Across Europe, turnover was impacted by difficult trading conditions and bad spring and winter weather. European markets entered recession a little later than the UK and recovery is slow. Recovery is under way in the United Arab Emirates.

Revenue and trading profit moved higher. Cost-cutting and efficiency gains contributed to stronger cash generation and improved ROFE.

The UK business 3663 First for Foodservice was restructured. Two standalone businesses were created: the 3663 Wholesale division, serving caterers, hotels and the institutional market, and Bidvest Logistics (formerly the contract distribution division of 3663) with primary focus on quick service restaurants. Each business has its own managing director.

Businesses performed in line with expectation. The UK business achieved a small, but pleasing increase in sales.

The strategy of acquisitive growth gathered pace with our move into the emerging markets of central and eastern Europe. Newly acquired Nowaco and Farutex made a pleasing contribution at operational level, though the income statement was impacted by the IFRS requirement that acquisition costs be fully expensed in the year incurred.

Our new colleagues in Czech Republic, Poland and Slovakia soon became recognisable as typical Bidvest people that take pride in the job. The cultural fit was close from day one.

Despite the downturn, underlying European trends remain favourable, such as a preference for eating out-of-home and interest in food as a leisure activity. Pressure on the consumers’ time ensures ready trial of smart food solutions. Unfortunately, recession was especially severe in the mid-range sector where our businesses are active. The number of out-of-home eating events fell. Fast casual dining reduced purchases of higher margin items.

The UK shift from canned and packaged foods to fresh and chilled continued. A trend to value offerings was evident across Europe.

A major focus area after central European expansion is experience-sharing and synergy exploitation to develop Europe-wide efficiencies. Cooperation is standard practice across logistic departments. Joint reviews are carried out in areas such as voicepicking and telematics. Shared procurement ensures cost efficiencies when buying vehicles and non-food consumables.

A major benchmarking innovation was implemented in the UK where external measurement is being conducted by two outside agencies. The strategy is to deliver what’s important to customers.

The UK business bought the assets of a small fine foods supplier, Giffords, to drive further growth in the fine foods and local produce market. Over the last 11 years, the European business has grown via a mix of organic and acquisitive growth. Further acquisitive opportunities will be explored.

In the year ahead, Bidvest Europe will seek continued revenue and trading profit growth.

Sustainable development

The food industry has a major impact on the world’s resources, and both institutional customers and consumers increasingly demand the foodservice industry to take responsibility for serving healthy and sustainably produced food. Our key position in the food supply network offers opportunities for Bidvest Europe to lead the industry in responsible practices and further entrench our brands as the customers’ preferred choice.

Environment – Systems to monitor environmental performance are largely in place, enabling us to set targets and implement programmes for next year, covering packaging waste, recycled packaging and energy and fuel usage. Efficient routing across the division has resulted in a significant decrease in diesel usage although overall usage increased due to acquisitions. Our UK businesses achieved ISO 14064 assurance for their work reducing greenhouse gases and their innovative waste oil recycling scheme. The businesses also attained the Carbon Trust Standard for the company’s commitment to reducing carbon emissions. Bidvest Foodservice companies partner with organisations to source food products from sustainable resources. Local sourcing is on the increase.

Human resources – Various initiatives provide opportunities for employees to share their ideas, from helping shape 3663 Wholesale’s vision, mission and values to reviewing paper usage at Deli XL Belgium. Satisfaction survey scores reflect loyalty to our businesses. Despite the recessionary environment, we maintained our training spend.

Health and safety – It is with regret that we report one work-related fatality. This was fully investigated to ensure ongoing commitment at 3663 Wholesale for the health and safety of all employees. No fatalities were recorded by Bidvest Europe’s continental operations.

Labour disputes – The percentage of female employees at management grades is improving and diversity training continues.

Society – Codes and policies are in place and processes implemented (with oversight by internal audit) to reduce the risk of unethical business behaviour by Bidvest Europe or any employees. Altogether 106 instances of fraud or theft, for a total loss to the company of £96 090, were reported to the audit committee. Most high-impact incidents are of external origin with no insider involvement. While the number of incidents is static, the financial impact has increased. There is a recent trend towards fraudulent applications for credit. All European operations are subject to the European Union’s Unfair Commercial Practices Act of 2008.

Product responsibility – Dedicated quality assurance oversees customer health and safety. Customer complaints at 3663 Wholesale fell 12% to 89 per million cases sold. We are working closely with industry bodies to ensure nutrition and health claims are easily understood by customers.

3663 WHOLESALE

Trading profit rose pre-exceptionals. A 2% reduction in overheads was achieved, despite the cost of running two IT systems in parallel. Better progress was made on the new £22 million AX Dynamics system, a platform that has been under test for two years. Cost savings came through following the closure of six depots in two years.

