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Bidserv |
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Bidserv provides South Africa‘s
most extensive range of corporate outsourced services.
Its brands operate across commerce and industry.
Activities include cleaning and specialised industrial
cleaning operations, hygiene, laundry and janitorial
services, corporate travel and travel-related
banking, aviation services and airport handling,
office automation, interior and exterior landscaping
and electronic procurement. |
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New structure
puts wider range of corporate
service-providers into
a single, cohesive business
unit |
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Platform
created for new synergies and
fresh growth |
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Total
number of Bidserv jobs reaches
53 144, up from 51 818 |
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Revenue
increases to a record level
of R4,6 billion |
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Trading
profit rises 21,2% to R554,7
million |
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Return
on funds employed exceeds 65,1%,
the highest ever |
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Lindsay
Ralphs
Chief
executive |
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Introduction |
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Bidserv’s structure has been widened to
include office automation, procurement services
and the banking operations and travel brands of
what was previously Rennies Financial Services.
These businesses have been included within Bidserv
with effect from July 1 2005 to enable meaningful
annual comparisons. However, operational integration
did not begin until March 2006. No other provider
of outsourced business-to-business services offers
such an extensive range.
Revenue increased by 6,4% to R4,6 billion while
trading profit rose 21,2% to R554,7 million. Return
on funds employed was 65,1%, the highest level
yet achieved. These results were largely driven
by organic growth.
The commonality of the corporate client-base gives
inner logic to the Bidserv restructure. Many customers
for office automation, corporate travel and travel-related
banking services are also customers for hygiene,
cleaning, security and other services. Increased
stature bestows some tendering advantages. An
entity as well resourced as Bidserv commands attention
as a potential partner and features on the tender
list whenever a major group seeks outsourced expertise.
A number of Bidserv companies have achieved “A”
empowerment ratings, a factor that often assists
our new business strategy, especially when we
seek inclusion in major procurement programmes.
A highly motivated team has delivered some exceptional
performances through rigorous expense management,
operational efficiency and service quality. The
challenge is to raise the bar across all operations
to ensure consistently high performance by every
contributor. There can be no leaders and followers
at Bidserv – we all have to be winners. |
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TMS
Group
is a dynamic role player in the
industrial cleaning and manpower facilitation
industries in southern Africa |
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Macro-economic
factors |
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Business confidence remained
high. Many companies are energetically pursuing
growth and the pace of commercial property development
has picked up in several sectors. As Bidserv is
a business-to-business service provider these
stimuli are positive.
The interest rate environment remained stable
and the consumer’s propensity to spend assisted
some of our clients in the retail, travel and
leisure sectors. Inflation continued at historically
low levels and entrenched the corporate resistance
to price rises.
Government’s SME-friendly policies are also
having an impact with the emergence of aggressive
new competitors in areas where barriers to entry
are relatively low. |
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Premier
Club
lounges located at
all major airports |
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Steiner
Hygiene
is South Africa’s
leading provider
of hygiene services |
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Montana
Laundries
offers on-premises
laundries
24 hours a day |
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| Industry-related
issues |
The most notable
event for Bidserv’s security
operations was the divisive and confrontational
strike by security guards seeking
a double-digit pay rise. Thankfully,
this action has now been resolved,
but it blighted the fourth quarter
of our year.
Industrial relations have been severely
impacted. This is particularly hard
on quality-conscious security companies
which committed themselves three years
ago to rapid compliance with three-shift
working practices and the dismantling
of the old two-shift system, despite
the impact on labour costs. Better
working conditions helped to create
an improved industrial relations climate
at leading companies. A new start
now has to be made to rebuild trust
and the image of the guarding sector.
Media coverage of the security guards’
strike drew the attention of everyone,
including Bidserv clients, to the
level of wage demands. If nothing
else, this will help the industry
communicate the message to corporate
clients whose blanket refusal to countenance
increases above CPI is unreasonable
in a sector affected by statutory
wage settlements that significantly
outstrip this benchmark. It has to
be remembered that in the security
industry labour costs account for
80% of the overall contract price. |
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Regrettably, cleaning staff
subsequently went on strike. This national action
was initiated at the start of our 2007 year and
affected all companies in the office cleaning
sector. In a low-wage environment, there is a
continuing risk that workers may resort to industrial
action from time-to-time. It is hoped, however,
that strike action and picketing will be conducted
within the framework of our labour legislation.
