Directors' report
The directors have pleasure in presenting their report for the year ended June 30 2016.
Nature of business
Bid Corporation Limited (Bidcorp) is an international broadline foodservice group present in all continents other than North America and Antarctica. Bidcorp’s focus is on realising the potential that exists in its current foodservice operations as well as acquisitive growth opportunities. The business comprises a mix of well-established operations in leading and rapidly growing markets, offering significant future upside. The profile of the customer base is strategically targeted to fully cater to the foodservice industry’s needs.
Financial reporting
The directors are required by the Companies Act No 71 of 2008, as amended (the Act), to produce financial statements, which fairly present the state of affairs of the company and the group as at the end of the financial year and the profit or loss for that financial year, in conformity with IFRS and the Act.
The financial statements as set out in this report have been prepared by management in accordance with IFRS and the Act and are based on appropriate accounting policies supported by reasonable and prudent judgements and estimates.
The directors are of the opinion that the financial statements fairly present the financial position of the company and of the group as at June 30 2016 and the results of their operations and cash flows for the year then ended.
The directors are satisfied that the group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements.
Stated capital
During the year, the company’s authorised stated capital was increased by the creation of ordinary no par value shares, so as to result in the company’s authorised capital being 540 000 000 no par value shares
The company’s 2015 authorised share capital of 90 000 ordinary par value shares was cancelled.
During the year the company issued:
- 335 394 112 ordinary no par value shares to The Bidvest Group Limited.
Unbundling from The Bidvest Group Limited
The unbundling was governed by and carried out in accordance with the Companies Act. The entire issued share capital of Bidcorp was unbundled to Bidvest shareholders by way of a distribution in specie in accordance with section 46 of the Companies Act, section 46 of the Income Tax Act and the JSE Listings Requirements. The Bidcorp shares were unbundled in a ratio of 1:1 with The Bidvest Group Limited shares.
The Bidvest Group Limited directors were of the opinion that the unbundling of Bidcorp would result in:
- streamlined activities and operations of Bidcorp while ensuring an improved platform from which it could each pursue continued growth;
- provide greater transparency with regard to the nature of the activities and geographies within which Bidcorp operates and the potential value of each business;
- improve management focus which will assist in identifying acquisition opportunities, both locally and abroad, and enable management to mitigate and manage specific risks and challenges faced by each business;
- enable seamless and transparent management succession; and
- provide Bidcorp with the flexibility to anticipate and react to changes within the specific market segment and economic landscape in which it operates.
Acquisitions
The group made a number of small acquisitions during the year namely, Caterfood (UK), Cimandis (UK), Knight Meats (UK), MPD (Czech Republic), Van Bennekom (Netherlands), Hume Fresh Produce and Pacific Provideros (Australia).
These acquisitions form part of the group’s strategic expansion plans in the international foodservice industry. Goodwill arose on the acquisitions as the anticipated value of future cash flows that were taken into account in determining the purchase consideration exceeded the net assets acquired at fair value. The acquisitions have enabled the group to expand its range of complementary products and services and, as a consequence, has broadened the group’s base in the marketplace.
There were no significant contingent liabilities identified in the businesses acquired.
Subsequent events
No material subsequent events have arisen since June 30 2016.
Results of operations
The unbundling of Bidcorp from The Bidvest Group Limited was effective on May 30 2016. Prior to the unbundling, Bidcorp and The Bidvest Group Limited undertook a number of asset-for-share transactions. As required for statutory reporting purposes, the statutory financial information for Bidcorp has been presented for the financial year ended June 30 2016 and comparative financial year ended June 30 2015. In this regard, Bidcorp’s statutory financial information from April 1 2016 includes:
- transfer into Bidcorp of Bidvest Food Africa Proprietary Limited, Bidvest Food Properties Proprietary Limited and Bidvest treasury shares for the issue of 335,4 million Bidcorp shares to The Bidvest Group Limited; and
- transfer out of Bidcorp of EAS Zimbabwe Private Limited, EAS Zambia Limited and Bidvest Zambia Limited to The Bidvest Group Limited.
Accordingly, the statutory financial information for the years ended June 30 2016 and June 30 2015 does not fully reflect the performance of the Bidcorp Group as it is currently structured.
