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Bidvest Group Limited - Audited results for the year ended June 30 2006

Release Date: 04/09/2006 07:00
Code(s): BDEO BVT
Wrap Text

Bidvest Group Limited - Audited results for the year ended June 30 2006 The Bidvest Group Limited Incorporated in the Republic of South Africa ("Bidvest" or "the Group" or "the Company") Registration Number 1946/021180/06 Share Code: BVT ISIN: ZAE000050449 Audited results for the year ended June 30 2006 The promise of new life reaches far and wide, where it takes root and starts to flourish Appreciation Bidvest acknowledges the contribution of all 93 218 employees to these pleasing results Revenue R77,3 billion up by 23% Operating profit R3,7 billion up by 22% Headline earnings R2,4 billion up by 22% Headline earnings per share 804,6 cents up by 23% Distributions per share 369,0 cents up by 21% Basis of preparation of financial statements The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). Audit report The consolidated results for the year have been audited by KPMG Inc and their unqualified audit report is available for inspection at the Company"s registered office. Analyst presentation The presentation to investors will be available on the Bidvest website from 14:00 on September 4 2006. Condensed income statement for the year ended June 30 2006 2005 Restated Percentage R000"s Audited Audited change Revenue 77 276 493 62 811 776 23,0 Cost of revenue (61 589 806) (49 957 282) Gross profit 15 686 687 12 854 494 22,0 Other income 140 331 122 360 Operating expenses (12 135 511) (9 960 501) Sales and distribution expenses (7 215 356) (5 877 351) Administration expenses (3 606 424) (2 994 130) Other costs (1 313 731) (1 089 020) Operating profit 3 691 507 3 016 353 22,4 Net finance charges (342 392) (285 105) Finance income 66 295 42 291 Finance charges (408 687) (327 396) Share of profit of associates 48 846 38 846 Dividends received 4 991 6 905 Share of retained earnings 43 855 31 941 Profit before taxation 3 397 961 2 770 094 22,7 Income tax expense (933 418) (797 755) Profit for the year 2 464 543 1 972 339 25,0 Attributable to: Shareholders of the Company 2 388 717 1 961 231 21,8 Minority shareholders 75 826 11 108 2 464 543 1 972 339 25,0 Shares in issue R000"s Total 299 154 299 421 Weighted 299 976 302 700 Diluted weighted 313 826 310 185 Basic earnings per share (cents) 796,3 647,9 22,9 Headline earnings per share (cents) 804,6 656,4 22,6 Diluted earnings per share (cents) 761,2 632,3 20,4 Diluted headline earnings per share (cents) 769,1 640,6 20,1 Distribution per share (cents) 369,0 306,0 20,6 * Includes distribution from share premium HEADLINE EARNINGS The following adjustments to profit attributable to shareholders were taken into account in the calculation of headline earnings: Income attributable to shareholders of the Company 2 388 717 1 961 231 21,8 Impairment of goodwill and other intangibles 14 174 10 292 Net loss on disposal and closure of businesses 19 951 6 594 Loss (surplus) on disposal and closure of businesses (29 212) 6 053 Tax charge 49 638 1 822 Minority interest (475) (1 281) Net loss (surplus) on disposal of property, plant and equipment (11 915) 7 762 Loss (surplus) on disposal of property, plant and equipment (15 689) 13 410 Tax charge (relief) 3 774 (5 627) Minority interest - (21) Negative goodwill recognised in profit (2 457) - Negative goodwill recognised in profit (3 780) - Minority interest 1 323 - Share of capital items in associates 5 059 1 108 Headline earnings 2 413 529 1 986 987 21,5 Rand/Sterling exchange rates Opening rate 11,532 11,285 Closing rate 13,205 11,957 Average rate 11,435 11,532 Segmental analysis for the year ended June 30 2006 2005 Restated Percentage R000"s Audited Audited change SEGMENTAL Revenue Bidfreight 15 601 922 13 268 320 17,6 Bidserv 4 587 817 4 172 336 10,0 Bidvest Europe 22 132 036 14 836 523 49,2 Bidvest Australasia 6 505 802 5 691 085 14,3 Bidfood 3 666 437 3 254 592 12,7 Bid Industrial and Commercial Products 6 722 172 5 643 160 19,1 Bidpaper Plus 1 747 690 1 333 805 31,0 Bid Auto 16 197 055 13 628 958 18,8 Corporate Services 1 295 421 1 174 266 10,3 Namsov 378 430 268 387 41,0 Ontime Automotive 893 231 905 879 (1,4) Investment and other income 23 760 - Revenue from continuing businesses 78 456 352 63 003 045 24,5 Revenue from businesses disposed of 470 052 1 188 984 Inter group eliminations (1 649 911) (1 380 253) 77 276 493 62 811 776 23,0 Operating profit Bidfreight 536 917 455 860 17,8 Bidserv 554 709 466 865 18,8 Bidvest Europe 651 223 532 753 22,2 Bidvest Australasia 219 403 163 844 33,9 Bidfood 299 813 316 227 (5,2) Bid Industrial and Commercial Products 483 320 383 284 26,1 Bidpaper Plus 201 980 176 928 14,2 Bid Auto 621 264 474 672 30,9 Corporate Services 108 698 92 124 18,0 Bidprop 58 039 49 049 18,3 Namsov 75 925 12 589 503,1 Ontime Automotive 7 348 (49) - Investment, other income and corporate expenses (32 614) 30 535 - Trading profit from continuing businesses 3 677 327 3 062 557 20,1 Trading losses from businesses disposed of (20 327) (16 449) TRADING PROFIT 3 657 000 3 046 108 20,1 Net capital profits (losses) 44 901 (19 463) Impairment of goodwill and other intangible assets (14 174) (10 292) Negative goodwill 3 780 - OPERATING PROFIT 3 691 507 3 016 353 22,4 Condensed cash flow statement for the year ended June 30 2006 2005 Restated
