you had a very short-term, private equity-type mentality, maybe you wouldn't. Maybe you would squeeze as much as you could out of what you got, and let it be somebody else's problem in five years' time. We don't think that way. We're playing a long game here, and we'll continue to invest. Our teams around the world continue to do what they do phenomenally. I think, yeah, it's our greatest, it's our greatest competitive advantage. We've got, w hat's the right word? A mature team who've been in place a long time. A well-established team is the word I'm looking for in almost every geography.
Where you do have people who are approaching retirement, and there are some in various different geographies, we are going through a very active process, and we have been for a long time, of bringing young talent through the business. And what we're finding is the youngsters are far better than the old people, and are giving a new way of looking at things. And when you combine the young, the old, and put it all together, we're getting some very exciting things happening in many of the businesses, which I think bodes well for the future. Technology certainly plays a part in that. Yeah, online ordering is now just part of the business. It's not something we even talk about, because you're seeing e-commerce penetration, digital penetration, of 70%-100% in businesses.
It's just not a thing anymore. It's just reality. So now it's what are you gonna do with that tech? What are you gonna do with AI? What are you gonna do with, with automation in warehouses? How's that all gonna play out in the future? And we're looking with that. We're trialing some things in various markets. The biggest short-term benefit will absolutely come out of the customer relationship issue, the data that we have on the trading relationship we have with customers, what product they're buying, when they're buying the product, how they're buying the product, more importantly, what they're not buying, and looking at the potential for that. So it does present a whole lot of opportunity, and we do have lots of exciting projects.
And what we do is, instead of throwing everything at one project, we like to divide it up and get lots of people to do components of things and try different things in different markets. We take those learnings, we combine them, we move them around, and we come up with best of breed. And in that way, we can actually get to the answer very quickly without having to make a bet on one big thing. So we've got lots of small bets, some which will work, some which won't work, but in a relatively short period of time, you can put that all together and get the best of the best, and roll that out to all the businesses and let them all leverage off that. So looking forward for the rest of the year, I'm not a fortune teller.
There's still six weeks left, I believe. But where we are at the moment, we're confident to say the trajectory will continue. If nothing untoward happens in the next six weeks, and things carry on the way they are, and we've got no reason to believe they won't. But who knows, with weather and the strange geopolitical world we live in? But we're relatively confident, and we've just completed. We're going through the completion phase of our next year look forward, which isn't really a budget. It is a budget, but it's more a soul-searching exercise and understanding what people's view and understanding of the future looks like.
It's great to see that there's a lot of optimism and recognition of the fact that we've still got a long way to go. We've still got a lot of market share. We've still got a lot of opportunity in every single market. There's still acquisition opportunities out there. There's manufacturing opportunities which are working well for us in many geographies. There's brand strategies, house brand strategies, replacement strategies, import strategies, customer diversification, channel diversification. So there's a lot of things going on. There are a lot of levers to pull, and our teams around the world remain very optimistic. I think we are seeing, particularly from the retailers, they are talking that they're seeing a trend of people eating more in the home than out, and I think that's probably correct. And that's just reality.
People have maybe less disposable income. They're paying more on mortgages, they're paying more on rental. But notwithstanding that, we're still growing ourselves in real terms. So imagine what happens when the economy starts booming again, and people start eating out again. Let's not think that this is gonna be a permanent change. People wanna eat out, people do wanna socialize, and we still believe very strongly in the fundamentals of the out-of-home market and people eating out of home, which is our addressable market. So I think that covers off most issues. I'm gonna hand over to David to take you through the financial, the numbers in a little bit more detail, and then we'll do Q&A afterwards. So thank you very much.
Thanks, Bernard. Yeah, I guess not too much to add. We set out the sales performance. The year-to-date numbers obviously are accurate numbers to the end of April, and three weeks into May is really a like for like. So just to clarify, that just in terms of FX, we, I think the impact of FX on the first half is around 12%. It's around 9% at the moment, so the rand has pulled back against the currencies. Just to note, and, but obviously, as we reiterate all the time, we measure these businesses in their home currencies. Gross margins, as Bernard indicated, have held up well. Obviously, there's been a little bit of a change in the mix. Australia and Europe are holding up well.
