Good morning, everybody. Welcome to the Bidvest Annual Results presentation. I think when we factor, take into account the kind of year that we've been through, starting with riots in South Africa, Omicron disease spreading around the world with followed on by lockdowns all over the show.
Okay, that's the end of our chairman. This is a bloodless coup.
I'm Stephen. Thank you. We're at Bidvest.
Results presentation. Just for clarity's sake, it is Bidcorp. If any of you think it's Bidvest, you're probably in the wrong place. On behalf of our chairman, Stephen Koseff, I'd like to welcome everyone here today. I apologize for the technical problems. Must be rolling blackouts in Australia that are affecting communications. We thought that might happen, so once again, apologies for that. Stephen did want me to thank lots of people. I've forgotten most of them already. To everybody, thank you. To all of those of you who actually aren't working from home, that's very pleasing to see at least eight people aren't working from home in the economy.
That's good that we're getting back to normal. What a year it's been. What a two years it's been. In fact, the last time I was here was three years ago. It was August 2019, and a lot's changed in the world since then, which we'll go through. Firstly, just to say thank you, and I apologize if I leave anybody out. Won't be the first time I've upset people. Probably won't be the last either. To get to where we've got to takes the work and dedication of lots and lots of people. First and foremost, I wanna thank the 25,000 Bidfoodies out there around the world who've done a phenomenal job, not just this year, but through many, many, many years. Through ups, through downs, through difficult times.
They really are a remarkable bunch, an inspirational bunch. I'm very privileged to work with them. They make my life very easy. They make me look good, however difficult that is. Whatever credit for the results that we see goes to them, certainly not to me. It's a fantastic bunch of people out there around the world. First and foremost, we owe them our gratitude. To our directors, thank you very much. I know it's becoming increasingly difficult in this world of compliance to manage businesses. At times it does become frustrating and tedious, but to all the hard work and dedication that went into that, we thank you. To our auditors, we've had our difficulties, our differences.
I continue to have my differences with the accounting profession in general. I think they are diverging from reality. Anyway, that's my personal view. That's maybe why I gave up my membership, or else they would've had to kick me out, and that wouldn't have been a good look. To our own internal accounting people, to David, to Charlie, to the whole team around the world, there's many of them. Deadlines are exceptionally tight, as I was reminded by Evan. To get to where we are in such a short period of time, thank you very much. To our many tens of thousands of customers out there, we realize that you are the most important people in our organization besides our own people, because without customers, we don't have a business.
Our suppliers around the world, we enjoy working with you most of the time, and we look forward to a continued strong relationship. Without waffling on too much, I think I've done Stephen's introduction. I'm gonna move on to talking more about how we see not only the results that were, but the future. Yeah. I've often said, and please don't take this the wrong way, there are three types of people in an organization. There are those who are running the business on a day-to-day basis, and that's the bulk of the people in the business are running the day-to-day business, picking the orders, dealing with customers, getting it out.
You've got a team of people who are looking in the rear-view mirror as to what happened, and that's generally the finance team, the admin team who like cleaning up the mess to get to that point. You have the people who are looking forward and saying, "Where's this business gonna go, and how are we gonna take it to where it needs to go in the future?" It's a team effort, and everybody has their role to play, and you need all three of them to work in harmony with each other in order to get to where you wanna go. None of them stand alone. Must have got that one. Okay, so that's our strategy. I'm not gonna go through that. You know who we are.
Like I said, it's been a very difficult year. All the comparators that we talk about are comparators to FY2021. Let's bear in mind, FY2021 was not a normal year, and FY2020 was not a normal year. The best we can do is actually compare to FY2019, which was a non-COVID impacted year. Any percentage increases on FY2021, although they're flattering, are actually meaningless. FY2021 had significant COVID impact, so we need to look at FY2022 in isolation and look at our performance relative to FY2019. It's very pleasing that we did surpass FY2019's performance in FY2022. In the context, you need to look at that in terms of what FY2022 actually was. If we look at some of the events that happened, it wasn't a normal year either.
It was far from it, particularly on a global basis. In July, we had the unrest in KwaZulu-Natal, which saw us losing a couple of warehouses, some shops around the place. The uncertainty that arose from that, the cleanup effort, the disruption to our customers' lives, et cetera. We had Australia and New Zealand in absolute lockdown for many months at the beginning of the year. I was locked in my house in Sydney from, I think it was the twentieth of June, and they let us out in late October, I think it was. These were proper lockdowns. We could go five kilometers from home if you had three reasons to be out the house, and it was adhered to. I think in New Zealand it was even worse.
Bearing in mind that in the previous year, the Australia, New Zealand, the Australasia segment was 50% of our business. We had that to contend with for a significant part of the year. We had the supply chain disruptions, where ships just weren't getting to where they needed to get to, factories were closed, products weren't flowing. We had those issues. We had the Omicron wave, which caused a significant amount of disruption, particularly in the UK and Europe, where they had a self-imposed lockdown and Christmas was canceled. Not only that, in the Netherlands, where we've got a reasonable-sized business, they went into lockdown in November. Nobody knows why. Nobody can explain it. They were locked down from November to I think it was the end of January, beginning of February.
Coming out of that, once the Omicron wave sort of passed, we had the same impact that everybody else did of the staff absence caused by COVID that we had to work through. We had the Ukraine war, which started six months ago today, unfortunately. That had major repercussions, particularly in Europe. Not only financial repercussions, there were also real humanitarian repercussions. David and I were in the Czech Republic and Poland a month or so ago, and I guess we're fortunate in that some of our employment issues have been resolved by Ukrainian women who fled the country and are basically refugees. It's tragic. I mean, obviously it solves an employment issue, and we're happy to be part of that solution.
You know, people shouldn't in this day and age have to go through that type of trauma of being separated from their families and torn apart. We've had this inflation issue going through the world to greater or lesser degrees. Through all of that, our teams have managed the ups and downs. I'm sure I've left out a couple of issues. They've managed the ups and downs, and overall, the business has absolutely, I think, performed admirably well. What's really surprised us is the strength of the customer rebound that we've seen, particularly in the second six months of the year, and particularly in the last quarter. We're talking from about Easter time through to the end of June. The consumer just rebounded with great strength.