R000"s Audited Audited Cash flow from operating activities 2 352 689 2 416 284 Operating profit 3 691 507 3 016 353 Dividends received from associates 4 991 6 905 Depreciation and other non-cash items 954 879 832 643 Changes in working capital (161 019) 344 548 Cash generated by operations 4 490 358 4 200 449 Net finance charges paid (258 582) (211 897) Taxation paid (863 495) (742 364) Distributions: Company (992 408) (812 592) Minorities (23 184) (17 312) Cash effects of investment activities (2 368 372) (2 223 714) Net additions to vehicle rental fleet (298 251) (131 624) Net additions to property, plant and equipment (1 454 153) (1 204 447) Net additions to intangible assets (100 613) (52 184) Net acquisition of subsidiaries, businesses, associates and investments (515 355) (835 459) Cash effects of financing activities 842 777 (842 050) Proceeds from shares issued 180 274 177 061 Repurchase of treasury shares (508 810) (532 058) Net borrowings raised (repaid) 1 171 313 (487 053) Net increase (decrease) in cash and cash equivalents 827 094 (649 480) Cash and cash equivalents at the beginning of the year 1 497 683 2 100 982 Currency adjustments 222 218 46 181 Cash and cash equivalents at the end of the year 2 546 995 1 497 683 Cash equivalents are made up as follows: Cash on hand and in the bank 3 255 457 1 707 932 Bank overdrafts shown as current portion of interest-bearing debt (708 462) (210 249) 2 546 995 1 497 683 Condensed balance sheet as at June 30 2006 2005
Restated R000"s Audited Audited ASSETS Non-current assets 10 606 995 8 423 459 Property, plant and equipment 5 511 253 4 303 123 Intangible assets 378 808 321 246 Goodwill 3 123 722 2 530 700 Deferred taxation 398 411 221 523 Interest in associates 574 893 493 684 Investments and advances 544 923 511 983 Banking and other advances 74 985 41 200 Current assets 17 387 506 12 699 872 Vehicle rental fleet 479 326 249 155 Inventories 5 092 821 4 024 025 Short-term portion of banking and other advances 142 718 105 979 Trade and other receivables 8 417 184 6 612 781 Cash and cash equivalents 3 255 457 1 707 932 Total assets 27 994 501 21 123 331 EQUITY AND LIABILITIES Capital and reserves 9 158 695 7 642 424 Shareholders of the company 8 928 995 7 468 866 Minority shareholders 229 700 173 558 Non-current liabilities 3 677 777 1 956 441 Deferred taxation 202 907 87 401 Life assurance fund 32 795 13 265 Long-term portion of borrowings 3 093 184 1 513 871 Post-retirement obligations 221 092 218 752 Long-term portion of banking liabilities 278 155 Operating lease liability 127 521 122 997 Current liabilities 15 158 029 11 524 466 Trade and other payables 12 562 695 9 544 144 Provisions 324 667 254 813 Vendors for acquisition 41 795 - Taxation 501 245 448 242 Short-term portion of banking liabilities 113 265 94 468 Short-term portion of borrowings 1 614 362 1 182 799 Total equity and liabilities 27 994 501 21 123 331 Number of shares in issue (000) 299 154 299 421 Net tangible asset value per share (cents) 1 814 1 542 Statement of changes in equity for the year ended June 30 2006 2005 Restated R000"s Audited Audited Shareholders" interest Issued share capital 14 958 14 971 - balance at the beginning of the year 14 971 15 108 - in terms of the share incentive scheme 238 240 - repurchase of shares by subsidiary (251) (377) Share premium arising on shares issued 1 228 660 2 549 591 - balance at the beginning of the year 2 549 591 3 511 901 - in terms of the share incentive scheme 180 217 177 349 - refund of share premium to shareholders (992 408) (607 450) - repurchase of shares by subsidiary (508 559) (531 681) - share issue costs (181) (528) Foreign currency translation reserve 807 033 466 019 - balance at the beginning of the year 466 019 (20 859) - realised on disposal of subsidiaries (20 562) - - arising during the period 361 576 486 878 Statutory reserves 10 013 6 039 - balance at the beginning of the year 6 039 4 240 - transfer from retained earnings 3 974 1 799 Equity-settled share-based payment reserve 107 724 57 828 - balance at the beginning of the year 57 828 20 248 - arising during the year 49 896 37 580 Movement in retained earnings 6 760 607 4 374 418 - balance at the beginning of the year 4 374 418 2 620 128 - income