Bidvest closed 3.8% higher after releasing results for the six months to December 2021.
This is a highly diversified group with exposure to everything from businesses servicing office properties through to commodities and renewable energy solutions, with some automotive and freight thrown in for good measure. There are even pianos, of which I’ve been a happy customer of a Yamaha digital example!
There are winners and losers within the group each year, with the theory being that the management team focuses its energy and capital investment on the juiciest bits.
All divisions posted double digit trading profit growth in this period, so there was plenty of juice.
The Services division grew trading profit by 19.3%. Branded Products grew trading profit by 24.4%, driven by a strong recovery in Adcock Ingram as people got sick again from something other than Covid. The Freight business posted a whopping 29% increase in trading profit, thanks to bumper agricultural volumes and decent LPG and bulk mineral volumes.
Commercial Products grew trading profit by 24.9%, which includes businesses like Plumblink and Yamaha. Automotive grew trading profit by 15%, with new vehicle sales up 9.0% and used vehicle sales down 10.8%. Finally, Financial Services grew trading profit by 20.1% with growth in foreign exchange and insurance business lines.
From continuing operations, the group posted a juicy R50 billion in revenue, up 13%. R5.1 billion in trading profit reflects a 25% increase on the prior year, a pleasing operating margin expansion for investors.
Group headline earnings per share (HEPS) from continuing operations increased by 35.3% to 813.8 cents. On a normalised basis, the group reported a 31% increase in HEPS.
The earnings have translated solidly into cash, driving a 31% increase in the interim dividend to 380 cents per share.
Of the R4 billion in cash generated from operations (after hefty working capital movements), R1.2 billion was needed for capital investment. Shareholders won’t mind, as return on invested capital (ROIC) of 15.5% is above the group’s weighted cost of capital.
Bidvest is looking abroad, having successfully raised a USD800 million international bond at a fixed semi-annual coupon of 3.625%. This has been swapped into GBP using a cross currency swap, reflecting the group’s focus on the UK. From 1 April 2022, the Services division will split into Services SA and Services International, so its no secret where the international growth strategy will focus. As things stand, there’s an almost equal split between local and offshore revenue in this segment.
The share price is up 25% in the past year, a solid return for those who punted on the stock. Bidvest was stuck in a range from 2018 to the start of the pandemic and is now at a level that is firmly back in that range.
The key consideration for shareholders is whether it can finally break higher.