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Bidvest lifts H1 headline earnings, revenue

27th February 2017

By: Anine Kilian

Contributing Editor Online

     

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JSE-listed Bidvest’s headline earnings increased by 5.6% to R1.7-billion for the six months ended December 31, while revenue increased 4.1% to R3-billion.

Despite the competitive and difficult operating environment, five of the group’s divisions managed to maintain or increase margins through enhanced efficiencies and cost control.

“While markets remain difficult, our seven divisions, as well as the property business, must be commended for maintaining competitiveness, market shares and good cost management,” CEO Lindsay Ralphs said on Monday.
The services division continued to perform well, with a 6.8% increase in trading profit for the period.
 
“Excellent results were achieved by facilities management services, security services and allied services. Industrial services produced steady results, however the travel services business remains a concern,” Bidvest CFO Peter Meijer said.

The Freight division reported a commendable trading profit increase of 6.1%, despite a decrease in revenue following the sale of the Manica business. Increased profits were supported by maize import volumes as a result of the drought in Southern Africa.
 
Bidvest’s motor retail and car rental division reported an increase of 1.9% in trading profit, against a new-vehicle market that contracted by 13% in the six months under review.

Used vehicles performed well, increasing revenue by more than 9%. A focus on used vehicles has been critical to offset double-digit volume declines and margin pressures in the new-vehicles market.

The luxury new-vehicle component continued to contract at a faster rate than the overall market. 
 
The office and print division recorded a 1.4% decrease in revenue, owing to the nonrecurrence of the Tanzanian voter registration project and the disposal of Kolok Mozambique.

The division’s trading profit was also negatively impacted by currency movements in Konica Minolta and Kolok, which masked solid performances by the other operations. Margins and expenses were generally well controlled.

The commercial services division delivered a 37% increase in trading profit.

“The industrial segment achieved a pleasing performance, growing trading profit by 18%, on revenue growth of 9%.” 
 
In the financial services division, Bidvest Bank and the Insurance cluster reported a 14.1% increase trading profit, with strong contributions from Bidvest Bank, as well as an improved return on the investment portfolio in the Insurance business.

Lastly, the electrical division performed well given that the infrastructure development, mining and construction sectors in South Africa remain constrained.

“The 5.1% increase in operating profit on revenue growth of 1.9% is commendable,” he said. 
 
NAMIBIA
Difficult macroeconomic factors in Namibia contributed to a disappointing overall performance, with trading profit down 80.6% across Bidvest’s businesses in that country.

All Bidvest’s Namibian operations, besides the properties division, reported a decline in profitability, with Bidfish and food and distribution generating losses for the six months.

“The extremely difficult trading conditions are expected to continue in the short term. Various initiatives have been implemented to improve the operating performance,” Ralphs said.

He added that the size of the vessel fleet was being reduced and cost reduction programmes have been put in place.          

OUTLOOK
Meanwhile, Ralphs said he expected Bidvest would benefit from new infrastructural and other development projects, with the group committed to investing in organic and acquisitive growth opportunities.

“The balance sheet remains robust and net debt levels are acceptable at R8.4-billion given Brandcorp’s recent inclusion. Net debt to equity at 42.7% and earnings before interest, taxes, depreciation and amortisation interest cover of seven times are comfortably above the group's conservative self-imposed targets, providing ample capacity for further expansion,” Meijer noted.
 

Edited by Creamer Media Reporter

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