Annual Report • Sep 27, 2015
Annual Report
Open in ViewerOpens in native device viewer
ARYZTA Food Group – Continuing Operations
1
Commenting on the results, ARYZTA AG Chief Executive Officer Owen Killian said:
"ARYZTA has been in constant evolution to remain relevant to consumers as changing consumer trends negatively impacted parts of our business. This involved significant capital investment of €1.3bn and acquisitions of €2.4bn to reposition the business since FY 2010. ARYZTA is now fully focused on speciality food, with the divestment of our Origin investment and reinvestment in Picard.
ARYZTA is well invested and strategically positioned to grow its relevance to customers through food innovation and customisation in a highly competitive market. ARYZTA has strategic partnerships with large scale customers with complex supply chains. ARYZTA Food Solutions provides speciality food for an increasingly sophisticated consumer, through independent and professional food service customers with differentiated offerings, while customers who fail to differentiate continue to experience challenges. ARYZTA can help every customer to survive, either through supply chain partnerships or speciality food propositions.
FY 2015 has been a disappointing year for shareholders as underlying revenue growth failed to materialise, resulting in negative operating leverage. Our focus is now on delivering the underlying revenue growth potential of the business, which is expected to generate a tenfold expansion in free cash generation in FY 2016 to €200m+ and building further thereafter. We expect to achieve underlying fully diluted EPS in the range of 365- 385 cent for FY 2016."
The ARYZTA full year results for the year ended 31 July 2015 are available for download from the ARYZTA website and at the following link: http://www.aryzta.com/2015-FullYear-Results
ARYZTA AG ('ARYZTA') is a global food business with a leadership position in speciality bakery. ARYZTA is based in Zurich, Switzerland, with operations in North America, Europe, Asia, Australia, New Zealand and South America. ARYZTA has a primary listing on the SIX Swiss Exchange and a secondary listing on the ISE Irish Exchange (SIX: ARYN, ISE: YZA).
Paul Meade Communications Officer ARYZTA AG Tel: +41 (0) 44 583 42 00 [email protected]
2
An analyst call will take place today at 09:00 CET (08:00 BST).
Dial in numbers are: Switzerland: 022 595 4764, Ireland: 01 526 9481, UK: 0844 493 3800, USA: 1 631 510 7498, International: +44 1452 555566.
Please provide the following code: 43248776 to access the call.
A printable version of the slides will be available to download from the ARYZTA website www.aryzta.com 15 minutes before the call.
A conference call webcast replay will be available from the ARYZTA website www.aryzta.com
This document contains forward looking statements which reflect management's current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.
| in EUR `000 | July 2015 | July 2014 | % Change |
|---|---|---|---|
| Continuing operations | |||
| Group revenue | 3,820,231 3,393,783 | 12.6% | |
| EBITA1 | 513,965 | 486,294 | 5.7% |
| EBITA margin | 13.5% | 14.3% | (80)bps |
| Joint venture | (1,210) | – | – |
| EBITA including joint venture | 512,755 | 486,294 | 5.4% |
| Finance cost, net | (83,390) | (62,604) | – |
| Hybrid instrument accrued dividend | (30,673) | (29,548) | – |
| Pre-tax profits | 398,692 | 394,142 | – |
| Income tax | (64,035) | (65,754) | – |
| Non-controlling interests | (4,669) | (3,800) | – |
| Underlying net profit – continuing operations | 329,988 | 324,588 | 1.7% |
| Underlying net profit – discontinued operations2 | 29,735 | 52,890 | (43.8)% |
| Underlying net profit – total | 359,7233 | 377,4783 | (4.7)% |
| Underlying fully diluted EPS (cent) – total | 402.24 | 422.24 | (4.7)% |
| Underlying net profit – continuing operations | 329,988 | 324,588 | 1.7% |
| Underlying fully diluted EPS (cent) – continuing operations | 368.94 | 363.04 | 1.6% |
1 See glossary in section 18 for definitions of financial terms and references used in the financial and business review.
2 Following the reduction in the Group's investment in Origin during March 2015, the Group's proportion of Origin's results have been presented separately as discontinued operations in both the current and prior year.
3 See bridge from underlying net profit to reported net profit as included on page 18.
4 The 31 July 2015 weighted average number of ordinary shares used to calculate underlying earnings per share is 89,441,152 (2014: 89,407,313).
| Continuing operations in EUR million |
Food Europe | Food North America |
Food Rest of World |
Total Group |
|---|---|---|---|---|
| Group revenue | 1,646.6 | 1,942.3 | 231.3 | 3,820.2 |
| Underlying growth | 1.0% | (6.2)% | 3.3% | (2.2)% |
| Acquisitions, net | 0.4% | 14.8% | – | 7.1% |
| Currency | 2.4% | 13.8% | 1.4% | 7.7% |
| Revenue Growth | 3.8% | 22.4% | 4.7% | 12.6% |
| Continuing operations in EUR `000 |
July 2015 |
July 2014 |
% Change |
EBITA Margin 2015 |
EBITA Margin 2014 |
% Change |
|---|---|---|---|---|---|---|
| Food Europe | 212,031 | 230,334 | (7.9)% | 12.9% | 14.5% | (160) bps |
| Food North America | 275,108 | 230,313 | 19.4% | 14.2% | 14.5% | (30) bps |
| Food Rest of World | 26,826 | 25,647 | 4.6% | 11.6% | 11.6% | – bps |
| Total Group EBITA | 513,965 | 486,294 | 5.7% | 13.5% | 14.3% | (80) bps |
| Joint venture | (1,210) | – (100.0)% | ||||
| Total EBITA incl. joint venture |
512,755 | 486,294 | 5.4% |
During March 2015, ARYZTA announced the completion of its offering of 49 million ordinary shares of Origin Enterprises plc ('Origin') for €8.25 per share, which raised net proceeds for ARYZTA of €398.1m. The divestment simplifies ARYZTA's reporting structure and transforms ARYZTA into a business that is fully focused on speciality food.
Following the placing, the Group's investment in Origin was reduced from 68.1% to 29.0% and Origin has been accounted for as an associate held-for-sale, rather than as a fullyconsolidated subsidiary.
As Origin previously represented a significant component and a separately reported segment of the Group, Origin's results have been separately presented as discontinued operations, in both the current and prior years, as shown below:
| Aug – Mar 2015 |
Apr – Jul 2015 |
July 2015 |
July 2014 |
% Change |
|
|---|---|---|---|---|---|
| Revenue | 829,518 | 628,580 | 1,458,098 1,415,239 | 3.0% | |
| EBITA | 12,803 | 66,092 | 78,895 | 79,513 | (0.8)% |
| EBITA margin | 1.5% | 10.5% | 5.4% | 5.6% | (20)bps |
| Associates and JV, net of tax | 8,172 | 5,904 | 14,076 | 13,392 | – |
| EBITA incl. associates and JV | 20,975 | 71,996 | 92,971 | 92,905 | 0.1% |
| Finance cost, net | (3,591) | (1,219) | (4,810) | (5,534) | – |
| Pre-tax profits | 17,384 | 70,777 | 88,161 | 87,371 | – |
| Income Tax | (1,572) | (11,118) | (12,690) | (12,426) | – |
| Total underlying net profit | 15,812 | 59,659 | 75,471 | 74,945 | 0.7% |
| Non-ARYZTA portion of discontinued operations |
(3,373) | (42,363) | (45,736) | (22,055) | (107.4)% |
| Underlying net profit contribution – discontinued operations |
12,439 | 17,296 | 29,735 | 52,890 | (43.8)% |
Also see the calculation of the net gain on disposal of discontinued operations included in note 9 and the additional disposal of the remaining 29.0% interest subsequent to yearend, as included in note 14.
5
ARYZTA's business is speciality food with a primary focus on speciality baking, a niche segment of the overall bakery market. Speciality bakery consists of freshly prepared food giving the best value, variety, taste and convenience to consumers at the point of sale. ARYZTA's customer channels consist of a mix of large retail, convenience and independent retail, Quick Serve Restaurants ('QSR') and other foodservice categories.
Total revenue from continuing operations increased by 12.6% to €3.8bn, entirely due to acquisitions and currency. Underlying revenue declined in the year by (2.2)%, reflecting the impact of the volume losses associated with the North American capacity optimisation strategy. As communicated throughout the year, these efforts are aimed at freeing capacity for larger customers, without committing further investment capital. There was a strong 7.1% contribution to revenue from acquisitions, primarily from the prior year acquisitions of Cloverhill and Pineridge in North America. The year also benefited from a favourable currency impact of 7.7%, mostly as a result of the strengthening of the US Dollar.
Group EBITA from continuing operations increased 5.7% to €514.0m, while EBITA margins declined by (80) bps to 13.5%, reflecting the softening of European margin performance due to ARYZTA Food Solutions volume declines during the second half, as well as the reduced operating leverage, as a result of the capacity optimisation efforts in North America.
Food Europe has leading market positions in the European speciality bakery market. It has a diversified customer base including convenience retail, gas stations, multiple retail, restaurants, catering, hotels, leisure and QSR.
Food Europe revenue grew by 3.8% to €1.6bn. Underlying revenues grew 1.0% during the year. Acquisition related revenue growth added 0.4% and a favourable currency impact added 2.4%, compared to the prior year. Food Europe EBITA declined by (7.9)% to €212.0m, while EBITA margins decreased by (160) bps to 12.9%.
Within Food Europe the business has experienced notable changes in customer and consumer behaviour, as a result of the hourglass economy. At the lower end of the hourglass, Bakeries Europe delivered strong, volume driven, underlying revenue growth of c. 3% providing quality food offerings at value.
At the top end of the hourglass, Food Solutions Europe is also achieving c. 2% growth rates providing customised speciality food offerings to food professionals. However, in the middle of the hourglass, which is also serviced by Food Solutions, revenues are being squeezed. As a result, the business suffered a significant step change in pricing and volume declines during the year across continental Europe, primarily within the convenience & independent retail channel. These impacts are expected to moderate during FY 2016.
Due to the proportionately higher operating costs required to service incremental Food Solutions revenues, these revenue reductions led to significantly lower operating leverage, as the remaining revenues were left to absorb the existing fixed cost base.
In response to these challenges, management has not only focused on re-aligning the cost base, but also on opportunities to drive increased sales. These include transferring the existing product offering across regions, investing in technology to enable automated customer re-ordering and driving product innovation to help ARYZTA customers differentiate themselves with their consumers.
