Bidvest Group is hot on the acquisition trail, locally and abroad

Bidfood, a unit of Bidvest. Photo: Supplied

Bidfood, a unit of Bidvest. Photo: Supplied

Published Mar 5, 2024


Bidvest is pursuing a number of acquisition opportunities, this after spending R3.2 billion on bringing nine new businesses into the group in the six months to December 31, CEO Mpumi Madisa said yesterday at the release of results for the six months to December 31.

The market welcomed the results, with the shares surging 7.69% to R252.77 in afternoon trade on the JSE yesterday.

“We have successfully executed on our growth pipeline, with numerous acquisitions concluded in South Africa, Australia, the UK and Singapore. This has added to our geographic footprint in hygiene services, enhanced geographic scale in facilities management and augmented our product and service offering.”

“We have kept focus on making our businesses sustainable and have also grown the number of staff by 5 100,” she said in an online presentation,

Group revenue increased 8.8% to R62.2bn, with acquisitions boosting the growth rate by 2.8%. In largely stagnant markets, price inflation, a weaker rand against major currencies and new business gains were the key growth drivers.

Acquisition costs were incurred to buy Consolidated Property Services (Consolidated) in Australia, Rental Hygiene Services (RHS) in Singapore and several bolt-on transactions, both locally and abroad.

Bolt-on acquisitions of Interloc, a road and air freight consolidator, Brandability, a corporate promotional gift sales channel, Roan and Green Home, which have complementary products to the existing data, print and packaging offering, and a few small hygiene and facilities management services businesses in existing territories, became effective in the six months.

She said acquisitions were an integral part of the group’s strategy. Bidvest was participating in acquisitive processes, locally and offshore, in varying phases of completion. Engagement with regards to possible private sector participation in South Africa also continued, she said.

Bidvest’s net debt increased by R6.8bn since June 30, 2023, to R25.9bn, some 68.3% of it offshore. Debt funding, mainly from the multicurrency syndicated revolving credit facility, was used for the acquisitions. The balance sheet remained healthy and cash generated by operations of R3.7bn was almost doubled.

Five of Bidvest’s seven divisions reported double-digit trading profit growth in a competitive and price-conscious market and in spite of close to double-digit wage inflation.

Top-line growth, active margin management and strong expense controls saw the group lift earnings a share (Eps) and normalised headline earnings a share, by 5.3% and 6.9%, respectively. The interim dividend was raised 6.9% to 467 cents.

Expenses increased 3.6%. Reduced overtime, the streamlining of businesses and reduced costs associated with load shedding mitigated inflationary pressures.

The freight terminal operations benefited from positive price mix, robust demand for bulk commodities and oil and gas activity in Namibia.

Healthy travel and tourism activity contributed to profit growth by Services South Africa. Capitalising on pockets of niche demand boosted Branded Products’ trading profit.

Services International’s new business was boosted by acquisitions and foreign exchange movements. A much improved cost-to-income ratio at Bidvest Bank drove core profit growth in Financial Services.

Commercial Products navigated more competition and an overstocked renewables supply chain for a satisfactory result. The downturn in the automotive market coincided with high levels of excess stock which compressed Automotive’s margin. Adcock Ingram delivered a flat result.

On the outlook, Madisa said traditional seasonal trading trends appeared to be re-establishing in bulk commodity freight movement. This, with a non-repeat of frenetic renewable product purchases, as well as weak vehicle demand, would likely result in market pressures in the second half.

However, she said management remained “optimistic about the group’s ongoing growth trajectory” as pockets of opportunity were being pursued in certain sectors such as travel and tourism.

“Recent strong business wins will contribute fully, and management will also remain vigilant with regards to margin and expense management. We will continue to advance our strategy and maintain our financial discipline,” she said.

Martin Rodgers (@SAValueInvestor), an assistant portfolio manager at Integrity Asset Management, said on X: “Bidvest $JSEBVT jumped 10% on their results this morning. Morgan Stanley expects some upgrades to consensus estimates following the results. Company currently has six buys, three hold and no sells with average price target of R283.33 (12.5% upside from last price).”