Annual Integrated Report 2019

Chief executive’s report continued contracts was exited in September 2018, and the team has done a sterling job to reduce the cost base and focus more heavily on freetrade growth. New Zealand continued to perform very well across almost all of its business segments, with a particularly strong performance from its value-add manufacturing and processing activities. A second depot is scheduled to open in Auckland in October, giving us significantly more capacity in the largest market. A large customer contract was terminated from July 1 2019, as renewal terms from the customer were unrealistic and uncommercial. The team is energised, and focused, to ensure lost volume is replaced over the next few months. United Kingdom (UK) Within the UK, our foodservice offering delivered fantastically well. However, there is no doubt Brexit had an impact, the average consumer is frustrated in this uncertain environment. Notwithstanding this, the team has done remarkably well, and they have adapted nicely to the Bidfood operating method. Bidfood UK is now the largest business in our portfolio as a result of a focused restructuring, repositioning and expansion plan implemented over the last few years. The Bidfresh business remains a bit challenging, Seafood is performing well, however, Meat and Produce are more difficult for us at this stage. Good progress has been made in terms of the sale of the Logistics business, and the disposal is progressing well. This sale will result in the removal of certain operating distractions, and ensure an even greater strategic focus, strengthening the core business model in this region. Europe We are pleased with the overall result in Europe, although the slowdown in Germany had some impact, economically, on the rest of Europe. Our Iberia region includes Spain and Portugal. Portugal is doing well and has delivered an outstanding performance. In Spain, while there are some components of the business that are doing exceptionally well, Guzman – acquired in 2017 – has been disappointing. We are in a process of integrating the businesses, and this will take some time to transform into a true Bidfood-type operation. We remain positive about the region and we are expecting a much improved performance this year. Our German operation is relatively small and is still at an early stage of development. We are still building the base which if done properly will take some time. We are interacting very carefully and closely with the customer base to provide the longevity we always aim to achieve in all the regions we operate. Freetrade sales have improved and we see some scope for bolt-on acquisitions. After the change in strategy a few years back, we continue to make good progress in the Netherlands, with a higher trading profit delivered. It is a country where exciting future potential exists, and we have started a process of simplification to align this business with group strategy. We are seeing good sales and margin growth. Belgium had another solid year and delivered a good increase in profits in a stable but slow environment. In an economy that is mature and showing low growth, the ability to increase profits on a regular basis is remarkable. The Czech and Slovak region delivered a fantastic performance. This region benefited from an investment in infrastructure a few years back, which has enabled continued growth despite the pressures of securing skilled labour as well as experiencing large increases in energy costs. The team continue to innovate and introduce value-add opportunities and, in fact, is the group leader in creating margin opportunities in the manufacturing of own products. These learnings are being shared among our leadership teams in other countries. Lithuania and Latvia are now profitable, albeit small businesses and Poland delivered a good result. We invested ahead of the curve in this region and the subsequent growth has been exciting and rewarding. The management team is delivering record revenue in local currency and has certainly exceeded expectations. Italy had an acceptable year, but in a tough economic and political environment. While the business has doubled sales over the last five years, we are introducing certain structures to integrate recent acquisitions, and ensure better continuity. Emerging Markets South Africa remains in a difficult economic environment, coupled with the ongoing impact that resulted from last year’s listeriosis crisis. However, there was a trading profit improvement year-on-year, which is commendable under the circumstances. In the Middle East, after a difficult 2018, this business has bounced back and delivered a record result. The United Arab Emirates remains a bit challenging, but we are making progress. Saudi Arabia continues to perform strongly. In Chile, the team delivered a good profit and the business is well positioned for significant growth. We are starting to build scale and strength in this region, both in terms of a team of people and market position. The Brazilian economy is tough, and the politics are disruptive. We still see Brazil as a large potential market and we have a solid base set up from which to scale a future business. We are assessing various opportunities that are available. We made a small investment in Argentina in May 2019, which we see as a reasonable foodservice market and we will use this to consider growth opportunity going forward. Profitability in the core Singapore and Malaysia business increased, but was eroded by start-up losses incurred in opening the new business in Vietnam. Greater China has been challenging and ended the year substantially below the prior year. Pleasingly, however, the performance improved as the year progressed, and there is a visible recovery underway. The in-country team has entered new product ranges and is establishing a solid supplier base. In Hong Kong we reduced the cost base, simplified and re-focused the business. There is a concern, however, following recent and ongoing political demonstrations and protests. Volumes have declined significantly with residents not frequenting restaurants, as well as tourism and hotel occupancy numbers substantially down. The year has been good for Turkey as the business has transitioned into a local foodservice wholesaler, being less dependent on expensive, imported brands. Expansion plans are underway, and we remain confident of good growth, albeit off a low base. 22 / Bid Corporation Limited Annual integrated report 2019