Earnings Release • Sep 29, 2013
Earnings Release
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Zurich/Switzerland, 30 September 2013 – ARYZTA AG announces results for the financial year ended 31 July 2013
Commenting on the results, ARYZTA AG Chief Executive Officer Owen Killian said:
"Revenue growth and margin expansion performance was robust in FY 2013, given the level of change management achieved across the business. Underlying revenue growth remained positive, and the improved diversification of our channel mix should improve the sustainability of this growth.
FY 2013 marks five years since the creation of ARYZTA AG, with Food Group revenue growth of 89% to €3.1bn, Food EBITA growth of 134% to €407m and consolidated underlying fully diluted EPS growth of 78%, achieved in a period challenged by prolonged consumer recession and highly volatile food inflation. ARYZTA has emerged financially strong and poised for growth as it completes the final year of transformation into a customer centric group, focused on consumer trends and individual customer requirements."
The ARYZTA full year results for the year ended 31 July 2013 are available for download from the ARYZTA website and at the following link: http://www.aryzta.com/2013-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, South America, Europe, Asia, Australia and New Zealand. ARYZTA has a primary listing on the SIX Swiss Exchange and a secondary listing on the ISE Irish Exchange (SIX: ARYN, ISE: YZA).
ARYZTA is the majority shareholder (68.6%) in Origin Enterprises plc, which has a listing on the AIM in London and the ESM in Dublin (AIM: OGN, ESM: OIZ).
Paul Meade Communications Officer ARYZTA AG Tel: +41 (0) 44 583 42 00 [email protected]
An analyst call will take place today at 09:00 CET (08:00 BST).
Dial in numbers are: Switzerland: 056 580 0007, Ireland 01 431 9648, UK 0844 493 3800, USA +1 631 510 7498, International +44 145 255 5566. Please provide the following code: 58348378 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
| in Euro `000 | July 2013 | July 2012 | % Change |
|---|---|---|---|
| Group revenue | 4,503,690 | 4,207,667 | 7.0% |
| EBITA | 475,584 | 444,050 | 7.1% |
| EBITA margin | 10.6% | 10.6% | – |
| Associates and JVs, net | 22,057 | 14,200 | – |
| EBITA incl. associates and JVs | 497,641 | 458,250 | 8.6% |
| Finance cost, net | (63,904) | (65,311) | – |
| Hybrid instrument accrued dividend | (19,898) | (16,642) | – |
| Pre-tax profits | 413,839 | 376,297 | – |
| Income tax | (69,689) | (63,776) | – |
| Non-controlling interests | (25,041) | (21,476) | – |
| Underlying fully diluted net profit | 319,109 | 291,045 | 9.6% |
| Underlying fully diluted EPS (cent) | 360.31 | 337.5c1 | 6.8% |
1 The 31 July 2013 weighted average number of ordinary shares used to calculate diluted earnings per share is 88,559,475 (2012: 86,228,153). The increase in the weighted average number of ordinary shares is primarily due to the impact of the 4,252,239 shares issued during January 2012 on the weighted average shares outstanding during each respective year.
2 See glossary in section 18 for definitions of financial terms and references used in the financial and business review.
| in Euro million | Food Europe | Food North America |
Food Rest of World |
Total Food Group |
Origin Total Group | |
|---|---|---|---|---|---|---|
| Group revenue | 1,391.5 | 1,459.8 | 234.2 | 3,085.5 | 1,418.2 | 4,503.7 |
| Underlying growth | 0.2% | 1.6% | 6.6% | 1.3% | 4.5% | 2.4% |
| Acquisitions | 9.0% | 2.8% | 2.3% | 5.5% | 0.0% | 3.8% |
| Currency | 0.1% | 2.0% | (3.2)% | 0.8% | 1.3% | 0.8% |
| Revenue Growth | 9.3% | 6.4% | 5.7% | 7.6% | 5.8% | 7.0% |
| in Euro `000 | July 2013 | July 2012 | % Change | |
|---|---|---|---|---|
| Food Group | ||||
| Food Europe | 185,990 | 169,495 | 9.7% | |
| Food North America | 190,286 | 176,291 | 7.9% | |
| Food Rest of World | 30,419 | 29,040 | 4.7% | |
| Total Food Group | 406,695 | 374,826 | 8.5% | |
| Origin | 68,889 | 69,224 | (0.5)% | |
| Total Group EBITA | 475,584 | 444,050 | 7.1% | |
| Associates & JVs, net | ||||
| Food JVs | 201 | 1,062 | (81.1)% | |
| Origin associates & JVs | 21,856 | 13,138 | 66.4% | |
| Total associates & JVs, net | 22,057 | 14,200 | 55.3% | |
| Total EBITA incl. associates and JVs | 497,641 | 458,250 | 8.6% |
3
| in Euro `000 | July 2013 | July 2012 | % Change |
|---|---|---|---|
| Revenue | 3,085,517 | 2,867,644 | 7.6% |
| EBITA | 406,695 | 374,826 | 8.5% |
| EBITA margin | 13.2% | 13.1% | – |
| JVs, net | 201 | 1,062 | – |
| EBITA incl. JVs | 406,896 | 375,888 | 8.2% |
| Finance cost, net | (57,761) | (58,717) | – |
| Hybrid instrument accrued dividend | (19,898) | (16,642) | – |
| Pre-tax profits | 329,237 | 300,529 | – |
| Income tax | (57,261) | (50,559) | – |
| Non-controlling interests | (3,619) | (3,367) | – |
| Underlying net profit | 268,357 | 246,603 | 8.8% |
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 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 convenience and independent retail, large retail, Quick Serve Restaurants ('QSR') and other foodservice categories.
Total Food Group revenue grew by 7.6% to €3.1bn. ARYZTA's underlying Food business performed well, posting underlying revenue growth of 1.3% in what was a very a challenging trading environment, particularly in the Food Europe segment.
Food EBITA increased by 8.5%, while EBITA margins expanded by 10bps to 13.2%, reflecting the improved efficiencies being derived through the ARYZTA Transformation Initiative ('ATI'). This translated into an 8.8% increase in underlying net profit within the Food Group.
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 and hotels, leisure and QSR.
Food Europe revenue grew by 9.3% to €1.4bn. This was largely driven by a very strong contribution of 9.0% from acquisitions. Underlying revenues grew marginally at 0.2% over the year, with a strong recovery during the fourth quarter of 2013. The weak underlying growth in bake-off reflects sustained weak consumer spending and the growing impact of government austerity measures across the region. The impact from currency movements was negligible during the year.
The acquisition of Klemme significantly transformed ARYZTA's presence in the pan-European large retail segment. Klemme enables ARYZTA to target the high growth In Store Bake-off ('ISB') for large retail customers, as consumers seek greater bake-off choice for home consumption.
Food Europe EBITA increased by 9.7% to €186.0m, while EBITA margins expanded by 10bps to 13.4%.
Significant ATI-related and expansion-related capital investment was completed in Europe in FY 2013. The total cash costs relating to non-recurring items were €44.5m, while €44.0m was invested in the roll-out of the European ERP system and optimisation-related capital investments. These investments were key to establishment of a European customer centric business model and to rebalancing the channel mix within Europe. Additional expansion-related capital investments, primarily for further bakery capacity in Poland that is in the final commissioning stages, amounted to €63.8m.
Food North America is a leading player in the US speciality bakery market. It has a diversified customer base, including multiple retail, restaurants, catering and 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, position the Group to grow market share in tandem with customer growth.
