29 August 2017

Namibia: Pressure Mounts On Bidvest - Operating Profit Down 50 Percent

Photo: New Era
Windhoek (file photo).

Bidvest Namibia's headline earnings per share for the 12 months ended 30 June 2017 came in 74% (N$47.5 million) lower than the comparative period last year (N$182.6 million).

The disappointing performance by all divisions, brought down revenues by 2.1%. In the Full Year 2017 (FY17) results released on 25 August 2017, operating profit for the group declined by 50% to N$187.4 million compared to N$377.3 million recorded in FY16.

"Bidvest Namibia results are very disappointing and fell short of our forecast. Pressure is on all divisions in the group. We hoped to see a turnaround in the Food and Distribution division, however clearly that did not come through in the numbers. As already indicated in the interim results, in addition to the sluggish local economic growth, we see the challenges that haunted the group in the past to continue into the future. We change our positive recovery outlook and do not foresee any turn around soon. We reduce our target price by 28% to 5.99/ share and downgrade our rating from a Hold to a Sell," Simonis Storms Securities (SSS) stated.

The firm adjusted their Headline Earnings per Share (HEPS) forecasts of the Bidvest for FY18 and FY19 by 65.6% and 73.7%, respectively. This is on the back of a reduction in capacity at the fishing divisions, the sale of one more vessel in FY17, declining horse mackerel prices, legislative levies introduced, uncertainty of quota allocations and the threat of new foreign and public sector entrants in the local fishing market.

"Management have indicated that the disposal of another vessel is under consideration. Prevailing operational inefficiencies in the Food and Distribution division should continue to put pressure on the earnings, especially as we are seeing significant contracts being lost in the process. We do expect vehicle sales to pick up slightly from current levels. That is on the back of our in-house assumption that the Namibian economy will turn mid-2018 and consumer spending which will be supported by the start of the interest rate cutting cycle. Management further indicated the intention to reduce high dependence on the new vehicle segment," SSS stressed.

SSS concluded that because management lacked conviction of a turnaround strategy, it does not foresee any major recovery soon.

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