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Johannesburg - The 2010 FIFA World Cup turned out to be a let-down for The Bidvest Group [JSE:BVT], touted by analysts as the JSE-listed company most likely to benefit from the tournament.
Bidvest, which reported annual results to end-June on Monday, had contracts for providing hospitality services at stadiums and printing tickets as well as offering tourism and car rental services to visitors.
However, the end result was just a 0.75% contribution to headline earnings per share (Heps), mostly from Bidvest's services divisions.
"We misread what was going to happen," said CEO Brian Joffe. "The country shut down, people stayed at home and there weren't as many overseas visitors as we expected."
Joffe said the World Cup's medium-term benefits should not be ruled out, as South Africa could enjoy higher foreign tourist levels in future.
However, the group was still praised by analysts for unlocking value and reporting "phenomenal growth" during the period under review.
This came in spite of the 2.3% revenue drop for the year to end-June, which can be chalked down to currency losses of about R7.4bn. Group financial director David Cleasby said revenue would have been 4.2% higher at a constant currency rate.
Foreign operations contributed 38% to Bidvest's revenue. This figure is increasing every year, indicating that the company will be even more susceptible to foreign exchange fluctations going forward.
However, neither analysts nor CEO Joffe was particularly concerned about the net effects on the bottom line.
"Currency is a big issue for us and if we had prepared these numbers in US dollars they would have looked a lot better," said Joffe. "But we are not interested in controlling the currency - we just want to have a good return on investment."
Heps were 15.1% higher at 1 070 cents. At constant currency rates, they would have risen by 19.3%.
"The market was looking for a 10% increase," said Chris Gilmour, investment analyst at Absa Investments. "These numbers are not an accident but the result of a logical and brilliant thought process on the part of Bidvest management."
He added that he would expect the company to continue unlocking value for its shareholders going forward, especially as the economy emerges from the recession. Bidvest's services, freight and food operations are closely linked to economic growth.
The company may also enhance earnings further with the acquisition to follow the R1.75bn buy of Eastern European food services company Nowaco, which happened in the 2009/10 financial year.
Nowaco contributed almost a third of the profit of Bidvest Europe, which rose 17% to R897.8m, once the acquisition expenses have been stripped out.
Joffe said the group continues to search for ways to widen its food division's international footprint, although this probably won't include the United States. Bidvest's food division already has a strong presence in Europe, the UK, Asia Pacific and southern Africa.
He added that a future acquisition may be a sizeable one.
Cleasby said the group's balance sheet is well equipped to handle acquisitions. Net debt has declined to R3.8bn in the current year from R4.1bn last year, despite the Nowaco acquisition. The group's net debt to equity ratio also fell to 23% from 29% in June 2009.
Further changes set to take place at the company include a consolidation of Bidvest's financial services operations currently split between Bidvest Bank, and vehicle financing and insurance services housed under the McCarthy vehicle dealership banner.
Joffe said the new financial services division will be aimed at a wider customer base and will rely on the Bidvest brand to entrench itself in South Africa's financial services space.
- Fin24.com
Bidvest, which reported annual results to end-June on Monday, had contracts for providing hospitality services at stadiums and printing tickets as well as offering tourism and car rental services to visitors.
However, the end result was just a 0.75% contribution to headline earnings per share (Heps), mostly from Bidvest's services divisions.
"We misread what was going to happen," said CEO Brian Joffe. "The country shut down, people stayed at home and there weren't as many overseas visitors as we expected."
Joffe said the World Cup's medium-term benefits should not be ruled out, as South Africa could enjoy higher foreign tourist levels in future.
However, the group was still praised by analysts for unlocking value and reporting "phenomenal growth" during the period under review.
This came in spite of the 2.3% revenue drop for the year to end-June, which can be chalked down to currency losses of about R7.4bn. Group financial director David Cleasby said revenue would have been 4.2% higher at a constant currency rate.
Foreign operations contributed 38% to Bidvest's revenue. This figure is increasing every year, indicating that the company will be even more susceptible to foreign exchange fluctations going forward.
However, neither analysts nor CEO Joffe was particularly concerned about the net effects on the bottom line.
"Currency is a big issue for us and if we had prepared these numbers in US dollars they would have looked a lot better," said Joffe. "But we are not interested in controlling the currency - we just want to have a good return on investment."
Heps were 15.1% higher at 1 070 cents. At constant currency rates, they would have risen by 19.3%.
"The market was looking for a 10% increase," said Chris Gilmour, investment analyst at Absa Investments. "These numbers are not an accident but the result of a logical and brilliant thought process on the part of Bidvest management."
He added that he would expect the company to continue unlocking value for its shareholders going forward, especially as the economy emerges from the recession. Bidvest's services, freight and food operations are closely linked to economic growth.
The company may also enhance earnings further with the acquisition to follow the R1.75bn buy of Eastern European food services company Nowaco, which happened in the 2009/10 financial year.
Nowaco contributed almost a third of the profit of Bidvest Europe, which rose 17% to R897.8m, once the acquisition expenses have been stripped out.
Joffe said the group continues to search for ways to widen its food division's international footprint, although this probably won't include the United States. Bidvest's food division already has a strong presence in Europe, the UK, Asia Pacific and southern Africa.
He added that a future acquisition may be a sizeable one.
Cleasby said the group's balance sheet is well equipped to handle acquisitions. Net debt has declined to R3.8bn in the current year from R4.1bn last year, despite the Nowaco acquisition. The group's net debt to equity ratio also fell to 23% from 29% in June 2009.
Further changes set to take place at the company include a consolidation of Bidvest's financial services operations currently split between Bidvest Bank, and vehicle financing and insurance services housed under the McCarthy vehicle dealership banner.
Joffe said the new financial services division will be aimed at a wider customer base and will rely on the Bidvest brand to entrench itself in South Africa's financial services space.
- Fin24.com