attributable to shareholders 2 388 717 1 961 231 - change in fair value of available- for-sale equity securities 1 446 - - dividends and capitalisation issues - (205 142) - transfer to statutory reserves (3 974) (1 799) 8 928 995 7 468 866 Minority shareholders - balance at the beginning of the year 173 558 369 435 - attributable profit 75 826 11 108 - dividends and capitalisation issues (23 184) (17 312) - share of movement in foreign currency translation reserve 2 659 1 762 - share of movement in equity-settled share-based payment reserve 154 41 - changes in shareholding 687 (191 476) 229 700 173 558 Total equity 9 158 695 7 642 424 Message to shareholders Overview The Group produced very satisfying results for the year ended June 30 2006. Compound growth achieved in headline earnings per share over the past 18 years is in excess of 30,0%. Headline earning per share increased by 22,6% with divisional trading profit increasing by 20,1%. The strong operational results were enhanced by the full benefits of last year"s share buyback programme. Corrective action was taken to deal with most of the Group"s underperforming operations which resulted in a number of disposals. Revenue growth of 23,0% to R77,3 billion was achieved which included R5,6 billion from Deli XL which was consolidated with effect from September 12 2005. The total benefit of this top-line growth was not fully realised due to higher energy costs and costs of increasing capacity. Divisional trading margin decreased slightly from 5,0% to 4,8% reflecting the nine-month impact of Deli XL and a change in the profit contribution mix of the various businesses. Exchange rates, despite the devaluation in the last quarter of the financial year, were relatively stable and had a slightly negative effect on the translation of the earnings of the Group"s foreign businesses. The rand traded at an average R11,44 against sterling, compared to R11,53 for the previous year. Cash generation from the underlying businesses remains strong. Larger but deliberate working capital investments, further share buybacks, increased capital expenditure and acquisitive activity resulted in a net utilisation of funds. The Group"s balance sheet remains strong with interest cover being approximately 11 times. The financial results have been presented in conformity with IFRS, the effect of which has been a 4,4% restatement to the comparative period headline earnings per share (previously 686,6 cents per share), reflecting for the most part the cost of share-based payments as well as the amortisation of reinstated intangible assets previously written off. Acquisitions and disposals Deli XL First for Foodservice With effect from September 12 2005 Bidvest acquired 100% of Deli XL, the leading delivered foodservice wholesaler in the Netherlands, from Koninklijke Ahold N.V., for approximately R1,1 billion. Good progress has been made in bedding down the acquisition and new management has made good progress in addressing the strategic challenges in the business. A number of initiatives designed to extract synergies and improve efficiencies have been implemented within the European foodservice businesses. Horeca Trade In September 2005, 3663 First for Foodservice acquired a controlling stake in Horeca Trade, a small Dubai-based foodservice distributor. Progress has been made in strengthening the business whilst growing market share. Potential exists to expand into the fast-growing Middle East foodservice market. Dart Line Shipping In January 2006 Bidvest concluded the sale of its cross-channel ferry business, Dartline Shipping, including the ferry terminal at Dartford, Kent, for GBP58,9 million (R650,0 million), resulting in a significant premium to carrying value. The sale is consistent with the Group"s philosophy of exiting businesses which fail to meet acceptable rates of return. Lithotech France Lithotech France continued to underperform and generate losses, despite concerted management efforts to place the business on a sound financial footing. Accordingly the Group sold the business to a consortium including management with effect from January 1 2006, incurring a loss of R202,9 million. Changes to the board of directors The Group announced on June 28 2006 its new directorate incorporating the philosophy of maintaining the Bidvest culture of decentralisation and participative management styles, whilst ensuring succession planning and strengthening the non-executive component along with the Dinatla BEE representation. The Group expresses its gratitude and appreciation to those retiring directors for their contribution. Appreciation The Directors and Management of Bidvest acknowledge the contribution of all 93 218 staff who have delivered these pleasing results. Divisional review Bidfreight Bidfreight produced a good set