Food North America revenue grew by 6.4% to €1.5bn, with acquisition contribution of 2.8% and underlying revenue growth of 1.6%. Favourable currency movements also benefited the reported performance in the year by 2.0%. Underlying organic growth in North America was strong, reflecting progress on deepening customer relationships and increased availability of a broader range of products to North American customers. The performance also benefited from stronger consumer spending trends in North America compared to Europe. Food North America EBITA grew by 7.9% to €190.3m, due to positive underlying revenue growth and further margin expansion of 20bps to 13.0% during the year.
In North America, the cash costs for non-recurring items were €37.9m, with an additional €17.5m relating to expanding the ERP system functionality and other optimisation-related capital investments. As announced at the half year, the North American Direct Store Distribution ('DSD') business was transitioned to third party contractors during the year. Like in Europe, these investments underpin the deployment of a customer centric business model in North America. An additional €15.1m was also invested in a variety of expansion-related capital investment projects.
ARYZTA's operations in the Rest of World include Brazil, Australia, New Zealand, Malaysia, Singapore, Taiwan and Japan.
Food Rest of World revenues grew by 5.7% to €234.2m, with underlying revenue growth of 6.6% and acquisition contribution of 2.3%. Unfavourable currency movements reduced reported growth by 3.2%. Food Rest of World EBITA grew by 4.7% to €30.4m, while EBITA margins declined by 10bps to 13.0%. Despite commissioning new bakeries in the region, involving a total expansion-related capital investment of €32.1m in FY 2013, the business remains capacity constrained. Food Rest of World will continue to need capital allocation to remove capacity bottlenecks and to facilitate new revenue growth opportunities in the region.
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 customer centric business model deployment in North America was supported with a further investment of €55.4m (non-recurring cash costs, ERP investment and optimisation-related capital investments). In Europe this investment was €88.5m, as part of the programme to replicate the customer centric model already established in North America.
The North American business has begun to see positive margin expansion as a result of the ATI-driven integration of autonomous business units during the prior year, as well as from the transition of DSD and further centralisation of certainadministrative tasks during the current year.
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 in North America and other locations within Europe. The remaining planned ERP implementations in Europe remain on track to be substantially completed during FY 2014.
During the two years since the ATI programme announcement, the Food Group has incurred the following amounts:
| in Euro `000 | ARYZTA Transformation Initiative | ||||
|---|---|---|---|---|---|
| Acquisition, disposal and restructuring-related costs |
Cash | Total ATI | Non-cash | Total | |
| Year ending 31 July 2013 | 82,459 | – | 82,459 | 37,355 | 119,814 |
| Year ending 31 July 2012 | 77,144 | – | 77,144 | 6,333 | 83,477 |
| Investment capital expenditure |
Optimisation related & ERP |
Total ATI | Expansion related |
Total | |
| Year ending 31 July 2013 | – | 61,462 | 61,462 | 111,044 | 172,506 |
| Year ending 31 July 2012 | – | 46,643 | 46,643 | 42,758 | 89,401 |
| ATI investment to date | 159,603 | 108,105 | 267,708 | ||
| Estimated overall ATI investment | 460,000 | ||||
| Remaining available for ATI investment | 192,292 |
The financial goal of these investments is to improve the ARYZTA Food Group ROIC related to the FY 2011 underlying food assets to 15% by 2015. The successful efforts to date have positioned the Group well for the continued growth and margin expansion necessary to achieve this measure.
ARYZTA's 68.6% subsidiary and separately listed company, Origin, has separate funding structures, which are financed without recourse to ARYZTA. Origin's net debt amounted to €29.6m at 31 July 2013.
The consolidated net debt of the Food Group, excluding Origin's non-recourse debt, amounts to €849.2m. The Food Group net debt: EBITDA ratio is 1.57x (excluding hybrid instrument as debt) and interest cover of 9.37x (excluding hybrid interest). The weighted average maturity of the Food Group gross term debt is circa 5.14 years. The weighted average interest cost of Food Group debt financing facilities (including overdrafts) is circa 4.62%.
ARYZTA intends to maintain an investment grade position in the range of 2x–3x net debt to EBITDA. During the year, ARYZTA completed an additional CHF400m of hybrid funding, with a coupon of 4%, which brings the total amount of Hybrid funding to CHF800m. ARYZTA's financing facilities and key financial covenants (excluding Origin, which has separate ring-fenced financing without recourse to ARYZTA) are as follows:
| Debt Funding | Principal | Maturity |
|---|---|---|
| Nov 2011 – Syndicated Bank Loan | CHF 970m | Dec 2016 |
| May 2010 – US Private Placement | USD 350m / EUR 25m | May 2016 – May 2022 |
| Dec 2009 – US Private Placement | USD 200m | Dec 2021 –Dec 2029 |
| Nov 2009 – Swiss Bond | CHF 200m | Mar 2015 |
| Jun 2007 – US Private Placement | USD 450m | Jun 2014 – Jun 2019 |
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
| as at 31 July 2013 | Ratio |
|---|---|
| Net Debt: EBITDA1 (hybrid as equity) | 1.57x |
| Net Debt: EBITDA1 (hybrid as debt) | 2.77x |
1 Calculated based on the Food Group EBITDA for the year ended 31 July 2013, including dividend received from Origin, adjusted for the pro forma full-year contribution of Food Group acquisitions.
| Food Group cash generation | ||
|---|---|---|
| in Euro `000 | July 2013 | July 2012 |
| EBIT | 300,053 | 275,043 |
| Amortisation | 106,642 | 99,783 |
| EBITA | 406,695 | 374,826 |
| Depreciation | 93,690 | 90,342 |
| EBITDA | 500,385 | 465,168 |
| Working capital movement | (11,198) | (19,280) |
| Dividends received1 | 14,250 | 11,183 |
| Maintenance capital expenditure | (43,675) | (46,248) |
| Interest and tax | (90,954) | (97,721) |
| Other non-cash charges / (income) | 573 | 1,796 |
| Cash flow generated from activities | 369,381 | 314,898 |
| Investment capital expenditure2 | (172,506) | (89,401) |
| Cash flows generated from activities after investment | ||
| capital expenditure | 196,875 | 225,497 |
| Underlying net profit | 268,357 | 246,603 |
| in Euro `000 | FY 2013 | FY 2012 |
|---|---|---|
| Food Group opening net debt as at 1 August | (976,283) | (955,468) |
| Cash flows generated from activities | 369,381 | 314,898 |
| Hybrid instrument proceeds | 319,442 | – |
| Net debt cost of acquisitions | (311,609) | (100,959) |
| Share placement | – | 140,854 |
| Acquisition and restructuring-related cash flows | (86,497) | (88,570) |
| Investment capital expenditure2 | (172,506) | (89,401) |
| Proceeds from disposal of property, plant and equipment | 9,863 | 6,411 |
| Proceeds from disposal of joint venture | 1,941 | 4,675 |
| Contingent consideration | (268) | (7,247) |
| Dividends paid | (45,999) | (43,745) |
| Hybrid dividend | (16,561) | (16,305) |
| Foreign exchange movement3 | 62,024 | (139,216) |
| Other4 | (2,156) | (2,210) |
| Food Group closing net debt as at 31 July | (849,228) | (976,283) |
1 Includes dividends from Origin of €14,250,000 (July 2012: €10,450,000).
2 Includes expenditure on intangible assets.
3 Foreign exchange movement for the year ended 31 July 2013 primarily attributable to the fluctuation in the US Dollar to Euro rate between July 2012 (1.2370) and July 2013 (1.3280).
