Interim / Quarterly Report • Mar 10, 2014
Interim / Quarterly Report
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In March 2014, ARYZTA agreed to acquire 100% of both Pineridge Bakery in Canada and Cloverhill Bakery in the US. The combined consideration of these acquisitions was €730m, with further post-acquisition investments of €70m anticipated to support a strong growth pipeline and integration. Once complete, these acquisitions will significantly enlarge ARYZTA's bakery capabilities, customer access and product portfolio in North America and should provide double digit EPS accretion in fiscal 2015.
Commenting on the results, ARYZTA AG Chief Executive Officer Owen Killian said:
"ARYZTA continues to make excellent progress with our Customer Centric strategy in this the final year of the ARYZTA Transformation Initiative. We have begun to undertake consolidation opportunities to extend market share and customer relevance in what is a fragmented sector. Continued financial discipline and strong cash generation will support these growth strategies, as well as improve our overall risk profile. We are guiding double digit growth in underlying EPS for FY 2014".
2
Six month period ended 31 January 2014
| in EUR '000 | January 2014 | January 2013 | % Change |
|---|---|---|---|
| Group revenue | 2,102,800 | 2,067,994 | 1.7% |
| EBITA | 198,254 | 186,311 | 6.4% |
| EBITA margin | 9.4% | 9.0% | – |
| Associates and JVs, net | 6,693 | 11,069 | – |
| EBITA incl. associates and JVs | 204,947 | 197,380 | 3.8% |
| Finance cost, net | (26,005) | (33,367) | – |
| Hybrid instrument accrued dividend | (14,258) | (8,234) | – |
| Pre-tax profits | 164,684 | 155,779 | – |
| Income tax expense | (25,193) | (21,696) | – |
| Non-controlling interests | (3,913) | (4,652) | – |
| Underlying fully diluted net profit | 135,578 | 129,431 | 4.7% |
| Underlying fully diluted EPS (cent) | 152.4c1 | 146.4c1 | 4.1% |
1 ARYZTA January 2014 underlying fully diluted earnings per share is calculated using a weighted average number of diluted shares of 88,951,383 (January 2013: 88,395,981).
2 See glossary in section 19 for definitions of financial terms and references used in the financial and business review.
Six month period ended 31 January 2014
| Food | Food North | Food Rest | Total Food | ARYZTA | ||
|---|---|---|---|---|---|---|
| in EUR million | Europe | America | of World | Group | Origin | Group |
| Group revenue | 764.0 | 714.7 | 106.5 | 1,585.2 | 517.6 | 2,102.8 |
| Underlying growth | 1.7% | (0.2)%1 | 5.9% | 1.1% | (5.4)% | (0.7)% |
| Acquisitions | 18.6% | 1.9% | – | 8.9% | – | 6.5% |
| Currency | (1.2)% | (5.2)% | (15.8)% | (4.3)% | (3.4)% | (4.1)% |
| Revenue Growth | 19.1% | (3.5)% | (9.9)% | 5.7% | (8.8)% | 1.7% |
1 Excluding the transition of the DSD business to third parties, underlying revenue growth in Food North America would have been approximately 2.0% higher during the period.
Six month period ended 31 January 2014
| in EUR '000 | January 2014 | January 2013 | % Change |
|---|---|---|---|
| Food Group | |||
| Food Europe | 92,097 | 77,611 | 18.7% |
| Food North America | 89,899 | 90,738 | (0.9)% |
| Food Rest of World | 12,246 | 15,576 | (21.4)% |
| Total Food Group | 194,242 | 183,925 | 5.6% |
| Origin | 4,012 | 2,386 | 68.1% |
| Total Group EBITA | 198,254 | 186,311 | 6.4% |
| Associates & JVs, net | |||
| Food JVs | – | 203 | (100.0)% |
| Origin associates & JVs | 6,693 | 10,866 | (38.4)% |
| Total associates & JVs, net | 6,693 | 11,069 | (39.5)% |
| Total EBITA incl. associates and JVs | 204,947 | 197,380 | 3.8% |
Six month period ended 31 January 2014
| in EUR '000 | January 2014 | January 2013 | % Change |
|---|---|---|---|
| Group revenue | 1,585,194 | 1,500,314 | 5.7% |
| EBITA | 194,242 | 183,925 | 5.6% |
| EBITA margin | 12.3% | 12.3% | – |
| JVs, net | – | 203 | – |
| EBITA incl. JVs | 194,242 | 184,128 | 5.5% |
| Finance cost, net | (23,631) | (30,333) | – |
| Hybrid instrument accrued dividend | (14,258) | (8,234) | – |
| Pre-tax profits | 156,353 | 145,561 | – |
| Income tax expense | (24,824) | (21,986) | – |
| Non-controlling interests | (2,125) | (2,073) | – |
| Underlying net profit | 129,404 | 121,502 | 6.5% |
ARYZTA's Food Group business is primarily focused on speciality baking, a niche segment of the overall bakery market. Speciality bakery consists of freshly prepared offerings giving the best value, variety, taste and convenience to consumers at the point of sale. ARYZTA's customer channels consist of a mix of convenience and independent retail, large retail, Quick Serve Restaurants ('QSR') and other foodservice categories.
Total Food Group revenue grew by 5.7% to €1.59bn. This growth consists of underlying growth of 1.1%, in what continues to be a very challenging trading environment. There was a strong contribution of 8.9% from acquisitions, while currency had a negative (4.3)% impact.
Food EBITA increased by 5.6% to €194.2m, while EBITA margins were maintained at 12.3%, reflecting the impact of the continued fragile consumer spending environment and the absence of notable price increases in the period.
Food Europe has leading market positions in the European speciality bakery market. It has a diversified customer base including convenience retail, gas stations, large retail, restaurants, catering and hotels, leisure and QSR.
Food Europe revenue increased by 19.1% to €764.0m. Underlying revenue grew by 1.7%. There was a very strong contribution of 18.6% from acquisitions, while currency had a negative (1.2)% impact.
The continuing strong acquisition contribution is largely attributable to the acquisition of Klemme, which has enabled ARYZTA to target the high growth In Store Bake-off ('ISB') market for large retail customers.
The improved underlying growth in Europe reflects the commissioning of new capacity in Poland and the improved channel mix between Independent & Convenience and large retail customers.
Food Europe EBITA increased by 18.7% to €92.1m, while EBITA margins were maintained at 12.1%.
Bolt on acquisitions were completed in Europe, the most significant of these was Rina in the Czech Republic, which complements existing capabilities and channels.
Food North America is a leading player in the US speciality bakery market. It has a diversified customer base, including large retail, restaurants, catering and hotels, leisure, hospitals, military, fundraising and QSR. ARYZTA is the leader in high-value artisan bakery through La Brea Bakery, which focuses on the premium bakery segment. ARYZTA's well-established partnerships with key global QSR customers, which dominate the North American convenience food landscape, position the Group to grow market share in tandem with these customers.
Food North America revenue decreased (3.5)% to €714.7m. Underlying growth was largely flat, due to the impact of the transition of the Direct Store Distribution ('DSD') business to third parties during the prior year, which offset an increase of approximately 2.0% in the remaining underlying revenues. Acquisitions contributed 1.9% and there was an unfavourable currency impact of (5.2)%.
Food North America EBITA decreased (0.9)% to €89.9m, with underlying growth being entirely offset by unfavourable currency movements. Food North America EBITA margins increased by 30bps to 12.6%, which provides further evidence of the benefits achieved through continued focus on ARYZTA's Customer Centric Strategy.
The acquisition contribution reflects the complementary capabilities and capacity acquired with Pita Pan.
Food Rest of World revenue declined (9.9)% to €106.5m as underlying growth of 5.9% was offset by an unfavourable currency impact of (15.8)% throughout Asia Pacific and Brazil.
EBITA declined by (21.4)% to €12.2m and margins declined by (170)bps to 11.5%.
