|
|
|
| Review of operations – Bidpaper Plus continued |
|
|
| |
| Introduction |
Revenue was in line with management expectations as the previous year’s sales were significantly boosted by large election materials contracts at Lithotech.
Major contract gains were achieved by our export projects division with the contract to supply ballots to the Nigerian election while the Lithotech corporate sales team had a number of successes on the national account front.
Continued success was achieved with the strategy to position Bidpaper Plus as a provider of digital and new technology solutions that complement our traditional base in print production. The launch of our digital pen and paper set underlined the e-proposition. The product is supported by locally hosted software, process servers and infrastructure to combine traditional pen-and-paper documentation with digital record keeping.
A further highlight was the implementation at many centres of a new, standardised management information system. |
| |
| Macro factors |
Strong GDP growth and high levels of retail activity were positive for the business, particularly bill presentment and print-to-post and fulfilment services. There are signs that retail activity may slacken as the national strategy puts increasing emphasis on infrastructure-led growth. But this had no material effect. The impact of the new National Credit Act is not yet apparent, but the Act is anticipated to both add to and subtract from client communication activities.
Exchange rate fluctuations and the behaviour of local monopolies and duopolies continue to be significant issues and are cause for growing concern.
Mondi has exited the market for self-copying paper and lightweight uncoated stock, leaving Sappi the sole local supplier of lightweight paper. A 10,0% price rise was the result, ascribed to limited local capacity. The increase puts the price at about the same level as the cost of imported papers.
In a competitive market, the ability to control or influence input costs is critical to business sustainability. Steps are therefore being taken to reduce our vulnerability to unilateral action by dominant suppliers.
Constant – and significant – increases in fuel prices are an abiding concern.
Skills shortages are another critical issue. We are increasing our training investment while looking at new ways of deriving optimum advantage from this growing budget. |
| |
| Challenges of national growth |
Supply bottlenecks created by the pressures of prolonged national growth are not yet a major issue, though there are signs that we may be affected by certain constraints.
The key restriction is load-shedding and power-sharing caused by rising electricity demand and consequent pressure on national generating capacity. Printing presses and associated equipment are major users of electricity. Reliable power is critical to us; so is our reputation as a dependable, on-time supplier.
Following a series of power outages in centres around South Africa, we have invested in our own power generation equipment to assure continuity of supply on time-sensitive projects. We are still rolling out these installations. Back-up at every operation is not economically viable, but will be available at strategic points.
Limited local capacity in the manufacture and supply of lightweight papers for the scholastic market is the first bottleneck that specifically applies to our industry. Moving to higher weights of paper is suggested as a way around the problem, but the cost implications are significant for the consumer. |
| |
| Risks |
There has been no change in business risks. The major risks are exchange rates, crime and credit risk. Insolvency levels are quite low in our high-growth economy, but criminality has taken off. Non-payment of accounts may not be linked to a customer’s commercial difficulties, but deliberate fraud. Quite sophisticated scams have been reported.
We are fair but firm in our approach to credit and the fulfilment of contractual obligations – ours and those of our clients. We also benefit from the fact that we work on major national accounts and for international organisations with reputations to protect.
The consistency of our approach works for us. We deal in Africa with official departments, donors and foreign aid projects, and apply rigorous controls. We do not bend rules or cut corners. We are ethical and transparent. We deliver quality, on time and within budget and will not take on a job if we know it cannot be completed on deadline and within previously agreed quality parameters. |
| |
| Sensitivity analysis |
We are sensitive to rand weakness and inflation beyond 5,0%.
If industry inflation (driven principally by wage settlements and paper prices) rises above this level, the result is margin pressure. The same applies when rand weakness moves out of the 5,0% band. The reason is that customer attitudes have been shaped by several years of low inflation. Customers now regard any increase above 5,0% as unacceptable. We offer quality solutions in support of long-standing relationships. Cost-cutting that compromises quality also compromises this marketplace positioning. High inflation and pronounced rand weakness could leave us vulnerable to attack by price-cutters who do not have these reputational concerns.
We are also sensitive to the abuse of monopoly or duopoly power. For example, the post office is both a “partner” (as we use its services) and a competitor (as it strives to enter the laser print market and become a direct participant in the market for mail services). In either capacity, we are vulnerable to increased postal charges or unilateral actions.
We are also impacted by the behaviour and pricing practices of dominant local paper manufacturers and suppliers. |
| |
| Proudly Bidvest |
| We donated R1 million in educational materials to under-privileged schools as part of a Gauteng regional initiative under the Croxley brand and the Proudly Bidvest banner. The media was quick to associate this donation with the “Hear for Life” initiative in conjunction with Radio 94.7. This Proudly Bidvest donation aligned us with the rest of the Group at a time when corporate advertising and sports sponsorship had increased the public’s awareness of the overall brand. |
|
|
|
|
