the bidvest group limited results for the six months ended december 31 2005 creating value and...

The Bidvest Group Limited

Results for the six months endedDecember 31 2005

Creating value and building strength from diversity

2

Agenda

Introduction Financial Results Strategy & Prospects

Introduction

4

Results Summary

Revenue +21.6% to R38,2bn

Trading income +18.7% to R1,7bn

Headline earnings +20.4% to R1,1bn

HEPS +21.8% to 368,6cps

Cash generated by ops +59.1% to R936m

DPS +21.1% to 162cps

Note: IFRS compliant

5

H1 2006 Trading Features

Pleasing overall performance from group businesses

Strong revenues (volume gains) with trading margins offset, to some extent, by cost of capacity increases as well as fuel price increases

Deli XL acquisition substantially bedded down - adds 5.5cps with effect from 12/9/05

Substantive progress on underperformers

6

Segments at the Forefront of PerformanceRevenue

% ch on

H1 2005

Trading Income

% ch on H1 2005

+16.8 +17.7

+5.2 +11.3

+8.9 +15.4

+38.7 +19.9

+21.1 +27.7

+18.4 +26.4

+19.9 +28.6225.6

95.1

85.2

238.8

64.9

129.7

221.0

290.2

120.2

108.8

286.3

74.9

260.2

144.3

0 50 100 150 200 250 300 350

Bid Auto

Bid Industrial

Foodservies Australasia

Foodservices Europe

Renfin

Bidserv

Bidfreight SA

RmH1 2005 H1 2006

Trading income (Rm)

7

76.6

107.6

70.5

100.0

5.6

79.8

115.9

70.7

105.1

5.6

0 20 40 60 80 100 120 140

Bid Paper Plus

Office Products

Combined Foods

Caterplus

Bidcorp

RmH1 2005 H1 2006

Segments Holding Their Own

Trading income

Revenue

% ch on H1 2005

Trading Income

% ch on H1 2005

-0.9 +0.8

+14.2 +5.1

+4.2 +0.3

+9.7 +7.7

+10.3 +4.2

8

Action on Underperformers

Dart Line exit announced (at considerable profit)

Volume Distribution France exited

BNS sold to BCX

Further actions underway at Lithotech France

Financial Results

10

Consolidated Income StatementSix months ended December 31 2005

Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Note: Bidvest has terminated constant currency comparisons. Should the R/£ exchange rate move materially, constant currency comparisons will be reinstated.

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY

Revenue 38 240,1 +21.6 31 447,1 1st time contribution of R2.15bn by Deli XL (3,5 months)

11


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY


Trading Income 1 691,5 +18.7 1 425,0 Pleasing 16% increase excluding Deli XL

12

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY



Trading margin 4,4% 4,5% Change in profit contribution mix


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Trading margins

H1 2006 H1 2005

Offshore* 2.6% 2.8% Comparative margin negatively affected by innately lower margin at Deli XL and positively affected by Namsov

Local 5.5% 5.8% Change in profit contribution mix; cost of capacity increases; fuel price increases

Group 4.4% 4.5%

*Offshore margins include a R14m loss from Lithotech France (-R15m in H1 2005)

13


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY




Net finance expense

(164,4) (131,1) Offshore interest of R41,4m : local interest of R123m; net debt offshore of R1,1bn : local net debt of = R1,9bn; largely funding of capex, Deli XL and share buybacks

14

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY




Net finance expense


Taxation (420,6) (379,6) 1% decline in statutory tax rate; no tax relief on share-based payments


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Effective tax rates

H1 2006 H1 2005

Offshore 24,9% 27,3% Once-off tax relief crystallised by Dart Line sale (+/-R7m); avg tax rate of +/-27% going forward - offset, to some extent, by overcharge on Deli XL tax rate

Local 28,4% 28,7% Excluding capital items & STC

Group 27,4% 28,4%

15


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY




Net finance expense



Minority int’s (29,2) (3,5) Improved performance from Namsov

16


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY




Net finance expense




Headline earnings (Rm)

1 104,2 +20.4 917,2 Offshore earnings in H1 2006 of R289,9m (26%) vs R207,5m (23%) in H1 2005

