As at 17 April 2026

Executive Summary

Key highlights

In this report, we review BVT’s latest 1H26 performance and the refreshed valuation case.

Financial results at a glance:

• Margins improved despite a challenging trading environment. Revenue increased by 3.7% from R64.4 billion to R66.7 billion, while gross profit rose 5.3% from R17.8 billion to R18.7 billion. Both gross margin and trading margin showed measured improvements, growing from 27.7% to 28.1% and 9.8% to 10.1%, respectively. This demonstrates effective management of pricing, mix and cost recovery, safeguarding profitability amid competitive conditions.

• Cost control remained tight, with expenses indicating a 3.4% increase and like-for-like operating expenses only marginally higher. This allowed modest revenue growth to drive stronger profit growth, reinforcing the margin-defence, self-help investment case.

• Cashflow was the standout feature of 1H26. Despite working capital rising 35.5% to R6.1 billion, cash conversion improved from 44.8% to 69.8%, lifting free cashflow to R3.8 billion, translating earnings into balance-sheet improvements that will ensure future capital flexibility.

• In 1H26, revenue increased by 3.7%, trading profit rose by 6.9% and trading margin improved to 10.1% – showing resilient performance amid a competitive and price-sensitive environment.

• The result was broad-based, with balance-sheet risk remaining manageable, supporting confidence in earnings quality. Trading profit increased across all divisions, reducing reliance on any single business or one-off recovery, while leverage remained contained at 2.2x net debt/EBITDA and interest cover improved from 6.1x to 6.4x. ROFE eased slightly from 37.9% to 37.6% and ROIC eased from 14.4% to 13.4%, reflecting higher capital investment ahead of a recovery in profit growth.

Analyst thesis

Our recommendation is based on:

• A better earnings mix underpins Bidvest’s (BVT) higher-quality valuation profile, which is increasingly weighted toward essential, service-led and cash-generative activities. Business services contribute the largest share of group trading profit, while the investment case is progressively anchored in cash generation, with improved conversion and FCF strengthening the balance sheet and re-rating.

• The hygiene industry remains its clearest structural growth platform. The company is building scale across multiple geographies, with a presence in 11 countries, while maintaining the number-one position in eight. The Citron acquisition adds North American exposure.

• BVT’s decentralised model remains a real competitive advantage. Local management autonomy enables agile execution, while retaining control of returns and cash generation. That approach has been a consistent feature of BVT’s operating philosophy and continues to bolster the investment case.

• Our valuation implies an upside, but the path to that value depends on execution. We believe the discount can narrow as BVT sustains stronger cash conversion, deleverages the balance sheet, improves returns, and demonstrates that recent acquisitions can be integrated into a higher-quality earnings base.