Morning, everybody, and welcome to the JSE for AVI's Interim Results Presentation to December. Thank you very much for coming. I'm sorry we don't have any goody bags this time, but you have to wait till the full year results, which is a pity because we had some very good innovation in the six months. It's a pretty normal presentation. I'll take you through the key features. Justin will take you through the financial results. I'll take you through the BU performances in more detail, talk a little bit about prospects. Some of my colleagues are here from the business units, and I'm here too, and we'll take any questions that you might have. It's a tough semester against the backdrop of continuing declining real incomes, not an easy thing to deal with if you are an FMCG producer, particularly if your portfolio is aimed at middle-class consumers. That certainly continues to be a theme that is challenging for AVI, and you can see that coming through in this semester with group revenue only up 1.1%. I think it's easy to forget that in this semester last year, we grew both the main businesses, I think Snackworks by 35% and Entyce by 17%. To some extent, there's a little bit of annualizing in the base, which I think is worth mentioning. Justin will take you through a little more detail with respect to that. December is very important. Unfortunately, one of our major suppliers in Italy let us down, and we had a pretty constrained December with respect to our Carvela brand, which was frustrating given the importance of December to that business. Abalone continues to be challenging, both from a demand point of view, certainly oversupplied, and lower selling prices coming through, affecting the business operationally and also the mark-to-market on the biological asset. Nonetheless, a very important part of how we run AVI is to protect our gross margins and notwithstanding the environment, we managed to do that across the portfolio, and that with good cost control, improved operating profit just under 9%. Headline earnings are pretty much in line with the operating profit performance, dividend in line with the headline earnings. We'll get to the detail, but strong cash generation sustained. We did sell one of the small JVs in I&J as we continue focusing that business on its core hake business. We spent significant CapEx in the six months. Main portion of that was the Umlungisi, which is a second-hand freezer vessel to help I&J catch its quota with the current catch rates lower than they have been historically. Strong capital return in the context for the 12 months rolling. That is the operating profit history, which I think gives you some sense of that increase over the last 18 months, which I think is important to contextualize this semester. Compounded annual growth of 11.1% since 2005 and operating profit margin increased into this semester 23.1%, which I think is pretty much an all-time high. Return on capital employed, that chart speaks for itself. Strong sustained capital employed. It is important to remember that from an asset replacement point of view, that capital return obviously reflects depreciated assets. It's important to run a strong capital return given the exchange rate and the importance of being able to replace capital to sustain the future cash flows of the business. The cash conversion, strong cash conversion, pretty much in line with the prior year, slightly up. The dividend, that's based on the year-end, includes obviously the special dividend in the prior period. Returns to shareholders, an important part of how we run AVI is to try and push surplus cash back to shareholders, and I think headline earnings pay out of nearly 96% now since all the way back to 2005. I'll give you to Justin, who'll talk to you about the group financial results. Thank you, Simon, and good afternoon, everybody. I think a reasonable profit achievement in the context of the environment, which remains constrained and very competitive. As you can see, revenue growth of 1.1%, primarily driven by selling price increases that were taken across most parts of our business in order to ameliorate the impact of input cost pressures. This was offset by lower volumes. Our gross profit achievement was higher than our top line, with the gross profit margin well supported by cost efficiencies, factory efficiencies, investment in automation, as well as some operational leverage, and improved from 41.5% last year to 42.9% in the semester. Selling and administration expenses finished largely in line with last year. Benefits from the initiatives that we implemented last year through the first and the second semester, as well as the non-recurrence of some of the implementation costs associated with those initiatives and lower distribution costs with benefits from lower fuel prices, and also the impact of some of the lower sales volumes resulting in a lower cost there. This was partly offset by higher levels of investment in marketing activity across some parts of our business. Overall, operating profit grew to just under ZAR 2 billion for the semester by 8.9%, and the operating profit margin benefiting primarily from an improved performance in our entire business and grew to 23.2% for the semester. Net finance costs increased to ZAR 107.5 million, slightly higher than last year, and primarily a function of higher average debt levels as a result of the special dividends, which we paid to shareholders in October last year. This was partly offset by the impact of lower interest rates, which we saw coming through during the semester compared to last year. The capital item, Simon has already alluded to, increased to ZAR 17.4 million. That includes the ZAR 12.6 million profits that we earned on the disposal of the squid fishing business that was conducted by one of I&J's joint ventures. The effective tax rate increased marginally on last year, but remains largely in line with the South African corporate tax rate of 27%. Headline earnings growing to ZAR 1.35 billion by 9.1% and a slightly lower increase in our headline earnings per share as a result of dilution from shares issued under our group share incentive schemes. From the table, you can see here what the underlying drivers of our operating profit have been through the semester. You can see the standout and strong performance coming through from Entyce Beverages. Snackworks saw a reduction in its operating profit by 3.3% through the semester. I think it's important to contextualize that performance, which with the prior year having increased from ZAR 585 million to the ZAR 789 million that you can see in the prior year there. That's a 35% growth in operating profits, so still over a two-year period, a strong performance from the Snackworks business. I&J saw a marginal improvement, I guess from