South African industrial services group Bidvest on Monday reported diluted headline earnings per share of 350 cents for the six months ended December 2005, from 293,4 cents a year ago.
Headline earnings per share were up 21,8% to 368,8 cents. The distribution per share was 21,1% higher at 162 cents.
Trading income was up 18,7% to R1,691-billion, with revenue up 21,6% to R38,24-billion. Net income for the period was up 25,4% to R1,152-billion.
Strong operational performances were recorded by most of the group’s businesses, it said.
The group’s trading margin decreased slightly from 4,5% to 4,4%, reflecting the impact of the acquisition of Deli XL and a change in the profit-contribution mix of the various businesses.
Exchange rates were relatively stable and had a neutral effect on the translation of the group’s foreign businesses, Bidvest said.
Chief executive Brian Joffe said the trading results were further lifted by a lower statutory tax rate and the share buy-backs concluded last year.
“These results are pleasing in that good revenue growth was achieved in the current low inflationary environment, but many businesses experienced cost increases in excess of inflation, due to start-up costs of increasing capacities and fuel-price rises. This in turn impacted margins,” he said.
Cash generation from the underlying businesses remained strong, but seasonal working capital requirements, increased capital expenditure and acquisitive activity resulted in a net utilisation of funds.
The group’s balance sheet is extremely strong with interest cover being approximately 11 times, he added.
The financial results have been presented in conformity with IFRS accounting standards, the effect of which has been a 5,2% restatement — or 16,8 cents per share — of the comparative period’s headline earnings per share. Most of this is due to the cost of share-based payments as well as the amortisation of reinstated intangible assets previously written off.
During the review period, Bidvest acquired 100% of Deli XL BV from Koninklijke Ahold NV, for approximately R1,1-billion, effective September 2005. Good progress has been made in bedding down the acquisition and certain management changes have been effected, Bidvest said.
“This acquisition strengthens our foothold in the European food-service market and management is confident Deli XL will deliver on our expectations,” said Joffe.
In September 2005, 3663 First for Foodservice acquired a controlling stake in Horeca Trade, a small Dubai-based food-service distributor that has the potential to develop into one of the largest food-service distributors in the Middle East.
Subsequent to the half year-end, Bidvest concluded the sale of its cross-channel ferry business Dartline Shipping, including the ferry terminal at Dartford, Kent, for £58,9-million, or R650-million, resulting in a significant premium to book value.
The sale is consistent with the group’s philosophy of exiting businesses that fail to meet acceptable rates of return.
Looking ahead, Joffe said the trading environments for many businesses in the group are favourable.
“Capacity expansion has taken place across the group to cater for current and future growth, and management has proven itself up to the task of seizing opportunities when they arise,” he said.
In addition, the impact of the Deli XL acquisition will be more significant in the second half of the financial year as the full six months’ earnings are brought to account. The divisional reporting and management structures have been realigned to better take advantage of the many synergies which exist in the group.
Bidvest’s general approach to acquisitions is to seek 100% control; however, this policy is being relaxed with regards to new, larger-scale activities where Bidvest can acquire a significant shareholding with management control.
“This will enable the group to take advantage of larger acquisition opportunities and where it can utilise its skills in extracting value,” he said.
Looking forward to the second half of the year, Joffe said the group is optimistic of continuing to achieve above-average returns and growth.
“We will continue to look for acquisitions where we believe we can add value,” Joffe concluded. — I-Net Bridge