Directors' report
The directors have pleasure in presenting their report for the year ended 30 June 2017.
Nature of business
The Bidvest Group Limited (the Company) is an investment holding company with subsidiaries operating in the services, trading and distribution industries.
Financial reporting
The directors are required by the Companies Act of South Africa (the Act) to produce financial statements, which fairly present the state of affairs of the Company and the Group as at the end of the financial year and the profit or loss for that financial year, in conformity with International Financial Reporting Standards (IFRS), the interpretations adopted by the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and in terms of the requirements of the Companies Act of South Africa.
The financial statements as set out in this report have been prepared by management in accordance with IFRS and the Act and are based on appropriate accounting policies supported by reasonable and prudent judgements and estimates.
The directors are of the opinion that the financial statements fairly present the financial position of the Company and of the Group as at 30 June 2017 and the results of their operations and cash flows for the year then ended.
The directors are satisfied that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements.
Share capital
During the year, the Company did not issue any share capital. In the previous financial year, 241 061 shares of 5 cents were issued at a premium of R342,57 per share in settlement of the conditional share plan awards.
Acquisitions and disposals
The Group acquired 100% of the share capital of Brandcorp Holdings Proprietary Limited (Brandcorp) with effect from 1 October 2016. Brandcorp is a value-added distributor of niche industrial and consumer products trading under the Industrial brands, Matus, Renttech, Burncrete, Moto Quip, Leisure Quip and Consumer brands, Cellini and MIC Prestige. The acquisition forms part of the Bidvest Commercial Products segment and will enable the Group to expand its range of complementary products and services provided by Bidvest Commercial Products. The acquisition has been funded with a combination of long-term borrowings and existing cash resources.
The Group also made a number of less significant acquisitions and disposals during the year. Certain of these acquisitions resulted in insignificant bargain purchase price gains.
Internal restructuring
In order for the Group's statutory structure to more closely resemble its reporting structure, the Company received shares in Bidvest Commercial Products Holdings Proprietary Limited, Bidvest Office and Print Holdings Proprietary Limited, Bidvest Property Holdings Proprietary Limited and Bidvest Properties Proprietary Limited in exchange for certain of its investments in subsidiaries. These transactions resulted in material changes to the cost of underlying investments.
Subsequent events
The Group acquired 100% of the shares of Noonan from Alchemy partners and Noonan's current management. Noonan, which is based and operates throughout the Republic of Ireland and in the United Kingdom, has established a clear leadership position with a 40-year track record of delivering high-quality integrated facility management services and solutions. Its services include soft, technical and ancillary services and range from cleaning and security to building services and facilities management. The board believes that Noonan's business model and geographic presence will be complementary to Bidvest's Services division. Several learnings can be shared and enhanced, thereby improving the Group's overall services offering. The current dual geographic footprint allows for growth optionality into Europe and further afield. South African Reserve Bank approval has been obtained. The transaction is effective 1 September 2017. The EUR175 million (R2,7 billion) purchase price was settled by way of foreign credit facilities. Three-year variable rate, euro denominated funding has been secured at an attractive rate.
Results of operations
The results of operations are dealt with in the consolidated and separate income statement, segmental analysis and commentary.
Movement in treasury shares
In terms of general authorities granted to the Company to repurchase its ordinary shares, the latest being shareholder authority obtained at the annual general meeting (AGM) of shareholders held on Monday, 28 November 2016, a maximum of 67 080 842 ordinary shares may be acquired by the Company, of which 33 540 421 may be acquired by its subsidiaries. No shares were acquired during the year (2016: Nil).
A total of 2 422 368 ordinary shares were disposed of at an average price (after deducting capital gains tax) of R113,21 per share in settlement of share options exercised by staff.
Dividends
The directors declared an interim gross cash dividend of 227 cents (181,6000 cents net of dividend withholding tax, where applicable) per ordinary share payable to ordinary shareholders recorded in the register on the record date, being Friday, 17 March 2017. The dividend was declared from income reserves.