ZAR 31 million - ZAR 36 million, still below levels that we would want to be seeing out of this business and off a low base, but a reasonable improvement in our fishing business offset by declines in the Abalone profits. The fashion brands business came under a little bit of pressure, had a difficult semester. Personal care saw margins reducing from 21%-1 8% over the semester, primarily a function of increased competition, which limited our ability to realize price increases that were needed to recover some input cost pressures. Footwear and apparel, as Simon has mentioned, were impacted by some supplier and supply chain challenges through the semester, which resulted in some lost sales in that part of the business. We did do a lot of work to try and ameliorate the impact of that, which included bringing in via air freight some of our footwear to ensure availability through the season. There were still some lost sales, but this came at a materially higher cost than what we have incurred in the past. From a revenue perspective, this graph really contextualizes the impact that volume and price and mix have had on our top line performance through the semester. I think, as highlighted, price increases taken across most parts of our business. I think it's also important to understand that included in that price mix impact of ZAR 800 million is the benefit of a weaker exchange rate on I&J's export revenues. This was primarily a function and a benefit from our hedging portfolio, with the actual average spot rate during the semester finishing marginally lower than the prior year. Volume pressure was evident, I think, across most of our business. We have got slides later on in the presentation which provide more context at a category level to the volume impact within each of our categories. Nonetheless, what is important to understand is that we continue to manage the volume-value dynamic across our business. It's important to understand that the group remains more sensitive to value than volume, and it's within this context that we look to manage price and volume and optimize our profitability. The graph here gives some context to the gross margin performance. You can see it compared to the last five years. Cost savings initiatives, as well as the improvement in the entire business, have been a strong support to the improvement over the last few years. The achievement in the current semester falls closer and more in line with the achievement that we've seen in our 2019 financial year. Ongoing cost control continues to be a focus, as well as manufacturing initiative across all parts of our business. I think also worth noting is that our hedge program, both currency and commodity hedges, provided some benefit through the semester. There is, in the information section of the presentation, a graph that provides a comparison of the market price achievement relative to the average market prices and the January market price and shows the benefit that we've realized relative to the market pricing over the semester. This graph and the bullets included in it really cover the underlying drivers of performance. I'm not going to go through these in much more detail other than to maybe say that in every part of our business, cost control has played an important part in delivering the overall performance. This will be discussed in more detail later on in the presentation as Simon takes you through the individual business unit performances. Cash generation remains very strong, with cash generated by operations increasing to ZAR 2.1 billion over the semester and by 16.4% on last year. The higher-than-operating-profit growth level of increase is primarily a function of working capital movements, with our working capital in the semester decreasing compared to the prior year increase of some ZAR 202 million. Working capital as a percentage of revenue, as a result, reduced to 24.3%, with lower levels of inventory seen in our footwear and apparel business at the end of December, as well as a lower biological asset valuation, which played a part there. I will talk to capital expenditure in the next slide. Cash from investments largely reflects the dividend received from the joint venture as a result of declaring the proceeds that we received on the disposal of the squid fishing business during the semester. Net debt, in line with our expectation and following the payment of the special dividends in October last year, increased from ZAR 1.8 billion - ZAR 2.55 billion. This rate remains in line with our target debt capital employed levels, albeit at the upper limit, which was intended to be the case and ended at 33.8% at the end of December. Return on capital employed, well supported by an improvement in earnings over the last 12 months and ended at 34.2%. We have maintained our dividend cover policy for our interim dividends, and as a result, the normal dividend of ZAR 2.20 was declared, which is 8.9% higher than the previous year and in line with the growth in headline earnings per share. As mentioned, capital expenditure, we saw a marked increase in the level of spend over the semester. This was primarily a function of the ZAR 158 million that we spent to acquire the second-hand freezer vessel for our I&J business. In addition to that, you can see the table here highlights some of the key areas of spend through the semester. We continue to carefully consider our capital investment in the context of the current environment, and projects that support and improve efficiency, support product quality, and our customer service levels will continue to be supported going forward. I think an important part, though, of managing our return on capital employed still is ensuring the longevity of these assets, and we have incurred and continue to spend a large amount of repair and maintenance costs in our facilities in order to make sure that we achieve that. Something that is important to also understand is that we continue to experience failing municipal infrastructure across the group. I think that often it's understood that this comes at an increased operational cost and increased complexity to the business, but maybe what is not fully appreciated is the extent to which one needs to invest capital into addressing and ameliorating some of these challenges. At the end of December, the group had invested up to ZAR 180 million on a historical cost basis in ensuring electricity and water backup and ZAR 70 million in terms of security infrastructure across our group. We plan to invest a further ZAR 24 million in the second semester. This is largely related to security initiatives as well as closing out some water backup projects that are currently underway. I'll now hand you back to Simon, who will take you through the underlying business unit