This year’s exceptional operating and financial results were delivered despite several domestic and global crises and rapid changes in demand.

The R9.7 billion reported trading profit is similar to the profits pre the 2016 unbundling of the foodservice businesses. Cash flows from operating activities, excluding dividends, and on a comparable basis, are almost R0.5 billion higher. This is a remarkable achievement in a mere six years.

For the first time, the Commercial Products division generated trading profit of more than R1.0 billion, another milestone. Four out of the seven Bidvest divisions now generate profitability in excess of a billion rand each.

Bidvest has also made further progress with its international growth ambitions, adding incremental value to stakeholders through scale in existing territories and expanding its facilities management footprint, post year-end, into Australia for the first time.

Investment in the Freight division to increase capacity in terminals remains a focus with the Bidvest board approving two projects, an inland Liquefied Petroleum Gas (LPG) terminal and multi-purpose tanks in Richards Bay, at a combined value of R1 billion. Investment made to increase capacity in factories and back-offices, as well as inventory, has and will continue to yield good results. The considerable strength of Bidvest’s balance sheet remains a key enabler.

Simultaneously, good progress has been made to reduce the Group’s environmental footprint, improve social and economic well-being of business and communities, and offer customers more innovative and sustainable products and services.

Excellent trading profit growth was delivered by six out of the seven divisions, off a base that had already rebounded strongly after the worst of the pandemic. Importantly, the performance was emulated in operational cash generation. The successful inaugural international bond issuance diversified and extended the capital structure, enhancing the continued pursuance of Bidvest’s growth strategy.

HEPS, from continuing operations, grew by 21.9% to 1 442.0 cents. Normalised HEPS1, a measurement used by management to assess the underlying business performance, grew by 24.0% to 1 601.5 cents.

Return on Funds Employed (ROFE) improved significantly from 31.6% a year ago to 37.6%. Return on Invested Capital of 17.1%, which compares to 14.1% as at 30 June 2021, remained well above the Group’s weighted cost of capital.

The total dividend for the financial year amounts to 744 cents per share, up 24.0%, after declaring a final dividend of 364 cents.

Note 1: Normalised HEPS excludes acquisition costs, amortisation of acquired customer contracts, deferred tax rate change and COVID-19 costs in the base.

Group revenue grew 13.2% to R99.9 billion (FY2021: R88.3 billion). Record bulk commodity volumes handled and pharmaceutical sales, new vehicle price and volume increases, a strong rebound in travel and tourism-related revenue and the full year contributions from the acquisitions concluded in the UK and Ireland in the latter part of FY2021, were the key growth drivers.

The gross and trading profit margins were 30.0% (FY2021: 30.8%) and 9.7% (FY2021: 8.9%), respectively. Expenses were exceptionally well managed and increased by only 4.7%.

Trading profit grew by 23.3% to R9.7 billion. Superb profit growth was delivered by Services South Africa and Freight, primarily on the rebound in tourism and hospitality related demand and strong maize export volumes handled. Excellent profit performances from Branded Products, Commercial Products and Automotive, off already high bases, were driven by an exceptional Adcock Ingram (Adcock) result, market share gains and margin focus. In Services International, the offshore businesses performed well while the local business performance was solid. Financial Services’ result was disappointing.

Acquisition costs, which were higher year-on-year, were incurred as part of the inaugural international bond issuance and other corporate activity. The amortisation of acquired customer contracts of R283.1 million increased modestly year-on-year.

Net capital items contributed a net profit of R176.6 million compared to losses of R179.7 million recognised in the prior period. The bulk of the capital profit originated from the sale of a vacant property in Namibia.

Net finance charges were 8.3% higher at R1.6 billion (FY2021: R1.5 billion). Excluding IFRS 16, fair value adjustments and hedge costs, the increase was 11.3%, due to higher gross debt following the international bond issuance and the impact of higher rates on the Group’s variable rate funding. The Group’s average cost of funding remained largely unchanged at 4.7% – pre-tax (FY2021: 4.6%).

Share of associate profits at R101.1 million, largely attributable to Adcock’s associate holdings, was almost flat.

The Group’s effective tax rate is 30.0% (FY2021: 28.9%). The net increase is due to the recognition of deferred tax on intangible assets following the corporate tax rate change in the UK. The initial recognition of the deferred tax was done on balance sheet at the time of acquisition. The foreign tax differential was a favourable 2.7%.

