Directors' report

The directors have pleasure in presenting their report for the year ended 30 June 2017.

Nature of business

The Bidvest Group Limited (the Company) is an investment holding company with subsidiaries operating in the services, trading and distribution industries.

Financial reporting

The directors are required by the Companies Act of South Africa (the Act) to produce financial statements, which fairly present the state of affairs of the Company and the Group as at the end of the financial year and the profit or loss for that financial year, in conformity with International Financial Reporting Standards (IFRS), the interpretations adopted by the International Accounting Standards Board, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and in terms of the requirements of the Companies Act of South Africa.

The financial statements as set out in this report have been prepared by management in accordance with IFRS and the Act and are based on appropriate accounting policies supported by reasonable and prudent judgements and estimates.

The directors are of the opinion that the financial statements fairly present the financial position of the Company and of the Group as at 30 June 2017 and the results of their operations and cash flows for the year then ended.

The directors are satisfied that the Group and Company have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements.

Share capital

During the year, the Company did not issue any share capital. In the previous financial year, 241 061 shares of 5 cents were issued at a premium of R342,57 per share in settlement of the conditional share plan awards.

Acquisitions and disposals

The Group acquired 100% of the share capital of Brandcorp Holdings Proprietary Limited (Brandcorp) with effect from 1 October 2016. Brandcorp is a value-added distributor of niche industrial and consumer products trading under the Industrial brands, Matus, Renttech, Burncrete, Moto Quip, Leisure Quip and Consumer brands, Cellini and MIC Prestige. The acquisition forms part of the Bidvest Commercial Products segment and will enable the Group to expand its range of complementary products and services provided by Bidvest Commercial Products. The acquisition has been funded with a combination of long-term borrowings and existing cash resources.

The Group also made a number of less significant acquisitions and disposals during the year. Certain of these acquisitions resulted in insignificant bargain purchase price gains.

Internal restructuring

In order for the Group's statutory structure to more closely resemble its reporting structure, the Company received shares in Bidvest Commercial Products Holdings Proprietary Limited, Bidvest Office and Print Holdings Proprietary Limited, Bidvest Property Holdings Proprietary Limited and Bidvest Properties Proprietary Limited in exchange for certain of its investments in subsidiaries. These transactions resulted in material changes to the cost of underlying investments.

Subsequent events

The Group acquired 100% of the shares of Noonan from Alchemy partners and Noonan's current management. Noonan, which is based and operates throughout the Republic of Ireland and in the United Kingdom, has established a clear leadership position with a 40-year track record of delivering high-quality integrated facility management services and solutions. Its services include soft, technical and ancillary services and range from cleaning and security to building services and facilities management. The board believes that Noonan's business model and geographic presence will be complementary to Bidvest's Services division. Several learnings can be shared and enhanced, thereby improving the Group's overall services offering. The current dual geographic footprint allows for growth optionality into Europe and further afield. South African Reserve Bank approval has been obtained. The transaction is effective 1 September 2017. The EUR175 million (R2,7 billion) purchase price was settled by way of foreign credit facilities. Three-year variable rate, euro denominated funding has been secured at an attractive rate.

Results of operations

The results of operations are dealt with in the consolidated and separate income statement, segmental analysis and commentary.

Movement in treasury shares

In terms of general authorities granted to the Company to repurchase its ordinary shares, the latest being shareholder authority obtained at the annual general meeting (AGM) of shareholders held on Monday, 28 November 2016, a maximum of 67 080 842 ordinary shares may be acquired by the Company, of which 33 540 421 may be acquired by its subsidiaries. No shares were acquired during the year (2016: Nil).

A total of 2 422 368 ordinary shares were disposed of at an average price (after deducting capital gains tax) of R113,21 per share in settlement of share options exercised by staff.

Dividends

The directors declared an interim gross cash dividend of 227 cents (181,6000 cents net of dividend withholding tax, where applicable) per ordinary share payable to ordinary shareholders recorded in the register on the record date, being Friday, 17 March 2017. The dividend was declared from income reserves.

