Bidcorp gains from rebound in global economy

Hefty dividend on the back of an increase of 75% in earnings per share.
Whether dining out or ordering in across 35 countries, chances are the group supplied some of the ingredients. Image: Supplied

Surprisingly, Bidcorp noted that it enjoyed a “record financial performance” in the first quarter of its financial year.

CFO David Cleasby confirmed to Moneyweb that it was indeed the best quarter ever, even in comparison to pre-pandemic trading. While some countries reintroduced restrictions in the second quarter and some countries maintained restrictions throughout the last six months, Bidcorp performed exceptionally well whenever conditions allowed.

The end result was that Bidcorp was just about back to pre-pandemic levels in the six months to end-December 2021.

Cleasby said the figures suggest that Bidcorp gained market share in most sectors despite the fact that international travel and hospitality activity remained subdued, people were still not allowed at sporting and other events, and cruise ships were barely operating.

Good start …

Bidcorp CEO Bernard Berson says the six months started well.

“Most economies rebounded strongly in July through to September 2021.

“Our performance deteriorated somewhat into the second quarter as the rapid spread of the Omicron variant in Europe and UK impacted on the festive season trade. Fortunately, this disruption is now easing, and we are once again seeing a return to stronger and more normalised levels of trading in most jurisdictions,” he says.

The exceptions were Australia and New Zealand, which were impacted by Covid restrictions for the better part of the half-year.

Whenever restrictions eased in any country, Bidcorp noted a surge in demand.

“There remains little evidence that there has been any shift in consumer behaviour away from the eat-away-from-home market,” says Berson. Whether people eat out in restaurants or order takeaway meals in any of the 35 countries in which Bidcorp operates, chances are good that the group’s entities supplied some of the ingredients and basics to prepare the meals.

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The numbers

The income statement shows that revenue increased by 18% to R71.6 billion, with management noting that the increase was actually better measured in constant currency terms. Taking out the effect of exchange rate fluctuations, revenue increased by around 26%.

“Notwithstanding the impact of the Covid-19 pandemic on Australasia, revenue in constant currency across all divisions was higher than the comparative period and, overall revenue has almost recovered to pre-pandemic levels,” says Berson.

Trading profit increased by nearly 53% to R3.4 billion during the six months compared to R2.2 billion a year ago.

Profit margins recovered to 4.7% (3.6% in the comparable six months) and is just about on par with pre-pandemic levels.

Headline earnings per share increased by 75,3% to R6.68. This enabled Bidcorp to declare a hefty dividend of R3 per share.

“This performance is particularly pleasing in the context of extremely challenging operating conditions,” says Berson.

“Demand in the hospitality sector has been robust, but remains impacted by pandemic-restrictive measures, while most activity aligned to business travel and office catering remains depressed. Work-from-home requirements or a hybrid thereof remain in place in many markets, which continues to have an impact on national customers with exposure to major institutions located in large cities,” he says.

Cleasby explains that, from Bidcorp’s point of view, demand from suburban restaurants made up for this with people working from home and still picking up lunch or dinner.

Reduced international tourism has been offset to some extent by staycations and increased suburban and rural activity. Non-discretionary demand from hospitals, aged care, prisons, military and government departments is stable, but in cases still below pre-Covid levels.

Berson notes that operating conditions have been particularly difficult during the last six months in that demand fluctuated due to ongoing governmental restrictions to control the pandemic, as well as staff shortages, supply chain disruptions and rising operating costs that hampered efficiencies.

Management says that while rising inflation brings challenges, it also presents opportunities. Bidcorp was able to contain costs – growing revenue at a faster pace than costs.

“Inflation, arising from wage and utility price increases, as well as food product price increases, presents a trading opportunity which Bidcorp is managing well,” says Berson. “Many customers are facing similar challenges, which is limiting their ability to grow, and presents an opportunity for further investment into value-add product preparation.

“Further development of product sourcing capabilities, both local and imported, is allowing the opportunity to further grow Bidcorp’s own brand product range,” he says.

Cleasby says SA is not doing “too bad” either, despite slow economic growth and the problems this creates. “Demand picked up in November and December after restrictions were eased. A negative was the civil unrest in KwaZulu-Natal and parts of Gauteng that disrupted operations, and its lingering impact.”

Management expects things to improve further

Berson says he is “cautiously” optimistic about the trading environment through the evolving pandemic and that they are pleased that activity levels appear to be recovering strongly.

Cleasby indicates that shareholders can expect growth to continue in the second half of the financial year. “If life stays as it is now,” he says, cautioning against short-term problems.

He mentions rising geopolitical tensions as a concern, and the challenges that rising inflation brings.

Shareholders seem to expect growth to continue for years to come.

The latest results put Bidcorp on a price-earnings ratio of a demanding 27 times, while the share price of R323 is not far from its all-time high of R354.

 

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