Good morning, South Africa, the U.K., and everywhere else in the world. Good evening to anyone from Australia. Welcome to Bidcorp's half year results for the period ended 31 December 2020. Just a brief introduction. I'm Stephen Koseff. I'm chairman of Bidcorp, and I think that these results, again, are reflective of the kind of strength that Bidcorp is as a corporate, very diversified. Obviously, this has been another tough period, with COVID hitting many of the markets in which we operate, particularly in the latter part of the half year, or the second half of the half year. I think that Bidcorp again showed very strong resilience, generated significant amounts of cash, and showed up as a quality company. Unfortunately, during this period, we did have a loss of one of our directors, Dolly Mokgatle, passed away, not of COVID. I'm not sure exactly what.
I think a heart attack. We were very sad to hear that. Dolly was a very dignified individual and really made a great contribution to this board. Back to the results. I think I'm going to hand over to Bernard as soon as possible. Again, I think just well done to the Bidcorp people. I think they have continued to show resilience in what continues to be a very challenging world. I don't think if we stood up here this time last year, we would have believed that we would still be dealing with issues like COVID. Certainly, this is not something that is going away too quickly, and I think that Bidcorp is reasonably well-positioned to continue to navigate very difficult circumstances. I'm going to now hand over to Bernard, and he will take you through the results. Thank you.
Thank you, Stephen, and good morning, good evening, everybody. Thank you for taking the time to attend this. In hindsight, a year ago, we did this from Cape Town, and I did talk about the impending COVID crisis that was happening, but not in any of our wildest dreams did we think that it would get to the proportions that it has got to and would have such dire consequences. Anyway, that's the way the world works. You need to be nimble, agile, adaptive, responsive, and deal with what life throws at you. It's fair to say that our business is absolutely caught in the crosshairs of this crisis. When you look at our customer base, generally, they're the types of people who've been impacted most severely by the pandemic. The hospitality industry, leisure, tourism, cruise ships, airlines, stadiums, sporting events, et cetera.
I think in the context of all of that, our numbers are truly commendable. It's very difficult to say they're a good set of numbers when you're 46% down year-on-year. The fact that we are profitable, and they are as robust as they are, I think is a great achievement. I think first and foremost, I need to pay tribute to 25,000 Bidcorp family around the world, who've done an absolutely amazing job through this very, very difficult time. Bearing in mind, we've kept open every single working day in every single geography that we operate in, with the exception of Wuhan, China, for a few weeks in February, March last year. Besides that, all of our businesses have kept open. We haven't had the luxury of working from home.
We've been absolute frontline workers providing meals, providing food, providing necessities, packaging, sanitizer, whatever else to hospitals, aged care homes, nursing homes, schools, whoever requires the inputs that we provide. Our business has carried on through this, through some very trying times in different geographies, where we have been impacted by staff members contracting COVID in lots of geographies. We've had to contend with that. We've had to break workforces up into A teams and B teams and C teams. We've worked with less staff numbers. It's been difficult, and it's a true tribute to our people around the world, our management team, and all our staff, that we have weathered this crisis so well so far, and it still has a way to go. It's not over yet. We saw in the U.K., the roadmap was announced yesterday. Maybe it will be quicker than that.
Our hope is that it will be quicker. At least there's a roadmap and there's some optimism that there will be green shoots of recovery coming through. I don't want to dwell on the numbers for too long because the numbers are numbers. You've got a book full of numbers. You've got a book full of statistics and ratios. They're historical. Things change on a daily basis, and I don't think it serves any purpose to do an in-depth analysis of what the numbers actually were. I think what's more important is to give you a taste of where we find ourselves and what we think about the future and how the future is going to look, and the part we'll play in that going forward. You know who Bidcorp are. We haven't changed.
We believe that our fundamental philosophies, our guiding principles, have put us in a great position to be able to weather the storm as best we could under the circumstances. Our decentralized philosophy, our geographic spread, our diversification, our customer diversification, our focus on the correct customer, our agility, our financial strength, have all given us the tools and the ability to navigate this crisis, we believe, relatively well. Each country has its own set of circumstances, and I'm really not going to go through each of them because they are all different. Every country's handled the pandemic in different ways. It's had different elements of lack of management from a country point of view. Sometimes good luck, bad luck, good management, poor management. Certain countries have been able to support their economies better than others. Others have been left to fend for themselves.
We operate in 35 countries, and there's 35 different circumstances that are changing relatively regularly. What we are fortunate to see is what the other side looks like, hopefully, based on the experience of a few countries that are emerging out of this pandemic. We led that with China, which basically recovered relatively quickly from about April, May last year. Although they have some snap lockdowns and some regional lockdowns, which are ongoing, I think Beijing went into a lockdown a few weeks ago for a few days. Our business in China has gone from strength to strength, and we've seen real growth, and we are now cycling through the weak. We started to cycle through the weak months in February. We're seeing some real strong growth coming out of China.
The next cab off the rank showing us what the good side looks like are New Zealand and Australia, where fortunately, they are islands far away, and I think they've both done a very good job from a country point of view, from a sovereign point of view, of navigating the pandemic very successfully, and have both effectively managed to keep the virus out. That's not to say in the six months it's all been plain sailing. We had the state of Victoria in Australia locked down for, I think it was the better part of about four months in the period we're talking about. That was one of the strictest lockdowns in the world, where people were allowed out for one hour a day, and that was all. New Zealand, the largest city, Auckland, was shut down, I think it was for the month of August.
Subsequent to that, we've had snap lockdowns of three days or five days in various different geographies that happen, that don't happen. You have an Australian Open with crowds, and then you have an Australian Open without crowds for five days. They allow the crowds back again. The crowds boo when you tell them that the vaccinations are rolling out. Anyway, that's all just part of it. If you look at the Australia-New Zealand business, they're doing very, very well. The numbers that we're starting to see out of them are very, very pleasing. Without telling too much, those businesses are basically operating at or better than where they were pre-pandemic. That's with large swathes of the customer base still not operational.
