Good morning. Good evening, everybody. Thanks for joining the Bidcorp results for the half year ended December 31, 2025. I'm Bernard Berson, the CEO of Bidcorp. Joining me will be David Cleasby, our CFO. I promise to make this shorter than Donald Trump's State of the Union Address a little bit earlier, and I promise I'm not gonna award myself any Bidcorp medals of honor, although I definitely deserve quite a few. I definitely do. Let's get straight into these results. I'll just take you through the high level of them. David will then take you through the financial detail. I'll come back and talk a little bit about the past 10 years. 2016 marks 10 years since the unbundling of Bidcorp from Bidvest. We'll talk a little bit about the outlook.
Q&A, which will be the normal format, so please send your questions in through the normal mechanism, and we'll get to those at the end. Hopefully we can wrap up, and I can go have my dinner. Let's go straight into it. You know who Bidcorp is. If you don't know who Bidcorp is, you're probably on the wrong call. We are a global foodservice business. We like to update the market on a regular basis, so you know as much about the business as possible.
Our last update was towards the end of November, so we really are just filling in only a few gaps over here, which I find very interesting that, yeah, we're only filling in a few, a few months' worth of differential, yet there's still some commentary that we overachieved on certain things and underachieved on certain things. I think there's way too much micro-analysis that goes on over a very short period of time. What I would like to stress, particularly later when we look at the 10 years, is this is a marathon, it's not a sprint. And sometimes you can't look at the results just in the isolation of the last three months since our last update, or even of six months. You need to take a longer view on certain things.
It's about the longer-term trajectory, not necessarily what transpired in six months. However, we're very happy with the performance of our business over six months. I'm not trying to make any excuses. I think we've performed exceptionally well in a pretty tough environment. Globally, in the markets we operate, it's certainly not strong. Economic activity isn't strong. There's a lot of uncertainty. A lot of the jurisdictions, and we can go through them individually in a while, are negative, not positive. For us to deliver revenue growth of 7.1% in rand, which is 6% in constant currency, I think is a very solid result. Bearing in mind, food inflation is maybe 1%-2% of that 6%.
It is very difficult to get a handle on what inflation actually is across the portfolio of countries and across the basket of product that we sell, which doesn't run the same as published inflation numbers. We're very happy that we are seeing real growth in an environment that we don't think is growing by much. Constant currency revenue up 6%. Gross margins are relatively stable. There are a few environments where they're a little bit down for certain reasons, competitive reasons, some that they're up, but overall, we've maintained our GP margins. Our trading profit is up over 8% in rands, 7% in constant currency. Once again, we're very happy with that. Trading margin has trended up slightly from 5.3%- 5.4%.
I say slightly, it's 5.4% is probably at world-class levels anyway. Every 10 basis points that you can get out of this are hard-fought. We're not coming off a low base. We're coming off a very well-developed, well-defined, strong historical base. To increase off that base, we are very satisfied with and believe our teams have done a great job to get us there. The result of all of that is we've got HEPS up by 8.5% in rands, which is 7% up in constant currency, which is a little bit better than we indicated in November when we spoke to you. More or less in line with our expectations. Like I say, economic conditions out there aren't favorable.
They're not terrible. I don't think we should over be over negative about them, but they certainly aren't running hot, and yeah, it's, it is just tough going in most in most geographies. Overall, we're very satisfied with these results. Our teams have done a great job around the world. Almost every business has performed well. There are one or two that haven't, for various reasons, and we're happy to talk about those. We are a portfolio of 34, 32 countries, 20 businesses, I believe, over those countries, and obviously, in any period, you're gonna get one or two that don't perform for certain reasons, and one or two that are gonna shoot the lights out for various different reasons. My thanks do go out to the team.
We do have a very stable management team, which I believe is part of our success. It's a team who have bought into our strategy, who are all firmly aligned with the path that we're on, who understand what our offering is, and we've stuck to the path. We've elaborated the path that we're on, and that's what we're doing, and I think the teams have delivered upon that and executed once again very admirably. My thanks go out to the 31,000 team members around the world, ably led by our very small management team, very tight management team, who once again have done a great job. Thank you to all of those on the call, all those not on the call. It doesn't happen because of me or because of David.
Sometimes it happens despite me and David, and it's very much because of the great team that we have around the world who are passionate and enthused, and have bought, brought into the strategy of how we grow this business. If we move on to the segmental analysis of the business. First up, we have Australasia. Now, you may recall over many years, Australasia was the star performer, and certainly led the charge, and certainly supported the group through many years, and I guess over the last year or two, that's taken a little bit of a breather. For what was our largest segment to be flat, I think under the circumstances, is a remarkable achievement that it hasn't gone backward, bearing in mind some of the conditions out there.
The two businesses have performed very satisfactorily in constant currency. Once again, we look at constant currency. The rand moves as the rand moves. We have no control over that. Revenue between Australia and New Zealand is up 4.5%. We're very happy with that. In that, New Zealand's revenue growth is very minimal, and Australia's revenue growth is approaching about 5%. From a profitability point of view, New Zealand had a very tough start to the year. We've spoken about that. However, we did see conditions there change in about October. We've seen I'm gonna say a strong performance from our New Zealand business, which matches our expectations from about October onwards. Hopefully that trend continues. That's a two-pronged issue. Tourism has returned.