The start of the strike by cleaning staff was
certainly conducted in a calm and orderly fashion.
The trend toward aggressive tendering and re-tendering
continued as corporate customers applied pricing
pressures. Bidserv lost some contracts while retaining
or winning others at lower margins. In this environment,
our significant increase in trading profit was
even more creditable. |
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Business risks |
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Cyclical factors have little
impact on the historic core of Bidserv operations
(cleaning, laundry, janitorial and security services)
as these fundamental needs have to be met no matter
what the business climate. Newer Bidserv members
in aviation, travel, financial services and office
automation are more exposed to cyclical factors
and exchange rate fluctuations. Built-in balance
is created by including two sets of companies
with contrasting risk profiles in the same “basket”.
Legislative and industrial relations risks are
also evident. Several Bidserv brands offer low-skilled
employment. On occasion, these operations may
benefit from government policy initiatives to
promote jobs growth, but there is also a risk
that some regulatory changes may affect the cost
base. The risk of a sudden worsening of the industrial
relations climate in some lower paid job categories
was underlined by recent strike action.
Our business-to-business base also entails risk
as major corporate groups can exercise considerable
negotiating power. This is counteracted by Bidserv’s
extensive services and ability to provide complete
integrated solutions across various competencies.
A major group looking for a single outsourced
package need look no further than Bidserv.
Low barriers to entry may also create a business
risk. Many smaller black-owned companies today
compete for office cleaning and washroom hygiene
contracts as relatively low levels of investment
and skills are demanded of newcomers. Established
service-providers who perform to world-class standards
now find that a quality differential has less
influence on the award of a contract. Business
can be lost to industry entrants with strong BEE
ownership credentials but little experience as
major groups seeking BEE recognition are predisposed
toward these new owners.
Bidserv has a commitment to grow jobs and maintain
world-class service standards. However, it is
difficult to be an engine for jobs growth in the
face of such pressure. Our defence is our strong
brands and proven track record. We will not compromise
on quality. The Bidserv difference underpins our
relationship with clients; it will also prove
a decisive factor when reclaiming business lost
to the current wave of unproven industry entrants.
A further defence to competition from inexperienced
entrants is the trend to higher regulatory safeguards
and the corporate sector’s commitment to
hazard analysis critical control point (HACCP).
Crime remains a risk to business. Bidserv has
a banking licence and handles cash, making us
a target for criminal gangs. Crime also creates
a risk to the image of “brand South Africa
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Sensitivity analysis |
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Bidserv is dependent to a great
extent on annuity-based income, often linked to
contract business from major corporate groups.
Tender activity is constant. Bidserv brands are
therefore engaged in an unrelenting effort to
ensure that contract gains counterbalance contract
losses. Net contract losses for a protracted period
would be detrimental to the business in view of
a relatively high base of fixed costs. These costs
are an investment in high standards of service
demanded by corporate clients. These same clients
tend to manage their own expenses quite aggressively. |
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Execuflora
is a leader in the interior
plant industry |
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Structures and
growth |
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Procurement services and the
Renfin travel and banking brands have now been
placed under the Bidserv banner, as have the office
automation operations (Minolta SA) that were previously
housed in Bidoffice. There were no major acquisitions,
though strong momentum was maintained by widening
the national footprint of brands that were previously
locked into a single region. |
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Black economic
empowerment |
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The Bidvest BEE model is now
better understood and our BEE credentials help
to ensure our participation in many procurement
programmes. All operational units strive to improve
their BEE scores and achieve improved recognition.
This process is constrained by the capacity of
credible empowerment auditors to keep pace with
demand, not by any lack of commitment by Bidserv
business units. |
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New investments |
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No major capital expenditure
programmes were launched. However, work was completed
on Security Services’ state-of-the-art remote
monitoring centre and the specialised equipment
and fleet needs of TMS were met at a cost of R24 million.
In other areas, the emphasis was on optimising
benefits flowing from recent investments in major
installations such as the high-tech laundry completed
last year at Spartan for Boston Launderers.
Investment in technology is on-going to maintain
Bidserv’s qualitative edge in all operational
areas. |
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Innovations |
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Renfin Travel services successfully
deployed their online booking engine, creating
an easy-to-access website that brings together
a range of competitive options on a single page.
