Grindrod Limited (GND) Earnings Call Transcript

[Presentation] Good morning, everybody, and welcome to the half year presentation of Grindrod's results. Thank you all for joining us. I hope you enjoyed our quick video. That's what we at Grindrod wake up in the morning to do each day, and we're proud of what we get done. I'm Andrew Waller. And with me today are David Polkinghorne, the CEO of the bank; Fathima Ally, Finance Director of Grindrod; and Xolani Mbambo, CEO of Freight Services. As always, I think we know what to do with these presentations now. Just click on the Q&A section to post your questions, and we will get to those questions at the end. The [ SENS ] and the presentation are loaded on the website for your use. And once again, thank you very much for joining us. If I look at the overview, the performance scorecard as we like to call it, the core businesses have all done really, really well in the first half. Revenue, trading profit and headline earnings are all up. Good cash generation. NAV is still way in excess of the share price, and we'd love to see that closing. And the net debt to equity is still in a real good place. On the safety side, no fatalities from SHERQ. But very sadly, we now have had 10 fatalities from COVID-19, and our thoughts and prayers are with the families of those people during this time. If I step back and look at the business overview, it isn't -- the first 6 months has been a carry on from the last 6; very, very complex working environment. COVID-19 waves continued. Those are impacting all our businesses. We've had ships out at sea that aren't able to come into the harbor because they have COVID-positive people. We've had border posts struggling to get through the COVID protocols to get the traffic through to the Port of Maputo, same too with the corridor up to the north. So very, very difficult circumstances in which the teams have been working. We also, as you know, have a big uncertainty in northern Mozambique, and that has had a huge impact on the first half results. Xolani will talk to how he's redelivered a lot of those ships to reduce our exposure in that area, but at the same time, remaining positive about the fact that this is a temporary withdrawal and will come back again. So very, very complex trading environment. On the plus side for us as Grindrod and for South Africa, strong demand for minerals. And of course, we had a great agricultural season. Great rains throughout Southern Africa, which has meant that we as a country have done really well on the exports, and that has helped us as Grindrod as well. So positive mining and agri on the back of very complicated logistics solutions that we have been putting in place. And that's only been able to take place because our teams have been working with the customers, with the customers and the shipping lines to make sure that we are able to do the best we can to achieve those numbers. On the bank side, a lot of work helping customers who have been impacted by COVID and of course, after the half year now, the unrest that happened in Durban. So very conservative approach from David and the bank, not paying up for deposits but receiving them and then being very conservative with the lending and keeping that big liquidity base. You'll see the returns are down in the bank but [ pertinent to what we saw ]. Our core business has been impacted primarily from the northern Mozambique temporary withdrawal. So we provisioned heavily there. And we remain, as I say, agile to get back on terms in northern Mozambique. And secondly, a number of provisions and impairments to remove the goodwill from the carrier businesses, which we are very close to selling at this stage. On the non-core side, there are 9 private equity businesses now sold. We remain with the 2 large assets that we are still looking to sell but waiting for a little bit better pricing. And then we continue to seek solutions on the North Coast land and the Marine Fuels business. If I could hand over to Fathima Ally to take us through a little bit more of the numbers.

