Good morning, everybody, or good evening, depending on where you are. It's a great pleasure to welcome all of you to our 2023 results presentation. It's not often that one is able to announce results of the quality that we've announced today. Management under Bernard and David, Dave's leadership have done a phenomenal job navigating the organization through a difficult few years, enabling to take advantage of the opportunities out there to deliver these excellent results. I take this opportunity in front of many of our stakeholders to congratulate and thank Bernard and Dave and the management teams from all over the world for this great achievement. I would also like to thank our non-executive directors for the role they play in enabling the organization to remain entrepreneurial and living its culture and values.
I specifically thank Helen Wiseman, who chairs the Audit and Risk Committee, Tasneem Abdool-Samad, who chairs the Social and Ethics Committee, Paul Baloyi, who chairs the Acquisition Committee, and Nigel Payne, who's the Senior Independent Director and chairs RemCo. Also, thank you to Keneilwe Moloko, who joined our board in the not, in the recent past, and Cliff Rosenberg for their continuous dedication and support. And last but not least, I'd like to thank our founder, Brian Joffe, who laid foundations, the foundations, and defined and developed the culture that enables to grow and develop and prosper. He continues to question and challenge us in meetings, keeping all of us on our toes. I'm now gonna hand over to, Bernard, to take you through the finer details of the results, followed by Dave. Thank you very much for attending.
Thank you, Stephen, and hello, everybody. It really is a pleasure talking to you all today, and to put some color to these results and to talk about, more importantly, what we see the future looking like. Before going on, there are just a few more thank yous. So firstly to Stephen for his continued guidance and support and leadership of the board and chairmanship. It really is much appreciated. And I think most importantly, my thanks go to our team, our senior team, our management team around the world, as well as all 28,000 people in 35 countries who make this all happen.
It might look simple when you look at it on a few pieces of paper and a few PowerPoint slides, but there's a lot of stuff that happens in the background. I'd also just like to thank all those people involved with actually getting these numbers out as quick as they do and in the quality that they do. And I'm sure David will thank people in more detail when he gets to talk. So you all know... Hopefully, you know who is, which is a great thing, or else you're probably in the wrong meeting. So let's just go straight ahead and understand what happened last year. And like I said, I don't want to dwell too much on last year. That was two months ago.
We're already nearly 20% into next year. But to understand the future, sometimes you need to understand what happened in the past. The numbers for last year are, in my opinion, truly spectacular and are a testament to the management teams and the culture with which we run our business. So they weren't an accident. They weren't just a lucky victim of circumstance. Obviously, conditions were favorable for us, but I think the structure and the strategy that we've adopted for many years and haven't really strayed very far away from, other than to refine the strategy, has put us in a very strong position.
That when conditions did change after the few dark years of COVID, and we started seeing the bounce back, our teams around the world, our people, were able to quickly adapt to new circumstances. And were able to, under very difficult conditions and circumstances, suddenly change from a business that was struggling with low volume and low consumer activity, for no reasons other than COVID, to suddenly a consumer out there that was spending a lot of money and was out with a vengeance to make up for the lost few years of COVID. So I think these results are very, very strong on a number of levels.
Most importantly, I think we need to look at our peer competitor activity wherever possible. And there's no doubt that many of our peers have done reasonably well. I'm sure you analysts out there will know more about that than I do. But certainly, the impression we are getting from our suppliers, from our customers, more importantly, is that we are gaining market share, that we did seem to be a little bit more nimble out the blocks than a lot of our competitors. That we had less repairing to do after COVID. We had left the muscle intact. The business was in good shape and was able to continue on the trajectory from 2019, 2020. When we look at the comparative of FY 2022, there were two halves to FY 2022.
The first half, from July 2021 to December 2021, was significantly COVID impacted, and the second six months of 2022, I'm talking, so from January 2022 to June 2022, were not COVID impacted, and we started seeing the, the recovery happening in about February and March of 2022. So clearly, this year is also a story of two halves. The first half of the year, we were, we were cycling through the COVID impact of the year before. The second half of the year, we were cycling against a strong recovery in the previous year. And that sort of mirrors in the, in the results we've achieved, which is a much stronger percentage performance in the first six months compared to the second six months, which is a normalization of activity out there in the marketplace.
So what we are seeing, and we have seen it for many months, and we've spoken about this before. We - I spoke about it in February, I spoke about it in early June; is we are over a year through this recovery now, and we are seeing a normalization back to reasonable levels of activity. So we had a very, very strong bounce back when borders reopened, international travel started happening again, people could move around, businesses got back to work, and things just got back to a reasonable level of normality. Then we were hit with this inflationary environment from about March of last year. And now what we're seeing is a normalization, and I'm picking my words very carefully, because I don't want to... I don't want to create the wrong impression.
I don't want to create a negative impression. All we're seeing is that the absolute strength and frothiness of maybe a year ago is more normalized now, and it's more a market that's easier to understand and to rationalize. So David will take you through the financial components of FY 2023. We've given you a whole lot of detail in the back by division. But suffice to say, the numbers are very, very strong on all levels. Revenue growth is strong. Margins, gross margins held up. Expense control was particularly good. Cash flow generation was exceptionally good. We continued to invest for future growth, both in capital investment and acquisitions of new businesses.
We bought nine bolt-on businesses, and interestingly, since 2016, we've bought 70 bolt-on businesses, which obviously all contribute to building the foundation, you know, the large structure that we have that enables future growth. These acquisitions are all small individually, but added up, there's a whole lot of compound benefit that you get from them. So that's definitely a strategy that is playing well for us. Obviously, we never got everything right in the year. I think you'd have to be a pretty brave person to say that everything went right, and obviously, we made one or two mis-steps, which is totally understandable in a portfolio type of business like we have. 21 operating businesses across 35 countries.
