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BID CORPORATION LIMITED - Management update on general trading conditions

Release Date: 24/11/2016 11:52
Code(s): BID     PDF:  
Wrap Text
Management update on general trading conditions

Bid Corporation Limited
(Incorporated in the Republic of South Africa)
Registration number: 1995/008615/06
Share code: BID ISIN ZAE 000216537
(“Bidcorp” or “the company” or “group”)


Divisional Day – November 24 2016 - Management update on general
trading conditions

Shareholders are advised that the executive management of the group met
with members of the financial community on November 24 2016, including
shareholders and financial analysts, for an update on current market
conditions and the trading environment across the international operations.

Management commented as follows:

1. Current market conditions and trading

   -   Overall conditions within the global foodservice industry remain positive
       and continued growth opportunities remain in all our trading
       geographies. Many of Bidcorp’s international foodservice peers have
       reported improved results benefitting from positive underlying market
       conditions.
   -   Overall trading within Bidcorp for the first 4 months of the financial year
       2017 has been good and the positive momentum achieved in the
       financial year 2016 has continued. Currency volatility continues to
       positively impact Bidcorp’s rand reported results with the depreciation
       of the rand against the euro and Australian dollar more than offsetting
       the appreciation of the rand against sterling following the UK
       referendum to leave the EU in June 2016 (Brexit).
   -   This performance has been achieved against a backdrop of zero food
       inflation in most operational geographies (bar South Africa and Brazil),
       in relatively benign economic conditions globally.
   -   Management remains focused on executing on the strategic plan to
       rebalance their customer portfolios by focusing on the correct
       segments and on adding value to their customer offering through
       innovation and service delivery.

   United Kingdom (“UK”)

   -   Following Brexit, one of the potential impacts of sterling’s
       devaluation will be inflation and the impact of inflation on our UK
       businesses is positive. Overall the economy in the United Kingdom
       is growing and the sterling devaluation should further propel activity
       levels forward, benefitting from more tourists and local consumer
       spending.
   -   The foodservice business continues to perform well and the
       business transformation process continues. We have retained our
       second largest customer for a further period of 5 years and the
       sales pipeline is looking encouraging. The highly fragmented
       foodservice market remains a growth opportunity.
   -   The fresh business has been impacted by inflation over the period,
       particularly in seafood and mainly in fresh salmon products. The
       strategy of building out a national presence across all product types
       continues.
   -   Logistics, a small contributor to the aggregated UK results, has
       been disappointing and remains a tough business. Current
       performance is under the microscope and the future strategic
       options for the business are under consideration.

Europe

   -   Western European growth remains low however Eastern Europe is
       experiencing significantly higher growth, which is benefiting our
       businesses.
   -   The Netherlands business is delivering positive growth as
       management transitions its focus to the ‘core’ street / independent
       customer segment, moving away from the previous institutionally
       focused customer model.
   -   The Belgium business is delivering good growth in its foodservice
       market while maintaining an even keel in its institutional exposure,
       despite low confidence following the terror attacks earlier in the
       calendar year.
   -   Czech and Slovakia have performed exceptionally well driven by
       solid growth in the core foodservice business. Good growth has
       continued in Poland as the benefits of recent infrastructural
       investment manifest in productive capacity.
   -   DAC Italy has performed well in the first quarter of F2017 buoyed
       by the bolt on Quartiglia acquisition. The core focus of the business
       on the independent market segment bodes well for further growth.
       Global procurement benefits in Italian product are being achieved
       across the group.
   -   Spain remains an attractive market and we are committed to
       accessing the right opportunity.
   -   Further expansion into the European region, both in terms of in
       country bolt on acquisitions and strategic entry into new
       geographies, will be explored as we are not represented or
       underrepresented in many countries.

Australasia

     -  In Australia, the exit of low margin contracts is substantially
        complete. Both the broadline foodservice business and fresh and
        meat operations have contributed to solid growth in the first quarter
        of F2017.
     -   New Zealand continues to produce solid results, with all segments
         of the business performing well, despite modest economic activity
         levels.
     -   A number of bolt on acquisitions are being explored in both
         countries which will sustain growth in the region.

  Emerging markets

     -   South Africa is producing excellent results, contrary to the generally
         tough operating conditions and low GDP growth. Energised
         management, rebalancing the product portfolio and innovation have
         all contributed to the improved result. Exposure to Africa is being
         hampered by a lack of credit and our resources are being refocused
         within each segment of the division.
     -   Within Greater China, Hong Kong continues to experience subdued
         trading off lower tourism activity. Our business remains stable
         however real growth is difficult to achieve. In mainland China, the
         business continues to power along however a number of trading
         challenges are being encountered. The region remains a huge
         growth opportunity with a growing middle class population and
         increasing demand for Western styled food products.
     -   In Singapore, the benefits of the transition to a foodservice model
         over the past few years is reflecting in an improved performance.
     -   Further expansion into Asia remains an opportunity as investment
         conditions become more user friendly.
     -   In South America, despite challenging political and economic
         conditions, management remain optimistic that significant
         opportunities exist in the region to consolidate markets to build a
         strong growth platform over time. In Brazil, our business is
         performing much better. Bolt on opportunities continue to be
         pursued however transaction conversion generally takes longer
         than anticipated. Chile is benefitting from its foodservice focus and
         national exposure provides a great platform for further organic
         expansion.
     -   Middle East has produced respectable results in spite of the
         geopolitical challenges in the region. Our small investment in
         Lebanon was exited in July. Focused management attention on its
         larger businesses in UAE and Saudi are delivering desired results.

2. General

     -   Management is highly motivated and enthused by the opportunity in
         each of the geographic regions within which the group operates.
     -   Bidcorp will be undertaking a global rebranding exercise within the
         next short while, which will be used to promote our image as ‘value
         add food people’ rather than box movers, as we transition to the
         new “Bidfood” brand.
     -   We have made 8 acquisitions (bolt-on’s) in the first 5 months of this
         financial year:
             o  In Fresh UK we acquired 80% of a produce supplier.
             o  In Belgium, we bought 100% of a regional Horeca distributor.
             o  Italy has acquired 60% of a central Italian distributor.
             o  In New Zealand, we acquired a sous vide meat producer to
                supply their foodservice needs with value add sous vide and
                cooked product
             o In Brazil, we have acquired another distributor in Sao Paolo.
             o In Australia, we have acquired 3 businesses, a meat
                processor / distributor in Canberra, and foodservice
                wholesalers in Launceston, Tasmania and Port Macquarie,
                NSW to fill in geographic gaps.
             o In aggregate (assuming they all perform as planned), the
                approximate annualised financial impact of these
                transactions (converting at current forex rates) would be
                Revenue of R1.9 billion, EBITDA of R100 million, and a
                purchase consideration of R530 million (including property
                acquired in Belgium of R115 million).
      -   Some new geographies are also under consideration.
      -   Management remain alert to all acquisition opportunities that
          present themselves both in current markets and in new territories.


The full presentation was recorded and a playback recording is available on
the group’s website www.bidcorpgroup.com.

This management update has not been reviewed or reported on by the
company’s independent auditors.

Johannesburg
November 24 2016

Sponsor
The Standard Bank of South Africa Limited

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