Salient features
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Review of the year
| R million | Year ended 30 June 2020 |
Year ended 30 June 2019 |
Change | |||
| Revenue | 6 308 | 6 698 | (5.8%) | |||
|---|---|---|---|---|---|---|
| Trading profit | 1 161 | 1 386 | (16.3%) | |||
| Trading margin | 18.4% | 20.7% | ↓ | |||
| EBITDA | 1 385 | 1 668 | (17.0%) | |||
| Average Funds Employed | 4 000 | 3 437 | 16.4% | |||
| ROFE | 29.0% | 40.2% | ↓ |
The Freight division's results reflect the subdued local economy and lower global trade. We saw significantly lower volumes handled and consequently trading profit reduced by 16% to R1.2 billion.
There was limited trading activity during the COVID-19 period, while lockdown-led restructuring and rightsizing initiatives also had an impact.
Bidvest Tank Terminals, however, performed pleasingly with improved efficiencies more than offsetting a 3% decline in volumes. The capacity requirements of a few of our customers, particularly in the chemicals sector, are changing and we are engaging closely with clients to ensure that we can manage this appropriately. The LPG storage project was delayed due to the lockdown and associated travel restrictions which prevented its technical completion but the terminal was commissioned post year end. Bidvest Tank Terminals has a ten-year, plus ten-year extension, take-or-pay contract in place for this terminal. This facility doubles South Africa's current available capacity of LPG and contributes to the changing energy dynamic in the country. We see this as a potential growth area, and we are assessing further initiatives to participate in South Africa's changing energy landscape.
South African Bulk Terminals produced a flat result with maize exports below expectations although wheat imports were fairly strong following a poor local crop.
Bulk Connections handled 1% higher volumes – largely chrome and manganese – despite lockdown-related disruptions, which affected exports for an extended period. Encouragingly, rail supply increased in June and Bulk Connections has ongoing engagements to optimise and increase rail allocation, which should ultimately resolve some of the port congestion.
The challenging trading environment and COVID-19 negatively affected Bidfreight Port Operations, Bidvest International Logistics (which has changed its international partner to EMO Trans), Naval, Bidvest SACD and Ontime Automotive. In addition to COVID-19, the Ontime trading result was affected by Brexit-related uncertainty.
Overall, our operating expenses were well managed and increased only 1% on the prior year.
Looking forward
While the immediate outlook for trade activity remains fairly subdued we look forward to improved market conditions in key areas.
Our liquid business remains strong and the contribution from the LPG project will meaningfully improve results.
The expected, above normal, summer rains are positive for fertiliser imports and we should see an excellent maize crop, although we are anticipating wheat imports to be lower due to indications of a good harvest for the 2020 season.
Chrome and manganese exports are forecast to remain strong and we are actively pursuing the handling of other higher-value products.
With the easing of lockdown restrictions, local logistics and international freight movements are showing a positive trend, albeit slow, and we are confident of a gradual but continuing volume improvement from the current low base. We have appointed dynamic new management teams in key areas of the division and together with rightsizing interventions and efficiency improvements, means we are optimally positioned to capitalise from the recovery. We have enhanced our focus on securing new business on the EMO Trans platform, which will be beneficial as we move into the future.