Macro-environment
Economic conditions remained challenging
in all geographies, though signs of recovery
emerged as the year progressed.
The interest rate climate was positive at
Group level, though adverse effects were
felt by Bidvest businesses that provide
funding to clients as part of their business
model. Our banking and foreign exchange
business was also adversely affected.
The South African Reserve Bank cut rates,
dropping its repurchase rate by 5,5% in all.
By March 2010, the repo rate stood at
6,5%, the lowest level since 1981. Rates
were also low in many international markets
as government stimulated economies.
A resilient rand versus the Group's major
trading currencies, sterling and euro, had a
material impact on the translation of our
offshore earnings. The net effect was to
reduce headline earnings per share by
4,2%. The Australian dollar versus the rand
reflected a stable environment.
Inflation was generally muted in all markets
in which Bidvest is active, though some
pockets of higher than expected inflation
persisted in parts of Asia. South African
inflation was higher than the targeted range
of 3% to 6% at the beginning of the period.
The rate declined steadily, however, and
was well within range as our financial year
came to an end.
A measure of inflation is normally beneficial
for our trading businesses. Steady declines
and consequent deflation in some sectors
were negative for many of Bidvest's South
African businesses.
We continue our policy of taking forward
cover on trade-related transactions and our
risk management policy of matching our
foreign assets against our foreign liabilities
in their local currencies was maintained.
This policy was reinforced with the raising of long-term Czech koruna debt for the
Nowaco acquisition.
Trading environment
Trading performance was mixed as
businesses in various geographies had to
contend with different rates of recovery by
their national economies. Some felt the
effects of continuing fiscal stimulation; some
were impacted by austerity measures.
Finance is still readily available to creditworthy
customers, though nominal rates
are somewhat higher. Most businesses
faced no exceptional micro challenges
but certain restructuring was required.
Everyday issues predominated – trading
profitably, managing credit and inventory
and collecting debts. Generally, Bidvest
businesses did well in this "new" normal
environment.
Asia Pacific emerged from the financial
crisis quicker than most economies,
which assisted their good performance.
In the UK, recovery was weak. The major
challenge has been to manage the asset
base aggressively to maximise cash
generation while engaging in strategic
investment to create a platform for
tomorrow's growth.
The Eurozone downturn impacted the
Benelux countries. Our business in the
Netherlands did not escape. The Belgium
business was not hit as severely due to its
particular market exposure. The depressed
business climate also affected eastern
Europe, though areas of opportunity exist.
South Africa's economic recovery, though
better of late, was disappointing. At the
beginning of the period the expectation
was that recession would be brief and
recovery robust. Recovery has been slow
and recessionary impacts more severe;
especially in key sectors like construction
and retail. |
Bidvest group