Somebody termed the phrase revenge spending, and it seems to be that way. People are sick and tired of being told what to do by their governments and to stay at home and to do whatever. They're going out and they're spending, and they're traveling again, and things are opening up again, and people are venturing out into the real world again. It's basically sprung back to above normal in a very quick period of time. That in itself is wonderful, but it's created challenges, 'cause we live in a world where there seems to be a shortage of labor. I don't think it's a South African issue, although I see your unemployment rate did come down slightly. In many of the countries we operate, there's basically zero unemployment.
We're running at unemployment rates of 2%, 3%, which actually is full employment. Whoever wants to work, sort of the recruitment process is, you got a heartbeat, you can work. That might sound funny, but it really is like that. We really are struggling to find people around the world to work at the, you know, in the business, particularly in warehousing and distribution-type roles. Notwithstanding that, I think the business has performed remarkably well and probably is in a stronger position than it was in 2019. The pandemic gave us the opportunity to make some changes, to make some difficult calls that would have been maybe too difficult to make in non-crisis times. Fortunately, we retained the bulk of our workforce.
As we said, we were cutting the fat, not the muscle, so that when it did bounce back, we had the people in place. We'd carried them through the pandemic and, yeah, that's stood us in good stead. We think we're. The whole market is doing well. There's no doubt that the out-of-home market has rebounded very strongly. Our peers are probably doing very well as well. I think we're doing slightly better. I think we're doing slightly better because of our strategy that we had a few years that we've implemented from quite a few years back, and which we continue to evolve and develop and go down the same path.
We are exiting some business to further move on the path of the correct customer base, which I think has enabled us to manage the inflationary issue relatively well. We've exited a large customer in Belgium, beginning of July. There's a large QSR company, a chicken chain leaving in October. In Australia, there's a large pizza chain leaving in New Zealand in October. There's another one in Belgium leaving in January. These are all. They're exiting. We didn't lose the business. We made the decision that unless we could have a mutually beneficial trading relationship, we'd rather use the capacity for the correct customer base. They're very mutually amicable separations and you know, we're very comfortable with the strategy and the path we're taking.
That's who we are. I don't think that's much change from the previous years. Once again, I think that's part of our strength, is that every year or two, we're not changing course, we're not doing a major restructure, we're not doing an in-depth analysis of what we're doing and a strategic change and getting consultants in and doing all of that stuff. We're on the path, and we're on the path. We make changes to the course, we tack the sails a little bit as we go, but generally we're on the same path. All of this, you know, you can read. I'm waffling on about it anyway. The important part is we really saw the strong growth come through in the latter part of the year. Our operating margins are back to where they were in 2019 for the full year.
Don't forget that the year is made up of parts, and parts of the year were severely COVID impacted and other factor impacted. If you look at the more recent run rate, you can make your own deduction as to where how that trend is working. Obviously, what's more important to us is what the future looks like. All I can tell you is where we're sitting at the moment. For the first eight weeks of this financial year, our revenue is running. In constant currency, we're 30% above where we were for the same eight weeks last year. Bear in mind, there were some COVID-related issues last year in July and August, and parts of Australasia were COVID impacted. This year, China is still COVID impacted. There's still lockdowns. Hong Kong is still not accessible.
You still got these challenges going on. You always like to look at the individual segments. We'll start with Australasia. On the face of it's disappointing it's gone backward. I think that's an absolutely remarkable result, considering the fact that Australia was locked down for 4 months. 60%, 70% of Australia was locked down for 4 or 5 months. New Zealand was locked down for 5 or 6 months and was incredibly slow in unlocking and did it in a very slow, cautious, and damaging way. Australia, we saw an incredible rebound from about February onwards, and they're motoring ahead at great speed. New Zealand followed a few months later, and we only saw that pickup in New Zealand happen in about June. The last few months have been phenomenal.
Those two businesses really are performing exceptionally well. We continue to invest in infrastructure. We continue to invest in manufacturing and value add type operations. You can see the margins we make. That 7.5% is probably realistic. 7% obviously is impacted by trading conditions. Very happy with the fact that New Zealand and Australia have continued their trajectory, notwithstanding the tough trading, the tough COVID-related environment. The UK made a very strong recovery back to 4.1%. That is below where they were tracking in FY2019, so there is a way to go there. Part of that is probably because the UK has the greatest proportion of larger customers, and that's a historical issue that can't be rectified in a short period of time.
Generally, what you find is that when you're dealing with large customers, pricing is locked in for a longer period of time, and there's more negotiation that goes on around pricing, changes. It takes a little bit longer to get the pricing, the inflationary, price increases through, but they will follow. We really are on a strong trajectory in the UK as well. The fresh business has now been fixed, and it's part of the total UK business. We're not gonna split them out in future because our UK business now has multiple components. Some of it is wholesale, some of it is specialist. It's got manufacturing, it's got import, it's got fresh. It all forms part of the same offering.
Our offering to the customer is they can determine who they wanna deal with or in a combination of all of them. That's given us a whole lot of efficiency. It's also enabled us to trade with our customers on a different basis. We're pretty happy with what's gone on in the UK. Some nice customer wins there. We're not gonna detail exactly who they are, but the forward book looks pretty acceptable. That's a remarkable result. 4.5% out of Europe. Bearing in mind that Holland was in lockdown from November to February, and Holland's quite a major component of Europe. There's a little bit of government assistance, but the assistance went nowhere close to making up for the lost profits out of not trading.
All our businesses for this period, for the year in Europe are profitable. Spain was a problem. We don't believe it's a problem anymore. We've got rid of some of the activities, focused on what we do well, and that business is. We're very comfortable with that. Germany is absolutely a work in progress. It's not causing us major dramas and remains a work in progress and a future potential success story. The large businesses in Europe have continued to do very well, and we had record performances, record ever performances. Notwithstanding there was a lockdown, the Netherlands, we had a record performance ever. Belgium, we were at equal record levels. Italy, we were at record levels. Czech, we were at record levels. Poland absolutely blew the light out. Poland's now 5% operating margin business plus.
The Baltics is profitable, record levels. Europe for us actually in this year, that's our largest segment, which is interesting how that dynamic has changed. Traditionally, always you had UK and Australasia were the largest, and then Europe and emerging markets were smaller. In the current year, Europe has taken that position. Once again, very happy with the way Europe's progressing. Emerging markets has also been a standout performance. Margins of 5.6%. Bear in mind, Hong Kong, China have had COVID issues for at least, I think it's four or five months of the year, and that's impacted it. There are some of the South African team here. Full credit to them. They had a record year. I know there's a lot of negativity about South Africa.
