Palmer & Harvey has insisted Costcutter service levels are “back up to where they should be” after taking over the symbol group’s distribution in July this year.

Speaking exclusively to The Grocer, P&H managing director Martyn Ward said the delivery and availability problems experienced by retailers since P&H took over the contract from Nisa had been caused by a lack of forecasting data from Nisa, chilled volumes increasing faster than forecast and slow-moving lines causing efficiency issues in its depots.

“Because of contractual obligations and minimum order quantities imposed by Nisa, the vast majority of the migration took place in a four to six-week period,” Ward said.

“With the scale and speed of the change, there were always going to be some issues. We apologise to anyone who has been affected but service levels are right back up and we’re improving forecasting all the time.”

Ward said the chilled forecasting issues had been addressed by bringing forward plans to upgrade P&H’s Avonmouth depot. The company had also found there were 2,000 to 3,000 lines that were moving much slower than forecast. These were taking up space in its depots for faster-moving lines, so P&H reopened its former Winerite depot in Leeds to handle them.

Costcutter and P&H’s joint buying venture, The Buyco, was progressing well, he added. The first round of negotiations with suppliers had been largely completed and it was now into annual negotiations for next year. He said suppliers had “embraced the strategic direction we are going in,” adding some 500 lines had now been developed for The Buyco’s new Independent own-label range.

Ward also revealed the wholesaler’s financial results for the year to 5 April 2014. EBITDA fell 18.2% to £29.6m, while pre-tax profits excluding exceptional items dropped 70% to £3.8m. Profits were hit by increased operating expenses and investment ahead of the Costcutter migration.

Total sales slipped 0.6% to £4.2bn, with tobacco sales down 3.3% to £3.1bn but non-tobacco sales up 7.2% to £1bn.

Tobacco sales were affected by the termination of a supply contract with Makro in November 2013, the loss of a contract to supply about 400 McColl’s c-stores, and the government’s ‘2% above RPI’ duty increase.

Non-tobacco sales were boosted by new contract wins with One Stop and Coca-Cola Enterprises during the year, which P&H said “more than offset” the McColl’s loss.

It predicted the new Costcutter contract would increase sales by more than £300m in the year to April 2015, up from £20m this year.

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