Services, trading and distribution group Bidvest has reported that it delivered a commendable and resilient half-year performance in a competitive operating environment.

For the six months ended December 31, the company reported that revenue growth, strong gross margin expansion and disciplined cost control resulted in a 6.9% increase in trading profit to R6.7-billion and a trading margin uplift to 10.1%.

“All divisions contributed positively to profit growth. Group cash flow generation was excellent, with free cash almost R2-billion more than the same period last year, delivering on our stated commitment to increase free cash generation,” says Bidvest CE Mpumi Madisa.

The group declared an interim dividend of R4.95 a share, 5.3% higher year-on-year.

Continuing operations’ headline earnings per share (HEPS) and normalised HEPS, a measurement used by management to assess the underlying business performance, grew by 5.1% and 5.3%, respectively.

Group revenue grew by 3.7% to R66.7-billion. The gross profit margin improved by 43 basis points to 28.1%.

The company notes that four divisions and Adcock Ingram improved their gross profit margin through operating leverage and/or positive business mix.

Bidvest says overall expenses, which increased by 3.4%, were well controlled across the divisions. On a like-for-like basis, operating expenses were only marginally up.

The improved cash conversion ratio of 69.8% supported R3.8-billion in free cash delivered in the six months. This was a combination of more cash generated by operations, lower net working capital investment and broadly stable capital expenditure (capex) spend.

The company explains that the elevated focus on cash generation is key to achieving Bidvest’s objective of deleveraging the balance sheet and creating economic value.

A new $500-million seven-year bond was raised in September 2025, enabling the group to address upcoming debt maturities and extend tenor at tighter spreads.

Bidvest says the debt mix has been “fine-tuned” to optimise the risk adjusted cost of debt while maintaining an overweight variable profile to benefit from additional expected rate cuts.

Annualising capital investment in the business ran ahead of the rolling 12-month increase in profitability, resulting in a return on funds employed of 37.6% and return on invested capital (ROIC) of 13.4%.

The company notes that the pressure on returns is expected to ease in the second half of the current financial year, owing to limited merger and acquisition activity, and even stronger free cash generation.

Bidvest says the ROIC remains above the group’s weighted average cost of capital.

For Services South Africa and Services International, the company says excellent results in hygiene, hospitality and testing, inspection and compliance services, together with very strong cost control, more than neutralised contract margin and rescoping pressures to deliver trading profit growth of 10% and 8.3%, respectively.

Commercial products and branded products navigated muted and price-sensitive demand well by focusing on positive revenue mix, product portfolio management, factory efficiencies and tight cost control to deliver healthy trading profit increases of 9.7% and 5.4%, respectively.

Bidvest says positive operating leverage in the bulk commodity terminal operations supported the 6.9% increase in freight trading profit.

The company notes that automotive held its own, delivering a 1.8% increase in trading profit despite record low vehicle gross margins across the industry.

Adcock’s trading profit increased by 20.1% and recovered off the depressed base given a better sales mix, volume growth and a rebound in factory recoveries.

“Our strategy of building the largest international hygiene business is gaining traction, with the hygiene services operations now contributing 55% of Services International trading profit,” says Madisa.

Cash generated by operations after working capital increased by 35.5% to R6.1-billion. The resultant cash conversion ratio improved from 44.8% to 69.8%.

Group basic earnings per share (EPS) increased from R10.16 to R10.20, or 0.4%, the result of 3.1% growth in continuing operations’ EPS and a decrease in profit after tax from discontinued operations.

Group HEPS increased by 2.2% to R10.38.

Group normalised HEPS, which excludes acquisition costs, amortisation of acquired customer contracts and the derecognition of depreciation and amortisation in the discontinued operations, grew by 2.7% to R10.86.

Two bolt-on acquisitions were concluded – Aquatico, an environmental monitoring and testing laboratory business, adds scale to the recently formed testing, inspection and compliance cluster in Services South Africa; and Cleanbio, a small hygiene services operator in Singapore, will be integrated into Rental Hygiene Services.

The company notes that the disposal of Bidvest Life is subject to customary regulatory approvals, which are currently being pursued.

Unfortunately, the Bidvest Bank disposal transaction was terminated as a result of Access Bank not securing the required approvals prior to the long stop date, Bidvest explains.

“The sale process has been relaunched, and we remain confident in our ability to successfully execute this disposal and will accelerate transaction timeframes,” says Madisa.

PROSPECTS

Bidvest says its key priorities remain improved organic growth and stronger cash generation to drive deleveraging while simultaneously improving returns.

“Our near-term focus is on ensuring that our portfolio of businesses deliver on their growth potential and generate strong operational cash flow. Free cash flow will primarily be used to reduce gross debt and build capacity to support medium- and long-term growth aspirations,” says Madisa.

The company says organic growth will be supported by continued demand for hygiene services, hospitality services and strong inbound travel volumes.

It notes that the testing, inspection and compliance services operations have more than doubled in size, providing a larger platform for continued growth. Improved performance is expected from the expanded automotive brand representation and used-vehicle market operations.

Additionally, Bidvest says synergies from the delisted Adcock will be explored.

The company adds that delivery of large power-related contracts has already gained momentum.

Margin pressure from restructured and renewed contracts as well as price deflation will remain headwinds but new contract mobilisations and the annualisation of acquired businesses will boost growth, it explains.

The company says no material merger and acquisition is planned while it is deleveraging, and growth capex will be concentrated in freight.

Bidvest says engagement with regard to private-sector participation in South African ports is progressing well, with finalisation of key contracts on the horizon.

“Our macroeconomic view is that in South Africa, there is reason for optimism. Interest rates are at their lowest in more than two decades, inflation is declining and will remain modest given the newly adopted South African Reserve Bank target of 3%,” the company says.

The company notes that the 2026 economic growth forecasts have been revised upwards, while sovereign credit was upgraded and high commodity prices are a welcome tailwind.

Structurally, Bidvest says there is also no doubt that progress continues to be made in electricity and rail reforms while the removal of South Africa from the Financial Action Task Force grey list opens the door for investment flows.

While economic activity is expected to remain muted in the group’s international territories, the company says structural demand drivers such as urbanisation, and rising health and wellness awareness, remain intact and supportive of growth over the medium to long term.

Bidvest argues that lacklustre economic demand will be countered with margin management, cost efficiency and enhanced sales strategies and capacity.

“Our international operations now have the requisite scale to optimise buying synergies whilst sharing innovation, technology and AI best practice to drive performance. Our focus across the Group will remain on what we can control, operational agility, innovation and free cash generation to deliver sustainable value to all stakeholders,” says Madisa.