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Johannesburg - Interim earnings at diversified industrials group Bidvest will decline after the company opted to close and restructure certain units, resulting in an expense of R165m.
The changes took place in three areas of the business: motor retail, Bidvest's British food services business and Ontime, a UK-based firm which owns and operates 600 transporter vehicles throughout Europe.
Bidvest says it decided to make changes in an attempt to "put the group in a stronger position at a time of uncertainty and worldwide economic recession".
Bidvest sees headline earnings per share (Heps) for the half year to end-December 2008 being 9% lower than in the previous corresponding period. Earnings per share are expected to increase 9%.
Sanlam Investment Management senior equity analyst Andrew Kingston said that Heps minus the closure and rationalisation costs would be a better reflection of performance. Bidvest said that these earnings fell 1%.
"It's below forecasts," Kingston said. "We were expecting low single-digit growth, but the reality is that the market has worsened considerably in the past three months."
Kingston said there will be further deterioration in the geographic markets in which Bidvest operates, namely Europe, Asia and Australia. "Most of these regions are exposed to a rapid slowdown and negative GDP [gross domestic product] growth," he said.
Bidvest is also exposed to South Africa's beleaguered automotive retail sector through its ownership of McCarthy Motor Holdings, which has over 130 dealerships and franchises for brands like Mercedes-Benz, Toyota, Volkswagen and Tata. For the year to end-June 2008, McCarthy's contribution comprised 16.7% of Bidvest's revenue and 13.9% of trading profit.
The South African vehicle market is in pain as result of high interest rates, which have deterred consumers from buying new cars.
New vehicle sales in January 2009 dropped by 35.4% - the worst January performance in 8 years, according to the National Association of Automobile Manufacturers of South Africa.
- Fin24.com