Thank you, Andrew, and a very good morning to all of you from my side. If we move on to the financial results. I think it's important for me to point out that the half year 2020 numbers have been restated, and this is as a consequence of the agri, Marine Fuels and private equity businesses coming out of discontinuing and being reclassified into continuing. No major implications from the agri and the private equity from an earnings perspective, but on the Marine Fuels, we did have to equity account the earnings for that period within the region of ZAR 62 million. From a revenue perspective, as Andrew pointed out, 5% up on our core businesses, largely attributable to our Logistics businesses and specifically the container, Seafreight and landside businesses, where we have synergies coming through from the mineral exports, from citrus exports as well as working with the shipping lines to craft solutions to both of our benefits. On the noncore operations side, we've seen the contraction of the Marine Fuels business, which is a trend that's continuing from the December year-end period, if you recall. Core operations nicely up 33%. From a trading perspective, we saw 18% increase in volumes at the Matola Terminal. However, this came -- this was impacted by slightly lower margins because of our rail-road mix from a haulage perspective. Close to all of our volume was rail in the previous period, and we had about 25% road haulage in this period. But Xolani will talk more to that in a few minutes. We also were impacted from the ceasing of operations in the oil and gas project, and we had a hard look at our exposures. We booked close to ZAR 53 million of provisions coming out of our lease exposures, account exposures and some elements on the [ dated ] book. From a noncore perspective, that ZAR 269 million is really impacted by impairments on our private equity investments of ZAR 288 million. And from a Marine Fuels perspective, in that line, we had ZAR 72 million embedded in H1 2020 and close to no earnings in the H1 2021. As you're aware, it's a high-revenue, high-volume business with lean margin. Non-trading items, ZAR 433 million, ZAR 260 million of which are coming out of impairments in our carrier businesses. We've executed disposals, and we're really pushing to close those transactions and get them over the line now. We booked close to ZAR 146 million on our private equity -- on the private equity side coming out of disposal of one of our main subsidiaries in that segment as well as the impairment of our Palma facility in northern Mozambique. Very pleased with our share of associate earnings, which is directly linked to the Maputo Port. Volumes up 7% and 62% increase in earnings year-over-year. I guess you look at the overall loss for Grindrod Limited at ZAR 424 million. But what's important for us is to actually go ahead and look at how our core businesses performed from a headline earnings perspective. As you can see on the slide, Ports and Terminals, up 15% year-on-year. Bank is solidly up, 38%. And if we exclude the noise coming through from the oil and gas provisioning as well as the healthy gains that we booked on our shipping shares this year because of the uplift in net share price, you'll see that our Logistics business is more than 100% up from its base and overall core 87% up. I think it's really important for us to take cognizance of the efforts from the various commercial, financial and management teams in the businesses, the efforts to generate these earnings. On the balance sheet side, our property, plant and equipment, mainly impacted by the reclassification in that line for our carrier fleet that's not sitting in the held for sale, lower down on the presentation. Carrier business has also impacted the swing and movement in our intangible assets because of the goodwill we took off balance sheet. You see the step up in right of use assets because of the leases that we've acquired at the Durban Port for our Logistics businesses as well as our Beaconvale facility in Cape Town. Our [ dated ] book has increased. This again is attributable to Marine Fuels. We saw a step-up of close to ZAR 300 million. You'll see the similar trend on the creditor side, and that's because of the increase in oil prices. We are sitting with a lockup of about $8 million relating to oil and gas in that line. I'll skip through the investments, but quite key to point out our private equity portfolio is now sitting at just under ZAR 1 billion. In the comparative December, it was sitting at close to ZAR 1.5 billion. Our efforts are coming through to try and get this disposed. And as aforementioned, 9 investments over the line in this period. And our shipping shares are also embedded in the investment plan, sitting at ZAR 288 million now compared to ZAR 96 million in comparative. Bank, very strong liquidity and negotiable securities increase of close to 58%. You can see the cash from funding we've deployed into the treasury bills, which come at a decent yield and just makes sense from a capital management perspective as well. New loans and advances helped us get to about 9% uplift in our advances [ with the bank ]. The funding base core deposits up 23%. But from an overall bank perspective, David will give you more insight around the various activities that have -- that the bank has worked on in the period. We'll unpack it in the slides that are coming. From an overall group legal net debt perspective, pretty much flat from December to June. We generated in excess of ZAR 300 million of cash in the business in this period, and it would have been more had it not been for lockup in the Northern Mozambique business that I mentioned. We deployed a lot of that cash to our interest and our tax obligation, which we made investments of close to [ ZAR 190 million], into our PPE base of close to about ZAR 140 million as well as the Maydon Wharf leases that I've talked to of close to ZAR 143 million. Of course, that relates to the acquisition of those leases, but then you can see the noncash movement of ZAR 338 million on the slide. That relates to actual recording the actual lease liability because a lot of those leases have a long-term profile embedded in them. We also -- that ZAR 338 million is also a function of Beaconvale, as I mentioned, as well as the step-up and the expansion of our container landside fleet in this period. Cash from our disposal program, from our agri investment as well as private equity close to ZAR 532 million. And you can see on this slide that, that cash has predominantly being injected into our general borrowing facilities where you can see that come off [ by close to 21% ] from the December year-end. You're not seeing the uplift in the lease liabilities at close to the ZAR 338 million, and that's largely because of the repayments we've also made against that at close to ZAR 150 million in this period. Our borrowings, which is the red block, pretty much flat to marginal movement because, as we set up for some acquisitions, we also paid down certain short-term borrowings in the offshore jurisdiction. Our net debt to equity is sitting at 25% after our lease liability. I think from a debt perspective overall, us at Grindrod, the focus really is to try and extinguish much of the private equity debt so that we can get the capacity then to deploy into the freight business and expand that footprint. And Xolani will talk to that. Just to wrap up and close from my side. When we look at the 2 consecutive half year periods, the group's generated -- the group's core businesses have generated an 11% return. And if we remove the impact of the shipping shares, that return normalizes to about 8% we still have some work to do to clean up the [ ZAR 125 million ] on the noncore operations, but are focused on that. And Andrew will give you insight. Thank you.

