Bid­vest: Diver­si­fi­ca­tion pro­tects against risk

Finweek English Edition - - FEEDBACK - BY SHAUN MURI­SON Mar­ket An­a­lyst at IG

Bid­vest, t he i nternational ser v ices, trad­ing and dis­tri­bu­tion com­pany with a global foot­print ex­tend­ing to five con­ti­nents a nd a mar­ket cap­i­tal­i­sa­tion of nearly R106bn, has once again re­ported a ro­bust set of re­sults for the year to end June.

The group’s oper­a­tions con­sist of four key di­vi­sions, namely: Bid­vest South Africa, Bid­vest Namibia, Bid­vest Food­ser­vice and Bid­vest Cor­po­rate. An­nounc­ing its re­sults at the end of Au­gust, it said all four di­vi­sions have man­aged to grow turnover over the last re­port­ing pe­riod, with the two largest di­vi­sions – Bid­vest Food­ser­vice and Bid­vest South Africa – post­ing the most sub­stan­tial rev­enue gains of 14% and 9.2% re­spec­tively.

Bid­vest Namibia a nd Bid­vest Cor­po­rate posted more mod­est rev­enue growth of 2.5% and 6.5% re­spec­tively. The di­ver­sif ica­tion of t he Bid­vest port­fo­lio pro­vides a de­fen­sive hedge against in­dus­try spe­cific risks, while the ge­o­graphic diver­si­fi­ca­tion re­duces the im­pact of cur­rency risks. In the last re­port­ing pe­riod, the stand­out per­for­mance was rea li s ed by t he Food­ser­vice di­vi­sion.

Bid­vest Foodser vi c e – which sup­plies food, equip­ment, liquor and non-food items like clean­ing ma­te­ri­als and pack­ag­ing to cus­tomers around t he world i nclud­ing cof­fee shops, restau­rants, ho­tels, air­lines, mines, pris­ons and hos­pi­tals – ac­c­counts for just over half of the group’s turnover, while con­tribut­ing more than 40% to the group’s trad­ing profit. Within the di­vi­sion, a slug­gish per­for­mance from the emerg­ing mar­kets geogra­phies was more than off­set by im­pres­sive growth par­tic­u­larly in t he Euro­pean and the UK busi­nesses, which have seen trad­ing profit surge by 57% and 42% re­spec­tively.

Bid­vest SA, which con­trib­uted just over 40% to group rev­enue and just over half to the group’s trad­ing profit, has shown re­silience as the di­vi­sion con­tin­ues to grow de­spite the eco­nomic head­winds cur­rently in place.

Ten of t he 11 South Africa n oper­a­tions achieved turnover growth while only the small­est con­trib­u­tor to rev­enue, the con­sumer prod­ucts di­vi­sion, showed con­trac­tion.

Over­all, head­line earn­ings per share for the year to end June were up 8.6% to R18.82, while group turnover grew 11.6% to R204.9bn. A f inal div­i­dend of R4.82 a share was de­clared.

Bid­vest trades on a his­tor­i­cal priceto-earn­ings ra­tio (P/ E) of 16.5 times, while of­fer­ing a div­i­dend yield of around 3% per an­num and gen­er­at­ing a re­turn on eq­uity just short of 20%. The man­age­ment of the busi­ness, led by Brian Joffe, has proven its ef­fi­cacy in achiev­ing both or­ganic growth and ac­quis­i­tive growth year af­ter year.

The cur­rent mar­ket volatilit y is likely to re­sult in fur­ther op­por­tu­nity and in turn strate­gic ac­qui­si­tions for the group. If past per­for­mance is any in­di­ca­tion of fu­ture per­for­mance, then this should serve to fur­ther en­hance the scope, reach and earn­ings po­ten­tial of the busi­ness go­ing for­ward.

For those mar­ket par­tic­i­pants look­ing for an in­vest­ment which has proven con­sis­tent growth in the past, of­fers a fair yield, while pro­vid­ing a par­tial cur­rency hedge and a di­ver­sif ica­tion in­her­ent of it­self, the Bid­vest Group war­rants con­sid­er­a­tion.

CEO of Bid­vest Group

Brian Joffe

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