Earnings Call: H1 2021

Mar 1, 2021

Good day, ladies and gentlemen, and welcome to Lidvest Interim Results Presentation. All participants will be in listen only mode. There will be an opportunity to ask questions when prompted. Please note that this conference is being recorded. I'd now like to hand the conference over to Ilsa Roux. Please go ahead, ma'am. Thank you, Judith, and good afternoon, ladies and gentlemen. As Judith said, my name is Ilse Roux, and we thank you for dialing into the Bitvest Group's results for the 6 month period, which ended on the 31st December 2020. As customary, Pumi Malita and Mark Stane will present the results and the outlook, after which there will be a question and answer session. But before we go into the details, I would like to hand over to Boonang Muhale, the Chairman of Bethesda Group. Boonang? Afternoon, colleagues. After this, I'll hand over to my boss, Cixinom Punelelo, Thembekile Madisa. But on behalf of the Board of Directors and the entire Big West family, we express our heartfelt sympathies, sincere condolences to the families, friends and colleagues of those many thousands of people that have lost their lives to this dreaded pandemic, which has disrupted our lives in such a traumatic way. The consequential effect has been grief and severe disruption to livelihoods, which makes the critical return to a form of a better normal economic activity, such an urgent imperative. Our hope for this is centered on the successful vaccine rollout throughout not only our country, but the world because it's when all of us can travel freely and safely that we can look forward to indeed a better normal. Our government must be commended for the rapid rollout program now underway with nearly 70,000 health care workers already vaccinated. Significant work is also ongoing to secure sufficient vaccines for the future, which will allow us to move deeper into the Phase 1 rollout campaign, while also ensuring readiness for the Phase 2 and 3 campaigns. This will ultimately cover the majority of our adult population. Over the past year, BIDVET has participated in many different ways to assist in countering the effects of this pandemic, and we are continuing to work closely with all our social partners, agencies to ensure a successful vaccine rollout. By providing numerous resources at various levels of the program. But turning to the financial and operating performance, I'm pleased to say that the group has produced a pleasing set of results in all aspects. This is directly related to the agility and experience of our entire management team, ably led by Sisnombu Melelo, Tembiki Le Magisa and the over 10,000 people that make up the family. We thank them for their continued contribution to creating value for all our stakeholders. Sisnompumelelo, over to you. Thank you very much, Chair. Good afternoon, ladies and gentlemen. I'd like to start with just some introductory remarks before going into the financial highlights for the period. And as an opening just to say that it really gives myself and Mark huge pleasure in really presenting a set of results that we're really proud of. The 1st 6 months of this financial year has been tough from an economic perspective. As across all our 3 major territories, South Africa, U. K. And Ireland, we've obviously been experiencing the knock on effects of the various lockdowns in those territories. In South Africa, in fact, we only went to level 1 lockdown yesterday. And in fact, in the U. K. And Ireland, they're still in their 3rd lockdown. And we're hoping that by end of March, they'll be coming out of that phase. Notwithstanding the really tough economic environment, our business is really with the storm. Recovery has been good across all our divisions. And while some of our businesses have been impacted by structural changes such as work from home policies and practices, constrained consumer spending, etcetera, on the other hand, we really had spectacular individual performances from some of our businesses and significant market share gains, in particular, in our trading businesses. Just two characteristics stand out for me in terms of what I think were really big drivers for these results in the first half of the year. And the first one being the strength of our diversified operating model. Our diversity enabled us to weather a very difficult economic environment. We had exceptional outstanding performances from some of our businesses. And while some of our other businesses were challenged by the various economic challenges, we were able to, through our diversified model, present what is a solid consolidated set of results. Secondly, the strength of our decentralized operating model really, really came through. Our decentralized operating model gave us agility. It gave us flexibility and nimbleness. And this really shot out in the 1st 6 months. Each and every one of our businesses very quickly got to work, controlled costs and used the levers available to them to right size their businesses for the current and anticipated future demand. And at the same time, we continue to look for growth opportunities with many of our trading businesses, as I indicated earlier, increasing market share in a globally contracting economic environment. At Bitwest, our people are our most important assets. So reiterating what my Chairman has already said, I'd like to take this opportunity to pass condolences to the families, friends and colleagues of the 44 Bitwest employees who sadly succumbed to the COVID-nineteen virus in the recent months. Since the start of the pandemic, at BitWest, we have lost 79 of our colleagues. And today, most of us have now been directly impacted by COVID-nineteen, having buried our own close family members and friends. I suppose one of the things this pandemic has reminded us is how valuable life is and how valuable family is. Touching further on the Bedwest family, it gives me great pleasure to report that 95% of our employees are back at work from 75% who were not working in the hard lockdown of April 2020. We are back full time in the offices in most of our 200 plus businesses with the COVID-nineteen health and safety protocols implemented across all our operations. At this point in time, let me also take a moment to pass a really big thank you to governments in South Africa, the U. K. And Ireland for the employee support that they've provided. In South Africa, the UIF, TIRZ benefit and further support programs in the U. K. And Ireland created significant safety nets for our people. And for that, we are really truly grateful. Lastly, as I close out the introduction, it gives me great pleasure to report that BedWest will pay for the cost of vaccines for all our employees who are not on medical aid. Turning to the financial highlights for the period. Slide 5 of the presentation, trading profit is up 3.5 percent to 4,100,000,000. We've had really excellent performances from our Services and Commercial Products division. Automotive and Freight also performed well. Branded products delivered a really resilient result. And unfortunately, Financial Services fell short of expectation and I'll unpack this further when I get to the divisional review. As