Bidcorp has delivered a record performance for the financial year to June 2023, in an environment
where management teams were able to maximise the trading opportunities created by resurgent demand
across the broader foodservice market and higher inflation. Our strategic focus implemented by our
experienced global teams within our entrepreneurial and decentralised operating model, contributed
to a very successful result.
The financial performance of the group has been excellent. Headline earnings per share (HEPS)
increased by 35,4% to 2 082,9 cents per share (F2022: 1 538,3 cents per share), with basic earnings
per share (EPS) increasing by 42,8% to
2 061,8 cents per share (F2022: 1 444,3 cents per share). Currency volatility, particularly in the
second half of the reporting period, positively impacted the rand-translated HEPS by 10,1%.
Activity levels in every market showed real growth and market share gains however the rate of
growth moderated in the second half as our businesses cycled through the buoyancy seen
in the latter part of F2022. Overall demand in our hospitality markets remained strong, well
surpassing the pre-pandemic trajectory.
Australasia delivered a fantastic performance both in terms of revenue growth and margins achieved.
Normal seasonality returned to Europe with all businesses delivering much improved performances.
The UK benefitted from contract wins and new acquisitions, achieving good growth albeit at lower
margins. Emerging Markets delivered real top line growth, but profitability was impacted by
'growing pains' in several businesses.
Our focus on the correct exposure to both the discretionary and non-discretionary market segments
remains a priority for our businesses, the correct balance of which has contributed to the strong
performance in all our markets. Stubbornly high food inflation has complicated trading but overall has been beneficial to the
businesses. Higher cost inflation has been driven by labour, energy, and fuel cost increases, which
only started to slow in the latter part of the financial year as labour availability, supply chain
disruptions, and product shortages started to ease.
Investment activity, both in distribution capacity and bolt-on acquisitions, has accelerated in
F2023 as our businesses cater for current and future growth.
Distribution
The board has declared a final cash dividend of 500,0 cents per share for the year ended June 30 2023 (Final F2022: 400,0 cents per share), representing approximately 2,2 times HEPS cover, in line with group policy.
Financial overview
Net revenue of R196,3 billion (F2022: R147,1 billion) rose by 33,4% (constant currency increase of 23,5%), representing real double-digit growth despite the benefits of high food inflation.
Gross profit percentage at 23,8% (F2022: 24,2%) held up very well. Gains achieved from the current inflationary environment were offset to a small extent by strategic decisions to sacrifice margin to maintain volumes, some discounting of overstocked positions and some pressure from the exposure to national customers where there has been a timing lag in repricing contracts. Nearly all businesses have been able to substantially pass through product and cost inflation increases.
The overall cost-of-doing-business decreased from 19,1% in F2022 to 18,5%. The group achieved constant currency cost efficiencies with a 19,7% increase in operating costs against an increase in revenues of 23,5% despite rising employee costs, high energy and fuel prices, and ongoing inefficiencies from supply chain disruptions.
Group trading profit increased by 38,4% to R10,5 billion (F2022: R7,6 billion) and the trading margin achieved was 5,4% (F2022: 5,2%).
Net finance charges (excluding IFRS 16 charges) were significantly higher by 51,1% at R508,5 million (F2022: R336,6 million) driven by higher investments into working capital, facility expansions, dividend payments to shareholders, and a materially higher interest rate environment across in all markets.
Overall cashflow has been excellent. Cash generated by operations before working capital was strong at R13,7 billion, some 37% more than the R9,9 billion in F2022. Bidcorp absorbed working capital of R0,5 billion, R1,5 billion less than F2022 despite higher activity levels. Quarterly average net working capital days at 7,1 days (F2022: 5,0 days) has increased, however, our yearend working capital percentage to revenue at 3,0% sits well below our normalised target of 4,0% to 5,0%.
Gross capital investments in property, plant, and equipment of R4,3 billion (F2022: R2,9 billion) include R1,8 billion expansionary investments in new capacity, the largest portion of which has been in Australia. Nine bolt-on acquisitions were concluded at a cash cost of R1,3 billion, the majority of which extended our in-country geographic reach in the UK and Europe.
Non-IFRS 16 net debt to EBITDA at 0,2 times, similar to F2022 and non-IFRS 16 EBITDA interest cover at 23,2 times (F2022: 25,2 times) is well within group covenants. Bidcorp retains adequate headroom for further organic and acquisitive growth.
Prospects
Bidcorp's overall strategic focus is on the wholesaling of food and allied products to the eating-out-of-home market; focusing on growth through selling to the correct mix of customers; serviced by well-located infrastructure; and enabled by world-class technology solutions. Growth is further supplemented by in-territory bolt-on acquisitions to expand geographic reach and product range, or via strategic acquisitions to enter new markets.
Although all our businesses operate in the same broad industry, we encourage diversity and individuality through decentralisation and entrepreneurship. Our greatest synergy is the collective knowledge of operating in multiple geographies, with each business at differing stages of maturity and development. We benchmark and compare, to demonstrate what works and what doesn't, and what success looks like. We actively encourage competitiveness amongst our businesses, but we equally encourage co-operation and sharing of ideas and learnings.
For our less mature businesses, focus is on building their scale, either through organic growth or bolt-on acquisitions, to expand their geographic reach. For our mature businesses, both local and imported product sourcing capabilities are bolstering our Own Brand offering which, combined with value-add manufacturing and processing opportunities, further enhance their product range.
Further investments into strategic distribution facilities to provide for future capacity are planned in many businesses to cater for anticipated organic growth. New technologies for renewable energy, refrigeration, energy efficiency, and logistics optimisation in an environmentally and cost-efficient way afford Bidcorp the opportunity to reduce its carbon footprint. We continue to invest to develop our technology and data capability to support our growth strategy.
Several bolt-on acquisitions are under consideration across the group, both in geographic expansion opportunities as well as value-add product development. At present, no new geographic-market acquisitions are being investigated, but we are alert to any opportunities should they become evident.
Bidcorp believes the long-term growth fundamentals of the global foodservice industry remain positive. However, in the short term, the global economic outlook is volatile but not necessarily negative. Global operating conditions are changing rapidly with high food inflation abating, and consumer spend under pressure as high interest rates compound the cost-of-living crises. The strong bounce in consumer behaviour experienced through F2023 has tapered off, which is, in our view, a return to normality. In every geography we operate in, we believe there remains more market share to be gained and we have the management teams and the business model to continue to outperform. Activity levels into July and August are within management's expectations and we remain positive that we can continue to deliver real growth into the financial year ahead.
