Bidcorp reports good performance for four months to end Oct

14th November 2023 By: Schalk Burger - Creamer Media Senior Deputy Editor

In an update to the market on its trading performance for the four months from July to October, JSE-listed foodservices multinational Bidcorp CEO Bernard Berson said the company was happy with its performance and was achieving real growth in excess of inflation across most of its territories.

Group gross profit percentage for the period to October 31 held up well, albeit slightly below the comparable period in the prior financial year. The group's businesses continually weigh up the need to balance volume growth and margins depending on prevailing consumer demand, he said in the November 14 market update.

“Our operating costs as a percentage of net revenue, or our cost of doing business, through to October has declined to 18.4%, around ten basis points better than for the same period in the prior financial year. The small decline in gross margins has been largely mitigated by our cost base efficiencies,” he noted.

Pent-up demand seen in the previous year has normalised and this has also been coupled with some macroeconomic headwinds, but the group was performing well.

Inflation had manifested as higher interest rates in most countries worldwide, leading to consumers stress, however, the economies were slowing, which was leading to slowing inflation, moderating wage growth and moderating demand, said Berson.

“This is all well and good, but we have to operate our businesses where they are and in the economies that are there, and our teams have done a phenomenal job. In the past four months, we have seen real growth in hard currency in excess of our weighted inflation average.

“The [rand] exchange rate has given us a 14% tailwind, but we are satisfied with where we are. These strong results also came about not because of volume growth, as volume growth is difficult to come by currently, but we think we are gaining some market share in some geographies and we are doing relatively well in economies that are relatively tough,” he said.

Bidcorp had controlled its cost base as best it could and had maintained it in line with sales growth. The tough inflationary environment meant it experienced some wage pressures. However, the company was also seeing a drop in energy and fuel prices year-on-year, although there were pockets of exception, said Berson.

For the four months to October, the group achieved a "pleasing" earnings before interest, taxes, depreciation and amortisation margin of 5.8%, similar to the very strong comparable period in the preceding financial year, said CFO David Cleasby.

Net capital investments to September amounted to R1.4-billion, up from R1-billion in the comparable period in the prior financial year, with R400-million invested for the ongoing creation of future capacity and R1-billion for replacement of capital equipment, most notably vehicles. The company also concluded one new bolt-on acquisition to date in Australia, he noted.

“In terms of trading performance, the gross margin tracked down a bit owing to the impact of the UK business, but we expect the UK business to contribute to the bottom line in time. However, we are doing relatively well overall, and the cost of business is down, although mitigated slightly by the decrease in gross margin,” said Cleasby.

“We continue to invest broadly across the world, including in Australia, New Zealand, the UK, Europe, Malaysia and South Africa, among others, as we see the need for capacity. In terms of liquidity, we have a strong balance sheet and ample capacity for future investments as and when they are required,” he added.

Bidcorp is seeing signs of slowing market activity and, while there is heightened geopolitical turmoil and uncertainty, the group remains positive and determined in the knowledge that it faces relatively few significant endogenous obstacles, and its teams worldwide continue to exude positivity and enthusiasm.

“There remains a promising pipeline of future opportunities, affirming the effectiveness of our long-held strategic approach, however, some of these may take longer to bring to fruition,” said Berson.

“We remain committed to adapting as necessary to navigate these challenges with resilience and swiftness. Many of the actions taken over the past years have laid the foundations for sustainable growth.

“We continually refine our customer portfolio, invest in future growth and expand our reach to be within close proximity of our customers. We maintain a portfolio of businesses at various stages of growth and size, presenting significant opportunities in the coming years,” he said.

Further, Bidcorp continues to invest to deliver on its target of a 25% reduction in carbon emissions by 2025 and is ahead of its plan.

“Our investments are focused firmly on the areas within our control, such as zero-emission, energy-efficient refrigeration, renewable energy generation and lower impact distribution capability,” he said.

Berson highlighted that the company was investing in its technology systems, which were being refined, but was also increasing the number of representatives on the ground to ensure the company maintained its relationships with its customers.

“We continue to invest a lot of money in and roll out solutions. Artificial intelligence is playing a role in terms of dynamic pricing, and we are excited about the jobs it can help us with and some of the benefits that we are seeing are phenomenal.

“Our business is quite complex, but each customer is managed as a one-to-one relationship and each customer is different. The secret is how we construct the baskets for each customer and technology has a big role to play in that,” Berson said.