Acquisition of businesses and subsidiaries
for the year ended June 30
Acquisition opportunities in the year were limited, due to unrealistic vendor expectations and management’s focus on bedding down recently acquired underperforming businesses. The acquisition of 100% of Elite Frozen Foods Limited (Elite), a regional wholesaler in the United Kingdom supplying ambient, chilled and frozen products was completed in July 2019. Total investment in Elite was R163,7 million, and its contribution to revenue and trading loss for the year ended June 30 2020 was R693,3 million and R57,9 million respectively.
Goodwill arose on the acquisitions as the anticipated value of future cash flows that were taken into account in determining the purchase consideration exceeded the net assets or net liabilities acquired at fair value. No separately identifiable intangible assets were recognised on acquisition. The Elite acquisition has 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. Qualitative factors that support (but, not limited to) the goodwill recognised on Elite:
- Growing scale and access to customers in the southwest of the United Kingdom;
- Improving purchasing power for the group; and
- Management’s skill and expertise as a platform from which to consolidate their respective fragmented foodservice markets.
There were no significant contingent liabilities identified in the businesses acquired.
The impact of acquisitions on the group’s results can be summarised as follows:
|Property, plant equipment||44 679||88 547|
|Deferred taxation||(935)||(37 820)|
|Interest in associates||–||4 244|
|Other investments and loans||–||51|
|Inventories||39 395||47 607|
|Trade and other receivables||124 860||58 249|
|Cash and cash equivalents||(34 080)||88 446|
|Borrowings||(14 554)||(7 801)|
|Trade and other payables||(100 061)||(70 603)|
|Taxation||(3 845)||(7 179)|
|Total identifiable net assets at fair value||55 459||163 751|
|Separately identifiable intangible assets||–||192 672|
|Goodwill||80 307||365 948|
|Non-controlling interest||–||(3 950)|
|Total value of acquisitions||135 766||718 421|
|Cash and cash equivalents acquired||34 080||(88 446)|
|Vendors for acquisition recognised||(210)||(138 557)|
|Puttable non-controlling interest liabilities recognised||–||(70 464)|
|Costs incurred in respect of acquisitions||1 968||27 686|
|Net amount paid||171 604||448 640|
The purchase price allocations for Elite are provisional and may be retrospectively adjusted if the group obtains new information about facts and circumstances that existed at the acquisition date relating to these entities.
Bidfood Australia disposed of its Fresh business for A$3,3 million (R34,7 million) in September 2019. Amounts included in 2020 years results for operations disposed to revenue and trading profit was R122,6 million and R10,3 million respectively. Amounts included in 2019 years results for operations disposed to revenue and trading profit was R649,0 million and R7,4 million respectively.
Subsequent to year end, the group concluded a sale and leaseback transaction for a freehold property in Hong Kong. Settlement of HK$325 million (R715 million) is expected in late August 2020. Other than the above matter, there are no other material events since or subsequent to June 30 2020.
The board of directors’ policy is to maintain a strong capital base so as to sustain future development of the businesses so that it can continue to provide benefits to its shareholders.
|Capital expenditure approved|
|Contracted for||747 726||1 113 122|
|Not contracted for||686 007||1 188 901|
|1 433 733||2 302 023|
|Capital expenditure split|
|Property, plant and equipment||1 336 171||2 171 767|
|Computer software||97 562||130 256|
|1 433 733||2 302 023|
It is anticipated that capital expenditure will be financed out of existing cash resources. Capital expenditures for F2021 are to approximate the depreciation and amortisation charge for F2020. Significant contracted capital expenditures relate to property, plant and equipment in the following components: Bidfood UK (R351 million), New Zealand (R139 million) and Australia (R59 million).