expected, we closed our acquisition of PHS in May 2020. And so in the first half of this financial year, PHS is a significant contribution to the results. Cost management has been outstanding. Expenses increased 1.3%, but on a like for like basis, expenses were down 9.6%. Our standout performance has to be cash. Operational cash generated is up 86.2 percent to €6,200,000,000 We strengthened our balance sheet and when Mark goes through the key highlights of the balance sheet, he'll touch on the salient features, but really balance sheet performance in the group has been quite spectacular. Rafi has improved to 31.3%. Normalized HEPs is up 6.1%. And I'm pleased to also report that we'll be paying an interim dividend of €2.90 per share, which is up 2.8%. On the same slide, if I can just talk to the graph and really one of the things that we have been doing over the last half year is measuring our performance on a month by month basis and really looking out for that recovery out of call it what we call the COVID month. So from April, you see the kind of the drop in trading profit and that's really April hard level 5 lockdown, particularly mainly in South Africa. In May, that uptick in revenue sorry, this is a revenue slide, not trading profit. In revenue is really because of PHS coming into the numbers. So PHS came into the numbers in May. And what I think is important on this slide is the recovery that you see from May into July, August, September, October and holding at our revenue number of DKK7 billion plus per month. And that's really the underlying business recovering. And I think that slide kind of shows you how the business has really just showed a very resilient performance. Moving on to the next slide in terms of our journey. We continue to focus on diversification and cash generation and obviously focusing on capital light businesses. From 2016, when we unbundled our food distribution business, Bidvest really became a call it almost 100% South African entity, mainly an industrial business. And at that time, we articulated our ambitions around expansion both locally, but also into niche areas from an international perspective. In terms of geographic mix, it's great to see that we grew from 2016 financial year to predominantly South African to today where 20% of our trading profit is offshore. Equally so from a service mix, we indicated that we want to grow our defensive services contribution. And today, 65% of our trading profit comes from our service business with 36% from our trading and distribution businesses. At this point, I'd like to hand over to Marc to talk you through the financial highlights for the period. Thanks. Thank you, Pammi, and good afternoon, everyone. It's been all, and I'd like to say a special thank you to all those involved in the production of these results as well as the operating teams in each division. Results presented today are a reflection of their successful efforts in a difficult trading environment. As opposed to the last year end, the Spirit did not present any material new accounting complexities and it was nice to have a little bit of a breather. There has been a reclassification between goodwill and intangibles on the balance sheet as a consequence of the completion of our PHS PPA, but otherwise no other material changes. Just some general comments before we actually jump into the numbers. I think it's important to contextualize this result in particular with regard to the COVID-nineteen impact. And both Penang and Pumi have already talked to it. While the last 6 months gave rise to $84,000,000 in direct COVID-nineteen related costs, which is obviously much reduced from what we saw in June last year. The trading impact in a number of sectors continues to be significant. Travel and related businesses are still materially affected, but these have all been appropriately resized to absorb this low cycle. Similarly, the extension of work from home and the delayed educational return has created pressure. Both these areas though will present upside once we start to emerge from the lockdown fog. Despite this, most businesses have produced really good results and we're encouraged by the post year end trading to date as Anupamuni has already indicated. The strong steps we took last year to protect our financial position continue to bear fruit. Our liquidity and solvency have improved, expenditure control has been good and cash management has been exceptional. The success of this is evidenced by our closing balance sheets and cash position, both of which we are very proud of. In terms of acquisitions, there have been no material acquisitions in the last 6 months. As you recall, we did acquire PHS in May last year and that's bidding down well and meeting expectations. We've had one smaller bolt on in Newnan. They acquired a group called the Axis Group in the U. K, which is a security focused business at an equity value of £24,000,000 are also very pleased to have finally disposed of our Mumbai airport investment last month after a number of years in this process, and the disposal of our bit less car rental business is ongoing. With that as a backdrop, let's dive into the numbers and turning to Slide 9. Revenue up 3.4 percent to $44,400,000,000 It has been enhanced by PHS in the numbers for 6 months and Adcock for an additional 1 month. Again, to really understand the group revenue, you do need to unpack the individual divisional performances and we'll do that a little bit later in the presentation. I think what we're very encouraged by though is revenue has steadily improved as you can see as you've seen from the graph that Apumi talked to just now post the lockdown. We've seen the businesses stabilizing. We've seen very good organic growth in commercial products with services flat. The rest of the divisions from a revenue perspective down single digits except freight. I guess the one area that we obviously we're managing very closely, travel aviation and hospitality, which is still remains very weak with the current lockdown in place as well as the related foreign exchange trading. From a gross income perspective, we've managed to maintain broadly flat our gross margin of 30.2%, which was very pleasing. We did have with the inclusion of PHS an enhancement to the margin, but this was offset by the trading in brand and products, financial services and the travel related businesses. From an expenses perspective and this is always or certainly for the last couple of years have been a highlight for our business presentation. On a gross basis, we've maintained operating expenses rather are up at 1.3%, but on a like for like, they're down 9.6%. We're very, very happy with this performance. We are obviously benefiting from restructured programs that took place last year, but there is a continued strong focus on cost containment in each of the divisions. From a trading profit perspective, trading profit up 3.5% to 4,100,000,000. We're very happy with this result, especially given that the comparative was a pre COVID comparative. We're seeing excellent results from commercial products and PHS. Automotive, freight and Newnan delivered good results, particularly given the revenue