The region continues to make a substantial contribution to the group. Revenue decreased following the strategic exit of low-margin contracts by 2,9% to R29,4 billion (2016: R30,3 billion). Trading profit rose 9,8% to R2,0 billion (2016: R1,8 billion), which when translated in constant currency reflects a 12,0% increase. The successful strategic focus on the free trade sector is reflected in these results and management remain committed to keeping it "all about the food".
Australia reported a great finish to the year which took trading profit 8,7% higher in a national economy that showed subdued consumption growth and almost zero food inflation. Net revenue fell 5%; however, this was expected as we continued to exit the low-margin Logistics business. Overall margins rose, mainly a function of the changing business mix.
Free trade sales – our main area of strategic focus – were up a pleasing 5%. Growth has come from new and existing business, and has been driven by hard working sales teams and focused initiatives.
In a year of significant change, the exit of some logistics contracts led to the closure of two sites. We relocated the Adelaide branch to a new purpose-built facility, and consolidated the Perth Fresh business into the Perth Logistics site. We opened a new branch in Port Melbourne, opened a new purpose-built branch in Yatala, Queensland and opened a new branch in Truganina, Victoria. The Sydney Support office was moved to a new facility in Botany that will also operate as a foodservice branch.
Three small, bolt-on foodservice acquisitions were made in Launceston, Tasmania, in Cairns, Queensland, and in Port Macquarie, NSW. Expansion is motivated by the strategic imperative for continued growth in the free trade market.
Foodservice division put in another strong performance, despite increasingly intense competition as new players enter this market.
We now have 36 foodservice operations, most of which performed well. Perth put in a particularly strong performance as the resources sector showed signs of a slight recovery. Further foodservice growth is projected for the year ahead, with the new branches positioned to contribute fully to continued momentum.
Imports division had a great year. The pace of new product development was maintained and the number of products in our home-brand basket continued to grow.
Fresh had a better year and returned a meaningful trading profit. However, more can be done to unlock the undoubted potential in this sector. Management changes were made in Sydney and Adelaide. Competition is intense, but a base on which to build has now been established.
The Classic Meats business showed pleasing trading profit growth, though some was attributable to the reallocation of meat sales from Brisbane Foodservice to Classic Meats Brisbane. Continued organic and acquisitive growth is planned.
Only one standalone Logistics business remains (in Perth) and the overall rebalancing of the customer portfolio is substantially complete.
Across the Australian business, significant progress was made with the strategy of creating a sustainable base that will foster continued growth in the free trade space and enable us to entrench our image as food people, not carton-movers. We are excited by positive change and the opportunity to achieve continued growth in our desired target market.
New Zealand delivered a strong fourth quarter which created the platform for 22,6% trading profit growth on prior year. Double-digit profit growth was secured by most of the business units.
Nationally, the key growth driver was tourism, which offset a softening in some parts of the domestic economy. Weaker results in manufacturing and mining had little impact on a buoyant hospitality market.
Food prices rose sharply, with dairy, meat and fresh produce leading the way. A tight labour market created challenges and contributed to rising expenses. Margins were well protected, resulting in improved profitability in all divisions.
Gains were underpinned by a particularly strong performance by Foodservice. This division recorded 10% sales growth and benefited from improved buying and margin management. Imports had an outstanding year.
Free trade remained the key Foodservice focus area, though a high level of contract retention contributed to the strong divisional performance.
Fresh performed strongly, expenses were well controlled and margins were well protected.
Logistics division was bolstered by a good result at Auckland and an excellent one at the Christchurch branch.
Processing put in a stellar performance. Higher branch network volumes enabled the business to generate efficiencies. Improved buying created price stability and supported margins.
Across the business, returns improved, driven by excellent working capital management. Investment in fixed assets continued. Three new distribution centres are nearing completion.
As a primary market, with a long history in this region, sustainability and social outreach are important components of the work we do in Australasia. Our suppliers, customers and communities within whom we work are environmentally and socially aware, and expect the highest standards from us.
|Diesel (litres)||Petrol (litres)||LPG (kg)||LNG (kg)||Biodiesel (litres)|
|9 339 735||720 184||81 603||0||0|
|2016: 8 733 167||2016: 742 534||2016: 62 030||2016: 0||2016: 0|
Fuel consumption, energy, water and waste are the key focus areas that drive our environmental initiatives. These form the foundation of our environmental management procedures, which includes the implementation of the ISO14001 environmental management system in all our Australian sites.
An increase in diesel consumption during the year was expected due to increase in business activity. Despite this, efforts are being addressed to ensure that we are as fuel efficient as possible. In 2018, we plan to pilot an electric delivery truck in New Zealand, in partnership with manufacturer Vuso. In addition to its environmental advantages, the truck is reported to incur 30% lower maintenance costs; with weight and payload specifications that make it an ideal inner-city delivery vehicle.
