Good morning, everybody. Welcome to the Bidcorp 31st December half year results presentation. I think this will be one of the easier results presentations that I've ever had to attend. I think that it's been a great half year. A great performance from management, Bernard, Dave, and the whole management team, and all the staff at Bidcorp. Again, demonstrating the strength of the franchise, having come out of quite a difficult few years. I think management and staff ought to be congratulated on the effort they made in keeping the business on a solid footing, and we're able to take advantage of the strong bounce back that we've seen post the COVID era. I'd also like to thank some of our board members, or all our board members, specifically our founder, Brian Joffe, who continues to make a contribution.
Helen Wiseman, our Chair of our Audit Committee, that's always been a very tough task. All the members of the Audit Committee play a significant role in ensuring that our results always are in line with the reality. Also our senior independent Director, Nigel Payne, for the contribution that he makes, as well as all the other directors and Chair of the various committees. Without further ado, I'm gonna hand you straight over to our CEO Bernard Berson, who will take you through the results presentation, followed on by David Cleasby. Thank you. Again, well done to Bernard, Dave, and the team, and all the management and staff of Bidcorp. Thank you.
Thank you, Stephen. Good morning, good afternoon, good evening, everybody. It's wonderful to talk to you again after a few months. We gave you an update in November. Fortunately we're just updating the update on a very positive basis. Up front, I'd just like to say that Stephen, you know, acknowledged David and my contribution. I like to say we do very little, and it's actually our fantastic team around the world of MD, CEOs, whoever else, 26,000 Bidfoodies around the world who do a fantastic job. We are a very diverse business operating in 35 countries. I think it might be 36 now. It really isn't run from the center. It's really run from the core businesses. Each business is an important contributor.
It's a huge thank you to our leadership team around the world. They've done an amazing job once again. They continue to do an amazing job, and they continue to fortunately show myself and David in a very good light. Long may that continue. Full credit to them, and that's where the credit is due. Before we kick off, let's just acknowledge the difficulty that our people in Turkey are going through, and the Turkish people in general. The earthquake certainly was very devastating for the country. Certain members of our staff have tragically lost family members in the earthquake, and it's really a terrible tragedy. We're doing our bit to help. We're supplying some mobile kitchen, some food, some emergency aid.
Also to our colleagues in New Zealand who were hit by floods, and then a massive ex-tropical cyclone a week or so ago, which has had quite a disastrous effect on certain areas of the country. Our thoughts are with them. Once again, we're proud to say that we're part of the recovery effort and certainly assisting in getting food to those food and water to those most in desperate need of it, and working very closely with the military authorities, the government, civil defense authorities. It's times like that that you realize the scale, the scope, and the importance of our business in terms of the national infrastructures of the countries in which we operate. We're not just some small little two-bit business that has no role to play in the larger society.
You realize in times of need and crisis like this, how important businesses like us are who can respond very quickly to meet the needs of a very desperate situation, where you have to get food to places very quickly. You have to get water to places very quickly. We're very, very proud of our people and the way they rise to the challenge to ensure that we can play our part in assisting wherever possible. Moving on to the results. As always, I'll ramble on. I'll go from slide to slide, and Poorva actually will try keep up with me and probably you'll all be confused. I'll try keep it according to the schedule. Afterwards, David will give you an update, a financial update.
After that, we'll go through our normal Q&A routine, where David and I have got the questions that you're submitting. We'll read them out loud and answer them as best we can. Stephen says, this should probably be the quickest earnings update and call that we've had. The results are fantastic. People have done a phenomenal job. Almost every single business in the portfolio is trading at an all-time high in terms of operating profit. Things are going exceptionally well in the business. There are challenges out there, but our teams have navigated them brilliantly. There continue to be challenges in the world.
Some are global challenges, some are micro challenges. Each geography has its own unique set to contend with as well, and our teams have done a remarkable job in navigating that, and we'll talk a little bit more about that on a country-by-country basis. I will be using a lot of superlatives because I don't know how else to describe these results, other than using superlatives like amazing and fantastic. I actually think that you need to take a step back and look how strong they actually are to appreciate how fantastic they are. Yeah, it's not just a COVID bounce back. These numbers blow out anything, blow out the water, anything we've done before, and I think we were pretty good before.
These numbers really are strong and a fantastic testament to our teams around the world. The one thing I wanna stress is this isn't an overnight success. This absolutely isn't purely attributable to any one factor, a bounce back. Obviously, those things make a difference. I believe our real strength is in the strategies and the strategic direction and the path we embarked upon many years ago. We stuck to that core path. Obviously, we've made a few refinements along the way. Fundamentally, we've stuck to the path that we chose. We've executed, I think, very well, notwithstanding the challenges that were thrown at us with COVID and then everything after that.
The results we're seeing now are very much the result of things that were put in place five years ago, three years ago, during COVID, now, and there really hasn't been much change in what we've done. We've always told you we'll invest ahead of the curve. We're at an optimistic, confident business that knows we're gonna grow. We're comfortable with what we do. We understand who our customer base is, who our customer base needs to be, what our product range is, what it needs to be, what our procurement looks like, what it needs to look like, and we're very much on that path. It's a continual journey, and we remain very optimistic and upbeat about the prospects in our business, both in the shorter term and the longer term. We only worry about things we can control.
