Divisional review

Bidvest South Africa

Results were highly creditable and reflect meaningful contributions by all operations, with turnover up by 15,7% at R80,2 billion (2013: R69,3 billion). Trading profit rose by 17,0% in challenging business conditions to R4,9 billion (2013: R4,2 billion).

The positive impact of recent acquisitions was significant. Businesses that were previously part of Mvelaserve contributed 6,3% of the overall profit contribution, while Consumer Products contributed 2,4%. Academy Brushware made a 0,7% contribution.

Automotive

Trading profit dipped 3,6% to R618,0 million (2013: R641,0 million) in the face of a significant market slowdown. At R21,9 billion (2013: R20,7 billion) turnover was up 5,7%, largely the result of new vehicle price inflation. New vehicle retail sales dropped on the exit of certain low-selling brands. Market share pressure impacted volume brands. Used vehicle sales were up 14,6%. The market was characterised by fierce discounting and margin erosion. Mercedes, Land Rover and Jaguar made good contributions and a refocused Burchmore’s did well. Parts and Service showed some growth. Working capital and expense management became focus areas as the market slowed, and was impacted by tighter credit, rand weakness and strikes in several sectors. The pre-owned network was expanded and all dealers completed the migration to the Autoline dealer management system. An interactive virtual dealer concept was launched in the fourth quarter.

Consumer Products

In a challenging consumer market, Home of Living Brands (HoLB) achieved pleasing turnover results of R1,3 billion with a trading profit contribution of R102,1 million. Exchange rate volatility, competitor brands and house brands impacted margins. A sales division restructure contributed to rigorous cost management. Promotional activity, particularly by Russell Hobbs and Salton, helped drive sales. Strong category performance was put in by appliances, electrical and media accessories, FMCG, Aerial King and Pro Audio. Growth in the export distributor business exceeded 40%.

Electrical

Satisfactory results were achieved, with turnover up 8,6% to R4,9 billion (2013: R4,5 billion), while trading profit rose 14,9% to R258,2 million (2013: R224,6 million). Margins were well maintained. The launch of the Voltex MVLV joint venture drove growth in the high-tech transformer, generator and substation space, while the Invirohub rollout spearheaded growth into smart metering solutions and energy management. Expenses were up 15,9% largely due to once-off costs to re-engineer and expand the business.

Financial Services

Financial Services put in a satisfactory performance, achieving trading profit of R616,7 million (2013: R594,9 million). Turnover was up 14,1% to R1,7 billion (2013: R1,5 billion). The division remains strongly capitalised and highly cash generative.

At Bidvest Bank, profit before tax fell 4,5% to R346,5 million (2013: R362,9 million), as a major leasing contract approaches end of term. Operating income rose 0,7% to R903,3 million (2013: R896,7 million). Continued growth was achieved in transactional banking and treasury volumes. Cash and cash equivalents rose 17,4% to R2,1 billion. At R2,1 billion, deposits were up 0,8%. Credit quality remained good, with low impairment provisions and no exposure to unsecured lending. The evolving strategy of securing new partners delivered success in niche areas. Moody’s reaffirmed the bank’s rating as A3.za/P-2.za with a stable outlook.

Bidvest Insurance increased pre-tax profit by 19,3% to R266,8 million. Gross written premiums rose 42,8% to R317,3 million. The net underwriting result was in line with expectation, though some product penetration rates were under pressure. Claims management was good at both Bidvest Insurance and Life. Travel insurance was launched and several new products were developed. Investment portfolio returns were impressive. Total investment income rose 46,9% to R206,7 million. Total assets under management reached R1,4 billion.

Freight

A strong performance resulted in a 13,7% increase in trading profit to R1,1 billion (2013: R979,4 million). Turnover rose 6,7% to R26,8 billion (2013: R25,1 billion). Bulk Connections continued its strong run, with a record performance. The full-year effect of Bulk Connection’s upgrade took annual terminal volumes to 4,5 million tonnes. Bidfreight Port Operations performed strongly, with an exceptional stevedoring contribution. Improved performance at the Durban warehousing business was driven by higher steel, fertiliser and cement volumes.

South African Bulk Terminals volumes were under pressure, but the business ended the year strongly. Island View Storage’s cost control and restructuring helped drive profit growth.

Bidvest Panalpina Logistics put in a strong finish, with a good contribution by transport operations. Warehousing performance improved. Cape Town operations of SACD Freight posted positive results as replacement volumes were secured after wine exports failed to reach anticipated levels. Johannesburg capacity was fully utilised, though import volumes contracted in Durban.

