| Mon 26 Aug 2002, 0:00 | | THE BIDVEST GROUP LIMITED - AUDITED RESULTS FOR TH |
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("Bidvest" or "the Group")
Registration number: 1946/021180/06
ISIN NUMBER: ZAE000008132
Share code: BVT
Audited Results for the Year Ended June 30 2002
- Revenue 43% to R42,0bn (2001:R29,bn)
- Operating income 42% to R2,0bn (2001:R1,bn*)
- Headline earnings 24% to R1,3bn (2001:R1,06bn*)
- Headline earnings per share by 21% to 436,2c (2001: 361,8c*)
- Dividend per share by 12% to 190,0c (2001: 169,2c)
Note: * Restatement of comparative figures due to change in accounting
policies
- Operating income exceeds R2bn for the first time
- Excellent performance from Bidvest plc, contributing 23% (2001: 19%) to the
Group operating income, and 21% to headline earnings (2001: 19%)
- Double-digit operating income growth from each division
- Increase in the effective tax rate to 27,6% resulted in an additional
charge to the income statement of approximately R80m
- SA operations delivered organic growth of approximately 23%
- Working capital management improved considerably by year end
- Compound growth rate of approximately 29% over the last 11 years
- Major acquisitions:
- 56.7% of Bidcorp plc (formerly Jacobs Holdings) for GBP31.5m
- Balance of Voltex (68%) for R218m
- Paragon Business Communications for R58m and merged
with Lithotech
- Magnum Group for R60m, integrated into Shield Security
- Renfreight incorporated into Safcor Panalpina
- Strategic review and return to profitability of Bidcorp plc
- Successful launch of mymarket.com in South Africa and in the UK
Brian Joffe, Chairman, commented:
"Bidvest has delivered a strong set of results with each division reporting
double digit operating income growth. Management across the Group did a
superb job responding to a slowing economy and extremely volatile market
conditions.
Bidvest has been through a period of consolidation and is well placed for the
next phase of its development. We will continue to proactively source
potential acquisitions whilst maximising the opportunities that are available
to the Group.
The Bidvest of today provides a solid foundation for growth and we look to
the future with optimism."
August 26 2002
Enquiries:
The Bidvest Group Limited Tel: + 27 (0) 11 772 8700
Brian Joffe, Executive Chairman
Jack Hochfeld, Investor Relations
David Cleasby, Investor Relations
College Hill Johannesburg Tel: + 27 (0) 11 447 3030
Nick Elwes
Robyn Hunt
The BidVest Group Limited
Consolidated Audited results for the year ended June 30 2002
highlights
REVENUE 42,6%
OPERATING INCOME 41,5%
HEADLINE EARNINGS 23,7%
HEADLINE EARNINGS PER SHARE 20,6%
DIVIDEND PER SHARE 12,3%
Operating income exceeds R2 billion for the first time
Income statement
for the year ended June 30
Restated*
2002 2001 Percentage
R`000 R`000 change
Revenue 41 950 388 29 415 011 42,6
Operating income 2 012 611 1 422 212 41,5
Amortisation of goodwill (52 646) (14 529)
Net capital items (11 467) 1 058
Net finance expense (80 163) (391)
Income before taxation 1 868 335 1 408 350 32,7
Taxation (515 264) (328 520)
Income after taxation 1 353 071 1 079 830 25,3
Income from associates 17 735 25 248
Trading profits 27 788 33 384
Impairment and goodwill
write-off in associates (10 053) (8 136)
Outside shareholders`
interest (129 557) (69 612)
Income attributable
to shareholders 1 241 249 1 035 466 19,9
Number of shares
in issue (weighted 000) 299 089 291 599
Headline earnings
per share (cents) 436,2 361,8 20,6
Earnings per share (cents) 415,0 355,1 16,9
Dividend per share (cents) 190 169,2 12,3
- interim 90,0 81,0
- final 100,0 88,2
Headline earnings
The following adjustments
to income attributable to
shareholders were taken into
account in the calculation of
headline earnings:
Income attributable
to shareholders 1 241 249 1 035 466
Amortisation of goodwill 52 646 14 529
Net surplus on disposal of
assets and businesses (3 610) (1 058)
Costs relating to
unsuccessful bid for
Brake Bros plc 20 403 -
Underwriting commission
received net of costs from
Bidcorp plc (formerly
Jacobs Holdings plc) (5 326) -
Impairment and goodwill
write-off in associates 10 053 8 136
Tax relief (4 363) -
Outside shareholders`
share (6 322) (2 129)
Headline earnings 1 304 730 1 054 944 23,7
Segmental analysis
for the year ended June 30
Restated*
2002 2001 Percentage
R`000 R`000 change
Revenue
The Services Division 16 424 403 13 759 072 19,4
Bidfreight 14 383 523 12 131 648 18,6
Bidserv 1 505 982 1 162 818 29,5
Renfin 534 898 464 606 15,1
The Foodservice
Products Division 21 121 321 13 226 694 59,7
Bidvest plc 18 741 489 11 213 360 67,1
Caterplus 1 653 732 1 360 908 21,5