Deployment of various energy-efficiency technologies has been at the forefront of our drive to reduce electricity consumption across both countries. Smart (LED) lighting and motion sensor units have been installed in all our Australian branch warehouses and solar panel arrays installed at selected sites. In New Zealand, LED lighting and motion sensors have now been fitted in all our older distribution centres (DCs), and are standard features in all new DCs.
Our water consumption has largely remained constant, however we do recognise that we have operations in water sensitive areas that require astute management. At our Verissimo Drive plant in Auckland, our largest site in New Zealand, we have installed a 200 kilolitre rain-harvesting tank that is used for non-drinking purposes such as irrigation and the washing of our fleet.
At Verissimo Drive, two new compacting balers have been introduced to improve the cardboard and plastic recycling measures at the plant. In addition to saving physical space, our recycling rates and revenue generated from these initiatives has increased significantly.
Unfortunately we are reporting an increase in our lost time injury frequency rate this year (12-16/200 000 hours). This is a concern to us as employee development is a key operational focus. Expenditure on staff training continues to increase and we are implementing innovative practices, such as eye training technology for our fleet in New Zealand that detects driver fatigue and poor driving practices.
Health and safety procedures are well-drilled in all our New Zealand sites, and close analysis made of typical workplace injuries and appropriate remedial action.
Our Australian operations are directed by a Quality, Safety, Environmental and Food Safety Policy that outlines strict occupational, health and safety procedures at all our Australian branches.
Community and social support
In addition to donations made to sports teams and smaller charities, much of our community outreach work has been in the support of youth development.
We have a long history of collaboration with the Graham Dingle Foundation (formerly the Foundation for Youth Development) in New Zealand. Over the past nine years we have been able to fundraise and direct some NZ$600k, including NZ$114k in 2017, in support of the Foundation's work with vulnerable children. This is achieved by donating a percentage of the sales of our Smart Choice home brand products to the GDF.
In a country such as New Zealand, which has the highest youth suicide rate in the OECD and in which 20% of children live in relative hunger, we believe the GDF's work to be well researched and sustainable. Our contribution is helping over 15 500 students in 89 schools build the emotional intelligence to cope with life's challenges.
In Australia we support the Daniel Morcombe Foundation, through fundraising and event support, in their programmes of child safety, awareness and assistance to young victims of crime. We directly support the KickStart for Kids programme through the donation of over A$30k in milk that assists KickStart in providing breakfasts, lunches and mentoring programmes in Australian schools.
We directly sponsor two youth chef development programmes – "Fonterra Proud to be a Chef" and "Nestle Golden Chef's Hat Award". This forms part of our endeavour to promote and support the local food service sector in Australia.
Support for the Graeme Dingle Foundation (GDF) is central to CSI strategy at Bidfood NZ. GDF is a child and youth development initiative that transforms young lives, supporting over 25 000 kids at more than 100 schools.
GDF's work began over 20 years ago in response to a youth crisis and youth suicide rates that were of the highest in the developed world. 19,8% of New Zealand children live in relative poverty. The aim is to create stronger, healthier and happier young people.
Last year, Bidfood's financial donations helped almost 20 000 students in 89 schools. In addition, Bidfood teams give food to GDF events and support fund-raising drives.
In nine years, donations have topped NZ$600k, and in 2016 to 2017 we gave NZ$114k. Donations are underpinned by an annual profit percentage from SmartChoice sales. Research shows every donated dollar generates NZ$7,15 in long-term benefits.
We also support associated school-based initiatives, including Kiwi Can (a life skills programme), Career Navigator (a work-readiness scheme), Project K (youth mentoring) and MYND (interventions to stop young offenders re-offending).
Local Bidfood staff participation is whole-hearted and often high profile – such as the time the head of marketing was pushed off the top of an Auckland tower in a "Drop-Your-Boss" fund-raiser.
A key community programme in Australia is KickStart for Kids. This programme, launched in 2011, is driven by the belief that every child, regardless of background, deserves an equal chance.
KickStart for Kids runs breakfast, lunch and mentoring programmes in South Australian schools. It also provides clothing and addresses healthcare needs.
If children are hungry or encounter hardship, they cannot fully engage at school. This hobbles educational outcomes, with the risk that the cycle of poverty and marginalisation will be perpetuated for another generation.
Research shows that children who grow up in hardship are more likely to be poorly educated and face deprivation as adults. KickStart for Kids tries to level the playing field.
To assist the programme, Australia donates a pallet of milk every week. This equates to an annual contribution of A$30k and enables KickStart for Kids to serve around 40 000 breakfasts and 10 000 lunches a week at over 300 South Australian schools.