In fact, have grown a little bit, and that's certainly offset the year-on-year impact that we've seen in the emerging markets, and mostly the U.K., obviously, which you're aware of. Operating costs, as Bernard indicated, are up a little bit, and that's being driven by employment costs and asset replacement costs. EBITDA is holding up, notwithstanding, at similar levels to last year. So, that indicates, you know, still solid performance. And just to note that that's the EBITDA as we measured it on the old basis. So we need to just make sure that before you jump up and down, that you're measuring it on the right basis, compared to what your models say. The working capital is under control. It's better than it was a year ago.
Certainly as we, you know, go through the nine months to March, we're around one and half days better. So, that's good, and indicates that the businesses, you know, are trading with reasonable levels of working capital, but not excessive. And as we also measure it in terms of the working capital to annualized revenue, that's tracking absolutely in line with our expectations. And, you know, we speak about from time to time, the 4%-5%, and it's up at the higher end of that. But I think one just needs to bear in mind that March was a difficult close because of Easter.
Easter was on March 31st. March 31st was Easter Sunday, so that would have had some impact on the business, but absolutely in line. The investments, capital investments that we've made, Bernard spoke about, slightly higher than our normal run rate of what we've indicated, 1.5%-2%. It's probably tracking about 2.5% at the moment. But that is a little bit higher than normal, but we have seen slightly higher than normal investments, like going into places like Australia over the last while. The small bolt-ons Bernard spoke about, so other than saying that the group retains sufficient liquidity, we're in line with all our debt covenants, and there's no issues with that. Yeah, nothing really more to add from my perspective.
I guess back to Bernard and Q&A.
Thanks, David. I'm just gonna go through the Q&A quickly, and then we can. I'll just give a summary. Some of these questions I can't answer, or we won't answer because we won't do it in a trading update, and you'll get that information at the year end. So the first question is one of those: Please, can you give color on the emerging market margins, growth, and trading at the divisional level and by country? All we're gonna say is what we said. It's relatively consistent. The trends we saw in December are more or less the same. So you'll get the more granular detail to the extent we give more granular detail in August, in late August, when we release the full year results. But there's no major shift between the segments.
It's all pretty much consistent. Next question says: Of the constant currency growth year to date, how much is acquisitions, roughly? Also, have you noticed any reaction by competitors to your market share gains? Thank you. So our competitors certainly aren't asleep in any market, and many of our competitors are great competitors, and we always welcome competition. I think it's good, and it keeps you on your toes, and it keeps you moving forward and it keeps you hungry, and it absolutely makes for a more interesting day at the office. Where we do see the most short-term impact of that is on the larger type customers, that in many, many, many geographies we see that our competitors are very eager to get some top-line growth at very skinny margins, and that's generally on the very large customers.
So that sort of fits in with our cycle. We're not prepared to get involved in a race to the bottom. Our experience about these things, first of all, if it's a customer type that does fit our profile, you might have to exit them for a period of time, because generally they come back again in a period of time, at a more reasonable margin. Nobody can do business for nothing for too long. And, you know, you've got to get a fair price for what you're doing, or else you'll go out of business at some point in time, unless you're a technology company, where you can seem to do things for nothing for a long time. But us and our competitors aren't in that type of environment.
So we have seen something from our competitors, but it's nothing more than normal. But it's certainly no one-way street that everything goes our way. We get everything we bid for. We lose some, we gain some. We seem to gain a little bit more than we lose. In terms of the acquisitions, I actually don't know what the number is, but it's not significant, and it's not gonna shift the needle, 'cause these are the acquisitions we made in 2022, I guess, which wouldn't shift the needle more than a few percentage points at that top line. And by the time it's rolled a year, you actually can't really tell what they're contributing at bottom line because they're integrated into the business. They're split up.
Some of the business might go there, something might be closed down, some of it might be rolled into a different business. So yeah, it's all just part of, a fter a year or two, this just becomes organic growth anyway. But nothing. We didn't make any huge acquisitions last year, and therefore, it's not gonna, doesn't have any significant impact on the numbers year to date. David, do you agree with that assessment?
Absolutely. It's negligible, in my view.
Okay. Please, can you highlight the small Chinese ventures you are exiting? The one we exited a few days ago was a wholesaler of, what's the right word? Nuts and pulses, which basically went to, to manufacturers, value-added manufacturers, people who make it into smaller units. They, that business specialized in importing some bulk ingredients, primarily from the States, and it just wasn't our core business. But it's really not a lot of money we're talking about. But it's just distraction and non-core. We are taking out some of our joint venture partners in China to get better control, I guess, of those businesses. And we're also looking at all the cities we operate in to make sure that all of them make sense.
