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Unbundling of Bidvest Food service aims to create focused growth platform


BRIAN JOFFE
Longevity is created when corporations are willing to change

BRIAN JOFFE Longevity is created when corporations are willing to change

Photo by Duane Daws

11th March 2016

By: Mia Breytenbach

Creamer Media Deputy Editor: Features

  

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The unbundling and separate listing of JSE-listed Bidvest’s Food service would be “a great opportunity” for the business to refocus, expand its international footprint and continue its growth path, said founder and outgoing CEO Brian Joffe.

Successful completion of the proposed transaction for the Bidvest Food service would be subject to conditions precedent, including approval by shareholders and regulators. The Food service division is one of Bidvest’s biggest and supplies restaurants, hotels and pubs across Europe, Asia and South America.

Speaking at a presentation of the group’s results in Johannesburg, last week, Joffe highlighted the proposed unbundling and listing on the main board of the JSE of the Bidvest Food service business, which would be led by Bidvest Food service CE Bernard Berson.

Following the unbundling and separate listing of Bidvest’s Food service business, Joffe will step down as CEO and assume an executive chair- person role in the business.

The remainder of the Bidvest group will be headed up by current Bidvest Industrial CE Lindsay Ralphs, while Joffe will continue as a director in South Africa. This would include an executive role to manage some of the strategic acquisitions.

Joffe noted that, in the food business, the focus of the wholesale segments remained on balan- cing the exposure between national and independent food service customers.

“Innovative technological food service solutions for customers as a value-add service continue to be rolled out. The fresh product offering presents significant potential in most regions. Across all our businesses, opportunities to add new product ranges and expand local footprints, through organic and acquisitive growth, will continue,” he said.

The Bidvest Food service had secured real organic growth in local currencies in most businesses in an environment of near-zero food inflation. The overall trading results in rands were buoyed by currency depreciation, said Berson.

Turnover rose 14.6% to R68.2-billion from R59.5-billion in 2014, with trading profit up 22.8%, at R2.4-billion. Bidvest Food Group achieved strong results in a challenging econo- mic environment, with strong growth in the UK and Europe, while Australasia and emerging markets also provided a solid contribution.

Joffe, however, stressed that Bidvest was the second-largest company by revenue and –excluding its Food service business – the group also remained “the largest industrial company by multiples” in South Africa. He highlighted great opportunities for the business to refocus, expand its international footprint and continue its growth.


Notwithstanding “a backdrop of challenging market conditions, particularly in the Southern African region”, Bidvest’s headline earnings per share rose 13% to R10.02c, while basic earnings per share rose 7.8% to 930.9c for the six months to December 31.

Headline earnings rose 14.7% to R3.3-billion, with profit for the year up 9.5% to R3-billion. Joffe said trading results were solid, with the group’s turnover up 9.6% to R114.5-billion.

Bidvest Europe and Bidvest UK were major contributors to these increases, reflecting organic growth and assistance from currency effects.

Bidvest’s gross profit percentage increased off a higher turnover to 20.5%, from 20.1% in 2014. Trading profit rose 11.6% to R5.2-billion. The average rand exchange rate weakening against the pound and the euro resulted in a 3.7% benefit to trading profit.

The group’s associate earnings fell 22.8%, impacted on by a decline in the fortunes of aviation group Comair. This was offset to some extent by an improved performance at pharmaceuticals company Adcock Ingram.

While Adcock was valued at R52 per share, in line with the group management’s June 2015 valua- tion, Bidvest group FD David Cleasby warned that further declines in the Adcock share price – following December – might result in noncash and nonheadline earnings impairments at year-end.


Despite impacts from declining commodity volumes and prices at the freight business, and weak consumer demand at Bidvest Automotive, Bidvest South Africa delivered an improved trading result. The division achieved a 3.1% turnover growth to R45.3-billion and a 5.1% rise in trading profit to R2.7-billion.

Ralphs noted that good performances were achieved in the commercial, electrical and office and print divisions.

Bidvest Automotive, however, struggled in this period, with profit down about 7%, which Ralphs suggested was a reflection of poor new-vehicle sales.


Further, trading profit fell at Bidvest Namibia as poor fishing and freight results outweighed the benefits of the division’s newly acquired automotive business. Ralphs noted a substantially reduced result in freight on lower project activity levels.

Bidvest Namibia results disappointed with a flat turnover at R2.1-billion, while trading profit fell 30.1% to R120.7-million, from R172.5-million in 2014.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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