JSE-listed Bidvest Group says its achieved “decent” result for the six months ended December 31, with most of its businesses having generated consistent profits.

Bidvest is a business to business services, trading and distribution group, operating in two segments through six divisions. The Business Services segment constitutes the Services International, Freight and Services South Africa divisions; while the Trading and Distribution segment constitutes the Commercial Products, Branded Products and Automotive divisions.

The interim performance was driven by continued demand for everyday essential products and services, supplied by the group, across most sectors of the economy.

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 performance, as well as the impact of price sensitive customers and weaker than anticipated discretionary consumer spend.

Free cash generation was positive with almost half a billion rand increase year-on-year in this seasonally weaker interim period.

This resulted in a flat net debt to earnings before interest, taxes, depreciation and amortisation ratio, even as the group continued to execute on its growth strategy, concluding six bolt-on acquisitions.

These acquisitions are vehicle testing station business Dekra; condition monitoring specialist WearCheck; truck body builder Serco; Spec Systems, which has complementary products to the existing print portfolio offering; UK facilities services business Nexgen; and UK care sector consumable supplier Countrywide.

Also, Bidvest in July announced its proposed acquisition of Citron Hygiene, a provider of washroom hygiene products and services in Canada, the US and the UK.

The acquisition is subject to the UK Competition and Markets Authority approval, with the process still ongoing.

Meanwhile, Bidvest in December announced that sales and purchase agreements were signed for the disposal of Bidvest Bank and FinGlobal. 

The group maintains its previously announced satisfaction with the respective signed offers, deemed to be financially and strategically sound and to provide continued employment for employees.

“We are working towards closing these transactions, with the remaining conditions precedent mainly regulatory in nature,” Bidvest CE Mpumi Madisa informs, adding that the transactions are slated to be concluded by June.

The group declared an interim dividend of 470c apiece, 0.6% higher year-on-year.

FINANCIAL

Group revenue grew by 5.7% year-on-year to R64.5-billion.

Individually, all but two divisions held or improved their margins. Four out of the six divisions reported good trading profit growth.

Services South Africa and Branded Products grew their trading profit growth 16% and 9.7%, respectively.

The ongoing strategic realignment in the Automotive division yielded a 14.1% increase.

Services International delivered strong overall growth of 8.7% in both hygiene and facilities management services – the domestic businesses performed strongly, while the international contribution was boosted by acquisitions, moderated by foreign exchange movements.

Negative operating leverage in the bulk commodity terminal operations could not be mitigated by strong performances in the balance of the Freight division, with this decreasing 11.9%.

The sharp drop off in renewable energy product sales and profitability together with muted industrial demand culminated in a 26.9% contraction in Commercial Products’ trading profit.

Adcock’s trading profit declined by 17% owing to lower volumes and negative gross margin mix.

Expenses were indicated as well controlled across the divisions.

The expected contraction in Freight and Commercial Products’ trading profit was primarily owing to no maize export volumes handled and cycling of the elevated renewable energy sales base, Madisa points out.

She attributes the unexpected Adcock result to declining consumer spend, reduced inventory holdings in the pharmaceutical wholesale channel and the knock-on effect of factory under-recoveries.

Cash generated by operations after working capital increased by 18.4% to R4.5-billion. The resultant cash conversion ratio improved from 33.4% to 44.8%.

On a full year 2024 pro-forma basis, the capital structure of the group’s continuing operations yielded a higher than overall return on funds employed (ROFE), but a lower return on invested capital (ROIC).

At period end, as a result of the flat interim trading profit and continued capital investment in the business, ROFE and ROIC declined to 37.9%, compared with 40.9% in the prior comparable period, and 14.4%, compared with 15.8% in the prior comparable period, respectively, on a like-for-like basis.

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

Headline earnings per share (HEPS) from continuing operations and normalised HEPS contracted by 1.1% and 0.4%, respectively.

Group basic earnings per share (EPS) increased from 960.8c to 1 016.1c, or 5.8%, the result of a 1.3% contraction in continuing operations EPS and a significant increase in profit after tax from discontinued operations as depreciation and amortisation was suspended

in terms of International Financial Reporting Standards and healthy trading profit growth across the three entities.

Group HEPS increased by 2.8% to 1 015.5c. A net impairment recognised on the disposal group held-for-sale in the prior period moderated the growth.

OUTLOOK

“We remain confident in our clearly defined strategy and that our diverse portfolio of businesses, as a collective, can successfully navigate the environments we operate in.

“Trading conditions are constrained and rapidly changing, making it more important than ever to deliver value to customers, maintain innovation and be nimble. We will remain focused on what we can control and will continue to contribute to structural advancement in our home base,” Madisa says.

She called for action and project mobilisation in infrastructure build in South Africa, as these present opportunities for the group.

“Domestically, the beneficial impact of lower interest rates and inflation should ease pressure on consumer spend, but broad economic activity is expected to remain tight in the immediate future until pro-growth initiatives are implemented. Contractual business will remain healthy while order books and contract pipelines across the group are encouraging,” Madisa highlights.

“Offshore, geoeconomic fragmentation and elevated policy uncertainty make for tough economic backdrops and sizeable labour-related increases will need to be recovered from customers. The annuity nature of these operations and the increased use of technology will contribute to defensiveness,” she points out.

The group would continue to focus on free cash generation while simultaneously shaping its portfolio for the future.