pressures that those sectors faced. Our SA Services businesses, if you exclude that the impact of the travel and related businesses also performed very well. Profits were lower in both branded products and financial services. Our organic trading profit contracted 8% of a pre COVID base. However, this does include the final meal mark to market adjustment of minus $144,000,000 In terms of other costs, not a lot to talk about on the acquisition line. Acquisition costs of CAD8 1,000,000 mainly relate to the Plush acquisition in Adcock and there was some sundry disposal processes. And then on the amortization of acquired customer contracts, that's up quite a lot. On the completion of the PHSPPA, there was additional amortization there of the intangible of an additional ZAR99 1,000,000. In the net capital items line, that's predominantly the disposal of our on time automotive business in the U. K, which was slightly offset by insurance claims proceeds across the group. Moving to our financial charges, they're up 3.6% including IFRS 16, so it's on a like for like basis now. I think we were very happy with that result given that we had additional funding come into the mix because of the PHS acquisition, which resulted in additional 5.5% finance costs. Across the group, we maintained our CapEx programs. We haven't stopped spending. That continues. Our average borrowing cost across the group has reduced, now down to 4.6% pretax with 6.5% last year, obviously, a reflection of lowering interest rates across the board. And our EBITDA interest cover remains conservative at 8.6 times. From an associate income perspective, now that we've effectively exited from Comay and got very, very small shareholding remaining there, the only material JVs left in the group are within Adcock in India. And the reason there's been such a big shift in the comparative the prior included Comair losses, which are now no longer repeated. From a tax perspective, our tax expense, if you exclude the impact of the meal ForEx impairment and our capital items is broadly in line with the SA statutory rate, which is really the core rate for the group as a whole. Obviously, we enjoy slightly lower tax rates in both the U. K. And Ireland. And as these businesses continue to grow in the group, this will overall this will lower the overall group tax rate. From a non controlling interest and minorities perspective, this is now predominantly Adcock, which is consolidated from June last year. Our effective shareholding now in Adcock is 56.1%. From a HEPS perspective, as Anupamir mentioned, HEPS from continuing operations up 6.3%, normalized HEPS from continuing operations and you recall that normalized for us excludes acquisition costs, the amortization of acquired customer contracts and the COVID-nineteen costs is up 6.1%. Hits from discontinued operations, which is the BCR business was negative $0.075 It's pleasing to be able to report the resumption of dividends again after the COVID delay at year end. As Pammi mentioned, interim dividend $2.90 which is 2.8% above the $2.82 declared last year. Our cover ratio is 2.25 times, which is consistent with the policy range of 2 to 2.5 times normalized heaps. Moving then to our balance sheet and our debt and funding. I think broadly we're very comfortable where we've landed from a balance sheet perspective. Our balance sheet is certainly stronger. We maintain a conservative approach, which is consistent to previous years, particularly with respect to our debt and funding. Net debt after cash and cash equivalents is down to $15,800,000,000 from $9,200,000,000 at the end of the year. You recall that the year end position was elevated because of the PHS bridge. We're comfortably within all our covenants and in fact both key ratios are improving. EBITDA interest cover to 8.6 times versus 8.4 times at year end. Our covenant there is 3.5 times. And then net debt to EBITDA at 1.7 times with year end at 2.1 times. Our covenant there is 3. And what's obviously benefited that ratio is the significant net debt repayment of $2,500,000,000 which has come through our cash flow. 64% of our gross debt is now long term. We successfully raised a long term debt program of CHF 4,750,000,000 locally that we did talk to on a previous call that was finalized in November, which has been used to assist with the PHS bridge takeout. Moody's did downgrade the group last year in line with the Sovereign to BA2. We've continued to monetize our non core assets and generate good free cash flow to further enhance headroom and we've got adequate funding facilities in place. So from a debt and funding perspective, very comfortable where the group has landed. We have included as per normal an interest cover graph really to demonstrate the relative stability of our interest cover. It's been very consistent over the last few years. The spike in net debt that you see in the 2020 year was the PHS bridge and obviously now starting to see that start to come down. In terms of that bridge, we have repaid GBP 330,000,000 in December 2020, GBP 234,000,000 of that was via local debt and dollars 96,000,000 was via free cash. In terms of our debt maturity profile, as you can see, there's no significant maturities in the 2021 financial year. In 2022, the foreign debt reflected there is the PHS bridge. And then in 2023, the foreign debt there is the euro term loan. But just to remind everyone, we have 2 further 1 year extensions on that facility. And then lastly moving to our cash flow and as Mbumi said, this is an absolute highlight for us. I mean cash conversion at 124% is exceptional, really has been a great cash result. Cash generated from operations at 6,200,000,000 versus 3,300,000,000 last year is fantastic. What we have seen in this number is a very strong working capital position, working capital released by 336,000,000 versus a 2,000,000,000 absorption last year. This is uncharacteristic and it resulted from reduced inventories and accounts payable. While we're obviously very pleased particularly with the inventory release, we are monitoring our inventory levels quite closely in the light of supply chain restrictions, which we are seeing across some markets. We're unsure at this point as to whether we're going to see a working capital absorption in the second half of the year, and I think that largely depends on the strength of what the second half recovery looks like. From a cash flow perspective, we still continue to spend CapEx. So that's still in the numbers and we have seen a very strong debt repayment in the last 6 months. Our cash generation graph, which we always include, normally demonstrates an absorption of working capital in the first half of the year and then a release in the second half. Obviously, this 6 months has shown that on its head a little bit with a strong release. My expectation would be that if businesses starts to come back strongly in the second half that we would see an absorption. So this year will be a bit of a reverse quite uncharacteristic of our normal cycle. And then just finally, some concluding comments. It's very encouraging to see the improvement of the COVID-nineteen statistics, both in South Africa and in the U. K. And