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 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 results for the half year ended December 31  2022 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 21  2023.

Statement of cash flows re-presentation

The group made the following re-presentation to the statement of cash flows and have adjusted comparatives accordingly.

Cash effects from payments made to puttable non-controlling interests were reclassified from cash effects from investing activities to cash effects from financing activities. The subsequent purchase by the group of a subsidiary's equity instruments is now accounted for as an equity transactions and is classified in the same way as transactions with owners described in IAS 7.17. The comparatives were re-presented to show this cash flow activity change. This representation had no impact on the group's cash and cash equivalents or statement of financial position.

R'000	Previously reported H1F2022	Payments to puttable NCI re-presented as financing activities	Re-presented H1F2022
Operating activities	124 947	–	124 947
Investing activities	(1 379 561)	1 226	(1 378 335)
Financing activities	148 575	(1 226)	147 349
Movement in cash and cash equivalents	(1 106 039)	–	(1 106 039)

Accounting estimates, judgements and fair values

During the period, the expected credit loss provision increased from 5,8% (June 30  2022) to 6,1% at December 31  2022. The ECL percentage remains elevated compared to 2019 (pre-COVID ECL percentage of 4,5%) as we operate in times of economic uncertainty (Russia-Ukrainian war and rampant global inflation), heightened cash flow pressures on independent free trade customers and possible changes to the macro-economic environment (i.e. economic recession). It is possible that estimates and actual uncollectible amounts will differ, and additional charges may be required; however, it is also possible that reductions in the group's provision for bad debts could also occur over time.

As at December 31  2022, the provision for stock obsolescence is 2,2% of gross inventory (H1F2022: 2,9%).

The group has applied judgement to recognise subsequent measurement changes in the puttable NCI liabilities in accordance with the principles of IFRS 10.23. Changes in assumptions used to estimate the future purchase price of the puttable NCI liabilities are recorded directly in retained earnings in the statement of changes in equity. There is diversity in practice as to whether to recognise subsequent measurement changes in the carrying amount in profit or loss or equity. The total remeasurement changes of the puttable NCI liabilities during the year was R13,4 million (credit) (H1F2022: R3,7 million (debit)).

Hyperinflationary accounting requires transactions and balances of each reporting period to be presented in terms of the measuring unit current at the end of the reporting period to account for the effect of loss of purchasing power during the period. The group has applied the Turkish consumer price index (CPI) (as determined by TURKSTAT) as the general price index to restate amounts as it provides an official observable indication of the change in the price of goods and services. From July 1  2020, the cumulative CPI at December 31  2022 is 91,0 (June 30  2022: 76,5), which has been used to restate amounts. CPI provides an official observable indication of the change in the price of goods and services. Hyperinflation accounting for Türkiye resulted in the group recording a net monetary loss of R10,0 million.

Significant commitments

The group's policy is to maintain a strong capital base to sustain future development of the businesses so that it can continue to provide benefits to its stakeholders. During H1F2023, R2,1 billion of the R3,4 billion F2023 approved capital expenditure has been spent mainly on infrastructure capex (through upgrades to (or new) distribution centres including the fit out of plant and equipment, purchase of land and vehicle fleet). For H2F2023, significant capital commitments will involve:

• Australia – continued infrastructure investment into Lismore, Queensland to rebuild the refrigeration damaged in the floods and Malaga, Western Australia – to grow capacity.
• New Zealand – to start construction on Taupo distribution centre and purchase land in Kerikeri.
• United Kingdom – infrastructure investment for Glasgow distribution centre (expected opening March 2023) and continued replacement of vehicle fleet.
• Poland – infrastructure investment in Wroclaw.

Related parties

The group has a related party relationship with its subsidiaries and associates. Key management personnel has been defined as the executive and non-executive directors of the company. The definition of key management includes the close members of family of key management personnel and any other entity over which key management exercise control.

The group encourages its employees to purchase food products from group companies. These transactions are generally conducted on terms similar to those with third parties, although in some cases nominal discounts are granted. Transactions with key management personnel are conducted on similar terms. No abnormal or non-commercial credit terms are allowed, and no impairments were recognised in relation to any transactions with key management personnel during the year, nor have they resulted in any non-performing debts at December 31  2022.