I have no control over economies of a country and consumer confidence, and all we can do is adapt and adjust our course as we go. We look past that. We look at the medium to long term and make our decisions accordingly. I think when you look at what we do and how we allocate capital, that bears testimony to that. You know who we are. If you don't know who we are, you're probably in the wrong, the wrong meeting at the moment. I won't go through what our core values and beliefs are and just head straight into some of the broader detail. At 25% constant currency topline growth, primarily organic.
It's very difficult to make accurate comparisons because bear in mind, we're comparing to July 2021 to December 2021 in the prior comparative period, where there's still COVID impacts in multiple geographies. Although we're at 25% up, is that a true reflection? We need to go back to FY20, which wasn't COVID impacted, at December 2019 or before then, our volumes are up, our revenues are up. All the metrics that we look at are positive. Our estimate of inflation compared to volume is around 60% of the 25% relates to inflationary increases in food and related products, and 40% is volume growth. I know I'm gonna get lots of analytical questions about that and what inflation looks like.
Bear in mind, we operate across 35 geographies, across hundreds of thousands of different products. There's no simple answer to what the real inflation number is. Fair to say food inflation's running hotter than general inflation, and I think we're seeing that around the world. Although we are seeing the rate of increase of inflation is coming off, both in food and in our general expenditure base. We're not seeing deflation. Let's be clear about that. The rate of growth of inflation is certainly declining.
The other thing that I wanna just speak a little bit about, which is not a negative, please don't construe it as a negative, is we are now cycling for the rest of this financial year against some months that were reasonably strong last year as the world, most of the world started coming out of COVID. The rate of growth might slow down a bit. There's 45% growth in the first six months. Wow, we'd be doing a fantastic, amazing, stupendous job if we achieve 45% for the full year, and we'll certainly be doing whatever we can. Please bear in mind, we are cycling against some stronger months. Having said that, our January and February trading has remained with the same momentum so far.
Having said that, the bounce back really started in March towards Easter last year. I'm just putting that little bit of a reality check in there, which is by no means negative. All I'm doing is asking you to be realistic in your expectations looking forward. The business is still incredibly positive. We will absolutely show substantial real growth for the rest of the year. We very much continued along the strategic path that we've spoken about before. There's very little to talk about. We continue to rebalance our customer portfolio. We've exited those pockets of business that we told you we were gonna exit in Belgium, New Zealand, Australia.
As you'll see in the results, it's had the desired impact, notwithstanding the fact that it only has happened in the last six months in the case of Belgium and in the last two or three months in the case of Australia and New Zealand. We've continued to invest in infrastructure, and that's critical. Our infrastructure is warehouses, is distribution capability. When you're growing at a real volume growth rate of call it 10% of real volume growth, you need warehouses to cope with that. We'll continue to invest in warehouses, in real estate, which achieves our next strategy of being closer to the customer and having more distribution centers being able to cater to the desired target market that we're looking for. We've continued to make some small bolt-on acquisitions.
We've made six in the first six months. Relatively small. None of them are gonna shift the needle in isolation. We've also made two subsequent to that in January. Both were in the U.K. One's a little bit bigger than the other. Like with all these acquisitions, they're very small in isolation. They're purchased at a accretive value proposition. It takes us a little bit of time to integrate, to get the synergistic benefits, to bring them up to group standards and public company standards, et cetera. After a year or two or three, you start getting the benefit. It's a consistent process that every year you're getting the benefit of acquisitions made a year or two or three ago. We'll continue to do that.
On larger acquisitions, there is nothing that we have looked at or on the horizon at the moment. We remain very alert for any M&A opportunity. Should it arise, we'll certainly be at the table looking at it. Technology continues to be an important part of our business. It's not technology for technology's sake, and I think that's important. We actually are a technology business. We use technology to run a business and to make money, and I think we do that relatively successfully, as opposed to technology for the sake of maybe burning through some equity. A lot of our business is underpinned by technology, and that will continue to evolve and get more sophisticated. We've been talking about data analytics and AI for a while now.
I know the likes of ChatGPT, et cetera, are getting more talk now, but it's not something new to us that we say, "What's this all about?" What we're doing in data analytics and AI to a degree, is adding to the value proposition of what we do. Overall, we've got a very stable management team. People have been with us a long time. We've been around a long time. Some people will say that's a bad thing. I think if you're getting a 45% increase in EPS, don't know that it's such a terrible thing. And that's coming from people who've been in the business a long time. They understand what they're doing. They're on the journey. We're all headed down the path together the same way.
You know, we're just, we're excited about where we are and where we see the future. You know, from our point of view, we're in a great industry. Fundamentally, people are going to eat more out of the home. As long as people are eating more out of the home or even eating more takeaways in the home, that's market share for us and that's opportunity for us. As we've always said, we're relatively agnostic to what people's tastes are because we sell a broad range of products and we're not wed to any one particular concept. If there's a trend towards something, that's fine, we'll follow the trend. If there's a shortage of seafood, we'll follow the trend into poultry.
If there's a bird flu outbreak, we'll move to different products, and we have the ability to do that very quickly and satisfy the market requirements accordingly. Let's just very quickly run through each of the geographies. First we look at Australasia, which is Australia and New Zealand. 7.1% trading margin. ZAR 1.5 billion trading profit. I don't know what more to say. just a phenomenal, fantastic result. well done to Rachel in Australia, Phil in New Zealand and their teams. Everything about those results is good. By no means are either business, I'll get into trouble for this, totally perfect either. Both of those teams, their teams, are constantly looking for new avenues of growth, for new markets, for new products, for new opportunities in value add.
