Directors' report
The directors have pleasure in presenting their report for the year ended June 30 2017.
Nature of business
Bid Corporation Limited (Bidcorp) is an international broadline foodservice group present in all continents other than North America and Antarctica. Bidcorp is focused on growth opportunities: organically in our current markets through attaining the appropriate business mix by selling more products to our existing customers and gaining new customers; via in-territory bolt-on acquisitions to expand our geographic reach and expanding our product ranges; and via larger acquisitions to enter new markets. Despite our appetite for acquisitions, we remain disciplined in our approach.
Bidcorp's entrepreneurial and decentralised business model, depth and experience of management teams and strength of the group's culture has set up the group for sustained growth in the future.
Financial reporting
The directors are required by the Companies Act to produce financial statements, which fairly present the state of affairs of the group and the company as at the end of the financial year and the profit or loss for that financial year, in conformity with IFRS and the Companies Act.
The financial statements as set out in this report have been prepared by management in accordance with IFRS and the Companies 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 group and of the company as at June 30 2017 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
The company's authorised stated capital is 540 000 000 no par value ordinary shares. There were no issues of no par value ordinary shares during the year and as at June 30 2017 the total issued ordinary no par value shares was 335 404 212.
Acquisitions and disposals
Bidcorp acquired 90% of the issued share capital of Guzmán Gastronomia and Cuttings (Guzmán) for an enterprise value of €75 million (R1.1 billion), the effective date of this acquisition was April 1 2017.
Other than the Guzmán acquisition, the group made a number of small acquisitions during the year, namely Bestfood NV (Belgium), BFS Port Macquarie Proprietary Limited (Australia), Central Choices Foods Proprietary Limited (Australia), Hanlon's Smokehouse Dublin Limited (Ireland), Mariusso Comércio De Alimentos E Representação Limitada (Brazil), Quartiglia Food Service Spa (Italy), R Noone & Son Limited (England), Wyn Lee Holdings Limited (England) and Wynne-Williams (Flint) Limited (England).
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. There were no significant contingent liabilities identified in the businesses acquired.
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 its marketplace.
Effective April 1 2017, Bidcorp Food Africa Proprietary Limited, a subsidiary of Bid Corporation Limited, signed agreements with Puratos Group NV (Puratos) whereby Puratos became an equal shareholder in Bidcorp Food's Bakery Solutions Division (BBS, subsequently renamed Chipkins Puratos (CP)) manufactures and supplies bakery ingredients to industrial bakers, the craft market and large retailers under the Chipkins and NCP brands in South Africa.
The transaction provides CP with an opportunity to grow its existing business and to develop new products and tailormade solutions for the South African baking industry. Planned investment in new product categories and technology are very exciting and offer opportunities and development experiences to management and staff. For further details of the transaction, refer to note 19 of the financial statements.
Subsequent events
Subsequent to year-end, management has been through a legal mediation process with the perpetrators of the Logistics UK irregularities. Bidcorp management remains optimistic that pursuant to legal action and insurance claims, potential recoveries arising from the management irregularities will be forthcoming.
Other than the legal matter disclosed above, no other material subsequent events have arisen since June 30 2017.
Results of operations
The results of operations are dealt with in the consolidated statement of profit or loss, segmental analysis and commentary.
Dividends
The directors declared an interim gross cash dividend of 250,0 cents (200,0 cents net of dividend withholding tax, where applicable) per ordinary share to those members registered on the record date, being Friday, March 24 2017. The dividend was declared from income reserves.
In line with the group dividend policy, the directors declared a final gross cash dividend of 250,0 cents (200,0 cents net of dividend withholding tax, where applicable) per ordinary share for the year ended June 30 2017 to those members registered on the record date, being Friday, September 22 2017.
| Declaration date | Thursday, August 24 2017 |
| Last day to trade cum dividend | Tuesday, September 19 2017 |
| First day to trade ex dividend | Wednesday, September 20 2017 |
| Record date | Friday, September 22 2017 |
| Payment date | Tuesday, September 26 2017 |
Share certificates may not be dematerialised or rematerialised between Wednesday, September 20 2017 and Friday, September 22 2017, both days inclusive.