Anything to do with the cruise line industry, anything to do with the airline industry, anything to do with large stadiums, anything to do with conventions and conferences isn't happening. We are seeing a greater trend of local, of staycation, of supporting local happening, which has been great for the business. There's no doubt there's a pent-up demand. When people have been stuck in their homes for four months, they actually do want to go out and eat. As soon as they've got the confidence that it's relatively safe to do so, they do so, fortunately for us. We are seeing a very sharp rebound in those markets. We're seeing a very similar story in the Middle East, where basically up until a few weeks ago, we were tracking quite comfortably ahead of last year.
Saudi went back into a stage of lockdown, and that's obviously dampened sales a little bit. We look at South America, they've had a great deal of difficulty handling the pandemic. To a large degree it's been allowed, I guess, to run its course. We're seeing ourselves rebounding relatively strong. Also in the summer, northern European months, July, August, we saw a very, very strong rebound in our business. When you're analyzing our results, which I don't think you have the numbers to do, you'll see that July and August were very strong months. September started weakening as lockdowns and restrictions started coming into play again. It got worse as the year progressed. November wasn't great. December got very bleak in the Northern Hemisphere and the U.K. January continued to be bleak. February is no great performance.
Probably March won't be all that great either. We are starting to see some green shoots in Eastern Europe, and things are improving. People have learned to adapt to the new normal. That's showing up positively in our results. One of the highlights, I think, of our numbers is that notwithstanding the fact that we've been trading on lower revenue, we have managed to generate a lot of cash. I guess it's from three different factors. There's been a greater focus on working capital management, and we haven't seen, I guess, the feared spate of customer distress that maybe we thought we'd see, which I think speaks to our customer base and the diversification in our customer base and the type of customer, as well as the fact that there is a lot of support out there generally in the world for businesses.
The banks are being supportive, governments are being supportive and trying to keep as many businesses alive as possible. We've had a very strong emphasis on working capital management. Our CapEx program has maybe been pulled back a little bit. I say it's a little bit because we certainly are optimistic about the future, and there are a lot of plans in place to continue our rollout, to continue investing in CapEx, to continue investing in facilities, and to grow our business. These things have a 2-year, 3-year, 4-year life project span before they come on stream. We're making decisions now for the next few years, and we're optimistic about that, know that we need to build now for what's going to be a very buoyant future.
The other aspect of the strong cash generation, obviously, has been the disposal of two properties, one in Hong Kong, one in Sydney, which did generate a fair amount of cash. They weren't done to generate cash. They were done to take advantage of market opportunities where yields are at historically low levels, investor yields, which means that you can generate a fairly significant uptick in the value of your property. These properties are both approaching end of life. As part of our strategy of reinvesting into new property, you need to turn over some of the older stuff so that you can invest in new technologically advanced state-of-the-art, automated, whatever else is necessary, in those jurisdictions. They have been done on a sale and leaseback basis.
One's five years, one's seven years in terms of sale and leaseback, to give you some idea as to where our thinking is on that. We've decided to not pay an interim dividend. It was a subject that had a lot of discussion. We are in a very strong financial position. If you look at our borrowings, they're significantly less than where they were a year ago and where they were six months ago. We continue to generate very good cash returns. As a board, we took a view that it would be inappropriate at this point in time to pay a dividend. The world is still in a very uncertain place. We have many of our businesses in the Northern Hemisphere, in Northern Europe, in the U.K., where we have significant numbers of staff on furlough.
We are still receiving government support of various forms in certain geographies, we feel the timing of a dividend now would not be correct and would only be in the interests of shareholders and not all stakeholders equally. We believe we've got a responsibility to more than just shareholders. We need to balance those responsibilities, but we have a responsibility to our employees, to governments, to all stakeholders in the community as well. We'll reassess that in August, when hopefully there's more certainty and the benefits of the vaccine are rolling out and the economies are opening up again. If we can, we will pay a dividend in accordance with our normal dividend policy.
The decision not to pay a dividend is absolutely a very well-debated, well-thought-out decision, which is a timing issue reflecting the appropriateness of paying a dividend at this particular point in time. As I said, I want to pay tribute to our people. They've done a phenomenal job. In my mind, they're all heroes. I don't really want to pick any out for special mention other than two of our senior team in the U.K. were awarded MBEs for their work in the rollout of the Shield Care program, Steve Clarke and Jim Gouldie, and we really are proud of them. I think it's not about them, it's about the team and the importance that Bidfood could play in ensuring the most vulnerable were looked after. Just on that, we're involved at the moment with getting schools back.
Not only do we provide the food, we are actually providing the lateral flow testing apparatus and peripherals that go with it that's enabling the education system to get back on its feet in the U.K. We are very proud to play our part, and that goes around the world. We're supporting governments, we're supporting feeding schemes, we're supporting nursing homes, frontline workers, whatever else. It's great to actually be part of a business that can contribute in some way and can be part of what is a very challenging and trying time for the whole world and for all of us. If I can just do a very quick run around the world and just give you a very brief overview of conditions. Like I say, the detail is all in here. They're all numbers.
I know a lot of you love your numbers and you love your percentages and you love your spreadsheets. I think these times really are unique and it really isn't about what the numbers say because the numbers are actually irrelevant. The forward look is nowhere similar to what the historical past might reflect. Just to give you a feel as to where we believe the market is in various jurisdictions. I've touched off on Australasia, and you can see the numbers have held up very well there. Profitability margins are actually higher than they were a year ago. I think that gives us a lot of confidence around the world that the same is going to be repeated. Which like I say, was reinforced in July, August, through the rest of the world when we were trading strongly.
Both the Australia and New Zealand businesses continue to perform strongly, have great market positions, are definitely gaining market share, and are giving us a lot of confidence about what the future looks like. Moving to the U.K., it's a story of two halves. A great first few months, terrible second six months. Will be an awful third quarter that we're currently in. That's just the way it is. When all hospitality is closed, it's very difficult to do too well and to be too effusive and glowing about your performance. That business will absolutely bounce back exceptionally strongly. We've had some great customer wins for when these customers reopen. There's a very high level of morale in the staff, notwithstanding the fact that roughly 50% of our staff are on furlough. We've taken the remedial action necessary in the fresh business.
