Confident of a rebound in key markets, Bidcorp, the global food services company spun off from Bidvest in 2016, held on to its interim dividend even though a good start to its half-year was derailed by another wave of Covid-19 infections.
Bidcorp, which delivers to the food services industry, said it remains optimistic about its markets bouncing back after coming under pressure in SA, the UK and Europe towards the end of 2020.
Headline earnings from continuing operations fell 46.2% to R1.31bn in the six months to end-December while revenue fell 10.9% to R60.76bn as its businesses, particularly those that rely on large crowds, took a knock during the pandemic lockdown.
The group, however, says it has not moved to implement large-scale job cuts, reflecting confidence in the global trends towards eating from home, and a recovery. Staff costs make up almost two-thirds of its operating expenses.
Bidcorp CEO Bernard Berson said while 2021 so far has been “a mixed bag”, vaccine rollouts and the end of winter in the northern hemisphere are cause for optimism.
The strong rebound in demand in many countries before renewed lockdown conditions were introduced, including in SA and the UK, further reinforces the group’s upbeat outlook, he said.
“Those countries that performed really well in containing the virus and enabling people to get back to work saw demand rebound very quickly.”
The UK generated just more than a fifth of group revenue but revenue declined 23.5% and trading profit 67.5%. In Europe, which accounts for almost a third of group sales, revenue fell 15.2% and trading profit 60.9%.
In emerging markets trading profit fell 21.4%, with the group reporting a slow recovery in the hotel, office catering and aviation sectors in SA. It said it has done well to limit its revenue decline in SA to 17%.
Australia, New Zealand and Asia performed well, growing both revenue and trading profit. That market grew revenue 5.2% and trading profit 7.1%, generating about half of the group’s R2.24bn in trading profit.
Where lockdown restrictions have been eased, Bidcorp said it has seen demand in discretionary spending recover. However, any customers’ businesses associated with large crowds, such as entertainment, sports events, conventions and the cruise line industry, remain largely shuttered.
Berson said Bidcorp is confident these industries would recover. Although the cruise industry, for example, is still not operating, forward bookings reportedly are strong.
Nondiscretionary demand from the group’s institutional customers including hospitals, aged-care institutions, prisons, the military and government departments remained stable but below pre-Covid-19 levels, the group said.
Mohamed Mitha, an investment analyst at Kagiso Asset Management, said Bidcorp’s view of a rebound in demand appears to be justified. “We can already see this playing out with the strong rebound in activity levels in regions such as Australasia and China, where sales have bounced back to pre-Covid levels following infection rates dropping and lockdown restrictions easing.
“These regions experienced relatively mild second Covid-19 waves and we are noting increased resumption of more ‘normal behaviour’, including dining out,” said Mitha.
In afternoon trade Bidcorp’s share was down 0.3% to R287.07, having recovered 9.14% so far in 2021 but having fallen 9.23% over the past 12 months.
Update: February 23 2020
This article has been updated with additional information throughout.
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