Basic earnings per share (EPS) from continuing operations increased from 1 130.2 cents to 1 492.2 cents mainly due to the strong operational performance and the net capital profit on disposal and closures compared to losses and impairments in the prior period. Basic EPS for the Group improved from 1 131.3 cents to 1 492.2 cents.

Bidvest’s net debt decreased from R15.5 billion as at 31 December 2021 to R12.0 billion at the end of June 2022. A portion of the strong cash generated by the businesses was invested in working capital and capital expenditure to increase capacity in certain operations, resulting in less free cash flow generated. Covenant net debt to adjusted EBITDA of 1.5x improved from the 1.8x in the prior year. Interest cover was 9.8x (FY2021: 9.4x).

Cash generated by operations of R11.5 billion, after working capital, was 16.0% lower than in the prior period. The Group absorbed R1.4 billion of working capital in the current year, compared to R2.4 billion released in the prior year, as the working capital cycle across the Group normalised. As is customary, there was a release of R1.3 billion cash from working capital in the second half, which is less than the R2.1 billion in the same period last year largely because inventory investment normalised. Absorption of working capital is encouraging and indicative of higher activity levels.

Bidvest’s pipeline, in the niche areas selected for international expansion as well as local bolt-on acquisitions, remains healthy and opportunities are being actively pursued.

The following transactions were concluded during the second half of the financial year: A2 Group, comprising mainly electric forklifts, was acquired for R92.0 million to enhance the current offering of Bidvest Materials Handling; and Service Royale, a hygiene business in KwaZulu-Natal, was bought to enhance Steiner’s footprint. Mayflower, a hygiene consumable business in the UK, was acquired effective May 2022, for £19.7 million as a bolt-on to PHS.

Subsequent to year-end, effective 7 July 2022, Bidvest acquired B.I.C. Services (Pty) Limited (BIC) in Australia for an enterprise value of A$163.0 million. This acquisition is part of advancing the Group’s international growth strategy and enhances Bidvest’s facilities management service offering and global footprint. The company, which was established in 1989, is head quartered in Sydney and operates across Australia. BIC is a leading provider of niche integrated facilities management services across office, commercial and education sites. Its core cleaning service offering is augmented by a full range of hygiene, waste, maintenance and other ancillary services. BIC employs almost 2 500 people across 3 250 sites.

In addition to the R500.0 million capital investment approved in the Freight division to establish an inland LPG terminal, the Bidvest board also approved a further R547.6 million investment in multi-purpose tanks in Richards Bay.

During the year, Bidvest spent R521.0 million on skills development and R24.0 million on bursaries. A total of 5 596 people participated in learnerships, apprenticeships and internships programs. A total of 406 of these learners were absorbed into permanent employment. Through various initiatives, the Group is supporting 729 students for the 2022 academic year.

The Group made good progress in the diversity profile of its top and senior management teams. Black people represented 83% of appointments made and females 44%.

Bidvest committed to increase its procurement spend with local, transformed suppliers. During FY2022, the Group spent R8.0 billion, R3.0 billion more than prior year, with black and black women-owned SME businesses.

Great progress was made in reducing the Group’s environmental footprint and achieving the goals set out in the Bidvest ESG Framework. Emissions and water intensity, off the FY2019 base, declined by 29.5% and 25.6%, respectively. The businesses have initiatives to reduce their footprint further in the coming year. At the same time, new environmentally-friendly products and services were introduced in several businesses.

The agility and diversity of the Group present opportunities for continued operating efficiency and growth.

South Africa’s mining and agricultural sectors remain robust, whilst ongoing private sector investment and renewable energy projects are contributing positively to demand. Local manufacturing and production capacity has normalised, showing increased activity.

Demand in the tourism and hospitality related areas has been increasing, with the Group’s platforms all geared for this upswing. Basic product and service demand from improved corporate office occupancy continues to rise, albeit on a price sensitive basis. The Group’s range of products offered, and its ability to customise services and entrench value-added offerings, will stand it in good stead. Throughout the Group, the ability to innovate service and product offerings, with a strong sustainability undertone, is entrenching business partnerships and adding real value to customers.

Whilst the Financial Services division delivered a poor result, recovery of this division represents material uplift for the Group in the coming year. Strategies for the 2023 financial year have been set and we expect digital migration, optimised credit processes, fully resourced sales teams and entry into new niche markets to significantly improve the division’s results in the coming year.

Entering the facilities management and general cleaning markets in Australia will deliver new profit streams for the coming financial year. The Group’s intention remains focused on pursuing acquisitive growth opportunities internationally in its selected niches and operating regions.

