Strategic dynamics

The impact of recession and the effects of the global financial crisis were the most material strategic factors. The change from a difficult environment to an embattled one was abrupt and affected most industries in which we are active.

The TopTurf contract for golf course design and construction in Morocco was one victim of the global crisis. All work was suddenly halted. In the domestic market, challenges were compounded by the change in the rand’s fortunes (largely unforeseen by commentators). An initially weaker rand added to the imported component of our costs while the cost of forward cover constrained our ability to draw benefit from the rand’s recovery.

Lower interest rates in the second half had little influence on our business.

Industry dynamics Lower commodity and oil prices impacted two of Bidserv’s most important customer groups – the mines and the petrochemical industry. Customers in both areas became increasingly price sensitive and often engaged in stringent expense management. Business travel was an early casualty of the national economy drive, impacting all operations in the travel, hospitality and airline handling sectors. Brand dynamics With the exception of Bizhub, our brand bouquet is dominated by corporate rather than product brands. Companies such as Boston Launderers, Prestige Group, Rennies and Steiner Hygiene have been industry leaders for many years. Their track record and reputation for professionalism contribute to improved customer retention.

The impact of brand-building and strong name recognition has been demonstrated by the progress made by one of our newest brands – Bidvest Bank. TV advertising, strong, distinctive signage and a highly visible presence in well-trafficked areas at major airports have helped Bidvest Bank to become South Africa’s leading retail foreign exchange brand in only two years.

Bidair, our aviation services company, has been strongly branded and also achieves high airport visibility.

Konica Minolta this year emerged as industry leader in the office automation sector. Its flagship product, Bizhub has become the industry benchmark for multi-functional equipment.

Operational dynamics

Price negotiation and re-negotiation became a key feature of the second half of the year. Price became the dominant factor for business in every industry. Even long-standing contracts went out to tender and accounts were occasionally lost to competitors offering heavy discounts with little assurance that standards could be maintained. We walked away from some business rather than cut prices to unreasonable levels.

In the face of lower volumes and reduced margins, each Bidserv business sought efficiencies and cut costs. A freeze on new recruitment at supervisory and managerial level was imposed. Unfortunately retrenchments could not be avoided and the division’s net headcount fell by 2 246 (3,5%).

Certain of our businesses, including Bidvest Bank, were hard hit in the last two quarters. All teams worked under extreme pressure and companies such as Konica Minolta and Steiner led the way in the search for cost cuts.

New initiatives

New structures were implemented at Steiner. Costs were taken out of head office and a new divisional structure implemented. By year-end, nine divisional operations had been consolidated into four.

The fully automated version of our travel booking engine – an industry leader from Bidserv – was rolled out nationally by mymarket.com. Take-up by Bidtravel’s corporate clients accelerates month-by-month. The number of transactions driven by the automated system is up 152% year-on-year.

The engine handles travel, hotel and car rental bookings to deliver optimum results to predetermined criteria. The recession proved the ideal showcase as savings on business travel costs are often substantial. Training enables a client’s own staff to run the engine, creating a virtual travel agency at a client’s office. The system may soon be deployed in international markets.

TMS Group Industrial Services launched operations in Saudi Arabia in a joint venture with local partners. Falling demand for specialist cleaning and maintenance services in South Africa’s petrochemical industry highlighted the need for broader reach. Under-utilised equipment has been transferred to Saudi Arabia. This country’s petrochemical industry is much larger than South Africa’s. A broader customer-base helps TMS address the risk of stop-start demand for its specialist services.

Global Payment Technologies has, with its partners, developed a safe deposit system offering unprecedented till-to-safe-to-bank-account efficiencies. The system rapidly achieved strong acceptance among major banks as it reinforces their relationships with retailers and other businesses handling large amounts of cash. The system comprises a note-counter and bill validator with a link to a bank’s in-house computers, enabling verified cash amounts to be instantly credited to a business account.

A strategic effort began at Bidprocure to gather precise data on capital and operational capital expenditure across Group businesses. Efficiencies were demonstrated a year ago when the telecommunications costs of all South African businesses were consolidated into one monthly Bidvest account. This model may prove to be the template for Group-wide procurement synergies.

Risks to the business

Risks are little changed, though the recession highlighted areas of vulnerability; for example, the suddenness of knock-on effects when the general economy contracts. Our principals feel the primary effects. We take the secondary impact as corporate customers “share the pain” by applying margin pressure or curtailing some activities.

Broad penetration of the corporate sector creates balance when some sectors do well while others feel pressure. But in a general downturn, pressure occurs across the board and can be considerable as large businesses are strong negotiators with considerable buying power.

As a well-resourced company making long-term investment in training and equipment, the risk of competitive pressure from under-resourced operators with low overheads is ever present. Quality service and professionalism mitigate this risk – except in a severe downturn when price overwhelms all other buying criteria.

Credit risk obviously increases as business failures begin to mount. Credit risk mitigation became a priority.

Organisational culture

The Proudly Bidvest positioning is important to a division with such a diverse spread of interests. The unifying theme is reinforced by a common culture. All businesses are run in accordance with the same principles and philosophies. Managers are close to their businesses and teams. We run our business in an ethical manner. We’re open and honest with customers and staff. In all areas of activity, we take pride in our professionalism.