Subsequent to year-end, the board declared a final gross cash dividend of 264 cents (211,2000 cents net of withholding tax, where applicable) per ordinary share for the year ended 30 June 2017 to those shareholders recorded in the register on the record date, being Friday, 22 September 2017. The salient dates are:

Declaration date Monday, 28 August 2017
Last day to trade cum dividend Tuesday, 19 September 2017
First day to trade ex dividend Wednesday, 20 September 2017
Record date Friday, 22 September 2017
Payment date Tuesday, 26 September 2017

The dividend will be paid out of income reserves. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.

Payments to shareholders

Approval was obtained at the last AGM for the Company to make payments which would reduce its share capital, share premium and/or reserves in terms of the Act. Other than dividends, no other such payments were made.

Special resolutions

Special resolutions were passed at the AGM held on Monday, 28 November 2016 in regard to a general authority to enable the Company to acquire its own shares, approval of non-executive directors' remuneration for the 2017 financial year and general authority to provide financial assistance to related or inter-related companies and corporations in terms of sections 44 and 45 of the Act.

Special resolutions were passed by certain subsidiaries to accommodate the acquisition of various businesses, to change their names and the general authority to provide financial assistance to related or inter-related companies and corporations in terms of sections 44 and 45 of the Act. A number of subsidiaries passed special resolutions for the adoption of a new Memorandum of Incorporation (MOI) and amendments to the MOIs.

Directorate

The following changes to the board occurred during the year:

  • Carol Winifred Nosipho Molope was appointed as an independent non-executive director on 2 August 2017.
  • Brian Joffe resigned as a non-executive director on 18 August 2017.
Attendance

The names of the directors who were in office during the period 30 August 2016 to 25 August 2017, and the details of board meetings attended by each of the directors are as follows:

Director 1 2 3 4  
Independent non-executive chairman          
CWL Phalatse  
Independent non-executive directors          
DDB Band A  
EK Diack A  
AK Maditsi  
S Masinga  
T Slabbert  
NG Payne  
CWN Molope1        
Non-executive director          
B Joffe2 A    
Executive directors          
AW Dawe A  
NT Madisa  
GC McMahon  
HP Meijer  
LP Ralphs  

Meeting dates:

1 – 28 November 2016 (scheduled)

2 – 24 February 2017 (scheduled)

3 – 26 May 2017 (scheduled)

4 – 25 August 2017 (scheduled)

✔ Attended in person, by video-conference or tele-conference.

A Apologies tendered.

1 Appointed 2 August 2017.

2 Resigned 18 August 2017.

Directors' interests

The aggregate interests of the directors in the share capital of the Company at 30 June 2017 were:

  2017   2016  
Beneficial 175 178   326 435  
Non-beneficial 1 020 596   1 370 596  
Held in terms of The Bidvest Incentive Scheme        
   Replacement rights 428 448   605 948  
   Shares   148 743  
Directors' shareholdings

Beneficial

The individual beneficial interests declared by the current directors and officers in the Company's share capital at 30 June 2017, held directly or indirectly, were:

  2017
Number of shares
  2016
Number of shares
 
Director Direct   Indirect   Direct   Indirect  
AW Dawe 3 465     3 465    
B Joffe 21 544     21 544    
HP Meijer 35 245   4 000   35 245   4 000  
LP Ralphs 110 924     262 181    
Total 171 178   4 000   322 435   4 000  

Held in terms of The Bidvest Incentive Scheme

The Bidvest Incentive Scheme granted loans to staff and executive directors for the acquisition of shares in the Company. The scheme was concluded in the current year and loans were repaid.

  2017   2016  
  Number
of shares
  Carrying value
of loan
R'000
  Number
of shares
  Carrying value
of loan
R'000
 
LP Ralphs     148 743   13 473  
Total     148 743   13 473  

Non-beneficial

In addition to the aforementioned holdings:

  • B Joffe is a trustee and potential beneficiary of a discretionary trust holding 559 960 shares (2016: 909 960).
  • CA Brighten (company secretary) is a trustee of the Group's retirement funds holding 460 636 shares (2016: 460 636).

The interests of the directors remained unchanged from the end of the financial year to the date of this report.