of results with strong momentum being maintained throughout the year. Capital expenditure incurred was R227,0 million, providing a solid base for continued growth and efficiency improvements. Terminals results were pleasing. Effective cost control and high tank occupancy levels assisted the good results from Island View Storage. SACD Freight benefited from increased volumes from its new warehouse facilities in Durban. Bulk Connections delivered an improved performance notwithstanding disruptions during the site upgrading. Export volumes at Bidfreight Port Operations, Rennies Distribution Services and South African Bulk Terminals were constrained by the strong rand and increased domestic demand. Safcor Panalpina produced good growth in billings, revenues and profits. While airfreight volumes were up, increased competition placed pressure on margins. Phase 1 of the new facility at Johannesburg International Airport is fully commissioned, with phase 2 presently under construction. Marine put in a strong performance off the back of increased liner volumes. Despite pleasing volumes, margin pressure is evident as freight rates become more competitive. Manica"s results continue to improve, which is encouraging given the difficult political and economic environment. Bidfreight benefits from the growth in the South African economy and continues to expand its operational capacity to meet this demand. Bidserv The recently enlarged Bidserv produced a good set of results, despite challenging trading and volatile labour environments. Good volume growth offset margin pressure with most businesses well positioned going forward. Cleaning"s results were satisfactory benefiting from the achievements of the TMS group. Prestige"s results were reasonable making up for some contract losses. Laundries performed consistently well achieving improved returns. Steiner Hygiene delivered strong growth off a high base benefiting from contract wins across all target markets. Execuflora realised expectations. BidRisk Solutions, comprising the guarding and electronics security businesses, had a difficult year characterised by tough trading conditions and impacted by the protracted industry-wide security strike. Corrective measures were taken to rightsize the Joint Operation Centre. IPS and Provicom continue to deliver strong results. New management of the BidRisk cluster is confident of improved results. Industrial Products performed in line with expectations, in particular G. Fox delivering marked improvements. In the Greens Division, Top Turf had a disappointing year but full order books are encouraging. Bid Travel (formerly Renfin"s Travel businesses) and Rennies Bank have been relocated to Bidserv. Significant management changes were effected in both businesses. Bid Travel"s performance was much improved. The fee-based model has improved profitability and margins even though average ticket sales and volumes remained flat. Rennies Bank delivered a steady performance with retail performing well despite the stable currency environment. Treasury results were lower as margins suffered under increasing competitive pressures. Office Automation, previously part of Bid Office had an excellent year with trading profit up 24,3%. Konika Minolta in particular, leveraged successfully off the digital transformation evident in corporate South Africa. BidAir"s results were flat but in line with expectation. BidAir continues to explore growth opportunities which, if realised, will deliver on the division"s potential. Mymarket.com broke even with revenue up 36,3%. Prospects remain encouraging, particularly with third parties. Bidserv"s prospects are encouraging with marked improvements expected from Magnum, Top Turf and Bidair businesses. Management action should ensure improved margins and overall asset management. Bidvest Europe Bidvest Europe comprises 3663 First for Foodservice in the United Kingdom, Deli XL in the Netherlands and Belgium and Horeca Trade in the United Arab Emirates. 3663 delivered a strong trading performance increasing trading income in sterling by 12,7% despite sluggish conditions and the effects of the terror bombings in London. Trading margins were maintained despite inflationary pressures and the increased revenue from the low margin contract distribution business. Multi Temperature maintained sales but increased profitability from excellent margin management and cost control. The Frozen/Fresh/Chill concept is being adopted with increasing success by customers which contributed to the good operational performance. Barton Meat results were below expectation but an improvement on the prior year. Contract Distribution showed good growth with the full inclusion of new contracts. Ongoing depot upgrades continued with five new depots brought on stream. The Ministry of