These really are two fantastic businesses who are once again leading the charge in the group. You know, I don't have anything more to say about Australia and New Zealand. They're doing an absolutely awesome job, and I believe they're outperforming their competitors. In the U.K., it's an interesting set of numbers, and I do need to put a little bit of a caution here. On the face of it, the numbers are very good at ZAR 910 million of trading profit, a trading margin of 3.9%, which is lower than we achieved in 2019. There are numerous reasons for that.
The most important reason for it is the structure of the market and the fact that a larger proportion of the U.K. business is with the larger type of customer. That's a legacy issue. Which gives you less opportunity on the margin side, as to when inflation comes in and how you manage the inflation equation. Yeah, it's a far more contractually based business. That's reflected in the results. I think we are gonna see a little bit of difficulty in getting back to the margins we expected, we had expected before, until this inflationary period washes through. The core business in the U.K. is doing phenomenally well. We're picking up market share. We're winning great contracts. The business is really performing well, Andrew and the team have done a phenomenal job.
Fresh is going awesome. I think they're operating at an all-time high, and they've really cleaned that business up. The wholesale business, which is the core of the business, the largest component, is picking up market share, but is struggling a little bit on the passing on of the margin as quickly as we are in other countries. They've adopted the same manufacturing strategy. Those businesses are performing well. The specialist businesses, which gives us a different route to market for the independent market, is doing phenomenally well, and that's where our acquisitions have been. We bulked that up with three acquisitions, one in July and two in January, which gives a lot more balance to the business between the independent channel going through the specialist Caterfood Group and the larger type of business going through the wholesale business.
I think this is a great performance. Yeah. All the way through COVID, they were profitable, which I think, their peers, I don't believe, achieved the same level of success. That's a very positive situation, we just do need to be mindful that margins might be under pressure for a while, until the inflationary environment settles down a bit. The U.K. is a great set of numbers. Europe, you were all doom and gloom about Europe, or most of you were doom and gloom about Europe. Firstly, there was the theory that the war, the terrible war in the Ukraine was gonna cause a collapse in Europe. Fortunately, that didn't happen. We're told that after summer, come first of September, the whole thing's gonna fall in a pile.
That didn't happen. We were told that probably when it gets cold in November, December, October, it's gonna fall in a heap. Fortunately, that didn't happen. We were told definitely after Christmas, it's all gonna come to an end. All I can tell you is our sales in Europe, up until last week, have maintained the same rates and pace of increase as historical. There's certainly no falling in a heap. Obviously, there's seasonal fluctuations. It is winter in the Northern Hemisphere. We expect that, but they're tracking exactly on trend as to where they have been tracking for the last probably 10 months. Yeah, once again, long may that continue, but we certainly aren't seeing any signs of a slowdown. Europe's made up of a lot of pieces.
The Netherlands, bearing in mind, had some COVID lockdowns, which was the only country in Europe, I believe, from November to, I think, late January. November 2021. Sorry, I get confused. November 2021 to January 2022, they had lockdowns. Obviously, we're cycling through that, but our Dutch business is really doing well. It's at group acceptable levels. It was always a problem business for us, but now it's one of the shining stars, and they're doing fantastically, primarily because of the change in customer mix and adopting the same strategy that we have adopted everywhere else, and they've adopted it with great vigor, success, and they're bearing the fruits of that and have done phenomenally well.
Belgium, as we said, we exited a large catering customer in July. Our trading margin is higher, our profitability is substantially higher. We will continue to go down the path of rebalancing the customer portfolio in Belgium. That's probably the business that has the least optimal mix. It does have some very large QSR customers that we are actively in discussion with. Yeah, you can't fix these things overnight. You have very long-term relationships. You've got complicated structural issues in the business. We do understand we need to get a return out of what we're doing, and we are working very hard on that. The Czech and Slovakia business had a great year. Let's bear in mind, the year before, they had a phenomenally great year. Now we had an even better year.
They are under a little bit of margin pressure in the. They sell quite a lot of manufactured products into the retail segment. It's fair to say that the retail segment is doing it much tougher than the out-of-home segment at the moment. Therefore, we're under a bit of pricing pressure. We feel we'd rather maintain volume and sacrifice a little bit of margins until the retail food service equilibrium maybe swings a little bit the other way. They had a record year doing fantastically. Poland, you know, one of those businesses we spoke for years about how we were investing ahead of the curve. We're ahead of the curve. They're just doing amazingly. That business is at world-class margins, growing exceptionally strongly. Their ratios are all good. Their customer mix is fantastic.
What we're seeing there is we need to invest ahead of the curve. We've got to go through the next phase of investment to perpetuate this very strong growth. Sales up 30% in the six months. Trust me, food inflation's not running at 30%. Italy continues to perform very strongly, and I think we're performing stronger than our peers. We have one listed company as a peer. They'll be releasing results in the next few weeks. They're a very good competitor, a very solid business. I certainly think we are holding our own or maybe inching a little bit ahead. That business continues to do very well. The Baltics, a small business that's growing very well.
Made a large-ish acquisition, which is a small acquisition in global terms, but for them doubles the size of their business. In Estonia in late December. It hasn't contributed to the numbers yet. You can see what we're doing there. We've established a base. We've established a profitable base. We've invested in infrastructure. We're investing in acquisitions, and we will have a business of scale and significant size in the very near future. Spain remains a work in progress. We've got two businesses there. The business in Basque Country in round about San Sebastian is doing very well. It's a nice food service business. We made a small acquisition there in complementary bakery-type products to bulk that up and add on. That business performs exceptionally well.