Divisional review
Australasia
Australasia ended the year with record results continuing its strong positive trajectory set throughout F2023 with both Australia and New Zealand delivering excellent results. Demand to yearend has remained buoyant and both Australia and New Zealand are trading strongly. Revenue for the year increased 33,0% to R44,3 billion (F2022: R33,3 billion), bearing in mind that in October 2022 two material QSR contracts were exited in the period. Trading profit was up 51,9% to R3,5 billion (F2022: R2,3 billion), an excellent result with commendable expense management. Management focused on growth opportunities working closely with their customers to unlock mutually beneficial opportunities, through creating value in the manufacturing and procurement offering.
Australia has delivered an exceptional performance, delivering a best-in-class result. Food inflation did assist the full-year results, but significant volume growth and market share gains were recorded. Focused efforts to maintain margins and to navigate the labour market and supply chain challenges were a constant throughout the year, with some easing noted late in H2. Looking after our people has been key, with retention and incentivisation programmes paying off, keeping our team positive and delivering their best.
Foodservice performance evidenced the incredibly hard work and dedication from our branch teams, and the success of our strategy to focus on managing the right customer and product mix. Record low unemployment levels, especially in warehouse and distribution roles, were a challenge and labour costs, especially overtime costs in city centres, remain high. We opened new branches in Morwell (Victoria), Malaga (Perth WA), Armidale and Newcastle (NSW), as well as expanded existing sites in Toowoomba (QLD) and John Lewis (Adelaide). A new build commenced in Darwin (NT), reinforcing our confidence in our national growth prospects. Our ability to invest ahead of the curve has strengthened our market position.
Supply Solutions were faced with navigating a turbulent commodity price environment, impacted by fluctuating cooking oil prices. Recent investments include additional storage of a new dry warehouse in Adelaide and two frozen and chilled facilities, in Girraween and Yatala.
Our manufacturing business, Simply Food Solutions, is a key part of the future growth strategy. The success of our cheese processing activities has required additional capacity in a new cheese processing plant in Brisbane. Meat and Repacking have both navigated some operational challenges but are getting the necessary management attention.
We are sustainably focused, continuing to drive emissions reductions and positively influencing the communities in which we operate. The future looks positive with a great foundation for continued growth and success.
New Zealand surpassed all previous period results with the best-on-record results achieved. Resurgent tourism, inflation, and most significantly excellent margin management ensured the impact of rising costs were contained. Towards the latter part of the year, an easing in the inflation rates and overall activity levels was noted. Our teams are well experienced in being flexible and nimble to adjust strategically ahead of the curve.
Management focus was on ensuring a variable service model that was able to adjust to the changing needs and cost appetites our customers were experiencing with the ever-fluctuating hospitality sector operating environment. Expense containment well below sales growth levels was evidence of the success of this approach, considering the exit of our single biggest customer in October 2022.
Foodservice had an outstanding year with sales volumes and margins higher than previously recorded, despite the disruption experienced in H2 due to adverse weather conditions. In spite of ongoing weather challenges causing supply chain disruptions, the Fresh business was able to deliver a superb result. Focus on margin protection and consistency of supply has set our operations apart. We remain underrepresented in many areas of the country and are positioning the team for good growth.
Simply Food Solutions bedded down through the year and navigated startup challenges to deliver a positive result, positioned well for growth. Navigating ongoing supply chain challenges and a restrained labour market has been a key focus area, with the team delivering a commendable outcome.
Capital investments are planned for at least three new sites in Taupo, Waipapa, and Wellington, to meet current growth needs. Plans are underway for additional capacity in Rotorua, Whangarei, and Christchurch. The capital goods supply chain is still struggling to return to normalcy.
Focus for the year ahead is to bed down the gains of the past year, both in terms of customer retention and cost management. Opportunities abound as we tighten our customer engagement, broaden the product offering into alcohol, strengthen the imports product range, and continue to support and incentivise our phenomenal team.
United Kingdom (UK)
A turbulent H1 both politically and economically in the UK resulted in little growth being recorded in the food and beverage sector, which bore the brunt of inflation, labour challenges, cost-of-living pressures, and materially higher interest rates. Despite these challenges, Bidfood UK grew revenue 35,9% to R51,4 billion (F2022: R37,8 billion) and trading profit up 25,1% to R1,9 billion (F2022: R1,5 billion). Gross profit margins declined a little as the exposure to national account customers, with rigid pricing windows, made it difficult to pass on price increases timeously in the environment of high and rapidly increasing inflation. In addition, in a strategy to grow their free trade customers, some margin was traded away to support this channel.
Wholesale delivered a good result, despite adverse weather conditions and ongoing national rail strikes dampening activity levels. Volume growth in excess of 10% was achieved, most importantly in both free trade and national account sectors. Bedding down of new sales contract wins positively impacted H2 results. Significant focus on managing overheads remains the key challenge with relatively fixed wage costs, and high energy and fuel costs. Trading margins are in line with prior year but well below the long-term trends, with opportunity for improvement in the medium term.
Caterfood Buying Group (CBG) recorded improved profits, benefiting from the acquisition of three bolt-ons (Nicol Hughes (Q1), Harvest Fine Foods (Q3), and Thomas Ridley (Q3)). Manufacturing is profitable, however, Simply Foods Solutions struggled operationally.
Fresh delivered solid profit and growth was achieved. Passing on supplier price increases and maintaining margins offset higher but well-controlled costs. Trading profits doubled in sterling.
Digitisation strategies and consolidating the IT infrastructure will continue, with a strong focus on aligning the new acquisitions to group standards. Plans are underway for six new-builds, strengthening our national footprint and capacity.
The new "People and Sustainability Vision, Mission and Purpose" has driven a wide range of projects and engagements to improve our stakeholder experience. Work continues in developing our wider sustainability impact, focussing efforts on where we can make a material difference. Progress is being made in the measurement and extent of scope 3 carbon emissions, working closely with key suppliers, on the journey towards setting net-zero targets.