I think the consumer's in a bit of a better place. They've bounced off the bottom. Also we did take some measures when things weren't so great in the business, and we have looked at our margins and who we're selling to, and the pricing we're selling to. You know, do we need to sell to certain customers that, you know, does it just make sense to have those relations? Also, we looked at our cost base and trimmed the cost base down a little bit. The New Zealand business is now looking at a very strong recovery. We're optimistic about that. The Australian business is doing fine. We are seeing revenue growth.
Profitability growth is a little bit slow. When you, once again, when you look at the trend over a number of years, that business is double the size of what it was pre-COVID. It's probably more than double the size of what it was pre-COVID. To maintain that and to wait for the next growth phase is the position we're in in Australia at the moment. I have no doubt that will come. The Australian economy is probably flat at best. It's not terrible, it's not, it's certainly not great out there. What we are seeing in, not only as Australia, but a lot of markets, is the consumer's under pressure, and as a result of that, there's a lot of down trading into the QSR segment.
By design and by choice, we service very little of the QSR segment, so we're not benefiting from that, and we have no regrets about that. As soon as the economy does improve a little bit, we have no doubt the pendulum swings back towards the type of business that we're heavily engaged with and invested in, and we'll see the strong benefits of that. From an Australasian point of view, profitability is basically flat year on year in the six months. We're pretty confident about the look forward, particularly New Zealand, we think will be pretty buoyant, and Australia will follow within six months, maybe a year. Moving across to the United Kingdom, we are seeing sequential improvement there.
I notice sequential is the new, the new buzzword that everybody uses. I'm not actually sure what it means, but we're definitely seeing sequential improvement, with our margins ticking up from 3.4%- 3.5%. Before all of you say: "Oh, wow, only 0.1%, you know, when are you gonna get to 5%? When are you gonna get to 6%?" The answer to that is, we'll get there when we get there. It's really hard going in the U.K. There's very little positive news that comes out of the economy. We don't operate in isolation. We don't operate in a bubble. We're not magicians.
We very much operate in the reality of the market we're in, and I think under the circumstances of the U.K. market, and those of you who cover the other U.K. stocks will understand this, I think our business has performed very, very well. Revenue up 5.8% in constant currency, profitability up almost 10% off a reasonable base last year. Yes, it's not where we want it to be yet, but we are making progress in all the business pillars we do have in the United Kingdom. We are making some progress. We definitely are seeing improvement. Actually, to my point earlier about the QSR channel, the U.K. business is probably the one that we are most heavily skewed towards the QSR channel.
We do have a few of those customers still, so we are getting the benefit of that. Once again, that doesn't overly excite us because long term, that's probably not going to be sustainable. That growth won't be sustainable, and it's not where we want to position our businesses for the long term. Like I say, we don't measure things on a week-to-week basis and make decisions on a week-to-week basis. It's a much longer view. We're happy with where the U.K. is from our business point of view. I'm still hearing lots of very negative news about the U.K. economy, about the consumer, about the sentiment out there. The hospitality industry is really under pressure. We are seeing that in our hospitality type of numbers.
Fortunately, we've got a large non-discretionary type of business as well, with healthcare, aged care, government, education, et cetera. We're very satisfied with the U.K. It is tough going, but we are making progress and seeing improvements. Europe had another great performance, and that's following on from a few years of strong performance. We have a trading margin there almost at 6%, which is wonderful. The question now is how we get that to 7% in a period of time, but it all becomes much more difficult. The low-hanging fruit's been picked, and now it becomes more difficult. We've got a revenue growth of 7.6% in constant currency, trading profit up nearly 12%.
Europe's combination of many different businesses at different stages of development, and it's a microcosm of a portfolio within itself. The Western European, the Benelux businesses, I guess, performed very stably, reliably, gave us good growth, but in reasonable numbers. Spain and Portugal remain work in progress and will remain work in progress for quite a few years. We're still building the base there. We're still getting the foundation correct. We're still looking for suitable acquisition. We're still building the team, and building our regional presence. Those will take time. They're not causing us any stress. They are going the way they need to go. They just haven't scaled up to the extent that we expect them to quite yet. Italy was a stand-out performer, which probably was expected.
We put the investment in the year or two before. We made a few changes, and we're very pleased with the outcome of that, and that business has grown very strongly. The Czech, Slovak, Hungary business continues to perform very well for a mature business, and both top line and bottom line growth. Poland remains a very exciting market for us, with good growth. We are going to have to reinvest in Poland. Many years ago, we spoke about having to grow into our skin. We made that investment, we grew into it, and now it's too tight. Yeah, we've grown to that capacity, plus we're operating at max, and we are going through that investment phase again to expand our presence in Poland.
It's a very strongly performing market, a strongly growing market, and we're very, very enthused about that. The Baltics continue to perform very adequately. Relatively small market. I think the addressable population is only 4 million-5 million, but the business is stable, profitable, and, yeah, is a nice business now, performing the way it should. Emerging markets is a mixed bag. Very difficult to look at the overall numbers, where you have revenue up 4.1% and profitability up 5.2%. Standout performers are South Africa once again. I think we're at about 15% profitability growth in South Africa across the Bidfood business and the Crown business. The bakery business, which is equity accounted, also performed very satisfactorily.