Thanks, Fathima.

Thanks, Fathima. Thanks, Andrew. And good morning, everyone, and thanks for joining us this morning. If you look at our segments within the Freight Services division, focusing mainly -- or first and foremost on the Ports and Terminals infrastructure businesses, we recorded an increase in our revenue base of around 3%. But that number does not include the Port of Maputo revenues because we account for it on an equity basis. If I look at solely on the operation, its revenue base increased markedly by 28% from last year. It's a strong recovery coming out of that business. If I expand it further and compare it to H1 2019, pre COVID, the growth in revenue base is 11%. So this is really encouraging because what it does tell us is that this operation is now performing at pre-COVID level. I'm excited that going forward we should be seeing more of those coming up. Now this revenue base increase translates to headline earnings growth of 14% from ZAR 97 million to ZAR 111 million. This is despite the impact of foreign exchange rates, where we've seen the rand getting stronger compared to last year. We've also seen challenges that we faced at the start of the year around February, March are weather-related. Our U.S. dollar-based revenue remains offshore to an extent of 57% this time around. This compares to 69% last year. And this drop is coming off the back of a stronger rand compared to the U.S. dollar. Looking at our Logistics revenue base, up from ZAR 1.5 billion to ZAR 1.6 billion. That's good growth at 9%. That's driven by LNG gas project in Mozambique as well as the Logistics businesses and in our container business in South Africa. Now unfortunately, the margins or the headline earnings coming out of that revenue base are relatively low. This year, we were impacted highly by the LNG closure, which my colleagues have talked to, in northern Mozambique. And we've had to close the onerous contractual positions and book ZAR 53 million losses in that business. We continue to push hard on the execution of road transport sale transaction. Unfortunately, that has not been concluded meaningfully at the start of the year, resulting in us booking ZAR 28 million, impacting the margins on that business, and also resulting in the impairment of [ ZAR 253 million ]. And that's why we see a loss of around ZAR 223 million reported. If we look at our operational performance, starting off with our core Ports and Terminals, good set of performance coming through. First and foremost, our inoculation program has stayed well. I'm quite impressed with the uptake of our employees in Port of Maputo as well as Matola. We saw the uptick of 90 -- over 90% of our employees being vaccinated. In fact, this number is closer to 100% had it not been for some of our employees that were infected at the time of running the program. Now what does this mean for us? Going forward, it means 2 things. One, our employees will now be working in a relatively safer environment compared to before. Secondly, what it means is that the disruption in our operations in both of those facilities with be markedly reduced. The challenge for us as management is to ensure that we're able to replicate this across our organization, and I'm looking forward to the help of our colleagues to achieve that. If we turn to the port performance on volume. These are the volumes that we currently have as export outside the slab concession volume. The chrome and ferrochrome volumes have shown a healthy growth from H1 2020. In fact, if I look at H1 2019, that growth translates to about 6%, [ 2.9 million tonnes ]. Again, we're emphasizing that this operation is now operating at pre-COVID level, and this is really encouraging. If we look overall with the slab concession volumes, we show a healthy growth of around 7% overall within the port. Now this growth in volume is driven by the slab capacity which we've expanded, and that has grown by 89% to 9.3 million tonnes per annum. That's really good. And it also indicates the growth pace that the port will be taking in the next coming years to ensure that we achieve [ net ] capacity. We also see an uptick in the trucks which carry the chrome and ferrochrome cargo flow into the port. We averaged about 433 trucks per day, up 39% from last year. We'd like to see that number getting close to 600 trucks a day, but also we'd like to see rail complementing or supplementing those volumes into the port. And we also, of course, have trucks into the port of -- sorry, into the Matola Terminal. And that is really assisting us in boosting the terminal volume by 18% from last year. In fact, the overall terminal volume has grown by 13% overall across Richards Bay, Matola as well as our Namibia operation. Again, if you just look at the ports, we've completed the port master plan, and that has been approved by the Board of Maputo Port. Now the growth in Matola Terminal volume of 18% had translated into a healthy capacity utilization of 85%. This is up from 72% last year, quite an encouraging performance. Again, if I look at the 3.1 million tonnes achieved