Business context and trading conditions

Bidvest Electrical is the largest electrical distributor in South Africa. The division comprises 73 general electrical distributors and eight specialised divisions, including energy services, power sources, power distribution and engineering and project management.

Our exclusive electrical focus after restructuring has enabled us to concentrate on core challenges and opportunities. Clearer operational focus across our streamlined division was good for team spirit at a time when the construction industry was at a 40-year low. Collaboration at regional management level shows continued improvement.

No major capital expenditure was incurred and rationalisation of the branch structure continued. The number of branches fell by three to 73; the result of consolidation rather than outright closure. This enabled us to relocate staff whenever possible. Despite downscaling, the business maintained its national representation.

The construction industry contracted in some regions while zero growth was reported in others. Both government tender activity and private sector developments were at a low ebb. Demand from contractors for cable, electrical fittings and other products was extremely low. Volumes and margins remained depressed for a second year.

Trading activity was also down. Previously, speculative buying of additional cable inventory was a feature of buying patterns by some customers, but firm copper prices and doubts about the ability to on-sell cable stock inhibited this type of purchasing.

The only sign of recovery occurred in the retail sector among some stockists of building and home improvement supplies.

Business failures among wholesalers and contractors highlighted the severity of the slump in construction activity.

Exports to Botswana and Swaziland were disappointing, but some encouraging successes were achieved in Zambia.

Fuel prices and toll charges are a risk. Our multi-branch distribution model creates opportunities to manage costs by strategic stockholding at key points, an advantage over more centralised competitors. Stockholding and distribution routes and frequencies will be re-examined as we anticipate new toll fees on greater Johannesburg highways.

Bidvest Electrical spent R25 million completing new IT systems. Implementation across all wholesale branches was completed and roll-out began in specialist branches. The fully integrated real-time system helped management achieve further efficiencies.

The Western Cape region used its database to launch a direct marketing campaign, also achieving closer interaction with its market through meet-the-customer events, supplier functions and product launches.

Performance

With the construction industry still in recession, teams did well to retain market share and maintain revenue at R4,1 billion (2010: R4,0 billion). Trading profit dipped by 6,2% to R181,8 million (2010: R193,9 million). Operational performance was satisfactory in such challenging conditions.

Teams focused on internal efficiencies and working capital management. Branch consolidation and rationalisation continued, without leaving significant gaps in network coverage. Our reputation for providing national availability of the widest range of electrical supplies was maintained.

Despite a protracted strike, Atlas Cables achieved record sales in a shrinking market. Certain regions were hit harder than others, with some branches reporting poor results. Improvements were seen at Voltex Retail and Waco performed at acceptable levels, but Sanlic results were disappointing.

ROFE of 20% was achieved. Rigorous focus on credit management was maintained.

Our sustained commitment to transformation was recognised at the 10th annual Metropolitan ‘Oliver’ Empowerment Awards, at which Voltex was saluted as top empowerment achiever in the retail category.

Sustainability

Bidvest Electrical is constantly seeking ways to use resources more efficiently and reduce waste. We are exploring a cross-divisional initiative to assist other Bidvest companies with energy-saving programmes and demonstrate the benefits of moving to low-consumption equipment. Lighting is one area in which we can make a substantial difference, both through our own interventions and through engaging with suppliers on energy-saving equipment.

Many of our products are designed to improve energy efficiency and increase the use of renewable sources. Examples include our solar products and energy-saving equipment such as efficient heat pumps. Our upcoming economical low-pressure geyser system represents a major step forward in energy management and solar power. The product is targeted at low-cost housing developments and addresses both energy and social issues.

We also recognise the need to educate customers about sustainability. Our people contribute to this, helping customers choose more sustainable products. We have also initiated ‘customer evenings’ that enable us to host product-related discussions and convey information to our support base.

We deeply regret that there was one fatality at Bidvest Electrical this year, in a car accident. We send our condolences to Ben VusuMuzi’s family. Full enquiries were conducted in accordance with regulations, and all efforts are being taken to further enhance safety awareness throughout the division.

Training spend fell, reflecting the fact that only five Voltex candidates entered management development training this year compared to 20 in 2010. Owing to recessionary conditions social investment also fell. Lost-time injury frequency rate increased, highlighting the importance of continued emphasis on safety awareness. Health campaigns led to a significant increase in staff attendance of HIV/Aids training.