Bidcorp fattens up

GLOBAL FOOD BUSINESS LEADS TO HEALTHY PROFITS

Bid Corporation (Bidcorp), the food services company spun off from industrial conglomerate the Bidvest Group, is seeking to boost its clout in international markets through more acquisitions.

The company, with global operations across fresh produce, logistics solutions and equipment – in markets such as the UK, Australasia, Europe and emerging markets – sees opportunities to expand its operations further into fresh produce, meat categories and value-add processing. Bidcorp is on the prowl for bolton and large acquisitions with which to enter new markets, as the growth in out-of-home eating is expected to continue.

It unveiled its growth ambitions this week, together with its maiden results since its JSE-listing in May, showing a trading profit growth of 26.1% to R5.2 billion on the back of revenue growth of 20.8% to R140.5 billion for the year ended June.

Momentum Wealth portfolio manager Wayne McCurrie says for Bidcorp to deliver headline earnings per share growth of 14.2%, when factoring out the rand weakness, is still impressive.

“Also, for management to even deliver growth – given Europe’s poor state of the economy, with low growth and inflation – is good,” McCurrie says.

Bidcorp’s operations are largely global, and the weakness of the rand against major currencies was a fillip to its earnings.

CEO Bernard Berson says the company’s financial position remains strong, as “our cash generation is robust and we retain significant headroom to accommodate expansion opportunities, both acquisitive and organic”.

Its planned acquisitions will be funded through debt.

McCurrie says the company is positioned well with “money being cheap overseas”.

The split from its parent company, Bidvest, and the subsequent listing will also allow it to raise its own capital for expansion.

Australasia (Australia and New Zealand) remains the biggest profit generator for Bidcorp, with revenue growth of 7.6% to R30.3 billion and trading profit growth of 21.8% to R1.8 billion. Its UK operations grew revenue by 27.8% to R61 billion and revenue accelerated by 24.9% to R31 billion in Europe, driven largely by its eastern Europe-based businesses in markets such as Poland, Czech Republic and Slovakia.

Its emerging markets businesses in markets such as China, Hong Kong, Singapore, Brazil and in the African continent, grew revenue by 16.7% to R18.2 billion. As a result of its listing, Bidcorp declared a dividend of R2.41 per share based on the pro forma results pertaining to the second half of its financial year.

McCurrie rates Bidcorp’s stock as a “hold”, as the company has “good earnings potential in the long term”. “In the short-term, I am worried that one-third of their business is in the UK where there is still Brexit uncertainty.”