17


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY




Net finance expense






HEPS (cents) 368,6 +21.8 302,7 +4cps from shares bought back in prior period (R532m cost for 7,5m shares )

18


Avg R/£ 11.56

IFRS

Avg R/£ 11.43

Restated ito IFRS

Rm’sH1 2006

% ch vs H1 2005

H1 2005

COMMENTARY




Net finance expense






HEPS (cents) 368,6 +21.8 302,7 +4cps from shares bought back in prior period (R532m cost for 7,5m shares )

DPS 162,0 +21.1 133,8 HEPS cover = 2.3x

19

Consolidated Cash Flow Statement

Concerted working capital management across the group; still room for improvement

Cash effect of investment activities includes R1,1bn for the acquisition of Deli XLGearing capacity:

Ample room to gear up - current interest cover of 11x R1bn due from Bidvest options by year-end R650m received from the sale of Dart Line

Rm’s H1 2006 H1 2005

EBITDA 2 166,1 1 779,3

Movements in working capital (1 229,8) (1 190,9)

Cash generated by operationsCash generated by operations 936,4936,4 588,4588,4

Cash effects of investment activities (1 889,1) (1 375,6)

Cash effects of financing activities 1 118,9 (18,1)

20

International Financial Reporting Standards

NOTE: IAS17 straight lining of fixed percentage escalation leases adopted in F2005 accounts. Impact for H1 2006 R7,1m (H1 2005 R6,3m).

H1 2006R’000

H1 2005R’000

F2005R’000

Intangible assets 18 304 17 227 32 829

Share-based payments 24 160 16 920 37 580

Revenue recognition 2 943 2 020 4 315

Property plant and equipment and leases

3 843 9 127 18 238

49 250 45 294 92 962

Adjustments to income attributable to shareholders for IFRS

Strategy & Prospects

22

South African macro Trends

Increasing spending power from growing middle class

Increasing outside-of-home food consumption

Emphasis on education – growing learner base

Growing new vehicle market - could double in 5 years

Upcycle in infrastructure spend

Aspirational branding

Tourism, leisure and related services

Outsourcing (infrastructure, labour, intellect, services)

Growth in specific commodities and resources

Macro Trends that continue to benefit Bidvest group companies

23

The Bidvest Model

TODAY TOMORROW

Management decentralised & autonomous

Management decentralised & autonomous

Management incentivised (options) Management incentivised (revised approach)

Management as per the Bidvest philosophies of ROFE, working capital management, cashflow management, etc)

Bidvest management philosophies remain the same

100% ownership Policy shift: no longer only 100%, but still significant management influence; facilitates participation in larger scale business opportunities

Board structure Optimisation of Board: structure; succession planning; strengthening of non-executive; BEE

24

1. Group reorganised to realise the synergies between product categories as well as group businesses

2. Bidvest remains committed to decentralisation

New Group Structure

Bidfreight Bidserv (incl.

Renfin & Minolta)

Bidvest Europe (incl.

Deli XL)

Bidvest Australasia

Caterplus (incl. Combined

Foods)

Bid AutomotiveBid Paper Plus

Bidindustrial (incl. Office

Products)

Bid Prop Corporate

25

Prospects for F2006

Positive impact of Deli XL Automotive Market growth over the next 5 years Growing car parq boost for ancillary services

Strong volume growth set to continue – contract wins will benefit H2 2006Focus on Lithotech France and mediocre performersImpact of additional capacity in SA and offshoreAmple capacity for further gearing Group energisation

26

MANAGEMENT IS CONFIDENT OF CONTINUED REAL MANAGEMENT IS CONFIDENT OF CONTINUED REAL HEPS GROWTHHEPS GROWTH

Prospects for F2006

215.9

216.9

243.2

220.3

248.0

296.0

302.7

353.7

368.6CE

NT

S P

ER

SH

AR

E

F2002 F2003 F2004 F2005 F2006

HEPS - 1st Half HEPS - 2nd Half

Earnings are traditionally

weighted toward second half

* F2005 restated for IFRS

Deli XL in for only 3 months of H1 2005

Appendix 1:Divisional Results

29

Services – Bidfreight Bulking up

Upgrading of bulk facilities - a competitive advantage for the future

BMA profits up 88% despite upgrade construction; MOU on terms has not yet translated to alterations to leases