During January 2015, the Group agreed to exchange certain assets within the Food Europe operating segment for a 50% interest in Signature Flatbreads, a pioneering flatbread producer in India and the UK. While the assets disposed had historically generated approximately €100m in annual revenues, the associated margins had recently begun to deteriorate. Therefore, management felt the significant opportunities presented through a joint venture in India provided an appropriate exit strategy for that business. During April 2015, the Group also agreed to sell its 100% interest in a non-core business, Carroll Cuisine, which historically generated approximately €45m in annual revenues. These transactions resulted in a non-cash loss on disposals of €45.7m.
During the second half of the year, Food Europe completed the separate acquisitions of Pré Pain, a recognised leader in 'crusty bake-off bread' in the Netherlands, and Fornetti, a leading bakery goods supplier in Hungary, for total combined consideration of €190.9m. These acquisitions have historically generated combined annual revenues of approximately €130m and provide additional well-invested capacities, further customer relationships and new geographic market expansion within Northern and Eastern Europe.
During the year ended 31 July 2015, Food Europe invested €178.5m to add newly automated bakery capacities, primarily in Germany, the UK and Denmark, which are significantly dedicated to strategic customers and in completing or enhancing the ERP roll-out in certain locations.
During the year, Food Europe incurred €72.4m of non-cash asset write-downs of various manufacturing, distribution and administration assets due to the planned reduction in activities expected to be generated from those assets. These reductions are the direct result of the Group's recent integration and rationalisation programme investments, which were aimed at replacing obsolete assets, optimising the distribution network and streamlining administrative functions.
Food Europe incurred cash non-recurring costs of €52.3m, primarily related to advisory, severance and staff-related costs associated with completion of certain ATI programme projects, as well as costs associated with the Group's various acquisition and investment activities.
Food North America is a leading player in the speciality bakery market. It has a diversified customer base, including multiple retail, restaurants, catering, hotels, leisure, hospitals, military, fundraising and QSR. ARYZTA is the leader in high-value artisan bakery via La Brea Bakery, which focuses on the premium branded bakery segment. ARYZTA's well-established partnerships with key global QSR customers, which dominate the North American convenience food landscape, also provide the Group with a solid customer base from which to further grow market share.
Food North America revenues increased by 22.4% to €1.9bn. While underlying revenue declined by (6.2)% during the year, there was a strong contribution of 14.8% from
the prior year acquisitions of Cloverhill and Pineridge, which continued to perform to expectation, and a favourable currency impact of 13.8%.
The decline in Food North America underlying revenue reflects the impact of the capacity optimisation strategy to free up capacity for higher volume customers without committing further investment capital. While the business has already replaced more than half of the volume lost as part of the program, this strategy is expected to continue to impact Food North America underlying revenue into FY16. Beginning in H2-16 these underlying declines are expected to subside, as replacement volumes continue to rebuild from the existing customer pipeline, as well as from increased management focus on growth of ARYZTA own-branded product sales.
Food North America EBITA grew by 19.4% to €275.1m, while EBITA margins declined (30)bps to 14.2%. These declines reflect the decreased operating leverage created by the decline in underlying revenues during the period; however, management has done an excellent job containing the cost base during this transition and during the second half of the year was able to maintain margins consistent with prior year.
During the year, Food North America invested an additional €146.4m to expand capabilities in-line with the needs of strong international partners and to focus on higher margin, higher revenue per tonne, products going forward.
Food North America also incurred non-cash asset write-downs of €68.5m during the year, as a direct result of these transitions and the resulting closure of multiple aged manufacturing locations, as well as the reduction in use of various other administration equipment or obsolete production assets.
In North America, the cash costs for non-recurring items were €31.4m, related primarily to advisory, severance and staff-related costs associated with the integration of recently acquired businesses supply chain and distribution functions into the Group's network, costs associated with the closure of select facilities and further centralisation of certain administrative functions.
ARYZTA's operations in the Rest of World include businesses in Australia, Asia, New Zealand and South America. While accounting for less than 10% of the Food Group business, these locations provide attractive future growth opportunities.
Food Rest of World revenues increased by 4.7% to €231.3m, with a strong underlying growth contribution of 3.3% and a favourable currency impact of 1.4%.
Food Rest of World EBITA increased by 4.6% to €26.8m and EBITA margins were stable at 11.6%.
While underlying revenue growth was slightly negative during Q4-15 due to timing issues, the annual run rate remains positive. There was strong revenue growth in Brazil, as the expanded bakery capacities there begin to gain momentum, but there was some weakness within APAC. These trends are reflective of the performance of large QSR customers across these regions.
During the year ended 31 July 2015 the Group incurred the following amounts related to integration, rationalisation and restructuring of the Group:
| in EUR `000 | Discontinued Operations 2015 |
Continuing Operations Non-cash 2015 |
Continuing Operations Cash 2015 |
Total 2015 |
|---|---|---|---|---|
| Net gain/(loss) on disposal of businesses | 523,300 | (45,685) | – | 477,615 |
| Asset write-downs | – | (146,289) | – | (146,289) |
| Acquisition-related costs | – | – | (9,982) | (9,982) |
| Severance and other staff-related costs | – | – | (48,642) | (48,642) |
| Contractual obligations | – | – | (2,087) | (2,087) |
| Advisory and other costs | – | – | (27,265) | (27,265) |
| Year ended 31 July 2015 | 523,300 | (191,974) | (87,976) | 243,350 |
During March 2015, ARYZTA announced the completion of its offering of 49 million ordinary shares of Origin for €8.25 per share, which raised net proceeds for ARYZTA of €398,108,000. At the time of the placing, the deemed fair value of the Group's remaining 29.0% interest in Origin was also valued at €8.25 per share, resulting in a value of €299,329,000. As the total deemed consideration exceeded the Group's €145,678,000 share of the disposed net assets and cash balances of Origin, the Group recognised a gain on disposal of discontinued operations of €551,759,000.
Following the placing, the Group's remaining 29.0% interest in Origin has been determined to be an associate held-for-sale, recorded at fair value, less costs to sell. Based on the unadjusted quoted price of €7.62 as of 31 July 2015, less estimated costs to sell, a fair value adjustment of €28,459,000 was recorded during the period to reduce the carrying value to €270,870,000 as of 31 July 2015, resulting in a total net gain in relation to the disposal of Origin of €523,300,000, as shown below:
| in EUR `000 | Total |
|---|---|
| Cash received, net of transaction costs | 398,108 |
| Net cash disposed | (25,133) |
| Cash received, net of cash disposed | 372,975 |
| Fair value of retained 29% interest | 299,329 |
| Total consideration | 672,304 |
| ARYZTA's share of Origin net assets disposed | (120,545) |
| Gain on disposal of discontinued operations | 551,759 |
| Fair value adjustment to associate held-for-sale | (28,459) |
| Net gain on disposal of discontinued operations | 523,300 |
Also see the additional disposal of the remaining 29.0% interest subsequent to year-end, as included in note 14.
During January 2015, the Group agreed to exchange certain assets, for a 50% interest in Signature Flatbreads (UK) Ltd. As the €53,106,000 total fair value of the Group's 50% interest and the Vendor Loan Note receivable from the Joint Venture, were less than the €66,659,000 carrying value of the net assets exchanged and related costs incurred, the transaction resulted in a loss on disposal in the amount of €13,789,000, including foreign exchange losses of €236,000.
During April 2015, the Group agreed to sell its 100% interest in Carroll Cuisine, for cash consideration of €37,276,000. As the proceeds received exceeded the €12,970,000 carrying value of the net assets disposed and associated costs incurred, the transaction resulted in a gain on disposal of €24,306,000.
As a result of the two disposals above, the Group also wrote-off a proportionate amount of Goodwill within the UK and Ireland Cash Generating Unit in the amount of €56,202,000. The total of the above disposals and the associated write-down of Goodwill resulted in a net loss on disposal of businesses within continuing operations of €45,685,000 during the year ended 31 July 2015.
The Group also incurred €146,289,000 of asset write-downs during the year, primarily related to the write-down of various manufacturing, distribution and administration assets within the Food Europe and Food North America segments, following the closure and/ or reduction in activities expected to be generated from those assets. These reductions are the direct result of the Group's recent integration and rationalisation programme investments, which have replaced obsolete assets, optimised the distribution network and streamlined administrative functions.
As these non-cash gains and losses included above are added back when calculating ROIC for management compensation purposes, they had no impact on management compensation.
The Group also incurred €87,976,000 of costs related to the continued integration of prior year acquisitions into the Group's bakery network. These estimated integration costs are in-line with the €70,000,000 guidance when adjusted for currency and the incremental costs associated with current year acquisitions.
As of 31 July 2015, the Group's financing facilities, related capitalised upfront borrowing costs, finance leases, overdrafts and cash balances outstanding were as follows:
| Debt Funding | Principal | Maturity | Outstanding in EUR `000 |
|---|---|---|---|
| Feb 2014 – Syndicated Bank Loan | USD 330m | Feb 2019 | (297,056) |
| Feb 2014 – Syndicated Bank Loan | CHF 230m | Feb 2019 | (216,267) |
| Feb 2014 – Syndicated Bank Loan | GBP 100m | Feb 2019 | (141,024) |
| Feb 2014 – Syndicated Bank Loan | CAD 110m | Feb 2019 | (76,146) |
| Feb 2014 – US Private Placement | USD 490m / EUR 25m | Feb 2020 – Feb 2024 | (466,084) |
| May 2010 – US Private Placement | USD 350m / EUR 25m | May 2016 – May 2022 | (340,060) |
| Dec 2009 – US Private Placement | USD 200m | Dec 2021 –Dec 2029 | (180,034) |
| Jun 2007 – US Private Placement | USD 300m | Jun 2017 – Jun 2019 | (270,051) |
| Food Group gross term debt | (1,986,722) | ||
| Food Group upfront borrowing costs | 15,011 | ||
| Food Group term debt, net of upfront borrowing costs | (1,971,711) | ||
| Food Group finance leases | (1,425) | ||
| Food Group cash and cash equivalents, net of overdrafts | 248,033 | ||
| Food Group net debt | (1,725,103) |
| Hybrid funding at 31 July 2015 exchange rates | (804,772) | ||
|---|---|---|---|
| Hybrid funding fair value adjustment to year-end exchange rates | (84,316) | ||
| Hybrid funding at historical cost, net of associated costs | |||
| April 2013 – Perpetual callable subordinated instrument |
CHF 400m | No maturity – First call date April 2018 |
(319,442) |
| Oct 2014 – Perpetual callable subordinated instrument |
CHF 190m | No maturity – First call date April 2020 |
(155,679) |
| Nov 2014 – Perpetual callable subordinated instrument |
EUR 250m | No maturity – First call date March 2019 |
(245,335) |
As of 31 July 2015, the Group's interest cover including hybrid interest was 5.76x (2014: 7.29x). The weighted average maturity of the Group gross term debt was 4.98 years (2014: 5.43 years). The weighted average interest cost of Group debt financing facilities (including overdrafts) was 3.84% (2014: 3.63%).