Defence contract performed within expectations albeit at lower levels than previously. This contract will terminate in September 2006 following an unsuccessful re-tender but management are adopting various measures to counter the impact. Plans are well advanced for the commencement of a major non-food contract in January 2007. Following the acquisition of Deli XL in September 2005, the business was split into autonomous Netherlands and Belgium operations. Deli XL Netherlands delivered results in line with expectations with new and motivated management in place. Growth has been achieved in the hospitality market but the institutional market is under pressure. Strategic and operational initiatives are under way involving range rationalisation and logistics improvements to create capacity and improve profitability. Deli XL Belgium"s trading results were as expected. Under new management, a number of operational efficiency initiatives are under way while ensuring staff morale and motivation are improved. Horeca Trade, albeit small, has good market potential. Initial focus has been on wholesale growth of non-commodity products whilst stabilising operational systems. Bidvest Europe expects the loss of the Ministry of Defence contract to be largely offset by anticipated procurement opportunities across the European platform and improved trading margin management from Deli XL. Further expansion opportunities continue to be sought across Europe. Bidvest Australasia Bidvest Australia excelled growing revenue in local currency by 10% of which 8% was organic. Trading profit increased 27,6% to A$33,5 million improving its trading margin to 3,0% (2005: 2,6%). Major focus was on the independent foodservice market which benefited margins despite cost pressures. The overall foodservice business continues to perform well while Sydney and Melbourne, although still challenging, are improving. The major facilities upgrades nationally are substantially complete. The QSR Division performed optimally delivering a good trading performance. Ample scope exits for continued growth in Australia through service extension and geographic expansion as the market-leading foodservice distributor. Crean First for Foodservice New Zealand grew revenue by 25,8% whilst increasing trading income by a more modest 13,7% to N$11,7 million amid increasingly challenging economic conditions. Broadline performed satisfactorily despite cost pressures of fuel, wages and infrastructure. The Fresh business has meaningfully increased its contribution and acquisitions are being sought to expand national coverage. Despite the slowing economic environment, adequate opportunities exist to enable sustainable growth. Bidfood Caterplus and Combined Foods have been grouped as one reporting unit. Revenue increased by 12,7%, however trading profit declined 5,2% due to margin pressures and capacity and overhead cost increases, mainly in distribution. Catering Supplies although impacted by ongoing low food inflation and increasing competition, achieved good top-line growth. Management is focused on pursuing new business whilst investing in sales management capital. Frozen Foods performed well with trading income up 9,0% from new business in the independent market. Good market share gains offset cost increases. With effect from July 1 2006, Catering Supplies and Frozen Foods have merged into a focused foodservice business under a single management team. Speciality delivered an excellent performance buoyed by the continued focus on branded niche products and growth of in-home entertainment. Vulcan"s Catering Equipment traded well, yet results were negatively impacted by high manufacturing costs. Structural changes in manufacturing and good market conditions will yield improvements. Hotel Amenities produced good trading results with contract wins and capacity expansions. Lufil continues to grow its own manufactured products, the benefits of which will offset the loss of a distribution contract. Crown Foods, impacted by the loss of business to cheap imports, the effects of the Newcastle poultry disease and the disruption caused by the move to new premises in December 2005, produced flat trading results. Bidbake operated in a static market with excessive local and international competition in yeast products, negatively impacting trading margins. Cost control and trading efficiency improvements are being implemented to regain market share. Bidfood management is focusing on sales growth to regain lost market share while extracting synergies among the operations to offer an expanded product range to existing customers. Overhead cost management is receiving attention across all business units. Bid Industrial and Commercial Products Bid Industrial and Commercial Products comprises the Voltex Group, the Stationery and