JSE-listed food service group Bidcorp increased group trading profits by 38.4% to R10.5-billion for the year ended June 30 and increased headline earnings a share by 35.4% to R20.82, up from R15.38 in the 2022 financial year.

It also declared a final cash dividend of 500c a share, thereby increasing dividends for the 2023 financial year by 34% compared with the prior financial year. The final cash dividend represents about 2.2-times headline earnings a share cover, which is in line with group policy.

Net revenue increased by 33.4% to R196.3-billion, up from R147.1-billion in the 2022 financial year, and this represents double-digit growth despite the benefits of high food inflation. Currency volatility, particularly in the second half of the reporting period, positively impacted the rand-translated headline earnings a share by 10.1%.

Gains achieved from the current inflationary environment were offset to a small extent by strategic decisions to sacrifice margin to maintain volumes, some discounting of overstocked positions and some pressure from the exposure to national customers where there had been a timing lag in repricing contracts. Nearly all businesses had been able to substantially pass through product and cost inflation increases, Bidcorp CEO Bernard Berson said on August 30.

Basic earnings a share increased by 42.8% to R20.61 a share, up from R14.44 a share in the prior year.

“The strategic focus implemented by our experienced global teams within our entrepreneurial and decentralised operating model has contributed to this very successful result. The financial performance of the group has been excellent. This was achieved in an environment where management teams were able to maximise the trading opportunities created by resurgent demand across the broader foodservice markets, and higher inflation,” said Berson.

Activity levels in every market showed real growth and market share gains. However, the rate of growth moderated in the second half, as businesses cycled through the buoyancy seen in the latter part of 2022. Overall demand in Bidcorp’s hospitality markets remained strong, well surpassing the pre-pandemic trajectory, he added.

Australasia delivered a strong performance in terms of revenue growth and margins achieved. Normal seasonality returned to Europe with all businesses delivering much improved performances. The UK benefitted from contract wins and new acquisitions, achieving good growth albeit at lower margins.

Emerging markets delivered real top line growth, but profitability was impacted by growing pains in several businesses, he said.

“Our focus on the correct exposure to both the discretionary and non-discretionary market segments remains a priority for our businesses, the correct balance of which has contributed to the strong performance in all our markets,” he added.

Additionally, stubbornly high food inflation has complicated trading, but overall has been beneficial to the businesses. Higher cost inflation has been driven by labour, energy and fuel cost increases, which only started to slow in the latter part of the financial year as labour availability, supply chain disruptions, and product shortages started to ease.

“Investment activity in distribution capacity and bolt-on acquisitions accelerated in the 2023 financial year, as businesses cater for current and future growth,” Berson said.

Overall cash flow had been excellent. Cash generated by operations after working capital was up 66%, at R13.2-billion, from the R8-billion in the 2022 financial year, he added.

Further, Bidcorp's gross capital investments in property, plant and equipment of R4.3-billion is up on R2.9-billion in the prior financial year, and includes R1.8-billion of expansionary investments in new capacity, the largest portion of which has been in Australia.

“Nine bolt-on acquisitions were concluded at a cash cost of R1.3-billion, and the majority of which extended our in-country geographic reach in the UK and Europe,” said Berson.

The company's net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio was 0.2 times, similar to the 2022 financial year and it had Ebitda interest cover at 23.2 times, down from 25.2 times in the prior financial year, but well within the group's covenants.

Bidcorp retained adequate headroom for further organic and acquisitive growth, he added.

PROSPECTS
“Although all our businesses operate in the same broad industry, we encourage diversity and individuality through decentralisation and entrepreneurship. Our greatest synergy is the collective knowledge of operating in multiple geographies, with each business at differing stages of maturity and development,” Berson noted.

The focus for the less mature businesses is on building scale, either through organic growth or bolt-on acquisitions, to expand their geographic reach.

For mature businesses, both local and imported product sourcing capabilities were bolstering Bidcorp’s Own Brand offering which, combined with value-add manufacturing and processing opportunities, further enhanced their product range, he said.

“Further investments into strategic distribution facilities to provide for future capacity are planned in many businesses to cater for anticipated organic growth.

“New technologies for renewable energy, refrigeration, energy efficiency, and logistics optimisation in an environmentally and cost-efficient way afford Bidcorp the opportunity to reduce its carbon footprint. We continue to invest to develop our technology and data capability to support our growth strategy,” said Berson.

Further, several bolt-on acquisitions are under consideration across the group, in terms of geographic expansion opportunities as well as value-add product development. Currently, no new geographic-market acquisitions are being investigated, but the company is alert to opportunities should they become evident.

“The long-term growth fundamentals of the global foodservice industry remain positive. However, in the short term, the global economic outlook is volatile, but not necessarily negative.

“Global operating conditions are changing rapidly with high food inflation abating, and consumer spend under pressure as high interest rates compound the cost-of-living crises. The strong bounce in consumer behaviour experienced through the 2023 financial year has tapered off, which is, in our view, a return to normality.

“We believe there remains more market share to be gained in every geography we operate, and we have the management teams and the business model to continue to outperform. Activity levels into July and August are within management’s expectations and we remain positive that we can continue to deliver real growth into the financial year ahead,” Berson said.