Whilst we acknowledge the precarious global macroeconomic backdrop, rampant inflation and intensifying energy crises, we remain confident that our strategic alignment over recent years, the close management of operating costs, prudent cash conversion and capital allocation, as well as an absolute focus on customer growth, care and retention, will yield good operating and financial results over the long-term.

The Group

Bidvest encourages a performance-driven, decentralised business model that continuously seeks scale and growth. We empower the enterprises across our diverse areas of operation – Services International, Services SA, Branded Products, Freight, Commercial Products, Financial Services and Automotive – which act as remarkable catalyst for enduring value creation.

Services International

Trading profit over the 12-month period rose 14.7% to R3.1 billion, with the profit almost equally split between the hygiene businesses and facilities management businesses. The offshore businesses contributed strong results as benefits of scale materialised and the South African businesses, held their own. The market is quickly normalising following the significant demand for wellness and hygiene products and services during and immediately after the pandemic period. Divisional growth was achieved as a result of contributions from the bolt-on acquisitions concluded towards the end of the previous year, new business success across the division, as well as an enhanced focus on efficiencies and operating methodologies, specifically adopting, technology-led innovations within most businesses. The post year-end acquisition of BIC is important in that it provides the platform from which to grow our niche offerings in that region and adds geographic diversity. The year’s ROFE at 203.0% has been pleasing as the working capital cycle normalised.

The non-repeat of pandemic-related work is expected to be broadly neutralised by higher office occupancies, scale opportunities, growth in focus segments and efficiencies.

Branded Products

Trading profit was 28.4% higher at R1.9 billion. Adcock’s profit was exceptional, driven by improved demand for Over-the-Counter and consumer healthcare products, together with an increase in elective surgeries, doctors’ consultations, and dispensary visits. Multiple new product launches and an expanded portfolio, together with good expense control, culminated in this record performance. The portfolio of other businesses also contributed strongly with the Office Products cluster being the stand-out performer, where office automation and the office furniture businesses delivered superbly well. The Consumer Products as well as the Data, Print and Packaging clusters performed well. Packaging benefited from the shift toward paper bags and increased online retail penetration and demand for warehouse technology solutions grew strongly. The level of innovation and success in implementing business enhancing processes, efficiencies and new product offerings is yielding benefit. Divisional ROFE grew from 24.4% to 29.6% and operational cash generation was superb.

The division will continue to deliver essential products, at multiple price points, in the most cost efficient manner to a wide range of customers.

Freight

Trading profit increased by 36.5% to R1.8 billion. In contrast with traditional patterns, the second half of the year delivered very pleasing trading, which is generally slower due to the cyclical and seasonal nature of certain commodities handled. The terminal and related operations again delivered an exceptional result, buoyed by a record maize export season, strong LPG demand and healthy global demand for South African commodities, specifically chrome, manganese, coal and iron ore. The terminal operations outside of South Africa benefited from re-directed cargo to avoid some of the bottlenecks in South Africa. Despite the ongoing global sea and airfreight challenges, there was a remarkable turnaround and recovery in the international clearing and forwarding activities. Services closely linked to railed container movement continued to trade under difficult conditions. ROFE rose from 30.8% to 44.6% and cash generation was exceptionally strong.

Several interesting multi-year terminal projects are being pursued in our operations, both in and outside South Africa. Investment in capacity will continue in the new financial year.

Commercial Products

This year’s divisional trading profit set another record, rising 27.4% to R1.2 billion, which follows last year’s profit increase of 134.5%. These results are a demonstration of the versatility of the businesses and the ability to effectively execute strategically considered plans, despite global supply chain challenges. The Trade cluster, which includes the electrical and plumbing businesses, delivered another stellar result, the culmination of active gross margin, inventory and cost management. The electrical businesses matched their previous record profitability in the lead up to the 2010 Soccer World Cup. The DIY/Tools/Workwear, Leisure and Warehousing clusters contributions were good with modest revenue growth amplified by excellent gross margin improvements. Capacity was added to the workwear factory and the revival of the local textile industry boosted demand for relevant product. Load-shedding and strike action negatively impacted factory efficiencies is some businesses. Divisional ROFE increased to 31.1% from 25.5% despite a normalisation of working capital.

Notwithstanding subdued activity in public infrastructure, the mining, agriculture and renewables sectors continue to present growth opportunities. Product substitution will likely continue given material price increases.