Ireland. And the rollout of the vaccine programs will obviously enhance this. This will stimulate an acceleration of the return to work scenario. Our businesses have been appropriately right sized for current demand levels. And so we expect upside as businesses come out of lockdown. Profitability has returned across the group, but our financial position is strong with good capacity for growth. Thank you. Thanks, Marc. Thank you very much. I'm now going to go through the divisional review, starting with the Services division. And with each division, I'll touch on the key financial metrics and then talk to some of the key drivers behind those individual divisional results. So if we start with services, revenues up 28% to €14,000,000,000 trading profit up 38% to €1,700,000,000 trading margin at 12% increased from 11% in the prior year EBITDA up 42% to €2,100,000,000 funds employed down 40% to €1,600,000,000 and roughly at 2 10% is now more than double what it was in the prior year at 92%. The Services division has really delivered an excellent set of results. The half year, as indicated earlier, was supported by PHS, whose performance is in line with expectation, making a trading profit contribution of £24,000,000 Noonan operations in the UK in particular continue to be impacted by lockdown restrictions, mainly in the Horik effectors. Outside of this, the rest of the business performed well, and we continue to be impressed by that management team. In terms of our services operations, the division was negatively impacted by declines in the businesses that are directly exposed to the travel and tourism industry with a €250,000,000 year on year link in profit contribution. On the upside, our Facilities Management cluster did well. Our Security and Aviation cluster also delivered a good result. Our Allied Services cluster continues to be impacted by low occupancy levels in the offices. Overall, the teams across all the clusters are focused on identifying opportunities for growth and the new business pipeline is also strong. Asset Management was strong as reflected in the decline in funds employed. Cash generation was good. Roughly at 2 20% is really excellent. The work that's been done by this team, especially in terms of looking for growth opportunities, both organically and by acquisition is really impressive. Newman, in fact, has made an acquisition that we bought on board early February this year 2021, and I'll talk to that in my closing remarks. If I move to the next division, Branded Products, revenues down 5% to €8,900,000,000 trading profit down 19% to €800,000,000 trading margin is 9.1%, down from 10.7% in the prior year EBITDA down 17% to €900,000,000 funds employed up 1% at €6,500,000,000 and roughly a 26.7 percent is down from 32.5% in the prior year. Branded products faced really, really significant headwinds in the first half of the year. The work from home and learn from home policies adopted by both business and education institutions together with constrained consumer spending and the absence of the flu season, which impacted Adcock, has significantly impacted trading in this division. Gross profit margin pressure was apparent in most areas of the division, but expense management was really excellent with expenses declining by 4.8%. If I move to Adcock, they've just released their results. Those are available on a standalone basis. ADCOB was negatively impacted by the absence of the flu season. Gross margin deterioration is due to unfavorable exchange rates, product mix, and unfortunately we also had lower recoveries in one of our factories. Strong performances though came out from our consumer division who are up 48% on the trading line. OTC was down on prior year and that's the link to the absence of the flu season. Prescription flat year on year and the hospital division was nicely up. The balance of the division aligned their operating expenses to revenue as declining print to pulp volumes, low office occupancies and constrained consumer spend put pressure on the top line. The back to school season was unfortunately disrupted by COVID uncertainties and this placed quite enormous pressure on our businesses supplying basic and tertiary education institutions. Overall, margins were impacted by mix, lower rebates and exchange rate pressure. One of the really great performances in this division, if you exclude Adcock, operating and direct expenses were down 18%. So that gives you a sense of how much work went into cost containment. The teams must really, really, really be commended. While trading profit is down 19%, this division has delivered a trading profit number of €800,000,000 notwithstanding the above mentioned challenges. If I move to our 3rd division, Bedwest Freight, revenues down 13% to €3,400,000,000 trading profit flat year on year at €600,000,000 trading margin at 19% is up from 16.5% in the prior year EBITDA up 1% to €800,000,000 funds employed up 16% to €4,200,000,000 and Rafi at 31.2% is down from 35.9% in the prior year. Just in terms of those metrics, the last 2, so funds employed and Rafi are primarily impacted by the ZAR1,000,000,000 investment in our LPG terminal. We'll start seeing an improvement in those metrics as we move forward. Holding trading profit flat or for 13% decline in revenue is a solid result from the Freight division. Bulk aggregate and mineral commodities performed well in the 6 months with volumes of yellow maize quadrupling and chrome and manganese volumes increasing year on year. Our bulk liquid terminal was impacted by lower fuel and chemical volumes as well as price concessions. Bulk liquid volumes are expected to recover from April onwards, which is great and export slots for Mays have already been booked from the end of April onwards. Our LPG terminal was commissioned in October in line with budget and is performing well. On the other hand, import and export volumes remained slow, impacting 2 businesses in this division, Bitvits International Logistics and Bitvits SACD. Restructures in both these businesses are complete and the teams are focusing on securing additional volumes. Our Namibia operations are experiencing similar volume changes challenges, while our Mozambique operations are performing well. Overall, the team did produce a solid result and we look forward to their contribution for the second half of the year. Coming to the 4th division, Business Commercial Products. Revenues up 7% to €6,900,000,000 trading profit up 44% to €500,000,000 trading margin at 7% is up from 5.3% in the prior year EBITDA up 34% to €500,000,000 Funds employed is down 13% to €3,700,000,000 and roughly at 26.7 percent is up from 16% in the prior year. Commercial Products really, really delivered an exceptional set of results with phenomenal trading profit growth achieved across most areas of the division. In fact, in this division, most of the businesses were well up on last year. These results were driven in the main by market share gains, strong brand equity, gross margin uplift and really solid cost control. The trade cluster, which comprises our electrical and plumbing business, produced an excellent trading profit result. The catering cluster exceeded expectations