There are also other segments of the business that I don't want to talk too much about, that we're just questioning whether we should be in, which is more about the customer, the customer type, the customer class, as opposed to the product that they sell. But that's actively being looked at and part of the refinement process of developing a proper focused food service business in China. How easy or difficult is it to shift toward an independent client base from a national client base in the U.K.? The strategy has proven to be successful in Europe and Australia. It's not easy because you've got infrastructure, you've got people, you've got customers, you've got contracts, you've got commitments, you've got suppliers, and you've also got the reality of a market.
I think the reality of the U.K. market is it's a relatively small geography, and there is a high preponderance or a high proportion of national-type business. And when we say national-type business, multi-site operators, people who have 10, 50, 100 chicken shops, hotels, hamburger joints, whatever it might be. So that is the nature of the market. We're not going to be able to move out of that to the same extent as we have in other markets. But I think the U.K. have actually done a remarkably good job of developing core competencies in other aspects of the market. So we've got a core competency in national, which is the biggest chunk of the business, which is where we've had the most challenges in the high inflation market.
We've got the fresh business, which is performing remarkably well, which is primarily selling to the independent market. Then we've got the Caterf ood business, which is a collection of independent wholesalers 100% owned, which caters to the independent market, which is doing phenomenally well, and that's where a lot of the acquisition activity is happening. So our strategy in the U.K. is a little bit different to elsewhere, which isn't a bad thing. I think it's good to try different things. Where you've got three different routes to market, and we've got to get all three of them working properly. Two out of three of them are working well, and now we've just got to get the bigger engine, the Bidfood bit, to operate at optimal efficiency, and I think we're definitely on the right track.
Next question is: U.K. GP margins are slowly improving, and the cost base seems to be getting more controlled. When does this translate to better trading margins, which are still below long-term trends? That's a very good question, and I don't know the answer. Well, obviously, we're impatient. We're probably a little bit more impatient than you are. It's an anonymous attendee, so I don't know who it is. But it's, that's work in progress. These things happen as they happen. There's only certain levers you can pull at certain times. There is the reality that there is very low unemployment. There's very high staff turnover in certain categories of work, from a cost base point of view.
On a margin point of view, you don't have this inflation, headwind or tailwind, and it depends which way you look at it, which does change the playing field a little bit. But we're very hopeful that our look forward is better from a margin point of view than it has been in the past few years. Have you ever considered a cash-and-carry model like some of your peers, and why or why not? Yes, we have. And we are playing around with it in various different jurisdictions. It's not a cash-and-carry model like the good old days. I think it's got a place. It's got a smallish place, but we are trialing it, trialing some version of that, very low cost, low risk, basis in certain markets, and we'll get some learnings from that.
Some of it's very small, some of it's more significant, but none of it's gonna shift the needle in the short term. But we absolutely are trialing it, and we do think it has a role to play, but done correctly. We don't see the large footprint, multi-category cash and carry as being the answer. We also don't see a delivery hybrid cash and carry being the answer. The cash and carry has a niche role to play in certain markets, in certain geographies, in certain products. So it is something we're looking at. It is something we're actively trialing. And, you know, I think there is some potential there.
I don't think it's gonna make a radical change, but I do think there is another opportunity for us to make some decent returns out of what we do in a cash-and-carry-type environment. Are the two acquisitions, three, that have annual revenue of ZAR 2.9 billion margins, small, similar, higher or lower than the group margin? At trading level, on average, they're average. So I think that answers that question without giving too much away. If you add them up and look at the average of them, they will be at the average of our t hey're sort of at the average of our average group margins. So once again, I know I'm repeating myself, it's not gonna make a huge amount of difference, either diluted or accretive.
How do you continue to improve margins in Europe, yet you face wage pressure and sluggish demand? Well, I think a lot of that's coming through, through real volume increase, and you can have a look at those sales numbers. They're, they're very strong. So clearly, we're on a, on the right path in terms of getting the sales growth. So as long as you can get sufficient sales growth to offset some of the decline in margins, some of the cost-based pressure, the arithmetic works out okay, and that's exactly what's happening. So there's no, there's no magic in it. Sometimes we do give margin away, particularly in the, in the larger businesses, maybe in the Czech business in particular, where we sell to retail. You do have to take decisions once in a while to keep the factories busy.
