Following the Covid disruption, global marketer a2 Milk made a concentrated effort to strengthen its sales channels and develop a growth plan. The effort is paying off.
A2 Milk surprised the market late last month by upgrading its full-year earnings guidance and announcing it will be paying the first dividend in its 20-year history in February. A2 Milk’s share price took off again.
Chair Pip Greenwood told shareholders at the annual meeting that it has made considerable progress in developing its operating model and creating a more resilient business.
“We made great strides in lifting capability across the organisation, investing in a more sustainable future, expanding distribution in China and across new markets, and delivering new and improved products to our consumers, and we reported another strong financial performance.
“As we look ahead, obtaining access to additional China label registrations and developing our own nutritional manufacturing capability are critical components of the company’s supply chain transformation strategy,” Greenwood said.
A2 Milk was particularly pleased that its China and English label infant milk formula (IMF) products achieved a top-five brand position in its main market of China during the 2024 financial year.
The latest results meant a2 Milk won the Most Improved Performance category at the Deloitte Top 200 awards.
A2 also believes it is on track to achieve $2 billion in revenue by the 2027 financial year.
The judges said the business community continues to traverse multi-year disruptions arising from the Covid pandemic: re-establishing markets and supply chains, managing the wave of inflation pressures that resulted, and now dealing with the recessionary impact of policy settings.
Within the context of what has been a very difficult operating environment, the judges recognised the performance of a2 Milk as it dealt with the significant market disruptions to its business.
“The company successfully negotiated new strategic partnerships, adjusted to challenging regulatory environments within its key markets of China and the US, and strengthened its leadership team. While the journey is not complete, there are good signs that a2 is back on track,” said the judges.
Revenue for the 12 months ending June increased 5.2% to $1.68b; operating earnings (ebitda) were up 6.9% to $234 million, and net profit was $167.5m, a gain of 7.7%. Earnings per share was up 9.2% to 23.2c.
Revenue growth was again driven by the China and other Asia markets, up 14%, and representing two-thirds of total sales.
A2 Milk finished the financial year with $970m in cash, $212m from the previous year, and given the strong balance sheet, the board believed the time was right to introduce a dividend policy of 60-80% of net profit.
Category-wise, IMF sales increased 4.6% in China with the Chinese label up 9.5% while the market was shrinking; liquid milk grew 3% in Australia and 7% in the United States, and sales of other nutritionals, made up of plain and fortified milk powders, UHT and fresh milk exports to China, rose 37%.
“Importantly, after several periods of decline, we stabilised our English label IMF sales [in China] and achieved growth in the second half,” said chief executive David Bortolussi.
He said a2 Milk’s team have been executing various initiatives including forming new strategic partnerships, capturing growth in emerging e-commerce channels, investing in marketing activations, and improving customer service through drop-shipping (selling products on the website and sending the orders to another company to ship the goods directly to the buyer).
Bortolussi said the liquid milk businesses in Australia and the US, both under new leadership, progressed well in the 2024 financial year with innovation delivering positive results and a2 Milk continues to progress its application for long-term Food and Drug Administration approval to import infant milk formula into the US.
“In terms of financial performance after refreshing our growth strategy, we have grown group revenue by $469m at a compound annual growth rate of 11.6% and improved our edbitda margin to 14% from a post-Covid low of 10%,” Bortolussi said.
Leading food services provider Compass Group New Zealand has sought continuous improvement, whether it’s health and safety, brand innovation or sustainability.
“We take great care with health and safety,” says Compass director of growth Alistair Dickie. “Our people work in a pressured environment to produce great food on time across multiple sectors.
“We make sure our people go to work safely and send them home safely. This also flows through to our clients – we make sure the food we serve and send out is safe.
“We identify any allergens for who our food is being served to. It is temperature-controlled every step of the way, and is nutritionally sound when you are dealing with children and the elderly.”
Dickie says Compass is continually innovating the product through the uniqueness of each brand. “We understand the persona of the customers we serve – a soldier at Waiouru is a different proposition to a school student.
“The student needs a nutritional and balanced meal that is the right-sized portion. A soldier needs fuel and intake to get through the day’s exercises, duties and disciplines – 550 grams of protein, carbohydrates and starch for lunch and 800-1000 grams for dinner.
