While JSE-listed diversified services, trading and distribution group Bidvest delivered a robust set of results for the six months ended December 31, 2022, CEO Mpumi Madisa believes it would have been better were it not for loadshedding.  

The group has, therefore, increased its focus on finding and implementing solutions across the group that will ensure sustainable and consistent access to power in future.  

“The challenge of uncertain and unreliable access to power in South Africa has moved from a loadshedding risk to a business continuity risk. We've done well in the period under review to weather the storm, but keeping operations running has come at a significant cost,” she said at the company’s results presentation on March 6. 

Madisa noted that fuel increases across the group were primarily owing to the increased diesel costs associated with running generators, as well as additional capital expenditure being ploughed into solar solutions for new warehouses.

“Our businesses are in the process of evaluating the most optimal mix between electricity alternatives and renewable energy. It's difficult to quantify the rand value impact of loadshedding, but at an individual business unit level we can see the negative impact on profitability,” she explained. 

Bidvest capitalised on growth nodes within the agriculture, mining, renewable energy and travel and tourism industries to ensure robust organic growth despite local constraints and global macroeconomic pressures over the period. 

The group reported trading profit growth of 14.5% year-on-year to R5.8-billion, with R1.1-billion contributed by international operations.  

Cash generation of R7.3-billion was delivered before investing R5.5-billion in working capital. Capital investment of R1.5-billion was made into operations to upgrade facilities and maintain assets, while R2.3-billion was spent on acquisitions. 

The expansion of Bidvest's facilities management footprint into Australia, effective July 7 last year, delivered in line with the company’s expectations, with a pipeline of strategic growth opportunities now active across the group.  

Against a backdrop of unprecedented inflation, margin management was a key focus area, Madisa said. Both 29.4% gross profit margins and 10.2% trading profit margins remained stable compared with the prior interim period, considering the inflationary trading environment and incremental energy and distribution costs.

Despite an already high base, Bidvest reported that six out of the seven divisions delivered real trading profit growth with many individual businesses producing record months during the period.  

The continuation of strong demand for bulk, mineral and agricultural commodities, as well as higher liquid petroleum gas (LPG) volumes, benefited the freight terminal operations, while clearing and forwarding activity recovered strongly. 

The group benefitted from a revival in tourism volumes, as expected, notwithstanding continued air travel capacity constraints, resulting in good performances from its travel and hospitality-related businesses.  

Coming off record high bases, both the commercial products and branded products divisions produced satisfactory results as many of the underlying businesses gained market share by trading in sought-after products, while simultaneously managing margins. 

“The ghost of Covid-19 is still evident in the base and will be with us for one more quarter. Our supply chains are mostly normalised and inventory availability has certainly improved,” Bidvest CFO Mark Steyn said. 

The expected improved performance from the financial services division materialised during the period, and margin discipline in the automotive division continued.  

Meanwhile, Bidvest's international services division's largely unchanged financial result was attributed to businesses realigning following the extraordinary Covid-19-related work in the prior year, while also being augmented by the inclusion of hygiene services company BIC since July last year. 

“Our hygiene and facilities management operations are undergoing a Covid-19 normalisation period after the two years of very strong Covid-19-related revenue and profits,” Madisa explained. 

Headline earnings per share (HEPS) and normalised HEPS grew by 15.3% to R9.39  and R9.83, respectively. Return on funds employed was slightly down at 37.6% at the end of the period from 40.4% in the first six months of the year, which Bidvest attributed to the working capital investment.  

Return on invested capital of 16.3% went from 15.5% year-on-year and remains above Bidvest's weighted cost of capital. The group’s net asset value grew from R81.62 in the prior period to R89.88 at the end of the year. 

Steyn said Bidvest expected activity in renewable energy, mining, agricultural, tourism, and hospitality-related sectors to remain healthy going forward. Planned investments into alternative energy to mitigate the impact of the electricity crisis in South Africa will continue.  

However, consumer disposable income pressure is expected to intensify throughout the calendar year.  

“Consumer products unfortunately struggled as electrical appliance sales were significantly lower due to loadshedding and consumer spend that was constrained,” Madisa said. 

Demand for select bulk commodities is expected to remain robust, supporting terminal activity in the Southern African ports. The improved performance from financial services should gain momentum, Steyn said. 

Madisa assured that Bidvest would remain disciplined on margin generation and nimble in offering a differentiated bouquet of products and services. The group will remain focused on expense management as competition intensifies, together with declining economic growth, suboptimal infrastructure as well as labour cost pressures, she said. 

Steyn noted the group’s recent acquisitions were performing in line with expectations, with growth opportunities having been identified to add incremental value. Several corporate action opportunities were currently being actively pursued, he said, and discussions continued with regards to capital-intensive partnership opportunities in South Africa.  

Steyn added that the group’s overall balance sheet remained able to support its growth strategy.  

Bidvest declared an interim gross cash dividend of R4.37 per ordinary share for the period.