Independent auditor's report

To the shareholders of Bid Corporation Limited

Report on the audit of the consolidated and separate financial statements

Our opinion

In our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Bid Corporation Limited (the company) and its subsidiaries (together the group) as at 30 June 2019, and its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa.

What we have audited

Bid Corporation Limited’s consolidated and separate financial statements set out here:

the consolidated statement of financial position as at 30 June 2019;
the consolidated statement of profit or loss for the year then ended;
the consolidated statement of other comprehensive income for the year then ended;
the consolidated statement of cash flows for the year then ended;
the consolidated statement of changes in equity for the year then ended;
the notes to the consolidated financial statements, which include a summary of significant accounting policies:
the separate statement of financial position as at 30 June 2019;
the separate statement of comprehensive income for the year then ended;
the separate statement of changes in equity for the year then ended;
the separate statement of cash flows for the year then ended; and
the notes to the separate financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and separate financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the group in accordance with sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (revised January 2018), parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (revised November 2018) (together the IRBA Codes) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities, as applicable, in accordance with the IRBA Codes and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively.

Our audit approach

Overview

Overall group materiality

Overall group materiality: R317 million, which represents 5% of the consolidated profit before taxation from continuing operations.

Group audit scope

Full scope audits were performed over all financially significant components.
Specified audit procedures were performed on certain account balances and transactions of three non-significant components to obtain sufficient and appropriate audit evidence to express an opinion on the consolidated financial statements as a whole.
Our scoping provided audit work over more than:
– 90% of revenue
– 75% of profit before tax (on an absolute value basis)
– 70% of non-current assets
– 85% of current assets

Key audit matters

Goodwill impairment assessment
Assessment of agent versus principal and the impact on revenue recognition

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated and separate financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Materiality

The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable assurance whether the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Overall group materiality	R317 million
How we determined it	5% of the consolidated profit before taxation from continuing operations.
Rationale for the materiality benchmark applied	We chose profit before taxation from continuing operations as the benchmark because, in our view, it is the benchmark against which the performance of the group is most commonly measured by users, and is a generally accepted benchmark. We chose 5% which is consistent with quantitative materiality thresholds used for profit-oriented companies in this sector.

How we tailored our group audit scope

We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, and the industry in which the group operates.

The group has five principal reportable operating segments that align with its organisational design, namely Australasia, United Kingdom, Europe, Emerging Markets and Corporate.

The group’s financial statements are a consolidation of 52 reporting components, which make up the group’s five operating segments. Of these reporting components, we selected 16 components for full scope audits due to their financial significance. The materiality applied in performing these audits was limited to an appropriate allocation of the Bid Corporation Limited consolidated materiality. Specified audit procedures on certain balances and transactions were performed on three other reporting components and analytical review procedures were performed on the remaining components.

This, together with additional procedures performed at the group level, including testing of consolidation journal entries and intercompany eliminations, gave us the evidence we needed for our opinion on the group financial statements as a whole.

In establishing the overall approach to the group audit, we determined the type of work that needed to be performed by us, as the group engagement team, or component auditors from other PwC network teams or firms. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those components to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the group financial statements as a whole.

We met with certain of the component auditors in the United Kingdom, European, Emerging Markets, and Corporate reporting segments and attended divisional audit and risk committee meetings for all components as part of planning and completion of the audit.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and separate financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

The following key audit matters relate to the consolidated financial statements. We have determined that there are no key audit matters to communicate in our report with regard to the separate financial statements.