Subsequent to year-end, the board declared a final gross cash dividend of 264 cents (211,2000 cents net of withholding tax, where applicable) per ordinary share for the year ended 30 June 2017 to those shareholders recorded in the register on the record date, being Friday, 22 September 2017. The salient dates are:
| Declaration date | Monday, 28 August 2017 |
| Last day to trade cum dividend | Tuesday, 19 September 2017 |
| First day to trade ex dividend | Wednesday, 20 September 2017 |
| Record date | Friday, 22 September 2017 |
| Payment date | Tuesday, 26 September 2017 |
The dividend will be paid out of income reserves. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.
Payments to shareholders
Approval was obtained at the last AGM for the Company to make payments which would reduce its share capital, share premium and/or reserves in terms of the Act. Other than dividends, no other such payments were made.
Special resolutions
Special resolutions were passed at the AGM held on Monday, 28 November 2016 in regard to a general authority to enable the Company to acquire its own shares, approval of non-executive directors' remuneration for the 2017 financial year and general authority to provide financial assistance to related or inter-related companies and corporations in terms of sections 44 and 45 of the Act.
Special resolutions were passed by certain subsidiaries to accommodate the acquisition of various businesses, to change their names and the general authority to provide financial assistance to related or inter-related companies and corporations in terms of sections 44 and 45 of the Act. A number of subsidiaries passed special resolutions for the adoption of a new Memorandum of Incorporation (MOI) and amendments to the MOIs.
Directorate
The following changes to the board occurred during the year:
- Carol Winifred Nosipho Molope was appointed as an independent non-executive director on 2 August 2017.
- Brian Joffe resigned as a non-executive director on 18 August 2017.
Attendance
The names of the directors who were in office during the period 30 August 2016 to 25 August 2017, and the details of board meetings attended by each of the directors are as follows:
| Director | 1 | 2 | 3 | 4 | |
|---|---|---|---|---|---|
| Independent non-executive chairman | |||||
| CWL Phalatse | ✔ | ✔ | ✔ | ✔ | |
| Independent non-executive directors | |||||
| DDB Band | ✔ | ✔ | A | ✔ | |
| EK Diack | ✔ | ✔ | ✔ | A | |
| AK Maditsi | ✔ | ✔ | ✔ | ✔ | |
| S Masinga | ✔ | ✔ | ✔ | ✔ | |
| T Slabbert | ✔ | ✔ | ✔ | ✔ | |
| NG Payne | ✔ | ✔ | ✔ | ✔ | |
| CWN Molope1 | ✔ | ||||
| Non-executive director | |||||
| B Joffe2 | ✔ | ✔ | A | ||
| Executive directors | |||||
| AW Dawe | A | ✔ | ✔ | ✔ | |
| NT Madisa | ✔ | ✔ | ✔ | ✔ | |
| GC McMahon | ✔ | ✔ | ✔ | ✔ | |
| HP Meijer | ✔ | ✔ | ✔ | ✔ | |
| LP Ralphs | ✔ | ✔ | ✔ | ✔ |
Meeting dates: 1 – 28 November 2016 (scheduled) 2 – 24 February 2017 (scheduled) 3 – 26 May 2017 (scheduled) 4 – 25 August 2017 (scheduled) |
✔ Attended in person, by video-conference or tele-conference. A Apologies tendered. 1 Appointed 2 August 2017. 2 Resigned 18 August 2017. |
Directors' interests
The aggregate interests of the directors in the share capital of the Company at 30 June 2017 were:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Beneficial | 175 178 | 326 435 | ||
| Non-beneficial | 1 020 596 | 1 370 596 | ||
| Held in terms of The Bidvest Incentive Scheme | ||||
| Replacement rights | 428 448 | 605 948 | ||
| Shares | – | 148 743 |
Directors' shareholdings
Beneficial
The individual beneficial interests declared by the current directors and officers in the Company's share capital at 30 June 2017, held directly or indirectly, were:
| 2017 Number of shares |
2016 Number of shares |
|||||||
|---|---|---|---|---|---|---|---|---|
| Director | Direct | Indirect | Direct | Indirect | ||||
| AW Dawe | 3 465 | – | 3 465 | – | ||||
| B Joffe | 21 544 | – | 21 544 | – | ||||
| HP Meijer | 35 245 | 4 000 | 35 245 | 4 000 | ||||
| LP Ralphs | 110 924 | – | 262 181 | – | ||||
| Total | 171 178 | 4 000 | 322 435 | 4 000 | ||||
Held in terms of The Bidvest Incentive Scheme
The Bidvest Incentive Scheme granted loans to staff and executive directors for the acquisition of shares in the Company. The scheme was concluded in the current year and loans were repaid.
