Bidcorp profit soars on resurgent hospitality industry

Talk of the imminent demise of the tourism and hospitality industry is greatly exaggerated, international food services group Bidcorp said on Wednesday.

Group CFO David Cleasby said the company is betting on sustained momentum in SA’s hospitality and leisure sectors, with demand for travel and eating out on the rise. 

He said this is the despite energy constraints with which its largest customers have to grapple.

The food services company reported a 45.5% jump in half-year earnings, benefiting from a resurgence across the hospitality sector as pent-up demand for dining out continued through the summer.

Cleasby dismissed what he labelled as “sensationalist” reports of crumbling travel and tourism sectors around the world.

He said the Bidfood business, which serves the catering industry, hotels and restaurants locally, has done particularly well owing to a definite recovery in leisure. But he warned that operating conditions are likely to remain volatile, with ongoing staff shortages, supply chain disruptions and stubbornly high inflation. 

“If you go back to when Covid-19 first struck, people thought that was the end of eating out. That hasn’t proven to be the case,” Cleasby told Business Day.

“The markets have bounced back and the socialisation aspect and its effect on hospitality is something that is important to people. You go to any country in the world, there are people travelling and eating out, and that in a way has been mirrored in our sales, which we monitor on a weekly basis.”

The group, which operates in 35 countries across six continents, said profit soared by 48% year on year to R3.29bn. Headline earnings per share (HEPS) were up 45.5% to 971.7c, while revenue increased 28% to R91.7bn.

The board declared an interim cash dividend of 440c a share, up from 300c previously.

The performance came despite challenging operating conditions in the period, characterised by high food inflation underpinned by higher labour, energy and fuel costs. Labour scarcity, ongoing supply chain disruptions, and certain product shortages remain prevalent, CEO Bernard Berson said.

Bidcorp flagged that power outages have “wreaked havoc” on the restaurateurs who have had to navigate load-shedding as best they can.

The group said working capital came under pressure in the review period due to “the late arrival of frozen chips during the Transnet strike and strategic buy-ins of hake fillets and sugar”. 

“What we’ve seen over time is menu requirements have changed a bit. People have gone for less specialist type food and more for food that has a longer shelf life and has more uses as opposed to the fresh stuff, which doesn’t last particularly long,” said Cleasby.

Despite the anticipated slowing of discretionary spending due to tougher economic conditions, activity across the group remains positive, “with no significant evidence of a slowdown yet”, it said in a statement accompanying the earnings. 

Conversely, its Crown National business, a division of Bidcorp Africa that supplies spices, herbs, seasonings, sauces, condiments and equipment to the meat industry, struggled to avoid the effects of high inflation and low economic growth in the period.

Blackouts affected independent butcheries as well as production in the meat and chicken processing sectors, which had a ripple effect on Crown. The group said its wholesale customers had chosen to hold less inventory due to the downturn in demand.

“We are seeing a lot more pressure there,” said the CFO, adding that the spending levels in the lower LSM were not where it was before Covid-19.

“The ability of our customers to operate with this load-shedding going on is becoming tough and we’ve seen a number of customers who have closed down or are doing short runs because they just can’t manufacture with any consistency. And so that’s played some havoc in that space and that business is feeling the pressure,” said Cleasby.

Revenue across all divisions was significantly higher than the first half of the 2022 financial year, reflecting the benefits of high inflation but also representing real double-digit growth in activity, Berson said. Each division exceeded the pre-Covid levels achieved in the same period in 2020, he added.

While general seasonality resulted in a positive festive season in most territories, Berson said unfavourable weather and rail strikes did affect the UK, where it makes the bulk of its revenue, and European businesses. Still, there was some recovery in the group’s UK segment in the second quarter

“Bidcorp remains well capitalised, with headroom for further organic and acquisitive growth,” said Berson.

gumedemi@businesslive.co.za