Good morning, good afternoon, good evening, everybody. Welcome to the Bid Corporation Trading Update for the first four months of the FY26 year. It's going to be another beautifully boring presentation. I don't think it will take all that long because we don't have all that much to update you with, other than, I guess, to say that we remain on track and we continue to remain delivering on what we said we would. Conditions aren't particularly buoyant out there generally, and we'll talk about each jurisdiction separately, each broad jurisdiction, but generally, it's not wonderfully buoyant out there. I think under the conditions that we face, our businesses have once again performed very well. I thank my team out there, 31,000 people around the world, who continue to do an absolutely amazing job and continue to deliver in times that aren't necessarily all that great.
We can only think about what's going to happen when much better days do come, and they will in many geographies. We can already start seeing the green shoots of that in some countries in which we operate. You have seen the numbers that we have given, and let's not get too caught up in the exact minutiae of the numbers. It only has been four months, and I think it's more important to talk about the trends and what we're seeing than the absolute numbers. Things do move around a little bit. Tax rates move around a bit. Interest finance costs move around a little bit. Seasonality impacts numbers in various different ways. The Rand is behaving in different ways. It has weakened, but now it's strengthening.
All of these things have an impact, and I do not think it is worth spending too much time talking about whether the trading profit growth of 8.6% in ZAR, which is 6.4% in constant currency, should have been 7.2% or something else. I think let's just talk about the overall position that we are finding. What we are seeing is relatively robust revenue growth in constant currency over 6%, of which just over 1% relates to acquisitions made in the period. Maybe 2% relates to food inflation, 2%-2.5%. We are still getting maybe 4% volume growth across the portfolio, which we think is a very strong performance in these four months when we look at the overall conditions that we faced in the various different jurisdictions.
This basically continues the trend that we saw last year, and towards the end of last year, we spoke about it at the end of August, and it has continued. I am really proud of what the team have done, what my management team have done. There have been very few missteps, and we are progressing the way we want to progress. Our businesses are in good shape. We can see the potential. Everyone is being edged to perform a little bit more, but they are performing exceptionally well, and I think our results are world-class. Our margins are ticking up ever so slightly in a tough market. Like I say, when conditions do turn, I think we are well placed for some significant growth, but we do not know when that is going to happen.
We're not banking on that happening soon, and we continue to do what we do, and our teams execute on that exceptionally well and continue to refine their offering to the market in terms of our overall broad strategy and our continuum of where our businesses need to be. Each business is doing what they need to do to move along that continuum. Like I say, it's boring because it's a little bit of this, it's a little bit of that, it's a little bit of this, which then gives you this stability and this constant growth that we've seen. I think if I just quickly look on it on a jurisdictional basis, that's probably the best way to start. Australia, New Zealand, Australasia, which used to be our largest pillar, which I think is now the second largest after Europe, continues to do it relatively tough.
New Zealand, the economy is not great. In the first four months, we're slightly behind last year. What we are seeing, very fortunately, is the last six weeks, we've seen an improvement, and we're now actually, for the first time in quite a while, we're above where we were a year ago or two years ago, both in revenue and in margins. We're quietly confident that we're over the worst in the New Zealand market, that either we're gaining a disproportionate market share, which is probably true, but more relevant, I think, is the economy is improving. They've had some pretty big interest rate cuts. I think the mood is improving. The consumer is probably feeling a little bit more confident than they were before. House prices have come off, which, it's a double-edged sword. Some people will argue it's good for the economy.
Some people will argue it's not so good, but it must probably put some more disposable income in our type of customers' hands. So we're very satisfied with our New Zealand performance. Still a very, very strong performance in a very average market. We can see many of our competitors are doing it tough. A few of them are closing down. Smaller ones doesn't really make a difference. But it is a tough market that our team have done very, very well to basically tread water. And we're cautiously optimistic that we've rung the bell at the bottom and we're starting to see improvement. In Australia, which is a big business, we saw about 5% revenue growth, and most of that is real volume growth, very muted food inflation. And we've seen a little bit of profit growth, not to the same degree.
That was a conscious effort to maybe sacrifice some margins to maintain volumes and to grow volumes, which has been successful. Once again, it's a similar story to maybe New Zealand. We are seeing the consumer a little bit stronger. We're seeing demand a little bit stronger, and we're seeing our pricing moving up slightly. We're talking very, very, very slightly. We're talking basis points of a percentage point. We are seeing the pendulum swing slightly there. We are also on the Australian side cautiously optimistic of a continued upswing and a growth trajectory that maybe is more reminiscent of where we were in previous years. The business, once again, is in very, very strong shape. Margins are at an all-time high, although only marginally ahead. It is still operating at a very, very strong level.