ARYZTA intends to maintain an investment grade position in the range of 2x – 3x Net debt: EBITDA on its syndicated bank loan. The Group's key financial ratio is as follows:
| July 2015 | July 2014 | |
|---|---|---|
| Net Debt: EBITDA1 (syndicated bank loan) | 2.54x | 2.49x |
1 Calculated based on the terms of the Group Syndicated Bank Loan Revolving Credit Facility.
1 The Group term debt maturity profile is set out as at 31 July 2015. Food Group gross term debt at 31 July 2015 is €1,986.7m. Group net debt at 31 July 2015 is €1,725.1m, which also includes overdrafts and finance leases, and is net of cash and related capitalised upfront borrowing costs.
2 Incorporating the drawn amount on the Revolving Credit Facility of € 730.5m as at 31 July 2015, which represents 37 % of the Group gross term debt.
The principal euro foreign exchange currency rates used by the Group for the preparation of these Financial Statements are as follows:
| Currency | Average 2015 |
Average 2014 |
% Change | Closing 2015 |
Closing 2014 |
% Change |
|---|---|---|---|---|---|---|
| CHF | 1.1191 | 1.2250 | 8.6% | 1.0635 | 1.2169 | 12.6% |
| USD | 1.1799 | 1.3601 | 13.2% | 1.1109 | 1.3430 | 17.3% |
| CAD | 1.4009 | 1.4590 | 4.0% | 1.4446 | 1.4611 | 1.1% |
| GBP | 0.7547 | 0.8291 | 9.0% | 0.7091 | 0.7933 | 10.6% |
| Cash generation – continuing operations | ||
|---|---|---|
| in EUR `000 | July 2015 | July 2014 |
| EBIT | 345,943 | 362,532 |
| Amortisation | 168,022 | 123,762 |
| EBITA | 513,965 | 486,294 |
| Depreciation | 124,306 | 102,879 |
| EBITDA | 638,271 | 589,173 |
| Working capital movement | (63,319) | 12,372 |
| Working capital movement from debtor securitisation | 104,077 | 34,224 |
| Maintenance capital expenditure | (80,725) | (59,970) |
| Segmental operating free cash generation | 598,304 | 575,799 |
| Investment capital expenditure1 | (329,412) | (276,843) |
| Acquisition and restructuring-related cash flows | (101,266) | (105,561) |
| Segmental operating free cash generation, after investment capital expenditure and integration costs |
167,626 | 193,395 |
| Dividends received from Origin | 17,056 | 16,388 |
| Hybrid dividend | (39,107) | (29,388) |
| Interest and tax | (117,947) | (103,375) |
| Other non-cash income2 | (6,200) | (2,941) |
| Cash flow generated from activities | 21,428 | 74,079 |
Net debt and investment activity – continuing operations
| in EUR `000 | FY 2015 | FY 2014 |
|---|---|---|
| Opening net debt as at 1 August | (1,642,079) | (849,228) |
| Cash flow generated from activities | 21,428 | 74,079 |
| Disposal of businesses, net of cash and finance leases | 22,728 | – |
| Proceeds from reduction of interest in Origin | 398,108 | 71,789 |
| Net debt cost of acquisitions | (149,822) | (862,792) |
| Contingent consideration | (9,240) | (4,190) |
| Hybrid instrument proceeds | 69,334 | – |
| Dividends paid | (69,364) | (51,146) |
| Foreign exchange movement3 | (363,792) | (22,682) |
| Other4 | (2,404) | 2,091 |
| Closing net debt as at 31 July | (1,725,103) | (1,642,079) |
1 Includes expenditure on intangible assets.
2 Other non-cash income comprises primarily amortisation of deferred income from government grants.
3 Foreign exchange movement for the year ended 31 July 2015 is primarily attributable to the fluctuation in the US Dollar to euro rate from July 2014 (1.3430) to July 2015 (1.1109) and in the Swiss Franc to euro rate from July 2014 (1.2169) to July 2015 (1.0635).
4 Other comprises primarily proceeds on disposal of property, plant and equipment, and amortisation of financing costs.
| Continuing operations | Food | Food North |
Food Rest of |
Total |
|---|---|---|---|---|
| in EUR million | Europe | America | World | Group |
| 2015 | ||||
| Group share net assets | 2,023 | 2,602 | 204 | 4,829 |
| EBITA & JVs cont. | 217 | 275 | 27 | 519 |
| ROIC1 | 10.7% | 10.6% | 13.2% | 10.7% |
| 2014 | ||||
| Group share net assets | 1,811 | 2,303 | 243 | 4,357 |
| EBITA | 237 | 261 | 26 | 524 |
| ROIC1 | 13.1% | 11.3% | 10.6% | 12.0% |
1 ROIC is calculated on a consistent basis year over year using a pro-forma trailing twelve months segmental EBITA and Profit from Joint Ventures ('TTM EBITA') divided by the respective Segmental Net Assets as of the end of each respective period. See glossary in section 18 for further definitions of financial terms and references used.
2 The Food Group WACC on a pre-tax basis is currently 7.4% (2014: 7.0%).
| Group Balance Sheet in EUR `000 |
Total Group 2015 |
Total Group 2014 |
|---|---|---|
| Property, plant and equipment | 1,543,263 | 1,374,010 |
| Investment properties | 25,916 | 30,716 |
| Goodwill and intangible assets | 3,797,269 | 3,690,597 |
| Deferred tax on acquired intangibles | (246,116) | (255,639) |
| Associates and joint ventures | 32,067 | 54,911 |
| Other financial assets | 28,644 | 42,586 |
| Working capital | (218,669) | (197,394) |
| Other segmental liabilities | (132,849) | (122,708) |
| Segmental net assets | 4,829,525 | 4,617,079 |
| Associate held-for-sale | 270,870 | – |
| Net debt | (1,725,103) | (1,653,991) |
| Deferred tax, net | (95,423) | (105,799) |
| Income tax | (45,813) | (60,152) |
| Derivative financial instruments | (12,113) | (5,680) |
| Net assets | 3,221,943 | 2,791,457 |
| Continuing Operations Balance Sheet in EUR `000 |
Continuing operations 2015 |
Continuing operations 2014 |
|---|---|---|
| Property, plant and equipment | 1,543,263 | 1,283,584 |
| Investment properties | 25,916 | 23,141 |
| Goodwill and intangible assets | 3,797,269 | 3,539,225 |
| Deferred tax on acquired intangibles | (246,116) | (246,717) |
| Joint venture | 32,067 | – |
| Other financial assets | 28,644 | – |
| Working capital | (218,669) | (149,277) |
| Other segmental liabilities | (132,849) | (93,481) |
| Segmental net assets | 4,829,525 | 4,356,475 |
| Associate held-for-sale | 270,870 | 46,515 |
| Net debt | (1,725,103) | (1,642,079) |
| Deferred tax, net | (95,423) | (102,102) |
| Income tax | (45,813) | (41,019) |
| Derivative financial instruments | (12,113) | (4,465) |
| Net assets | 3,221,943 | 2,613,325 |
At the Annual General Meeting on 8 December 2015, shareholders will be invited to approve a proposed dividend of CHF 0.6555 (€0.6033) per share. If approved, the dividend will be paid to shareholders on 1 February 2016. A dividend of CHF 0.7646 per share was paid during the year, as approved by shareholders at the Annual General Meeting on 2 December 2014.
During August 2015, the Group completed its previously announced agreement to acquire a strategic interest in Picard, a speciality premium food business in France. Based on the terms of the final agreement, total consideration paid was €450,732,000, in exchange for a 49.5% interest in Picard.
ARYZTA also retains the right to exercise a call option to acquire the remaining outstanding interest in Picard in three to five years. Picard remains a separately managed entity, with separately funded debt, which is non-recourse to ARYZTA.
During September 2015, the Group completed the divestment of its remaining 29.0% interest in Origin, which was classified as an associate held-for-sale as of 31 July 2015.
ARYZTA raised net proceeds of €225m by placing 36.3m shares in Origin at €6.30 per share, resulting in an estimated net loss of €46m compared to the yearend carrying value of €271m. This fair value adjustment will be accounted for within discontinued operations during the year ending 31 July 2016, along with the operating results of Origin, up to the date of disposal.
During September 2015, the Group completed the 100% acquisition of La Rousse Foods ('La Rousse') for an enterprise value of €26,500,000. La Rousse supplies fresh, frozen and ambient goods to various restaurants, hotels and caterers across Ireland.
Following recent repositioning and investments, ARYZTA's focus in FY 2016 is on delivering the underlying revenue growth potential of the business. This is expected to generate a tenfold expansion in free cash generation to over €200m in FY 2016. We expect to achieve underlying fully diluted EPS in the range of 365-385 cent for FY 2016.
The Board and senior management have invested significant time and resources in identifying specific risks across the Group, and in developing a culture of balanced risk minimisation. The Board considers the risks and uncertainties disclosed on page 19 to continue to reflect the principal risks and uncertainties of the Group.
This report contains forward looking statements, which reflect management's current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.
'Joint venture' – presented as profit from joint venture, net of taxes and interest, before non-ERP amortisation and the impact of associated non-recurring items.
'EBITA' – presented as earnings before interest, taxation, non-ERP related intangible amortisation; before net acquisition, disposal and restructuring-related costs and fair value adjustments and related tax credits.
'EBITDA' – presented as earnings before interest, taxation, depreciation and amortisation; before net acquisitions, disposal and restructuring-related costs and fair value adjustments and related tax credits.
