BID CORPORATION LIMITED - Capital Markets Trading Update Q1 F2021

            
BID
Capital Markets Trading Update Q1 F2021

Bid Corporation Limited
(Incorporated in the Republic of South Africa)
Registration number: 1995/008615/06
Share code: BID
ISIN: ZAE000216537
(Bidcorp or group or the company)

CAPITAL MARKETS TRADING UPDATE Q1 F2021

Shareholders are advised Bidcorp today, Tuesday November 17th, wishes to
update the market on the trading environment across its operations. This is in
terms of Bidcorps requirement of continuous disclosure in terms of the JSE
Listings Requirements.

Management comments as follows:

Employees

Our employees continue to be our top priority in terms of securing their health,
well-being and where possible, maintaining their incomes in the face of the
fallout from the global COVID-19 pandemic (COVID). We have seen limited
cases of infections within our various businesses around the world, which are
managed within strict business best practices and local government
requirements. None of these infections have materially impacted on our ability
to operate.

We are conscious this is a stressful and difficult time for all our people and are
offering help where we are able. We continue to work with our customers and
suppliers in navigating the crisis and plotting the way forward.

Overall market conditions

Where lockdown restrictions have been eased, we have seen demand in the
discretionary spend sectors recover, however any businesses associated with
large crowds, such as entertainment, sports events, business travel,
conventions and conferences, aviation and the cruise line industry remain
largely shuttered. The requirement of major institutions, many of whom are in
large inner capital cities, for employees to work from home has reduced activity
levels of our national customers. Some of this activity has shifted into suburban
areas and more rural locations as people continue to seek out eating-away-
from-home opportunities.

Most independent customers have reopened and have been able to adapt to
the varying economic conditions relatively well. The recovery of our larger
national customers has been much slower and activity levels remain subdued.
Our diversification into the home delivery new channel in a few businesses has
reduced as activity has returned in our traditional channels, however we have
continued to supply some products into independent retail related channels.
The overall contribution of these initiatives is small and remains generally non-
core.

Non-discretionary demand from our institutional customers, including serving
hospitals, aged care, prisons, the military, and government departments has
continued and is relatively stable.

Our governmental support programs in several countries to provide food and
care packages to the most vulnerable members of society via home delivery,
have ceased in most jurisdictions.

Current trading performance

The financial year started relatively well, with most geographies seemingly
coming out of the worst of the COVID crisis, with July showing a strong financial
performance, particularly in Europe and UK. Unfortunately, this started
deteriorating in August and has worsened with Europe and UK now firmly in the
grip of a harsh second wave that is showing little sign of easing. This is having
a significant impact on us once again. Fortunately, we are a diversified
business, with Australia, New Zealand and Asia doing well, and our other
Emerging Market constituents continuing to improve on a month-to-month
basis.

Group sales (in constant currency) for the financial year to date peaked in the
week ended August 2nd at 87% versus the corresponding week in F2020 but
had eased to 71% of the corresponding weekly sales for the week ended
November 8th.

All our businesses continue to fully operate in each geography however each
country is at a different stage of the COVID crisis. Sales progression by division
and for the group as a whole, between the period July 1st and November 8th as
shown in the table below, reflects the different stages of the COVID impact on
our markets.

TABLE: Constant currency sales progression by division for the 19-week
       period from week-ended July 5th to November 8th:
        Week-
                       AUS          UK         EUR          EM        GROUP
        ended:
         05-July        88%        63%         75%         78%          75%
         12-July        94%        65%         77%         74%          77%
         19-July        91%        69%         83%         75%          80%
         26-July        91%        78%         84%         76%          83%
         02-Aug         92%        83%         90%         82%          87%
         09-Aug         91%        74%         86%         75%          82%
         16-Aug         86%        78%         92%         85%          86%
         23-Aug         84%        71%         86%         83%          81%
         30-Aug         84%        84%         78%         78%          81%
         06-Sep         92%        72%         83%         93%          84%
        Week-          AUS           UK        EUR            EM       GROUP
        ended:
         13-Sep        90%           72%       83%            83%        82%
         20-Sep        91%           72%       84%            93%        84%
         27-Sep        91%           73%        %
                                               80%            98%        84%
         04-Oct        93%           69%       76%            88%        80%
         11-Oct        96%           67%       75%            94%        81%
         18-Oct        93%           67%       68%            84%        77%
         25-Oct        94%           67%       58%            89%        75%
         01-Nov        89%           61%       54%            95%        72%
         08-Nov        95%           60%       48%            95%        71%

       * Please note that weekly comparatives to last year should be viewed as a
         trend as the timing of public holidays, school holidays and other events
         can have an impact on any one week in isolation.

