Financial director's review

"Our people continue to demonstrate innovation and their resilience and capacity to achieve real growth in no or low-growth economies is remarkable."  

David Cleasby

Group financial director

  David Cleasby

2014 snapshot

Turnover up 19,7% to R183,6 billion (2013: R153,4 billion)
EBITDA up 14,4% to R11,0 billion (2013: R9,6 billion)
Headline earnings up 11,1% to R5,5 billion (2013: R4,9 billion)
Cash flows before working capital up 16,0% to R10,7 billion (2013: R9,3 billion)
Net cost of acquisitions of R5,3 billion
Net debt increases to R7,9 billion (2013: R4,5 billion) driven by investments
Net capital expenditure of R3,0 billion (2013: R2,5 billion)
Trading margin 4,9% (2013: 5,0%).

Looking ahead

Managers at all businesses will continue to pursue efficiencies and cost savings. Asset management, particularly in respect of credit extension, remains a critical focus area in the current trading environment.

Local teams will also remain alert for opportunities to grow their businesses through bolt-on acquisitions.

Indications are that the pace of merger and acquisition (M&A) activity is picking up, locally and offshore. Though in a number of geographies we may have entered a rising interest rate cycle, rates remain at competitive levels. This creates further opportunities to access external funding at attractive rates.

Bidvest has a strong balance sheet and has built momentum with its growth strategy. This momentum should be maintained.

Overview 2014

Trading conditions in South Africa during the last quarter of the year became increasingly disruptive, compounded by the detrimental effects of prolonged labour unrest and declining consumer demand. Bidvest South Africa delivered improved trading results in most divisions, assisted by the acquisitions of Home of Living Brands Limited (HoLB) and Mvelaserve Limited. Bidvest Namibia recorded a decline in trading profit as the lower fishing performance negated the improved results of the commercial businesses.

Bidvest Foodservice’s trading results reflect improved performances in all operations, delivering real growth in home currencies. The core Australian and New Zealand markets remain resilient, driven by expansion and innovation into new segments of the food market. The UK businesses did well, particularly the specialist food businesses of Bidvest Fresh. In Europe, signs of recovery were evident across some markets, though improvement was subdued in the Netherlands and Belgium. The Czech and Polish businesses put in a strong performance.

Performance drivers

Many of our businesses were impacted by above-inflation increases across the cost spectrum wages, utilities, fuel and other inputs. A key driver of performance was therefore the realisation of efficiencies and savings. Each business strives to be the lowest-cost producer in its industry. This creates competitive advantage in price-sensitive markets and enables organic growth through gains in market share.

Our people continue to demonstrate innovation and their resilience and capacity to achieve real growth in no or low-growth economies is remarkable.

Strategic acquisitions made valuable contributions to turnover and earnings per share. The acquisitions of both HoLB (effective July 1 2013) and Mvelaserve Limited (effective November 1 2013) proved accretive while a series of smaller, bolt-on acquisitions in several divisions added to momentum.

At a time when the South African corporate sector was criticised in some quarters for “sitting on piles of cash”, Bidvest demonstrated that it remains a counter-cyclical investor with a proven appetite for continued investment that grows the business in challenging times.

Financial performance

Turnover grew 19,7% to R183,6 billion (2013: R153,4 billion). Turnover includes R22,0 billion (2013: R20,9 billion) of gross billings related to disbursement recoveries, primarily in the clearing and freight forwarding industry. Revenue grew 22,0% to R161,6 billion (2013: R132,5 billion). Major increases occurred in Bidvest Asia Pacific (R4,8 billion) and Bidvest Europe (R14,0 billion), principally reflecting organic growth and assistance from currency effects on translation. Acquisitions accounted for R7,2 billion of the turnover growth.

Gross profit increased by 23,1% off a revenue increase of 22,0%. Operating expenses increased by 24,6%. On a constant currency basis, the increase was 14,9%. Excluding the effects of the material acquisitions, like-for-like costs rose 10,2%. Share-based payment costs rose by R67,5 million, reflecting the increased costs of staff incentivisation and the increase in the Bidvest share price over the past year. Acquisition costs, which are once-off and directly related to the increased investment activity, rose by R59,9 million, equating to approximately 1,1% of HEPS.

The Group grew trading profit by 16,6% to R8,9 billion (2013: R7,7 billion). Trading margin dipped to 4,9% (2013: 5,0%), impacted by the dilution from some of the recent acquisitions. The average rand exchange rate weakened against major currencies in which the Group operates, in particular against the euro and sterling.

Net finance charges increased by R283,7 million to R1 048,3 million (2013: R764,5 million), a function of various investments and acquisitions, greater utilisation of working capital throughout the year, a higher interest rate environment in South Africa and the conversion of larger foreign finance charges at higher average exchange rates.