4 Other comprises primarily amortisation of financing costs.
| Food | Food North |
Food Rest of |
Total Food |
|||
|---|---|---|---|---|---|---|
| in Euro million | Europe | America | World | Group | Origin3 | Total3 |
| 2013 | ||||||
| Group share net assets1 | 1,738 | 1,684 | 266 | 3,688 | 475 | 4,163 |
| EBITA & associates/JVs cont.2 | 205 | 191 | 30 | 426 | 91 | 517 |
| ROIC | 11.8% | 11.3% | 11.4% | 11.6% | 19.1% | 12.4% |
| 2012 | ||||||
| Group share net assets1 | 1,447 | 1,835 | 290 | 3,572 | 457 | 4,029 |
| EBITA & associates/JVs cont.2 | 170 | 177 | 29 | 376 | 82 | 458 |
| ROIC | 11.7% | 9.6% | 10.1% | 10.5% | 18.0% | 11.4% |
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 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 fluctuation in its average quarterly working capital by €144,453,000 (2012: €116,061,000).
4 The Food Group WACC on a pre-tax basis is currently 7.7% (2012: 8.0%).
| Group Balance Sheet in Euro `000 |
Total Group 2013 |
Total Group 2012 |
|---|---|---|
| Property, plant and equipment | 1,141,847 | 1,022,587 |
| Investment properties | 22,984 | 29,268 |
| Goodwill and intangible assets | 2,905,242 | 2,871,982 |
| Associates and joint ventures | 45,235 | 127,384 |
| Other financial assets | 39,433 | 37,223 |
| Working capital | (27,656) | (106,857) |
| Other segmental liabilities | (108,560) | (68,542) |
| Segmental net assets | 4,018,525 | 3,913,045 |
| Net debt | (878,787) | (1,044,091) |
| Deferred tax, net | (330,870) | (326,657) |
| Income tax payable | (46,570) | (27,440) |
| Derivative financial instruments | (1,669) | (5,502) |
| Net assets | 2,760,629 | 2,509,355 |
| Food Group Balance Sheet in Euro `000 |
Food Group 2013 |
Food Group 2012 |
|---|---|---|
| Property, plant and equipment | 1,061,200 | 931,439 |
| Investment properties | 15,409 | 15,960 |
| Goodwill and intangible assets | 2,775,430 | 2,729,340 |
| Joint ventures | – | 2,545 |
| Investment in Origin | 51,045 | 51,045 |
| Working capital | (70,710) | (57,048) |
| Other segmental liabilities | (92,626) | (49,799) |
| Segmental net assets | 3,739,748 | 3,623,482 |
| Net debt | (849,228) | (976,283) |
| Deferred tax, net | (320,136) | (310,674) |
| Income tax payable | (33,342) | (16,976) |
| Derivative financial instruments | 46 | (1,739) |
| Net assets | 2,537,088 | 2,317,810 |
The Board recommends a final dividend of CHF 0.66521 to be paid on 3 February 2014, if approved by shareholders at the Annual General Meeting to be held on 10 December 2013.
Origin is a leading agri-services group focused on integrated agronomy and agri-inputs in the UK, Ireland and Poland. ARYZTA has a holding of 95 million shares in Origin (68.6% holding).
Origin reported financial and operating results in line with expectations for the year. The Origin Board has proposed a dividend per ordinary share of 17.25 cent for the year ended 31 July 2013.
Additionally, the Origin Board has proposed to return up to €100 million of capital to shareholders, by way of a tender offer for Origin shares, following the disposals of the marine protein and oils joint venture and other associate interests during the year.
Origin's separately published results, which were released on 25 September 2013, are available at www.originenterprises.com.
ARYZTA's journey to becoming the partner of choice in speciality bake-off through leadership in innovation excellence is well established in North America and well underway in Europe. In Rest of World, the focus remains on adding new capacity.
ARYZTA's customer centric strategy will enable the business to leverage key customer relationships to grow revenue, by focusing on product development around consumer insights and to identify cost efficiencies across the organisation.
The trend of sector consolidation continues and ARYZTA's strategy in this regard remains unchanged, with the focus on acquiring targets that add bakery capability, capacity and customer/ geographic access.
During FY 2014, ARYZTA will be focused on completing the reorganisation and transforming of the business into a customer centric company focused on consumer trends and customer requirements. ARYZTA is guiding double-digit fully diluted EPS growth in FY 2014.
1 Based on EUR 54.05 cent per share converted at the foreign exchange rate of one EUR to CHF 1.2308 on 26 September 2013, the date of the approval of the ARYZTA financial statements.
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 14 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.
'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 year 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 JVs, net of taxes and interest.
'Hybrid instrument' – presented as Perpetual Callable Subordinated Instrument in the Financial Statements.
'Non-controlling interests' – always presented after the dilutive impact of related subsidiaries' management incentives.
for the financial year ended 31 July 2013
| Food Group | Origin | Total Group | Total Group | |
|---|---|---|---|---|
| in Euro `000 | 2013 | 2013 | 2013 | 2012 |
| Group revenue | 3,085,517 | 1,418,173 | 4,503,690 | 4,207,667 |
| EBITA | 406,695 | 68,889 | 475,584 | 444,050 |
| Associates and JVs, net | 201 | 21,856 | 22,057 | 14,200 |
| EBITA incl. associates and JVs | 406,896 | 90,745 | 497,641 | 458,250 |
| Finance cost, net | (57,761) | (6,143) | (63,904) | (65,311) |
| Hybrid instrument accrued dividend | (19,898) | – | (19,898) | (16,642) |
| Pre-tax profits | 329,237 | 84,602 | 413,839 | 376,297 |
| Income tax | (57,261) | (12,428) | (69,689) | (63,776) |
| Non-controlling interests | (3,619) | – | (25,041) | (21,476) |
| Underlying fully diluted net profit | 268,357 | 72,174 | 319,109 | 291,045 |
| Underlying fully diluted EPS (cent) | – | 52.11c1 | 360.3c2 | 337.5c2 |
| Food Group | Origin | Total Group | Total Group | |
|---|---|---|---|---|
| in Euro `000 | 2013 | 2013 | 2013 | 2012 |
| Reported net profit3 | 79,161 | 73,012 | 129,415 | 146,264 |
| Intangible amortisation | 106,642 | 5,689 | 112,331 | 106,184 |
| Tax on amortisation | (29,960) | (1,873) | (31,833) | (30,354) |
| Hybrid instrument accrued dividend | (19,898) | – | (19,898) | (16,642) |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments |
119,814 | (2,458) | 117,356 | 99,629 |
| Tax on asset write-down and costs arising on integration | 12,598 | (2,196) | 10,402 | (8,850) |
| Non-controlling interest portion of acquisition, disposal and restructuring-related costs and fair value adjustments |
– | – | 1,450 | (4,490) |
| Underlying net profit | 268,357 | 72,174 | 319,223 | 291,741 |
| Dilutive impact of Origin management incentives | – | – | (114) | (696) |
| Underlying fully diluted net profit | 268,357 | 72,174 | 319,109 | 291,045 |
| Underlying fully diluted EPS (cent) | – | 52.11c1 | 360.3c2 | 337.5c2 |
1 Origin FY 2013 underlying fully diluted EPS is calculated using the weighted average number of shares in issue of 138,499,155 (FY 2012: 138,499,155).