SABT profits up 8% on better volume IVS profits up 8% despite higher costs on

re-negotiated leases; Rand strength hurts margin on export business

SACD profits up 33%, aided by new Durban capacity and Intermodal volumes

Safcor billings 16% up & profits 24% up mainly on buoyant incoming trade

Overall business increase for Marine

Prospects focus on organic growth & acquisitions

100

150

200

250

300

350

H1 2005 H1 2006

4000

5000

6000

7000

8000

9000

Trading income Revenue

…% Trading margin

3.4%3.4%

Rm RevenueRm Trading Income

+18%

30

Services – Bidcorp Floating off

3

5

7

9

11

13

15

H1 2005 H1 2006

500

520

540

560

580

600

620

640

660


…% Trading margin

0.9%

Rm Trading Income Rm Revenue

0.9%

Strategic re-appraisal reaps substantial gains

Dart Line sold effective 1January to Cobelfret for £58,9m; buyer repays overdraft of £5m. Total gross realisation in past year of £75m (incl. prior sale of 2 ships £11m)

Volume Distribution continues to disappoint Ontime steady – but loss in France Car park business lost to NCP

Prospects SVTV volume distribution in France

exited

UK Volume Distribution gains Volvo & Toyota as well as renewal from Land Rover & Mini

+1%

31

Services – BidservCleaning up

Expense management boosts margin

Cleaning and Laundries exceptional profits

Cleaning: up 21% - Sasol & Eskom H2

Laundries: up 27%, ROFE 25% - leveraging off capital programme

Steiner: up 12%; beats off competition

Security: up 15%, substantial IPS orders

Greens: Top Turf disappoints, orders good for H2

Bidair: above budget, lack of a ground handling license impedes progress

Industrial Products: G Fox benefits, new Johannesburg facility to be beneficial

Prospects: new contracts, real growth in garment rental, stronger H2

50

70

90

110

130

150

170

190

H1 2005 H1 2006

0200400600800100012001400160018002000


…% Trading margin

9.9%9.3%


+11%

32

Services – Renfin Travel comes up trumps

0

50

100

H1 2005 H1 2006

0

50

100

150

200

250

300

350

400


…% Trading margin

20.4%19.2%

Rm Trading Income Rm RevenueTravel trading income recovery (+56%):Despite continued flat ticket prices and

severe industry competitionVolumes down but profitability up post

introduction of fee-based revenue in May ’05

Banking trading income (-21%)Retail forex margins down 100 bp; stable

Rand; costs incurred to develop infrastructure; high excesses for cash-in-transit thefts

Late launch of Debit Card products

ProspectsContinued cost containment Fees and commissions in the Bank are

increasing

+15%

33

Foodservice Product – Bidvest Europe (3663)Britannia cools its way

100

120

140

160

180

200

220

240

260

280

H1 2005 H1 2006

2.5

3.5

4.5

5.5

6.5

7.5

8.5


…% Trading margin

3.1%3.2%


3663 revenue up 8% to £709,4 and profits up 4% to £21,9m*, despite:

GDP growth decelerates; London bombs; wage, fuel, utility cost pressures;

Lower margin CD sales up 32% due to new KFC contract (high £15 unit values)

Multi-temp Like-for-like margin up

Barton meat contains losses

MOD profit down - reduced military activity

£16m capex – 3 new depots complete

JV signed with Compass - non-food

Horeca Dubai small; 3663 to assist with growth initiatives

Prospects Joint purchasing with Deli XL; new MOD

contract decision due 1 May

+6%

* 26 weeks in H1 06 versus 27 weeks in H1 05

34

Foodservice Product – Deli XLDeli set to excel

Deli XL combined = €4,3m (£2,9m) in profits (12/9/05 – 31/12/05)

Deli XL Netherlands strong cash generationInstitutional benefits from new Compass

sales; early signs of positive market growth emerging

Hospitality running at a loss

Deli XL BelgiumManagement changesProfits static, but sales up 8.6% due to

Quick and Pizza HutCash flows pleasing

Prospects: on track to deliver on BVT expectations; margins of 2-3% expected over 2-3 years


