To view the PDF file, sign up for a MySharenet subscription.

BIDVEST CONTINUES 16 YEAR GROWTH BEATING DEFLATION AND CURRENCY VOLATILITY

Release Date: 23/08/2004 08:20
Code(s): BDEO BVT
Wrap Text

BIDVEST CONTINUES 16 YEAR GROWTH BEATING DEFLATION AND CURRENCY VOLATILITY The BidVest Group Limited Incorporated in the Republic of South Africa Registration number 1946/021180/06 Share code: BVT ISIN: ZAE000050449 ("Bidvest" or "the Company") BIDVEST CONTINUES 16 YEAR GROWTH BEATING DEFLATION AND CURRENCY VOLATILITY THE BIDVEST Group beat deflationary pressures and currency volatility to produce a 17,7% rise in headline earnings per share of 546.7 cents (2003: 464.5 cents). The results include the acquisition of McCarthy Limited for the first time Revenue grew 8.9% to R51.3 billion (2003: R47.1 billion) and the trading margin increased to 5,0% (2003: 4.8%). Trading income reached R2.6 billion (2003: R2.2 billion), an increase of 13.9%. Income attributable to shareholders increased by 15.2% to R1.5 billion (2003: R1.3 billion). In accordance with recently amended accounting standards, the basis of accounting for secondary tax on companies and goodwill was changed. Currency volatility had a material impact on the results, however notwithstanding these challenging conditions, the businesses achieved pleasing results. Based on a constant currency translation of earnings from foreign businesses, HEPS would have increased by 21.8% to 565.6 cents per share. Bidvest"s results were also lifted by a strong performance from the McCarthy Group, whose earnings were consolidated with those of Bidvest from January 2004. Lower interest rates and pent-up demand for new vehicles translated into a record performance, demonstrating McCarthy, South Africa"s second largest automotive retailer, is already benefiting from Bidvest"s empowerment credentials, financial strength, internal support and synergies across business units. Bidvest has achieved a 26.5% annual compound growth rate in headline earnings over the last 13 years. The balance sheet remains strong with significant cash generation. A conscious decision was taken during the year to raise the gearing ratio, which was 10% at year end. An upper cap for gearing has been placed at 40%. Bidvest CE Brian Joffe paid tribute to the country"s political and economic leadership. "At the close of our first democratic decade, a strong acknowledgement from business is due: today"s economic environment permits the pursuit of business opportunities on a scale few thought possible a few years ago. We record our appreciation to those who have led our democratic transformation." Steps were also taken to acquire the minority interests in Bidvest plc and Bidcorp plc, consistent with the group"s philosophy of having full ownership of its businesses. Bidvest made successful offers to acquire 100% of these foreign subsidiaries, both of which were delisted from their respective stock exchanges in August 2004. BLACK ECONOMIC EMPOWERMENT A seminal event for Bidvest was the acquisition of a 15% stake in the group by Dinatla Investment Holdings, making it the single largest shareholder. Dinatla"s broad shareholding base includes a number of Bidvest"s existing BEE business partners. Since the commencement of the Dinatla partnership, Dinatla has four seats on the Bidvest board, and has assisted in sourcing seven historically disadvantaged individuals who have been appointed to the positions of commercial director in the divisions. Dinatla has helped in drawing up the Bidvest Charter whilst also creating BEE procurement linkages. Another development of note is the agreement by Shanduka Group, a black owned and managed business chaired by Cyril Ramaphosa, to obtain a 15% stake in Dinatla. Cyril Ramaphosa has since taken over the chairmanship of Bidvest from Brian Joffe, who remains the Group"s CE. A new BEE investment vehicle, Dinatla New Ventures, has been created in conjunction with a number of large financial institutions, to pursue large investment opportunities in areas which do not conflict with Bidvest. PROSPECTS Joffe says Bidvest"s primary goal in the year ahead is to consolidate and extract synergies and efficiencies created by the current climate of low inflation and current economic conditions. The businesses are well placed to add further impetus to the underlying momentum. The full benefits of the acquisitions