performances. Apologies. Hi, sorry. Just a member of the audience driving a black BMW X3 with the registration number MG84JJ. You've left your car idling in the parking, so just a note. Load shedding of another kind. Be quite inconvenient. Thanks, Justin. I'm going to take you through some highlights of the business unit performance. I'm not going to repeat the slides. Just to provide you, I guess, some context, we did lift prices again, as Justin mentioned, in order to preserve gross margins. I think it's important to emphasize that we do have in each of our categories different price points, different brands that work for different parts of the community of consumers that we serve. I think overall sound improvement in operating profit across all of the brands. We did launch an affordable Rooibos version in the six-month period. We'll see how that performs, which I think is going to be interesting to see. Good cost control in the process environment with a slight improvement in margin, which was a recovery of the prior year period. With respect to coffee, most of you who track commodities will know that Robusta and Arabica prices, particularly in the last three months, four months, have spiked all-time highs. Very, very significant price pressure. Fortunately, our hedging positions in the short term have done their work for us, but long term, obviously, depending on what happens to selling prices of the underlying raws, that might be a challenge. We've had good improvements in the portfolio, good recovery in mixed instant, which was pleasing. Where we are seeing quite aggressive competition is in the Ciro businesses, out-of-home volumes with lots of small entrants into that category, selling at prices that we don't think are sustainable, but nonetheless, that's the reality of a thin market. Again, good operating leverage in the factory environment. We did have a material restructuring. Justin mentioned some of those investments in the prior year in achieving, obviously, a lower cost production environment for coffee. In creamer, great growth again, notwithstanding the fact that our competitor who gave us a pretty strong semester in the prior year came back, but notwithstanding that, we've preserved quite a lot of the progress that we made. Sales volume slightly lower and some loss of market share, but strong margin. This is a process environment we invested quite aggressively into producing packaging, robotic packaging at the back end, and we've seen great leverage from that investment in the six-month period. Margin sustained, notwithstanding, obviously, the loss of share and volume, which was pleasing. Operating profit margin 30.4% versus the prior year is 22.8%. As Justin said, one of the challenges in the environment, and also I think with respect to comparing this semester to last semester, is obviously the changes in volumes, which I guess the creamer one is the most notable. That is very contextual to what I said earlier. On balance, what we have seen, of course, is a shift in some of our volumes to the informal system. Our market shares are often a function, obviously, of modern retail shares when I touch on them on the next slide, which gives you some context. In modern retail, our shares were down. One of the things that I think is easily forgotten, and I am not sure we are the only supplier who will have experienced this, is that you will recall after those tragic incidences of people being poisoned in spaza environments was the requirement for all spaza shops to be registered. It was a process that ran into some administrative issues, and it created quite a lot of uncertainty for wholesalers. We saw some of those volumes being, I guess, lower in the last quarter of this semester. We're seeing some progress in the new financial period, obviously, in the second semester, which hopefully will be sustained. We have a pretty strong business in wholesale in this portfolio. We can't read all of the informal sector like we can read the formal sector. These slides just simply show you the impact of raw material costs. Now, keep in mind, these are net of our hedge positions that Justin mentioned. Snackworks, obviously, coming off a very, very strong prior year semester, lower biscuit profit, only marginally. Nonetheless, again, we lifted selling prices to deal with input costs and a number of key inputs. Sales volume slightly lower or for the strong base. Festive for season demand for Choice was pretty good, not as strong as we would have liked it to be, but I guess in line with some of the constraints that we've talked about with respect to consumers in the semester. Quite a lot of innovation and marketing to support that innovation in the period, but good protection of margins in the portfolio. Snacks are more challenging in our Maize Extruded portfolio. There's lots of informal competition in this category at the bottom end, and some of it's regional, and that's certainly impacting some of our demand. Potato, a little bit of an improvement coming off the installation of the new fryer and some strong flavor extensions which were well received. Margins a little lower in line with the deleveraging effect of the lower volumes in the extruded portfolio, but selling costs well managed. Overall, the impact is not material. As Justin said, slightly lower operating profit margins, but certainly still a very strong 24.9%. You see the volume impacts in both categories. I think one of the things that's important to keep in mind is that we have a very, very big portfolio of products. Some of them are lower priced. Your mix and value effect here is quite difficult to pin down. In some cases, some of our lower price points had strong volume growth. Some of the constraints in the portfolio's volume sales will have been in the top end, and we make up for that, obviously, with volume growth in the lower price points. Similarly true also of the snacks portfolio. These are the market shares in formal retail. Significant, I guess, is the loss of the biscuit volumes, but not substantial. It is, as I've said, only formal. Raw material costs, a mixed bag, native hedging, flour prices remain at historically low levels, but some of the other commodities outside of hedge positions, as the slide Justin referred to will show you, have continued to rise in costs in the near term. The I&J business, very tough semester, sustained challenges in fishing, but nonetheless improving slightly off the prior year's low base. There is a slide that shows you that catch rates in the semester slightly higher than the previous period, but only 0.4% tons per sea day. Domestic sales volumes, lots of aggressive competition from our main competitor, which we just simply aren't prepared to promote at those levels, and we tend to sit these sorts of events