Combined Foods 726 100 652 426 11,3
The Commercial
Products Division 5 500 712 3 372 066 63,1
Bidoffice 3 512 837 2 798 707 25,5
Bidpac 625 537 573 359 9,1
Voltex 1 362 338 - -
Corporate Services 159 387 168 244 (5,3)
I-Fusion 159 225 168 244 (5,4)
mymarket.com 162 - -
Intergroup eliminations (1 255 435) (1 111 065) -
41 950 388 29 415 011 42,6
Operating income
The Services Division 718 570 577 370 24,5
Bidfreight 474 514 382 674 24,0
Bidserv 134 317 105 661 27,1
Renfin 109 739 89 035 23,3
The Foodservice
Products Division 672 927 439 642 53,1
Bidvest plc 460 875 265 223 73,8
Caterplus 132 493 106 080 24,9
Combined Foods 79 559 68 339 16,4
The Commercial Products
Division 487 675 289 547 68,4
Bidoffice 313 715 219 720 42,8
Bidpac 84 142 69 277 20,5
Voltex 89 818 - -
Corporate Services 133 439 115 653 15,4
I-Fusion (9 096) (5 965) (52,5)
mymarket.com (2 172) - -
Investment and other
income 108 904 90 303 20,6
Group properties 35 803 31 315 14,3
2 012 611 1 422 212 41,5
Cash flow statement
for the year ended June 30
Restated*
2002 2001 Percentage
R`000 R`000 change
Cash flow from operating
activities 2 002 904 1 127 424
Operating income net
of capital items 2 001 144 1 423 270
Depreciation and other
non-cash items 580 019 401 334
Changes in working capital 207 183 (265 830)
Cash generated by
operations 2 788 346 1 558 774
Net finance expense (80 163) (391)
Taxation paid (395 737) (269 007)
Dividends paid
- Company (268 901) (145 977)
- subsidiaries (40 641) (15 975)
Cash effects of investment
activities (1 658 352) (493 500)
Net additions to
fixed assets (695 117) (495 955)
Net additions to
intangible assets (18 760) (8 509)
Net (acquisition)realisation
of subsidiaries, businesses
associates and investments (944 475) 10 964
Cash effects of
financing activities 552 378 (127 000)
Proceeds from shares issued
- Company 596 462 48 609
- subsidiaries 506 2 478
Distribution of share
premium to shareholders (159 743) (116 981)
Net borrowings raised
(repaid) 115 153 (61 106)
Net increase in cash
and cash equivalents 896 930 506 924
Net cash and cash
equivalents at the
beginning of the year 1 058 213 536 263
Currency adjustments 247 188 15 026
Net cash and cash
equivalents at the
end of the year 2 202 331 1 058 213
Balance sheet
at June 30
Restated*
2002 2001
R`000 R`000
Assets
Non-current assets 5 132 443 3 579 216
Fixed assets 3 602 498 2 182 752
Intangible assets 681 903 353 164
Deferred tax 251 282 239 092
Investments and advances 404 615 495 278
Banking advances 192 145 308 930
Current assets 9 998 814 6 162 755
Other current assets 7 253 322 4 848 692
Liquid funds 2 745 492 1 314 063
Total assets 15 131 257 9 741 971
Equity and liabilities
Capital and reserves 6 395 651 4 165 785
Shareholders` interest 5 589 235 3 860 494
Outside shareholders` interest 806 416 305 291
Non-current liabilities 604 371 325 428
Deferred taxation 252 048 87 385
Post-retirement obligations 188 785 167 182
Long-term portion of
interest-bearing borrowings 135 838 28 778
Banking liabilities 27 700 42 085
Current liabilities 8 131 235 5 250 758
Other current liabilities 6 887 622 4 924 842
Current portion of
interest-bearing borrowings 1 243 613 325 916
Total equity and liabilities 15 131 257 9 741 971
Number of shares in issue (000) 311 839 295 821
Net tangible asset value
per share (cents) 1 574 1 186
Statement of changes in shareholders` interest
for the year ended June 30
Restated*
2002 2001
R`000 R`000
Shareholders` interest at
the beginning of the year 3 860 494 3 028 819
Share capital issued 801 309
- capitalisation issue 107 206
- cash issue 623 -
- in terms of the share
incentive scheme 71 103
Share premium arising on
shares issued 436 025 (68 475)
- in terms of the share
incentive scheme 40 067 48 730
- cash issue 557 377 -
- refund of share premium
to shareholders (159 743) (116 981)
- costs (1 676) (224)
Movement in non-distributable
reserves 329 882 10 222
- foreign currency
translation reserve 329 882 8 723
- revaluation of fixed assets - 2 186
- transferred to distributable reserves - (687)
Movement in retained income 962 033 886 619
- income attributable to
shareholders 1 241 249 1 035 466
- dividends and capitalisation
issues (269 008) (146 183)
- secondary tax on companies (10 208) (351)
- transfer from non-distributable
reserve - 687
Shareholders` interest at the
end of the year 5 589 235 3 860 494
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The financial statements have been prepared in accordance with South African
statements of Generally Accepted Accounting Practice and the accounting
policies used are consistant with the prior year other than as set out below.
