Bidvest Group Limited

Namibia

OVERVIEW

Many of our businesses did well to optimise opportunities in an economy that achieved relatively good GDP growth for much of the period.

Double-digit sales and profit growth was delivered by many teams within our commercial cluster – Freight and Logistics, Commercial and Industrial Services and Products, Food and Distribution and the newcomer to our divisional structure, Automotive.

Bidfish, which accommodates our fishing interests, faced continued pressure.

External macro-economic factors negatively impacted the financial performance of Bidvest Namibia.

FINANCIAL PERFORMANCE

Revenue rose 9,2% to N$3,9 billion (2015: N$3,5 billion), highlighting the value of diversification as an 11-month contribution by newly acquired Novel Motor Company boosted these figures by more than N$778 million. Novel was repositioned as Bidvest Namibia Automotive.

Trading profit fell 25,9% to N$297 million (2015: N$400 million). Trading margin dropped to 7,7% (2015: 11,3%).

MACRO FACTORS

The pilchard resource faced severe pressure and poor catches resulted in the suspension of seasonal operations at our canning factory. We entered into an agreement with another player in the Namibian pilchard industry that enabled our UFE vessels to carry out fishing operations for both parties while canning became the responsibility of our industry counterparts.

Although there were no further cuts in our share of the commercially available horse-mackerel catch, stabilisation perpetuated a 50% fall in our fishing fleet’s traditional quota.

Hard currency prices fell for horse-mackerel (traditionally a major driver of profits). A lower incidence of large fish sizes in the sizing mix also kept prices under pressure.

Namibia’s oil and gas industry was largely at a standstill while traffic volumes along Namibia’s principal transport corridors remained depressed as a result of weak global demand for commodities from neighbouring states.

More positive factors included continued infrastructure spending and a relatively robust consumer economy. However, a fourth-quarter slowdown created concern.

The Namibian dollar weakened, though net effects were beneficial as most fish sales are denominated in US dollar.

CHALLENGES

Management took robust action to streamline operations in line with new demand patterns. Focus areas included fishing and freight and logistics.

Bidfish began downsizing in the prior period when a vessel from the Namsov horse-mackerel fleet was sold. In the review period, a second vessel was sold to our former partners in the Trachurus joint venture when they exited this structure, bringing the partnership to an end.

Three vessels are left in Namsov’s fleet. Further downsizing will be considered if quotas prove insufficient for acceptable fleet utilisation.

At Freight and Logistics only one redundancy was necessary as management streamlined the business. Other savings were achieved by staff attrition.

JOBS AND TRAINING

Bidvest Namibia remains one of the country’s largest employers. Regrettably, and as a result of the suspension of pilchard canning operations and the fleet downsizing, staff numbers fell from 3 319 to 2 732. The ship’s crew retained their jobs as new owners agreed to keep them on.

Training investment was still substantial at N$6,9 million (2015: N$7,6 million).

DIVERSIFICATION

Significant progress was made with strategic diversification and expansion into motor vehicle retailing. At the same time, our commercial and industrial business moved into plumbing supplies and related activities following the opening of Namibia’s first Plumblink branch.

Bidfish gained increased exposure to downstream distribution via the purchase of a 40% stake in a Mozambique-based distributor.

Management at all businesses continues to explore opportunities to broaden the operational base.

DIVISIONAL REVIEW

Food and Distribution was largely successful in a strategic effort to find replacement volumes following the loss of chicken sales in the wake of government limitations on chicken imports and the subsequent cancellation of a major poultry contract. By year-end, sales were on par with the prior year. However, results were inflated by settlement of a claim relating to the contract cancellation.

Most businesses within Commercial and Industrial Services and Products showed pleasing profit growth. Regrettably, sizeable losses were again registered by Voltex, negating improvements seen elsewhere. Remedial action is under way at the electrical products supplier.

Freight and Logistics failed to meet targets as port visits fell, freight volumes stalled and project work declined. However, a major mining industry tender was won.

Automotive performed broadly in line with expectation at the time of Novel’s acquisition. Teams did well despite a softer new car market in the second half. Investments were maintained in facilities and skills development.

Bidfish went through a disappointing period. Carapau – a new joint venture to assist fishing industry newcomers – performed strongly. We own 25% of Carapau and its contribution is reported as an equity accounted investment. Carapau’s catch therefore does not add to our volumes. Pilchard operations faced severe pressure.

YEAR AHEAD

Greater diversification and the consolidation and streamlining of our businesses provide a firm base for the future. Economic conditions may worsen and fishing resources and quotas could have a material impact on performance. However, all operations will seek organic growth. We remain alert for acquisition opportunities.