The dividend has been declared from income reserves. A dividend withholding tax of 20% will be applicable to all shareholders who are 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 | November 11 2016 |
February 22 2017 |
May 18 2017 |
August 23 2017 |
|
| Non-executive chairman | ||||||
| B Joffe | August 17 1995 | ^ | ^ | ^ | ^ | |
| Independent non-executive directors | ||||||
| PC Baloyi | March 10 2016 | ^ | ^ | ^ | ^ | |
| DDB Band | March 10 2016 | ^ | ^ | ^ | ^ | |
| S Koseff* | August 16 2017 | n/a | n/a | n/a | ^ | |
| DD Mokgatle | October 4 2016 | ^ | ^ | ^ | ^ | |
| NG Payne | 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. |
| * | Appointed August 16 2017 |
Directors’ shareholdings
Beneficial
The individual beneficial interests declared by the current directors and officers in the company’s stated capital at June 30 held directly or indirectly were:
| 2017 | 2016 | ||||
| Number of shares | Number of shares | ||||
| Director | Direct | Indirect | Direct | Indirect | |
| BL Berson | 8 | 224 211 | 8 | 209 511 | |
|---|---|---|---|---|---|
| DE Cleasby* | 133 814 | – | 129 314 | – | |
| B Joffe | 21 544 | 20 060 | 221 544 | 20 060 | |
| Total | 155 366 | 244 271 | 350 866 | 229 571 | |
| * | DE Cleasby acquired 4 500 Bidcorp ordinary shares on September 26 2017. There were no other changes in directors’ interests to note between financial year-end and publication of Annual Integrated Report 2017. |
Non-beneficial
In addition to the aforementioned holdings:
- B Joffe is a trustee and potential beneficiary of a discretionary trust holding 700 107 (2016: 1 009 900) shares.
- DE Cleasby is a potential beneficiary of a family trust holding 750 (2016: 750) shares.
- DE Cleasby is a trustee of The Bidvest Group Limited retirement funds which holds 679 092 (2016: 541 636) shares.
Directors’ remuneration
The remuneration paid to executive directors while in office of the company during the year ended June 30 2017 can be analysed as follows:
| Remuneration and benefits paid to directors | |||||||
| Basic remuneration R’000 |
Other benefits and costs R’000 |
Retirement/ medical benefits R’000 |
Cash incentives R’000 |
2017 Total emoluments R’000 |
|||
| Director | |||||||
| BL Berson | 14 754 | 262 | 359 | 17 904 | 33 279 | ||
| DE Cleasby | 4 461 | 278 | 385 | 6 017 | 11 141 | ||
| B Joffe | 13 032 | 637 | 454 | 16 479 | 30 602 | ||
| Total | 32 247 | 1 177 | 1 198 | 40 400 | 75 022 | ||
For comparative purposes the remuneration paid to the 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 Bidvest |
|||||||||||
| 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 |
2016 Total emoluments R’000 |
||||
| Director | ||||||||||||
| 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 | |||
| Total | 22 227 | 339 | 449 | 25 617 | 11 826 | 2 250 | 1 312 | 13 658 | 77 678 | |||
The remuneration paid to non executive directors while in office of the company during the year ended June 30 is analysed as follows:
Directors’ and other related fees
| Non-executive director | 2017 R’000 |
2016* R’000 |
||
| PC Baloyi | 572 | 106 | ||
|---|---|---|---|---|
| DDB Band | 634 | 180 | ||
| DD Mokgatle (appointed October 4 2016) | 226 | – | ||
| NG Payne | 771 | 120 | ||
| CWL Phalatse (resigned November 11 2016) | 141 | 115 | ||
| H Wiseman | 1 625 | 264 | ||
| Total | 3 969 | 785 |
| * | Non-executive directors appointed on 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
| Director | 2017 R’000 |
2016 R’000 |
||
| BL Berson | 7 050 | 11 496 | ||
|---|---|---|---|---|
| DE Cleasby | 2 637 | 6 223 | ||
| B Joffe | 8 486 | 23 699 | ||
| Total | 18 173 | 41 418 |
Details of directors outstanding conditional share plan (CSP)
The CSP awards executives of Bidcorp a conditional right to receive Bidcorp shares free of any cost. Due to the unbundling in May 2016, the 2015 CSP awards for executive directors were restructured into replacement conditional rights. Each conditional right in terms of the 2015 awards was exchanged for a right over a Bid Corporation Limited share. CSP replacement rights are subject to revised performance conditions for the period starting July 1 2016 and ending June 30 2019.
