Industrial conglomerate Bidvest, the operations of which span from cleaning services to property interests, has upped its interim dividend and remains on the hunt for acquisitions, after getting a boost from Covid-19 related demand for better hygiene.
The group, which is confident in its ability to scale up existing operations, was looking for new opportunities and bolt-on acquisitions after a robust performance and market share gains in the six months to end-December, CEO Mpumi Madisa said on Monday.
Bidvest is looking at across its operating regions, SA, the UK and Ireland, Madisa said, seeking to boost its portfolio of facilities management, including security, plumbing and hygiene.
“We were fortunate in that we chose to have a niche focus on hygiene just as Covid-19 arrived, but the the pandemic has just amplified that focus,” she said.
Bidvest acquired the UK’s biggest commercial cleaning service PHS in May 2020, its biggest deal yet, for £495m (R10.5bn), seeing its performance filter through into its service segment for the first half of its 2021 year.
The group raised its interim dividend 2.8% to 290c per share in to end-December, about a R987m payout, benefiting from strong demand for Covid-19-related work.
PHS and Noonan, which operates in the UK and Ireland, secured pandemic-related business, and this includes the setting up and management of testing and vaccine centres in the UK, as well as specialist cleaning.
Profit rise
Trading profit from continuing operations grew 3.5% to R4.1bn, off a pre-pandemic base, enhanced by the consolidation of PHS, although Madisa said all the group’s operations had seen improved performance relative to the first half of 2020.
Group revenue grew 3.4% to R44.4bn year on year, while cash generated from operations surged 86.2% to R6.2bn, amid focus on working capital management, as well as cost containment.
Madisa said although Bidvest usually absorbs cash during the period, it had been cautious with its working capital, and as a result inventories had run down. As a result, this strong cash generation may not continue in the second half, as inventory is restocked, she said.
Trading profit in the group’s services segment — just under a third of revenue — jumped 37.9% to R1.7bn, boosted in the UK and Ireland, although overall, the SA trading profit declined modestly as the travel and related industries remain effectively closed, Bidvest said.
Services have now overtaken automotive as Bidvest’s biggest-single revenue generator, although the group said it saw the benefits of cost-cutting in that business.
Automotive revenue fell 7% to R10.6bn, although trading profit rose 5.6% to R323.8m.
Overall, the SA automotive market remains depressed despite showing a faster than expected rebound off the mid-2020 trough, the group said. Used car volumes were lower, but a pickup in demand was noted in the second quarter.
Debt and acquisitions
Amid strong cash generation, net debt decreased 17.7% to R15.8bn relative to June 2020, although it is up from R10bn in the same period of 2019, following the acquisition of PHS.
In February, Noonan acquired Axis Group, a UK-based security and cleaning service provider, for an enterprise value of about R480m. This bolt-on acquisition significantly enhances Noonan’s footprint in the UK, with Madisa saying on Monday that that would make Bidvest the number one security provider in London, and number four in the UK.
In afternoon trade on Monday, Bidvest’s share was up 3.29% to R173.79, having risen 10.68% so far in 2021. This gave Bidvest a market capitalisation of R59.1bn.
Update: March 1 2021
This article has been updated with additional information throughout
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