Release Date: February 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 24% in rand and 11% in constant currency, indicating strong top-line growth.
- Trading profit rose by 21% in rand and 9% in constant currency, showcasing robust operational performance.
- European, Australian, New Zealand, and South African businesses delivered strong performances, contributing significantly to overall results.
- The company maintains a strong balance sheet, enabling it to take advantage of emerging opportunities.
- Management remains optimistic about continuing to deliver real growth for the rest of the financial year, despite challenging conditions.
Negative Points
- The effective tax rate increased by 2%, impacting HEPS negatively.
- The UK business faced challenges, with significant costs incurred due to the opening of new facilities.
- The economies in which Bid Corp Ltd (JSE:BID, Financial) operates are generally flat to negative, with consumer stress and cost of living crises affecting performance.
- Inflation and supply chain disruptions continue to pose challenges, adding costs and inefficiencies.
- The Chinese market showed zero growth, with food deflation impacting business performance.
Q & A Highlights
Q: Please, can you talk to the level of constant currency growth in the second half of '24 to date, given it is slowing?
A: All we can tell you is where we are now, and we're satisfied that the first six, seven weeks have continued the trend of where they were. Our spreadsheets are not as clever as your spreadsheets that can predict the future. It will be what it will be. Obviously, it gets more relevant as we get into the northern hemisphere summer. As we get into May and June, which are more important, the Easter period kicks off. And then May and June are more important. So we got no clue how that's going to pan out. And I'm not being negative, I'm just being pragmatic. Weather plays a part in it, consumer sentiment plays a part in it. As we said, at the moment, if we had to extrapolate where we are, we're very comfortable with the guidance we're giving you and where the business is striking.
Q: How are you thinking about gross and operating margins for the second half, given slowing underlying growth, but also hopefully showing inflationary pressures, excluding food inflation?
A: I think that's the same question, phrased a different way. We are seeing gross margins hold up. We are seeing some cost headwinds that we're facing. But overall, in the mix, you put it through the washing machine, and we're very satisfied where we are. And we're managing it all as best we can. On an underlying basis, we are seeing real growth in the business. There is still real volume growth coming through the business.
Q: Are there any cost-cutting initiatives to improve operating margin going forward?
A: Let me answer this, maybe I can come up with a [greatness] but you don't cut your way to greatness. And we've got real volumes growing at 5%, 6%, 7%, whatever it might be. We're investing for the future. We don't believe that the way forward in this business is to cut costs. What we believe is striving for more efficiencies. And that's a constant program that all our businesses are embarking on. And obviously, the low-hanging fruit has been taken. You look at our operating margins across most jurisdictions, they are at world-class levels. Now, could that be improved by 0.1, 0.2. 1.3, yeah, maybe. That's something that we're looking at all the time. But no, we're not about going in and cutting costs to inflate a bottom line in the short term. We're investing for growth. We're getting real growth. We're getting growth in top line and we're getting growth in bottom line. And we're making sure that we've got a sustainable business here for the medium to long term.
Q: Could you elaborate on Bidcorp's plans to enhance its reporting on emissions Scope 3?
A: I'm glad you asked the question, good question. And I think could you talk a little bit about the E part of ESG, and we're on a journey. We're absolutely on the journey. We understand that we have a responsibility. However, it's not all our responsibility. There are other stakeholders in this who need to step up to the plate as well. And then just staying on Scope 1 and 2, I will talk in particular with the Governance, particularly in the emerging market segments, where the electricity produced is exceptionally dirty and exceptionally carbon footprint heavy. In many of our developed markets, we've chosen green power, where available almost green power and supplemented that with solar wind, et cetera, where we can install that. But we can't do that all amounts and as governments have a responsibility to assist in that journey. Having said that, it's an important part of what we do. We continue to invest, and we understand the importance of being committed to reducing our footprint on the world in being a positive effector of change. As regards Scope 3, it's a very complicated issue because it's not within our control to do the reporting. There's upstream and downstream. Scope 3 emissions, our suppliers, our customers, and we're being taken on that journey in certain jurisdictions by legislation in the UK and Europe leading that. And we have obligations to start reporting that at an exceptionally difficult and subjective process that we're going through. And there's no doubt that as countries go through this, they will refine the processes and people will get better. So we will start reporting on Scope 3 where we can. If we have to tell you we can report now, we would be lying and we'd be guessing. So the numbers would be relatively meaningless. All that we do know is that Scope 3 emissions all are 95% of our total admissions. So Scope 1 and Scope 2 are relatively small. We've achieved our targets that we set a few years ago and now we're going to set more ambitious targets whilst still being realistic that we are operating the storage and distribution business that ends on refrigeration and logistics to move things around. So I do want to reiterate that the environment is important to us, but we can only control what we can control. We can only report on what is reportable, and we'll do our best to do our best. We don't want to make commitments that are not backed by science or reality. I've said before, we can commit to net zero by 2050, because of one being more problem. But that's irresponsible and it is incorrect. It is disingenuous and dishonest. So we're just not going down that path. We'll do our best to do our best.
Q: Is the GBP8 million cost of the two UK depots mentioned an annual number or for the six months?
A: It is only for the six months. Now that's going to be the higher amount, because the two depots opened in -- I don't know when -- was September, October-ish. And obviously, the most impact is upfront. We have got the maximum disruption and maximum set-up costs, et cetera. That doesn't mean they're not going to be there in the second six months. They'll be there at a lower rate. But often what numbers because of that. But it will be less than GBP8 million. It will be between GBP8 million and zero. But there are fixed cost assets that you have some inefficiency and will grow into that environment and into that infrastructure.
Q: What is your comment about conditions getting tougher? Are you suggesting that the pace of real growth will slow down in the second half?
A: Hopefully not.
Q: Could you give more context to the UK margin, the H2 and medium-term trajectory? You mentioned the structural differences of that business that we understand. But historically, it's been a 5% with the same structure in place.
A: When we see 5% as being a medium-term objective, we believe business can get back there within a period of time. But I want to commit to
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
