Annual Integrated Report 2019

Chief financial officer’s report It is exceptionally pleasing to report on a year that has again delivered in terms of operational and financial performance. It is commendable that Bidcorp’s overall group revenue rose by 9,8% to R129,3 billion. Currency volatility positively impacted our (rand) translated results which was more profound in the second half of the financial year as the South African rand weakened against most currencies in the countries in which we operate. Constant currency revenue increased by 4,7% at R123,2 billion. The group’s trading profit rose 11,8% to R6,7 billion, and was 7,1% higher in constant currency. Strategically, Bidcorp has been for some time pursuing higher margin business and exiting lower margin contracts. The success of this imperative is starting to deliver, contributing to gross margins increasing to 23,9% from 23,3%. The EBITDA trading margin improved slightly to 6,2%. Even though the overall trading profit margin was fairly flat at 5,2%, it improved in most jurisdictions, but not Emerging Markets. The Australasia region delivered the highest segment margin at 6,9%, Europe showed an improvement to 4,3%, despite Iberia and Germany detracting, and the United Kingdom (UK) margin was higher at 5,2% with improvements in the Foodservice offering offset by a decline in Fresh. Emerging Markets at 4,9% was principally impacted by a large decline in Greater China. As we have been highlighting, there has been ongoing wage and energy cost pressures, yet food inflation in our core foodservice markets remains low. We are naturally pleased with the 7% (constant currency) containment in operating expenses. Our management teams have done a sterling job to manage costs, considering a variety of social, political and economic disruptions we contend with as a global operator. The group’s overall cost of doing business (operating costs) increased to 18,7%, from 18,3% last year, on higher sales and distribution activity, a greater focus on the better margin, freetrade customers, which results in a higher cost to serve this larger independent base. Headline earnings rose 12,7% to R4,8 billion with constant currency earnings up 7,9% at R4,6 billion. Headline earnings per share (HEPS) rose 12,5% to 1 443, 6 cents, with constant current HEPS increasing 7,7%. Balance sheet strength Net debt was higher at R4,7 billion, from last year’s R3,6 billion, and was largely as a result of higher working capital absorption and higher investing activities. As a percentage of EBITDA, net debt is up 10 basis points from 0,5 times to 0,6 times, but remains at a comfortable level. We refinanced a significant portion of the Euro-denominated debt, at fixed rates. This provides us with more comfort during these volatile economic times as we manage our liquidity profile. Certain refinancings are due in the next six months which we will extend over an acceptable term. The higher utilisation of working capital at R1,4 billion (F2018: R1,0 billion) is understandable, considering increased activity levels, tighter supplier terms and the particularly difficult timing of the period’s year-end close, which occurred on a Sunday (June 30), in relation to debtors and creditors. The working capital cycle is being monitored closely, specifically as importing activities are increasing across many areas of the group. It lengthens the supply chain but there is a positive impact on own brand and value-add product opportunities. As these activity levels increase, we remain focused on managing our working capital aggressively despite higher anticipated growth rates. The monthly average net working capital days increased to 13 days (calculated on a 13-month rolling average basis) from 11 days last year. Operational and financial performance delivers Sterling job to manage costs in light of disruptions HEPS rose 12,5% to 1 443,6 cents Refinancing of Euro facility for 3 years and raising a further 1 year GBP facility Strong financial base to support real growth in home currencies Final dividend of 330,0 cents Total distribution to 640,0 cents Own brand Asiya, Bidfood Poland. 24 / Bid Corporation Limited Annual integrated report 2019