Change in accounting policies*
In accordance with recently amended South African statements of Generally
Accepted Accounting Practice with regard to depreciation of buildings (AC
135) and employee benefits (AC 116), the Group has changed its policies and
now provides for post-retirement employee benefits, full leave pay and
depreciation of buildings. These changes have resulted in additional charges
to the income statement for the current year totalling R10,5 million (2001:
R10,4 million), net of tax and outside shareholders` interest. Had these
changes in accounting policies not taken place, the headline earnings per
share for the year would have been 439,4 cents per share (2001: 365,4 cents
per share), an increase of 20,3%.
Audit report
The consolidated results for the year have been audited by KPMG Inc and their
unqualified audit report is available for inspection at the Company`s
registered office.
Introduction
Bidvest has delivered strong results. The performance by the Group is
commendable given the backdrop of some of the most turbulent times in recent
history.
Twelve months ago we had no hint that the civilized world was about to be
delivered the horror of September 11. We probably all thought that this was
the ultimate horror of what we would be required to face. However, the
business world was further plagued by a number of high profile events and
scandals which has again severely dented investor confidence.
We all need to remind ourselves that there are countless thousands of people
who, either directly or through their pension funds, have committed their
savings to our care. They have pooled their capital and placed it in our
charge in the belief that we will manage it honestly, diligently and
prudently. They hope for growth in value and an income stream, but more
importantly, they seek fair dealing and face value reporting.
Our strength lies in our diversity. We are able to withstand the storms and
cycles of economies because of the spread of our operations and the
commitment of our people who ensure our success. In today`s markets single
focus businesses are more subject to market negativity than a solid, diverse
group such as Bidvest.
I am convinced that it is not the products and services we provide that make
the Group successful, but the way we provide them - it`s not what we do, but
how we do it. With our focus on operational excellence, our execution is
better than our competitors`, and where it isn`t we don`t rest until it is.
Our emphasis on decentralisation and entrepreneurship ensures that Bidvest is
structured for performance in any economic environment. Our strategy and
leadership has been proven and we have a long history of careful risk taking,
solid execution and attention to detail.
Bidvest has an unequalled position with its breadth and depth of products and
services and an ability to extract value even from mature industries. We have
a tried and tested business model, one that performs. We are financially
strong, ungeared, cash flow positive and showing impressive growth relative
to our peers and competitors. Our people have responded exceptionally to the
challenges allowing us to deliver headline earnings growth of 23,7%. We have
much of which to be proud.
MARKET REVIEW
Economic conditions
Activity in the global economy slowed substantially in 2001 and September 11
further heightened economic uncertainty. Evidence of improved global economic
conditions began to surface towards the end of 2001 and signs of a worldwide
recovery have steadily increased. However, events in the Middle-East further
serve to compound uncertainty.
South Africa has maintained a GDP annual growth rate of just more than 2%
despite the global slowdown and has recorded consecutive positive quarterly
growth rates since the fourth quarter of 1998.
The rapid devaluation of the rand impacted all businesses in South Africa
making imports expensive and increasing working capital requirements.
However, on the positive side the devaluation improved the price
competitiveness of locally manufactured goods and boosted exports and tourism
to South Africa.
Business conditions in South Africa have slowly improved since the first
quarter of our financial year. Crime remains a negative influence on the
social fabric of South African society and government`s inability to act
decisively on such matters as Zimbabwe, HIV/AIDS and black economic
empowerment have contributed to the negative perception of the country held
by investors and international businesses.