      Australasia (AUS) - Sales have fluctuated between 84% and 96% of
       F2020 demand despite localised lockdowns in both Auckland (New
       Zealand) and Victoria (Australia) over the period.

      United Kingdom (UK) - Bidfood UK sales improved through the
       summer period assisted by the Shield Pack business in July, the Eat
       out to Help Out scheme in August and the return of the education sector
       in September. Fresh UK sales in September were 57% of last year, down
       from 61% in August. However as reported COVID cases increased,
       sales in our UK operations decreased in October and November as local
       and national restrictions began to bite.

      Europe (EUR) - Sales reached a low of 48% of the F2020 activity levels
       in the week of November 8th as the second wave of lockdowns limited
       activity across EUR from mid-October onwards, and this looks likely to
       continue through the winter.

      Emerging Markets (EM) - Other than in Greater China where the
       recovery was quick, the COVID pandemic has had a much longer and
       deeper impact in our EM region. However, through the quarter, sales in
       EM have continued to improve, particularly in South Africa and Turkey.
       Angliss Greater China has tracked at or better than the comparative
       Q1 F2020.

Currency volatility has positively impacted our rand-translated results and will
remain a significant factor for the remainder of F2021. Currency movements for
Q1 F2021 are shown below:

                          Q1 F2021             Q1 F2020
                                                                    % change
                       Average FX rate      Average FX rate
        AUD:ZAR              12,09               10,27                17,7
        EUR:ZAR              19,76               16,30                21,2
        GBP:ZAR              21,84               18,07                20,8

Our group gross profit percentage for the Q1 F2021 has been maintained at
similar levels to the comparative quarter in F2020, benefitting from the mix of
smaller independent customers, however under a little pressure in certain
businesses who are driving market share gains.

Throughout the crisis, our focus has been on making sure that our businesses
retain as much human capital capacity and internal IP as we are able, in order
to scale-up as activity levels return, as we have seen quickly happen across
many regions in which we operate. To enable us to retain the muscle of the
businesses, we have continued to access various government wage assistance
schemes in jurisdictions where we are eligible to do so, in order to protect as
many of our staff as possible. Unfortunately, this hasnt negated the need to
furlough some employees and permanently reduce headcount where
restructuring was required.

With lower levels of activity, operating costs as a percentage of net revenue
increased from 18,8% to 19,5%. In the quarter, constant currency operating
expenditure (opex) declined by 14,2% compared to a constant currency
revenue decline of 17,1%. We estimate that 35% to 40% of the cost base is
relatively fixed so we will not see a linear reduction in opex as revenues decline,
particularly where the onset of the resurgent spread of the virus as in the UK
and Europe results in rapid and sudden lockdowns imposed by governments.

For Q1 F2021, the group made a pleasing EBITDA (Earnings Before Interest,
Tax, Depreciation and Amortisation) equivalent to 5,2% of monthly net revenue
compared to 5,9% in Q1 F2020.

Non-IFRS 16 finance charges were 12,7% higher in Q1 F2021 driven up by the
forex translation impact and imputed interest on the DAC put option. Excluding
these impacts, real net finance charges were lower by 20% arising out of the
benefits of lower capex and better working capital management.

Working capital days are better by 8 days in Q1 F2021, a great result achieved
by our operations despite a few areas of anticipated absorption. Our inventories
are in good shape, customers are generally paying well, and our payable terms
are normalised.

We completed a sale & leaseback of a Hong Kong property for HK$325 million
and will conclude on two other properties in the next few months. These asset
sales are part of our property maximisation strategy in terms of end-of-useful-
life properties, where we are taking advantage of very low yields currently being
achieved in many markets on industrial property.

Free cash flow (excluding dividends but after operating cashflows, working
capital and capex) for Q1 F2021 amounted to an inflow of R1,2 billion, some
R2,6 billion better than the comparative Q1 F2020. This has been achieved by
improved cash generated from operations (after working capital), capex in line
with depreciation and proceeds received on the sale of the Hong Kong property
in August.
Cashflow evolution since March 2020

As at March 31st 2020 the groups net debt was #338 million. Through April
and May during the initial strict government lockdowns, cashflow was
aggressively managed which resulted in net debt levels being maintained. As
markets reopened from June onwards, group sales improved from week-to-
week which resulted in excellent cash generation through to August. Net debt
levels during October and November are stable at levels around #175 million
to #185 million, but approximately #200 million better when compared to the
prior year.

