Acquisition activity

During the year there was an apparent lack of acquisition activity. This was not because of any deliberate pause; it could better be described as a function of pipeline effects.

We are constantly alert for acquisition opportunities in various geographies. Not all opportunities are pursued to the point of in-depth investigation, and not all investigations result in formal negotiations.

We take a conservative approach to deal-making. “Conservative” sometimes means we take our time. Although no transactions were concluded during the year, we did not neglect the search for value-enhancing acquisitions.

After our year-end, we concluded an agreement to acquire the leading foodservice player Nowaco and Farutex in the Czech Republic, Slovakia and Poland, from JPMorgan Partners and Bancroft Private Equity for an enterprise value of EUR250 million.

Earlier in the year, we identified central and eastern Europe as a strategic market with significant growth opportunities in the foodservice industry. The Nowaco and Farutex acquisition complements our highly successful international foodservice businesses and adds impetus to the internationalisation of our foodservice interests.

The transaction presented us with a unique opportunity to acquire the market-leading central and eastern European foodservice business, with sufficient scale to provide potential customer and purchasing synergies.

The acquisition is contingent on the approval of the European Union competition authorities.

Regional review

Recession or falling growth impacted all regions in which we are active.

Asia Pacific

Asia Pacific remains a growth engine, but plummeting confidence and the slowdown in world trade had immediate effects in a market such as Singapore. Our businesses were affected, but the resilience of our Australian and New Zealand operations ensured satisfactory results.

The global crisis threw an interesting sidelight on the changing status of India and China. It is evident they will play an increasingly important role in the world economy. Bidvest is committed to the region and is engaged in incremental growth. We are mindful of significant cultural differences and that we are still moving along the learning curve. We have planted the seeds and will watch them grow.

United Kingdom

Our UK businesses were impacted by three consecutive quarters of economic contraction. The British automotive industry was severely affected, prompting a restructure at Ontime Automotive. Two sustainable businesses were retained and strengthened. The others were closed.

3663 First for Foodservice took prompt action to reduce costs and rightsize the business. By year-end the first benefits of rationalisation were evident.

Continental Europe

The Eurozone also faces the challenge of falling growth, but the Belgian and Dutch markets have not been as badly hit as some. Growth opportunities may arise in these areas. Further to the east, “Emerging Europe” also faces recession, though some of these markets are positioned to benefit from 20 years of structural reform. The region’s potential cannot be ignored.

Zimbabwe

The global crisis affected Africa less severely than most. The inauguration of an inclusive government in Zimbabwe is a hopeful sign.

Namibia

Our Namibian assets have been successfully consolidated ahead of a listing. The new division put in a pleasing performance. A key factor was the high level of motivation among local teams as they prepared for “independence”.

Work ahead of the Namibian listing was also remarkable for the “export effort” by Bidvest and Dinatla as we ensured the Group’s successful empowerment model was made ready for the new owners.

South Africa

In South Africa, Bid Auto has been under intense pressure for more than a year, prompting an energetic response to reduce costs and align the business with a much-changed market. In recent months, significant improvement has been seen. Bid Industrial and Commercial has been impacted by price deflation, but corrective action is under way.

Bidserv did well in the first half, but the challenging business environment put a brake on performance. Bidfreight, our food businesses and Bidpaper Plus put in a solid performance despite difficult trading conditions.

Appreciation

In business, like sport, you don’t know how strong a team is until you see it perform under pressure. Last year our managers and people faced unprecedented challenges and proved their ability to deliver creditable results. I thank you all.

I also benefit from the counsel and guidance of a strong boardroom team. In a difficult year, I thank all my board colleagues for their wisdom and support.

Future

Business conditions will remain challenging, but I believe we are through the worst. Statistically we may find that the absolute bottom is just ahead, rather than just behind us. However, on an emotional level the average family confronted the low point some months ago and is shaking off the shock-effect of the recession.

A gradual recovery is in sight, though in South Africa’s case further interest rate cuts may be needed. However, the “World Cup effect” should prove helpful in the second half. I also anticipate recovery in Asia Pacific, mainland Europe and the UK.

Our refocused and restructured businesses are well placed to take advantage of economic improvement and industry opportunities as some weaker competitors cut back, consolidate or close. This improvement will over time provide the fertile soil for Bidvest to look at opportunities to unlock shareholder value.

Though a return to trading profit growth will be sought, we cannot simply expect a return to business as usual. New avenues will have to be explored and perhaps we will have to think differently about our business.

Last year, thanks to a shared organisational culture, our businesses intuitively adopted similar recession-fighting strategies, becoming partners of their customers in a search for joint solutions.

Serving shared customers to common quality standards creates new opportunities for efficiency and growth. We can synergise without having to centralise. Collaboration without integration may be a new way to optimise opportunities in a new commercial landscape.

By working together as never before Bidvest will achieve its five-year goal of doubling our size by 2010. We can then go on to set new performance benchmarks as we pursue our long-term vision of continually enhanced shareholder value.

Brian Joffe
Chief executive