out. Good innovation in the semester. We're seeing good growth from that, and we hope that that carries through into the second semester of the financial year. Demand is good for our export product. We just simply don't have sufficient product, unfortunately, because of the catch rates. Hence the purchase of the Umlungisi, which is now fishing. I'll touch on that just now. Good operating cost control and slightly lower fuel prices did help in the semester. Abalone, we face two fundamental challenges. We've talked about this before. One is core Asian markets remain weak, and certainly in the context of a fair amount of oversupply, pricing has been affected, and in particular, the impact on the biological assets, seeing nearly ZAR 28 million reflected in the semester in the P&L. And you can see the breakdown here. You can see, obviously, pricing and costs, a real contribution, but the fishing performance and the Abalone fair value adjustment, obviously, pulling down the performance for the period. That is the breakout of the profit history. Frustrating to see the performance of both of our core categories here, but they are pretty much in line with our competitors, and I guess we are hoping that this will improve during this calendar year. You can see what I was referring to with respect to small improvement in the tons per sea day in the semester. Volume impact in both domestic and international markets is set out in the slide. Strong price increases, I guess, in the context of both the exchange rate and obviously lifting selling prices against the strong demand that we have seen from some of our international markets. Indigo Brands, as Justin said, tough performance, tough category, lots of competitive discounting taking place in the core body spray business, reducing selling prices, affecting our ability to lift selling prices, stabilized more recently. We are working very hard on becoming bigger in the roll-on category, which sells at a lower price point. We have a new line being commissioned in H2, and we are seeing quite strong volume growth given the focus, obviously, on roll-ons. Of course, that gives us a different sales mix. Those margin pressures are not fully recovered with the mix change. Certainly, although we have managed the costs very effectively in this business, not enough to offset the declines in sales volumes in the semester. That gives you some sense of, obviously, the volume and value. Market shares, again, as you can see, informal trade slightly lower. We've got a strong growing business in the informal sector and also contribution from AVI International, which I'll touch on just now. Justin mentioned the challenges that we had in December with respect to supply. Very, very frustrating. We worked extremely hard to try and ameliorate this, spent a lot of money on air freight, but we just simply couldn't catch up the volumes that were missing. We have three main suppliers, not anticipated, very frustrating given the challenging environment we faced. On balance, still a strong operating profit margin performance from the portfolio. We're hoping that this is something that we won't see a repeat of. Nonetheless, also worth noting, constrained consumer environment, our labors were slightly lower, I guess, in line with having less of the right inventory, but we also could see the consumer constraints coming through in the semester. You can see the significant volume declines. I think the performance of Spitz in the context of that was very credible. International, pretty decent performance affected. I think it would have been a little better if Mozambique had not had the levels of unrest that affected our ability to push product over the border in the semester. Nonetheless, I think a credible performance from AVI International, good cost management, good margin control, and a pleasing performance in aggregate. You can see the percentage of the international operating profit, somewhat of a numerator denominator, nonetheless, pleasing growth on the prior year in terms of both margin and a percentage of the total grocery profit pool. Where are we? It is a tough environment. The performance of our core grocery portfolio, very substantial in the near term relative to some of the other businesses that have been more challenged. Clearly, we're coming with high margins off a strong base. We accept that there is, in a very thin economy, increased competition. It's something that we've managed before. I think effectively, as Justin said, very important for us to manage this portfolio for the medium term. We continue to do that, managing volume and value. It's a very complicated, big portfolio. We probably have 100 different versions of biscuits. We try and manage the portfolio independently. We don't lift selling prices across the board. We manage these selling prices by SKU. What you see is an aggregated outcome. We manage this portfolio for the long term. We have a very strong portfolio of leading brands, and we've got some very interesting innovation that we think continues to support our place in these categories, both premium and affordable. That's work that we will continue to do. Clearly, managing costs is absolutely critical. Managing our input costs and protecting our product sovereignty is also important. We will never shortchange consumers with respect to what we include in our recipes. We think that's fundamental to our ability to charge a premium for our products. We have a strong hedge for the H2 period, both in commodity and currency. That, I think, bodes well. Cost management, something that I think we, I think Justin and I'm correct, our real S&A cost increase over five years is only 1%. That is something that we continue to focus on. We've got some pretty strong initiatives. I think we've said it over many years is that we will continue to change how we run AVI, how we structure AVI, how we operate our process environments in order to ensure that we have both the cost efficiency and the operational flexibility, speed to market, and efficacy that is required in a constrained environment. I think by the end of this financial year, we'll talk to you about some other significant cost structures that we think we can achieve in the semester. We've got our roll-on commissioning in the second semester. I&J is always going to be, as you know, highly leveraged to catch rates. We're seeing pretty much the same trend that we saw in the first semester. At the moment, we get good days then followed by bad days. No fundamental change in the trajectory. It's not getting worse, but it's certainly not improving quickly. The Umlungisi will give us the ability to put a fourth vessel into the freezer strategy, which is really useful with the lower catch rates. That product all goes into the international