Wrap Text
Bid Corporation Limited
(Incorporated in the Republic of South Africa)
Registration number: 1995/008615/06
Share code: BID
ISIN: ZAE000216537
('Bidcorp' or 'group' or the 'company')
CAPITAL MARKETS TRADING UPDATE: TEN MONTHS TO APRIL 2021
Shareholders are advised Bidcorp today, Wednesday June 9th 2021, wishes to update
the market on the trading environment across its operations. This is in accordance with
Bidcorp's obligations for continuous disclosure in terms of the JSE Listings
Requirements.
Management comments as follows:
Employees
The health and well-being of our employees continues to be our top priority in the face
of the impact from the global COVID-19 pandemic (COVID). We are extremely proud
of the great achievements of our teams in every jurisdiction we operate in and how well
they have adapted to the ever-changing landscape. Low case numbers of infections
within our businesses around the world have not impacted our ability to operate at any
time. We remain vigilant and continue to manage within strict business best practices
and local government regulations and protocols.
We appreciate the stress and difficulties being experienced by all our people during
this time and are indebted to all who work tirelessly to keep our products moving and
the wheels rolling. Our customer base has been affected more than most, where any
form of lockdown inevitably results in hospitality closures. We continue to work with
our partners, including customers and suppliers, in navigating this crisis and moving
forward.
Overall market trends
The operating environment in most countries remains volatile and restrictions are often
imposed to varying degrees with no advance warning, which has challenged both
ourselves and our customers abilities to operate effectively and efficiently. These
challenges include maintaining good service levels and ensuring we operate with
adequate inventory levels to prevent wastage of product. Our teams around the world
have come to expect this unpredictability and continue to remain flexible, nimble, and
highly adaptive to the inevitably changing circumstances.
Where lockdown restrictions have been eased or reduced in each country where we
operate, we have seen a recovery in demand in the discretionary spend sectors.
However, hospitality closures from any form of restrictions continue to adversely
impact activities such as entertainment, sports events, business travel, conventions
and conferences, aviation, and the cruise line industry, which remain largely shuttered.
Non-discretionary demand from our institutional customers, including hospitals, aged
care, prisons, the military, and government departments has remained relatively stable
although at levels below our expectations.
The work from home (WFH) requirement of major institutions, many of whom are
located in large inner capital cities, continues to reduce activity levels of our national
customers. However where life has returned to some form of 'normality', we are seeing
some growth in the customer base. The shift of WFH activity into suburban areas and
more rural locations has assisted where restrictions do not have an impact on our
customer's ability to operate.
Our independent customer base appears resilient, managing the varying economic
conditions relatively well through their flexibility and adaptability. We are confident we
are gaining market share in this segment of the market against competitors who do not
have the financial strength of Bidcorp. We have gained many new national customers
which will benefit the business as soon as activity levels improve.
Trading performance for the ten months to end April 2021
The Q3 F2021 trading has been dominated by the harsh second wave which gripped
both the UK and Europe from September 2020 onwards and continued through to April
2021. This has had a significant financial impact on these businesses. However, we
are a well-diversified business, with Australia, New Zealand, and Asia doing well, and
our other Emerging Market constituents continuing to slowly improve despite being
subject to further COVID related lockdowns.
From March 2021 onwards, comparatives of group and divisional sales to F2020 have
become meaningless. Sales progression by division and for the group, from the first
two weeks of March 2020 (deemed to be 'normal' just prior to the start of the global
pandemic, rebased to 100%) to the end of May 2021, as shown in the table below,
reflects the COVID impact on our operations. Overall group sales for the last week of
May 2021 have returned to 100% of our pre-COVID 'normal'.
TABLE: Constant currency sales by division and group per month from March 2020 to
the end of May 2021 (rebased to the period just prior to the start of the global
pandemic):
AUSTRA EMERGING UNITED
MONTH EUROPE GROUP
LASIA MARKETS KINGDOM
March 2020 73% 42% 80% 52% 59%
April 2020 42% 40% 61% 44% 45%
May 2020 61% 55% 70% 56% 59%
June 2020 78% 84% 79% 59% 75%
July 2020 87% 107% 78% 69% 87%
August 2020 84% 112% 86% 72% 90%
September 2020 88% 104% 100% 88% 92%
October 2020 93% 84% 101% 71% 85%
November 2020 94% 61% 110% 59% 76%
December 2020 102% 66% 119% 63% 83%
January 2021 89% 57% 102% 36% 66%
February 2021 92% 67% 100% 40% 72%
March 2021 97% 66% 106% 56% 78%
April 2021 98% 68% 105% 60% 79%
May 2021 99% 92% 107% 83% 94%
Please note that monthly percentages should be viewed as a trend reflecting the
impacts of the pandemic since the start in March 2020.