While the underlying growth in Food Rest of World was in line with guidance, the regional performance was adversely impacted by unfavourable currency movements, especially on the margins of finished food products imported from outside the region to service the growing high-end food service channel. The development of local manufacturing capacity is underway and once operational will support a reversal of these currency impacts on margins.
In September 2011, the Group announced the ATI programme, a three year plan focused on supply chain optimisation and ERP implementation. ATI was launched with the goal of becoming a leading international bakery company, by leveraging ARYZTA's people, capabilities, partnerships and brands. Critical to this initiative is the development of a customer centric strategy, with highly effective cross-functional teams, to replace the previous business model of autonomous business units.
The deployment of the customer centric business model in North America was supported with a further investment of €23.2m during the period, while an additional €45.4m was invested to replicate the customer centric model throughout Europe. These current and prior period ATI investments in optimising the supply chain, implementing a standardised ERP system and other cash non-recurring costs have now enabled the rationalisation of €49.9m of obsolete plant and machinery infrastructure during the period, as the Group continues to optimise its bakery footprint.
The North American business has begun to see positive margin expansion as a result of the ATI-driven integration of autonomous business units, as well as from the transition of DSD and further centralisation of certain administrative tasks. Additionally, the phased implementation of ERP has continued across many of the Food Group's European locations. These implementations have been successful due to leveraging experiences obtained from previous implementations. The remaining planned ERP implementations in Europe and the overall ATI program remain on track to be substantially completed during 2014.
During the period since the ATI programme announcement, the Food Group has incurred the following amounts:
| ARYZTA Transformation Initiative in EUR '000 |
|||||
|---|---|---|---|---|---|
| Acquisition, disposal and restructuring-related costs |
Cash | Total ATI | Non-cash | Total | |
| Period ended 31 January 2014 | 18,176 | – | 18,176 | 49,918 | 68,094 |
| Year ended 31 July 2013 | 82,459 | – | 82,459 | 37,355 | 119,814 |
| Year ended 31 July 2012 | 77,144 | – | 77,144 | 6,333 | 83,477 |
| Optimisation | |||||
| Investment capital expenditure |
related & ERP |
Total ATI | Expansion related |
Total | |
| Period ended 31 January 2014 | – | 50,434 | 50,434 | 72,458 | 122,892 |
| Year ended 31 July 2013 | – | 61,462 | 61,462 | 111,044 | 172,506 |
| Year ended 31 July 2012 | – | 46,643 | 46,643 | 42,758 | 89,401 |
| ATI investment to date | 177,779 | 158,539 | 336,318 | ||
| Estimated overall ATI investment | 460,000 | ||||
| Remaining available for ATI investment | 123,682 |
ARYZTA's 68.1% subsidiary and separately listed company, Origin, has separate funding structures, which are financed without recourse to ARYZTA. Origin's net debt amounted to €163.6m. Origin's Net Debt: EBITDA ratio was 1.97x as at 31 January 2014 (31 July 2013: 0.38x).
As of 31 January 2014, the consolidated Net Debt of the Food Group, excluding Origin's non-recourse debt, amounted to €840.3m (including overdrafts and finance leases and net of cash and related capitalised upfront borrowing costs). The Food Group interest cover was 10.43x (excluding hybrid interest). The weighted average maturity of the Food Group gross term debt was 4.51 years. The weighted average interest cost of Food Group debt financing facilities (including overdrafts) was 4.43%.
ARYZTA intends to maintain an investment grade position in the range of 2x – 3x net debt to EBITDA. The Food Group's key financial ratios were as follows:
| Net Debt: EBITDA1 | January 2014 | July 2013 | January 2013 |
|---|---|---|---|
| Net Debt: EBITDA1 (hybrid as equity) | 1.58x | 1.57x | 1.79x |
| Net Debt: EBITDA1 (hybrid as debt) | 2.80x | 2.77x | 2.44x |
1 Calculated based on the Food Group EBITDA for the 12 month period, including dividend received from Origin, adjusted for the pro forma full-year contribution of Food Group acquisitions
During February 2014, the Food Group funded additional private placements of USD 490m and €25m, which had a weighted average interest cost of 3.93% and an average maturity of 8.40 years. The Food Group also agreed an amendment to its existing revolving credit facility, which increased the facility from CHF 970m to CHF 1,977m and extended the maturity to February 2019, with substantially unchanged financial covenants and interest rate margins.
Including these subsequent events, ARYZTA's Food Group financing facilities, the related capitalised upfront borrowing costs and Origin's loan facilities (which are separate ringfenced financing without recourse to ARYZTA) and the associated amounts outstanding as of 31 January 2014 were as follows:
| Debt Funding | Principal | Maturity | Outstanding in EUR '000 |
|
|---|---|---|---|---|
| Feb 2014 – Syndicated Bank Loan | CHF 1,977m | Feb 2019 | 256,696 | |
| Feb 2014 – US Private Placement | USD 490m/EUR 25m | May 2020 – May 2024 | – | |
| May 2010 – US Private Placement | USD 350m / EUR 25m | May 2016 – May 2022 | 280,811 | |
| Dec 2009 – US Private Placement | USD 200m | Dec 2021 –Dec 2029 | 146,177 | |
| Nov 2009 – Swiss Bond | CHF 200m | Mar 2015 | 162,610 | |
| Jun 2007 – US Private Placement | USD 450m | Jun 2014 – Jun 2019 | 328,899 | |
| Food Group gross term debt | 1,175,193 | |||
| Food Group upfront borrowing costs | (6,973) | |||
| Food Group term debt, net of upfront borrowing costs | ||||
| Origin loans, net of upfront borrowing costs | ||||
| ARYZTA Group loans, net of upfront borrowing costs |
CHF 400m Hybrid funded October 2010 - 5% coupon until October 2014, thereafter 905bps plus 3-month CHF LIBOR
CHF 400m Hybrid funded April 2013 - 4% coupon until April 2018, thereafter 605bps plus 3-month CHF LIBOR
Traded on SIX Swiss exchange
Treated as 100% equity for bank covenant purposes Treated as 25% equity for US PP covenant purposes
Food Group gross term debt at 31 January 2014 was €1,175m, incorporating the drawn amount on the Revolving Credit Facility of €257m and excluding the hybrid instruments. The additional private placement funding in February 2014 increased the Food Group gross term debt by €383m to €1,558m. This increased financing capacity also reduced the weighted average interest cost of Food Group debt financing facilities to 4.30% and extended the weighted average maturity of the Food Group gross term debt to 5.80 years, as reflected in the following profile:
| Food Group cash generation | ||
|---|---|---|
| in EUR '000 | January 2014 | January 2013 |
| EBIT | 134,701 | 135,188 |
| Amortisation | 59,541 | 48,737 |
| EBITA | 194,242 | 183,925 |
| Depreciation & ERP amortisation | 46,422 | 46,252 |
| EBITDA | 240,664 | 230,177 |
| Working capital movement | (12,262) | (14,987) |
| Maintenance capital expenditure | (22,867) | (20,104) |
| Dividends received from Origin | 16,388 | 14,250 |
| Interest and income tax | (41,436) | (38,078) |
| Other non-cash income | (386) | (302) |
| Cash flow generated from activities | 180,101 | 170,956 |
| Investment capital expenditure1 | (122,892) | (66,527) |
| Cash flows generated from activities after investment | ||
| capital expenditure | 57,209 | 104,429 |
| Underlying net profit | 129,404 | 121,502 |
| in EUR '000 | January 2014 | January 2013 |
|---|---|---|
| Food Group opening net debt as at 1 August | (849,228) | (976,283) |
| Cash flows generated from activities | 180,101 | 170,956 |
| Origin tender offer proceeds | 71,789 | – |
| Net debt cost of acquisitions | (83,712) | (28,031) |
| Acquisition and restructuring-related cash flows | (33,388) | (46,948) |
| Investment capital expenditure1 | (122,892) | (66,527) |
| Proceeds from disposal of joint venture | – | 1,941 |
| Contingent consideration | (777) | (268) |
| Dividends paid | (3,248) | (2,482) |
| Hybrid dividend | (16,221) | (16,561) |
| Foreign exchange movement2 | 15,766 | 79,981 |
| Other3 | 1,472 | 141 |
| Food Group closing net debt as at 31 January | (840,338) | (884,081) |
1 Includes expenditure on intangible assets.
2 Foreign exchange movement for the period ended 31 January 2014 primarily attributable to the fluctuation in the US Dollar to euro rate from July 2013 (1.3280) to January 2014 (1.3682) and from July 2012 (1.2370) to January 2013 (1.3450) for the period ended 31 January 2013.
