Bidvest: Diversification protects against risk
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