But in all our businesses, we still see upside potential, opportunity, and a positive runway. Some of them will take a little bit longer, some of them might be a little bit more frustrating, but in every market we operate in, we see the opportunity to expand our sphere of influence, and to continue growing. Obviously, in some markets, we have more market share than in others. We're more mature on the spectrum, so growth rates will, of necessity, be more moderated. But we're confident that we're operating in environments around the world where we can continue to see sustained growth. So that was last year. The record results are at a record level, in absolute numbers, in ratio numbers.
Whichever way you want to look at them, they really are a very solid, strong set of results. And maybe what I can do is very, very briefly talk about the segments because they are different in their nature. And I'm gonna talk about the past, I'm gonna talk about the future as well at the same time. So if we start off in the U.K.., and I'm actually in London at the moment, I think the U.K.. is probably, in terms of the developed economies that we operate in, the U.K.. has had a very challenging economic time with a lot of political, economic volatility, a cost of a cost of living crisis, a political crisis, lots of other things. And under the circumstances, I think our business has performed particularly well.
I'm sure I'm gonna get lots of questions asking why the margins in the U.K.. are lower than the rest of the world, and when do we expect them to be at a different level? Each country is different, and each of our businesses operate in a slightly different manner. In the U.K.., we have a particularly strong position in the national accounts, in the larger account space. That's historical, and I think it's also a factor of the structure of the market in the U.K.. We've taken some very good market share. We've seen some very strong revenue growth. Unfortunately, our margin growth is lagging some of that revenue growth, which we will anticipate there will be a rebalancing of that in time to come.
There's probably our cost base has been quite difficult to control... not to control, but to moderate in The U.K.. They face particular cost pressures, which might be a little bit more severe than in other markets. But we're very comfortable with where our business is. We've redefined the business over a few years into three divisions. We've got the wholesale business, which is the bulk of the business, the traditional business. We've got the fresh business, which is the traditional seafood business, coupled with meat as well. And then we've got the Caterfood Group , which is businesses targeted towards the independent free trade HORECA type market, which is doing particularly nicely in this environment. The at the moment, I think, is going through reasonably challenging times.
Summer in the wasn't great. It was the wettest summer for however long and the coolest summer for however long. So the summer season wasn't particularly fantastic. These things happen. We can't control the weather. But volumes are holding up relatively strongly, and the future in the , in our mind, is not diminished, and we're still confident that we can increase the operating margin in the . Maybe in the short term, they're not gonna get to some of the others. Let's be pragmatic.
Structurally, there are some differences in the market, but there is some upside still in the U.K.. market, and we will see the benefit of the volume gains that they have picked up over the last year coming through in the next year or two as they bed down. So we're very comfortable and content with where we are in the U.K.. Europe's had a phenomenal year. I think they were a particular beneficiary of global travel opening up and the pent-up demand going through the roof. We saw a strong summer season last year, which was July, August, September 2022. Volumes held up for the rest of the year. In almost...
In fact, in every geography we operate in Europe, we achieved very, very strong results. Our Dutch business and our Belgian business are now approaching levels of operating profit that we thought they were capable of. So those teams have done a phenomenal job getting those businesses in a very short period of time up to optimal levels. The Czech Slovakian business continues to perform very, very well. We do have a greenfields business in Hungary that we've opened. It's about two years old now, and it's actually profitable already. Operating out of the Czech engine, and we will do something more local in Hungary, but we have built a foundation now that would enable us to roll that business out.
The Polish business continues to go from strength to strength, and it's a remarkable story. It's one of those textbook case studies, from a business that was loss-making, 10, 11 years ago, to a business that's now that's sustainably profitable at very acceptable margins with a whole lot of growth still, still, embedded in that business and very well structured for, for the future. The Italian business, once again, has had a great time. There's no doubt that tourism has, has boosted that. But it's not just about tourism, it's obviously a whole lot of factors, of which tourism is one. Operating margins are absolutely back to where they were pre-pandemic. We have some capacity issues, and we will be investing in, in, in more... We are currently investing in further capacity to fuel that growth.
Yeah, I think when we bought that business in 2016, it was doing about EUR 250 million. They are almost at EUR 1 billion of revenue now. So we've seen phenomenal growth in that business over the last period. The Baltics, doing absolutely perfectly. We've made a reasonably sizable for them bolt-on acquisition in Estonia, which is working well, and we'll have a nice... We have got a nice business in that part of the world now. Spain, we've seen good progress. We have a refreshed management team to take that business forward. It's profitable. It's profitable at reasonable levels. Obviously, we've scaled the size of the business back, but the profitability is now doing well.
Portugal remains a great opportunity for us to scale up, and we've got some construction in progress, as well as some acquisitions. And Germany, while not causing us any real problems, it's a profitable business now, gives us the opportunity of where we go from here. Now, once again, I'm sure I'll get asked the question: When are you gonna do something in Germany? So I'll cut that one at the path. We'll do that when the time is right and the right opportunity arises, the right targets are available, and we certainly will endeavor to make the right decision and not a hasty decision. Emerging markets is a more interesting collection of businesses in terms of it's eclectic and operates across multiple parts of the world.
South America is economically challenged for the last year or so. Notwithstanding that, Brazil, we're showing some real good opportunities and real growth coming out of that. Argentina, we're doing very, very well. Chile, although we're growing our top line, we've had a few internal issues which are all part of the growing pains. Bearing in mind, once again, that was a greenfields operation that we only started maybe 10 years ago. So we built a business of significant scale that we now need to, and we are, building the back end to support this very strong growth that did happen. Australasia continued its phenomenal performance. Both Australia and New Zealand exited their largest customers in about October of 2022. They were QSR customers in both of them, accounted for roughly five-...
