August 22, 2018 / 6:33 AM / a month ago

UPDATE 2-South Africa's Bidcorp close to a deal on selling UK logistics business

* Bidcorp’s FY HEPS up 9.1 pct

* Unnamed global player to buy UK distribution unit

* To announce details of sale in two weeks (Recasts with update on UK distribution unit)

By Nqobile Dludla

JOHANNESBURG, Aug 22 (Reuters) - International food distributor Bid Corporation Ltd (Bidcorp) is finalising an agreement to sell its UK logistics business, moving a step closer to removing a loss-making, non-core asset.

The South African company has in the past few years been exiting low-margin logistics activities globally where they do not fit into its model for its food distribution businesses.

Chief Executive Bernard Berson said Bidcorp would announce the details of the sale in the next two weeks as the buyer, a global company, was in the final stages of clearing its internal approvals.

“We’re very pleased that we can exit the business by way of a sale as opposed to shutting down. We have reached an agreement with a major global player to sell the business,” Berson said after the company announced a 9 percent rise in full-year earnings.

“It’s a great outcome firstly for our staff, there are about 1500 people involved in that business and it gives them a secure future,” Berson said of the sale.

“For our customers it absolutely gives them great continuity of supply in terms of a partner who sees this as a core activity as opposed to us who didn’t see it as a core activity.”

Bidcorp bought the UK Contract Distribution business in 1999. It had a few large contracts with fast-food chains like Yum Brands Inc’s KFC and Burger King but has struggled to contribute to the group’s overall profit, with too many risks and no opportunity for margin growth.

The exit of KFC in February, along with accompanying redundancies and restructuring as well as downscaling of properties and vehicles, contributed to significant annual losses at the business, Bidcorp said on Wednesday.

In February, KFC switched its delivery contract to DHL but after enduring problems with getting fresh chicken delivered, KFC later returned to Bidcorp for more than a third of its UK restaurants.

EUROPE: STANDOUT PERFORMER

Bidcorp, which has operations in Europe, Australasia and emerging markets, on Wednesday reported a 9.1 percent increase in headline earnings per share (EPS) from continuing operations for the year through June, while net revenue rose 8 percent from a year earlier to 119.4 billion rand. ($8.16 billion)

Bidcorp said its European operations were the “standout performer this year”, where investments and acquisitions made in recent years have paid off.

“Investment made in prior years established a strong foundation on which we capitalised in improved market conditions,” Bidcorp said.

Bidcorp has made bolt-on acquisitions in recent years in order to broaden its range and geographic reach. In the past financial year it entered Germany for the first time through a small foodservice business Pier 7.

The group declared a final dividend of 280 cents per share, up from 224 cents a share a year earlier.

$1 = 14.6363 rand Editing by Edmund Blair and Susan Fenton

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