Bid Corporation traded well in the 10 months to April 2023, with much lower food inflation and real, constant currency growth continuing from the first half, directors of the international food services group said yesterday.
Bidcorp's estimated weighted average food inflation of about 2.6% to April 2024 had declined significantly from 15.2% a year ago.
Currency volatility impacted rand-translated results, with year-to-date (YTD) movements to the end of April 2024 having a 9% positive impact on rand numbers, the group said in an update yesterday.
Australia and New Zealand delivered strong trading results despite weaker economic conditions, particularly in New Zealand. Sales in home currencies in Australia were up 4,6% YTD and New Zealand up 10.4% YTD, excluding two big contracts exited in October 2022.
Europe operations continued to perform “very well” with almost all businesses tracking ahead of the 2023 financial year.
“Sales… are trading in line or ahead of expectation. The general trends we are seeing across Europe are very consistent, sluggish demand, rapidly declining food inflation, and wage cost pressures,” directors said.
In the UK, sales were ahead of 2023, with volume growth in both the free trade and national account sectors around 10%. Bolt-on acquisitions concluded in 2023, as well as new contract activations were all contributing.
“We are starting to see an improvement in overall conditions with growth and consumer sentiment improving. Gross margins are slowly improving, and the cost base seems to be getting more controlled. Trading margins are still tracking well below long-term trends.”
The group’s Emerging Markets (EM) region delivered overall solid sales, but with mixed fortunes in each region. South Africa was doing well despite being hampered by low economic growth exacerbated by electricity supply issues, albeit much improved in the past 8 weeks.
Consumer spending remained under pressure in Mainland China, and their move away from the higher-priced imported European dairy products negatively impacted the gross margin.
Hong Kong was affected by the net outflow of consumers from the city and inbound tourism that hadn't materialised.
In Brazil, sales were flat as the food-service market had not grown as expected, impacted by the slow economy, yet trading results were up slightly from 2023.
Chile and the Middle East were much improved. Malaysia was performing well, and infrastructure investment was taking place to expand capability. Singapore was settling down after a management restructure. Türkiye performed in line with expectations.
“The operating environment remains challenging. Food inflation is for the first time in two years tracking at a lower rate than core inflation. The demand for skills and the availability of labour continues to drive higher than core inflation wage increases,” Bidcorp’s directors said.
Group margins held up considering the overall economic environment and were tracking slightly ahead of 2023. The UK and certain Emerging Market business' margins remained below norm, but this was more than offset by Australasia and Europe.
Bolt-on acquisitions across geographies continued to be pursued and the group’s management was confident of concluding a couple in the UK and one in Europe early in the new financial year, collectively with annual revenues of around R2.9bn at an estimated cost of R1.8bn.
“Larger opportunities remain scarce albeit a few opportunities are being explored. Our balance sheet remains strong and provides significant financial firepower for growth,” they said.
BUSINESS REPORT