Bidvest’s normalised headline earnings per share up

Bidvest’s normalised headline earnings per share up

 

Bidvest results for the half-year to December 31, 2012, reflect an 18,2% rise in normalised headline earnings per share to 725,1 cents while normalised basic earnings per share are 24,5% higher at 724,4 cents. Normalised headline earnings exclude the abnormal profit of R399,1 million on the partial sale of the investment in Mumbai International Airport Private Limited in the comparative period.

 

HIGHLIGHTS

 

§  Normalised headline earnings per share (HEPS) up 18,2% to 725,1 cents

§  Normalised earnings per share (EPS) rise 24,5% to 724,4 cents

§  Final gross cash dividend of 324,0 cents

§  Revenue up 11,9% to R75,4 billion (2011: R67,3 billion)

§  Trading profit 8,3% higher at R3,6 billion

§  Cash generation before working capital up 11,0% at R4,4 billion

§  Bidvest SA increases trading profit 12,8% to R2,0 billion

§  Bidvest Foodservice grows revenue by 16,6% to R40,8 billion

§  Further growth to be pursued in Latin America

 

OVERVIEW

 

Bidvest Chief Executive Brian Joffe reported reasonable trading results for the half-year to December 31, 2012 despite challenging trading conditions in many geographies. He commended management for their focus and commitment.

 

Normalised HEPS rose 18,2% to 725,1 cents. Normalised EPS rose 24,5% to 724,4 cents. HEPS declined 2,3% to 725,1 cents while basic EPS rose 1,9% to 724,4 cents.

 

Joffe noted, “In South Africa, lower demand in many industries combined with a customer drive for cheaper cost of services is driving increased competition, some of which is at sub-economic rates. Despite low inflation, cost pressures, particularly those of administered prices, are mounting. Labour unrest in the mining and transport sectors negatively impacted many operations.

 

“However, overall trading performance in South Africa was good, with excellent results from a number of divisions. Demand in the construction industry and discretionary consumer spending remained weak.”

 

He said Asia Pacific continues to deliver solid results, but the performance of Angliss Singapore lags those of other businesses. Bidvest Europe’s results reflect resilient performances from most operations other than Deli XL Netherlands, which recorded a small loss. Bidvest Namibia’s trading profit fell by 20,7%, primarily due to a drop in fishing profits after a 25% quota allocation reduction.

 

Bidvest derived 27% of trading profit from businesses outside Africa. On translation, currency fluctuations impacted Rand results.

 

Financial performance

 

Revenue grew 11,9% to R75,4 billion (2011: R67,3 billion). The major growth occurred in Bidvest Europe (R3,3 billion) and Bidvest Asia Pacific (R2,5 billion), which reflects organic and acquisitive growth.

 

Gross margin dipped slightly, largely due to mix and acquisitions. Some businesses experienced margin pressure. Operating expenses – up 12,7% – were well controlled but influenced by currency effects and the impact of acquisitions.

 

Trading margin dipped to 4,7% (2011: 4,9%) on higher contributions by lower margin activities and a decline in certain operations.

 

The group grew trading profit by 8,3% to R3,6 billion (2011: R3,3 billion). Share-based payment costs increased from R41,8 million to R59,6 million following the issue of share options to staff in November 2011.

 

Associate earnings rose on the normalisation of returns from some Group investments, buoyed by the first-time contribution from Mvelaserve Limited.

 

Net finance charges fell by R15,6 million to R352,9 million. Net debt increased to R6,2 billion (2011: R5,6 billion).

 

Joffe noted, “Our financial position remains strong and the group is well-capitalised. Bidvest’s attitude to gearing remains conservative and the group retains adequate borrowing capacity.”

 

Cash generated by operations before working capital changes rose 11,0% to R4,4 billion (2011: R4,0 billion). The Group utilised working capital of R2,5 billion compared to R1,6 billion in the comparative period, reflecting growth and currency impacts. Inventories were well controlled.

 

Acquisitions

 

In November 2012, Bidvest announced its intention to make an offer for the shares in Amalgamated Appliance Holdings Limited that it doesn’t already own. Further details of the offer will be provided in a scheme circular. A number of smaller acquisitions were made.

