Bidvest lets go of underperforming travel business in portfolio clean-up

Diversified industrial group Bidvest has sold its struggling BidAir Services business to a consortium that includes management and Africa’s biggest ground handling company.

The travel bans and lockdowns saw the air services companies in the Bidvest stable come to a virtual standstill in 2020, forcing the companies to declare losses and retrench large numbers of staff at BidAir Services, BidAir Cargo and Bidvest Premier Lounges.

Bidvest did not dally and made the decision to dispose of BidAir Services, along with its car rental business, at the end of its 2020 financial year, noting that it expected the travel, tourism and related industries to underperform into the future. 

It will retain BidTrack, Vericon and Bidair Cargo, which achieved commendable results, as did Bidair Lounges, which was on track for a strong performance until the pandemic curtailed its performance in the fourth quarter of 2020. 

While travel may be struggling, the hygiene side of its business, which Bidvest first invested in 30 years ago, is going from strength to strength. This is not just due to Covid-19 but is a long-term trend that is supported by structural growth drivers such as urbanisation, hygiene and greater safety standards.  

“The global outbreak of Covid-19 undoubtedly heightened the awareness of and need for out-of-home hygiene,” outgoing CEO Lindsay Ralphs said last year at the presentation of the full-year results. 

“We have escalated our focus internationally and the acquisition of [UK hygiene firm] PHS is indicative of the scale we are pursuing. Even without Covid-19, we anticipated that hygiene would be a growth industry and the decision to give this sector a more strategic focus was made some years back. Our sector learnings in South Africa and now in the UK, Ireland and Spain, will stand us in good stead as we pursue other possibilities.”

Results for the six months to December bear this out, with the company reporting a 6.1% year-on-year rise in profit, supported by higher demand for hygiene and facility services, DIY products and bulk commodity services. PHS supported the strong performance.

The clean-up of the Bidvest portfolio may have been accelerated by Covid, but it had already begun the process early in 2020, before the pandemic struck Africa. 

In February it sold its 6.75% stake in the Mumbai international airport, and has sold UK-based logistics group Ontime Automotive.

Now BidAir Services has been sold for an undisclosed sum to Kuwait-based National Aviation Services (NAS), black-owned investment company Colossal Africa and a consortium of the executive management team. BidAir provides ground-handling services including passenger and ramp handling, load control and operations, cleaning, toilet and water services at nine South African airports including the international gateways of OR Tambo, Cape Town and King Shaka in Durban. 

NAS is a fast-growing emerging markets operator that provides aviation services across 20 countries, 55 airports, and manages more than 50 lounges in Africa, the Middle East and South Asia.

“We believe that the success of the aviation industry in Africa is tied to its economic prosperity and have made significant investments into the industry across the continent,” says Hassan El-Houry, group CEO of NAS.

“We look forward to adding BidAir Services, the largest South African ground handling company, to our expanding network.”

With these disposals in the bag, Bidvest has largely completed its reorganisation. Its balance sheet has been strengthened with net debt to Ebitda at 1.7x, down from 2.1x in June 2020. This will be used to make selective bolt-on acquisitions in the hygiene space, said Mpumi Madisa, who replaced Ralphs as CEO in September 2020.

The share price is R171.45, up 17.8% in the last six months. DM/BM