“We include a dietary, healthy approach and make sure our food engages the mind and helps mental wellbeing.”
Dickie says Compass is committed to zero wastage. The company uses lean path technology in the kitchen to track and reduce food wastage in production which results in cost efficiencies and reduces the carbon footprint for our clients.
The attention to detail enabled Compass to secure a new two-year contract for the Ministry of Education’s Healthy School Lunch programme, worth $79 million, and some 125,000 students will receive a lunch during school days.
Compass is in a collective with suppliers Gilmours and Libelle to cater for 480 intermediate and senior schools from the end of January.
Over the past four years, Compass’ revenue and market share has steadily increased – $207m in the financial year ending September 2021; $221.6m in 2022 (net profit $6.6m); $274.21m in 2023 (profit $11.94m); and a record $296m this year.
A subsidiary of British multinational Compass Group, the New Zealand operation began in 1987 and has 4000 staff, including more than 500 chefs at 300 sites around the country.
Compass also services Scott Base in Antarctica with one permanent person.
It operates in the education, hospital and senior living, corporate and leisure, business and industry, and defence sectors with six brands and 77 clients, which also have multiple sites.
Medirest provides the daily food for patients in 12 public hospitals and a premium bedside service for four Southern Cross private hospitals, and for CHT Care Homes residents. Restaurant Associates caters for Air New Zealand, Qantas and Emirates airport lounges, as well as for ANZ Bank and Deloitte.
Chartwells serves boarding school students, cafes and staff functions at secondary schools such as St Cuthbert’s College, Saint Kentigerns and Diocesan School for Girls in Auckland, Sacred Heart in New Plymouth and Te Aute Boys College near Hastings.
Eurest caters for staff canteens in the industrial sector for clients such as Affco, Tegel, Fonterra, and Team Global Express. ESS is contracted to look after the Army, Navy and Air Force dining needs at Whenuapai, Devonport, Ohakea, Waiouru, Trentham and Woodbourne bases.
Compass has introduced a new brand, Rapport, which provides concierge and reception services for the Deloitte Centre in Auckland and Wellington, and the ANZ towers in Auckland, Wellington and Christchurch. Compass, ever extending itself, will also clean, complete routine maintenance and run laundry services for its clients.
Well-established GPC NZ has been around the country for 100 years through its state-of-the-art aftermarket parts and accessories business.
Lately, GPC has been undertaking a refreshment plan by investing in new infrastructure, focusing more on the customer and engaging more with its team members.
“We have had an in-depth review of customer needs now and into the future and how we service them,” said GPC NZ executive general manager Jonathon Maddren. “We shared our plan with our teams to reinvigorate the business. It’s not that we lost focus; we had to move with the times.”
He said the makeup of the vehicles on the road has changed with the advent of hybrids and EVs and the different technology involved. “We’ve been training staff and even customers to meet the [new] product requirements.”
GPC’s 30,000sq m, automated distribution centre at Wiri has been fully operational for a year and stocks many hundreds of thousands of automotive and industrial parts.
Five Auckland-based distribution centres were consolidated into one state-of-the-art facility to cater for ongoing growth.
In May last year, GPC bought the remaining 70% it didn’t own of SAS Autoparts (Shock Absorber Services) which has 19 locations in New Zealand. A year earlier GPC bought certain assets of Century Distributors and BGH Group to extend its customer base.
According to the 2023 financial statement on the Companies Register, GPC had a total revenue of $580.23m, up from $148.76m the previous year – with trade customer contracts making up $426.65m and retail $153.58m.
Gross profit was $268.72m compared with $232.23m in the 2022 financial year ending December, and net profit was $25.97m, up from $20.54m. The inventory was worth $1634.42m.
GPC NZ is part of GPC Asia Pacific and is owned by Atlanta-based Genuine Parts Company, established in 1928 and listed on the New York Stock Exchange.
The parent company has 10,700 locations in 17 countries and employs more than 60,000 people.
The New Zealand operation has Repco for retail and trade; NAPA with more specialist products for the trade; and Motion industrial products which has “belts, bearing and fluids to keep the factories moving.”
GPC NZ has 1900 staff and 160 locations with 87 Repco stores, 39 NAPA and 34 Motion.
The Country looks back at some of the biggest and best stories of the past 12 months.