Growth in the UK retail sector continued to accelerate across all customers, in particular during the second half of the year, with an increase in market share of 12% compared with 2018 developing further to 17% by the last quarter. Cafédirect’s UK Foodservice division exited 2019 in a strong fashion, delivering growth of 10% in the final quarter having sustained declines in the first three quarters, ending the year slightly down (-3%) versus the prior year. Increased resource and a clear strategy in this sector, combined with the performance improvement, provide the board with a high level of confidence in growth in 2020.
2019 was a highly significant year for Cafédirect. The step up in growth was accompanied by a profit in 2019 of £156k before adjusting for fair gains/losses on foreign exchange (2018: £171k). This is the second year that the Company has delivered a surplus since 2009. Importantly the growth improvement from 2.9% in 2018 to 7% in 2019, along with maintaining profitability, demonstrates the significant potential of the business.
Overall profitability was achieved whilst investing in operating expenses to drive future revenue and margin growth. Investment in capability included resource to review the operations of the business, identifying significant annual savings of £0.5m (realisable primarily in 2020) and resource to accelerate and expand innovation, which will increase new product development in the period 2020 – 2023.
In addition to this improvement in commercial performance Cafédirect’ has seen its impact increase to even higher levels. Cafédirect continues to support the lives and wellbeing of producer growers, through Fairtrade premiums, Organic premiums and via donations to its farmer led charitable organisation - Producers Direct; significant sums that deliver real impact.
During 2019 £990,284 (2018: £781,968) was invested in growers and their communities via Fairtrade premiums, Organic premiums and Producers Direct. Supporting the core costs of Producers Direct enabled them to continue to deliver programmes with growers funded by third parties and to leverage an increased amount of external funding for their charitable activities with growers.
The company’s capabilities were increased considerably in 2019. During the year key appointments were made to accelerate the company’s growth. In addition a project to implement SAP enterprise software was successfully delivered. This will have a major impact in 2020 and beyond, improving efficiency and providing greater insight for decision making. Also a complete review of Cafédirect’s operations will enable improvements in ways of working and cost savings.
Looking ahead to 2020, Cafédirect has further plans in place to build on its achievements in 2019. The potential impact of Covid-19 is discussed and considered on page 10 of this report.
The Directors are confident that growth can be attained at higher levels, whilst maintaining profitability and maximising impact.
Cafédirect’s is a proven leader in delivering social and environmental change. It is also a strong and progressive brand owner with a powerful purpose.
Total stock at the year-end was £3.4m (2018: £3.0m); debtors were £2.2m (£2018 £2.0m) and creditors less than 1 year were £2.1m (2018: £1.3m).
Working capital is carefully managed at Cafédirect - cash balances at year close of £550k (2018: £466k) reflected an increase in stock and debtors offset by an increase in the amount owed to creditors. Consistent with its principles of social responsibility, it is a matter of policy that supplier liabilities are paid on time.
After making provision for potential losses on maturation on forward foreign currency contracts, the company year-end balance sheet showed net assets of £3.4m, (2018: £3.4m).