In a not great market, the teams have once again delivered fantastically well, which does create a blueprint for us around the world, that notwithstanding the fact that economies might not be fantastic, there's still opportunities out there to be explored. We don't have dominant market share in any market. We don't sell all products to all customers. There are levers we can pull in all countries, and certainly South Africa shows us how that can be done. South America was very pleasing as well. We're starting to see some good growth come out of that. I think the economies there have generally improved. All three of them, Brazil, Argentina, and Chile, performed relatively well.
Those businesses still aren't at the scale we'd like, we don't know which ones we'll scale up first. Yeah, somewhere like Argentina is a little bit more tricky or contentious than maybe a Chile or a Brazil. Brazil might be more attractive because it's a bigger market. Chile, we've been there longer and have a very established business that's now starting to perform very well. Middle East is going through a little bit of an adjustment phase. There was a large customer that exited Saudi, went to a logistics model. It was great for us to ride the wave with them, we always knew that was gonna come to an end. We are now re-engineering our business to be a more sustainable type model that more closely resembles the UAE market.
In the UAE, we're doing very, very nicely. It's a very stable, strongly performing business. Now we need to get Saudi to that. Turkey remains a very challenging market. We're seeing good revenue growth, but from a macroeconomic point of view, it's tough. You've got very high inflation, you've got very big increases to the cost base, you've got government interference in a lot of things. We have a very small business, and small businesses require investment to get them to scale, and we're still going through that trauma. Moving over to Asia, I'll start with the good. Moving over in Asia, Malaysia's performing very well. We're very enthused about Malaysia and the prospects there.
We did make an acquisition beginning of the financial year, which expanded our portfolio into ambient products, moving a little bit away from premium chilled and frozen, to broaden the range, broaden the customer base, and, you know, change the nature of the business to be a more broad-line foodservice distributor. That performed very well, we're very enthused about that. Singapore remains a work in progress. We are making progress. There's still some restructuring going on. The business is performing satisfactorily, but not to its potential, and that will take another year or two or three. Singapore, as a country, I think is probably struggling a little bit. I think they've lost a little bit of that tourism stopover, airline hub type of business.
When you look at the expansion plans of Changi Airport, you wouldn't believe that. There is definitely some local pressure in the short term there, but the business is doing fine. Greater China continues to be tough going, particularly mainland China. Very quickly, and I think I might have spoken about it before, we were an importer of expensive foreign Western-type product, mainly dairy type of product and beef and protein out of Europe, Australia, New Zealand, America, South America. China has very much decided to go to a more local procurement type of model from a country point of view. There've been quite a few retaliatory tariffs put in, particularly on European dairy. It's very difficult now to import that product into China.
Not only have we seen the price of the product go up and the import of it become very difficult, but the principals, our suppliers, have also tried to protect their position and moved away from a exclusive one distributor-type model, which they had before, and have opened up to multiple distributors to try and maintain their volumes. It's a very short-term strategy because all they're doing is they're filling the pipeline of multiple wholesalers with inventory. Then you've got multiple wholesalers trying to give the stuff away because it's got a time, a date on it and it's expiry, and the clock is ticking. We've seen our margins being crushed quite significantly in China on imported product.
We have shifted a little bit to local product, have been relatively successful in that, but we can't do that quick enough to replace the lost volume of imported product. The Hong Kong business is relatively stable in a very flat Hong Kong market. The Hong Kong market then was also impacted by that high-rise tower fire, which caused the cancellation of a lot of Christmas-type parties and festivities. They had a really flat December. That had an impact there. I think I've gone through, I've gone through the segments. Overall, our team have done great. We're very happy with it. I'm gonna hand over to David to talk about the financial highlights.
Thanks, Bernard, morning to everyone. Thanks for taking the time to listen to us. First up, obviously, thanks to all our people around the world, in terms of delivering the results. Thanks, I guess, more in particular from my perspective, to the finance teams, as well as the corporate team who put it all together. Thanks. As usual, in terms of IFRS, there are no changes. The accounting policies are consistent, they're consistently applied, no issues there. The constant currency, just to remind you, we use it as the truer measure of the performance of the businesses. We don't have a dominant currency, it's every currency or results of that particular business in the currency, but at last year's rate.
So it does give a sort of like for like comparative, and that's obviously how we measure the business, and how we judge performance in the business in their home currencies. The end result obviously will fluctuate, and as you've seen, I'll talk a little bit about that later. Hopefully, I don't repeat too much of what Bernard sort of alluded to already. I think from my perspective, the results are. The quality of the result is particularly good. They're very clean. I think you can see from the difference between earnings per share and headline earnings per share, there's very little extraneous issues in the group. Some, I guess, cleanups of some businesses in terms of rationalizations, you know, within countries and within portfolios. That's obviously an ongoing basis.
ongoing issue and will continue, but there's very little from that perspective. A little bit of inflation accounting, but really doesn't account to too much. From a quality of earnings perspective, we are happy. Just some of the highlights, I guess, revenue growth up 7.1% in rands. Gross profit stable at 24%. Trading profit up 8.1% and nearly 7% in constant currencies. I'll talk a little bit about that later. 8.5% of HEPS growth, nearly 7% in constant currency. Dividend up 10% almost, I'll talk a little bit about that, because that's basically ahead of our normalized earnings growth as well as a little bit lower cover.
Pleasingly, returns have stabilized, I guess, from where they were a year ago. We are starting to see the benefits of the investments that have been made over the past while, and that's always something that is going to happen. You know, as one invests, you takes a bit of time to utilize the capacity and get the throughput, and therefore, you've got the cost base, but you haven't got the revenue coming through as yet. Free cash flow is ZAR nil. I think what we've seen is basically a balanced free cash flow period, where cash generated by operations has been offset by the investments into working capital, into acquisitions, and into capital investments. I'll talk a little bit about that later.