I think it's 5%-7% of the revenue. And we can see that the impact on that has been positive, and as we predicted, created the capacity to fill with the right volume, the right customers, where you can mutually benefit out of the relationship. So those businesses continue to do particularly well, good opportunities for growth. We're continuing to invest substantially in capacity for the forward look. And those businesses, like I say, operating at world-class margins, which is reflective of the strategy of not only being a distributor, but being an integrated food business, where we're importing and we're manufacturing as well. So that's...
Yeah, you've got the dynamic of those components working symbiotically to enable you to maximize the margin that you get, whilst offering customers great solutions and great value. Which I suppose brings me on to the next point, that we are seeing inflation taper off quite quickly now. We are seeing consumers who might have been more accepting of price increases a year ago, are now pushing back. We're in a great position to offer them alternatives because of our house brand strategy, because of our manufacturing strategy, we're able to offer value propositions that keep us exceptionally competitive in the market and are of benefit to our customers.
I don't wanna talk about the economic outlook of the economies we operate, because I'm no economist, and I think there's a lot of negativity out there, and we're not really seeing that negativity portrayed in our volumes. Now, obviously, it's more difficult than it was a year ago. I mean, that's just obvious. And many economies are at very low levels of growth. They might even be in recession. And then the circumstances are very different to where they were a year ago. But we're still seeing growth in almost all markets that we operate in. Our revenue for July and August, we're still up somewhere between 12%-15% on a constant currency basis, in that period.
And when you look at inflation, you've now got the base effect put into it, and you can see inflation's coming down quite dramatically. I think Australian inflation released today was 4.9% year-on-year. So the fact that we're getting double-digit growth, to me, tells me that our growth is in excess of inflation, and there's real volume growth in the business as well. So where we are at the moment, we're very confident that we've got a great team of people in place. It's generally the same group of people who have been out there in, you know, with us for a long period of time. And the strategic building blocks are exactly as we've spoken about for a few years with minor changes.
I think, possibly, that's the differentiating factor in our business, is that we spend more time focusing on what we can do for our customer and not looking at ourselves and restructuring our business and having to change what we're doing midstream. We've got a very coherent, straightforward strategy. It's very simple. Our teams are fully committed to that. It's what we've been doing, it's what we continue to do, and clearly, it's given the correct results. Just on a couple of one or two negatives I must just talk about. Our China/Hong Kong business is going to possibly struggle a little bit, because and you read all about it, China didn't experience the bounce back that the rest of the world did when it came out of COVID.
And in fact, China is in a little bit of an economic difficult situation. And not only did we not see consumer demand pick up when they released restrictions, we've actually seen a decline. So it is a challenging time in China. You've got deflation. We specialize in imported product, primarily out of Europe and Australia, New Zealand, and America, where you've got product inflation and a consumer who's not willing to accept inflationary increases. So that's a challenging environment. Once again, that will change. We've got a great infrastructure. We're in 27 different cities. Notwithstanding the negative, our revenue is relatively flat year-on-year, which we think is a great outcome based on the doom and gloom that you do hear about doom in China.
Hong Kong obviously is impacted by the by the Chinese slowdown to a degree, but Hong Kong is also impacted by the fact that you've got an outflow of Hong Kong people on a temporary basis and very few tourists coming back in. So they haven't achieved that balance yet of tourism flooding back to Hong Kong. And Hong Kong is very dependent on inbound tourism, inbound business, et cetera. So the Hong Kong business will also have a few tougher months. But once again, I don't want to... I don't want this that to be seen as a huge negative. It's just a reality, and these things always do change. We've got a great business, great brands, great people, great infrastructure, and we're doing very, very good volume.
Once it does turn, we'll be absolutely well poised to ride the wave once again. I think it would be remiss if I didn't talk a little bit about South Africa, seeing that a lot of you are based out of South Africa. Phenomenally, our South African business had a record performance again last year. The food business, the food service business in particular, had a great year as the recovery kicked in. The Crown business struggled a little bit with load shedding and the fact that they were cycling through an incredibly strong year, the year before. They were a beneficiary of COVID and sales to retailers, and they were paying the price for that last year.
But to show record performance in South Africa, off a record base the previous year, in a tough environment, I think it's full testimony and credit to the team. I'd also like to pay special tribute to Klaas Aucamp, who's retiring in a few weeks' time. Klaas has been with us for 12 years and has been an integral part of our journey in South Africa, as well as in the Middle East and Turkey. So we wish him all the best and lots of good health and happiness, and thank him for his great contribution to our group and the development of our business over the time. So I think I'm gonna hand over to David, who can take you through the numbers in great detail.
There is a Q&A facility. Submit your questions, and we'll attempt to answer them once David has done his bit. So thank you, everybody.
Thanks, Bernard, and good afternoon to all. As Bernard indicated, it's certainly a pleasure to be able to talk about the numbers as we presented them. It really is a tribute to all the teams around the world, and I'd just especially like to make thanks to the finance teams and obviously the central finance team. The central corporate team that we've got goes through quite a lot of hell at this time of the year. Now, cognizant, obviously, the finance presentation is a bit backward-looking, but as Bernard said, you don't know where you're going to unless you know where you've come from. So let's just understand that. All the numbers are presented in terms of IFRS as we understand it.
The policies are consistent, consistently applied, and there's nothing new that has popped out this year. All the information is online, so if you do need presentations and the like, you're welcome to pick it up from there. We'll just look at the highlights, and I think in a few words, it's exceptional, both in terms of earnings and cash flow, quality and quantity. So, yeah, we really can't say much more than that. Revenue is up 33% to nearly ZAR 200 billion. Gross margins were down a little bit, and I'll talk a little bit about that and what the drivers of that were.
