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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