To assist shareholders in their understanding of Bidcorp, pro forma financial information for the years ended June 30 2016 and June 30 2015 has been disclosed from Directors’ responsibility statement to Notes to the pro forma statement of financial position of the Bidcorp Group in appendix B and appendix C respectively. This reflects Bidcorp as it is now structured and as if it was in effect from the beginning of both financial years.
Dividends
In line with the group dividend policy, the directors declared a final gross cash dividend of 241,0 cents (204,85 cents net of dividend withholding tax, where applicable) per ordinary share for the year ended June 30 2016 to those members registered on the record date, being Friday, September 16 2016.
| Declaration date | Wednesday, August 24 2016 |
| Last day to trade cum dividend | Tuesday, September 13 2016 |
| First day to trade ex dividend | Wednesday, September 14 2016 |
| Record date | Friday, September 16 2016 |
| Payment date | Monday, September 19 2016 |
The dividend was paid out of income reserves. A dividend withholding tax of 15% was applicable to all shareholders who were not exempt.
Directorate and attendance
The directors who were in office during the year and the details of board meetings attended by each of the directors are as follows:
| Director | Date of appointment | April 4 2016 | May 30 2016 | June 10 2016 | August 23 2016 | |||||
| Executive chairman | ||||||||||
| B Joffe | August 17 1995 | ^ | ^ | ^ | ^ | |||||
| Independent non-executive directors | ||||||||||
| PC Baloyi | March 10 2016 | ^ | ^ | ^ | ^ | |||||
| DDB Band | March 10 2016 | ^ | ^ | ^ | ^ | |||||
| NG Payne | March 10 2016 | ^ | ^ | A | ^ | |||||
| CWL Phalatse | March 10 2016 | ^ | ^ | ^ | ^ | |||||
| H Wiseman | March 10 2016 | ^ | ^ | ^ | ^ | |||||
| Executive directors | ||||||||||
| BL Berson | March 10 2016 | ^ | ^ | ^ | ^ | |||||
| DE Cleasby | September 12 2007 | ^ | ^ | ^ | ^ |
^ Attended in person, by video-conference or tele-conference.
A Apologies tendered.
Directors’ shareholdings
Beneficial
The individual beneficial interests declared by the current directors and officers in the company’s stated capital at June 30 2016 held directly or indirectly were:
| 2016 | 2015 | |||||||
|---|---|---|---|---|---|---|---|---|
| Number of shares | Number of shares | |||||||
Director |
Direct | Indirect | Direct | Indirect | ||||
| BL Berson | 8 | 209 511 | – | – | ||||
| DE Cleasby | 129 314 | – | – | – | ||||
| B Joffe | 221 544 | 20 060 | – | – | ||||
| Total | 350 866 | 229 571 | – | – | ||||
Non-beneficial
In addition to the aforementioned holdings:
- B Joffe is a trustee and potential beneficiary of a discretionary trust holding 1 009 960 (2015: nil) shares.
- DE Cleasby is a potential beneficiary of a family trust holding 750 (2015: nil) shares.
- DE Cleasby is a trustee of The Bidvest Group Limited retirement funds which holds 541 636 (2015: nil) shares.
There has been no change in the directors’ interest between 30 June and the issue date of the annual integrated report.
