DIVERSIFIED INDUSTRIES

Bidvest shares rise on interim dividend payment

BIDVEST’S shares rose by more than 5 percent yesterday morning after the group declared an interim dividend for the six months to the end of December, boosted by strong cash generated by operations, which was up 86.2 percent.

The share closed 2.89 percent higher at R173.12.

The business-to-business services, trading and distribution group increased its dividend by 2.8 percent to 290 cents a share, up from 282c, while cash generated by operations rose to R6.2 billion compared with R3.3bn a year earlier.

The group operates six divisions in its portfolio: services, branded products, freight, commercial products, financial services and automotive.

Chief executive Mpumi Madisa said Bidvest’s agility, discipline and strong customer focus had enabled the group to deliver a commendable operating and financial result during the period.

“Demand for hygiene and facility services, DIY products and bulk commodity services were good over the period, but demand for the travel and related sectors, as well as hospitality, were hard hit and remain, largely, closed,” Madisa said.

Bidvest reported a 3.4 percent increase in revenue to R44.4bn, and trading profit was up 3.5 percent to

R4.1bn, boosted by the acquisition of PHS, the leading hygiene service provider in the UK.

Its normalised headline earnings per share from continuing operations increased 6.1 percent to 651.6c.

Bidvest said the last phase of the portfolio clean-up that started after the unbundling of the food services businesses had gained traction.

Bidvest sold its 6.75 percent stake in Mumbai International Airport, effective February 5, for R1bn.

The group has also signed a sale and purchase agreement with a purchaser consortium in relation to the disposal of Bidair Services, the airports ground-handling business.

The group reduced its net debt to R15.8bn, down from R19.2bn at the end of June. Madisa said it was likely that the economic downturn would persist, with the pace of recovery remaining largely uncertain.

“Cognisant of the constrained operating environment, Bidvest has optimised its cost base and improved efficiencies. The group’s businesses are future-fit, and their operating models scalable and well placed for growth,” she said.

Peter Takaendesa, the head of equities at Mergence Investment Managers, said Bidvest reported resilient interim results largely driven by acquisitions, cost containment and working capital reduction.

“The results have, therefore, benefited largely from management actions directed at minimising the impact of Covid-19, as well as continuing tougher economic conditions in South Africa, which still contributes 80 percent of group profits. Revenue actually declined 5 percent excluding new businesses acquired in the past 12 months,” Takaendesa said.

He said although the working capital reduction would reverse at some stage in the future, the strong cash generation has helped Bidvest to resume paying dividends, and balance sheet gearing had reduced to 1.7 times net debt to earnings before interest, taxes, depreciation and amortisation by the end of December from more than 2 times in June.