' Australasia (AUS) - Sales have fluctuated between 89% and 99% of 'normal'
demand during Q3 F2021 reaching 99% during May 2021. Demand has been
negatively impacted by localised lockdowns at varying times both in New
Zealand and Australia.
' United Kingdom (UK) - Wholesale and Fresh sales were severely impacted
by the strict lockdown through the 3rd quarter but have subsequently improved
as restrictions have been eased from mid-March onwards. The highest weekly
sales in both businesses of the financial year were recorded in the last week of
May 2021.
' Europe (EUR) - Sales have been significantly impacted for the period of
November 2020 through to April 2021 reaching a low of 57% in January 2021.
May 2021 sales have recovered to an average of 92% for the month.
' Emerging Markets (EM) - COVID has had a much longer and deeper impact
in our EM region, other than in Greater China where the recovery was quick.
Sales in EM are seeing improvements in the Middle East, Turkey, and
South Africa. Angliss Greater China continues to outperform its Q3F2019
results.
Currency volatility has positively impacted our rand-translated results however this
impact is diminishing with current rand strength. Year to date currency movements for
the 10 months to the end of April 2021 are shown below:
F2021 F2020
% change
Average FX rate Average FX rate
AUD:ZAR 11,63 10,24 13,6
EUR:ZAR 18,65 16,87 10,5
GBP:ZAR 20,93 19,29 8,5
Our group gross profit percentage for the period to April 2021 has largely been
maintained at similar levels to the comparative period in F2020 and is the same as that
for the same period in F2019. We are benefitting from our overall mix of smaller
independent customers, however we have sacrificed some margin in certain
businesses that are driving market share gains. Liquidation of expiring stock, caused
by sudden lockdown restrictions, has also had a slightly negative impact.
Throughout the crisis, we have been conscious of making sure that our businesses
retain as much human capital capacity and internal IP as we are able, ready to scale-
up as activity levels return. We have continued to access various government wage
assistance schemes in jurisdictions where we are eligible to do so, to protect as many
of our staff as possible and retain the 'muscle' in the respective business.
Unfortunately, this has not negated the need to furlough some employees and
permanently reduce headcount where restructuring was required.
With lower levels of activity, operating costs as a percentage of net revenue through
to April 2021 remained flat at 20,1% however this is elevated compared to F2019.
Constant currency operating expenditure (opex) declined by 17,0% compared to a
constant currency revenue decline of 17,5% for the period to April 2021. As 35% to
40% of opex is relatively fixed, we do not see a linear reduction in opex as revenues
decline, particularly where the onset of the resurgent spread of the virus results in rapid
and sudden lockdowns imposed by governments.
For the period to April 2021, the group made a pleasing EBITDA (Earnings Before
Interest, Tax, Depreciation and Amortisation) equivalent to 4,8% of net revenue (10
months of COVID impacts), the same as for the period to April 2020 (2 months of
COVID impacts). EBITDA for the comparative period in F2019 was 5,8%.
Constant currency non-IFRS 16 finance charges were 10,4% lower to April 2021
despite the imputed interest on the DAC put option. Excluding this impact, real net
finance charges were lower by 18% arising out of the benefits of lower capex and good
working capital management.
Average working capital days are better by 7 days year to date versus F2020, a great
result achieved by our operations despite a few areas of anticipated absorption. Our
inventories are in good condition, customers are largely honouring their payment terms
and we have normalised our payables terms.
In the period to April 2021, we have completed a number of sale & leaseback
transactions as part of our property maximisation strategy in dealing with end-of-useful-
life properties, where we are taking advantage of very low yields currently being
achieved in many markets on industrial property.
Free cash flow (excluding dividends but after operating cashflows, working capital, and
capex) for the year to April 2021 amounted to an inflow of R2,2 billion, some
R1,9 billion better than the comparative year to April 2020. This has been achieved by
improved cash generated from operations, capex a little ahead of depreciation and
amortisation, and proceeds received on the sale & leaseback of the properties noted
above.
Cashflow evolution comparison since March 2020
As at May 31st 2021, the group's net debt was #138 million, some #229 million better
when compared to the prior year.
YTD Month
Month F2021 F2020
change movement
September #205 m #401 m #196 m -
October #190 m #373 m #183 m (#13 m)
November #211 m #371 m #160 m (#23 m)
December #128 m #269 m #141 m (#19 m)
January #190 m #352 m #162 m #21 m
February #179 m #341 m #162 m Nil
March #147 m #325 m #178 m #16 m
April #139 m #350 m #211 m #33 m
May #138 m #367 m #229 m #18 m
Liquidity
Our priority has been to ensure that our operations have had sufficient liquidity for their
respective requirements over the past 14 months. We believe that the group has
sufficient liquidity for the foreseeable future and have reduced headroom in order to
preserve costs. The group and its subsidiaries have, as at May 31st 2021, total
headroom available including uncommitted facilities and cash and cash equivalents,
of R12,8 billion (#653,7 million).