2 The 31 July 2013 weighted average number of ordinary shares used to calculate diluted earnings per share is 88,559,475 (2012: 86,228,153). The increase in the weighted average number of ordinary shares is primarily due to the impact of the 4,252,239 shares issued during January 2012 on the weighted average shares outstanding during each respective year.
3 Food Group reported net profit excludes dividend income of €14,250,000 (2012: €10,450,000) from Origin.
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 and 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 ARYZTA Board of Directors on an annual basis. Risks identified and associated mitigating controls are also subject to audit as part of operational, financial and health and safety audit programmes.
The directors are responsible for preparing the Annual Report and the Group consolidated and Company financial statements, in accordance with Swiss law and regulations.
Company law requires the directors to prepare Group consolidated and Company financial statements for each financial year. Under that law, 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 disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with IFRS and the requirements of Swiss law and the Company's Articles of Association.
They are also responsible for taking such steps as are reasonably open 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
26 September 2013
of Directors
for the year ended 31 July 2013
| in Euro `000 | Notes | 2013 | 2012 |
|---|---|---|---|
| Revenue | 2 | 4,503,690 | 4,207,667 |
| Cost of sales | (3,279,291) | (3,023,420) | |
| Gross profit | 1,224,399 | 1,184,247 | |
| Distribution expenses | (564,458) | (553,385) | |
| Administration expenses | (296,688) | (292,996) | |
| Operating profit before net acquisition, disposal and restructuring-related costs and fair value adjustments | 363,253 | 337,866 | |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments | 3 | (117,356) | (99,629) |
| Operating profit | 245,897 | 238,237 | |
| Share of profit after tax of associates and joint ventures | 22,057 | 14,200 | |
| Profit before financing income, financing costs and income tax expense | 267,954 | 252,437 | |
| Financing income | 10,534 | 11,758 | |
| Financing costs | (74,438) | (77,069) | |
| Profit before income tax expense | 204,050 | 187,126 | |
| Income tax expense | (48,258) | (24,572) | |
| Profit for the year | 155,792 | 162,554 | |
| Attributable as follows: | |||
| Equity shareholders | 129,415 | 146,264 | |
| Non-controlling interests | 26,377 | 16,290 | |
| Profit for the year | 155,792 | 162,554 | |
| 2013 | 2012 | ||
| Earnings per share for the year | Notes | euro cent | euro cent |
| Basic earnings per share | 4 | 124.3 | 150.8 |
| Diluted earnings per share | 4 | 123.5 | 149.7 |
| in Euro `000 | Notes | 2013 | 2012 |
|---|---|---|---|
| Profit for the year | 155,792 | 162,554 | |
| Other comprehensive (loss)/income | |||
| Items that may be reclassified subsequently to profit or loss: | |||
| Foreign exchange translation effects | |||
| – Foreign currency net investments | (237,352) | 246,802 | |
| – Foreign currency borrowings | 6 | 91,854 | (156,513) |
| – Recycle of foreign exchange gain on settlement of quasi-equity loans | – | (668) | |
| – Recycle on disposal of joint venture | (3,653) | – | |
| – Taxation effect of foreign exchange translation movements | (1,630) | 6,863 | |
| – Share of joint ventures and associates' foreign exchange translation adjustment | (2,035) | 1,639 | |
| Cash flow hedges | |||
| – Effective portion of changes in fair value of cash flow hedges | 4,941 | (3,522) | |
| – Fair value of cash flow hedges transferred to income statement | (1,588) | 720 | |
| – Deferred tax effect of cash flow hedges | (817) | 259 | |
| – Share of joint ventures and associates' gain/(loss) on cash flow hedges, net of deferred tax | 339 | (1,275) | |
| Total of items that may be reclassified subsequently to profit or loss | (149,941) | 94,305 | |
| Items that will not be reclassified to profit or loss: | |||
| Defined benefit plans | |||
| – Actuarial loss on Group defined benefit pension plans | (3,840) | (10,710) | |
| – Deferred tax effect of actuarial loss | 356 | 2,002 | |
| – Share of associates' actuarial loss on defined benefit plans, net of deferred tax | (4,552) | (4,379) | |
| Deferred tax effect of change in tax rates | (462) | (858) | |
| Total of items that will not be reclassified to profit or loss | (8,498) | (13,945) | |
| Total other comprehensive (loss)/income | (158,439) | 80,360 | |
| Total comprehensive (loss)/income for the year | (2,647) | 242,914 | |
| Attributable as follows: | |||
| Equity shareholders of the Company | (21,913) | 228,663 | |
| Non-controlling interests | 19,266 | 14,251 | |
| Total comprehensive (loss)/income for the year | (2,647) | 242,914 |
17
as at 31 July 2013
| in Euro `000 | Notes | 2013 | 2012 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 1,141,847 | 1,022,587 | |
| Investment properties | 22,984 | 29,268 | |
| Goodwill and intangible assets | 2,905,242 | 2,871,982 | |
| Investments in associates and joint ventures | 45,235 | 127,384 | |
| Other receivables | 39,433 | 37,223 | |
| Deferred income tax assets | 71,146 | 85,465 | |
| Total non-current assets | 4,225,887 | 4,173,909 | |
| Current assets | |||
| Inventory | 297,641 | 281,917 | |
| Trade and other receivables | 678,845 | 553,566 | |
| Derivative financial instruments | 1,821 | 422 | |
| Cash and cash equivalents | 6 | 626,922 | 547,474 |
| Total current assets | 1,605,229 | 1,383,379 | |
| Total assets | 5,831,116 | 5,557,288 |
| Notes in Euro `000 |
2013 | 2012 |
|---|---|---|
| Equity | ||
| Called up share capital | 1,172 | 1,172 |
| Share premium | 773,735 | 773,735 |
| Retained earnings and other reserves | 1,888,112 | 1,648,223 |
| Total equity attributable to equity shareholders of the Company | 2,663,019 | 2,423,130 |
| Non-controlling interests | 97,610 | 86,225 |
| Total equity | 2,760,629 | 2,509,355 |
| Liabilities | ||
| Non-current liabilities | ||
| Interest-bearing loans and borrowings | 1,157,435 6 |
1,330,446 |
| Employee benefits | 22,339 | 23,710 |
| Deferred income from government grants | 25,251 | 10,210 |
| Other payables | 48,190 | 24,580 |
| Deferred income tax liabilities | 402,016 | 412,122 |
| Derivative financial instruments | 2,136 | 2,008 |
| Contingent consideration | 8,570 | – |
| Total non-current liabilities | 1,665,937 | 1,803,076 |
| Current liabilities | ||
| Interest-bearing loans and borrowings | 348,274 6 |
261,119 |
| Trade and other payables | 1,004,142 | 942,340 |
| Income tax payable | 46,570 | 27,440 |
| Derivative financial instruments | 1,354 | 3,916 |
| Contingent consideration | 4,210 | 10,042 |
| Total current liabilities | 1,404,550 | 1,244,857 |
| Total liabilities | 3,070,487 | 3,047,933 |
| Total equity and liabilities | 5,831,116 | 5,557,288 |
| 31 July 2013 in Euro `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 2012 | 1,172 | 773,735 | (57) | 285,004 | (2,381) | 15,403 | 10,148 | 140,298 | 1,199,808 | 2,423,130 | 86,225 | 2,509,355 |
| Profit for the year | – | – | – | – | – | – | – | – | 129,415 | 129,415 | 26,377 | 155,792 |
| Other comprehensive (loss)/income |
– | – | – | – | 2,268 | – | – | (148,078) | (5,518) | (151,328) | (7,111) | (158,439) |
| Total comprehensive (loss)/income |
– | – | – | – | 2,268 | – | – | (148,078) | 123,897 | (21,913) | 19,266 | (2,647) |
