Bidcorp 6M Numbers - Flat

Global food-services business Bidcorp is a company that we hold for most clients with JSE portfolios. For those with short memories, this group was spun off from the old Bidvest in May 2016. It has a market capitalisation of R106 billion. The share price has done fairly well since the separation, rising to a recent high of about R340 per share.

Bidcorp's head-office is in a new building at 90 Rivonia in Sandton, but in reality the group is run from wherever CEO Bernard Berson and CFO David Cleasby happen to be at the time - which is probably in a plane, or the meeting room above a warehouse, or in an airport hotel. They have operations in Australasia, Europe (plus the UK), the Middle East, South America, the Far East and Africa.

The core business is sourcing, preparing, refrigerating and delivering high-value food products. They focus on just-in-time, flexible service to their end customers using the best available ordering and billing systems. They have a strong preference for devolving management accountability and retaining entrepreneurs at an operational level. They have grown through many acquisitions over the years, often of family-run businesses.

The company put out interim results yesterday which were basically flat compared to the prior period. The key headline earnings per share number was up 4.0%. The board of directors declared an interim cash dividend of R3.30 cents per share, up 6.5% from the same period last year. The chair of the board is ex-Investec CEO Stephen Koseff, who is an absolute legend, and one of my favourite South African businesspeople. That's him in the picture below.



Here is the management commentary from the results presentation, giving you an idea of the breadth of their operations:

Operating conditions were challenging in a number of geographies. Social unrest in Hong Kong and Chile impacted out-of-home demand, the bush fires in Australia dampened consumer sentiment while the lead-up to the UK general election and Brexit-fatigue dampened British consumer spending. In addition, trading performance was impacted by management underperformance in Bidfresh UK, Spain and Germany.

Europe continued to perform well, particularly Netherlands, Czech and Slovakia, Italy and Poland. Australia's revenue growth remained subdued while the team continued to rationalise exposure to lower-margin customers. New Zealand achieved both top-line and margin growth, offsetting cost pressures. Bidfood in the United Kingdom continued its growth trajectory. However, this was somewhat negated by the poor performance of Bidfresh. In Emerging Markets, South Africa maintained some growth despite tough economic conditions. The Middle East performed well. Greater China's performance declined as the recovery in mainland China was insufficient to offset the impact of social unrest on our Hong Kong activities.

We continue to hold, and where appropriate, buy Bidcorp in JSE portfolios. People love to eat, and premium restaurants and dark kitchens continue to proliferate, so there will never be a shortage of customers for Bidcorp. The challenge is to do the job better than their competitors. The group electronic ordering system BidOne now handles 30% of total group sales. At a price-to-earnings ratio of 21, the stock is not too expensive at current levels. It is also worth noting that if the Rand devalues due to poor economic management in this country, and a sovereign credit rating downgrade, Rand-hedge shares like Bidcorp will hold their value.