and did well in the Q2 in particular boosted by export revenue and overall reduction in expenses. The DIY Tools and Wilkrete cluster delivered an outstanding trading profit result due to the increase in DIY projects. Yamaha was a standout performer in the leisure cluster, and this was really driven by increased demand for luxury goods. The Industrial Clusters trading profit result improved off the back of increased gross margin, reduced expenses and increased revenue from consumer. There is friction in the supply chain, Mark referred to it already. This is being actively managed by management, but we do highlight it because our ability to have stock and deliver on increased demand is what really also contributed to the results in this division. And so we are cognizant of those supply chain challenges, which are global. But as I indicated, management is actively managing this. A 44% increase in trading profit against a non COVID 2019 half year is really a spectacular performance from this division. If I move to our 5th division, British Automotive, revenues down 7% to 10,600,000,000 dollars trading profit up 6% to €300,000,000 trading margin at 3% is up from 2.7% in the prior year EBITDA up 1% to €300,000,000 funds employed is down 25% to €1,900,000,000 and roughly at 34.4% is up from 24.7% in the prior year. The automotive market overall in South Africa continues to be impacted by a weak macroeconomic environment, constrained disposable income and lower consumer confidence. According to NAMSA, the South African new vehicle dealer market volume decreased by 12.7% year on year for the 6 months ended 31 December. So there's real contraction in this market. McCarthy sold fewer new and used cars and sales to fleet customers were also depressed as customers held back on CapEx expenditure. Obviously, liquidity being a key focus for all businesses. After sales activity was impacted by lower mileage and subdued trading activity with our panel clients. But the team focused on cost containment and the result of that is a 10% reduction in operating expenses of a 7% decline in revenue. To drive further efficiencies, innovation and technology is being leveraged through the introduction of robotics and our online auction platform is also gaining momentum in Birchemont. Our Namibia operations delivered a solid performance for the half year due to increased new and used vehicle revenue in that territory. Delivering 6% growth in trading profit or for 7% decline in revenue is a commendable result. And lastly, Financial Services. Revenue is down 5% to 1,300,000,000 trading profit down 39 percent to €200,000,000 trading margin at 12.7 percent is down from 19.8% in the prior year EBITDA is down 27% to €300,000,000 Funds employed is down 2% to €3,700,000,000 and Rafi is unfortunately disappointing at 9.2%. The Financial Services division really experienced an extremely, extremely difficult half year. And they were really impacted significantly by the knock on effects of COVID-nineteen. The bank's foreign exchange business has been harshly impacted by the global travel restrictions. FX notes and the world currency card reduced quite dramatically. FX trading margin remained under pressure and interest rate cuts also had a negative impact on interest revenue and average yields on cash. In relation to our fleet business, which is a significant contributor in the bank, fleet income reduced due to higher maintenance charges as a result of an extension of a sizable fleet contract. And also at the same time, we had a municipal contract that reached end of term. The bank's balance sheet on the other hand is strong, adequately liquid and adequately capitalized. Total loans and advances grew 14% and deposits are up 8%. Cash and investments are also up on the prior year. Really, our challenge in the bank's balance sheet is our declining leased asset balances. The team just really needs to secure more fleet contracts so that we can deploy the excess capital. The bank's digital journey is progressing, having reduced its retail footprint from 63 branches to 21 during the period under review. Looking at our insurance businesses, the best insurance revenues were impacted by lower premium income collected as consumers disposable income came under pressure. The negative revenue variance was offset by cost containment initiatives, lower acquisition costs and improved claims management resulting in a good trading profit growth year on year. Compendium held its own. However, policy cancellations remain a concern, and we've already alluded to constrained disposable income earlier. Midwest Life new volumes were up year on year. However, this has been offset by higher claims. The first half of the year was really, really tough for this division. I mean, looking forward, we expect the pressure on FX income to continue into the Q3 of the financial year. But overall, we expect improved trading to June. We have appointed a new CEO for the division, Hannah Sadiki. Hannah started on the 1st October 2020. Hannah brings with her 50 years banking experience, and we're really confident that she'll be able to bring a lot of value to this division going forward. Hannah also joins us as the 1st black female divisional CEO in the history of the best. On corporate and properties, the list properties really managed to weather the storm. The portfolio's vacancy rates are at the bottom end of industry averages. Revenue declined as a result of rental reductions and an increase in building vacancies. Operating expenses though remained well controlled and the market value of the portfolio is circa €8,000,000,000 On time automotive has been disposed off and as Mark indicated earlier, we're very relieved and very happy to have closed off Mile on the 5th February and the €1,000,000,000 proceeds have been banked. Moving to just strategy and outlook. We've got a blueprint and I suppose let me call it the DNA of the group that really is what drives performance and what enables us to deliver in the way that we do. And maybe just touching and highlighting some of the areas that are on the slide. Leadership entrepreneurial leadership style and culture in the business is really fundamental. It's our winning formula. It's part of our magic. This is entrenched across all our divisions. And our business managers, CEOs and MDs understand that what is expected of them is to treat the businesses and run them as if they were their own and take personal accountability. We also have best in breed. Our management teams are the best in their industries and their experts in their field. And all of this contributes to the kinds of results that we deliver. Diversity and inclusion will always be important. And I'm very happy to report that at an executive leadership level and this is from our divisional CEOs up 45% of the team are women and 45% are black. In relation to strategy, we continue to focus on diversifying our portfolio, continuing to broaden our service basket. We'll allocate capital efficiently. We'll continue watching our debt levels and keep these within an acceptable range, whilst at the same time creating capacity for acquisitive growth. Expanding in niche areas internationally remains