November 18, 2003

By Ann Crotty

Johannesburg - Bidvest management and long-term shareholders could be forgiven for feeling frustrated with the group's share price performance in recent years. Despite generating strong and consistent earnings growth over its 15-year life, the share is on its lowest market rating.

The recently released 2003 annual report provides details of the financial performance of the group over the past 12 years and highlights the fickle nature of market sentiment.

Using the year-end share price as an indicator for each year reveals that as a mere five-year-old company Bidvest was on a price:earnings rating of 20 times. As an eight-year-old it enjoyed a p:e rating of 25 times and in 1997 the market was rating Bidvest on a p:e of 28 times.

In terms of market rating as at the end of June each year, 1997 was Bidvest's peak. Despite the fact that in each subsequent year Bidvest produced strong earnings growth from an ever-larger asset base, the market apparently was not impressed.

From an all-time high of R65.50, which was briefly reached in financial 2000, the share has eased back to a trading level of about R43, which puts it on a historic p:e rating of 8.9 times.

While it might be of some comfort for the Bidvest management to know that the weakening share price performance is not unique, but in large part reflects general market trends, it must be galling to see their share price is enjoying very little reward for the consistency and strength that is reflected in each year's results.

In his chairman's statement, Brian Joffe refers briefly to the JSE Securities Exchange.  

"From a high point in May 2002, the JSE's all share price index declined by 37 percent to a low in April 2003, recovering by 16 percent at the end of June. Bidvest's share price performed well relative to its peers."

But this could hardly be described as well relative to the company's performance.

A company's share price performance is always significant, but for the next three years it is going to be even more significant for Bidvest and its new black empowerment partner Dinatla.

Dinatla has voting power over 15 percent of Bidvest equity and can buy that equity at any time over the next three years at a capped price of R60 a share.

A substantial empowerment partner is expected to enhance Bidvest's growth prospects, which in turn should support a reasonably firm share price performance.

Of course there are those who would argue that Bidvest deserves to be trading at R60 today. As Joffe remarked in the annual report, the group's decentralised and entrepreneurial strategy has shown that sustainable results are not only created in growing markets.

"Bidvest has consistently improved its performance in sometimes stagnant and often mature industries through increased efficiencies and market share growth," he said.

Joffe also issued a word of caution on the corporate governance front, saying:

"One needs to guard against restrictive corporate governance where undue administrative requirements place pressure on businesses."

Bidvest shares closed 5c higher at R43 yesterday.