MSCSports

In October, Bidvest bought a 50% stake in sports marketing company MSCSports, which in turn holds a 49% stake in athlete management company, Stellar Africa. The businesses form the core component of the new Bidsport unit. Strong growth in revenue and trading profit was achieved, confirming the potential of the sports marketing sector. Acquisition opportunities will be explored now that a base has been established.

MSCSports’ main focus is the sale of sports memorabilia, event management and sports marketing; ie managing and implementing sponsorships. Associate company, Stellar Africa, represents 150 South African sportsmen and women, including leading rugby and cricket players.

Transformation

Transformation remains a strategic imperative. The board has oversight of the process while day-to-day monitoring and facilitation are the responsibility of a dedicated professional based at the corporate office. Particular rigour was applied to ensure that challenging business conditions were not used to justify lack of focus on transformation issues.

Efforts did not slacken, however, and satisfactory progress was recorded across all elements of the BBBEE scorecard. Improvements were noted in employment equity and preferential procurement. Restructuring has been completed or is under way at several South African businesses. In all cases, care has been taken not to compromise transformation gains when streamlining the businesses.

BIDVEST PROPERTIES

The built-in quality of the portfolio was demonstrated in a difficult year for the property industry. As the economy slowed down, the authorities eased monetary policy, but the cost of long-term money benefits given by government was not passed on by the banks and construction sector inflation remained high while business confidence fell.

The property industry in general was plagued by higher vacancy rates and lower rentals. However, the Bidvest portfolio’s stable tenant mix and well-located, modern, multi-fit buildings ensured that rental streams remained strong.

The portfolio is always benchmarked against property industry trends and indices. Although rentals moved higher in line with built-in escalations, certain rentals remained below market and the portfolio’s gross lettable area increased. The portfolio continues to benefit from favourable long-term finance rates secured three years ago. The portfolio continued to add value to Group operations by providing all South African divisions with strategically located and efficiently designed premises. In challenging macro-economic conditions, the development of new premises becomes challenging. Though commercial property prices remained under pressure, rentals going into the future should rise due to the underlying costs of new developments.

It is portfolio policy to remain conservative. Speculative development is never undertaken, nor is opportunistic purchasing of commercial/industrial stock to exploit supposedly favourable market conditions unless potential tenants have been identified.

One Cape Town property was sold.

A R100 million joint venture development near Cape Town International Airport was completed. The 15 000m² purpose-built premises houses a division of the Western Cape operations of Lithotech, Caterplus, Blue Marine and First Food.

Two buildings in Heriotdale, Johannesburg, were refurbished. The “recycled” premises were fully let on completion of the upgrade. An extension of the Ormonde building occupied by Konica Minolta was also completed.

The risks faced by all property businesses have been underlined. The sector is sensitive to interest rate movements, the state of the economy and changes in business confidence. Risk is managed by a conservative approach to portfolio management and the employment of experienced property professionals.

A growing area of risk relates to local government processes and the increasingly slow rate of approvals. Delays increase costs. Allowance has to be made for these bottlenecks as risk mitigation is impossible when external factors are involved such as capacity-building within government.

In the immediate term, industry conditions will remain challenging. Toward the middle of 2010, however, lower interest rates and, hopefully, a return of business confidence will contribute to a measure of recovery, but this will be accompanied by increased rentals.

ONTIME AUTOMOTIVE

The UK recession has been accompanied by heavy cutbacks in the automotive industry. Manufacturing plants have closed and many operations have gone onto short-time working. Production volumes have plummeted, with no immediate or even medium-term prospect of industry revival – creating severe challenges for our UK automotive service business.

As a result, our loss-making volume vehicle distribution business has been closed. The depot has been shut, staff retrenched and all of the surplus vehicle transporters sold.

The vehicle distribution contract for Subaru has been housed within a streamlined and reconstituted distribution and vehicle handling business comprising Specialist Transport Operations and Prestige Vehicle Distribution.

As a niche brand, Subaru finds a good fit within this consolidated business as core competence is the care, handling and transport of top vehicle marques, both within the UK and into overseas markets.

In addition, we have merged Ontime Rescue and Recovery and Ontime Parking Solutions. There are synergies across these operations as they both have strong recovery capabilities and efficiencies can be unlocked through consolidation. Infrastructure has been rationalised and operations are now consolidated around the Hayes, Bolney, Iver and Kent depots.

The contract for parking enforcement services from Transport for London, won late last year, was discontinued by the client following policy changes by the city authorities. The cost of winding up this contract has been met by Transport for London.

Our Technical Services operation at Wellesbourne has been closed.

Our consolidated operations are strongly positioned in their fields. Furthermore, contract terms have been successfully renegotiated with their customers. Given the leaner base, the two remaining businesses are well placed to reverse the pattern of recurring losses experienced in recent years.