In a trading update for the ten months ended April 30, service, trading and distribution group Bidvest has reported that its financial performance remains robust and has so far been sustained in line with what the company reported for the six months ended December 31.

The company reported on June 8 that it had continued to capitalise on the growth nodes within the agriculture, mining, renewable energy and travel and tourism industries. The recurring income type businesses maintained their consistent performance despite a weakening macroeconomic backdrop.

Revenue continued to grow, largely price- and mix-driven, as well as from a focus on gross profit margin and active cost management.

Bidvest CEO Mpumi Madisa said during an investor call that the company was still operating in an environment of elevated and persistent input cost pressures, yet managed to yield strong real trading profit growth.

“We are still experiencing similar pressures to what was reported at half year. The impact of loadshedding is obviously compromising us, with high inflation from a cost perspective, as well as increased wage inflation. We are also seeing the consumer under much more pressure with regard to disposable income,” she said.

Madisa said operational cash generation remained robust and the financial capability to continue investing strategically in working capital remains a key competitive advantage for the company.

“Our business service operations, which include the services international, freight, services South Africa, and financial services divisions, performed very well.

“The normalisation of international travel and tourism-related demand, very strong liquefied petroleum gas, as well as bulk commodity volumes and the anticipated improved performance from financial services, boosted results beyond the annuity underpin embedded in the nature of the services basket,” Madisa explained.

However, real wage increases remained a key pressure point across all operating territories, with management actively engaging with customers to recover this cost.

Bidvest’s trading and distribution operations, which include the commercial products, branded products, and automotive divisions, delivered strong results following the record performance of the company in the 2022 financial year trading profit bases.

Meanwhile, demand for alternative energy products accelerated, while corporate, mining and industrial demand for everyday essential products remained robust in an increasingly competitive market.

Madisa said that factory efficiencies, mainly during times of electricity loadshedding, along with distribution costs, were key pressure points. Additionally, disposable income pressure manifested incrementally in vehicle and appliance sales during the period.

Investment in working capital appears to have peaked, she added, noting that product inflation increased the value, while inventory days had generally normalised.

“Management is continuously looking to secure more favourable trade terms as well as to source inventory strategically to ensure customer needs are met. There is no concern with regards to the quality of debtors and inventory,” Madisa said.

Bidvest said its balance sheet remained strong, with return generation very positive. Moreover, the renegotiation of the terms, size and make-up of the group’s offshore syndicate funding facility was successfully concluded.

“The amended arrangement has a greater revolving credit facility, which allows for merger and acquisition funding flexibility at only a slight increase in funding margin for a three-year term, with two one-year extension options,” Bidvest CFO Mark Steyn said.

The focus on Bidvest’s international expansion strategy remains on course, with several possible corporate action opportunities, both locally and offshore, at different stages.

Bidvest reported that it would remain steadfast in its capital allocation discipline and criteria and that the anticipated acquisition pipeline could be completed within the current funding capacity of the group. Additionally, negotiations on freight-related projects would continue.

In addition, the Bidvest board adopted a resolution on June 8 authorising the company, as guarantor, to enter into a facilities agreement for €750-million arranged by, amongst others, Citibank, London Branch and Standard Bank.

The guarantee provided in terms of the facilities agreement is to the maximum value of €862.5-million.

Bidvest’s results for the financial year ending June 30 will be released on September 4.