Bid Corporation Limited (BID) Earnings Call Transcript & Summary
November 26, 2020
Earnings Call Speaker Segments
Stephen Koseff
executiveGood morning, ladies and gentlemen. I welcome you to this Annual General Meeting of Shareholders of Bid Corporation. I'm Stephen Koseff, the Chairman of Bidcorp. As a consequence of the impact of the COVID-19 pandemic and the restrictions placed in public gatherings, the meeting will now be conducted through the electronic participation as per the approval by the JSE and in terms of the provisions within the Companies Act [indiscernible] of 2008, as amended, and the company's memorandum of incorporation. Just before we start, there a few points on how to navigate the Zoom meeting platform. Shareholders who would like to pose questions, please click on the Q&A icon at the bottom of your screen. If you have a question on a particular resolution, please start with your name, the resolution number followed by your question and press enter or send. Or alternatively, if you'd like to address the meeting directly, please click on the raise your hand icon. Once the Chairman has identified you, your microphone will be unmuted, and you will be able to address the meeting. All questions and comments will be addressed after all resolutions have been put to the meeting. The results of the poll will be announced before the close of the formal business of the meeting. The quorum requirements for this meeting are that at least 3 members entitled to vote are present in person or represented either by proxy or letter of representation. And in terms of the Companies Act, at least 25% of shares in issue are represented. I can inform you, a quorum of shareholders is personally present or represented at this meeting, and I accordingly declare the meeting properly constituted. The notice convening this Annual General Meeting was sent to all shareholders during October 2020. The notice contains full details on the special and ordinary resolutions to be considered at this meeting. I propose that we committed to take the notice as read. Are there any objections to this procedure?
Unknown Executive
executiveChairman, there's a raised hand from a shareholder. Shareholder, please proceed.
Unknown Shareholder
shareholderHi, Stephen. Can you hear me?
Stephen Koseff
executiveYes, we can hear you.
Unknown Shareholder
shareholderHi, Stephen, same to you, Helen. Good morning to all the attendees on the call. Yes, I took the opportunity. I wasn't sure if there was going to be a Q&A session and so forth. So I said let me just raise my concerns then upfront.
Stephen Koseff
executiveI'm not going to do Q&A at the end. That's why if it is a concern about one of the resolutions, you're entitled to raise it at the end. All we're asking for is, are you happy that we conduct a poll.
Unknown Shareholder
shareholderYes. So look, this is part of that discussion as well. So Stephen, this is [indiscernible] speaking here from Benguela Global Fund Managers. We are deeply concerned with the LTI modifications in Bidcorp's change in remuneration policy. To be more specific, we have -- there have been Bidcorp employee cuts in the wake of COVID-19 and Bidcorp executives want to be protected from the impacts of the pandemic while employees and shareholders suffer the full burden. The modifications to the long-term incentive scheme means that Bidcorp execs will be easier rewarded by just staying employed in the business. Bidcorp's guaranteed pay already addresses retailing executives through its objectives and practices. Between 2017 and 2020, procurements in the total single-figure remuneration less the LTI for Bidcorp's CFO and CEO was circa [ ZAR 43 million ] and [ ZAR 140 million ]. This is a value-added team in good times. The modifications are a cultural shift away from your performance-based focus to primarily a retention-based focus. Bidcorp's Remco have chosen to ignore independent legal advice from Bowman Gilfillan regarding modifications to impact awards and in not being favored by shareholders. The [ memo ] was not followed in making the changes. Modifications cannot be made retrospectively without the required notice. This is in contravention of the company's actions in South Africa. Bidcorp directors could possibly be declared delinquent and they may be held personally liable for this breach of the acts. For any losses or costs to the company, this could be as much as $75.3 million in our estimates. We are for the belief that Bidcorp may be in breach of the JSE listing requirements as it pertains to retrospective changes to prior shareholder-approved remuneration policies. The modifications to the remuneration policy are a clear indication of a lack of independence by Remco. The Board has to take action. Performance measures must be included across all Bidcorp's long-term incentives in-flight [ resolution ]. We certainly don't want modifications to the scheme. The scheme -- these are the concerns that we have. We felt that it was appropriate...