'ERP' – Enterprise Resource Planning intangible assets include the Group SAP system.
'Hybrid instrument' – presented as Perpetual Callable Subordinated Instrument in the Financial Statements.
'Segmental Net Assets' – Based on segmental net assets, which excludes all bank debt, cash and cash equivalents and tax balances, with the exception of deferred tax liabilities associated with non-ERP intangible assets, as those deferred tax liabilities represent a notional non-cash tax impact directly linked to segmental intangible assets recorded as part of a business combination, rather than an actual cash tax obligation.
'Reported ROIC' – Return On Invested Capital is calculated using pro-forma trailing twelve months segmental EBITA and profit from Joint venture ('TTM EBITA') reflecting the full twelve months contribution from acquisitions, divided by the respective Net Assets.
'Underlying earnings' – presented as reported net profit, adjusted to include the Hybrid instrument accrued dividend as finance cost; before non-ERP related intangible amortisation; before net acquisition, disposal and restructuring-related costs and fair value adjustments and before any non-controlling interest allocation of those adjustments, net of related income tax impacts.
The Group utilises the Underlying earnings measure to enable comparability of the results from period to period, without the impact of transactions that do not relate to the underlying business. It is also the Group's policy to declare dividends based on underlying fully diluted earnings per share, as this provides a more consistent basis for returning dividends to shareholders.
for the financial year ended 31 July 2015
| ARYZTA Group | ARYZTA Group | |
|---|---|---|
| in EUR `000 | 2015 | 2014 |
| Underlying fully diluted net profit – continuing operations | 329,988 | 324,588 |
| Intangible amortisation | (168,022) | (123,762) |
| Tax on amortisation | 35,104 | 28,710 |
| Share of joint venture intangible amortisation, net of tax | (310) | – |
| Hybrid instrument accrued dividend | 30,673 | 29,548 |
| Net acquisition, disposal and restructuring-related costs | (279,950) | (170,711) |
| Tax on net acquisition, disposal and restructuring-related costs | 47,881 | 3,879 |
| Reported net (loss)/profit – continuing operations | (4,636) | 92,252 |
| Underlying fully diluted net profit – discontinued operations | 29,735 | 52,890 |
| Underlying contribution as associate – discontinuing operations | (17,296) | – |
| Intangible amortisation, non-recurring and other – discontinued | ||
| operations | (6,343) | (9,629) |
| Profit for the year – discontinued operations | 6,096 | 43,261 |
| Gain on disposal of discontinued operations | 551,759 | – |
| Fair value adjustment – discontinuing operations | (28,459) | – |
| Reported net profit – discontinued operations | 529,396 | 43,261 |
| Reported net profit attributable to equity shareholders | 524,760 | 135,513 |
The Board and senior management continue to invest significant time and resources in identifying specific risks across the Group, and in developing a culture of balanced risk minimisation. The Group has formal risk assessment processes in place through which risks are identified and associated mitigating controls are evaluated. These processes are driven by local management, who are best placed to identify the significant ongoing and emerging risks facing the business. The outputs of these risk assessment processes are subject to various levels of review by Group management and Internal Audit, and a consolidated Risk Map denoting the potential frequency, severity and velocity of identified risks, is reviewed by the Board of Directors on an annual basis. Risks identified, and associated mitigating controls, are also subject to audit as part of various operational, financial, health and safety audit programmes.
Company law requires the directors prepare Group consolidated and Company financial statements for each financial year. The directors are required to prepare the Group consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS') and the requirements of Swiss law and to prepare the Company financial statements in accordance with Swiss law and the Company's Articles of Association.
This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of the Group consolidated and Company financial statements that are free from material misstatement, whether due to fraud or error.
In preparing each of the Group consolidated and Company financial statements, the directors are required to:
The directors are responsible for keeping proper books of account that present, with reasonable accuracy at any time, the financial position of the Group and Company and enable them to ensure that its financial statements comply with IFRS, the requirements of Swiss law and the Company's Articles of Association.
They are also responsible for taking such steps as are reasonably available to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website.
On behalf of the Board
Denis Lucey Owen Killian Chairman, Board of Directors CEO, Member of the Board
23 September 2015
of Directors
for the year ended 31 July 2015
| Represented | |||
|---|---|---|---|
| in EUR `000 | Notes | 2015 | 2014 |
| Continuing Operations | |||
| Revenue | 2 | 3,820,231 | 3,393,783 |
| Cost of sales | (2,709,763) | (2,368,378) | |
| Distribution expenses | (407,658) | (377,856) | |
| Gross profit | 702,810 | 647,549 | |
| Selling expenses | (167,646) | (143,147) | |
| Administration expenses | (469,171) | (312,581) | |
| Operating profit | 2 | 65,993 | 191,821 |
| Share of loss after tax of joint ventures | (1,520) | – | |
| Profit before financing income, financing costs and income tax expense | 64,473 | 191,821 | |
| Financing income | 2,137 | 2,762 | |
| Financing costs | (85,527) | (65,366) | |
| (Loss)/profit before income tax | (18,917) | 129,217 | |
| Income tax credit/(expense) | 18,950 | (33,165) | |
| Profit for the year from continuing operations | 33 | 96,052 | |
| Discontinued operations | |||
| Profit for the year from discontinued operations | 3 | 532,246 | 63,487 |
| Profit for the year | 532,279 | 159,539 | |
| Attributable as follows: | |||
| Equity shareholders – continuing operations | (4,636) | 92,252 | |
| Equity shareholders – discontinued operations | 529,396 | 43,261 | |
| Equity shareholders – total | 524,760 | 135,513 | |
| Non-controlling interests – continuing operations | 4,669 | 3,800 | |
| Non-controlling interests – discontinued operations | 2,850 | 20,226 | |
| Non-controlling interests – total | 7,519 | 24,026 | |
| Profit for the year | 532,279 | 159,539 | |
| 2015 | 2014 | ||
| Basic earnings per share | Notes | euro cent | euro cent |
| From continuing operations | 5 | (39.8) | 71.1 |
| From discontinued operations | 5 | 597.1 | 49.1 |
| 557.3 | 120.2 | ||
| Diluted earnings per share | Notes | 2015 euro cent |
2014 euro cent |
| From continuing operations | 5 | (39.8) | 70.1 |
| From discontinued operations | 5 | 597.1 | 48.2 |
In accordance with IFRS 5, the figures for the year ended 31 July 2014 have been represented to reflect the impacts of discontinued operations together as a single amount, separate from the impacts of continuing operations. For further information see notes 1 and 3.
557.3 118.3
| Represented | ||
|---|---|---|
| in EUR `000 | 2015 Notes |
2014 |
| Profit for the year | 532,279 | 159,539 |
| Other comprehensive income | ||
| Items that may be reclassified subsequently to profit or loss: | ||
| Foreign exchange translation effects | ||
| – Foreign currency net investments | 370,741 | (5,037) |
| – Foreign currency borrowings | (359,872) 7 |
(19,241) |
| – Recycle of foreign exchange gain on settlement of quasi-equity loans | – | (1,488) |
| – Taxation effect of foreign exchange translation movements | 5,265 | (916) |
| – Foreign exchange translation effects related to discontinued operations | 9,286 | 8,030 |
| Cash flow hedges | ||
| – Effective portion of changes in fair value of cash flow hedges | (12,391) | (3,160) |
| – Fair value of cash flow hedges transferred to income statement | 4,936 | (1,554) |
| – Deferred tax effect of cash flow hedges | 599 | 466 |
| – Cash flow hedges gain related to discontinued operations, net of tax | 3,352 | 1,064 |
| Total of items that may be reclassified subsequently to profit or loss | 21,916 | (21,836) |
| Items that will not be reclassified to profit or loss: | ||
| Defined benefit plans | ||
| – Actuarial (loss)/gain on Group defined benefit pension plans | (6,882) | 193 |
| – Deferred tax effect of actuarial loss/(gain) | 1,216 | (2) |
| – Discontinued operations (loss)/gain on defined benefit plans, net of tax | (17,789) | 137 |
| Deferred tax effect of change in tax rates | – | (1,415) |
| Total of items that will not be reclassified to profit or loss | (23,455) | (1,087) |
| Total other comprehensive loss | (1,539) | (22,923) |
| Total comprehensive income for the year | 530,740 | 136,616 |
| Attributable as follows: | ||
| Equity shareholders of the Company | 522,888 | 109,440 |
| Non-controlling interests | 7,852 | 27,176 |
| Total comprehensive income for the year | 530,740 | 136,616 |
In accordance with IFRS 5, the figures for the year ended 31 July 2014 have been represented to reflect the impacts of discontinued operations together as a single amount, separate from the impacts of continuing operations. For further information see notes 1 and 3.
