Material issues and risks Cooperation with Ministry of Fisheries key Limited skills pool Fishing business major contributor to regional food security Condition of ports infrastructure affects volumes at freight and logistics business while road repair impacts distribution businesses Fuel prices material in view of long distances between Namibia’s commercial hubs High injury rate concerning and plans in place to address

Material issues and business risks

Fishing operations depend on the sustainable biomass resource in Namibian waters and fishing quotas allocated by government.

Ongoing management of Namibia’s fish stocks (in strong recovery for several years) and cooperation with the Ministry of Fisheries are key.

Namibia has a limited skills pool. Attracting and retaining skilled people and retaining high potential staff are strategic imperatives.

The divisional balance of the business receives ongoing attention. The division is highly diversified, but traditionally fishing has contributed more than 80% of profit.

The division’s fishing business is a major contributor to regional (and west African) food security. Its horse-mackerel is the daily source of affordable protein for 2,5 million Africans.

Exchange rates influence results as the fishing industry trades in US dollars.

State infrastructure investment or lack of it has knock-on effects. The condition of ports infrastructure can affect volumes at the freight and logistics business while road repair is a key factor for distribution businesses.

Fuel prices are material in view of the long distance between Namibia’s commercial hubs.

Legislative trends present opportunities as the division was ‘BEE-ready’ ahead of its 2009 listing on the Namibian Stock Exchange while operating companies apply South African standards that often anticipate local legislation.

Namibia is an extremely water-stressed country and ongoing efforts are made to keep water consumption to a minimum.

There is rising awareness and management of HIV/Aids among employees.

Performance and trading conditions

Majority of divisional targets were met or exceeded – an extremely pleasing performance in a slowing economy.

Divisional performance was driven by high catch rates at BidFish, efficiencies, market-share gains by some commercial businesses and expansion on the back of the December acquisition of Taeuber & Corssen (T&C).

Revenue rose by 39,3% to N$3,0 billion (2011: N$2,1 billion) while trading profit increased by 18,1% to N$637,7 million (2011: N$540,2 million).

Return on funds employed amounted to 75,2% (2011: 84,1%). Margins decreased to 21,5% (2011: 25,3%) as a result of the acquisition of T&C, a lower-margin business.

Job numbers increased to 3 110 (2011: 2 700).

The N$188,7 million acquisition of T&C, the fast moving consumer goods (FMCG) distributor made a positive contribution.

Capital expenditure rose 65,8% to N$125,0 million (2011: N$75,4 million). Capital expenditure includes the purchase of the fishing vessel Liafjell for N$41,8 million and construction of Budget Rent a Car’s N$9,2 million turnaround facility at Windhoek airport.

Highs and lows

BidFish again performed strongly, buoyed by large catches and firm world prices. The fishing fleet expanded to eight vessels with the purchase of the Liafjell from Norway which augmented the sardine catch.

Namsov has drawn optimum benefit from the recovery of the biomass and the rising total allowable catch (TAC) sanctioned by the Ministry of Fisheries.

Management teams at BidCom were strengthened. A new managing director and financial director were appointed at Waltons and a new general manager and financial manager at Voltex.

Three new sub-divisions were created within BidCom: Food and Distribution (comprising T&C and Caterplus), Freight and Logistics (Manica) and Commercial and Industrial (Waltons, Cecil Nurse Business Furniture, Kolok, Voltex, Minolta, Budget Rent a Car, Rennies and Bidvest Namibia Steiner).

Accountable management teams maintain a strong focus on customers and marketplace opportunities and strong staff morale underpinned improved BidCom performance.

The expected benefits of the T&C acquisition were realised with strong logistics capabilities and a nationwide network of warehouses and branches covering Windhoek, Katima Mulilo, Grootfontein, Otjiwarongo, Walvis Bay, Keetmanshoop and Ongwediva.

The transaction’s major benefit is strategic as bulking up in the food and distribution sector brings added balance to Bidvest Namibia.

Bidvest Namibia Steiner was launched with an initial focus on Windhoek and Swakopmund. No comparable business provides corporate hygiene services. Market education is necessary, but the model has proved itself in South Africa and significant potential can be exploited.

Voltex moved to new premises in Windhoek.

The return to profitability of the Pesca Fresca joint-venture in Angola was encouraging.

An initially slow response by the Caterplus/Blue Marine foodservice business to competitor attack from new market entrants was disappointing. Remedial action has since been taken.

Budget Rent a Car also performed below expectation.

Unfortunately we regret to report one fatality at Bidfish.

A sustainable business

Future performance is dependent on key sustainability issues such as biomass management, skills development and fuel/energy efficiency.