of McCarthy and 100% of Bidvest plc and Bidcorp plc will be realised in the year ahead, and under-performing offshore businesses are expected to make a positive contribution. Further expansion into Africa will be investigated. "We are conscious of new challenges," says Joffe. "Active management of assets and rapid response to challenging business conditions will be more vital than ever." "The Group will continue to seek out acquisitive opportunities whilst organic growth will be vigorously pursued. Management is budgeting for real growth in earnings notwithstanding the benefits of the acquisitions of McCarthy and Bidvest plc. Focus will be on enhancing stronger relationships across the businesses accompanied by significant personal development of the people of Bidvest." said Joffe. DISTRIBUTION Distributions to shareholders increased 13.7% to 250.2 cents per share (2003: 220.0 cents per share). The final distribution to shareholders increases to 159.548 cents per share in terms of the Dinatla scheme of arrangement, whereby all normal distributions accrue to the Dinatla scheme participants or their successors and not to Dinatla itself. OPERATIONAL REVIEW THE SERVICES DIVISION This division comprises Bidfreight, Bidcorp, Bidserv and Rennies Financial Services. Bidfreight increased trading income by 5.5% to R417.3 million (2003: R395.4 million), though revenue decreased by 11.5% to R12.1 billion (2003: R13.7 billion). Falling interest rates and a strong rand exerted pressure on margins and resulted in intensified competition. Despite this, Bidfreight"s strong relationships with blue chip clients enabled it to show growth in most areas. Bidfreight has developed a strong partnership with the National Ports Authority, Transnet and other state agencies, and shares their vision to create efficient harbours, and world class transport infrastructure and freight management systems. Bidcorp, the UK-based subsidiary providing services to the automotive, shipping and property sectors, experienced a 25.2% decrease in revenue to R1.5 billion (2003: R1.9 billion) resulting in a trading loss of R21.8 million (2003: R0.8 million profit). Joffe says he is confident Bidcorp will deliver an improved performance in the coming financial year. Bidserv provides "soft services" such as cleaning and laundry to the facilities management sector. Clients resisted price increases during the year under review, and Bidserv responded by pursuing volume growth through aggressive pricing. The Dinatla transaction helped in winning new business, particularly in the public sector. Bidserv revenue increased by 24.8% to R2.2 billion (2003: R1.7 billion) and trading income rose 23.3% to R205.6 million (2003: R166.7 million). Rennies Financial Services witnessed a decline in inbound tourist numbers, which in turn impacted forex encashments. Though there was an increase in currency volumes, the rand value of transactions declined, impacting profitability. Outbound travel was undermined by corporate cost-cutting. Renfin was able to leverage its expertise in managing corporate travel budgets, winning several new business accounts. Heavy discounting by Asian travel operators has succeeded in diverting some tourism traffic away from South Africa, but this is unsustainable and South Africa will again be regarded as an exciting value-for-money destination. Renfin revenue increased by 2.5% to R658.2 million (2003: R642.1 million). Trading income decreased 18.3% to R127.4 million (2003: R156.1 million). THE FOODSERVICE PRODUCTS DIVISION This division is focused on the supply and distribution of foodservice products and comprises Bidvest United Kingdom, Bidvest Australasia ( formerly Bidvest plc), Caterplus and Combined Foods. Results of the international foodservice products businesses were materially affected on the translation into Rands. Revenue decreased by 2.0% to R19.4 billion (2003: R19.7 billion). Trading income rose 5% to R597.9 million (2003: R569.4 million). Despite operating in a flat market, 3663 First Food for Foodservice succeeded in driving volume growth through product extension while maintaining focus on its core grocery and frozen food distribution. Revenue increased by 10.4% to GBP 1.2 billion (2003: GBP 1.1 billion) and trading income rose 25.0% to GBP 40.0 million (2003: GBP32.0 million). The Frozen Division extended its reach into other temperature-controlled