market and provides strong leverage. We will see how the vessel settles down. It's in its first voyage, in its second week. Pleasing progress both operationally and at a factory level on the boat and not bad catch rates so far. So far, so good. The exchange rate benefit is slightly better than the first semester. We have an improvement in the TAC. Of course, the critical thing is, will we be able to catch it? We hope so. I've alluded to the restructuring initiatives, and these are across the entire business. The Abalone business, I mean, so much will depend. I mean, the only good thing I see here is that some of our competitors in SA, there have been some transactions that have taken place. Hopefully, some consolidation will lead to slightly more sensible pricing strategies, and that certainly might help us in the calendar year. Not absolutely confident that it will affect the second semester to the extent that we might like it to, but we hope that the prospects for Abalone improves over the next 8-12 months. Footwear and apparel, this is a very competitive environment. Any of you who go to shopping centers will see certainly in apparel, aggressive and ongoing discounting taking place. I guess if retailers fail to meet their sales targets, the inventory has to be sold, and that generally converts into quite aggressive discounting. We very seldom discount in the Spitz business. We aren't a value retailer, but nonetheless, obviously, there's lots of competition for consumers' purse. We don't think the second semester is going to be materially easier. We continue to focus on improving retail densities. We've managed our staffing levels appropriately. We are looking at a few new locations. We do have another brand that we'll be introducing to the market in the next 6-12 months, which we're excited about. Of course, we have finally decided to close the retail portion of Green Cross. We will continue wholesaling the Green Cross brand, and we will continue to sell some of the Green Cross products through the Spitz distribution as a brand. What we're seeing here is that in the middle markets, there really isn't a lot of scope for a brand like Green Cross. People are trading either very low or at a premium level like the Spitz business. We have decided to make that decision, and that will impact, obviously, H2 from a reporting period. Capital investment, as Justin said, we continue to look for projects that will allow us to improve our manufacturing efficiencies, improve our margins by doing so with strong returns. Some of it is maintenance, some of it is specific projects in line with productive and efficient manufacturing. There is a fair amount of money going into I&J in the period. Some of it is long dated after the finalization of the quantification process, and some of it, obviously, is the final portion of the Umlungisi investment. It is a tough environment. I think that the optimism around the Gnu has not translated into substantial improvements in the economic prospects for consumers. Unfortunately, optimism has to be followed by effort and endeavor. We do not think that in the very short term, unless there is obviously a substantial change in the economic prospects in the economy, that there is any other thing for us to do except to continue managing our business model in that context. We continue to invest substantially in simplification, innovation. We manage margins very carefully across the portfolio. Obviously, we continue looking for cost savings and for production efficiencies. We have a lot of innovation that we are working on. It takes time to build momentum, but I think a lot of it is going to be useful and helpful as time passes. We are looking to put our brands into markets where we think we have uniqueness, and we continue to focus on that initiative. We think that over time, that will also give us opportunities for higher levels of volume growth. Capital projects, as I've already touched on, are very much part of what we continue to look at. We do not have, in the next 6 - 12 months, any very substantial capital projects, but we will continue to invest money across a very busy manufacturing environment to find ways of running this business more effectively and efficiently. As always, it is not that we lack ambition, but we have a very, very clear view of what the risks look like when we look at investments. Any surplus cash net of the requirement for investment, we will continue to stick to the same philosophy. We, as you have seen, continue to get volume growth in regional markets, keep focusing on that, an important part of extending the opportunity to our SA factories where we get operating leverage by selling into the region. We have and continue to look at acquisitions where appropriate, but the real challenge is the quality of the brand equity. Thank you very much. Tough six months, but nonetheless, we think well navigated. Thank you, my colleagues. Hopefully, H2 will be easier in the balance of the calendar year. Very happy to take any questions from either those listening in or here. Can start at the floor. Sorry. Cannot see because it is dark. Hi. Good morning. Sorry, yes. Hi. It is [Saj Athia from Sutton]. Yes, hi. I just wanted to ask the Entyce beverages, the margins expansion. How much of it was driven by cost control versus the shift to more profitable wholesale customers over the last six months? Then follow to that, is this margin expansion and is this margin sustainable going forward? Yeah. We do not target a margin. We are always trading in an environment where our cost sets, our competitors' behavior, the mix of customers that we're serving, the channels that we're serving provide us an opportunity. That's essentially what the semester basically allowed us to achieve. Now, the question is, do all of those variables play out in the same way in the second semester? I can't obviously give you a forecast, but that's our philosophy, is that if we can achieve margins, then we try and achieve them. The ability to have a philosophy as to what is the target profit is not how we've ever run AVI. Unfortunately, I'm going to disappoint you and not answer your question. Thank you. Sean Chowker from Nedbank. Simon, when you look at AVI as a business, now, obviously, it's done well over the years, and the recipe continues to work well. If you had to change or add something to this business outside what you've always done, what would it be? It would be a business with a very strong portfolio of brands because your fundamental requirement is your ability to deal with South Africa's volatility, its inflation, and its competitive environment. Its strong retailers have their own countervailing place in the equation. It's impossible to do that unless you have a brand that you can use and