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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