• Bidcorp,   the global food service business, has just released an impressive set of   results for the year to June 2021. They come despite major challenges from   Covid-19, which resulted in lockdowns in the all jurisdictions in which   Bidcorp operates.

  • The UK was hardest hit with nine months of lockdowns, and now seems   to be in turnaround mode despite supply chain headwinds caused by labour   shortages, transport bottlenecks, cost pressures and skyrocketing energy   prices.

  • The company believes that it should be able to pass on most of the   higher food prices as economies reopen. Europe experienced a rebound in most   sectors during summer with local tourism buoyant. The Australian-New Zealand   operations, an important part of Bidcorp group operations contributing 50% of   group trading profits, showed strong growth to the end of June 2021. However,   the subsequent lockdowns in Sydney and Melbourne, coupled to the lack of   interstate travel, has in the short term resulted in a downturn in business.

  • The geographic spread of the group’s operations encompasses all   continents except North America and ranks in the top three players in the   global food services market. This diversification has stood Bidcorp in good   stead, enabling it to show quality results throughout the ups and downs of   the businesses cycles.

  • This quality is reflected in the recent results, where outstanding management   enabled the company to accomplish bottom line growth in HEPS of R868.4c, up   by 21.8%, despite a decline in revenue of 4.8% to R114.8 bn. Trading profit   increased by 17.7%, with working capital days seven days better, and cash   generation of R7.7 bn. Free cash flows were impressive coming in at R4.7 bn   versus R2.0 bn in the comparative period in 2021. This is the result of sound   management as well as proactive initiatives.

  • Hong Kong, China, and Singapore had various challenges due to   Covid-19 variants, as did South America. Chile and Brazil’s results were,   however, sound. Bidcorp ended the year with a strong balance sheet, with cash   and cash equivalents of R8.1 bn from R7.0 bn in 2020. The company maintained   its gross profit margin of 24%, and reduced finance charges by 10.3% and   13.4% in operating costs. This enables Bidcorp to make acquisitions and   increase dividends in the future. This is evidenced by the declaration of a   final dividend of R4.00 after passing on the interim dividend previously. One   blemish on the otherwise great set of results was a loss of R694 m suffered   in the Chinese business operations. This was relatively insignificant in the   overall context of the group.

  • The group’s business model to focus on fresh, chilled, and frozen   foods in the hospitality industry should enable it to capitalise on growth   opportunities in a fragmented food services market. The management team has   consistently bedded-down bolt-on acquisitions which have been earnings   accretive. Despite volatility and uncertainty caused by the ongoing Covid-19   pandemic, Bidcorp remains optimistic for the prospects of the food services   industry. We have been long term investors in Bidcorp shares for our   portfolios and remain invested in this quality counter with its exceptional   Rand-hedge attributes.