Strong focus on working capital and debtors management helped us to a 10% increase in ROFE. Head office costs fell by 20%. Debtor days were the lowest in five years. Stock availability and first-time order fulfilment hit an all-time high. Stock wastage, damage and theft were down. Cash flows were strong.

Consolidation of delivery routes led to vehicle utilisation efficiencies and cuts in the fleet. Continued investment in driver training fostered fuel efficiency.

Depot costs were cut and all fourth-quarter cost-reduction targets were met. Job losses were minimised and staff showed their commitment by agreeing a one-year pay freeze.

We stepped up the development of the short-life produce mix at Swithenbank Foods, our specialist fresh and chilled division. To address the value focus we relaunched our Smart Choice range.

A major research initiative was launched to map customer needs and substantiate our “Delivering what’s important to you” positioning. Empathy with customer challenges drives our strategy.

We spent £18 million on a new multi-temperature depot at Paddock Wood, Kent. Enhanced credentials for quality chilled and fresh foods helped us win a major contract from a multinational caterer.

We entrenched customer relationships. We were the only supplier to get through to Parkhurst prison on the Isle of Wight in heavy snow. As snow continued, we made deliveries by sled to an old-age home. We quantified our carbon footprint for a major hospital caterer – the only wholesaler to do so.

Roll-out of mobile phone technology was completed, resulting in a 46% increase in customer calls. E-notebooks were deployed to sales staff.

We introduced central London’s first all-electric delivery vehicle and continue to encourage the use of recycled biodiesel.

Telesales launched a customer loyalty programme with a safari theme to build on our South African associations.

Two regional managing directors were appointed. Competition is strongest from regional players. Tighter local focus will help keep us on top.

Off a low base, VIVAS (our joint venture with a leading vintner) almost doubled sales. A combined food and wine delivery in a mini-drop has strong appeal in the current market. In contrast, the smaller drops trend made some fresh produce deliveries unprofitable. The customer-base was rationalised.

In the coming year, we plan a new e-commerce site. It will be benchmarked against Australasian performance as Bidvest Australia and Bidvest New Zealand are leaders in this area. Further revenue and profit growth are projected.

BIDVEST LOGISTICS

Performance was well up. Operational improvements were driven by the new regionalisation strategy, use of double-decker trailers, efficiencies in all departments and the savings achieved through the Lichfield depot closure. ROFE and profit rose significantly.

Competition intensified as third-party logistics operators continue to investigate foodservices. We retained a core client despite an aggressive pitch by a multinational. Hoped-for volume increases failed to materialise. Fuel costs were largely stable, but rose late in the year.

Productivity gains and cost savings were driven by the implementation of telematics and further expansion of voicepicking. Employee-contracted working hours were reviewed to ensure staff availability dovetails with customer requirements.

To address the risk of reliance on large customers, efforts were made to stagger contract end-dates and extend and roll over contracts. Diversification opportunities will be explored.

Long-term sustainability is assured by commitment to cost efficiency and continuing investment in telematics, radio frequency identification technology and planning software. Waste management and recycling initiatives create partnerships with likeminded customers.

The business retained its accreditation in Investors in Excellence and ISO 14001 status.

Excess market capacity may persist for three years and third-party logistics operators can be expected to maintain competitive pressure. Effective deployment of new technology will help us retain our competitive edge. Staff motivation is key. We plan to create strong forward momentum following our relaunch as Bidvest Logistics in July 2010. Further savings will be pursued as we seek trading profit growth in 2011.

DELI XL BELGIUM

Trading profit rose on marginally higher revenue, a satisfactory performance in the face of Belgium’s steepest post-war recession. The country’s GDP shrank by 3,7% in 2009.

Development of a virtual trade fair for customers resulted in lower costs while driving sales 30% higher for the promotion. Margins were well managed and distribution costs were driven down by the application of new technology. ROFE improved.

The Flanders depot was further developed. Prioritisation of national and international customers was aided by implementation of a customer value matrix.

Our “Start To Save” campaign was launched to reinforce our business sustainability strategy. It encompasses economic, ecological and social factors with the focus on cost reduction, motivation, innovation, cohesion, confidence and competitive advantage. Our GRI report on 2009 activities and five-year plan was being finalised at year-end.

A new customer loyalty programme was launched as a major retailer bought a foodservice company, signalling a possible challenge in our core market.

Opportunities will be explored in the non-food and daily fresh markets. E-commerce, the own-brand strategy and hub-and-spoke optimisation will receive management attention.

