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Bid Corporation Limited
(Incorporated in the Republic of South Africa)
Registration number: 1995/008615/06
Share code: BID
ISIN: ZAE000216537
('Bidcorp' or 'group' or the 'company')
CAPITAL MARKETS TRADING UPDATE: TEN MONTHS TO APRIL 2023
Shareholders are advised that today, Tuesday, June 6th 2023, Bidcorp wishes to
update the market on the trading environment across its global operations, for the
period January 2023 to April 2023 which is post our half-year results. This is in
accordance with the group's obligation for continuous disclosure in terms of the JSE
Listings Requirements.
Management comment as follows:
Our group trading results have pleasingly continued to achieve record levels in the four
months period to April 2023, against the backdrop of the Northern Hemisphere winter
across the UK and Europe and a few natural disasters which temporarily impacted
some operations in various parts of the world. Australasia has continued its strong
positive trajectory in Q3 F2023 with both Australia and New Zealand delivering
excellent results. Our UK business continues to grow organically with several new
contracts being activated as well as benefiting from recently completed bolt-on
acquisitions. Our European businesses have continued to grow through the Northern
Hemisphere winter and overall, their performance has been very strong. The Emerging
Markets segment has experienced some economic challenges in their 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 the anticipated post-COVID bounce
hasn't materialised to the same degree previously experienced in other parts of the
world. Trading conditions in South Africa remain difficult.
Overall market trends
The operating environment post-December 2022 has remained challenging, high
inflation has started to moderate but the food component thereof remains sticky in most
parts of the world. Labour costs remain elevated as the demand for skills is competitive
in most operating jurisdictions, pleasingly the scarcity of labour is 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 easing up overall.
Customer demand has remained robust and our teams around the world remain
flexible, nimble, and highly adaptive in maintaining high service levels. We applaud
them for their fantastic efforts in this regard.
In all geographies (other than Greater China) in which we operate, discretionary spend
has normalised and in some cases improved. We believe most sectors of the industry,
such as accommodation, business travel, conventions and conferences, and the
cruise line industry, are now approaching normalised trading levels. Workplace
catering remains subdued.
Our multi-year strategy to 'rebalance the customer portfolio' towards more appropriate
business continues. Our independent customer base remains resilient, margins are
being maintained, albeit the credit risk in a few jurisdictions is being closely monitored.
Our businesses with a higher proportion of large customers on longer-term contracts
have had the greatest difficulty in passing on price increases in the current high
inflationary environment. In several cases a number of national and QSR contracts
have been renegotiated at more reasonable margins.
We believe that we continue to gain market share in our preferred sectors of the
market, which has benefitted from the flexibility, resilience, and financial strength of
Bidcorp.
Group trading performance for the ten months to April 2023
Our F2023 trading results to the end of April 2023 reflect strong performances across
all divisions. In terms of HEPS, YTD to April 2023 has significantly surpassed any
previous comparative trading period.
Sales progression by division and for the group (in constant currency), from the start
of July 2022 to May 2023, as shown in the table below, reflects the sales trajectory of
our divisions compared to F2022.
TABLE: Constant currency sales by division and group per month from July 2022 to
May 2023 compared to F2022:
EMERGING UNITED
MONTH AUSTRALASIA EUROPE GROUP
MARKETS KINGDOM
% OF F2022
JULY 122,6% 128,1% 127,2% 140,0% 129,4%
AUGUST 144,2% 127,2% 118,3% 130,8% 130,6%
SEPTEMBER 156,2% 125,8% 117,6% 123,7% 123,7%
OCTOBER 141,0% 129,0% 113,3% 131,3% 125,4%
NOVEMBER 126,1% 140,9% 111,0% 129,9% 128,6%
DECEMBER 118,8% 155,1% 109,3% 131,9% 130,0%
JANUARY 119,8% 154,8% 109,0% 135,4% 131,3%
FEBRUARY 124,2% 137,5% 129,5% 132,7% 131,6%
MARCH 125,2% 124,8% 116,3% 126,0% 123,8%
APRIL 110,9% 123,5% 111,2% 131,5% 120,4%
MAY 110,1% 119,9% 110,0% 128,2% 118,3%
Please note that the month-on-month percentages should be viewed as a sales trend
rather than absolute numbers and are not cumulative.
Currency volatility has positively impacted our rand-translated results. Year-to-date
currency movements for the financial period to the end of April 2023 are shown below:
F2023 F2022
% Change
Average FX rate Average FX rate
AUD:ZAR 11,82 11,01 7,4%
EUR:ZAR 18,22 17,22 5,8%
GBP:ZAR 20,93 20,36 2,8%
As a comparison to the aforementioned average FX rates, the current spot ZAR has
depreciated by 9,1% to the AUD; 14,8% to the Euro; and 16,1% to the GBP.
Group gross profit percentage for the period to April 2023 has held up well, slightly
below F2022 but satisfactory in the current trading environment. In a few businesses,
we have 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, we have written down some stock values to latest pricing. In the main, most
businesses have been able to pass through price increases.
Our operating costs as a percentage of net revenue ('cost of doing business') through
to April 2023 has declined to 18,6%, somewhat lower than F2022 of 19,3%. Despite
the small impact of gross margin, our cost efficiency has resulted in a positive impact
on trading margins.
For the ten months to April 2023, the group made a pleasing EBITDA (Earnings Before
Interest, Tax, Depreciation, and Amortisation before IFRS16) margin of 5,7% of net
revenue, similar to F2019 (a period unaffected by COVID and inflation) and higher than
F2022 of 5,4%.