3 Other comprises primarily proceeds on disposal of fixed assets and amortisation of financing costs.
| in EUR million | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin3 | ARYZTA Group3 |
|---|---|---|---|---|---|---|
| 31 January 2014 | ||||||
| Group share net assets1 | 1,811 | 1,600 | 244 | 3,655 | 416 | 4,071 |
| EBITA incl. associates and JVs2 | 203 | 189 | 27 | 419 | 84 | 503 |
| ROIC | 11.2% | 11.8% | 11.1% | 11.5% | 20.1% | 12.4% |
| 31 July 2013 | ||||||
| Group share net assets1 | 1,738 | 1,684 | 266 | 3,688 | 475 | 4,163 |
| EBITA incl. associates and JVs2 | 205 | 191 | 30 | 426 | 91 | 517 |
| ROIC | 11.8% | 11.3% | 11.4% | 11.6% | 19.1% | 12.4% |
1 Net assets exclude all bank debt, cash and cash equivalents and tax-related balances.
2 ROIC is calculated using pro forma trailing twelve months segmental EBITA ('TTM EBITA') reflecting disposals and the full twelve months contribution from acquisitions. EBITA is before interest, tax, non-ERP amortisation and before the impact of non-recurring items. The contribution from associates and JVs is net profit (i.e. presented after interest and tax).
3 Origin net assets adjusted for the put option liability and fluctuation in average working capital by €62,003,000 (July 2013: €144,453,000).
4 The Food Group WACC on a pre-tax basis is currently 7.2% (July 2013: 7.7%).
| ARYZTA Group Balance Sheet in EUR '000 |
ARYZTA Group January 2014 |
ARYZTA Group July 2013 |
|---|---|---|
| Property, plant and equipment | 1,173,427 | 1,141,847 |
| Investment properties | 23,007 | 22,984 |
| Goodwill and intangible assets | 2,892,480 | 2,905,242 |
| Associates and joint ventures | 50,721 | 45,235 |
| Other receivables | 40,452 | 39,433 |
| Working capital | (53,601) | (27,656) |
| Other segmental liabilities | (117,750) | (108,560) |
| Segmental net assets | 4,008,736 | 4,018,525 |
| Net debt | (1,003,888) | (878,787) |
| Deferred income tax, net | (310,522) | (330,870) |
| Income tax payable | (47,158) | (46,570) |
| Derivative financial instruments, net | (5,890) | (1,669) |
| Net assets | 2,641,278 | 2,760,629 |
| Food Group Balance Sheet in EUR '000 |
Food Group January 2014 |
Food Group July 2013 |
| Property, plant and equipment | 1,087,415 | 1,061,200 |
| Investment properties | 15,432 | 15,409 |
| Goodwill and intangible assets | 2,743,009 | 2,775,430 |
| Investment in Origin | 45,824 | 51,045 |
| Working capital | (101,682) | (70,710) |
| Other segmental liabilities | (88,311) | (92,626) |
| Segmental net assets | 3,701,687 | 3,739,748 |
| Net debt | (840,338) | (849,228) |
| Deferred income tax, net | (297,703) | (320,136) |
| Income tax payable | (35,684) | (33,342) |
| Derivative financial instruments, net | (3,395) | 46 |
| Net assets | 2,524,567 | 2,537,088 |
Origin is a leading agri-services group focused on integrated agronomy and agri-inputs in the UK, Ireland, Poland and Ukraine.
During September 2013, Origin announced its intention to return up to €100m of capital to shareholders by way of a tender offer. Following approval from shareholders at Origin's extraordinary general meeting on 18 November 2013, Origin completed the Tender Offer in December 2013.
ARYZTA participated in this offer by successfully tendering 9.7 million shares in exchange for €71.8m, net of related costs, thereby reducing ARYZTA's shareholding in Origin to 85.3 million shares. As not all Origin shareholders elected to participate in full, this reduced ARYZTA's shareholding in Origin from 68.6% to 68.1%.
Origin's separately published results, which were released on 6 March 2014, are available at www.originenterprises.com.
During March 2014, ARYZTA agreed to acquire 100% of Pineridge Bakery, based in Canada and also separately agreed to acquire 100% of Cloverhill Bakery, based in the US, for a combined consideration of €730m. Further post-acquisition investments of €70m on capital expenditures and cash non-recurring costs are also anticipated to support a strong growth pipeline and to integrate these businesses into the Group's operations.
Pineridge is a top tier speciality bakery in Canada. Cloverhill Bakery is a leading manufacturer of individually wrapped Ready To Eat (RTE) baked snacks. The combined businesses had revenues of €400m in calendar year 2013 with double digit revenue growth and have margins comparable to the ARYZTA Food Group margins.
These acquisitions will significantly enlarge ARYZTA's manufacturing footprint in North America. They extend ARYZTA's customer access in Canada and product portfolio in the US by providing an attractive entry point into the high growth North American snacking market through leveraging these businesses successful customer partnership models.
Both acquisitions remain subject to regulatory approvals and will be financed by existing resources upon completion. The estimated contribution to fully diluted underlying EPS in the current year is expected to be modest, while double digit underlying EPS accretion is expected in fiscal year 2015.
Guidance for FY 2014 is for double digit growth in fully diluted underlying EPS.
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 53 of the ARYZTA AG 2013 Annual Report and Accounts to continue to reflect the principal risks and uncertainties of the Group over the remaining six months of the financial year.
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.
'ERP' – Enterprise Resource Planning intangible assets include the Food Group SAP and Origin Microsoft Dynamics AX software systems.
'EBITDA' – presented as earnings before interest, taxation, depreciation and amortisation reported for the period and before net acquisitions, disposal and restructuring-related costs and fair value adjustments, and related deferred tax credits.
'EBITA' – presented before net acquisition, disposal and restructuring-related costs and fair value adjustments, and related tax credits. ERP intangible asset amortisation is treated as depreciation.
'Associates and JVs, net' – presented as profit from associates and joint ventures, net of income tax and interest.
'Hybrid instrument' – presented as Perpetual Callable Subordinated Instrument in the Financial Statements.
'Non-controlling interests' – presented after the estimated dilutive impact of related subsidiaries' management incentives.
'Underlying earnings' – presented as reported net profit adjusted to include the Hybrid instrument accrued dividend as finance cost; before non-ERP related intangible amortisation; 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.