| 2017 | 2016 | |||||||
|---|---|---|---|---|---|---|---|---|
| Number of shares |
Carrying value of loan R'000 |
Number of shares |
Carrying value of loan R'000 |
|||||
| LP Ralphs | – | – | 148 743 | 13 473 | ||||
| Total | – | – | 148 743 | 13 473 | ||||
In addition to the aforementioned holdings:
- B Joffe is a trustee and potential beneficiary of a discretionary trust holding 559 960 shares (2016: 909 960).
- CA Brighten (company secretary) is a trustee of the Group's retirement funds holding 460 636 shares (2016: 460 636).
The interests of the directors remained unchanged from the end of the financial year to the date of this report.
Directors' remuneration
The remuneration paid to executive directors while in office of the Company during the year ended 30 June 2017 is analysed as follows:
| Director | Basic remuneration R'000 |
Other benefits and costs R'000 |
Retirement/ medical benefits R'000 |
Cash incentives R'000 |
Total emoluments R'000 |
|
|---|---|---|---|---|---|---|
| AW Dawe | 4 487 | 76 | 263 | 3 347 | 8 173 | |
| NT Madisa | 3 027 | 89 | 272 | 2 324 | 5 712 | |
| GC McMahon | 1 672 | 154 | 218 | 1 409 | 3 453 | |
| HP Meijer | 3 237 | 164 | 397 | 2 606 | 6 404 | |
| LP Ralphs | 9 164 | 912 | 825 | 7 227 | 18 128 | |
| 2017 total | 21 587 | 1 395 | 1 975 | 16 913 | 41 870 |
Certain executive directors serve as non-executive directors of companies outside of the Group. Directors' fees in this regard are paid to the Group.
For comparative purposes the remuneration paid to executive directors, while in office of the Company during the year ended 30 June 2016, is analysed as follows:
| Director | Basic remuneration R'000 |
Other benefits and costs R'000 |
Retirement/ medical benefits R'000 |
Cash incentives R'000 |
Total emoluments R'000 |
|
| BL Berson (resigned 23 May 2016) | 11 748 | 253 | 368 | 13 625 | 25 994 | |
| DE Cleasby (resigned 23 May 2016) | 3 693 | 495 | 439 | 4 858 | 9 485 | |
| AW Dawe | 4 119 | 148 | 381 | 3 000 | 7 648 | |
| B Joffe1 (resigned as executive and appointed as non-executive director) | 16 012 | 1 755 | 873 | 17 518 | 36 158 | |
| NT Madisa | 2 751 | 84 | 248 | 1 800 | 4 883 | |
| GC McMahon | 1 494 | 144 | 196 | 1 250 | 3 084 | |
| HP Meijer1 (appointed executive director 23 May 2016) | 232 | 12 | 29 | 2 500 | 2 773 | |
