Earnings Call: H1 2021

May 26, 2021

Afternoon, ladies and gentlemen, and welcome to Ruiner's Half Year Results Presentation for the 6 month period ending 31 March 2021. I'm Alan Dickson, the Group Chief Executive of Ronit and together with Nick Thompson, our CFO, we'll be presenting these results today. Due to the restrictions associated with COVID, this is a pre recorded webcast with a live Q and A session immediately after the webcast. Please submit any questions on the tab on the left hand side of your screen and we will address them at the end of the webcast. The 6 month period under review has been a much improved performance relative to the comparative period in the 2020 financial year. It is worth highlighting that the improved performance of the 3 operating segments, which are the profit generators and are the best indicator of Ruiner's performance, have delivered an 8% improvement in operating profit, which is pleasing given the fact that the comparative results were not materially negatively impacted by COVID. This improvement reflects the solid financial performance of the group and the success achieved in effectively managing our businesses under the new operating environment. The businesses have managed the pandemic and the associated health and safety protocols applied both at our businesses and with our key customers particularly well. The improvement in performance included a return to profitability for our Electrical engineering segment, which was led by an excellent performance in the circuit breaker business. Equally pleasing, all our ICT businesses performed at or slightly better than our expectations. In line with our guidance last year, Quince's returns reduced in line with the lower interest rate environment. Unfortunately, the Applied Electronics segment had a challenging half as the impact of South African travel restrictions, coupled to local lockdowns in several of our key export markets led to us concluding lower than expected new export contracts. In addition, the stronger rand negatively impacted revenue and margins on the export sales that were executed. Overall, the performance of the segments was pleasing, particularly since the general level of activity has still not returned to the pre COVID volumes. In our 2020 financial results, we shared several key improvement actions undertaken to ensure the challenges of last year were addressed And I'm pleased to report that these have had the desired effect. At Quinz, the outcomes from the independent enterprise wide risk control audit have been implemented. The deep dive that was being conducted on the Quince book is complete and the quality of the book has been confirmed, leading to no further need for any provisions or ECLs to be created. These actions together with a more stable credit risk environment and steadily improving customer collections led to Quinn's performing slightly ahead of expectations. At our Power and telecommunications cable companies, the actions taken to reduce the cost base to match the expected infrastructure investment in South Africa And the restructuring of the loan at ZEMIFA in Zambia all yielded positive results and the cable companies delivered a positive operating profit despite general production volumes remaining weak. Finally, the cash generation of the group remains within normal levels, despite requiring some investment into working capital as revenue increased. This has enabled us to increase the dividend payment by 8% to $0.70 per share, largely in line with the improvement in the segment operating profit performance and more than double the inflation rate. Our shareholder returns have been augmented by the commencement of a share buyback program in which just over 1,000,000 shares have been bought back and a further ZAR58 1,000,000 return to shareholders through this initiative. The high level financial metrics flowing from the performance show an increase in revenue of 11% to ZAR4.6 billion and significant increases in both operating profit and attributable profit to ZAR436 1,000,000 and ZAR311 1,000,000 respectively. I will now hand over to Nick Thompson to take us through the detailed financial analysis. Good afternoon to our South African and UK participants, and good morning to those of you who are joining us from the USA, and thank you for your attendance. Today, I have a much more pleasant task in presenting results for these 6 months to 31 March 2021 as compared to the results of the comparative period When we had to consider and account for the potential impact of the COVID-nineteen pandemic on both our financial and non financial assets In terms of the forward looking requirements of IFRS, I'm very pleased to confirm that the significant adjustments required in the prior period have not been repeated in this current period. In evaluating our results, it is worth remembering that the pandemic resulted in a 7% decline in the South African GDP In calendar 2020, which includes the Q1 of this reporting period for Roynet, and that only a modest recovery of 3.3% is being forecast for the 2021 calendar year. This major decline in economic activity is only gradual recovery there from Impacts on our ICT segment as GDP growth and the related business confidence that it brings are key drivers of demand for our products and services in this segment. Equally, gross domestic fixed investment reduced by 12% in 2020 and is expected to recover by 4.6% in 2021, which has a significant bearing on demand for the group's infrastructure related offerings, particularly in the Electrical Engineering segment. As can