Diverse portfolio helps Bidvest weather challenging milieu, grow full-year profit

September 3, 2019

ENGINEERING NEWS / 02 SEPTEMBER 2019 - 12.21 / MARLENY ARNOLDI

 

 

Four of JSE-listed trading, distribution and services group Bidvest’s seven divisions achieved trading profit growth in the financial year ended June 30.

 

This resulted in the group’s trading profit reaching R6.7-billion, a 3.5% increase compared with that of the year ended June 30, 2018, despite a “difficult operating environment”, CE Lindsay Ralphs said on Monday.

 

The company reported 9.8% year-on-year growth in headline earnings per share (HEPS) to R13.52, while headline earnings increased to R4.6-billion, from R4.1-billion in the prior financial year.  

This contributed to the company declaring a final dividend of 318c a share, which was up 5.6% year-on-year. The total dividend for the year was 600c a share.

 

In the reporting year, Bidvest concluded bolt-on acquisitions, mostly in the services and office and print operating divisions, which helped to boost trading profit growth.

The acquisitions within the services division were Aquazania and United Drone Services, while Bidvest also bought out minorities in Bidvest Namibia.

Bidvest expects the acquisition of Eqstra Fleet Management and Logistics for R1.3-billion to become effective towards the end of the 2019 calendar year.

 

The disposal of Bidvest’s 1.3-million shares in Mumbai International Airport is also progressing.

In the reporting year, Bidvest increased its stake in Adcock Ingram to 43.3%, knowing that a terminated broad-based black economic empowerment scheme would terminate and effectively boost Bidvest’s shareholding to 50.1%.

 

DIVISIONAL REVIEW

 

The services division, in the reporting year, achieved 12.5% growth in trading profit to R2.2-billion, on the back of solid performance from the Noonan, Bidvest Facilities Management and Protea Coin businesses.

Ralphs said there was also improved growth performances from Steiner, BidAir Services, Bidvest Lounges, BidTrack and the Allied Services cluster.

The freight division’s trading profit for the reporting year rose by 3.8% to R1.4-billion, despite a large swing in agricultural volumes handled year-on-year.

 

Bidvest Tank Terminals delivered an exceptional result, said Ralphs, adding that its new liquid petroleum gas (LPG) storage facility in Richards Bay was advancing satisfactorily - the R1-billion project will have a 22 600 t/y capacity and will be commissioned by mid-2020.

The South African Bulk Terminal business’ profit was lower on the back of minimal maize exports and lower wheat imports, but it still contributed an “acceptable” profit.

 

Ralphs noted that the Bulk Connections business had handled significantly higher chrome and manganese tonnages; however, lower volumes and fierce price competition in warehousing and transport continued to drag down the Bidvest Panalpina Logistics business’s profit.

The office and print division grew its profits by 5% year-on-year to R735-million, owing to good margin management, good cost control and enhanced efficiencies. Ralphs said the bolt-on acquisitions of Aluminium Foil Converters, Make Me Mobile and Logo Print helped to boost profit.

The commercial products division reported a 13.2% year-on-year decrease in profit to R616-million. Ralphs pointed out that the industrial cluster, particularly Renttech, Afcom, Vulcan and Matus, had been severely impacted on by tough market conditions, while Burncrete, Plumblink, Interbrand and Moto Quip performed well.

 

The financial services division also reported a 7.5% year-on-year decrease in profit to R584-million. Ralphs highlighted that Bidvest Bank had a reasonable year despite no contribution from any large fleet full maintenance lease contracts and certain contracts having run down.

The investment portfolios within this division had not performed well, owing to poor JSE market performance, said Ralphs. However, there were pleasing results from the Compendium, FinGlobal and Tradeflow businesses.

 

Ralphs added that Bidvest Insurance had had a disappointing year and had realigned its offering. 

The automotive division grew its trading profit by 1% year-on-year to R609-million, despite revenue having declined by 5.1% year-on-year.

Ralphs said Bidvest Car Rental had delivered a pleasing turnaround in trading profit, following a very poor performance in the prior year. He added that fleet utilisation had improved and reasonable rental rate increases had been achieved.

Bidvest’s McCarthy dealers sold 5.3% fewer new vehicles in the reporting year, on the back of the national new-vehicle dealer market volume decreasing by 3.2% year-on-year, as a result of lower demand.

Meanwhile, the company’s electrical division’s results reflected a difficult trading year, which saw a near-decimation of the building industry and challenging conditions in the mining sector. Trading profit declined by 14.2% year-on-year to R257-million in the reporting year, while revenue decreased by 5.5% year-on-year.

Ralphs explained that the Voltex business had performed well, while the vertical integration strategy of Cabstrut yielded benefits. The project-type businesses generally struggled with little activity and numerous delays during the reporting year.

 

Electech delivered a good result owing to growth in the renewables sector.

 

Invirotel supplied thousands of prepaid electricity meters to State-owned power utility Eskom and Johannesburg’s City Power, which offer electricity vending opportunities in the future.

The Bidvest properties division grew its trading profit by 14.7% year-on-year to R545-million. The portfolio comprised 112 properties with an estimated market value of R7.5-billion.

Ralphs noted, however, that the Namibian operations and The Mansfield Group business had performed poorly.

Ralphs concluded that the company’s diverse portfolio of businesses and extensive reach allowed the group to weather challenging times.

 

“Bidvest will continue to strategically invest to generate sustainable profits for the long term, while remaining cognisant of suitable timing for embarking on large organic investments, such as the LPG storage project that remains within budget and on time.

“Sufficient headroom exists to continue the group’s strategy of growth in its existing markets, as well as continuing to acquire divisional bolt-on businesses, and to pursue larger, value-adding opportunities locally. Internationally, we target expansion in the chosen niche areas of services and commercial products.” 

 

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LINK : https://m.engineeringnews.co.za/article/diverse-portfolio-helps-bidvest-weather-challenging-milieu-grow-full-year-profit-2019-09-02/rep_id:4433

 

Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER

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