| LP Ralphs | 9 110 | 942 | 772 | 9 400 | 20 224 | |
| 2016 total | 49 159 | 3 833 | 3 306 | 53 951 | 110 249 |
1 Not considered a prescribed officer prior to this date.
| Paid by continuing operations | 29 532 | 3 580 | 2 938 | 17 950 | 54 000 | |
| Paid by discontinued operations | 19 627 | 253 | 368 | 36 001 | 56 249 |
The remuneration paid to non-executive directors while in office of the Company during the year ended 30 June 2017 is analysed as follows:
| 2017 | ||||||
|---|---|---|---|---|---|---|
| Director | Directors' fees R'000 |
As directors of subsidiary companies and other services R'000 |
Total emoluments R'000 |
2016 Total R'000 |
||
| DDB Band | 551 | – | 551 | 881 | ||
| EK Diack | 808 | 775 | 1 583 | 1 684 | ||
| B Joffe | 203 | 4 000 | 4 203 | 407 | ||
| AK Maditsi | 535 | – | 535 | 400 | ||
| S Masinga | 582 | – | 582 | 603 | ||
| NG Payne | 1 296 | 873 | 2 169 | 2 557 | ||
| CWL Phalatse | 1 350 | – | 1 350 | 1 120 | ||
| T Slabbert | 562 | – | 562 | 566 | ||
| 5 887 | 5 648 | 11 535 | 8 218 | |||
| Former directors | – | – | – | 1 914 | ||
| 2017 total | 5 887 | 5 648 | 11 535 | 10 132 | ||
| 2016 total | 7 026 | 3 106 | 10 132 | |||
Prescribed officers
Due to the nature and structure of the Group and the number of executive directors on the board of the Company, the directors have concluded that there are no prescribed officers of the Company.
Directors' long-term incentives
Details of the directors and officers' outstanding replacement rights are as follows:
| Replacement rights at 30 June 2016 |
Replacement rights granted during the year |
Replacement rights exercised |
Replacement rights at 30 June 2017 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Number | Average price R |
Number | Average price R |
Number | Market price1 R |
Number | Average price R |
|||
| AW Dawe | 133 066 | 267,27 | – | – | – | – | 133 066 | 267,27 | ||
| NT Madisa | 118 566 | 266,49 | – | – | – | – | 118 566 | 266,49 | ||
| GC McMahon | 76 250 | 258,30 | – | – | 15 000 | 267,03 | 61 250 | 271,44 | ||
| HP Meijer | 158 066 | 252,43 | – | – | 42 500 | 257,27 | 115 566 | 269,29 | ||
| LP Ralphs | 120 000 | 61,75 | – | – | 120 000 | 410,59 | – | – | ||
| 605 948 | 221,42 | – | – | 177 500 | 361,75 | 428 448 | 268,19 | |||
| Company secretary | ||||||||||
| CA Brighten | 28 078 | 253,05 | – | – | 7 500 | 237,27 | 20 578 | 262,26 | ||
| 634 026 | 222,82 | – | – | 185 000 | 356,70 | 449 026 | 267,92 | |||
1 Value of share/replacement right on exercise of replacement rights
Refer to note 27 of the financial statements for further details.
A share appreciation right (SAR) is a right awarded subject to the appreciation of Company's shares.
| SARs at 30 June 2016 |
SARs granted during the year |
SARs exercised |
SARs at 30 June 2017 |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Company secretary | Number | Average price R |
Number | Average price |
Number | Market price R |
Number | Average price R |
||
| CA Brighten | – | – | 14 000 | 146,41 | – | – | 14 000 | 146,41 | ||
These SARs are exercisable over the period 1 July 2019 to 31 December 2023. A detailed register of SARs outstanding by tranche is available for inspection at the Company's registered office.
Share-based payment expense
| Director | 2017 Normal R'000 |
2016 Normal R'000 |
2016 Accelerated vesting R'000 |
|||
|---|---|---|---|---|---|---|
| AW Dawe | 3 687 | 2 869 | 9 | |||
| NT Madisa | 3 086 | 2 483 | – | |||
| GC McMahon | 1 834 | 1 483 | – | |||
| HP Meijer | 3 710 | 292 | – | |||
| LP Ralphs | 3 920 | 6 700 | 5 150 | |||
| Former directors | – | 22 671 | 18 086 | |||
| 16 237 | 36 498 | 23 245 | ||||
| Relating to continuing operations | 16 237 | 30 257 | ||||
| Relating discontinued operations | – | 6 241 | 23 245 |
Details of directors and officers' outstanding conditional share plan (CSP)
A conditional award is a conditional right to a share, which is awarded subject to performance and vesting conditions.