areas, specifically fresh and chill, and formed a joint venture with Matthew Clark, a leading UK purveyor of beers, wines and spirits. Acquisitions included the assets of the Barton Meat Company, which is represented throughout the UK, and Wilson Watson, a Scottish Catering Equipment Company. Both acquisitions extend the group"s national footprint in these growth markets. Bidvest Australasia"s revenue increased by 41.3% to GBP 433.6 million (2003: GBP 307.0 million) and trading income rose 37.9% to GBP 11.5 million (2003: GBP 8.4 million). Bidvest First for Foodservice in Australia grew trading income by 19% in local currency and increased its market-share. In New Zealand, Crean First for Foodservice entrenched its position as the county"s only national foodservice company, and increased its geographical footprint through strategic acquisitions. Caterplus, impacted by sluggish markets, fended off the deflationary effects of lower interest rates and a strong rand through efficiency improvements, margin management and the pursuit of new business. Caterplus revenue remained flat at R2.0 billion, but trading income fell 5.3% to R170.3 million (2003: R179.8 million). The anticipated increase in inbound tourism is expected to contribute to the ongoing development of the foodservice sector. Combined Foods had a good year, with improvements in both volumes and trading income. The accent was on efficiency, improved market share and margin expansion. Two old factories, in Cape Town and Johannesburg, were replaced by a state-of-the-art facility in Cape Town, and the product range has been broadened. Revenue increased by 12.7% to R960.7 million (2003: R852.7 million) and trading income rose 28.8% to R121.3 million (2003: R94.2 million). THE COMMERCIAL PRODUCTS DIVISION This division comprises Bidoffice, Bidpac and Voltex and is involved in the manufacture, trading and distribution of commercial products. It was a challenging year for Bidoffice, with the strong rand exerting pressure on prices and margins, particularly for stationery, paper and office furniture. Bidoffice management nevertheless improved on last year"s sales volumes and maintained or grew market share. Lithotech France had a difficult year but it now better positioned to reclaim lost market share. Bidoffice revenue increased 0.5% to R4.8 billion (2003: R4.7 billion) but trading income fell 2.5% to R383.9 million (2003: R393.8 million). Despite extensive destocking for much of the year under review, Bidpac"s entrepreneurial culture resulted in profit growth in all business units. Profitability remained in tact due to aggressive management of expenses, assets and margins. Bidpac revenue increased by 2.4% to R748.2 million (2003: R730.6 million) and trading income rose 7.6% to R110.9 million (2003: R103.1 million). Rand-related and deflationary pressures were also evident in electrical equipment supplier Voltex. The business was largely successful in countering these effects through improved sales volumes, service diversification and market share gains. Voltex"s accreditation as an Energy Service Company by the National Electricity Regulator helped in gaining industrial accounts. The aim is to help these clients save on energy costs. Voltex revenue increased by 7.2% to R2.3 billion (2003: R2.1 billion) and trading income rose 22.1% to R142.2 million (2003: R116.4 million). THE AUTOMOTIVE PRODUCTS DIVISION McCarthy generated revenue of R5.9 billion and trading income of R 217.6 million for the six month period of its inclusion in Bidvest. The motor industry experienced buoyant trading conditions due to a favourable macro-economic environment, vehicle price stability and low financing costs. Effective price deflation on new vehicles impacted both new and used vehicle margins. McCarthy"s financial services business benefited from the growth in new vehicle sales while the strong rand assisted Yamaha Distributors. Joffe added, " People are our strength - people create growth, companies report it" ISSUED ON BEHALF OF: THE BIDVEST GROUP LIMITED BY: CLEAR DISTINCTION COMMUNICATIONS BIDVEST CONTACTS: Brian Joffe (CE) Tel: (011) 772-8704 David Cleasby (Investor Relations) Tel : (011) 772-8706 Mobile: 083 228 1810
CONSULTANCY CONTACT: Carol Dundas Tel: (011) 444-0650 Mobile: 083 447-6648 Date: 23/08/2004 08:20:06 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

Share This Story