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Chairman’s message
I am pleased to report that the Group emerged successfully from what was yet another difficult trading environment. An increase in HEPS and EPS (8,6% and 25,0% respectively) has been welcomed by our board. Improvements in cash generation and better employment of funds ensured we finished the financial year with a stronger balance sheet. The Group’s strategic advantage in these trying times remains its diversity, both in respect of its large food services and industrial exposure, and its expanded geographic positioning. These two factors are second only to our competent management and staff as determinant factors to the Group’s successful trading result. These attributes are well recognised by management as a necessary and successful construct for maintenance of the Group’s premium position along with continued growth in brand loyalty by staff and our clients. While the local operations were subject to difficult market and environmental conditions, management and staff ensured that local operations returned acceptable results. These factors notwithstanding, Bidvest South Africa returned decent trading results, 4,0% up against prior year, aided largely by strong contributions from Electrical, Industrial, Paperplus, Services, and Rental and Products. Our international operations performed strongly to ensure a healthy Group position compared to the prior year. Benefits of geographic diversification have been evident, with Bidvest Foodservice producing excellent results. The United Kingdom, China and Eastern Europe returned strong results, with Western Europe showing some recovery. Offshore acquisitions have been successfully consolidated and provided an added boost, enabling Foodservice to achieve a 25,1% increase in trading results against the prior year. Fortunately, South Africa still has some of its key sectors showing resilience to depressed trading conditions. Certain sectors are experiencing continued downturn (particularly the mining sector) on the back of declined demand for commodities, from China in particular. Manufacturing remains relatively stagnant. These factors are evident in the fragile economic growth rate, with our GDP barely expected to be above 1%. South African unemployment fell to 25% from 26,4%, although this is largely a reflection of structural adjustments (a lower number of job seekers). The net effect has been a marginal decline in unemployment to 5,2 million from 5,5 million. Needless to say, it is nowhere near the desired levels that are needed to move gross economic indicators. Some offshore markets show continued recovery such as the United Kingdom and Eastern Europe. Brazil and Chile fared badly economically and there remain concerns around China’s slowdown and the political situation in Brazil. At the strategic level, the Group continued with its acquisitive positioning, both locally and internationally. We also took the opportunity for strategic consolidation on some of our important holdings (Adcock Ingram and significant acquisitions in Europe) to ensure synergistic alliances for revenue optimisation. These strategic actions will no doubt position the Group for further growth. Our business would not be in the strong position it is today were it not for our people. One of Bidvest’s strengths is the ability of developing a culture of empowering our people, and ensuring accountability, innovation and excellence. One of our core strengths is the capability and experience of our local and global teams. On behalf of the board I wish to express sincere gratitude to all our colleagues across the Group for their support during challenging trading conditions globally. Socio-economic development Bidvest is committed to sustainable business practice and in accordance with our decentralised business model, individual companies invest in a range of initiatives designed to underpin socio-economic development while aligning their operations with the communities they serve. This work is complemented by considerable social investment by the Group. We believe long-term investment is necessary to achieve substantial gains that make a noticeable difference. The Group therefore prefers enduring partnerships that deliver measurable progress. In 2015, the Group again maintained a high level of corporate social investment and spent more than R100 million on a range of interventions. Again, the primary focus was on health, education and the welfare of the communities in which we operate. The effort is particularly important in South Africa, however, the commitment is by no means limited to this country. Group businesses on five continents make a sizeable contribution and Bidvest people at all our operations are active in their communities. These interventions add up to “the Bidvest difference” – the positive cumulative effect our businesses and people have on the lives they touch. South African examples include:
Key challenges for the ensuing year This last year was another period of declining business confidence, which lag effect is likely to pull through beyond 2016. Of concern is the public and private sectors’ readiness to plan for a turnaround of the country’s decline in fortunes. At such difficult times, fiscal brevity (government), and entrepreneurial heroism (private sector), would be a major boost for the economy. Economists note the fact that there are both “also negative domestic and external forces bearing down on the economy which makes its predicament that much worse. With the mining sector edging closer to yet another strike, the rand testing new lows, fresh concerns over China’s growth, and the Fed on the cusp of raising rates, there is a real danger that SA’s economy could tip into an outright recession”. Compounding this is the possible impact of Brazil’s downgrading (to junk status) on markets. A worrying factor is that South Africa is increasingly showing trends similar to those preceeding the Brazil downgrade. Our biggest challenge is that we seem to be “tied down”, with key leadership and by extension their respective institutions, being largely internally focused. We continue to hear of great plans to revive the economy. Regrettably very few, to date, seem to have been initiated. Our saving grace is that we are endowed with great innovators and we still have strong leadership in some quarters in both the public and private sectors. There remains isolated evidence of what is possible when these resources do from time to time come together. The South African economy is forecast to grow by 2% by 2016 with gradual improvement to 3% by 2017. Weaker global growth prospects and slower growth in key emerging markets introduce a degree of uncertainty into these forecasts. The moderately improving growth outlook will be supported by continued economic growth in much of sub-Saharan Africa as well as better terms of trade and inflation gains associated with the lower oil price and a more competitive rand exchange. Inadequate electricity supply, however, will impose a serious constraint on output and exports over the short term. Though the official unemployment rate fell this year, the unemployment rate for the youth (under the age of 25) is at an unacceptably high 63,1%. This data is discouraging. The high rate of unemployment contributes to much of the social tension and anguish in South Africa. Working to decrease unemployment in South Africa has to be the number one economic, political and social imperative. Domestic labour unrest during the period of wage negotiations and unemployment remain among some of our key risks in South Africa for business. The ongoing negotiations between Greece and its creditors could have destabilising economic and political consequences for the European Union, which is a major trading environment for us The challenge to the Group is how we should respond. Bidvest has some of the best talent on its board and in its management. Some things I am certain about are:
We remain conscious of the need to broaden and improve our empowerment status. In this and everything we will be doing I am certain that, as in the past, we will continue to demonstrate that there is a strong business and social imperative to drive the challenges of transformation in the Group. I would like to convey my sincerest thanks to the management and staff of Bidvest for their sterling efforts, and to the board for its unfailing support. We welcome all the new staff who have joined the Group during the year and congratulate Gillian McMahon, who was recently appointed onto the Group board. Bidvest restructured Continued growth and the demands of succession planning at senior level now make it necessary to bring greater formality to Bidvest’s highly successful, and highly flexible, structure. Shareholders are referred to the announcement made on October 7 2015 which announced the internal restructure of the Group. The new formal structure is simple. Bidvest Group now comprises three distinct and independent entities; each with its own board. The Bidvest Group board will be reconstituted under my chairmanship. At the date of the AGM notice, this matter is still under discussion and a final composition of the board has not been concluded. Shareholders will be advised as soon as the composition of the board has been agreed. The new entities are Bidvest Industrial Holdings (focused on the operations of Bidvest South Africa and Bidvest Namibia), Bidvest Foodservice International (housing our international and South African foodservice operations) and Bidvest Capital (to oversee the Group’s South African property portfolio and investments). At a strategic level, clear separation of interests gives us greater management focus. This helps us spot acquisition opportunities, here and overseas. The idea is to create even more scope for entrepreneurial flair. The biggest single positive is increased growth potential. A structure that increases the chance of sustained expansion is good news for everybody. Jobs are more secure at a company that continues to grow. We look forward to a “Proudly Tomorrow” for the Bidvest family. Lorato Phalatse
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Registered office South Africa |
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