by Matola Terminal and I compare it to H1 2019, pre COVID, we are reporting a healthy growth of 35%. This is a great achievement, and we are well on the path to approach our capacity utilization. And I'm quite excited and looking forward to when I can get our team to get to over 90% of Matola utilization going forward. What is also pleasing for me and is really, really a breakthrough for us as a terminal operator in both the port and Matola is our ability to handle the bigger vessels. I'm talking about the capesize vessel of 100,000 tonnes [ capacity ]. Now what does this mean for us? It means we are now able to thrust or create or develop a solution for our customers which allows our customers to load bigger vessels and thereby reducing the tonnage cost or the cost per tonne [ landed into China ]. Our ability to do that means that our ports as well as our terminal in Matola remains very attractive to our customers. And this then shows that we at Grindrod remain relevant to our customers as we develop solutions for them. Now if I look at the forecast for H2 and probably in the medium term as well. We are spending all the time with ports to ensure that -- to improve our rail allocation and port performance in Richards Bay, working in collaboration with TPT as well as TFR. The teams are working tirelessly, and the cooperation we've been getting with -- from Transnet is quite encouraging. On our side in Maputo and Matola, we continuously look at optimizing our berth. What is really pleasing for me are the innovative ideas that are coming out of teams on the ground in terms of how they can optimally ensure that our berth utilization is kept up to speed all the time. In particular, if you look at what we're doing in the Port of Maputo, we identified if there are any times where there are gaps and -- on the berth utilization, we approach our customers and encourage them to take up those time allocation and call for their vessels to come in. This makes a huge impact in terms of ensuring that our berth is utilized throughout the month. If you look at an example, in Matola, we're looking at ways of finding a staging area just before the corridor and then we rail wholly into the Matola Terminal and thereby ensuring that we are able to continuously load our vessels for exports. As Fathima has indicated earlier, the road haulage into Matola came at a softer margin. I'm pleased to announce that we're continuously working with our customers to make sure that we improve that position. The key for us is the bottleneck at the Mozambique border. Some of you may have read in the media that the queue -- or the truck queue goes as long as 20 kilometers. Now that is untenable. But I'm quite pleased that we continue to work with both the South African authorities, SARS or customs as well as on the Mozambique side to find a way to get that process seamless. And hopefully, as the vaccination takes over, we should see improvements coming through at the border. As it stands now, it does remain a key challenge for us to spend our energy forecasting on. And our CEO in the port as well as on the terminal side are working relentlessly to try and unlock that. The other exciting thing or area for us is manganese. We currently provide customer solutions on manganese and logistics in Maydon Wharf facility in Durban. We're looking to embed ourselves and get involved meaningfully at Grindrod. Manganese is a very attractive product, a key export out of South Africa, and it only makes sense for Grindrod to participate in that. We're positioning Grindrod for PSP opportunities. Now these opportunities in our assessment are likely to come in 4 areas and we've actually seen in 1 area. First is the container terminal development in pier 2 in Durban as well as in the [ Port of Ngqura ]. Obviously, the RFI is out and it's called specifically for international players to come into the country and assist us in improving the efficiencies, inject the capital and reposition South Africa as a leader in providing the container terminal facility. The second opportunity sits in the manganese, in PE. It's in 2 phases. One is the relocation of the facility out of the PE into the [ Port of Ngqura] and then the development of the [ Port of Ngqura] for the export facility. The third potential area is the consolidation of the drybulk commodities in the Richards Bay contracts. And lastly is the open access on rail facility. I'm more interested in the rail -- or in the open access in the corridors in which we operate, particularly in the Maputo Port -- sorry, in the Maputo corridor as well as in the Richards Bay corridor. At this stage, we do not have -- other than the RFI on container terminal, we do not have visibility on how these PSPs will be structured. But at Grindrod, we are capacitating ourselves to ensure that we're able to respond to those opportunities when they arise. Quite exciting opportunities coming up in South Africa. We continue to roll out the newly approved Maputo Port master plan. Now if we head on to the operational highlights for the Logistics business, strong