Directors’ remuneration
The remuneration paid to executive directors while in office of the company during the year ended June 30 2016 can be analysed as follows:
| Remuneration and benefits paid to directors by the company |
Remuneration and benefits paid to directors by The Bidvest Group Limited |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Director | Basic remuneration R’000 |
Other benefits and costs R’000 |
Retirement/ medical benefits R’000 |
Cash incentives R’000 |
Basic remuneration R’000 |
Other benefits and costs R’000 |
Retirement/ medical benefits R’000 |
Cash incentives R’000 |
Total emoluments R’000 |
|||
| BL Berson | 12 777 | 275 | 370 | 14 864 | – | – | – | – | 28 286 | |||
| DE Cleasby | 335 | 19 | 41 | 442 | 3 693 | 495 | 439 | 4 858 | 10 322 | |||
| B Joffe | 9 115 | 45 | 38 | 10 311 | 8 133 | 1 755 | 873 | 8 800 | 39 070 | |||
| 2016 total | 22 227 | 339 | 449 | 25 617 | 11 826 | 2 250 | 1 312 | 13 658 | 77 678 | |||
For comparative purposes the remuneration paid to the executive directors while in office of the company during the year ended June 30 2015 can be analysed as follows:
| Remuneration and benefits paid to directors by the company | Remuneration and benefits paid to directors by The Bidvest Group Limited |
|||||||||||
| Director | Basic remuneration R’000 |
Other benefits and costs R’000 |
Retirement/ medical benefits R’000 |
Cash incentives R’000 |
Basic remuneration R’000 |
Other benefits and costs R’00 |
Retirement/ medical benefits R’000 |
Cash incentives R’000 |
Total emoluments R’000 |
|||
| BL Berson | 9 675 | 244 | 239 | 10 637 | – | – | – | – | 20 795 | |||
| DE Cleasby | – | – | – | – | 3 662 | 428 | 414 | 4 500 | 9 004 | |||
| B Joffe | 6 536 | – | – | 7 730 | 8 322 | 1 253 | 903 | 8 000 | 32 744 | |||
| 2015 total | 16 211 | 244 | 239 | 18 367 | 11 984 | 1 681 | 1 317 | 12 500 | 62 543 | |||
The remuneration paid to non-executive directors while in office of the company during the year ended June 30 2016 is analysed as follows:
| Non-executive director | Directors’ fees R’000 |
|
|---|---|---|
| PC Baloyi | 106 | |
| DDB Band | 180 | |
| NG Payne | 120 | |
| CWL Phalatse | 115 | |
| H Wiseman | 264 | |
| 2016 total | 785 |
All non-executive directors were appointed with effect from March 10 2016.
Prescribed officers
Due to the nature and structure of the group and the number of executive directors on the board of the company, the directors have concluded that there are no prescribed officers of the company.
Share-based payment expense
| Accounted for in the company |
Accounted for in The Bidvest Group Limited |
Total | ||||||||||
| Director | 2016 R’000 |
2015 R’000 |
2016 R’000 |
2015 R’000 |
2016 R’000 |
2015 R’000 |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BL Berson | 6 428 | 5 791 | 5 068 | – | 11 496 | 5 791 | ||||||
| DE Cleasby | 101 | – | 6 122 | 3 397 | 6 223 | 3 397 | ||||||
| B Joffe | 373 | – | 23 326 | 11 723 | 23 699 | 11 723 | ||||||
| 6 902 | 5 791 | 34 516 | 15 120 | 41 418 | 20 911 | |||||||
Details of directors’ and officers’ outstanding conditional share plan (CSP)
A conditional award is a conditional right to a share, which is awarded subject to performance and vesting conditions.| Conditional share plan awards accounted for in the company | ||||||||||||||
| Director | Balance at June 30 2015 |
New awards |
Shares* awarded |
Vesting arising out of unbundling** |
Forfeited*** | Transfer as a result of unbundling |
Closing balance June 30 2016 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BL Berson | 151 163 | 35 000 | (47 930) | (68 417) | (34 816) | – | 35 000 | |||||||
| DE Cleasby | – | – | – | – | – | 19 000 | 19 000 | |||||||
| B Joffe | – | – | – | – | – | 70 000 | 70 000 | |||||||
| 151 163 | 35 000 | (47 930) | (68 417) | (34 816) | 89 000 | 124 000 | ||||||||
| * | During 2016 shares were awarded at R342,62 per share. |
| ** | As a result of unbundling, The Bidvest Group Limited remuneration committee resolved to restructure the outstanding 2012, 2013, 2014, and 2015 Bidvest CSPs. On May 26 2016 CSPs were awarded at a market price of R346,00 per share |
| *** | Shares forfeited as a result of performance targets not being met. |
| Conditional share plan awards accounted for in The Bidvest Group Limited | ||||||||||||||
| Director | Balance at June 30 2015 |
New awards |
Shares* awarded |
Vesting arising out of unbundling** |
Forfeited*** | Transfer as a result of unbundling |
Closing balance June 30 2016 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| DE Cleasby | 87 747 | 19 000 | (31 228) | (37 340) | (19 179) | (19 000) | – | |||||||
