Bidvest shares slump most in 15 years as demand in consumer-facing sectors wanes

Bidvest shares slumped nearly 10% on Tuesday in their biggest one-day drop in 15 years, suggesting investors were caught off guard by the four-month trading update even though it came off a very high base relative to the same period a year earlier.

The diversified industry group is arguably one of the proxies of the SA economy given its extensive footprint across services, freight, consumer and commercial products, financial services and the automotive sectors.

CEO Mpumi Madisa said in a statement that while the expected slowdown was previously communicated to the market, the actual volume and margin drop, particularly in the consumer-facing activities, was greater than anticipated.

Demand for renewable energy products tapered off in the four months to the end of October year on year, in line with improving electricity supply, before SA was again plunged into higher stages of load-shedding from last week.

Vehicle sales have also been softer in the context of a high interest rate environment, resulting in higher inventory which Bidvest said would need time to draw down. There was also excess stock in renewable energy products.

The share price ended 9.94% weaker at R244.05 on the JSE, equating to a paper loss of R9bn. However, the share price is still up nearly 14% in the year to date, making it one of the few bright spots among the top 40-listed shares on the JSE.

Bidvest said revenue growth slowed off a high base in the prior comparable period and was affected by contracting durable consumer spend, volume reduction in some sectors and increased price competitiveness.

However, travel and hospitality as well as commercial demand for basic products and services fared well during the reporting period. The weaker rand made SA an attractive destination for foreign tourists, such as those from the UK and Europe.

The company added that there has been a meaningful increase in net interest charges due to funding for the acquisition of Consolidated Property Services in Australia.

Bidvest has been on the acquisition trial in recent months and more potential deals are on the horizon.

The acquired businesses include hygiene services businesses in Singapore, the UK, Ireland and Australia, and bolt-on acquisitions in branded products services in SA. 

“We have been actively converting the group’s M&A pipeline over the past few months,” the company said.

mahlangua@businesslive.co.za