performance at our coastal shipping and container business. Unfortunately, that does not come through in the numbers that I've talked to clearly because of some exogenous factors that impacted this logistics segment, LNG, Mozambique and the disposal of our road transportation business. But this is the jewel of our business at the moment. I'm quite excited to inform you on the resumption of our graphite, which is operation in Nacala. This has somewhat assisted us in mitigating our LNG project suspension in the Cabo Delgado region. We've deployed 5 locomotives in Sierra Leone. It's a good story here because the strong earn-out prices have enabled -- Tonkolili mine has become viable and has attracted a new operator into that region. And working together with the new operator, we've been able to deploy 5 locomotives. I'm excited with the potential opportunities to do further business in that region. Of course, that's all dependent on the iron ore prices remaining in the current levels where they are currently. We progressed meaningfully the disposal of our 4 locomotives at an estimated $11.3 million. Now what is good for us and -- is the validation of the value of those locomotives that are currently sitting in our balance sheet. You'll recall that a few years back, we've had to take a knock on the impairment of those locomotives. But the Grindrod management, in fact, brought some of the locomotives in Sierra Leone, and the reason for that was because of values that they see in these locomotives. So I'm quite excited that has just been validated. And by luck, the remaining locomotives are now being deployed in our fleet. We've completed the buy-up of our additional contract in Röhlig-Grindrod. We've been in partnership with Röhlig for many, many years. And as it stands now, our interest in that business has increased from 42.5% to 50%, and we continue to benefit from Röhlig's international network in executing the last mile in South Africa in terms of the customer solutions. Our disposal of road transportation is well progressed. Now the focus for our Logistics segment in the second half of this year is margins and margins. We've also continued to replace and forego our footprint in the container business to the extent of the increase in demand particularly for our intermodal container depot. We continually optimize our graphite logistics solution as the customer ramps up production. It is quite key for us because, if you recall, that operation is run in a very remote area. And with the rainy season coming up, we need to be on top of our game in order to ensure that the ramp-up of our customer on the production side is not impacted. We continue to monitor development in the Cabo Delgado region. Our ears are on the ground in terms of the development there. We do not currently have any information in terms of when the operations will resume. But what you're seeing on the ground is a positive story around the security and Rwandan soldiers being there. And we're hoping that something positive will come out of that. And when that happens, we at Grindrod will be positioned to continue providing solutions to the customers there. And we also are keeping in touch with the owners of the vessel landing crafts that we are using before the suspension of the project. In fact, at some stage, we ramped up, up to 13 landing crafts, and we've now wind -- wound down those landing crafts to only 2, which we'll give back to the owners in this year coming. We continue to pursue the extraction of rail business as -- value from our rail business through the locomotive disposal or redeployment as I've indicated earlier. And we continue to get the inquiries from other customers. And I'm pressing harder on my CEO to improve usage rates in this regard and also the opportunity to continue to dispose of some of the vessels. Currently, we're sitting with a fleet of about 47 locomotives in our balance sheet. Again, as I've said before, we are concluding the road transportation business. So in summary, if you step back and look at the Freight Services division in the first half of the year, it's been a good performance. It could be better, but it's been a really, really solid performance. But it has not been without its challenges in the first half of the year. And generally, as we said in the past, the H2 tends to do better than H1 for the following 3 reasons. One, at the start of the year, you have your Chinese New Year, and that tends to sort of slow down the cargo flow into China. Secondly, we tend to see a lot of disruptions weather related, and that tends to also have an impact. And certainly, we saw that impacting our operations this year. And lastly, we tend to see, in fact, the major infrastructure annual maintenance is scheduled towards the back end of the first half of the year, and that does tend to impact the cargo flow mainly through rail. So I'm quite excited with the second half of the year. And I'm really upbeat that -- and I'm actually seeing some of the numbers, but I'll leave it for the [indiscernible] to talk through those.