You might drop your margins for a period of time, but that gets you the volume, and it's a juggle and, fortunately, our management teams are very experienced and understand the various different levers and have called it correct so far. So although there's sluggish demand, we're still growing our sales on a real basis in excess of what the cost base is growing. Have you considered entering the Indian market? I imagine this is a large potential market. We've had a lot of people come to us with ideas about India, and we look at them, but there's nothing that makes sense for us yet. It's a very fragmented, different type of market. I don't think anybody's really succeeded in our space in India.
That's not to say somebody won't at some point in time, but I think in the shorter term, there's easier fish to fry in other geographies. I think it'll be an expensive, risky venture. And that's not to say that wouldn't necessarily be a very big business at some point in time, but we just don't have the appetite for it at this point in time and believe there's enough for us in other markets. Sorry, I've just got to get up to speed here on where these questions are. Okay, just give me half a second, if food inflation remains below core inflation, do you have concerns around margins in the forthcoming year, or is this more a return to business as usual? Do you have levers to continue to expand margins despite this dynamic? Yeah.
I think it's a return to business as usual. I don't actually see that there's gonna be too much change in the overall mix. And don't forget, we are doing things all the time. So we are implementing, continue to implement, continue to refine what we do from a sales point of view in terms of the customer mix, in terms of the product portfolio, the house brand portfolio, our manufacturing operations, which all have an impact on gross margins. The cost base will settle down. Those wage cost pressures will equalize inflation at a period in time. Not everything works perfectly in synchronicity in the real world. Things lag, things lead, and so you've got to make those adjustments. So we're not overly concerned looking forward.
We're quite comfortable with the fact that our margins have stabilized, notwithstanding the fact that inflation has cooled rapidly, which returns us to a business as usual type of environment that we experienced, I guess, pre-COVID. What are they doing so well in Australasia, that margins remain stable and might improve? They do what they've always done. So, you know, we've had this discussion for the last 15 years or so. They're very focused on what they do. They execute exceptionally well. We've got very stable management teams. They've been in place for a long time.
We've invested significantly in the infrastructure, and lots of you questioned that maybe, I don't know, 10 years ago, eight years ago, when we started investing quite a lot, and I think it's that investment that's absolutely giving us the opportunity to continue growing, and we continue to invest. So of the ZAR 4.4 billion or ZAR 4.2 billion CapEx that we've spent so far, quite a big proportion of that is in Australia, which probably will take a breather for a year or two, and New Zealand's gonna kick in next year with some big CapEx requirements, which will give them the next boost of growth, of productivity, of innovation, of manufacturing capability. So I think, yeah, that's the key to it.
They've been very focused about having the correct customer profile, and working that through the system relatively well. Has the DAC, the Italian put option liability of EUR 5 billion June 2023, been renegotiated? Are you expecting this to be payable in June 2026? At this stage, it hasn't been renegotiated, so it is June 2026, but there's still two years to June 2026. So at this stage, it is what it is.
Just to add, sorry, but just to add there, that it's not all due in 2026. It's part in 2026, part in 2027 and part in 2028.
Thanks. Would you say that the change in the Chinese consumer preferences regarding more local consumption is structural? How long do you expect it to take for you to fully compete in providing this to this local consumption trend? I don't know. I really, I can't answer that question. You know, some of it's government-led, some of it's economic-led. Who knows? We don't have a huge business in China. We don't have a huge exposure there. I think our, our revenues in China, Dave, correct me if I'm wrong, are in the region of about 2 billion, 2 billion RMB-
Yeah.
Which in the context of China, is pretty small. Yeah, it's a difficult place. China's a difficult place to do business in. If I was sitting in your shoes, would I put a model together that said China was gonna be 50% of our business in five years' time? Probably not. But it is a market we're in. It's a market we'll continue to invest in, and we still think we can grow. However, it is a difficult place, and we're very conscious of that, and we're very conscious of the fact that we don't really understand it, and I'm not sure we ever will totally understand how it works, because things seem to change relatively quickly, and you have to adapt accordingly. A large U.S. peer appears to be investing aggressively into the U.K.
Do you think that will change the competitive landscape materially over the next 12-18 months? Well, they're our largest competitor anyway, so we've competed against them forever. When they went U.S.-owned and they were private equity-owned, and before that, they were private equity-owned, and before that, they were listed in the U.K., family-owned and a phenomenally successful, fantastic business. So, they are our largest competitor. They continue to be. They are making big investments, but so are we. Yeah, we compete against them, and we compete against all the other competitors on a daily, weekly, monthly, annual basis.