| Issue of perpetual callable subordinated instrument |
– | – | – | 319,442 | – | – | – | – | – | 319,442 | – | 319,442 |
| Transfer of share-based payment reserve to retained earnings |
– | – | – | – | – | – | (8,699) | – | 8,699 | – | – | – |
| Release of treasury shares due to exercise of LTIP |
– | – | 1 | – | – | – | – | – | – | 1 | – | 1 |
| Share-based payments | – | – | – | – | – | – | 7,416 | – | – | 7,416 | 395 | 7,811 |
| Equity dividends | – | – | – | – | – | – | – | – | (43,517) | (43,517) | – | (43,517) |
| Dividends to non controlling interests |
– | – | – | – | – | – | – | – | – | – | (8,935) | (8,935) |
| Transfer of revaluation reserve to retained earnings |
– | – | – | – | – | (1,993) | – | – | 1,993 | – | – | – |
| Dividend accrued on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (19,898) | (19,898) | – | (19,898) |
| Total contributions by and distributions to owners |
– | – | 1 | 319,442 | – | (1,993) | (1,283) | – | (52,723) | 263,444 | (8,540) | 254,904 |
| Dilution due to vesting of Origin management equity entitlements |
– | – | – | – | 7 | (30) | (3) | 54 | (687) | (659) | 659 | – |
| Non-controlling interest forward contract |
– | – | – | – | – | – | – | – | (983) | (983) | – | (983) |
| Total transactions with owners recognised |
||||||||||||
| directly in equity | – | – | 1 | 319,442 | 7 | (2,023) | (1,286) | 54 | (54,393) | 261,802 | (7,881) | 253,921 |
| At 31 July 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 |
| 31 July 2012 | Share | Share | Treasury | Other equity |
Cash flow hedge |
Revalua tion |
Share based payment |
Foreign currency trans lation |
Retained | Total share holders |
Non controlling |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 At 1 August 2011 |
capital | premium 1,061 632,951 |
shares | reserve (30) 285,004 |
reserve 260 |
reserve 17,148 |
reserve 24,989 |
reserve 44,054 |
earnings 1,118,659 |
equity 2,124,096 |
interests 72,410 |
Total 2,196,506 |
| Profit for the year | – | – | – | – | – | – | – | – | 146,264 | 146,264 | 16,290 | 162,554 |
| Other comprehensive (loss)/income |
– | – | – | – | (2,721) | – | – | 95,910 | (10,790) | 82,399 | (2,039) | 80,360 |
| Total comprehensive (loss)/ income |
– | – | – | – | (2,721) | – | – | 95,910 | 135,474 | 228,663 | 14,251 | 242,914 |
| Issue of treasury shares | 41 | – | (41) | – | – | – | – | – | – | – | – | – |
| Issue of shares, net of costs |
70 | 140,784 | – | – | – | – | – | – | – | 140,854 | – | 140,854 |
| Transfer of share-based payment reserve to retained earnings |
– | – | – | – | – | – | (21,682) | – | 21,682 | – | – | – |
| Release of treasury shares due to exercise of LTIP |
– | – | 14 | – | – | – | – | – | – | 14 | – | 14 |
| Share-based payments | – | – | – | – | – | – | 6,872 | – | – | 6,872 | 193 | 7,065 |
| Equity dividends | – | – | – | – | – | – | – | – | (41,490) | (41,490) | – | (41,490) |
| Dividends to non controlling interests |
– | – | – | – | – | – | – | – | – | – | (6,437) | (6,437) |
| Transfer of revaluation reserve to retained earnings |
– | – | – | – | – | (1,361) | – | – | 1,361 | – | – | – |
| Dividend accrued on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (16,642) | (16,642) | – | (16,642) |
| Total contributions by and distributions to owners |
111 140,784 | (27) | – | – | (1,361) (14,810) | – | (35,089) | 89,608 | (6,244) | 83,364 | ||
| Dilution due to vesting of Origin management equity entitlements |
– | – | – | – | 80 | (384) | (31) | 334 | (5,807) | (5,808) | 5,808 | – |
| Non-controlling interest forward contract |
– | – | – | – | – | – | – | – | (13,429) | (13,429) | – | (13,429) |
| Total transactions with owners recognised |
||||||||||||
| directly in equity At 31 July 2012 |
111 140,784 1,172 773,735 |
(27) | – (57) 285,004 |
80 (2,381) |
15,403 | (1,745) (14,841) | 334 10,148 140,298 |
(54,325) 1,199,808 |
70,371 2,423,130 |
(436) 86,225 |
69,935 2,509,355 |
| in Euro `000 | Notes | 2013 | 2012 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit for the year | 155,792 | 162,554 | |
| Income tax expense | 48,258 | 24,572 | |
| Financing income | (10,534) | (11,758) | |
| Financing costs | 74,438 | 77,069 | |
| Share of profit after tax of associates and joint ventures | (22,057) | (14,200) | |
| Net gain on acquisitions, disposals and dilution | 3 | (20,249) | (3,722) |
| Asset write-downs and fair value adjustments | 3 | 51,595 | 20,221 |
| Acquisition and restructuring-related payments in excess of current year costs | (7,804) | (7,201) | |
| Depreciation of property, plant and equipment | 2 | 92,852 | 90,679 |
| Amortisation of intangible assets | 2 | 120,215 | 111,491 |
| Recognition of deferred income from government grants | (2,644) | (1,581) | |
| Share-based payments | 7,344 | 6,068 | |
| Other | (2,527) | (272) | |
| Cash flows from operating activities before changes in working capital | 484,679 | 453,920 | |
| (Increase)/decrease in inventory | (27,167) | (5,347) | |
| (Increase)/decrease in trade and other receivables | (23,071) | (22,913) | |
| Increase/(decrease) in trade and other payables | 35,562 | 20,402 | |
| Cash generated from operating activities | 470,003 | 446,062 | |
| Interest paid | (70,544) | (70,118) | |
| Interest received | 2,530 | 2,625 | |
| Income tax paid | (40,014) | (49,219) | |
| Net cash flows from operating activities | 361,975 | 329,350 |
| in Euro `000 | Notes | 2013 | 2012 |
|---|---|---|---|
| Cash flows from investing activities | |||
| Proceeds from sale of property, plant and equipment | 10,230 | 6,852 | |
| Proceeds from sale of investment property | – | 485 | |
| Purchase of property, plant and equipment | |||
| – maintenance capital expenditure | (51,568) | (51,832) | |
| – investment capital expenditure | (112,195) | (60,136) | |
| Grants received | 79 | – | |
| Acquisitions of subsidiaries and businesses, net of cash acquired | 5 | (311,609) | (92,310) |
| Disposal of joint ventures and associates | 18,260 | 4,675 | |
| Purchase of intangible assets | (66,432) | (35,932) | |
| Dividends received | 6,908 | 11,073 | |
| Net receipts from/(contributions to) associates and joint ventures | 21 | (7,731) | |
| Contingent consideration paid | (9,114) | (13,346) | |
| Net cash flows from investing activities | (515,420) | (238,202) | |
| Cash flows from financing activities | |||
| Net proceeds from issue of shares | – | 140,854 | |
| Net proceeds from issue of perpetual callable subordinated instrument | 7 | 319,442 | – |
| Gross drawdown of loan capital | 6 | 27,405 | – |
| Gross repayment of loan capital | 6 | (53,950) | (142,255) |
| Capital element of finance lease liabilities | (2,177) | (2,708) | |
| Dividend paid on perpetual callable subordinated instrument | (16,561) | (16,305) | |
| Dividends paid to non-controlling interests | (8,935) | (6,437) | |
| Dividends paid to equity shareholders | (43,517) | (41,490) | |
| Net cash flows from financing activities | 221,707 | (68,341) | |
| Net increase in cash and cash equivalents | 68,262 | 22,807 | |
| Translation adjustment | (20,875) | 4,646 | |
| Net cash and cash equivalents at start of year | 345,089 | 317,636 | |
| Net cash and cash equivalents at end of year | 6 | 392,476 | 345,089 |
The financial information included on pages 16 to 34 of this News Release has been extracted from the ARYZTA Group consolidated financial statements for the year ended 31 July 2013 on which the auditor has issued an unqualified audit opinion.