These factors should not detract from the all-round performance of the South
African government who should be given credit, especially for monetary and
fiscal discipline. Government and business need to work more closely together
to promote South Africa as an exciting place for foreign investment.
JSE Securities Exchange South Africa
Resource stocks have influenced the performance of the All Share Index on the
JSE particularly since January 2002, but Bidvest performed well relative to
the industrial index, particularly when compared to its peers and
competitors.
Investment community
Sustainable and solid businesses are those that are managed and perform over
the short- and long-term. The investment community`s insistence on evaluating
a company`s quarter-to-quarter performance creates unrealistic pressure on
management. This pressure has, in my opinion, led to the current high profile
corporate and auditing scandals regarding engineered financial results,
business failures and questions raised around corporate credibility. Although
everyone enjoys a feisty one-day international cricket match, business should
more appropriately be compared to a five-day test, with good batsmen slowly
building the innings, depending on the conditions in the field.
Regulatory environment
Doing business in South Africa unfortunately becomes more difficult every
year and the latest amendments to the Labour Relations Act governing mergers
and acquisitions is no exception, adding another layer of red tape.
The Competition Commission continues to have an influence on business, but it
seems of late to be evaluating transactions more commercially, rather than
strictly in terms of the legal parameters, which is positive. Free market
economics should be tempered with anti-monopoly legislation, but not at the
expense of entrepreneurship. Due to the low threshold level, meeting the
resulting bureaucratic requirements of the Competition Commission places
enormous administrative burdens on acquisitive companies such as Bidvest and
adds to the cost of doing business.
The regulatory environment in which we operate seems to promote small and
medium enterprises at the expense of big business. Big business is
responsible for a large percentage of the country`s exports and provides the
fertile ground upon which smaller business can grow and flourish. The
compliance issues become more complex every year and serve primarily to
entrench bureaucratic thinking. Big business should be entrepreneurial, yet
still adhere to international best practices and good corporate governance.
Empowerment
Economic transformation remains fundamental to the future of South Africa and
empowerment is a critical element. However, the requisite criteria to qualify
as an empowerment organisation are subject to different interpretations,
which makes overall compliance impossible and not transparent. We are fully
supportive of and committed to the concept of black economic empowerment and
actively work to empower our staff members and the communities in which we
operate.
The insistence on measuring empowerment only by equity percentages is
complicated and difficult. In Bidvest`s case, our shareholding has no one
controlling party, but is held largely by institutional investors on behalf
of the retirement and life fund industries. The Bidvest directors acknowledge
their responsibility to manage and develop sustainable businesses for the
benefit of all stakeholders.
FINANCIAL REVIEW
In February 2002 we challenged our executives to react to the slowing economy
and they not only met the goals set, but exceeded them.
Revenue grew by 42,6% to R42,0 billion (2001: R29,4 billion) and the
operating margin was maintained at 4,8%. Operating income amounted to R2,013
billion (2001: R1,422 billion), exceeding R2 billion for the first time.
Headline earnings increased by 23,7% to R1,305 billion (2001: R1,055
billion), whilst headline earnings per share increased by 20,6% to 436,2
cents (2001: 361,8 cents). A compound growth rate in earnings per share over
the past eleven years of approximately 29,0% has been achieved. Bidvest plc,
the Group`s 80,8% held offshore subsidiary, contributed 22,9% (2001: 18,6%)
to the Group`s operating income and 20,7% (2001: 18,9%) to headline earnings.
Income attributable to shareholders increased by 19,9% to R1,241 billion
(2001: R1,035 billion).
The cash flow generated by operating activities increased by 77,7% to R2,003
billion (2001: R1,127 billion) resulting in the Group having liquid funds of
R2,745 billion (2001: R1,314 billion) available to finance future activities.
Net capital expenditure on fixed assets increased by 40,2% to R695,1 million
(2001: R496,0 million).
Capital items amounting to R11,5 million have been written off.
In accordance with recently amended South African statements of Generally
Accepted Accounting Practice with regard to depreciation of buildings and
employee benefits, the Group has changed its accounting policies and provides
for depreciation on buildings, leave pay and post-retirement employee
benefits. These changes have resulted in additional charges to the income
statement for the current year totalling R10,5 million (2001: R10,4 million),
net of tax and outside shareholders` interest. Had these changes in
accounting policies not taken place, the headline earnings per share for the
year would have been 439,4 cents per share (2001: 365,4 cents per share), an
increase of 20,3%.