The legacy Guzmán business has been very challenging for us. We're by no means giving up. We will fix it. But we're not miracle workers. Sometimes we don't get it right the first time. But we'll certainly get back in there. We are in there, and we are making progress. Portugal, a great business. We only made one mistake. We should have invested way more capital way earlier to get way ahead of the curve. We're operating at 120% capacity. This business would be a lot bigger had we acted sooner a few years ago and built the infrastructure necessary to cope with that growth. We believe in the medium term, in a few years' time, because you can't build facilities in three months.
In the medium term, we'll have a very solid, highly profitable business in Portugal. Germany is steady as she goes. It's profitable. We have had a change in management there. The previous owner was exited from the business not so long ago. That was relatively seamless. A new management team is in there. Under the circumstances, they're doing very well. They're growing their top line. They're controlling their expense base. They're profitable. The challenge for us now is where do we go from here? How do we bulk this business up? At least when you're making profits, however small they might be, it's a lot more palatable than making losses. The emerging markets portfolio, the operating margins are consistent at 5.8%. There are a lot of moving parts in emerging markets.
There are a lot of very different economies. Let me just go through them very quickly. South Africa is a very, very challenging environment. Notwithstanding that, our profits are at an all-time high, and our businesses, particularly the Bidfood food service business, is doing very well. The Crown Food business had an absolutely phenomenal year last year, and it was highly unlikely that they were gonna be able to surpass that by any significant degree. They're still highly profitable, although slightly behind the prior year. South Africa does face lots of challenges. I don't need to tell you. load shedding is a great cause for concern, particularly in Crown. Crown sells a lot of products into large plant manufacturers, people who are making, processed food-type products, processed poultry, processed meats, et cetera. Those factories generally need electricity. Generally, they can't rely on generators.
They're just too big to run on generators. It's too costly or just too energy consuming. What we've seen is quite a slowdown in the manufacturing segment. They are only producing when they have assurance of a reliable electricity supply. That's not a great thing when you're cooking meat, and halfway through the process you lose electricity and can't finish cooking the meat. We are seeing some volume declines in the Crown business as a result of that. Hopefully that situation gets rectified. Not sure how, but in due course. Overall, under exceptionally difficult circumstances, our management in South Africa have done a phenomenally good job. Well done to the whole team there. That's amazing under the circumstances that they are trading at record levels.
Let's talk a little bit about Greater China. There are a few issues to talk about there. Hong Kong and China were closed to the world for the full period under review. Not only were they closed to the world, they were closed to themselves. There were major lockdowns, major restrictions, travel restrictions, et cetera. They operated the full period under lockdown conditions. Notwithstanding that, we operated at levels which I think are at record levels of profitability. Our revenue was down. We managed to take cost out. We managed to rationalize the product range a little bit and take some opportunities through the retail channel and trade a little bit. The team really reacted fantastically to those circumstances and performed very well.
They actually, yeah, achieved good levels of profitability under very difficult circumstances and unpredictable circumstances and did fantastically well. China announced a reopening at sometime in December. Although they flicked the switch, not everything changes straight away. There's quite a lot of PTSD going on in the area, bearing in mind they were under a COVID zero story for three years. There's a little bit of expectation that, yeah, maybe they're going to go back into some type of lockdown or something, which won't happen, I don't believe. There is an element of nervousness. It's opening up. It's opening up a little bit slowly. In hindsight, when we look at the rest of our businesses a year ago, that's no different.
They opened up, they had massive waves of infections, bit of nervousness, and after a month or two, that settled down and reality kicked back in again. Hong Kong and China will do exactly that. They're just one year behind the rest of the world in that. We actually can get back into Hong Kong, China. I visited there last week for the first time in three years, which was great to see. The people were really glad to be part of the world again and to see some type of normality. There was a Bloomberg article from an unnamed source a few weeks ago that says we're considering the sale of the Greater China business. I'll just give you a very quick background to that.
During the COVID lockdown and during a little bit of the latter part of last year, the China sentiment was a bit negative. We had a couple of unsolicited expressions of interest in our Greater China business. It was absolutely only the Greater China business, although I'm sure people would like to buy many more parts of our business. This was purely around the Greater China business. We got these expressions of interest, and I think as good corporate citizens, we retained the services of a bank to give us some advice. They had a look at these and, you know, they ran some numbers. We think that the market thought we were doing a lot worse than we were doing.
I think there was a perception that we were in trouble, the business wasn't profitable, it was all just becoming too difficult to do business in China, and we'd be a soft touch, and we'd be looking to offload the thing. That's absolutely not true. We are not selling the business. We have not entertained any offers. We're absolutely running the business. It's part of the group. We're I'm not saying we'll never ever be sellers of any business. Fundamentally, we're not a private equity shop. We're building a portfolio of global food businesses, and we'll continue to do so. We are going through a management change in Greater China. Johnny has been with us since we bought the business in 2007, and he's done a great job of getting us to where we are.
A couple of years ago, in fact, it was three years ago, Johnny expressed a desire to retire. The timing wasn't correct during COVID. He kindly agreed to stay on. He's staying on until June this year, we still got another few months. We are going through a management transition plan. There is a candidate who we are far advanced with, we're very confident we'll continue the trajectory of growth in the Greater China market. We are seeing a rebound in revenue and in sales and activity there, although it's a little bit slow. I've never seen the Hong Kong airport as quiet as it was. Most of the retail shops in the concourse are still closed.