leverage. Obviously, there are brands like that, and it would be wrong to say that we haven't tried to acquire brands like that. They're hard to come by, both in SA and internationally. It's easy to forget we fundamentally compete against multinationals. We don't really compete against SA Inc., but I'm envious of some of the brands that some of SA Inc. have owned because there are some fabulous brands and products in South Africa. Is there a category specifically that shines very brightly that we would have loved to have been in? Not fundamentally because there has not been much asymmetry in the growth of categories in South Africa. There was a period, for example, in body sprays where we did extremely well, where we had expanding participation in middle-class communities, and that was a very under-indexed category. With the maturing of the economy and declining real incomes, the opportunity has thinned out. There is no shortage of competition in South Africa. I would say that if you think about it, those of you who travel, if you go into our retail environments, there are fabulous world-class retailers in South Africa, and there are fabulous world-class manufacturers. The choice is remarkable, actually. I mean, there's very few categories in SA that don't have a very high level of participation, of great product sovereignty, of choice. It is a very competitive environment. It's easy to forget. That environment, obviously, was designed for an economy that was going to see a much higher increase in real GDP per capita, and that's just not matured. In trying to acquire things in South Africa, if you don't pay the right price, that's another thing that you've got to be thoughtful about because you walk into the same challenges that we all have. I mean, I don't think there are many categories. I've just seen the ARC data for January and February, and you can see the constraints in all of FMCG SA. We would have liked to have bought other brands, but in general, multinationals don't sell their brands. The brands that we might have liked to have acquired in SA Inc. are part of large portfolios, and those have also not been for sale. Hi, Simon, and thanks for the presentation. [Ruan Dongguan from Owewe The Capital]. Hi. My question is around the footwear and apparel business, around the supply chain issues. I am just trying to find out, were these port-related issues? If so, were they from our side or from the supplier's side? Or was it issues from the actual suppliers? If so, was it all three main suppliers? No, it was one main supplier, Italian-based, and it was not port-related, although there have been continued delays in, I guess, most of the port facilities in SA, and we were affected. We have learned to bring in our orders earlier as a way of reducing any impact in the ports. In this particular case, it was really a manufacturing supply chain issue with a supplier. Hi, Simon. Hi. My name is Muzi from Standard Bank. To start, I'll ask, we see most of the competitors in your space exploring e-commerce. Does AVI have any strategy to explore perhaps reaching the customer through the online channels? We do do e-commerce in Cairo, so most of our coffee shops can order online. We are working at doing e-commerce in our retail portfolio at the moment. I mean, we have a very particular relationship with our customers in the Spitz business who historically are very committed to coming into our retail environments, which are premium retail environments, touching and feeling the product, normally committed to a lay-by because we have a high level of lay-by. We are going to experiment in some of our brands in retail, and then we'll roll it out based on how we see that working for us, given our particular kind of retailing. In the balance of the portfolio, we are committed to working with our retail partners on their own e-commerce platforms. In some of our categories, we do significant volumes through their own e-commerce channels. Are there any further questions from the floor? Yes, thank you. [Sean Chowker] again. Simon, just to come back to the earlier question, if you could please explain the price-volume dynamic. I know you've touched on it. It feels like there was an option to increase prices less than what you've actually increased them by and still having achieved the same volume declines to try and maintain the same margin. I know you spoke that you don't look at it on a margin. What I'm trying to figure out is the margin upside you got, was this an element of surprise, or it was actually sort of intended, sort of a byproduct or a consequence of sort of what you were looking at from a risk management perspective? Thanks. I think we've said over many years that we manage our gross margins with a long-term philosophy, and those really are the single biggest drivers for us. We have to do that in the context of uncertainty and volatility, which is why we hedge. Our experience with retailers is on balance, most of them would like no more than one or two price increases at the most a year. You have to then obviously make a commitment to lifting your selling prices with as much certainty as you have. You always have, in our rolling hedge program, a six-month period which is uncovered. You have to look forward and make that decision. We would have lifted selling prices in some of our categories in the second semester already with a view that those price increases have to be enduring for a 12-month period unless there's some catastrophe that would require us to come back into the market and do that. Of course, it's a very big basket. It's different categories. There are different directional realities and input costs. Of course, it would be obviously foolish to think that you compete in a world without competition. We're never surprised by, I guess, an outcome. What we're trying to do is manage the cash flow, the long-term value of the business in the context of all of these uncertainties. As I said, which is why I answered the question in the way I did, we don't target basically a level of profitability. What we're trying to do is to run in a very volatile environment, in a competitive environment, I guess, our selling prices. The outcome that we achieve is a function of the volumes that we sell, the operating leverage that we have in that particular process. Some of our processes have lots of operating leverage. If you get a little bit of volume uplift at the right GP in a six-month period, you can translate that into a higher level of operating profit than you might have in the prior period. You might find that goes against you in the next period, unfortunately. Nonetheless, what we're trying to do is to operate all of these categories at what we consider to be an effective operating margin and that allows us to invest in