The financial information has been prepared in accordance with the accounting policies set out in the Group's consolidated financial statements for the year ended 31 July 2012 which were prepared in accordance with International Financial Reporting Standards (IFRS) and Swiss law, and have been updated for changes in IFRS applicable to the financial year 2013, as outlined in the Group accounting policies note to the interim financial statements for the period ended 31 January 2013.
The Group consolidated financial information is presented in Euro, rounded to the nearest thousand, unless otherwise stated.
| I) Segment revenue and result |
Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Segment revenue1 | 1,391,525 1,273,707 1,459,805 1,372,411 | 234,187 | 221,526 3,085,517 2,867,644 1,418,173 1,340,023 4,503,690 4,207,667 | |||||||||
| Operating profit before net acquisition, disposal and restructuring-related costs and fair value adjustments 2 |
135,483 | 124,750 | 141,287 | 128,597 | 23,283 | 21,696 | 300,053 | 275,043 | 63,200 | 62,823 | 363,253 | 337,866 |
| Net acquisition, disposal and restructuring-related costs and fair value |
||||||||||||
| adjustments 2 (note 3) | (68,019) (40,700) (51,795) (44,044) | – | 1,267 (119,814) (83,477) | 2,458 (16,152) (117,356) (99,629) | ||||||||
| Operating profit | 67,464 | 84,050 | 89,492 | 84,553 | 23,283 | 22,963 | 180,239 | 191,566 | 65,658 | 46,671 | 245,897 | 238,237 |
| Share of profit after tax of associates and joint ventures |
– | 39 | 201 | 430 | – | 593 | 201 | 1,062 | 21,856 | 13,138 | 22,057 | 14,200 |
| Profit before financing income, financing cost |
||||||||||||
| and income tax expense | 67,464 | 84,089 | 89,693 | 84,983 | 23,283 | 23,556 | 180,440 | 192,628 | 87,514 | 59,809 | 267,954 | 252,437 |
| Financing income3 | 3,666 | 4,473 | 6,868 | 7,285 | 10,534 | 11,758 | ||||||
| Financing costs3 | (61,427) (63,190) (13,011) (13,879) (74,438) (77,069) | |||||||||||
| Profit before income tax expense as reported in Group Consolidated |
||||||||||||
| Income Statement | 122,679 | 133,911 | 81,371 | 53,215 | 204,050 | 187,216 | ||||||
| 1 | There were no significant intercompany revenues between business segments. |
segment.
2 Certain central executive and support costs have been allocated against the operating profits of each business
3 Finance 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.
| II) Segment assets | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Segment assets excluding investments in associates and joint ventures |
2,162,369 1,760,828 1,894,380 2,042,006 | 307,428 | 329,833 4,364,177 4,132,667 | 682,382 | 626,653 5,046,559 4,759,320 | |||||||
| Investments in associates and joint ventures and related financial assets |
– | 530 | – | 2,015 | – | – | – | 2,545 | 84,668 | 162,062 | 84,668 | 164,607 |
| Segment assets | 2,162,369 1,761,358 1,894,380 2,044,021 | 307,428 | 329,833 4,364,177 4,135,212 | 767,050 | 788,715 5,131,227 4,923,927 | |||||||
| Reconciliation to total assets as reported in the Group Consolidated Balance Sheet Derivative financial |
||||||||||||
| instruments | 1,329 | 327 | 492 | 95 | 1,821 | 422 | ||||||
| Cash and cash equivalents | 501,438 | 452,175 | 125,484 | 95,299 | 626,922 | 547,474 | ||||||
| Deferred income tax assets | 66,642 | 80,745 | 4,504 | 4,720 | 71,146 | 85,465 | ||||||
| Total assets as reported in Group Consolidated Balance Sheet |
4,933,586 4,668,459 | 897,530 | 888,829 5,831,116 5,557,288 | |||||||||
| III) Segment liabilities | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
| in Euro `000 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Segment liabilities | 424,683 | 314,553 | 210,143 | 208,659 | 41,527 | 40,297 | 676,353 | 563,509 | 436,349 | 447,373 1,112,702 1,010,882 | ||
| Reconciliation to total liabilities as reported in Group Consolidated Balance Sheet |
||||||||||||
| Interest-bearing loans and borrowings |
1,350,666 1,428,458 | 155,043 | 163,107 1,505,709 1,591,565 | |||||||||
| Derivative financial instruments |
1,283 | 2,066 | 2,207 | 3,858 | 3,490 | 5,924 | ||||||
| Current and deferred income tax liabilities |
420,120 | 408,395 | 28,466 | 31,167 | 448,586 | 439,562 |
Total liabilities as reported in Group Consolidated
Balance Sheet 2,448,422 2,402,428 622,065 645,505 3,070,487 3,047,933
| IV) Other segment information |
Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Depreciation | 43,929 | 43,204 | 34,688 | 35,676 | 8,866 | 6,610 | 87,483 | 85,490 | 5,369 | 5,189 | 92,852 | 90,679 |
| ERP-related amortisation | 2,069 | 778 | 4,138 | 4,074 | – | – | 6,207 | 4,852 | 1,677 | 455 | 7,884 | 5,307 |
| Amortisation of other intangible assets |
50,506 | 44,745 | 48,999 | 47,694 | 7,137 | 7,344 106,642 | 99,783 | 5,689 | 6,401 112,331 106,184 | |||
| Capital expenditure | ||||||||||||
| – Property, plant and equipment |
82,739 | 37,318 | 35,375 | 45,723 | 44,858 | 28,272 162,972 111,313 | 7,964 | 5,768 170,936 117,081 | ||||
| – Computer-related intangibles |
46,270 | 14,244 | 14,529 | 9,637 | 1,781 | 7,492 | 62,580 | 31,373 | 5,826 | 5,987 | 68,406 | 37,360 |
| – Other intangibles | – | – | – | – | – | – | – | – | 295 | 575 | 295 | 575 |
| Total capital expenditure | 129,009 | 51,562 | 49,904 | 55,360 | 46,639 | 35,764 225,552 142,686 | 14,085 | 12,330 239,637 155,016 |
| Europe | North America | Rest of World | Total Group | |||||
|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Revenue by geography1 | 2,809,698 | 2,613,730 | 1,459,805 | 1,372,411 | 234,187 | 221,526 | 4,503,690 | 4,207,667 |
| Assets by geography | 2,929,419 | 2,550,073 | 1,894,380 | 2,044,021 | 307,428 | 329,833 | 5,131,227 | 4,923,927 |
| IFRS 8 non-current assets2 | 2,177,166 | 1,954,207 | 1,717,422 | 1,845,060 | 260,153 | 289,177 | 4,154,741 | 4,088,444 |
1 Revenues from external customers attributed to the Group's country of domicile, Switzerland, are 4.9% (2012: 5.3%) of total Group revenues. Revenues from external customers attributed to material foreign countries are United States 29.1% (2012: 29.2%), United Kingdom 26.9% (2012: 29.8%) and Germany 9.5% (2012: 7.4%). 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. Non-current assets attributed to the Group's country of domicile, Switzerland, are 8.9% of total Group non-current assets (2012: 9.4%). Noncurrent assets attributed to material foreign countries are: United States 28.3% (2012: 31.3%), United Kingdom 8.6% (2012: 10.9%) and Germany 16.2% (2012: 9.0%).