Directors' remuneration

The remuneration paid to executive directors while in office of the Company during the year ended 30 June 2017 is analysed as follows:

Director Basic
remuneration
R'000
Other benefits
and costs
R'000
Retirement/
medical benefits
R'000
Cash
incentives
R'000
Total
emoluments
R'000
 
AW Dawe 4 487 76 263 3 347 8 173  
NT Madisa 3 027 89 272 2 324 5 712  
GC McMahon 1 672 154 218 1 409 3 453  
HP Meijer 3 237 164 397 2 606 6 404  
LP Ralphs 9 164 912 825 7 227 18 128  
2017 total 21 587 1 395 1 975 16 913 41 870  

Certain executive directors serve as non-executive directors of companies outside of the Group. Directors' fees in this regard are paid to the Group.

For comparative purposes the remuneration paid to executive directors, while in office of the Company during the year ended 30 June 2016, is analysed as follows:

Director Basic
remuneration
R'000
Other benefits
and costs
R'000
Retirement/
medical benefits
R'000
Cash
incentives
R'000
Total
emoluments
R'000
 
BL Berson (resigned 23 May 2016) 11 748 253 368 13 625 25 994  
DE Cleasby (resigned 23 May 2016) 3 693 495 439 4 858 9 485  
AW Dawe 4 119 148 381 3 000 7 648  
B Joffe1 (resigned as executive and appointed as non-executive director) 16 012 1 755 873 17 518 36 158  
NT Madisa 2 751 84 248 1 800 4 883  
GC McMahon 1 494 144 196 1 250 3 084  
HP Meijer1 (appointed executive director 23 May 2016) 232 12 29 2 500 2 773  
LP Ralphs 9 110 942 772 9 400 20 224  
2016 total 49 159 3 833 3 306 53 951 110 249  

1 Not considered a prescribed officer prior to this date.

Paid by continuing operations 29 532 3 580 2 938 17 950 54 000  
Paid by discontinued operations 19 627 253 368 36 001 56 249  

The remuneration paid to non-executive directors while in office of the Company during the year ended 30 June 2017 is analysed as follows:

  2017      
Director Directors'
fees
R'000
As directors
of subsidiary
companies and
other services
R'000
Total
emoluments
R'000
  2016
Total
R'000
 
DDB Band 551 551   881  
EK Diack 808 775 1 583   1 684  
B Joffe 203 4 000 4 203   407  
AK Maditsi 535 535   400  
S Masinga 582 582   603  
NG Payne 1 296 873 2 169   2 557  
CWL Phalatse 1 350 1 350   1 120  
T Slabbert 562 562   566  
  5 887 5 648 11 535   8 218  
Former directors   1 914  
2017 total 5 887 5 648 11 535   10 132  
2016 total 7 026 3 106 10 132      

Prescribed officers

Due to the nature and structure of the Group and the number of executive directors on the board of the Company, the directors have concluded that there are no prescribed officers of the Company.

Directors' long-term incentives

Details of the directors and officers' outstanding replacement rights are as follows:

  Replacement rights at
30 June 2016
Replacement rights granted
during the year
Replacement rights
exercised
Replacement rights at
30 June 2017
Number Average
price
R
Number Average
price
R
Number Market  
price1
R  
  Number Average
price
R
 
AW Dawe 133 066 267,27 –     133 066 267,27  
NT Madisa 118 566 266,49 –     118 566 266,49  
GC McMahon 76 250 258,30 15 000 267,03     61 250 271,44  
HP Meijer 158 066 252,43 42 500 257,27     115 566 269,29  
LP Ralphs 120 000 61,75 120 000 410,59      
  605 948 221,42 177 500 361,75     428 448 268,19  
Company secretary                    
CA Brighten 28 078 253,05 7 500 237,27     20 578 262,26  
  634 026 222,82 185 000 356,70     449 026 267,92  

1 Value of share/replacement right on exercise of replacement rights

Refer to note 27 of the financial statements for further details.

A share appreciation right (SAR) is a right awarded subject to the appreciation of Company's shares.

  SARs at
30 June 2016
SARs granted
during the year
SARs
exercised
  SARs at
30 June 2017
 
Company secretary Number Average
price
R
Number Average
price
Number Market
price
R
  Number Average
price
R
 
CA Brighten 14 000 146,41   14 000 146,41  

These SARs are exercisable over the period 1 July 2019 to 31 December 2023. A detailed register of SARs outstanding by tranche is available for inspection at the Company's registered office.