They delivered record results on record results and exceeded their FY2019 numbers by, I think it was 15%. Correct me if I'm wrong. Our South African business is in great shape, is performing phenomenally. Full credit to the team there. Obviously, South Africa has its challenges, as do all markets. I think it's just the, you know, challenges might be a little bit different from market to market. Middle East also absolutely shut the lights out. I know I'm jumping around a little bit here. They just had a phenomenal year. Once it bounced back, tourism came to the Middle East very strongly. I think the strong oil prices helped as well. We were in Dubai in February, I think it was, end of February, beginning of March. The place was packed.
Saudi is transforming at an incredibly quick pace, their modernization program, and that's great for business. You know, it's remarkable the amount of investment that's going on in that part of the world. Turkey, we have a great business there now. We struggled for many years. Absolutely booming. The accountants have made some nonsense new rules about hyperinflationary accounting. Seriously, nobody understands, least of all them, which somehow gifted us ZAR 0.24 earnings per share. Whoosh. We just magicked ZAR 0.24. Don't know how that happened. Don't expect it next year. It's not gonna be magicked again. The rules are the rules. The business, the core business is doing exceptionally well. I think we're now in 5 or 6 cities, with major businesses, real food service distribution businesses.
South America for us remains a very exciting prospect. We're doing great in all three of them. In Chile, Argentina, and Brazil, we've made some acquisitions. We are bulking up. Those businesses are now substantially bigger than they were in FY2019. They've come out of the pandemic exceptionally strong, and they're reasonable-sized businesses now, which will be good contributors. Then we've got China and Hong Kong, which are very challenging. When the rest of the world has moved on from COVID and doesn't talk about it anymore, in China, they're dealing with it on a daily basis. There's two COVID cases, let's close down Shanghai. That's how it's very unpredictable, and it's very harsh. Their lockdowns are lockdowns. It's actually quite a tough place to do business at the moment.
Having said that, we're still profitable in China and in Hong Kong, but obviously we're not performing to anywhere near the levels we did before. There's almost zero tourism into Hong Kong, and there is zero tourism in China. We're having a conference next week at Sun City, actually for 200 of our global execs. Unfortunately, our Chinese colleagues can't attend because they're not allowed to leave the country. It's a difficult set of circumstances. What else have we done during the year? We've made 10 bolt-on acquisitions, which are detailed. It's pleasing to say that in the first eight weeks of this year, we've already made three, one in Australia, one in Malaysia, and one in the UK.
We are working on numerous others in the UK, in South Africa, in Argentina, in the Czech Republic, and I'm sure there are a few more, which are all at relatively advanced stages. Now, these bolt-on acquisitions appear small, and they are small, and they're low risk. We spent ZAR 800 million, which isn't a correct number either because one of the acquisitions included a property, and we did an immediate sale of the property. Accounting rules, once again, and I won't say anything about them even, relax, says that we had to put the gross amount into the acquisition, but actually we got back a substantial part for selling the property which sits in another line.
Good luck trying to understand that. Those acquisitions form an integral part of what we do, and they're very small on an individual basis, very low risk, but they add to the base very quickly. Takes a year or two or three or four to get the full effect, the full impact, the full synergistic impact of what they're doing, of what they do, and they certainly are important for us. We always get asked the question, "What about a major acquisition?" We're on the lookout. If anything opportunistic comes along, we'll look at it, but we are responsible. We're under no pressure to do a deal. We've got lots of balance sheet firepower. We've got almost no debt for a business our size.
When the right deal, if the right deal comes along, we'll absolutely do it, but there's no strategic imperative that we have to do a big deal anyway. We believe that's the responsible path to take. We've continued to invest in our infrastructure, and that sits in the CapEx line, and I think there's a great deal of confusion or misunderstanding about what we're doing. We're actually investing in hard real estate, in physical infrastructure, and I compare it to a supermarket, where the most important thing for a supermarket is where are you located. If you get the right location, you've got the correct catchment, you can service that market. It's exactly the same for us. We need to be close to our customer.
We've got this philosophy of wanting to be no further than thirty minutes away from the bulk of our customers, and you need to invest in infrastructure in order to do that. We'd far prefer to be an owner of that infrastructure than to be a renter of that infrastructure. Once you've got the right location, it's key. It's a critical component to what we do. We have the balance sheet capability to be the owner of that property, and I think we own about three-quarters of the facilities that we operate out of around the world, and I think that's a great strategic advantage. The other very important component of these investments relates to our ESG credentials.
We were an early adopter, and in 2018, we set a target of reducing our emissions by 25% by 2025 when it wasn't really being spoken about yet. I'm very proud to say we're at that level, and we're now looking at what the next targets are gonna be, what the 2030 targets are gonna be. Part of the investments we are making are in energy-efficient warehousing, zero carbon emission refrigeration. We operate huge freezers and chillers and temperature-controlled warehouses. They're built with the most modern insulation, with the most heat-efficient ways of operating them, cool-efficient ways of operating them, with plants that consume very little electricity. With solar on the roof, we're investigating on-site wind turbines to generate electricity.
It's a very important component of what we do to reduce our carbon footprint particularly on the two most major inputs that we have, which is running facilities, and secondly, we run a huge fleet of motor vehicles. We've got many thousands, if not tens of thousands of trucks running around, which are absolutely critical to what we do. At this point in time, there unfortunately is no real credible alternative to basically diesel trucks. There's a lot of talk about electric, and there's a lot of hype about others, but they're not at that point yet.
There's no Tesla type of equivalent when you're talking about a big truck delivering 10 or 12 ton worth of product over 200 or 300 kilometers with a fridge motor and an insulated body, which is what we require. We are absolutely investing in smaller electric vehicles for running around in the cities where you don't have huge kilometers to run, and you don't need a big payload. We're looking at biodiesel-type alternatives to see what type of efficiencies we can get. We are going through a fleet, an accelerated fleet replacement program because a Euro 6 truck, it's far more efficient than a Euro 5 or a Euro 4 truck. Unfortunately, there's a 1- or 2-year delay in getting trucks anyway.
