Basis of presentation of the condensed interim consolidated financial statements
The condensed interim consolidated financial statements have been prepared in accordance with the JSE Limited Listings Requirements for interim reports, and the requirement of the Companies Act of South Africa applicable for condensed interim consolidated financial statements. The Listings Requirements require interim reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, and include disclosure as required by IAS 34 Interim Financial Reporting and the Companies Act of South Africa. The accounting policies applied in the preparation of the condensed interim consolidated financial statements from which the condensed interim consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous consolidated annual financial statements.
In preparing these interim condensed consolidated financial statements, management has made judgements, estimates and assumptions, many of which are directly related to COVID-related impacts as set out below, that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these judgements, estimates and assumptions.
Preparation and results
These half year ended December 31 results have not been audited or reviewed by the group’s auditors. The condensed interim consolidated financial statements have been prepared by CAM Bishop CA(SA), under the supervision of DE Cleasby CA(SA), and were approved by the board of directors on February 22 2021.
Statement of cash flows re-presentation
The group made the following re-presentation to the statement of cash flows and have adjusted comparatives accordingly:
- comparative cash effects on interest for right-of-use lease liabilities was reclassified from being disclosed
as part of the lease payment under financing activities to interest paid under operating activities. Lease
repayments of principal are classified within financing activities (IAS 7.17(e)), with the interest portion being
aggregated with other interest outflows (for other borrowings) and presented as arising from operating
activities.
This representation had no impact on the group’s cash and cash equivalents or statement of financial position.
Financial impact that COVID has had on the condensed interim consolidated financial statements
The group has considered the potential ongoing impact of COVID on the group by taking a variety of risk elements into account which included considering macro-economic factors, contractual obligations and supply chain impacts when reviewing estimates.
| COVID consideration | Assessment of COVID consideration | |||
| Credit risk | The group’s maximum exposure to credit risk is represented by the carrying amount of the group’s financial assets. The group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. There was a material change in the group’s exposure to credit risk and its objectives, for managing and measuring the risk during Q3 and Q4 of the 2020 financial year due to the impact of COVID. This impact was factored into the expected credit loss (ECL) for trade receivables for the group’s as the average ECL increased from 4,5% (June 2019) to 10,9% (June 2020). Many of Bidcorp’s customers, including those in the restaurant and hospitality have operated or are operating at substantially reduced volumes due to governmental lockdowns or other social-distancing measures. During H1F2021 collections have been maintained, however, due to the uncertainties surrounding COVID and that it has been more widespread, longer in duration and the risk of further COVID waves and the potential for further economic fallouts. The group’s ECL ratio has been maintained at levels around 10,7% of trade receivables. While Bidcorp traditionally incurs bad debt expense, the magnitude of such expenses and benefits the group has experienced is not indicative of normal operations. |
|||
|---|---|---|---|---|
| Revenue | Group sales (in constant currency) for the financial year to date peaked in the week ended August 2 2020 at 87% versus the corresponding week in F2020 but had eased to an average of 78% for the half year ended December 31 2020. The group’s businesses continue to operate in each geography, however, each country is at a different stage of the COVID crisis. Harsh second waves particularly in Europe and UK have had a significant impact on the group’s performance and this looks likely to continue through the northern hemisphere winter. Fortunately, the group has a diversified business, with Australia, New Zealand and Asia doing well, and our other emerging market constituents continuing to improve on a month-by-month basis. |
|||
| Non-financial asset impairments | Goodwill is tested for impairment annually and whenever there are indicators of impairment. During H1F2021 there were no additional indicators of impairment that weren’t present at June 30 2020. At June 30 2020, to account for estimated impact/potential impact of COVID on future cash flows the key revenue assumptions used to determine the recoverable amounts of the group’s cash-generating units (CGU) were generally set at 80% for 2021, 90% for 2022 and 100% for 2023 of 2019 CGU revenues respectively (other than Spain where revenues were 56% for 2021, 74% for 2022, 82% for 2023). At this stage these assumptions are considered reasonable in light of the current pandemic operating conditions. The group has seen that activity levels quickly return back to 2019 operating levels once governmental closures and lockdowns or other social-distancing measures are relaxed or lifted. Due to COVID timing of future cash flows will remain uncertain whilst the pandemic continues to cause economic uncertainty in the group’s trading environment. |
|||
| Lease liability and lease concessions | The group applied the practical expedient per IFRS 16:46A. In terms of this approach, we accounted for COVID-related rental concessions as if they were not lease modifications but rather as variable lease payments and which were recognised in profit and loss. An insignificant amount of rental concessions were received in H1F2020. |
|||
| Liquidity risk | During the COVID pandemic the group’s priority has been to ensure that our operations have sufficient liquidity for their respective requirements. The group believes that it has sufficient liquidity for the foreseeable future, the group and its subsidiaries have available to it, as at December 31 2020, undrawn facilities of R13,4 billion (£672 million) and cash and cash equivalents of R7,0 billion (£348 million). |
Sale and leaseback
The group concluded two sale and leaseback transactions during the half year ended December 31 2020. Transactions were concluded on a Hong Kong property for HK$325,0 million and Australian property for A$72,3 million. These assets sales are part of our property strategy in terms of dealing with end-of-useful life properties, where we are taking advantage of very low yields currently being achieved in many markets on big demand for industrial property.
