Our opinion on the current state of BVT

Bidvest (BVT) is a highly diversified South African company with dozens of subsidiaries. Its most notable investments are 66% of Bidvest Namibia which also owns a large property portfolio rented out to various Bidvest companies and 50.1% of Adcock Ingram. Its subsidiaries are organised into 6 divisions - Services, Freight, Automotive, Office, Print & Commercial Products, Financial Services and Electrical. The directors of each operating company are allowed considerable autonomy within this structure provided they produce good returns. This is the opposite of most listed companies, which aim to retain their focus on a single area of business and constantly sell off or close down "non-core" businesses. Diversification of this sort has the benefit that it reduces risk. When one division is performing badly, the others are performing well. The company is also constantly making new acquisitions. The acquisition of PHS, UK's largest cleaning service was well timed coming immediately before the huge increase in demand for cleaning that followed COVID-19. The company's investment in alternative energy sources is seen as a potential profit generator. In its results for the year to 30th June 2023 the company reported revenue up 15% and HEPS up 24,5%. The company said, "Seven divisions reported double-digit trading profit growth, off already high bases. The trading profit margin improved by 22bps to 10.0% despite a slight contraction in gross margin (100bps to 29.0%) as operating expenses were well controlled". The market was disappointed with the latest trading statement and pushed the share price down. In an update on the 4 months to 31st October 2023 the company reported, "...revenue growth slowed as activity, off a high base, was diluted by contracting durable consumer spend, volume reduction in some sectors and increased price competitiveness. Travel and hospitality as well as commercial demand for basic products and services were pockets of growth". The report caused the share price to fall almost 10% in a single day. Bidvest now trades on a P:E of 13,6 - but we believe it still represents good value at these levels.