We are trying as quick as we can to upgrade and replace the fleet to be as sustainable as possible. There are a whole lot of other sustainability initiatives going through the business in terms of packaging that we sell to customers, moving away from single use, moving towards biodegradable, compostable, recyclable. In the food that we source, there are a lot of steps being taken to ensure sustainability, that they're sustainably farmed, they're sustainably fished, they're sustainably grown, and that there's a level of responsibility shown by the producers of that, of those products. There's a great deal of emphasis going on into ESG. That is a very important component, but it is a journey, and it's a journey that everybody has to be on.
You know, we do it because it's the right thing. We'll continue down that path, and hopefully, we'll be able to communicate it, as best we can as to what we're doing. I think we've achieved phenomenal success so far, and we strive to continue down that path. Before I hand over to David, I know I'm gonna get asked one particular question from the analysts. I'd like to just cut it off at the pass.
They're going to ask, "Of your sales increase, can you please tell us exactly how much of it relates to inflation and how much of it relates to volume growth?" I'll paraphrase the question, and the answer is no, we can't tell you, because the numbers we're giving you are an average across the whole year. Inflation hasn't been a consistent number across the whole year, and inflation isn't consistent from geography to geography. Furthermore, the increase that you're looking at is the increase compared to 2021, which was COVID impacted. Some sales are higher because they're not all that COVID impacted, some are COVID impacted, so the comparative to 2021 isn't of any relevance either. What we are seeing is there is food inflation.
We believe that the food inflation on a basket across all the countries across the whole year has maybe been 7% or 8%. Might be a little bit higher in some other countries, it's lower in other countries, and it depends on the type of product you sell. On the issue of volumes, we wish there was just a very easy statistic that we could push a button on a computer, and it would tell you what the change in volumes are, but it's not that easy either. Customer spending habits have changed. Whereas they were maybe buying a carton of something before, maybe they're now buying 2 cans every 4 days. Does that mean your volumes have changed, or are you just selling it in different proportions? The things we're selling have changed.
Our focus has very much been to move up the value chain. You can sell a carton. The carton can be my famous carton of baked beans, which costs $10, or it can be a carton of meat, which sells for $200. Your volumes can be the same, but your sales revenue is slightly different. I think all you have to do is trust us when we say that when you look at the mix, our gross margins have gone up, our cost of doing business has come down and slightly above where it was in 2019. The overall trading margins are back to where they were in 2019, which was a clean year, whereas this year isn't a clean year. Like I say, read the trend. We actually can't answer that question.
I'm gonna hand over to David. He'll take you through the numbers. Oh, by the way, those people who are physically here, you can see that there's a goodie bag from Crown National. In lieu of a dividend, people who are here, shareholders who are here get a goodie bag, so thank you. It's an in-specie distribution, and you don't have to declare it for tax purposes. Thank you to the Crown people for supplying this. Hopefully, it's not old, out-of-date stock, and it's good, modern stuff. Crown. By the way, Crown have had an absolutely phenomenal year, and we need to give them a big shout-out. The way they've developed that Six Gun Grill brand in particular is phenomenal. We're sitting on an absolute powerhouse of a brand that they've developed in-house.
Phenomenal product, phenomenal volumes going through the business, in addition to all the other great things they do. Big shout-out to the Crown National guys. Thank you very much, and I'll hand over to David.
That's the outlook. Yeah, morning to all. Nice to be here again after, as Bernard said, a few years. It's great to be able to stand up here and you know deliver the news about the great results. You know, obviously, as Bernard's indicated, it's up to the 25,000 people who we are. These are attributable to. We provide a lot of information. Our financials are basically done or are done. Just checking the auditors. No, they are. The booklet's got a lot of information. I would encourage you to read it because I think if you read it, you'll get a better perspective of what Bidcorp's about. I can tell you now, a lot of people don't read it.
On that, just really it's the amount of information, as Bernard indicated, was, you know, put together by the various teams around the world. Particular thanks from my perspective to our finance team, certainly in the corporate office, but everyone else in the various jurisdictions because the deadlines are tight. Not tight enough according to some, but too tight for others. Really it is an effort to get the results put together and audited and released in the time period. That's great. Unfortunately, I need glasses these days. That's something that's changed in the last few years. I think it was COVID, but it may be age. I think one of the really pleasing things from our perspective is that we've delivered an unmodified audit opinion.
If you go back a year, we weren't in a great place with the Miumi fraud that had been recently uncovered. I'm very happy to say that that is all behind us, all been contained, written off in the previous years. The group's accounts are unmodified according to the right terms, and we're really chuffed about that. The numbers, yeah. IFRS, as someone famously says, blah, blah. Consistent policies and accounting, blah, blah, except for one, and Bernard mentioned it, hyperinflationary accounting for Turkey. I'll talk a little bit about it, but it's an old standard, but a very complicated standard. It got thrown at us sometime in June, so it came at us quite late in the year. It had some benefit.
As you've heard, Turkey had a fantastic year, but even on top of that, they had a brilliant year. Moving on just with some highlights, revenue up 28%. Margin improved on last year and on 2019 as Bernard indicated, that's sort of the really comparable year. EBITDA margin up at 5.9% on last year and largely in line with 2019. Trading margins in line with 2019 at 5.2%. Hyperinflationary accounting, as I said, gave us a kicker of 24.5%. We've spoken about normalized HEPS, and on that basis, they're still up 74% as opposed to the 77.1% as we announced, but still a fantastic result.
Working capital, I'll speak a bit about, but largely under control and notwithstanding the investment that's gone into the business. Cash flow is still very good. As I said, unmodified audit opinion, and we've declared a final dividend of ZAR 4 a share, which in total makes ZAR 7 for the year, and ZAR 7.02 with the bags that you've got.
That still equates to about a 2x , 2.16x HEPS cover, better than what we talk about from a policy perspective, but largely in line with where we've declared and paid previously. Just on the P&L, as I said, revenue. I think the fact that, you know, our exposure and the trans, w ell not transition, but the mix that we've put together and the businesses we've put together over the last few years has stood us in very good stead.