There's very few planes, there's very few gates operational, that's only a matter of time. That will bounce back pretty quickly. People talk about the brain drain out of Hong Kong. If you read any of the articles, I spoke to an investment bank, I spoke to a law firm, I spoke to an accounting firm, they all said they've got large numbers of expats who are coming back. I don't think that a lot of that brain drain is permanent, it will find its equilibrium. Moving on to Singapore, I know Nigel has got the team listening to this in Singapore. Hello to KJ, Angel, Beatrice, Remy, whoever else might be there. Nice to have you listening in on this. Singapore performed exceptionally well during the period.
Strong sales growth, strong profitability growth. We are moving that business more into the Bidcorp model. Obviously, we don't wanna take any rapid changes, but there's some great components of that business, which coexist with each other. We need to extract the synergies accordingly and attack the market in the most effective way. Singapore is a country with, I think it's about 6 million people and I think 30 million international visitors who spend a lot of money. It's a very good market for us, and we're very excited about the prospects, and we've got a great team in place there to get us to where we need to get to. Vietnam is tiny. It's operating basically at a breakeven-ish type of situation.
Oof, that's one of those questions of can we scale up in that market in a timely way. We'll have a look at it. We'll see what we can do. Yeah. It's probably a little bit too early to comment and not big enough to talk too much about. Malaysia was Basically, it was a greenfields operation maybe 10, 15 years or 12 years ago. Then we built that up and added on, and we now have a self-standing business in Malaysia, which is doing very, very well, growing a lot. Big market, big eating out culture, a lot of potential. We made another acquisition in East Malaysia in September to give us the geographic coverage. There's a lot more to come. We're very excited about our prospects in Malaysia. Chile has had a tough 6 months.
They've had some growing pains. That business has done phenomenally well at the top line, maybe we struggled a little bit with some indigestion along the way. We're well and truly through that. The results we've seen coming through in the latter part of the period are very, very strong and at acceptable levels. Now we're gonna be cycling through months which were tougher last year. I think, you know, in Chile, the prospects are good. The business is a large national business that's either the number one or the number two player in Chile, depending how you define the market. Brazil is a tough gig. It's a tough economy. It's a tough political environment. We were probably a little bit below our expectation, but we still had an all-time high.
We are primarily São Paulo state-based, we see the opportunity to expand that further around. Brazil is a big country, a lot of spend, I think we've done a reasonable job there. We've always made money. It's tightly controlled, well managed, and we're excited about Brazil. The Middle East has had a phenomenal performance. Once again, this was a greenfields operation made in about 2005. We're now gonna turn over more than $200 million in the market. It's a very profitable business. It is an import business, maybe has a little bit more invested in inventory, that's the nature of the beast. They've done exceptionally well.
We've seen very strong economic growth out of both primarily, Saudi as well as the UAE. Economically, they're doing well. Activity levels are high. Tourism has bounced back. There are a lot of big dream projects going on in their region, which will be very good for us in the future. Turkey, very nice for us as well. Once again, a very small startup, which is now an established national business. Profitable. It's got some type of scale. The country has challenges, as do most. We are profitable, and we'll continue to invest. That's probably a business that will require a disproportionate amount of CapEx to grow into so we can keep growing and scaling up. Argentina is the last one. We've got slightly under 50%.
Our business is doing phenomenally there. Don't ask me how. Obviously, we've got a hugely talented management team. In Argentinian money, inflation-adjusted, they're doing exceptionally well, highly profitable, well managed, tightly run, and we're very confident about the future of the Argentinian market for us. Obviously, it carries a level of geopolitical risk. I think you can look at quite a few businesses in our portfolio that maybe have a similar risk profile, and some of them are closer than others. We're, you know, we're happy with Argentina. The outlook is positive. We're not seeing any clouds on the horizon. We're seeing inflation come off its peak. We are seeing the supply chain shortages ease. The disruptions are easing up a little bit. Labor availability is becoming easier. Easier, not easy.
Probably wage expectations are coming down a little bit. Conditions are easing up. We're not seeing a takeoff in consumer demand yet. Hopefully, we don't see that. Hopefully, we can adjust to it accordingly and move our segments and our focus as that happens. We are very confident of continued real growth for the rest of the year. David will take you through the numbers and talk about the balance sheet and the cash and the working capital and all that other exciting stuff. We'll come back and answer questions. I do just wanna conclude with what I started off with. It's a huge thank you. If I haven't mentioned anybody who's on the call and as part of the team, you can send me a WhatsApp and abuse me like you always do.
You've all done a fantastic job, each and every one of you. You truly are. You do an amazing job. If the shareholders don't thank you, they should thank you, because you're the women and the men who make this happen. To you and your teams, I can only just extend my gratitude and appreciation for another phenomenal performance. Well done. David, it's yours.
Thanks for that. Morning to everyone. As we start all these presentations, the numbers I've prepared in terms of IFRS do not change its accounting policies and all that, and they're applied consistently. Just to note that, I think Brian used to say, you know, "People create growth and companies report it." Just from our side, my side, obviously great appreciation to the businesses and the people who delivered the results and also to the people that collect them and prepare them and deliver them to you as well as they do. Just to note a small change in terminology, which we refer to capital investment, not capital expenditure. I think it's more of a...