26
| Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | Notes | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 |
| Gain/(loss) on acquisition, disposals and dilution |
|||||||||||||
| Gain/(loss) on disposal of interest in joint ventures and associate |
3.1 | – | – | (705) | – | – | 1,417 | (705) | 1,417 | 20,954 | – | 20,249 | 1,417 |
| Gain on dilution of associate interests |
3.2 | – | – | – | – | – | – | – | – | – | 2,305 | – | 2,305 |
| Net gain/(loss) on acquisition, disposals and dilution |
– | – | (705) | – | – | 1,417 | (705) | 1,417 | 20,954 | 2,305 | 20,249 | 3,722 | |
| Acquisition-related costs | 3.3 (3,427) (1,654) (2,063) | – | – | (150) | (5,490) (1,804) | – (1,451) | (5,490) (3,255) | ||||||
| Restructuring-related costs and fair value adjustments |
3.4 | ||||||||||||
| Asset write-downs | (23,228) (3,744) (13,149) (4,006) | – | – | (36,377) (7,750) (8,612) (2,806) | (44,989) (10,556) | ||||||||
| Fair value adjustments of investment properties |
(273) | – | – | – | – | – | (273) | – (6,333) (9,665) | (6,606) (9,665) | ||||
| Severance and other staff related costs |
(23,179) (25,758) (15,460) (24,881) | – | – | (38,639) (50,639) (3,227) (4,535) | (41,866) (55,174) | ||||||||
| Grant-related costs | – | (713) | – | – | – | – | – | (713) | – | – | – | (713) | |
| Contractual obligations | (82) (2,175) (5,278) | (837) | – | – | (5,360) (3,012) | – | – | (5,360) (3,012) | |||||
| Advisory and other costs | (17,830) (6,656) (15,140) (14,320) | – | – | (32,970) (20,976) | (324) | – | (33,294) (20,976) | ||||||
| Total restructuring-related costs and fair value adjustments |
(64,592) (39,046) (49,027) (44,044) | – | – (113,619) (83,090) (18,496) (17,006) (132,115) (100,096) | ||||||||||
| Total acquisition, disposal and restructuring-related costs and fair value |
|||||||||||||
| adjustments | (68,019) (40,700) (51,795) (44,044) | – | 1,267 (119,814) (83,477) | 2,458 (16,152) (117,356) (99,629) |
During July 2013, Origin announced it had reached conditional agreement 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 disposal has been reflected in the financial year ended 31 July 2013. The consideration is shown as a receivable in the amount of €94,002,000 in the Group Consolidated Balance Sheet at 31 July 2013. The transaction completed during August 2013 and the proceeds were received in full. As the proceeds received were in excess of the carrying value of the investment of €73,873,000, the transaction resulted in a gain on disposal of €20,631,000, net of foreign exchange gains recycled from other comprehensive income of €3,653,000 and disposal-related costs of €3,151,000.
In June 2013, Continental Farmers Group was acquired by United Farmers Holding Company. As a result, Origin no longer has an investment in Continental Farmers Group. Consideration on disposal was €16,910,000, which was in excess of Origin's carrying value of the investment of €16,587,000, resulting in a gain on disposal of €323,000.
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.
In financial year 2012, the Food Group completed the disposal of its interest in a joint venture, previously held as part of the Food Rest of World segment. Consideration received on disposal was €4,675,000, which was in excess of the investment carrying value of €3,258,000 at the time, resulting in a gain of €1,417,000.
In financial year 2012, Origin's investment in Valeo was reduced from 44.1% to 32.0% as a result of Valeo raising additional funding from investors. As a result of this transaction, the Group recorded a gain of €2,305,000 on the dilution of the holding, which is recorded in the Group Consolidated Income Statement for the year ended 31 July 2012.
Acquisition-related costs of €5,490,000 incurred during the year ended 31 July 2013 relate to Food Group acquisition-related activities. Acquisition costs of €3,255,000 incurred during the year ended 31 July 2012 related primarily to Origin's share of Valeo transaction and rationalisation costs, as well as costs associated with the prior year Food Group acquisitions. These costs include share purchase tax, due diligence and other professional services fees.
During the financial year 2013, 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 €44,989,000 (2012: €10,556,000) of asset write-downs during the year. These amounts relate to the write-down of certain distribution, manufacturing and administration assets, due to the closure and/or reduction in the activities related to those assets. These amounts primarily related to the closure of 50 distribution centres and 224 truck routes as a result of discontinuing Direct Store Delivery in Food North America, as well as the continued evaluation of the manufacturing and distribution footprint across the various Food Europe business units as part of the Food Group ATI integration and rationalisation programme. Based on the anticipated future use of certain items within property, plant and equipment, Origin management obtained an external valuation and adjusted the carrying values accordingly.
The Group incurred €6,606,000 (2012: €9,665,000) of fair value adjustments related to the carrying value of investment properties, based on the results of independent valuations. These adjustments are primarily the result of the continuing decline in the Irish property market, lack of transactions, restricted bank financing for property-related deals, a generally difficult economic environment, and in particular the indication that the value of development land in regional areas is converging to that of agricultural land.
The Group has incurred and provided for €41,866,000 (2012: €55,174,000) in severance and other staff-related costs during the year, in relation to employees whose service was discontinued following certain rationalisation decisions throughout the Group. These costs also primarily related to discontinuing Direct Store Delivery in Food North America and the continued evaluation of the manufacturing and distribution footprint across the various Food Europe business units.
The termination of certain activities caused by the Group's integration and rationalisation programmes in the prior year resulted in the triggering of related grant repayment conditions. This resulted in the reversal of €713,000 in grants previously amortised through the prior year Group Consolidated Income Statement.
The operational decisions made through the Group's integration and rationalisation projects triggered early termination penalties and resulted in certain operational contracts becoming onerous. The Group incurred total costs of €5,360,000 (2012: €3,012,000) during the year to either exit or provide for such contractual obligations.
