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”)
Capital Markets Day – May 17 2017
Management update on general trading conditions
Shareholders are advised that the executive management of the group are meeting with
members of the financial community, today May 17 2017, including shareholders and
financial analysts, for an update on current market conditions and the trading
environment across its international operations.
Management comments as follows:
1. Current trading performance and overall market conditions
- Trading within Bidcorp for the first 9 months of the financial year 2017 has been
positive and the momentum achieved in the 6 months to December 2016
(measured in home currencies) has continued. Currency volatility continues to
impact Bidcorp’s rand results, with the rand having appreciated against both the
euro and sterling.
- Overall, fundamentals within the global foodservice industry remain positive and
continued organic growth opportunities remain in all our operating geographies.
- Our performance has been achieved against a backdrop of very low food inflation
in most operating geographies.
- Our focus on executing on the strategic plan to rebalance customer portfolios by
focusing on the correct segments of the markets, and on adding value to their
customer offering through innovation and service delivery, is yielding the desired
results.
1.1 United Kingdom (“UK”)
- Overall the economy in the UK is growing and the sterling devaluation
following the referendum to leave the EU (Brexit) has increased activity levels
in the foodservice market, benefitting from more tourists and local consumer
spending. Inflation has started to tick up which should be positive for our UK
businesses.
- The foodservice business continues to perform very well benefitting from
targeting the correct customer base and its internal business transformation
process. Additional investment into further capacity is being considered to
capture anticipated growth opportunities ahead. To date the effects of Brexit
haven’t had any negative impact on the business.
- The Fresh business has been impacted by price volatility, particularly in
seafood products, which has dampened its growth trajectory in the short
term. The strategy of building out a national presence across Meat, Produce
and Seafood continues. A meat business was acquired in the 3rd quarter to
continue to expand our presence.
- The Logistics business performance, a marginal profit contributor to the
aggregated UK results, remains disappointing. Management are making
progress in improving underlying results. The future strategic options for the
business remain under consideration.
1.2 Europe
- Eastern Europe is experiencing good growth, significantly higher than
western European growth, which is benefiting our Czech, Slovakian and Polish
businesses.
- Our Netherlands business continues to make steady progress in transitioning
its focus to the core horeca customer segment. Significant focus is being
directed at matching the infrastructure and cost base with the revenue
opportunity, however this remains a medium-term outcome.
- The Belgium business is performing well, delivering good growth in its horeca
market while maintaining an even keel in its institutional exposure. Special
management attention is being directed at bedding down the recent
Bestfoods bolt-on acquisition.
- Czech and Slovakia have continued to performed exceptionally well driven by
solid growth across all segments of their foodservice business. Further
infrastructure investment is planned to bolster capacity. Good organic growth
has continued in Poland as the benefits of their infrastructural investment
manifest in productive capacity.
- DAC Italy has delivered a solid performance in the 9 months to date driven by
strong growth in the independent sector of the market. The integration of
Quartiglia, a bolt-on acquisition made in July 2017, continues. Growth in
global procurement benefits in Italian product (sourced from DAC) are being
achieved across the group.
- To date, the contribution from our Spanish business has been small. The
recent acquisition of Guzman will bolster our opportunities in this attractive
foodservice market.
- 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.
1.3 Australasia
- In Australia, both the broadline foodservice business and fresh and meat
operations have maintained their growth momentum in the first three
quarters of F2017. The exit of those targeted low margin contracts is
substantially complete. Our major metro-expansion project continues to gain
traction.
- New Zealand has again delivered very solid results, with all segments of the
business performing well, despite capacity constrained economic activity
levels.
- Further bolt-on acquisitions are being explored in both countries to sustain
growth.
1.4 Emerging markets
- South Africa has produced excellent results, contrary to the generally tough
operating conditions, low GDP growth and negative political sentiment.
Innovation, new contract gains and energised teams have all contributed to
the improved result. Our focus on Africa is now being driven from within each
business segment.
- Within Greater China, Hong Kong is slowly improving as tourism activity picks
up. Our business is doing well despite inefficiencies due to duplicate
warehousing costs. Our move to a new facility in June will alleviate these
issues. In mainland China, our business continues to show strong growth as
our geographic expansion continues. The focus on selling branded products
to western styled food outlets continues. The region remains a good growth
opportunity with a middle-class population driving ‘eating out of home’
demand.
- In Singapore, steady improvement continues as we develop our foodservice
model. New management have settled in well. A small acquisition is being
concluded in Malaysia to bulk up our presence there.
- Further expansion into Asia remains an opportunity as investment conditions
become more user friendly.
- In South America, despite challenging political and economic conditions,
management continue to build a strong growth platform in a region with
significant opportunities. In Brazil, our business has weathered the crisis and
is performing much better. Bolt-on opportunities continue to be pursued,
both in Sao Paulo and the Rio de Janeiro regions. Chile is delivering very solid
growth, benefitting from its foodservice focus and expanded national
platform.
- Middle East is showing pleasing results despite the geopolitical challenges,
lower oil prices and higher taxes in the region. Focused management
attention on its larger businesses in UAE and Saudi are delivering desired
results.
2. General
- Bidcorp’s global rebranding exercise as ‘Bidfood’ should be substantially
complete by June. It has brought a lot of energy and passion to the group and
enabled us to promote our image as ‘value add foodie people’ It has also
promoted more collaboration between our businesses in terms of marketing
strategy.
- To December 2016, we had invested R496 million on bolt-on acquisitions, in Q3
we have acquired the following bolt-on’s, costing in aggregate R134 million:
o In Fresh UK, we acquired 100% of a meat distributor
o In Australia, we acquired 100% of a distributor in Cairns.
- Assuming they both perform as planned, the approximate annualised financial
impact of these transactions (converting at current forex rates) would be EBITDA
of R23,4 million.
- 50% of our Bakery business in South Africa was sold to Puratos NV with effect
from April, the business will be equity accounted in Bidcorp going forward.
- 90% of Guzman in Spain was acquired with effect from early April.
- Further geographies are also under consideration.
- Management remains highly motivated and alert to all acquisition opportunities
that present themselves both in current markets and in new territories.
The full presentation is being 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.
May 17 2017
Johannesburg
Sponsor: The Standard Bank of South Africa Limited
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