Stephen Koseff
executiveOkay. You've raised your concerns. You should have raised it at the end when we put the resolutions to the meeting. But you have raised them now. They are noted, and now we will carry on with the meeting. Thank you very much. So I'm going to move you into the meeting now. Just -- I just wanted to get to my position before -- okay. So it is our intention to conduct voting on all resolutions proposed at this meeting by way of a poll. The representatives from Meeting Specialist, Peter [indiscernible], will act as Scrutineers. Please note that only shareholders in possession of a valid proxy, which has been filed within a quarter of notice of meeting or shareholders who are reflected in the share register, who are in possession of a written letter of representation are entitled to speak and vote at this meeting. Any person who's not entitled may be able to pose questions after the conclusion of the meeting. A few pointers on how to cast your vote. All shareholders or their representatives who are registered to vote would have received a link to the voting platform through either their mobile phone or e-mail address. Please click on the Vote Now link and it will direct you to the voting platform. You will notice that the voting platform contains all of the resolutions, which have been published in the notice of meeting, with your vote automatically defaulted to abstain. You may vote on all the resolutions simultaneously, or defaulting all your votes as either for or against or keeping it as an abstain vote and then clicking on the submit button on the electric -- on the bottom electronic pallet. You may also indicate your votes individually per resolution by selecting the relevant option, for, against or abstain, on a resolution-by-resolution basis. Once you have voted on all the resolutions, scroll down to the bottom the page and click submit. A message will pop up on your screen confirming that your votes have been received. Please note that once you click submit, your votes cannot be retracted and revoted. As such, please ensure that you selected the correct option on your resolution, either for, against or abstain, while we'll announce results to the resolutions voted by web poll. Are there any questions regarding this procedure?
Unknown Executive
executiveChair, there is a raise of hand from a shareholder. Shareholder, please proceed. Okay. The shareholder has voted. Thank you. Shareholder?
Unknown Shareholder
shareholderI'm [indiscernible] from Benguela. I do want to find out from you if you are going to put any legal resolution to shareholders who voted on the in-flight resolution, on the modifications of the remuneration scheme. So is that what the Chairman is going to do now, to ask our shareholders? Thank you.
Stephen Koseff
executiveWe are putting all of the resolutions tabled in the notice of meeting to the shareholders. I note the inclusion of the annual financial statements for the year ended 30th of June 2020, as included in the publication of BidCorp 2020 annual report on October 21, 2020. The annual integrated reporting includes our annual financial statements as well as a report of the auditors, the Audit and Risk Committee and the other directors, which covers -- fully covers the activities of the company for the year under review. Please use the Q&A button or raise your hand icon if you like to ask a question in relation to the information presented. As I've said earlier, we're going to take -- all questions will be taken at -- once all resolutions have been put to this body of shareholders. We will now display the resolutions one by one. Please be reminded that we'll respond to questions at the end of posting of all resolutions. And if you have any -- a question pertaining to a particular resolution, please pose your questions by clicking the Q&A or raise your hand. As I said, we will take the question after all the resolutions have been proposed -- have been tabled, not in the middle. Now I'll start off on ordinary resolution #1. Our proposed ordinary resolution #1 regarding the reappoint of Pricewaterhouse as independent external auditors as a group for the audit of the year ended 30th of June 2021 financial year with Eben Gerryts as the individual registered auditor, being the designated auditor as set out in the notice convening this meeting. Resolution 2, reelection of the directors in terms of the company's memorandum of incorporation. The Board Members to be reelected are: Mr. Koseff; Paul Baloyi; and Helen Wiseman, all being eligible at the time of posting the notice have offered themselves for reelection. The Board has reviewed its composition and has recommended the reelection of the aforementioned directors who have offered themselves for reelection. It is the view of the Board that