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BID Vest. Interim Results. for the six months ended. December 31 2003. An operationally active investment holding company. whose core competence is the management of a. balance of cash generative and growth businesses. Group overview. Financial Results. Divisional Results. - PowerPoint PPT Presentation
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December 31 2003
for the six months ended
Interim ResultsBIDVest
whose core competence is the management of a
An operationally active investment holding company
balance of cash generative and growth businesses
Agenda
Group overview
Financial Results
Divisional Results
Strategy & Outlook
Group OverviewGroup Overview
The BIDVest Business ModelAn operationally active investment holding company of
market-leading service, trading & distribution businesses
Strategy
Own the cash flows
Control distribution channels
A balance of mature & growth businesses
Funds allocated across asset base according to proven return criteria
Vigorous capital management - cash used from mature businesses to fund growth businesses and acquisitions
Identifying acquisitive value
Strategy
Own the cash flows
Control distribution channels
A balance of mature & growth assets
Funds allocated across asset base according to proven return criteria
Vigorous capital management - cash used from mature businesses to fund growth businesses and acquisitions
Identifying acquisitive value
Control distribution channels:
Implementation
Businesses actively & successfully managed
Decentralised, focused business units
Market leaders in distribution channels:Critical mass for sourcing & fundingReaching common customers Tying the customer in
The BIDVest Business ModelAn operationally active investment holding company of
market-leading service, trading & distribution businesses
The BIDVest Business ModelAn operationally active investment holding company of
market-leading service, trading & distribution businesses
Control distribution channels:
Implementation
Businesses actively & successfully managed
Decentralised, focused business units
Market leaders in distribution channels:
Critical mass for sourcing & funding
Reaching common customers Tying the customer in
Strategy
Own the cash flows
Control distribution channels
A balance of mature & growth assets
Funds allocated across asset base according to proven return criteria
Vigorous capital management - cash used from mature businesses to fund growth businesses and acquisitions
Identifying acquisitive value
A team of operationally strong owner-managers:
Financial disciplines (working capital, managing sustainable
returns)
Corporate office frees up businesses to perform
Financial integrity
Proven ability to correct underperformance
Proven ability to create value in businesses
Management Focus
The BIDVest Business ModelAn operationally active investment holding company of
market-leading service, trading & distribution businesses
Control distribution channels:
Implementation
Businesses actively & successfully managed
Decentralised, focused business units
Market leaders in distribution channels:
Critical mass for sourcing & funding
Reaching common customers Tying the customer in
Strategy
Own the cash flows
Control distribution channels
A balance of mature & growth businesses
Funds allocated across asset base according to proven return criteria
Vigorous capital management - cash used from mature businesses to fund growth businesses and acquisitions
Identifying acquisitive value
A team of operationally strong owner-managers:
Financial disciplines (working capital, managing sustainable returns)
Corporate office frees up businesses to perform
