Quarterly Report • Mar 15, 2010
Quarterly Report
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02 Interim Financial and Business Review
10 Group Condensed Interim Financial Statements
"The global economic recovery has yet to reach consumers who continue to adjust their patterns of spending in response to tough economic conditions. Credit availability remains difficult for many customers who need to maintain and develop their consumerfacing investment. Those customers who have adapted to the conditions and who offer a satisfying consumer experience by using 'freshly baked' throughout the dayparts demonstrate the resilience of the business.
Bakery offers excellent food value for consumers, and ARYZTA remains committed to developing customer relationships and delivery channels that enhance the consumer experience.
The Group has optimised its capital structure over the period through accessing the Swiss bond and US private placement markets. As a result, ARYZTA's debt maturity has been extended to c. 7.4 years, leaving it well positioned within the fragmented speciality bakery industry.
The Group continues to focus on cash generation and operating efficiencies, and confirms existing guidance on underlying EPS of 224 cent for FY 2010."
| in Euro `000 | Food Group 2010 |
Origin 2010 |
Total Group 2010 |
Total Group 2009 |
% Change |
|---|---|---|---|---|---|
| Group revenue | 800,921 | 593,1324 | 1,394,053 | 1,571,169 | (11.3)% |
| Group operating profit1 | 98,080 | 15,933 | 114,013 | 126,450 | (9.8)% |
| Share of associates and JVs2 | 8,468 | 5,167 | 13,635 | 7,837 | – |
| Operating profit incl. associates and JVs1 | 106,548 | 21,100 | 127,648 | 134,287 | (4.9)% |
| Finance cost, net | (15,961) | (7,762) | (23,723) | (24,405) | – |
| Pre tax profits1 | 90,587 | 13,338 | 103,925 | 109,882 | – |
| Income tax1 | (15,576) | (1,389) | (16,965) | (19,675) | – |
| Minority Interest3 | (1,257) | – | (4,430) | (6,233) | – |
| Underlying fully diluted net profit | 73,754 | 11,949 | 82,530 | 83,974 | (1.7)% |
| Underlying fully diluted EPS (cent) | 8.7c6 | 104.5c5 | 107.7c5 | (3.0)% |
| in Euro `000 | Food Group 2010 |
Origin 2010 |
Total Group 2010 |
Total Group 2009 |
% Change |
|---|---|---|---|---|---|
| Reported net profit | 57,065 | 10,228 | 64,371 | 44,729 | 43.9% |
| Amortisation of intangible assets | 21,749 | 2,002 | 23,751 | 22,444 | – |
| Tax on amortisation | (5,060) | (281) | (5,341) | (5,370) | – |
| Merger costs, net of tax | – | – | – | 22,520 | – |
| Underlying net profit | 73,754 | 11,949 | 82,781 | 84,323 | (1.8)% |
| Dilutive impact of Origin management incentives | – | – | (251) | (349) | – |
| Underlying fully diluted net profit | 73,754 | 11,949 | 82,530 | 83,974 | (1.7)% |
| Underlying fully diluted EPS (cent) | – | 8.7c6 | 104.5c5 | 107.7c5 | (3.0)% |
1 Before intangible amortisation, impact of non-recurring items and related tax credits.
2 Associates & JVs profit net of tax and interest.
3 Presented after dilutive impact of Origin management incentives.
4 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
5 Actual 2010 underlying fully diluted EPS calculated using weighted average number of shares in issue
of 78,946,101 (January 2009: 77,999,274).
