| Mon 27 Feb 2006, 12:22 | | Bidvest Posts Pleasing 21 |
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BDEO BVT
BVT
Bidvest Posts Pleasing 21,8% Increase In Headline Earnings Per Share At Interim
Stage
The Bidvest Group Limited
Incorporated in the Republic of South Africa
Registration number 1946/021180/06
Share code: BVT
ISIN: ZAE000050449
("Bidvest" or "the Company")
HIGHLIGHTS
21,8% increase in headline earnings per share
Cash flows remain strong
Good operational performances across most Group businesses
Acquisition of Deli XL expands foodservice footprint into continental Europe
Rand exchange rate had a neutral effect on translation of foreign businesses
Full benefits of good top line growth limited by costs of increasing capacity
and fuel price increases
Distribution increased by 21,1% to 162,0 cents
OVERVIEW
BIDVEST today (Monday, February 27) posted a 21,8% increase in headline earning
per share and an 18,7% increase in trading income for the six months to 31
December 2005.
Strong operational performances were recorded by most of the group"s businesses.
Revenue growth of 21.6% to R38.2 billion included R2.2 billion from Deli XL,
which was consolidated with effect September 12 2005. Trading margin decreased
slightly from 4,5% to 4,4% reflecting the impact of Deli XL and a change in the
profit contribution mix of the various businesses. Exchange rates were
relatively stable and had a neutral effect on the translation of the Group"s
foreign businesses. The rand traded at an average R11,56 against sterling,
compared to R11,43 the previous period.
Chief Executive Brian Joffe says the trading results were further lifted by a
lower statutory tax rate and the share buy-backs concluded last year. "These
results are pleasing in that good revenue growth was achieved in the current low
inflationary environment but many businesses experienced cost increases in
excess of inflation, due to start up costs of increasing capacities and fuel
price rises. This in turn impacted margins."
Cash generation from the underlying businesses remains strong, but seasonal
working capital requirements, increased capital expenditure and acquisitive
activity resulted in a net utilisation of funds. The Group"s balance sheet is
extremely strong with interest cover being approximately 11 times.
The financial results have been presented in conformity with IFRS accounting
standards, the effect of which has been a 5,2% restatement (16,8 cents per
share) of the comparative period"s headline earnings per share. Most of this is
due to the cost of share-based payments as well as the amortisation of
reinstated intangible assets previously written off.
ACQUSITIONS AND DISPOSALS
Bidvest acquired 100% of Deli XL B.V. from Koninklijke Ahold N.V., for
approximately R1.1 billion, effective September 2005. Good progress has been
made in bedding down the acquisition and certain management changes have been
effected. This acquisition strengthens our foothold in the European foodservice
market and management is confident Deli XL will deliver on our expectations. In
September 2005, 3663 First for Foodservice acquired a controlling stake in
Horeca Trade, a small Dubai-based foodservice distributor which has the
potential to develop into one of the largest foodservice distributors in the
Middle East.
Subsequent to the half yearend, Bidvest concluded the sale of its cross-channel
ferry business, Dartline Shipping, including the ferry terminal at Dartford,
Kent, for 58,9 million (R650 million), resulting in a significant premium to
book value. The sale is consistent with the Group"s philosophy of exiting
businesses which fail to meet acceptable rates of return.
DIRECTORATE
As advised in the 2005 annual report, the Group intends to restructure its
statutory board with as little disruption as possible to the Bidvest culture of
decentralised and participative management styles. The intention behind this
restructuring is to include the executives of the major business activities on
the board. Attention is also being given to reconstituting the non-executive
component.
PROSPECTS
The trading environments for many businesses in the Group are favourable.
Capacity expansion has taken place across the Group to cater for current and
future growth, and management has proven itself up to the task of seizing
opportunities when they arise. In addition, the impact of the Deli XL
acquisition will be more significant in the second half of the financial year as
the full six months earnings are brought to account. The Divisional reporting
and management structures have been realigned to better take advantage of the
many synergies which exist in the Group.