for the six months ended 31 January 2014
| Food Group | Origin | Total Group | Total Group | |
|---|---|---|---|---|
| in EUR '000 | January 2014 | January 2014 | January 2014 | January 2013 |
| Group revenue | 1,585,194 | 517,606 | 2,102,800 | 2,067,994 |
| EBITA | 194,242 | 4,012 | 198,254 | 186,311 |
| Associates and JVs, net | – | 6,693 | 6,693 | 11,069 |
| EBITA incl. associates and JVs | 194,242 | 10,705 | 204,947 | 197,380 |
| Finance cost, net | (23,631) | (2,374) | (26,005) | (33,367) |
| Hybrid instrument accrued dividend | (14,258) | – | (14,258) | (8,234) |
| Pre-tax profits | 156,353 | 8,331 | 164,684 | 155,779 |
| Income tax expense | (24,824) | (369) | (25,193) | (21,696) |
| Non-controlling interests | (2,125) | – | (3,913) | (4,652) |
| Underlying fully diluted net profit | 129,404 | 7,962 | 135,578 | 129,431 |
| Underlying fully diluted EPS (cent) | – | 5.93c1 | 152.4c2 | 146.4c2 |
| Food Group | Origin | Total Group | Total Group | |
|---|---|---|---|---|
| in EUR '000 | January 2014 | January 2014 | January 2014 | January 2013 |
| Reported net profit3 | 38,297 | 3,353 | 40,582 | 62,051 |
| Intangible amortisation | 59,541 | 2,859 | 62,400 | 51,638 |
| Tax on amortisation | (14,028) | (509) | (14,537) | (13,158) |
| Hybrid instrument accrued dividend | (14,258) | – | (14,258) | (8,234) |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments |
68,094 | 2,409 | 70,503 | 44,501 |
| Tax on asset write-down and costs arising on integration | (8,242) | (150) | (8,392) | (6,877) |
| Non-controlling interest portion of acquisition, disposal and restructuring-related costs and fair value adjustments |
– | – | (720) | (465) |
| Underlying net profit | 129,404 | 7,962 | 135,578 | 129,456 |
| Dilutive impact of Origin management incentives | – | – | – | (25) |
| Underlying fully diluted net profit | 129,404 | 7,962 | 135,578 | 129,431 |
| Underlying fully diluted EPS (cent) | – | 5.93c1 | 152.4c2 | 146.4c2 |
1 Origin January 2014 underlying fully diluted earnings per share is calculated using the weighted average number of diluted shares of 134,296,257 (January 2013: 138,499,155).
2 ARYZTA January 2014 underlying fully diluted earnings per share is calculated using a weighted average number of diluted shares of 88,951,383 (January 2013: 88,395,981).
3 Food Group reported net profit excludes dividend income of €16,388,000 (January 2013: €14,250,000) from Origin.
for the six months ended 31 January 2014
| Six months ended | |||
|---|---|---|---|
| 31 January | |||
| in EUR '000 | Notes | 2014 Unaudited |
2013 Unaudited |
| Revenue | 3 | 2,102,800 | 2,067,994 |
| Cost of sales | (1,532,191) | (1,507,827) | |
| Gross profit | 570,609 | 560,167 | |
| Distribution expenses | (277,581) | (288,679) | |
| Administration expenses | (157,174) | (136,815) | |
| Operating profit before net acquisition, disposal and restructuring-related costs and fair value adjustments |
135,854 | 134,673 | |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments | 4 | (70,503) | (44,501) |
| Operating profit | 65,351 | 90,172 | |
| Share of profit after income tax of associates and joint ventures | 6,693 | 11,069 | |
| Profit before financing income, financing costs and income tax expense | 72,044 | 101,241 | |
| Financing income | 3,515 | 5,588 | |
| Financing costs | (29,520) | (38,955) | |
| Profit before income tax expense | 46,039 | 67,874 | |
| Income tax expense | (2,264) | (1,661) | |
| Profit for the period | 43,775 | 66,213 | |
| Attributable as follows: | |||
| Equity shareholders | 40,582 | 62,051 | |
| Non-controlling interests | 10 | 3,193 | 4,162 |
| Profit for the period | 43,775 | 66,213 | |
| Six months ended 31 January |
|||
| 2014 | 2013 | ||
| Earnings per share for the period | Notes | Euro cent | Euro cent |
| Basic earnings per share | 5 | 29.9 | 61.1 |
| Diluted earnings per share | 5 | 29.6 | 60.9 |
for the six months ended 31 January 2014
| Six months ended | 31 January | |||
|---|---|---|---|---|
| in EUR '000 | Notes | 2014 Unaudited |
2013 Unaudited |
|
| Profit for the period | 43,775 | 66,213 | ||
| Other comprehensive loss | ||||
| Items that may be reclassified subsequently to profit or loss: | ||||
| Foreign exchange translation effects | ||||
| – Foreign currency net investments | (82,416) | (207,063) | ||
| – Foreign currency borrowings | 6 | 14,614 | 102,994 | |
| Cash flow hedges | ||||
| – Effective portion of changes in fair value of cash flow hedges | (1,732) | 3,679 | ||
| – Fair value of cash flow hedges transferred to income statement | (2,584) | 1,359 | ||
| – Deferred tax effect of cash flow hedges | 585 | (1,207) | ||
| – Share of joint ventures and associates (loss)/gain on cash flow hedges, net of deferred tax | (122) | 214 | ||
| Total of items that may be reclassified subsequently to profit or loss | (71,655) | (100,024) | ||
| Items that will not be reclassified to profit or loss: | ||||
| Defined benefit plans | ||||
| – Actuarial gain/(loss) on Group defined benefit pension plans | 4,888 | (2,633) | ||
| – Deferred tax effect of actuarial gain/loss | (748) | 666 | ||
| – Share of associates' actuarial gain/(loss) on defined benefit plans, net of deferred tax | 2,153 | (3,255) | ||
| Deferred tax effect of change in tax rates | – | (495) | ||
| Total of items that will not be reclassified to profit or loss | 6,293 | (5,717) | ||
| Total other comprehensive loss | (65,362) | (105,741) | ||
| Total comprehensive loss for the period | (21,587) | (39,528) | ||
| Attributable as follows: | ||||
| Equity shareholders of the Company | (27,607) | (40,527) | ||
| Non-controlling interests | 10 | 6,020 | 999 | |
| Total comprehensive loss for the period | (21,587) | (39,528) |
as at 31 January 2014
| 31 January | 31 July | |
|---|---|---|
| in EUR '000 | 2014 Unaudited Notes |
2013 Audited |
| Assets | ||
| Non-current assets | ||
| Property, plant and equipment | 1,173,427 | 1,141,847 |
| Investment properties | 23,007 | 22,984 |
| Goodwill and intangible assets | 2,892,480 | 2,905,242 |
| Investments in associates and joint ventures | 50,721 | 45,235 |
| Other receivables | 40,452 | 39,433 |
| Deferred income tax assets | 72,451 | 71,146 |
| Total non-current assets | 4,252,538 | 4,225,887 |
| Current assets | ||
| Inventory | 367,179 | 297,641 |
| Trade and other receivables | 449,633 | 678,845 |
| Derivative financial instruments | 744 | 1,821 |
| Cash and cash equivalents | 589,188 6 |
626,922 |
| Total current assets | 1,406,744 | 1,605,229 |
| Total assets | 5,659,282 | 5,831,116 |
as at 31 January 2014 (continued)
| 31 January | 31 July | ||
|---|---|---|---|
| in EUR '000 | Notes | 2014 Unaudited |
2013 Audited |
| Equity | |||
| Called up share capital | 1,172 | 1,172 | |
| Share premium | 773,735 | 773,735 | |
| Retained earnings and other reserves | 1,800,018 | 1,888,112 | |
| Total equity attributable to equity shareholders | 2,574,925 | 2,663,019 | |
| Non-controlling interests | 10 | 66,353 | 97,610 |
| Total equity | 2,641,278 | 2,760,629 | |
| Liabilities | |||
| Non-current liabilities | |||
| Interest-bearing loans and borrowings | 6 | 1,286,504 | 1,157,435 |
| Employee benefits | 17,574 | 22,339 | |
| Deferred income from government grants | 23,547 | 25,251 | |
| Other payables | 60,708 | 48,190 | |
| Deferred income tax liabilities | 382,973 | 402,016 | |
| Derivative financial instruments | 2,010 | 2,136 | |
| Contingent consideration | 7,100 | 8,570 | |
| Total non-current liabilities | 1,780,416 | 1,665,937 | |
| Current liabilities | |||