0102030405060708090

100

H1 2006 (3 months)

Trading income

Revenue: R2,15bn

1.5%

R32,4m

…% Trading margin


35

…% Trading margin

10

30

50

70

90

110

130

H1 2005 H1 2006

1000

1500

2000

2500

3000

3500

4000

4500

5000


3.2%3.0%


Foodservice Product - Bidvest Australasia

A lot of lolly in lucky country

AUSTRALIA (A$):Revenue up 10% to $566,7m & profits up 20% to $17,3m*; margin expands to 3,1% from 2,8% (foodservice margin 3,4%) Organic revenue up 8%, profits up 16% Gold Coast shines but losses in Sydney & Melbourne battling with cost structureHospitality focuses on expanding footprintQSR profits up 4x; Yum! (80% of volume) 5-year contract on favourable terms

Prospects – “street” focus; national market share of 20% = untapped potential

New Zealand (NZ$)

Revenue $132m, profits up 21% to $5,7m – Fresh now 10% of profitsProspects: well prepared for capacity and infrastructure constraints, as well as lower GDP growth

+28%


36

0

20

40

60

80

100

120

H1 2005 H1 2006

200

400

600

800

1000

1200

1400


…% Trading margin

8.3%9.1%


Foodservice Product – Caterplus (SA)

Top line up 14%, profits up 5%

Minimal food inflation vs overhead cost increases

Hospitality flat, slow down in leisure, but continued growth in fast food

Home entertainment a growing reality

Catering Supplies: procurement disciplines

Frozen: market share gains, flat profits

Speciality: capitalises on home entertainment

Vulcan: profits down, export off

Hotel Amenities: profits up despite customer losses

Lufil Packaging: good growth; branded fast foods

Prospects: differentiation, aggressive responses

+5%

Dietary disciplines

37

Foodservice Products – Combined Foods (SA)

30

40

50

60

70

80

90

100

H1 2005 H1 2006

100

200

300

400

500

600

700


…% Trading margin

12.2%12.7%

Rm Trading Income Rm RevenueRelocation to new Longmeadow premises temporarily disruptive

Crown increases profits despite import prices and poultry disease challenge

Sourcing initiatives in place

BidBake deflated by import threats, relocation of yeast production to Johannesburg

Crown/Bidbake synergies

Prospects efficiency gains from world class

facilities discount reductions at Bidbake procurement benefits

Dough (n’t) despair

0%

38

Commercial Products - Bidoffice

80

85

90

95

100

105

110

115

H1 2005 H1 2006

850

1050

1250

1450

1650

1850

2050


…% Trading margin

6.3%6.5%


Warmth out of Walton

+8%

Waltons profits rise 23% despite continuing underperformance in Southern Gauteng – significant expense savings achieved

Growth in furniture and promotional gifts

Furniture: profits up 7% - strategic realignment and move up the value chain

Kolok suffers ongoing margin squeeze; cheap, grey & counterfeit imports plus price wars continue to feature

Automation: outperformance continues, with Minolta profits up 19% off a high base

Prospects: solutions based model at Kolok & state of the art premises, sales focus at Waltons

39

Commercial Products – Bid Paper Plus*

20

40

60

80

100

H1 2005 H1 2006

100

300

500

700

900

1100

1300


…% Trading margin

7.5%7.9%


+4%

Toughest trading ever experienced

Commendable 23% rise in continuing profits

Lithotech SA: market decline in business forms being offset by mailing & laser (revenue up 15%, profits up 26%); R41m capex

Lithotech France: H2 ’05 profit turns to H1 loss despite restructuring

Silveray: aggressive pricing, margin pressure

Prospects: Lithotech France exit strategy, continued focus on shifting out of commodity products by Lithotech, modernisation of Silveray factory processes & redesign of Croxley products, tough market to keep management on its toes

