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| Review of operations – Bidvest Asia Pacific continued |
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| BIDVEST NEW ZEALAND |
| Trading profit in local currency grew by 23,3% while revenue increased by 19,3%, a result of both acquisition and organic growth. This represents a highly satisfactory performance in a challenging market. |
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| Macro factors |
Low GDP growth of less than 2,0%, the highest interest rates in the developed world (8,0%) and an extremely strong currency are the principal features of the domestic economy. Labour costs remain high and labour shortages continue as the unemployment rate runs at close to 3,0% (a record low).
Inflation is controlled at about 2,5% and consumers have benefited from competitively priced imports, courtesy of the strong New Zealand dollar. Import activity, however, has hit some local industries hard. The country remains a major exporter of agricultural products and the farming sector has looked to capitalise on high world prices for dairy products. The strong local currency diluted some of these gains, however.
Interest rates were driven higher by the authorities in a failed attempt to cool the overheated housing market. The net effect has been to dent business confidence and keep economic growth in check. |
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| Industry factors |
| The strong currency has also inhibited the growth of tourism, with knock-on effects among one of our major customers – the hospitality industry. In addition, we are affected by high wage costs and the rising fuel bill. New Zealand’s petrol and diesel prices are totally unregulated. Any adjustment in world prices is immediately felt by distribution businesses. The effects were mildly positive in the first half of the year when the oil price dropped, but in the second half the pressure was constant. |
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| Business drivers |
We benefited from the full-year effect of the new structure. Crean, our core foodservice business, is now complemented by a fast-growing fresh produce division supported by a focused logistics operation.
Several acquisitions have extended our national footprint while contributing to growth.
Staff continuity and stability have become critical factors in management planning. We retained all key staff during the year. The contribution of dedicated, experienced and enthusiastic managers enabled us to maintain focus while pursuing a vigorous growth strategy. Challenges to the further growth of our business are similar to those faced by our Australian counterparts. |
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| Investment and acquisitions |
Fresh produce businesses have been acquired in Hamilton and Wellington on the North Island and Christchurch on the South Island. They join the existing network to form a group of eight fresh wholesaling businesses throughout New Zealand.
The latest acquisitions move the fresh business to the next level – the development of a truly national player in the fresh produce sector. The concept is unprecedented in New Zealand where local operations predominate.
Complementary, nationally based foodservice and fresh businesses create opportunities to offer customers one-stop solutions and achieve continued growth.
The creation of the Bidvest Logistics division – announced last year – proceeded as planned and its new Auckland distribution centre was completed in October 2006.
The concept of logistics support from a focused operation rapidly proved itself and has led to the further planning of logistics distribution centres in other key areas of the country. |
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Work is nearing completion on a new distribution centre in Wellington at an investment of NZ$6,5 million. It should be fully operational by August. In addition, construction has begun on another centre at Palmerston North (an investment of approximately NZ$5 million). Work will be completed by the beginning of 2008. |
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