Europe
Our European sales have held up well with all businesses having traded above expectation, bolstered by good summer weather and benefiting from inflation. Revenue growth was outstanding, up 38,9% to R69,5 billion (F2022: R50,1 billion). Trading profit results were as impressive with an increase of 53,6% to R3,7 billion (F2022: R2,4 billion). The businesses navigated high energy costs volatility through localised hedging strategies. Supply chain disruptions continued through the period, which led to higher prices across most expenditure categories, particularly capital equipment.
Netherlands delivered an exceptional performance with revenues exceeding the €1 billion mark for the first time – an excellent achievement. Revenue growth exceeded 20% as the free trade segment continued to exceed expectations. Gross margin was strong and operating expenses were impacted by one-off costs related to the integration of the Zegro acquisition. Trading profits reached record levels. National accounts performed at expectation, with focus on growing the basket and customer cost management. Independent and free trade market is growing and exceeding expectations.
Capital investments included a new depot, Zierikzee, the purchase of a building in Meppel, and a new property development in the Hague. Occupancy is planned in April 2024. Reducing carbon emissions by using electric vehicles, as well as replacement of lighting and refrigeration to low emission alternatives remains a priority.
Belgium's revenue growth, over 20%, exceeded expectations. Pleasingly, trading profit followed suit, achieving their best results on record. Managing the inflationary pressures well had minimal impact to gross margins. Cost management was impacted by rising labour costs, but an easing in energy costs assisted. The Delitraiteur contract was terminated from June 2023 and all exit costs accounted for. The horeca businesses improved profitability in a highly competitive environment. Belgium saw strong growth in the QSR segment as consumers' buying power remains low. An acquisition opportunity is being explored.
Czech Republic and Slovakia had a great Q4 with the early summer weather boosting ice cream sales, and manufacturing running at full capacity to yearend. Excellent trading profits were recorded. Revenue into all customer sectors increased on prior year, benefiting from high inflation. Slovakia and Hungary had a more challenging year. Volatility in the price of certain commodities, mainly cooking oil, due to shortages of supply being quickly replaced by surpluses, negatively impacted market prices.
Capital investments have focused on solar panel installations, easing increased energy costs, and improved fire protection systems. New vehicles, previously delayed by supply chain challenges, have been delivered and commissioned. A small bolt-on acquisition in the produce category was completed at yearend.
Italy delivered record revenues, buoyed by tourism activity which bolstered the street trade and national account segments. Out-of-home eating was up nearly 10%. Trading profits were up, as the whole business focused on recovering operating profitability. Wholesale segment was impacted by low product availability in frozen seafood, but this pressure eased into the summer months.
Purchasing ahead of the inflation curve resulted in higher inventory levels. Capital investments were made in buildings, equipment, and machinery, most notably into solar panels and low emission vehicles, as well as expanding the current capacity for Quartiglia in Teramo.
Poland continued their H1 trajectory achieving excellent revenue, margin, and trading profit results. Increased activity in the free trade sales, focussing on the right mix of customer and product, was the key driver of the great performance. Inflationary cost pressures were present throughout the year, but real growth was recorded with much higher volumes delivered.
Expenses were impacted by inflation, and unprecedented labour cost increases. Stability of the economic environment is being impacted by the ongoing tension from the Russian invasion of Ukraine but opportunities continue to present themselves in support of the relief efforts present along the border. Investment into digitising the customer engagement continues with ecommerce sales now 58% of total revenue. The Nowy Targ depot (opened December 2022) has increased capacity to meet growth targets, and good progress has been made on the two new sites in Wroclaw and Poznan.
Germany delivered trading profits for the first time since joining the group. Volume growth and significant food inflation positively impacted the full-year revenue. Margins also improved slightly. Increased labour costs in response to the macro-inflationary environment was the biggest impact in expense management. Increased investment into maintaining and growing the vehicle fleet is required to support the forecast growth. Improvements in the IT environment have been noted, following an investment of time and capex.
Baltics pleasingly grew revenue in both Lithuania and Latvia, as well as the new acquisition in Estonia. The Fruit Xpress acquisition (with effect from December 2022) has established our presence as a fresh and multi-temp food wholesaler in the Estonian foodservice sector. Lithuanian and Latvian margins came under pressure due to fresh produce price increases trading into the retail sector, however, Estonia maintained good margins. Energy and fuel costs eased back to prior year levels, assisting with cost management.
Spain's hospitality sector has exceeded pre-pandemic levels, with the hotel and tourism industry delivering excellent growth. All trading branches were profitable. Guzman had a tough year, but improved profitability. Igartza is showing signs of real improvement, although still not quite at its previous levels. Customer retention remains a priority. The acquisition of a bread and pastry business, Euskopan (with effect from December 2022), has contributed positively. Investment into a new facility for Igartza will help support long-term growth, and into land for a new depot in San Sebastian to increase capacity. Cross-selling opportunities between operations have shown positive results and will continue.
Portugal performed well even though consumer cost-of-living pressures slowed growth in the second half. Expenses were impacted by staff incentivisation. The new Sintra depot in Lisbon has been delayed by legalities but should be on track for occupation by end F2024. The Porto warehouse expansion has commenced. Bolt-on acquisition opportunities have been identified to grow the product and service offering.
Emerging Markets
Emerging Markets delivered a solid overall performance despite economic challenges in several markets, compounded by supply chain challenges and volatile exchange rates. Revenue was up 20,0% to R31,1 billion (F2022: R25,9 billion) and trading profit up 9,0% to R1,6 billion (F2022: R1,4 billion). The devastating earthquake in Türkiye, low economic growth exacerbated by electricity blackouts in South Africa, and Greater China's sluggish post-COVID activity, impacted our businesses. Other than in Greater China, discretionary spend has normalised and in some cases improved, now approaching normalised trading levels.
Bidcorp Food Africa (BFA including Bidfood and CFG) achieved excellent results for the financial year, due to the outstanding performance of our foodservice business. Inflation and interest rates remain at elevated levels, increasing the pressure on consumers' disposable income. This is particularly prevalent in lower LSM segments serviced indirectly by CFG. The pent-up demand for dining out expenditure continues, and the hotel occupancies have returned to pre-pandemic levels. All businesses have faced double digit price increases in fuel and utilities over the financial year. Ongoing power blackouts increased into the second half, causing many customers to close or downscale production, resulting in a loss of revenue in an environment facing high unemployment, inequality, and low growth.
