RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2024

“Bidvest has delivered a decent result, with strong growth in cash generation and excellent execution on key strategic priorities,” Mpumi Madisa, Chief executive

Salient features for the six months ended 31 December 2024

• R64.5 billion revenue, +6%
• Flat trading profit of R6.3 billion
• Trading profit margin of 9.7%, down 66bps
• R4.5 billion cash generated by operations, +18%
• ROFE 37.9%
• Group HEPS 1 015.5 cents, +3%
• Group Normalised HEPS 1 057.7 cents, +1%
• Continuing operations HEPS 941.3 cents, -1%
• Flat continuing operations Normalised HEPS 1 011.4 cents
• Interim dividend of 470 cents, +1%

The Bidvest Group has delivered a decent result for the six months ended 31 December 2024, with most businesses generating substantial and consistent profits. 

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

Pleasingly, 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/EBITDA ratio even though we continued to execute on our growth strategy, concluding six bolt-on acquisitions.

The Group declared an interim dividend of 470 cents per share, 0.6% higher year on year.

Highlights

Bidvest Chief executive, Mpumi Madisa, commented, “Four out of the six divisions reported good trading profit growth. The expected contraction in Freight and Commercial Products’ trading profit was primarily due to no maize export volumes handled and cycling of the elevated renewable energy sales base. The unexpected Adcock result was due 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 an excellent 18.4% to R4.5 billion. The resultant cash conversion ratio improved from 33.4% to 44.8%. 

On a FY2024 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 31 December 2024, as a result of the flat interim trading profit and continued capital investment in the business, ROFE and ROIC declined to 37.9% (1HFY2024 40.9%) and 14.4% (1HFY2024 15.8%), respectively, on a like-for-like basis. ROIC remains above the Group’s weighted cost of capital.

Continuing operations HEPS and Normalised HEPS¹, a measurement used by management to assess the underlying business performance, contracted by 1.1% and 0.4%, respectively.

1. Normalised HEPS, which excludes acquisition costs, amortisation of acquired customer contracts and the impact of one-off taxation events, is a measurement management uses to assess the underlying business performance

Financial overview

Group revenue grew 5.7% to R64.5 billion (1HFY2024: R61.1 billion). 

Expenses were again well managed and, on an organic basis, the 1.8% increase was below inflation.

Group trading profit of R6.3 billion was in line with the prior period and the trading profit margin moderated to 9.7% (1HFY2024 10.3%).

• In Services South Africa and Branded Products, new business wins, volume growth and a broader product and/or service offering, together with firm gross margin and cost control were the common features of the outstanding trading profit growth of 16.0% and 9.7%, respectively.
• The ongoing strategic realignment in the Automotive division to increase diversity and adjust to structural changes through a combination of organic and acquisitive actions, yielded an excellent overall result (+14.1%).
• Services International delivered strong overall growth (+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 (-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 17.0% due to lower volumes and negative gross margin mix.

On a like-for-like basis, Bidvest’s net debt increased by R5.7 billion since 30 June 2024 to R30.9 billion. The majority, R3.5 billion, of the increase was corporate action driven with the balance representing the dividend payment to shareholders. 60.3% (1HFY2024 73.7%) of net debt is offshore.

Group basic earnings per share (EPS) increased from 960.8 cents to 1 016.1 cents, or 5.8%.

Group HEPS increased by 2.8% to 1 015.5 cents, and 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 0.6% to 1 057.7 cents.

Corporate action

On 12 December 2024 Bidvest announced that SPA’s were signed for the disposal of Bidvest Bank and FinGlobal.  Madisa added, “This makes both financial and strategic sense for Bidvest and it is very pleasing that we are able to provide continued employment for employees. We are working towards closing these transactions, with the remaining conditions precedent mainly regulatory in nature”.

Value-accretive corporate action remains a key component of the Group.  Bolt-on acquisitions concluded during the last six months included: Dekra, a vehicle testing station business; WearCheck, a condition monitoring specialist; Serco, a truck body builder; Spec Systems, which has complementary products to the existing print portfolio offering; Nexgen, a facilities services business in the UK; and Countrywide, a consumable supplier in the UK care sector.

As reported in July 2024, we announced our proposed acquisition of Citron Hygiene, a provider of washroom hygiene products and services in Canada, the USA and the UK. The acquisition is subject to the UK Competition and Markets Authority approval. This process is still ongoing.

Prospects

Madisa said, “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”.

To date, structural reform frameworks and ambitions relating to South Africa’s infrastructure build have not translated into basic infrastructure spend and increased demand. The projected spend and envisaged opportunities pose exciting growth prospects for the Group over the medium- to long-term. What remains outstanding is action and project mobilisation.

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.

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.

Madisa concluded, “We continue to seek operational excellence and focus on free cash generation while simultaneously shaping our portfolio for the future and creating social value for our own and surrounding communities”.