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Chief financial officer’s report
The capital items that arose during the year totalled R152,7 million,
the most material of which relating to write down of the investment in
Icelandic Water Holdings ehf of R119,1 million.
Distribution
As a result of the listing and in accordance with its dividend policy,
Bidcorp has declared a dividend of 241,0 cents per share based
on the pro forma results, which pertain to the second half of the
financial year.
Ratings
Three rating agencies stripped the UK of its AAA rating following the
Brexit vote. The EU’s long-term credit rating was also downgraded in
the aftermath of the referendum.
South Africa avoided a downgrade of its sovereign credit rating to
so-called junk status and remains just one rung above the BBB- level,
with a negative outlook.
Markets anticipate such actions and price risk accordingly. However,
the risk to these jurisdictions remains the ability to reverse the
downward trend by taking hard economic decisions. History has
shown that all participants in the economy are impacted by such
downgrades.
Currently, Bidcorp does not have an international credit rating. This
remains a strategic imperative in the year ahead.
Compliance, communication and regulation
All stakeholders expect regular and transparent communication.
Accordingly, we give increasing time and attention to reporting and
compliance matters. Executives and management are available to
stakeholders, as required, and respond at frequent intervals through
various types of engagement.
In our decentralised environment, we demand the highest level of
personal integrity from our managers and staff. All personnel subscribe
to a Bidcorp value system that stresses the need for honesty and
transparency. This value system has always been part of the Bidcorp
culture and its DNA.
We believe corporate regulation should take the form of self-regulation
based on principles rather than rules. Regulation that proves stifling will
result in less, not more, communication.
Taxation
Bidcorp is a multinational entity and each business is self-sufficient
in each of its operating jurisdictions, in line with the group’s
decentralisation philosophy.
As a result, little inter-company business is conducted and we
therefore have only a passing interest in the current global debate
about transfer pricing and aggressive tax avoidance practices.
Revenue grew 20,8% to R140,5 billion (2015: R116,3 billion). Major
contributors to the increases were the UK and European operations,
reflecting organic growth and assistance from currency effects
on translation. Revenue growth was dampened by the deliberate
and planned exit of large contract, low margin business in various
geographies.
The gross profit percentage increased to 20,8% (2015: 20,3%),
reflecting the benefit of the strategy of focusing on the correct mix of
business. Operating expenses remained well controlled, increasing
by 6,2% on a constant currency basis. The benefits of lower fuel
costs were negated by some wage pressure in a number of growing
economies and higher sales and distribution costs, reflecting higher
activity levels.
Group trading profit increased by 26,1% to R5,2 billion (2015:
R4,1 billion) and the trading margin increased to 3,7% (2015: 3,5%),
principally reflecting the operational focus in many geographies of
growing the independent trade and rebalancing the customer portfolio.
Share-based payment costs declined from R89,9 million to
R64,0 million, impacted by the unbundling and the run-off of previous
option schemes. Long-term incentivisation remains a cornerstone of
management motivation and new allocations to staff have been made.
Acquisition costs of R8,9 million (2015: R43,6 million) reflect minimal
acquisition activity as compared to the prior year.
Net finance charges are 11,1% lower at R294,6 million (2015:
R331,3 million), reflecting good cash generation despite greater
utilisation of working capital. Bidcorp remains well capitalised, with
trading profit interest cover at 17,5 times (2015: 12,3 times). We
remain conservative in our approach to gearing.
Headline earnings increased by 32,7% to R3,6 billion (2015:
R2,7 billion). Net headline earnings adjustments in the year totalled
R152,7 million.
The group’s financial position remains strong. Growth in total assets
reflects normal levels of replacement, investment capital expenditure
on fixed assets and higher trading activity in inventories and
receivables.
Bidcorp’s strategic positioning entails continued migration into high-
margin areas of the foodservice industry. This highly competitive
business-to-business environment necessitates continued innovation
that adds value for customers. Investment in new systems,
e-commerce platforms, multi-temp facilities and modern infrastructure
was therefore constant. Capital expenditure rose to R2,1 billion
(2015: R1,7 billion).
Net debt declined to R1,7 billion as compared to R3,3 billion at
June 30 2015. Cash generated by operations was extremely robust
as was working capital management, despite organic growth and
currency impacts on translation. Net working capital days remained in
line with the prior year (2015: -1 day).
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| Bidcorp Limited Annual integrated report 2016