as at 31 July 2015
| in EUR `000 | Notes | 2015 | 2014 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 1,543,263 | 1,374,010 | |
| Investment properties | 25,916 | 30,716 | |
| Goodwill and intangible assets | 3,797,269 | 3,690,597 | |
| Investments in associates and joint ventures | 32,067 | 54,911 | |
| Other receivables | 28,644 | 42,586 | |
| Deferred income tax assets | 105,579 | 72,748 | |
| Derivative financial instruments | – | 342 | |
| Total non-current assets | 5,532,738 | 5,265,910 | |
| Current assets | |||
| Inventory | 259,855 | 362,469 | |
| Trade and other receivables | 264,036 | 614,326 | |
| Derivative financial instruments | 653 | 1,077 | |
| Cash and cash equivalents | 7 | 316,867 | 694,838 |
| Total current assets | 841,411 | 1,672,710 | |
| Associate held-for-sale | 3 | 270,870 | – |
| Total assets | 6,645,019 | 6,938,620 |
| in EUR `000 | 2015 Notes |
2014 |
|---|---|---|
| Equity | ||
| Called up share capital | 1,172 | 1,172 |
| Share premium | 774,040 | 773,735 |
| Retained earnings and other reserves | 2,428,295 | 1,928,798 |
| Total equity attributable to equity shareholders | 3,203,507 | 2,703,705 |
| Non-controlling interests | 18,436 | 87,752 |
| Total equity | 3,221,943 | 2,791,457 |
| Liabilities | ||
| Non-current liabilities | ||
| Interest-bearing loans and borrowings | 1,937,176 7 |
1,898,435 |
| Employee benefits | 15,274 | 12,451 |
| Deferred income from government grants | 16,998 | 21,261 |
| Other payables | 51,917 | 73,742 |
| Deferred income tax liabilities | 447,118 | 434,186 |
| Derivative financial instruments | 5,401 | 3,445 |
| Contingent consideration | – | 7,100 |
| Total non-current liabilities | 2,473,884 | 2,450,620 |
| Current liabilities | ||
| Interest-bearing loans and borrowings | 104,794 7 |
450,394 |
| Trade and other payables | 742,560 | 1,174,189 |
| Income tax payable | 45,813 | 60,152 |
| Derivative financial instruments | 7,365 | 3,654 |
| Contingent consideration | 48,660 | 8,154 |
| Total current liabilities | 949,192 | 1,696,543 |
| Total liabilities | 3,423,076 | 4,147,163 |
| Total equity and liabilities | 6,645,019 | 6,938,620 |
| 31 July 2015 in EUR `000 |
Share capital |
Share premium |
Treasury shares |
Other equity reserve |
Cash flow hedge reserve |
Revalua tion reserve |
Share based payment reserve |
Foreign currency trans lation reserve |
Retained earnings |
Total share holders equity |
Non controlling interests |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At 1 August 2014 | 1,172 | 773,735 | (55) | 604,446 | (3,616) | 13,322 | 19,454 | (29,045) 1,324,292 2,703,705 | 87,752 2,791,457 | |||
| Profit for the year | – | – | – | – | – | – | – | – | 524,760 | 524,760 | 7,519 | 532,279 |
| Other comprehensive (loss)/income |
– | – | – | – | (4,571) | – | – | 20,487 | (17,788) | (1,872) | 333 | (1,539) |
| Total comprehensive (loss)/income |
– | – | – | – | (4,571) | – | – | 20,487 | 506,972 | 522,888 | 7,852 | 530,740 |
| Issue of perpetual callable subordinated instruments |
– | – | – | 401,014 | – | – | – | – | – | 401,014 | – | 401,014 |
| Redemption of perpetual callable subordinated instrument |
– | – | – (285,004) | – | – | – | – | (46,676) (331,680) | – (331,680) | |||
| Release of treasury shares due to exercise of LTIP |
– | 305 | 8 | – | – | – | – | – | – | 313 | – | 313 |
| Share-based payments | – | – | – | – | – | – | 1,705 | – | – | 1,705 | – | 1,705 |
| Transfer of share-based payment reserve to retained earnings |
– | – | – | – | – | – | (19,919) | – | 19,919 | – | – | – |
| Equity dividends | – | – | – | – | – | – | – | – | (65,034) | (65,034) | – | (65,034) |
| Dividends to non-controlling interests |
– | – | – | – | – | – | – | – | – | – | (12,307) | (12,307) |
| Dividend accrued on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (30,673) | (30,673) | – | (30,673) |
| Total contributions by and distributions to owners |
– | 305 | 8 | 116,010 | – | – | (18,214) | – (122,464) | (24,355) | (12,307) | (36,662) | |
| Disposal of Origin | – | – | – | – | (2,077) | (13,322) | (1,240) | 3,405 | 14,562 | 1,328 | (64,727) | (63,399) |
| Acquisition of non controlling interests |
– | – | – | – | – | – | – | – | (59) | (59) | (134) | (193) |
| Total transactions with owners recognised |
||||||||||||
| directly in equity | – | 305 | 8 | 116,010 | (2,077) | (13,322) | (19,454) | 3,405 (107,961) | (23,086) | (77,168) (100,254) | ||
| At 31 July 2015 | 1,172 | 774,040 | (47) | 720,456 | (10,264) | – | – | (5,153) 1,723,303 3,203,507 | 18,436 3,221,943 |
| 31 July 2014 in EUR `000 |
Share capital |
Share premium |
Treasury shares |
Other equity reserve |
Cash flow hedge reserve |
Revalua tion reserve |
Share based payment reserve |
Foreign currency trans lation reserve |
Retained earnings |
Total share holders equity |
Non controlling interests |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| At 1 August 2013 | 1,172 | 773,735 | (56) | 604,446 | (106) | 13,380 | 8,862 | (7,726) 1,269,312 2,663,019 | 97,610 2,760,629 | |||
| Profit for the year | – | – | – | – | – | – | – | – | 135,513 | 135,513 | 24,026 | 159,539 |
| Other comprehensive (loss)/income |
– | – | – | – | (3,523) | – | – | (21,419) | (1,131) | (26,073) | 3,150 | (22,923) |
| Total comprehensive (loss)/income |
– | – | – | – | (3,523) | – | – | (21,419) | 134,382 | 109,440 | 27,176 | 136,616 |
| Release of treasury shares due to exercise of LTIP |
– | – | 1 | – | – | – | – | – | – | 1 | – | 1 |
| Share-based payments | – | – | – | – | – | – | 10,597 | – | – | 10,597 | 243 | 10,840 |
| Equity dividends | – | – | – | – | – | – | – | – | (47,898) | (47,898) | – | (47,898) |
| Dividends to non-controlling interests |
– | – | – | – | – | – | – | – | – | – | (10,751) | (10,751) |
| Dividend accrued on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (29,548) | (29,548) | – | (29,548) |
| Total contributions by and distributions to owners |
– | – | 1 | – | – | – | 10,597 | – | (77,446) | (66,848) | (10,508) | (77,356) |
| Origin tender offer share buyback and dilution |
– | – | – | – | 13 | (58) | (5) | 100 | (1,956) | (1,906) | (26,526) | (28,432) |
| Total transactions with owners recognised directly in equity |
– | – | 1 | – | 13 | (58) | 10,592 | 100 | (79,402) | (68,754) | (37,034) (105,788) | |
| At 31 July 2014 | 1,172 | 773,735 | (55) | 604,446 | (3,616) | 13,322 | 19,454 | (29,045) 1,324,292 2,703,705 | 87,752 2,791,457 |
| Represented | |||
|---|---|---|---|
| in EUR `000 | Notes | 2015 | 2014 |
| Cash flows from operating activities | |||
| Profit for the year from continuing operations | 33 | 96,052 | |
| Income tax (credit)/expense | (18,950) | 33,165 | |
| Financing income | (2,137) | (2,762) | |
| Financing costs | 85,527 | 65,366 | |
| Share of loss after tax of joint ventures | 1,520 | – | |
| Net loss on disposal of businesses | 4 | 45,685 | – |
| Asset write-downs | 4 | 146,289 | 87,357 |
| Other restructuring-related payments in excess of current-year costs | (14,650) | (23,456) | |
| Depreciation of property, plant and equipment | 2 | 114,519 | 94,216 |
| Amortisation of intangible assets | 2 | 177,809 | 132,425 |
| Recognition of deferred income from government grants | (4,107) | (4,249) | |
| Share-based payments | 1,705 | 8,253 | |
| Other | (2,437) | (5,695) | |
| Cash flows from operating activities before changes in working capital | 530,806 | 480,672 | |
| Increase in inventory | (25,627) | (38,105) | |
| Decrease in trade and other receivables | 67,594 | 29,765 | |
| (Decrease)/increase in trade and other payables | (1,209) | 54,936 | |
| Cash generated from operating activities | 571,564 | 527,268 | |
| Interest paid | (88,831) | (61,392) | |
| Interest received | 1,666 | 1,274 | |
| Income tax paid | (30,782) | (43,257) | |
| Net cash flows from operating activities – continuing operations | 453,617 | 423,893 | |
| Net cash flows from operating activities – discontinued operations | 3 | (171,068) | 75,336 |
| Net cash flows from operating activities | 282,549 | 499,229 |
In accordance with IFRS 5, the figures for the year ended 31 July 2014 have been represented to reflect the impacts of discontinued operations together as a single amount, separate from the impacts of continuing operations. For further information see notes 1 and 3.
| in EUR `000 | Notes | 2015 | Represented 2014 |
|---|---|---|---|
| Cash flows from investing activities | |||
| Proceeds from sale of property, plant and equipment | 1,120 | 4,522 | |
| Purchase of property, plant and equipment | |||
| – maintenance capital expenditure | (80,725) | (59,970) | |
| – investment capital expenditure | (269,290) | (174,271) | |
| Grants received | 193 | 214 | |
| Acquisitions of subsidiaries and businesses, net of cash acquired | 6 | (148,530) | (862,792) |
| Proceeds from disposal of Origin, net of cash disposed | 3 | 372,975 | – |
| Disposal of subsidiaries and business, net of cash disposed | 22,642 | – | |
| Purchase of intangible assets | (60,122) | (102,572) | |
| Contingent consideration paid | (9,240) | (4,190) | |
| Investing cash flows from discontinued operations | 3 | (4,224) | 68,165 |
| Net cash flows from investing activities | (175,201) | (1,130,894) | |
| Cash flows from financing activities | |||
| Issue of perpetual callable subordinated instrument | 8 | 401,014 | – |
| Repayment of perpetual callable subordinated instrument | 8 | (331,680) | – |
| Gross drawdown of loan capital | – | 915,004 | |
| Gross repayment of loan capital | 7 | (337,668) | (110,636) |
| Capital element of finance lease liabilities | 7 | (60) | (680) |
| Dividends paid on perpetual callable subordinated instruments | (39,107) | (29,388) | |
| Repurchase of non-controlling interests | (193) | – | |
| Dividends paid to non-controlling interests | (4,330) | (3,248) | |
| Dividends paid to equity shareholders | (65,034) | (47,898) | |
| Financing cash flows from discontinued operations | 3 | 79,485 | (50,216) |
| Net cash flows from financing activities | (297,573) | 672,938 | |
| Net increase in cash and cash equivalents | (190,225) | 41,273 | |
| Translation adjustment | (549) | 5,058 | |
| Net cash and cash equivalents at start of year | 438,807 | 392,476 | |
| Net cash and cash equivalents at end of year | 7 | 248,033 | 438,807 |
In accordance with IFRS 5, the figures for the year ended 31 July 2014 have been represented to reflect the impacts of discontinued operations together as a single amount, separate from the impacts of continuing operations. For further information see notes 1 and 3.
ARYZTA AG (the 'Company') is domiciled and incorporated in Zurich, Switzerland. The consolidated financial statements for the year ended 31 July 2015 consolidate the individual financial statements of the Company and its subsidiaries (together referred to as the 'Group'), and show the Group's interest in associates and joint ventures using the equity method of accounting, except where those investments are held-for-sale.