6 The Origin share denominator for the six months ended 31 January 2010 is 137,626,000.
| Food | ||||||
|---|---|---|---|---|---|---|
| Food North | Developing | Total | Origin4 | |||
| in Euro million | Food Europe | America | Markets | Food Group | Total Group | |
| Group revenue | 533.6 | 254.7 | 12.6 | 800.9 | 593.1 | 1,394.0 |
| Underlying growth | (10.1)% | (2.7)% | 3.4% | (7.6)% | (11.9)% | (9.5)% |
| Acquisitions and disposals | 3.4%2 | – | – | 2.3% | (0.8)%3 | 0.9% |
| Transfer within segments | (0.2)%1 | – | 18.2%1 | – | – | – |
| Currency | (0.8)% | (5.2)% | 4.7% | (2.1)% | (3.3)% | (2.7)% |
| Revenue Growth | (7.7)% | (7.9)% | 26.3% | (7.4)% | (16.0)% | (11.3)% |
1 Reflects the transfer of business activity from Food Europe to Food Developing Markets due to operational change.
2 Reflects the contribution of French bolt on acquisition in February 2009 not included in the prior year comparative.
3 In the case of Origin this reflects the impact of the disposal of its marine protein and oils business in February 2009 which is now included in the share of profit from associates & JV line. It also reflects the contribution from the acquisitions of CSC Crop Protection Ltd. and GB Seeds Ltd. which are not included in the prior year comparative.
4 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
| Food | Origin | Total Group | |||
|---|---|---|---|---|---|
| Food North America |
Developing Markets |
Total Food Group |
|||
| 60,736 | 35,271 | 2,073 | 98,080 | 15,933 | 114,013 |
| (5.1)% | 2.8% | 126.0% | (1.1)% | (41.5)% | (9.8)% |
| Food Europe |
1 The above figures exclude intangible amortisation and the impact of non-recurring items.
ARYZTA AG's ('ARYZTA') food business is primarily focused on speciality bakery, a niche part of the total global bakery market. The total bakery market at retail selling price is valued at €260bn. The North American market accounts for 20% and the European market for 45% of this total. Speciality bakery accounts for €30bn of the total €260bn bakery market. North America's and Europe's share of this €30bn market is split 30% and 47% respectively.
Speciality bakery consists of freshly prepared bakery offerings giving the best value, variety, taste and convenience to consumers at point of sale. The aroma of freshly baked goods at the point of sale drives consumer footfall and represents a point of difference for ARYZTA's customers in foodservice and retail establishments.
The bakery business has a diversified customer base across convenience retail, gas stations, restaurants, catering, hotels and leisure, large multiple retail and quick service restaurants.
Revenue continued to decline during the period and this decline is evident across most channels and markets. Consumers continued to switch channels during the period with food service more impacted than retail. Lower consumer spending and in some cases
customers experiencing difficulties in obtaining credit has led to customers reducing costs and postponing investment decisions.
Bakery is everyday food. It is basic and sustainable. It is also indulgent and affordable. The challenge is to deliver everyday consumer experience, with consistently high quality baked goods. To do this, investment must be maintained in best in class execution and innovation of freshly baked goods at point of sale.
Food Europe has leading market positions in the speciality bakery market in Switzerland, Germany, Poland, the UK, Ireland and France. In Europe, ARYZTA has a mixture of business to business and consumer brands, including Hiestand, Cuisine de France, Delice de France and Coup de Pates. It has a diversified customer base including convenience retail, gas stations, multiple retail, restaurants, catering and hotels and leisure.
Food Europe continued to face tough trading conditions in the 6 months to January 2010 with like-for-like revenues (excluding impact of acquisitions and foreign exchange) for the period declining by 10.1%. Food Europe's operating profit declined by 5.1% to €60.7m.
In Europe the decline in revenue is still most evident in Ireland and the UK from the continuing economic downturn and customer credit concerns. In Continental Europe revenue growth from new customers, through investment in additional field sales personnel, has partially compensated for slower revenues.
Food North America has leading market positions in freshly baked cookies and freshly baked artisan breads. The business has two iconic brands which evoke emotional appeal with the US consumer, namely Otis Spunkmeyer and La Brea Bakery. Food North America has a strong diversified customer base across the US foodservice channel from restaurants, catering (including hospitals, military and fundraising events), to hotels and leisure, quick service restaurants and across the US multiple retail channel.
In spite of the prevailing environment Food North America delivered revenues of €254.7m which represented a decline of 2.7% in like-for-like revenue growth (excluding impact of acquisitions and foreign exchange) for the first half of the year. An increased focus on operating efficiencies allowed operating profit to grow by 2.8% to €35.3m.