We've pulled out a whole lot of cost. We've extracted synergies between the two businesses whilst not losing the sales focus and the USP of our fresh business. We are a fresh business and we're a food service business. Behind the scenes, there is a combination and a sharing of resource. I think that bodes exceptionally well for the future. I think the U.K. is well primed for some good growth. Europe. Yeah. Generally, those businesses have held up as good as can be expected. Spain is our problem child. We have had a management change, which we've spoken about. That happened in about July, I think July or August. We're very happy with our new management, and as soon as some of their customers reopen, we have no doubt that we'll start seeing the necessary sales to pull that business through.
There are components of the Spanish business that were great, remain great, and will continue to be great. Portugal, we've separated from Spain. We believe that our Portuguese business has enough momentum, strength, and scale to stand on its own, and we'll be investing further in Portugal and expanding that footprint. Germany as well is a work in progress. A lot of the hard stuff's been done, and we're not gonna see it until some type of sales normality resumes. Through our more developed businesses, for the six months, we were profitable in all of them, which is quite an achievement, other than Spain and Germany. I think it was Spain and Germany. The Dutch business remained profitable. The Belgian business is profitable. Not hugely profitable, but notwithstanding the fact that there's a crisis going on.
The guys have managed to adapt and right-size the business accordingly, greatly assisted by government help on the employee side. A lot of you are asking questions quite rightly about this government assistance, but in my opinion, it's sort of a zero-sum game. Governments, yes, they're assisting you, but you're passing that straight on to employees to keep them employed. If governments weren't assisting, you'd obviously have to take a different decision with regards to the livelihood and the future of employment opportunities within the group. It's not something that just goes on top of. It enables you to keep your staffing levels at a reasonable level, and the money comes in and flows basically straight out to staff to keep them employed and engaged. Our Czech business, Czech and Slovak business, held up reasonably well.
They do have a retail component where we do sell things like ice cream and value-added foods and seafood and fish and meat and game and all other types of things. They held up reasonably well, notwithstanding the fact that at one stage, Czech was leading the world rankings in the number of COVID cases. Went into quite a strict shutdown. We also did have a fire in, I think it was November or December, in one of our processing plants in Kralupy, which is Prague. Fortunately, we were only operating at reduced capacity because of COVID, and we were able to move the production to other facilities relatively quickly within a day or two. We actually didn't experience any great business loss. Obviously, there was a loss of property. Fortunately, there were no lives lost, there were no injuries, and the rebuilding process has happened.
It was a significant fire, but fortunately, the damage was relatively limited and the fallout was relatively small. Poland, we had the most fantastic few months in, I think it was about July to October. Absolutely an all-time high, followed by a lockdown. We know what happens next, but gives us great confidence in where that business is heading. The Baltics, they've soldiered through it. We've got a very solid small business there now, so that's fantastic. Italy, we're profitable. Not hugely profitable, I must say. Italy was also in the eye of the storm for a long, long period. Summer was good, followed by a series of lockdowns. We have no doubt that we're seeing a lot of stress in our competitors, particularly the smaller competitors in Italy, which will be good for us in the shorter and medium term.
I think that covers off the European segment. Emerging markets is obviously a collection of multiple businesses. You've got China in there. That's done very well. Hong Kong have done very well under the circumstances, bearing in mind that Hong Kong have operated with social restrictions for almost the entire period. There was quite a strict lockdown. I think November, December, they were in a relatively stringent form of lockdown. Macau has been basically closed. They've just closed the casinos. There was just no one traveling there. Macau has a population in total of 500,000 people. The whole industry is based on tourism from mainland China predominantly, which was absolutely cut off. They're slowly starting to bring that back to life. We're seeing that in our business, which is now kicking back to life in the last few weeks.
South America. I'm very, very enthused about what's gonna happen in South America. We picked up significant new lines of business in all our three geographies, in Chile, in Brazil, and in Argentina. They're a very entrepreneurial, creative bunch of guys. They've seen an opportunity and they've developed new markets and new product ranges that I think is gonna bode exceptionally well. South Africa has also been a bit of a mixed bag. Two out of the three businesses have performed well, which is Crown Food Group and the bakery business, primarily because they sell into more the retail channel than the foodservice channel. They've done very, very well. Crown Foods, in particular, have done fantastically. For all of you in South Africa, I encourage you to go buy some of the Six Gun Grill. They tell me it's the best thing since sliced bread.
Please make sure you all go stock up on it, and then make sure you use a lot of it. The Bidfood business in South Africa has struggled with the alcohol bans, with the lockdown restrictions, with everything else. The mix of their business changed quite dramatically as well, which has had an impact on margins disproportionately, I guess, to anything else we've seen anywhere around the world. It's a temporary issue as to where the mix of business is and how they've tried to counteract that, developing new channels, which has come at a cost of margin. We do believe that's short-term and will correct itself as soon as you get some type of normality back in the market. Overall, obviously, I'm disappointed that we are 46% down, but I can't really say I'm disappointed. I'm thrilled with what the team have done.
I'm thrilled with the performance, the resilience, the cash generation, the fact that we are profitable. The fact that we are in such a strong position, just waiting for circumstances to change. We've really got a great team of people. Most of us have been together for 10, 15, 20 years, which I think has been an integral part of our success through this difficult time. I remain totally enthused about what the future looks like. Just a couple of other points I want to make, which might cut off some of the questions. We do get some questioning about why we don't cut further in our expense base. Our expense base is about 65% payroll, and people are our most important asset.
We could take a very short-term, short-sighted, naive view of drastically reducing our headcount to save some short-term cost, which basically means we wouldn't have a business when it comes back. When it comes back, it comes back within a day, within a week, and you need to be ready and waiting. That's very short-sighted to panic, get rid of staff and wait until the good times roll again before you start hiring. There are a few issues regarding that. Firstly, many of our staff are very sought-after commodities in this environment. The retail environment is doing very well. The logistics environment supporting e-commerce is doing very well. Our people are very competent, capable, well-trained people who are fair game for those industries to try and poach. It's very important for us to keep our staff engaged, enthused, motivated, and retained.
That answers the question as to why we're not cutting the base further. It will bounce back. It will bounce back at almost 100% relatively quickly, and we need to be ready and waiting for that. The other question is: Why haven't we made heaps of acquisitions? It's a great theoretical debate to have that says a lot of your competitors are in trouble, and we do believe a lot of our competitors are in trouble, but there's a lot of life support going on at the moment. Banks are very, very generous, governments are very generous, and no owner who can see this through is gonna absolutely panic and give his business away because of a short-term set of circumstances. They have a longer-term view. They have the ability to ride it out, nobody's falling over themselves to get rid of their business for nothing.