Furniture businesses of Bid office, Afcom GE Hudson and Buffalo Executape. The transition to the new division has been bedded down smoothly. Revenue increased 19,1%, while trading income increased by 26,1%. Electrical Wholesaling Division delivered an outstanding trading result growing by 67,4%. The construction sector remains buoyant and the thrust into the project and tender markets continues. Proactive procument of both copper wire and other imported products yielded good results. The acquisition of Versalec effective March 1 2006 contributed positively. Energy-saving initiatives continue to evolve and infrastructure and mining electrification will provide a solid platform for growth. Stationery and Furniture revenue increased by 11,4% and trading profit by 19,1%. Gross margins were maintained despite pricing pressure on consumables and paper. Waltons produced good trading results despite the southern Gauteng region which continues to be problematic. Benefits of further rationalisation should become evident in the year ahead. Capacity constraints at Kolok were addressed with new facilities nationally now operational. Intense margin pressures from excessive competition was offset by volume increases of 23,0%. Furniture"s businesses performed well. Cecil Nurse (rebranded CN Office Products) launched a new product catalogue. Seating benefited from sourcing imports and Dauphin secured some large projects. Afcom GE Hudson continued to focus on balancing its cost of local manufacture and sourcing cheaper imports in order to maintain returns. Buffalo Executape delivered flat trading profit due to increased pressure on trading margins, however revenue improved on the expansion of DIY tape product range. Bid Industrial and Commercial Products will focus on extracting synergies within the new division and is well placed to deliver further growth benefiting from strategic initiatives across all businesses. Bidpaper Plus Revenue grew by 31,0% and trading profit increased by 14,2% with mixed results across the division. Lithotech performed ahead of expectations, successfully counteracting the ongoing decline in the traditional business forms market with growth in the laser and mail product segments. Successful completion of a major election contract contributed to the results. Electronic solutions continue to make good progress. The Silveray/Statmark integration has progressed and the restructured business is expected to improve results. Lithotech continues to invest in growth areas to meet ongoing demand and the launch of the "New Croxley" brand will assist Silveray. Bid Auto McCarthy produced excellent results with revenue increasing by 18,8% and trading profit by 30,9% achieved through organic growth. Industry margins remain low despite the best new-vehicle market ever in the history of the motor industry. McCarthy increased new vehicle sales by 19,6% to a record of 49 679 units whilst used units grew a more modest 11,8% to 34 714. The investment in the retail dealer network has expanded significantly with numerous facility upgrades and working capital to meet increased demand. Budget Rent a Car achieved better fleet utilisation and volume growth, increasing market share. Yamaha Distributors performed satisfactorily initiating strategies to counter the extremely competitive environment and growth in parallel imports. Financial Services benefited from increased sales volumes as well as continued focus on innovative value-added products which resulted in greater market penetration. Favourable market conditions are expected to continue albeit at lower growth levels. However, cognisance needs to be taken of the rising interest rate environment and impacts of price increases on the market. The launch of McCarthy"s comprehensive range of Chinese vehicles is due in early 2007 and will assist in achieving growth. Corporate Services Namsov Fishing Enterprise, in which the Group has an effective 31,0% interest, produced excellent results, with trading profit increasing to R75,9 million buoyed by higher selling prices in the latter part of 2005, despite poorer catch rates. The dominance of small fish catches may impact the 2007 quotas. Bidvest acquired 65,0% of Namibian Sea Products during the latter part of the year and has made an offer to minority shareholders. Further announcements on the rationale and strategy for the acquisition will be made shortly. Ontime Automotive achieved a much improved performance across most of the businesses particularly the Specialist operations although trading results were impacted by the losses made in the Volume Distribution business in France, which was closed during January 2006. Bidvest, together with a consortium comprising Airports Company South Africa and GVK Industries, won the bid in February 2006 for the operation, management