Global food services group Bid Corporation saw “a very pleasing performance” for the four months to October 2023, CEO Bernard Berson said yesterday.
Headline earnings a share (Heps) was up in real terms in constant currency rates, after taking into account 8% average estimated inflation, he said in a capital markets update that was presented to investors yesterday.
Heps had “well” surpassed the comparative trading period. Group revenues continued to reach record levels to November 2023 against the backdrop of normalised activity in almost all jurisdictions, a statement said.
“The Bidcorp team have once again risen to the occasion and performed brilliantly in a tough environment. These all-time high results are the outcome of a fantastic, stable team executing very well on a clear and deliberate strategic framework,” Berson said.
Currency volatility positively impacted the rand-translated results, with year-to-date forex movements to the end of October having a 14% favourable impact.
The group’s directors said customer demand post-June 2023 held up well both in the UK and Europe through the Northern Hemisphere summer, despite generally poor weather in the peak holiday season.
Australasian demand was stable despite weaker economic conditions.
In emerging markets, except for Greater China, market demand held up despite generally unfavourable economic conditions.
The operating environment was challenging. High food inflation had started to moderate but remained sticky, tracking higher than core inflation in most parts of the world.
Labour costs had stabilised as the demand for skills and the scarcity of labour eased. Energy and fuel costs, both of which were not a material component of the cost base, had declined and had benefited the businesses.
Product supply disruptions remained a normal day-to-day operational challenge. Replacement of capital equipment and new depot investment costs had soared, negatively impacting the cost base.
“Our independent customer base remains resilient in tightening economic conditions and we remain vigilant in managing the credit risk in all jurisdictions. Our businesses exposed to a higher proportion of larger national-type customers continue to experience greater difficulty in timeously passing on price increases.”
In the high inflationary environment, the greatest competition from competitors trying to regain market share was being felt in the high-volume, low-margin customer sector, said Berson.
“We believe we continue to grow in our preferred sectors of the market, as our teams around the world remain flexible, nimble, and highly adaptive in maintaining high service levels and relevance to our target market,” Berson said.
Both Australia and New Zealand traded. Sales in home currencies in Australia are up 8% year-to-date (YTD) and New Zealand was up 12%, excluding the two significant QSR contracts that were exited in October 2022.
Estimated annual food inflation for Australasia to the end of September was around 6%. Gross and trading margins improved.
In Europe sales held up well, and all businesses traded in line or ahead of expectation.
Estimated food inflation in Europe was around 7% to the end of October, compared to 13% in the fourth quarter of 2023. Gross and trading margin improved.
In the UK sales were tracking well, impacted by food inflation (estimated at 12% to the end of October 2023), bolt-on acquisitions concluded in the 2023 financial year, and new contract activations.
The UK's gross profit margins remained under pressure due to their exposure to larger customers, who had rigid pricing windows, where it is difficult to pass on regular price increases in the high inflation environment.
In October, the UK implemented a scheduled price review. Trading margins were still tracking below long-term trends.
The emerging markets region delivered an overall solid sales in the four months. South Africa delivered real growth while it was hampered by low economic growth exacerbated by ongoing electricity supply issues.
In mainland China, consumer spending was under pressure and price hikes on imported European dairy products negatively impacted the gross margin.
In Brazil, sales were flat as the food service market did not grow as expected, impacted by the slow economy. The Middle East and Chile, which delivered weaker trading performances in the second half of the last financial year, were much improved.
Singapore and Malaysia continue to report progressively stronger growth. Türkiye, where a national footprint was being built out, performed in line with expectations.
The small decline in gross margins at group levels had been largely mitigated by cost efficiencies.
At the end of September, total headroom, including uncommitted facilities and cash and cash equivalents, was R19.5bn.
Berson said that the group continues to transition toward house brands, imports, and light value-add manufacturing to sustain and enhance margins.
BUSINESS REPORT