There's a greater conversation to what we're doing and how we see the future and the growth in the business. When we refer to pre-COVID, we are obviously talking to these numbers, the period to December 2019, the six months, and 18. Just for reference. I'll talk a little bit about returns later on. In terms of the highlights, they're there. You know, if you just see revenue up 28% in ZAR and 25% in constant currency. As Bernard's indicated, margins have come off a little bit, but overall, they've held up pretty well. Price inflation has accelerated over the last three, four quarters. There's a disconnect between, I guess, reduced food inflation and what we're seeing in the commodity space.
Typically there's a lag, but we are quite firm that going forward that certainly product inflation should moderate going forward. Cost inflation is still being driven by labor, fuel and energy at this particular point in time. Cash generation from operations strong at ZAR 6.1 billion versus a year ago, ZAR 4.5 billion. Working capital is up, but I think if you compare it against the pre-COVID periods, we're slightly better, largely in line. Talk a little bit about that later. Receivables provisioning from our perspective is conservative and obviously estimates of how we see the market going forward. Capital investments, as Bernard indicated, is required to maintain the growth and certainly, you know, takes time to come on stream.
We do that, invest ahead of the curve. I think also to note, it comes with a lot of the e-benefits, environmental benefits through efficiency, e-energy efficiency, and overall reducing our carbon footprint. Let's add this up a little bit at ZAR 4.6 billion. I think in the context of the investments that we've made in working capital investments, dividends are well within the group covenants. And I think in the context of the group, the size of the group, we've really seen no real change in the relative covenants or percentages in terms of covenants. EBITDA earnings are up 45% and HEPS 45 and a half percent.
Declared an interim dividend of ZAR 0.044 per share, in line with our dividend policy of around about two times, two and a half times covered, and a record for Midco. We're proud of that as well. In terms of the P&L, I think we've given you in the back of the booklet how we're tracking. You can see that, you know, as we've gone by forward sales have held up in every business other than in China, where as Bernard indicated they were due to COVID restrictions. Gross margins, we've seen a little bit of intentional sacrificing in Czech and Crown. There is a bit of a lag in some of the businesses as indicated, you know, where we have natural exposure.
It does take some time for those increases to go through, and that does have a bit of an impact on the margins. Operating expenses I think have been very well managed. We're still getting some leverage with constant currency operating costs only up 19% odd and revenues up 25%. You know, that has been a little bit dissipated by cost inflation as we've seen across all categories. Trading margins at 5.3% is a record for the group. If we take that against pre-COVID, it's only the U.K. segment that is that high. Interest is up, I suppose a fair amount.
I think if you take it in the context of the capital allocations to working capital or capital investments, shallower returns. I think the other thing is obviously a much higher and different interest rate environment that we have at the moment, you know, compared to, I guess a year ago when rates, you know, base rates and central bank rates have started to go up. What's interesting is that if you look at the credit spreads that we could get in the market, they haven't really changed from a year ago, but it's really just the impact of the base rates, which are up, you know, two to three times compared to 12 months ago.
That has had some impact, particularly where we have exposures to the short end or the very lean end of the market. The effective tax rate hasn't really changed, largely in line with our guidance. In terms of the cash flows, cash from operations up 37% to ZAR 6.1 billion. No real issues and surprises in the non-cash movements. Working capital, I guess from our perspective, as I was told yesterday, there's not really one correct way of looking at measuring working capital. A lot of the measures or most of the measures are backward-looking and are forward-looking, which is what they should be.
We look at it in terms of days, and we measure it relatively consistently to trade over the last two to three to four months. Our working capital as a percentage of annualized revenues. On those bases, yes, our days are up a little bit, but I think largely in line and slightly better than the pre-COVID period. The working capital cycle we guess is normalized. Working capital as a percentage of annualized revenue at 4.5%. We've guided for some time that we think our norms are somewhere between 4% and 5%. That stacks up relatively well if you look at the pre-COVID periods of up to December 2019 and December 2018. Receivables have been well managed.
They are better, about three days versus pre-COVID period. As I said, our provisioning is conservative and currently comprises about 6.1% of the book compared to on dates at the end of June 2022. Inventory days are up a little bit. That's understandable in the context of us basically, you know, larger activities, more importing that we're doing now than we were doing in the pre-COVID periods. Also the intentional, you know, buying in ahead of price increases, which obviously assists in an inflationary environment. Payables terms have normalized compared to pre-COVID. It's obviously they've got slightly shorter in terms of the benefits we had through COVID.
Certainly what we are seeing is that, you know, suppliers are, the leniency granted through the COVID period has waned a little bit. They obviously, with the high interest rate environment are also under pressure in terms of profitability and cash flow. Therefore, we are seeing some shortening of those debts. Other than that, no real change. Investing activities, largely gone into, I suppose 50/50 split between maintenance and expansionary CapEx. A large portion of that in Australia, where it's gone into capacity expansion, and obviously some of that into improving ESG. Obviously, I mean, typically these investments into solar, as an example, have a four-five-year payback. Economically, that simply makes sense to do so.
Debt of ZAR 4.6 billion is up a little bit, and understandable in terms of the context of as to where we've invested the capital. In terms of the balance sheets, let's just very quickly I mean, no real change from liquidity. No change to the risk management. We don't really have any refinancing in the short term. We did have quite a lot of that last year. There's some opportunity potentially to do some trimming out of short-term planning, short-term rates, and long-term rates aren't materially different. As long as there's availability or supply of capital to trim these out, certainly from our perspective, makes sense. I think the reality of the interest rate environment has changed.
