Feed the beast
Bidvest needs new acquisitions
BRIAN JOFFE, CE of the sprawling (in terms of being big and everywhere) Bidvest Group, was in a feisty mood when Finweek spoke to him last Monday. With a strong set of interim results under his belt, he probably felt he could give a bit of stick to a journalist who, in his opinion, wandered a bit off the path.
Comair, in which the group recently bought a 20% stake, was clearly not on the agenda when he had much bigger things to talk about. “When we get the opportunity to buy 20% of any company that’s worthwhile, we do it. We look at opportunities all the time. I don’t know why there’s all this fuss about Comair.”
Probably because airlines are perceived, and probably incorrectly, to be glamorous, exciting businesses. And Bidvest is firmly on the periphery of the airline industry with its interests in aircraft cleaning services, cargo and running the Premier Class lounges at airports. It’s also involved in running and upgrading Mumbai International Airport as part of a consortium. Does this mean there will one day be a Bid Air?
“There is, we have a number of airport related services,” he snaps. That’s not what we meant though – we know about the relatively new Bidair Services division. Is Joffe going to do a Richard Branson and buy or develop an airline?
“Comair is just an investment, an opportunity we saw as entrepreneurs. It’s going to be held as an investment.” Then we remind Joffe that the last time we spoke he said airlines weren’t good businesses. “I’m an entrepreneur, I can change my mind. But generally speaking, I don’t believe airlines are good businesses.” He confirms however that services like baggage handling are being investigated as opportunities. But not onflight catering – that would put Bidvest in competition with clients.
Okay, that’s cleared up. We know Bidvest is looking at a possible, probably large acquisition in food service overseas, Europe or possibly the US, but no details yet.
Food service interests held by Bidvest Europe are valuable contributors to group revenue and profits, which are growing strongly off a big wheel (revenue of R15bn in Europe, R48bn for the group in total). But the landmark 3663 First for Foodservice in the UK took a bit of a hit, losing the contract for the Ministry of Defence. Joffe says, however, that new business has been brought in, including Hilton Hotels, KFC and Pizza Hut. “We’ve already replaced the volume, though it’s not as profitable,” Joffe says.
In South Africa there are a few problems, like the baking division, but Joffe says it’s being worked on, and Bidvest remains committed to the business. However, as the group expands at a rapid pace, maintaining the high returns that Bidvest is renowned for, seems to be causing some strain.
“The group grows and you have to reinvest in the group all the time, and it leads to a period of introspection. Not so much about the business, but about managing the assets. The broad view is that you put more assets in and returns are lower – it’s a situation we don’t want to continue.”
And that’s probably the biggest challenge Joffe faces – finding the real quality acquisition opportunities to feed into a group hungry for new businesses. It’s also probably why Bidvest will increasingly look abroad for acquisition opportunities. The last great, large deal in South Africa was probably McCarthy, the vehicle retailer now housed in Bid Auto (with Budget Rent a Car and Burchmore’s) that’s pumping out a fifth of group revenue.
Unless Joffe looks at increasing his stake in Comair and introducing… no, we’re not going to get into that again.
McCarthy seems well placed, almost perversely placed in the current economic climate. New vehicle sales are still robust but slowing a bit due to increases in interest rates, and margins are under pressure from competing new vehicle pricing policies and the used car market. But any swing
“I’m an entrepreneur, I can change my mind.”
towards used cars should benefit McCarthy, which has a strong presence in this market. And for new car owners who overextended themselves and had vehicles repossessed, well they get auctioned at Burchmore’s.
Looking ahead, Joffe sees many opportunities for Bidvest in spending on the infrastructure projects leading up to and beyond 2010. Many group businesses are well placed to benefit from this spending, which Joffe feels has lagged and needs to catch up.
And he will continue seeking out new opportunities. “We should have a good second half, the currency conversion is very positive for us. But, we live in very volatile times.”
That may just be a throwaway line, but we suspect Bidvest has some big plans.
Getting introspective. Brian Joffe