The financial information included on pages 21 to 43 of this News Release has been extracted from the ARYZTA Group financial statements for the year ended 31 July 2015, which are subject to approval by the shareholders at the General Meeting on 8 December 2015.
The Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'). These policies have been consistently applied to all years presented, unless otherwise stated.
In the preparation of these Group consolidated financial statements, the Group has applied all standards that were required for accounting periods beginning on or before 1 August 2014. The following standards and interpretations, issued by the International Accounting Standards Board ('IASB') and the IFRS Interpretations Committee, are effective for the first time in the current financial year and have been adopted by the Group:
While the above standards and interpretations adopted by the Group modify certain presentation and disclosure requirements, these requirements are not significantly different than information presented as part of the 31 July 2014 year-end financial statements and have no material impact on the consolidated results or financial position of the Group. The Group has not applied early adoption of any standards which are not yet effective.
The consolidated financial information is presented in Euro, rounded to the nearest thousand, unless otherwise stated.
In accordance with IAS 1, the Group Consolidated Income Statement is presented by function of expense.
Management has also identified certain acquisition, disposal and restructuring-related costs and fair value adjustments within each functional area that do not relate to the underlying business of the Group. Due to the relative size or nature of these items, in order to enable comparability of the Group's underlying results from period to period, these items have been presented as separate components of operating profit within note 4 and have been excluded from the calculation of underlying fully diluted net profit in note 5.
Following the reduction in the Group's ownership interest in Origin Enterprises plc ('Origin') from 68.1% to 29.0% in March 2015, and the classification of the remaining investment in Origin as an associate held-for-sale, the corresponding amounts included in the 31 July 2014 Group Consolidated Income Statement, Consolidated Statement of Comprehensive Income and Consolidated Cash Flow Statement related to Origin have been represented, in accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', and presented as a single Discontinued Operations amount within each of these respective statements and the related notes. Consistent with the guidance included in IFRS 5, no similar reclassifications or adjustments were made within the 31 July 2014 Consolidated Balance Sheet or Consolidated Statement of Changes in Equity.
Certain other amounts in the 31 July 2014 Group consolidated financial statement notes have been reclassified or adjusted to conform to the 31 July 2015 presentation. These other reclassifications or adjustments were made for presentation purposes and have no effect on total revenues, expenses, profit for the year, total assets, total liabilities, equity or cash flow classifications as previously reported.
| I) Segment revenue and result | Food Europe |
Food North America |
Food Rest of World |
Total Continuing Operations |
||||
|---|---|---|---|---|---|---|---|---|
| in EUR `000 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 |
| Segment revenue1 | 1,646,635 1,586,275 1,942,342 1,586,560 | 231,254 | 220,948 3,820,231 3,393,783 | |||||
| Operating (loss)/profit2 | (40,881) | 74,626 | 96,077 | 100,701 | 10,797 | 16,494 | 65,993 | 191,821 |
| Share of loss after tax of joint venture3 | (1,520) | – | – | – | – | – | (1,520) | – |
| Operating (loss)/profit after share of joint venture |
(42,401) | 74,626 | 96,077 | 100,701 | 10,797 | 16,494 | 64,473 | 191,821 |
| Financing income3 | 2,137 | 2,762 | ||||||
| Financing costs3 | (85,527) | (65,366) | ||||||
| (Loss) / profit before income tax expense as reported in Group Consolidated Income Statement |
(18,917) | 129,217 |
1 There were no significant intercompany revenues between business segments.
2 Certain central executive and support costs have been allocated against the operating profits of each business segment.
3 Finance income/(costs) and income tax expense are managed on a centralised basis. Therefore, these items are not allocated between business segments for the purposes of presenting information to the Chief Operating Decision Maker.
| II) Segment assets | Food Europe |
Food North America |
Food Rest of World |
Total Continuing Operations |
|||||
|---|---|---|---|---|---|---|---|---|---|
| in EUR `000 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Segment assets excluding investments in joint ventures |
2,513,401 2,315,520 3,107,704 2,770,263 | 269,234 | 310,814 5,890,339 5,396,597 | ||||||
| Investments in joint ventures and related financial assets |
60,711 | – | – | – | – | – | 60,711 | – | |
| Segment assets | 2,574,112 2,315,520 3,107,704 2,770,263 | 269,234 | 310,814 5,951,050 5,396,597 | ||||||
| Reconciliation to total assets as reported in the Group Consolidated Balance Sheet |
|||||||||
| Associate held-for-sale | 270,870 | – | |||||||
| Derivative financial instruments | 653 | 847 | |||||||
| Cash and cash equivalents | 316,867 | 555,262 | |||||||
| Deferred income tax assets | 105,579 | 68,938 | |||||||
| Discontinued operations | – | 916,976 | |||||||
| Total assets as reported in Group Consolidated Balance Sheet |
6,645,019 6,938,620 | ||||||||
| III) Segment liabilities | Food | Food North America |
Food Rest of World |
Total Continuing Operations |
|||||
| in EUR `000 | Europe 2015 |
2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Segment liabilities | 550,965 | 504,389 | 505,284 | 467,559 | 65,276 | 68,174 1,121,525 1,040,122 | |||
| Reconciliation to total liabilities as reported in Group Consolidated Balance Sheet |
|||||||||
| Interest-bearing loans and borrowings | 2,041,970 2,197,341 | ||||||||
| Derivative financial instruments | 12,766 | 5,312 | |||||||
| Current and deferred income tax liabilities |
246,815 | 212,059 | |||||||
| Discontinued operations | – | 692,329 | |||||||
| Total liabilities as reported in Group Consolidated Balance Sheet |
3,423,076 4,147,163 |
| IV) Other segment information |
Food Europe |
Food North America |
Food Rest of World |
Total Continuing Operations |
|||||
|---|---|---|---|---|---|---|---|---|---|
| in EUR `000 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Depreciation | 57,368 | 49,254 | 47,547 | 35,710 | 9,604 | 9,252 | 114,519 | 94,216 | |
| ERP amortisation | 5,330 | 4,515 | 4,457 | 4,148 | – | – | 9,787 | 8,663 | |
| Amortisation of other intangible assets | 82,550 | 63,267 | 79,101 | 54,282 | 6,371 | 6,213 | 168,022 | 123,762 | |
| Capital expenditure | |||||||||
| – Property, plant and equipment | 180,113 | 145,909 | 153,204 | 83,965 | 10,963 | 21,060 | 344,280 | 250,934 | |
| – Intangibles | 39,577 | 71,176 | 21,328 | 27,579 | 316 | 433 | 61,221 | 99,188 | |
| Total capital expenditure | 219,690 | 217,085 | 174,532 | 111,544 | 11,279 | 21,493 | 405,501 | 350,122 |
| Europe | North America | Rest of World | Total | ||||||
|---|---|---|---|---|---|---|---|---|---|
| in EUR `000 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | |
| Revenue by geography1 | 1,646,635 1,586,275 1,942,342 1,586,560 | 231,254 | 220,948 3,820,231 3,393,783 | ||||||
| Assets by geography | 2,574,112 2,315,520 3,107,704 2,770,263 | 269,234 | 310,814 5,951,050 5,396,597 | ||||||
| IFRS 8 non-current assets2 | 2,343,064 2,048,356 2,837,326 2,530,613 | 246,769 | 266,981 5,427,159 4,845,950 |
1 Revenues from external customers attributed to the Group's country of domicile, Switzerland, are 6.8% (2014: 7.1%) of total Group revenues. Revenues from external customers attributed to material foreign countries are United States 40.2% (2014: 37.9%), Germany 15.1% (2014: 17.3%) and Canada 10.6% (2014: 8.8%). For the purposes of this analysis, customer revenues are allocated based on geographic location of vendor. As is common in this industry, the Group has a large number of customers, and there is no single customer with a share of revenue greater than 10% of total Group revenue.
2 Non-current assets as reported under IFRS 8, Operating Segments, include all non-current assets as presented in the Group Consolidated Balance Sheet, with the exception of deferred taxes and derivative financial instruments. Non-current assets attributed to the Group's country of domicile, Switzerland, are 6.6% of total Group non-current assets (2014: 7.4%). Non-current assets attributed to material foreign countries are: United States 39.3% (2014: 33.8%), Germany 14.1% (2014: 13.6%) and Canada 12.9% (2014: 13.7%).
During March 2015, ARYZTA announced the completion of its offering of 49 million ordinary shares of Origin Enterprises plc ('Origin') for €8.25 per share, which raised net proceeds for ARYZTA of €398.1m. The divestment simplifies ARYZTA's reporting structure and transforms ARYZTA into a business that is fully focused on speciality food.
Following the placing, the Group's investment in Origin was reduced from 68.1% to 29.0% and Origin has been accounted for as an associate held-for-sale, rather than as a fullyconsolidated subsidiary.
In accordance with IFRS 5, as Origin previously represented a significant component and separately reported segment of the Group, Origin's results have been separately presented in the Group Financial Statements as Discontinued Operations, in both the current and prior years.
A calculation of the gain on disposal is shown below:
| in EUR `000 | Origin |
|---|---|
| Net assets of discontinued operation disposed | |
| Property, plant and equipment | 96,394 |
| Investment property | 7,575 |
| Goodwill & Intangibles | 160,495 |
| Investments in associates and joint venture | 62,370 |
| Inventory | 220,157 |
| Trade and other receivables | 396,520 |
| Trade and other payables | (458,284) |
| Interest bearing loans and borrowings | (248,774) |
| Derivative financial liabilities, net | (748) |
| Employee benefits | (24,240) |
| Deferred tax | (10,355) |
| Corporation tax | (17,166) |
| Total net assets disposed | 183,944 |
| Other comprehensive income recycled on disposal of discontinued operations |
1,328 |
| Non-controlling interests disposed as part of discontinued operations | (64,727) |
| ARYZTA's share of Origin net assets disposed | 120,545 |
| Consideration | |
| – Cash received, net of transaction costs | 398,108 |
| – Net cash disposed | (25,133) |
| – Cash received, net of cash disposed | 372,975 |
| – Fair value of retained 29% interest | 299,329 |
| Total consideration | 672,304 |
| Gain on disposal of discontinued operations | 551,759 |
| Fair value adjustment to associate held-for-sale | (28,459) |
| Net gain on disposal of discontinued operations | 523,300 |
Following the placing, the Group's remaining 29.0% interest in Origin has been determined to be an associate held-for-sale, recorded at fair value, less costs to sell. Based on the unadjusted quoted price of €7.62 as of 31 July 2015 less estimated costs to sell, a fair value adjustment of €28,459,000 was recorded during the period to reduce the carrying value to €270,870,000 as of 31 July 2015, resulting in a total net gain in relation to the disposal of Origin of €523,300,000.
