BIDVEST NEW ZEALAND Sustainable development Training investments were maintained and continued emphasis was placed on initiatives to support local producers, improve energy efficiency and operate in an environmentally sensitive manner. We see implementation of the paperless warehouse concept (in partnership with Bidvest Australia) as win-win as it reduces paper usage while increasing efficiency. Performance Businesses performed strongly. Revenue was 12% up to NZD431 million (NZD384 million). Trading profit of NZD19,6 million (NZD16,8 million) was up 16,6%. All divisions – logistics, fresh and foodservice – performed well and remained strongly cash generative. The year was arguably Bidvest’s have been greater in some previous years, but double-digit growth in such challenging times was remarkable.

Benchmarks

Benchmarking tends to be year-on-year, but increased information-sharing with Bidvest Australia will enable comparison of operational performance. Results were ahead of expectation.

Strategic dynamics

The country has endured six consecutive quarters of economic contraction and remained in recession, though government has cut taxes and increased infrastructure spending, turning a budget surplus into a growing deficit. Interest rates have also been cut to 2,5%. New large primary export sector has been affected by lower world dairy prices although this has been partly offset by the weaker New Zealand dollar. Business and consumer confidence remains subdued.

Job security is the key factor depressing a resurgence in consumer demand. Although lower personal taxes and interest rates translate into greater disposable income, the prospect of future unemployment induces people to increase savings or reduce debt. Unemployment has increased to 5% and is expected to reach 7%.

Industry dynamics

Like Australia, our sector is experiencing consumer down-trading and a trend to at-home eating. Many food products are imported and food inflation moved higher as the New Zealand dollar softened.

Brand dynamics

The Crean name was discontinued in the first quarter. All vehicle livery, stationery, web pages and corporate identity items now carry the Bidvest name. A “big-bang” approach was taken and proved highly successful. The strength and impact of the branding have never been stronger.

Operational dynamics

In a lingering recession, all our customers are engaged in a search for savings and efficiencies. In recent years, we have stayed “on message” with a consistent theme – we are solution-providers rather than simple suppliers. This message struck home as never before. By combining technology with operational efficiency, we have delivered real and substantial operational cost savings to customers.

Prompt delivery and the ability to deliver a comprehensive basket of goods in a single drop created competitive advantage and highlighted the benefit of recent investments in our logistics division.

The convenience of electronic ordering also came into focus. Approximately 30% of orders are now executed via this channel.

In an industry under pressure, our teams consistently grew market share.

New initiatives

The development of a new South Island distribution hub in Christchurch proceeded as planned. The intention is to replicate the distribution successes achieved by our logistics operation in Auckland. Expansion of the Christchurch operation entailed an investment of NZD6 million.

A new greenfields distribution centre will be built in Tauranga in the coming year in order to move closer to a growing market and relieve capacity pressure from our Rotorua and Hamilton businesses.

New Fresh businesses are being set up within our foodservice operations in the smaller regions. The goal is to achieve national coverage in the coming year.

The business has formed a close association with the youth development programme, Project K. The programme is designed to inspire 13- to 15-year-olds to reach their full potential through building self-confidence and teaches life-skills such as goal-setting while promoting good health and a positive attitude to education. In addition to financial support, our staff are undertaking leadership training and becoming mentors to youth on this programme.

Risks to the business

Risks are little changed. An extended recession obviously increases credit risk, but our controls remain rigorous. As suppliers of a comprehensive range to many categories of customer, the business has built-in balance. Pressure in one area is generally balanced by larger opportunities in another. Certain risks are reduced. Higher unemployment means we can access a larger labour pool without large increases in training investment as many candidates come to us with requisite skills. As our customers are increasingly focused on basic food offerings, the already small risk of failing to anticipate food fashions recedes even further.

Organisational culture

We are national operators, but are rooted in the communities we serve. We stay close to our customers and markets while drawing advantage from our access to Group resources.

Future

For the next 12 months we have targeted trading profit growth of 10% off an 8% increase in sales. We believe we will continue to grow market share at the expense of local competitors that lack our range and ability to provide reliable, efficient service.

Our de-facto positioning as the efficiency partner of our customers gives us a platform for continued growth over the next three to five years.

The implementation of ongoing efficiencies will underpin the growth strategy. The paperless warehouse system pioneered in Australia is to be rolled out here. This is an early example of a process of two-way information and innovation sharing to be instituted with our Australian counterparts. Best practice and smart ideas will be exchanged in a continual search for efficiencies and service improvements.