These things are gonna take time. We've got to wait for the bounce back. You've got to wait for things to get back to normal. You've got to wait for banks to get back to normal, for government support to get back to normal, I think, before deal flow is gonna start happening effectively again. There will be opportunity, there's absolutely no doubt. It's very, very difficult to do a deal in these circumstances because you don't have motivated vendors, and it's also very difficult to get around and kick tires and actually do any type of due diligence, particularly when you look at Europe, for example, where you can't travel. Even in Australia, we're looking at doing a few deals, but up until recently, I couldn't even get to Perth if I wanted to.
Even internally in those countries that are doing well, we still have borders and limitations of what we can do. I think I've rambled on enough. Once again, I do just want to thank the team. I think it's superlative results. Without looking at the numbers, the underlying contribution has been fantastic. I want to thank all of them. I'm gonna hand over to David Cleasby, our CFO, who'll take you through some of the absolute numbers, and then we'll have a Q&A session afterwards. I'm not entirely sure how you're gonna get your Qs to Ashley. I think there's a methodology that you can submit them to her via a messaging system on the webinar. If not, we'll find out during what David speaks about. I'm gonna hand over to David. Thank you.
Thanks, Bernard. Morning to everyone. I will go through the numbers. Otherwise, I've got nothing to do. As I start all these presentations, just to reiterate the numbers, I have been prepared in terms of IFRS, and using the same accounting policies as we normally do or have done. There are no real new material standards that have been introduced in this period and likely for the full year. Bernard, just to reiterate, certainly my thanks, and particularly to the finance people around the world that compile the numbers. Obviously, the teams that generate the numbers, but it's like everyone, it's a tough time in terms of doing all this stuff, working remotely and the like. Just my thanks to everyone, particularly our corporate office team. We're still in the midst of a pandemic, as you've heard from Bernard, and there's still a reasonable amount of uncertainty around.
We've retained what I would call our conservatism in terms of the way we've prepared the numbers. I'll give you some sort of sense of that as we go through them, but I would refer these as clean numbers, if I can put it that way. If we go to the highlights. Overall, from a financial perspective, certainly a very good performance supported by strong cash flows. Revenue was down 10.9%. Constant currency revenues, 21.9% down. Gross margins held up relatively well, other than in two areas, which I'll deal with a little bit later. Free cash flow, one of the highlights, certainly of the period, of ZAR 2.7 billion, which is about ZAR 1.8 billion, better than the comparative period. We've given you a number here of what one would call the pandemic era free cash flows of nearly GBP 160 million.
That excludes the dividend that we paid in March and excludes the benefit of the two property sales that Bernard has spoken about. Very good free cash flows from effectively the beginning of February of last year to the end of January this year. Working capital, also good performance, better by eight days. That's on average, so it is relative to the level of trading that we're seeing in the various jurisdictions. Great performance there. Our receivables provisioning percentages have been maintained largely at where they were as at June, and there I refer to our conservatism. Net debt at ZAR 2.6 billion. That's non-IFRS, what I would call real debt. Significantly better than a year ago and also as of June. Bernard's spoken about the impacts of the lockdowns, particularly into Q2 in the Northern Hemisphere. Notwithstanding that Q2 trading was EBITA positive.
Headline earnings down 46%, headline EPS down 46.2%. Bernard's spoken and given you the rationale around the interim dividend, which I guess will be reassessed in August of 2021. In terms of the P&L, I think we've obviously seen a decline in sales. Largely driven, I guess, in the second quarter by the impacts in the Northern Hemisphere. Gross profits have held up reasonably well, slightly down on the comparative period, and impacted, I guess, by two things. Firstly, we've had to liquidate inventories. Typically, what these lockdowns did, and one would know that they come relatively quickly without any warning. That means your market is shut down almost immediately or reduced, and we have to deal with the inventories on that basis. The other thing is there has been some discounting, price discounting into the market to gain some market share and maintain market share.
I think overall, gross profits have held up particularly well. I think on the expenses, Bernard spoke about effectively cutting the fat and not the muscle of a business. We do have a component of fixed costs around about, I guess, 35%. As we've warned that you don't get a linear reduction in costs as you do in revenues. If we look at it on a constant currency basis, revenue was down about 22%, but we managed to reduce costs through the same period of about 17%. I think a great performance by the businesses. There haven't been any real changes, as I said, in the provisioning levels. As I said, it's a relatively clean result. There are no real significant COVID-related costs, and I refer those to receivables, inventory obsolescence, and/or restructuring that I think we categorized when the June result.
Interest is down. Well, overall it's up, but I think if you strip out the FX and the imputed interest on the DAC put option, it's down around about 22%. We are seeing the benefit of better asset management and the strong free cash flows, despite the lower profitability that has been generated. We've got some capital profits of about ZAR 192 odd million. That really is a combination of the profits on the sale and lease backs, which Bernard spoke to, offset by some impairments, both to PPE. Some of that related to the fire that we had in Kralupy in Czech Republic, as well as some intangibles, which is really software, I guess end of life, that we've taken the decision to impair. The tax rate is up a little bit.
We've, for some time, guided at around 25% on a normalized basis. I think the only thing that has changed here is the Australasian contribution to the overall mix has gone up. Australia and New Zealand both have higher tax rates, and that's really the only reason for that having increased. In terms of the cash flows, going on to the next slide. As we've spoken about, excellent free cash flows. I think really just two things to note. Firstly, the working capital. We generated half a billion of working capital this period versus ZAR 200 million absorption in the comparison period. The net average working capital days of six days, which declined by eight from a year ago. I think a very, very good job done by the businesses.
If we look at, and it's a measure we do measure the businesses by to see where our working capital is normalized, we're running at net working capital as a percentage of annualized revenue of about 3.1%. We normally track under normal circumstances between 4% and 5%. The businesses have done a great job in terms of pulling that back. I think just to warn that as life returns to whatever the new normal is, and we do see markets reopening, we do expect there to be some absorption and that working capital percentage to go back up to where the normal levels are. In terms of the investments, investing activities, we see a cash inflow of about ZAR 400 million. That's largely driven by the proceeds on the sale of leaseback of the two properties. Bernard's spoken about the methodology and the reasoning for doing that.
