Bidcorp revenue up, increases dividend 75%

NZINGA QUNTA: Bid Corporation Limited reported [that] headline earnings per share for the [year] ended June 30, 2022, increased by 77.1%, and group trading profit increased by 58.5%.

Bidcorp CEO Bernard Berson joins me now. A very good evening. Thanks so much for your time on the SAfm Market Update. Bidcorp is a foodservice group listed on the JSE in South Africa, but you’re also present on five continents. Just talk to me about how the industries you operate in were affected by Covid-19 and what effect, if any, that had on those results.

BERNARD BERSON: Well, thank you very much. Covid impacted our business directly and very sharply and very suddenly if we go back to March 2020. In fact, we operate in China as well, so we first started feeling the impacts in January of 2020. We cater to the foodservice market, which by definition is people who are eating meals out of home, at restaurants, cafés, canteens, prisons, universities, and wherever else. Obviously most of those segments were directly impacted by Covid-related shutdowns and curtailment of freedoms.

So our business really weathered two very tough years in ’20 and ’21, and fortunately we are coming out of that and have rebounded very strongly. Certain parts of the world are still impacted by Covid – mainly China and Hong Kong. The rest of the world seems to have navigated its way forward.

During the year under review there were still some geographies that were significantly Covid-impacted. Australia and New Zealand were under lockdown for a significant part of the year. The Netherlands was in lockdown through some of the winter months. So Covid had a very marked effect and fortunately we seem to be out of it and facing a brave new world.

NZINGA QUNTA: Your net revenue rose by 28.2% to R147.1 billion. I know you’ve spoken about that recovery, but what else drove that?

BERNARD BERSON: Look, a lot of it is the recovery. There’s some inflationary impact as well. Inflation is just a reality in the world at the moment and food is not spared from that, so there is some inflationary impact.

There is some market-share growth. There’s no doubt we have grown our market share in various different geographies. There is a small amount of acquisition there, but it is a very small amount, less than 1%.

So it’s primarily the markets rebounding and people getting out and eating again and enjoying life again. Fortunately we are there to be the beneficiary of that.

NZINGA QUNTA: You’ve said that gross profit percentage at 24.2% is a testament to the agility of the team’s responsiveness in volatile economic conditions. Just give us some practical examples of that and what you mean.

BERNARD BERSON: Markets are very dynamic. There’s a lot of inflationary pressure that came to bear. The supply-chain disruptions around the world – shipping routes have been severely disrupted. There are product availability issues in various parts of the world for various different reasons, from floods to droughts and everything else. So our teams have had to be agile in terms of managing those factors and dealing with their customers and ensuring we’re selling the correct product at the correct price, which they’ve managed to do around the world – and that’s been reflected in our margins holding up very, very well during the year.

NZINGA QUNTA: And then cash generated by operations before working capital was R9.9 billion. What was it last year and why that difference?

BERNARD BERSON: Last year was about seven [R7 billion]. And obviously we’ve got much higher levels of activity this year. Last year also I think we had the impact of some sale and lease-back transactions, but I don’t think that’s in the number that you’re looking at.

So it’s primarily because of the increase in activity levels from last year to this year.

NZINGA QUNTA: And you are declaring a final cash dividend of 400 cents per share.

BERNARD BERSON: Yes. R4, and R7 for the year in total. There’s a R3 interim dividend, the R4 final dividend.

NZINGA QUNTA: Just talk to me about Bidcorp’s strategy going forward. I know part of it hinges on eat-at-home meals.

BERNARD BERSON: No, we are a eat-out-of-home business. We’re in the space of people who are eating meals not in the home. Obviously there’s a little bit of overlap when you get something from delivery or Uber Eats or whoever your local provider is, but that comes from a restaurant or a takeaway.

So we don’t sell anything through the retail channel to the consumer. We sell it through the foodservice channel to a restaurant or a café or a caterer or a hotel.

NZINGA QUNTA: Eat-out-of-home meals, rather. Just talk to me more about Bidcorp’s strategy going forward.

BERNARD BERSON: Look, we’ve been on the same path for quite a few years. We’re very focused on what we do. We think we do it relatively well, and we will continue to grow the business organically, and seek out acquisitions in geographies where it makes sense to do so.

We’re in 35 countries and there are still many attractive markets that we aren’t represented in, and in certain of the markets we are operating in we are not at significant and sufficient scale yet. So we’ll be looking to bulk up those businesses in time to come.

NZINGA QUNTA: Bernard, I know your results are testament to that period of great difficulty when it comes to Covid-19. Just talk to me about any other challenges that you may foresee in the short term, and perhaps how you prepare in your business for that.

BERNARD BERSON: There are a lot of challenges. We live in interesting times.

So, just when you think you’re over the worst of something, something else comes and smacks you in the face.

The war in Ukraine obviously has an impact on many different levels, and we don’t know where that’s going to end up. We do operate businesses in Europe and in Eastern Europe, so it’s pretty much on our doorstep.

There’s this issue of inflation – where’s inflation going to go? Is it going to continue? Is it going to moderate? Our view is that it is moderating and we are seeing it in pricing certainly not escalating at the same rate.

The biggest issue we actually face at the moment is a skills shortage. In most of our businesses around the world most economies are facing severe labour shortages. Many economies are running at full employment. So trying to find labour to handle this increased business activity is a major challenge.

But these are all the issues our teams around the world are well equipped to handle, and we [do] the best we can under the circumstances.

NZINGA QUNTA: And as we wrap up, your e-commerce and digital strategy: you say that remains a key enabler of your competitive advantage. Just talk to us about that.

BERNARD BERSON: We’ve been a very early adopter of technology. We went digital in 2000 and started dealing with our customers electronically – and we just continue to enhance that. Obviously that’s been greatly progressed at the moment with advances in data analytics, artificial intelligence. We deal with lots of customers and lots of products and lots of complex equations, and there’s no doubt that data analytics and smarts can help you with that relationship and ensuring you are maximising your impact and contact with the customer.

NZINGA QUNTA: Bidcorp CEO Bernard Berson joining me there, hanks so much for your time this evening on the SM SAfm Market Update with Moneyweb.