Bidfood South Africa (Bidfood) delivered a solid performance. Revenue grew well above inflation with focus on growing the street trade and national account channels, despite the economic pressure on consumers and the impact of power blackouts on customers. National accounts sales continue to grow strongly in the quarter, particularly the hotels and hospitals. Workplace catering remains subdued. Industrial caterers' channel was up but losing market share on ambient lines. Food inflation impacted all products, especially in commodities like frozen chips. Bidfood's expenses were well managed given the revenue growth. Investment into vehicles, material handling equipment, and IT infrastructure improvements were made in the year.
Crown Food Group (CFG) struggled, impacted by high inflation, lower factory volumes, and weak economic growth which has had a devasting impact on the LSM groups that is serviced by its customers. Continual power blackouts have materially impacted our customers such as independent butcheries and the meat and chicken processing sectors. CFG was also impacted by a downturn in retail demand, lower manufacturing recoveries, and necessary action taken to liquidate overstocked inventories. Pricing disciplines and controls have been strengthened. Expenses were impacted by higher distribution and premises costs, resulting in lower trading profit. Tough conditions are expected to continue but the foundations have been laid for a better F2024.
Chipkins Puratos (CP) (50% equity accounted) volumes were under pressure across most categories with power blackouts impacting smaller customers. CP did well to pass on the price inflation across all channels. Gross margins were positively impacted by growth in the production facilities and yeast, while the trading margins were under pressure. Expenses increased due to warehouse and distribution costs. CP will seek to grow its position in manufactured products.
Bidfood Properties finalised the new Gqeberha development for Bidfood and CFG. Construction for the new Johannesburg South Bidfood multi-temp facility to replace the existing Heriotdale site has started. Development of a new Bidfood and CFG facility in Pretoria is underway, with occupation due in late 2024.
Greater China's (including Hong Kong) rebound at the start of the 2023 calendar year faded due to consumer weakness and the net outflow of tourism in Hong Kong. Deflation resulted in imported dairy products becoming uncompetitive after repeated price hikes, leading to a loss in market share in mainland China. Improved gross margins in Hong Kong and the pickup of tourism to Macau offset the impact in Greater China. Government stimulus will benefit consumer confidence and the return of international tourism to the region will assist performance going forward.
Singapore performed well, increasing both revenue and trading profits despite sluggish economic activity, high inflation, and a tight labour market. In Angliss, overall performance was good. Margins were under pressure in poultry but offset by improved margins in the beef and seafood categories. Operating expenses increased due to higher labour and energy costs. Bidfood Innovations contributed well with an investment into larger premises to increase production capacity. Gourmet Partner continues to improve results.
Malaysia had a difficult year, impacted by weak currency affecting imported products, yet all businesses reported an improvement in sales. Investment into additional fleet and warehouse capacity is underway, with occupancy planned for F2025. Operating expenses were higher than anticipated, which is getting management attention. myBidfood implementation is planned for F2024.
Bidfood Middle East (BME) revenues increased with the introduction of new brands in the UAE and growth in a QSR account in Saudi Arabia (KSA). BME gross margins were impacted by an unfavourable change in sales mix, a drop in margins on the mixes business in KSA, and liquidating overstocked dairy products in the UAE. BME underperformed and delivered lower trading profits than F2022.
Türkiye sales grew off the back of an increase in local consumption. Despite the impact from the February earthquake and disruptions from elections, all divisions met targets. Foodservice operations in Antalya and Izmir both surpassed expectations and have moved to new facilities to cater for anticipated growth. Ankara is progressing and the new distribution centre in Marmara will open in September. Although the tourism season started a bit later than anticipated, summer trade has been incredibly promising. Despite the high inflation environment, demand for consumer goods has increased.
South America delivered an overall good result, in spite of market challenges, political change, and high inflation pressures across the region. Investments into bolt-on acquisitions to grow the product offering and expand the national footprint is paying off.
In Brazil, the foodservice market has felt the pressure of high interest rates, unemployment, and low consumer confidence impacting the eating-out-of-home market. Hybrid working continues to hinder the full return of commercial catering activity. Hotel demand has returned to pre-pandemic levels. The Central Foods acquisition, completed in F2022, had some teething issues in managing customer service levels. Focus on managing the inflationary pressures from fuel, energy, and labour has aided profits. The restructuring of sales, purchasing, and marketing functions has enabled closer cooperation between the teams, the benefits of which will flow in F2024. Management are investigating opportunities to expand their regional footprint.
Chile had a poor F2023 but started to track back to normality in Q4. Financial and operational controls are receiving significant focus from local management. Gross margins were negatively impacted by losses in meat processing and lower poultry margins following a bird flu outbreak in January and February. Expense management, particularly in warehouse and distribution costs, was difficult. Focus on optimising the purchasing and pricing of the protein range is key to returning to profitability.
Argentina (46% equity accounted) buoyed by the influx of tourism, exceeded revenue and trading profit expectations. New branches in Ushuaia and Iguazu have been bedded down and are set to contribute profitably. Progress is being made to acquire a new depot in Córdoba later this year.
Corporate
BidOne has embraced a new technology "roadmap" to focus on strategic projects aligned with four key goals being "Performance, Personalisation, Data, and Product". BidOne continues to deliver world-class ecommerce and digital solutions, embracing real-time "AI" as well as experiential learning from within the group. The maturity of the BidOne operations continues to develop, reflected in enhanced depth in leadership and support.
Bidfood Procurement Community (BPC) team is working closely with procurement teams across the group to identify and support opportunities to improve product supply and pricing. Developing product categories, product knowledge and insight, researching and confirming suppliers' certifications with internationally recognised food safety accreditations continues.
Dividend declaration
In line with the group dividend policy, the directors declared a final cash dividend of 500,0 cents (400,0 cents net of dividend withholding tax, where applicable) per ordinary share for the year ended June 30 2023 to those members registered on the record date, being Friday, September 29 2023.
The dividend will be paid out of income reserves. A dividend withholding tax of 20% is applicable to all shareholders who were not exempt.
Share code:
BID
ISIN:
ZAE000216537
Company registration number:
1995/008615/06
Company tax reference number:
9040946841
Gross cash dividend amount per share:
500,0 cents
Net dividend amount per share:
400,0 cents
Issued shares at declaration date:
335 404 212
Declaration date:
Wednesday, August 30 2023
Last day to trade cum dividend on the JSE:
Tuesday, September 26 2023
First trading day ex dividend on the JSE:
Wednesday, September 27 2023
Record date:
Friday, September 29 2023
Payment date:
Monday, October 2 2023
Share certificates may not be dematerialised or rematerialised between Wednesday, September 27 2023 to Friday, September 29 2023, both days inclusive.