The net tangible asset value per share increased by 32,7% to 1,574 cents
(2001: 1,186 cents) and dividends to shareholders increased by 12,3% to 190,0
cents per share (2001: 169,2 cents per share).
Working capital management deteriorated during the first half of the year but
improved considerably during the last quarter. The increase in Bidvest`s
effective tax rate from 23,3% to 27,6% had the effect of an additional charge
to the income statement of approximately R80 million.
Bidvest is traditionally financially conservative and has always operated
from a position of financial strength. We enjoy the highest local credit
rating issued to an industrial corporate and we have a strong balance sheet,
with financing capacity available for expansion, acquisitions and to take
advantage of local and international opportunities.
STRATEGIC REVIEW
Bidvest has a clear focus and a commitment to build on what we have created.
We have a common, proven business model across all of our closely aligned
businesses and we use our resources and our diversity to create value. We are
a strong, resilient and accountable company with a multi-faceted portfolio of
focused businesses selling leading branded products and services and this
financial strength allows us to capitalise on opportunities that present
themselves through unpredictable economic cycles.
We are acquisitive and opportunistic by nature and will continue to be so. We
have a focused approach to acquisitions, targeting assets, which not only
extend and add value to our range of products and services, but also offer an
above average return on investment.
Organic growth is equally important and we strive for optimal operational
performance, which includes focusing on product and market development,
improved product and service quality and cost containment. Bidvest`s
management is tasked with ensuring that the business strategies of the
decentralised operations remain relevant in the changing business environment
and that future customer demands are proactively anticipated and addressed.
Bidvest achieved organic growth of approximately 23,0% in operating income.
We also intend to migrate our businesses along the integration ladder. We aim
to develop from a product-, service- and asset-centric organisation to one
offering holistic products and services catering to all our customers` needs.
The future holds the promise of new service lines, new geographies and new
clusters of offerings. The future may also produce new businesses as we turn
internal competencies into marketable offerings. The concept of bundling our
products and services and cross-selling the packaged solution across the
Group has enormous potential.
Whilst Bidvest is a dynamic and opportunistic organisation, our core strategy
of investing in distribution, services and trading businesses and operating
on a decentralised and entrepreneurial basis has not changed and we will
continue to deliver shareholder value by using the capacity of our South
African growth engine to develop local operations and drive international
expansion.
Acquisitions
During the year the Group acquired the balance of 68% of the shares of Voltex
Holdings Limited for R218 million, 100% of Paragon Business Communications
Limited for R58 million and on January 3 2002 invested GBP31,5 million in
the London-listed Jacobs Holdings plc (renamed Bidcorp plc). A number of
smaller acquisitions were also made.
OPERATIONAL REVIEW
During the previous financial year, Bidvest simplified its structure into
three umbrella divisions, which has given perspective to the size and scope
of the Group`s operations. Each of these divisions will expand their
businesses into the international marketplace to provide the platform for
future growth. Bidvest is a multi-billion rand business and each of these
divisions has the potential to achieve this scale in their own right.
THE SERVICES DIVISION
The Services Division comprises Bidfreight (incorporating Bidcorp plc),
Bidserv and Rennies Financial Services, three highly focused operations
providing services to niche markets, and all leaders in their field.
Our services business offsets economic cycles by offering long-term revenue
streams and aligns Bidvest to its customers by linking their future success
to our own.
Bidfreight
Bidfreight`s revenue increased by 18,6% and operating income by 24,0% with
especially strong performances from the Terminals division and the Namibian
operations.
Bidfreight saw a significant shift in trade patterns post the World Trade
Centre disaster and the resultant economic slowdown. Import volumes in
respect of both sea and air freight declined swiftly. Exports rose on the
back of a weakened rand and import values increased, which boosted
Bidfreight`s forwarding revenue.
The growth of South Africa`s international trade is expected to continue to
be more rapid than its GDP growth. A greater percentage of South Africa`s
domestic product is traded internationally each year and we expect this trend
to continue.
Renfreight was incorporated into Safcor Panalpina during the first quarter of
2002 with minimal disruption to their customers. Benefits arising from the
merger have started to flow through.
The separation of Portnet into SA Port Operations and the National Port
Authority is almost complete and all indications are that the start of the
Port concessioning process is imminent. Bidfreight Terminals is well
positioned to benefit from the concessioning process.
Similarly, Bidfreight has a close relationship with Spoornet and is working
closely with them to facilitate the shift in cargoes back to the rail system.
