Chairman's report

We continue to work hard to ensure the Group’s principles, values, and the outcomes arising from the recently introduced ESG Framework, are judged on their respective effectiveness, and the ability of the business to fulfil its purpose.

Delivering a good result is one thing but, at Bidvest, we believe we are only performing satisfactorily if we deliver beyond the financial statements and provide benefit to our broader base of stakeholders. We are doing this remarkably well, specifically in terms of providing for all levels of education and sustainable employment generation, providing more learnerships and bursaries, achieving visibly higher levels of leadership, employee and supplier transformation, supporting those in need, while also delivering on pledges made to all other social and environmental ambitions. You can only say that success has been achieved when you deliver on commitments, made through a clearly defined purpose, and which provide benefit for your people, the planet, and ultimately result in a strong performance.

Social transformation through economic upliftment of communities and businesses, and investment in education and health is a prerequisite at Bidvest, and we have established strategic partnerships with key stakeholders to gain scale, add value and entrench long-term relationships through common purpose. Diversity and inclusion are prioritised for both internal and external stakeholders, and we are continually enhancing economic transformation through a more diverse supplier network and inclusive procurement approach.

It is pleasing that Bidvest made good progress on reducing its environmental footprint, improving social and community wellbeing, while also being able to offer customers more innovative and sustainable products and services. Ultimately, ensuring a better future for all our stakeholders.

Growing concern, rising risk

The past year bore witness to several worrying events which are placing strain on a world economy already damaged by the pandemic.

Decades-high inflation in many of the world’s biggest economies was exacerbated by Russia’s invasion of Ukraine, which had a more negative than previously anticipated global impact, resulting in food and energy prices soaring and interest rates aggressively hiked. While inflation in SA seems to be fairly well contained at 6.5%, with a forecast of 5.7% next year, the country’s forecast GDP growth is of real concern, at around 2.0% in 2022, declining to 1.3% in 2023. In the UK, a significantly lowered GDP growth expectation of 0.5% in 2023, with inflation increasing to 10.5% for 2022, is cause for alarm. The European Commission’s updated economic forecast for Ireland indicates good GDP growth at 5.3% and 4.0% for 2022 and 2023, respectively, with inflation at 7.3% and 3.3%. Australia’s economic growth is expected to remain strong during 2022, moderating in 2023 with forecast GDP growth of 3.8% and 2.2%, respectively, and the country’s CPI is expected at 7.8% over 2022 and around 4.0% in 2023.

It is clear living standards around the world are declining, disproportionately impacting the most vulnerable people. Government finances are stretched and climate change mitigation needs urgent multilateral action. This is not an easy operating environment to navigate.

The consequence is continued negative impacts on consumer and business confidence, extending economic headwinds even further. This is concerning, specifically for a Group like Bidvest that prides itself on delivering everyday essential products and services. We are monitoring these global events and their respective impacts very carefully and will continue to seek out pockets of growth.

The Group’s risk monitoring processes are firmly established, and actions were taken to mitigate the areas of most concern, which include continued inflationary effects and the secure provision of energy.

Additionally, while supply chains broadly stabilised and product delivery is more consistent, delivery lead times are extended. Together with pricing variations, this resulted in Group inventory levels being higher than the prior reporting year.

The continued decline in the state of SA infrastructure is of grave concern. Water infrastructure and supply in many municipalities has deteriorated significantly. Poorly managed rail and port operations are limiting the effective distribution of goods across the country, and those destined for export markets. Freight cargo is being diverted away from Durban and other SA ports to neighbouring countries. Government’s indication that it seeks to work with the private sector on progressing municipal effectiveness, as well as rail and port upgrades and efficiencies, needs urgent advancement.

A changing world

The pandemic, and its consequences, has driven many corporations to review ways of operating, employee work practices and behaviours, as well as customer and other stakeholder demands. It has also resulted in our companies reviewing and amplifying their respective ESG practices, which is based on the Framework entrenched across the Group.

We are all experiencing a time of enormous change, with challenges and opportunities emerging. In SA, despite good progress in certain areas and sectors, there remains a need for further and significant improvement. This includes an urgent requirement to rapidly rollout a revitalised infrastructure development strategy across the country, together, and with a stronger resolve to stabilise energy provision. Over the past year, SA’s energy supply interruptions were more severe than ever experienced. Uninterrupted access to electricity is of utmost importance for Bidvest, and indeed all SA companies. There is a pressing need to accelerate the restructuring of state energy provider, Eskom, and the recent momentum delivered through the Independent Power Producer Procurement Programme to intensify renewable energy availability is welcomed and must be maintained. Additional changes to legislation, processes and regulatory frameworks are urgently needed to ensure a better energy supply environment.

We must remove the obstructions brought on by red tape bureaucracy within many areas of government, ethical leadership must be more visible and more emphasis placed on driving crime and corruption out of the system.

Strategic alignment and growth driving success

The success of our growth strategy, which is delivering returns beyond our expectations, was one of the key drivers of this year’s remarkable financial results.

Concurrently, the strategic impetus across the Group – improving operational efficiencies, maintaining good cost management and cash generation, together with ongoing investments to increase capacity in terminals, factories and back-offices, as well as robust inventory levels – contributed to this past year’s excellent results.

It demonstrated several realities, including Bidvest’s capacity to ensure strategic agility, the importance of our everyday essential products and services, and the critical need to maintain a strong balance sheet coupled with a relevant and considered capital allocation programme. Product and geographic diversification remain key enablers, ensuring a good balance between our services, trading and distribution offerings. In previous years, the balance between those sectors performing well and segments more harshly impacted, was roughly in equilibrium. However, we are now seeing the majority of our operations performing well across most areas of the business. This is, I believe, a consequence of how Bidvest has adapted to the turmoil the world has seen, and we are all currently experiencing.

Appreciation

During this past financial year, we welcomed Ms Faith Nondumiso Khanyile (Faith) and Ms Motlanalo Glory Khumalo (Koko) as independent non-executive directors. They are both providing valuable insights into Board deliberations. After year-end, we announced that Ms Nonzukiso Siyotula (Zukie) and Ms Sibongile Masinga (Bongi) would step down from the Board at the conclusion of forthcoming annual general meeting. My gratitude is expressed to all Board colleagues for their unstinting time, as well as their generous contributions and sound guidance.

On behalf of the Board, it is difficult to adequately express our thanks and congratulations on these stellar results in mere words to the entire Bidvest family of employees and the leadership teams across the Group. We are extremely grateful and encouraged by what has been achieved and look forward to what lies ahead as we aim to shape a brighter future for the Bidvest Group, for all our stakeholders and the respective countries in which we operate.

I am confident that Bidvest’s ability to continue adapting to these ever-changing markets, its focused growth strategy, prudent management, resilient companies, robust balance sheet and strong financial standing, will stand us in good stead as we move forward.

Bonang Mohale