That business, the Australian business, continues to innovate in terms of its product offering, its manufacturing, its value add, its import, its house brand, as do many of our businesses, which are moving along that continuum very nicely. If we move to the U.K., we've seen about 8% profit growth there in the first four months, which under the circumstances we think is absolutely phenomenal. There's very little positive news that anybody can show you coming out of the U.K. economy. It seems to be a pretty negative, depressed scenario that probably isn't going to get better. Summer, the weather wasn't totally great. Maybe we say that every year. I'm not really sure. The weather certainly didn't give us a huge boost. Whatever we've done, we've had to work very, very hard for.
The team have worked hard, and they have worked very, very successfully to show growth and to continue that upward momentum that we saw last year. It is heading in the right direction. I have no doubt that there are already questions there. When will the U.K. margins get to 5%? We can predict those questions that come through. It will get there when it gets there. All I can say is we are heading in the right direction, and we are very satisfied with what our team have done in the U.K. in a tough environment. It is hard going. It is a slog. It is a week-by-week slog with way more negative news than positive news, which does not create a great environment within which to work. Our team have done exceptionally well to deliver growth yet again in the U.K. business.
We onboarded the large new customer at the end of September, so that has not really impacted the numbers. In fact, this has probably negatively impacted the numbers because we have got some startup costs, some mobilization costs in the numbers where you do not have the revenue in there yet. We saw some of the benefit come through in October, and that will continue through the rest of the year. It is our second largest customer, our largest single mobilization ever, and it went off relatively smoothly. The customer was happy with the outcome, and it seems to be adding value in the way that we thought. We are very satisfied with that and have no doubt that in the next few months, we should start to see some benefits of that coming through as well.
We also had the cost of a brand new greenfield depot in Worcester open up in, I think it was in September, that it actually went on a soft live launch. That costs money. We do not separate those out. We do not try to do any fancy accounting with one-off costs and recurring costs that some others do. It is funny because those one-off recurring costs seem to be one-off and recurring every year. We acknowledge that they are just a cost of doing business, and there absolutely is some cost sitting in the U.K. for that, to a degree offset by an acquisition we made of a relatively small fish business in the seafood fresh business, which performed according to expectations. Not going to shift the needle, but did contribute and does help us with our national rollout of that seafood offering, that very successful seafood offering.
There was a geographic gap that was quite costly for us to service, and this acquisition fills that gap very nicely. Moving over to Europe, Europe remained our star performer in the first four months. We're not really sure why. The weather wasn't great. Consumer sentiment isn't great. There is very little positive that came out of it. I think tourism numbers are strong, but they're not as strong as they were in prior years. Our businesses are all performing well. We saw growth in every jurisdiction, I think, other than Spain, where we've invested in some additional capacity, quite significant additional capacity in Barcelona and San Sebastian to facilitate future growth. That is just a very small decrease and absolutely part of the growth plan. We're still seeing growth in every business. Our Italian business in particular has performed very well.
We spoke about that a year ago, that we were going through some cost in exercise as we rolled out our southern depot in Rome. That was over a year ago. We have worked through that. That business is now profitable. We have made two small acquisitions in Sardinia and down in the south of Italy, which have greatly helped our logistics of moving product around the country. Italy was quite a big mover in the period and contributed quite significantly. The Polish business continues to outperform and grow ahead of expectation and trend. Some of the big businesses are growing very satisfactorily, but there are big businesses with a very large base, like the Czech Republic business, Belgium, Holland. Europe's in a reasonable place. They have performed very strongly for a few years.
We are heading into a more difficult trading environment now, winter, which then gets improved by Christmas, and then you go back into winter. We are seeing volumes maybe a little bit more challenging than they have been. When I say that, don't panic. We just finished with summer, and what we're seeing is they are slowing down. It's a usual slowdown, but Europe does get into a more challenged environment for the next few months. The emerging markets cluster, once again, overall looks good, and most businesses are actually doing okay. A very strong performance, once again, out of South Africa. That's a consistent story there of double-digit growth, which is phenomenal, mainly coming out of the Bid Food business this period. Krana coming off a reasonable period last year. There's a little bit of cyclicality in that, but South Africa's performed exceptionally well.