Services South Africa

Trading profit increased 37.1% to R880.3 million for the year. The bulk of divisional profitability is contributed by the Security and Aviation Services cluster, which again, performed exceptionally well despite the sharp increase in fuel costs. The turnaround in the travel-related businesses was most pleasing and exceeded our expectations, with strong momentum towards the end of the financial year. Allied Services capitalised on a slow return in corporate demand, increased penetration in the retail market and adapting to market changes. The Travel cluster and airport lounges delivered strong results as both domestic and global travel returned, albeit still below pre-pandemic levels. Excellent cost control and continued innovation complemented the performance. ROFE at 121.1% is significantly up on last year, given the tourism-related turnaround and good asset management.

Further improvement is expected in the tourism related businesses.

Automotive

Despite ongoing industry supply challenges, trading profit rose 25.6% to R819.0 million, an all-time divisional high, following the prior year’s profit increase of 267.3%. The availability of new vehicles across the dealer network continues to be erratic with global vehicle supply, componentry and parts still a challenge. The KwaZulu-Natal floods further hampered supply. Despite this, new vehicle sales still increased 8.6% and Bidvest McCarthy’s market share increased. Fleet sales are yet to recover to pre-pandemic levels. Demand for used vehicles was strong, placing pressure on the franchised dealer network to secure good quality, well-priced used vehicles. In total 9.6% fewer used vehicle were retailed during the financial year. Aftermarket activity improved as the year progressed, but recently showed signs of plateauing. Management’s focus on margin rather than volume and continued attention to improving efficiencies paid off handsomely. ROFE was very pleasing at 50.0%, up from last year’s 37.6%.

The supply of new vehicles has started showing early signs of improvement. Pressure on consumer disposable income is manifesting in lower credit approval rates and aftermarket activity. The discipline of targeting good margin sales will continue, and strategies to grow the contribution from used vehicles explored.

Financial Services

Trading profit was a disappointing R85.6 million compared to R331.6 million in the prior year. Bidvest Bank accounted for significant one-off costs, which included branch closure costs, and credit impairment charges on a few single name exposures where the lagged effect of the pandemic and national lockdown caught up. At the same time, the deployment of capital was slower than anticipated and approved pay-outs were delayed due to vehicle stock shortages. Demand for fleet and forex-related products is still muted, exacerbated by channel-to-market changes. Regulatory ratios across the businesses remain very strong. Policy sales were under pressure, particularly in Bidvest Life. The investment income recognised on the investment portfolio declined significantly year on year as it bore the brunt of challenging markets. Compendium performed well and FinGlobal in line with expectations.

Bidvest Bank is in the process of implementing its digitisation strategy. Additional growth niche sectors have been selected and necessary industry skills and resources have been secured. Credit processes have been optimised to enable speed of execution. Technology is being used to optimise and create efficiencies. Significant opportunities exist for the division, together with the rest of the Group, to deliver turn-key solutions to customers.

Bidvest Properties and Corporate

The Group owns a significant property portfolio, comprising 137 strategic properties, which is largely Bidvest occupied. Despite a very challenging property market, Bidvest Properties held its profit contribution to the Group steady, reduced vacancies and recycled capital successfully. Property transactions included the sale of a large vacant property in Namibia that was sold for N$231.0 million. A phased plan is in place to retrofit properties with solar energy capabilities. The book value of the portfolio is R4.3 billion compared to an estimated market value of R8.4 billion.

Corporate costs remained well controlled while the non-core Namibian food distribution businesses had a challenging period.

For and on behalf of the board

BF Mohale, CHAIRMAN
NT Madisa, CHIEF EXECUTIVE
Johannesburg

5 September 2022

In line with the Group dividend policy, the directors have declared a final gross cash dividend of 364 cents (291.2000 cents net of dividend withholding tax, where applicable) per ordinary share for the financial year ended 30 June 2022 to those members registered on the record date, being Friday, 30 September 2022. The dividend has been declared from income reserves. A dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.

Share code:	BVT
ISIN:	ZAE000117321
Company registration number:	1946/021180/06
Company tax reference number:	9550162714
Gross cash dividend amount per share:	364.0000
Net dividend amount per share:	291.2000
Issued shares at declaration date:	340 274 346
Declaration date:	Monday, 5 September 2022
Last day to trade cum dividend:	Tuesday, 27 September 2022
First day to trade ex-dividend:	Wednesday, 28 September 2022
Record date:	Friday, 30 September 2022
Payment date:	Monday, 3 October 2022

Share certificates may not be dematerialised or rematerialised between Wednesday, 28 September 2022, and Friday, 30 September 2022, both days inclusive.

For and on behalf of the board

Ms. Nonqaba Katamzi
Company Secretary