Bidcorp: global unicorn
With the release of results by Bidcorp yesterday, I couldn’t help but dig into a company that has achieved something almost unheard of on the JSE: a successful global expansion campaign.
South Africa is only a small part of Bidcorp now. This also means that a period of rand strength isn’t great for this stock, highlighting an issue facing many local companies that positioned themselves for an ever-weakening rand that appears to have stopped weakening.
But before we get into that, I have two new podcasts for you to enjoy.
The first is a look at the tourism sector in Investec’s excellent No Ordinary Wednesday podcast. Host Jeremy Maggs and Investec economist Lara Hodes unpack whether momentum in the sector will translate into investment, jobs and sustained growth. This podcast is only 12 minutes of your time and promises great insights.
For something different, you may be interested in Magic Markets - a podcast that I’ve been hosting with macroeconomic expert Mohammed Nalla for nearly 300 episodes! In the latest example, he took us through the US inflation print in detail, while I talked about insights into inflation from recent SENS announcements on the JSE. Get it on YouTube here or add it to your weekly podcast schedule on Apple Podcasts or Spotify.
On Unlock the Stock, we look forward to welcoming CA&S to the platform on 3 September. Remember, attendance is always free, but you must register. Put on your analyst hat for the day and engage with management on the call.
Enjoy the rest of the goodies today!
Ghost Bites: Making sense of SENS
Bidcorp is the food service giant that was originally in the Bidvest stable. The business model is simple at its core: act as a supply chain and procurement solution for the restaurant and hospitality industries. As a restaurant, you need to buy numerous ingredients each day. Bidcorp makes that much easier by offering a catalogue of food and related products along with a consolidated delivery service.
Think of it as online grocery shopping, but for restaurants and hotels.
This model works beautifully because of the lack of client concentration risk. Restaurants come and go all the time, but Bidcorp sits further up the value chain and benefits from broader industry growth rather than reliance on a specific franchise or brand.
Bidcorp has used bolt-on acquisitions to build this international footprint. This is my favourite kind of deal, akin to adding a few bricks to a Lego house rather than starting an unrelated set on a different part of the carpet. It’s far less risky to add to an existing structure than it is to start something from scratch.
The results for the year ended June 2026 reflect reasonable underlying growth. Revenue was up by 5.0% and trading profit increased by 8.2%, so there’s evidence of operating leverage here (a higher percentage growth rate in profits than in revenue).
Keep in mind that this leverage came through in a period of heightened fuel costs, showing how successfully Bidcorp can pass pricing pressure on to its clients.
The problem is that these are both constant currency measures. Due to Bidcorp’s global positioning, a period of strength for the rand makes a huge difference. The numbers reported in rand terms show revenue up by 2.8% and trading profit up 6.5%.
The operating leverage is still there, but the overall growth isn’t as inspiring once translated to rand.
To finish off on the main numbers, HEPS was up by 6.8% in constant currency, or 5.4% as reported. The dividend per share increased by 6.9% and the group repurchased just under 1% of shares in issue for R1.1bn.
It’s worth mentioning that most of the revenue growth in this period was thanks to market share gains. The group highlights only a “limited benefit” from acquisitions, food inflation and consumer spend. They are specifically referring to new acquisitions though, not the legacy acquisitions that built the group. Bolt-ons are still firmly part of the strategy here.
In fact, it says something about the dealmaking culture at the group that this period of limited acquisitions still saw five deals being completed. Most companies won’t do five deals in their lifetimes!
The reason for this relatively light period of dealmaking (by Bidcorp’s standards) is that pricing expectations have been high for assets, forcing them to rather walk away from deals than overpay for them. This is the kind of discipline that investors want to see.
Bidcorp is certainly ready and willing to do deals at the right price, with net debt to equity of just 8% and EBITDA interest cover of 25x.
On the topic of capital allocation, I also love their comment around investment in technology, with the group noting that they “remain mindful that technology is not a substitute for effective operational management”. Amen.
Cash generated from operations was up by 17.7%. The company clawed back some lost ground in working capital, evidenced by 118% of EBITDA being turned into cash.
There are non-cash items that affect EBITDA, but the primary way to achieve cash conversion of over 100% is if your working capital (e.g. cash tied up in debtors and inventory) has improved. Bidcorp managed to reduce its working capital cycle from 8 days to 5 days, which means they spit cash out of the system much faster than before.
Having a deeper look at the geographical split, the largest exposure is Bidfood Europe with 38.4% of group revenue. The margin story here is excellent, as revenue growth of 5.0% was enough to drive trading profit growth of 13.3% (both in constant currency). When your largest operation is also heading the right way in terms of margins, everyone is having a good time.
Bidfood UK is 28.7% of group revenue. Margins are lagging here, with trading margin of just 4.0% (vs. Europe for example at 6.0%). But there are positive signs here for margins, with constant currency growth of 6.9% in revenue and 12.3% in trading profit.