It's not a wholesale sale of properties that we're doing across the businesses. It really is taking advantage of, from our perspective, end of useful life. That's really been the CapEx to a large extent is lower. If you look at the percentages, it's about 1.2x depreciation and amortization. Normally, we've been around 1.5x- 1.6x . If you look at it as a percentage of revenue, that's sitting at about 1.6%. You'll recall that we have been tracking at somewhere between 2%- 2.4% of revenue over the last few years. It is down, it's under control. As the regions open up, and particularly Australasia, we are planning and investments are already underway in that region. Cash and cash equivalents of ZAR 7 billion versus ZAR 5.3 billion in the prior year.
Just really tracking, I guess, the COVID era cash flow evolution from the group. You can see how we've performed relative to the previous year. Granted, there isn't a dividend in there, but when I was talking about the free cash flow, we did also exclude the benefit of the property sales. You can see that the group has managed through the crisis particularly well, and we're very proud of the way the cash flow has evolved. I think that's testament to our management teams around the world. In terms of financial position, don't really want to dwell on it. The group is in a strong position in terms of solvency. All our ratios are basically much better than they were a year ago. In many cases, better than they were at June.
The balance sheet is in a very healthy position. In terms of the guidance, I guess, looking forward, certainly, we are going to see a bounce back in the U.K. and European sales. I guess it's only a case of when restrictions are eased and, as Bernard said, we've seen some light starting to shine in terms of a roadmap in the U.K., and I'm sure Europe won't be too far behind that. The financial base we've got is absolutely supportive of the business recovery, and growth, as and when it returns in the various jurisdictions. We're cash generative and we've been profitable, healthily profitable through H1. We're confident that that will continue into H2, maybe not in the first quarter as much as certainly the second quarter. Our debt to equity is low at 9% compared to about 19% in the prior period.
As I've spoken, we do anticipate a bit of working capital absorption. A little bit difficult to say because that's really dependent on market recovery and when they open. We are managing the liquidity of the group well. We do have some short-term debt maturing, and we're working on turning that out into term facilities, obviously, market conditions and pricing being dependent. The strength of the business is what it is. We are decentralized, and I think that's given us the wherewithal to really operate and see through this crisis particularly positively. CapEx, I've sort of spoken about. No real change in terms of our philosophies and how we manage the group. Forecasting risk remains high, obviously due to ongoing uncertainty. We believe we are conservative in terms of the way we're looking at the risk going forward, and certainly is our best estimate as we sit here today.
Currency volatility will continue to be a feature. It's always going to be a feature if we're reporting in ZAR, but we do manage the businesses in their home currencies. We do give you a sense of constant currency trading, so you can make sense of the numbers. Largely, our international shareholder base is stable. Hasn't really gone up and down. There's obviously some rotation within that, but has been stable for some time. We're not providing any growth projections until we've got more visibility on the extent of the recovery, particularly in the northern hemisphere. On that, I don't really have anything further to add. If I can hand back to Bernard and we can take some questions. Bernard, you're on mute.
Thank you. I didn't put me on mute, so I'm not sure how that happened. Okay, I've got some questions here. Please excuse me if I get your name slightly wrong. If you do have questions, please type them in, send them to Ashley. Ashley will send them to me. Here we go. From Rowan Goeller: "Please could you talk about whether consolidation is happening in the global food service sector? Have competitors closed? Are there opportunities in new geographies?" Like I said, we're not really seeing anything happening in the M&A space. We're not seeing the consolidation. Most people are on life support and in a state of suspended animation. We're not really seeing too much happen. There will be some activity happening in the future.
In terms of opportunities in new geographies, we have looked at one or two, but when you can't get on an airplane and meet people, firstly, you're not gonna get a vendor who's gonna sell to you over a Zoom call unless they're really desperate. In a new geography, we wouldn't take on a business unless we were very comfortable with the people we were acquiring on the other side. Yeah, we're just gonna have to be patient for those opportunities. The next question is from Warren Riley: "Can you comment on food inflation across your markets? Are you expecting food inflations once markets completely reopen?" There's a lot of talk about inflation. We're not really seeing it in the food space other than on some commodities like we always have, that are impacted by weather and climatic issues.
What we are seeing is there is a dislocation in shipping markets at the moment. Shipping freight rates are very high, which is obviously being passed through on product price. Hopefully, that will normalize over a period of time. In pure price inflation, we are not really seeing it. We do believe that there most probably will be more of a likelihood of there being some type of food inflation as opposed to deflation. As we have always said, as long as that is on a manageable number in the low single- digits, that is positive for our business. We are not really seeing anything of consequence across the world at this point in time. That is Warren. Another one from Rowan. "Have dark kitchens established given the lockdowns? If so, is this a permanent switch? What could it mean for you?"
For us, it means another customer. Basically, all a dark kitchen is it's a restaurant without a front and with no tables or chairs. You still got a kitchen with somebody cooking food and making burgers and pizzas, et cetera. We are working with numerous dark kitchen operators who generally are restaurateurs anyway. They're shutting down some restaurants temporarily. They're opening dark kitchens. It's just an alternative customer source for us. We don't see it any different to any others. Although they say that dark kitchens maybe are owned by Deliveroo or Uber Eats or Delivery Hero or DoorDash or whoever it might be, generally, they're only fronting them and somebody else is actually operating the kitchen, and doing the work. Ordering the food, making the pizzas, and then using the Uber platform, Deliveroo, whatever it might be, to deliver the food.
Is it permanent? I would say it absolutely is permanent. Is it gonna carry on growing at the way it's growing? I don't think so. I think people are gonna go back to wanting social interaction, as opposed to staying home. I think most of us have had enough of staying at home for four months at a time. I think they are permanent, but I don't think it's going to take the place of a restaurant type of experience. I've got a question from Paul Steegers, which I think has been repeated by a number of people. "Could you quantify the positive impact from government support to trading profit in the first half?" David will quantify the number. I actually don't know what the number is. Like I say, it's a bit of a red herring because most of the government support is there to support wages.
