2015-08-27Staff Report 2 Windhoek Bidvest Namibia is not overburdened with re-designing its business model to be less dependent on fishing – a strange stance considering its recent financial results are heavily peppered with concerns about the reduction in revenue from its fishing division, because of the government slashing the company's fishing quota. Group chief executive officer Sebby Kankondi, and executive for its fishing division Jan Arnold, remain optimistic about the future of Bidvest as a business that does well at unlocking potential through acquisitions, while allowing autonomy to subsidiaries in the group to manage themselves in a manner that allows Bidvest to collect and declare dividends to shareholders. For the financial year ended June 2015 though, the group revenues at N$3.5 billion came in 4.6 percent short of revenues in the previous financial year, while the trading profit of N$415.6 million is also down 17.1 percent from the previous year. Headline earnings are at N$218 777 million, 11 percent less than the previous financial year. Dividends have been slashed by 11.1 percent to 56 cents per share. The tumble in earnings is largely owed to a lower horse mackerel quota, with the fisheries ministry having slashed the group's annual allocation. For Bidvest it is a bitter pill to swallow, seeing that its fishing division is the main contributor to trading profit, contributing 83 percent to overall profit for the financial year under review. However, the group would not speak of specific business re-generation or of strategies to reduce exposure to the fishing sector. Not least because of their confidence in the legal recourse – Bidvest has won the first legal court challenge over the reduction of fishing quotas – but also because of the future acquisitions and newly approved shore processing project. Bidvest says it has thus far spent about N$15m in market research and feasibility studies for setting up a N$600 million fish processing plant and cannery onshore for handling horse mackerel. “We would be successful in reducing our dependency on the fishing quota and rely on third party quotas,” says Arnold of his hope that the processing capacity of the plant would be sufficient to reduce reliance on resource allocation from the ministry. Arnold, forever an optimistic fisherman, is also hoping that the project will allay tensions between the fisheries minister and Bidvest. Kankondi is however adamant that the group will not define its future survival on the percentage of revenue from fish but rather on how it will successfully transform its business portfolio going forward. The problem though is that Bidvest Namibia’s troubles are not only limited to fishing quotas. Its other major subsidiary segments have not done well, with the exception of the industrial and commercial products and service segment, which delivered 21 percent improvement. The food and distribution segment did not do well – actually on paper it did very badly as it recorded a 61.1 percent decrease in profit. The reason is because Namibia Poultry Industry (NIP) terminated its contract with the group’s T&C cold storage distributor. The termination of that contract made a dent of N$149 million in the group’s financials. “Lack of product availability, drop in margins, and a general cooling down of consumer spending together with insufficient internal controls and procedures have resulted in unsatisfactory results for the current financial year,” Kankondi says of the bad performance in the food and distribution segment. Just like with the fight for fish, Bidvest also took NIP to court over the termination of the contract, and won the first round. NIP has appealed the judgement – and Bidvest’s T&C is still not allowed to distribute frozen chicken on behalf of NIP, the country’s largest supplier of frozen chicken. The group’s freight and logistic segment did also not do well because of a “lack of projects.” Its fishing operations in Angola did not go well in the year but the group says all has been sorted out. Institutional shareholders in the NSX-listed Bidvest Namibia include the Government Institutions Pension Fund (GIPF), which owns 10 percent shareholding on behalf of government civil servants’ pension funds. Other private pension and provident funds also own about 10 percent, while the public individual shareholders own 2 percent, with the rest owned by companies and directors, while Bidvest Group owns 52 percent. 2015-08-27Staff Report 2