Financial integrity
Proven ability to correct underperformance
Proven ability to create value in businesses
Management Focus
BIDVest Group Structure
61%
39%
Foodservice Products
Combined Foods
Bidvest plcCaterplus
% of op income
Commercial Products
Voltex
Bidoffice
Bidpac
% of op income
74%
26%
Services
Bidfreight
Renfin
Bidcorp plc
Namsov Fishing
Bidserv
% of op income
69%
31%
96%
4%% of op income
Corporate
Group properties
mymarket.com
Investments & other income
I-Fusion
Group performance summary for the half-year to December 2003
HEPS: +2% to 248.0cps; DPS: +5% to 113.4cps
Group operating margins up to 5.1% from 4.6%
Operating income pre-translation losses up 1.4% to R1.14bn
8% organic growth in operating income for domestic operations
Bidvest plc headline earnings up 22% to £17.2m
Organic operating income growth from acquisitions
Note: All figures indexed to 1999
100
150
200
250
300
350
400
1999 2000 2001 2002 2003
Ind
ex
Waltons Rennies 3663
Historic Performance
Operating profit & margins
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004
Rm
1H 2H
4.6%
5.1%
4.7%
4.4%
4.9%
5.0%
4.9%
4.8%4.8%
Historic Performance Operating profit & margins
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004
Rm
1H 2H
4.6%
5.1%
4.7%
4.4%
4.9%
5.0%
4.9%4.8%4.8%
Annualised Returns
42 44
5749
3034 32
25
0
10
20
30
40
50
60
2000 2001 2002 2003
%
ROFE ROE
Historic Performance
Annualised Returns
42 44
5749
3034 32
25
0
10
20
30
40
50
60
2000 2001 2002 2003
%
ROFE ROE
Historic Performance Operating profit & margins
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004
Rm
1H 2H
4.6%
5.1%
4.7%
4.4%
4.9%
5.0%
4.9%4.8%4.8%
HEPS
153.6 181.6215.9 243.2 248.0
152.8180.2
220.3235.8
0
100
200
300
400
500
600
2000 2001 2002 2003 2004
cp
s
1H 2H
23% CAGR over 5 years
Historic Performance
HEPS
153.6 181.6215.9 243.2 248.0
152.8180.2
220.3235.8
0
100
200
300
400
500
600
2000 2001 2002 2003 2004
cps
1H 2H
Historic Performance
23% CAGR over 5 years
Operating profit & margins
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004
Rm
1H 2H
4.6%
5.1%
4.7%
4.4%
4.9%
5.0%
4.9%4.8%4.8%
Annualised Returns
42 44
5749
3034 32
25
0
10
20
30
40
50
60
2000 2001 2002 2003
%
ROFE ROE
17% CAGR over 5 years
Historic Performance
DPS
72.0 81.0 90.0108.0 113.4
78.388.2
100.0
112.0
0
50
100
150
200
250
2000 2001 2002 2003 2004
cps
1H 2H
17% CAGR over 5 years
HEPS
153.6 181.6215.9 243.2 248.0
152.8180.2
220.3235.8
0
100
200
300
400
500
600
2000 2001 2002 2003 2004
cps
1H 2H
Historic Performance
23% CAGR over 5 years
Operating profit & margins
0
500
1000
1500
2000
2500
2000 2001 2002 2003 2004
Rm
1H 2H
4.6%
5.1%
4.7%
4.4%
4.9%
5.0%
4.9%4.8%4.8%
Annualised Returns
42 44
5749
3034 32
25
0
10
20
30
40
50
60
2000 2001 2002 2003
%
ROFE ROE
DPS
72.0 81.0 90.0108.0 113.4
78.388.2
100.0
112.0
0
50
100
150
200
250
2000 2001 2002 2003 2004
cps
1H 2H
Financial ResultsFinancial Results
Consolidated Income Statement
Revenue 22 211 643 24 565 364 (9,6) 47 073 375
Negative rand impact (R3bn translation difference for Bidvest plc alone)
Volumes increased, but deflationary pressure on selling prices
Foreign currency-denominated revenues (Safcor Panalpina)
2003 2002
Unaudited % changeUnauditedYear ended
June 30 2003R000s
Half-year ended December 31
Consolidated Income Statement
2003 2002
Unaudited % changeUnauditedYear ended
June 30 2003R000s
Operating Income 1 132 873 1 128 347 2 244 1210,4
Revenue 22 211 643 24 565 364 (9,6) 47 073 375
Half-year ended December 31
Gross margins up slightly, but rand value of gross profit on imports declined
No material AC133 impact
* Offshore margins include a R19.3m loss from Bidcorp plc and a R10.5m loss from Litho France (Bidvest plc operating margins increased to 3.1% from 2.9%)
