Sustainable development

While low barriers to entry and the ever-present threat of competition put continual pressure on margins, Bidserv companies concentrate on building enduring business models characterised by high standards of quality, safety and reliability. Employees stand at the centre of this sustainability challenge. Well-trained, healthy, motivated employees allow businesses to maintain competitiveness and ensure customer satisfaction and retention. Developing and nurturing employees is central to achieving these aims.

Performance

Bidserv businesses across the board recorded pleasing results to achieve a 22,5% increase in revenue – up from R5,2 billion to R6,4 billion. Trading profit of R838,7 million (2007: R660 million) was up by 27,1%.

The return on funds employed improved from 69,6% to 74,4%.

Strategic drivers

Though trading conditions gradually became more difficult over the period, Bidserv was not severely impacted. Business units have little direct exposure to the South African consumer market. Therefore, the rapid slowdown in consumer spending had little material effect. All areas of major operational focus continued to do well, including the hospitality industry (hotels, travel, tourism and airlines), the petrochemical industry, the resources sector, state agencies and parastatals.

National infrastructure spend – at R124 billion in 2007/08 – has knock-on benefits for a business like Bidserv as expansion of transport facilities, power generation and other items of infrastructure often requires increased service support. Bidserv customers include operations such as Sasol, Eskom, Chevron, Telkom and major hotel groups that have been spending heavily to expand or upgrade their capacity.

South Africa’s longest period of growth has added significantly to the country’s a foundation for the expansion of Bidserv-type services from office automation to industrial cleaning.

Industry factors

Bidserv is driven by annuity income that is often derived from long-term contracts and enduring relationships with major groups. These income streams continue despite continually rising interest rates and a downturn in business and consumer confidence.

Legislative trends and increasing alignment of major South African groups with world best practice are also positive. For example, a private sector drive to achieve or improve HACCP compliance underpins strong demands for reliable quality delivery by service companies.

There is a growing quality gap between under-resourced, locally focused service companies and those businesses able to commit to the rigorous Service Level Agreements (SLAs) set out by an increasing number of corporate clients.

In numerous sectors, South Africa’s or quality standards, suggesting that the service continued investment means Bidserv is well positioned to respond.

In recent years, the authorities’ resistance to rate increases. Service company pricing has low correlation to general consumer inflation as the wage bill is the major cost input and quality-minded operators like Bidserv have for several years paid inflation-positive pay increases. Bidserv has consistently communicated these realities to clients only to meet with limited success in price negotiations.

In 2008, clients generally showed greater appreciation of these factors. This debate was probably taken to a tipping point by two years of steadily rising inflation. With general inflation back in double digits and still rising, clients became somewhat less resistant to rate rises.

Operational factors

Industry-wide strike action on the pattern of previous years was not repeated, enabling our business units to meet or exceed operational targets on a broad front. Our security group drew particular benefit from the improved industrial relations climate and turned last year's loss into solid profit.

Continued growth in air traffic and domestic air travel coupled with high hotel occupancy rates were positive for many businesses.

The ground-handling licence granted to Bidair by the Airports Company South Africa (ACSA) became effective at the end of the third quarter. Challenges to the ACSA decision created uncertainty and complicated planning ahead of the start date, but by year-end great strides had been made in the delivery of consistently high standards of service.