be seen in the statement of profit and loss, going straight to the bottom line, our current results reflect $311,000,000 profit after tax for the current period as compared to a loss of $326,000,000 for the comparative period. This substantially improved result was achieved against the consequences of the continuing COVID-nineteen pandemic, As I've just outlined and that the comparative period operating results being revenue and EBITDA before financial asset impairments were largely pre COVID and the current results were achieved during COVID. Pleasingly, revenue for the period has increased by 11% or 470,000,000 This increase was driven by the $782,000,000 increase in the revenue contribution of the Electrical Engineering segment. This was firstly from the uninterrupted production at our main energy cable business, African cables, as compared to the loss of almost a full quarter in the first half of twenty twenty as a result of last year's industrial action. However, demand for medium and high voltage energy cable and copper telecommunication cable remains depressed when compared to normal market demand levels. Secondly, the Energy and Telecommunication Cables Business's revenue Also increased due to the pass through to customers of rapidly rising commodity prices, particularly copper prices, which have increased by about 20% in rand terms during this half year period. Thirdly, our circuit breaker business delivered an excellent performance as it increased both export and local market revenue. Offsetting the revenue recovery in the Electrical Engineering segment, The ICT segment's revenue was $239,000,000 lower, largely due to reduced demand for our products and services in line with the curtailment in GDP and the reduced business confidence resulting from the COVID-nineteen pandemic. The ICT segment was impacted by the various levels of lockdown restrictions imposed on a significant portion of our customers in the education, hospitality and tourism sectors. Applied electronics revenue reduced by $95,000,000 in part due to the current strength of the rand and its impact on the value realized from export orders And in part due to the difficulties in both concluding and fulfilling export orders due to COVID restrictions in our export markets, as well as certain regulatory delays in our receiving export clearances for some export orders. This improved revenue 11% translated into an 8% increase in EBITDA before impairments of financial assets. The increase in revenue did not fully translate into the increase in EBITDA before financial impairments due to the change in relative revenue contribution between and in the segments. Expanding on this, the EBITDA before impairment to financial assets margin was 12.3% in the current period as compared to the 12.8% in the prior period. This change is due to the increased revenue contribution from the Electrical Engineering segment, which has a lower margin than the margins in the other two segments. The lower revenue earned in the high margin ICT segment, together with the impact of the current low interest rate regime on our EBITDA from the rental finance book and the change in mix of the revenue contribution from the various businesses In the Applied Electronics segment, with the renewable energy cluster contributing a greater proportion of the overall Applied Electronics revenue at its lower EPC margins than was the case in the prior year. Very positively due to the gradually improving economic conditions And our focused efforts on rental and trade receivable collections, there was no requirement to increase our ECLs against either our rental book or our trade receivable book in the current financial period. The required ECLs were assessed in a manner consistent with the assessment conducted in the prior period and in accordance with IFRS 9. Our assessment resulted in a total ECL and credit loss of $8,000,000 being required in the current period as compared to the $267,000,000 ECL and $298,000,000 credit write off from the comparative period. All these improvements resulted in an increase in EBITDA from the loss of $36,000,000 in the prior period to a positive $562,000,000 in the current period. Below EBITDA, depreciation increased by 6% or $7,000,000 due to the 2020 asset acquisitions of 138,000,000 combined with the year to date asset acquisitions totaling CAD45 1,000,000 excluding capital work in progress. The carrying value of goodwill, property, plants and equipment The right of use assets was carefully reconsidered in terms of IAS 36. Based on the exercise performed, no impairments were considered necessary in this reporting period. In the prior period, there were substantial impairments needed of $101,000,000 During this period, the group has disposed of an 18.8% Portion of its shareholding in the Zimbabwean Energy Cable Business. This investment was fully impaired some years ago due to the economic conditions in Zimbabwe and the inability of the group to receive dividends from this company due to currency controls. Accordingly, both the proceeds and the profit realized for the stake amounted to ZAR17 1,000,000. As will be discussed further by Alan, the group is making good progress in establishing the solutions and systems integrated cluster In the ICT segment, which has commenced with the creation of PlusOnex. This has resulted in an IFRS 2 charge For transaction related share based payments of €5,000,000 on the introduction of new BBBEE and other minority shareholders who will lead this important business initiative. Lastly, on the statement of profit and loss, the group's