The Group"s general approach to acquisitions is to seek 100% control. This
policy is being relaxed in so far as new larger scale activities where Bidvest
can acquire a significant shareholding with management control. This will
enable the group to take advantage of larger acquisition opportunities and
where it can utilise its skills in extracting value.
Looking forward to the second half of the year, Joffe says "the Group is
optimistic of continuing to achieve above average returns and growth and we will
continue to look for acquisitions where we believe we can add value."
DISTRIBUTION
The distribution to shareholders out of share premium, in lieu of a dividend,
increased 21,1% to 162,0 cents a share (2004: 133,8 cents a share).
DIVISIONAL REVIEW
Bidvest"s businesses are grouped into four divisions: Services, Foodservice
Products, Commercial Products and Automotive Products.
Services
It was a positive trading period for Bidfreight southern Africa. Trading income
grew by 17,8% to R260,2 million on a 16,8% increase in revenue to R7,7 billion.
Terminals" results were good. Trading at both Bulk Connections (previously BMA)
and Bulk Terminals improved. IVS improved its tank capacity utilisation,
although trading income was slightly behind expectation. SACD produced a strong
result, boosted by volume increases through the new warehouse in Durban and the
Intermodal business. Safcor Panalpina, South Africa"s largest freight forwarder,
performed well despite a slight decline in margins. Marine benefited from
increased port calls in its Liner business.
Bidcorp"s Ontime Automotive results were again impacted by a continued weak
performance from the Volume Distribution business, particularly in France.
Bidserv delivered an acceptable performance in a challenging trading
environment, characterised by margin pressure in certain businesses. Revenue
grew 5,2% to R1,5 billion, though trading income was up 11,3% to R144,3 million
due to management"s strong focus on cost containment. Strong performances from
the Laundries business and specialised cleaning group TMS were offset by weaker
performances in Magnum Shield and BidAir. The Cleaning division reported a 21%
improvement in trading income, while Laundries achieved a creditable 27%
increase in trading income. Magnum Shield, in common with the rest of the
security industry, had a difficult trading period during which cost increases -
primarily wages - exceeded the inflation rate.
Rennies Financial Services revenue was 8,9% higher at R367,9 million and trading
income increased by 15,4% to R74,9 million. Notwithstanding the introduction of
fee-based income in 2005, the Travel businesses have experienced static volumes,
however profitability improved by 55,6%. Average ticket prices have remained
flat over the period and as all suppliers move to zero commission, the ability
to leverage competitive advantage will improve. Rennies Bank delivered a poor
performance with trading income down 21,1% impacted by the lower retail margins
and higher sales of lower value products. The strong and stable rand constrained
dealing margins.
Foodservice Products
Europe
In the UK, 3663 First for Foodservice increased trading income in sterling by a
modest 4%. Overall performance was adversely affected by sluggish economic
conditions and the adverse impact of the 7 July 2005 bombings in the London
area. Sales in Multi Temperature, Frozen, Fresh and Chilled were in line with
prior year. Margin growth has been strong and reflects continued management
focus on this area. The Barton Meat Company reported sales below expectations
due to a shortfall in new business. Contract Distribution traded well,
benefiting from new contracts. The Ministry of Defence contract revenue was down
as a result of reduced military activity in Kuwait and Afghanistan. Joint
purchasing opportunities are being pursued with Deli XL to lower purchasing
costs and improve margins, and a new customers will come on stream during the
second half of the year.
Deli XL"s results were in line with expectations, notwithstanding management
changes following the acquisition. There are encouraging signs of sustained
growth in the European hospitality industry, and Deli XL is well positioned to
benefit from this. Opportunities for consolidation and market share gains are
being explored.
Australasia
Bidvest Australia had a good trading period, growing revenue and trading income
in Australian dollars by 10% and 20% respectively. Even more pleasing was the
16,3% organic growth in trading income and the improvement in trading margin to
3,1% (2005: 2,8%). Crean First for Foodservice New Zealand traded strongly with
trading income up 21,3%, achieved despite a slowing economy and deflationary
pressures.
