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.