The only thing I will add on that is because they are a listed company, and they do pay dividends, and they do have shareholders and people like you asking the same questions of them, they need to make a return out of what they do, which is great for us. As long as they have to make a return, we can compete on a level playing field. There's no problem with that. Is there an impact on your business if customers eat out less at home, or do you simply just supply wherever the meal gets consumed? That absolutely has an impact, because a meal eaten at home is supplied to the retail channel. So I'm not sure where that question comes from.
In South Africa, if they eat at home, they're gonna go to Pick n Pay or Checkers and buy their food and make hamburgers at home, or in the U.K., they're gonna go to Tesco or Sainsbury's, or if they're fancy, to John Lewis or one of those fancy places and make some meal at home. We don't supply the retail channel to any great degree. We supply some of the retailers with some products in a few markets, but that's really not our core business. We supply restaurants, takeaway chains, hotels, airlines, caterers, universities, people who make a meal not for consumption in the home. So it obviously does have an impact because people will be cooking at home, because maybe more cost-effective at a point in time, which means they're not eating a meal at a restaurant or a takeaway.
When we say they're eating at home, it's not that they're eating a takeaway meal at home. A takeaway meal at home is still an out-of-home meal, even though it's eaten in the home. We're talking about the shift from the food service channel into the retail channel, which absolutely does have an impact. But fundamentally, the long-term trend of that is people are gonna eat more meals out of home than in-home until some equilibrium gets reached. But the long-term trend absolutely is we all like to eat out more. We've got fancier tastes, we're lazier, we're not as skilled in the kitchen, we enjoy the social aspect, our kitchens are smaller, there's double income families. We're spoiled, and even as we get older and live in an aged care facility, that's an out-of-home meal.
We have greater expectations of what will be served to us, what food, what drink, et cetera. So yeah, that's our potential market. I think there might be more. But wait, there's more. How will the summer sports, the summer of sports in Europe affect you? There is UEFA Euro from the June 14th, and then Olympics in July. Yeah, it probably means I won't get too much sleep because it's like in the middle of the night here, so, b ut I guess that's not the question. Firstly, the Olympics probably will have a positive effect on us because we don't operate in France. So I think it'll be very disruptive for the French and probably be very positive for the rest of the U.K...
For the rest of Europe and possibly the U.K., because people will, and this is my guess, people will travel around Europe and then include some Olympics activities as part of their travels. And we'll get all the benefit of their traveling into Italy or Spain or Czech or wherever they might go, Holland, Belgium, but we won't have all the trauma and, difficulty of operating in France with the Olympics, which, yeah. Our experience has said that host cities during Olympics don't do particularly well. In fact, they do awfully, because everything comes to a standstill. All business, all leisure travel stops, and the Olympics absolutely doesn't make up for it. So I actually think it will be positive for us. As regards the football, I think that makes absolutely no difference. That's just par for the course.
It's just a regular event, which won't really have any real impact. So those are all the questions. Thank you very much. Sorry if I'm a little bit grumpy. I'm not feeling totally well. Lucky David's in a good mood. Just to recap, I think we've done o ur teams have done phenomenally well. I want to thank all of them who are listening to this, for everything they have done, continue to do. They're an amazing bunch of people, and I say it every time, but I can't say it enough. It's really not about me or David. We do very little. It's the people out there in the 35 countries we operate in, who make it happen every day and inspire us and inspire their colleagues as well, which is very important.
As I said, the look forward for the rest of the year, at this point in time, looks satisfactory and looks on track. And where we sit for next year, at this point in time, we're optimistic we'll get continued real growth. We don't see any real train smashes ahead. Obviously, you've got economies behaving as economies do, and geopolitical winds blowing whichever direction they're blowing in on any particular day. We can't control any of that. You've got shipping disruptions, which I didn't speak about, but they're not having any major impact. They have a very short impact, and then that settles down very quickly. The product finds another way of getting to you, or you find a different product to, to sell to the customer. So that doesn't have too much of an impact.
We actually see the employment situation we think is gonna improve, that unemployment will start ticking up a little bit. We'll find staff, hopefully, a little bit easier to find, retain, employ. We're hopeful that wage pressures will start easing a little bit, which will help the cost base a tiny little bit. And we remain confident. We continue to invest. We've got some acquisitions in the pipeline. It's exciting times ahead, so bring it on. I look forward to seeing you all at the end of August, and we'll catch up then. So thank you, everybody. Stay well. Thank you.