4.6%5.1%Group
Improved operating efficiencies, cost containment and limitation of price decreases
6.0%6.7%Local
Improved operating efficiencies & better buying at Bidvest plc, but losses from Bidcorp and Litho France
2.7%2.5%*Offshore
1H20031H2004Operating Margins
Consolidated Income StatementHalf-year ended December 31
Operating Income 1 132 873
1 128 347 2 244 1210,4
Revenue 22 211 643 24 565 364 (9,6) 47 073 375
Operating Income before translation effects 1 140 120 1,41 124 6213 726
2 259 197(15 076)Translation gains (losses) (7 247)
Amortisation of goodwillNet capital items
(35 532) (64 887)(13 924) (877) (61 548)
Translation loss: R7m on conversion of offshore cash balances
(22 449)
2003 2002
Unaudited % changeUnauditedYear ended
June 30 2003R000s
Consolidated Income StatementHalf-year ended December 31
Revenue 22 211 643 24 565 364 (9,6) 47 073 375
Operating Income 1 132 873
1 128 347 2 244 1210,4
Net finance expenses (52 898) (36 865) (110 982)
R644m net cash offshore
43% increase in net interest paid but 29% decrease off 2H 2003
R427m net debt in SA
R1bn funds used for McCarthy acquisition will affect interest paid in 2H 2004
Cash applied where necessary in the group
2003 2002
Unaudited % changeUnauditedYear ended
June 30 2003R000s
Consolidated Income StatementHalf-year ended December 31 2003
Revenue 22 211643 24 565 364 (9,6) 47 073 375
Operating Income 1 132 873
1 128 347 2 244 1210,4
Net finance expense (52 898)
(36 865) (110 982)
Income before taxation 1 030 519
1 068 156 (3,5) 2 006 704
Taxation (299 607)(289 271)
(557 148)
2003 2002
Unaudited % changeUnauditedYear ended
June 30 2003R000s
27%27%Offshore
1H20031H2004
……28%28%Local
27.4%27.3%Group
Note: Rates exclude goodwill amortisation
Edging toward maximum rate
of 30%
Net finance expense (52 898)
(36 865) (110 982)
Income before taxation 1 030 519
2 006 7041 068 156 (3,5)
Taxation (557 148)
Consolidated Income Statement
Revenue 22 211 643 24 565 364 (9,6) 47 073 375
Operating Income 1 132 873
1 128 347 2 244 1210,4
Income after taxation 1 449 556
Income from associates 30 328
Income attributable to shareholders 1 382 308
Number of shares in issue (weighted 000) 308 116
(97 576)
(299 607)(289 271)741
248768 549
(0.8)
9 308 15 921
(44 218) (52 158)
Headline earnings (Rm)
2003 2002Unaudited % changeUnaudited
Year ended June 30 2003R000s
Half-year ended December 31 2003
Total foreign earnings from Bidvest plc, Bidcorp plc, Litho France & Namsov = 20% of Group (R146m)
Capital items: includes R11.2m loss on disposal and discontinuance of businesses + R2.5m surplus on disposal of assets
Outside Shareholders’ interest
310 402
732 312
(3,6)
706 338
1 475 856
302 085
749 070
(3,5)
754 906
Net finance expense (110 982)
Income before taxation 2 006 704
Taxation (557 148)
Consolidated Income Statement
Revenue 22 236 884 24 565 364 (9,6) 47 073 375
Operating Income 1 132 873
1 128 347 2 244 1210,4
Income after taxation 1 449 556
Income from associates 30 328
Income attributable to shareholders 1 382 308
Number of shares in issue (weighted 000) 308 116
(97 576)
Headline earnings (Rm)
(97 576)
2003 2002
Unaudited % changeUnauditedYear ended
June 30 2003R000s
Half-year ended December 31 2003
Outside Shareholders’ interest
1 475 856
HEPS (cents)
Distribution per share (cents)
479.0248.0 243.2 2.0
220.0
(52 898)
(36 865)
1 030 519
1 068 156 (3,5)
(299 607)(289 271)
741 248 768 549
(0.8)
9 308 15 921
(44 218) (52 158)
310 402
732 312
(3,6)
706 338
302 085
749 070
(3,5)
754 906
113.4 5.0108.0
2.7% decrease in weighted average number of shares due to share repurchases