share of income from its investment in joint ventures and associates, of which the most significant is the group's investment in the telecommunications Cable business improved from a loss of ZAR82 1,000,000 in the comparative period to a breakeven position for this reporting period. This was due to both an improving fiber optic cable market and the substantial effort put into reducing this business' cost base over the past several years and no further impairments being required. All of these improvements resulted in the profit for the period of 311,000,000 versus the loss of $326,000,000 in the prior period. Turning to the statement of financial position. There have been no significant developments impacting the financial position during this period under review. The group continues to replace and enhance Property, plant and equipment and related asset portfolio in line with the depreciation incurred and there were no impairments raised during this reporting period, nor was there any acquisitions or impairments impacting goodwill. The rental finance book currently stands at 2,600,000,000 Net of the allowance for expected credit losses, which is a very minor decrease from the prior year end due to discounting activities being currently in line with the rentals being settled by customers. The allowance for expected credit losses of $183,000,000 is now 6.7 percent of the rental book compared to $210,000,000 or 7 point percent at the end of the last financial year. Working capital has increased by $116,000,000 in terms of our normal cycle of building up inventory in the first half as the group secures the long lead items needed to meet second half orders. It also reflects the impact of escalating commodity prices, particularly in the electrical engineering segment and the growth in the segment's receivables and inventory arising from its growth in revenue. The group's net cash resources of $235,000,000 compare favorably with the net cash resources of $72,000,000 at the end of the comparative period. The statement of financial position reflects a strong net ungeared position, which together with our credit facilities provide the financial resources for both the attainment of the group's strategic objectives and to return cash to shareholders. The second to last slide is the cash flow analysis for the period. Starting from the 1st column on the waterfall on the right hand side of the slide, reflects the cash generated from operations before working capital movement is $553,000,000 for the period. Dollars 116,000,000 was then invested into the working capital for the reasons outlined before, resulting in free cash flow of $270,000,000 after tax payments of $137,000,000 Free cash flow generated represented an 87% Conversion of the group's profit for the period into cash, despite the need to have invested $116,000,000 into working capital. Free cash flow was applied to meet expansionary capital investment of $76,000,000 and increased by a small cash return from the Quinte rental book and the $17,000,000 received on the disposal of the 19% stake in our Zimbabwean power cable. This resulted in a net cash generation for the period of 216,000,000 Turning to the waterfall on the left hand side of the slide, the net cash generation of 216,000,000 resulted in a final net cash position of $235,000,000 after considering the opening cash balance of $323,000,000 and the cash outflow for the 2020 final dividend of $315,000,000 paid in the current period. Lastly, the slide on capital expenditure reflects that the group continues to invest appropriately in both expansionary and sustaining capital in all the segments, with the majority of the investment being into plant and solar assets. In summary, the group delivered a solid result 6 months to 31 March 2021 against the backdrop of the continuing COVID-nineteen pandemic and its impact on our economy and customers. The group remains well resourced to both take advantage of future growth opportunities and to continue to provide cash returns to shareholders. With that, I will hand back to Alan, who will share the developments in the group strategy with you. Our strategy execution has continued positively in the first half of the twenty twenty one financial year. Our key new growth businesses of renewable energy and last mile broadband connectivity have made good progress. In the renewable energy market, further legislative developments have continued the liberalization of the energy generation market and improve the overall growth projections for this market. Most importantly, the long awaited notification of the increase in the cap for embedded generation from 1 megawatt to 10 megawatts, which is a key enabler for accelerated growth in our Terrafirma solutions business has been issued for public comment and its implementation is imminent. The new REIPP window 5 has also been announced, which will provide further opportunities specifically in the electrical engineering segment. To ensure we maximize the impact of these market developments, A key expansion of our renewable energy strategy took place through the launch of Lumiqa Renewables. Lumiqa Renewables is a joint venture with a European capital partner called AP Mueller Capital. AP Mueller Capital is an affiliate of AP Mueller Holdings, whose interests include Maersk Shipping. This blue chip partner with a deep access to African markets and experience in these countries, coupled to Betis and excellence in renewable energy will expand our ownership of renewable assets into Africa, where we intend to deliver cost efficient energy solutions