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Overview
Businesses in all geographies, with the
exception of Aktaes Turkey and Logistics
UK, performed well and achieved pleasing
growth, ahead of last year and largely in line
with management’s expectations. Bidcorp’s
high standard of performance in home
markets is not clearly evident when reported
in rand terms as our reporting currency is
schizophrenic at times. The rand appreciated
considerably against three of our principal
trading currencies; sterling, euros and
Australian dollars.
This should not detract attention from the
marketplace gains achieved in numerous
Bidcorp jurisdictions. To give context to
operational and currency effects, it should
be noted that during the year the rand
appreciated by nearly 20% against the
British pound yet our UK-based foodservice
teams (excluding the Logistics’ business)
still achieved home currency trading profit
growth of nearly 18%.
The only significant disappointment related
to poor performance at our Logistics UK
business following previously reported
management irregularities. Significant effort
and cost were expended in dealing with
these matters, which remain the subject of
ongoing legal processes. In terms of dealing
with the performance issues, remedial action
is under way. However, this remains a non-
core activity and management is committed
to finding a viable solution for the business,
hopefully at minimal cost as the business is
downscaled over the medium term.
Rand reporting
Bidcorp is listed on the JSE in Johannesburg
and has its corporate office nearby. We have
reported in rand since our listing, and did so
for many years prior to that in our ‘previous
life’ as a key component of South Africa’s
Bidvest group.
We are well aware that nearly 90% of
Bidcorp profit comes from our international
businesses and it is well known that we
measure and manage our operational teams
in their home currencies. However, at this
juncture, no one currency dominates in
terms of contribution and therefore we see
no reason to change our reporting currency
just yet.
In South Africa, our shares are viewed as a
rand hedge and receive significant support
on that basis. Internationally, we are seen
as a geographically diverse business with a
growing presence in emerging markets of
interest.
Bidcorp investors are well aware of currency-
market see-saw effects and live with them.
We are content to do so as well. If there is
a material change in this situation, we will
review our position, but that time has not yet
come.
Since our listing in May 2016, our shares
have enjoyed solid support across
the investment community (local and
international) and are currently held 55% by
the international investment community.
Financial performance
Bidcorp has, in addition to its actual audited
results, provided shareholders with pro forma
financial information in relation to the
comparative year-end due to the unbundling
from The Bidvest Group Limited in May
2016, to enable a full appreciation of the
true performance of the group. The following
comment is based on the comparison to that
pro forma information.
Bidcorp delivered very pleasing results for
the year ended June 30 2017, though
the true performance in home currencies
was negatively impacted by rand strength
across all major currencies. Headline
earnings per share (HEPS) increased by
9,4% to 1 181,0 cents per share (PF2016:
1 080,0 cents) with basic earnings per share
(EPS) increasing by 16,7% to 1 207,1 cents
per share (PF2016: 1 034,0 cents).
On a constant currency basis, excellent
growth of 19,1% in HEPS was achieved,
truly reflective of the strong performance of
the businesses.
Net revenue of R130,9 billion (PF2016:
R140,5 billion) declined by 6,8%, in part due
to currency impacts and the deliberate and
planned exit of some low-margin contracts in
various geographies, which still reflect in the
comparative base.
These low-margin contracts are regarded
as non-strategic and detract from our
positioning as a provider of added-value
foodservice solutions in the independent or
free trade sector of our industry. The strategic
thinking behind the deliberate exit of these
high-volume contracts and the consequent
rebalancing of customer portfolios has
been well communicated to the investment
community. In our core foodservice sector,
solid revenue growth was achieved in local
currency terms at most operations.
The strategic shift to the free trade sector
helped us better manage our margins in
highly competitive markets. Gross profit
percentage increased to 21,7% (PF2016:
20,8%), reflecting the benefit of trading with
the correct mix of business.
Bidcorp delivered very pleasing results for
the year ended June 30 2017. On a constant
currency basis, excellent growth of 19,1%
in HEPS was achieved, truly reflective of
the strong performance of the businesses.
Overall, Bidcorp expects another
positive year.
Chief financial officer’s report
19
Annual integrated report 2017
Bid Corporation Limited