Cleaning Services organised the local production
under licence of a range of environmentally friendly
chemicals (previously only available from the
United States). |
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Challenges |
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HIV/Aids remains the greatest
challenge affecting Bidserv and its workforce.
Our awareness and educational programme continues
in all regions and is periodically stepped up
in those areas where prevalence rates are high.
Bidserv repeats its call to other providers of
soft services and outsourcing services to work
together on ways of taking HIV/Aids programmes
to the next level – provision of anti-retroviral
treatment (ART). The cost of fully subsidised
ART is high and would have to be reflected in
pricing. In cost-sensitive categories such as
office cleaning and hygiene, any company which
adopted a go-it-alone approach to ART would rapidly
be at a significant pricing disadvantage. This
makes it imperative that industry-wide programmes
be developed. Bidserv is willing – indeed
eager – to participate in industry discussions.
Regrettably, significant numbers of workers are
incapacitated through HIV/Aids and the Aids-related
death toll continues to rise. Often those falling
casualty to Aids are sole providers for extended
families. Where possible, an attempt is made to
offer employment to a family member to ensure
that dependants are not rendered destitute.
BEE challenges are being effectively addressed.
All operational units are on target to achieve
their five-year scorecard objectives. A pragmatic
approach has been taken to periodic confusion
around codes of good practice. Rather than wait
for clarification, businesses are encouraged to
press ahead in accordance with the Bidvest BEE
charter as it reflects overall government strategy.
If necessary, points of detail can be adjusted
later.
Skills-training investments have been reinforced
by the deployment of mentorship programmes.
Employment equity programmes are ahead of target.
Bidserv was a net creator of jobs. The current
headcount of 53 144 shows a net gain of 1
326.
Bidserv recognises its obligation to behave in
an environmentally responsible manner. All chemicals
and other supplies are audited to make sure they
are the most environmentally friendly available.
New products are assessed for their environmental
impact before they are used by Bidserv companies.
Bidserv companies operate more than 3 000 vehicles.
The average age of the fleet has been consistently
reduced, a key factor in the control of exhaust
emissions. Our CSI programmes are often linked
to environmental initiatives. Social investment
also focuses on the upliftment of previously disadvantaged
communities as many of our workers are drawn from
these areas. |
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The future |
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We plan to achieve real growth
as a result of several positive factors. Continued
growth of the economy is anticipated; this will
encourage investment and expansion by our corporate
customers. New office and retail developments
are anticipated; another positive factor for Bidserv
companies.
High fuel prices and strong power demand (a function
of higher growth) will keep the focus on energy
efficiency. This should underpin Bidserv’s
relationship with major customers in the energy
and petro-chemical sectors.
In addition, it is to be hoped the healing process
will begin in the industrial relations environment
within the guarding sector, with beneficial effects
for our security brands.
In the fourth quarter of 2006, increased rand
volatility was evident. This may assist our banking
operations as margins improve on foreign exchange
dealings when values fluctuate. A weaker rand,
however, may dampen the propensity for international
travel.
Bidserv has a growing presence in Africa thanks
to its travel brands, support for regional hospitality
groups through Green Services and the international
expansion by the Puréau Fresh Water Company.
Opportunities to extend this African footprint
will not be neglected.
Our strategy is to seek net real growth in all
our businesses while securing price increases
that at least match our levels of internal inflation.
We have only recently begun to exploit the potential
synergies of our new, broader structure. Opportunities
for further structural efficiencies, deeper customer
relationships and new growth will be energetically
pursued. |
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CLEANING SERVICES |
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Prestige Group |
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Prestige and its individual
brands made a significant contribution to trading
profit, despite a highly competitive environment
and margin pressure. Prestige is proud that it
maintained its staffing levels in such challenging
circumstances.
Hospitality and Healthcare operations gained market
share as quality of service benchmarking inhibits
competition by inexperienced and under-resourced
industry newcomers. Both revenue and trading profit
grew.
Prestige is well positioned for further penetration
of the public sector now that effective delivery
has become an urgent priority for policy-makers.
