International broad-line foodservice group Bidcorp has reported a 15.9% increase in group trading profit to R12.2-billion for the financial year ended June 30.

Headline earnings per share (HEPS) increased by 15.5% to R24.06 and basic earnings per share (EPS) by 16% to R23.93.

The company notes that currency volatility positively impacted on the rand-translated HEPS by 6.4%.

The board has declared a final cash dividend of R5.65 a share for the year under review.

“Our top line has grown by 15.1% (7.5% in constant currency) and after adjusting for our estimated weighted food-basket inflation, we have achieved real organic volume growth of just under 6%.

“Most of our businesses have improved their performance against previous record achievements of the 2023 financial year, and our global teams are to be highly commended on continuing to successfully deliver on our strategy,” says Bidcorp CEO Bernard Berson.

It notes that Europe delivered another record performance with almost every business growing well ahead of the prior financial year.

The company also notes that, while Australasia’s revenue growth moderated in tough economic conditions, both Australia and New Zealand delivered strong trading results.

Moreover, the UK weathered a challenging environment but delivered a strong second half to end flat compared with the 2023 financial year. Good volume growth from contract wins and acquisitions benefitted profitability.

Emerging markets reflected mixed performances with a strong result out of the South African businesses, which was offset by the weaker trading in Greater China.

Although activity levels were weaker through the backend of the first half of the year, the company says this recovered into the latter part of the second half despite a poor start to this year’s northern hemisphere summer.

Moreover, moderating food inflation throughout the year and difficult economic conditions resulted in customers becoming more price sensitive as competition increased.

The company says its focus on improving the mix of sales particularly in the independent segments assisted in protecting its gross margins.

Cost inflation eased from the prior year; however, the company says wage pressures remain as it builds its workforce for stability and the increased scale of the business.

Meanwhile, the company notes that investment activity has been robust as it expands its infrastructural capacity in many regions, particularly Australia, the UK and Italy. Four small bolt-on acquisitions were concluded in the year.

FINANCIAL OVERVIEW
Bidcorp says net revenue of R225.9-billion rose by 15.1% – constant currency increase of 7.5% – in an environment of rapidly moderating food inflation and weak consumer demand.

Gross profit percentage at 24.1% improved as businesses continued to refine their sales mix by focusing on the correct customer base.

The company notes that declining food inflation reduced the occurrence of product-buying opportunities. Margins benefited from flexibility in managing the trading volatility which saw the need to either sacrifice margin to maintain volumes, or vice versa.

Moreover, the overall cost of doing business increased slightly from 18.5% in the prior financial year to 18.7% in the year under review, with the largest input being labour, which accounts for about two-thirds of the cost base.

Although cost inflation is decelerating, the cost of new capacity, which takes time to reach scale and efficiency, has impacted negatively, says Bidcorp.

Overall cash flow has been solid but impacted by the investment being made into the businesses.

Cash generated by operations before working capital was R15.4-billion, about 13% higher year-on-year.

“Although we absorbed working capital of R1.6-billion, R1.2-billion more than [the prior year], all metrics were in line [year-on-year],” says Bidcorp.

STRATEGY
Bidcorp says its overall strategic focus remains on track in the wholesaling of food and allied products to the eating-out-of-home market; through developing its own/house brand and imports; moving into niche value-add manufacturing; focusing on growth through selling to the correct mix of customers, serviced by well-located infrastructure and enabled by “world-class” technology solutions.

The company says growth is further supplemented by in-territory bolt-on acquisitions to expand geographic reach and product range, or through strategic acquisitions to enter new markets.

“The interaction of these various components is what continues to propel our business forward, and those businesses that get more of these components in sync are the ones that continue to perform strongest. Each business is at differing stages of maturity and development along our foodservice continuum.

“We encourage cooperation and sharing of ideas and learnings, recognising each business’ autonomy and, although we manage each independently, we aim to maximise the benefit of our global scale, experience, expertise and combined intellectual property for the collective benefit of Bidcorp,” says Berson.

PROSPECTS
Bidcorp notes that the long-term growth fundamentals of the global foodservice industry remain positive although the economic outlook for many of its jurisdictions is tougher in the short term.

“While food inflation has abated, cost inflation, driven by elevated ongoing wage increases, is likely to remain sticky. Consumer spend will remain under pressure until interest rates start to decline materially,” the company says.

Activity levels through July and into August have held up reasonably well, considering the poor summer weather in many countries in the northern hemisphere, it adds.

Investments into strategic distribution facilities to provide for future capacity and value-add manufacturing have been budgeted for.

While this investment comes at a cost and detracts from short-term performance, the company says they remain the correct long-term decisions to ensure the sustainability of the businesses.

New technologies for renewable energy, refrigeration, energy efficiency, and logistics optimisation, in an environmentally and cost-efficient way, remain a strategic imperative to minimising its environmental impact.

Although only four bolt-on acquisitions were concluded in the past financial year, two more have been done post-year-end, with a further one to complete in September.

Bidcorp says there appear to be a larger number of opportunities currently presenting themselves, both in-country expansion as well as new geographies, noting that it is alert to these opportunities, although the successful completion thereof cannot be guaranteed.

The company is also actively investigating AI solutions to maximise sales opportunities, margin optimisation, inventory management, as well as operating efficiencies through using the collective knowledge of its businesses operating in multiple geographies, as well as its significant data holdings.

The company notes that continued investment is being made into BidOne’s e-commerce and customer relationship platforms to enhance customer experiences, streamline operations and promote continuous improvement.

“Despite the many negatives that pervade the global environment currently, our focus is as much as possible on what we can control.

“We believe we have the right strategy, the best management teams and people, and the business model to continue to perform, adapting and maximising the opportunities which inevitably arise. One of our founding mottos was ‘we are not participating in the recession’ and, therefore, we are budgeting to once again deliver real growth in the year ahead,” Berson concludes.