Our net debt to EBITDA is slightly below where it was a year ago. In terms of the more detailed P&L, revenue up 7%, nearly 6% in rands, and Bernard's spoken about Australasia's contribution. Just to bear in mind that that's nearly 20% of the group. I think for the rest of the businesses, they've done particularly well. Gross profit at 24%, largely stable. I think the issue is that, you know, the businesses have to trade. We are a trading business. They will make calls depending on trading conditions that they see in their markets, and you're gonna get a little bit of sometimes trading margin for volume. And that's just a reality, I guess, of the trading environment.
We're very happy, and you can see that some businesses are slightly down. Bernard spoke about particularly China, where margins have come off significantly. Overall, we're very happy that the rest of the businesses have made up some of those shortfalls. Expenses have been well managed. We see the cost of doing business from our perspective has fallen, and I think that's more than offset the slight decline in the gross profit. And if we look at the constant currency, OpEx growth of 5%, we can still see we're getting some leverage because gross margins have grown by slightly more than that, at 5.4%. Group trading profit at 8.1% in rands, nearly 7% in constant currency.
I spoke the margins have increased a little bit, that's, you know, we managed to trade through the costs, and offset that against the slightly low gross margins. For those things slightly below the trading profit line, the non-interest net interest in constant currency is up a little bit. I'm hopeful that we are seeing the top of the interest rate cycle from our perspective at this particular point in time. I think as we go forward, our expectation is good cash generation, and therefore, we should see that moderating and hopefully come down a little bit. Effective tax rate, it is mix dependent, but it's absolutely within guidance at 26.7%.
Just to note that I think we noted it at the end of 2025, the results, the Pillar Two detailed tax exercise has really had a negligible impact on the group. We pay full taxes in almost every jurisdiction around the world. Those from SARS who are listening, unfortunately, there's not a big take from Bidcorp. Capital items, as I said, were really comprised some asset impairments relating to sort of almost in-country portfolio rationalizations and no big issues there. HEPS is up 8.5%, but EPS 16.6%, and that's really largely attributable to the prior year impact of the exit of Germany. That's really just to note. Currency volatility at 1.6% benefit in this period.
Obviously, the currencies and what you get is a little bit all over the place at the moment. The P&L is done on average, and that's obviously looking back over the last six months, whereas the balance sheet's measured on a closing period end number, and in the P&L's case, there was a slight benefit, but certainly in the balance sheet's impact, there was a decline or an appreciation from a rand perspective in the balance sheet. On the cash flows, I think just generally a pretty strong result from our perspective. Cash generated by operations was up 8% before working capital. If you take that after working capital or 9%, was up somewhere around 27%, so the business continues to generate really good cash flows.
Working capital, I think overall a pretty good performance, not perfect, but, you know, in a group on a decentralized basis, you're never gonna get a perfect result, and when you do, you've got no real opportunity to improve. I mean, we measure working capital, you know, across three measures. Firstly, an absolute impacts, and in this period, the absorption, which is typical of our first half of the year, we had ZAR 2 billion of absorption, but against ZAR 2.7 billion last year. Give that a tick. On a days basis, they've come down from 12 days to 10 days. That's also positive from our perspective.
The last one is our sort of internal measure, which is working capital as a percentage of revenue, and it's really just measures how much working capital we've got invested in terms of the growth we're achieving, and that's also come down in the period versus the prior period. I think the businesses have done a good job in this space. Investing activities, we've indicated that these will taper off, obviously not going to 0, but they have come down a little bit. A lot of it is still going into new capacity, but there's also quite a lot of maintenance CapEx in this period.
A lot of that well, some of that is actually replacement depots, where, yes, there is some additional capacity, but the majority of it is replacing facilities that we have. Our intention remains to own our facilities where it's feasible, where we can, and I guess where it's strategic, we still own around 73% of the property portfolio. Acquisitions, four in the period. The cash cost in this period was about ZAR 0.8 billion. Contribution to revenue, 1.3% and 1.2% to trading profit, not a great contribution. Some contribution, obviously, we'll see the benefit of that as we do, as the businesses are integrated, and become more efficient. Net debt is slightly down.
I think if we look at it in pound terms, it's basically flattish. We definitely are seeing the cash generation starting to improve against the prior period on a day-to-day basis. You know, I'm sure we'll see that improve even further as we go into the second half of the year. In terms of going forward, in terms of the balance sheet, I won't dwell on this too much. It's still strong and conservative, as I say, as we like it. Solvency and liquidity ratios are all good. In fact, they're very good and obviously well within all our covenants. No real issues with the debt maturity profiles.
We do have an RCF, which is, I guess, a standby facility, and we're renewing that, and that will hopefully conclude in the next month or two or three. But generally, from a balance sheet perspective, we're very happy, and it is a, what we think a very competitive advantage from a group perspective or from, you know, the group perspective to have the balance sheet as strong as we've got it. In terms of financial guidance, I think I'm not going to go through all of this, but I think things to note, rand appreciation, has obviously, you know, accelerated a little bit in the last two, three months. That is likely to have some impact on the rand results.