The potential role of public-private partnerships
(PPPs) is well accepted in theory. Unfortunately,
roll-out of the PPP model has been delayed for
some considerable time. Prestige has the resources
and skills necessary to tackle the capacity constraints
which bedevil some state, regional and municipal
departments. |
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TMS Group |
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This specialised business unit
put in the best performance of any single Bidserv
contributor. The highly motivated team is to be
congratulated on optimising the opportunities
flowing from strategic investment in the latest
specialised cleaning technology. As a result,
TMS entrenched its position as the undoubted leader
in the industrial cleaning field.
TMS won a five-year contract from Sasol and increased
its revenue from leading companies in the petro-chemical
industry. In addition, the business has become
a key partner of Eskom as the national electricity
provider refurbishes its power stations in order
to meet rising energy demand. Contract gains enabled
TMS to grow jobs as well as trading profit. |
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LAUNDRY SERVICES |
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All brands, Boston Launderers,
First Garment Rental and Montana Laundries, strengthened
their position as the private sector leaders in
the provision of superior laundry services. Productivity,
revenue and trading profit rose significantly
as management leveraged the benefits of the recently
completed capital expenditure programme. Market
share growth was also achieved.
A four-year capex programme saw the completion
of ultramodern facilities in Spartan. Fine-tuning
of systems to secure optimal results will continue
for some time.
The garment rental business enjoyed strong growth,
thanks to continuing penetration of the food processing
industry. HACCP regulations and growing health
and safety demands are expected to promote further
growth. Laundry brands were also assisted by higher
hotel occupancy levels. |
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HYGIENE SERVICES |
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Steiner Hygiene |
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Steiner Hygiene put in a notable
performance, achieving growth in profit and trading
profit. The company is positioned as the leader
in the washroom equipment sector at a time when
awareness of hygiene standards is rising in many
industries.
This is an unglamorous industry but Steiner continues
to deepen customer relationships through its high
standards, reputation for reliability and ability
to innovate. Steiner pioneered the use of a new
automated urinal sanitiser with an extended product
life. The sanitiser is more effective and efficient
and has proved a market winner nationwide. |
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Execuflora |
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Execuflora, previously part
of Green Services, is now managed as part of Steiner
because of a common customer-base.
Execuflora, formerly a regional Gauteng operation,
is now represented in all major centres and is
being positioned as a national brand. Synergies
with other Steiner businesses have been identified
as an area of strategic opportunity.
Increased efficiencies were achieved through improved
routing and better utilisation of Steiner’s
IT systems. |
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Puréau
Fresh Water Company |
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Puréau Fresh Water Company
continues on the growth path. Five new facilities
were opened (in Cape Town, Durban, Nelspruit,
Port Elizabeth and East London). The Puréau
brand has now established itself nationwide. The
Mozambique facility – opened last year –
has proved to be a success. |
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BIDSERV INDUSTRIAL
PRODUCTS |
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Industrial Products put in
a strong performance, drawing benefit from growth
in the national economy and some job creation
by the manufacturing sector: the greater the number
of garment wearers, the greater the demand for
garments, safety clothing and associated equipment.
Garments are made in Malawi by Giant Clothing,
distributed by the wholesalers at Clockwork Clothing
and sold at retail level by G. Fox & Company.
Another factor driving the division’s growth
was the expansion of G. Fox & Company. It
was previously a regional Gauteng brand, but synergies
with the extensive branch network of Commercial
Sundries have enabled it to become a national
player.
SL Distributors, a small-scale clothing and equipment
supplier, was acquired and integrated into the
G. Fox & Company operation. Their lines are
complementary.
The janitorial supplies business of Commercial
Sundries had another good year. |
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GREEN SERVICES |
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The operation faced a challenging
year. Top Turf’s contracting business was
constrained by a dearth of resort projects. More
promising prospects have been identified in the
golf estate niche and a specialised golf course
development unit has now been launched. It is
busy on its first significant contract. Other
work is in the pipeline. |
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AVIATION SERVICES |
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The umbrella brand “Bidair
Services” was launched to create a single
package of aircraft-cleaning and cargo and passenger-handling
services. A majority interest was acquired in
CHS (a ramp-handling service) and a strategic
holding is being pursued in a passenger-handling
operation to strengthen the single package.
Bidair Services has established a strong national
presence and draws benefit from the increasing
number of domestic, regional and international
flights into and out of South Africa. Plans for
faster growth have been constrained by delays
in securing further ground-handling licences.
