Food services specialist Bidcorp remains a portfolio staple for investors wanting a well-diversified rand hedge offering that has steady growth prospects over the longer term. Compared with the JSE’s other, perhaps more illustrious, global businesses, Bidcorp is a real meat-and-potatoes option — stodgy and steady enough to sustain a dividend policy that keeps shareholders satiated.
Last month the group underlined its dependable nature by serving up another solid performance in its latest half-year results to end-December. CEO Bernard Berson was keen to highlight that 2026 marks 10 years since the company was unbundled from the Bidvest business, and when investors scan some of the 10-year charts in the results presentation, it is reassuring to see the half-year result is replicated numerous times over the past decade.
This time around, headline earnings fattened by 6.9% in constant currency terms for the half year and have increased at a compound annual growth rate of 10% since the spin-off. Though there were some down years during the Covid pandemic, the trend is very much a gentle upward slope, with consistent growth compounded year over year. Headline earnings for the full year in 2016 were R10.80 a share, and for this most recent half year they were at R13.25. Annualised, these earnings will be more than double the 2016 level. Full-year results will be out in September.
Of course, when a business spans multiple geographies across the globe, there are always going to be some pluses and minuses across it. The Australia and New Zealand business, which had been the star performer of the group for a long time, has struggled in recent times. While the business is still performing, it is just not hitting the heights it previously reached. The New Zealand economy has been in a really tough spot after Covid; Australia, the much larger neighbour, has seen its economy hold up better. But with inflation on the rise again and a recent interest rate hike and more hikes predicted in 2026, a return to star performer status looks unlikely in this geography. Despite the slowing growth profile, this division still delivers the best trading margin of any division at 7.4%, more than double Bidcorp’s UK trading margin.
These days it is Europe that is Bidcorp’s star performer, with revenue growth in the past half-year at 7.6% and trading profit up 11.7% as the trading margin improved from 5.6% to 5.9%. Berson called out Eastern and Southern European countries as delivering better results than those in Western Europe. This is a good read across for some JSE property real estate investment trusts (Reits), which have been on a spending spree in places such as Spain and Poland over the past few years. These economies are experiencing good economic growth, which is being reflected in capital flows from the Reits and showing up in the numbers through consumer, government and business spending in Bidcorp’s results.
These days it is Europe that is Bidcorp’s star performer, with revenue growth in the past half-year at 7.6% and trading profit up 11.7%
Emerging markets cover a wide range of countries, from South Africa to China and from Chile to the Middle East. Obviously the ongoing situation in the Middle East is a net negative for Bidcorp, but its highly diversified geographic and end-customer base will broadly insulate the overall business. Notably, from this division South Africa was cited as one of the better-performing countries. With nascent signs of improving economic growth showing in the country along with that of some other countries in the emerging market division, there should be good growth in this segment for the remainder of 2026.
The UK remains the weakest division, with trading margins well below those of other divisions, at sub-4%. The general macro environment in the UK after Brexit has kept the economy in the doldrums for a decade. This was compounded by Covid disruptions and the inflationary aftermath. The most recent austerity budget, as well as affordability pressures, have left little room for discretionary spending by consumers and a sharp focus on all costs for business and government customers of Bidcorp alike. Berson says management is working hard to optimise the business and improve operations, but it’s likely that in order to get some decent improvements in the trading margin, the macro environment will need to be far more positive than it is now in the UK. This does seem a remote possibility at this time.
The Bidcorp share price has lagged the JSE over the past year and is negative on an absolute rolling 12-month basis, which is not altogether surprising given that most investors would have Bidcorp down as a solid rand hedge share with the majority of its operations outside South Africa. A strong rand will hold back the share price.
However, with earnings growth still coming through, the valuation has fallen into the mid-teens on an earnings multiple basis, which is on the low end of where Bidcorp has historically traded. Berson touched on this during the investors’ call, saying that share buybacks were a possibility, as are higher dividend payout ratios to return capital to shareholders. It’s possible Bidcorp’s dividend growth will be ahead of earnings growth. Capital expenditure is expected to moderate after a period of higher-than-normal investment, which should free additional cash for capital management.
Overall, Bidcorp remains a solid rand hedge share that is looking attractive based on historical valuations compared with current ones. While the stock will never shoot the lights out, it does provide some excellent ballast to a portfolio for investors who don’t want to own fixed income but want something to dampen down volatility in an equity portfolio. The current dividend yield is approaching 3% and also doesn’t look that low compared with developed market bond yields.
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