Five of JSE-listed trading, distribution and services group Bidvest’s seven divisions achieved trading profit growth in the six months ended December 31.

This resulted in the group’s trading profit reaching R4-billion, a 19.8% increase on that reported for the six months ended December 31, 2018.

The period remained challenging to operate in from a macroeconomic and consumer spending perspective, CE Lindsay Ralphs said in a results statement on Monday.

The company declared an unchanged interim dividend of 282c a share.

Bidvest reported that its normalised headline earnings per share (HEPS) for the period under review, which exclude acquisition costs, amortisation of acquired customer contracts and include an adjustment for Bidvest’s share of subsidiary Comair’s South African Airways impairment, is a measurement used by Bidvest’s management to assess the underlying business performance.

On this basis, the group delivered a slightly improved result, as reflected in pro forma normalised HEPS of 636.5c.

The noncash impact of International Financial Reporting Standards 16 (4.1%) and Bidvest’s share of Comair’s impairment of the State-owned airline’s settlement (5.8%) represents the differential to the reported 10.5% decline in HEPS to 563.2c apiece.

The company said its basic earnings a share had, however, decreased by 27.7% year-on-year to 476.9c, owing to a contraction in the share prices of associates, compared with material share price increases in the prior comparable six months.

Meanwhile, Bidvest in December announced its acquisition of UK-based hygiene services provider PHS Group for an enterprise value consideration of almost £500-million, or R10-billion. The transaction was expected to be completed by mid-2020.

Additionally, the company’s R1-billion liquid petroleum gas storage project, in Richards Bay, remained within budget and on time; while the company’s disposal of its stake in the Mumbai International Airport was progressing.

“We are pleased with this six-month result, especially the increased trading profit, improved gross and operating margins, as well as excellent cash generation of R3.8-billion. 

“This was driven by a very good performance from the offshore service businesses. The South African operations held their own in tough trading conditions. We are particularly excited about the potential of PHS. The group’s growth strategy remains intact and is focused on South Africa and selected international markets,” Ralphs said.

He also mentioned that the company was monitoring its risks related to the coronavirus outbreak; however, Ralphs said, on the plus side, it had highlighted the importance of hygiene services, which could ultimately be beneficial for the company.

Ralphs explained that the company’s branded products and commercial products divisions would likely be impacted on by delays in Chinese exports of raw materials, as well as plumbing supplies, tools and equipment.

However, the impact would only become apparent after three or four months, owing to the lead time for goods to be received.

He added that 65% of Bidvest comprises services, which means that only 35% is product driven, which would help to protect the business if Chinese production delays continued.

DIVISIONAL PERFORMANCE

The company’s services division reported increased trading profit of 15.4% year-on-year to R1.2-billion.

The division’s Noonan business delivered an exceptional result, said Ralphs, driven mainly by margin uplift. The division’s newly acquired Future Cleaning business also added scale and capabilities in the six months under review.

Bidvest’s newly named branded products division, which includes the Adcock pharmaceutical business, grew its trading profit by 75% to almost R1-billion in the six months under review. Excluding the Adcock business, which was consolidated into this division for five of the six months under review, trading profit was down 4.1%.

Ralphs said the division was impacted on by the company’s consumer products businesses, which reflected a depressed retail sector.

The freight division handled increased bulk and liquid commodity volumes, but these were offset by lower agricultural exports and general cargo volumes. The division’s trading profit contracted by 9.3% in the six months under review to R645-million.

Bidvest’s commercial products division, which was restructured to now include the former electrical division and King Pie, while the Home of Living Brands and Cellini businesses were transferred to the branded products division. The division’s trading profit declined by 9.7% in the six months under review.

Ralphs reported that the key challenge for commercial products was margin management, which neutralised well managed operating costs. He added that the trade, catering, warehousing and general industrial clusters performed well, while the do-it-yourself, tools, workwear and packaging clusters were hampered by tough operating conditions.

“Plumblink delivered another excellent result. The speciality electrical businesses benefited from the shift to alternative energy sources and vertical integration while the commodity trading activities were subdued.

“The business noted pockets of infrastructure and low-cost housing activity. Poor factory recoveries in Academy Brushware and G Fox and margin erosion in Matus resulted in disappointing results,” Ralphs noted.

Bidvest’s financial services division’s trading profit rose 13.9% year-on-year to R276-million.

Ralphs said Bidvest Bank delivered an improved performance in the six months under review, but the insurance business remained under pressure.

In the automotive division, Bidvest achieved a turnaround for the Car Rental business, as well as efficiencies and cost control, which resulted in a 16.5% trading profit growth to R380-million. This was despite a depressed automotive market in South Africa.

Bidvest’s properties division delivered a strong result, with trading profit up 4.6% to R295-million. The company’s portfolio comprised 130 properties across South Africa and Namibia, with an estimated market value of about R8.3-billion.

“We anticipated the economic conditions experienced during the interim period to persist for the remainder of the financial year. Bidvest remained well positioned to participate in pockets of activity and opportunities while creating value for its extensive stakeholder base,” Ralphs concluded.