That's interesting, Xolani. Thanks, Xolani. David?

Thanks, Andrew, and thank you to Fathima and Xolani. And welcome and good morning to everyone out there. I think while I was listening to Xolani, you could probably have switched the word freight services for bank in many of the things that he was talking to. While they are very different businesses, I think it struck me over the course of the last 6 months and more particularly the last shorter period how resilient we are as a business, how resilient and committed our staff are. And it really is an unbelievable testimony to our staff, our clients that they have been able to adapt to take a lot of the punches that got thrown at them. And we now seem to almost take that for granted, that that's part of our daily lives. So thank you to all of the bank staff in particular for their ongoing commitment and support and certainly, the commitment they give to a great service to their clients. So with that as a backdrop, the first half for the bank, really a continuation of last year. And one of the things we now need to see is we've got used to this, almost, strong balance sheet performance that we've built up over the last few years and very strong liquidity, very conservative balance sheet. And we're now seeing that the time has come to let the earnings and the profits start catching up with that balance sheet. I think that's really the challenge going forward. We can blame COVID for lots of things. We can blame all sorts of things, and we're going to have disruptions to our lives going forward. I think that's, as I said, come part and parcel of what operating in South Africa is. But with that comes opportunity, and we're certainly seeing that. The ability to be flexible to look for those opportunities as a bank, we were able to spot those and certainly are working on a number of initiatives that we think will come to fruition in the very near future. On the numbers, the revenue marginally up, but as Fathima indicated, profit up 33%, still not high enough for me but it's heading in the right direction, and still seeing margin maintenance. So from an interest perspective, able to maintain our margins where we want them. Fees are on track. Still seeing impairments, unfortunately. We -- so in those numbers are impairments we'd rather not have. And expense is well controlled. So I think not a bad position to be in but well placed for the next half. As indicated, equally -- core deposits up 9% and loans and advances up 5%, so a balance sheet we're very comfortable with. If I look at some of the key highlights, not to underplay it, ZAR 4 billion of surplus liquidity. So that is, again, going way back, lazy money for us. Fortunately, it doesn't cost us anything so it's not a drain on the earnings. But we'd far rather be earning a margin on that surplus liquidity that we do have. We did see a very positive response to our bond program that we had, some of the bonds maturing back in June. We went to the market. We had an oversubscription for those bonds, and we were able to finance them at below 50 basis points lower than we'd originally issued. So very pleased with that response. We also had our credit rating maintained over the period, which again for us is always, always a positive position. From a platform banking perspective, we, as I say, have a number of initiatives in place. Some delays due to COVID, but we're certainly hoping that in the next very short while, we will be coming to market with success in one of those initiatives. What's interesting in H2? If you look at what we -- we're continuing there on really what was in play for the first half. But from a platform banking perspective, that almost goes counterintuitive to a later point we will talk about, still very strong demand for relationship banking. And we do see that there's a place for that. Very necessary to have the shift into digitization that is happening throughout the banking industry, but at the time, we still see that clients do like and do identify with a relationship approach. So for us, opportunities to grow, introduction of strategic partners to support that growth is still ongoing. That can be in the form of Tier 1 or Tier 2 capital, and that's something that we are working on strongly. So like Xolani, very positive about where we are. And I think we're very well positioned to take those opportunities that we're seeing in the market now.