DELI XL NETHERLANDS

Performance was on budget, despite recession and fierce competition. Out-of-home spending plummeted. Adverse weather impacted tourism.

A major cost-saving drive, Mercurius Quick Wins, was highly successful. Last year’s decision to close two sites proved timely. Cash generation was a priority. An e-learning programme, Focus on Finance, made employees aware of their impact on cash flow. Stock value was reduced. Margins narrowed as a result of growth in low-margin catering and large-contract business.

Through a series of joint ventures we created a new specialist seafood company and bought a majority interest in Stavasius, a fruit and vegetable producer and wholesaler. We took a minority interest in Eetgemak, a producer of convenience meals and food components. New investment lowered ROFE slightly.

We stepped up e-commerce activities and launched a new website. A new CSR policy was introduced, focusing on climate and environment, health, hospitality, chain responsibility, sustainable buying, passion for food and service.

We relaunched Reuser & Smulders, our tea and coffee brand (now Rainforest Alliance-certified). To sell non-food items into the hospitality market, we introduced a new brand, NonFoodProfessionals.nl.

Transition from a hierarchical organisation to a process-driven business gathered pace with the appointment of process managers and teams. The First for Foodservice staff awards, introduced two years ago, have become an important means of instilling our values.

Our marketplace standing remains strong. The last review confirmed market-share gains in the hotels, restaurants and catering sector. Development of our new organisational model and roll-out of a new IT system will strengthen us still further.

Acquisition opportunities may occur as industry consolidation is predicted. The immediate challenge is to increase sales in tough trading conditions.

MIDDLE EAST

Expansion by Horeca United Arab Emirates into Saudi Arabia via a JV with a local partner was timely as the credit crisis slowed Dubai’s growth. Revenue and trading profit rose and by year-end the new Saudi Arabian business – Al Diyafa – had reached break-even point.

Investment in quality and HACCP accreditation was vindicated by Dubai’s introduction of new food distribution regulations. Less well-resourced competitors are under pressure.

We launched a strong US desserts brand and a frozen smoked-salmon offering to complement our high quality fresh smoked salmon.

NOWACO (Czech Republic and Slovakia)

Business conditions remained challenging, though the Czech and Slovakian economies returned to growth. Revenue dipped, but cost savings enabled a slight trading profit improvement. Nowaco maintained market leadership in Czech Republic and strengthened its position in Slovakia.

Nowaco Czech Republic comprises three divisions – production, distribution and Gastrostella. Production covers Prima own label ice-cream (top seller by volume in Czech Republic and third in Slovakia) and the processing of frozen fish, vegetables, meat and other frozen products. The distribution division accounts for about 60% of foodservice and 40% of retail distribution in Czech Republic. Gastrostella is a dry goods and beverages wholesaler.

In Slovakia, the business focuses on distribution, serving 75% of foodservice and 25% of retail customers. In Czech Republic there are three depots and five branches; in Slovakia one depot and two branches.

Czech Republic’s economic growth lagged Slovakia. Inflation eased higher to about 2% in both countries. Nowaco was impacted by a harsh winter and wet spring, a poor environment for ice-cream sales, tourism and out-of-home activity.

In tough trading conditions the strength of our core brands was demonstrated – Nowaco, a trusted frozen food brand, and Prima ice-cream. New brands, Nowameat fresh meat and Nowamilk diary products were introduced. Bagetier, a new bakery line, has been launched, further enhancing our range.

The only major new investment was in new bakery production lines at our Opava factory in Czech Republic, a €3 million commitment. A new freezer is being constructed in Kralupy to increase storage capacity.

For the first time since inception 20 years ago, Nowaco sales stalled. The emphasis switched to efficiency gains. We increased the average value per delivery while cutting kilometres travelled per day. Pay was frozen. We reduced marketing costs and inventories. Just-in-time efficiencies were achieved.

Leveraging the Bidvest relationship was a priority and we implemented the Bidvest identity with the help of Bidvest Europe.

In the coming year, we see good prospects for bakery production and distribution and growth potential in frozen meats and fresh. Prima is well positioned to seek cross-border expansion into Slovakia.

FARUTEX (Poland)

The business was impacted by the expiry of a contract with a major customer, yet maintained its position as Poland’s leading foodservice distributor. In a little over six months, lost volumes were replaced, but trading profit fell as a result of customer cutbacks, adverse weather, extensive flooding and the period of mourning following the death of the Polish president and other leaders.

Investment in new sales resources to recoup lost turnover impacted ROFE. A new branch, our 11th, was opened in Łódz.

Management focused increasingly on savings and in the second half some redundancies occurred. Further cost efficiencies will be sought in the year ahead. We will seek sales growth while looking to achieve better margins by growing higher value product lines.