CHAIRMAN’S REPORT

Sadly, 122 Bidvest Group employees passed away as a result of the COVID-19 pandemic. Our thoughts, condolences, and support remain with all their families, and we will never forget, and fully appreciate, the individual contributions they made to the development of the Bidvest Group.

It is pleasing that Bidvest’s leadership has, throughout this chaotic time, remained completely focused on the Group’s longer-term purpose and delivered a remarkable result, which has ensured continued value for all stakeholders.

Group revenue increased by 15.4% to R88.3 billion, trading profit was R7.9 billion, which is a considerable 47.8% higher than last year, and this translated into substantial cash generated by operations of R13.6 billion, up 48.6%. This enabled a total dividend payment for the year that was 112.8% higher at 600 cents a share.

A special acknowledgement and word of gratitude must be directed toward the Group’s employees. They have shown the will, determination, incredible dedication and commitment in their collective efforts to ensure that our vast customer base remained stocked with product and continued to receive the quality services for which Bidvest has become known.

Agility and strength

Around the world, throughout the pandemic period, business, supply chains and operating models have been tested. The strength and robustness of a business can only be truly tried during times of volatility and disruption and when companies, like Bidvest, emerge with strength from tough times, it suggests a model that is working.

Our everyday essential product and service offerings, together with a structure in which we manage and operate at a decentralised level, and with teams that are incentivised and empowered to grow their respective operations, have all contributed to these sterling results. We are now even better aligned for a future where we will continue to broaden our offering basket to stay relevant, and at the same time offer cost-effective value adding solutions.

The Group’s acquisitive and organic growth has continued unabated. This has enabled us to maintain benefits from efficiencies and economies of scale and scope, whilst delivering sustained service improvements to our customers. We have emerged with an even stronger, better blended portfolio of defensive, cyclical and growth assets, which allows us to leverage this scale to innovate, enter new markets and achieve sustainable competitive advantage. This is very evident in our facilities management and hygiene growth in the United Kingdom and Ireland. From a standing start in 2017, and through selecting carefully considered niche focus areas for acquisition, the Bidvest Group has become a top-10 facilities management company (through Noonan) and the number one hygiene services company (through PHS) in the United Kingdom. This is a remarkable achievement and is another demonstration of the quality, foresight and ability of the Group’s leadership, which is being ably directed by chief executive, Nompumelelo Thembekile Madisa.

Resilience and challenge

The impact of COVID-19 has affected industries in various ways. Bidvest, being a broad, diversified operator across numerous sectors experienced resilience in some areas, but we were more harshly affected in others. Whereas hygiene, pharmaceutical and other products and services benefited from the pandemic consequences, and freight has been boosted by the commodities boom, the travel and tourism industry, as well as automotive sales, have had to contend with severe challenges. This is a true demonstration of the nature of diversification. While it is crucial that management’s attention remains directed toward the longer-term purpose and objective, the imperative for a strong balance between product and service, where advances are continually made to enhance and improve the offering, is similarly essential. This invariably means unrelentless growth through innovation, product and service development and acquisition. Equally important, is to continue the contribution to societies served. The Bidvest leadership has again demonstrated success in all these areas.

This would not have been possible without our decentralised management structure. Bidvest achieves this by a commonality of understanding of the overall Group objectives, ensuring uniformity and simplicity, with measurement of specific targets, in our case: trading profit growth; cash conversion; Return on Funds Employed (ROFE); sustainability and transformation.

There has, over recent years, also been a timeous and considerable amount of time spent within all Group businesses on rightsizing to ensure that operating models remain relevant and future fit. This process was certainly accelerated by the COVID-19 disruptions, with many of our businesses now realigned to operate in a changed and adapted environment.

Political and macroeconomic intricacies

The South African economy, already under pressure prior to the pandemic, experienced a contraction in GDP of some 7% for the 2020 year, when compared to the previous year. Like the rest of the world, we are expecting a rebound off this low rate with anticipated growth of approximately 5% this year, from which the Group is, and will continue, to benefit.

Going forward, however, South African GDP growth predictions are more difficult to forecast with the unknown level of market recovery and immunisation success. While we are confident that sufficient supply of the vaccine is now available, the current, emerging and unknown variants of the virus, and a consequential fourth wave, remain a concern.

