South African conglomerate the Bidvest Group announced a solid set of numbers for its half-year to 31 December 2020, declaring an interim dividend of 290 cents per ordinary share. This is positive news for all South African incorporated businesses, given Bidvest’s broad exposure to the South African consumer through a number of controlling stakes in businesses spanning over multiple industries. The group unbundled its flagship asset, offshore food service group Bid Corporation in 2o16, a corporate action that created value for shareholders. Given Bid Corporation’s exposure to the global food service industry, Bidvest has become a company predominately exposed to the South African consumer. The business has streamlined its operations, creating operational efficiencies and reducing its cost base. This leaves the company in a great position for any uptick in the South African economy. – Justin Rowe-Roberts
Read also: Bidvestās spun-off unit Bidcorp lists on JSE, valued at R91.6bn
Bidvest SENS statement:Ā
Unaudited financial results and cash dividend declaration for the six months ended 31 December 2020
Salient features
- R4.1bn trading profit from continuing operations, +3.5%
- Normalised HEPS from continuing operations 651.6 cents, +6.1%
- HEPS from continuing operations 601.7 cents, +6.3%
- Basic EPS from continuing operations 562.3 cents, +17.2%
- R6.2bn cash generated from operations, +86.2%
- ROFE up to 31.3%
- Net debt / EBITDA improved to 1.7x from 2.1x as at June 2020
- Interim dividend 290 cents, +2.8%
- Commissioned R1bn LPG terminal in Richards Bay
- Executive leadership team 45% women and 45% black
Introduction
During the six months to December 2020, Bidvest pulled together like never before, strengthening our resolve to emerge stronger. Our entrepreneurial philosophy, agility, discipline, customer centricity enabled us to deliver a good set of results. Solid profit and HEPS growth converted into exceptional cash flow which enhanced our balance sheet.
Our people, many of whom are frontline workers, were key enablers in delivering this outcome. We are particularly pleased that today 95% of our employees have been able to return to work, a massive shift from the approximately 75% of employees that were unable to work during the height of the lockdown in 2020.
We sadly lost a further 44 employees to Covidā19 during the period as infections peaked over the past few months. We extend our sincere condolences to their families, friends and colleagues. The Bidvest Covidā19 Fund continued to support South African employees during the past six months. In the UK and Ireland, employees continued to receive support from their respective government employee relief schemes. Governments of South Africa, Ireland and the UK are commended for the support provided to livelihoods through TERS and furlough schemes.
In order to protect the health, safety and wellbeing of the Bidvest family, we will cover the cost of vaccinations of our employees not on medical aid in the coming months.
Highlights
Trading profit growth of 3.5%, off a preāpandemic base, was enhanced by the consolidation of PHS, the leading hygiene service provider in the UK. During the six months to December 2020, demand was disparate across industries. There was good demand for hygiene and facility services, DIY products and bulk commodity handling services. Travel and related, as well as hospitality, sectors were hard hit and remain, largely, closed.
Bidvest’s focus was on expense and balance sheet management while delivering efficiently into market demand. Exceptional cost and margin management across the Group limited the negative profit impact of lower demand. This, together with excellent working capital management, resulted in cash generated by operations almost doubling to R6.2 billion (H1 2020: R3.3 billion). Free cash flow totalled R3.1 billion (H1 2020: R306.9 million). Group cash conversion was 124.3%.
The balance sheet strengthened over the period. Return on Funds Employed (ROFE) improved significantly from 17.8% at year end to 31.3%. ROIC of 12.9%, unchanged from 30 June 2020, is above the Group’s weighted cost of capital.
Prospects
Looking ahead, it is likely that the economic downturn will persist with the pace of recovery remaining largely uncertain. Cognisant of the constrained operating environment, we have optimised our cost base and improved efficiencies. Our businesses are futureāfit and their operating models scalable, well placed for growth.
In addition, we have better aligned our product and service mix with evolving market demands and we expanded our geographic footprint.
Bidvest’s comprehensive basicāneed services and everyday essential products position us favourably to withstand the current headwinds as well as capitalise on the resumption of trade. Our businesses will continue to seek new revenue and take advantage of the opportunities that are evident in some sectors.
Whilst we continue to pursue our strategy of expanding into niche areas, we will maintain our sound capital allocation disciplines. In so doing, we remain confident in our ability to deliver sustainable growth and create longāterm value for all stakeholders. Bidvest is actively participating in national workstreams to enable a return to economic activity as soon as possible.Ā Ā This includes working alongside industry peers to ensure the effective distribution of Covidā19 vaccines across the country.
Dividend declaration
In line with the Group dividend policy, the directors have declared a final gross cash dividend of 290 cents (232.0000 cents net of dividend withholding tax, where applicable) per ordinary share for the six months ended 31 December 2020 to those members registered on the record date, being Friday, 26 March 2021. The dividend has been declared from income reserves. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.
