Annual integrated report 2017

Ratings

Bidcorp has no international credit rating at

present. Processes are currently under way

that in due course will enable us to apply for

a rating.

The April downgrading of South Africa’s

sovereign credit rating to sub-investment

grade had no discernible effect on our

business operations in South Africa. Similarly,

the full-year effects of downgrades in the

UK and Europe had little or no impact on

the performance of Bidcorp businesses in

the affected jurisdictions. Given the correct

positioning of our foodservice operations in

their respective markets, our strategic view

is that macro-economic factors should not

act as an impediment to local management’s

ability to outperform their local conditions.

Taxes

There is little doubt inter-government

collaboration on equitable tax dispensations

for multinational enterprises (MNEs) will

continue and probably gather pace. The

Organisation for Economic Cooperation

and Development (OECD) has worked

for several years on plans to address the

issue of transfer pricing across international

jurisdictions, aka BEPS (base erosion profit

shifting).

Early in our 2018 financial year, the BEPS

Framework published additional guidance

for tax administrations and MNEs on the

implementation of country-by-country (CbC)

reporting.

However, Bidcorp is not an MNE in the

true sense of the word as we operate a

decentralised business model where every

country and every business within that

country is self-standing and self-sufficient

in terms of management and autonomy.

We ensure all our operations worldwide are

aware of the latest CbC developments and

updates while the group reporting systems

and documentation are aligned with the

latest CbC requirements. In addition, each

financial team in each national jurisdiction

works to ensure they comply with local

taxation requirements.

We pay our taxes and respect the

international BEPS and CbC processes.

Compliance and ESG

Taxation is not the only area in which

rigorous compliance is necessary. Food and

foodservice are heavily regulated industries.

This is understandable as food safety and

healthy eating are key issues for consumers

and regulators.

We accept the need for strict adherence to

the highest standards of food quality and

integrity – along with the need to deal with

environmental and social matters. Again, in

line with our decentralised business model,

these duties are undertaken by local teams.

We operate in more than 30 countries.

Different priorities apply in each region. For

example, the black economic empowerment

imperative is unique to South Africa. Local

sourcing, food traceability and healthy eating,

especially in schools, are major issues in

Britain, Australasia and many European

countries.

Managers on the ground are responsible

for ensuring all national regulations are

respected. In certain jurisdictions, they have

an industry lead thanks to their familiarity

with best international practice – a result of

stepped-up information – and experience-

sharing across Bidcorp businesses.

Group cooperation is growing, but central

control is neither possible nor desirable due

to geographic diversity, our decentralised

business model and the lack of a single

regulatory template. Accordingly, only

material items that are common to all

businesses are reported on through our

ESG (environmental, social and governance)

framework. Local teams are driven by

sustainable business practices and have

integrated these functions into their day-

to-day workings. They continue to do an

exemplary job.

The future

The group is well positioned for continued

expansion in all geographies. Rising inflation

is evident in many markets. This, combined

with above average growth in the eating-out

segment, indicates that prospects for our

businesses remain positive. Cost pressures

are evident, particularly in salaries and

wages. However, the drive for efficiencies is

built into the Bidcorp DNA and will continue.

Operationally, our people continue to

demonstrate the potential for solid growth

in largely fragmented markets. We therefore

expect our businesses to achieve further

organic growth and market-share gains.

In addition, we have ample resources to

fund acquisitive growth in current markets

and perhaps in new geographies in which

we currently have no representation. Overall,

Bidcorp expects another positive year.

David Cleasby

Chief financial officer

The annual executive strategy conference – Rome, September 2017

Annual integrated report 2017

Bid Corporation Limited