Key audit matter		How our audit addressed the key audit matter
Goodwill impairment assessment Refer to notes 3 and 8.3 to the consolidated financial statements. IAS 36: Impairment of Assets requires goodwill to be tested annually for impairment, or more frequently if impairment indicators are identified. As at year-end, the group had goodwill amounting to R14,784 million. Management tested goodwill for impairment and concluded that there is no impairment as the recoverable amount exceeded the carrying amounts of the individual cash-generating units (CGUs) to which goodwill has been allocated. The recoverable amount was based on the value in use for all CGUs. In determining the value in use of the CGUs, management applied judgement in determining the following key assumptions: Cash flow forecasts; Sales volumes, sales prices and variable input cost assumptions; Terminal growth rates; Capital expenditure forecasts; and the discount rates. We considered the goodwill impairment assessment to be a matter of most significance to our current year audit due to the following: the magnitude of the consolidated goodwill balance; the level of judgement applied by management in performing the impairment assessment, including determining the key assumptions; and the sensitivity of the impairment assessment to certain key assumptions.		We obtained an understanding of the process and procedures applied by management during their impairment assessment of goodwill. Our audit procedures included, among others, testing of the principles and integrity of management’s value-in-use calculation. We evaluated management’s calculation by: Challenging and testing the reasonability of the key assumptions used by management in the calculations, which included cash flow forecasts, sales volumes, sales price and variable input cost assumptions, terminal growth rates, capital expenditure forecasts and discount rates. We compared these key assumptions to industry benchmarks, historical performance and future market forecasts. We found management’s key assumptions to be reasonable. We compared the process followed by management in determining these cash flow forecasts to past practice and found the process to be consistent with past practice. We considered the historical accuracy of forecasts by comparing the 2018 and 2019 actual results to the forecasts for those years. Where variances were noted, we followed up with management and assessed the reasonability of the variances. We found management’s forecasts to be reasonable for most CGUs. Where certain forecasts indicated a deviation from past results, we adjusted the forecasts based on past results, and assessed the impact of this on the impairment to be recognised. This assessment indicated immaterial possible impairments on Iberia and Germany, and no further possible impairments on other CGUs. We made use of our valuation expertise to test the appropriateness and reasonability of the discount rate through independent recalculation of the discount rates. We found the discount rates used by management to be within a reasonable range for most CGUs. Where we found a higher discount rate to be more reasonable, we adjusted the calculation for the higher discount rate and assessed the impact of this on the possible impairment to be recognised. This assessment indicated immaterial possible impairments on Iberia and Germany, and no further possible impairments on other CGUs. We compared the long-term growth rates used by management to economic and industry forecasts and found the long-term growth rates to be within a reasonable range. We tested the mathematical accuracy of management’s impairment assessment and utilised our valuation expertise to assess whether generally accepted valuation methodology was applied. No material differences were noted and we found the methodology applied by management to be acceptable. We performed independent sensitivity calculations on the impairment assessments in order to determine the degree by which the key assumptions (discount rate, growth rates and the terminal growth rate) needed to change in order to trigger an impairment. We discussed these with management and considered the likelihood of such changes occurring. We concurred with management on their conclusion that the key assumptions applied in the models were reasonable.

Assessment of agent versus principal and the impact on revenue recognition Refer to note 4.1 to the consolidated financial statements. Management applied judgement in determining whether they are acting as an agent or as a principal in relation to certain revenue transactions for Bidfood Netherlands. Based on the agent versus principal assessment performed, it was concluded that Bidfood Netherlands is acting as an agent instead of as a principal in relation to certain chilled food deliveries. The comparative period has been restated to reflect this. We consider the determination of agent versus principal to be a matter of most significance due to the significant judgements applied by management in determining whether the relationship is one of an agent rather than one of a principal as previously reflected.		We obtained an understanding of the nature of these chilled food delivery transactions by performing the following procedures: discussions with management; evaluating relevant legal agreements; and review of component auditors’ working papers. We utilised our accounting technical expertise to evaluate the assessment performed by management in determining whether Bidfood Netherlands acted as an agent or principal in relation to these transactions. In doing so we considered the following factors with reference to relevant legal agreements: which party had the inventory risk before and after the order; which party had the primary responsibility for providing the goods to the customers; and who had influence over setting the price at which the product was sold to the customers. We concurred with management on their assessment that sales in relation to certain chilled food deliveries should be treated as sales as an agent.

Other information

The directors are responsible for the other information. The other information comprises the information included in the document titled “Bid Corporation Limited annual financial statements for the year ended 30 June 2019”, which includes the directors’ report, the audit and risk committee report and the declaration by company secretary as required by the Companies Act of South Africa, which we obtained prior to the date of this auditor’s report and other sections of the document titled “Bidcorp annual integrated report for the year ended 30 June 2019” which is expected to be made available to us after that date. The other information does not include the consolidated or the separate financial statements and our auditor’s report thereon.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not and will not express an audit opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the consolidated and separate financial statements

The directors are responsible for the preparation and fair presentation of the consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the directors are responsible for assessing the group and the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and/or the company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated and separate financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and separate financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s and the company’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the group and/or company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on other legal and regulatory requirements

In terms of the IRBA Rule published in Government Gazette Number 39475 dated 4 December 2015, we report that PricewaterhouseCoopers Inc. has been the auditor of Bid Corporation Limited for one year.

PricewaterhouseCoopers Inc.
Director: EJ Gerryts
Registered Auditor

Johannesburg

27 August 2019