our focus. We've identified hygiene services, facilities management and plumbing and related services, and we've ticked on the hygiene and the SM side, and we continue looking for a plumbing and related type acquisition. Our people are our number one priority. You can imagine when you employ more than 100,000 people, the health and safety, the livelihoods of our people are really key and important. A lot of work is happening behind the scenes that you don't see, but we're working hard in terms of ensuring that 100,000 plus people are key Midwest ambassadors out there for us. Technology innovation remains key to what we are working on our business. The only way that a business remains future fit and ready is through leveraging technology as an enabler and key driver. We're very comfortable disrupting our own business. This is evident when we acquired the drone business in our security portfolio, bringing the disruption within our own organization and being comfortable to enable our businesses to evolve accordingly. Lastly, in terms of structure, our 6 pillars of operations really give us focus. We're very comfortable that we can continue to grow within those 6 pillars, both organically and by acquisition. Our decentralized model gives us the agility and flexibility that I've already spoken to. It's part of our DNA and it will remain. And I think what the way that we've been able to deliver in the first half of the year is really because this decentralized model enabled us to do a number of things all at the same time across 200 plus businesses. And of course, we've got our established governance processes, which we work through in line with our ethical business practices. Underpinning all of this is our core values of honesty, integrity, accountability and respect. And so we will continue focusing on these areas as we move forward. In closing, just in terms of the outlook going forward, we anticipate that the economic tough economic environment is likely to persist. And really, it's around quick decision making. We've taken action very quickly. We've optimized our cost basis. We've improved efficiencies, and we're really very comfortable that our businesses are future fit and our models are sufficiently scalable. We've expanded our geographic footprint, and we'll continue leveraging this going further. In terms of growth, we'll continue looking for growth opportunities, both organic and by acquisition. And as I indicated earlier, Newnan finalized the bolt on acquisition in February of a company called the Axis Group, who are a security and cleaning business in the U. K. And the value that Axis brings to Newnan is as follows. Firstly, it expands our geographic footprint in the U. K. At the moment, we've got 2 regional offices. With this acquisition, we'll move to 9 regional offices across the U. K. We'll also be merging 2 large security portfolios in the U. K. And this acquisition will take Noonan from a security perspective to number 1 in terms of market share in London and number 4 in the U. K. Our cleaning business does get a bit of scale, but overall in general is still a subscale in general when you look at the whole of the U. K. There are further synergies that have been identified. And as always, through a due diligence process, we look for areas and opportunities for EBIT uplift. The team has done this and these will be delivered over a 2 to 3 year period. Enterprise value for this acquisition was £24,000,000 In closing, I'd like to thank Gillian and Marc. I think we've had a fantastic 6 months. Whilst it was tough, we had fun. And in fact, I think across all our management teams, we were able to bring back hope and we were able to bring back energy, which is important. I'd also like to thank the divisional CEOs and also in our expo, Ilsa and Akona, just all for their leadership, because good results really fall on good leadership. And the team has done exceptionally well. To our 100,000 plus ambassadors out there, I thank them because BirdVest is a people business. So we produce these results because of the people that we have. Lastly, we remain very confident in our ability to deliver sustainable growth and create long term value for all our stakeholders. Thank you very much. I'm happy to take questions. Thank you. Thank you, Pumi and Marc. I'm going to hand back to Judith. Great. Thank you very much, Thank you, Judith. While we wait for any questions to be posed, we've got a question here from the webcast, comes from Jumasani from All Weather Capital. He is commenting that we think that our non core assets, the cleaning up of that portfolio is nearing completion and that ad cost is now classified as core. Does this have any specific preference for holding listed or unlisted investment? Okay. Happy to answer that. Yes, you're absolutely right. Cleanup coming to an end. At Calkerscore, we do have a preference. We prefer not holding listed entities. We've got a very clear preference. That's preference number 1. And the second preference is that we also do have a preference for owning 100%. Most of our subsidiaries we own will own 100%. Adcock is obviously an anomaly from that perspective. There's history to it, which is known and understood. But yes, that's the answer to that question. Okay. I suppose there was a question where the ad hoc is corporate, but you've mentioned that, that is indeed core. And second question, I suppose, comes from Rob Strecker from JPMorgan. Do you think financial services can be fixed with minor changes? Or should we expect major restructuring? Here? So thanks for the question, Ross. Yes, we think it can be fixed. I mean, the reality of what happened in the first half of the year for Financial Services is that when travel bans were put in place, FX revenue just went to 0. So a significant portion of the business that top line just really went to 0 and that's really the material impact there. As travel restrictions lift and people start moving around and that demand comes back, we'll start seeing a recovery. Really, I mean, the big thing here and I spoke around it, we've got excess capital in the bank. We can deploy it. Great returns and margins from our fleet contracts. And we just need to land a couple of those again. And I mean, really, that's what's required in this business. Marc, I don't know if there's anything else you want to add, but I mean, those are the 2. It's absolutely the key issues. And I mean Ross, they're not going to take massive amounts of change from where we are now. As you'll know, we've already done quite a lot of the actual infrastructure restructure that we needed to do. So in terms of taking up the branch network, particularly on the ForEx side, that's been done with the restructure of the appropriate people as well. So I think the heavy lifting from a restructure point of view has already been done. And the bank is now well positioned, obviously, for the travel market to then open again. Thank you. I'm going to combine 2 or 3 sort of questions that's similar in vein. The question is where will the next rand of cash flows be allocated in terms of growth, acquisitions? Then there's a specific you made a specific reference to a plumbing top