 

Ratings

 

Fitch Ratings upgraded the Group’s national long-term rating to ‘AA(zaf)’ from ‘AA-(zaf)’ following South Africa’s sovereign downgrade. Moody’s continue to rate the Group at A1.za with a stable outlook.

 

PROSPECTS

 

Joffe said global economic environments remain volatile and challenging while growth rates remain subdued. Despite environmental factors, management remain focused on delivering stakeholder value.

 

He added, “We remain true to our decentralised and entrepreneurial business model and significant effort has been directed to ensure the Bidvest culture is reinforced.”

 

In South Africa, trading conditions are anticipated to remain lacklustre. Divisional teams are focused on organic growth while seeking acquisitive opportunities. Further progress is anticipated in developing the Africa strategy in products-related businesses.

 

In Europe, further opportunities to add new product ranges and expand local footprints via organic and acquisitive growth remain a focus area. In Asia Pacific, management will pursue innovative, value-adding solutions to enable continued growth in Bidvest’s wholesale model. In developing markets, consolidation opportunities will be aggressively pursued. Management are confident of further organic and acquisitive growth.

 

Joffe noted, “Management focus remains on maintaining and improving customer service and ongoing cost control … Effort is being directed at operations where performance is below expectations.

 

“The group has ample capacity to fund growth opportunities. We continue to see organic growth opportunities, which – combined with the acquisitive expansion of our footprint and service offering – bodes well for the group going forward.”

 

DISTRIBUTION

 

Bidvest declared a final gross cash dividend of 324,0 cents (275,4 cents net of dividend withholding tax, where applicable) per ordinary share for the six months ended December 31 2012.

 

DIVISIONAL REVIEW

 

Bidvest South Africa

 

The businesses achieved revenue and earnings growth in challenging conditions. Revenue rose 6,0% to R34,1 billion (2011: R32,2 billion). Trading profits increased by 12,8% to R2,0 billion with impressive contributions by Bidvest Automotive (34,9%), Bidvest Services (28,5%) and Bidvest Travel and Aviation (27,1%).

 

 

Bidvest Office achieved modest revenue improvements – up 2,9% to R2,2 billion (2011: R2,1 billion) while trading profit dropped 7,4% to R130,7 million (2011: R141,2 million). Expenses were well controlled. Operational performance was mixed. The stationery group recovered following a well executed back-to-school strategy. Technology group results were acceptable, but were impacted by delays in major contract awards at Konica Minolta and Océ. Results at GPT were good in a challenging market. Losses within the furniture business were stemmed. Demand rose significantly at Dauphin and Cecil Nurse. Furniture manufacturing orders are well up.

 

Bidvest Paperplus had a challenging half-year but grew revenue 2,1% to R2,0 billion (2011: R1,9 billion) on the back of increased sales of packaging products, office supplies and marketing print. Trading profit fell 5,8% to R175,4 million (2011: R186,2 million), impacted by lower export project work, lower than expected wholesale stationery volumes and lower than projected SoluXions product sales. Overall expenses were well controlled. Sales by the Printing and Conversion business rose on a good performance by Silveray Mobeni. Labelling and Packaging achieved good growth, but at lower margins. Revenue was down at the Wholesale Stationery Division. Volumes at Personalisation and Mailing were under pressure with Lithotech Afric Mail experiencing a short-term volume decline. Email Connection benefited from additional contract work and new product offerings, delivering an excellent performance.

 

Bidvest Services grew revenue by 3,2% to R1,6 billion (2011: R1,5 billion) while trading profit moved 28,5% higher to R121,2 million (2011: R94,3 million). Operating expenditure was well managed and ROFE improved significantly. The Prestige office cleaning business achieved excellent new business growth, but performance was impacted by some contract losses. Magnum’s results were disappointing as additional labour costs impacted guarding while the technology businesses failed to maintain sales momentum. TMS continued its recovery with certain divisions excelling. Top Turf optimised opportunities flowing from increased contract revenue inSouth Africa andMauritius.