Paper isn’t Board

*Was Printing & Paper Conversion

40

Commercial Products - Bid Industrial ProductsElectric Avenue

50

60

70

80

90

100

110

120

130

H1 2005 H1 2006

500

700

900

1100

1300

1500

1700

1900


…% Trading margin

6.8%6.4%


+26%

Voltex Profits up 57% off a 21% rise in revenue Electrical Wholesale boosted by building Smart buying of copper – strategic stocking Organic growth benefits from focus on

tenders, projects & industry Luminary initiatives evolving well

Afcom Profits down 19% off a 3% rise in revenue Deflation, import penetration Balancing - selective imports, rationalising

manufacturing capability

Buffalo Executape Modest drop in profits; DIY market

penetrations

Prospects: overall upward momentum continues

41

Automotive Products - McCarthy

…% Trading margin


50

100

150

200

250

300

H1 2005 H1 2006

500

1500

2500

3500

4500

5500

6500

7500

8500

9500


3.5%3.2%

Profits up 29% off a 20% rise in revenue

Access to BVT group treasury yields sizeable funding benefit

New vehicle units of 31 131 (up 25%); used units of 27 458 (up 14%) but ongoing margin squeeze

Toyota & VW/Audi star contributors

Trend to volume-orientated market

Budget: volumes up 23%, profits pleasing

Yamaha leverages full offering in a strong consumer environment

Financial profits up 35%, market gains

Growing HP debtors book & leasing fleet

GAZ taxi sales 258 units (up from 66)

Prospects: agreement with Auto China (FAW product); favourable auto market over medium term;

Moving motivation

+29%

42

Corporate Services

32.6

56.2

0

10

20

30

40

50

60

70

H1 2005 H1 2006

Trading income

Rm Trading Income

BNS sale to BCX

mymarket.com continues to grow customer base

Property rental income up 11,4%

Corporate costs net of investment income (–R12m); decrease in investment income

Sharp recovery at Namsov to R42,3m (R13,1m attributable to Bidvest) due to improved selling prices, catch and fish sizes

Appendix 2: Macro Trends that benefit Bidvest companies

44

Assessment of International Macro Trends

Bidvest existing strong positioning

Key Macro Trends Bidvest strategic initiatives

International & SA Foodservices

Increasing outside-of-home consumption of food

Geographic/range expansion

Caterplus, Yamaha Leisure Range extension; geographic expansion

Bidserv, Bid Paper Plus

Outsourcing (infrastructure, labour, intellect, services)

Bolt-on services; geographic/range expansion

Bidfreight Niche commodities and resources growth

Acquisitions (supply chain), capacity expansion

Renfin Travel services Service extension

45

Assessment of South African Macro Trends

Bidvest existing strong positioning

Key Macro Trends Bidvest strategic initiatives

McCarthy, Yamaha, SA Foodservices, Tiger Wheels, Renfin, Bidserv. Bidoffice, Bid Paper Plus, Voltex

Increasing spending power from growing middle class

Exposure

McCarthy, Financial services

New vehicle market could double in 5 years

FML, asset-based finance, distributorships

Voltex, Bidserv (services PPP)

Upcycle in infrastructure spend

Electrical products, lighting, healthcare services

Yamaha, McCarthy Aspirational branding Leverage

Appendix 3: Historic performance

47

Historic Performance (F2005 restated for IFRS)

16% CAGR over 4 years

HEPS

215.9 243.2 248.0302.7

368.6216.9 220.3

296.0353.7

0100200300400500600700

F2002 F2003 F2004 F2005 F2006

cps

1H 2H

17% CAGR over 4 years

DPS

90.0 108.0 113.4 133.8100.0

112.0136.8

172.2

050

100150200250300350

F2002 F2003 F2004 F2005

cps

1H 2H

Annual Returns

5749 51

55

3225 27

31

0

10

20

30

40

50

60

F2002 F2003 F2004 F2005

%

ROFE ROE

Operating Profit & Margins

0500

100015002000250030003500

F2002 F2003 F2004 F2005 F2006

Rm

1H 2H

5.1%4.5%4.7%4.9%

4.9%4.9%4.8%

5.2%

4.4%

the bidvest group limited results for the six months ended december 31 2005 creating value and...

Documents

ifrsavg r

h1 2005rmsh1

time contribution of

bntrading income

restated ito ifrs rmsh1

deli xltrading margin4

restated ito ifrs note

r exchange rate