JSE-listed Bidcorp is “very pleased” with the business’ performance in the four months to April 30, with CEO Bernard Berson saying the business is performing well and delivering a record result to date.

“We are thrilled with where the business is at the moment. We are tracking where we thought we would. We are very bullish and optimistic about the business’ prospects and there is no need for major changes, with a great team in place around the world,” he said in a capital market trading update, reflecting on the group’s performance for the four months from January 1 to April 30.

He mentioned that there were some issues, such as supply chain disruption, inflation and staff availability issues, but said these were normalising and that next year was anticipated to be a positive year with better growth.

Management highlights that group trading results continued to achieve record levels in the four months, against the backdrop of the northern hemisphere winter across the UK and Europe and a few natural disasters which temporarily impacted on some operations in various parts of the world.

Berson said trading conditions in South Africa remained challenging, with loadshedding exacerbating this.

Australasia has continued its strong positive trajectory in the period with both Australia and New Zealand delivering very good results.

The UK business continues to grow organically, with several new contracts being activated as well as benefiting from recently completed bolt-on acquisitions.

The European businesses have continued to grow through the northern hemisphere winter and overall, its performance has been very strong.

The emerging markets segment has experienced some economic challenges in its respective markets, driven by supply chain disruptions and volatile exchange rates, which has muted overall performance.

Angliss Greater China (China, Hong Kong, and Macau) has improved its comparative profitability; however, Berson said the anticipated post-Covid-19 bounce had not materialised to the same degree previously experienced in other parts of the world. He said the group believed this would normalise over time.

The operating environment post-December 2022 had remained challenging, high inflation had started to moderate but the food component thereof remained sticky in most parts of the world, Bidcorp outlined.

It noted that labour costs remained elevated as the demand for skills was competitive in most operating jurisdictions, however, the scarcity of labour was slightly abating.

Energy and fuel costs, both of which are not a material component of the cost base, are declining.

Supply chain disruptions and product shortages remain day-to-day operational challenges, although these are easing up overall.

Customer demand has nevertheless remained robust.

In all geographies (other than Greater China) in which the group operates, discretionary spend has normalised and in some cases improved.

Bidcorp’s multi-year strategy to “rebalance the customer portfolio” towards more appropriate business continues.

TRADING PERFORMANCE

Bidcorp’s performance for the ten months to April 30 reflected strong performances across all divisions, it highlighted.

Headline earnings a share for the ten months had considerably surpassed any previous comparative trading period.

Currency volatility has positively impacted the group’s rand-translated results.

Group gross profit percentage for the period to April was said to have held up well, slightly below full-year 2022 but satisfactory in the current trading environment.

In a few businesses, Bidcorp has taken strategic decisions to maintain volumes by sacrificing some margin, in a few others, margins have been squeezed as there is a timing lag in repricing customer contracts in the national accounts sector and with certain product price volatility, it has written down some stock values to latest pricing.

In the main, most businesses had been able to pass through price increases, Bidcorp noted.

Its operating costs as a percentage of net revenue through to April had declined to 18.6%, somewhat lower than full year 2022 of 19.3%.

Despite the small impact of gross margin, its cost efficiency has resulted in a positive impact on trading margins.

For the ten months to April, the group highlights a “pleasing” earnings before interest, taxes, depreciation and amortisation before IFRS16 margin of 5.7% of net revenue, similar to full year 2019 (a period unaffected by Covid-19 and inflation) and higher than full year 2022 of 5.4%.

Net capital investments to April were R3.3-billion, mainly for the ongoing creation of future capacity and replacement of vehicles.

Several new bolt-on acquisitions have been concluded to April, notably in the UK, Australia, Estonia, Spain and Malaysia, at a cost of R1.4-billion.

Free cash flow to April amounted to an outflow of R2.5-billion, the key driver of which is the investment in working capital, capital investments and bolt-on acquisitions.

Total dividends paid to shareholders in full-year 2023 equate to R2.8-billion.

On a divisional level, Bidcorp says its emerging market region has delivered an overall solid sales performance in the third quarter despite the earthquake in Türkiye, and South Africa being hampered by low economic growth exacerbated by electricity blackouts.

Finance of €195-million was raised through the USPP market in March, the proceeds of which were used for refinancings and expansion.

The group and its subsidiaries have at March 31 total headroom available, including uncommitted facilities and cash and cash equivalents, of R17.4-billion.

The group said it remained well within its debt covenants.

Bidcorp said labour market pressures had eased a little in many jurisdictions but remained constrained (specifically in operational roles) in view of the robust sales demand.

CHALLENGES & OPPORTUNITIES
Bidcorp said that, while the business delivered an exceptional performance to date, it was now starting to cycle against the strong rebound in food service activity experienced in almost all parts of the world in the fourth quarter of the prior year. Accordingly, the rate of growth was normalising.

Most of the group’s emerging market businesses should continue to perform well with the Middle East and Chile now on their recovery path, it pointed out.

The UK and Europe are gearing up for a positive northern hemisphere summer and activity levels have already increased with the change of season.

In Australasia, the recent trajectory is expected to continue in both Australia and New Zealand.

Food inflation overall, although moderating, remained elevated and sticky in most countries. Bidcorp said.

Deflation was presenting itself in some commodity products creating some short-term margin pressures, however, the group said management was dealing with these instances responsibly.

It noted that the long-term impact of inflation on overall economic activity was unpredictable.

Supply chain disruptions related to food products, for the most part, had substantially eased but continued to remain a challenge for capital equipment, including trucks and materials handling equipment, Bidcorp indicated.

The group continues to invest to deliver on its target of a 25% reduction in carbon emissions by 2025.  

It also continues to investigate value-accretive acquisitions in Australasia, Latam and Europe as part of its strategy of bolt-on organic growth.

Bidcorp’s current balance sheet provided significant financial firepower to make acquisitions, however, it said it would continue to be patient in finding the most appropriate opportunities.