Bidvest Namibia partners with the Ministry of Fisheries while implementation of sustainable fishing practices and by-catch reduction measures go beyond legal compliance.

BidFish vessels collect data for the ministry. Scientists and researchers are regularly hosted on board the vessels. Senior executives are regularly consulted by policymakers on resource levels.

Waste materials are disposed of responsibly. Business units have appointed sustainability champions who help drive recycling and collection initiatives focused on paper, plastics and ink cartridges.

Sustainability reports are now tabled at the board risk committee.

Energy-efficient lighting systems and environmentally friendly office automation products are marketed by Voltex and Minolco.

Stakeholders

Stakeholders include our customers, suppliers, employees, communities, shareholders and government. Close liaison is maintained with the Ministry of Fisheries as policy on TAC and fishing quotas is material to our business. Divisional executives are represented on fishing industry committees that advise government and are active at forums set up by the Chamber of Commerce and Industry.

Various forms of stakeholder communication are used, including SENS announcements and half-yearly presentations to shareholders, analysts and the business media, press releases, profiles and articles in industry and national directories, newsletters to staff and customers and one-on-one interaction with community groups.

The work of our empowerment partners at Ovanhu Investments and distributions to NGOs through various businesses ensure constant community engagement.

Training investment increased to N$6,4 million (2011: N$2,9 million). Our N$2 million training centre at the Manica site in Walvis Bay was completed in the first quarter and has begun work.

Training of naval officers for our expanding fleet is a priority and 15 candidate officers have been sent to Moscow to train as navigation officers and marine engineers.

Namibia is moving toward black economic empowerment, with strong relationships with our empowerment partners at Ovanhu Investments (a 15% shareholder) and a commitment to skills transfer, preferential procurement, community involvement, enterprise development and employment equity.

A Namibian Preferential Procurement Council was recently established. Rennies Travel has received a certificate from the council confirming a satisfactory BEE contribution. Manica has submitted its application.

Development of black Africans into senior positions remains a challenge. However, Africans were recently appointed to two leadership roles. One is the new commercial director of BidCom; the second is CEO of Namsov.

The divisional staff resignation rate has increased to 2,5% over the last three years. Reasons for this increase were salary related and changes in management structure. The situation has again normalised.

Corporate social investment continues to rise and in 2012 was N$8,8 million. The NAMSOV Community Trust focuses on grassroots needs and education.

Our decentalised structure encourages local interventions and voluntary effort by staff members. A recent initiative is the Pandula Trust where Manica employees personally contribute to projects where urgent help is required.

Education and youth unemployment are important societal issues in Namibia. Many businesses provide bursaries to disadvantaged youth. Staff support local efforts to build classrooms and our stationery business provides school materials.

IT progression

Manica is preparing to roll out track-and-trace systems at its freight operations while IT system upgrades are under way at Kolok and Caterplus. Waltons is investigating a new system. Budget Rent a Car and Cecil Nurse are directly linked to their sister companies in South Africa.

Future

BidFish may face future challenges as government wishes to encourage new, community-based entrants to the fishing industry. These small businesses benefit from rising quota allocations, previously earmarked for BidFish.

Our fishing business has already created a platform – the Trachurus joint-venture with smaller right-holders – to address this challenge. Namsov provides resources and administrative and managerial support to smaller partners, enabling them to fully utilise their quota and achieve sustainable commercial returns. Its product is marketed by Namsov.

Competition from large international fleets cannot be excluded as other fishing grounds have been depleted. International players may target the now healthy Namibian resource.

These players are detrimental to the local industry by not promoting any local employment nor allowing the Namibian Resource Authorities to increase its tax base.

BidFish’s fleet is positioned to respond strongly. It has been expanded to eight vessels. A ninth, the Diolinda, is being built at Saldanha and is expected to enter service in March.

A bigger contribution from BidCom’s new sub-divisions is anticipated. Bidvest Namibia Steiner has potential for strong growth. The food and distribution business takes a broad FMCG basket to customers.

The opening of Budget Rent a Car’s new Windhoek turnaround centre creates a platform for renewed growth. Cecil Nurse benefited from an increase in project work.

Continuing development of Namibia’s offshore gas and oil deposits are positive for the long-term future of Manica and Rennies Travel as demand grows for shore-based logistics support. One short-term challenge relates to the lack of rig repair business at Walvis Bay. Port infrastructure is ageing. Rig repair is increasingly channelled to Cape Town, Las Palmas and Lobito.

The division retains a strong balance sheet and remains alert for further acquisitions.