Bidcorp has delivered a record performance for the financial year to June 2023, in an environment where management teams were able to maximise the trading opportunities created by resurgent demand across the broader foodservice market and higher inflation. Our strategic focus implemented by our experienced global teams within our entrepreneurial and decentralised operating model, contributed to a very successful result.
The financial performance of the group has been excellent. Headline earnings per share (HEPS) increased by 35,4% to 2 082,9 cents per share (F2022: 1 538,3 cents per share), with basic earnings per share (EPS) increasing by 42,8% to 2 061,8 cents per share (F2022: 1 444,3 cents per share). Currency volatility, particularly in the second half of the reporting period, positively impacted the rand-translated HEPS by 10,1%.
Activity levels in every market showed real growth and market share gains however the rate of growth moderated in the second half as our businesses cycled through the buoyancy seen in the latter part of F2022. Overall demand in our hospitality markets remained strong, well surpassing the pre-pandemic trajectory. Australasia delivered a fantastic performance both in terms of revenue growth and margins achieved. Normal seasonality returned to Europe with all businesses delivering much improved performances. The UK benefitted from contract wins and new acquisitions, achieving good growth albeit at lower margins. Emerging Markets delivered real top line growth, but profitability was impacted by 'growing pains' in several businesses.
Our focus on the correct exposure to both the discretionary and non-discretionary market segments remains a priority for our businesses, the correct balance of which has contributed to the strong performance in all our markets. Stubbornly high food inflation has complicated trading but overall has been beneficial to the businesses. Higher cost inflation has been driven by labour, energy, and fuel cost increases, which only started to slow in the latter part of the financial year as labour availability, supply chain disruptions, and product shortages started to ease.
Investment activity, both in distribution capacity and bolt-on acquisitions, has accelerated in F2023 as our businesses cater for current and future growth.
Distribution
The board has declared a final cash dividend of 500,0 cents per share for the year ended June 30 2023 (Final F2022: 400,0 cents per share), representing approximately 2,2 times HEPS cover, in line with group policy.
Financial overview
Net revenue of R196,3 billion (F2022: R147,1 billion) rose by 33,4% (constant currency increase of 23,5%), representing real double-digit growth despite the benefits of high food inflation.
Gross profit percentage at 23,8% (F2022: 24,2%) held up very well. Gains achieved from the current inflationary environment were offset to a small extent by strategic decisions to sacrifice margin to maintain volumes, some discounting of overstocked positions and some pressure from the exposure to national customers where there has been a timing lag in repricing contracts. Nearly all businesses have been able to substantially pass through product and cost inflation increases.
The overall cost-of-doing-business decreased from 19,1% in F2022 to 18,5%. The group achieved constant currency cost efficiencies with a 19,7% increase in operating costs against an increase in revenues of 23,5% despite rising employee costs, high energy and fuel prices, and ongoing inefficiencies from supply chain disruptions.
Group trading profit increased by 38,4% to R10,5 billion (F2022: R7,6 billion) and the trading margin achieved was 5,4% (F2022: 5,2%).
Net finance charges (excluding IFRS 16 charges) were significantly higher by 51,1% at R508,5 million (F2022: R336,6 million) driven by higher investments into working capital, facility expansions, dividend payments to shareholders, and a materially higher interest rate environment across in all markets.
Overall cashflow has been excellent. Cash generated by operations before working capital was strong at R13,7 billion, some 37% more than the R9,9 billion in F2022. Bidcorp absorbed working capital of R0,5 billion, R1,5 billion less than F2022 despite higher activity levels. Quarterly average net working capital days at 7,1 days (F2022: 5,0 days) has increased, however, our yearend working capital percentage to revenue at 3,0% sits well below our normalised target of 4,0% to 5,0%.
Gross capital investments in property, plant, and equipment of R4,3 billion (F2022: R2,9 billion) include R1,8 billion expansionary investments in new capacity, the largest portion of which has been in Australia. Nine bolt-on acquisitions were concluded at a cash cost of R1,3 billion, the majority of which extended our in-country geographic reach in the UK and Europe. Non-IFRS 16 net debt to EBITDA at 0,2 times, similar to F2022 and non-IFRS 16 EBITDA interest cover at 23,2 times (F2022: 25,2 times) is well within group covenants. Bidcorp retains adequate headroom for further organic and acquisitive growth.
Prospects
Bidcorp's overall strategic focus is on the wholesaling of food and allied products to the eating-out-of-home market; focusing on growth through selling to the correct mix of customers; serviced by well-located infrastructure; and enabled by world-class technology solutions. Growth is further supplemented by in-territory bolt-on acquisitions to expand geographic reach and product range, or via strategic acquisitions to enter new markets.
Although all our businesses operate in the same broad industry, we encourage diversity and individuality through decentralisation and entrepreneurship. Our greatest synergy is the collective knowledge of operating in multiple geographies, with each business at differing stages of maturity and development. We benchmark and compare, to demonstrate what works and what doesn't, and what success looks like. We actively encourage competitiveness amongst our businesses, but we equally encourage co-operation and sharing of ideas and learnings.
For our less mature businesses, focus is on building their scale, either through organic growth or bolt-on acquisitions, to expand their geographic reach. For our mature businesses, both local and imported product sourcing capabilities are bolstering our Own Brand offering which, combined with value-add manufacturing and processing opportunities, further enhance their product range.
Further investments into strategic distribution facilities to provide for future capacity are planned in many businesses to cater for anticipated organic growth. New technologies for renewable energy, refrigeration, energy efficiency, and logistics optimisation in an environmentally and cost-efficient way afford Bidcorp the opportunity to reduce its carbon footprint. We continue to invest to develop our technology and data capability to support our growth strategy.
Several bolt-on acquisitions are under consideration across the group, both in geographic expansion opportunities as well as value-add product development. At present, no new geographic-market acquisitions are being investigated, but we are alert to any opportunities should they become evident.