2H HEPS will include McCarthy (pro forma impact: 7% for full year to June 2003)
Bidvest to use its treasury stock in satisfaction of Dinatla transaction options
17% enhancement in dividend due to Dinatla transaction
Dividend cover will remain around 2x
Consolidated Balance Sheet
Non-current assets 5 011 393
4 889 800 4 927 958
Current assets 9 749 338 9 764 886 9 643 424
Total assets
Assets
2003 2002
Unaudited UnauditedYear ended
June 30 2003R000s
Half-year ended December 31 2003
Net working capital cycle has increased Numbers influenced by currency fluctuations:
Sales at avg rates; assets at spot rates
50 45
59 57
39 38
1H2004 1H 2003
Debtors' DaysCreditors' DaysStock Days
30 26
No
. o
f D
ay
s
Consolidated Balance Sheet
Non-current assets 5 011 393
4 889 800 4 927 958
Current assets 9 749 338
9 764 886 9 643 424
14 751 731 14 654 686 14 571 382Total assets
Assets
Equity and Liabilities
Non-current liabilities 436 1391 029 179
1 007 749
Current liabilities
Total equity and liabilities
Capital and reserves 6 335 1406 247 422 6 103 451
7 460 182
14 571 382
7 883 4077 475 130
14 654 68614 751 731
Bidvest is not averse to leveraging the balance sheet (target - 40%)
R1bn funds used to purchase McCarthy brings SA gearing to app. 34%
Strong cash generation by underlying businesses Cash generated by operations:
• unchanged before working capital at R1.5bn• R816m applied to fund working capital
2003 2002
Unaudited UnauditedYear ended
June 30 2003R000s
Half-year ended December 31 2003
Divisional ResultsDivisional Results
Services - Bidfreight
Rand strength dominant theme - ZAR up by 30% against USD
Terminals produced a strong result - BMA, SA Stevedores, SACD and RCT counteracted weakness in Marine and Manica & FedEx
Safcor Panalpina coped well – volumes increased, profit slightly below budget
Bidlog to be split between Bidserv and Terminals
19%
81%
Contr to Group Op Income
50
70
90
110
130
150
170
190
210
1H2003 1H20042000
3000
4000
5000
6000
7000
Operating income Revenue
…% Operating margin
3.4%
2.8%
Rm RevenueRm Operating Income
Services – Bidcorp plc 0%
100%
-20
-15
-10
-5
0
5
10
1H2003 1H2004
150
350
550
750
950
1150
1350
Operating income Revenue
Contr to Group Op Income
Tough trading conditions
Heavy costs in Shipping and Ports on expanded sailing schedules and excess capacity
Automotive rationalised into two operating divisions - reduce overheads and improve efficiencies
Management focus now on operating efficiencies, increased capacity utilisation and greater turnover
Rm Operating Income Rm Revenue
Services - Bidserv
Real growth in revenue of 5%
Margin pressure ameliorated by strict expense control and high degree of annuity income
Laundry secures significant contract wins in healthcare sector
Security remains profitable in an industry in disarray
Execuflora acquired
8%
92%
Contr to Group Op Income
50556065707580859095
100
1H2003 1H2004
400
500
600
700
800
900
Operating income Revenue
…% Operating margin
9.5%
8.5%
Rm Operating Income Rm Revenue
Services - Renfin
Travel performed well in flat market conditions
Recent travel acquisitions will boost profits
Banking disappointed due to currency strength, narrower dealer margins, and a slowdown in tourist spending
6%
94%
10
20
30
40
50
60
70
80
90
100
1H2003 1H2004
250
270
290
310
Operating income Revenue
…% Operating margin
22.9%
28.6%
Contr to Group Op Income
Rm Operating Income Rm Revenue
Foodservice Products – Bidvest plc
UK, Australia, New Zealand exceed budget in sterling
Australian & New Zealand dollars strengthen by 15% against sterling
3663 gaining share in a flat market
Good organic growth in Australia & New Zealand
8 small acquisitions to extend customer service offering
25%
75%