the reelection of the nominees referred to above will enable the group to maintain a mix of business skills and experience relevant to the group and balance the requirements of diversity, continuity and succession as well as to comply with the corporate governance requirements in respect of matters such as the balance of executive and independent nonexecutive directors on the Board. The Board has considered that the proposal of the nomination committee and recommends the reelection of Mr. Koseff, Baloyi and Wiseman by way of separate resolutions. A brief curriculum vitae in respect to the above-mentioned directors are set out on Pages 18 and 81 of the 2020 annual integrated report. Our proposed ordinary resolutions #2.1 to 2.3, that Mr. Koseff, Baloyi and Wiseman being reelected as independent -- nonexecutive directors of the company are set out in the notice convening this new meeting. Ordinary resolution #3. our proposed ordinary resolution #3, 1, 2, 3, 4, that Mrs. Abdool-Samad, Paul Baloyi, Nigel Payne and Helen Wiseman is elected as members of the audit and risk committee as set out in the notice convening this meeting. The election of Mr. Baloyi and Wiseman -- and Mrs. Wiseman are certainly to their reelection as directors. Ordinary resolution #4. In accordance to recommendations of King IV, the company gives shareholders the right to express their views on the remuneration policy by casting a nonbinding advisory vote on Bidcorp's remuneration policy and the implementation of the policy as set out in the notice convening this meeting. Voting by way of a nonbinding vote on this resolution will be done in 2 sections as follows: enforcement of the remuneration policy, our proposed ordinary resolution 4.1 be adopt -- to adopt the Bidcorp remuneration policy; 4.2, implementation of remuneration policy on proposed ordinary resolution 4.2 to implement the Bidcorp remuneration policy. Ordinary resolution #5. Our proposed ordinary resolution #5 to grant authority to 16,750,000 of the unissued shares of the company to be placed under control of directors as set out in the notice convening this meeting. Ordinary resolution #6. Our proposed ordinary resolution #6 to grant authority to directors to issue up to 16,750,000 shares for cash as set out in the notice convening this meeting. Ordinary resolution #7. Our proposed ordinary resolution #7, granting directors authority to pay dividend by way of a pro rata reduction of stated capital as set out in the notice convening this meeting. Ordinary resolution #8. Our proposed ordinary resolution #8 granting directors authority to create an issue convertible debentures as set out in the notice to this meeting. Ordinary resolution #9. Our proposed ordinary resolution #9, authorizing directors of the company to sign documentation to implement the various resolutions as set out in the notice convening this meeting. Ordinary resolution #10 -- special resolution #1, sorry. On our proposed special resolution #1, authorizing the repurchase of securities as set out in the notice convening this meeting. Special resolution #2, on our proposed special resolution #2 regarding the approval of the 2020 -- prescribed '21 annual fees payable to the nonexecutive directors for their service as directors and members of various committees as well as travel fees, which will be voted on separately, as set out in the notice convening this meeting. Special resolution #3, on our proposed special resolution #3, authorizing all the directors to provide financial assistance to related or interrelated Companies as per sections 44 and 45 of the company as set out on the notice convening this meeting. Ladies and gentlemen, we will now respond to all questions from shareholders on the special and ordinary resolutions provided in the notice. Questions will be answered by a member of the Board who may be best suited to answering the questions.
Unknown Executive
executiveChairman, we have a raised hand. Please go ahead, shareholder.
Stephen Koseff
executiveWhat?
Unknown Shareholder
shareholderStephen, can you hear me?
Stephen Koseff
executiveYes, we can hear you.
Unknown Shareholder
shareholderYes. I raised a number of concerns in my opening remarks. Would just like a response, please, on those remarks in terms of the stance of Bidcorp going forward in -- for adjusting its long-term incentives, which we feel is incorrect and it goes against the policies over the last few years, which is set out in Bidcorp's remuneration policy. I'm happy to go through the points again, if need be. But...
Stephen Koseff
executiveI think you made your point earlier. You don't have to make the point again. We understand your point. And I'm going to hand you over to Nigel Payne, the Chairman of the Remuneration Committee, to respond to your point. Nigel?