| Interest-bearing loans and borrowings | 6 | 306,572 | 348,274 |
| Trade and other payables | 870,413 | 1,004,142 | |
| Income tax payable | 47,158 | 46,570 | |
| Derivative financial instruments | 4,624 | 1,354 | |
| Contingent consideration | 8,821 | 4,210 | |
| Total current liabilities | 1,237,588 | 1,404,550 | |
| Total liabilities | 3,018,004 | 3,070,487 | |
| Total equity and liabilities | 5,659,282 | 5,831,116 |
| Foreign | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash | Share | currency | Total | |||||||||
| for the six months | Other | flow | Revalua | based | trans | share | Non | |||||
| ended 31 January 2014 | Share | Share | Treasury | equity | hedge | tion | payment | lation | Retained | holders | controlling | |
| in EUR '000 | capital | premium | shares | reserve | reserve | reserve | reserve | reserve | earnings | equity | interests | Total |
| At 1 August 2013 | 1,172 | 773,735 | (56) | 604,446 | (106) | 13,380 | 8,862 | (7,726)1,269,3122,663,019 | 97,6102,760,629 | |||
| Profit for the period | – | – | – | – | – | – | – | – | 40,582 | 40,582 | 3,193 | 43,775 |
| Other comprehensive income |
– | – | – | – | (3,644) | – | – | (69,509) | 4,964 | (68,189) | 2,827 | (65,362) |
| Total comprehensive income |
– | – | – | – | (3,644) | – | – (69,509) | 45,546 (27,607) | 6,020 (21,587) | |||
| Release of treasury shares due to exercise of LTIP |
– | – | 1 | – | – | – | – | – | – | 1 | – | 1 |
| Share-based payments | – | – | – | – | – | – | 3,390 | – | – | 3,390 | – | 3,390 |
| Equity dividends | – | – | – | – | – | – | – | – | (47,898) | (47,898) | – | (47,898) |
| Dividends to non-controlling interests |
– | – | – | – | – | – | – | – | – | – | (10,751) | (10,751) |
| Dividend on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (14,258) | (14,258) | – | (14,258) |
| Total contributions by and distributions to owners |
– | – | 1 | – | – | – | 3,390 | – (62,156) (58,765) (10,751) (69,516) | ||||
| Origin tender offer share buyback and dilution |
– | – | – | – | 13 | (58) | (5) | 100 | (1,772) | (1,722) | (26,526) | (28,248) |
| Total transactions with owners recognised directly in equity |
– | – | 1 | – | 13 | (58) | 3,385 | 100 (63,928) (60,487) (37,277) (97,764) | ||||
| At 31 January 2014 | 1,172 | 773,735 | (55) | 604,446 | (3,737) | 13,322 | 12,247 (77,135)1,250,9302,574,925 | 66,3532,641,278 |
| Other | Cash flow |
Revalua | Share based |
Foreign currency trans |
Total share |
Non | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| for the six months ended 31 January 2013 in EUR '000 |
Share capital |
Share premium |
Treasury shares |
equity reserve |
hedge reserve |
tion reserve |
payment reserve |
lation reserve |
Retained earnings |
holders equity |
controlling interests |
Total |
| At 1 August 2012 | 1,172 | 773,735 | (57) | 285,004 | (2,381) | 15,403 | 10,148 | 140,2981,199,8082,423,130 | 86,2252,509,355 | |||
| Profit for the period | – | – | – | – | – | – | – | – | 62,051 | 62,051 | 4,162 | 66,213 |
| Other comprehensive income |
– | – | – | – | 3,431 | – | – (101,589) | (4,420) (102,578) | (3,163) (105,741) | |||
| Total comprehensive income |
– | – | – | – | 3,431 | – | – (101,589) | 57,631 (40,527) | 999 (39,528) | |||
| Transfer of share-based payment reserve to retained earnings |
– | – | – | – | – | – | (7,642) | – | 7,642 | – | – | – |
| Release of treasury shares due to exercise of LTIP |
– | – | 1 | – | – | – | – | – | – | 1 | – | 1 |
| Share-based payments | – | – | – | – | – | – | 1,521 | – | – | 1,521 | 46 | 1,567 |
| Equity dividends | – | – | – | – | – | – | – | – | (43,517) | (43,517) | – | (43,517) |
| Dividends to non-controlling interests |
– | – | – | – | – | – | – | – | – | – | (8,935) | (8,935) |
| Dividend accrued on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (8,234) | (8,234) | – | (8,234) |
| Total contributions by and distributions to owners |
– | – | 1 | – | – | – | (6,121) | – (44,109) (50,229) | (8,889) (59,118) | |||
| At 31 January 2013 | 1,172 | 773,735 | (56) | 285,004 | 1,050 | 15,403 | 4,027 | 38,7091,213,3302,332,374 | 78,3352,410,709 |
for the six months ended 31 January 2014
| Six months ended | 31 January | ||
|---|---|---|---|
| 2014 | 2013 | ||
| in EUR '000 | Notes | Unaudited | Unaudited |
| Cash flows from operating activities | |||
| Profit for the period | 43,775 | 66,213 | |
| Income tax expense | 2,264 | 1,661 | |
| Financing income | (3,515) | (5,588) | |
| Financing costs | 29,520 | 38,955 | |
| Share of profit after income tax of associates and joint ventures | (6,693) | (11,069) | |
| Net loss on acquisitions, disposals and dilution | 4 | – | 705 |
| Asset write-downs and fair value adjustments | 4 | 49,918 | 9,869 |
| Acquisition and other restructuring-related payments in excess of current-period costs | (14,679) | (13,817) | |
| Depreciation of property, plant and equipment | 46,216 | 46,496 | |
| Amortisation of intangible assets | 66,382 | 54,645 | |
| Recognition of deferred income from government grants | (1,794) | (704) | |
| Share-based payments | 9 | 3,390 | 1,476 |
| Other | (1,980) | (128) | |
| Cash flows from operating activities before changes in working capital | 212,804 | 188,714 | |
| (Increase)/decrease in inventory | (57,377) | (72,365) | |
| (Increase)/decrease in trade and other receivables | 144,947 | 126,769 | |
| Increase/(decrease) in trade and other payables | (189,233) | (162,254) | |
| Cash generated from operating activities | 111,141 | 80,864 | |
| Interest paid, net | (28,433) | (30,104) | |
| Income tax paid | (17,751) | (15,583) | |
| Net cash flows from operating activities | 64,957 | 35,177 |
for the six months ended 31 January 2014
| Six months ended | 31 January | ||
|---|---|---|---|
| 2014 | 2013 | ||
| in EUR '000 | Notes | Unaudited | Unaudited |
| Cash flows from investing activities | |||
| Proceeds from sale of property, plant and equipment | 2,638 | 1,319 | |
| Purchase of property, plant and equipment | |||
| – maintenance capital expenditure | (28,998) | (24,068) | |
| – investment capital expenditure | (80,233) | (50,814) | |
| Grants received | 63 | – | |
| Acquisitions of subsidiaries and businesses, net of cash acquired | 11 | (90,971) | (28,031) |
| Disposal of joint venture | 4 | 94,002 | 1,941 |
| Purchase of intangible assets | (43,450) | (18,619) | |
| Dividends received | 1,703 | 2,220 | |
| Net receipts from associates and joint ventures | – | 20 | |
| Deferred consideration paid | (777) | (2,141) | |
| Net cash flows from investing activities | (146,023) | (118,173) | |
| Cash flows from financing activities | |||
| Gross drawdown of loan capital | 6 | 138,768 | 115,168 |
| Capital element of finance lease liabilities | 6 | (600) | (1,206) |
| Dividend paid on perpetual callable subordinated instrument | (16,221) | (16,561) | |
| Origin tender offer paid to non-controlling interests and related costs | (28,432) | – | |
| Dividends paid to non-controlling interests | 10 | (10,751) | (8,935) |
| Net cash flows from financing activities | 82,764 | 88,466 | |
| Net increase in cash and cash equivalents | 6 | 1,698 | 5,470 |
| Translation adjustment | 6 | (1,776) | (11,981) |
| Net cash and cash equivalents at start of period | 6 | 392,476 | 345,089 |
| Net cash and cash equivalents at end of period | 6 | 392,398 | 338,578 |
for the six months ended 31 January 2014
The Group Condensed Consolidated Interim Financial Statements (hereafter the 'Interim Financial Statements') have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting ('IAS 34').
