Bidvest half year results to December 2011

The results continue to flow here and it is a little tough to keep up, but this is what we do, so we must pay attention. First, Bidvest half year results to December, because that was the chronological order, the timeline. First come, first served, a little like the football seating at FNB stadium (Soccer City) Saturday. For the record, if want to have fun that is off the funometer scales, you must go to a Soweto derby. It was the second time that I was going to such a match, the stadium had over 93 thousand I think. Amazing.

But back to the grind of results, Bidvest reported revenue for the half year of 58.5 billion ZAR, an increase of 4.2 percent. Headline earnings grew to 1.7 billion ZAR, an increase of 11.3 percent, that translates into a headline earnings per share of 539.8 ZAR cents. Distribution of 225 ZAR cents. So annualise these numbers for the face value fundamentals geeks and you are looking at 14 and a half times earnings and a dividend yield of around three percent. Not overly exciting and not at current growth rates.

Tyco is a *nice* comparison at a global level (OK, sort of) and they trade on 16.6 times earnings with a dividend yield of just less than 2 percent. Maybe a GE comparison too, but as was noted in the office here, not as much intellectual property and not as much manufacturing in the Bidvest stable. GE trades on 18 times earnings with a dividend yield of 2.75 percent. 3M trades on 16 times earnings with a yield of just less than 2.5 percent. You get where I am going with all of this, the price is probably about right. Well done market participants.

Bidvest could be really interesting with potentially a whole lot of corporate activity with some potential slicing and dicing down the road. One of the theories (at least in the office) is that we could see a local business unit, a European one and maybe even an Asian one. Or Bidvest South Africa and Bidvest International. Something along those lines.

Divisionally as I scan down the page you can see that there was a big bounce-back from the Automotive segment, sales up 17.7 percent to 9.5 billion ZAR. Foodservice, a monster contributor (around half of all sales) was lower by 3.8 percent to 29.2 billion Rand. European sales in Rand terms were lower by 9.7 percent to 17 billion ZAR, Asia Pacific was higher by 7.3 in Rand terms to 9.5 billion Rand, the fastest growing of the major divisions.

But freight was the star performing business unit, revenue up 19.8 percent to just shy of 9.6 billion ZAR, and this was against a second half last year that was worse than the comparable first half to December 2010. In other words of the last three halves, the middle one was the worst. I guess it is seasonal as well. So, those are the big five divisions.

Listen in here carefully, because you can have all the sales in the world, it is actually all about profits. Margins across the group are not great, I must be honest. The most profitable (trading profit) of all the major divisions is the Foodservice division, 956 million ZAR, but that was lower by 7.4 percent when measured against the comparable period (H1 2010). Check out the commentary, "Revenues ... reflect continuing pressure on consumers in both the out-of-home eating and institutional sectors and the impact of the translation of the earnings of foreign businesses into rands. Margin squeeze and downtrading impacted trading profit..."

I did a quick trading profit margin calculation and of the big five divisions by sales and here goes, Bidvest Automotive (2.55%), Bidvest Foodservice (3.27%), Europe (2.18%), Asia Pacific (4.19%) and Bidvest Freight (4.16%), the margins are pretty low.

However, of the other divisions not mentioned here (it is not all about revenue, said that already), Bidvest Services is very profitable, trading profit margins of 14.39%, Bidvest Namibia has legendary trading profit margins, up 23.90%. Bidvest Southern Africa on the same metrics has trading profit margins of 7.09%. So you can see that some of the smaller businesses inside of the group have much better margins. What is that old payoff line of theirs, "through diversity comes strength", something like that. Bidvest are actually the offices next door to us. My favourite sign is still the one in the Bidvest foyer: "We refuse to participate in the recession". It makes me chuckle. I should see if it is still there, because that would indicate where Bidvest think we are in the cycle.

And the outlook? Looks better in parts ---> "Economic conditions in most of the geographies in which Bidvest operates have improved, resulting in higher activity levels, however, the European landscape is likely to remain weak. The underlying threat of inflation and the potential for rising interest rates present both opportunity and risk for trading operations. Our businesses have adjusted to the new economic reality. Management is acutely aware that innovation and service hold the key to future success." I will check out the results presentation and add in anything tomorrow.

We are not huge fans of the company, but it falls into the category like. You know, like that "like button" on social websites. Too many moving parts is a negative, but keeping the management in place of business that they (Bidvest central) buy, and centralise everything is hugely helpful. So centralised control of a whole lot of different businesses and bankrolling from one acquisition to the next. Brian Joffe is highly regarded. I guess a few question marks about a successor, but I would not be too worried about that. Yes, no, maybe, ja, no well.