capital over a five or ten-year period. I think that's the thing that's something that I'm going to emphasize again. If you have a look at our return on capital employed, obviously, it's a complex amalgam, and there are lower returns and higher returns in the portfolio. Fundamentally, South Africa has had an oversold exchange rate for some time, in my view, at least. All of the capital equipment that we require has to be imported. If you don't manage your capital employed to the right level, your ability to replace capital is very compromised because, to some extent, the capital return that we are demonstrating is flattered by the fact that some of those assets are depreciated assets and in our balance sheet at historical costs. I think if you have a look at, well, I believe if you look across SA Inc., there are many businesses whose capital employed are at levels that are much lower than ours, but who will still have to replace those assets with new capital at some point in time. This whole question of volume, value, margin, and capital return are all working together in an amalgam that requires us to think carefully about basically our pricing decisions. They're not taken for semesters. We can't run the business for a semester. We're having to run this business for a much longer time period. It's a complicated, volatile environment. Currencies and commodities move all the time. Perhaps that helps. Perhaps we can go to a question from the webcast that's a bit of a follow-on from Sean's question from Alec Abram of Sasson Wealth. He's also in relation to your price increases in the first half. He's asked you to speak to the elasticity of demand across your various products and then whether those elasticities educate your view on pricing in the second half, and do they motivate your muted second-half outlook guidance? Our outlook is muted by what we consider to be the uncertainty of the macro environment. It's not we know that our hedges and our cost sets at the moment are pretty secure, as we've already said. It is not clear to us the cadence of demand, will it increase or will it stay at these levels? It is not motivated because of pricing or any other aspect. It is really a view that we are taking on the macro outlook. If that changes, I think all of you can see this business has got incredible operating leverage. Its cost sets are tightly controlled. Its hedges are strong. Its margins are strong. Any improvement in the rate of demand would be substantially positive for AVI in the second half. Thank you, Simon. We also have a couple of questions from Warren Riley of Bateleur Capital. The first one, Intel's earnings have stepped up significantly over the last 12 months. Is this new level of run rate? I think you have partially addressed this, actually. The profitability is sustainable. The second part to the question was, are there any business units in AVI you feel are over-earning potentially? I'll ignore the first one because I think we did cover it. Are they over-earning? Is there such a thing? Are there any stock pickers here who've ever over-earned on a share price? I think if I said yes, I think I'd be swearing in front of the investment community. Look again, as I said, you're measuring one semester. We don't run AVI to one semester. Let's look at what it looks like at the end of the financial year. We produce great products. We've invested aggressively to produce them cost-effectively. We have a global competitor to keep us in our place if our pricing was wrong. We don't feel that we're over-earning in that context. Thank you, Simon. His next question. He says slide 58 shows continued price pressure in Robusta, Arabica, and Butter primarily. Can you talk to me to take prices this year to protect margins across Entyce and Snackworks? We've taken prices in Snackworks already. Those are done. Remember, we have obviously accelerator and brake in this car. If we wanted, if soft commodity prices change their cadence, we have the ability to change our pricing. We do do that. The question on Robusta outside of hedges, no, we're on the wrong side of those costs, but it's extremely difficult to predict. I mean, Arabica prices went over ZAR 4.00 a pound. They're down to ZAR 3.40. This all happens in two or three-week periods. It's so difficult for us to say whether we're on the right or the wrong side yet. We're reasonably well-hedged on a rolling basis, and we'll see how these cost sets play out, and then we'll price as we feel we can. Thank you, Simon. The next question is with regards to Spitz volumes being down 17.4%. Can you quantify how much of the volume loss was from own goals and how much is general market weakness? A related question to Spitz is how much you spent on air freight costs for Spitz. I'm not going to disclose the air freight costs, but we reckon we lost, and of course, this is our best judgment, around ZAR 30 million worth of revenue because of stock issues. Obviously, that would be significant from a contribution point of view. That was, as I've said, the supply issue. How much is macro? Yeah. It's so hard for me to give a useful answer to that question. I know what we think we lost based on our point of sales data that collects information when a customer can't buy the product that he needs. That's the only estimate I can give you. Macro impact, difficult for me to quantify. All right. Question from [Sippa Lillian, Doodle] of Matrix Fund Managers. He says the word constraint has been mentioned much more in this result than any of your other results in the past. What do you think would make the environment much more easier for the SA consumer? Wow. I mean, I don't think are there any economists in the room? All the obvious growth in employment, policy certainty, more electricity, cheaper electricity, effective port facilities, all of the things that you read about every day in the newspaper. I mean, there's nothing fantastically complicated about any of this. I mean, we really need, as was, I guess, driven by the optimism of the Ganoo, remedies around the things that are fundamental to growing an economy. I think that'd make a huge difference. This is a country filled with talented, hardworking people, lots of embedded capabilities, and lots of businesses who've got good operating leverage, AVI included. It's not, I think, fundamentally difficult to create some momentum, but the things that I think all of you know about and that I've just touched on are drivers of that. Thank you. Next question from Donnie Francell of Clucas Gray. For the AVI group, one has to go back to FY 2016 for positive volume contribution to top-line growth, as you disclose it. Are you optimistic that this trend can be reversed, and how is AVI positioned in terms of production capability if growth improves? We've