These Interim Financial Statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's most recent Annual Financial Statements in respect of the year ended 31 July 2013, which have been prepared in accordance with International Financial Reporting Standards ('IFRS').
These Interim Financial Statements for the six months ended 31 January 2014 and the comparative figures for the six months ended 31 January 2013 are unaudited and have not been reviewed by the auditors. The extracts from the Group's Annual Financial Statements for the year ended 31 July 2013 represent an abbreviated version of the Group's full accounts for that year, on which the auditors issued an unqualified audit report.
Certain amounts in the 31 January 2013 and 31 July 2013 comparative financial statement figures and related notes have been reclassified to conform to the 31 January 2014 presentation. The reclassifications were made for presentation purposes and have no effect on total revenues, expenses, profit for the period, total assets, total liabilities, total equity or cash flow classifications as previously reported.
Income tax expense is recognised based upon the best estimate of the average annual income tax rate expected for the full year.
The principal euro foreign exchange currency rates used by the Group for the preparation of these Interim Financial Statements are as follows:
| Currency | Average H1 2014 |
Average H1 2013 |
Closing H1 2014 |
Closing FY 2013 |
|---|---|---|---|---|
| CHF | 1.2314 | 1.2095 | 1.2299 | 1.2339 |
| USD | 1.3510 | 1.2886 | 1.3682 | 1.3280 |
| CAD | 1.4191 | 1.2747 | 1.5196 | 1.3644 |
| GBP | 0.8430 | 0.8054 | 0.8226 | 0.8630 |
Except as described below, the Interim Financial Statements have been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates, as set out on pages 68 to 80 of the ARYZTA AG 2013 Annual Report and Accounts.
The IFRS applied by the Group in preparation of these financial statements are those that were effective for accounting periods beginning on or before 1 August 2013. 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 2013 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.
| I) Segment revenue and result |
Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Six months ended 31 January |
Six months ended 31 January |
Six months ended 31 January |
Six months ended 31 January |
Six months ended 31 January |
Six months ended | 31 January | ||||||
| in EUR '000 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Segment revenue1 | 764,001 | 641,558 | 714,683 | 740,559 | 106,510 | 118,197 1,585,194 1,500,314 | 517,606 | 567,680 2,102,800 2,067,994 | ||||
| Operating profit/(loss) before net acquisition, disposal and restructuring related costs and fair value adjustments2 |
59,792 | 56,015 | 67,417 | 67,244 | 7,492 | 11,929 | 134,701 | 135,188 | 1,153 | (515) | 135,854 | 134,673 |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments2 (note 4) |
(31,184) (19,948) (35,028) (22,762) | (1,882) | – (68,094) (42,710) | (2,409) | (1,791) (70,503) (44,501) | |||||||
| Operating profit/(loss) Share of profit after tax of associates and joint ventures |
28,608 – |
36,067 – |
32,389 – |
44,482 203 |
5,610 – |
11,929 – |
66,607 – |
92,478 203 |
(1,256) 6,693 |
(2,306) 10,866 |
65,351 6,693 |
90,172 11,069 |
| Profit before financing income, financing cost and income tax expense |
28,608 | 36,067 | 32,389 | 44,685 | 5,610 | 11,929 | 66,607 | 92,681 | 5,437 | 8,560 | 72,044 | 101,241 |
| Financing income3 | 2,166 | 2,100 | 1,349 | 3,488 | 3,515 | 5,588 | ||||||
| Financing costs3 | (25,797) (32,433) | (3,723) | (6,522) (29,520) (38,955) | |||||||||
| Profit before income tax expense as reported in Group Consolidated Income Statement |
42,976 | 62,348 | 3,063 | 5,526 | 46,039 | 67,874 |
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 Financing income/(costs) and income tax expense are managed on a centralised basis for the Food Group and separately for Origin. Therefore, these items are not allocated between business segments for the purposes of presenting information to the Chief Operating Decision Maker.
| Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| II) Segment assets in EUR '000 |
as at 31 Jan 2014 |
as at 31 Jul 2013 |
as at 31 Jan 2014 |
as at 31 Jul 2013 |
as at 31 Jan 2014 |
as at 31 Jul 2013 |
as at 31 Jan 2014 |
as at 31 Jul 2013 |
as at 31 Jan 2014 |
as at 31 Jul 2013 |
as at 31 Jan 2014 |
as at 31 Jul 2013 |
| Segment assets excluding investments in associates and joint ventures |
2,243,152 2,162,369 1,856,613 1,894,380 | 289,297 | 307,428 4,389,062 4,364,177 | 516,664 | 682,382 4,905,726 5,046,559 | |||||||
| Investments in associates and joint ventures and other financial assets |
– | – | – | – | – | – | – | – | 91,173 | 84,668 | 91,173 | 84,668 |
| Segment assets | 2,243,152 2,162,369 1,856,613 1,894,380 | 289,297 | 307,428 4,389,062 4,364,177 | 607,837 | 767,050 4,996,899 5,131,227 | |||||||
| Reconciliation to total assets as reported in the Group Consolidated |
||||||||||||
| Balance Sheet Derivative financial instruments |
727 | 1,329 | 17 | 492 | 744 | 1,821 | ||||||
| Cash and cash equivalents | 522,922 | 501,438 | 66,266 | 125,484 | 589,188 | 626,922 | ||||||
| Deferred income tax assets |
67,549 | 66,642 | 4,902 | 4,504 | 72,451 | 71,146 |
| III) Segment liabilities | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| as at | as at | as at | as at | as at | as at | as at | as at | as at | as at | as at | as at | |
| in EUR '000 | 31 Jan 2014 |
31 Jul 2013 |
31 Jan 2014 |
31 Jul 2013 |
31 Jan 2014 |
31 Jul 2013 |
31 Jan 2014 |
31 Jul 2013 |
31 Jan 2014 |
31 Jul 2013 |
31 Jan 2014 |
31 Jul 2013 |
| Segment liabilities | 431,672 | 424,683 | 256,908 | 210,143 | 45,302 | 41,527 | 733,882 | 676,353 | 254,281 | 436,349 | 988,163 1,112,702 | |
| Balance Sheet | |
|---|---|
| in Group Consolidated Balance Sheet |
2,502,200 2,448,422 | 515,804 | 622,065 3,018,004 3,070,487 | |||
|---|---|---|---|---|---|---|
| income tax liabilities Total liabilities as reported |
400,936 | 420,120 | 29,195 | 28,466 | 430,131 | 448,586 |
| Current and deferred | ||||||
| Derivative financial instruments |
4,122 | 1,283 | 2,512 | 2,207 | 6,634 | 3,490 |
| Interest-bearing loans and borrowings |
1,363,260 1,350,666 | 229,816 | 155,043 1,593,076 1,505,709 |
| Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Six months ended | 31 January | Six months ended | 31 January | Six months ended | 31 January | Six months ended | 31 January | Six months ended 31 January |
Six months ended | 31 January | |||
| in EUR '000 | Notes | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Loss on acquisition, disposal and dilution |
4.1 | – | – | – | (705) | – | – | – | (705) | – | – | – | (705) |
| Acquisition-related costs | 4.2 | (682) (2,108) (1,498) (1,689) | – | – | (2,180) (3,797) | (912) | – | (3,092) (3,797) | |||||
| Restructuring-related costs and fair value adjustments |
|||||||||||||
| Asset write-downs and disposals |
(19,207) (2,449) (28,829) (7,420) (1,882) | – | (49,918) (9,869) | – | – | (49,918) (9,869) | |||||||
| Severance and other staff related costs |
(5,101) (10,010) (2,083) (8,509) | – | – | (7,184) (18,519) | (834) (1,305) | (8,018) (19,824) | |||||||
| Contractual obligations | – | (83) | – (1,837) | – | – | – (1,920) | – | – | – (1,920) | ||||
| Advisory and other costs | (6,194) (5,298) (2,618) (2,602) | – | – | (8,812) (7,900) | (663) | (486) | (9,475) (8,386) | ||||||
| Total restructuring-related costs and fair value adjustments |
4.3 (30,502) (17,840) (33,530) (20,368) (1,882) | – | (65,914) (38,208) (1,497) (1,791) | (67,411) (39,999) | |||||||||
| Total acquisition, disposal and restructuring-related costs and fair value adjustments |
(31,184) (19,948) (35,028) (22,762) (1,882) | – | (68,094) (42,710) (2,409) (1,791) | (70,503) (44,501) |
During January 2013, the Food Group completed the disposal of its interest in a joint venture, previously held as part of the Food North America segment. Consideration received on disposal was €1,941,000, which was less than the investment carrying value of €2,646,000 at the time, resulting in a loss of €705,000.