Any efforts to improve UK cuisine should be applauded.
Bidfood Australasia is 18.8% of group revenue. Dodging dangerous spiders with every delivery pays well, as the trading margin of 8.2% makes this the juiciest segment in terms of unit economics. The margin is under pressure though, as constant currency revenue growth of 4.2% was watered down to trading profit growth of just 2.0%. Bidfood believes that conditions are improving in that market, but investors will to watch out for the margin reverting to the levels seen in other markets.
Finally, we get to Bidfood Emerging Markets, contributing 14.1% of group revenue. South Africa is just one part of this segment, showing you the extent to which they’ve moved beyond the home market. The Middle East is also in here, so it wasn’t a great period for obvious reasons, although markets like Malaysia, Chile and Argentina posted decent growth. Revenue growth in constant currency was 2.2%, while trading profit was perfectly flat.
The guidance for FY27 is that a normal working capital cycle is anticipated, which means absorption in H1 heading into the festive season and then a release in H2. Or, in simple terms, they need the flex on the balance sheet to prepare the group for peak season trading. As the cash from peak season is collected, the pressure on the balance sheet relaxes.
The group notes that FY27 off to a good start overall, with a modest uptick expected in food inflation.
With a 10% HEPS CAGR since 2016, Bidcorp has been a solid performer over the past decade. But the share price has been a range-bound story for the past few years, with a total return over 3 years of under 13%.
On a dividend yield of 2.8%, shareholders need decent share price growth to achieve appealing returns. In recent years, Bidcorp has needed to grow into its lofty multiple, with the P/E currently at 16x (vs. the average over 3 years of 18.7x according to TIKR data).
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Selected Nibbles:
Discovery’s trading statement for the year ended June 2026 guides normalised HEPS growth of between 18% and 23%. Both Discovery South Africa and the Vitality composite were strong contributors here. When results come out on 3 September, I’ll be keen to see how the bank is doing.
Blu Label Unlimited’s financials for the year ended May 2026 cover the period in which Cell C was spun out and separately listed. As usual, Blu Label has provided endless inspiration for the most sadistic Fin Acc IV lecturers, while confusing anyone else who picks up the financials. In this period, revenue fell by 7%, EBITDA was down 397% and core HEPS tanked by 81%. But there are numerous underlying items to be adjusted. The normalised numbers suggest HEPS of 75.33 cents and a total dividend for the year of 53.56 cents. This puts the group on a dividend yield of around 6.6% - probably the only number that most people in the market will ever understand in Blu Label’s financials.
Metair has described its strategic reset as “substantially complete” and the balance sheet as “stabilised” – words that investors will be happy to see. Although revenue as reported was up by 1%, the real story is that you would need to adjust for the timing of the Hesto revenue. If you adjust the base accordingly, then group revenue would’ve declined by over 9%, which management describes as being the result of lower volumes from a major local OEM customer in the automotive segment. This makes it even more impressive that EBIT was up by 1%, while HEPS from continuing operations was up by 4%. Metair remains a difficult story, with new vehicle sales growth masking the reality for Metair’s customer base. Local new vehicle sales are being driven by imports, with the local OEM sector fighting for survival with growth of just 1% in volumes. This is exactly why Metair has pushed into the aftermarket segment with the acquisition of AutoZone, but that business has been running roughly six months behind the turnaround schedule.
Transpaco’s results for the year ended June 2026 can best be described as resilient, as the revenue growth was just 0.7%. Plastics revenue was up by 4.0%, but Paper was down by 2.8%. The group managed to increase HEPS by 6.8%, driven by an uptick in operating margin from 8.7% to 8.9%. The industrial base in South Africa remains a source of great concern for our economy, as these companies cannot achieve great cost control into perpetuity. We need to see some top-line action.
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Global markets update with Shaun Murison
US markets closed mixed overnight as investors awaited NVIDIA's results, which delivered on expectations. The chipmaker has since traded firmer in after hours dealings, gaining around 5%, lifting sentiment into the Asian session where chipmakers are leading regional gains this morning.
Core PCE inflation data released yesterday came in slightly firmer than expected, though this has done little to dent the improved risk appetite.
Brent crude is softer this morning, the dollar is weaker, and gold is firmer, a combination consistent with a short term risk on tone across asset classes.
Locally, the rand is steady and the JSE All Share Index is expected to open firmer, tracking the positive lead from Asia and Wall Street's after hours strength.
On the calendar today, markets await US initial jobless claims, while the Jackson Hole Symposium gets underway, likely to keep participants attentive to any signals on the path for US monetary policy.
This update is provided by Shaun Murison, Senior Market Analyst at randswiss.com. Connect with him on LinkedIn here and follow him on X here.
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