Associate earnings showed significant decline as both Mvelaserve and HoLB became subsidiaries, though the performance of Comair Limited improved.

Headline earnings per share (HEPS) increased by 11,1% to 1 733,9 cents. Basic earnings per share (EPS) fell by 4,2% to 1 462,0 cents, impacted significantly by capital items, the most significant of which was the R1,056 billion impairment of the investment in Adcock.

Bidvest South Africa delivered improved trading results in most divisions, assisted by the acquisitions of Home of Living Brands Limited (HoLB) and Mvelaserve Limited.

Financial position and cash flow

The Group’s financial position remains robust. Net debt rose to R7,9 billion (2013: R4,5 billion), largely driven by cash utilised for investments and acquisitions of R5,3 billion. Normalised interest cover (excluding the cost of associate investments) declined to 9,4 times (2013: 10,0 times), but remains comfortably above the Group’s self-imposed targets. Bidvest’s attitude to gearing remains prudent while retaining adequate headroom to accommodate expansion opportunities.

Cash generated by operations before working capital changes rose 16,3% to R10,7 billion (2013: R9,3 billion). The Group absorbed R0,5 billion (2013: R1,9 billion) of working capital, reflecting growth, the impact of the devaluation of the rand on replacement inventories and strategic stocking in some businesses. Returns on funds employed on a monthly average basis declined from 30,1% in 2013 to 27,6% in 2014. Net working capital days decreased to a net 11 days (2013: net 12 days), reflecting good cash collections in the latter part of the year.

Acquisitions and investments

Historically low interest rates in capital markets continue to create opportunities to utilise external funding for the purposes of acquisitive growth.

Bidvest acquired the remaining 71,7% of HoLB for R532,0 million effective July 1 2013. Bidvest also purchased the majority shareholding of outsourcing firm Mvelaserve. At the time of the offer, Bidvest already owned just under 35%. The R846,6 million cash transaction became effective from November 1 2013.

A 60% stake in the share capital of Distribuidora E Importadora Irm os Avelino Limitada (Avelino), a Brazilian company, was acquired with effect from January 1 2014 for a consideration of R229,7 million. This acquisition forms part of the Group’s strategic expansion plans in the international foodservice industry and broadens Bidvest’s exposure to South American markets.

In January and February 2014, the Group acquired an additional 44,5 million shares in Adcock for a consideration of R3,1 billion, bringing its total voting interest to approximately 30,0%. The Group has accounted for Adcock as an associate with effect from March 1 2014.

A 60% stake in the share capital of Distribuidora E Importadora Irmãos Avelino Limitada (Avelino), a Brazilian company, was acquired with effect from January 1 2014 for a consideration of R229,7 million

The performance of Adcock has been well below expectation and way off what was portrayed in publicly available information prior to and at the time of our investment.

The Group also made a number of smaller acquisitions. Integration of all these businesses is progressing well. Total net investments in the year totalled R5,3 billion.

Post-year-end, and with effect from July 1 2014, the Group acquired a 60% interest in Gruppo Dac S.p.A., a leading Italian foodservice provider, and a significant controlling stake in PCL 24/7 Limited, a specialist in chilled products storage and distribution business operating in the United Kingdom. The aggregate purchase consideration was approximately R1,7 billion (£95 million).

Interest rate environment

South African interest rates moved 50 basis points higher to 5,5% in late January 2014 largely due to an immediate response to the capital flight from emerging markets. The authorities acted with the rand close to a five-year low and inflation projected to exceed the official target level of 6,0% and remain at elevated levels for some time.

The effect of the rate hike was to increase the pressure on already embattled consumers, with knock-on effects across most business sectors. However, the increase appeared to signal a period of restrained and gradual rate adjustments rather than the aggressive rate rises apparent in previous interest rate cycles.

Interest rates internationally remained at historically low levels and the US Federal Reserve indicated that dollar rates were likely to “remain low for a long time”. Across the Atlantic, the June meeting of the European Central Bank brought deposit rates down from zero to minus 0,1% in a bid to head off the risk of deflation. The cut prompted speculation that some form of quantitative easing may follow if European growth continues to stall.

In terms of the long-term cost of borrowing at an international business such as Bidvest, the impact of South Africa’s January rate rise was small. Of more significance was the announcement by the US authorities in May 2013, that they intended to “taper” their programme of quantitative easing, which prompted an immediate rise of between 200 and 300 basis points in the cost of medium-term funding in South Africa.

Subsequently the five-year swap rates have tracked back to the five-year average and from a Bidvest perspective, these levels remain relatively attractive.

Currency impacts

Currency effects at Bidvest were beneficial on translation of our foreign earnings into rand. The average rand exchange rate was weaker against the major currencies in which the Group operates and in particular against the euro and sterling, largely since the emerging market financial meltdown in January 2014. This weakness had a positive impact equivalent to 4,9% of headline earnings per share.

