The Bidvest Group Limited
Annual report 2009

Commentary

Chief Executive's report

“We refuse to participate in the recession and salute our employees
for their efforts in exceptionally difficult trading conditions.”

Brian Joffe, chief executive

  Highlights
 
 
  • Revenue grows 1,8% to R112,4 billion despite deepest recession in 50 years
  • Decisive action puts Bidvest in a stronger position despite economic challenges
  • Headline earnings per share of 930 cents
  • Resilient contributions by Bidfreight, Bidserv, Bidvest Asia Pacific and SA food businesses
  • Exceptional performance at Bidvest Namibia
  • Restructuring for a new future has already begun as businesses in all geographies adjust to the ‘new normal’
  • New investment of R2 241 million as anti-cyclical growth spending continues
  • Our refocused businesses are well placed to take advantage of economic improvement
 

Introduction

Respectable trading results were delivered in extremely tough economic conditions. Headline earnings per share declined by 12,9% to 930 cents per share and basic earnings per share declined by 13,4% to 929,6 cents per share.

Decisive action was taken to put the Group in a stronger position at a time of uncertainty and worldwide economic recession. The decline in headline earnings is in part due to the expensing of R118,3 million in closure and reorganisation costs in certain operations within motor retail, the UK foodservice and Ontime Automotive businesses, and the impact of higher interest rates in the first half of the year.

Difficult times provide opportunities and Bidvest is alert to the potential this offers.

Trading profit reflects resilient contributions from Bidfreight, Bidserv, Bidvest Asia Pacific and the South African food businesses. Bidvest Namibia performed exceptionally well. Areas of underperformance were principally contained in 3663 and Ontime Automotive in the UK, Bid Industrial and Commercial Products and Bid Auto.

Revenue grew 1,8% to R112,4 billion (2008: R110,5 billion), though trading profit dipped by 3,7% to R5,1 billion (2008: R5,3 billion).

Trading profit and revenue were somewhat below our usual high expectations. In a performance-driven business such as Bidvest this is disappointing. However, in the circumstances of the deepest recession in 50 years, credit should be given to our people in all operations for their efforts in exceptionally difficult trading conditions.

Bidvest resilience was summed up by our 2009 slogan “We refuse to participate in the recession” and the results achieved by individual teams often defied depressing economic realities. Striving to the utmost has always been the overall target at Bidvest. I believe this target was achieved.

The ‘new normal’

The deep recession that struck much of the world last year was without precedent. The effects were so at odds with previous experience it was tempting to regard the catastrophe as a freak event and cling to the hope that once it had worked its way through the system we would get back to “normal”.

The temporary aberration theory gives false comfort. Damage has been severe to economies, institutions and confidence. The crisis of 2008/09 was a watershed event. Restoring shattered faith will be difficult.

Bidvest businesses in all geographies are adjusting to a “new normal” – a fundamentally different set of parameters that will continue to influence corporate strategy and management behaviour.

Internationally, the new financial, economic and commercial normality is still being defined; so is the political response. Changes to many international institutions seem likely, however. The institutional architecture established over the past 60 years is up for review.

Fixing the system

The Group of 20 and other supra-national bodies are looking to “fix” the financial system. One focus area is the mismatch between the global nature of today’s the strictly national or regional mechanisms available to regulators. Other items on the international agenda are likely to be solvency standards and capital requirements, the use of leverage and the need for greater transparency.

On occasion, problems were not caused by an overdose of sophistication or over-reliance on debt, but by deliberate flouting of the law or breaches of trust.

We applaud efforts to stop corruption and criminality.