Bidcorp believes the long-term growth fundamentals of the global foodservice industry remain positive. However, in the short term, the global economic outlook is volatile but not necessarily negative. Global operating conditions are changing rapidly with high food inflation abating, and consumer spend under pressure as high interest rates compound the cost-of-living crises. The strong bounce in consumer behaviour experienced through F2023 has tapered off, which is, in our view, a return to normality. In every geography we operate in, we believe there remains more market share to be gained and we have the management teams and the business model to continue to outperform. Activity levels into July and August are within management's expectations and we remain positive that we can continue to deliver real growth into the financial year ahead.
Divisional review
Australasia
Australasia ended the year with record results continuing its strong positive trajectory set throughout F2023 with both Australia and New Zealand delivering excellent results. Demand to yearend has remained buoyant and both Australia and New Zealand are trading strongly. Revenue for the year increased 33,0% to R44,3 billion (F2022: R33,3 billion), bearing in mind that in October 2022 two material QSR contracts were exited in the period. Trading profit was up 51,9% to R3,5 billion (F2022: R2,3 billion), an excellent result with commendable expense management. Management focused on growth opportunities working closely with their customers to unlock mutually beneficial opportunities, through creating value in the manufacturing and procurement offering.
Australia has delivered an exceptional performance, delivering a best-in-class result. Food inflation did assist the full-year results, but significant volume growth and market share gains were recorded. Focused efforts to maintain margins and to navigate the labour market and supply chain challenges were a constant throughout the year, with some easing noted late in H2. Looking after our people has been key, with retention and incentivisation programmes paying off, keeping our team positive and delivering their best.
Foodservice performance evidenced the incredibly hard work and dedication from our branch teams, and the success of our strategy to focus on managing the right customer and product mix. Record low unemployment levels, especially in warehouse and distribution roles, were a challenge and labour costs, especially overtime costs in city centres, remain high. We opened new branches in Morwell (Victoria), Malaga (Perth WA), Armidale and Newcastle (NSW), as well as expanded existing sites in Toowoomba (QLD) and John Lewis (Adelaide). A new build commenced in Darwin (NT), reinforcing our confidence in our national growth prospects. Our ability to invest ahead of the curve has strengthened our market position.
Supply Solutions were faced with navigating a turbulent commodity price environment, impacted by fluctuating cooking oil prices. Recent investments include additional storage of a new dry warehouse in Adelaide and two frozen and chilled facilities, in Girraween and Yatala.
Our manufacturing business, Simply Food Solutions, is a key part of the future growth strategy. The success of our cheese processing activities has required additional capacity in a new cheese processing plant in Brisbane. Meat and Repacking have both navigated some operational challenges but are getting the necessary management attention.
We are sustainably focused, continuing to drive emissions reductions and positively influencing the communities in which we operate. The future looks positive with a great foundation for continued growth and success.
New Zealand surpassed all previous period results with the best-on-record results achieved. Resurgent tourism, inflation, and most significantly excellent margin management ensured the impact of rising costs were contained. Towards the latter part of the year, an easing in the inflation rates and overall activity levels was noted. Our teams are well experienced in being flexible and nimble to adjust strategically ahead of the curve.
Management focus was on ensuring a variable service model that was able to adjust to the changing needs and cost appetites our customers were experiencing with the ever-fluctuating hospitality sector operating environment. Expense containment well below sales growth levels was evidence of the success of this approach, considering the exit of our single biggest customer in October 2022.
Foodservice had an outstanding year with sales volumes and margins higher than previously recorded, despite the disruption experienced in H2 due to adverse weather conditions. In spite of ongoing weather challenges causing supply chain disruptions, the Fresh business was able to deliver a superb result. Focus on margin protection and consistency of supply has set our operations apart. We remain underrepresented in many areas of the country and are positioning the team for good growth.
Simply Food Solutions bedded down through the year and navigated startup challenges to deliver a positive result, positioned well for growth. Navigating ongoing supply chain challenges and a restrained labour market has been a key focus area, with the team delivering a commendable outcome.
Capital investments are planned for at least three new sites in Taupo, Waipapa, and Wellington, to meet current growth needs. Plans are underway for additional capacity in Rotorua, Whangarei, and Christchurch. The capital goods supply chain is still struggling to return to normalcy.
Focus for the year ahead is to bed down the gains of the past year, both in terms of customer retention and cost management. Opportunities abound as we tighten our customer engagement, broaden the product offering into alcohol, strengthen the imports product range, and continue to support and incentivise our phenomenal team.
United Kingdom (UK)
A turbulent H1 both politically and economically in the UK resulted in little growth being recorded in the food and beverage sector, which bore the brunt of inflation, labour challenges, cost-of-living pressures, and materially higher interest rates. Despite these challenges, Bidfood UK grew revenue 35,9% to R51,4 billion (F2022: R37,8 billion) and trading profit up 25,1% to R1,9 billion (F2022: R1,5 billion). Gross profit margins declined a little as the exposure to national account customers, with rigid pricing windows, made it difficult to pass on price increases timeously in the environment of high and rapidly increasing inflation. In addition, in a strategy to grow their free trade customers, some margin was traded away to support this channel.
Wholesale delivered a good result, despite adverse weather conditions and ongoing national rail strikes dampening activity levels. Volume growth in excess of 10% was achieved, most importantly in both free trade and national account sectors. Bedding down of new sales contract wins positively impacted H2 results. Significant focus on managing overheads remains the key challenge with relatively fixed wage costs, and high energy and fuel costs. Trading margins are in line with prior year but well below the long-term trends, with opportunity for improvement in the medium term.
Caterfood Buying Group (CBG) recorded improved profits, benefiting from the acquisition of three bolt-ons (Nicol Hughes (Q1), Harvest Fine Foods (Q3), and Thomas Ridley (Q3)). Manufacturing is profitable, however, Simply Foods Solutions struggled operationally.
Fresh delivered solid profit and growth was achieved. Passing on supplier price increases and maintaining margins offset higher but well-controlled costs. Trading profits doubled in sterling.
Digitisation strategies and consolidating the IT infrastructure will continue, with a strong focus on aligning the new acquisitions to group standards. Plans are underway for six new-builds, strengthening our national footprint and capacity.
The new "People and Sustainability Vision, Mission and Purpose" has driven a wide range of projects and engagements to improve our stakeholder experience. Work continues in developing our wider sustainability impact, focussing efforts on where we can make a material difference. Progress is being made in the measurement and extent of scope 3 carbon emissions, working closely with key suppliers, on the journey towards setting net-zero targets.
