JSE-listed diversified services, trading and distribution company Bidvest recorded an 8.8% year-on-year increase in revenue to R62.2-billion and an 11.8% increase in trading profit to R6.5-billion for the six months ended December 31, 2023.

Acquisitions boosted the revenue growth rate by 2.8% contributing to organic growth of 6%.

In largely stagnant markets, price inflation, a weaker rand against major currencies and new business gains were the key growth drivers. The group achieved organic growth through new business wins, margin management and cost management, said Bidvest CE Mpumi Madisa.

The company also improved its trading profit margin to 10.5%. Cash generated by operations almost doubled to R3.7-billion for the interim period, after the company made a R4.5-billion investment in working capital.

Top-line growth, together with active gross margin management and strong expense control, culminated in trading profit increasing by 11.8% to R6.5-billion, over the six months ended December 31, 2023.

Expenses were well managed and increased by only 3.6%. Reduced overtime, the streamlining of businesses and reduced costs associated with loadshedding mitigated the inflationary pressures, she said.

Normalised headline earnings per share (HEPS), which is a measurement Bidvest's management uses to assess the underlying business performance, grew by 6.9% to R10.51, while HEPS increased by 5.3% to R9.87.

Basic earnings a share increased by 4.6% to R9.60, mainly owing to a strong operational performance diluted by significantly higher net finance and acquisition charges, as well as increased amortisation on customer contracts in the current period.

The group declared an interim dividend of R4.67 a share, which is 6.9% higher than that of the six months ended December 2022.

The trading profit growth from the seven divisions was commendable, especially in the current very competitive and price-conscious market, with close to double-digit wage inflation, Madisa said.

Further, Bidvest spent R3.2-billion on acquisitions, invested in maintaining and growing its asset base, and rewarded shareholders with a higher dividend.

Despite this, gearing increased only modestly year-on-year, and the coveted cash generative nature of the group remained firmly intact, she said.

Bidvest’s net debt increased by R6.8-billion since June 30, 2023, to R25.9-billion, with 68.3% of net debt being offshore.

Available debt funding, mainly from the multi-currency syndicated revolving credit facility, was used for acquisitions concluded during the period.

Additionally, Bidvest successfully refinanced maturing local bonds and preference shares, totalling R1.6-billion, at more attractive interest rate spreads than previously.

Further, robust cash generated by the operations was invested in working capital, increased capital investment and paying dividends to shareholders, Madisa said.

The covenant net debt to adjusted earnings before interest, taxes, depreciation, and amortisation (Ebitda) was two times for the interim period, compared with 1.9-times as at December 31, 2022, half-year period, and 1.7-times Ebitda as at June 30, 2023.

Interest cover was 7.3 times, down from 9.4 times in the prior comparable half-year period. Group cash conversion was 26.7%, compared to 7.6% in the half-year period to end December 2022.

Meanwhile, Bidvest was sourcing 2.5 GW from renewable energy sources across its territories, which was double compared with a year ago, she added.

“We have successfully executed on our growth pipeline, with numerous acquisitions concluded in Australia, Singapore, South Africa and the UK.

“This has added to our geographic footprint in hygiene services, enhanced geographic scale in facilities management and augmented our product and service offering,” Madisa said.

Bidvest was actively pursuing a number of acquisition opportunities. Acquisitions remained an integral part of the group’s growth strategy. Bidvest was participating in processes, both locally and offshore, which were in varying phases of completion, she added.

The 100% acquisition of Consolidated in September 2023 doubled Bidvest’s facilities management operations in Australia.

Further, the company also acquired Singapore hygiene services business RHS. This was a small business in an attractive growth market and was the group's first entry in hygiene in Asia, she said.

The group also completed bolt-on acquisitions of road and air freight consolidator Interloc and corporate promotional gift sales company Brandability, as well as Roan and Green Home, which has complementary products to Bidvest's existing data, print and packaging portfolio offering.

It also completed acquisitions of a few small hygiene and facilities management service businesses in existing territories.

“We remain optimistic about the group’s ongoing growth trajectory as we pursue pockets of opportunity in certain sectors such as travel and tourism. Recent strong business wins will contribute fully, and management will also remain vigilant with regards to margin and expense management.

“We will continue to advance our strategy and maintain our financial discipline, while collaborating with all stakeholders to build and support a brighter future,” Madisa said.

FREIGHT
Meanwhile, Bidvest Freight had commissioned repurposed butane spheres in Richards Bay in October, which has added storage capacity.

Additionally, the group has also allocated expansion capital expenditure of R550-million for multipurpose tanks, which should be commissioned during the first half in the following financial year, and R185-million for fuel tanks, to be commissioned in the 2026 financial year in Richards Bay.

During the company's results presentation, Madisa noted that the group was engaging with government in South Africa on potential public-private-partnership and private-sector-participation opportunities.

Bidvest Freight's terminal operations represent most of the division’s profit. Trading profit for the division increased 16% to R1.3-billion and delivered good contributions off high bases.

Modest growth in net bulk volumes handled through South African ports was the consequence of notable product mix changes with greater gas, fuel, wheat, sorghum and chrome volumes more than offsetting lower chemical, maize, manganese and coal volumes.

Operational stoppages owing to inclement weather and poor State-owned Transnet marine services were experienced in South African terminal operations during the period under review.

Clearing and forwarding profit grew on the back of higher air volumes and new business secured. The growth in air volumes was attributable to the ongoing port issues in South Africa, Madisa said.

However, port operations outside of South Africa continued to benefit from a redirection of mineral volumes. In addition, operations in Namibia benefited from strong oil and gas industry activity in the region.

“Traditional seasonal trading trends appear to be re-establishing in bulk commodity freight movement.

“However, logistics and supply chains are the Achilles' heel of South Africa, and they continue to deteriorate. Rail challenges and poor marine services impacted on the freight division, as well as impacting inventories in certain other divisions as well,” Madisa noted.

“Low growth seems to be a systemic problem in South Africa, which seems stuck in a rut. Power availability and reliability remain an issue and, while we have invested a lot to derisk our operations through solar power and generators, the cost was high.

“The economy cannot grow without consistent power. If we were to think about adding or expanding our factories, we have to think twice because of the power issue. Power remains an issue for us and South Africa,” she emphasised.