Liquidity

Our priority remains to ensure that our operations have sufficient liquidity for
their respective requirements. We believe that the group has sufficient liquidity
for the foreseeable future. The group and its subsidiaries have as at
September 30th, cash and cash equivalents of R7,2 billion (#336,1 million),
gross borrowings of R11,7 billion (#540,9 million) of which R6,7 billion is short
term. Total headroom available, including uncommitted facilities and cash and
cash equivalents, is R21,6 billion (#998,9 million).

Debt covenants
The groups debt covenants sit at 2,5x net debt to EBITDA and interest cover
ratio of EBITDA to net consolidated finance costs (excluding the effects of
IFRS 16) of not less than 5x. As at September 30th 2020, the group was well
within these covenant ranges and does not believe there will be any breach
thereof for the year ending June 2021.

Update on under-performing businesses

Going into the COVID crisis we had problems in our Spain, Germany and Fresh
UK activities. We have taken remedial action with these businesses, and
although the financial numbers dont yet show it, we are well on the track to
recovery with all of them. Spain remains the largest challenge, the senior
management team has been changed, we bought out the minorities, the
business has been significantly downscaled and now we just need sales to
return. Fresh UK has also been significantly streamlined and excess costs and
capacity taken out, without diminishing its position as a specialist supplier of
seafood, meat and produce. Germany is operating effectively and once sales
return, so too will profits.

Strategic future

Bidcorps current focus is to operate at the new normal which is being dictated
by the unpredictability we are seeing in many markets arising out of the second
waves prevalent in the northern hemisphere now. It is not possible at this time
to confidently predict activity levels until we see consistent levelling off and
decline in the spread of COVID. Our businesses in UK and Europe are well
prepared to ride out the next phase of the COVID pandemic, likely to persist
through the winter months. The Group has taken steps to ensure that
management are incentivised to guide our businesses through the short-term
effects of COVID whilst seeking longer-term growth opportunities to return the
group to pre-COVID activity levels.

We continue to believe that there will not be any long-term fundamental shift in
consumer behavior of eating-away-from-home and evidence suggests that not
much has changed in those markets where normality and confidence has
returned. If anything, we are seeing growth particularly in our sweet spot target
market, namely the smaller to mid-size independent customer.

Large supply disruptions havent materialised as predicted, however for our
products imported into China the supply chain has been strained for products
sourced in Europe, USA, and South America. In most of our businesses, the
majority of product is procured locally. There is an element of disruption
currently being experienced in global shipping and container availability, and
we continue to adapt our procurement as necessary.

No significant acquisitions in the foodservice space have become evident yet,
however we believe economic conditions will result in opportunities coming to
market. The ability to explore opportunities in new markets remains hindered
by the general prohibition on international travel into and from many parts of the
world. In existing markets, we are confident we are gaining market share
against competitors, many of whom do not have the financial strength of
Bidcorp. We have concluded a small in-country acquisition in the Middle East
and are looking at some potential targets in Chile, Brazil, Australia, New
Zealand, Malaysia, and Germany. We do however need to understand that
acquisitions made now are riskier than before due to the uncertainty and
disruption of the past nine months.

We have scaled back much discretionary spend in capex and other business
expenses. We are considering future investments in those jurisdictions where
activity levels have returned as the time delay between conceptualisation and
conclusion can be up to three years.

Our ecommerce platform remains a source of competitive advantage and
continues to evolve primarily to cater for our wholesale customers. Our digital
transformation journey has accelerated through this crisis, and we are seeing
some great benefits, particularly with regards to insights through data analytics,
of which we have the benefit of a multi-jurisdictional view. For retail customers,
who can either collect or elect home-delivery, this remains a fringe activity
catering to the current environment.

Comment

Bernard Berson, CE, commented as follows:

   Although our financial results are down, our motivation and confidence
   are up, and we are very fortunate to have the team that we do around
   the world running our businesses. Our competitive position is good even
   though our industry has been particularly hard hit. We believe hospitality
   will bounce back strongly and we will be ready to take advantage of
   these opportunities. In the meantime, its about a focus on long-term
   sustainability, strength, and resilience. I believe we are doing better than
   most. This is helped by our (deliberate) geographic diversity, our
   (deliberate) de-emphasising of large volume, low-margin business in
   favour of smaller to mid-size independent customers, and our
   (deliberate) decentralised and entrepreneurial approach to how we
   manage our business across 35 geographies.



The information contained in this announcement has not been reviewed or
reported on by the groups external auditors.

______________________________________________________________


Date: November 17th 2020
Johannesburg

Sponsor:     The Standard Bank of South Africa Limited

Date: 17-11-2020 09:10:00
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