Europe
Our European sales have held up well with all businesses having traded above expectation, bolstered by good summer weather and benefiting from inflation. Revenue growth was outstanding, up 38,9% to R69,5 billion (F2022: R50,1 billion). Trading profit results were as impressive with an increase of 53,6% to R3,7 billion (F2022: R2,4 billion). The businesses navigated high energy costs volatility through localised hedging strategies. Supply chain disruptions continued through the period, which led to higher prices across most expenditure categories, particularly capital equipment.
Netherlands delivered an exceptional performance with revenues exceeding the €1 billion mark for the first time – an excellent achievement. Revenue growth exceeded 20% as the free trade segment continued to exceed expectations. Gross margin was strong and operating expenses were impacted by one-off costs related to the integration of the Zegro acquisition. Trading profits reached record levels. National accounts performed at expectation, with focus on growing the basket and customer cost management. Independent and free trade market is growing and exceeding expectations.
Capital investments included a new depot, Zierikzee, the purchase of a building in Meppel, and a new property development in the Hague. Occupancy is planned in April 2024. Reducing carbon emissions by using electric vehicles, as well as replacement of lighting and refrigeration to low emission alternatives remains a priority.
Belgium's revenue growth, over 20%, exceeded expectations. Pleasingly, trading profit followed suit, achieving their best results on record. Managing the inflationary pressures well had minimal impact to gross margins. Cost management was impacted by rising labour costs, but an easing in energy costs assisted. The Delitraiteur contract was terminated from June 2023 and all exit costs accounted for. The horeca businesses improved profitability in a highly competitive environment. Belgium saw strong growth in the QSR segment as consumers' buying power remains low. An acquisition opportunity is being explored.
Czech Republic and Slovakia had a great Q4 with the early summer weather boosting ice cream sales, and manufacturing running at full capacity to yearend. Excellent trading profits were recorded. Revenue into all customer sectors increased on prior year, benefiting from high inflation. Slovakia and Hungary had a more challenging year. Volatility in the price of certain commodities, mainly cooking oil, due to shortages of supply being quickly replaced by surpluses, negatively impacted market prices.
Capital investments have focused on solar panel installations, easing increased energy costs, and improved fire protection systems. New vehicles, previously delayed by supply chain challenges, have been delivered and commissioned. A small bolt-on acquisition in the produce category was completed at yearend.
Italy delivered record revenues, buoyed by tourism activity which bolstered the street trade and national account segments. Out-of-home eating was up nearly 10%. Trading profits were up, as the whole business focused on recovering operating profitability. Wholesale segment was impacted by low product availability in frozen seafood, but this pressure eased into the summer months.
Purchasing ahead of the inflation curve resulted in higher inventory levels. Capital investments were made in buildings, equipment, and machinery, most notably into solar panels and low emission vehicles, as well as expanding the current capacity for Quartiglia in Teramo.
Poland continued their H1 trajectory achieving excellent revenue, margin, and trading profit results. Increased activity in the free trade sales, focussing on the right mix of customer and product, was the key driver of the great performance. Inflationary cost pressures were present throughout the year, but real growth was recorded with much higher volumes delivered.
Expenses were impacted by inflation, and unprecedented labour cost increases. Stability of the economic environment is being impacted by the ongoing tension from the Russian invasion of Ukraine but opportunities continue to present themselves in support of the relief efforts present along the border. Investment into digitising the customer engagement continues with ecommerce sales now 58% of total revenue. The Nowy Targ depot (opened December 2022) has increased capacity to meet growth targets, and good progress has been made on the two new sites in Wroclaw and Poznan.
Germany delivered trading profits for the first time since joining the group. Volume growth and significant food inflation positively impacted the full-year revenue. Margins also improved slightly. Increased labour costs in response to the macro-inflationary environment was the biggest impact in expense management. Increased investment into maintaining and growing the vehicle fleet is required to support the forecast growth. Improvements in the IT environment have been noted, following an investment of time and capex.
Baltics pleasingly grew revenue in both Lithuania and Latvia, as well as the new acquisition in Estonia. The Fruit Xpress acquisition (with effect from December 2022) has established our presence as a fresh and multi-temp food wholesaler in the Estonian foodservice sector. Lithuanian and Latvian margins came under pressure due to fresh produce price increases trading into the retail sector, however, Estonia maintained good margins. Energy and fuel costs eased back to prior year levels, assisting with cost management.
Spain's hospitality sector has exceeded pre-pandemic levels, with the hotel and tourism industry delivering excellent growth. All trading branches were profitable. Guzman had a tough year, but improved profitability. Igartza is showing signs of real improvement, although still not quite at its previous levels. Customer retention remains a priority. The acquisition of a bread and pastry business, Euskopan (with effect from December 2022), has contributed positively. Investment into a new facility for Igartza will help support long-term growth, and into land for a new depot in San Sebastian to increase capacity. Cross-selling opportunities between operations have shown positive results and will continue.
Portugal performed well even though consumer cost-of-living pressures slowed growth in the second half. Expenses were impacted by staff incentivisation. The new Sintra depot in Lisbon has been delayed by legalities but should be on track for occupation by end F2024. The Porto warehouse expansion has commenced. Bolt-on acquisition opportunities have been identified to grow the product and service offering.
Emerging Markets
Emerging Markets delivered a solid overall performance despite economic challenges in several markets, compounded by supply chain challenges and volatile exchange rates. Revenue was up 20,0% to R31,1 billion (F2022: R25,9 billion) and trading profit up 9,0% to R1,6 billion (F2022: R1,4 billion). The devastating earthquake in Türkiye, low economic growth exacerbated by electricity blackouts in South Africa, and Greater China's sluggish post-COVID activity, impacted our businesses. Other than in Greater China, discretionary spend has normalised and in some cases improved, now approaching normalised trading levels.
Bidcorp Food Africa (BFA including Bidfood and CFG) achieved excellent results for the financial year, due to the outstanding performance of our foodservice business. Inflation and interest rates remain at elevated levels, increasing the pressure on consumers' disposable income. This is particularly prevalent in lower LSM segments serviced indirectly by CFG. The pent-up demand for dining out expenditure continues, and the hotel occupancies have returned to pre-pandemic levels. All businesses have faced double digit price increases in fuel and utilities over the financial year. Ongoing power blackouts increased into the second half, causing many customers to close or downscale production, resulting in a loss of revenue in an environment facing high unemployment, inequality, and low growth.