Non-discretionary side of the business has also held up well, as one would sort of expect through good and bad, but there's no necessary discretionary spend that's driving it. Just an example of you know one category, which is hotels or restaurants and cafes, from year to year has gone up from in the mix, 35% of the overall mix to 41%. That segment of the market has done well and we've benefited from it. If we look at the weekly sales, Q4 2022 versus Q4 2021, they're up nearly 38%.
Certainly over the last while, last quarters, we've consistently been above ZAR 3 billion worth of sales on a constant currency basis a week. GP up by a little bit, 24.2%. I think the pleasing thing is that the businesses have had to deal obviously with very volatile conditions. I suppose the bigger one there is the inflation, but they managed to trade through it. As Bernard said, some of the businesses that do have exposure to larger contracts, there has been a little bit of margin squeeze, and it's really temporary in that the timing of getting price increases through is a negotiation as opposed to being able to do that relatively quickly. Costs generally have been very well managed. Cost of doing business versus 2021 has come down.
Still a little bit elevated versus 2019. I think in context, you know, through COVID, I think there was quite a lot of efficiency that we saw in the cost base. Some of that was because we were able to pick and choose with government assistance schemes as to when to bring people back. It was very efficient. Some of those efficiencies have been impacted by, you know, staff shortages as the world's opened up and it's impacted the cost base. I think generally in terms of our overall labor cost percentage to revenue, it's stayed very consistent, you know, compared to prior years and pre-COVID. Trading profit up to ZAR 7.6 billion, 58% up.
As I said, margins at 5.2%. I'm not going through too much of this stuff. I think interest charge is up a little bit, and that really reflects, firstly, a much-changed interest rate environment. We do carry debt through the year. That's obviously gone, you know, impacted working capital because we've invested more in there, CapEx, and we've paid significantly higher dividend in this financial year as opposed to 2021. So, you know, those are all the things have absorbed. As I said, the interest rate environment has significantly changed, particularly from about October, November onwards. There are some capital items.
The large really significant part there is really losses on disposal of businesses, primarily attributable to business in Spain and Germany, part of the ongoing getting the businesses into a more stable and structure. Other than that, we had a little bit of impairments on PPE, which was some of it was flood related, and some profits on sale of properties. Other than that, the big thing is really those losses on exiting those loss-making or parts of those loss-making businesses. HEPS, I spoke about hyperinflationary accounting, has had some impact. We've given you the normalized number. I think to please at least one shareholder, we did a small buyback.
It was really to limit dilution on the issuance continued exercise of share incentives by staff, which is obviously an important part of the group. Something small but beneficial. On cash flows, really, I think just to talk about the working capital. It is we had an absorption of around ZAR 2 billion in the period, ZAR 1.8 billion in the first half and about ZAR 0.2 billion in the second half. I think if you look at the working capital days, and we debate internally as to how to best measure that, but as we've shown you here, it's on an annualized revenue basis and cost of sales basis. We're still sitting at very consistent levels to what we did last year and significantly better than pre-COVID.
They were somewhere out around 14 days. We have captured some of that in the activities in the businesses and held onto them as we've continued to operate and the business has bounced back. I think another way of looking at it is our investments relative to revenue, which I think is an important part. You can't generate the revenue if you haven't got the working capital to sustain it. That's up on an annualized basis of 3.4%. A little bit higher than what it was a year ago, but I think last year was a particularly aggressive position that we ended up in because of the nature of the activities through the latter period of the year. We were.
Managed working capital very aggressively, and many activities started to bounce back towards the latter part of Q4 of the financial year. Receivables provisioning is a little bit probably conservative, but it, you know, we remain cautious of the general market. No issues there, but it has come back and is largely more normalized compared to where we were pre-COVID. No issues with inventory provisioning other than our inventory stocking is up, not materially so, but, you know, we've been taking advantage of where we can get products in terms of supply chain issues, as well as inflation, which is impacting the actual absolute quantum of inventory holdings.
In terms of investing activities, Bernard's spoken about the investment into new capacity, new distribution centers and the like, and that comprises the bigger portion of those investments. Our maintenance CapEx largely mirrors our depreciation, as one would expect. Acquisitions, on a net basis, ZAR 0.8 billion less the, I guess, nearly ZAR 400 million that we sold the property for, so that's the net investment. 1% contribution to revenue and 0.3% to trading profit. Net debt at ZAR 1.7 billion is up a little bit on the last year. As I said, last year was a little bit, you know, pretty well managed.
Not that this year isn't, but we've, you know, generated a lot of cash, but we've also invested a lot of cash, working capital, CapEx, and dividends. Last year was also impacted by those sale and leaseback transactions. You know, we got proceeds of about ZAR 1.6 billion, and they were one-off. So it did assist in the net cash position of the group. Some of the financial position of the group, the balance sheet, not really gonna talk about here, but other than that, only to mention we did a significant refinancing exercise in Q3. Termed out all the short-term. Well, not all short-term debt, but a lot of the term debt that was short-term and needed to be refinanced.
We've positioned a lot of it in the three, five, and seven-year buckets at very competitive rates. It was interesting that we actually priced the deal on the day that Russia invaded Ukraine. It was the only transaction we understand that priced in the U.S. market that day, and we still got it away at a very competitive rate. That was a good thing to do. There's nothing, no issues with solvency. We're happy there. Sorry. Then really just onto, I suppose, guidance. You know, the financial strength is, we think, a competitive advantage in the market. We'll continue to remain conservative as we have been. Inflation, as I said, the businesses are managing it.
The long-term effects. Who really knows what's going to happen at this particular point in time. We've got adequate headroom, I think around ZAR 19 billion. So we're really well-capitalized to take advantage of any opportunities, either organic or acquisitive. Yeah, we do expect a little bit of working capital absorption, but probably not to the same extent that we've seen in the first half of the prior year. We are hoping that there will be a more normal Christmas, and that may drive some of that absorption, particularly in the Northern Hemisphere. There are no real debt maturities that are coming up.
From our perspective, we'll be focusing on efficiencies in the treasury, and making sure that in this higher interest rate environment, we're getting or doing the best deal that we can in amongst our operations in terms of managing, you know, high interest rates. I think ESG, obviously, there's heightened focus on E and S. We have launched an online ESG platform. And it's really there. It's quite a unique tool. It's really there to try and, you know, from a business perspective, cope with the thousands of requests one gets for different information in different forms, you know, from interested parties on ESG. It is in its infancy in terms of populating it. It'll get better and better.