Nigel Payne
executiveYes. Thank you, Chairman. We take -- so firstly, the Bidcorp Remuneration Committee has spent an enormous amount of time considering how to address remuneration and the impact of COVID, which in the case of Bidcorp, started with the requirement to close our operation in Wuhan in China in January and then rippled through Asia. So our operation -- various operations elsewhere in China, in Singapore, in Hong Kong, other Asian countries, southwards to Australia and New Zealand, then a very significant impact in Europe. And so it progressed. During May this year, the remuneration committee applied our minds -- the enormous uncertainty that was being faced in our industry, the hospitality industry, cruise ships, airlines, restaurants in almost all of the countries in which we operated in, had already gone into some sort of lockdown restrictions, South Africa and then ultimately, South America as well. We had an enormous amount of uncertainty, and we asked our executives and in fact, the Board also volunteered to take fee cuts by the directors and guaranteed salary cuts by our 2 senior executives. We also determined that we would not be paying any short-term incentives in the current year and that our focus, in fact, needed to change from all of the metrics that we had previously applied. And in a context of an enormous amount of uncertainty, what would the impact be on our suppliers and on our customers? Also, what would the impact be on our employees? Huge focus on the safety of our employees. Huge focus on food quality and food safety in that context. And then also, on protect the company, make sure that Bidvest comes through this in the best position we possibly could. We took significant advice from our independent remuneration advisers. And it is set out in the remuneration report, naming Martin Hopkins from Bowmans. We applied our minds as to what are the best options under the circumstances. And we can consider various options. We specifically wanted management to focus on, first, Bidcorp and ultimately, our people and our business partners, being our customers and our suppliers to navigate through this uncertainty, the depth and duration of which was unknown. The options that we considered in relation to long-term incentives were leave them as they were and focus on the other levers of remuneration, which we had already cut salaries and STI, as I had indicated. We also took into account the enormous stress that our executives were working under in the context of COVID. So things that we considered were change the metric to nonfinancial metrics, which -- and Bidcorp's Remco was one of the first to have to consider what to do in this context given that COVID impacted us earlier than most other listed companies because of the global scale of our operations. So we considered, should we change the metrics. We've since seen a lot of other companies have done that. And in fact, that has been supported by the shareholders. We note that. We also considered what we've also since seen what other companies have done, is they issued a number of retention shares to executives with quite long-vesting dates. Our concern in that regard was that the time we considered these issues, global stock markets were dead, share prices were at a particular low, and we didn't believe that it was appropriate to go and issue a bunch of retention shares at particularly low share prices. So we took the decision that we took, namely to take a haircut off and we took it with significant reluctance, but our conclusion was it was the best option available to us at the time to keep our executives focused on the things that will ensure that Bidcorp not only survives but comes through the COVID uncertainty and challenges in the strongest possible position. So our conclusion was extend the vesting date, apply a haircut of 30% to them, but turn them into retention shares as opposed to their performance-based conditions. We are very pleased, as has been reported in the various reports that the company has given to the market since -- I'm going to say, since May or since the onset of COVID, that Bidcorp's resilience and agility is coming through. We -- the Remco has, of course, taken on board. We've had communication from a number of shareholders. Given that this AGM is electronic, we already see quite clearly the trend that -- of shareholder voting. The Remco decided very early on, once we started getting feedback from shareholders. And indeed, once we saw what other remuneration committees and boards we're doing, the Remco decided that post the AGM, we will engage with all shareholders. We will take their comments and concerns on board, one of the most significant being, what do we do in the future? We never believed, in the Bidcorp Remuneration Committee, that we would change the conditions of in-flight LTI, but none of us have lived long enough to experience something as extreme and as uncertain in terms of impact and duration impact, particularly on our customer base of COVID. So -- and we have taken significant legal advice. I do note that the Benguela shareholders believe that there is illegality there. We've taken legal advice, which is very different to the allegations of Benguela. So I guess you must pursue those however you believe is appropriate. But in terms of the remuneration committee Chairman and to all of our shareholders, and we've indicated it already to the shareholders who have communicated with us, that post this AGM, we will have a robust and open interaction with all shareholders as the remuneration committee, and that will inform our actions going forward. Thank you, Chairman. I hope I've addressed the issue in sufficient granularity and with sufficient clarity.
