International food, service and technology group Bidcorp increased its headline earnings per share (HEPS) for the year ended June 30 by 12.5% to R14.44, while basic earnings a share increased by 14.8% to R14.51.

These increases were achieved despite the volatile economic conditions in many of the geographies in which the group operates.

Currency volatility, however, positively impacted on the rand-translated results for the year, leading to constant currency HEPS growing by 7.7%.

Despite the volatility, persistent low food inflation and moderate economic growth, CEO Bernard Berson on Wednesday said the company declared a final cash dividend of 333c a share, resulting in a 14.3% year-on-year increase in the total dividend for the financial year to 640c a share.

Bidcorp’s net revenue of R129.3-billion was 9.8% higher year-on-year, which Berson said reflected “real growth” in activity levels.

Gross profit percentage increased to 23.9%, which reflected greater free trade growth in the customer mix and enabled Bidcorp to trade through the higher cost base, he added.

However, despite significant cost pressures in terms of wages, fuel and energy, food inflation in Bidcorp’s core foodservice markets remained low.

Bidcorp’s overall operating costs increased to 18.7%, up from 18.3% last year, on the back of higher sales and distribution activity, as well as a larger invested operational capacity base and greater focus on free trade customers.

Group trading profit rose 11.8% to R6.7-billion, while the trading margin increased to 5.2%.

Berson pointed out that lower acquisition costs had reflected fewer acquisitions in the year as Bidcorp’s focus was on bedding down the various investments made in previous periods. Owing to this, the company is able to retain adequate headroom for further organic and acquisitive growth, while remaining well capitalised.

The most significant acquisitions made during the financial year was the acquisition of the remaining minority interest in the D&D bolt-on acquisition in Italy, and the buyout of 100% of Igartza in Spain and Punjab Kitchen – since rebranded as Simply Food Solutions – in the UK.

Overall investment activity during the year was lower than that of 2018, at R847-million, as Bidcorp’s focus was on “bolstering the platforms from recent acquisitions” in Germany, Iberia and Australia.

“We remain conscious of the need to balance gearing and shareholder returns; however, we believe a strong financial position is a positive attribute in today’s volatile global markets,” he further remarked.

Investments in fixed assets is high “but necessary” to accommodate increased capacity and facility modernisation for organic growth.

Net debt, at R4.7-billion, had increased, owing to higher working capital absorption and higher investing activities.

Cash generated by operations before working capital absorption was R8-billion, a 15.4% increase year-on-year.

DIVISIONAL PERFORMANCE

The Australasia region continues to grow, with revenue having increased by 3.7% to R31.1-billion in the financial year under review. Trading profit rose by 9.4% to R2.1-billion.

Lower revenue growth but higher margins reflected the strategic shift away from the lower-margin customers, the company noted.

Bidcorp has also invested further capital expenditure on organic expansion in foodservice in this region, while in New Zealand, all branches will continue to focus on productivity improvements, although labour availability continues to be a challenge, increasing pressure on wage rates.

During a results presentation on Wednesday, Berson said the UK faced an “uncertain environment” as a lot of questions surrounding Brexit remained.

As a result, Bidcorp has reactivated its contingency measures, starting October 31.

Despite the Brexit fatigue in the UK, revenue rose 10.8% to R33.3-billion, while trading profit increased by 20.3% to R1.7-billion.

Foodservice continues to deliver “excellent” results, with Bidfresh continuing to make steady progress. Bidfood UK performed strongly, with sales and trading profit well ahead of 2018, and the company’s business improvement initiatives continue to deliver, with a growing penetration for ecommerce.

Additionally, Bidcorp’s new liquor brand, Unity Wines, continued to strengthen its market position. Further investment into increased distribution capacity remains a key focus to cater for anticipated growth in the region.

Meanwhile, Bidcorp continues to fare well in the rest of Europe, with most businesses delivering higher revenues and solid trading results. However, the region’s results were not as good as the company had hoped for, owing to worse-than-expected performances in Germany and Spain, the latter of which Berson described as a “disappointment” for the company during the period.

Bidcorp’s Eastern European businesses have achieved record revenue growth but experienced wage pressures throughout the region. Revenue for the region rose by 12.7% to R43.7-billion, while trading profit rose by 15% to R1.9-billion.

EMERGING MARKETS

In Bidcorp’s emerging markets, Berson said South Africa had a stronger second half, despite tough economic conditions. Greater China’s performance lagged, but a recovery was evident in the latter part of the financial year.

Emerging markets continued to navigate challenging economic and political headwinds, however, staged a strong recovery by year-end. Overall revenue was up 13.1% to R21.1-billion, with trading profit marginally up at R1-billion.

In Africa, in particular, the continent delivered an improved second-half performance even though difficult economic conditions have curtailed consumer spending with cost pressures rising above food inflation.

Overall, Bidcorp said its businesses in Singapore, Chile, Brazil, the Middle East and South Africa had delivered “notable performances”, while its operations in Turkey were now profitable and making good progress.

PROSPECTS 

Looking ahead, Berson said Bidcorp remained focused on growth opportunities in the wholesaling of food and allied products to the out-of-home market; organically through achieving the appropriate customer mix, by selling more products and gaining new customers.

The company will also be looking to in-territory bolt-on acquisitions to expand its geographic reach or to expand its product ranges; while also considering strategic acquisitions to enter new markets, as and when these arise.

Meat, value-add processing and supply chain procurement initiatives all remain areas of further potential across all businesses in the group.

“Our objective is to generate above-average returns, and despite significant political and economic upheaval in many of our markets, we believe the fundamental demographics and industry drivers of our global foodservice markets remain positive,” Berson stated, highlighting that the company remained “well-positioned to continue delivering real earnings growth in the year ahead”.

Despite remaining wary of continuing trade tensions between the US and China, combined with political demonstrations and protests in Hong Kong, contributing to an uncertain outlook for these regions, Bidcorp remains “anticipatory” of ever-changing consumer markets.

As a result, Berson concluded that the company would sacrifice short-term growth through timely interventions to ensure the company’s overall longevity.