Bidcorp has delivered another solid set of results.
Indeed, the reliability of results from Bidcorp is such that investors may become blasé about them. It’s a case of checking the results and saying, yes, management delivered what it said on the tin, and moving on, knowing that as part of the portfolio it remains firmly tucked away in the bottom drawer for safekeeping.
Bidcorp is a core holding for many JSE investors, providing steady returns over the long term and a reliable rand hedge. Looking at the results, given the scope of the geographies the business operates in, there were some positives and negatives, but across the board, revenue grew 6.8% in constant currency terms, which is the critical revenue metric for a multicurrency business such as Bidcorp.
To compare like with like further down the income statement, we need to look at growth in constant currency headline earnings, which came in at 9.6%, so a nice operating margin was captured at the bottom of the income statement.
On the balance sheet, it remains as solid as ever and should allow investors to sleep easy at night. Bidcorp’s gearing remains low, as per management’s long-standing policy on debt, with R11bn of cash sitting in the bank.
Some refinancing occurred during the year, with the effect that the margin paid on debt decreased by 30 basis points as interest rates in most markets were cut as central banks responded to declining inflation and anaemic GDP growth. The drop in finance charges will provide a boost to earnings in financial 2026. No further material refinancing is expected, given the debt profile.
The dividend was again increased, despite the business working through a period of higher capital investment in various regions, demonstrating management’s confidence in generating future returns from this investment programme and the strength of the broader business. Indeed, the final dividend has increased from 241c to 600c over the past nine years, rising every year except during the latter part of the pandemic, when it remained steady; crucially, dividends were still paid during Covid.
This dividend stability and growth, despite some harsh operating conditions, make Bidcorp an attractive proposition for income investors. Though your starting yield today is about 2.65%, there is a reasonable chance of it growing over time, and a high degree of certainty that it will be paid.
CEO Bernard Berson believes that, despite a trading margin of 5.5% being its best yet, there is still room to grow this over the medium term. A key growth plank will be lifting the trading margin in the UK business. This business reflected a trading margin of 3.7% for the financial year just gone, up a healthy 0.4% on the prior comparative period. Berson believes this margin can be lifted to between 5% and 6% over the next five years. This will have a material impact on Bidcorp’s bottom line, given that the UK business generates R67bn in revenue, about 28% of the group’s total revenue. Thus, a 1.3% margin improvement in this geography and hitting the lower end of the aforementioned target range, over the medium term, would be meaningful.
Bidcorp’s gearing remains low, as per management’s long-standing policy on debt, with R11bn of cash sitting in the bank
The other notable geography was Australasia, which operates on a trading margin of 8%-plus, the highest of any geography in the group. It has been the star performer for years, but this was not the best year for either Australia or New Zealand, resulting in a softer result for this region.
The latest GDP numbers indicate an uptick in the Australian economy, and recent interest rate cuts are starting to take effect. New Zealand is in a brutal recession with no sign of recovery yet. However, given that Australia is by far the larger of the two economies that make up this geographical segment for Bidcorp, there is a better than even chance of getting a decent result from this region in FY26.
Bidcorp remains a solid rand hedge stock with a dependable dividend and reasonable growth profile, and should easily find a home in most investors’ portfolios. The common refrain from many investors is that it always looks expensive, but that is reflective of the quality of the business and its track record of delivery. Thus, a potential strategy for new investors or existing shareholders is to purchase some shares when the Bidcorp share price is dragged down by a broad market sell-off, which is not tied to the performance of the business.
It will be difficult to ever get a chance to buy Bidcorp at a sub-10 p:e ratio, but during broad equity market downturns an agile investor can pick up some stock on the cheap relative to where it generally trades.
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