Business context and trading conditions

Fears of a double-dip recession meant fewer UK families eating out. Teams had to contend with down-trading and margin pressure. Trading conditions were also challenging in the Benelux countries.

Official figures reflect continued recovery by the Dutch economy with GDP growth of 1,5%, but unemployment is falling only gradually and inflation has moved higher. Our Netherlands operations did well to achieve budgeted profit despite tough trading conditions and continued investment in IT and e-commerce.

Competition intensified in Belgium as industry players focused on low-risk customers. Similar trends were evident in the Netherlands.

Growth remained hesitant in the Czech Republic and Slovakia. Nowaco was also impacted by a poor summer, resulting in sluggish ice-cream sales. Operations in the Czech Republic were also affected by a 2% national reduction in retail food sales.

The Polish economy avoided recession and continues to do well, though unemployment remains high at 9,6%. Farutex maximised opportunities, taking sales to record levels.

In the Middle East, recovery is under way and tourist revenues moved higher in the United Arab Emirates. Several hotel developments in Saudi Arabia create opportunities for continued growth. Strategic growth continued. In December we acquired 100% of the share capital of Seafood Holdings for an enterprise value of £45 million. UK-based Seafood Holdings is a leading national fresh fish processor and distributor to the catering and hospitality sectors.

In the Netherlands, Deli XL swapped its majority interest in two produce businesses (Verhaaren and Stavasius) for a minority stake in Van Gelder (a much larger specialist produce business).

Performance

Performance was disappointing. Trading profit of R842,5 million (2010: R897,8 million) was significantly below prior year and budget. Revenue amounted to R34,7 billion (2010: R35,5 billion). Performance was impacted by abnormal costs, largely in the UK. The most material impairment related to the cancellation of a major IT project at 3663 Wholesale.

Though financial results were well below expectation, the efforts by our people were outstanding. Many work in economies that still feel the aftermath of recession while the threat of a second downturn continues to plague an important national market like the UK.

In these circumstances, our teams have to achieve constant efficiency gains and make vital savings without compromising the quality standards that create competitive advantage. Our people did well to maintain this effort and their own morale in difficult conditions.

Sustainability

Environmental responsibility tops the public and political agenda in Europe with strong pressure being applied to the food industry. In general customers demand fresh, seasonal products of known provenance.

3663 continues to provide a substantial range of locally sourced products. This year, 3663 has increased its range of British produce to 120 products. The company has retained ISO 14001 certification at all sites since 2003. Further innovations in branding standards are becoming a priority.

Product innovations include new ranges of more sustainable products. Deli XL Belgium has developed its organic range, and Deli XL Netherlands has launched its “Naturally Sustainable” range which includes organic, fairtrade and animal welfare eco-labels.

Systems are in place to monitor environmental performance, measuring packaging waste, recycled packaging, and energy and fuel usage. Recorded increases in water and petrol consumption are largely a reflection of improved measurement at some companies. Resource monitoring has enabled 3663 to submit carbon footprint data to the Carbon Disclosure Project (CDP) supply chain initiative for the third year running.

Addressing climate change, 3663 and Deli XL Netherlands are improving routing systems to reduce total distance travelled, and 3663 trained drivers in fuel-efficient techniques.

Both 3663 and Bidvest Logistics run successful waste oil recycling schemes converting customers’ used cooking oil to biodiesel to fuel vehicles. 3663 achieved ISO 14064 assurance for its scheme. Logistics converted its entire trucking fleet to double-deck trailers, reducing trucking movements by 40%. In addition, Logistics improved its efficiency substantially, transporting 14% more cases per mile travelled than last year.

Further programmes at 3663 include a green travel initiative, voltage optimisation equipment (reducing electricity use by 8%), LED lighting, green specifications for new buildings, heat-recovery components for refrigeration, and sourcing over 97% of electricity from renewable sources. In addition to reducing paper use, Deli XL Belgium has implemented the use of Forest Stewardship Council-certified paper.

3663 has effective recycling policies in place at all sites and tracks packaging material used, proactively exploring ways to reduce this. Nowaco, in the Czech Republic, is a member of EKO-KOM, a company that recovers packaging waste for recycling.

3663 works with suppliers to continually improve the environmental performance of the entire supply chain.

In addition to Marine Stewardship Council certification, Seafood Holdings is pursuing a number of strategies to maximise sustainability. These include focused customer education and an initiative to market locally abundant by-catch species usually discarded.

The recorded increase in lost-time injury frequency rate is the result of more accurate data this year.

Corporate social investment includes Deli XL Netherlands’ employees’ participation in the annual Roparun relay race raising funds for cancer patients, and supporting the elderly. Nowaco is an official partner of the Czech National Theatre and also sponsors animals in the Prague Zoo. Horeca supported the Child Foundation Dubai and the Dubai Autism Centre, among other social projects.