During the year, the Group incurred €33,294,000 (2012: €20,976,000) in other costs related directly to the implementation of the integration and rationalisation programs. These costs are composed principally of restructuring-related advisory costs, site restoration costs, costs associated with establishing shared service centres for centralisation of certain administrative functions and other directly attributable incremental costs.
| 2013 | 2012 | |
|---|---|---|
| Basic earnings per share | in Euro '000 | in Euro '000 |
| Profit attributable to equity shareholders | 129,415 | 146,264 |
| Perpetual callable subordinated instrument accrued dividend (Note 7) |
(19,898) | (16,642) |
| Profit used to determine basic earnings per share | 109,517 | 129,622 |
| Weighted average number of ordinary shares | '000 | '000 |
| Ordinary shares outstanding at 1 August1 | 88,038 | 82,810 |
| Effect of exercise of equity instruments during the year2 | 67 | 827 |
| Effect of shares issued during the year | – | 2,300 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,105 | 85,937 |
| Basic earnings per share | 124.3 cent | 150.8 cent |
| 2013 | 2012 | |
| Diluted earnings per share | in Euro '000 | in Euro '000 |
| Profit used to determine basic earnings per share | 109,517 | 129,622 |
| Effect on non-controlling interests share of reported profits, due to dilutive impact of Origin management equity entitlements3 |
(116) | (557) |
| Profit used to determine diluted earnings per share | 109,401 | 129,065 |
| Weighted average number of ordinary shares (diluted) | '000 | '000 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,105 | 85,937 |
| Effect of equity-based incentives with a dilutive impact2 | 454 | 291 |
| Weighted average number of ordinary shares used to determine diluted earnings per share4 |
88,559 | 86,228 |
| Diluted earnings per share | 123.5 cent | 149.7 cent |
1 Issued share capital excludes treasury shares.
2 The change in the equity instruments 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 The 31 July 2013 weighted average number of ordinary shares used to calculate diluted earnings per share is 88,559,475 (2012: 86,228,153). The increase in the weighted average number of ordinary shares is primarily due to the impact of the 4,252,239 shares issued during January 2012 on the weighted average shares outstanding during each respective year.
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:
| 2013 | 2012 | |
|---|---|---|
| Underlying fully diluted earnings per share | in Euro '000 | in Euro '000 |
| Profit used to determine basic earnings per share | 109,517 | 129,622 |
| Amortisation of non-ERP intangible assets (note 2) | 112,331 | 106,184 |
| Tax on amortisation of non-ERP intangible assets | (31,833) | (30,354) |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments (note 3) |
117,356 | 99,629 |
| Tax on net acquisition, disposal and restructuring-related costs and fair value adjustments |
10,402 | (8,850) |
| Non-controlling interest portion of acquisition, disposal and restructuring-related costs and fair value adjustments |
1,450 | (4,490) |
| Effect on non-controlling interests share of adjusted profits due to dilutive impact of Origin management equity entitlements |
(114) | (696) |
| Underlying fully diluted net profit | 319,109 | 291,045 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,105 | 85,937 |
| Underlying basic earnings per share | 362.2 cent | 338.7 cent |
| Weighted average number of ordinary shares used to determine diluted earnings per share |
88,559 | 86,228 |
| Underlying fully diluted earnings per share | 360.3 cent | 337.5 cent |
During the year, the Group completed the acquisition of Klemme AG, as well as three other smaller acquisitions, by acquiring all outstanding shares of these individual entities. 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 Euro `000 | Klemme | Other | values | |
| Provisional fair value of net assets acquired: | ||||
| Property, plant and equipment | 119,307 | 19,940 | 139,247 | |
| Intangible assets | 99,182 | 24,645 | 123,827 | |
| Inventory | 15,367 | 2,427 | 17,794 | |
| Trade and other receivables | 42,659 | 3,984 | 46,643 | |
| Trade and other payables | (43,183) | (14,913) | (58,096) | |
| Other non-current payables | – | (22,225) | (22,225) | |
| Deferred tax | (29,308) | (1,756) | (31,064) | |
| Deferred income from government grants | (17,842) | – | (17,842) | |
| Income tax payable | (4,742) | (2,199) | (6,941) | |
| Net assets acquired | 181,440 | 9,903 | 191,343 | |
| Goodwill arising on acquisitions | 110,059 | 23,028 | 133,087 | |
| Consideration | 291,499 | 32,931 | 324,430 | |
| Satisfied by: | ||||
| Cash consideration | 282,834 | 31,008 | 313,842 | |
| Cash acquired | (1,335) | (898) | (2,233) | |
| Net cash consideration | 281,499 | 30,110 | 311,609 | |
| Contingent consideration | 10,000 | 2,821 12,821 |
||
| Total consideration | 291,499 | 32,931 | 324,430 |
The net cash outflow on these acquisitions during the year is disclosed in the Group Consolidated Cash Flow Statement as follows:
| in Euro `000 | Total |
|---|---|
| Cash flows from investing activities | |
| Cash consideration | 313,842 |
| Cash acquired | (2,233) |
| Cost of acquisitions | 311,609 |
Costs of €5,490,000 related to the acquisitions were charged to the net acquisition, disposal, and restructuring-related costs and fair value adjustments in the Group Consolidated Income Statement during the year ended 31 July 2013.
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 | 153,634 |
| Profit for the year | 5,938 |
If these acquisitions had occurred on 1 August 2012, management estimates that the consolidated revenue would have been €4,653,291,000 and profit for the year would have been €174,754,000. 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 2012.
For the identification and estimation of the fair value of the intangibles acquired as part of these acquisitions, ARYZTA was assisted by a non-audit independent 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.
| Analysis of net debt in Euro `000 |
1 August 2012 |
Cash flows | Non-cash movements |
Translation adjustment |
31 July 2013 |
|---|---|---|---|---|---|
| Cash | 547,474 | 108,351 | – | (28,903) | 626,922 |
| Overdrafts | (202,385) | (40,089) | – | 8,028 | (234,446) |
| Cash and cash equivalents | 345,089 | 68,262 | – | (20,875) | 392,476 |
| Loans | (1,385,488) | 26,545 | (2,887) | 91,854 | (1,269,976) |
| Finance leases | (3,692) | 2,177 | – | 228 | (1,287) |
| Net debt | (1,044,091) | 96,984 | (2,887) | 71,207 | (878,787) |
| Split of net debt in Euro `000 |
1 August 2012 |
Cash flows | Non-cash movements |
Translation adjustment |
31 July 2013 |
| Food Group net debt | (976,283) | 67,287 | (2,256) | 62,024 | (849,228) |
| Origin net debt | (67,808) | 29,697 | (631) | 9,183 | (29,559) |
| Net debt | (1,044,091) | 96,984 | (2,887) | 71,207 | (878,787) |
In April 2013, the Group raised CHF 400,000,000 through the issuance of a Perpetual Callable Subordinated Instrument ('Hybrid Instrument'), which has been 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% and has no maturity date, with an initial call date by ARYZTA after five years from issuance. In the event that the call option is not exercised after five years, the coupon would be 605 bp plus the 3-month CHF LIBOR.
In October 2010, the Group raised CHF 400,000,000 through the issuance of a separate Hybrid Instrument, which was recognised at a carrying value of €285,004,000 within equity, net of transaction costs of €7,436,000. This Hybrid Instrument offers a coupon of 5% and has no maturity date, with an initial call date by ARYZTA after four years from issuance. In the event that the call option is not exercised after four years, the coupon would be 905 bp plus the 3-month CHF LIBOR.
| in Euro `000 | 2013 | 2012 |
|---|---|---|
| At 1 August | 285,004 | 285,004 |
| Issuance of hybrid instrument, net of transaction cost | 319,442 | – |
| At 31 July | 604,446 | 285,004 |
The total coupon recognised for these Hybrid instruments during the year ended 31 July 2013 was €19,898,000 (2012: €16,642,000).
At the Annual General Meeting on 10 December 2013, shareholders will be invited to approve a proposed dividend of CHF 0.6652 (€0.5405) per share, to be paid to shareholders after the balance sheet date. A dividend of CHF 0.6125 was paid during the year (2012: CHF 0.5679).
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