I mean, I think if anyone is thinking that it's going back to the, you know, the 1%, 2% and the very cheap funding, that definitely isn't the case. Certainly from my perspective, it's gonna be like this for some time to come. Rates are rates and funding costs are funding costs at the moment. I think when I, y ou know, we do cop a little bit of criticism saying we're too lowly geared, we're too conservative. I think from our perspective, you know, the proof of the pudding is really in the returns. I think if you look at the Bidcorp returns, they are certainly have improved over the last year. I think are superior. It.
You know, to us, it doesn't really matter whether you're 30% geared or 40% geared, or 50% geared. As long as one's getting superior returns, in terms of how the business is managed, we think that's probably more important than, you know, the level of risk, the absolute level of gearing. We have been conservative, as we've indicated, we will continue to be so. You can see from the sales, they're tracking well back, you know, into the third quarter of the financial year. We have graphs in the back of the presentation in the book, and one can see the impact, the comparison impact.
I think just to note that if you look at those numbers, you may get a little concerned about the emerging markets. One's just got to bear in mind that Chinese New Year, which impacts a lot in Asia, was in February of last year and is in January this year. You get a little bit of a mismatch. In terms of our financial position, we maintain that it's a competitive advantage. Inflation, we think will remain elevated, but the rate will moderate. Hopefully we see that in product pricing coming off with the alleviation of staff shortages, and energy prices coming down, that rate of change will come off. We retain adequate headroom to fund our organic and acquisitive opportunities.
We do think we'll generate some working capital in the second half of the year. We do think if you look at it as a % of working capital to revenue, that it's going to stay relatively similar to the current levels that we have at the moment. That's not to say that it's perfect. There certainly are areas of inefficiencies, and, you know, hopefully we can make some impact in those areas in the next six months. As I said, no material debt maturities in the period ahead. The interest rate environment is with us as we see it for some time to come. We should see capital investments moderate in Australia, but there's still quite a lot of plans for other parts of the world.
Remember I did mention Turkey a lot, but also the U.K. and Europe and South Africa. ESG, there's a big focus on E and S. That doesn't mean to say we're not focusing on G. It is ingrained in how we operate. The E, certainly is getting a lot of attention and as I said, makes commercial sense to invest into. Just to recap on the Munich fraud, with all these claims, the process is a long and hard road. It does get drawn out in terms of certainly going through the legal processes.
We haven't as yet really recouped anything material, but we are, you know, going to go the hard yards to recoup as much of the losses that we can, and that's from all parties, the perpetrators, as well as from insurers. Our core philosophy of hedging hasn't changed, being on a natural basis. The currency volatility obviously will play some part in terms of the rand diversion. I think if we look at the current rate of the rand versus what we had in the six months is, you know, a number of percentage points weakness in it. You can work it out as to the likely impact on the results for the full year. International share base hasn't changed a little bit.
It does rotate, you know, a few percentage points here and there, depending on the, I guess the investors' appetite for emerging markets and the like. It's still around about 50%. Actually only 46%. Just in conclusion, the quarter started off well, and you can see that in the trading in the sales through January and February. As indicated, we are budgeting for real growth into the second half. Just once again, to reiterate, the rate of increase that you see in the first half will moderate into the second. That's all from me. Back to you, Grant, for Q&A.
Okay. Thank you. I think I'm back. We don't have a heap of questions, so I'll just go through them. Some of them have been answered, so I'll run through them relatively quickly. There was some press speculation that Bid was looking to sell Angliss in China. Is this correct? If so, why? We've answered that. Can you talk to revenue growth trends in January and February in the regions in constant FX terms? We only look at it in constant FX terms, and it's tracking at the same trend that we saw in previous, in the previous six months. As David said, Chinese New Year was a few weeks earlier. That had a small impact on it.
Overall, the revenue trend is consistent and the growth levels we've seen for January and the first three weeks of February have been very consistent. What is the outlook for gross margins in second half 2023? Could it be a bit better given lag between price increases and cost pressures? Not really, because in the bulk of our geographies, we're actually quite agile, and you buy ahead of the price increases, and you actually get the benefit up front as opposed to later. It's only on the larger contracts where you've got the delay, and the larger contracts are a smaller proportion of our overall global portfolio. We are fundamentally traders, and inflation is good for us, and it has been good for us and has assisted the margins.
I don't think there's a whole lot of upside in the margins. I'm not saying, not to say margins aren't gonna go up. I think it's a challenge, which we're not shy of, to maintain margins. Do you see more M&A in second half? Any sizable deals in the pipeline? What are acquisition prices like at present? There's nothing major. There are some smaller ones we're looking at. We're very proud that we're not known as big payers, and that works for us. We don't like to pay huge multiples. We pay mid-ish single digit EBITDA multiples. We're happy with that strategy. It works for us. Obviously, if there's a strategic reason to pay more, we'll look at that.
Generally, yeah, we're at that level, and that works for us and has worked in the past, will continue to, but there is nothing big on the table at the moment. Let me just make sure. With longer dated contracts repricing in U.K., do you expect an improvement in trading margins? Previously saw 5.1% trading profit margin as achievable in the U.K.. Is this still the case with 2023? No, we won't get to 5.1 in 2023. Bearing in mind we're at 3.8 for the first, or 3.9, I'm not sure what the number was. For the first six months, in order to get to 5.something, it would imply that you've got to be at 6.5 or something for the second six months, which is just not gonna happen.
