BERZACKS

The demand for industrial sewing and embroidery machines and related items was severely impacted by recession and the crisis in the manufacturing sector. Expenses were tightly controlled.

EASTMAN STAPLES

The division’s UK sewing machine supplier was also affected badly by deteriorating business conditions. The British economy was among the worst hit by the international economic crisis. Any recovery in this business will be slow.

CATERING EQUIPMENT
Vulcan Catering Equipment

The business fully exploited business opportunities in the first half of the year. Demand was underpinned by new hotel openings and the expansion of existing facilities ahead of major sporting events in 2009 and on the run-up to the World Cup. Orders slowed in the second half, but Vulcan still managed to increase trading profit as a result of production efficiencies and strict expense control. The result was pleasing in view of growing pressure on customers in the hospitality industry.

STATIONERY
Waltons Stationery Company

Many stationery items are non-discretionary, but the business could not escape the slowdown in consumer spending and tight expense management within the commercial sector. These effects were especially noticeable in February after the back-to-school season. In this environment, the business performed well to achieve revenue and trading profit growth. However, margins were under strong pressure.

A number of store refurbishments and openings, completed at the end of the previous financial year, pushed expenses higher. A moratorium was imposed on major capital expenditure. Cash generation improved.

The integration of a new filing division will enable us to offer an even larger “basket” of goods to our customers in 2010. Interest rate cuts have made little impression on consumer spending and the retail industry will remain under pressure. Our expenses are well controlled, creating a platform for some growth in the next 12 months.

Kolok

The business put in an outstanding effort, achieving exceptional growth. All revenue and trading profit targets were achieved.

Performance was driven by the strong marketplace position of Hewlett Packard products and consumables. The weaker rand in the first half of the year helped the business protect margins.

Despite additional expenses through store relocations and branch openings, expense increases were contained.

The business was a victim of syndicated theft. After one investigation, 22 staff members were dismissed. Anti-theft controls and more stringent audit processes have been implemented.

Business challenges mounted as the year progressed and reduced retail demand became evident. The stronger rand was also negative and the team did well to maintain first-half momentum.

OFFICE FURNITURE
CN Business Furniture

Reduced corporate spending led to sluggish sales and created overstocked situations. It became a priority to move stock on hand and rightsize stockholdings.

In the face of falling demand, retrenchments became unavoidable and affected all staff grades, including management.

Difficulties with ERP implementation and operational problems at the main Gauteng distribution warehouse created further challenges.

Dauphin

The division’s specialist provider of office furniture solutions to the corporate project market faced a tough year. Many projects were postponed, cancelled or downscaled. The sector is highly cyclical and the general environment continues to give concern. However, by year-end there were some indications that project demand may revive in 2010.

Seating

The strategic challenge remained the rebalancing of the business to obtain the most beneficial mix of import activities and local manufacture. In the first half, a weaker rand and the desire to protect local jobs argued in favour of a tilt toward local activities.

Subsequently, the rapid contraction of the local economy resulted in significant over-capacity in our factories.

As new orders tailed off, short-time working was implemented. Other rationalisation initiatives were under consideration as a difficult year came to an end.

PACKAGING CLOSURES
Afcom

A shrinking manufacturing sector and the knock-on effects from an embattled consumer economy were negative for the business. The effects of the slowdown in the motor and steel industries were particularly noticeable. In these circumstances, Afcom did well to achieve a small measure of growth.

Deflation impacted margins as management put increasing emphasis on cost controls and revenue management. The breadth of our range provided some respite as on occasion we could offer alternative products to price-sensitive customers.

Trading conditions remained depressed at year-end. In macro-terms, the call on our brand’s fastening and closure products is beyond our control as activity levels within the commercial and industrial sectors drive demand. Management focus is therefore fixed on the things we can control – levels of motivation within the sales force, margin management, cost and credit control, purchasing and inventory management.

Lower overheads create a basis for some profit growth, but a robust recovery is not anticipated. Difficult trading conditions may create value opportunities as some industry members struggle to adapt to the new environment. We continue to stay alert for suitable acquisitions.

Buffalo Executape

Strong sales growth could not be maintained because of adverse trading conditions in our core industrial market and across our recently introduced retail range. Many manufacturing customers went into survival mode. Official statistics showed that South African manufacturing improved in May after 10 consecutive months of decline. Manufacturing activity is still down at 2004 levels, suggesting it will be some time before previous volumes can be achieved.