The total right-of-use lease liability recognised as of December 31 2020 for these properties was R486,6 million.
Financial instruments
When measuring the fair value of an asset or a liability, the group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques categorised as follows.
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy for financial instruments measured at fair value. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| Non-current assets (liabilities) | Current liabilities | ||||||||
| R’000 | Puttable non- controlling interests |
Investments | Vendors for acquisition |
Puttable non- controlling interests |
Vendors
for acquisition |
Total | |||
| December 31 2020 | |||||||||
| Financial assets measured at fair value | – | 32 252 | – | – | – | 32 252 | |||
|---|---|---|---|---|---|---|---|---|---|
| Financial liabilities measured at fair value | (4 249 892) | – | (27 840) | (26 972) | (154 690) | (4 459 394) | |||
| December 31 2019 | |||||||||
| Financial assets measured at fair value | – | 55 309 | – | – | – | 55 309 | |||
| Financial liabilities measured at fair value | (3 805 681) | – | (290 731) | (38 917) | (40 448) | (4 175 777) | |||
| June 30 2020 | |||||||||
| Financial assets measured at fair value | – | 32 264 | – | – | – | 32 264 | |||
| Financial liabilities measured at fair value | (4 632 682) | – | (73 150) | (55 262) | (204 188) | (4 965 282) | |||
| Fair value | Level 1 | Level 2 | Level 3 | Total | |||||
| December 31 2020 | |||||||||
| Financial assets measured at fair value | – | 5 761 | 26 491 | 32 252 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Financial liabilities measured at fair value | – | – | (4 459 394) | (4 459 394) | |||||
| December 31 2019 | |||||||||
| Financial assets measured at fair value | – | 4 691 | 50 618 | 55 309 | |||||
| Financial liabilities measured at fair value | – | – | (4 175 777) | (4 175 777) | |||||
| June 30 2020 | |||||||||
| Financial assets measured at fair value | – | – | 32 264 | 32 264 | |||||
| Financial liabilities measured at fair value | – | – | (4 965 282) | (4 965 282) | |||||
Valuation technique
The expected payments are determined by considering the possible scenarios of forecast EBITDAs, the amount to be paid under each scenario and the probability of each scenario. The valuation models consider the present value of expected payment, discounted using a risk-adjusted discount rate.
Significant unobservable inputs
- Average EBITDA growth rates: 10% (2019: n/a)
- EBITDA multiples: 10,5x (2019: 7,0x)
- Risk-adjusted discount rate: 1,7% (2019: 1,99%)
Sensitivity analysis on changes in significant variable unobservable inputs for puttable non-controlling interests (liability)
| Increase in assumption % |
Increase in liability R’000 |
Decrease in assumption % |
Decrease in liability R’000 |
||||||||
| Average EBITDA growth rate | 10 | 60 076 | 10 | 58 979 |
|---|
Exchange rates
The following exchange rates were used in the conversion of foreign interests and foreign transactions during the periods:
| December 31 | June 30 | ||||||||
| 2020 Unaudited |
2019 Unaudited |
2020 Audited |
|||||||
| Rand/Sterling | |||||||||
| Closing rate | 20,01 | 18,43 | 21,37 | ||||||
| Average rate | 21,23 | 18,49 | 19,73 | ||||||
| Rand/Euro | |||||||||
| Closing rate | 17,98 | 15,73 | 19,46 | ||||||
| Average rate | 19,19 | 16,29 | 17,31 | ||||||
| Rand/Australian dollar | |||||||||
| Closing rate | 11,30 | 9,83 | 11,92 | ||||||
| Average rate | 11,75 | 10,05 | 10,50 | ||||||
Supplementary pro forma information regarding the currency effects of the translation of foreign operations on the group
The pro forma financial information has been compiled for illustrative purposes only and is the responsibility of the board. Due to the nature of this information, it may not fairly present the group’s financial position, changes in equity and results of operations or cash flows. The pro forma information has been compiled in terms of the JSE Listings Requirements and the Revised Guide on Pro Forma Information by SAICA.