and upgrade of the Mumbai International Airport in India. Operational control of the airport was handed to the consortium in May 2006. The investment represents a strategic foothold into one of the fastest-growing economies in the world and provides a platform from which to assess further opportunities in the region. Prospects Our worldwide trading environments are expected to remain favourable despite the changing interest rate conditions. Substantial ongoing capacity expansion has positioned the Group to cater for growth across all its businesses. Management focus is to improve asset management, contain costs whilst seizing both organic and acquisitive opportunities when they arise. The new reporting and management structures have bedded down well. The new appointments will bring greater energy and focus to the many opportunities available and management is focused on extracting the many synergies which exist in the Group. The Group continues to seek out opportunities where it can acquire a significant minority interest and management control. This policy will enable the Group to take advantage of larger-scale acquisition opportunities and utilise its skills in extracting value. The Group is optimistic of continuing to achieve above-average returns and maintaining its commendable growth record. MC Ramaphosa B Joffe Chairman Chief executive Johannesburg September 1 2006 Distribution out of share premium Shareholders" attention is drawn to the further announcement by Bidvest regarding the distribution. Notice is hereby given that a final cash distribution out of share premium of 207,0 (2005: 172,2) cents per share, in lieu of a dividend, has been awarded to members recorded in the register of the Company at the close of business on Friday, September 29 2006. Shareholders are advised that the last day to trade "cum" the distribution will be Thursday, September 21 2006. The shares will trade "ex" the distribution as from Friday, September 22 2006 and the record date will be Friday, September 29 2006. Share certificates may not be rematerialised or dematerialised during the period Friday, September 22 2006 to Friday, September 29 2006, both days inclusive. Payment will be made on Monday, October 2 2006. In terms of the requirements of the Companies Act, the directors confirm that after the payment of the distribution, the Company will be able to pay its debts as they become due in the ordinary course of business and its consolidated assets, fairly valued, will exceed its consolidated liabilities. For and on behalf of the Board MA David Company secretary Johannesburg September 1 2006 Transition to IFRS The financial statements for the year ended June 30 2006 are the Group"s first consolidated financial statements prepared in accordance with IFRS. The only adjustments to the cash flow statement relate to reclassifications between categories. The Group"s transition date to IFRS is July 1 2004 and the Group has taken advantage of the following optional exemptions from full retrospective application at this date: - Not to restate business combinations which took place prior to transition date, other than to the extent that there were identifiable intangible assets at the time of acquisition that were previously written off to retained earnings. - To include goodwill on the basis of deemed cost, being cost less accumulated amortisation, with negative goodwill being recognised in retained earnings. These adjustments were made in the Group"s financial statements for the year ended June 30 2005. - The transfer to retained earnings of the accumulated foreign currency translation reserves at transition date. - To only account for the cost of options to acquire shares in the Company, granted subsequent to November 7 2002 which had not vested by January 1 2005. The transition to IFRS has resulted in the following principal changes to the Group"s accounting policies: - Property, Plant and Equipment: Where components of property, plant and equipment have significantly different useful lives, they are accounted for as separate assets. The useful lives and residual values of all assets are assessed annually. In addition the Group now provides for the estimated cost of dismantling and removing items and restoring the site on which they are located, as part of the cost of the asset. Changes in the measurement of these liabilities arising as a result of the unwinding of the discounts are recognised in the income statement as a finance charge. - Intangible Assets: Acquired computer software, previously reflected in property, plant and equipment as office furniture and equipment, has now been reclassified as an intangible asset. The useful life of computer software, both acquired and self-developed, is assessed annually. Patents, trademarks and tradenames acquired