JSE-listed Bidvest Group delivered a credible financial performance for the financial year ended June 30, despite the headwinds presented by an already constrained South African economy pre-Covid-19 and the pandemic’s severe impact on the final quarter of the financial year.
Group revenue from continuing operations was R76.5-billion.
On a comparable basis, the impact of the national lockdown on trading was broadly neutralised by the maiden consolidation of Adcock Ingram and two months’ contribution from the newly acquired PHS Group, a hygiene service provider operating in the UK, Ireland and Spain.
Commenting on the results, outgoing CE Lindsay Ralphs highlighted the group’s exceptional cost discipline and improved gross profit margin in a very challenging period.
Group trading profit increased by 3% to R6.9-billion from continuing operations, before R1.6-billion in Covid-19 charges.
Trading profit declined by 19.9% after accounting for Covid-19-related charges.
Almost two-thirds of profit originated from the services businesses – comprising the Services, Freight and Financial Services divisions – which provided a defensive underpin.
Normalised headline earnings per share (HEPS), excluding acquisition costs, amortisation of acquired customer contracts, fair value adjustment to Adcock inventory, Bidvest’s share of Comair’s full impairment of an outstanding South African Airways settlement and Covid-19 expenses, declined by 23% year-on-year.
Services delivered a good overall result, with a positive performance from Noonan, while the South African profitability was negatively impacted by no travel- and hospitality-related activity in the last quarter.
Freight delivered a resilient result on lower trade activity through South Africa’s ports.
Branded Products’ result was a combination of a solid Adcock performance, while the balance of the division bore the brunt of lower demand and trade restrictions during lockdown.
The results from Commercial Products and Automotive mirrored the latter. In Financial Services, the negative impact of a complete drop-off of foreign exchange demand in the last quarter and fleet contracts rolling off, more than outweighed higher investment income.
Normalised return on funds employed, which excludes Covid-19 charges, declined marginally from 23.2% to 23% as asset management remains a core focus, particularly in these challenging times.
Following the upliftment of South Africa’s level five lockdown in April, monthly trading results have progressively improved.
The group implemented prevention and treatment interventions across the group to manage health, safety and recovery during this time.
Bidvest established a R400-million Bidvest Covid-19 Fund, to assist its South African employees not working as a result of the lockdown restrictions.
Ralphs indicated that of the company’s 100 000 employees in South Africa, about 75 000 were deemed non-essential according to restrictions during the lockdown. The fund was aimed at supplementing the Temporary Employer/Employee Relief Scheme that the group also claimed for employees.
The executive management team and board members donated 30% of their salaries and fees to the fund during the fourth quarter.
Various other employee and family support initiatives were also rolled out.
Bidvest has also contributed to the social needs of its broader stakeholder community in South Africa through various donations of financial resources, cleaning and hygiene products and decontamination services.
Furlough support programmes by the governments of the UK and the Republic of Ireland supported Bidvest’s employees in these countries.
On March 4, 2019, Bidvest announced the appointment of Mpumi Madisa as CE-designate, consistent with the succession plan developed and executed over the past several years.
The past 18 months were spent on extensive preparation for a smooth transition. Ralphs has now reached his retirement age and Mpumi will assume the position of Bidvest CEO, effective October 1.
The acquisition of PHS became effective in May and management has identified areas of synergy and cost saving to achieve an improved margin more in line with industry peers.
Work has started to bring this into effect.
As previously reported, the R3.2-billion Eqstra transaction was terminated. Three bolt-on acquisitions were concluded in Services, the most notable being Future Cleaning, which augmented the footprint of Noonan’s UK operations.
Following a detailed strategic review of all Bidvest businesses, the group decided to divest from Bidvest Car Rental and Bidair Services. Formal disposal processes have progressed since year-end.
Management’s preference is to sell the businesses to preserve as many jobs as possible.
Bidvest Car Rental was disclosed as a discontinued operation.
In light of the extraordinary levels of uncertainty as it relates to the economies and environments in which the group operates and the restructuring actions taken, the board believes the decision to not declare a final dividend balances the interests of all stakeholders.
This leaves the total dividend for the year at 282c apiece, 53% lower year-on-year.
The pandemic will result in long-term socioeconomic shifts and structural changes. In recent weeks, Bidvest right-sized its operations to ensure its operating models remain relevant and future-fit, reinforces competitive positions and ensures the businesses has sufficient scale for growth.
This resulted in retrenchments across all six divisions.
Bidvest said it was actively participating in national workstreams incorporating labour, government and the private sector to achieve much-needed South African gross domestic product growth.
Ralphs noted that the group had an excellent spread of business in South Africa and the UK. He said that the group was much leaner and more agile than when the pandemic hit and that it would continue to rightsize the business.
He noted that the group was in a good space moving forward, with its resilience, liquidity and a good balance sheet.