Bidvest faces pressure but reports revenue growth in half-year results

Bidvest raised revenues by 6% to R64.5 billion in the six months to December although interim normalised headline earnings per share were nearly flat at 1057.7 cents.CEO Mpumi Madisa and chief finance director Mark Steyn on Monday described as tight and challenging the operating environment in which the financial service group went through in the six months.

Despite the revenue increase for the half-year, trading profits in Bidvest flatlined at R6.3bn after the trading profit margin for the season fell by 66 basis points despite cash generated from operations firming up by 18% to R4.5bn.

Madisa described the company’s performance as resilient while Bidvest said its performance for the first half-year had been “driven by continued demand for everyday essential products” and services.

However, a difficult operating environment negated growth in the company’s Adcock division and in the grain exports category.

“New business growth, additional tank capacity and bolt-on acquisitions helped to mitigate the headwinds in bulk commodity movements and renewable energy product sales, an unexpected weak Adcock Ingram (Adcock) performance, as well as the impact of price sensitive customers and weaker than anticipated discretionary consumer spend,” said Bidvest.

During the period, Madisa said there were “zero exports of maize” while the company suffered “a decline in renewables sales” and a drop in volumes under Adcock Ingram.\

“Inspite of a challenging environment I am confident that the group delivered a decent half year results and there was a strong contribution from acquisitions. Overall organic growth reduced to 1%,” said Madisa during a media call following the release of the company’s financials on Monday.

The South Africa operations, however, recorded improved gross margins on the back of “good cost of sales management” across the hospitality category. The SA division posted a R721 million trading profit.

Bidvest’s ongoing strategic realignment in the automotive division is set to raise diversity and adjust to structural changes through a combination of organic and acquisitive actions, helping to yield an excellent overall result.

However, the sharp drop off in renewable energy product sales and profitability together with muted industrial demand culminated in a 26.9% contraction in the commercial products’ trading profit.

Bidvest has declared a 470 cents per share interim dividend, a marginal 1% increase on the prior year same period pay out.

Bidvest chairman Bonang Mohale said the company was seeing “attractive growth prospects” while it “remains positioned to deliver growth” for stakeholders.

“We have a resilient portfolio and a strong balance sheet and robust capital allocation,” he said.

Steyn nonetheless underscored that the “consumer is under pressure” especially in South Africa where “infrastructure revival revival remains frustrating” amid other headwinds.

This was prompting Bidvest to focus on cost control despite “a very good cash performance” by the company. Inspite of the challenges it is facing, Bidvest is continuing with its capital expenditure investments.

In December, Bidvest announced the signing of agreements for the disposal of Bidvest Bank and FinGlobal. This transaction made “financial and strategic sense for Bidvest” as it worked towards closing transactions, with the remaining conditions precedent mainly regulatory in nature.

“Value-accretive corporate action remains a key component of the group,” it said.

The acquisitions it has concluded during the last six months include Dekra, a vehicle testing station business, WearCheck, a condition monitoring specialist, Serco, a truck body builder and Spec Systems, which has complementary products to the existing print portfolio. 

Nexgen, a facilities services business in the UK and Countrywide, a consumable supplier in the UK care sector, were also added on to the Bidvest portfolio.

BUSINESS REPORT