Thanks, David. If I can just talk to the noncore. And I think what I'm going to do is just step back a little bit before we get into the detail. If you remember, several years back, we had a Shipping division and we went to market and advised that we are unbundling the Shipping division. In hindsight, as we sit today, that was an extremely good decision by the Board at the time. I don't think if it had been within Grindrod, we would have still had a shipping business because we would have got scared a long time ago. But management team and the Board of shipping have done a great job of seeing after a very poor market cycle that they were in. And as you know, those of you that are still shareholders, that business is going from strength to strength now and, in fact, has indicated the decision, I believe. What we also did is we are going to focus our Freight Services business back on its core and the Bank back on its core. That meant there were a whole lot of businesses that didn't fit with the group. And it became my responsibility now to make sure that these we recover cash from. Obviously, it would be great to recover cash at a great -- above NAV. And unfortunately, we haven't been able to do that. And yes, as David said, we can't use COVID as an excuse forever. But certainly, that has had some -- that has caused some of the reasoning behind why we've not managed to get the numbers that we were hoping to get. So the entire private equity book, which consists of a number of small shares in growing businesses that are completely unrelated to freight and not related to the bank either, we have been in the market to either have the current shareholders buy the full the percentage that we carry or find another partner for them to take the businesses forward. We've been very successful in 9 of those. We still have 2 big ones to go. At this point, we haven't got a resolution on those 2 big ones. The 9 big ones, the 9 that we sold, you see the proceeds, ZAR 176 million. The U.K. real estate asset, that's under cautionary at the moment. We're hoping to come out with the category 2 in the coming weeks for the proceeds of GBP 17 million. The remaining assets, total of ZAR 983 million. So a number of you do those exercises to understand how do you think we will be able to get from those 2 businesses and then work your some of the past valuations using that number. The land, if I -- again, if I step back, the land was actually a bridge funding of a BEE transaction where BEE partly bought out land from Illovo Sugar and the mill. It was supposed to be a short bridge. And what happened, it got caught up in the land claim. And of course, the money didn't come. And we didn't want to get into any legal disputes, and we carried that investment forward. We're not in a [ Grindrod ] services in the business of lending money, and we're looking to get out of that loan of ZAR 1 billion. The team that's working to -- on that North Coast land have been actively looking at various nodes. It's a vast piece of land going from KwaDukuza or Stanger right to the sea and the 15 kilometers of coastal frontage. It's a very good land but, of course, a long-term development. And we are not property developers as Grindrod, either in the Bank or in Freight Services. So our best position would be to extract ourselves from that loan. The Marine Fuels business worked very well back in the day when we had a shipping business that needed bunker fuel. Our partner in there, Vitol, with an oil company. So we had a great JV, and we were involved in the business on a day-to-day -- from a day-to-day perspective. Right now, we have no involvement in Marine Fuel at all. We even sold our bunker fuel business, which supplies bunkers in the ports of South Africa. So we have no involvement with them at all, and it puts us at a big disadvantage. This is now bunker fuels distributed around the whole world to the shipping lines. So again, we're looking for a partner to -- a new partner for that business to take us out. And the carrying value there, $28 million or ZAR 450 million, ZAR 500 million. So those are the noncore assets that I'm responsible to making sure that we can get out of. It is the cause of a lot of the debits that you see on the income statement, and it causes a bit of a cloud over the core business that Xolani and David are running with -- creating a great footprint for us going forward. If I then move to the outlook. We monitor these stats daily, weekly, and we are very positive of where we are sitting at the moment. Economic growth for the globe is looking strong. There's a lot of discussion now on private sector participation in South Africa. Yes, you're quite correct that we've had that discussion for many, many, many years. But we see a distinct change in where the government is coming from and very much support from the likes of the power and the transit infrastructure teams on what they would like to see us as industry assisting them with. And it makes complete sense because if we as private sector can assist the government, we will unlock the great deal of value in South Africa. And certainly, we are well positioned, we believe, in the Freight Services business to do exactly that. So iron ore, important to us. Yes, it's softened a little bit, but it's still at very high prices. And if you want a recovery program globally, you need steel. So we think that iron ore, our forecast on iron ore is still positive. Manganese, South Africa are blessed with the majority of that resource. So we are very fortunate as a country. Chrome and ferrochrome, you saw the statistics coming out of Maputo Port, and we know Richards Bay also exports a lot from South Africa. So great -- saw some great exports expected there. We haven't even put copper on this slide. The container rates, we all know have gone through the roof. That has upset a lot of South African customers. And to try to get slots on container shipping lines into South Africa is now almost impossible. I'm sure that will all even out in time, but it is going to take some time. We've -- even though in Durban, we lost a lot of warehouse capacity with the looting and fire and therefore had to provide temporary solutions for local warehousing, we do find that our warehouses in Johannesburg are emptying out of it because -- and that is purely because the [ higher scales ] and economy can't get enough product into the country. So we need to just keep our eye on making sure that our facilities as logistics operators improves it. Coal, still a strong outlook for us on coal. So pretty positive for us. On the banking side, as David has talked to, still a little bit of concern about the impact of COVID on the economy. So what we thought would be a bit of uplift already going into second half is dragging a little. And we are very cautious that we must be careful here on the bank side. So overall, a good position for us as Grindrod on the freight and the bank side. And we look forward, as Xolani said, to a great second half. That is what we have prepared for the presentation today. Thank you all for listening to us. Alison will have been taking your Q&As that you would have put in the box. And now we're happy to take those questions now. The normal annexes on the volumes, port of Maputo and from the terminal perspective are in the presentation for you to look at. Alison, do you have some questions for us? And can we take them, please?

Yes, Andrew. Yes, Andrew. The first question, do you view the preference share in the bank as a correct long-term funding for that segment?

The preference share in the bank. Let me step back before I let David answer. Remember, Grindrod Limited has a preference share from the market. There's an obligation to pay a dividend on that preference share. What we have done is we've put part of that preference share into the bank, and the bank pays us a preference dividend on a half yearly basis in order that we can honor our market preference and dividend. So yes, as Grindrod Limited into the bank, the preference share is seen as equity. We could easily have put it in as ordinary equity, but then we wouldn't have been certain of the preference dividend. And we wanted to remain certain of the preference dividend, which is why we left it as a preference dividend in the bank. If you want to add the pref and the ordinary together to get the total equity in the bank, then remember you must add the preference dividend return to the earnings of the bank in order to do your ROE calculation.

[indiscernible] So we treated those as Tier 1 capital because of the conditionality on those pref shares.

Okay. I hope I answered everything under that question. Anything more, Alison?

Yes. Just to clarify, is the private equity portfolio and the land total carrying value ZAR 1.9 billion? Being equity and loan advance of ZAR 1 billion, is the ZAR 1 billion advance sitting in the bank?