Trading relationships with associates and jointly controlled entities are generally concluded on terms similar to those of third parties and there are no abnormal or non-commercial credit terms allowed. No impairments of associates or jointly controlled entities were recognised during the period (H1F2022: nil).

Revenue disaggregation

Composition of revenue

• Revenue comprises amounts earned from customers from the sale of frozen, chilled, ambient and non-food products (goods) and from the rendering of services.
• Revenue is disclosed net of value added taxation.
• Revenue is net of returns and allowances, trade discounts and volume rebates, all of which have been apportioned to the sale of goods.

	December 31							June 30
R'000	2022 Unaudited			2021 Unaudited		% change		2022 Audited
Sale of goods – frozen	33 663 287			26 206 430		28,5		53 156 263
Sale of goods – chilled	24 419 459			19 490 487		25,3		40 318 102
Sale of goods – ambient	29 184 135			22 379 182		30,4		46 140 256
Sale of goods – non-food	4 333 351			3 408 313		27,1		7 241 749
Rendering of services and commissions earned	148 335			143 188		3,6		281 941
	91 748 567			71 627 600				147 138 311
Revenue percentage by customer type
Hotels, restaurants and cafés	42%			40%				41%
Caterers, butcheries and canteens	14%			13%				13%
Retail, wholesalers and other distributors	13%			14%				14%
Quick service restaurants	12%			15%				14%
Healthcare and aged care	8%			9%				9%
Education	6%			5%				5%
Travel (airlines and cruise liners)	3%			2%				2%
Government-related customers	2%			2%				2%
Analysis of revenue per country by percentage
United Kingdom	25%			26%				26%
Australia	16%			15%				15%
Netherlands	9%			8%				9%
New Zealand	8%			8%				8%
Italy	7%			7%				6%
Czech Republic	6%			5%				6%
People’s Republic of China and Hong Kong	5%			7%				6%
Belgium	5%			5%				5%
South Africa	5%			5%				5%
Other	14%			14%				14%

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 assets (liabilities)
R’000	Investments	Puttable non- controlling interests	Vendors for acquisition	Puttable non- controlling interests	Vendors for acquisition	Total
December 31  2022
Financial assets measured at fair value	29 262	–	–	–	–	29 262
Financial liabilities measured at fair value	–	(4 389 211)	(110 378)	(212 694)	(117 106)	(4 829 389)
December 31  2021
Financial assets measured at fair value	29 715	–	–	–	–	29 715
Financial liabilities measured at fair value	–	(4 266 826)	(47 803)	(71 689)	(178 125)	(4 564 443)
June 30  2022
Financial assets measured at fair value	28 613	–	–	–	–	28 613
Financial liabilities measured at fair value	–	(4 006 503)	(115 477)	(266 658)	(49 128)	(4 437 766)

Fair value

R’000	Level 1	Level 2	Level 3	Total
December 31 2022
Financial assets measured at fair value	–	–	29 262	29 262
Financial liabilities measured at fair value	–	–	(4 829 389)	(4 829 389)
December 31 2021
Financial assets measured at fair value	–	–	29 715	29 715
Financial liabilities measured at fair value	–	–	(4 564 443)	(4 564 443)
June 30 2022
Financial assets measured at fair value	–	–	28 613	28 613
Financial liabilities measured at fair value	–	–	(4 437 766)	(4 437 766)

Valuation techniques and significant unobservable inputs

The table shows the valuation techniques used in measuring the DAC puttable non-controlling interests at December 31:

Valuation technique		Unobservable inputs		Inter-relationship between significant unobservable inputs and fair value measurement
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.		Average revenue growth rates: 6,5% (H1F2022: 16%)1 Average EBITDA margin: 7,0% (H1F2022: 7,3%) EBITDA multiples: 10,5x (H1F2022: 10,5x)		The estimated fair value would increase (decrease) if: the EBITDA were higher (lower); or the risk-adjusted discount rate were lower (higher).

¹ Average revenue growth rates for 2021 were distorted by the low revenue base as a result of the COVID pandemic.

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 margin	10	519 830	10	368 370

The group recognises any changes in the value of the liability as a result of changes in assumptions used to estimate the future purchase price directly in retained earnings in the statement of changes in equity.