100
150
200
250
300
350
1H2003 1H2004
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
Operating income Revenue
…% Operating margin
3.1%2.9%
Contr to Group Op Income
Rm Operating Income Rm Revenue
Food price deflation
Tight trading conditions
Overseas visitors not as free spending
Frozen division maintained volumes
Patleys traded well, despite reduced rand profit on imports
Export orders for Vulcan-Caars
8%
92%
0
20
40
60
80
100
120
1H2003 1H2004
300
400
500
600
700
800
900
1000
1100
Operating income Revenue
…% Operating margin
9.2%9.4%
Contr to Group Op Income
Rm Operating Income Rm Revenue
Foodservice Products – Caterplus
Competitive challenges met in bakery supplies
Structural changes in spending patterns
Sales to major customer segments up substantially; export sales & non-meat flat
New spice factory on double shift to meet demand
NCP Yeast ahead of budget in tough market
5%
95%
1015202530354045505560
1H2003 1H2004
100
150
200
250
300
350
400
450
500
550
Operating income Revenue
…% Operating margin
11.7%
10.9%
Contr to Group Op Income
Rm Operating Income Rm Revenue
Foodservice Products – Combined Foods
Margin pressure in stationery due to stronger rand
Acquisition of OCE Printing Systems benefited Automation
Kolok impacted by grey products
Dauphin and Cecil Nurse stars of Furniture
Lithotech strong, exceeded budget
Lithotech France made a loss - poor volumes in a weak economy
17%
83%
100110120130140150160170180190200
1H2003 1H2004
900
1100
1300
1500
1700
1900
2100
2300
2500
Operating income Revenue
…% Operating margin
8.0%7.7%
Contr to Group Op IncomeCommercial Products– Bidoffice
Rm Operating Income Rm Revenue
Margin held despite continuing rand strength
Destocking continued through H1
Falling unit selling prices
Decline in manufacturing volumes – secondary exporters hurt by rand
6%
94%
10
20
30
40
50
60
70
1H2003 1H2004
100
150
200
250
300
350
400
450
Operating income Revenue
…% Operating margin
15.8%15.8%
Contr to Group Op Income
Rm Operating Income Rm Revenue
Commercial Products– Bidpac
Downward pressure on cable & wire markets
Non-cable products held margins
Berzack & Eastman positive contribution
Large capex projects by private and state sector on hold
National footprint, service capability and breadth of products
4%
96%
10
15
20
25
30
35
40
45
50
1H2003 1H2004
500
600
700
800
900
1000
1100
1200
Operating income Revenue
…% Operating margin
3.9%4.4%
Contr to Group Op Income
Rm Operating Income Rm Revenue
Commercial Products– Voltex
I-Fusion • to be profitable by year-end• network regarded as state of
the art• Benefit from McCarthy
mymarket.com • Annualised billings R500m• Moving toward profitability
Property rental income from Group companies at arm’s length
4%
96%
10
15
20
25
30
35
40
45
50
55
1H2003 1H2004
10
15
20
25
30
35
40
Operating income Revenue
Contr to Group Op IncomeCorporate Services
Rm Operating Income Rm Revenue*
*Revenue = I-Fusion & MyMarket.com
Strategy & OutlookStrategy & Outlook
Dinatla Transaction
The transaction:
Dinatla consortium owns 15% of Bidvest
A. Dinatla Ownership vested
Price between R42-R60 in Oct 2006
Right of early settlement
Board representation
Unfettered voting rights
No hurdle price – the closer to R42 the better for Dinatla
Dinatla Transaction
The transaction:
Dinatla consortium owns 15% of Bidvest
B. Bidvest No financial impact
Positive BEE equity scorecard impact (BEE equity ownership increased to approximately 35%)
Retain existing business
New business opportunities
Dinatla Transaction
The transaction:
Dinatla consortium owns 15% of Bidvest
C. Current Shareholders Bidvest ords + a 17% dividend enhancement for 3 years
Dinatla Transaction
The transaction:
Dinatla consortium owns 15% of Bidvest
D. Shareholders affected by the transaction sold 15% of their shares to Dinatla.
For every 100 shares:
85 ordinary Bidvest shares with a 17% dividend enhancement 15 BidBEE loan notes with no dividend
• subject to a minimum of R42 and a maximum of R60 per share
• at recommendation of BidBEE board with 1 year extension option (75% vote by loan note holders)
6 Bidvest call options at a R60 strike price
BEE at Bidvest
In addition to this equity element:
Bidvest management at all levels committed to transformation
Senior BEE appointments at divisional level
Exec and non-exec BEE representatives appointed to Bidvest board
Process being formalised by Bidvest Board
Assessing alternatives for underlying JV’s
The Bidvest Charter
–
BEE at Bidvest
–
BEE Scorecard Credits Bidvest progress Equity ownership 20% √ Management & executive positions 10% √ Employment equity 10% √ Skills development 20% √ Procurement 20% √ Enterprise development 10% √ Residual 10% reserved for sector specific issues
******** Good = > 65%
Satisfactory = 40% - 64.9% Limited = < 40%
Bidvest Board
Large Board a result of Group culture• Bidvest built by merger with like-minded entrepreneurs
11 non-executives, of which 4 were historically disadvantaged
Effective committees:Executive CommitteeRemuneration CommitteeAudit CommitteeAcquisition CommitteeTransformation CommitteeNomination Committee
Clear division of power, accountability and responsibility through the organisation
–
Strategic ImperativesMICRO STRATEGY
• Each business focuses on achieving excellence in its core competence
• Executive autonomy within each business unit – decentralised philosophy
MACRO STRATEGY• Optimising synergies between businesses
Example:Hotel procurement
Electronic ordering (mymarket)
Catering (Caterplus)
Laundry, Cleaning, Housekeeping, Hygiene, Security, Garments (Bidserv)
Stationery, Mailing, Printing, Office automation, Furniture (Bidoffice)
Travel (Rennies Financial Services)
Strategic ImperativesMICRO STRATEGY
• Each business focuses on achieving excellence in its core competence
• Executive autonomy within each business unit – decentralised philosophy
MACRO STRATEGY• Optimising synergies between businesses• Adding to customer offering (geographically or product range)
down the Bidvest business chain
Multi-temp
Chilled
Frozen
Objective: Service existing and new customers within core markets, with some overlap Service the spectrum of customer needs Tie the customer in Utilise critical mass for sourcing and funding
Example:
Food strategy – maintain the core business but to add ancillary businesses
McCarthy Acquisition McCarthy fits the Bidvest model of market-leadership within a new
distribution channel
R1bn acquisition price at +/- NAV
Transaction, effective January 2004, will be immediately earnings positive
Synergistic benefits will come through in the next 12 months, eg. McCarthy Club
Currently investigating opportunities in complementary areas where McCarthy is not trading, eg.
• Financial leasing
• Van rentals
• Fleet management
• FML
• Private leasing
Organic and acquisitive growth planned for McCarthy
Bidvest – free up McCarthy management to perform
Implied valuation of local operations
0.00.3bnBidcorp plc @ GBP 17.0 pps
0.00.3bnLithotech France (NAV)
Current Bidvest Group @ 5185cps
SA operations derived
Bidvest plc @ AUD 540 cps
10.315.5bn*
8.610.3bn
12.84.6bn
Current market PE
Current market
value (Rbn)
PE’s based on annualisation of interim numbers
* Market capitalisation based on 300m shares excluding treasury shares
Key growth drivers
Cross-selling between businesses not yet fully exploited Electronically monitored Staff motivated by Group performance - share options and
Group remuneration
Acceleration of outsourcing trend – eg, benefit to Bidserv & Bidoffice
Freight: Continued strong growth prospects - international trade growth
trend well ahead of GDP Key privatisation opportunity lies not in ownership, but in
freeing up the system to handle optimum product mix Improved efficiencies after privatisation
Exposure to growth areas of the economy, supplemented by acquisitive growth
Prospects for 2H 2004
At current exchange rates Bidvest should achieve real growth in HEPS for the full year to 30 June 2004, notwithstanding McCarthy
Further major price deflation unlikely
HEPS will benefit from inclusion of McCarthy in 2H 2004 • (pro forma impact as per circular: 7% for year to
June 2003)