In South America, we're definitely seeing some strong growth come out of Brazil and remain enthused about that. Chile's relatively flat. Argentina's small and very challenging, but it's profitable. I think to have a profitable cash-generative business in a country like Argentina going through the trauma they're going through is actually an incredible achievement. There is no doubt that if all the pieces fall into place correctly economically, they will be in a very strong position at some point in time. It is small, but it is interesting, and it's an excellent learning curve. The Middle East overall looks okay. Our UAE business is performing very strongly. Our Saudi business is going through a little bit of pain. We exited a very large customer. That was always going to happen. It was just a matter of time. They were always going to go to their own internal distribution.
That's happened, and we're working through that and changing the model and adapting accordingly. That's a bit of short-term pain for long-term gain because we'll end up with a much more sustainable, balanced business with a correct portfolio of both customers and suppliers. Turkey remains a startup. It's a frustrating greenfield startup, profitable at the trading level, but it is a very challenging environment, a high-inflation environment, quite a volatile geopolitical environment. Once again, if that all goes well, we've got the national infrastructure, and I think that business has the potential to perform very well in future years. Moving over to the Asia cluster, Greater China remains very challenging, particularly mainland China. What we've seen there, just to give some context, is the business was primarily a distributor on an exclusive basis of Western brands.
When these Western brand owners out of Europe or America or Canada or Australia or New Zealand, or wherever they might have been, were not getting growth out of the market anymore on an exclusive basis, they have basically generally gone to a non-exclusive basis and opened the market up to multiple distributors, which is both good and bad. It is good because we have access to many other products and many other suppliers that we did not have access to before. It is not so good because other people have access to the same product that we had before. What we found is it is a race to the bottom. These principals are flooding their new suppliers with inventory who then have to flog it.
Our volumes are holding up reasonably okay, but the margins have been cut to shreds because there is a huge surface of product floating around in the market that wholesalers are now having to get rid of and move on and, yeah, turn into cash. Hopefully, that is a short-term issue. Hopefully, that resolves itself in six months or in a year. We are seeing a great deal of stress on the margin line in the Chinese business because of it. We have got competitors who are selling at no margin, at negative margin, and it is a highly complicated, difficult market. The Hong Kong market has been badly hit by typhoons, quite a few of them, which impacts the tourism market. It impacts the eating out market. It is also impacted generally by the malaise in the Chinese economy. We are holding our own in the Hong Kong business.
Greater China remains a challenge. Malaysia is doing very nicely. We made an acquisition in July or August of an ambient groceries distribution business, which is a very complementary range, synergistic to ours, put it together with our frozen and chilled primarily. We are building a large new distribution center in Kuala Lumpur, and that will certainly add to the scale of that operation and performing nicely. Singapore, we are absolutely cycling through the worst, and that business is heading in the right direction and performing according to trend and doing well and heading in the right direction. We are very satisfied with the outcome of that. I do not think I have left anybody out. That is where we are at the moment. Our businesses are performing well. We have made four small acquisitions, one in South Africa, one in Italy, one in the U.K., and one in Malaysia.
What we are seeing on the M&A front is probably the deal pipeline is shortening a little bit, is becoming less. And a few transactions we're looking at. Once we got into a little bit more detailed DD, we've decided to walk away from them at this point in time because those businesses generally, and it's a trend, seem to have passed peak profitability. And they're trying to sell on historicals, but their current trading isn't reflective of what the historicals look like. So we need a little bit of stabilization there. I think what that's also doing is giving us comfort that we're doing okay in the market compared to others. And we're seeing that in the businesses we look at. There is some strain out there. It certainly doesn't seem to be an easy story that every business we're looking at is showing this growth.
They showed some growth in prior years, and that seems to have come off relatively quickly in many of these businesses, and some of them are going backward. We remain patient, and we will carry on assessing them and paying the correct price and doing those deals that are strategic and add something to the overall basket of what we are doing. I guess we also took a strategic decision probably six months ago to pull back a little bit on the CapEx spend, and that is starting to come through. A lot of the CapEx that is going in now was committed two years ago, and we are seeing a little bit of a pullback, which will be a positive for the next year or two until we see the growth come back in the top line, and then we will have to speed up the CapEx program again.