acquisition. Has any targets been identified and any specific geographic areas that would be of interest? Let me pick up the sort of capital allocation component of that. Obviously, and you can see it from what we've done in the last 6 months. We have been looking just to pay down some debt and that's specifically in relation to the PHS bridge. We did a significant amount of that in the 6 months. There will be some more to come now. So obviously, part of the capital will be allocated to that. But we continue to look for acquisitions through this time frame. The process that the business has always gone through hasn't changed. We have, as Pumi already alluded to, have done 1 in the U. K. There are a number of others that we are actively pursuing at the moment offshore, and we will continue to do so. All of those are currently at a sort of bolt on level, which for us is about €500,000,000 But certainly, the capital allocation from an acquisitions point of view is going to carry on as is. In terms of plumbing, have we found anything? We've seen many, but we are looking for a particular business model. We acquired PlumbLink about 7 or 8 years ago. That business has really been absolutely spectacular, has grown from strength to strength every single year. But it's got a specific model. It's and it's quite unique. And so whilst we've seen a number of acquisitions when we kind of peel it back and look at the revenue mix and the profit mix and the margin mix, we haven't yet found what we're very comfortable to proceed with. So we continue looking. And as you know, I mean, we very we don't rush the goalie when it comes to acquisitions. We must find the right operating model and then we'll look further in terms of having further conversations. From a planning perspective, we're just not yet. We haven't found it yet. All right, Judith, I'm going to come back to Corus' call. It's 2 questions on the line before we will revert to the webcast. The first question comes from James Twyman. So if you could open his line, please. Thank you. Yes. Hi there. Thank you. I've got a few questions. Firstly, could you just say how much debt is in the UK now after your refinancing and compared with how much it was at the peak? Secondly, the cars you've sold quite a few cars from the car rentals business. Could you just give us some idea of how much cash has come in from that business, which I think is very substantial, but also how much more there is to come in the second half? And then, I have a final little question, which is just on the travel business, what your plans are in terms of are you planning to sell all of it, some of it or where are we on that? Thanks. Yes. Let me deal with the debt question first. So, in terms of overall offshore debt, and you recall we've got the 2 components of it. The first component relates to our FM service businesses, which was Newnan, USS, Future Cleaning, etcetera. We have a euro facility in play there for €320,000,000 and that facility still remains in play. The facility had an initial period of 3 years, which terminates next year in September with 2 additional 1 year renewal periods. And so that still remains in play at €320,000,000 And the other debt that we put in play was the PHS bridge, £516,000,000 in total. That runs through until December 2021. We paid down £350,000,000 of that with £186,000,000 remaining. In terms of discontinued cash, we brought in and this is now obviously the sale of the vehicles from BCR. We brought in £600,000,000 to date. And then, James, if I can answer your question on our travel businesses and what the plan is there. So last year, when we made a decision to dispose of bidet services and BCR, we obviously had our travel businesses also in the mix because of the impact in the travel and tourism industry. Our travel businesses are asset light. We've restructured sufficiently. We don't have huge capital investments in those businesses at all. We're very clear that from a restructure perspective, there isn't really more that can be done now. And it's really around waiting for recovery from a volumes perspective. So we're very comfortable to stay with our travel businesses and they'll rebound at the right time. BCR and Berde Services on the other hand were capital heavy. We had BRL 1,500,000,000 in vehicles and in our car rental business. We would have need to recapitalize better services at license renewal point at €500,000,000 And we just didn't feel that we wanted to have that kind of capital locked in when we knew that volumes would take a while to recover. So travel services, we're still in the game. Thank you, James. The next question comes from Paul Siges. Paul? Yes. Hello. Can you hear me? Yes, we can. Great. Thank you. Hello, guys, and well done on the numbers. Two questions from me. Maybe just on Newnan. Can you give us a sense of the trend that you've seen in terms of revenue and profitability? And what do you think has been the impact, maybe to Newnan, but also to PHS, if any, from the sort of work from home phenomenon post COVID? And I'm just trying to get a sense of what the negative impact has been to some of those operations, cleaning, etcetera, and what we could see happening when things hopefully open up. That's the first question. Thank you. Thanks, Paul. So in relation to Noonan and kind of what's happened in that business, the business has really done well. Our biggest challenge there has been the acquisition that we've made, which was Future Cleaning and their exposure is mainly in the Horacek Centre and in particular cinemas. And cinemas really just closed down in the U. K. And so that's where the significant negative pressure has been. The rest of the business, Ireland is strong. Our operations in Ireland are doing very well. And the U. K. Operations, the drag is just locked down, cinemas closed and feature cleaning exposure on the cinema side is quite significant. Impact of work from home. So in both businesses, I mean, the impact is obviously with the vacancies, your contractual revenue declines, right, because you then have clients where you're unable to bill for that full contract. But what both businesses have done is they've picked up on the one off work. So whether it is big decontamination of offices from a Newnan perspective and obviously from a PHS perspective, sanitizers has become a consumable, a big consumable item that we didn't have before. And the reality fact, people are washing their hands more. So from a PHS perspective, consumables in terms of soap are up. And so just in terms of one off work, both teams have been able to pick up on the one off side to compensate for the decline on the contractual revenue. Just in terms of the underlying contract pool, particularly around hygiene services, because that's how we really measure the sort of the growth of these businesses. So from a PHS perspective, that underlying contract pool now has grown consistently for I think end of January was 21 months straight. So, a net basis you're growing the net amount of net value of contracts versus the contraction thereof. I think we're very, very comfortable that they've managed to do that despite what's happening with COVID. Yes. Thanks, Ilsa. Thank