Exchange rates

The following exchange rates were used in the conversion of foreign interests and foreign transactions during the periods:

	December 31		June 30
	2022 Unaudited	2021 Unaudited	2022 Audited
Rand/Sterling
Closing rate	20,59	21,53	19,79
Average rate	20,35	20,48	20,24
Rand/Euro
Closing rate	18,22	18,07	17,02
Average rate	17,56	17,44	17,14
Rand/Australian dollar
Closing rate	11,61	11,57	11,23
Average rate	11,61	10,99	11,03

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 H1F2022 average rand exchange rates to the H1F2023 foreign subsidiary income statements and recalculating the reported income of the group for the period.

	For the half year ended December 31					Illustrative 2022 at 2021 average exchange rates	% change
R’000	2022 Unaudited	2021 Unaudited	% change
Continuing operations
Revenue	91 748 567	71 627 600	28,1			89 560 555	25,0
Trading profit	4 852 607	3 371 625	43,9			4 718 101	39,9
Headline earnings	3 244 634	2 232 017	45,4			3 158 476	41,5
Headline earnings per share (cents)	971,7	668,0	45,5			945,9	41,6
Constant currency per segment from continuing operations
Revenue
Australasia	21 752 049	16 002 910	35,9			20 950 091	30,9
United Kingdom	23 120 860	18 699 205	23,6			23 262 977	24,4
Europe	31 580 690	24 115 197	31,0			31 196 250	29,4
Emerging Markets	15 294 968	12 810 288	19,4			14 151 237	10,5
	91 748 567	71 627 600	28,1			89 560 555	25,0
Trading profit
Australasia	1 543 380	981 495	57,2			1 486 494	51,5
United Kingdom	908 828	583 146	55,8			914 414	56,8
Europe	1 579 358	1 113 886	41,8			1 552 011	39,3
Emerging Markets	894 279	742 582	20,4			839 175	13,0
Corporate office	(73 238)	(49 484)	(48,0)			(73 993)	(49,5)
	4 852 607	3 371 625	43,9			4 718 101	39,9

Acquisition of businesses and subsidiaries

Acquisitions

In the six months to December 31  2022, six bolt-on acquisitions were concluded, these were as follows:

• Variety Foods, a distributor to the independent pizza and kebab markets in Perth, Western Australia;
• Nichol Hughes, a regional wholesaler supplying ambient, chilled and frozen products, which serves the North West of England and northern Wales;
• Fruit Xpress OU which trades mainly fresh food products into the foodservice sector in Tallin, Estonia;
• H&T Group, an importer and distributor of food products in Kota Kinabalu, East Malaysia;
• Food Fabrique, a small cured meat and sausage processing business located in Dubai, United Arab Emirates; and
• Euskopan, a bread and pastry business based in Bilbao, Spain.

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. The acquisitions have enabled the group to expand its range of complementary products, services and, as a consequence, has broadened the group's base in the market place. In addition, through these acquisitions the group has acquired management skills and expertise as a platform from which to consolidate the regional and vertical integration of the foodservice market.

Total investment in acquisitions for the period was R375,8 million, the benefits of which will be evident in the medium term as we extract synergies and efficiencies. These bolt-on acquisitions contributed R283,1 million to revenue and R30,8 million to trading profit for the period ended December 31  2022. The expected annual total contribution from these acquisitions to revenue is R1,3 billion and an increase in trading profit of R105 million. There were no significant contingent liabilities identified in the businesses acquired.

Subsequent events

Subsequent to December 31  2022, two bolt-on acquisitions namely Harvest Fine Foods Ltd and Thomas Ridley & Sons Ltd, both based in the south of England, were concluded at an investment of R914 million. The expected annual total contribution from these acquisitions to revenue is R1,9 billion and an increase in trading profit of R128 million.

Administration

Directors

Chairman: S Koseff
Lead independent director: NG Payne
Independent non-executive: T Abdool-Samad, PC Baloyi, B Joffe, KR Moloko, CJ Rosenberg*, H Wiseman*
Executive directors: BL Berson* (chief executive officer), DE Cleasby (chief financial officer)

* Australian

Company secretary

Bidcorp Corporate Services (Pty) Ltd

Represented by AK Biggs and L Roos