New initiatives

The major focus was on efficiency improvements.

Deli XL in both the Netherlands and Belgium continued the focus on electronic order capture and website utilisation. More than 60% of all orders are now processed by the Deli XL websites. Significant benefits are derived by data-mining to support the sales and customer service effort. Steps are being taken to share best industry practice within the Dutch and Belgian electronic ordering system with the UK.

The use of “voice-picking” technology was expanded to more warehouses to improve productivity. The system is now being introduced to the larger sites in the Netherlands.

Within a more streamlined 3663, management and sales now sit closer together and efficiency gains were achieved. This included the use of new technology, called i-Snapshot to ensure the sales force focuses on areas of maximum opportunity. This mobile phone technology cuts down on the paperwork that has to be completed by sales representatives after a sales call. The system also monitors activity and productivity. Incoming data (encrypted by the mobile phone-user) is aggregated and used to drive ongoing customer service improvements.

Horeca has continued to add new brands to its product range, including the Sweet Street frozen deserts range from the US.

Risks to the business Insolvencies – particularly in the UK – have risen dramatically. The problem of unexpected business failure has become so severe in the UK that it is becoming uneconomic to insure against this risk. 3663 therefore decided against renewal of its bad-risk insurance programme in its wholesale division. Management of credit risk has become even more of a focus area. The banking sector’s stringent approach to credit applications had severe effects in the UAE as SMEs account for 85% of its economy and recent studies show that Gulf banks routinely reject up to 70% of loan applications from these businesses. The other area where business risk has risen significantly for all operations is declining inflation. The potential for some categories to deflate necessitates rigorous inventory control if loss is to be minimised or avoided. In addition, down-trading by consumers makes market intelligence on trends critical for margin management.

Organisational culture

A team culture prevails across all businesses. Management is open and honest. Staff input is requested and respected. Everyone is empowered to make a contribution and employee engagement practices are well established.

The benefits of low hierarchy and high involvement were spotlighted in the UK by the response of all teams to the unprecedented economic crisis. 3663 launched a staff campaign called “Strength in numbers; together as one”. Management communicated promptly on challenges and key issues. Staff responded with a steady stream of ideas to cut costs, reduce waste, improve efficiency and, ultimately, save jobs. Teams also showed what could be achieved through rapid adoption of flexible working practices to address the new pattern of workload peaks and valleys.

The campaign contributed to the achievement of important cost-efficiency targets in a situation where 500 jobs were being shed in restructuring programmes and more jobs appeared at one stage to be at risk. Positive staff response was one reason for management confidence at year-end that early and energetic restructuring was having the desired effect.

Future

Adverse economic pressures have been building in the Netherlands and Belgium. The full impact will be felt in the year to come. Operational structures have been strengthened and the solid base of business in the institutional market means the businesses are in good shape to withstand increasing pressure.

Over the next 12 months, sales and earnings growth are forecast in the core UK market as the benefits of this year’s restructuring accrue. The British economy will remain under pressure for some time; therefore next year’s business gains are expected to be modest. Areas of opportunity will be scrutinised closely and pursued where appropriate.

The UAE is also under growing economic pressure and results may be affected in the short term.

On a five-year view, the division is confident of a return to solid growth in trading profit and revenue. International studies show that foodservices have never failed to achieve net growth in any five-year period. In a downturn the demand for value grows. Bidvest Europe is well positioned to respond.

3663 FIRST FOR FOODSERVICE

Trading profit fell significantly, though revenue increased. Efficiency was a key focus area for a more streamlined business. Six wholesale division depots were closed.

National roll-out of the IT system by 3663 was delayed to make sure that the functionality and performance were proven. Company-wide implementation will be phased in following further tests.

Our mix of business enabled revenue growth in the more resilient institutional and workplace sectors. However, these sectors generate lower margins.

Despite considerable economic pressure, we maintained all environmental, sustainability and training programmes, winning national recognition in various award schemes. In addition, our Banbury depot was the first site accredited to the new British Retail Consortium standards for the receipt, handling, storage and distribution of frozen, chilled, and ambient foods, and consumer products.

Deli XL – BELGIUM

Our teams put in a strong first-half performance, but macro-economic conditions worsened as the year went on and momentum could not be maintained. The business benefited from continuing demand from core customers and its strength in the institutional eating segment where activity remained brisk, though at reduced margins. Limited exposure to the hospitality sector was beneficial as the tourism, hotel and restaurant sectors were early victims of the downturn.

Development of the Flemish platform in the north of Belgium was completed and by year-end had reached the break-even point. This contributed to continuing gains in operational efficiency.

Trading conditions are expected to worsen for the remainder of calendar 2009 and into 2010.

Deli XL – NETHERLANDS

A strong first-half performance culminated in a record Christmas season. Results fell away in the third quarter as the economy moved into recession. Trading conditions were significantly worse than in neighbouring Belgium as the traditionally thrifty and conservative Dutch cut household spending.

Two depots were closed to rightsize the business for a radically different trading environment.

Targeted acquisition activity was maintained. We took a strategic stake in a fresh fish business that is at the cutting edge of the trend toward local produce sourcing, preparation and distribution. The business model is based on closeness to market and immediacy of service. The person buying the fish before dawn in the fish market could be the same person who prepares and packages the product and then sells the fish.

One point of focus at operational level was the integration of this and earlier acquisitions.

Catering and institutional volumes remained robust while efficiency gains and purchasing improvements contributed to a pleasing result. Regrettably, prospects in the coming year are decidedly less upbeat.

Though earnings growth had slowed at Horeca Trade by year-end, the correction is seen as temporary as continued hotel construction is anticipated for several years in both Dubai and Abu Dhabi.