The illustrative information, detailed below, has been prepared on the basis of applying the H1F2020 average rand exchange rates to the H1F2021 foreign subsidiary income statements and recalculating the reported income of the group for the period.
| For the half year ended December 31 |
Illustrative 2020 at 2019 average exchange rates |
% change |
||||||||
| R'000 | 2020 Unaudited |
2019 Unaudited |
% change |
|||||||
| Continuing operations | ||||||||||
| Revenue | 60 766 300 | 68 215 439 | (10,9) | 53 300 471 | (21,9) | |||||
| Trading profit | 2 239 724 | 3 579 354 | (37,4) | 1 969 733 | (45,0) | |||||
| Headline earnings | 1 308 349 | 2 431 234 | (46,2) | 1 148 330 | (52,8) | |||||
| Headline earnings per share (cents) | 391,6 | 728,3 | (46,2) | 343,7 | (52,8) | |||||
| Constant currency per segment from continuing operations | ||||||||||
| Revenue | ||||||||||
| Australasia | 16 659 829 | 15 833 235 | 5,2 | 14 314 899 | (9,6) | |||||
| United Kingdom | 13 614 818 | 17 787 330 | (23,5) | 11 854 950 | (33,4) | |||||
| Europe | 19 539 464 | 23 040 079 | (15,2) | 16 795 081 | (27,1) | |||||
| Emerging Markets | 10 952 189 | 11 554 795 | (5,2) | 10 335 541 | (10,6) | |||||
| 60 766 300 | 68 215 439 | (10,9) | 53 300 471 | (21,9) | ||||||
| Trading profit | ||||||||||
| Australasia | 1 119 914 | 1 045 922 | 7,1 | 962 203 | (8,0) | |||||
| United Kingdom | 295 684 | 909 354 | (67,5) | 252 921 | (72,2) | |||||
| Europe | 429 643 | 1 098 949 | (60,9) | 376 609 | (65,7) | |||||
| Emerging Markets | 449 513 | 571 819 | (21,4) | 427 945 | (25,2) | |||||
| Corporate office | (55 030) | (46 690) | (17,9) | (49 945) | (7,0) | |||||
| 2 239 724 | 3 579 354 | (37,4) | 1 969 733 | (45,0) | ||||||
Disclaimer: Forward-looking statements
Bidcorp may, in this document, make certain statements that are not historical facts and relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to our future prospects, expectations, developments and business strategies. Examples of such forward-looking statements include, but are not limited to, the impact of COVID-19 on Bidcorp's business, results of operations, financial condition and liquidity and statements regarding the effectiveness of any actions taken by Bidcorp to address or limit any impact of COVID-19 on its business; statements regarding exchange rate fluctuations, volume growth, increases in market share, cost reductions, and business performance outlook.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and there are risks that the predictions, forecasts, projections and other forward-looking statements will not be achieved. If one or more of these risks materialise, or should underlying assumptions prove incorrect, our actual results may differ materially from those anticipated. You should understand that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.
Administration
DIRECTORS
Chairman: S Koseff
Lead independent director: NG Payne
Independent non-executive: T Abdool-Samad, PC Baloyi, CJ Rosenberg*, H Wiseman*
Non-executive director: B Joffe
Executive directors: BL Berson* (chief executive), DE Cleasby (chief financial officer)
*Australian
COMPANY SECRETARY
Bidcorp corporate services (Pty) Ltd
Represented by Ms AK Biggs
BID CORPORATION LIMITED
(Bidcorp or the group or the company)
Incorporated in the Republic of South Africa
Registration number: 1995/008615/06
Share code: BID
ISIN: ZAE000216537
Registered office
Bid Corporation Limited
2nd Floor North Wing, 90 Rivonia Road
Sandton, 2196
Postnet Suite 136, Private Bag X9976
Sandton, 2146
Transfer secretaries
Computershare Investor Services Proprietary Limited
Private Bag X9000, Saxonwold, 2132
0861 100 950
Sponsor
The Standard Bank of South Africa Limited
30 Baker Street, Rosebank
South Africa, 2196
Independent auditor
PricewaterhouseCoopers
Registration number: 1998/012055/21
Waterfall City, 4 Lisbon Lane, Jukskei View
Midrand, 2090