EBITDA margin of 6%, trading margin of 5.4%, headline earnings up 35% to ZAR 7 billion, and constant currency up 25%. As we've indicated, there was some benefit from the rand, particularly into the second half. The numbers do have hyperinflationary accounting, and we've termed normalized HEPS, and that really just takes out the effects of hyperinflation by accounting in Turkey. That is, if you look at that on a normalized basis, that was 37% up. Working capital on a quarterly average to the year-end is at 7 days, favorable against the 2019 comparatives of 13 days. I'll talk a little bit about that later. Cash flow was exceptional across the board. ZAR 13.2 billion, up 66% against FY 2022.
That's really reflected, I guess, in the free cash flow of ZAR 3.4 billion, which is significantly higher than the ZAR 1.5 billion of 2022. But the auditor sitting here, Evan, so just wanna note that we have an unmodified audited opinion for , which is good. The final dividend of ZAR 5 a share, which takes the total dividends for 2023 to ZAR 9.40, up 34%. But absolutely in line with our cover. As Bernard indicated, real growth and market share gains through the business over and above the inflationary impacts. When we measure inflation, it's not an exact measure against the basket of goods that we sell because they vary across the world.
But I think that sort of came for the up for the year at around 12%. So if you take that out of the constant currency growth, you're seeing that almost 50% of the, of the growth is coming out of market share gains and, and, and real volume growth. So, very good results. And that's really, I suppose, driven by the, the, the recovery that we've seen, particularly in the, in the discretionary spend sectors. As Bernard indicated, the quarterly sales into the first quarter of 2024, about 15% ahead of, the comparative period, largely to the end of August, and consistently above on a constant currency basis, ZAR 4 billion a week. Gross profit did come down a little bit compared to the prior period.
There were some conscious and maybe not so conscious decisions. Some of the decisions were to sacrifice margin to maintain volumes. We did have pockets of overstocking, where we had to trade through those positions, and that cost some of the businesses some margin. And as Bernard indicated, in the , we do have a big proportion of national accounts exposure, which, in an inflationary environment, has been more difficult to pass through price increases, where other than in, you know, if you compare it to other businesses. The expenses have been well managed, and if you look at it, the efficiencies in terms of cost increases versus revenue increases... there's still some sort of gap there, and that's despite, obviously being, there being massive cost pressures through the system.
Trading profit of 38% to ZAR 10.5 billion, first time the group's topped ZAR 10 billion, so good result. I think, you know, notwithstanding that the gross margin was a little bit under pressure, the trading margins came out higher, and that's really because we've got cost efficiencies through the businesses. So overall, very happy with the trading result. I guess the one area where we've seen quite a big increase in uptake is in the interest line. But that I think is really reflective of a number of things. Firstly, because of the activity levels, the amount of working capital through the year has been significantly upscaled. And we've invested quite a lot, as you can see, through capital investments.
Obviously higher dividend payments as well. And I guess the big thing has really been the impact of interest rates, you know, the interest rate environment around the world, which has ticked up over the last 18 months significantly. Capital items really are comprised of a few little bit of goodwill write-off in some businesses in Greater China. And headline earnings up 35%. And I've spoken a little bit about the normalized, which takes out the impact of hyperinflation. The final dividend, as I said, basically largely in line with our policy of just over 2 times covered in terms of normal EPS. In terms of the cash flows, cash generated from operations, both before working capital and after working capital, was both impressive.
Before working capital, up 37%, and after working capital absorption, up 66%. So, we're very happy with the performance of the businesses there. In terms of the working capital, we absorbed just under or just about ZAR 500 million in this period. It was ZAR 2 billion in the, in the prior period. And as I said, the net working capital days, on a quarterly basis, there's no real right measure in terms of looking at days, because it largely is a backward-looking measure. But I think, on a quarterly basis, the businesses have done pretty well relative to activity levels. And that's compared to pre-COVID, which we, we assume is sort of 2019, where the levels were around 13 days. So the businesses are significantly more efficient, you know, relative to, to the pre-COVID levels.
In terms of, I guess, our working capital, receivables provisioning is high in absolute terms, but not in relative percentage terms in terms of the book. I guess it is a little bit conservative, but I think realistic in terms of potentially what the outlook could be, assuming, you know, economics do get tighter. So we don't really have an issue with that. Inventory provisioning, likewise, very consistent with the prior year, although it is up on basically higher absolute inventory levels. And payable terms have normalized from the pandemic periods. They're still basically better than pre-COVID. But, you know, the nature of the business is incrementally changing. The businesses are doing more importing.
So the payables nature will change incrementally over time, because importing, you don't necessarily get the same credit terms that you do with buying locally. In terms of investing, as I said, quite a significant step up, largely because of two things. I think in terms of maintenance CapEx, that is up versus, I guess, what we look at the depreciation charge. And I think that's really reflective of the cost of new equipment versus old. And that obviously, as we've indicated before, has stepped up significantly. We're investing significant amounts into new capacity over in the past year and will continue to do so as we go into F 2024. It remains our intention to, where we can, own our properties, and 73% of our property portfolio is owned.
And that's valued at over ZAR 18 billion in current terms. Investments and acquisitions, as Bennett indicated, we did 9 in the period. Very much in line with bolt-on inorganic growth as we see it, you know, across each business. And their contributions to revenue in absolute terms were pretty small. But over time, basically add to the growth algorithm of each of the businesses. And, you know, over a while, certainly aid expanding the footprint or the product range that we're selling. Net debt in rand terms is ZAR 2.1 billion, but I think if you look at it in a proper currency, basically flat with the prior year.