Food North America has experienced revenue weakness across most channels compared with last year but this is against a high comparator of 16.6% growth in the prior period. There are no signs of any significant consumer recovery in the US with consumers continuing to conserve their dollars and customers not making decisions required to stimulate revenue growth.
About
ARYZTA has embryonic businesses in Japan, Malaysia and Australia. This gives ARYZTA an excellent opportunity to understand the customer diversity and opportunity in this vast market.
Like-for-like revenue growth (excluding the impact of acquisitions and foreign exchange) in Food Developing Markets for the period was 3.4%. Food Developing Markets operating profit grew by 126.0% to €2.1m in the period.
Otis Spunkmeyer is currently implementing SAP Enterprise Resource Planning ('ERP') System across its extensive business platform. The project is on plan and progressing well.
This will provide the blueprint for the rollout of the ARYZTA Technology Initiative ('ATI') across the Food Group. The effective implementation of ATI will drive substantial business efficiencies and reduce cost to serve customers.
This joint venture yielded a net contribution after tax and interest of €8.5m in the six months ended 31 January 2010 (€7.3m in the six months ended 31 January 2009).
ARYZTA's 71.4% subsidiary and separately listed company, Origin, has separate funding structures, which are financed without recourse to ARYZTA. Origin's net debt amounted to €190.5m at 31 January 2010.
The consolidated net debt of the Group excluding Origin's non-recourse debt amounted to €487.9m and relates to the Food segments of the Group.
| in Euro `000 | January 2010 |
|---|---|
| EBIT | 76,331 |
| Amortisation | 21,749 |
| EBITA | 98,080 |
| Depreciation | 28,044 |
| EBITDA | 126,124 |
| Working capital movement | (9,968) |
| Dividends received | 7,740 |
| Maintenance capital expenditure | (6,683) |
| Interest and tax | (25,363) |
| Other | (475) |
| Cash flow generated from activities | 91,375 |
| Underlying net profit1 | 73,754 |
| Depreciation | 28,044 |
| 101,798 | |
| Net underlying cash earnings conversion | 90% |
1 Underlying net profit before intangible amortisation and impact of non-recurring items.
| Food Group net debt and investment activity | |
|---|---|
| in Euro `000 | Food Group |
| Food Group opening net debt as at 31 July 2009 | (505,504) |
| Cash flow generated from activities | 91,375 |
| Investment capital expenditure | (22,591) |
| Dividends paid | (30,603) |
| Deferred consideration and acquisition costs | (2,128) |
| Foreign exchange movement1 | (16,727) |
| Other | (1,679) |
| Food Group closing net debt 31 January 2010 | (487,857) |
| Net Debt to EBITDA2 | 1.69x |
1 Foreign exchange movement is primarily attributable to the fluctuation in the US Dollar to Euro rate between July 2009 (1.4252) and January 2010 (1.3985) on the US\$650m private placement.
2 Food Group net debt to EBITDA ratio calculated on bank covenant definition. EBITDA includes contribution from the Canadian JV. It is also adjusted for the non-cash share based payments charge.
ARYZTA's banking facilities and financial covenants (excluding Origin, which is separately financed) are as follows:
| Private | |||
|---|---|---|---|
| Description | Revolving credit | Swiss Bond | placement |
| Principal | €795m | CHF 200m | \$650m |
| Maturity | 20 June 2013 18 March 2015 | 13 June 2014 - 09 December 2029 |
|
| Net Debt : EBITDA (not greater than) | 3.5 times | – | 3.5 times |
| Interest Cover (not less than) | 4.0 times | – | 4.0 times |
The equity ratio of the Food Group is 49.6%. The weighted average debt maturity of the Food Group's debt is c. 7.4 years.