Industrial

Results were satisfactory, with trading profit rising 46,1% to R125,7 million (2013: R86,0 million), bolstered by the acquisition and successful integration of Academy Brushware. Turnover was up 30,8% to R2,0 billion (2013: R1,5 billion). Strong performances were put in by Vulcan, Afcom and Bidvest Materials Handling. Yamaha made an exceptional contribution. Management changes were made at Berzacks. Expenses were well managed. Significant investment was made at Academy’s Babelegi factory.

Office

Results were bolstered by the acquisition of Zonke Monitoring Systems, with turnover up by 10,8% to R4,7 billion (2013: R4,2 billion). Trading profit was up 12,7% to R365,5 million (2013: R324,3 million). Expenses were well managed. Stationery found the going tough and measures to cut costs were taken. Furniture results were mixed, with a good contribution from Cecil Nurse. Manufacturing capacity was reorganised, and the factory made a loss. Technology produced good results, strengthened by Konica Minolta. Medical gained traction, and the introduction of revolutionary ultrasound equipment will enable an expanded offering.

Paperplus

Satisfactory results were recorded in a challenging market. Turnover rose 21,1% to R4,9 billion (2013: R4,0 billion), reflecting good operational performance and the inclusion of Stamford Sales. Trading profit is 12,2% higher at R315,6 million (2013: R281,3 million). Cost cutting and restructuring unfortunately resulted in job losses. Kolok performed strongly with a good contribution from Mozambique. Lithotech did well, but exports fell. Bidvest Data made a stronger contribution. Bidvest Packaging developed critical mass following the Masterpak acquisition. Silveray had a better year. Rotolabel faced challenges, but staged a recovery.

Rental and Products

Reasonable performance resulted in turnover growth of 6,4% to R2,4 billion (2013: R2,2 billion) while trading profit moved 9,6% higher to R477,6 million (2013: R435,8 million). Corporate cutbacks created challenges for all operations. Bundled services to deliver a one-stop offering remained a focus area. Newly acquired RoyalServe and Sanicorp performed to expectation and the integration went well. Steiner put in a good performance and grew its pest control offering. G. Fox opened operations in Botswana, Swaziland, Zambia and Zimbabwe. Laundries introduced direct sales of corporate clothing. Hotel Amenities Suppliers had a better year while Steripic finished strongly.

Services

Results on the back of the successful integration of Mvelaserve operations were pleasing. Turnover increased by 123,8% to R7,2 billion (2013: R3,2 billion), with trading profit up 90,8% to R527,5 million (2013: R276,5 million). Labour rate increases significantly exceeded inflation, contributing to cost under-recovery and margin pressures. The TFMC acquisition enabled energetic entry into the market for facilities management and critical mass was achieved in the security cluster following the integration of Protea Coin Security and Magnum. The consolidated business, rebranded Bidvest Protea Coin, is the country’s second largest security services provider. Protea Coin provided a platform for entry into international markets. Integration of RoyalServe Cleaning and Prestige created one of SA’s largest cleaning businesses. Results at a substantially enlarged TMS were pleasing. Khuseti (King Pie), RoyalMnandi, Velocity and SA Water have joined this division.

Travel and Aviation

Trading profit is 10,9% up to R421,4 million (2013: R379,9 million). Turnover rose 9,4% to R2,4 billion (2013: R2,2 billion). Ground-handling operations entrenched their position as industry leaders, achieving top scores in industry service audits. Bidvest Premier Lounges performed strongly and Budget-Rent-a-Car achieved average rates growth despite continued industry discounting. Entry into leisure travel was achieved following the customisation of the Webjet online travel booking technology. Budget-Rent-a-Car Namibia was acquired. Further expansion of the leisure offering is planned.

Bidvest Namibia

Results remained under pressure as a result of a lower fishing quota allocation and weak market prices for fish. However, continued gains by commercial businesses underpinned a 10,7% rise in turnover to R4,0 billion (2013: R3,6 billion). Trading profit fell 16,6% to R493,7 million (2013: R592,2 million). A protracted legal dispute impacted the performance of the Bidfish JV in Angola. Sardine businesses performed well. The Namsov horse mackerel fishing business investigated new refrigerated seawater technology. Stronger contributions were made by Freight and Logistics as well as Commercial and Industrial Services. The Steiner restructure delivered the expected benefits, the Waltons turnaround gained ground and Kolok performed strongly. Namibianisation programmes made continued progress.