That really indicates that the cash flow through the business has been particularly strong. And with cash equivalents of ZAR 12 billion, nearly ZAR 12.5 billion, significantly up on the prior period. Balance sheet remains strong. I'm not going to really dwell too much here. I think just in looking at the balance sheet and looking at the individual components, one just needs to bear in mind that the closing rates, 2023 versus 2022, were significantly higher. I think in sterling was about 20% up. So, you know, it's not all bad news. None of it really, it's just a reflection of the rand reporting. As you know, we did a refinancing exercise in February and March of this year. Accessed additional liquidity through the USPP market.
Fixed rates of 4.6% or 6% odd for five- and seven-year terms. Certainly one interesting thing was, the only thing that really changed from the year before that was the base rates that we were pricing over. The credit spreads for remained absolutely the same, notwithstanding the turmoil that the markets had seen over the prior year. Most of our debt now is termed out between four, five, six, and seven years. Around 83% of that is fixed at largely a blended rate of around 2.8%-2.9%. Significant headroom from a group perspective to be able to invest organically or inorganically. And we've got about ZAR 26 billion of headroom as we end the year.
No change in risk management and solvency ratios, and all those things are well within the group's covenants, and very, very low. In terms of guidance, as Bernard said, we're operating, I guess, in a more normalized world. But we've certainly got the wherewithal, financial wherewithal to deal with what comes down the track. As I indicated, group sales are tracking well into July and August. And despite, I guess, the poorer, wetter northern hemisphere summer, as we heard, particularly in the through July and August. As I said, we've got the financial strength to support the business's requirements and growth requirements. We expect to remain cash generative into the next year.
Inflation is moderating, but as you know, the food inflation remains a little bit stickier than core inflation. We will expect and with normalization, working capital absorption into the first half of the next year. And as I said, we are planning further capital investments into facilities and depots in many parts of the world. Australasia, particularly New Zealand, the , Europe, and the emerging markets, South Africa and Malaysia in particular. We think that the strength of the group remains a competitive advantage, and we've been able to deploy relatively quickly capital to take advantage of opportunities, and that's a great place to be in. ESG, the business has continued to invest into a lot of energy efficiency through new depots, refrigeration, vehicles, and the like.
And it's a big focus and absolutely has been taken on board by the businesses. No change to our philosophies of hedging and risk management, as I indicated. Obviously, I guess the only constant is volatility, not necessarily negative, but that's where the world, I guess, finds itself in. But our provisioning and look forward absolutely is appropriate for potentially a tougher economic environment going forward. Currency volatility, absolutely, we report in Rands, but we tell you what the constant currency effects are. But currency volatility will have some impact into this year. Our investor base is stable, but I guess we have seen a little bit of risk-off sentiment in emerging markets and probably a little more particular in South Africa.
Yeah, the Q1 is starting off as expected, and we are budgeting for real growth into the next financial year. So that's from me, I'll hand back to Bernard, and we can take Q&A.
Thanks, David. That was very comprehensive. I'm not sure if you did mention, I'm sure you did, but just to note that our tax rate going forward is higher. It is gonna be, we estimate, about 26%, compared to around about 24% historically, primarily because of the increase in the corporate tax rate in the , as well as the mix of the businesses that are contributing. We've seen very strong growth out of those that are possibly at a higher tax rate than others. So, when you do your fancy spreadsheets, you absolutely need to plug in the fact that the tax rates are gonna increase. Just a few other comments that I didn't speak about before, I'll keep it brief. We don't operate in isolation. Obviously, we operate in the economies. We operate in the economic realities that they face.
But one thing that we are comfortable with is our ability to adapt and react to circumstances as they change. And volatility, while it's difficult, presents opportunities, and sometimes you don't see those opportunities straight up front. But if you've got a nimble enough team who understand that out of any circumstance there's opportunity, I think you can benefit out of it in the medium term. So we are heading into a period... We are in a period, probably of lower growth... of inflation changing its nature, and decelerating, of labor availability coming back into the market, of supply chains easing up, of higher interest rates. So there's a lot of dynamics that are very different to what they were a year ago.
But a year ago, the dynamics were very different to what they were the year before. And I think as long as you're nimble, flexible, and you have the right strategic objectives, you can maximize your opportunity. And there's no doubt in my mind that our business, because of the people we have and the experience they have, the philosophy by which we run the business, will enable us to maximize our opportunity in the markets as they make themselves known. So once again, it's a big shout-out to our teams around the world. Across all our businesses, they really have done a phenomenal job. They understand what we're about, they understand the culture, they drive their business at a local level on a global strategy.
We have the absolute synergy of acting independently to local market conditions, but taking the learnings of other markets and understanding what's going on, and having the support of people in the same industry who can... Yeah, if you're willing to, you can actually learn very quickly as to what's right, what's wrong, what works or doesn't work, and change your course accordingly. So we remain very enthused about the future prospects. The medium term certainly looks good. There's a lot of talk, and you look at the statistics, mainly out of the U.S., where the out-of-home market growth is way outstripping that in retail. They're talking about, and we've just mentioned this before, that eating out is no longer a discretionary spend. It's becoming a staple, a commodity type of spend.
It's just what people do now. The changing demographics, the Millennials and the X's and the Y's and the Z's, who all live differently to the way us old Boomers used to live. So the world's changing, and I think our business is fortunate in that we're in an industry with great prospects and growth dynamics, and our business is exceptionally well positioned to take advantage of those opportunities, and we'll carry on doing what we're doing. There's no huge change in our strategy. There's no huge need to change things and restructure and do things differently. Like I say, we're a really boring story that somehow seems to deliver the results. And I was just flicking through some of the supporting documentation that David put in here.