Once again, you know, we look at these businesses and the group result on a constant currency basis because we've really got no control over what happens to the rand. It's either good or it's bad or it's indifferent. Cash generation into the second half of the year, that's consistent with our normal trading cycle, and that's our expectation going forward. Our capital investments, we have guided to 1.5%-2%, you know, over the next 12-18 months. That's still our expectation. Bernard, I know, will argue and say, "Well, that's not good," but that's the reality. We have been through a period of investment, and I'm sure that we're going to see the benefits of that coming forward.
At some point in time, I guess we are going to see the investment cycle start again as we absorb the capacity we've recently created. Returns, I've spoken a little bit about. They have stabilized, and our expectation is that they will get a little bit better going into the second half and into the period ahead. Our January results were as expected, and, you know, following the normal annual pattern, and just to remind everyone, we do have winter in the Northern Hemisphere, so it's not a great period from that perspective, and it was particularly cold this year. Cash generation as we go forward, I think I've alluded to, our expectation is it should be good. We are seeing a slightly reduced levels of capital investments.
At this point in time, you know, one can't talk about the acquisitions pipeline, but, as we sit here today, that is what it is. My expectation is we should reduce debt levels a little bit further, and this obviously gives the group an opportunity to return excess capital to the extent we generate it, to shareholders in a structured and sensible way. Obviously, with that, we obviously need to. You know, we're conscious of the need to balance the returns, the reinvestment into the group, as well as shareholder returns, which is obviously important. From our perspective, the businesses are in great shape, and, certainly our expectation of further real constant currency growth into the second half of the year. On that note, I'll hand back to Bernard for taking the presentation forward.
Thank you. Thanks, David. I thought it's a good idea just to dwell on this for a few moments, because as I said at the beginning, I think it's a pointless exercise looking at issues on a, on a two-monthly basis or a three-monthly basis and saying we're 0.2% off the forecast. We're 0.1% ahead of consensus, and all these other wonderful, very short-term targets that you look at. You need to take a longer-term view. You need to step back and say: "What, what is the, what is the overall long-term reality look like?" I think we've delivered on what we said we would. That's, I call it boring. I get criticized for that, and I'm being told to call it stable and consistent and reliable, et cetera.
When you look at it from 2016 to 2025, bearing in mind we went through COVID, which was particularly evident in our business, and we don't need to go through that. Other than, we're not trying to look for sympathy here. The reality is we did have two years that were just totally out of sequence. We then had to regroup and move forward again. When you look at all the metrics, almost all the metrics over that period, yeah, there's very little you can criticize.
I know some of you will say, "Oh, but looks like your ROPI is tracking a little bit lower." Yes, it is at 25, and we must probably track up again at 26. You look at the return on equity, the return on invested capital, they're improving again. The distribution to shareholders are 19% compound annual growth over the nine years. Earnings, 10% compound growth. A ROPI of over 50%. Yeah, the graphs are all heading the right way. They're good-looking longer-term trends, and that's what we're focused on. It's absolutely not on what the next three months are gonna do, despite the fact that there is this pressure to always report.
You've always got this unrealistic, what's happening on a quarter-by-quarter, month-by-month, six-month-by-six-month basis. Like I say, and I can't emphasize it too much, it's a much longer, it's a much longer cycle than that, and we're very well on that path. When you look at the trends, they're all absolutely heading the right way, and we're thrilled with the outcome of what our teams have achieved since the unbundling in 2016. The business is in great shape. We've got a strong portfolio around the world. We've still got opportunities for growth. We've got some wonderfully stable businesses that are strongly cash-generative. We've got some great opportunities for growth in some of the smaller businesses. We're very happy with that.
Just talking a little bit about the strategic outlook, we'll get to the Q&A. We're not gonna tell you anything radical. We're not gonna tell you anything amazing. I know you people, financial analyst-type people, you get very excited about chip stories and the announcement of new chips. We could say we're announcing a new chip, it will just be a 10-millimeter, straight-cut, deep-fry chip that's not really gonna change the world, unlike NVIDIA's chips, which will change the world. Sorry about that. Our chips aren't the same type of chips. We do what we do. We continue to move our businesses along the continuum. That's a continual, it's a continual movement on the continuum. Each business is at a different phase.
Each business is committed to moving along that journey takes however long that journey takes. There's not a predictable path to it. You have to get the building blocks in place correct, then you move along that journey. I think our results, when you compare us to our peers, when you look at the consistency and the predictability and reliability of our numbers, I think it validates what we're doing. What we really don't do is show you all this pro forma adjusted, normalized stuff. Whatever happens. It's all in the numbers.
We're not trying to extract things and say that they're not normal. Yeah, "If it didn't happen this way, and if that had happened, and if the sun had shone a little bit more, and if we hadn't relocated that, and if we hadn't opened that, then our profitability would have been a certain number." We are where we are with whatever moving parts are moving out there at the moment. Yeah, these numbers are as normalized as they ever are because with every business, not everything goes according to plan all the time. You're always gonna have these extraneous things happening. You're always gonna have some costs that are extraneous.