I don't think that the margins in the U.K. are gonna change much from where we are at the moment in the short term for the next year or so. You are gonna see top line growth. Could you talk about how much of the ZAR 3 billion working capital you see is seasonal versus permanent price-related factor? Look, if you don't have inventory, you can't sell it. It's as simple as that, we sell on credit. As your business grows, you're gonna have more inventory, you're gonna have more receivables, and you're gonna have higher payables. We have seen some structural shortening in our payables, which is probably permanent. Our working capital position is at its worst level it can be at the 31st of December. You've got factory shutdowns in the southern hemisphere.
You've got Christmas breaks in the northern hemisphere. You've got Chinese New Year, which basically China closes down for two weeks. Which this year was in the middle of January, which meant a whole lot of stock purchasing around the world from China had to be brought forward. The very worst snapshot you get of working capital is on the 31st of December, and a lot of that unwinds by the 30th of June. Obviously, our working capital will remain between 4% and 5% of recent revenue. When I say recent revenue, we're only carrying seven-10 days net working capital. You actually have to look at your revenue in the last month or two to understand how that relates to the absolute working capital.
There will be some seasonal decline in working capital and the working capital is better in June. I'm just careful how I say this because we've got an idea what activity will look like. If activity goes up by 30% from where we are now, and I'm not saying it will, obviously your working capital is gonna increase on a similar basis. There are some inefficiencies at the end of December, and it is at the worst level it can be. Sorry. Okay. There was a question that said. This has been answered. What do you expect capital spending to be in 2023 for the year as a whole? Look, we don't think of it as capital spending. As David said, we're changing the wording. We'll take the accounting profession on. We call it capital investment.
That's certainly not expenditure. If you don't make the investment, you don't grow. We're making these capital investments to ensure future growth. We make no apologies about it. We're investing in infrastructure, that's absolutely been a key enabler for us to grow our business. Once again, the vast majority of our capital investment is into real estate, into land and buildings in the right location, which are often in irreplaceable areas close to the customer, and key to our strategy of being close to the customer with multiple touchpoints. We'll continue to spend the CapEx that's required, some of which you don't see a return for a few years. As we say, we invest ahead of the curve. What is the impact of the earthquake in the New Zealand business? I think there's a bit of confusion there.
The earthquake was in Turkey. There was a cyclone in New Zealand. There'll be no material impact to the, to the New Zealand business as a result of the, of the cyclone. Fortunately, as devastating as it is, it's limited to one area, one geography, and yeah, that will, that will equalize itself relatively soon. What actually happens with these natural disasters is there's a huge amount of infrastructural investment that goes into those areas post the, post the disaster. We saw that in Australia with the floods, and we've seen it elsewhere. We actually see a long-term benefit of that money getting spent. You know, while it's a tragic event, we don't anticipate that it will have any significant impact in the, in the medium term, in the short term.
Turkey's a little bit of a different issue because I think the country is very somber and sad and reflective and, you know, we've seen that in the sales numbers. Time, time helps heal that, and hopefully that will happen. There's just one other issue for all of you wonderful computer literate people there and you analytical people, is in terms of the JSE, we have to give you something called revenue disaggregation, which splits the revenue up into the product type, the customer type, and the revenue per country. The revenue per country is 100% accurate. The split between the different types of products is 99.9% accurate. It's very difficult to confuse something in a freezer with something in a dry goods warehouse. That's correct.
When you come to the customer type, don't take this as 100% gospel because there's a lot of definitions that move around a little bit. Your understanding of, for example, a quick service restaurant might differ to somebody else's understanding of a quick service restaurant who might call themselves a restaurant or a café. There's a little bit of fluidity in these numbers, and it's a little bit of definition. The 12% doesn't necessarily represent your idea, possibly your idea of what a QSR is, where it's purely a carton moving exercise. Some of those QSRs are actually correct customers for us and will be part of the portfolio, and are, you know, it's a core part of what we do. I'm just urging you to be a little bit cautious when you look at this.
When you look at it in six months' time, let's not be too quick to try analyze why there's been a 1% movement away from caterers into healthcare. You know, that's gonna be a very difficult road for us to go down and try explain because, yeah, it's giving you an overall idea as to where the business is split. Let's not get down to the pedantic absolute detail of it. I don't believe there are any more questions. Let me just check. No, that's it. Once again, thank you, everybody. I know we've gone a little bit over time. Thank you for your attention and your continued support. If anybody does have any more questions that we can answer, I'm sure David would be thrilled to hear from you.
We remain very optimistic, upbeat about our business, that's because we've got a fantastic team in place. Once again, I know I've gone on about it, I'll carry on going on about it. They really are just a, an amazing bunch of people who continue to perform fantastically well. These numbers truly are a testament to them and a, and a great outcome. Thank you to Ashley for organizing all of this, to Charlie and the accountants all over the place who put the numbers together very quickly, very accurately, that enable us to give you the detail that we do in a short period of time, and to everybody else. If I've left anybody else, once again, I apologize.
We look forward to giving you an update in May, and hopefully it's more of the same, but I'm not a fortune teller. We'll try our best. We do remain exceptionally positive and optimistic about the outlook. Thank you, everybody. Have a wonderful day, and see you all soon. Take care. Bye-bye.