Directors' report
The directors have pleasure in presenting their report for the year ended June 30 2019.
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 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 2019 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 2019 the total issued ordinary no par value shares was 335 404 212.
Acquisitions and disposals
The group made the following acquisitions during the year namely:
- Punjab Kitchen (renamed Simply Food Solutions) (United Kingdom) a market leading manufacturer of texture modified meals and specialist ready meals, supplying primarily into the NHS and healthcare sector;
- Igartza, S.L. (Spain) a broadline foodservice distributor located in Guipúzkoa, northern Spain; and,
- In-territory bolt-on acquisitions of KBC Foods (Australia), Six Bar Trading 409 CC (South Africa) and Foodchoice (Chile).
These acquisitions form part of the group’s strategic expansion plans in the international foodservice industry. 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 market place.
There were no material disposals of businesses during the year.
Discontinued operations
The group is currently in negotiations for the sale of the UK Contract Distribution (CD) that operates in the United Kingdom. We are hopeful of being able to announce the details of this transaction within the near future. Any transaction is still subject to regulatory competition commission approval, which is anticipated to take up to four months to complete.
PCL’s (dairy distribution business for Arla) performance for the year was disappointing. Towards the end of 2018, following a dispute with Arla, management committed to exit the PCL business by either selling the PCL transport operations to Arla or to close down the PCL business. At June 30 2019, the PCL transport operations have been exited and the sales process/exit of the insignificant warehousing and handling components are ongoing at June 30 2019.
Subsequent events
The group is currently in negotiations for the sale of the UK Contract Distribution business in the United Kingdom. The process is at an advanced stage and management is optimistic of a successful conclusion to these negotiations. Other than the matter above, there are no material events subsequent to June 30 2019.
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 310,0 cents (248,0 cents net of dividend withholding tax, where applicable) per ordinary share to those members registered on the record date, being Friday, March 22 2019. The dividend was declared from income reserves.
In line with the group dividend policy, the directors declared a final gross cash dividend of 330,0 cents (264,0 cents net of dividend withholding tax, where applicable) per ordinary share for the year ended June 30 2019 to those members registered on the record date, being Friday, September 27 2019.
| Declaration date | Wednesday, August 28 2019 |
| Last day to trade cum dividend | Monday, September 23 2019 |
| First day to trade ex dividend | Wednesday, September 25 2019 |
| Record date | Friday, September 27 2019 |
| Payment date | Monday, September 30 2019 |
Share certificates may not be dematerialised or rematerialised between Wednesday, September 25 2019 and Friday, September 27 2019, 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 27 2018 |
February 19 2019 |
June 10 2019 |
August 27 2019 |
|
| Chairman | ||||||
| S Koseff | August 16 2017 | ^ | ^ | ^ | ^ | |
| Independent non-executive directors | ||||||
| PC Baloyi | March 10 2016 | ^ | ^ | ^ | ^ | |
| DDB Band | March 10 2016 | ^ | ^ | ^ | ^ | |
| DD Mokgatle | October 4 2016 | ^ | ^ | ^ | ^ | |
| NG Payne | March 10 2016 | ^ | ^ | ^ | ^ | |
| H Wiseman | March 10 2016 | ^ | ^ | ^ | ^ | |
| Non-executive director | ||||||
| B Joffe | August 17 1995 | ^ | ^ | ^ | ^ | |
| Executive directors | ||||||
| BL Berson | March 10 2016 | ^ | ^ | ^ | ^ | |
| DE Cleasby | September 12 2007 | ^ | ^ | ^ | ^ |
^ Attended in person, by video-conference or tele-conference.
Directors’ shareholdings
Beneficial
The individual beneficial interests declared by directors in the company’s stated capital at June 30 2019 held directly or indirectly were
| 2019 Number of shares |
2018 Number of shares |
||||
| Direct | Indirect | Direct | Indirect | ||
| Director | |||||
| BL Berson | 8 | 224 211 | 8 | 224 211 | |
| DE Cleasby | 145 564 | – | 144 564 | – | |
| B Joffe | 21 544 | 20 060 | 21 544 | 20 060 | |
| S Koseff | 1 168 | – | 1 061 | – | |
| Total | 168 284 | 244 271 | 167 177 | 244 271 | |
Non-beneficial
In addition to the aforementioned holdings:
- B Joffe is a trustee and potential beneficiary of a discretionary trust holding 536 278 (2018: 525 107) shares.
- DE Cleasby is a potential beneficiary of a family trust holding 1 050 (2018: 750) shares.