We're also seeing that the fleet replacement is slowing down, and that was a post-COVID issue where we actually couldn't get the vehicles, and they all came in one or two years. It's a bit of an issue with MHE as well, with material handling equipment. That has stabilized. From a balance sheet point of view, our cash generation looks pretty attractive. Our working capital remains exceptionally well managed and tightly controlled. We're very happy that all the metrics, all the controllables, are being managed as best we can under the environment we operate in. I don't want to sound negative because I'm not negative. I think these results are absolutely phenomenal in the context of the reality in which we operate. It's tough out there. In many jurisdictions, it's negative, and yet our teams have gone out and have once again delivered.
I'm going to hand over to David, and I've spoken about a lot of the things he should be speaking about. If you've got any questions, please send them in through the Q&A process. I'll just go through those questions quickly so that we can answer them. David, give me a few minutes to read through the questions, and I'll take you on again. Thank you. Thanks, Bernard. You have covered off quite a lot of stuff. Just really, I guess, to fill in some of the gaps, Bernard spoke about a bit of softness in the gross margins, but just to give everyone comfort that we actually have seen some retraction or decline in the cost of doing business. Trading margins and EBITDA margins are up slightly, so that's all holding pace. There was a question about the tax rate. I mean, it's early on.
A lot of these tax rates are a little bit of estimates. Our belief is that we will still be within the 26-27% broad range, but it's a little bit early to give you a forecast to the end of the year. You spoke about the working capital. From my perspective, it is in line with what it was a year ago in terms of days. It's below where we were if we look at our weighted average working capital as a percentage of revenue. That's good. As you said, Bernard, this is being well managed. I think just the last thing is the free cash flow is significantly, or the free cash outflow at this point in time, bearing in mind we do have quite a big swing in the creditors post-year end.
The investments into capital investments are down a little bit. Obviously, acquisitions are down a little bit. Working capital outflows are significantly lower than what they were a year ago. The free cash flow is significantly better than where we were a year ago. We can see that in the daily cash. It is basically tracking almost at the same levels as it was a year ago, despite obviously dividends, investments over the last year. We think that the balance sheet is in particularly good shape and getting stronger. That is all I guess to add, Bernard. Back to you. Thanks, David. Okay. I am going to just go through the Q&A quickly, of which we have answered some of them. Let us just go back to the beginning. Can you give some color on trading margin in Europe and emerging markets?
Both of them have trended up very slightly from prior year. It is not unexpected that they are where they are. I mean, there is no monumental change, but there is a slight improvement, and hopefully that carries on. Would you expect the tax rate to be at the high end of the 26-27% range for the full year? As David said, we actually have no idea, and that depends on the mix. If Australia and New Zealand's economies start booming again, and they contribute a huge amount to the profitability, and hopefully that happens, our tax rate is going to be higher because those are 30% jurisdictions. If we see a miracle in Hong Kong and they boom, I think it is a 16% jurisdiction. It all goes into the mix. We really do not know. We cannot actually comment on that.
There's a question on inflation. Do we see it increasing from 2% in the first four months? We really do not know. Once again, it is a basket calculation in our product range across our geographies. In the U.K., for example, they may be seeing 4% at the moment in our basket, but in other jurisdictions, we are only seeing 1%. It is a little bit all over the place. We do not really know. Europe food inflation is maybe at 2% or 3%, but our basket is actually lower than that. It is a little bit confusing. We have always said we are comfortable with a 2-3% food inflation, and we think it is going to be in that range, but we actually just do not know. In the short term, group returns have been negatively impacted by heightened investment.
Is it correct to think that over the next few years, one should expect to see returns improving as you bed down its new capacity and focus on driving organic growth? The answer to that is yes. I'll let David answer the next question. Is 20% ROE a fair assumption over the next three years? I think the reality is I'm not sure we've hit 20% over our history. We probably have tracked at sort of 18-19%. My estimations would be that's where we can get back to. 20%, I'm not sure. There's been limited leverage below the trading profile line given increased finance costs. Does the group aim to reduce debt and finance charges to drive faster bottom line growth? I think they're two independent issues. For us, the primary driver is trading profit. That's the business.
If we look after the working capital and we look after the capital investments and the acquisitions, the interest is going to look after itself. The funding is in place. There is no new funding. We manage the Treasury function very well. It is not something we actively drive in order to drive the HEPS. The HEPS is just a function of trading profit, less tax, and less interest in tax. Hopefully, that answers that. Bid Corporation is derated to trade at a relatively low multiple versus history. It does not make sense to think about share buybacks given the strong balance sheet. Absolutely. If there is share price weakness, it is something that is on the agenda to contemplate. At this point in time, at this share price, it is not necessarily an accretive exercise. If the share price weakens, it certainly is something that is getting some detailed attention.