That's just part of life, and I think it's a little bit disingenuous to try to justify what your business would look like in an ideal world, because there is no such thing as an ideal world. We operate in reality. We're confident where we are. We expect things to continue more or less along the same path, if the world continues on the same path as well. There is volatility, there is geopolitical volatility. We can't control that. We can't control economics. We can't control what governments do. Yeah, one of the issues that we are noticing is some of the cost pressures we're seeing in our businesses are government imposts, particularly coming through the labor line...
where there's increase in social securities and post-retirement benefits, and minimum wages, and employee entitlements, et cetera, which aren't offset by productivity gains. All that government is doing is finding the lazy way of making good on their shortfalls and passing the cost on to business. We see that happening in many jurisdictions. When we look at our labor costs on a per unit basis, they're going up. It's actually not because we're paying our people that much more. It's because you've got all these on costs that government are unilaterally transferring to business in many jurisdictions, which I think is lazy and inefficient. It is what it is, and we can only do what we can do.
What I am gonna do is run through the questions, which will then hopefully answer a whole lot of other things. Let me just find them all. Okay, I'm just gonna go through them in the order that I got them here. "Are there any larger acquisitions in the pipeline, and what geographies and sectors are of particular interest with respect to M&A?" At this point in time, there's nothing of major consequence that we're considering, and even on the smaller bolt-ons at this particular point in time, the pipeline is relatively small and constricted. There's a disconnect at the moment between vendor expectations and what we think things are valued at.
Until there's a change in that, and either we're prepared to pay more or vendors are prepared to accept less, there's a little bit of a standoff, and we don't have a huge number of bolt-ons. That's a temporary basis. That's a temporary situation. It will rectify itself in some point in time. We're certainly not chasing anything. If something's exceptionally strategic, we'll look at it. If it's opportunistic, we'll only pursue it at a correct value accreted price. I mean, what is interesting is our share prices has moderated, and it's not only ours, it's our peers as well, and obviously that's changed over the last few weeks, our multiples have come down.
Clearly, the multiple we're prepared to pay for businesses, or that our competitors, our peers are prepared to pay for businesses, is coming down as well. The vendors need to factor that into their thinking. That takes a little bit of time. "Can you quantify the impact on margin from new large U.K. contract and infrastructure investments?" I think it's pretty self-evident that we've seen an improvement in the U.K. Some of it, which must be attributable to the Whitbread contract that we activated at the end of September. One of the interesting things is we brought on new infrastructure in the U.K. in about September, in Worcester, and because we had a new contract that was rolling out at the same time, it had no negative impact.
If you recall, two or three years ago, we must probably had a GBP 5 million-GBP 10 million negative as a result of rolling out additional infrastructure, whereas this year we've absorbed it with the new contract wins and the rollout. I think it's been a very positive, and we have greater infrastructural capability now in the U.K. What other value-added opportunities are being evaluated in Australia? I'm not sure why you're picking on Australia, because we're looking at value-added opportunities around the world. One of the things we do is we see what's working in other businesses and copy. The other side of that is these things take time. It's not all that easy to start a factory and start manufacturing something, know what you're doing, take on the volume, and for it to be profitable. These things all have a ramp-up period.
They have an investment phase. They might take one year, they might take three years, they might take three years, before they come to fruition. In Australia in particular, because you asked the question, we are looking at a few. I'm not gonna give you the detail because that is strategic benefit to us as to what we're doing. We certainly do look at what works very well in other markets around the world and see how we can roll that out in each of our markets, and that's part of our continuum. That's part of the IP that we have, where our businesses share things that work and don't work.
What is the CapEx expectation for the full year, and going forward, does the corp need higher capital intensity versus history to keep growth rates at similar levels? We'll definitely see our CapEx this year lower than the prior year, the prior few years, and I really think what happened over the last few years is there was a catch-up after COVID. There was minimal investment made for two or three years, and then you just have to catch it up. Some of that was in fleet, some of it was in infrastructure, some of it was in MH&E. We don't see elevated levels for a while. I think we're in a phase now where the CapEx will probably run between 1.5%- 2% of revenue on an ongoing basis.
There might be spikes in that, bearing in mind there's infrastructure spend. Infrastructure spend is lumpy, and it's over a number of years. If you wanna put up a new facility, you think about it now, and you might open it in three or four years' time. Interestingly, in Portugal, we actually occupied our new facility extension a week ago. We started building that thing, I think, four years ago, but through council planning and bureaucracy, we've only just got in. These things are long-term. You talked to Australia improving on a six-12 month view. Any concerns around the impact of inflation ticking higher again and interest rate hikes? Of course. Of course, we're concerned. We have seen there was a quarter point hike a month ago.
There's probably gonna be another one based on the inflation reading today. Energy prices are out of control. Insurance prices are out of control. Of course, there's a downside risk, but we remain the eternal optimists. We still think the Australian business has many other levers to pull, and we've got a great business there, which will be fine. "Can you provide some color on the turnaround in New Zealand between Q1 2026 and Q2 2026, and specifically, how margins trended relative to the H1 2026 reported level?" That's a way too complicated question. It happened in about October, and we saw a revenue improvement on a week-by-week basis of about 5%.
That just suddenly spending increased. Of course, we'd love to attribute it all to our teams and everything we've done. Some of it is attributable to our teams. Obviously some of it is just macroeconomic. Our New Zealand business went backward last year slightly. Went backward in the first few months of this year. We're now seeing it operating at the levels it was before, plus a little bit more. We're very confident that the New Zealand business at this point in time, has seen a very strong recovery back to its traditional margins. Possibly even a little bit better. "Dare I ask about the future of China in the portfolio?" You can ask. You won't necessarily get an answer.