Southern Africa
Caterplus achieved a modest 5,1% growth in trading income despite good top-line
growth. The trading environment was challenging, as volume growth necessitated
capacity expansion. Catering Supplies and Frozen"s revenue gains were offset by
increases in overheads. Speciality traded very well, buoyed by niche foodstuffs
for home entertaining. Vulcan"s trading income was slightly down due to falling
export volumes. Hotel Amenities and Lufil both traded well.
Combined Foods results were disappointing, with trading income flat at R70,7
million. Bidbake was particularly affected by yeast imports, which impacted its
ability to pass on cost increases to customers. Crown National traded reasonably
well despite uncompetitive import prices and the effects of Newcastle disease on
the poultry industry. The move to new facilities should present opportunities
for efficiency improvements.
Commercial Products
Office Products
Revenue was up 9,7% to R1,83 billion, though trading income increased by 7,7% to
R115,9 million. Stationery traded under difficult conditions, where competitive
pressures and rand strength constrained margins, negating revenue gains. Waltons
grew trading income 22,6% despite a poor result from the Southern Gauteng
region. Kolok was impacted by the strong rand and capacity constraints in
Gauteng and Durban, although these bottlenecks have been addressed by the
opening of new distribution facilities. Furniture posted a 6,9% increase in
trading income in the face of strong import competition from China and Eastern
Europe. Automation traded well with Minolta growing trading income by 18,6%, the
result of tight control over expenses and growing margins.
BidPaper Plus
Revenue grew 10,3% to R1,07 billion and trading income was up 4,3% to R79,8
million despite tough trading conditions. Management"s unrelenting focus on
expenses, which fell 5,7%, assisted profitability. Lithotech SA experienced good
growth in its Mail and Laser businesses, although this was offset by the ongoing
decline in volumes in its traditional business forms. Silveray managed to
increase volumes, but at lower prices due to competitive pressures. Lithotech
France continued to show losses despite a major restructuring of the business.
Bid Industrial Products
Revenue increased 18,4% to R1,8 billion while trading income was up 26,3% to
R120,2 million. Electrical Wholesaling traded successfully on the back of a
buoyant construction sector with a 16,9% increase in revenue and a 57,2% growth
in trading income, despite a more than 38% increase in the price of copper over
the past 6 months. Revenue was flat for Afcom GE Hudson, whilst trading income
was down 19,5%, forcing Afcom to switch certain products from local manufacture
to imports. Buffalo Executape reported a 5,8% drop in trading income, but is
focussing on margin management and new business ventures into the DIY industry.
Automotive Products
McCarthy Limited
McCarthy achieved a 19,9% growth in revenue to R8,3 billion and a 28,6% rise in
trading income to R290,2 million. Notwithstanding the ongoing surge in new
vehicle sales, buttressed by low interest rates and strong consumer confidence,
new and used vehicle margins remained under pressure, and this impacted the
franchise"s trading performance. Budget Rent A Car achieved better asset
utilisation and volume growth. Yamaha Distributors performed well in an
increasingly competitive market, impacted by parallel and grey imports.
Financial Services delivered an outstanding performance, achieving greater
market penetration with insurance products. GAZ SA, the taxi distributorship,
continues to make steady progress.
Corporate Services
Namsov, Bidvest"s 31% owned Namibian fishing business, had an excellent year,
reversing the previous R4 million loss to report a R42 million profit where
reasonable catches and improved selling prices helped lift the bottom line. This
was achieved in the teeth of a struggling Namibian fishing sector. Mymarket.com
continues to grow its customer base.
ISSUED ON BEHALF OF: THE BIDVEST GROUP LIMITED
BY: CLEAR DISTINCTION COMMUNICATIONS
BIDVEST CONTACTS: Brian Joffe (CE)
Tel: (011) 772-8704
David Cleasby (Investor Relations)
Tel : (011) 772-8706
Mobile: 083 228 1810
CONSULTANCY CONTACT: Carol Dundas
Tel: (011) 444-0650
Mobile: 083 447-6648
Date: 27/02/2006 12:23:07 PM Produced by the JSE SENS Department