Share-based payment expense

Director 2017
Normal
R'000
  2016
Normal
R'000
  2016
Accelerated
vesting
R'000
 
AW Dawe 3 687   2 869   9  
NT Madisa 3 086   2 483    
GC McMahon 1 834   1 483    
HP Meijer 3 710   292    
LP Ralphs 3 920   6 700   5 150  
Former directors   22 671   18 086  
  16 237   36 498   23 245  
Relating to continuing operations 16 237   30 257      
Relating discontinued operations   6 241   23 245  

Details of directors and officers' outstanding conditional share plan (CSP)

A conditional award is a conditional right to a share, which is awarded subject to performance and vesting conditions.

Director  Balance at 
30 June 2016 
Number 
New 
awards 
Number 
Exchanged 
for 
replacement 
rights 
Number 
Forfeited*
Number 
Shares 
awarded 
Number 
   Closing 
balance 
30 June 2017 
Number 
  
AW Dawe  –  28 000  –  –  –     28 000    
GC McMahon  –  12 000  –  –  –     12 000    
LP Ralphs  35 000  174 280  (35 000) –  –     174 280    
NT Madisa  –  20 000  –  –  –     20 000    
HP Meijer  –  22 000  –  –  –     22 000    
Total  35 000  256 280  (35 000) –  –     256 280    

* Forfeited as a result of targets not being met.

Summary of executive directors' long-term incentives (LTIs) including CSPs

Director  Share-based 
payment 
expense 
R'000 
Benefit  
arising  
from the  
exercise*
of options  
R'000  
Benefit 
arising 
from award 
of CSP 
R'000 
Gross 
benefit 
R'000 
Previous 
share-based 
payment 
expense in 
respect of 
awards 
R'000 
Actual LTI 
benefit 
R'000 
  
2017                      
AW Dawe  3 687  –   –  3 687  –  3 687    
NT Madisa  3 086  –   –  3 086  –  3 086    
GC McMahon  1 834  4 005   –  5 839  (1 027) 4 812    
HP Meijer  3 710  10 934   –  14 644  (2 945) 11 699    
LP Ralphs  3 920  91 865   –  95 785  (6 179) 89 606    
2017 total  16 237  106 804   –  123 041  (10 151) 112 890    
2016                      
BL Berson  11 309  –   40 094  51 403  (22 551) 28 852    
DE Cleasby  6 122  –   23 619  29 741  (12 976) 16 765    
AW Dawe  2 878  –   8 079  10 957  (3 147) 7 810    
B Joffe  23 326  11 408   80 921  115 655  (47 424) 68 231    
NT Madisa  2 483  3 920   –  6 403  (872) 5 531    
GC McMahon  1 483  2 269   –  3 752  (661) 3 091    
HP Meijer  292  3 958   –  4 250  (2 458) 1 792    
LP Ralphs  11 850  –   42 487  54 337  (23 854) 30 483    
2016 total  59 743  21 555   195 200  276 498  (113 943) 162 555    

* Includes taxable benefits arising on the sale of shares and settlement of The Bidvest Incentive Scheme loans.

Directors' service contracts

Directors do not have fixed-term contracts.

Directors and officers' disclosure of interest in contracts

During the financial year, no contracts were entered into in which directors and officers of the Company had an interest and which significantly affected the business of the Group. The directors had no interest in any third party or company responsible for managing any of the business activities of the Group.

Secretary

During the year under review and in compliance with paragraph 3.84(h) of the JSE Listings Requirements, the board evaluated Mr CA Brighten, the company secretary, and is satisfied that he is competent, suitably qualified and experienced. Furthermore, since he is not a director, nor is he related or connected to any of the directors, thereby negating a potential conflict of interest, it was agreed that he maintains an arm's length relationship with the board.

The business and postal addresses of the secretary, which are also the registered addresses of the Company, are Bidvest House, 18 Crescent Drive, Melrose Arch, Melrose, Johannesburg, 2196 and PO Box 87274, Houghton, 2041, respectively.