The operations that trade in other African countries have, with the exception
of Namibia, been adversely affected by the economic decline in these
countries. The businesses have been focused on movement of commodities into
and out of the territories. The Namibian operations, which are reliant on the
fishing industry, had an excellent year with higher dollar prices being
obtained for the fish at the same time as a weakening exchange rate.
Bidcorp plc
Following the acquisition of Bidcorp plc, a strategic review of the business
activities was undertaken and a chief executive, seconded from Bidfreight
Terminals, was appointed. The operations were reorganised into three focused
operating divisions: Shipping and Ports, Automotive Services and Property and
Outsourced Services.
These actions are already starting to show results as reflected by Bidcorp`s
return to profitability in its interim results for the six-month period to
June 30 2002.
All business units have been stabilised in the period and the shipping
division is well placed to benefit from the announced closure of a major
competitor`s services on the Zeebrugge route.
Bidserv
Bidserv`s revenue increased by 29,5% and operating income of
R134,3 million reflects an increase of 27,1%.
The overall trend to outsourcing in South Africa continues to gather
momentum. All the divisions within Bidserv have taken advantage of this
trend. Industry specific service concepts have been developed, which have
been well received by the market. Bidserv Integrated Service Solutions, has
been successful in selling the full range of Bidserv`s services to single
clients.
The businesses of the Magnum Group were acquired with effect from
July 1 2002 and integrated with Shield Security. The combined operation is
now the third largest guarding business in the country.
Steiner Hygiene performed well and developed various new products to enhance
its range. Customer service levels were improved and a number of new depots
were opened.
The Prestige Group continued to grow well and improved its operating margin
through the use of superior equipment and advanced cleaning techniques,
coupled with efficient and highly trained personnel.
Although margins are low in the laundry industry, this division saw a
significant improvement in its operating performance through improved
efficiencies in its modern factory.
Rennies Financial Services
Rennies Financial Services` revenue increased by 15,1% and operating income
of R109,7 million reflects an increase of 23,3%.
The division increased its contribution and the value of bookings and foreign
exchange dealings was just under R16 billion.
September 11 and the dramatic depreciation in the rand negatively affected
international corporate travel, which had a knock-on effect on foreign
exchange sales. However, the combination of the cheaper rand, fears of east-
west travel and active marketing by SA Tourism all contributed to South
Africa`s attractiveness as a safe and affordable destination for foreign
tourists, which had a positive effect on all the division`s businesses.
Bidvest sold a 25% stake in Rennies Travel to Women`s Development Business
Investment Holdings at the beginning of the year, a move that has been
positively accepted by all stakeholders.
Rennies Bank, whose primary focus is in foreign exchange and related
activities, is now the leading seller of travellers` cheques and foreign
currency bank notes in South Africa and increased turnover by 75% over the
prior year. Rennies Bank has an A2 credit rating from CA-ratings with a
capital adequacy ratio of 62%.
THE FOODSERVICE PRODUCTS DIVISION
The Foodservice Products Division comprises Bidvest plc, Caterplus and
Combined Foods, which are focused on the supply and distribution of
foodservice products to the leisure, hospitality and catering industries.
There is a continuing and sustained lifestyle trend where single parent and
double income families are more pressured for time and are increasingly
spending money on meals away from home.
Bidvest plc
Bidvest plc`s revenue increased by 67,1% and operating income of
R460,9 million reflects an increase of 73,8%.
United Kingdom
3663 First for Foodservice had an extremely successful year, with revenue up
17% and operating income up 25% in sterling, in a market generally regarded
as flat.
The most significant gain was recorded by Multi-Temperature, the largest
division, with good growth from the Frozen division. These trading units
achieved sales growth in both the independent and national customer sectors.
Further buying improvements offset pressure on costs leading to increased
operating margins.
The performance of the Logistics division continues to improve. Central
Distribution achieved efficiencies in costs, which combined with new accounts
brought on stream in the latter part of the year, enhanced profitability.
Australasia
The results of Bidvest First for Foodservice in Australia reflect organic
growth as the year was spent on consolidation and the integration of the John
Lewis Foodservice business into the existing operations and infrastructure.
The trading environment in Australasia remains relatively stable and Bidvest
Australasia continues to entrench itself as the leading foodservice
distributor in Australia and New Zealand.
The unsuccessful bid for Brake Bros plc was disappointing. However, Bidvest
plc, with a strong and financially stable base, will continue to grow both
organically and by acquisition, consolidating its position as a market leader
to become a truly international player.
Caterplus
Caterplus` revenue increased by 21,5% and operating income of R132,5 million
reflects an increase of 24,9%.
The emphasis this year has been on gaining market share through aggressive
trading, whilst maintaining strict controls on assets and overhead expenses.