| Director | Balance at 30 June 2016 Number |
New awards Number |
Exchanged for replacement rights Number |
Forfeited* Number |
Shares awarded Number |
Closing balance 30 June 2017 Number |
||
|---|---|---|---|---|---|---|---|---|
| AW Dawe | – | 28 000 | – | – | – | 28 000 | ||
| GC McMahon | – | 12 000 | – | – | – | 12 000 | ||
| LP Ralphs | 35 000 | 174 280 | (35 000) | – | – | 174 280 | ||
| NT Madisa | – | 20 000 | – | – | – | 20 000 | ||
| HP Meijer | – | 22 000 | – | – | – | 22 000 | ||
| Total | 35 000 | 256 280 | (35 000) | – | – | 256 280 |
* Forfeited as a result of targets not being met.
Summary of executive directors' long-term incentives (LTIs) including CSPs
| Director | Share-based payment expense R'000 |
Benefit arising from the exercise* of options R'000 |
Benefit arising from award of CSP R'000 |
Gross benefit R'000 |
Previous share-based payment expense in respect of awards R'000 |
Actual LTI benefit R'000 |
|
|---|---|---|---|---|---|---|---|
| 2017 | |||||||
| AW Dawe | 3 687 | – | – | 3 687 | – | 3 687 | |
| NT Madisa | 3 086 | – | – | 3 086 | – | 3 086 | |
| GC McMahon | 1 834 | 4 005 | – | 5 839 | (1 027) | 4 812 | |
| HP Meijer | 3 710 | 10 934 | – | 14 644 | (2 945) | 11 699 | |
| LP Ralphs | 3 920 | 91 865 | – | 95 785 | (6 179) | 89 606 | |
| 2017 total | 16 237 | 106 804 | – | 123 041 | (10 151) | 112 890 | |
| 2016 | |||||||
| BL Berson | 11 309 | – | 40 094 | 51 403 | (22 551) | 28 852 | |
| DE Cleasby | 6 122 | – | 23 619 | 29 741 | (12 976) | 16 765 | |
| AW Dawe | 2 878 | – | 8 079 | 10 957 | (3 147) | 7 810 | |
| B Joffe | 23 326 | 11 408 | 80 921 | 115 655 | (47 424) | 68 231 | |
| NT Madisa | 2 483 | 3 920 | – | 6 403 | (872) | 5 531 | |
| GC McMahon | 1 483 | 2 269 | – | 3 752 | (661) | 3 091 | |
| HP Meijer | 292 | 3 958 | – | 4 250 | (2 458) | 1 792 | |
| LP Ralphs | 11 850 | – | 42 487 | 54 337 | (23 854) | 30 483 | |
| 2016 total | 59 743 | 21 555 | 195 200 | 276 498 | (113 943) | 162 555 |
* Includes taxable benefits arising on the sale of shares and settlement of The Bidvest Incentive Scheme loans.
Directors' service contracts
Directors do not have fixed-term contracts.
Directors and officers' disclosure of interest in contracts
During the financial year, no contracts were entered into in which directors and officers of the Company had an interest and which significantly affected the business of the Group. The directors had no interest in any third party or company responsible for managing any of the business activities of the Group.
Secretary
During the year under review and in compliance with paragraph 3.84(h) of the JSE Listings Requirements, the board evaluated Mr CA Brighten, the company secretary, and is satisfied that he is competent, suitably qualified and experienced. Furthermore, since he is not a director, nor is he related or connected to any of the directors, thereby negating a potential conflict of interest, it was agreed that he maintains an arm's length relationship with the board.
The business and postal addresses of the secretary, which are also the registered addresses of the Company, are Bidvest House, 18 Crescent Drive, Melrose Arch, Melrose, Johannesburg, 2196 and PO Box 87274, Houghton, 2041, respectively.