Bidfood South Africa (Bidfood) delivered a solid performance. Revenue grew well above inflation with focus on growing the street trade and national account channels, despite the economic pressure on consumers and the impact of power blackouts on customers. National accounts sales continue to grow strongly in the quarter, particularly the hotels and hospitals. Workplace catering remains subdued. Industrial caterers' channel was up but losing market share on ambient lines. Food inflation impacted all products, especially in commodities like frozen chips. Bidfood's expenses were well managed given the revenue growth. Investment into vehicles, material handling equipment, and IT infrastructure improvements were made in the year.
Crown Food Group (CFG) struggled, impacted by high inflation, lower factory volumes, and weak economic growth which has had a devasting impact on the LSM groups that is serviced by its customers. Continual power blackouts have materially impacted our customers such as independent butcheries and the meat and chicken processing sectors. CFG was also impacted by a downturn in retail demand, lower manufacturing recoveries, and necessary action taken to liquidate overstocked inventories. Pricing disciplines and controls have been strengthened. Expenses were impacted by higher distribution and premises costs, resulting in lower trading profit. Tough conditions are expected to continue but the foundations have been laid for a better F2024.
Chipkins Puratos (CP) (50% equity accounted) volumes were under pressure across most categories with power blackouts impacting smaller customers. CP did well to pass on the price inflation across all channels. Gross margins were positively impacted by growth in the production facilities and yeast, while the trading margins were under pressure. Expenses increased due to warehouse and distribution costs. CP will seek to grow its position in manufactured products.
Bidfood Properties finalised the new Gqeberha development for Bidfood and CFG. Construction for the new Johannesburg South Bidfood multi-temp facility to replace the existing Heriotdale site has started. Development of a new Bidfood and CFG facility in Pretoria is underway, with occupation due in late 2024.
Greater China's (including Hong Kong) rebound at the start of the 2023 calendar year faded due to consumer weakness and the net outflow of tourism in Hong Kong. Deflation resulted in imported dairy products becoming uncompetitive after repeated price hikes, leading to a loss in market share in mainland China. Improved gross margins in Hong Kong and the pickup of tourism to Macau offset the impact in Greater China. Government stimulus will benefit consumer confidence and the return of international tourism to the region will assist performance going forward.
Singapore performed well, increasing both revenue and trading profits despite sluggish economic activity, high inflation, and a tight labour market. In Angliss, overall performance was good. Margins were under pressure in poultry but offset by improved margins in the beef and seafood categories. Operating expenses increased due to higher labour and energy costs. Bidfood Innovations contributed well with an investment into larger premises to increase production capacity. Gourmet Partner continues to improve results.
Malaysia had a difficult year, impacted by weak currency affecting imported products, yet all businesses reported an improvement in sales. Investment into additional fleet and warehouse capacity is underway, with occupancy planned for F2025. Operating expenses were higher than anticipated, which is getting management attention. myBidfood implementation is planned for F2024.
Bidfood Middle East (BME) revenues increased with the introduction of new brands in the UAE and growth in a QSR account in Saudi Arabia (KSA). BME gross margins were impacted by an unfavourable change in sales mix, a drop in margins on the mixes business in KSA, and liquidating overstocked dairy products in the UAE. BME underperformed and delivered lower trading profits than F2022.
Türkiye sales grew off the back of an increase in local consumption. Despite the impact from the February earthquake and disruptions from elections, all divisions met targets. Foodservice operations in Antalya and Izmir both surpassed expectations and have moved to new facilities to cater for anticipated growth. Ankara is progressing and the new distribution centre in Marmara will open in September. Although the tourism season started a bit later than anticipated, summer trade has been incredibly promising. Despite the high inflation environment, demand for consumer goods has increased.
South America delivered an overall good result, in spite of market challenges, political change, and high inflation pressures across the region. Investments into bolt-on acquisitions to grow the product offering and expand the national footprint is paying off.
In Brazil, the foodservice market has felt the pressure of high interest rates, unemployment, and low consumer confidence impacting the eating-out-of-home market. Hybrid working continues to hinder the full return of commercial catering activity. Hotel demand has returned to pre-pandemic levels. The Central Foods acquisition, completed in F2022, had some teething issues in managing customer service levels. Focus on managing the inflationary pressures from fuel, energy, and labour has aided profits. The restructuring of sales, purchasing, and marketing functions has enabled closer cooperation between the teams, the benefits of which will flow in F2024. Management are investigating opportunities to expand their regional footprint.
Chile had a poor F2023 but started to track back to normality in Q4. Financial and operational controls are receiving significant focus from local management. Gross margins were negatively impacted by losses in meat processing and lower poultry margins following a bird flu outbreak in January and February. Expense management, particularly in warehouse and distribution costs, was difficult. Focus on optimising the purchasing and pricing of the protein range is key to returning to profitability.
Argentina (46% equity accounted) buoyed by the influx of tourism, exceeded revenue and trading profit expectations. New branches in Ushuaia and Iguazu have been bedded down and are set to contribute profitably. Progress is being made to acquire a new depot in Córdoba later this year.
Corporate
BidOne has embraced a new technology "roadmap" to focus on strategic projects aligned with four key goals being "Performance, Personalisation, Data, and Product". BidOne continues to deliver world-class ecommerce and digital solutions, embracing real-time "AI" as well as experiential learning from within the group. The maturity of the BidOne operations continues to develop, reflected in enhanced depth in leadership and support.
Bidfood Procurement Community (BPC) team is working closely with procurement teams across the group to identify and support opportunities to improve product supply and pricing. Developing product categories, product knowledge and insight, researching and confirming suppliers' certifications with internationally recognised food safety accreditations continues.
Dividend declaration
In line with the group dividend policy, the directors declared a final cash dividend of 500,0 cents (400,0 cents net of dividend withholding tax, where applicable) per ordinary share for the year ended June 30 2023 to those members registered on the record date, being Friday, September 29 2023.
The dividend will be paid out of income reserves. A dividend withholding tax of 20% is applicable to all shareholders who were not exempt.
Share certificates may not be dematerialised or rematerialised between Wednesday, September 27 2023 to Friday, September 29 2023, both days inclusive.
For and on behalf of the board
AK Biggs
Company secretary representative
Johannesburg
August 30 2023