Given that the deal's pipeline is smaller and given the weak share price, is it not perhaps it's time to start buying back shares? Done. Answered. Sorry, let me just see where I am. One second. Why do you still need to be in China? Do you really believe in the longer-term opportunity and why? Thanks, Nick. That's a very nice question. You could also set about a lot of countries that we've maybe had challenges at various points in time. Somebody might have asked us why we wanted to be in Poland in 2010 or 2011 when we were making losses. It is a market we've operated in. China, I'm talking about. We have made money. We continue to be profitable, despite lots of other people not being profitable.
At the same time, we need to assess whether every business fits in our portfolio in the long term. They're not simple questions. It's a much more complicated question than purely just putting some numbers on a spreadsheet. There are 1.5 billion people in China. Even if we found an addressable market of 100 million, that's still a pretty big market. You're right. At this point in time, it's not overly attractive. The margins we're getting out of it are tough. The structure of the market is tough. It is getting a whole lot of attention, but it's a complicated question that there isn't a simple answer to. Are your clients saying anything about the impact of weight loss drugs on their customers? Any changes in trends that you're seeing or anticipating?
Yeah, they're saying they're seeing a lot less fat people coming into their restaurants. They work well. No. Realistically, not. There was a lot of talk about it a few years ago that it was going to put PepsiCo out of business and others. It's probably going to have more of an impact on the fast food industry, on the QSR industry. Maybe they're already starting to see that, that there is quite a lot of strain in the fast food industry, which is probably going to get hit a little bit harder than ours. Please also remember that maybe 40% of our business is non-discretionary in education, healthcare, government, defense, etc., which won't be impacted to the same degree. No, we're not really seeing any impact from that.
Can you comment and elaborate more on the recent trend in Australia where you see margins starting to improve in October? What has changed? Like I say, I think the sentiment has improved a little bit. There were some interest rate cuts in Australia. I think there were three 25-basis point cuts. There have been three 25-basis point cuts, and they're starting to filter through. There was an election in May, and we've got a government for the next three years, so people have settled down with that. The cost of living crisis has to some degree settled, and it's probably more focused on energy prices than food prices now. Food's not seen as the major enemy. What we've always said is we're generally a leading indicator. Our business is a leading indicator. Because what do people do when they feel a little bit confident?
They're going to go out for a meal before they go buy a new TV or before they buy a new car or before they buy a new house or do something big. We see these trends come up relatively quickly. We talk to central bankers, reserve banks, etc., talk to us because we do see lots of customers, and we do see lots of these trends coming forward. Both in Australia and New Zealand, there's no doubt that the last six weeks we've seen a more optimistic customer out there. We've been asked to say it's absolutely doing it and it's market share, etc., but that's not realistic in a six-week period because every customer is just a little bit more. I just think it's getting better, and we're pretty confident about that. Okay, here's one for you, David.
David, how do you see net finance costs for the full year given your comment on higher funding costs against lower CapEx and improving FCF? Good luck, David. Thank you, Bernard. Listen, I think we would expect the month-on-month run rate to start improving. Listen, our best guess is we're probably going to be flattish, I guess, year on year. We do have a lot of fixed debt, which are at market rates. It's not a case of extra cash generation is going to take out all the debt that we've got in the group. Our expectation is that the run rate should start improving. Best guess is probably a flattish type interest charge for this year. Okay, we've got no more questions. Like I said, we'll keep it beautifully boring and brief.
A big thank you to our teams out there who continue to perform, perform exceptionally well. I think if you look against peers where we can see peers and they report, it's a bit of a paradoxical story. We seem to be in a different universe to many of them. It's going fine. It's tough. There's no doubt that economies are tough. There's no doubt markets are tough. Our people are tougher, and we remain confident and enthusiastic, and there's still levers to pull. We're hopeful that the trend continues. Hopefully we can give you a similar update in February when we do our six-month results. In the meantime, let's hope Christmas is a good Christmas for everybody, that trading is strong, and that the world's a little bit of a nicer, happier, stable, more peaceful place.
Thank you, everybody, and have a good day. Thank you.