As disclosed in the Group's annual financial statements for the year ended 31 July 2013, Origin agreed to dispose of its 50% interest in Welcon to its joint venture partner, Austevoll Seafoods ASA, for cash consideration of NOK 740 million. As all conditions were fulfilled by 31 July 2013, the transaction and the related gain on disposal of €20,631,000 were reflected in the financial statements for the year ended 31 July 2013, along with the consideration receivable in the amount of €94,002,000, which remained outstanding at that time. The transaction completed during August 2013 and these proceeds were received in full, as shown in the Group consolidated cash flow statement for the period ended 31 January 2014.
During the period ended 31 January 2014 the Group incurred acquisition-related costs of €3,092,000 (2013: €3,797,000).
These costs include share purchase tax, due diligence and other professional service fees associated with the Group's acquisition related activities.
During the period, progress has continued on the Food Group ATI programme to integrate or rationalise existing business assets to enable optimised manufacturing and business support throughout the Group. Origin has also continued to progress on its own separate business transformation programme. 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:
The Group incurred €49,918,000 (2013: €9,869,000) of asset write-downs during the period. These amounts relate to the write-down of certain distribution, manufacturing and administration assets, due to those obsolete assets having been replaced as part of the Food Group ATI integration and rationalisation programme.
The Group has incurred and provided for €8,018,000 (2013: €19,824,000) in severance and other staff-related costs during the period, in relation to employees whose service was discontinued following certain rationalisation decisions throughout the Group.
The operational decisions made through the Group's integration and rationalisation projects triggered early termination penalties and/or resulted in certain operational contracts becoming onerous. The Group incurred total costs of €Nil (2013: €1,920,000) during the period to either exit or provide for such contractual obligations.
During the period, the Group incurred €9,475,000 (2013: €8,386,000) in other costs related directly to the implementation of its integration and rationalisation programs. These costs are comprised principally of restructuring-related advisory costs, directly attributable incremental internal staff costs and operational site decommissioning costs.
| Six months ended 31 January |
||
|---|---|---|
| 2014 | 2013 | |
| Basic earnings per share | in EUR '000 | in EUR '000 |
| Profit attributable to equity shareholders | 40,582 | 62,051 |
| Perpetual callable subordinated instrument accrued dividend | (14,258) | (8,234) |
| Profit used to determine basic earnings per share | 26,324 | 53,817 |
| Weighted average number of ordinary shares | '000 | '000 |
| Ordinary shares outstanding at 1 August1 | 88,120 | 88,038 |
| Effect of vesting and exercise of equity instruments during the period2 | 14 | 52 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,134 | 88,090 |
| Basic earnings per share | 29.9 cent | 61.1 cent |
| 2014 | 2013 | |
| Diluted earnings per share | in EUR '000 | in EUR '000 |
| Profit used to determine basic earnings per share | 26,324 | 53,817 |
| Effect on non-controlling interests share of reported profits, due to dilutive impact of Origin management equity entitlements3 |
– | (16) |
| Profit used to determine diluted earnings per share | 26,324 | 53,801 |
| Weighted average number of ordinary shares (diluted) | '000 | '000 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,134 | 88,090 |
| Effect of equity-based incentives with a dilutive impact2 | 817 | 306 |
| Weighted average number of ordinary shares used to determine diluted earnings per share4 |
88,951 | 88,396 |
| Diluted earnings per share | 29.6 cent | 60.9 cent |
1 Issued share capital excluding treasury shares.
2 The change in the equity-based incentives with a dilutive impact is due to continued vesting of management share based incentives, offset by the impact of incentives exercised during the year, which are now included in the weighted average number of ordinary shares used to determine basic earnings per share.
3 Reflects the dilutive impact of equity entitlements granted to Origin senior management under the Origin Plan. These equity entitlements dilute the Group's share of Origin profits available as part of its diluted earnings per share calculation.
4 ARYZTA January 2014 underlying fully diluted earnings per share is calculated using a weighted average number of diluted shares of 88,951,383 (January 2013: 88,395,981).
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:
| Six months ended 31 January |
||
|---|---|---|
| 2014 | 2013 | |
| Underlying fully diluted earnings per share | in EUR '000 | in EUR '000 |
| Profit used to determine basic earnings per share | 26,324 | 53,817 |
| Amortisation of non-ERP intangible assets | 62,400 | 51,638 |
| Tax on amortisation of non-ERP intangible assets | (14,537) | (13,158) |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments (note 4) |
70,503 | 44,501 |
| Tax on net acquisition, disposal and restructuring-related costs and fair value adjustments |
(8,392) | (6,877) |
| Non-controlling interest portion of acquisition, disposal and restructuring-related costs and fair value adjustments |
(720) | (465) |
| Effect on non-controlling interests share of adjusted profits due to dilutive impact of Origin management equity entitlements |
– | (25) |
| Underlying fully diluted net profit | 135,578 | 129,431 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,134 | 88,090 |
| Underlying basic earnings per share | 153.8 cent | 146.9 cent |
| Weighted average number of ordinary shares used to determine diluted earnings per share |
88,951 | 88,396 |
| Underlying fully diluted earnings per share | 152.4 cent | 146.4 cent |
| Analysis of net debt | 1 August | Non-cash | Translation | 31 January | |
|---|---|---|---|---|---|
| in EUR '000 | 2013 | Cash flows | movements | adjustment | 2014 |
| Cash | 626,922 | (36,469) | – | (1,265) | 589,188 |
| Overdrafts | (234,446) | 38,167 | – | (511) | (196,790) |
| Cash and cash equivalents | 392,476 | 1,698 | – | (1,776) | 392,398 |
| Loans | (1,269,976) | (138,768) | (1,434) | 14,614 | (1,395,564) |
| Finance leases | (1,287) | 600 | – | (35) | (722) |
| Net debt | (878,787) | (136,470) | (1,434) | 12,803 | (1,003,888) |
| Split of net debt in EUR '000 |
1 August 2013 |
Cash flows | Non-cash movements |
Translation adjustment |
31 January 2014 |
| Food Group net debt | (849,228) | (5,757) | (1,119) | 15,766 | (840,338) |
| Origin net debt | (29,559) | (130,713) | (315) | (2,963) | (163,550) |
| Net debt | (878,787) | (136,470) | (1,434) | 12,803 | (1,003,888) |
Finance leases include amounts due within one year of €311,000 (July 2013: €876,000).
ARYZTA's 68.1% subsidiary and separately listed company, Origin, has separate ring-fenced funding structures, which are financed without recourse to ARYZTA.
At the Annual General Meeting on 10 December 2013 the shareholders approved the resolution to modify Article 5 of the Articles of Association (governing Authorised Share Capital for General Purposes). Pursuant to these modifications, the Board of Directors is authorised to increase the share capital at any time until 10 December 2015 by an amount not exceeding CHF 183,621.06 through the issue of up to 9,181,053 fully paid up registered shares with a nominal value of CHF 0.02 each. The Board of Directors is authorised to withdraw the subscription rights of the shareholders and to allocate them to third parties if the shares are used for the following purposes:
For further details, refer to Article 5 of the Articles of Association, which is available on the Company website at www.aryzta.com/about-aryzta/corporate-governance.aspx.