to commercial and industrial customers. Within South Africa, our investment into solar assets accelerated with a strong increase in our build, own, operate asset ownership. The pipeline for these projects remains robust and we expect the continued investment into our renewable assets to continue to accelerate. Within our circuit breaker business, Our investment into energy management, which is rapidly converging with our solar energy strategy resulted in the successful launch of our Astute IoT product range. This product range enables remote energy management and the extent of the uptake with nearly 10,000 devices connected to our platform since launch bodes well for the integration of this capability into our existing strategy for renewable energy. The modernization of our ICT segment also progressed well. Our solutions and system integration cluster under the brand PlusOnex have built out their service offering through 2 acquisitions in private virtual cloud provision and data consulting. These acquisitions maintain plus 1x on their business case projections and further complementary bolt on acquisitions are expected in the next 6 months to further bolster their service offering. Within our traditional businesses, the complementary services in the total workspace provision cluster now comprise 19% of total revenue. And our virtual cloud VBX connections in the business communications cluster have increased to over 22,000. These diversified revenues provide sustainable growth to our traditional income streams. In line with our guidance that we intended to reduce our interest in our African cable plants, we concluded the 18% sale of our interest in our Zimbabwe operation of Kafka. We expect further corporate action on this asset before year end and are in negotiations to further reduce our equity stake in Zimbabwe. Finally, the implementation of the share buyback program, which augments our strong dividend payments and enhances shareholder returns was commenced during the first half. These strategic actions coupled with a solid underlying segment performance position the group well for sustainable growth and enhanced investor returns. The electrical engineering segment delivered a solid performance after a particularly challenging 2020. In our power cable business, the weak local infrastructure continues, specifically in the medium and high voltage product lines. We are however encouraged by the improvement in the state's civil infrastructure expenditure and are hopeful this will expand into energy infrastructure soon. In Zambia, the liquidity position has not improved. And despite further commitments, no further reduction in the $96,000,000 government receivables was achieved. Despite this, the improvement in the cash position has been reinvested into working capital and ZEMIFA increased its production and improved its operational efficiencies. Our telecommunications cable plant continues to experience weak copper cable volumes, but optical fiber has improved over the period as both local demand and exports into Africa increased. The prior year's improvement actions yielded the desired results and the cable operations delivered a positive operating profit performance despite continued weak infrastructure demand. Importantly, They remain extremely well positioned for any increase in energy infrastructure investment, which we trust will emerge in the near future. The circuit breaker business delivered an excellent performance with an improvement in the local market share underpinning their performance. The launch of our new IoT Energy Management range, the Astute range, has been a success and provides a new product suite for the local market. In our circuit breaker export market, our recent R and D investments yielded positive results as several new OEM contracts were concluded for long term projects and export volumes increased significantly. Our subsidiaries in the USA and Australia continue to perform well and improved on the prior year profit levels as their growth continues. The strong market performance was supported by good production in a difficult supply chain and logistical environment. The ICT segment performed in line with our expectations. The largest impact on operating profit over the comparative period was in Quince, where the lower interest rate environment reduced the returns the company made on its rental book and on the equity that Roynet has invested in the book. The book remained robust, but decreased marginally due to sales volumes at NASHRA not yet having returned to the pre COVID levels. The independent enterprise wide risk controls have been implemented and strengthened both our credit applications and credit collection processes and the collections from our end customers improved steadily over the period resulting in no further ECLs or provisions being required to the book. In our total workspace provision cluster under the Nashua brand, The company steadily improved performance over the 6 months as more segments of the market opened and lockdown level 3 was reduced to 1, enabling broader economic activity. The business has returned to around 80% of pre COVID levels, with further improvement expected as the trend to normal economic activity continues. Importantly, the strategy of cross selling continues to accelerate with complementary products and services now comprising 19% of total revenue. This trend is expected to continue as the shift to digitization accelerates, and we will focus on delivering digital workflow and annuity based service offerings. Our business communication cluster performed