When you look at our HEPS, when we unbundled in 2016, was almost exactly half of where we are now. Now, obviously, the rand has had a little bit to do with that, but I don't think the rand has halved in value over that period of time. So for our teams around the world to double the size of the HEPS of the business over that period of time, I think is true testament to them. I'm gonna go through the questions that have been sent. I'll try and answer them as best we can. Some of them will get my typical response, which is, "We don't know." But let's go. Hi, this is from an anonymous attendee. "Hi, please, could you provide an idea of your medium-term growth algorithm?
Is it fair to expect nominal GDP + 1% or 2% offline growth or incremental margin expansion, leading to high single-digit constant currency earnings growth as a cost base... Sorry, strong constant currency earnings growth as a base case? On the conservative end, that's correct. We see that the out-of-home market will grow in excess of GDP growth, 5% or 2%. You've got GDP growth on top of that, you've got a bit of market share on top of that, you've got a bit of inflation on top of that, you've got some operational leverage and efficiency on top of that. So, yeah, as long as the economies don't tank and we don't see consumer demand, going back at a rate or not, that's more or less the algorithm. We're not as fancy as that. You know, we don't have artificial intelligence.
In fact, we don't have any real intelligence either. Like I said, we're just baked bean salesmen. But overall, that is the algorithm of the business, and I think that's what we've been doing over the years. From Paul Steegers: "What is the outlook for gross and trading margin in the current year, given lower food inflation?" When you look at our gross margin, that actually hasn't moved all that much over the years, and it's pretty constant. It's moved by a couple of points of a percent, and we expect that to continue on average across all the businesses. Now, obviously, in some businesses, there's more of an impact than others. But fundamentally, yeah, we see those numbers as being sort of where they are, and there's incremental gain to come out of that.
For many years, we operated in an exceptionally low to zero food inflation environment and still managed to grow our operating margin on gross margins staying relatively similar. Now, gross margins are also a factor of your customer mix and on the other things you do, like manufacture, house brand, et cetera. So it's not a simple answer that margins are only attributable to the price of product and inflation. There's other levers as well that have an impact. "In the constant currency revenue growth of 23.5% in FY 2023, how much was organic growth, i.e., excluding acquisition contributions?" So of 23.5%, 22% was organic.
So the acquisitions really didn't contribute a whole lot, and that's because they were relatively small in the scheme of things. They don't all happen on the first of July. They happen throughout the year, so you don't have the full year effect in either. But fundamentally, like we've said, these acquisitions are small, and in isolation, they don't shift the needle, but you add them all together, you aggregate them, you get the synergy out of them after a year or two or three or four, and that's where you can see the leverage coming through. From Brent Madel, I hope I said that right: Margins increased in Australasia and Europe in a half food inflation environment during FY 2023. Could you provide margin guidance in these two regions if we shift into a food deflationary environment?
Look, I don't think we're going to deflation. I think we're going to disinflation, whereby we're just not gonna see the rapid increases that we saw, but I don't think the base is coming back to any significant amount. So I think the base price is higher, and that's where it's gonna stay, and it's gonna inflate at a much lower rate than it happened before. So we don't see any reason to think that our margins are gonna be under significant pressure as a result of the lower inflation, and to some degree, it actually makes it easier to manage the business in a lower inflationary environment. We've always said that a small amount of inflation is the sweet spot.
Once you get to high inflation, it becomes difficult, and I should mention, what we are starting to see is a little bit of, how do I say it? Almost irresponsible behavior from some of our competitors in some markets. Now, I'm not gonna give any detail. I'm not going into anything, whereby some of them are... I think they missed out on this, on this wave of the last year or so. And they're trying to play catch up, and, you know, they, they're being a little bit irresponsible in the way they're pricing some contracts going forward. We've always said that volume is only good if it's the correct volume at the correct price. It's no good adding volume if you can't...
And you've gone on to mute.
Sorry. From James Foreman: Could you give an estimate of CapEx in 2024 and maybe some examples of the capacity growth you are doing? Well, you know, this is a constant fight between David and myself. If he had his way, I'd be spending less than I do, than we do spend. But we've always guided that it's 2%-3% of revenue, bearing in mind revenue is now ZAR 200 billion, growing at 10%-15%. So, you know, you can do the arithmetic on that and work out that we're gonna spend ZAR 3 billion, ZAR 4 billion, ZAR 5 billion, of which the bulk of it is in real estate, is in infrastructure capacity to enable growth. And this is happening in all the markets where the opportunity arises for us to grow our, our footprint.
It's happening in Portugal, it's happening in Spain, it's happening in the Czech Republic, in Holland, in the . And I'm gonna miss out a few. It's happening in South Africa. We're investing in new depots. We remain confident that we can continue to grow our business. It's certainly happening in Australia and New Zealand. We're opening new depots, new geographies. It's happening in Malaysia, where we see significant opportunity to grow from where we are at the moment. So we definitely are gonna continue on this path. It is fundamentally an enabler of growth over the medium term. Might have a short-term impact, but it's got an absolute positive impact over the medium term, because if you don't have capacity, you're not gonna grow.
We believe we run the business relatively efficiently, and hence, we don't have a huge amount of capacity, of idle capacity. There's a little bit of surge capacity, but there isn't idle capacity of 20% or 30% in our infrastructure. And infrastructure does take two, three, four years to bring online. It's not a quick act. What we also are gonna see for the next year or two is still a catch-up of the COVID years on some motor vehicles and some MHE, materials handling equipment, where there were shortages because of chip shortages. We couldn't get new trucks. The fleet has aged, the fleet does need to be changed, and that's just a case of the manufacturers catching up with the backlog.
Although you're spending the capital on that, there's absolutely a saving on the running cost. The older fleet is costing us a lot of money in off-road, in terms of cost of the fleet being off the road, not available for use, as well as maintenance costs. So that is gonna happen for the next year or two while we still play catch up. Also, let's bear in mind that we think our volume growth over the last year, which is absolute volume growth compared to 2019, isn't this probably 10, 15% higher, and that needs capacity to handle it. It needs things. Now here's a big question. I think I've answered this from Paul. What is your CapEx investment guidance for FY 2024 in the next three years?