 

 

Asia Pacific

 

Bidvest Australia had a good start to the year with sales up 13,1% in local currency. Expenses were well controlled in the face of rising electricity costs and branch relocation expenses. Foodservice division put in another good performance, despite margin pressure. Hospitality had a poor six months. A restructure is under way to align the business more closely with the Foodservice branch network. Fresh did well on the back of a major contract success. National expansion is being pursued. Logistics also performed at better levels, though volumes remain lacklustre. Bidvest New Zealand put in another good performance with the Foodservice, Fresh, Logistics and Butchery divisions all up on prior year. Angliss Singapore made continued progress with the strategic move from commodities-based trading to direct sales to end-customers. Sales volumes are lower, but higher margins and more acceptable and sustainable profits are anticipated. Angliss Greater China achieved continued strong growth. Hong Kong and Macau benefited from a late surge in sales. Further expansion of the branch footprint in mainland China is under way.

 

Latin America

 

Deli Meals in Chile, acquired in November 2011, continues to grow. The business has doubled sales since acquisition and an import programme has been set up. We continue to actively pursue further growth in Latin America.

 

Europe

 

3663 Wholesale in the UK put in a strong sales performance, with free-trade volumes significantly higher. Severe margin pressures in the overall market remain. The business continued to invest to ensure its infrastructure delivers the required efficiencies. Sales at Bidvest Logistics were above budget and a record number of cartons of product were transported.Bidvest Fresh UK (incorporating Seafood Holdings and the newly acquired Oliver Kay fresh produce business) performed very well. Overall, the London Olympics had a minimal impact on UK businesses. Deli XL Netherlands had a difficult first half, generating a small trading loss in a shrinking market. Deli XL Belgium grew sales, assisted by the first contribution of a newly acquired horeca wholesaler. The Belgian institutional market is under the same pressure as the Dutch. Bidvest Czech Republic & Slovakia grew revenue and profit despite a tough retail market. Expansion into speciality meat products continues to gain momentum. In Slovakia, retail sales were boosted by the Frost acquisition in 2011 and growing ice-cream volumes.Bidvest Baltics saw continued foodservice gains, but retail volumes and other sales declined, according to plan. Farutex Poland grew sales in a declining economy, but trading profit was below expectation. Horeca Dubai achieved continued sales gains and has opened a distribution centre in Abu Dhabi. The Al Diyafa joint-venture in Saudi Arabia performed very strongly.

 

Southern Africa

 

Bidvest Food Southern Africa achieved solid sales growth on the back of good volumes at the ingredients business. Margins were under pressure at all companies. Expense savings were achieved thanks to Bidvest Foodservice (BFS) multi-temp mergers, the integration of NCP Yeast into Bidvest Bakery Solutions and rationalisation at Patleys.

 

National accounts were under pressure at BFS. Investment continued in the BFS multi-temp fleet and facilities. TheA&SCapebusiness was integrated into the multi-temp airport facility while the Caternet business was integrated into Lou’s wholesale facilities. InDurban, the Chipkins Catering Supplies business was merged into the BFS Durban multi-temp facility.

 

CFG gained market share in the supermarket and independent account channel. The NCP Durban plant rationalisation began in October 2012 with the merging of the industrial and consumer businesses into Bidvest Bakery Supplies and Patleys respectively. The world class Innovation, Design and Technology Centre was launched at Crown in Cape Town. The So Good Foods wet plant was commissioned to enhance production capabilities. Patleys returned to profit following restructuring.

 

Bidvest Namibia

 

Though results were down on the prior period, overall performance exceeded expectation. Revenue rose 34,0% to NAD1,7 billion (2011: NAD1,3 billion) while trading profit fell 20,7% to NAD249,3 million (2011: NAD314,4 million). Fishing division results were impacted by a 25% reduction in quota allocation, lower catch efficiencies, high quota purchase costs and a weak performance at Pesca Fresca in Angola. Fleet efficiencies were undermined by foreign operator pressure. Overall results at Commercial and Industrial Services were below expectation. The freight, logistics, marine services and material handling businesses were impacted by a decline in port activities. Results in the Food and Distribution Services division were disappointing.

 

Bidvest Corporate

 

Bidvest Properties acquired new premises for Voltex in Alrode and a new site was earmarked for Seaworld Bloemfontein. At Ontime Automotive, Vehicle Transportation returned to profit and Parking Solutions continued to make modest gains, but overall results were impacted by further losses at Rescue & Recovery.

 

 

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