well and resulted in year on year growth in the cluster. Both ECN And Skywise core business accelerated as good new deal flow continued both in fixed voice and last mile broadband connectivity solutions. ECN is now at 87% of pre COVID voice minutes and this is also expected to improve as the final segments of the market eventually open. In the solutions and systems integration cluster, PlusOnex has achieved good progress as it delivered a profitable 6 months, while building out its core service offerings as it positions itself as an end to end ICT provider. The Applied Electronics segment had a challenging half as sales activities were hampered as a second wave of COVID flared around the world and resulted in SA's international travel bans and local lockdowns in several of our key geographies. In addition, Those sales concluded were negatively impacted by the strong rand at both a revenue and a margin level. Our export order books remain under some stress, specifically in our radar and fuses business, but recent new orders at Omnigo, Wrotech Communications and fuses have positioned the export businesses for a much stronger second half. The renewable energy businesses delivered on their strategic targets of investment into build own operate assets as the market demand continues to grow. Both BlueNova and Terra Firma Solutions have extremely strong order books entering the second half. Roynet has continued its recovery from the impact of COVID-nineteen and all businesses have fully adjusted to the new operating conditions. The improvement in performance in the electrical engineering segment is expected to be sustainable into the second half of the year And the ICT segment is expected to continue to deliver in line with its recent performances as the economy continues to improve. The Applied Electronics segment is expected to deliver a much improved second half as export orders on hand sufficient to deliver a stronger performance than the first half and the renewable energy businesses are operating at near capacity. The group's performance should remain robust, whilst generating sufficient cash flows to support the growth of and the investment into our businesses, while supporting both our dividend and share buyback programs. There does remain some economic uncertainty to our second half performance as the 3rd wave of COVID-nineteen in South Africa is expected to develop during the period and several of our key export markets continue to battle the pandemic and may negatively affect our export capability. Despite these uncertainties, the FY 2021 performance remains likely to exceed the prior period. That brings our recorded webcast to the end. Thank you for your attention And we will now manage any of the questions that you have posed to us. Thank you. Thank you for your attention this afternoon and Spending some time with us on the Roanoke results. The question box is open, so you're welcome to continue to submit any questions into the Wachs, that you would like us to answer. There are 2 in there at the moment, one which I'll answer and one that Nick will answer. The first of those is from David Fraser From Peregrine Capital and in fact they're both from David. The first one is, can you update us on the size and trends in the order book in the Applied Electronics division? So yes, we can. Just to perhaps put a little bit in context, when we feel comfortable or when we would classify the order books as good Would be if we had roughly a 12 month order book. So that is more than enough time for us to secure other contracts and it typically covers a full financial period. Where we find ourselves at the moment is that as we indicated in the presentation, whilst the order books have been around that 12 months for the last 2 or 3 years, We find ourselves at the moment with order books that are healthy to the end of the year and into the early part of the new year, but not as strong as 12 months. So there are a fair number of orders that we still need to secure in the remainder of this year to fill up the order books for next year. So I would classify them as being Decent enough to get us to the end of the year, but not sufficient to get us through to the end of next year. And overall, they are slightly lower on average than And we were in some of the prior periods. In terms of the trends, the primary trend at the moment is challenges of a logistical nature. And they manifest themselves in 2 ways. They first will manifest themselves in the ability to conclude new contracts. In many cases, our customers would like to hold almost an in person not in person, in country negotiation Or there is a requirement for us to complete some testing or some specification verification On products in countries and where we're unable to do that because of the travel bans at the moment, there tends to be a delay in the securing of those new export contracts. The second logistical challenge that we find is manifesting itself is once we have received the contract is in the execution of that contract. Again, In many of the contracts that we've got, there is some form of accreditation that's required by the customer, normally in his own country. And if we are unable to get into country, unable to engage meaningfully with the customer on in his own territory in order to sign those off, It also delays the acceptance of some of the contracts that we have. And within South Africa itself, we have a number of regulatory approvals that we need to get before we can Start to manufacture and before we can export. And both of those because of the restrictions