How will this investment likely impact return on capital? Look, there's no doubt that as you put in this long-term capital investment, your returns might come down by a very, very small amount. But what we've actually seen is our returns going up because the profit we've generated is greater than the cost of the capital of putting that in, and the return has been quicker than maybe we anticipated. But you, you're buying 20-year assets, so you're not gonna get the benefits in the first year. But we don't see any large dilutive impact on that. And David might want to talk to that a little bit later. Sorry, I've just got to download the rest of these questions. Bear with me for one second. How does the company track and evaluate its progress in achieving its ESG objectives?
Are there specific benchmarks or metrics that are monitored and reported on to measure the company's progress in this area? Absolutely. And there's a lot of opinions on ESG. There are a lot of experts out there. There's a lot of people who think they know the answers. There's a lot of different ways that you can measure. There's a lot of talk that goes on. But in reality, it's an area that is rapidly changing, developing, becoming a little bit more refined and a little bit more different. A lot of people pay lip service to it. They say we'll be net zero by 2050, which, like I said before, we can say that as well, because it won't be my problem. But we prefer to be real, realistic, honest, transparent, and accountable.
We set a target of 25% reduction on base emissions. I think it was 2017 or 2018. 25% reduction by 2025, and we're absolutely confident of achieving or overachieving on that objective. We do measure our Scope 1, Scope 2, Scope 2 + emissions. It's very difficult to measure Scope 3. We are starting to. Some of that is compulsory because of geographies we operate in. Some of the geographies we operate in make it very complicated to measure it, bearing in mind we're across 35 countries. But ESG is absolutely an important part of how we operate, and we have made significant progress. As I've said before, in Scope I and Scope II, there are two primary issues. Firstly, there's electricity consumption, because we do run large warehouses with large refrigeration plants.
We've made excellent progress in that in terms of adding sustainable, renewable energy to it, of solar generation where possible, but also sourcing green energy. In the Netherlands, for example, if we're not already, very soon, we will use 100% green energy. In New Zealand, for example, our energy is almost 100% green, and that's attributable to the country, where most of their power generation is green. Unfortunately, in some of the emerging markets, and I'll pick on South Africa, the electricity is exceptionally unclean and has a very high emissions factor. As long as we're running big warehouses in a place like South Africa, our emissions are gonna be relatively high, and solar can only do a certain amount. So, you know, we...
Once again, we don't act in isolation, and we have to, I guess, pressure authorities, governments, whoever provides the electricity, to go down that sustainable green path as well. And we can, you know, we can participate in that as appropriate. From a vehicle point of view, it's been far more difficult to achieve huge savings. We run a large fleet of relatively heavy vehicles that do large distances that need to run refrigeration. And at this point in time, electric vehicles aren't up to the job. They can handle some inner-city deliveries in small vans, but certainly, the economics of the bulk of our distribution doesn't yet work, and there isn't a credible alternative to diesel at this point in time. And I'm sure there will be at some point. We haven't stopped trying. We're trying with biofuels.
There is a trial that's gonna commence relatively soon, I believe, with a hydrogen vehicle. We are trying various different solar vehicles, but to date, the results have been frustratingly disappointing. Sorry, I'll just... What is your vision and your strategy about Vietnam country? Thank you very much for the question. It's a very, very small business for us. And it's one of those that we need to determine whether we can actually be a player of scale, and we're going through that at the moment. Vietnam is a great—it's a great country with a great future, I have no doubt. But it might be one of those that you've got to pay some school fees, and make some investments. And I'm not sure where we are on in that.
It's like I said, it's a very small investment at this stage, and we will make a decision in the next year or two of scaling up, or going the alternative way. Are you comfortable with your independent national mix in your different regions? Like I say, every country is different. The dynamics of the markets are different. Overall, we're comfortable because our results are great, so I'm not sure how we could say we're uncomfortable. Obviously, whatever we're doing has yielded the right, the right result. But it's a dynamic issue that it doesn't stay the same way, and sometimes you get nationals growing at a much more rapid rate, sometimes you get independents growing at a higher rate, sometimes you get independents taken over by nationals, sometimes you get nationals splitting up and becoming independents.
So it's something that you always need to have a look at. And, you know, there's a time and place for everything. The QSR business that we do have suits us at this point in time. But that's, that's always up for, for assessment. It's just part of what we do going forward.... What caused the drop in trading profit in the second half of emerging markets? I estimate around 10% year-on-year, down in constant currency. I don't know if that's correct. I might get Charlie to check that. Because if we look at the year-on-year, I think what we had was South Africa was certainly up year-on-year in the second six months. South America would most probably be down because we had a poor performance out of Chile in the second six months, which has probably dragged South America down.
Singapore, Malaysia, I think, performed well. Hong Kong, China, are most probably down year-on-year, slightly. The Middle East is definitely down year-on-year, where we tracked through some very high results from the year before. If you recall, they had Expo 2020, which happened in 2022. Sorry, I'm getting confused with my years. I think it was 2022, which we're now cycling through. So the emerging markets, like I say, was challenging, but therein is the opportunity for next year. So, you know, once you cycle through that, you get a kicker. Did you have any regions, businesses which you could flag that performed poorly in FY 2023 that you would expect to turn around in FY 2024? Look, the only softer performance, if you have, and I don't wanna use poor.
The only real soft performances that we had in the year were probably Chile, which we absolutely expect an improved performance from. There were some endemic issues there in some of the new businesses that acquired that needed to be fixed, which was done, and we're already seeing very positive results coming out of Chile. The Middle East was cycling through some very strong years the year before, which pulled their performance down last year, which we should see a benefit this year of. The Crown business in South Africa, like I said, had a poorer year last year, which most probably means they'll have a better year this year.
