Bidcorp the global food service group that specializes in foodservice solutions, including fresh, chilled and frozen foods, released a positive trading update for the ten months ended April 2021.
The company’s sales appeared to be largely in line with market expectations, with the UK and Europe showing a significant turnaround in May thanks to the lifting of lockdown restrictions. In addition they had a robust recovery in Australasia, with sales achieving between 89% and 99% of normal demand during the third quarter.
Emerging markets were impacted by Covid for a longer period, except for Greater China which made a quicker recovery.
Management seems to be confident that it is benefiting from an increase market share in the jurisdictions in which it operates. The results were also buoyed by a recovery in demand in discretionary spend, despite an operating environment that remains volatile and challenging.
Gross profit margins have been largely maintained at similar levels to the comparable period in 2020.
The groups net debt at 31st May of R138m which was R229m better than in the prior period, and the Bidcorp debt coverage of 2.5x, was well within the covenant range.
Bidcorp is a mix of small independent customers, which proved to be a resilient plus factor, whilst the addition to some gains in the food chain operators should prove beneficial in the longer term.
Although the acquisitive activities remain muted, a number of bolt-on deals amounting to around R200m were concluded. There is a potential for further opportunities, facilitated by a strong balance sheet, once global conditions stabilize. Operating challenges still remain due to ongoing government interventions, making it difficult to confidently predict levels of sustained activity.
The share price has strengthened following a quality set of results. Bidcorp has had a long history of strong sustained profit growth delivery as well as predictable execution. It has experienced growth both organically and thanks to their global acquisition strategy.
The market cap of Bidcorp is R102bn, and it is a pure Rand hedge investment (except for a minute contribution from SA), which should also benefit from rising global food prices. We are and remain long term investors in this quality company, which can be bought into any major weakness in the share price