and let's call it general slowdown In government orders as the government progress has been a little bit slower than it has been in the past. So I think the general trend has been it's more challenging to secure Export orders and a little bit slower also to execute. So we're hoping that as the vaccination Programs roll out around the world and travel starts to ease, but that should get a little bit easier as we move forward. The second question also from David Fraser with Peregrine relates to strong rand and the effect strong rand will have on our export margins And whether we have hedged any of the committed exports? And if so, at what average rate? And Nick will manage that. Good afternoon, everybody. Starting perhaps with the middle question is, do we hedge export sales? And the answer is, yes, we do. And typically, we enter into the hedges not at the time that we actually receive the order because typically These export orders come with relatively long lead times between when we receive the order and when the final deliveries will take place. But once we understand the delivery schedule and we look at what deliveries will be made within the financial year and we will typically hedge out the majority of Those deliveries that we're expecting to make in the year. So at this stage, as Alan has said, we have a reasonable order book. So to the extent we understand when those deliveries will take place, we will have hedged out. And the hedge rates will be somewhere between 14.20 and about 14.80 to the rand. But again, typically, we don't Take out a straight FEC, we will take out a collar and a cap, which will allow us to benefit in some of the upside, but creates a floor Below which we won't have to suffer the consequence of a strengthening round. Clearly, if we were to just simply float, A strengthening round would have an adverse impact on our export margins, particularly which would be a silly thing to do is if we Didn't hedge the sales, but hedged the input cost because then we would have a firm input cost probably incurred sometime before We actually did the export and if the export strengthened in that period, we would lose a significant portion of our margin. So what we do, do is we hedge both the input side In terms of the imported commodities which go in or components which go into our export sales as well as hedge the export Revenue that we owe. Certainly, that answers David's question. Thanks, Nick. We now have a question or 3 questions from Bania Ahmed from Precient. I'm going to deal with them 1 at a time. First question is, can you provide an update on ZEMIFA? Is the business now profitable or operating at a breakeven level? Because next just come out of the first question, I'm not sure you've seen that. So I'll take a better at this one. So just generally in Zambia, the Zambian economy Primarily from a government liquidity point of view and they've obviously defaulted on some of their foreign loan responsibilities, Continues to find itself in a difficult environment. So I will call the general macroeconomic environment in Zambia is very much the same as it would have been in the prior year. Anecdotally, the engagement with the IMF we are told is actually progressing well and better than it has done for the last number of years. But at the moment, we have no real clarity as to whether there will be an injection from the IMF, which would ease the liquidity in the country. In terms of the engagement between us and the government, it continues fairly well, but there has been no improvement on receivables that the government owes us. So we've made a significant improvement during the course of the 12 months of the 2020 financial year. The outstanding receivables at the end of last financial year were MXN96 1,000,000 kwacha and they remain at MXN96 1,000,000 kwacha. So there was no further Collections from the government during the period. However, the relative stability, despite not having got those receivables, It's actually generated solid cash flows in the business and those cash flows have been reinvested back into working capital And the throughput through some effort has been increased in the period under review. Again, we're not over investing into it to drive up the working capital. We've been quite cautious around it, but the working capital has gone up, efficiencies in the factory have improved and sales during the period have improved. And that is led to an operating profit being generated in the period. So it was slightly better A bit better than breakeven, and we were fairly pleased with their performance. The biggest challenge for the business still remains its Foreign or its hard currency loans which it holds and then an environment in which the quarter is generally weakening And the mark to market movements on those foreign exchange loans do end up in some ForEx losses in the business, and we continue to see some of those. So A key initiative for us in the 2nd 6 months to try and reduce those hard currency receivables sorry, the hard currency loans as far as we can. The second question from Muneer is around Quince and spoke about the At year end, you spoke about exploring the external funding of the principle. Is there any progress here? And would the unlocked cash be paid as Dividend in the absence of accretive opportunities. So I'm going to also the second part, which is let's call it the utilization of the cash, And Nick will touch a little bit on the progress that's been made. The unlock of the Kunst book is specifically being earmarked targeted to Our strategic aspirations and into our strategic