Bidvest Namibia financial results worse than expected - PSG

PSG Namibia has held a negative assessment of the latest financial results of Bidvest Namibia citing that investors will remain cautious to trade given the announcement that the company is still in the process of disposing of its interest in Bidfish, excluding certain assets.

“Whilst revenue in the Food and Distribution division was down by 6.5% and yet still made the largest dollar contribution to group revenue, it made a N$16 million loss, causing the largest reduction of group profits.”

“Freight and Logistics experienced a reduction in revenue of 6.3% but managed to double trading profits. Commercial and Industrial Services and Products made the second smallest dollar contribution to group revenue (of 13.8%), but the largest contribution of all to group trading profits,” says PSG.

No interim dividend was declared.

On whether the company’s outlook and or guidance had changed, PSG pointed that BVN management continue to be hopeful of restructuring strategies in the Food and Distribution division.

“Automotive is focusing on improving revenue streams other than the sale of new vehicles. The company line is that overall, the group remains focused on growing its current business, optimising operational structures and processes as well as being alert to potential acquisition opportunities,” says PSG. 

Comparing results against expectations, PSG notes that the Gross Profit Margin came in at 14.3% compared to their FY18 forecast of 18.0%.

“Return on Equity was reported as 2.9% at half-year compared to our forecast of 4.2% for FY18. The fishing division has not been able to increase margins as was expected. Margins for Freight and Logistics (6.6% vs 4.4% forecasted) and Commercial Services (4.6% vs 3.5% forecasted) were higher than forecasted for the full year,” says PSG. 

 PSG has noted that they will continue to give forecast and analysis for Bidfish as part of Bidvest Namibia.

However, the firm notes that the conclusion of the deal to sell this division could take time and very little detail is available.

“In the past we said that it is difficult to provide an outlook on what will happen with quota allocations in future. The change in strategy is now communicated that Bidfish is not expecting to receive an increase in quotas in the near future and they have sold the Namstar.”

“Bidfish is downsizing their fishing vessel fleet as they have more capacity than quota allotted to them. The own quota amount is not expected to increase,” says PSG.

They further observes that an increase to quota levies (which increased by NAD 91 per ton to NAD 475 per ton), observer fees and the introduction of an export levy (of 1.5%) effective from 1 June 2017 by government place continuous pressure on profitability.

This as well as currency and repatriation issues in Angola remain challenging.

Not included in the interim results is the 21.6% devaluation of the Angolan Kwanza to the Namibian Dollar which resulted in a NAD 16.4 million foreign exchange loss, says PSG.

“In addition, the portion of total allowable catch which consists of smaller sized horse mackerel have been increasing over several years. The resource remains under pressure. Fishing costs remain the same (except a higher commission paid to fishermen for larger catch sizes), but the price for the smaller fishes is less than that for the larger fishes (see table below), thus putting further pressure on margins,” says PSG. 

PSG also notes that Bidvest’s automotive division is largely at the mercy of the economic climate and government spending. 

Says the firm, “Slower government and consumer spending hamper growth in this division. Focus has shifted somewhat to the customer services from sales. Sales in new vehicles declined over the reporting period whilst used vehicle retail sales volumes remained fairly stable.”

It also states that the current stagnant economy means that significant growth is not expected in the commercial division in the next year.