Interested parties are able to go on, click which framework they want to particularly look at, and hopefully that's mapped back into the information we're providing, and they get a reasonable idea in terms of their requirements as to what the group is doing. As you heard from Bernard, there's significant amount of activity going on across the group. As I said, the Miumi fraud is largely behind us. There are some prosecutions that are in process. A number of people were arrested a few weeks ago. There are no recoveries to date. We are expecting something, but we are in legal processes and the like, so these things do take time, but nothing's been accounted for in the group accounts.
There's no change in our hedging philosophies across the group as forecasting still remains difficult, I guess, in the world as we see it today. We are rand-based, and I suppose not only rands that you're gonna get currency volatility, but you've got the world reacting to the US dollar and euro and pound and Aussie dollar. You know, the businesses are managed obviously in country and around their own currencies, but when you aggregate them, bring them back to rands or US dollars, you do get some imbalances. Yeah, shareholder base from an international local split is largely fairly consistent at around 50%. No real change there. Q1 of 2023 has started off, as you heard, well.
We're budgeting for real growth into 2023 as we stand here today. On that basis, I'll ask Bernard to come back and do Q&A. Thank you.
Thanks, David. Is my mic on? Like I said, I was bound to offend somebody, and the first cab off the rank, I apologize. In what way do you feel the accounting standards are distorting the reality of your business? Could you please give a couple of tangible examples of what we might be missing when looking at the results versus what you're monitoring in management accounts? That's a very good question because there is a difference between what you look at from a management point of view and when you're running a business compared to what accounting standards force you to report. Whatever we report is absolutely in terms of accounting standards, and it's all done 100% correctly.
What we've always tried to avoid is this element of normalized, adjusted, whatever other terms you'd like to use. Because what that does is opens the door for error, for subjective stuff. We'd far prefer that there's a set of accounts, that's a set of accounts and everything's correct. As accounting standards become more complicated, and I don't wanna get into the you know the why they do, way above my pay grade, they start forcing us down this path of adjusted earnings. David speaks about adjusting for hyperinflation, which is correct. Yes, our EPS absolutely is ZAR 1,537, of which ZAR 0.24 is an accounting creation. It's a stroke of a pen. It makes no difference how we look at our Turkish business or how we manage our Turkish business.
We manage our Turkish business in Turkish lira, and we sell to customers in Turkish lira, and the profits we make are in Turkish lira, and we've got a business in Turkey. We didn't suddenly make an extra 24 cents out of it in reality. I think accounting standards are forcing us down that path, which is unfortunate. I mean, some of the other issues are IFRS 16, and you can see throughout David's analysis when we talk about the debt, the debt is pre-IFRS 16. When we talk to our bankers, they don't really care about IFRS 16. It's written out of the covenants. It's written out of everything. It's just ignored.
It's purely just an accounting creation, which, you know, when we run the business, we don't look at those things and the impact that they might have in terms of how our accounts are prepared on a GAAP basis or an IFRS basis. It makes the most important measurement, in my humble opinion, and I'm old school, is the cash flow statement. That's the one place that actually tells the truth. What is your cash balance? What is your net, your real net debt, your real net cash balance at the end of the year? That doesn't lie. That's part of how we manage the business, is the reality of cash. You know, the other issue is this expected credit loss regime.
You know, I went to university a long time ago. It was very different then. It's now a very complicated, drawn-out, subjective, technical process with very complicated spreadsheets and all types of things. For us old school people who run the business, it doesn't work like that. There is this divergence between the real world and what accounting standards say, and it will cause far more emphasis on these things called normalized earnings or adjusted earnings, which obviously create far more scope for manipulation, for inaccuracies, for interpretation, which isn't a great scenario. I'll get off my soapbox now. I'm gonna get lynched outside, but anyway. You mentioned that you have exited some larger unprofitable customers and would rather use the capacity for more profitable business.
Will there be a lag before you fill this capacity, or can you onboard new customers seamlessly? The answer to that is it only takes a month or two or three to get the benefit of that. It's a really short process. These customers, they are profitable and do contribute, but they contribute a very small amount of profitability. Where we're dealing with scarce resources, we can't find drivers, we can't find warehouse people. When you pull out this business that you're not making a whole lot of money on, you actually don't go backwards by a whole lot, if at all, and you open up this huge amount of capacity, not a huge amount of capacity, an amount of capacity that you can replace very, very, very quickly.
Belgium, for example, we pulled the business out at the end of June, and our guys were really surprised as to how quickly that filled most of the gap by the end of July. We're talking one month. We don't see that as being a major issue. It's a one-off pain you go through for a short period of time, and on you go. Any views about how the share price has performed and where you think it should be? Well, I think it's performed awfully, and it should be ZAR 5. That's not my job. We run the business. You guys run the share price. So I think, you know, that's once again, not a question I can answer. Are you able to pass inflation to consumers, and what's your thoughts regarding the current wage labor increase?
Generally, we are able to pass the price increases on. Obviously we work with our customers. We find alternatives. We give them value add solutions that might take cost out of their kitchen because they've got the same labor pressures. We're selling them different products that solve different issues for them, which is another way of being able to pass on some of the inflation. It's a collaborative approach. We fundamentally yes, we have been able to pass on the price increases to date. Like I say, we see inflation coming down the curve now, which should make that easier going forward. What are my thoughts regarding the current wage labor increases? You know, there's two ways of looking at it.
You can look at it negatively that we're paying more, there's more cost, absolutely. People have got more income. Yes, they've got inflation, but at least they're keeping up with the inflationary pressures on their spending and are gonna spend the money. We face this dilemma in Eastern Europe, and I think I might have spoken about it many years ago, maybe about 2016, 2017, where we saw wages going up very rapidly in the Czech Republic, Slovakia, Poland, I think it was at the time. There were double-digit increases that were going through regularly, but it filtered through the economy and it stimulated the economy and it came back. You know, we paid people more and people ate more ice cream.
Our business in Eastern Europe have grown and the economies have grown as a result of it. So it's not necessarily a negative impact, but it does need to be controlled. I'm working through them. I'll come back to the floor afterwards here. How severe will the energy crisis in Europe and the U.K. affect Bidcorp and its customers? Please elaborate how energy costs will affect Bidcorp and the possible impact on out of home eating, given possible squeeze to disposable incomes. If I could answer that, I'd be the treasurer in the U.K. I really don't know. From an internal point of view, we've hedged a lot of our electricity, energy exposure. Hopefully we've taken the correct hedges, and that's not gonna go against us, but we have hedged the downside.