projects. So the rate and pace at which we're going to release it is very much aligned To the deployment of it, whether it be into acquisitions in some of the areas that we've spoken about in the ICT segment All into renewable energy, where there's a specific focus area of investment at the moment, the intention is largely to target those towards themselves. So The likelihood of us releasing all of the Quidditch cash and paying out a special dividend is relatively low. Thanks, Alan. In terms of the first part of the question is, you've been putting a lot of work into understanding What are the odds of the possible in terms of both the funding of the Quince book and also secondly looking at alternative structures as to how to deal with Quince? What we hadn't wanted to do is separate, let's call it, the funding cost of Quinte from the strategic objectives of Quinte. And what we need to do, make sure in terms of anything that we do with Quintus, make sure that it continues to enable the sales and distribution of our product through the franchise channels. But at the same time, do it in a way which is competitive with the market because there is competition The market and probably more so than they used to be. So we're looking very hard at appropriate structures for Quinz, which will address the competitive environment. And at the same time, we're looking at the funding. From a funding perspective, what we have we've explored Funding, let's call it within Quince and we've also explored funding against Quince. And it's obviously much easier to arrange funding at a group level And it's obviously cheaper to arrange it at a group level to fund the Quinz book. But it's and then we've also looked at funding of Quinz's own balance sheet. The implication there is that it will still come through into our debt to equity ratio on consolidation because it will still be part of The overall run-in balance sheet, and it is slightly more expensive than raising it at the central level, if that's what we We chose to do. But I think much more importantly, we're looking at the strategic objective of Quinz and what would be the appropriate structures, which will ensure that we are able to meet those objectives probably in a slightly different format to how we meet them today. Thanks, Nick. The third question is, assuming no shocks in the second half, would you expect the full year dividend payout ratio Currently less than 40% of H1 to increase significantly. So I'd like to just touch on The manner in which Ruina chooses and makes a decision on its dividends is that we don't have A policy around how we pay out in terms of percentage of cover or percentage of patch or anything of that nature. We evaluate The performance of the business, the cash generation that we've got, we determined the strategic requirements that we need in the period ahead, CapEx, economic situation, etcetera. And through that process or philosophy, the dividend is determined. So it's a little bit early in any event To be able to make a categoric statement one way or the other, we only do that towards the end of the year or at the end of the year once we understand The performance of the second half is imminent and what we need into the new year before we go through our dividend philosophy to determine what we're going to need. I'd just like to make reiterate again that the a portion of our Shareholder returns or cash returns to shareholders is not only the dividend that we've been paying out, but also the commencement of the share buyback program. Our view is that consistent share buybacks will generate an enhanced shareholder value and hence That is an integral part of us moving forward in terms of ensuring that the total cash return to shareholders is appropriate. And going forward, it's likely to include both the dividends itself as well as the share buyback program, and that will then also be taken into account in determining the exact extent of the dividend payout at the end of the year. I'll then move on to next question, which is from Raghav David. Please ask what is the contribution of renewable energy to revenue and operating profit? Bragun, we don't declare at business unit level What the individual company's profit and revenue is. But what I can share with the group is that it obviously It sits within the Applied Electronic segment, and we anticipate and expect it to be material both at an operating profit level and At a revenue level. So the contribution of revenue to the overall segment revenue now is significant. It's a material number And certainly big enough for it to matter. And the operating profit that we expect to be there by the end of the year will also be material in that. Perhaps even more important is the rate at which it's growing. So whilst already it is material, the speed at which it's growing is also very much faster than The general growth of most of, let's call it, run as traditional businesses. So there is some very healthy growth in it. We believe the market expanding on that Creates a market that is strong and is growing at a very rapid rate and our ability to grow into that to continue these rapid growth going forward, We also anticipate to be able to sustain some rapid growth. In my mind, around would be comfortable double digits growth for the next Number of years as we grow into this market and the market continues to expand. The final question that I think There's a couple more. We've got a question now from Ernest Kaplan from Kaplan Equity Analyst. Can you give us a sense of how big plus 1x is and how it differentiates So competitors