The proposed dividend covering the 12 month period ended 31 July 2013 of CHF 0.6652 (31 July 2012: CHF 0.6125) per registered share was approved at the annual general meeting held on 10 December 2013. The total resulting dividend of €47,898,000 (July 2013: €43,517,000 ) was paid in February 2014, to those shareholders holding shares in ARYZTA AG on 29 January 2014.
The Group has outstanding grants of equity-based incentives under the following LTIP plans:
The total cost reported in the Group consolidated financial statements in the current period in relation to equity settled share-based payments is €3,390,000 (2013: €1,567,000).
No significant activity occurred within these plans during the current period.
| Period ended | |
|---|---|
| in EUR '000 | 31 January 2014 |
| Balance at 1 August 2013 | 97,610 |
| Share of profit for the period | 3,193 |
| Share of loss recognised in other comprehensive income | 2,827 |
| Dividends paid to non-controlling interests | (10,751) |
| Origin tender offer share buyback and dilution | (26,526) |
| Balance at 31 January 2014 | 66,353 |
Following approval from shareholders at Origin's extraordinary general meeting on 18 November 2013, Origin completed a Tender Offer in December 2013. Pursuant to this offer, Origin repurchased 13.3 million shares at €7.50 per share. ARYZTA participated in this offer by successfully tendering 9.7 million shares, thereby reducing ARYZTA's shareholding in Origin to 85.3 million shares.
As Origin continues to be fully consolidated by ARYZTA, the difference between the total proceeds paid by Origin and the amount received by ARYZTA represents a transaction with the non-controlling shareholders of Origin, which is reflected as a decrease in noncontrolling interests within ARYZTA's consolidated financial statements, net of transactionrelated costs.
As not all Origin shareholders elected to participate in full, this reduced ARYZTA's shareholding in Origin from 68.6% to 68.1%. As a result of this dilution, the Group has recorded a reduction in the individual equity balances within the ARYZTA's total shareholders' equity and allocated these balances as an increase in non-controlling interests.
During the period, the Food Group completed multiple small acquisitions and Origin completed the acquisition of a controlling interest in a leading provider of agronomy services. 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 fair | |
|---|---|
| in EUR '000 | values |
| Provisional fair value of net assets acquired: | |
| Property, plant and equipment | 37,605 |
| Intangible assets | 34,252 |
| Inventory | 12,456 |
| Trade and other receivables | 3,928 |
| Trade and other payables | (11,226) |
| Deferred income tax | (2,643) |
| Income tax payable | (978) |
| Net assets acquired | 73,394 |
| Goodwill arising on acquisitions | 43,111 |
| Consideration | 116,505 |
| Satisfied by: | |
| Cash consideration | 91,055 |
| Total consideration | 116,505 |
|---|---|
| Contingent consideration | 3,800 |
| Put option liability | 15,784 |
| Consideration payable within one year | 5,950 |
| Net cash consideration | 90,971 |
| Cash acquired | (84) |
| Cash consideration | 91,055 |
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 | 91,055 |
| Cash acquired | (84) |
| Cost of acquisitions | 90,971 |
As part of Origin's acquisition of 60% of the ordinary shares of Agroscope, Origin has also entered into an arrangement under which the non-controlling shareholder has the right at various dates to sell the remaining 40% shareholding to Origin. In the event that this option is not exercised, Origin has a similar right to acquire the 40% shareholding. Accordingly, Origin has recognised a put option liability of €15,784,000 as part of the consideration for this acquisition, which is included within other long-term liabilities in the ARYZTA Group
consolidated balance sheet as of 31 January 2014. This amount represents the fair value of the future estimated amount payable to exercise the option and was determined based on an agreed formula, which includes an expectation of future trading performance and timing of when the options are expected to be exercised, discounted to present value. The estimated amount payable will be adjusted in future periods through the income statement.
Acquisition-related costs of €3,092,000 have been charged to net acquisition, disposal and restructuring-related costs and fair value adjustments in the Group Consolidated Income Statement related to these transactions during the period ended 31 January 2014.
No material difference exists between the consolidated revenue reported and the consolidated revenue that would have been reported if these acquisitions had occurred on 1 August 2013. 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 acquisition had occurred on 1 August 2013.
The identified intangibles associated with these acquisitions primarily includes the fair value of customer relationships. The income approach method was the basis for the fair value of these intangibles.
The fair values presented in this note are based on provisional valuations due to the complexity of the transactions and close proximity of the transactions to the end of the period.
Other than the movements reflected above, and the results of foreign currency translation adjustments, there have been no further adjustments to goodwill during the period. The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill might be impaired. No indication of impairment has been identified during the period ended 31 January 2013.
During the period ended 31 January 2013, the Group also completed two small acquisitions. 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.
The final fair values of net assets acquired during the period ended 31 January 2013 are set out below, as adjusted from the preliminary fair values originally disclosed.
| Final | |
|---|---|
| in EUR '000 | fair values |
| Final fair value of net assets acquired: | |
| Property, plant and equipment | 19,910 |
| Intangible assets | 14,838 |
| Inventory | 2,427 |
| Trade and other receivables | 3,984 |
| Trade and other payables | (12,334) |
| Other payables | (22,225) |
| Deferred income tax | 569 |
| Income tax payable | (2,166) |
| Net assets acquired | 5,003 |
| Goodwill arising on acquisitions | 23,028 |
| Consideration | 28,031 |
| Satisfied by: | |
|---|---|
| Cash consideration | 28,510 |
| Cash acquired | (479) |
| Total consideration | 28,031 |
The net cash outflow on these acquisitions is disclosed in the Group Consolidated Cash Flow Statement as follows:
| in EUR '000 | Total |
|---|---|
| Cash flows from investing activities | |
| Cash consideration | 28,510 |
| Cash acquired | (479) |
| Cost of acquisitions | 28,031 |
Acquisition-related costs of €3,797,000 were charged to net acquisition, disposal and restructuring-related costs and fair value adjustments in the Group Consolidated Income Statement during the period ended 31 January 2013.
For the identification and estimation of the fair value of the acquired intangibles of these acquisitions, ARYZTA was assisted by a non-audit independent appraisal firm. The identified intangibles include the fair value of customer relationships and other unpatented intangibles. The income approach method was the basis for the fair value of the customer relationships and the replacement cost approach was the basis for the valuation of the other unpatented intangibles.
The Group is not aware of any significant changes with regard to contingent liabilities, in comparison with the situation as of 31 July 2013.
During February 2014, the Food Group funded additional private placements of USD 490m and €25m, which had a weighted average interest cost of 3.93% and an average maturity of 8.40 years. The Food Group also agreed an amendment to its existing revolving credit facility, which increased the facility from CHF 970m to CHF 1,977m and extended the maturity to February 2019, with substantially unchanged financial covenants and interest rate margins.
During March 2014, ARYZTA agreed to acquire 100% of Pineridge Bakery, based in Canada and also separately agreed to acquire 100% of Cloverhill Bakery, based in the US, for combined consideration of €730m. The combined businesses had revenues of EUR 400m in 2013. These acquisitions remain subject to regulatory approvals and will be financed by existing resources upon completion.
Further information as required by IFRS 3, Business Combinations, has not been disclosed in the interim report due to the proximity between the date of these agreements and the date of approval of the interim report.
Due to the nature of the Agri-services sector, Origin results are significantly impacted by seasonality as customers defer buying decisions until closer to the main springtime application period. This seasonality is also reflected in Origin's increased inventory balance during January, compared to the July year-end balance.
There have been no significant changes in related party transactions other than those described in the ARYZTA AG 2013 Annual Report and Accounts, which could have a material impact on the financial position or performance of the Group in the six months to 31 January 2014.
The Annual Report and Accounts, Interim Management Statements, Interim Report and Accounts and other useful information about the Company, such as the current share price, is available on our website www.aryzta.com.
We confirm our responsibility for the half year interim results and that to the best of our knowledge:
The Group's auditor has not audited these half year interim results.
On behalf of the Board
Denis Lucey Owen Killian Chairman, Board of Directors CEO, Member of the Board
10 March 2014
of Directors
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