It comes in and it gets passed through to employees by and large. We're not luxuriating in money being thrown on us by governments just because they feel bad for us that our industry's been hit. Almost all of the government assistance is there to maintain jobs, so that when things come back to normal, the jobs can be maintained. David will quantify it, but I just think it's incorrect if you say our profits have been inflated by that number. All that happens is we haven't reduced our wages by a similar number, and maybe have had to incur a one-off redundancy cost in making these people redundant because we didn't need the services, and there was no government support for it. That's a philosophical debate, but David will happily give you that number. We're absolutely firmly of the view it's applied through by and large.
Okay, I've got some questions here from Monira Cava. "Can you give us some detail around the type of restrictions, if any, on restaurants in markets like Australia which is now open, i.e., are there laws around things like reduced number of diners, et cetera?" The second question, price discounts to customers. Do you expect these lower prices to remain, or will it be clawed back when the environment settles? In other words, are these discounts almost one-off COVID concessions? Firstly, on the restrictions, these things change by the day. Yes, there are restrictions. If we look at Australia, each state has its own set of restrictions. Generally, there's a square meter rule, which generally means that restaurants are operating at less than full capacity.
In New South Wales at the moment, until I think last Friday, we were operating at one patron per four square meters. That's now gone to one patron per two square meters. That effectively works out at four square meters. Generally, it's worked out at about 50% capacity. At two square meters, they're getting back to 60%, 70% capacity. There's also a limit on the total number of people that you can have. Like I say, New Zealand is slightly different. I think other than Auckland, which is back in a more restrictive environment, the rest of New Zealand is more open. China has no restrictions, as I understand. Even in a place like Australia, there are restrictions on weddings. There's restrictions on what they call vertical consumption, which basically means standing up and drinking. You can't partake in vertical consumption in certain states.
There's no dancing. Nightclubs aren't open. Notwithstanding all these negatives, and I'm just going through it to give you an idea of the negatives that the market is still experiencing, our market's holding up exceptionally well. People make a plan, and there's lots of opportunity out there, and our sales are tracking at the levels they were a year ago, if not in excess of it. Yeah, that's a positive in that. On the price discounts to customers, overall, our margins actually haven't declined by all that much. I guess what we are seeing is a lot of customers have a lot of time on their hands at the moment, because they unfortunately aren't operating their restaurant. They're looking at every cost they can, and they're inviting suppliers to retender, looking at alternatives, how to procure cheaper, what the alternatives would be.
That's both a benefit and a negative. We're picking up some business on that basis. Likewise, maybe we're losing a little bit of money, losing a little bit of margin, and maybe losing one or two customers. I think we're a net beneficiary of that because we have maintained our staffing levels. We have kept our salespeople on. We have kept the people active and busy as opposed to just running for the hills and from the costs. Yeah, I think your summation of it as a COVID concession is hopefully correct, although it's fair to say there hasn't been a material impact on our overall margins. Belinda van Staden asked the question on government support again. It's the same question. Yes, we do believe it's a wash through, but David will provide that number. From Nick Webster. What took you so long, Nick?
On the resumption of the dividend, you mentioned it would be in line with normal cover. Just to clarify, if resumed in August, it would include a catch-up on the interim not being paid now? That's question number one. Are you concerned about any permanent demand erosion as a result of working from home practices in particular, but also larger events such as conferences and prolonged weakness in travel and tourism globally? Okay, firstly on the dividend, I'm not a fortune teller, nor is anybody else. If tomorrow the vaccine worked and everybody was happy and all our staff came back from furlough and business bounced back and everything was hunky dory in August, at this point in time, looking at it, what we know now, our dividend would be at the normal payout ratio on the full year's profit.
We wouldn't just look at the second six months profit, we'd look at the full year's profit. It's obviously too soon to tell that. That's certainly our intention. We understand the importance of a dividend. We haven't changed our policy, and it's purely just an inappropriateness of paying a dividend at this point in time. Are we concerned about any permanent demand erosion? We actually aren't. Maybe we're naive. I believe things are going to bounce back relatively normal. There's work from home. I'm most probably in the minority, but a lot of people don't like working from home. You actually can't build a culture over a Zoom conference. There will be, I think, far more flexibility. This work from home isn't going to be work from home.
After working from home for four months, the last thing people want to do is actually work from home. There is going to be a resumption of some type of normality. Sporting events will come back again. If we look in New Zealand, stadiums are back sort of to normal capacity. In Australia, before we had some cases in December, we had stadiums that were almost full, almost back to normal capacity. Yeah, I think we're creatures of habit, and we're going to bounce back to our normal habits as soon as we have some confidence and safety that things are safe to do so. Like I say, I'm no fortune teller and I'm no epidemiologist. From Anthony Geard: "Can you quantify the extent of the furlough-
which cushioned trading profit margin across the regions? I say, I'm not so sure that that wording is correct, but that's okay. David will provide that number. I'm getting there. I'm getting there. There are a lot of questions. Sorry, I'm just a little bit lost here. Let's carry on. How much This is from Paul Steegers. I don't understand the question. How much do you think MIC has benefited your gross margin in 1H, given lower revenue from large, lower margin contracts? I'm not sure I understand that. How much do you think MIC Maybe if you could resend that question. From James Twyman. Cost savings were 17% down. How much of this do you think is sustainable when volumes recover? Emerging markets sales fell 5% in the period, up sharply by year-end.
Can you talk about some sort of scale improvement we are seeing versus pre-COVID? Thanks. There will be an element of cost saving as we go forward because there certainly have been some efficiencies that we've identified in our businesses. That's even in the businesses that are back to normal levels of operation. That's not going to be as marked as that. Bear in mind, our margins were relatively good. There will be points of percentages of margin improvement due to efficiency gains, from being forced to think differently and out the box about how we do things. Anonymous attendee: To what degree have government support schemes allowed you to retain people? In other words, what percent of the staff base might have had to have been cut off if you did not receive said government support?
I actually can't answer that question because in many countries we've had absolutely zero government support. In some countries it's been very admirable, like in the U.K., to a degree, Belgium, Holland, and some others, which I'm not really too sure of. I actually can't give you a number on that. It is fair to say that a number of countries has been absolutely zero from government. Belinda van Staden. Can you please comment on the percentage split between different client business types compared with normal? For example, hotels, eventing, restaurants, workplace catering institutions, et cetera. Yeah. There is a slight swing. Like I say, cruise ship business is zero. Airline catering is almost zero. Hotels are picking up. Once again, hotels is split. What you find is CBD hotels that are catered to international travel aren't doing all that great.