Debt covenants
The group's debt covenants sit at 2,5x net debt to EBITDA and interest cover ratio of
EBITDA to net consolidated finance costs (excluding the effects of IFRS 16) of not less
than 5x. As at April 2021, the group remains well within these covenant ranges.
Update on under-performing businesses
Our businesses in Spain, Germany, and Fresh UK have stabilised following remedial
action taken over the past 10 months. Although the financial numbers do not yet show
it, we are well on the track to recovery with all of them. Spain remains the largest
challenge, the senior management team is new and rising to the challenge. Fresh UK
has been significantly streamlined and excess costs and capacity taken out, without
diminishing its position as a specialist supplier of seafood, meat, and produce.
Germany is operating effectively, and once sales return as expected, so too will profits.
Strategic challenges and opportunities
Bidcorp's focus is to operate at the 'new normal' which is being dictated by the
unpredictability we are seeing in many countries arising out of the effectiveness of
vaccination rollouts, ongoing government interventions, and recovery timelines.
Forecasting remains difficult as it is not possible to confidently predict sustained activity
levels until we see broad declines in the incidence of COVID infections. Our
businesses in the UK and Europe are emerging from the second wave of the
pandemic, however the sustainability of this recovery will be determined by
effectiveness of immunisations, as seen in the UK. Australasia and Asia are performing
well and many countries in EM are starting to show signs of recovery.
We are not seeing evidence of any long-term fundamental shift in consumer behavior
away from eating-away-from-home and not much has changed in those markets where
normality and confidence has returned. The consumer appears to be in reasonable
shape worldwide and this is benefitting our target market, namely the smaller to mid-
size independent customer.
Large supply disruptions have not materialised as predicted, however for our products
imported into Hong Kong and China, the supply chain is being stretched. The majority
of our products are procured locally and although there is an element of disruption
currently being experienced in global shipping and container availability, this is having
a negligible effect on our businesses.
A number of macro challenges are starting to emerge, such as inflation and labour
shortages. We are not seeing too much direct food inflation yet but that will take a while
to filter through. We are seeing large increases in the price of vehicles and mechanical
handling equipment (and a total lack of availability), construction costs are escalating
quickly (led by steel and wood), and energy prices in many geographies are increasing
dramatically. All of this will likely lead to wage inflation. We are also unbelievably facing
a labour shortage in many markets where the recovery has been quick and sharp,
particularly in driver and warehouse roles. COVID related travel restrictions is no doubt
impacting on people being able to move around freely.
Bidcorp has committed to a target of a 25% reduction in carbon emissions by 2025.
We are a user of energy, we operate warehouses with refrigeration, and we operate
fleets of vehicles delivering our products to our customers. Accordingly, our
investments are focused on long-term sustainability which is getting the focus and
attention of each of our management teams. Our initiatives in low emission, energy-
efficient refrigeration, trucks, and particularly in warehousing, is significant and
ongoing.
No significant new-country acquisitions in the foodservice industry have become
evident yet. The ability to explore opportunities in new markets remains hindered by
the general difficulties of international travel into and from many parts of the world. In
our developed markets, the government support and available financial resources has
delayed opportunities becoming evident. In our developing world, where such support
is far more limited, we are seeing more opportunities and are exploring tangible targets
in Chile, Brazil, Turkey, South Africa, and Argentina. We have concluded a number of
small in-country acquisitions in Australia, Germany, Italy, and the Middle East. We
reiterate that acquisitions made now are riskier than before due to the uncertainty and
disruption of the past year.
We are again making investments in those jurisdictions where activity levels have
returned, as well as reconsidering investments that were delayed by the onset of the
pandemic. This is important as the time delay between conceptualisation and
conclusion can be up to three years.
Our ecommerce strategy is developing with increased momentum as our own software
development business continues to innovate in the HORECA industry providing our
business with a clear competitive advantage. Our digital transformation journey has
accelerated through this crisis, and we are seeing some great benefits in customer
service, business efficiency, and insights through data analytics, of which we have the
benefit of a multi-jurisdictional view.
Comment
Bernard Berson, CEO, commented as follows:
'I remain extremely proud of our teams around the world, often operating in
tough conditions (who don't have the luxury of working from home and need to
deliver food regardless) and who are being severely impacted by changing and
unpredictable events. We are indebted to our workforce who keep the products
moving and wheels rolling every day.
I am truly enthused and excited (as is our entire senior team) about the future
prospects of our business, it may just take a little longer than expected (or
maybe not) and will probably be a little bumpier than hoped, but it will be good.'
The information contained in this announcement has not been reviewed or reported on
by the group's external auditors.
______________________________________________________________
Date: June 9th 2021
Johannesburg
Sponsor: The Standard Bank of South Africa Limited
Date: 09-06-2021 09:00:00
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