Average working capital days for Q3 F2023 are 14 days, more than the 10 days in
F2022 but below the 17 days of F2019. The working capital absorption is within
management expectations considering much higher activity levels and installed
capacity, inflation, and the conscious efforts to buy-in inventory and pay suppliers
earlier to secure supply. Traditionally Bidcorp absorbs working capital in its first half of
the financial year and generates into the second half.
Net capital investments to April 2023 was R3,3 billion (F2022: R2,1 billion), mainly for
the ongoing creation of future capacity and replacement of vehicles. Several new bolt-
on acquisitions have been concluded to April F2023, notably in the UK, Australia,
Estonia, Spain, and Malaysia, at a cost of R1,4 billion.
Free cash flow (excluding dividends but after operating cashflows, working capital, and
capex) to April F2023 amounted to an outflow of R2,5 billion (April F2022: R1,6 billion
outflow), the key driver of which is the investment in working capital, capital
investments, and bolt-on acquisitions. Total dividends paid to shareholders in F2023
equates to R2,8 billion (F2022: R2,3 billion).
Divisional trading performance for the ten months to April 2023
' Australasia (AUS) - Demand to date has remained buoyant and both Australia
and New Zealand are trading strongly. Sales in Australia are up 26% YTD and
New Zealand are up 28% YTD, both in home currencies, bearing in mind that
in October 2022, two significant QSR contracts were exited. Excluding the base
effects of these contracts, Australia's YTD sales growth would have been 32%
and New Zealand's 35%. The rate of sales growth, with exited contracts still in
the base, has normalised in April and May 2023 compared to the similar months
in F2022. Estimated annual food inflation for Australasia to the end of
April 2023 is around 9%. Overall trading margins have improved.
' Europe (EUR) - Sales held up very well YTD and all businesses traded through
the Northern Hemisphere winter above expectation. Comparative sales from
April F2022 onwards started to reflect more normalised pre-COVID activity
levels. Estimated food inflation has remained elevated at around 16% to the
end of April however has moderated against 19% in Q2 and Q3 F2023. Trading
margins have held up well.
' United Kingdom (UK) - Sales have held up well, benefitting from annual food
inflation estimated at 19% to the end of April 2023, the bolt-on acquisitions
concluded in Q3 F2023, as well as new contract activations. Sales are tracking
well ahead of F2022. Trading margins are tracking in line with F2022 but below
their long-term trends, with opportunity for improvement in the medium term.
' Emerging Markets (EM) - Our EM region has delivered an overall solid sales
performance in Q3 despite the devastating earthquake in Turkiye and South
Africa hampered by low economic growth exacerbated by electricity blackouts.
Supply chain disruptions on some imported lines have caused some short-term
stock valuation issues in the Middle East and Chile which has impacted their
trading performances. Brazil, Singapore, and Malaysia continue to report
progressively stronger growth against the comparative base.
Liquidity and debt covenants
Finance of '195 million was raised through the USPP market in March, the proceeds
of which were used for refinancings and expansion. Since December 2021, global
interest rates have risen significantly driven by aggressive hiking cycles of central
banks. The group and its subsidiaries have at March 31 2023, total headroom
available, including uncommitted facilities and cash and cash equivalents, of
R17,4 billion (#751 million). The group remains well within its debt covenants.
Employees
The health and well-being of our management and employees continues to be a top
priority for the group. Our teams continue to perform exceptionally well. Labour market
pressures have eased a little in many jurisdictions but remain constrained (specifically
in operational roles) in view of the robust sales demand. Management remains alert to
the stresses confronting our workforce and strives to maintain a safe and balanced
work environment.
Strategic challenges and opportunities
Our businesses have delivered an exceptional performance to date, however, are now
starting to cycle against the strong rebound in foodservice activity experienced in
almost all parts of the world in Q4 of the prior year. Accordingly, the rate of growth is
normalising. The UK and Europe are gearing up for a positive Northern Hemisphere
summer and activity levels have already pleasingly increased with the change of
season. In Australasia, the recent trajectory is expected to continue in both Australia
and New Zealand. Most of our Emerging Markets businesses should continue to
perform well with the Middle East and Chile now on their recovery path. Greater China,
where the expected rebound in activity levels hasn't materialised as expected, should
continue to improve its trading performance.
Food inflation overall, although moderating, remains elevated and sticky in most
countries. Deflation is presenting itself in some commodity products creating some
short-term margin pressures, however management is dealing with these instances
responsibly. The long-term impact of inflation on overall economic activity is
unpredictable. Supply chain disruptions related to food products, for the most part,
have substantially eased but continue to remain a challenge for capital equipment,
including trucks and materials handling equipment.
The group continues to invest to deliver on our target of a 25% reduction in carbon
emissions by 2025. Our initiatives and investments are focused firmly on the areas
within our control i.e., in zero-emission, energy-efficient refrigeration and renewable
energy generation; however, an environmentally friendly fleet of vehicles capable of
meeting our operational requirements remains elusive.
We continue to investigate value accretive acquisitions in Australasia, Latam, and
Europe as part of our strategy of bolt-on organic growth. Our current balance sheet
provides significant financial firepower to make acquisitions, however we will continue
to be patient in finding the most appropriate opportunities.
Our teams have delivered record results for the ten months to April 2023 despite the
ongoing operational challenges and we remain confident of delivering a record
performance for the full period F2023.
Comment
Bernard Berson, CEO, commented as follows:
'Our business is performing very well, delivering a record result to date however we
are starting to cycle through an extremely strong comparative base hence the rate of
growth achieved to date will normalise. Despite the many challenges that face us, our
teams around the world are positive and enthusiastic about the pipeline of future
opportunities in each of our markets.'
The information contained in this announcement has not been reviewed or reported on
by the group's external auditors.
Date: June 6 2023
Johannesburg
Sponsor: The Standard Bank of South Africa Limited
Date: 06-06-2023 09:00:00
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