Bidvest Group lifted its interim dividend by 15% to 437 cents by capitalising on growth and margin strengths in the agriculture, mining, renewable energy and travel and tourism sectors, CEO Mpumi Madisa said.
Bidvest’s share price rose strongly by 7.9% to R252.58 yesterday morning after the release of robust financial results. The share price was 13.3% above what it was a year previously.
Revenue was up 14% to R57.2 billion, while trading profit was up by the same percentage to R5.8bn, indicating the group kept a lid on cost growth overall, despite big increases in for instance, energy and fuel costs.
As example, Madisa said they operate 20 factories where back-up diesel generators have essentially become core power, and diesel costs at these factories had increased significantly, he said in a phone interview yesterday.
She said it had been “hard” to control costs, but the group had also benefited from higher margins from their businesses in the strongly rebounding tourism sector, and from fast-growing renewable energy equipment sales. “We managed to maintain margins through the mix of our businesses,” Madisa said.
She said six out of seven divisions were performing well despite an already high base, with many individual businesses producing record months during the interim period.
And while the Services International division’s performance was flat, if one excluded the less Covid-related work and acquisitions, the performance would also have been stronger, Madisa said.
The impact of a higher base from declining Covid-related work would also likely impact the second half, and there may be an impact on the division due to a 9.5% increase in wages in the UK in the second half, she said.
Group headline earnings per share (Heps) increased 15.3% to 938.5 cents. Normalised Heps was up by the same percentage to 983.4 cents.
Madisa said they had grown well, notwithstanding global macro-economic pressures and barring unforeseen circumstances they expected another six months of strong earnings growth.
Of the trading profit during the interim period, R1.1bn was contributed by the international operations. Robust cash generation of R7.3bn was delivered before investing R5.5bn in working capital.
Capital investment of R1.5bn was to upgrade facilities and maintain assets, while R2.3bn was used for acquisitions.
The expansion of Bidvest’s facilities management footprint into Australia, effective July 7, 2022, delivered in line with expectations.
Strong demand for bulk, mineral and agricultural commodities, as well as higher liquid petroleum gas (LPG) volumes, benefited the freight terminal operations, while clearing and forwarding activity recovered strongly.
Tourism volumes revived, notwithstanding air travel capacity constraints, resulting in good performances from the travel and hospitality businesses, although passenger air traffic was not yet at pre-Covid levels. In the domestic market, the closure of airlines meant there were simply less flights available for passengers, Madisa said.
Coming off record high bases, both commercial products and branded products delivered strong results as many of the underlying businesses gained market share by trading in sought-after products, while simultaneously managing margins well.
The expected improved performance from Financial Services materialised – a turnaround strategy in the asset finance and business-focused bank resulted in a strong performance, excluding the investment performance. Margin discipline in automotive continued.
Activity in renewable energy, mining, agricultural, tourism and hospitality sectors was expected to remain healthy.
Planned investment to mitigate the impact of the electricity crisis would continue. Consumer disposable income pressure was anticipated to intensify throughout the calendar year.
Demand for select bulk commodities was expected to remain robust. The improved performance from financial services should also gain momentum, she said.
“We will remain disciplined on margin generation, nimble in offering a differentiated product and/or service and focused on expense management as competition intensifies, together with declining economic growth, suboptimal infrastructure as well as labour cost pressures.”
Several corporate action opportunities were currently being actively pursued and discussions continue with regard to capital intensive partnership opportunities in South Africa, Madisa said.
BUSINESS REPORT