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THE BIDVEST GROUP LIMITED - Business update for the ten months to April 2019

Release Date: 07/06/2019 12:00
Code(s): BVT     PDF:  
Wrap Text
Business update for the ten months to April 2019

(“Bidvest” or “The Group”)
(Incorporated in the Republic of South Africa)
(Registration number 1946/021180/06)
JSE Share code: BVT
ISIN: ZAE000117321


Bidvest executive management are briefing stakeholders, including shareholders and financial
analysts, on Friday, 7 June 2019 with regards to the performance of the Group for the ten months
ended 30 April 2019.

Overall, the year to date operating performance has been acceptable. The constrained trading
environment persisted as activity levels were markedly lacklustre in the run-up to the national
elections in May. This is evident in the GDP contraction in the first quarter of 2019.

Against this backdrop, Bidvest’s trading profit continued to grow, albeit at a slower pace than that
reported in December 2018. The annuity-type businesses continue to deliver growth while those
trading businesses, which are focused on industrial and infrastructure-related sectors, find trading
challenging. Agricultural volumes are well off the 2018 peak while bulk commodity volumes handled
have grown. Tight expense control and numerous other actions taken to remain relevant and
competitive have resulted in margins being maintained across the Group.

The Group’s strong financial position has allowed it to conclude several bolt-on acquisitions, while it
continues to invest in its existing businesses. A few larger sized acquisitions are currently being
pursued. The R1 billion Liquified Petroleum Gas (LPG) project is progressing well and is within
budget. The management team remains committed to ensuring an acceptable shareholder return is
generated. Bidvest’s growth and investment aspirations, both locally and internationally, remain
unchanged and well-supported by a solid balance sheet. Net debt / EBITDA is broadly unchanged at

Operational cash generation and asset management remain a core focus. An improved working
capital position, from interim end, is expected but last years’ exceptional performance is unlikely to
repeat. Lower activity levels and a slowdown in bank deposits are contributing factors.

Bidvest continues to maintain strong B-BBEE credentials. The need for inclusive economic growth
and transformation encourages strong, strategic partnerships with customers. Innovative SMME
solutions is a key focus area.

The delisting and take-over offer for Bidvest Namibia has been accepted by minorities. The
integration back into the South African operations will now commence.

The disposal of the 6.75% interest in Mumbai International Airport is taking longer than originally
anticipated. Bidvest remains confident in the ultimate consummation of this divestment.

The Adcock BEE scheme, which was put in place in July 2015, matures in July 2019. As per the AdBEE
SENS announcement dated 31 May 2019, Bidvest’s holding in Adcock is likely to increase in July
2019. This, together with ongoing challenges to secure a buyer whilst also facilitating local
empowerment, has led to a strategic re-evaluation of Bidvest’s options to maximise shareholder
Additional operational commentary:

The benefit from Bidvest Tank Terminals’ investments in liquid fuel and multi-purpose tanks during
the 2017 and 2018 financial years continues to flow through in higher trading profit despite lower
product volumes. Year to date, Bulk Connections and Bidfreight Port Operations have handled more
bulk commodity volumes. South Africa Bulk Terminals handled less agricultural volumes, particularly
since November 2018. Airfreight and import volumes have contracted, negatively impacting the
general freight activities. The damaged Bulk Connections berth became operational in April 2019.
The cyclones in Mozambique have caused disruption but fortunately all operations were restored
quickly, and all employees returned to duty. The LPG project is on track for July 2020 commissioning.
In light of the pending acquisition of Panalpina by DSV, management is strategically assessing its
options with regards to its forwarding activities which are owned by Bidvest but making use of the
Panalpina network under an agency agreement.

The South African Services businesses delivered good results with the exception of Travel. The
Facilities Management and Security clusters navigated the price sensitive, stagnant market well.
Focus on cost recovery and margin management have been top of mind. Travel results have been
negatively impacted by lower volumes, downtrading and margin pressure. The bolt-on acquisitions,
Click-On and Aquazania, are performing well. UDS, a drone solutions business, was acquired
recently. Noonan is posting an outstanding performance in Ireland, delivering on their niche focus
and country-wide footprint. The UK market is challenging and competitive. The additional two
months of trading augmented the divisions’ growth. Management remains focused on delivering
value-adding, customised solutions. The introduction of technology and alternative products and
services keep the business relevant.

Commercial Products
The overall trading performance has softened in the recent months. The consumer facing businesses
continue to perform better than the industrial focused operations. Home of Living Brands,
Interbrand, Moto Quip, Burncrete and G Fox delivered good results. Delayed industrial projects and
little manufacturing activity continue to weigh on the results. Investment in facilities and capacity is
currently a drag on profitability but positions the activities well for the future. Focus is on margin
management and ensuring relevant product and price points.

Office & Print
The pleasing year-to-date result is the culmination of well managed gross profit margins, strong cost
control and continued efforts at improving business efficiencies. Konica Minolta is bedding down the
more onerous, lower margin Treasury Contract where delays were experienced in its finalisation.
Operationally, office products are performing well in a challenging market. Product innovation and
ranging in trusted brands are standing this area in good stead. The furniture interests improved from
a slow start but industry conditions are subdued. The data, print and packaging businesses delivered
good overall results assisted by select bolt on acquisitions. The prior year contained results from the
Zonke low pay-out machine monitoring business which was closed when the national contract was
Financial Services
Bidvest Bank is rolling out additional fleet under the recently secured heavy commercial vehicle
Transnet contract. Business and Personal Banking are showing pleasing results. Bidvest Insurance
has had a challenging year in the commercial sector. Bidvest Life’s strong sales growth continue to
create new business strain on the income statement. Year-to-date, due to weak, volatile equity
markets, the investment portfolios have delivered lower returns. Management’s focus is on growing
the core niches of fleet management and foreign exchange products.

New vehicle sales volumes continued to decline, particularly in the luxury segment. Used vehicle and
aftermarket gross margins are under pressure. Bidvest Car Rental has successfully implemented two
much needed system transitions. Car rental trading profit is back to normalised levels on improved
utilisation and modest rate increases. Vehicle industry volumes are expected to remain under
pressure and management continue to focus on rationalisation and greater efficiency.

Not surprisingly, this division is feeling the impact of the challenging conditions in the building,
construction and mining industries. The traditional electrical wholesale businesses are maintaining
market share in a very competitive market. Project-type businesses are depressed as key
programmes have stalled. Given the widespread strain in the industry, management of the debtor’s
book is critical.

Bidvest Namibia recorded improved results off a weak base. The take-over offer has been accepted
by 99% of the minorities. We will proceed with the squeeze out of the remaining minorities. The
core activities of Bidvest Namibia will be incorporated back into the South African operations.

Bidvest intends issuing its results for financial year to 30 June 2019 on Monday, 2 September 2019.

Shareholders are advised that the financial information relating to the 2019 financial year has not
been audited, reviewed or reported on by the Group’s auditors and that this update does not
constitute a forecast.

A recording of the stakeholder briefing will be available on shortly after the event.

Date: 7 June 2019
Sponsor: Investec Bank Limited

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