New initiatives

Waltons’ Optiplan acquisition bedded down well. A specialised filing systems offering has now been integrated into all branches and across the Waltons regional structure. Waltons’ commercial warehouse at Modderfontein has moved to larger premises. Disruption was minimal as the new warehouse is nearby.

Bidvest Materials Handling was successfully integrated into Packaging and Catering. The business supplies forklifts and was previously part of McCarthy Heavy Equipment. It has acquired exclusive South African distribution rights to the Nissan forklift range.

Voltex, in conjunction with partner IntelliDB, began development of energy-monitoring software. Voltex is also exploring the market potential of solar heating for domestic and commercial water supplies.

A management development programme in collaboration with Henley Business College was successfully implemented at Voltex and was ready for roll-out across Bidvest Industrial and Commercial by year-end. Course content is shaped by the job description of each participant as the intention is to improve on-the-job performance by every supervisor and manager.

Business risks

Risks to the business did not change, though volatility sharpened currency risk and trading risks. The prices of commodities such as steel and copper are influenced by international as well as local factors. Management has long experience of dealing with these fluctuations.

Technology risk in the electrical and energy fields will continue to grow. The ever-increasing price of electricity will drive constant innovation. New energy-saving solutions will be developed. It will be a challenge to identify the most appropriate solution or technology-set. Further challenges apply to the timing of buying decisions and the estimation of the appropriate stock-holding.

The risks were showcased during the year. A few years ago, continual load-shedding by Eskom, contributed to higher demand for energy-efficient solutions and back-up systems. Eskom’s long-term challenges have not changed, but a year of relatively few outages led to a decline in demand for smart energy systems.

Objections to big increases in electricity prices also meant that Eskom’s new tariffs only took effect in July 2010. As a result, it will be mid-winter before customer demand for these solutions is likely to resurface. A focus area for management is therefore getting both the timing and the technology right.

Technology risk is managed to some extent by our international partnerships and ability to scan the global horizon for developments with most potential. South Africa is rarely the first adopter of new technologies. We can observe what works best internationally and canvass our global associates for new ideas.

The South African market is unique as it is influenced by a mix of first and third world factors. Managers are deeply rooted in their respective sectors and have long experience of identifying appropriate solutions for their markets.

As stockists with relatively large inventories we remain at risk from syndicated theft. We are constantly on our guard and employ sophisticated security systems. It is pleasing to report that no major losses from theft were reported.

Credit risk was well managed.

People risk and talent retention are under constant review; as are the most appropriate remuneration and incentivisation structures. We train, but we don’t always retain. Most South African businesses face this challenge.

A special risk this year is that of a World Cup hangover. Some of our businesses benefited when major infrastructure projects began and reached a peak. If government spending on infrastructure should be curtailed as priorities change in the post-World Cup period, many businesses will feel the effects. Diversification across multiple sectors helps us manage risks like this.

Sustainable development

Pride is a key feature of our culture. Our businesses tend to be industry leaders and strong brands. Our people take pride in this status and perform accordingly. We’re highly decentralised and entrepreneurial. This tends to attract self-starters and goal-setters.

Economic performance – All businesses have now improved to at least a level 3 or level 4 contribution against the DTI Codes. We use an electronic procurement tool to help our suppliers improve their empowerment credentials. We partner with new entrants to the subcontracting sector, helping them build a track record while instituting basic business disciplines. Kolok has established a township business hub that comprises 22 previously disadvantaged micro-business owners in Bophelong who resell computer consumables.

Environment – Petrol and diesel consumption has reduced by 12%, partly by increasing the proportion of direct deliveries (as opposed to handling through a warehouse). This has reduced double-handling of product, stock-holding, obsolescence, lead times and transport costs, but came at the cost of retrenching 40 people. Waltons and Kolok are promoting direct deliveries. Sustainable office furniture manufacturing is gaining momentum at our furniture operations.

Human resources – Operational restructuring led to the retrenchment of 318 employees. This was a last resort after other avenues, such as redeployment, were pursued. Investment in training has risen, taking us to the required 3% target for the first time. Companies are looking to develop high potential managers in the under-40 age bracket. A total of 19 Voltex candidates graduated from Henley Management College while 367 black employees participated in learnership (or equivalent) programmes.

Health and safety – The division’s LTIFR injury rate has reduced by half following improved housekeeping and attention to health and safety matters.

Labour disputes – CCMA cases brought against the business dropped 28% to 72, with 42 findings in favour of the division. No Department of Labour fines were incurred for non-compliance.

Society – Internal audit manages various aspects of ethical business conduct, and we engaged a leading law firm to conduct awareness training on the Competitions Act and the Competition Commission.

Corporate social investment – We concentrate our CSI activities in the education and training sectors. Each company selects its own flagship projects, often involving the supply of stationery to schools. The total value of our CSI was R2,5 million.

QUICK LINK: Divisional sustainability report

Future

Strong recovery may not yet be apparent, but the business cycle appears to have bottomed out. Our businesses are leaner and our people well motivated. We have maintained a strong position in every industry in which we are represented.

Volumes were down significantly, but showed some improvement late in the year, despite the disappointing impact of the World Cup. Gross margins held steady and expenses were well managed. Branch structure was rationalised. Hillcrest and Uitenhage branches were closed, while Springfield became a depot.

The new structure means we continue to draw on the experience of former chief executive Myron Berzack (now chairman) while joint managing directors drive the two operational arms of the business.

Voltex Solutions began work to develop the market for dual geyser elements, intelligent distribution boards, sensors and other smart products designed to optimise energy usage. Sales take-off was slow. Much-improved response is anticipated in the year ahead as power costs move higher.

The full benefit of the new ERP system will not be seen until the new period, but early indications are that we will realise major benefits in areas like market intelligence, anticipation of customer needs and rightsizing the inventory.

Results in export markets were disappointing.