Analysis of the result of discontinued operations in both years, including the fair value adjustment recognised on the re-measurement of the associate held-for-sale, is as follows:
| in EUR `000 | 2015 | 2014 |
|---|---|---|
| Revenue | 829,518 | 1,415,239 |
| Cost of sales | (719,381) | (1,196,262) |
| Distribution expenses | (18,196) | (22,973) |
| Gross profit | 91,941 | 196,004 |
| Selling expenses | (32,124) | (47,477) |
| Administration expenses | (52,572) | (78,707) |
| Operating profit | 7,245 | 69,820 |
| Share of profit after tax of associates and joint ventures | 6,026 | 9,611 |
| Profit before financing income, financing costs and income tax expense |
13,271 | 79,431 |
| Financing income | 1,951 | 2,471 |
| Financing costs | (5,542) | (8,005) |
| Profit before income tax expense | 9,680 | 73,897 |
| Income tax expense | (734) | (10,410) |
| Profit after tax from discontinued operations | 8,946 | 63,487 |
| Gain on disposal of discontinued operations | 551,759 | – |
| Fair value adjustment to associate held-for-sale | (28,459) | – |
| Profit for the year from discontinued operations | 532,246 | 63,487 |
| Attributable as follows: | ||
| Equity shareholders – discontinued operations | 529,396 | 43,261 |
| Non-controlling interests – discontinued operations | 2,850 | 20,226 |
| Profit for the year from discontinued operations | 532,246 | 63,487 |
Cash flows from discontinued operations were as follows:
| in EUR `000 | 2015 | 2014 |
|---|---|---|
| Operating cash flows | (171,068) | 75,336 |
| Investing cash flows | (4,224) | 68,165 |
| Financing cash flows | 79,485 | (50,216) |
| Total cash flows | (95,807) | 93,285 |
In accordance with IAS 1, the Group Consolidated Income Statement is presented by function of expense.
Management has also identified certain acquisition, disposal and restructuring-related costs and fair value adjustments within each functional area that do not relate to the underlying business of the Group. Due to the relative size or nature of these items, they have been presented as separate components of operating profit below, in order to enable comparability of the Group's underlying results from period to period, and have been excluded from the calculation of underlying fully diluted net profit in note 5.
| IFRS Income Statement |
Net acquisition, disposal, restructuring related costs |
Intangible amortisation |
Financial Business Review |
IFRS Income Statement |
Net acquisition, disposal, restructuring related costs |
Intangible amortisation |
Financial Business Review |
|
|---|---|---|---|---|---|---|---|---|
| in EUR `000 | 2015 | 2015 | 2015 | 2015 | 2014 | 2014 | 2014 | 2014 |
| Revenue | 3,820,231 | – | – | 3,820,231 | 3,393,783 | – | – | 3,393,783 |
| Cost of sales | (2,709,763) | 129,974 | – (2,579,789) | (2,368,378) | 92,618 | – (2,275,760) | ||
| Distribution expenses | (407,658) | 7,706 | – | (399,952) | (377,856) | 15,774 | – | (362,082) |
| Gross profit | 702,810 | 137,680 | – | 840,490 | 647,549 | 108,392 | – | 755,941 |
| Selling expenses | (167,646) | 5,545 | – | (162,101) | (143,147) | 2,412 | – | (140,735) |
| Administration expenses | (469,171) | 136,725 | 168,022 | (164,424) | (312,581) | 59,907 | 123,762 | (128,912) |
| Operating profit of continuing operations | 65,993 | 279,950 | 168,022 | 513,965 | 191,821 | 170,711 | 123,762 | 486,294 |
| Share of loss after tax of joint ventures | (1,520) | – | 310 | (1,210) | – | – | – | – |
| Profit of continuing operations before financing income, financing costs and income tax expense |
64,473 | 279,950 | 168,332 | 512,755 | 191,821 | 170,711 | 123,762 | 486,294 |
| Food Europe |
Food North America |
Food Rest of World |
Total Continuing Operations |
||||||
|---|---|---|---|---|---|---|---|---|---|
| in EUR `000 | Notes | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 | 2015 | 2014 |
| Net loss on disposal of businesses | 4.1 | (45,685) | – | – | – | – | – | (45,685) | – |
| Asset write-downs | 4.2 | (72,395) | (51,751) | (68,544) | (32,666) | (5,350) | (2,940) | (146,289) | (87,357) |
| Total net loss on disposal of businesses and asset write-downs |
(118,080) | (51,751) | (68,544) | (32,666) | (5,350) | (2,940) | (191,974) | (87,357) | |
| Acquisition-related costs | (9,467) | (2,566) | (515) | (4,668) | – | – | (9,982) | (7,234) | |
| Severance and other staff-related costs |
(28,367) | (24,369) | (18,916) | (22,801) | (1,359) | – | (48,642) | (47,170) | |
| Contractual obligations | (586) | (316) | (1,285) | (1,229) | (216) | – | (2,087) | (1,545) | |
| Advisory and other costs | (13,862) | (13,439) | (10,670) | (13,966) | (2,733) | – | (27,265) | (27,405) | |
| Total acquisition and restructuring-related costs |
4.3 | (52,282) | (40,690) | (31,386) | (42,664) | (4,308) | – | (87,976) | (83,354) |
| Total acquisition, disposal and restructuring-related costs |
(170,362) | (92,441) | (99,930) | (75,330) | (9,658) | (2,940) | (279,950) | (170,711) |
During January 2015, the Group agreed to exchange certain assets, which historically generated approximately €100,000,000 in annual revenues, for a 50% interest in Signature Flatbreads (UK) Ltd. As the €53,106,000 total fair value of the Group's 50% interest and the Vendor Loan Note receivable from the Joint Venture, were less than the €66,659,000 carrying value of the net assets exchanged and related costs incurred, the transaction resulted in a loss on disposal in the amount of €13,789,000 including foreign exchange losses of €236,000.
During April 2015, the Group agreed to sell its 100% interest in Carroll Cuisine, which historically generated approximately €45,000,000 in annual revenues, for cash consideration of €37,276,000. As the proceeds received exceeded the €12,970,000 carrying value of the net assets disposed and associated costs incurred, the transaction resulted in a gain on disposal of €24,306,000.
As a result of the two disposals above, the Group also wrote-off a proportionate amount of goodwill within the UK and Ireland Cash Generating Unit in the amount of €56,202,000. The total of the above transactions and the associated write-down of Goodwill resulted in a net loss on disposal of businesses within continuing operations of €45,685,000 during the year ended 31 July 2015.
The Group also incurred €146,289,000 of asset write-downs during the year, primarily related to the write-down of various manufacturing, distribution and administration assets within the Food Europe and Food North America segments, following the closure and/ or reduction in activities expected to be generated from those assets. These reductions are the direct result of the Group's recent integration and rationalisation programme investments, which have replaced obsolete assets, optimised the distribution network and streamlined administrative functions.
As these non-cash gains and losses included above are added back when calculating ROIC for management compensation purposes, they had no impact on management compensation.
During the year ended 2015, progress has continued on integrating recent acquisitions and aligning the operational processes of those businesses to the Group's existing network. As a result of these programmes, the Group has recognised costs, including providing for amounts as required by IAS 37, 'Provisions, Contingent Liabilities and Contingent Assets', in the Group Consolidated Income Statement as follows:
During the year ended 31 July 2015 the Group incurred acquisition-related costs of €9,982,000. These costs primarily related to activities associated with the Group's various acquisitions completed during the year, or subsequent to year end, as well as the Group's planned investment in Picard (see note 10), and include share purchase tax, due diligence and other professional services fees.
The Group incurred and provided for €48,642,000 in severance and other staff-related costs during the year. These primarily related to costs associated with employees whose service was discontinued following certain rationalisation decisions and to the continued evaluation and optimisation of the manufacturing and distribution footprint across the various business locations of the Group.
The operational decisions made as a result of the Group's integration and rationalisation projects triggered early termination penalties or resulted in certain long-term operational contracts becoming onerous. The Group incurred total costs of €2,087,000 during the year to either exit or provide for such onerous contractual obligations.
During the year ended 31 July 2015, the Group incurred €27,265,000 in advisory and other costs related directly to the integration and rationalisation programmes. These costs relate to the integration of the supply chain and distribution functions of recently acquired businesses into the Group's network, as well as costs associated with centralisation of certain administrative functions.
| in EUR '000 | |
|---|---|
| in EUR '000 | |
| (4,636) | 92,252 |
| 529,396 | 43,261 |
| 524,760 | 135,513 |
| 92,252 | |
| (29,548) | |
| 62,704 | |
| 43,261 | |
| 105,965 | |
| '000 | |
| 88,120 | |
| 24 | |
| 88,656 | 88,144 |
| (39.8) cent | 71.1 cent |
| 597.1 cent | 49.1 cent |
| 557.3 cent 120.2 cent | |
| 2015 | 2014 |
| in EUR '000 | in EUR '000 |
| (35,309) | |
| 62,704 | |
| 529,396 | 43,261 |
| (27) | (186) |
| 529,369 | |
| 494,060 | |
| '000 | 43,075 105,779 '000 |
| 88,656 | 88,144 |
| – | |
| 88,656 | 89,407 |
| 1,263 | |
| (39.8) cent 597.1 cent |
70.1 cent 48.2 cent |
| (4,636) (30,673) (35,309) 529,396 494,087 '000 88,175 481 |
1 Issued share capital excludes treasury shares.
2 Reflects the dilutive impact of equity entitlements granted to Origin senior management under the Origin LTIP. These equity entitlements dilute the Group's share of Origin profits available as part of its diluted earnings per share calculation.
3 In accordance with IAS 33, potential ordinary shares are treated as dilutive only when their conversion would decrease profit per share or increase loss per share from continuing operations. As the impact related to the conversion of equity-based incentives would decrease the loss per share for the year ended 31 July 2015, no dilutive effect is given to outstanding equity based incentives during that period.