The results were most pleasing.
The Catering Supplies division acquired M & M Quality Choice, located in
Johannesburg, with a small branch in Nelspruit, in December 2001 and their
results have been included for the second half of the year.
The Frozen Foods division performed very well in a market that remained
highly competitive with margins under continuous pressure.
The depreciation of the rand affected the Speciality division most
significantly and sales volumes declined as a result of the higher prices
whilst rand sales increased. Various new product ranges such as Ferrero
Rocher and Pez were acquired and a number of new products were added to the
Goldcrest range.
The benefits of the previous year`s restructuring at Vulcan-CAARS improved
the profitability of the business.
Combined Foods
Combined Foods` revenue increased by 11,3% and operating income of R79,6
million reflects an increase of 16,4%.
The baking industry is in a state of change and is characterised by strong
competition. Chipkins has focused on improving back office systems, reducing
costs and greatly improving customer service levels.
Despite increases in the price of red meat Crown National achieved growth in
market share and made inroads into certain non-meat market segments.
NCP Yeast serves the home and industrial baking and brewing industries, which
experienced mixed growth, increasing its customer base by utilising Chipkins`
distribution network.
THE COMMERCIAL PRODUCTS DIVISION
The Commercial Products Division comprises Bidoffice, Bidpac and Voltex,
which are focused on the manufacture, trading and distribution of commercial
products.
Bidoffice
Bidoffice`s revenue increased by 25,5% and operating income of R313,7 million
reflects an increase of 42,8%.
Kolok increased revenue by 88% as a result of an aggressive marketing and
sales campaign and managed its assets superbly to generate exceptional
returns and significant cash flows.
Waltons performed strongly with a marked turnaround in the profitability of
the Gauteng region. The successful formation of the `direct stores concept`
was extended through additional store roll-outs and significant progress was
made in e-procurement. Waltons is looking to brand more of its own products
as a hedge against further devaluation in the rand.
Lithotech produced outstanding results through effective management of assets
resulting in substantial cash generation and improved return on funds
employed. The acquisition of Paragon Business Communications Limited and its
merger with Lithotech created the opportunity for a major consolidation of
the industry. Their distribution channels were integrated and certain
production units combined. The mature products are focused on low cost
production achieved through better economies of scale, whilst a range of new-
age electronic products complements the product offering.
Bidpac
Bidpac`s revenue increased by 9,1% and operating income of R84,1 million
reflects an increase of 20,5%.
Afcom-GE Hudson and Buffalo Executape produced excellent results, with
improved margins achieved through enhanced manufacturing efficiencies and
productivity. During the year a strategic decision was taken to increase the
businesses` manufacturing capacity, to produce product previously imported,
which created a competitive edge in the face of a depreciating rand.
Silveray delivered good profit growth and increased market share in a growing
market through focused sales programmes of its Croxley range of products.
In the latter part of the year, Silveray embarked on an ambitious export
drive into the United Kingdom and has secured some lucrative orders. This
initiative will be continued into 2003.
Voltex
Voltex achieved revenue of R1,362 billion and operating income of
R89,8 million for the nine-month period since acquisition.
Voltex continues its policy of cost cutting initiatives with unprofitable
branches being closed, merged or relocated. Senior management is involved in
a thorough review of expenses throughout the business and continues to
monitor pricing on an ongoing basis.
Voltex embarked on a drive to increase its participation in the manufacturing
sector and is attempting to increase its market share in the electrical
maintenance and wholesaling industries as well as the mining sector whilst
consolidating its leading position in the contracting industry.
BID-IT
mymarket.com
mymarket.com dedicated most of the year to developing the infrastructural and
software capabilities required to accommodate the needs of trading partners,
which was largely completed by March 2002. The cost of this development was
R25,3 million and is now being depreciated.
Vigorous `proof of concept` pilot projects were successfully completed. Two
significant national customers of the Group are currently trading online.
mymarket.com has embarked on an aggressive customer acquisition strategy.
The site built for 3663 First for Foodservice in the United Kingdom went live
at the end of May 2002. A number of customers have already been signed up and
3663 is implementing the system into these customers` businesses.
I-Fusion
The past year proved to be particularly challenging for companies in the IT
industry. Further restructuring has resulted in I-Fusion`s focus being
narrowed considerably to provide a world-class network and networking
solutions to its customers.
Bidvest acquired the 22,7% minority shareholding in I-Fusion. I-Fusion owns
technologically advanced equipment and a state-of-the-art network, delivering
a managed service solution to Bidvest and the market at large. The Group
remains committed to maximising I-Fusion`s capabilities due to the strategic
nature of the operation.