Those in more regional type of areas are doing absolutely phenomenally from staycations and the like. Yeah, there's been a slight shift. Also, this work from home issue has resulted in CBD volumes being down, but it's been reflected by an uptick in suburban volumes. You've got coffee shops in suburbia doing exceptionally well at the expense of the city. What we are seeing in many places, and we saw in China, we see it in New Zealand, we see it in Australia, is the CBDs are coming back to life very quickly. People are learning to catch elevators again, and they're learning to navigate lobbies, and things are returning relatively simply, and relatively quickly. We got Sharma. Some gross margin sacrifice to gain market share. Is competition aggressive on pricing to gain some market share? What is the state of competitive pressures?
I think we've spoken about that. With our customer base being relatively unengaged with actually making food at the moment in many geographies, they're more concerned about back of house stuff. Like I say, we haven't seen a huge impact overall. I believe we're a net beneficiary. In some markets, we've got some great contracts waiting to kick off, as restaurants and venues can reopen. I don't see that there's a fundamental shift. We are in a very strong position, and we're not seeing the competitive pressure being ridiculously stupid. We actually aren't seeing our competitors doing really stupid things out there. It's just normal competition. I know you don't report Q1 and Q2, could you give us a split for the 392 HEPS number, i.e., 100% zero or 50/50? I don't know if David can do that. It's not 100.
Yeah. It's about 2/3 Q1, 1/3 Q2.
Okay. I think it's fair to say that December is an important month for the group because of the impact of Christmas. There wasn't a Christmas this year in the Northern Hemisphere U.K. They were in absolute strict lockdowns. I think in the U.K., they canceled Christmas, and I don't think you were allowed anybody in your home. Obviously, that had a marked impact. Another one from Belinda. How are you altering, freshening up your national client approach in Australasia? Is this the reason for market share gain and margin improvement in the region, despite the economy not being back to normal? That's an Australia-specific comment. We had a change in the team and a change in the direction. We've taken some learnings from the U.K., where they've done a fantastic job in managing their national accounts portfolio. We've taken from their learnings.
We've implemented here with a new team. A refreshed team, an invigorated team. More people in the team than we had before. They're doing absolutely phenomenally. They're scoring the wins. There's a whole lot on the cards that's going live in the next while. We're still in the process of weeding out some business that we've got historically that maybe doesn't belong with us, and would be better serviced by somebody else. That's a process. That's all just part of getting the balance right, and getting the right mix of customers. Our national accounts team, basically, we're learning from great experience elsewhere in the world, applying it here, and that's one of the benefits of being a multinational group. There you go.
Are you comfortable with your sourcing and/or supply chains from your local and international suppliers in the event of a stronger than expected recovery?" You know what they say, if only we have such a big problem. Our supply chains, we do have confidence. We are stocked up. We are relatively ready. Fortunately, a very small proportion of our portfolio of product is short life. The bulk of it has a reasonable life on it. We've still got inventory in our warehouses, in our freezers, in our fridges, et cetera. We do only keep, I don't know what the number is now, 20 days worth of inventory. We are used to replenishing at a very, very quick rate. Like I said, there's also been a move towards local as opposed to global. There's a little bit more insularism in people and self-dependency happening.
We absolutely do have confidence that we'll have product for our customers. In China, where we've seen very strong demand, we've been able to keep up with it. It hasn't been easy, and China's been very difficult to import food into because I think there's this theory in China that the virus came in on frozen food somewhere. It's quite a process importing food into China. Notwithstanding that, we navigate that and our volumes have held up. I've got one here from Kunal Kalan at Risk Insights. We've been tracking your company's performance in terms of ESG factors.
How much of a priority did Bidcorp place on environmental issues during 2021 reporting period, particularly with regard to sourcing and using low carbon sustainable package and climate change-oriented products to reduce carbon footprint?" That's an excellent question, and it is something that we are acutely aware of, and it is something that we take very seriously through the whole business. We are a user of energy. Let's be realistic about it. We operate big warehouses. We operate large refrigeration capability. We operate large fleets of trucks moving things around. Therefore, our emissions are relatively large and our CapEx investments are very much focused on reducing that, which is a twofold approach. Absolutely, it's going to reduce our emissions, but also reduces our cost. Our solar initiatives are relatively large.
Our initiatives in low emission refrigeration, in efficient refrigeration is very high, both on trucks and in warehouses, particularly warehouses. In trucks, we are running electric trucks in various different phases of experimentation. They aren't yet where they need to be. We are actively and right at the forefront of developing a fleet that has the right credentials. We're playing around with some gas-type trucks as well, obviously electric is a far greater prize at the end of the day, if you can actually get a truck with enough range and enough payload. We are working on that, and hopefully that will accelerate as time goes on.
As regards to the product portfolio we sell, each country is in a different stage of development, but it is something we look at in terms of recyclables, compostables, and that extends through to sustainability of fishing, of farming methods, et cetera. That's on a country-by-country basis. Obviously, it gets priority as a group and different countries are at different levels with that. Once again, from a global point of view, you know that whether, for example, the Dutch or the U.K. are heading is where lots of other countries are gonna head in the next two years or five years. We actually can see what the future path looks like, and we can get ahead of the curve. That's something that we do take on board.
It's pleasing to note that our emissions have reduced quite substantially in the six months, some of that, unfortunately, is due to lower levels of activity. I believe the core emissions have reduced because of the investments we've made and the attention we have placed on the importance of reducing our footprint. Sorry, I'm just getting very confused here with all these questions. We'll get there. Don't worry. Okay. "Was there any gross margin benefit from mix given less revenue from lower margin contracts in 1H?" I can't really answer that question. Margins in the first quarter were relatively stable. The bounce back happened sort of across most customer categories. Generally, as a business, we have far fewer low margin, high revenue contracts than we used to historically. I don't think there's as much of an impact.