In addition to the basic and diluted earnings per share measures required by IAS 33, 'Earnings Per Share', as calculated above, the Group also presents an underlying fully diluted earnings per share measure, in accordance with IAS 33 paragraph 73. This additional measure enables comparability of the Group's underlying results from period to period, without the impact of transactions that do not relate to the underlying business. It is also the Group's policy to declare dividends based on underlying fully diluted earnings per share, as this provides a more consistent basis for returning dividends to shareholders.
As shown below, for purposes of calculating this measure, the Group adjusts reported net profit by the following items and their related tax impacts:
| 2015 | 2014 | |
|---|---|---|
| Underlying fully diluted earnings per share | in EUR '000 | in EUR '000 |
| (Loss)/profit used to determine basic EPS – continuing operations | (35,309) | 62,704 |
| Amortisation of non-ERP intangible assets (note 2) | 168,022 | 123,762 |
| Tax on amortisation of non-ERP intangible assets | (35,104) | (28,710) |
| Share of associate intangible amortisation, net of tax | 310 | – |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments (note 4) |
279,950 | 170,711 |
| Tax on net acquisition, disposal and restructuring-related costs and fair value adjustments |
(47,881) | (3,879) |
| Underlying net profit – continuing operations | 329,988 | 324,588 |
| Profit used to determine basic EPS – discontinued operations | 529,396 | 43,261 |
| Underlying contribution as associate – discontinuing operations | 17,296 | – |
| Amortisation, non-recurring and other – discontinued operations | 6,343 | 9,629 |
| Gain on disposal of discontinued operations | (551,759) | – |
| Fair value adjustment – discontinuing operations | 28,459 | – |
| Underlying fully diluted net profit – discontinued operations | 29,735 | 52,890 |
| Underlying fully diluted net profit – total | 359,723 | 377,478 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,656 | 88,144 |
| Underlying basic earnings per share – continuing operations | 372.2 cent 368.2 cent | |
| Underlying basic earnings per share – discontinued operations | 33.6 cent | 60.1 cent |
| Underlying basic earnings per share – total | 405.8 cent 428.3 cent | |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,656 | 88,144 |
| Effect of equity-based incentives with a dilutive impact | 785 | 1,263 |
| Weighted average number of ordinary shares used to determine fully | ||
| diluted earnings per share | 89,441 | 89,407 |
| Underlying fully diluted earnings per share – continuing operations | 368.9 cent 363.0 cent | |
| Underlying fully diluted earnings per share – discontinued operations | 33.3 cent | 59.2 cent |
| Underlying fully diluted earnings per share – total | 402.2 cent 422.2 cent |
During the year ended 31 July 2015, the Group completed the 100% acquisitions of two businesses in the Food Europe segment.
The details of the net assets acquired and goodwill arising from these business combinations are set out below. The goodwill arising on these business combinations is attributable to the skills and talent of the in-place work-force and the synergies expected to be achieved from integrating the acquired operations into the Group's existing businesses.
| Provisional | |
|---|---|
| in EUR `000 | fair values |
| Provisional fair value of net assets acquired: | |
| Property, plant and equipment | 77,474 |
| Intangible assets | 55,671 |
| Inventory | 7,703 |
| Trade and other receivables | 15,926 |
| Trade and other payables | (31,515) |
| Finance leases | (1,292) |
| Deferred tax | (17,511) |
| Income tax payable | (2,672) |
| Net assets acquired | 103,784 |
| Goodwill arising on acquisitions | 87,112 |
| Consideration | 190,896 |
| 148,530 42,366 |
|---|
| (7,183) |
| 155,713 |
The net cash outflow on these acquisitions during the year is disclosed in the Group Consolidated Cash Flow Statement as follows:
| in EUR `000 | Total |
|---|---|
| Cash flows from investing activities | |
| Cash consideration | 155,713 |
| Cash acquired | (7,183) |
| Net cash consideration within investment activities | 148,530 |
| Finance leases acquired within net debt | 1,292 |
| Net debt consideration | 149,822 |
Costs of €9,982,000 related to the Group's acquisition-related activities were charged to the Group Consolidated Income Statement during the year ended 31 July 2015, as included in note 4 Net acquisition, disposal and restructuring-related costs and fair value adjustments.
The impact of these business combinations during the year on the Group Consolidated Income Statement is set out in the following table:
| in EUR `000 | Total |
|---|---|
| Revenue | 48,870 |
| Profit for the year | 2,874 |
If these acquisitions had occurred on 1 August 2014, management estimates that the consolidated revenue from continuing operations would have been €3,911,951,000 and profit for the year from continuing operations would have been €4,925,000. In making this determination, management has assumed that the fair value adjustments that arose on the date of the acquisition would have been the same if the acquisitions had occurred on 1 August 2014.
For the identification and estimation of the fair value of the intangibles acquired as part of these acquisitions, ARYZTA was assisted by an independent non-audit appraisal firm. The identified intangibles acquired primarily related to customer relationships, which were valued using the income approach method.
The fair values presented in this note are based on provisional valuations, due to the complexity of the transactions.
| Arising on business | ||||||
|---|---|---|---|---|---|---|
| Analysis of net debt of continuing operations in EUR `000 |
1 August 2014 |
Cash flows | combination / disposal |
Non-cash movements |
Translation adjustment |
31 July 2015 |
| Cash | 555,262 | (123,229) | (125,888) | – | 10,722 | 316,867 |
| Overdrafts | (251,091) | 196,888 | – | – | (14,631) | (68,834) |
| Cash and cash equivalents | 304,171 | 73,659 | (125,888) | – | (3,909) | 248,033 |
| Loans | (1,945,982) | 337,668 | – | (3,525) | (359,872) | (1,971,711) |
| Finance leases | (268) | 60 | (1,206) | – | (11) | (1,425) |
| Net debt of continuing operations | (1,642,079) | 411,387 | (127,094) | (3,525) | (363,792) | (1,725,103) |
| Split of net debt in EUR `000 |
Arising on business | |||||
|---|---|---|---|---|---|---|
| 1 August 2014 |
Cash flows | combination / disposal |
Non-cash movements |
Translation adjustment |
31 July 2015 |
|
| Continuing operations net debt | (1,642,079) | 411,387 | (127,094) | (3,525) | (363,792) | (1,725,103) |
| Discontinued operations net debt | (11,912) | (200,325) | 223,641 | (242) | (11,162) | – |
| Net debt | (1,653,991) | 211,062 | 96,547 | (3,767) | (374,954) | (1,725,103) |
In October 2010, the Group raised CHF 400,000,000 through the issuance of a perpetual Callable Subordinated Instrument ('Hybrid Instrument'), which was recognised at a carrying value of €285,004,000 within equity, net of transaction costs. This Hybrid Instrument offered a coupon of 5.0% and had no maturity date, with an initial call date by ARYZTA in October 2014. In October 2014, the Group repaid the CHF 400,000,000 (€331,680,000) Hybrid Instrument, in line with the initial call date.
In April 2013, the Group raised CHF 400,000,000 through the issuance of an additional Hybrid Instrument, which was recognised at a carrying value of €319,442,000 within equity, net of transaction costs of €4,865,000. This Hybrid Instrument offers a coupon of 4.0% and has no maturity date, with an initial call date by ARYZTA in April 2018. In the event that the call option is not exercised, the coupon would be 605 bps plus the 3-month CHF LIBOR.
In October 2014, the Group raised CHF 190,000,000 through the issuance of an additional Hybrid Instrument. This Hybrid Instrument offers a coupon of 3.5% and has no maturity date, with an initial call date by ARYZTA in April 2020. In the event that the call option is not exercised, the coupon would be 421 bps plus the 3-month CHF LIBOR.
In November 2014, the Group raised €250,000,000 through the issuance of an additional Hybrid Instrument. This Hybrid Instrument offers a coupon of 4.5% and has no maturity date, with an initial call date by ARYZTA in March 2019. In the event that the call option is not exercised, the coupon would be 677 bps plus the 5 year swap rate.
The two Hybrid instruments issued during the year ended 31 July 2015 were recognised at a combined value of €401,014,000 within equity, net of related transaction costs of €6,534,000.
| Other equity reserve in EUR `000 |
2015 | 2014 |
|---|---|---|
| At 1 August | 604,446 | 604,446 |
| Redemption of perpetual callable subordinated instrument | (285,004) | – |
| Issuance of hybrid instruments, net of transaction costs | 401,014 | – |
| At 31 July | 720,456 | 604,446 |
The total coupon recognised for these Hybrid instruments during the year ended 31 July 2015 was €30,673,000 (2014: €29,548,000).
At the Annual General Meeting on 8 December 2015, shareholders will be invited to approve a proposed dividend of CHF 0.6555 (€0.6033) per share. If approved, the dividend will be paid to shareholders on 1 February 2016. A dividend of CHF 0.7646 per share was paid during the year, as approved by shareholders at the Annual General Meeting on 2 December 2014.
During August 2015, the Group completed its previously announced agreement to acquire a strategic interest in Picard, a speciality premium food business in France. Based on the terms of the final agreement, total consideration paid was €450,732,000, in exchange for a 49.5% interest in Picard.
ARYZTA also retains the right to exercise a call option to acquire the remaining outstanding interest in Picard in three to five years. Picard remains a separately managed entity, with separately funded debt, which is non-recourse to ARYZTA.
During September 2015, the Group completed the divestment of its remaining 29.0% interest in Origin, which was classified as an associate held-for-sale as of 31 July 2015.
ARYZTA raised net proceeds of €225m by placing 36.3m shares in Origin at €6.30 per share, resulting in an estimated net loss of €46m compared to the yearend carrying value of €271m. This fair value adjustment will be accounted for within discontinued operations during the year ending 31 July 2016, along with the operating results of Origin, up to the date of disposal.
During September 2015, the Group completed the 100% acquisition of La Rousse Foods ('La Rousse') for an enterprise value of €26,500,000. La Rousse supplies fresh, frozen and ambient goods to various restaurants, hotels and caterers across Ireland.
The information required by IFRS 3 (Revised), Business Combinations, has not been disclosed in the annual report due to the proximity between the date of the completion of the acquisition and the date of approval of the Group Financial Statements.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.