got plenty of capacity, I guess, in most of the important SKUs that we produce. There are always seasonal constraints, which people tend to forget. I guess fundamentally, we've always run AVI on the basis of a long-term manufacturing plan, a five-year plan. Certainly, I think I was asked at this presentation six months ago, what would AVI be able to do if the economy grew at 5%? Seemingly, six months has changed how people see the world quickly. We can, yes. I mean, there's no fundamental limitation on our ability to accelerate our production. Thank you. We have a couple of questions regarding I&J. The first one from [Mari Moav Eilert and Co-Fund Managers]. You mentioned an improvement in catch rates per sea day. Does this mean lower volumes are due to fewer sea days, and is that being driven by vessel breakdowns? Have you seen an uptick in catch rates so far in the second half, and how are you planning to further simplify I&J's business model? The related question from Nick Wilson of News24. He's asked if. Can we do one at a time? Okay, no problem. Tons per sea day is numerator denominator. I mean, really, fundamentally, no, it's not to do with vessel availability. It's really to do with the performance of the resource and how it performs. If you take a look, I think Sea Harvest just put their results out. The tons per sea day is slightly lower than ours, but pretty much tracking our long-term trend. It's not a function of capability. It's a function of access to fish and the productive assets, obviously, that you're deploying. That's, to some extent, why we have purchased a new freezer vessel because if the catch rates per sea day remain at these levels, we're not going to catch our quota. At these catch rates, which is an industry-wide experience on an AVI or I&J experience, we need more capacity. All right. A follow-on question that fits with what you've just spoken about is Hannes Prinsloo, a private investor. He says, with a large percentage of total capital being spent in fishing, do you expect an improvement when the quota is filled? This is a very leveraged business. You can do the numbers in a simple spreadsheet. If you get the catch rates historically that we've had and you get today's exchange rates, you can accelerate your return in this business very rapidly. There's one big lever here or there are two, in fact, three. The one looks quite benign, and that's the fuel cost, although that cost has increased 50% over the last five or six years, particularly with the conversion of the fleet from marine fuel oil to diesel oil and the on-cost of that. Fundamentally, there are three big drivers here. It's exchange rate, catch rates, and fuel cost. I think the fuel cost looks benign to me as best as I can read it, and we hedged for that. Selling prices, there's strong demand in Europe. Exchange rates, you will have your view on currency, but at these exchange rates, if we can catch and get back to historical averages on catch rates, I&J's ability to produce a significantly bigger EBIT, I guess, is obvious. It's baked in. It's not something that can't be achieved. Thank you, Simon. The question from Nick Wilson, News24, was whether I&J still fits as part of the portfolio and if you'd ever consider exiting it or disposing of it. I think we've touched on that before. I mean, it is definitely not a brand business in the traditional sense, although it is a market leader in the frozen seafood category in SA. Internationally, the I&J brand is extremely well regarded. The fundamental difference in this business is that your ability to use pricing to deal with the uncertainties of catch rates, fuel prices, and exchange rates is very significantly different. Secondly, the capital required in order to actually live with this volatility on a risk-adjusted basis isn't obviously as desirable as the balance of the portfolio. The difficulty is and has been historically the uncertainty of the quota allocation process making the transaction or selling of I&J certainly uncertain. Secondly, there are foreign ownership requirements for this asset. It has been a business that has less optionality around that question than appears to be. To some extent, I guess, that is why we have continued to invest in the business, to make progress in the business, and we will continue to do so. How that might play out over time will depend, I guess, on the broader SA macro environment, the willingness of other participants to look at an asset like this. It does have high volatility. That optionality, for those of you in financial services who appreciate volatility, has value. To some extent, in AVI in the past, it has had some countervailing value. When the exchange rate has weakened suddenly, it has really been a strong deliverer of leverage. The most fundamental challenge in the near term has been obviously catch rates, which have been as low as they have been for 20 years. Added to it has been the woes of the Abalone business, which came as a result of the COVID crisis in Asia. Of course, others locally investing to support that market and the market having shallowed out has created a lot of price competition in the short term. I'm more optimistic about that maturing in the near term. I&J is a different business. It is a classic commodities business, and it doesn't fit as cleanly, but it is a historical asset, and we've managed it in that context. Thank you. Just in keeping with potential M&A, there's a question around whether it's time to exit the retail or Spitz business and for the group to focus on your core food or consumer business. That's from Serene Nardio at MoneyWeb. Yeah, I'm not going to comment on that. Okay. Donnie Fanzell from Clucas Gray. He says, among the listed food producers, AVI seems to have an unparalleled ability to effectively control operating costs. What would you ascribe that to? We I think have a different way of looking at running our businesses. We believe in very, very flat structures. We believe in senior managers carrying direct responsibility for operating activity. We've tried to collectivise in shared service structures the costs that are not associated with the core category business philosophy of growing the business. Those have given us great operating leverage. I mean, we have one of the few shared and support service field marketing and distribution structures in the country. We benchmark it every year. We operate at a materially lower cost. It's all of those sorts of things that I think have given us the ability to convert, I guess, our gross margins into higher levels of operating profit. Thank you, Simon. Just mindful of time. I just want to go back to the floor to see if there are further questions from the floor. Thank you very much. I think there is some lunch. I hope there's some lunch.