Please, can you talk about what you're seeing in terms of product mix changes, if any, across regions? Example, fresh, chilled, ambient, et cetera, and implications for margins. Yeah. It's actually quite interesting because what you are seeing is customers are looking for more generic product. I think they understand the uncertainty of the environment and the fact that shutdowns can come at any point in time. They're looking for product that's maybe got a little bit more life, that's got a little bit more alternative uses, as opposed to the ultra-bespoke, ultra-specialized product, which we think we've been a net beneficiary of. We obviously can't quantify it, but there definitely is a move towards more of the middle of the road at this point in time as opposed to this ultra-bespoke.
There's also a move away from very short life chilled a more generic type chilled in terms of getting a longer life on it and reducing the amount of wastage. Kristen Collins: You have taken large COVID provisions at June 2020 and have not taken any additional provision in the half year. Have conditions so far played out better or worse than your initial expectations? They played out better. As I said, our debtors' book is in reasonably good position. However, we don't know what the longer-term impacts are going to be, particularly in the northern hemisphere. Customers generally do what they can to pay. They might be on payment plans, but they're absolutely sticking to those payment plans. Once again, because I think there's a large degree of banking support in the system, and in many geographies, there's government support.
It's absolutely been better than we thought, and that's why we haven't increased the provisioning at December. Another one from Belinda: "How much will you spend on IT, e.g., ERP internally or acquisitions of applications to offer a greater variety of services to your customers, e.g. Eat Club and SmartQ acquisitions by Compass Group?" We've had a view for a long time that we're best served by developing our own IP internally, and we continue to do so. It doesn't come at a huge cost to the group because we do it internally. We've got a team of about 40 to 50 developers working primarily in New Zealand, but across the world, developing applications across ERP, across CRM, pricing models, customer ordering models, et cetera, and we've been doing it for a long time.
We don't like talking too much about it because we believe it's a competitive advantage. Many, many years ago, we went down this technology path. We went down e-commerce. We went down electronic ordering, which was all whizzbang at the time, which is now pretty normal. We are pretty far advanced in our application of data analytics of AI, of technology in warehouses, et cetera. Like I say, we don't want to talk too much about it because it's a competitive advantage, and our advantage is being able to take the best of the best in any geography and develop it for the rest of the world and share it relatively cost-effectively. How much do we spend? We don't spend swillions. We spend a few millions. Yes, we are spending millions of dollars, not rands, each year.
It might be a 10 of million or a few tens of millions, but it wouldn't be more than that. We certainly see the best ideas of what's out there in the world and find the best way of us developing that internally for our own bespoke use. Can you talk about the envisioned investment plans when normality returns, e.g., does your metro strategy remain relevant in a post-COVID WFH type world? Absolutely. If you look at e-commerce businesses now, they're talking about last mile and the criticality of having last mile locations and how important that is. I think if you go back about five years ago, we spoke about that. That's been absolutely part of our strategy and will continue to be part of our strategy.
It's obviously more difficult when you're competing against these large logistics companies who've got much deeper pockets than us, are sitting on much more cash, and have much lower yield expectations than we do in terms of what a property return looks like. The environment actually might be that it's cheaper for us to lease property than it is to buy and own. With yields now at 4% or 5% in many countries in the world, it just might be opportune to not be an owner in certain jurisdictions and actually be a tenant. We'll have a look at that. I think we've got to guide you back to, in a normal world, our CapEx is going to go back to what it was, 1%, 1.5%, 2% of revenue, depending on the time of the cycle and what the opportunities are.
Robyn Grueller: Are your house brands helping with supply chain issues? What percentage do you have now on average, and has this increased over the past year?" It's absolutely increased over the past year because customers have become probably more accepting of a house brand that gives them a value advantage. We have seen an uptick in house brand. It's also fair to say that a lot of the major brands operate in both foodservice and retail, and what they saw was an absolute boom happening in retail. What they did is they put all their resources into retail to support retail and basically wrote foodservice off as dead, which gave a great opportunity for us and our competitors to enhance our house brand strategy. That's absolutely happened over a period of time.
They are now coming back because retail, I think if you look at retailers in places like Australia and New Zealand, are starting to acknowledge that they've had their boom year and that the next boom is going to be the out-of-home market again. That consumption is going to move back to out of the home. I have no doubt that the suppliers will try and get back some of that market share. Yes, our house brand strategy has worked and has been enhanced. I can't give you what the percentages are because it's difficult to measure on a country-by-country basis, but it is up a little bit. I'm just trying to see. Wow. You guys got a lot of questions today.
On the gaining of new clients, customers, is that as a result of your competitors not renewing contracts with their customers, with Bidcorp assuming those contracts, or is it a result of new products introduced in the market? All or none of the above. We've been very-Active in the market with customers. Like I said, they've had a lot of time on their hands to look at what they were doing. To a large degree, our offering has been on trend, on point, and we think we've been a beneficiary. Maybe our competitors would say the same thing, I don't know. We definitely feel we are on the gaining side of market share. It's not about pricing. We're very conscious that it needs to be a win-win for both sides.
You might give them slightly different products, ties into the house brand strategy, it ties into the stock availability issue. It's a multiple issue. I don't know if there's any others. Ashley, help me. I think that's it. If anybody's got a question.
Bernard, that's all of the questions that we've had through the Q&A. I don't see any other questions, and there are no hands raised. I think that must be it.
Well, that was a lot of questions. Thank you. I hope I answered them. I know that the big unanswered question for you all is how much the government support is. Our view remains that it's primarily a wash through. We'll give you a number, but that doesn't mean that the profits are supported by that number, because it's just a contra on the payroll side. In conclusion, thank you, everybody. I certainly hope to be talking to you in August about looking in the rearview mirror on how horrible the crisis was. In the meantime, we've still got some difficulties to navigate. I'm very comfortable with our team. I think they've done a fantastic job once again.
I don't know if I've thanked them enough, but I certainly need to, because they're the guys who are out there every single day fighting the battle, doing it exceptionally well, looking after your interests. I think they've done that remarkably well. Everybody, stay safe. This thing isn't over yet. Stay strong, and we'll talk to you again, I guess, in May and give you a bit of an update. Like I say, hopefully, that will be more realistically upbeat and positive. Thank you very much for your support, for your interest, for your questions, and have a good day. Thank you