Bidvest shares surge on strong half-year results

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FIFI PETERS: We finish the show with results from the star performer on the JSE today, its stock price popping 15%.

Apparently R1 billion worth of trades were done in the stock of Bidvest, which reported really strong growth in the first six months of its financial year. It guided that the second half would also be as strong, saying that activity in some of the sectors it plays in – including renewable energy, mining, agriculture and tourism, as well as hospitality – were expected to “remain healthy” in its words. We’ve the Bidvest CEO on the Market Update for more, Mpumi Madisa.

Mpumi, thanks so much for your time. You gave your shareholders and your investors in the markets a good story to tell this year and this half, notwithstanding the challenges that you are seeing out there, from load shedding to inflation to concerns about the global economy and the degree to which it slows. Just tell us about the reporting period and how some of those challenges are shaping up in your business.

MPUMI MADISA: Hi, Fifi. And thank you very much for the opportunity. Yes, we are very happy with the results. I think it’s a really excellent result. We’ve spoken about where the growth nodes have come from, and our philosophy is to worry less about the macros.

We’ve got forecasts at the moment with SA GDP at 1%. What we say to the teams is: ‘Where are the growth opportunities and how do we make sure that our sales teams are hunting in those areas?’

And so to your point, you are absolutely correct, travel and tourism volumes have been up, and that has contributed to our numbers while mineral commodities have been up, not only in our South African operations, but also in our Namibia and Mozambique operations, driven primarily by volumes that have increased in coal and copper concentrates.

Grain has also been good. Not as strong as the first half of the previous financial year, but solid grain volumes.

And a nice turnaround in our financial services division. As you recall, in the previous financial year the bank was underperforming, and we’ve pulled that right back with underlying trading in financial services, if you exclude the equity portfolio up 92%.

You’re right, there are challenges. Inflation is a challenge. Wage inflation is a challenge. Power is a challenge. Rail infrastructure is a challenge. But for us it’s around the other side of that coin, and how we then see other opportunities on the other side of the coin.

From an energy perspective, renewable energy is up, significantly up. I mean, from our volume perspective, year on year, we’ve seen a five-times increase in volume year on year on renewables.

So while there’s a challenge from an Eskom power perspective, we are seeing good opportunities coming through in terms of renewable energy.

We’re managing those challenges. And I’m happy to talk in more detail around some of the plans that we have from an energy mix perspective.

FIFI PETERS: Yes, let’s talk about them. I was reading a report by one of my former colleagues on your plans for renewable energy, but I think they will be better delivered from your own mouth. So what are you planning? What’s in the pipeline?

MPUMI MADISA: Maybe just to talk around the challenges. We have about 20 factories within our portfolio. All our factories have had generator power from six, seven years ago, and that was really just to deal with the one-hour, two-hour downtime.

And what has happened now is we’re finding ourselves running generators for six to eight hours, which is just unsustainable. As you can imagine, the diesel cost has just shot through the roof.

We’ve also got warehouses that need to run. If we can’t pick, we can’t deliver into the increased demand.

And so one of the things that we are looking at with our new builds, is that we are actually putting solar solutions in place. We’re putting inverter and battery solutions in place in our new builds.

And Fifi, we’re not only looking at power, we’re also looking at water.

So all our new builds are looking at sustainability and independence from a water perspective and from a power perspective.

In terms of our existing operations, that’s a little more difficult because you are already in the grid, you’ve already got generator power. The plans are for us to look in the second half around what the most optimal mix should be between electricity from Eskom, renewable energy and alternative energy.

We’ll be able to provide a bit more colour, probably towards the end of the year, just around our existing infrastructure so that we can derisk ourselves.

FIFI PETERS: So you’ll be making use of some of the tax incentives that the finance minister announced with regard to businesses that ramp up their solar offering?

MPUMI MADISA: Yes. We’ll tap into those, but I can tell you that’s not the driver. Where we’re at at the moment, the issue around load shedding is it’s not load shedding risk anymore, it’s a business-continuity risk.

So the reality is that whether those tax incentive were there or not, in order for us to be able to maintain our current level of revenue and volume, we have to do something.

It’s unsustainable for us to continue in the way that we are doing. So, for us, we’re solving a business continuity problem, and therefore have to make sure that we get the right, optimal mix. It’ll be a mix somehow between solar and other sources of power.

FIFI PETERS: Mpumi, notwithstanding the resilience that your business continues to show, there are real concerns about the economy and the extent to which growth may or may not slow. You work across the board in many jurisdictions, and I’d like your take on some of the forecasters and their view on whether recession is something that will happen in South Africa, in Africa, in the global economy – or not. And if we do have a marked slowdown in global growth, what then will that mean for your business?

MPUMI MADISA: Our key areas of operation at the moment are South Africa, United Kingdom, Ireland and Australia.

From an SA perspective we know that the forecast for GDP is about 1% – very, very pedestrian.

But, as I indicated in the opening, the messaging for us through the group is ‘forget about the macro number’. Let us be clear about the areas in the economy that are growing. We take a sectoral approach to new business and we send our teams into those areas where there are pockets of growth. That’s what we did in the first half of the year, and that’s what we’ll do in the second half of the year. So I’m actually not too worried around a 1% SA GDP.

The UK growth rates have come down. The GDP forecast at the moment is sitting at around 4.3% in the UK, so that’s okay. Ireland is sitting at around 10%, and Australia 5.9%.

While the growth rates have come down, I think they’re still healthy numbers across the UK, Ireland and Australia. So we’re still very comfortable in terms of the organic growth that we’ll be able to get out of those jurisdictions.

FIFI PETERS: And acquisitive growth? Bidvest is well known for its acquisitive nature. Is that also part of the growth plan in the period ahead?

MPUMI MADISA: Yes, it is. In the past period we acquired BIC, which is a facilities management business in Australia. We acquired a hygiene and pest control business in Spain called Sahicasa.

And we made some other small bolt-on acquisitions in South Africa.

Our pipeline at the moment is looking very good, both local and offshore targets.

We’re in some formal processes at the moment, really excited about what we’ll be able to deliver and I’m hoping that at the next results presentation I’ll be able to confirm some transactions that we’ve been able to get over the line.

FIFI PETERS: Okay. And in which sectors, likely?

MPUMI MADISA: So offshore facilities, management, hygiene and plumbing and related products. And then locally it’s really across the board. There are some businesses that would fit in the automotive division that we are looking at. And the rest of the South African businesses as well. There are one or two other acquisitions that we’re looking at.

FIFI PETERS: And what does that possibly mean for jobs in South Africa?

MPUMI MADISA: Look, it’s good for jobs. Even if we just talk about the recovery that I spoke about in the travel and tourism industry in the first half of the year, just because of that recovery, we were able to employ 200 more people in our travel businesses.

For as long as we’re growing, we are employing more people. So that’s really very good.

And even from an M&A [mergers and acquisitions] perspective, Fifi, our M&A strategy is to buy good businesses, solid businesses that we can assist with strategies, give them capital for future growth and generally when we buy businesses we don’t change people. We buy the management teams, we buy everybody that comes with that business, and we just focus on growth.

So I think that a South African story like Bidvest, where we continue to add value to the businesses that we acquire, is really fantastic, even overall from a growth perspective for the country.

FIFI PETERS: I think so too. Mpumi, we will have to leave it there. Thanks so much for your time, ma’am. Good to talk. Mpumi Madisa is the CEO at Bidvest.