Does the strong cash generation, given you are moving past the U.K. CapEx and consistency of your earnings, not warrant having a capital structure with more debt?" Something we're looking at. We're looking at buybacks. When our share price was running at 400, it made sense to look at buybacks. We are looking at the best structure, what we do with dividends, what we do with capital returns. That's very much an active work stream, and it is getting attention. "What is the group's preference for returning excess capital to shareholders? Do you favor special dividends or share buybacks?" I actually don't favor special dividends at all, because I think they're one-off sugar hits. I think it needs to be in a sustained high dividend payout or share buybacks or a combination of both.
Share buybacks have to be accretive, and that depends on the share price and also the tax treatment of the debt that you're going to use for the share buybacks. We're still in a debt position. We're not in a cash positive position. We're in a net debt position. You want to be in a net debt position. You have to make sure it's tax effective in order for it to be accretive. If it's accretive, and at the right share price, buybacks absolutely make sense. "You mentioned there are more headwinds than tailwinds, which implies weaker second half constant growth. How does one read this together with Jan-Feb running slightly ahead of 1H ?" Oh, this is Arena. I am going to be in big trouble however I answer this.
I think you're picking on our words, and you're being a little bit pedantic about the semantics. There are more headwinds than tailwinds. That's just the reality of the geographies, the economics that we operate in. However, we're confident that we, all things being equal, will maintain the momentum that we have run with in the first half. I wouldn't read too much into those wordings saying that we're negative about the second six months. All we're saying is it's not party time out there. It's not all beer and skittles and fun and games. It's tough work. It's a slog, but we're confident that we've got the right ammo and the right teams in place doing the right thing that will continue the trajectory.
Maintenance CapEx, ZAR 2 billion versus D&A expenses, ZAR 1.2 billion. Previously, you've guided to 1.25 to stay in business. Will this normalize or are we in a new normal as a result of ESG investment, PPE, inflation, et cetera?" I think the reality is we're in 1.5%-2%, and building costs are probably 50%-70% more than they were pre-COVID for the same building, and certainly, we haven't seen food price inflation on the top line of that, which runs through to MHC and everything else. Yes, ESG does add a whole lot of cost. Electric trucks are 3x the cost of ICE vehicles. We don't know what the long-term total cost of ownership is because nobody does.
Yes, that impacts your CapEx upfront, but realistically, it's 1.5%-2%. "Will you consider share buybacks?" Spoken about that. "Great result, I'd like to ask if net profit margins will reach 5% or more in future?" I'm actually not sure what the net profit margin is. That's not a number I'm familiar with. I know our trading margin is 5.4%. I'm not sure what the net is. David, put you on the spot.
3.5, I think.
It's 3.5%, we've got to get to 5% after tax. Wow, that's an anonymous attendee. If you wanna help us achieve that, we're very willing to hear how we can do it.
I'm not sure how you get from 3.5%- 5% after tax. Do you have an outlook on food inflation in South Africa in particular? I'm actually gonna give that one to David, because I don't have a granular view on the inflation, the food inflation outlook in South Africa.
I mean, it's, you know, we're seeing somewhere around 4% in some businesses, and certainly in the Crown space, we've seen actual deflation in the space. I mean, I think it's in that 3%-4% range. You know, it depends. Foot and Mouth had some impact on certain categories like meat and the like, which are 30%-40%. It really depends on the basket we're selling and how that impacts us. Those are the two sort of spaces, I guess, that we're seeing from our businesses.
Yeah. European region margins saw strong uptick this period. Is this trend sustainable into the second half? Can you call out which reasons aided this improvement? I think we went through that strong performance from Italy, very acceptable performance from Netherlands and Belgium. Strong performance from Poland, strong performance from Czech, Slovakia, Hungary. Yeah, we do think it's sustainable. We don't think there are one-offs in there that won't be repeated. Once again, that goes to the macroeconomic environment and, you know, are there any events out there that we don't know about that are gonna impact the European environment? At this point in time, we're very comfortable with where the business is tracking.
United, that February sales to date have been tracking above the H1 constant currency run rate, excluding New Zealand, which are the markets the reason we're currently pulling out of that H1 trajectory. Once again, please don't read too much into the short term. You got Chinese New Year was a few weeks later this year than last year. That obviously has an impact. It has an impact in February because it was Chinese New Year was in January last year, and it's in February this year. Chinese New Year is not only an impact on the Chinese business, but it also does impact the other Asian businesses. Ramadan is at a different time this year. I think it's a month earlier to what it was last year. That has an impact.
You got the Winter Olympics that happened, that had a bit of an impact in Italy. It's not hugely material, but it had a bit of an impact. Please don't read too much into that comment. Broadly, our sales growth is tracking where our sales growth has been tracking. There's no major deviation, either up or down, on a longer-term trend basis. How much operational capacity do you have absorbed any rising fuel price? How much of your current margin is benefiting to low fuel price? The direct cost of fuel, diesel, actually isn't a major driver in the business. Obviously, it has some type of impact, but it's actually very small. Electricity is a far greater impact. Labor is still 60-70 I think it's about 70% of our input is labor.
You've got occupancy cost, rental, and then you've got electricity, and then you've got motor vehicle costs. It really isn't a major swing factor either way, and that's why we don't really talk about it when fuel prices go up or fuel prices come down. It's not something that has a material impact, particularly that it's not materially moving. Yes, pricing is 10% or 20% lower, but it's not 10% of what it was. It really isn't making a differential. Should we expect the usual seasonality for this year's results? Absolutely. There's nothing that's changed in the structure of the business.