Internally, in terms of the impact to our expense base, that's relatively under control. In terms of the impact on the consumer, we really don't know. Obviously, it's a major issue. It's a major issue in the UK. It's a major issue in Europe. I actually don't know what the answer to that's gonna be. Good afternoon, congratulations on an excellent result. That's a wonderful question. Thank you. Your balance sheet suggests there is a lot of capacity to optimize capital structure, enhance shareholder returns. Is the board considering share buybacks or a special dividend? The board considers capital structure all the time. It's a dynamic issue. Share buybacks only work if it's accretive. Special dividends are a one-off sugar hit. We've only just come out of COVID and the crisis.
The world seems to be possibly lurching into another crisis. Yeah, you've always got to make these calls as to when you need to keep your powder dry and when you can go out with abandon and splash the cash. It is something that gets considered, and there's nothing further to add that's definitive at this stage. Well, the questions are coming in fast and furious. Sorry, they're just delayed. Do you expect the group to see improving gross margins as food inflation begins to wane? i.e. do you ever drop prices once they are raised? Yeah, we do, because we operate in a dynamic market, and prices go up and prices come down. Margins should actually stay the same. The percentage margin should stay the same. We don't carry a lot of inventory.
Across the group, our total inventory is only about a month's worth of inventory. There's nothing inherent in the stock that we're carrying that stops us from passing on price increases or price decreases. We do operate in a very competitive marketplace. We don't have dominant market share in any market. We might be the market leaders, but we certainly aren't necessarily the price setters. You know, we do have a very dynamic, competitive market. I do see the margins remaining where they are. I don't see them increasing because we do have to remain competitive and responsible in the markets we operate.
Congratulations on the result. That's another good one. Could you give us some sense of the size of the New Zealand QSR exit and also the national contract wins in the UK? A broader question on how you view the balance of these national accounts which are exiting, such as in Australia and Belgium, and free trade, which generally has a positive mix. Could you expand on the comment around considerable prospects in South America? In New Zealand, that's NZD 75 million. That's a lot of pizza. The national contract wins in the UK, I don't wanna go into names, but there is a large pub group which we've won.
We've also won a sizable portion from one of the in a restaurant chain that we currently do a fair amount of work with, and we've picked up another quite a substantial chunk of that business, but I'm not at liberty to disclose who it is. On a broader question, how do we view them? We love all our customers, but there comes a time when they need to leave home. It's a conversation that you have that says, "You know, it's time you went out into the real world." Some customers start off small, and they're great customers, and you grow with them, and it's a great relationship. Then, you know, they develop into something that's not correct for us. We're not the correct partner for them. It's not about you, it's about me.
We've all heard that before. That's what happens. It's a dynamically changing environment. There's no start and finish to this thing. Some customers who are awful to deal with suddenly become almost pleasant to deal with. It has happened once or twice. Some who are great customers move to the dark side to, you know, it doesn't work for us anymore. We just constantly manage that, and I think it's important to constantly manage that. Could you expand on the comment around considerable prospects in South America? I think we've just started in South America. It really is a new frontier. Sorry, I'm just downloading some questions here. We think that South America is gonna be a great contributor to the overall profits in the future years.
It's a big, big market, and we really are small there, and it's highly fragmented. There's no real leaders, so we're actually creating a lot of this market as we go along. Sorry, let me just see where we are. Okay. In terms of major acquisitions, do you have any views on which geography that might be, wherever they might appear? We've been ambivalent up until now. As long as the market is an economy that we can do business with correct governance and correct principles, we're happy to look at it and consider investment. There is nothing on the agenda at the moment, but we're not opposed to most places in the world. As we exit COVID, are you seeing changes that are permanent, e.g., from remote work from home, business travel, et cetera?
No, we're not. I think the last thing that's still not back to normal is this work from home phenomenon. It's probably the only remaining remnant. My personal view, that's gonna change when the labor market changes, and the shoe's on the other foot, and the strength sits with the employer, not the employee. The employee is gonna say, "The job's in the office, not at home," and people will start coming back to the office. That's my own personal view. Workplace catering is still at depressed levels. It has picked up. You're now seeing offices are very busy on a Tuesday, Wednesday, Thursday, not necessarily on a Monday, Friday. That's not great for CBDs and the infrastructure that you have in CBDs. To us, that's the only real lasting thing.
Sporting events have come back, travel has come back, the cruise ship industry has come back. Generally we seem fine. Have you seen any demand destruction in out-of-home food consumption from high food inflation? Not at all. If you look at the American statistics, which are far more accurate, we believe, than anywhere else, the divergence between out-of-home increasing and retail decreasing has got back to its trend from before COVID. People are eating out more. Also what they're saying is that menu prices in out-of-home have been less inflation impacted, and don't ask me how, than supermarket pricing has. For some reason, there's perceived to be better value in eating out compared to retail than there was before. At this stage, those metrics work for us.
Could you please refresh us on how your ROIC calcs differ from ROC and ROIC? That's a David question, so I'm gonna leave it for him afterwards because, it's all very technical. You got that one, David? Given the high energy prices impacting many European citizens and their discretionary spend, do you see changing spending patterns that may impact your businesses? Like I say, up until now, our sales as of Saturday just past were 30% up on the previous year, and that's not inflation. There obviously is some inflation in that. Consumer demand is robust. So I can't tell you anything other than the facts of demand is intact. Appearing in the US highlight that grocery price inflation is running ahead of menu price inflation. Are you observing this dynamic in your markets? No, because we don't know that.
The U.S. are much better at measuring everything. Possibly in the U.K., they've got some type of statistic, but we actually don't know that. So it's all we know is the Australian and the U.S. factors. A question for David, which David will answer. You got that one? From Nick Webster. Good work. The last question that I have here before we throw it open to the floor is. Oh, another fantastic one. Congratulations on the set of results. I understand that there is still uncertainty in the world at the moment, and hence the current dividend cover ratio, but is it possible to lower the dividend cover to below the 2018, 2019 levels, given the strength of our balance sheet as opposed to share buybacks and special dividends? Well, I think we have.