Credit ratings

In June, many of the major international ratings agencies downgraded South Africa’s sovereign credit rating to one level above so-called junk status.

The downgrades were concerning, but predictable in view of the dislocation caused by the country’s longest mining strike and its impact on the economy. Clearly, the price of corporate debt is influenced by the national credit rating.

In respect of Bidvest, Fitch Ratings affirmed the Group’s national long-term rating at AA(zaf) in January 2014. Moody’s continue to rate the Group at with a stable outlook.


As Bidvest grows, it continues to make substantial contributions to the fiscus.

Low growth by the national economy seems to suggest low growth in national tax revenues. However, the authorities remain strongly focused on the goal of achieving significant increases in tax revenue.

This is understandable. Social delivery is vital to our nation’s stability. Infrastructure has to be modernised. Transport systems have to be upgraded. New homes, schools and hospitals must be provided. Increased power generation is a national priority. Revenue has to be found to fund these projects.

Currency effects at Bidvest were beneficial on translation of our foreign earnings into rand. This weakness had a positive impact equivalent to

4,9% of headline earnings per share.

Collection efficiency is therefore a priority and the private sector must play its part. However, collection zeal has to be complemented by efficient and responsive administrative systems, in particular dispute resolution mechanisms.

SARS has an enviable reputation for responding to challenges and fulfilling its duties in an efficient and timely fashion. Indeed, the tax service has a record for successful innovation and achieved notable efficiency gains following the introduction of its eFiling system.

However, there is a lack of respect between both SARS and the broader business community in resolving areas of contention. Both businesses and SARS have not come to a meeting of the minds of what is acceptable practice from both sides. The time has come to foster a greater level of cooperation between both parties in dispute resolutions in order to best serve the national interest.


Bidvest has strong corporate governance structures in place and invests considerable management time on compliance matters. We take our responsibilities as a good corporate citizen seriously. However, the task is complicated as the Group is represented in numerous jurisdictions and industries.

The compliance burden continues to grow as various parties expect detailed information on subjects that might range from environmental controls to competitive behaviour to changes in the Companies Act, labour law developments and requirements relating to treating customers fairly.

We appreciate the need to protect consumers, employees and the environment while operating in a fair and ethical manner. Such conduct is built into our own culture.

Comprehensive controls are acceptable, but unwieldy regulations are in no one’s interest. In this regard, the JSE has been proactive in reviewing its listings regulations in order to achieve further clarity and simplicity. The JSE is to be applauded for carrying out a review of this nature in assisting its members in an increasingly complicated world.


The Group paid an interim cash dividend of 378,0 cents per ordinary share in lieu of a scrip distribution. Those who elected to receive additional shares in March rather than cash were well rewarded by further gains in the share price.

Post-year-end, in order to enable the Group to continue to avail itself of further opportunities, as well as enable shareholders to further participate in the growth of the Group, the board declared a final distribution for the year by way of the issue of fully paid ordinary shares as a scrip distribution. Shareholders will be entitled to elect to receive a cash dividend of 432,0 cents per ordinary share in lieu of the scrip distribution.

Stakeholder engagement

Bidvest continued its long-established programme of regular engagement with all stakeholders.

Our decentralised business model devolves many communication responsibilities to local managers. They stay close to customers, markets and their industry peers. This system has proved highly successful over many years and continues to ensure we are alive to concerns and opportunities.

In a challenging industrial relations environment, regular communication with staff members became a key feature of stakeholder engagement. Again, our decentralised approach kept us close to issues at industry level and at individual businesses.

Regular interaction with investors, fund managers, investment analysts and the media is a critical feature of our corporate communication function. Regular presentations were held and senior executives made themselves available to explain strategies and objectives.

All feedback suggests that Bidvest strategy is well understood and our policy of transparency and openness is appreciated.

QUICK LINK: Stakeholder table

Sustainable reporting

Bidvest believes that all actions by a business should contribute to the sustained success of the enterprise. To ensure efficient execution, actions should be measured and every measurement should consider financial implications.

We believe in the integrated reporting of financial and sustainability metrics. In the Bidvest view, there is no such thing as non-financial reporting.

All the data we present on our people, our energy consumption, carbon footprint and other sustainability interventions have an effect on the bottom line. This is particularly true of “people information” as Bidvest is a major employer and we regard skilled, innovative and motivated people as a source of competitive advantage.

In order to give investors informed insight into our performance, we are committed to comprehensive reporting of training spend, skills transfer, staff development, safety investments and many sustainable business practices as these interventions have material impact on our results and our progress as a company.

David Cleasby
Group financial director

Registered office South Africa
Bidvest House
18 Crescent Drive
Melrose Arch
South Africa
Telephone: +27 (11) 772 8700


This graphing tool allows users to interact with data to chart the information they require.


Use this link to view our Integrated Report as an