as a result of business combinations prior to June 30 2000 and written off against retained earnings, have been reinstated with effect from the date of the business combination. These patents trademarks and tradenames have been amortised in accordance with the Group"s existing accounting policies. - Share-based Payments: Options to acquire shares in the Company granted to shareholders and staff, have been expensed against income over the vesting period at fair value, with a corresponding increase in equity. The fair value of the options is measured using the binomial method taking into account the terms and conditions upon which the options were granted. - Leases: Certain leases, which were previously considered to be operating leases, have been reclassified as finance leases. - Revenue Recognition: Fees charged for the origination of loans, previously recognised immediately in income, are now deferred over the anticipated period in which services will be provided. After the consideration of previous accounting standards (South African Generally Accepted Accounting Practice "SA GAAP") and IFRS, it was noted that revisions were required with regard to the interpretation of certain standards as previously reported. The following reclassifications were made resulting in a restatement of comparatives previously reported at interim: - Circulating stock: In prior years circulating stock which was included in inventory, has been reclassified as property, plant and equipment, resulting in a R35,3 million transfer from inventories to property, plant and equipment at June 30 2005 ( July 1 2004: R29,1 million). - Staff-related provisions: Originally included in provisions, staff-related provisions amounting to R463,2 million at July 1 2004 and R550,1 million at June 30 2005 have been reclassified to trade and other payables. - Operating lease liabilities: An operating lease liability arises as a result of operating leases being recognised on a straight-line basis in the income statement. In the prior year, this operating lease liability was included in other provisions. The short-term portion of this liability which at June 30 2005 amounted to R26,6 million (July 1 2004: R23,2 million) is now included in trade and other payables and the long-term portion of R123,0 million at June 30 2005 (July 1 2004: R107,3 million) is separately disclosed as a non-current liability in the balance sheet. - Vehicle rental fleet: Consistent with improved disclosure, the vehicle rental fleet previously included in inventory has been disclosed seperately. The impact of the adoption of IFRS on the equity and the profit attributable to shareholders is detailed in the tables below: Reconciliation of equity as at June 30 July 1
R000"s 2005 2004 As reported under IFRS 7 642 424 6 520 201 Transition to IFRS Property, plant and equipment 23 824 9 060 Intangible assets (123 816) (156 645) Share-based payments - - Finance leases 10 530 9 947 Negative goodwill - (21 268) Revenue recognition 11 439 7 124 As previously reported 7 564 401 6 368 419 Reconciliation of earnings Year ended June 30 Year ended June 30 R000"s 2005 Profit for the year attributable to shareholders of the Company as reported under IFRS 1 961 231 Transition to IFRS Property, plant and equipment 17 678 Intangible assets 32 829 Share-based payments 37 580 Finance leases 560 Revenue recognition 4 315 As previously reported 2 054 193 Adjustment to profit attributable to shareholders of the Company for the calculation of headline earnings as previously reported 24 167 Headline earnings in accordance with previous accounting policies 2 078 360 The Bidvest Group Limited Incorporated in the Republic of South Africa ("Bidvest" or "the Group" or "the Company") Directors Executive: B Joffe (Chief Executive), FJ Barnes*, BL Berson**, MC Berzack, AW Dawe, MBN Dube, LI Jacobs, CH Kretzmann, P Nyman (alternate DE Cleasby), SG Pretorius, LP Ralphs, AC Salomon. Non-executive: MC Ramaphosa (Chairman), DDB Band, LG Boyle*, AA Da Costa (alternate LJ Mokoena), S Koseff, RM Kunene, G Marcus, D Masson, BE Moffat (alternate T Slabbert), JL Pamensky, NG Payne, Adv P Tlakula *British **Australian Company Secretary MA David Transfer Secretaries Link Market Services (Pty) Limited, 11 Diagonal Street, Johannesburg, 2001, South Africa PO Box 4844, Johannesburg, 2000, South Africa Registered Office Bidvest House, 18 Crescent Drive, Melrose Arch, Melrose, Johannesburg, 2196, South Africa PO Box 87274, Houghton, Johannesburg, 2041, South Africa Registration Number 1946/021180/06 Share Code BVT ISIN ZAE000050449 Further information regarding our financial results can be found on the Bidvest website www.bidvest.com Date: 04/09/2006 07:01:31 AM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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