In addition to the CSP replacement rights, executive directors were awarded conditional share awards in terms of the 2016 Bidcorp CSP, approved by shareholders at the general meeting in April 2016. These share awards do not carry voting rights attributable to ordinary shareholders. The fair value of services received in return for the conditional share awards has been determined by multiplying the number of conditional share awards expected to vest by the share price at the date of the award less discounted by anticipated future distribution flows. A total number of 263 695 of the 348 000 CSP and CSP replacement rights awards are expected to vest, taking into account the performance of the group to date and forecasts to the end of the performance period, against the targets set at the time of the award.
No conditional share awards or CSP replacement rights (2016: 82 746) were forfeited as a result of performance conditions not being met. The average discounted share price used in the calculation of the share-based payment charge on the conditional share awards allotted during the year is R220,91 per share. These awards will vest in the next two years.
CSP replacement right awards
| Director | Balance at June 30 2016 |
Rights awarded |
Forfeited | Vested | Closing balance June 30 2017 |
|
|---|---|---|---|---|---|---|
| BL Berson | – | 45 000 | – | – | 45 000 | |
| DE Cleasby | – | 24 500 | – | – | 24 500 | |
| B Joffe | – | 90 000 | – | – | 90 000 | |
| Total | – | 159 500 | – | – | 159 500 |
CSP awards
| Director | Balance at June 30 2016 |
Rights awarded |
Forfeited | Vested | Closing balance June 30 2017 |
|
|---|---|---|---|---|---|---|
| BL Berson | – | 90 000 | – | – | 90 000 | |
| DE Cleasby | – | 26 000 | – | – | 26 000 | |
| B Joffe | – | 72 500 | – | – | 72 500 | |
| Total | – | 188 500 | – | – | 188 500 |
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 |
|
| 2017 | |||||||
| BL Berson | 7 050 | – | – | 7 050 | – | 7 050 | |
| DE Cleasby | 2 637 | – | – | 2 637 | – | 2 637 | |
| B Joffe | 8 486 | – | – | 8 486 | – | 8 486 | |
| Total | 18 173 | – | – | 18 173 | – | 18 173 | |
| 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 | |
| Total | 6 902 | 16 422 | 23 672 | 46 996 | (22 551) | 24 445 | |
| 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 | |
| Total | 34 516 | 41 336 | 63 204 | 11 408 | 150 464 | (60 400) | 90 064 | |
Directors’ service contracts
B Joffe
In consequence of a mutually agreed transition, Mr B Joffe has relinquished his role as executive chairman with effect from June 30 2017. His executive service agreement has been terminated from June 30 2017. In terms of the service agreement, Mr Joffe continues as a participant in the Bidcorp Conditional Share Plan in respect of his awards received prior to June 30 2017. All other benefits accruing in terms of the service agreement up to June 30 2017 have been honoured. Mr Joffe has agreed to provide advisory consulting services to the company for the period July 1 2017 to June 30 2018 and will receive a fee of R4,0 million payable in equal monthly instalments.
BL Berson
A new employment contract was concluded with Mr BL Berson. Under the terms of the new employment agreement, six months’ notice is required upon termination of employment or retirement.
No other directors have fixed-term contracts.
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.
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 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.
Change in directorate
At the annual general meeting (AGM), Mrs CWL Phalatse retired from the board. The board thanked Mrs Phalatse for her contribution.
Mrs DD Mokgatle and Mr S Koseff were appointed as independent non-executive directors with effect from October 4 2016 and August 16 2017 respectively.