you for that answer. That's helpful. Just on the freight and LPG contract ramp up, obviously, it was a little bit late, but now it's operational. Can you just remind us how we should think about this in terms of sort of annualized revenue and margins going forward? Thank you. Sure. I mean, so it was ZAR1 1,000,000,000 spend. We consistently said that we're targeting a return of 20% after tax over the life of the project. Volumes have come on board with commissioning now. As you say, we did commission about 3.5, 4 months later than expected. But we were actually quite chuffed with that given some of the COVID delays that were around. It's certainly performing from a financial perspective as we expected. In fact, volume levels are looking to be better than what our anticipated plan was. So in this particular year, you'll see 8 months of LPG coming through. There is just gets an extension to the same question. There is a second LPG project that we're looking at in our Sandoz, which is on the cards as well. And that's probably got another 2 years to go before we can bring that to market. Okay. Thank you for that. Thank you very much, guys. All right. Let's go back to the webcast questions. Mark, a question here for you. What local debt is maturing in 2022? Yes. Yes. And what is the big plan for this debt? So the local debt, and I can refer you to we've actually put it in the presentation. Give me 2 seconds. It's on page 11 of the presentation. Yes, we've got prep shares that are maturing and I think one small bond. And I mean we've got adequate free cash flow to cover those. So obviously depending on what happens from an acquisition perspective, there's nothing significant that we need at that point in time. We will then use free cash flow to pay them down. If there's an acquisition opportunity, we'll look to roll them. All right. And then a question on PHX. Warren comments that the PHS trading margin of 16.2% looks ahead of prior guidance. What drove this? And how far advanced are we in terms of the synergy extraction? Warren, I'm glad that actually we've been able to deliver early. But so let me talk to the main drivers. So it's the one off work that I spoke to earlier. So PHS, I mean, has picked up a significant amount in that space. And that work comes in at higher margins than the contractual revenue that we get. And that's really what's boosted PHE's numbers. And in fact, they're working a lot on vaccination testing stations, etcetera. They've just picked up quite a significant amount of call it COVID work, which will be temporary in nature because I suppose once in the U. K, they're done with the rollout, all of that will dry up. But for the moment, we'll take it and that's what boosted our margin. Unfortunately, because of lockdown and inability to travel, some of the synergies that we've spoken to have actually only been able to deliver on the one. So if you recall, we've spoken about a bin liner project. We've been able to roll that out now 100% to all our clients. That contribution is material in the number and it has contributed to the margin uplift. But the other areas we still need to get to and hopefully when we can travel we can do that. And that's obviously in relation to supply chain and kind of combined procurement between Steiner and PHS. The work with Noonan has started, but we expect that it will pick up momentum in the second half of the year. I'm just trying to The extension of the range? The extension of the range. We haven't gotten to that yet. So we do still need to have a look at their range and just bring in some of our best practice. But those I mean to answer your question, we've only hit 1 of the synergy benefits. We still got the 3 others to follow. And it's really been the COVID work that's boosted the market. So we might just as a follow-up in that region. Warren also asked what the contribution from government support systems and schemes were in this period? I don't know if we know the split. I mean certainly the contribution from a South Africa perspective has been very significant in terms of the UIF TIRS. And I mean really it has given that we're such a large employer in the South African environment, it really has enabled us to support our employees and keep them in work. And I think as importantly, we did it in her presentation, we've got to thank government for the process that they put in play. It really has kept a lot of people in employment. From a U. K. And Ireland perspective, I mean, they've got furlough schemes in play there. And similarly, it really has helped them to keep people in place. The overall support in all environments was significant. Then a question, thank Mark, from Namira from UBS. She you mentioned market share gains. She's interested to understand what the nature of the market share gains were. And is that competitors closing down or out of stock? Or what is driving those market share gains? Okay. So most of those market share gains, I did indicate that we saw that in our trading businesses. And just maybe to tell the story of what we've seen coming from April lockdown through to December is some of our trading businesses in the lockdown were designated as essential services. And so I suppose with limited points for purchasing, our sales did pick up and we did pick up some new customers during that time and we just held on to those customers, which has been great. And so there was obviously a shift from a customer purchasing perspective and we've held on to some of those customers. So that's the first point. Secondly, one of the things that we also did pick up was an increase in just sales. And what gave us the advantage and I spoke to it as well is just our inventory levels. So we had the stock. Before the lockdowns kind of hit, our management teams and our trading businesses anticipated that something was coming, increased their inventory levels. And so when you had global lockdowns and really cargo not moving, we had stock. And so the suppliers that had the stock were the ones who could fulfill the order. And just from that perspective, we were able to pick up and we kept those clients. Those clients want to go to supplies where you're not given these long lead times when you need to deliver. And so that's what also pushed us from a market share perspective. And yes, there are some of our competitors who have closed down. The number of companies who have gone into business rescue in the half year or from April lockdown across very different industries is there. And we have picked up from some of that benefit. So it's a combination really of all of that. But we definitely, definitely can see that the market share in those trading businesses is up nicely. Thanks. Sure. So those are the questions that we loaded on the webcast. Now I don't see any further questions in the queue on the call. So it's one going, going, gone. So thank you very much for participating. We will load a recording of this call on the website later today. Thank you. Thank you very much. Thank you. Thanks for joining us, everyone. Thanks, everyone. Cheers. Bye bye. Thank you. Ladies and gentlemen, on behalf of Britvest, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.