No. No. So these are -- what I have on my noncore slide, on noncore for Grindrod Limited, what's sitting in there is nothing to do with the bank. It is outside of the bank and outside of freight services. It's my portfolio. It's my responsibility to make sure I liquidate those. So the loan is sitting with me, and it's my responsibility to make sure we get the money back on that. So nothing to do with the bank and the bank credit processes, et cetera, et cetera. They have their own processes with the bank. The same as it was land and it was -- private equity is also all with me. That ZAR 983 million is all with me.

Great. If I could give some perspective, Ali, to the question, I think they asked about the carrying value. So if I look at it from a Grindrod Limited balance sheet, you're quite right, we're sitting with the land underpin of ZAR 1 billion and the private equity business of the ZAR 983 million that Andrew quoted, but we do have debt associated with that as well. And that external debt is about ZAR 1.2 billion. So effectively, you are looking at your ZAR 2 billion, and you're just slightly just under ZAR 1 billion in terms of the Grindrod Limited balance sheet. If we look at it purely from a segment perspective, we have to bring our book and recognize even internal debt associated with that business, and you'll see on the additional info we've just released that's sitting at just under ZAR 0.5 billion.

Fair. But very happy to take more questions on that. If you just e-mail Fathima or myself, and we'll be able to explain if that's not clear enough in that additional info that we put on the website.

So just leading on from that, what are the 2 private equity assets remaining? What is the split between the 2 assets and the land in the ZAR 983 million?

So the land, et cetera, the ZAR 983 million has got the 2 assets in it. And if you look on the detailed announcement, you'll see the description and the values are set out in there -- in the notes.

Thank you. Another question -- sorry.

I need to answer the question on [ for whomever ] assets. Effectively out of the ZAR 983 million, the 2 investments constitute about ZAR 530 million of debt.

Thank you. The next question. The net debt position remained fairly stable due to -- largely due to the sale of noncore assets. And are these -- were these actually necessary with forced disposals? Or are these sales generally noncore? And were they considered core in the past?

Yes. So everything that's on that noncore slide, we flagged as such from several years ago. And in so doing, you create an expectation in the market, which I think has also worked against us. So when you are a known seller, the people will then try to lower all your prices. So I don't think it has worked in our favor too much. But for a number of years now, we've been marketing essentially those assets for sale. So -- and if you think about it, none of them fits into our Freight Services business and none of them fits in our Bank business. They are what doesn't relate to our core business at all. So -- and for sale, no, we're very comfortable with the debt. And in fact, I get a lot of calls from a number of the analysts saying, why do you want to now pay down debt? Why are you buying back the share more? So we're not feeling uncomfortable with the debt levels. You saw the earnings -- the cash earnings from operations. We're very comfortable with that debt level. The reason why we are a little bit reticent in buying back shares, although we have bought back shares, is that we want to make sure that we find a proper landing for this land up the North Coast. That's a big number for us, and we need to make sure that we are comfortable with the way in which that is going. And over the next 6 months, I'm sure we'll get more clarity on that. I hope I answered that well enough. If not, again, please send an e-mail, and we'll discuss it.

Thank you. The South African government has indicated that they are open to inviting private operators onto the transit line. Is this a material opportunity for Grindrod? And if so, can you elaborate on the opportunity? Do you expect -- what sort of time line do you expect that the government will implement this?

Thank you for the question. Xolani did touch on it a little bit in his presentation, but -- and he's raring to go again. And then I'll put a little bit of perspective on that as well. Xolani?

Yes. Well, look, it's quite encouraging that the government is taking that view and that step, and we're hoping it is ready to come through to the market. We've seen the other major mining companies really looking for the opportunities to make sure that they can unlock their volume from the mining. I mean if you look at the [ RX ] line and as well as you look at the line into the RBCT, there is really an opportunity to actually unlock those corridors and make sure that if they ink, we actually benefit. So it's quite encouraging that the government is taking that stance. Now the form in which this will take is currently unknown, and therefore, we continue to keep our ear here on the ground to understand what form it will take. From Grindrod perspective, as I've indicated earlier, we're sitting with around 47 locomotives. So certainly, there are opportunities for us to actually deploy those locomotives. Now if you ask me whether we will have an appetite, especially to run a full concession with the maintenance on the line, of course, we'll have to weigh that against other opportunities that I've highlighted earlier, which includes the manganese in PE, includes the consolidation of the dry-bulk cargo in Richards Bay as well as the container terminal maybe to a lesser extent. So it's for Grindrod to decide on the participation, and the extent of the participation will depend on the nature of the opportunities coming out and also relative to the other opportunities which we are probably more inclined to take around the terminal operation because that where our competency is. But certainly, at the face of it, if we have the ability to deploy the 47 locomotives, we'll certainly look into it.