Review of the year
|R million||Year ended
30 June 2020
30 June 2019
|Revenue||22 091||20 648||7.0%|
|Trading profit||2 134||2 201||(3.1%)|
|EBITDA||2 669||2 710||(1.5%)|
|Average Funds Employed||2 550||2 515||1.4%|
The Services division's trading profit of R2.1 billion is an outstanding result considering the harsh operating environment. We are very pleased with overall cash generation, which was largely driven by Noonan's excellent cash collection performance.
Noonan's exceptional performance was partly due to increased COVID-19-related services, including the sale of PPE. The pandemic has opened numerous opportunities for an increased scope of services for Noonan, specifically as the demand for increased hygiene services and products will remain heightened for some time. We are pleased with how Noonan has been integrated into Bidvest and we remain comfortable that it is aligned to our overall growth ambition as we pursue a larger footprint for this niche offering in selected international regions.
Noonan's trading margin widened as the focus on COVID-19 products and services was augmented by strong commercial and cost control. The performance from the recently acquired Future Cleaning, however, was disappointing, with pubs and cinemas closed during lockdown.
PHS provides Bidvest with increased access to an increasingly resilient hygiene market. The company is very well established, being founded in 1963, has a solid and large customer base of over 120 000 clients and is an excellent cash generator. During the due diligence, we identified five areas of synergy and cost saving to achieve an improved margin, which is more in line with PHS' industry peers. Work has started to bring this into effect. The global outbreak of the COVID-19 pandemic undoubtedly heightened the awareness of and need for out-of-home hygiene, and this is expected to accelerate the development and maturity of the industry globally.
Despite the operating environment in South Africa, our Facilities Management cluster performed well. Steiner and Prestige both delivered good results with increased trading profits and excellent cash generation. New contracts and the sale of COVID-19-related products and services more than offset the complete lack of hospitality business and we are seeing this upward trend continuing as people start returning to work environments. Prestige, in particular, was very innovative during COVID-19, despite restrictions on the number of employees that were allowed to work.
One of the bolt-on acquisitions we concluded during the year, was the purchase of Mastrantonio's catering operations. This has elevated the Bidvest catering offering into the corporate customer base. We are still expecting this to be an area of growth as larger corporate entities outsource non-core operations, while maintaining a level of safe and healthy solutions for their respective employees.
The Security and Aviation cluster, Protea Coin and UDS delivered excellent results. UDS is a drone business that was acquired last year, and which continues to show impressive growth as innovations and efficiencies in the security and other industries start becoming more important.
Responding quickly to cargo flow and market changes, BidTrack, Vericon and Bidair Cargo achieved good results, as did Bidair Lounges, which was on track for a record performance until the pandemic curtailed its performance in the fourth quarter. We have made a decision to divest from Bidair Services (ground handling operations).
Businesses within the Allied Cluster held their own even though hospitality demand was restricted. Some of our offerings, like water and coffee demand in corporate offices, were impacted.
The Travel cluster was harshly affected by the closure of borders, which resulted in a loss for the year. We have accelerated an extensive restructuring plan with an objective of reducing the cost of doing business and ensuring we can be best positioned for niche travel solutions going forward.
We are extremely well positioned to capitalise on the now heightened awareness of out-of-home hygiene. We are pursuing strategic options, including the significant synergies that exist between Noonan and PHS and which we originally identified during the PHS due diligence. These are expected to contribute positively to profitability.
The challenging market conditions are expected to continue and we are carefully monitoring the short- and medium-term work-from-home trends to adapt our service offerings to ensure continued financial performance. We are therefore closely monitoring how the future of remote working will impact the 'empty building' syndrome in the regions where we operate, and we are positioning our offerings to respond appropriately.
The future of our travel- and tourism-related activities will depend on fully operational international borders and we are closely assessing this fluid situation and initiating remedial cost and efficiency strategies.
We will continue to pursue bolt-on acquisitions to augment our footprint and offering if they prove meaningful to future value and profitability.