- DE Cleasby is a trustee of The Bidvest Group Limited retirement funds which hold 799 734 (2018: 750 553) shares.
There has been no change in the directors’ interest between June 30 and the issue date of the annual financial statements.
Directors’ remuneration
The remuneration paid to executive directors during the year ended June 30 2019 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 |
Total emoluments R’000 |
||
| Director | ||||||
| BL Berson | 15 700 | 259 | 253 | 16 919 | 33 131 | |
|---|---|---|---|---|---|---|
| DE Cleasby | 5 873 | 193 | 469 | 6 913 | 13 448 | |
| Total | 2 1573 | 452 | 722 | 23 832 | 46 579 | |
For comparative purposes the remuneration paid to the executive directors during the year ended June 30 2018 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 |
Total emoluments R’000 |
||
| Director | ||||||
| BL Berson | 14 847 | 253 | 249 | 16 240 | 31 589 | |
| DE Cleasby | 5 457 | 193 | 441 | 6 642 | 12 733 | |
| Total | 20 304 | 446 | 690 | 22 882 | 44 322 | |
The remuneration paid to non-executive directors during the year ended June 30 2019 is analysed as follows:
| 2019 | |||||
| Director fees R'000 |
Other services R’000 |
Total R’000 |
2018 R’000 |
||
| Non-executive director | |||||
| PC Baloyi | 696 | – | 696 | 564 | |
| DDB Band | 868 | – | 868 | 705 | |
| B Joffe* | 472 | 4 240 | 4 712 | 6 288 | |
| S Koseff | 2 970 | – | 2 970 | 924 | |
| DD Mokgatle | 430 | – | 430 | 445 | |
| NG Payne | 954 | – | 954 | 800 | |
| H Wiseman** | 1 371 | 514 | 1 885 | 1 625 | |
| Total | 7 761 | 4 754 | 12 515 | 11 351 | |
* B Joffe provided advisory consulting services for the year ended June 30 2019.
** H Wiseman provided services by chairing the quarterly Bidcorp Divisional Audit and Risk Committee meetings.
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.
Summary of directors’ long-term incentives (LTI)
The Conditional Share Plan (CSP) awards executives of Bidcorp a conditional right to receive shares in Bidcorp free of any cost but do not carry voting rights attributable to ordinary shareholders. Due to the unbundling from The Bidvest Group Limited, the 2016 CSP awards for executive directors were restructured into replacement conditional rights and each conditional right in terms of the 2016 awards was exchanged for a right over a Bid Corporation Limited share. In addition to these replacement conditional rights, executives have been awarded Bidcorp share awards. The fair value of services received in return for these conditional share awards have been determined by multiplying the number of conditional share awards expected to vest, by the share price at the date of the award discounted by anticipated future distribution flows.
| Director | Share-based payment expense R’000 |
Benefit arising from exercise of awards R’000 |
Gross benefit R’000 |
Previous share-based payment expense R’000 |
Actual LTI benefit R’000 |
2018 R’000 |
|
|---|---|---|---|---|---|---|---|
| BL Berson | 18 061 | – | 18 061 | – | 18 061 | 12 831 | |
| DE Cleasby | 6 910 | – | 6 910 | – | 6 910 | 4 865 | |
| B Joffe | 8 753 | 24 514 | 33 267 | (18 636) | 14 631 | 10 149 | |
| Total | 33 724 | 24 514 | 58 238 | (18 636) | 39 602 | 27 845 | |
During the year, B Joffe exercised 81 250 of his replacement rights and CSP awards at an average price of R301,71 (2018: No cash benefits arose from the CSP awards).
Number of CSP awards (including 2016 CSP replacement awards)
| Director | Balance at July 1 2018 |
CSP awarded |
Forfeited | Exercised | Closing balance June 30 2019 |
|
|---|---|---|---|---|---|---|
| BL Berson | 225 000 | 98 000 | – | – | 323 000 | |
| DE Cleasby | 85 500 | 38 000 | – | – | 123 500 | |
| B Joffe | 162 500 | – | – | (81 250) | 81 250 | |
| 473 500 | 136 000 | – | (81 250) | 527 750 | ||
No CSPs were forfeited in 2019 (2018: nil).
Directors’ service contracts
BL Berson and DE Cleasby
Employment contracts have been concluded with Mr BL Berson and Mr DE Cleasby. Under the terms of the employment agreements, six months notice is required upon termination of employment or retirement.
No other directors have fixed term contracts.
Directors’ and officer’s disclosure of interest in contracts
During the 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 Ms 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.