Even so, a satisfactory performance was recorded. |
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SECURITY SERVICES |
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A major change of structure
was completed. Previously, all security companies
(Magnum Shield, Vericon Outsourcing, Provicom
Electronics and International Payment Systems)
were individually managed and followed separate
marketing strategies. All operations have now
been integrated into a single brand, Bidserv Risk
Solutions. Three areas of core competence are
covered: guarding, electronic systems and remote
monitoring. A consolidated management team is
now positioned to market the optimum security
solution for any need.
The new structure recognises the continuing trend
toward technology-intensive solutions. The strategic
change proved timely as the security guards’
strike is almost certain to increase the demand
for smart solutions that are less reliant on the
human element. Bidserv Risk Solutions is well
placed to respond, thanks to the recent completion
of its R4 million remote-monitoring centre.
Magnum Shield had a difficult year as a result
of the security guards’ strike.
Syndicated crime is growing. Cash-in-transit heists
and thefts from warehouses have reached epidemic
proportions. Clients are responding by installing
more CCTV systems, stricter access controls, electric
fencing and remote-monitoring capabilities. Continued
growth is foreseen.
International Payment Systems had another good
year. Its brands (De La Rue cash depositing and
dispensing devices and Ingenico point-of-sale
swipe card terminals) enjoy growing market penetration.
Strong demand is expected to continue as the major
banks are committed to user-friendly technology
installations in revamped banking malls. |
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mymarket.com
offers electronic procurement services
to the Group and external companies |
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Océ
technology revolution is reshaping
the local printing industry |
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| BUSINESS
SOLUTIONS AND GROUP PROCUREMENT |
mymarket.com offers
electronic procurement services to
both the Group and external companies.
The e-procurement offering has proved
itself a robust and reliable platform
over several years. Growing marketplace
acceptance of e-solutions in the procurement
field was reflected in some notable
new business successes, particularly
among external users.
Revenue increased by 43%, taking the
business to a break-even level after
several years of sustained investment.
mymarket.com is confident it is now
positioned to achieve acceptable returns. |
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| OFFICE
AUTOMATION |
Excellent results
were achieved. The search for business
efficiencies gave added impetus to
the trend toward standalone, integrated
and fully networked digital solutions.
In this field, Office Automation has
become a strategic partner of its
clients thanks to strong brands and
highly knowledgeable representation.
The sustained training investment
in our people has created a qualitative
edge and entrenched Minolta’s
position as the market leader in South Africa.
Océ achieved both revenue and
profit growth thanks to a highly motivated
local team and the strength of this
international brand. A technology
revolution is reshaping the local
printing industry, giving rise to
strong demand for sophisticated yet
proven solutions on the Océ
pattern. |
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BID TRAVEL SERVICES |
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Bid Travel Services led the
industry in the adoption of transparent fee-based
remuneration and derived first-mover advantage
as the outdated commission system was abandoned
by more and more industry players. Higher profitability
was achieved, though trading volumes declined.
Corporate travel is a core competence for all
brands. The group is, therefore, affected by the
wave of re-tendering triggered by the sectoral
shift to fee-based payments. To date, our brands
appear to be net winners in the re-tendering process.
Bid Travel reacted proactively to the threat of
dis-intermediation through online bookings by
investing in the development of the Rennies Travel
Engine, our own online service. It offers comprehensive
comparison of rates by carriers and other travel/leisure
brands and enjoys growing client acceptance.
Premier Club Airport Lounges witnessed strong
growth as air traffic continued to increase. Another
positive factor is growing demand by loyalty programmes
for lounge services for favoured customers. Further
growth is anticipated. Lounge upgrades are planned
in collaboration with our loyalty programme partners. |
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BANKING AND FOREIGN
EXCHANGE SERVICES |
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Travel banking experienced
a difficult year. New investment in infrastructure
was required. A strong full-service offering is
increasingly necessary as the market preference
shifts between cash, traveller’s cheques
or card-based transactions. Delays with the launch
of our own debit card products inhibited our ability
to derive optimum benefit from developments in
this niche.
The rand exchange rate was stable for much of
the period. This affected earnings from currency
trading as margins remain depressed when foreign
exchange fluctuations are kept in a narrow range.
Operating profit fell.
The bank retained its B+ credit rating and an
improved rating is being sought. |
