International food services group Bidcorp is ramping up its acquisition strategy, with plans to make additional purchases that could open up new markets.
JSE-listed Bidcorp, which operates in 35 countries worldwide, completed four bolt-on acquisitions in the past financial year in Australia, UK, SA and Germany. Two more transactions were completed post-year end, it said, with a further one set to be completed in September.
On Wednesday CEO Bernard Berson said investment activity had been robust as the group expanded its infrastructural capacity in many regions, particularly Australia, the UK and Italy.
Berson told investors that while the bolt-on acquisitions concluded in 2023, as well as new contract activations, were all contributing, the group was seeing more acquisition potential, especially with generational family-owned businesses.
He said the company would potentially “stretch its balance sheet” in pursuit of strategic growth opportunities, highlighting that the size of the upcoming deals may be “chunkier” than previous transactions.
“We are alert to these opportunities,” Berson said, but he cautioned, “the successful completion cannot be guaranteed.”
Speaking to Business Day, CFO David Cleasby said typically, Bidcorp acquisitions or investments served to either broaden the company’s geographic reach or expand its product offering in a certain sector.
Cleasby echoed the CEO’s sentiment, saying “we are getting the sense that there is more opportunity about for whatever reason”, but he was hesitant to give details on the looming purchases because some of the deals were in an “embryonic stage of development”.
However, he said the potential acquisitions could be in-country bolt-ons, similar to what had been observed in the UK and the Baltics, while some might allow Bidcorp to enter new territories.
The CFO said the group had the financial muscle to execute on larger purchases but that Bidcorp would exercise caution.
“We’ve got to be careful as to what we do. I mean, it has to fit into either, as I said, extending the product range or the geographic reach. But, absolutely, we do have the firepower to do that and we've got headroom as we talk about it now of R24bn,” Cleasby said. “If we had to really leverage the balance sheet, we can take on net debt of up to R33bn. So there’s absolutely the firepower for the kinds of acquisitions that we are envisaging for sure.”
Bidcorp reported cash and cash equivalents, including bank overdrafts, at the end of June of R11.5bn. It said overall cash flow had been solid but was affected by the investment being made in the businesses.
Cash generated by operations before working capital was R15.4bn, a 13% jump from 2023.
The group reported a 15,9% rise in annual trading profit to R12.2 bn on Wednesday. This was due to its businesses continuing to refine their sales mix, while good volume growth from contract wins and acquisitions benefited profitability, despite stagnant and sometimes negative economic growth.
The market welcomed the news as the share price jumped as much as 9.1% in intraday trade, before settling 4.54% higher at R440, its biggest one-day gain since mid-December.
Revenue for the year to end-June was up 15.1% to R225.9bn, comprising 28% from the UK and 13% from Australia, while revenue from SA was flat at 4%. Trading profit rose to R12.2bn from R10.5bn a year ago and profit after tax grew to R8.06bn from R6.95bn a year ago.
Headline earnings per share (HEPS) were 15.5% higher at 2,405.5c. The group declared a final dividend of 565c per share, taking the dividend distribution for the year to 1,090c, up 16%.
The group, which was unbundled from industrial conglomerate Bidvest in 2016, said in May in a trading update that both Australia and New Zealand delivered strong trading results despite weaker economic conditions, particularly in the latter.
Europe performed well, with almost all businesses tracking ahead of 2023. Sales had held up 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 tracked well ahead of those in 2023, with volume growth in both the free trade and national account sectors at about 10%.
In the emerging markets businesses, SA was outlined as a standout performer achieving over 20% profit growth. It said a brand-new multi-temp facility opened for business in Alberton, while solar projects were developed at several new and old locations.
During the year, it purchased a frozen-food service company in the Eastern Cape.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.