| B Joffe | 310 495 | 70 000 | (89 421) | (145 329) | (75 745) | (70 000) | – | |||||||
| 398 242 | 89 000 | (120 649) | (182 669) | (94 924) | (89 000) | – | ||||||||
| * | During 2016 shares were awarded at R342,62 per share. |
| ** | As a result of unbundling, The Bidvest Group Limited remuneration committee resolved to restructure the outstanding 2012, 2013, 2014, and 2015 Bidvest CSPs. On May 26 2016 CSPs were awarded at a market price of R346,00 per share. |
| *** | Shares forfeited as a result of performance targets not being met. |
Summary of executive directors’ long-term incentives
| Executive directors' long-term incentives accounted for in the company | ||||||||||||
| Director | Share- based payment expense R'000 |
Benefit arising from award of CSP R'000 |
Benefit arising from restructure of CSPs R'000 |
Gross benefits R'000 |
Previous share-based payment expense in respect of awards R'000 |
Actual LTI benefit R'000 |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | ||||||||||||
| BL Berson | 6 428 | 16 422 | 23 672 | 46 522 | (22 551) | 23 971 | ||||||
| DE Cleasby | 101 | – | – | 101 | – | 101 | ||||||
| B Joffe | 373 | – | – | 373 | – | 373 | ||||||
| 2016 total | 6 902 | 16 422 | 23 672 | 46 996 | (22 551) | 24 445 | ||||||
| 2015 | ||||||||||||
| BL Berson | 5 791 | 21 292 | – | 27 083 | (11 605) | 15 478 | ||||||
| 2015 total | 5 791 | 21 292 | – | 27 083 | (11 605) | 15 478 | ||||||
| Executive directors' long-term incentives accounted for in The Bidvest Group Limited | ||||||||||||||
| Director | Share- based payment expense R'000 |
Benefit arising from award of CSP R'000 |
Benefit arising from restructure of CSPs R'000 |
Benefit arising from the exercise of options* R'000 |
Gross benefits R'000 |
Previous share-based payment expense in respect of awards R'000 |
Actual LTI benefit R'000 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | ||||||||||||||
| BL Berson | 5 068 | – | – | – | 5 068 | – | 5 068 | |||||||
| DE Cleasby | 6 122 | 10 699 | 12 920 | – | 29 741 | (12 976) | 16 765 | |||||||
| B Joffe | 23 326 | 30 637 | 50 284 | 11 408 | 115 655 | (47 424) | 68 231 | |||||||
| 2016 total | 34 516 | 41 336 | 63 204 | 11 408 | 150 464 | (60 400) | 90 064 | |||||||
| 2015 | ||||||||||||||
| DE Cleasby | 3 397 | 15 969 | – | – | 19 366 | (8 704) | 10 662 | |||||||
| B Joffe | 11 723 | 31 939 | – | – | 43 662 | (17 407) | 26 255 | |||||||
| 2015 total | 15 120 | 47 908 | – | – | 63 028 | (26 111) | 36 917 | |||||||
* Includes taxable benefits arising on the settlement of The Bidvest Group Limited incentive scheme loans.
Directors’ service contracts
B Joffe’s employment agreement includes a contract term of three years, normal inflation related increases and a performance-related bonus.
No other executive directors have a fixed-term contract.
Directors and officers’ disclosure of interest in contracts
During the financial year no contracts were entered into in which directors and officers of the company had an interest and which significantly affected the business of the group. The directors had no interest in any third party or company responsible for managing any of the business activities of the group.
Logistics United Kingdom
Management irregularities were identified and investigated during the year, some of which relate to a recent acquisition and others to operational activities, all of which significantly impacted the Logistics division. These irregularities are subject to ongoing legal processes. Any impact on noncurrent assets is continually being monitored by management. In respect of the net operating assets, management has provided for the worst case scenario based on management’s best estimate for the year then ended, notwithstanding potential recoveries from legal action and insurance claims.
Secretary
During the year under review, and in compliance with paragraph 3.84(i) and (j) of the JSE Listings Requirements, the board evaluated Mrs AK Biggs, the company secretary, and is satisfied that she is competent, suitably qualified and experienced.
Furthermore, since she is not a director, nor is she related to or connected to any of the directors, thereby negating a potential conflict of interest, it was agreed that she maintains an arm’s-length relationship with the board.
The business and postal addresses of the secretary, which are also the registered addresses of the company, are 2nd Floor, North Wing, 90 Rivonia Road, Sandton, 2196 and Postnet Suite 136, Private Bag X9976, Sandton, 2146, respectively.