Unknown Shareholder
shareholderNigel, thanks for the response. Yes. Just to reiterate, again, the thinking that we have is that we don't -- we fail to understand how executives are going to be rewarded or met all again while all the shareholders have to bear the full brunt of the impact of COVID in terms of the valuation that we're seeing, not just at Bidcorp but across the market. And even more, sadly in this case, that we know that Bidcorp has actually [indiscernible] that goes up and there's been [ stock loss ] across different regions at Bidcorp. And we feel that this is generally morally wrong. And that's at the heart of what we're trying -- what we're really try to communicate here, that changing and adjusting these performance measures does have a lot of implications in terms of the management being made, made whole whereas shareholders as well as employees are faced with the full burden of the COVID-19 crisis. And again, I think just want to rehighlight that we have actually submitted a letter to Bidcorp -- yes, about 2 weeks ago. And we are happy to share that -- with other shareholders to highlight our concerns that we raised in that letter. And we would appreciate a written response to those comments that we made there, which is quite detailed in terms of our analysis. But yes, I mean, thanks for the response, and I'm going to leave it at that.
Nigel Payne
executiveWell, Chairman, if you'll commit me, please, and thanks again for the comment. Just to say, yes, I have responded to you indicating that -- and you acknowledged my response, thanks for that, indicating that the Remco will engage with all shareholders. And just -- you made a point, and Chairman, I just have to comment on this, that the remuneration committee is not independent on this matter. As I set out in the remuneration report, the nonexecutive directors, I'm going to use the correct term, the independent nonexecutive directors, voluntarily took a pay cut although my best estimate is -- and the time commitment that we have put in has increased three to five-fold. But notwithstanding in that context, we volunteered for a cut in our own remuneration. And I'm just going to say it, the remuneration committee is applying its mind as robustly as possible, is totally independent. Management are not members of the remuneration committee, and we take independent advice. So Chairman, in conclusion, we will engage with all shareholders on this matter post the AGM. Thanks very much.
Stephen Koseff
executiveAll right. Thank you very much, Nigel. Thanks for that feedback, in that input and thank you to the shareholder for raising an issue of concern. I think we're going to move forward now. And I think that our obligation is to address -- to engage with shareholders, which we will do. And in the course of the next one. So I think we're now ready. And I just wanted to remind shareholders who have not voted to please click on the voting link and cast your votes now. If you're registered to vote but have not received your voting link via e-mail, please inform the moderator. Mr. [indiscernible], are there any shareholders who still -- who should still exercise their votes?
Unknown Executive
executiveChair, we're simply waiting on Ms. [ Tab ]. Ms. Tab, please vote, then we have all the votes in.
Stephen Koseff
executiveSo do you have all the votes in?
Unknown Executive
executiveNo, sir, we're just waiting on one shareholder. Ms. Tab, who is present in the meeting. So if we could just pause for a short period to let Ms. Tab vote.
Stephen Koseff
executiveOkay.
Unknown Executive
executiveMs. Tab, if you're experiencing any difficulties with the voting, please, could you let us know. Otherwise, we will need to proceed with the meeting. Thank you, Ms. Tab. We've received your votes. Chairman, all the votes are in.
Stephen Koseff
executiveOkay. Peter, please hand the results. All right. All resolutions were passed, except the 2 resolutions relating to remuneration. Ladies and gentlemen, as all the business in the agenda has been dealt with, I now formally close the proceedings of the meeting, and I'd like to take the opportunity of thanking all of you for your participation. Thank you very much.
Nigel Payne
executiveThank you, Chairman.
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