BIDVEST FINANCIAL SERVICES

Strong recovery by the JSE was positive for our investment portfolio, driving a meaningful improvement in profit before tax. Revenue also moved higher. The finance business still had to contend with high levels of bad debt and low production volumes. The expected loss ratio fell from over 3% to 1,4%, enabling reduced bad debt provisions.

We did well to maintain a stable claims ratio at a time when claims experience across the insurance industry worsened considerably. We brought down our cost of policy acquisition by increasing product penetration per vehicle sold. Cross-selling into top-up policies, tyre protection and other products and upselling into comprehensive insurance solutions assisted margin management.

Headcount remained stable and expenses were tightly controlled. A re-energised team has bought into the new multi-channel business model and sees the potential for sustained growth as BFS made the transition into a fully fledged financial services company.

A more focused retail offering on the internet is a priority as more customers use technology (customers enabled by mobile technology already have the capacity to shop the market from the showroom floor).

Sustainability underpins our culture and way of doing business. In vehicle financing it is possible to lift short-term volumes by writing 72-months’ business. We prefer a solid core of four- or five-year transactions as this is more sustainable and is usually in the customer’s best interest.

Opportunities for increased Bidvest business in the group life and disability insurance categories will be pursued. Increased sales volumes will be sought by creating new brands in new distribution channels. BFS will aim for 10% revenue growth and meaningful profit growth.

BUDGET CAR AND VAN RENTAL

Performance was disappointing in difficult trading conditions. Though rental days were flat, revenue eased higher. Trading profit declined significantly. The Door2Door and Chauffeur division did well from a low base.

While vehicle utilisation fell, productivity (rentals per day per employee) improved by 8%.

The industry’s rise in average daily rental (up 1%) was well below inflation. The corporate travel component of our industry’s business mix fell by 11%, though the insurance replacement market rose 11%. Leisure and inbound tour rentals eased 3% higher.

Our branch network grew from 84 to 101 sites while R45 million was invested in the relocation of operations at the three main international airports. Vehicle check-out processes improved following the introduction of licence scanning. Customer fraud fell. Savings were made on vehicle maintenance and repair.

We grew the fleet by 12% in anticipation of an increase in World Cup business volumes that did not materialise. We cut back at year-end, realigning fleet size to demand levels. The fleet profile was also realigned, focusing on smaller vehicles in response to corporate economising.

Overall market growth is unlikely in 2011. We will continue to seek market-share gains.

YAMAHA DISTRIBUTORS SOUTH AFRICA

In September 2009 Yamaha was moved out of Bidvest Automotive and became an autonomous business, but reports through the division.

Performance was disappointing as a result of economic pressure on consumers and the leisure market, tighter credit and yen strength.

Market share was maintained by the marine products business and was improved by the motorcycle and music divisions. The music instruments business performed well versus budget and prior year.

Margins were under pressure due to yen strength and the fact that over-stocked competitors sold some inventory below landed cost. Improvements in margins were evident in the fourth quarter.

The all-new and highly anticipated Super Tenere Adventure Motorcycle was launched late in the fourth quarter and bodes well for 2011.

Signs of a gradual economic recovery are positive for Yamaha, which boasts a resilient international brand with a strong position in the leisure market.

Improved sales and trading profits are anticipated in 2011 on the back of continued web developments and a strong focus on electronic media to further enhance brand loyalty. Gauteng divisions are to be relocated to a “World of Yamaha” facility in Johannesburg.

AMALGAMATED AUTOMOTIVE DISTRIBUTORS (50% joint venture)

AAD underwent further restructuring and meaningful synergies materialised but financial benefits were more than off-set by substantial writedowns of excess and over-aged stock. Significant losses were incurred on vehicles brought in at an unfavourable exchange rate and retailed at much-reduced prices in an extremely competitive market.

Sales of the Chery and Foton ranges recorded meaningful improvements in the second half.

Additional new models (the Chery J3 and the Foton pick-up range) are due to be launched over the next six months. AAD is well positioned to take advantage of its lower cost base the strong rand and improving market conditions.