Bidvest ‘firing on all cylinders’ as the grip of Covid loosens
● Bidvest is seeing strong signs of life in the local economy, specifically in private sector infrastructure spending and in the renewable energy sector, a trend it expects will continue for the rest of the year.
At the release of results for the six months ended December 31 2021, CEO Mpumi Madisa said: “Bidvest is benefiting from greater private infrastructure spend, rather than public sector.”
This is evident in Bidvest’s plumbing and electrical businesses, such as Plumblink and Voltex, that are involved in many development projects now under way.
“The second area is renewable and alternative energy projects. They have been great performers for us and we have been able to pick up some of that work,” Madisa said.
“We anticipate that continuing as well, not just into the next six months of the 2022 financial year but into the full calendar year where we think there will be more demand.”
Bidvest is considered a bellwether for the
South African economy given the reach of its operations, which range from the automotive sector to freight and facilities management, hygiene services, tourism and health-care products.
Madisa said because Bidvest is “close to the building industry” it knows what projects have been approved and is anticipating more developments to be rolled out.
She said what was needed now was for the government to start rolling out public infrastructure projects, referring to last week’s budget speech by finance minister Enoch Godongwana in which he said a provisional allocation of R17.5bn had been set aside over the medium term for “infrastructure catalytic projects”.
Godongwana said the government looked “forward to engaging with specific proposals in this regard”.
Madisa said the renewable energy sector was very active, thanks to the private sector; since President Cyril Ramaphosa last year allowed private companies to generate up to 100MW of electricity without a licence, there has been a “massive spike in self-generation in mining and other industrial sectors”.
Bidvest’s plumbing and electrical businesses were seeing activity “picking up nicely” because of this, Madisa said.
Other areas of the economy were also flourishing. “We continually see mining expansion and the mining upswing has provided a myriad of opportunities for our trading and services businesses. The agri sector has been good and buoyant and, very similar to mining, we have been able to pick up some business opportunities which we expect to continue.
“We are in the middle of a record maize export season, so if we look at the freight division’s results the volume of maize we have been handling has been surging. We have handled 1.3Mt of maize [in the six-month reporting period]. We expect the full export season to be about 4Mt.”
Other green shoots for the JSE-listed industrial company include the return to the office by corporate SA.
Madisa said the implementation of mandatory vaccine policies by companies had “definitely resulted in more activity in offices ”— many in the banking sector, for example, already had their employees back three days a week. This has boosted the group’s hygiene services and facilities management businesses.
In the six months to December Bidvest’s divisions delivered “double-digit trading profit growth”, which Madisa said was probably the group’s best set of results since its unbundling in 2016 when the food-service business became a separate listed company called Bidcorp.
Bidvest reported that trading profit grew 24.8% to R5.1bn, with R1bn coming from its international operations. Group headline EPS surged 37% to 813.8c. Cash generated by operations rose 12.3% to R6.6bn, which was before investing R2.6bn in working capital.
Madisa said working capital spend was back at pre-Covid levels, which was a good sign that normality was returning to its global and local environments.
All Weather Capital senior equity analyst Cobus Cilliers said Bidvest was “firing on all cylinders”.
“It’s clear that Bidvest management have executed very well under difficult trading conditions, and the fact that they have gained market share is probably a function of good operational management, good capital allocation and some of their competitors struggling to navigate the current environment and/or going out of business.”
Madisa said the biggest challenges facing Bidvest included Covid-related global supply chain issues, which were expected to continue for at least another year, as well as any potential Covid variants and the reaction of the rest of the world to them.
She added that over and above the global supply chain issues there were inefficiencies at local ports that affected the offloading and loading of goods from ships, which Bidvest was hoping Transnet would resolve in the near future.
It’s clear that Bidvest management have executed very well under difficult trading conditions Cobus Cilliers
All Weather Capital senior equity analyst