What we do see in the second half of the year is Easter, and I think Easter might be a week or two later this year than it was last year, and you also see the start of the European summer. If that weather doesn't kick in, that has an impact, but once again, that's an uncontrollable. If they have a strong start to summer, we see the benefit of that in May and June. If they don't, we don't get the benefit in May and June.
I guess the other big kicker that happens every year in the second half is in the Australasian division, that's just the accounting for rebates and customer rebates and supplier rebates, et cetera, which is very consistent from year to year, there's no reason that won't be the same this year in terms of the seasonality effect. Plans to enter any new countries, geographies, Scandinavia, Canada, for example? If the right opportunity arises, we'll look at it. What we have learned is that if you're gonna go into a new market, you wanna go in of significant scale. Greenfields or very small businesses are very difficult in new geographies. It's a long road to travel. We are looking for.
If a new country does present itself, it needs to be an acquisition of reasonable scale. Those just haven't happened. We did have a look at something. I'm not gonna specify where. We did have a look at a business which was relatively large in the new geography. We didn't pursue that. We did a lot of work on it. We didn't pursue it. In hindsight, that was the correct call to have not pursued it for a number of reasons. Don't ask for details because I'm not gonna give you any details. We're very happy with our decision not to feel pressurized to make acquisitions. At the time, it looked okay. It was a market that theoretically was okay.
In hindsight, at this point in time, I think we made the right decision. Maybe in five years' time, we'll say it wasn't the right decision. Right now, where we sit, that was correct. To answer the question, we will only get into new geographies with the correct startup. You can even see in somewhere like Hungary, where we're doing a greenfields supported by a Czech business. That's tough game. It's profitable, but it's scaling up exceptionally slowly. It's hard work. Would you say that Bidcorp is mostly the same business now as it has been over the last nine-10 years? That's a very interesting question, because the answer to that is yes and no.
It's a very similar business, but we absolutely have changed our strategic focus in terms of that continuum of where we see the business and, and where our aspirations are and how we're gonna get there. We've very much moved away from just being a carton mover and a volume mover, and 10 years ago, we had a very large business in the U.K. selling to the logistics, the QSR operators, which we got out of. You know, it was a huge amount of revenue, a huge amount of work, and not a lot of, of, well, contribution. Over the years, we've spoken about the rebalancing of the customer portfolio, when you look at our portfolio now, it's very different to what it was 10 years ago. We're still selling the same things.
We're still selling baked beans and salmon, to a far more focused, defined customer grouping. The value-add opportunity is significantly more important to us now than it was 10 years ago, a much more prominent part of our profit portfolio and the drivers of growth than it was 10 years ago. The investment in infrastructure means that we're able to deliver on these other strategic imperatives because we have this philosophy of being 30 minutes away from 90% of our customers, whereas a lot of our competitors take a more traditional approach, a more, I don't know what you'd call it, a financial consultant approach, of having very big facilities, which are theoretically more economically efficient, than multiple smaller depots.
We've moved to that model of having multiple smaller ones close to the customer, which we think is giving us the correct return, and giving us the growth trajectory. We're a very similar business with the same people who were here 10 years ago. The team is fundamentally the same. I think our strategy is far more laser-focused and far more refined, and I also think there's a much larger emphasis on technology than there was before, and a lot of that technology sits behind what we do.
We're not a technology company, but a lot of what we do and a lot of the efficiencies that we get, and a lot of the ability to manage this business comes about because of the technology we have embedded in the business and continue to invest in, and to spend money on, and to experiment with, and to develop on a global basis. And that's gonna become more and more important. However, this isn't a technology business. It's not gonna be a technology business, 'cause it's very much one of those good old-fashioned physical businesses, which maybe the investor community realized over the last few weeks, that these businesses are what they are.
They are reliable, stable businesses that do adapt to technology, and absolutely, you need technology, but hopefully they're not going to be totally disrupted by technology. You still need product, and you still need to trade, and you still need to buy and sell, and you still need to service a customer's requirements. Would you say your market share gains are mainly from geographic expansion, e.g., Italy, or taking share in existing areas of focus? You know, the growth has been almost in every market. The revenue growth has been in every market. Yeah, New Zealand, I think, was one of the few large markets that didn't have revenue growth. They will start seeing that. We believe we are gaining market share in most markets that we operate in.
It's not one market or another that's totally skewing the numbers. It's balanced across the portfolio, offset by one or two markets. There's, in fact, there's one market that's going backward, which is the Greater China market, where our share definitely is going back and our volumes are going backward. Everywhere else, we're seeing growth. I think that's everything. Let me just check. No more questions. That's great. Thank you, everybody. We'll give you an update again in May. I will tell you once again not to worry about each three months in isolation, that this is a marathon, not a sprint. We need to look at 10-year trends, not one-month, two-month, three-month deviations from alpha estimates. I've got no clue what you people are talking about, clearly it's very important.
It's more about the longer-term trend of what we're doing, the sustainability of what we've, what we've built, the quality of the underlying business, and how that's gonna continue to grow in the future, as it has over the last 10 years. A big shout-out to our teams around the world. Thank you very, very much. Fantastic results. Thank you for all your hard work, efforts, and achievements. Thank you to everybody for joining the call, and we will catch up again in May. Thank you very much, everyone.