CORPORATE SERVICES
Bidvest`s relatively small corporate office provides the Group`s strategic
direction, financial management and corporate finance services. The corporate
centre adds value through the identification and evaluation of acquisition
opportunities and the implementation of Bidvest`s decentralised,
entrepreneurial business model.
As overall winner of the 2002 Five-Year Growth Award, the Group is proud to
have been recognised and ranked first amongst the companies that are making a
significant contribution to growing South Africa`s economy.
During April 2002 Bidvest raised R558 million through the issue of new shares
to institutional shareholders in anticipation of the participation in the
Brake Bros bidding process. Should acquisition opportunities arise, the Group
will not be averse to increasing its gearing to a debt-to-equity ratio of up
to 40%, which will have the effect of reducing Bidvest`s weighted cost of
capital and improving shareholder returns.
Bidvest intends to increase its international shareholder base. As the Group
globalises, so its shareholders should reflect the geographical spread of its
operations. The fundamental long-term goal of delivering shareholder value
requires further international expansion, which will need to be funded from
international resources.
A comprehensive open market valuation of the South African property portfolio
has been completed and the results are currently being evaluated. Some non-
core properties have been disposed of and new property developments to house
Group companies have commenced.
CORPORATE CITIZENSHIP
Bidvest intends, where applicable, to fulfil the requirements laid down in
King II and to implement triple bottom line reporting.
Empowerment initiatives
Empowerment should not be determined by percentages, but should be measured
on the rand value of projects and wealth created, educational initiatives and
skills development.
During the year various new empowerment joint ventures were set up, which
include two Cecil Nurse assembly plants in Gauteng and Port Elizabeth, Ubuhle
be Dauphin in Mpumalanga, SheNixsa Travel in East London, Tuka Travel and
Twafika in Namibia and Vuka Catering Supplies in Gauteng.
25% of Rennies Travel was sold to Women`s Development Business Investment
Holdings, a move that has been positively accepted by all stakeholders.
People
Bidvest`s culture has been embraced in our operations throughout the world.
Employees work in entrepreneurial environments where being the best and
paying attention to detail is imperative. We empower our employees with the
training, the authority and the responsibility and they respond by supplying
the results. Teamwork is critical and reinforced at every level of the
organisation.
I am extremely proud of Bidvest`s management. They succeed because our policy
of decentralisation means that they are in control of their own destinies and
they have the requisite strategic knowledge, which they use to choose the
appropriate growth paths.
Development
Training and career development are important elements of our business
philosophy and success. As the marketplace becomes more challenging, it takes
great leadership to guide a successful business. We put a high priority on
developing our next generation of business leaders and continue to explore
new ways to foster a progressive workplace that attracts and inspires bright,
passionate people.
A management development initiative will be launched in October 2002 and is
the first phase of what we hope will be a learning academy for staff at all
levels of the organisation.
HIV/AIDS
The Group has a responsibility to ensure that the rights of employees with
life threatening diseases are consistent with the rights of other employees,
and to provide a safe and productive working environment for all.
Bidvest`s philosophy of decentralisation applies equally to the handling of
HIV/ AIDS and each business unit monitors the magnitude of the problem. The
Group encourages training and education programmes, voluntary anonymous
testing and crisis planning.
We anticipate there will be a continued impact, although small at this stage,
on productivity and costs through increased demands on training and
recruitment resources, particularly in Bidserv, which is our largest
employer.
Social responsibility
The managers and staff of our operations understand which charitable causes
are most important in their areas and they determine how to support the
organisations that are making a difference in the lives of our customers and
their communities.
Good corporate citizenship is an integral way of life at Bidvest and through
the Chairman`s Fund, and on an ad hoc basis throughout the Group, Bidvest
will continue to support worthy programmes through financial grants and in-
kind donations.
POST-BALANCE SHEET EVENT
Servest Holdings Limited
Post the year-end, an offer was made to Servest by a consortium comprising a
private equity fund and the management of Servest to purchase the underlying
businesses, subject to approval by shareholders in general meeting. The
performance of Servest to date has been disappointing. As a 28% shareholder
and a potential offeror, Bidvest has not yet decided on its course of action,
however, the book value of our investment is reflected at 89 cents per
Servest share.
PROSPECTS
Bidvest is about the future, about where we are going, not where we have
been.
We have been through a period of consolidation after a number of large
acquisitions, but are now ready for the next growth phase and are proactively
sourcing potential transactions. Opportunities do not always a
