Food distributor Bidcorp’s constant currency trading results are reflecting a solid performance and a continuation of the real constant currency growth seen in the first half, it said on Thursday.
In an update for the 10 months to the end of April, the group said its estimated weighted average food inflation of about 2.6% to April had declined significantly from 15.2% a year ago. Currency volatility had affected its rand- translated results, with year-to-date foreign exchange movements for the period having a 9% positive effect on the rand numbers.
Both Australia and New Zealand delivered strong trading results despite weaker economic conditions, particularly in the latter. Sales in home currencies in Australia are up 4.6% year to date and 10.4% year to date in New Zealand.
Europe continued to perform very well with almost all businesses tracking ahead of 2023. Sales had held up very well for the year to date despite the slower winter period, and were trading in line or ahead of expectation, the group said.
In the UK, sales continued to track well ahead of 2023, with volume growth in both the free trade and national account sectors at about 10%.
“The bolt-on acquisitions concluded in 2023, as well as new contract activations are all contributing. We are starting to see an improvement in overall conditions with growth and consumer sentiment improving,” it said.
The group’s emerging markets region delivered an overall solid sales performance in the 10 months to April, but with mixed fortunes in each region.
SA is delivering “an excellent performance despite being hampered by overall low economic growth exacerbated by ongoing electricity supply issues, albeit much improved in the past eight weeks,” it said.
Consumer spending remains under pressure in Mainland China and Hong Kong continues to be affected by the net outflow of consumers from the city and inbound tourism has not materialised.
Chile and the Middle East, which delivered a weaker second half of 2023 trading performances, were much improved. Malaysia was performing well and the group was investing in infrastructure to expand capability.
Singapore was settling down after a management restructure. Turkey, where the group continued to build out its national footprint, performed in line with expectations, it said.
The group noted that the operating environment remained challenging. For the first time in two years, food inflation was tracking at a lower rate than core inflation.
The demand for skills and the availability of labour continued to drive higher than core inflation wage increases, Bidcorp said. Energy and fuel costs, both of which were not a material component of the cost base, had started to tick up as some hedged positions roll off, it said.
Replacement of capital equipment and new depot investment costs remained high, affecting depreciation charges.
Group revenues reflected record levels to April 2024, against the normalised comparative base across almost all jurisdictions. Sales into May had picked up as the northern hemisphere summer geared up, Bidcorp said.
Group margins had held up well considering the overall economic environment, and were tracking slightly ahead of 2023, it said.
The UK and certain emerging market businesses’ margins remained below the norm; however, that year-on-year decline had been more than offset by Australasia and Europe.
Operating costs as a percentage of net revenue through to April increased to 18.9%, about 40bps worse than the comparative 2023 period, driven by employment and asset replacement costs.
In the year to April, the group made a “pleasing” ebitda before IFRS 16 margin of 5.6% of net revenue, similar to an exceptionally strong comparative 2023, it said.
“We continue to pursue bolt-on acquisitions across geographies and are confident that we will conclude a couple in the UK and one in Europe early in the new financial year, collectively with annualised revenues of around R2.9bn at an estimated cost of R1.8bn,” CEO Bernard Berson said.
“Larger opportunities remain scarce albeit a few opportunities are being explored. Our balance sheet remains strong and provides significant financial firepower for growth, he said.
Bidcorp’s share price was down 1.29% on the day to R422.34.
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