But overall, yeah, it's, it's very difficult to fault the performances from last year, which does create a challenge for this year because, yeah, it really was a spectacular year in almost every geography, and I think the business did fantastically well. So I don't think we've got any further questions, and we're just on an hour. Hopefully, we've answered as much as possible. David, I'm not sure if you've got anything else that you need to add?
There are three or four more questions that have come through.
That's unfortunate. Okay, let me just find where I got to. Can you talk a bit about growing private label product and growth of independent customers, and how much can this benefit margins in the medium term? Look, I've got nothing more to add to that other than it's what we do all the time. That's not something that's gonna be a major step change because it's constantly being addressed and it's a small micro adjustment on an ongoing basis. But it does add to the margins on the... in the medium term. We've got no idea where it goes, but it is just something that gets focused on. We don't know where Utopia is. We actually don't know where the right answer is, and sometimes you go down a private label path, and then you get great results.
Sometimes the brands that you're competing with are too strong, and you've got to track back on it. So it's a balancing act, but absolutely fundamental to what we do, but the benefit is incremental now and not revolutionary. What acquisitive opportunities are you seeing in your operating geographies? Is ZAR 1 billion-ZAR 1.5 billion spend expected to sustain over the coming years? Yeah, hopefully. Like I said, we've made 70 bolt-ons since 2016. We've just announced a acquisition in Australia. There's one that will be announced in Western Europe relatively soon. Once again, none of them are huge. None of them are gonna shift the needle. There are a few others in the pipeline.
The time for acquisition probably isn't right at the moment because vendors wanna sell on historical performances, maybe of the last year, and maybe wanna sell before they see any economic slowdown coming through in their numbers. So we need to be a little bit aware of that. We're not seeing any huge plethora of opportunities being thrown at us. We're not seeing a whole lot of operators in real dire straits needing to sell, but we're talking to various different businesses in various different geographies. We remain opportunistic, alert, and our teams around the world are very good at seeking out these opportunities. There is nothing that we're looking at out of our geographies that we're currently operating.
So there is nothing of any scale that's currently being pursued or is being offered on the market in a process that we know of, and I think we know of most of them. So it's very much, at this point in time, bolt-on strategy, and if anything opportunistic comes out of that, we'll certainly have a look at it. Also, any geographical diversification plan? Sorry, I just answered that question without realizing it. Not unless the right opportunity arises. We've got enough on our plates, we've got enough geographies to operate in, we've got enough businesses that aren't yet at scale that need to operate at scale. It's an interesting dynamic. I might get my numbers a little bit wrong now. We've got 21 operating businesses in 35 geographies.
Out of those 21 businesses, I think five businesses account for 70% of our operating profit. I think it's five, David? Five, 70%?
That's correct, Bernard.
five is 70%, and I think 10, 10 businesses is 95%, and 11 businesses are 5%. So if we can make some of those 11 businesses into large from, you know, they say from small acorns, big oak trees grow. If we can get a couple of trees out of those 11, we'll be doing well. So there's a lot of opportunity out of those 11 to, to see something spectacular come out of 1 or 2 or 3 or 5 of those businesses. But there's enough for us to, to focus on and operate on in the, in the shorter term. And one more, Ashley.
Great.
You referred to a historic period of very little mild food inflation. What was the reason for this? Do you think we might be heading into an extended period similar to that, given the high price of food prices?" That's a very good question, and I don't have the answer to it. You know, for many presentations, if you've got nothing to do one day, I often said I don't understand why there was zero food inflation in those previous years. It's just not something we could understand. You had a growing world population, you had demand increasing, but yet food, food price inflation didn't move for many, many, many years following the GFC. And maybe this, what we see now is just that catch-up.
Maybe it was just an elastic band that was so tightly wound, that when it unwound it, it did it with great vigor. I'm not sure we're gonna get back to zero inflation quickly. You've got other impacts which are having an effect now. You've got climate change, you've got crop failures, you've got droughts, you've got floods, you've got increased demand, you've got a lot of other issues. With the raine war, which is also having an impact on certain things. So in the short term, I don't think we're getting back to zero food inflation. But possibly, I think we've just seen a reset of the base of food pricing to maybe where it should have been over those years and just caught that up.
But we definitely are seeing a relatively quick cooling of food inflation, although it is sticky and it isn't coming down as quick as some of the other things. But to a degree, it's also embedded in the... You know, the price of oil has a huge impact to the price of food, 'cause most food needs to be processed, needs to be transported, and energy pricing has an impact on that. So hopefully that answers that question. I think we've done them all, Ashley. No more questions, thank goodness. David, I don't know if you've got any final comments?
No, not from my side, Bernard. Thanks.
Okay. Well, thank you, everybody. We look forward to updating you, I think, in November. Hopefully, yeah, it's we can give you an accurate and objective assessment of where the world's heading. You certainly can see we're living in interesting times. We continue to live in interesting times, and the fact that the circumstances are pretty different now to what they were a year ago, which just means we need to approach things slightly differently and do things slightly differently. And this year will look different to last year, and that's the way it is. We remain confident, we remain enthused about our business and the prospects. Stephen, I don't know if you want to just wrap up and say a few words? Thank you very much.
No, no, I think you've covered everything. Well done, Bernard and Dave, and I think it's a great set of results, and hopefully we can deliver again next year. I know there will be more challenges, but it is a great set of results, so well done.
Okay. Thanks, Stephen. Thanks, David. Thank you, Ashley and the team, Charlie, everybody else involved. Thank you all for your attendance, participation, and interest, and take care. We'll talk to you soon. Thanks.