Release Date: March 03, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bidvest Group Ltd (BDVSF, Financial) reported strong performances in four of its six divisions, with notable profit growth in Services South Africa, Automotive, Branded Products, and international operations.
- The company achieved a Level 1 B-BBEE rating for the first time, highlighting its commitment to inclusive growth and socioeconomic development.
- Cash generated by operations increased by 18.4% to ZAR4.5 billion, demonstrating strong cash flow management.
- Bidvest Group Ltd (BDVSF) successfully executed six acquisitions, enhancing its portfolio and diversifying its offerings, particularly in the Automotive and Services South Africa divisions.
- The company maintained a strong balance sheet with stable gearing levels, despite deploying ZAR4 billion in capital for acquisitions.
Negative Points
- The company faced a contraction in three areas: zero export maize, declining renewable sales, and reduced volumes and margins in Adcock, impacting trading profit by approximately 7%.
- Group headline earnings per share increased by only 2.8%, with normalized HEPS down 0.4% on a continuing basis.
- The trading margin declined from 10.3% in the prior year to 9.7% in the current period, reflecting pressure on profitability.
- Interest costs increased by 17% when excluding hedging, due to higher average interest rates and increased debt levels.
- The Commercial Products division reported a weak trading result, with a 27% decline in trading profit due to lower renewable sales and pricing pressure.
Q & A Highlights
Q: Can you explain the increase in interest costs, which you mentioned was up 17% excluding hedging?
A: Mark Steyn, CFO: The total interest cost is up 5.4%. Excluding IFRS 16 and the unwind of hedges, the normalized interest cost increase is about 17%, reflecting the growth in underlying gross debt. The hedges provided a positive fair value adjustment of about ZAR100 million. The replacement of Eurobond debt with higher interest RCF debt impacted the last two months and will affect the second half. However, reductions in local and UK/European rates should mitigate some of this impact.
Q: Regarding renewable sales, why does it seem that there isn't an easier comparison in the second half?
A: Nompumelelo Madisa, CEO: In 2023, we averaged about ZAR300 million a month in renewable sales, which dropped to ZAR100 million in FY24, and further to ZAR30 million in the first half of this year. The base remains high, and current volumes are significantly lower, which affects comparisons.
Q: Is buying plumbing businesses internationally still a core part of your growth plans?
A: Nompumelelo Madisa, CEO: Yes, we are actively looking for opportunities. We were in process with a business in the UK and another in Europe but walked away due to pricing issues. We continue to seek suitable acquisitions.
Q: Can you comment on the diversification strategy within the Automotive division?
A: Nompumelelo Madisa, CEO: We are diversifying within the traditional franchise motor retail space by introducing six new OEMs. Additionally, we are expanding into the secondhand vehicle market, which has a larger car park. The Cubbi initiative is expected to contribute significantly in the 2026-2027 financial years.
Q: What is the status of the Citron Hygiene acquisition and its impact on debt covenants?
A: Mark Steyn, CFO: We are awaiting regulatory approval from the CMA, expected soon. The acquisition cost is approximately ZAR5 billion, offset by ZAR3 billion from the sale of Bidvest Bank, leaving a net ZAR2 billion, which we can manage with current cash generation. We do not anticipate covenant issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