I think we've reduced the cover from 2.5 down to 2.1, which means we're paying more as a proportion of earnings, and we'll continue to actively address that. From the floor here, are there any questions? We have a roving microphone. I think we have a roving microphone. We don't have a roving microphone. You have a loud voice.
Sure. Just two questions. Macro. Succession planning and the value of the land and buildings to total assets. Done.
Have I like overstayed my welcome? Is that the implication? I've had gray hair for 20 years. I'm only 35. One of the strengths of our businesses has been the longevity of the team we have in place. Now, a lot of clever people who write very sophisticated papers will tell you it's a negative not to have new, you know, not to change the top and keep on rotating through people. We have a different view on that. Our senior management team has been together for a long period of time. However, we do understand that none of us are getting younger and that we have a responsibility to bring the next generation through, and that's actively happening in all our businesses.
There's a very young up-and-coming management team throughout the world, who really are brought up in the business and understand the DNA of the business, understand the psychology of the business, the culture of the business, to take over, and drive the business forward. I think culture is a very important issue. We have a unique type of culture, which goes back to the Bidvest days and Brian Joffe's vision and, you know, the inspiration he gave us and, you know, that's continued. I think that's part of the secret sauce. People often say, "What's the secret sauce in the business?" A big component of that is the culture.
To us, it's important to make sure that the next generation coming through understand the culture, and obviously are gonna put their own color to it. There are lots of very capable people. There are lots of people who are far cleverer than David, and there's certainly many who are far cleverer than me in the business. We are bringing them through and listening to them. Technology, it's not led by us. It's led by the youngsters who are telling us what to do and driving this through the business. Sorry, the second part of your question was? Land and buildings.
Land and buildings as a part of the assets.
David, that sounds like a question for you or for Charlie. 10 what?
ZAR 10 billion for land. It's about 10 out of 80 total assets.
Having said that, the 10 is at cost.
Thank you very much.
Not at market value. There was another question.
Yes, just on the food side, are you seeing any scarcity where you can't actually get product in which you have to substitute with other food?
Uh, not-
What is different to that?
Not really. There's nothing that's not available. Cooking oil became a big issue because of the shortage of sunflower oil out of the Ukraine. That moved to different types of oil. Suddenly, palm oil became not the devil's own food, and it became acceptable again for a period of time. Yeah, alternatives are found. Generally, we're agnostic to the product we sell, as long as we can satisfy the customer's demand. Generally, similar products are gonna have similar pricing characteristics. There's no shortage of, on a global basis, of anything that doesn't have a replacement. There are some issues coming up which are more related to the drought in Europe than anything else, which is the price of Italian pasta, the availability of Italian tomatoes.
They're gonna be terribly scarce and expensive. However, there are alternatives. You do get pasta that's made in other countries. I don't know if South Africa still has Fatti's & Moni's. Used to be Fatti's & Moni's. I don't know if that still exists. Most countries make a pasta. You know, the Italians will be horrified by that, but that's the reality. There's. You can get American tomatoes, Chinese tomatoes. Generally, the market finds its way of equalizing.
Bernard, just a curveball, if I might throw at you. Looking at the spike in energy prices, particularly in Germany and the U.K., what does that do going forward into the winter in terms of eat out, with consumer spending under pressure constraints, different allocations to living costs and stuff? I know it's probably an unfair question, but just something appearing on the radar screen now.
Yeah. Look, it's obviously a concern, but I think it's a much bigger concern for the governments of those places than it is for us. I think governments are gonna have to step in and do something. I don't know what they can do. It's a much bigger macro problem for those countries, and it might have an impact. Up until now, we haven't seen the impact, and there has been substantial increases in the price of fuel and energy up until now. There still might be another spike upwards, which they're talking about, and winter being worse, but it might not be.
It's looking like the potential government subsidies.
Yeah. Which a lot of governments did with the fuel price. They took out their taxes and etc. to help the consumer through, and I think there'll be more of that. I think there might be another question. That's the last one. With the changes made to the business during COVID, do you expect margins to be sustainably higher than pre-COVID levels? No, we don't. You know, you can see the operating margin for 2022 was similar to 2019. Having said that, 2022 was a disrupted year, 2019 was clean. Hopefully we will see a slight improvement in those margins, but it's not significantly higher because we do need to remain relevant, competitive, responsible to our customers. There is a sweet spot as to where the margins need to be.
You know, it's not the trading margin certainly isn't multiple of percentage points higher than it currently is. Obviously, there is some movement and there is some upside. I'm being cagey here about not committing to a number, but it's not a significant upside. A lot of the strategy of what we've implemented and continue to will drive those margins up, which is the correct balancing of the customer portfolio, the import program, our manufacturing program, our value add program will all be margin accretive. But they're these are slower, I don't wanna say burden, but slower happening items that will add to the margins in the medium term. I'm gonna hand over to David and just say thank you once again.
Huge thank you to the teams out there. I know lots of them are listening in. I really do appreciate it. To all of you for coming in, I thank you. Hopefully, we've answered most of your questions, and David's gonna answer the last few.
One question is: can you please refresh us on how your ROFI calc differs from ROCE or ROIC? ROFI, if you recall, is something Brian developed over many years. It's a pretax and interest return over the operating and assets invested in that particular business. You know, if they, the business themselves are investing in working capital, they need to generate a return on that. That's what we measure the businesses by. You know, typically, over many years, we set a benchmark of around about 35%. As you can see, you know, we're tracking it much, much higher than that. It's absolutely the businesses are exceeding our returns expectation. ROIC or ROC, ROE is more a group measure, I suppose.
To a large extent, we decide on the big acquisitions, we decide on, you know, how much you're gonna pay for a business, and therefore, that's more a group measure as opposed to looking at how the operating activities of the business are being managed. I hope that answers that. I think the other one was CapEx guidance. I think we said for some time, you know, over the medium term, we still look at 1.5%-2% of revenue being invested in CapEx. As we've seen and we will continue to see a major portion of that. The major portion of that is going into long-term capacity expansion. We do think it's there. It's difficult to determine exactly.
But you know, with all the budgets we look at, there's absolutely more capacity being budgeted for, and that's not approved, but budgeted for as the businesses formulate their plans, you know, going forward. I think that's it. Nothing else.