By Tiisetso Motsoeneng
JOHANNESBURG (Reuters) – South African conglomerate Bidvest is considering a London stock market listing for its food business to help to fund future growth, the company said after announcing an 11 percent rise in annual profit.
Bidvest’s diverse operations from auto showrooms to shipping and office furniture make it South Africa’s second-biggest company by sales, but it has long acknowledged the need to separate its food business from the rest of the group because its true value was not fully reflected in its share price.
“Markets are particularly buoyant, money is cheap and there’s quite a lot of demand for this particular asset,” Bidvest Chief Executive Brian Joffe told reporters in a conference call.
Bidvest, which in 2011 rejected buyout bids for the business on the grounds that they would not have benefited shareholders, said on Monday that a separate listing would unlock value because it is becoming increasingly difficult to fund growth with a South African balance sheet.
Joffe, a renowned dealmaker in South Africa, also said the division is looking at entering the United States through acquisitions but that such deals would put strain on the group’s cashflow unless the business can fund itself.
“The kind of money involved to pursue an acquisition in the United States is quite significant and therefore one has to consider ‘how do you continue to fund the business going forward?’,” he said.
The food service business, Bidvest’s biggest division and one that contributes more than half the company’s 183.6 billion rand ($17.20 billion) in sales, supplies pubs, restaurants and hotels in Europe, South America and Asia.
Shares in Bidvest rose 2.4 percent on Monday morning, outpacing a flat JSE Top-40 index.
The group said its profit rise in the year to June 30 was partly attributable to favourable currency swings and acquisitions at home, where underlying demand was sluggish.
Diluted headline earnings per share (EPS), which strips out certain one-off items and is the most widely watched profit measure in South Africa totalled 1,723 cents. That was a touch below a 1,751 cent estimate in a Reuters poll of nine analysts.
Bidvest is largely insulated from weak demand at home thanks to its extensive operations in Europe and Asia, where it makes about half of its sales.
Group sales increased 19.7 percent to 183.6 billion rand, with the rand’s weakness serving to boost returns from sales made in foreign currencies.
Bidvest also said it has not made a decision on whether to take control of struggling local drugmaker Adcock Ingram. Citing a document from the Competition Tribunal, Reuters reported last month that Bidvest intended to increase its stake in Adcock to more than 50 percent.
“Given uncertainty around current trading performance, Bidvest continues to evaluate its position and has not determined whether to take steps to achieve control,” Joffe said.
Adcock, in which Bidvest owns about a third, reported a hefty nine-month loss last week after writing down everything from drug inventory, factories and trademarks to businesses in Ghana and India.
(1 US dollar = 10.6500 South African rand)
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