Annual Integrated Report 2019

Net interest paid was 25,5% higher at R285,9 million (F2018: R227,9 million). While asset management across the group is generally good, there are a few areas that need some attention. Additionally, there have been significant rate increases over the year particularly in the Asian geographies, which added to the higher interest charge. Investment in fixed assets is currently high, but necessary to accommodate increased capacity as well as enhance and modernise our facilities for organic growth. The overall tax rate (excluding associate income and capital items) is slightly lower at 23,3%. While UK tax rates are declining slightly, the group’s overall mix is expected to be maintained at the tax rate guidance previously provided of between 24% and 25% for next year. The associates and jointly controlled entities share of profit was slightly higher at R59,2 million. Minority interests of R33,2 million are relatively small but will remain a feature because of the Bidcorp model whereby owner-managers often retain a stake post acquisition. There has been a small impairment of assets, some R40,7 million, which was offset by net profit on property sales of R65,4 million. Discontinued operations include the UK Logistics businesses, CD and PCL. The CD sale process is ongoing, however, there has been an improved operational performance with most of the current customer base now at a sustainable revenue level. PCL, on the other hand, experienced significant trading losses (to April 2019), which led to an intangible asset impairment of £25,3 million. We disposed of the major distribution activities and the residual vehicle fleet, at significant cost. Cash generation continues One of the year’s highlights was the significant 15,4% increase, to R8 billion, in cash generated by operations before working capital absorption and ongoing reinvestment capital expenditure. Pleasingly, all cash flows as a percentage of EBITDA and trading profits have been improved. Free cash flow (excluding dividends paid) was up 13,0% at R1,2 billion. The cash conversion rate before working capital over trading profit was a significant 120%, which compares to 117% last year. Liquidity management remains an important imperative. All our debt is, de facto, long-term as short-term debt currently amounts to R5,8 billion and available cash totals R5,7 billion. Significant portion of our Euro funding has been refinanced and some 44% of gross borrowings now extend beyond June 2020. The weighted average interest rate on foreign borrowings is at 2,6% compared to 2,4% last year. We are continually focused on the need to balance gearing and shareholder returns. Ultimately, the group’s balance sheet strength, coupled with the reliability of our cash flows, provide us with the headroom to take advantage of growth opportunities. Our overall financial position is robust. Growth remains key The capital expenditures programme has continued with investing activities consuming R3,7 billion (F2018: R3,3 billion), primarily on maintenance and expansion capital, including the investment into key strategic properties. This compared to depreciation and amortisation of R1,3 billion. Continuing to invest in infrastructure is important to Bidcorp, and it was higher this year after making reasonably large infrastructure investments into Australasia, South Africa, and the UK. Our capital expenditure over revenue was approximately 2,3%, which compares to the average over the last few years of 2%, which is the more sustainable level. Bolt-on acquisitions consumed R0,8 billion, none of which are a singularly material. Our objective to generate above- average returns in each of our businesses, notwithstanding macro- considerations and short-term volatility in various markets, remains firmly intact. We are in a favourable position, with sufficient headroom to be able to fund organic and acquisitive growth. Leadership review Bid Corporation Li mited Annual integrated report 2019 / 25