In South Africa, there is a tremendous amount of work to be done to ensure a continuation of acceptable growth. Over and above the COVID-19 impacts, the South African government must restore economic activity, confidence, trust and hope. There is an urgent need to realign certain policies to ensure a conducive growth environment. While steps have been made to stem the corruption tide, and the power generation and supply model seem to be headed in a better direction, major hurdles remain. We see regulatory certainty, policy consistency and stability, the re-industrialisation of the economy, focusing on SMEs, investment and growth being absolute imperatives for a return of investor confidence. We must defeat the coronavirus pandemic, accelerate our economic recovery, implement economic reforms to create sustainable jobs, drive inclusive growth, while fighting corruption and strengthening the state.

There is extreme urgency to increase both direct domestic and significant foreign direct investment. The immediate focus must be on implementing projects which will lead to near-term employment gains.

There is still a considerable amount of work needed by the government in all these areas.

Committed to an improved, and inclusive society

An ongoing concern is that of South Africa’s elevated joblessness and the ever-increasing scholar dropout numbers. South Africa’s economy will only thrive when sustainable jobs are created. We firmly believe that this should be focused through SME support, which is the primary source of new jobs, as well as infrastructure development and mass employment programmes.

When economic recovery resumes, it will further amplify socio-economic transformation. We are doing our part and we are very proud of our efforts in terms of our Broad-Based Black Economic Empowerment (B-BBEE) ratings. We employ over 120,000 people of which 80% are Black and 44% are female, 834 employees have disabilities, and there are 6,866 learnerships, internships and apprenticeships, and our skills development spend was R372 million this past year. Our firmly established succession plans incorporate diversity, inclusivity and belonging.

Our support for product and service localisation is reflected in our procurement efforts. We are further developing and transforming our supplier base towards local manufacture and supply. We intend expanding our reach into buying more locally and assist in the creation of new businesses and industries. While our procurement policies and actions have been successful in equipping and increasing purchases from local, Black women-owned and Black-owned firms, we are enhancing the procurement spend even further.

Our continued focus on social justice, diversity, inclusion and equality at Board level has also been enhanced and we have contributed to the private-sector led Gender-based Violence and Femicide Response Fund, launched by President Matamela C Ramaphosa in February 2021, as well as the Female Academic Leaders Fellowship Programme.

Risk management

While Bidvest’s diversified, decentralised, asset-light and everyday essential products and service business model is, in itself an effective risk management tool, we are obviously impacted by numerous exogenous factors that affect our various divisions in different ways. These include the ongoing impacts of the COVID-19 pandemic, the continued strain on the South African economic environment, increased requirements for hygiene and wellness as well as the continued demand for South Africa’s bulk commodities, petrochemical and agricultural supply. The diminished construction, infrastructure, manufacturing and industrial activity, as well as an overall low business confidence, lead to reduced consumer spending, vehicles sales, and the like.

Specific attention is also given to cyberassurance, cybersecurity and data protection, where Group Internal Audit ensures adherence to our strict ICT frameworks and guidelines. Comprehensive Group-wide property damage and business interruption insurance is in place while we continually explore and find solutions enabled by technology. An emerging risk is that of the local and global supply chain, which is constrained as disruptions within international manufacturers, and logistical service providers grapple with an extremely challenging environment.

Bidvest management is accountable to the board for implementing and monitoring the processes of risk management and integrating this into day-to-day activities. The directors have taken a considered view when it comes to risk management. The board has clear sight of the emerging and management of the major, known risk areas that are raised within the divisional risk committees, and directors have access to risk registers which are used to actively focus management on critical issues faced at a business and industry level.

Appreciation

With Group management focused on managing risks superbly well, and market sentiment returning to a level of normality, combined with the full extent of recent acquisitions and strategic interventions, there is a degree of comfort that Bidvest’s growth momentum is set to continue. This will ensure an ongoing, always improving level of financial and operating performance for which Bidvest has become known.

It is a privilege to be able to share this success with all our stakeholders. I thank each and every, single, solitary one of you, for your unselfish and dedicated contributions to this amazing Group of businesses and people who continue to use their collective leverage, abilities and capabilities to provide ever increasing and much-needed support and assistance to our society at large. Collectively, this will ensure a better and brighter future for all.

Together we’ve got this!

Bonang Mohale
Chairman