can. So just to give a sense of it again, in Bruinert's world, when we talk about a cluster, A cluster is typically and will invariably bigger than ZAR100 1,000,000 operating profit. So whilst plus 1x It's only been established about 6 or 8 months ago. Our view around and the growth trajectory and the business plans that we have This is ZAR100 1,000,000 operating profit business and we intend to reach that within a couple of years. So we're working very hard. The trajectory is So of that, so it's not a material contributor at all to the numbers that you see in this 1st 6 months. But the growth security that is on and our for it is that it will be very similar to being some of the other clusters that we have at the moment. So we have an aspiration For them to be around about $100,000,000 In terms of the differentiation, there's a number of those. Certainly, because this is a newly developed business that we have, We have no legacy systems or no legacy costs that we need to manage in our environment at the moment and we're able to leverage off The cloud, we're able to leverage off the other elements that we have bought into our business and that enables us to have a very cost effective So cost advantage in terms of the primary competitors that we're after. So whilst this is a fairly contested space, certainly at a cost point of view, we find ourselves at a benefit to some of the competitors that we're after. Additionally, we are technology agnostic, so we don't find ourselves at this stage being Tightly aligned to any particular technology OEM, which enables us great flexibility to be able to move Around pharmace to be customer led in terms of solutions that we take to market and through that with a lower cost base allows us to be very agile and to target these moving into it. Again, we're not trying to compete in this market against the big players that we're up against who are going after 100 of 1,000,000 Of managed services contracts, we're actually working with our customers as they convert and as they go through the digital transformation, which means we're able to target specific areas in cloud and security in those areas where we do not need the legacy Similar after the cost advantage that we've got and the technology advantage that we've got, we believe we can be very competitive in that space and it's proving to be the case as we are being fairly successful in picking up a number of new contracts in this 1st 6 months. We then got another question from Murad Rajatannam, where he asks, has the demand for fiber optic Cables continued at a decent run rate post the reporting period and is there renewed interest in fiber rollouts in the marketplace? Nick, do you want to go with that? Yes, I'll have a go with that. That is obviously very applicable to our joint venture, which is in CBI Telecom. And the fiber optic business is nowadays the biggest part of their business. And I'm very pleased to say that the demand has continued Post the half year and we're expecting it to increase further towards the end of the year. And I think it really is because the sort of interest in fiber and if one thinks about the digitization Of the economy and if you think about the fact that we're doing this webcast as a webcast rather than in person, the need for FIFO really It is there and all of the big players are continuing to roll out at a reasonable rate their fiber pass to home and Other commercial applications of fiber. So I think the answer is yes, there has been a good recovery and that recovery is set to continue for At least as far as we can see, which is beyond the end of this financial year. And the last question at the moment is from Raghib David has asked, can you please clarify on the earnings guidance? Are you expecting the second half of twenty twenty one to exceed second half of twenty twenty? Or are we expecting the full year 2021 to exceed the full year of 2020? I think in both cases, we're hoping that the second half This year will be better than the second half of last year and you're anticipating that the full year this year should be better than the full year last year. Alan, there is one other question and it's just 2 up from the one that you've read. Thank you. This question is in ICT Business Communications cluster, you mentioned that minutes are back to 85% of pre COVID levels. Is that the total minutes or the average minutes per customer as you have growth in customers? So that is the total minutes that we have. So that includes The minutes consumed by our legacy customers as well as the new customer deals that we have closed. So we continue to see This is for the average minutes per customer to remain under some pressure and they would not have returned to above 85%. But with the new deals But they're continuing to close, which we actually recovered to some very nice levels. The total minutes volume that is growing and being transmitted across the network Has grown has gone back to about 85% of where we were of pre COVID levels, but it's not on the average minutes. Ladies and gentlemen, there were no further questions. So once again, thank you very much for your attention today and the questions that were asked. We value your time today and thank you for your interest. If there are any other questions that you didn't get out, please Car and Smith's contact details are on the webcast and in the booklet, so you're welcome to drop any questions to us, and we'll get back to you on them. And if you would like a 1 on 1 meeting or a more detailed meeting with us, the same methodology can be used to get hold of us.