| 2010 | |
|---|---|
| 2011 | 2.3% |
| 2012 | |
| 2013 | 19.0% |
| 2014 | 14.1% |
| 2015 | 17.8% |
| 2016/17 | 23.4% |
| 2018/19 | 4.7% |
| 2020/21 | 7.5% |
| 2022/23 | |
| 2024/25 | 3.7% |
| 2026/27 | |
| 2028/29 | 7.5% |
| * of €487.9m. |
Food Group gross debt at 31 January 2010 of €757.5m. Food Group net debt at 31 January 2010 |
The Group seeks to ensure a reasonable balance in terms of capital requirements between bank, debt capital and equity markets. The Group intends to maintain it's investment grade credit position and see its optimum leverage position in the range of 2x – 3x Net Debt : EBITDA.
| Group balance sheet | Total Group |
|---|---|
| in Euro '000 | 2010 |
| Property, plant and equipment | 655,288 |
| Investment properties | 63,083 |
| Goodwill and intangible assets | 1,508,187 |
| Associates and joint ventures | 147,270 |
| Working capital, net | 40,135 |
| Other segmental liabilities | (89,563) |
| Segmental net assets | 2,324,400 |
| Net debt | (678,348) |
| Deferred tax, net | (174,644) |
| Income tax | (43,907) |
| Derivative financial instruments, net | (6,710) |
| Net assets | 1,420,791 |
| Food balance sheet | Total Food |
|---|---|
| in Euro '000 | 2010 |
| Property, plant and equipment | 570,745 |
| Investment properties | 3,869 |
| Goodwill and intangible assets | 1,395,017 |
| Joint venture | 60,118 |
| Working capital, net | (18,884) |
| Other segmental liabilities | (40,217) |
| Segmental net assets | 1,970,648 |
| Net debt | (487,857) |
| Deferred tax, net | (160,838) |
| Income tax | (42,466) |
| Derivative financial instruments, net | (4,176) |
| Net assets | 1,275,311 |
Origin has performed well during the first half of 2010 in a difficult trading environment. Year-on-year comparisons are impacted by increased seasonality as agricultural activity becomes more concentrated towards the second half of the financial year with customers adopting a cautious approach and deferring buying decisions until closer to the main application periods.
Origin's integrated agronomy business delivered a strong performance in the first half, emphasising Masstock's resilience against the background of volatile output markets for primary producers. The excellent contribution from the Group's Marine Proteins and Oils Joint Venture reflects increased fishfeed demand and the enhanced position of the business globally.
Market conditions within Food continue to be extremely competitive. A continuous focus on service, value innovation and cost alignment remains key to maintaining the competitive positioning of Origin's consumer brands.
The recent uplift in primary output markets, while welcome, has yet to noticeably impact farm incomes. The business environment remains challenging, however Origin remains confident for the full year and expects to deliver consensus market expectations. Origin will continue to focus on cash generation and operational efficiencies to ensure the business is well positioned to respond to new opportunities as they arise.
Origin's separately published results are available at www.originenterprises.com.
The unprecedented global consumer downturn continued during the period. At a macroeconomic level there are signs of recovery, however this has not yet reached consumers.
ARYZTA continues to focus on maximising cash generation and operating efficiencies. The business has an efficient cash generative business platform and is therefore very well positioned to benefit from future economic growth. The fragmented bakery market offers opportunities for disciplined strategic expansion. The company guidance on underlying EPS of 224 cent for FY2010 remains unchanged.
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.
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 37 of the ARYZTA AG 2009 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.
for the six months ended 31 January 2010
| Six months ended 31 January |
||
|---|---|---|
| 2010 2009 |
||
| in Euro `000 | Notes Unaudited |
Unaudited |
| Revenue | 1,394,053 3 |
1,571,169 |
| Cost of sales | (1,005,422) | (1,150,860) |
| Gross profit | 388,631 | 420,309 |
| Distribution expenses | (200,236) | (216,551) |
| Administration expenses | (98,133) | (99,752) |
| Operating profit before merger costs | 90,262 | 104,006 |
| Merger costs | – (22,738) |
|
| Operating profit | 90,262 | 81,268 |
| Share of profit of associates and joint ventures | 13,635 | 7,837 |
| Profit before financing income and costs | 103,897 | 89,105 |
| Financing income | 3,057 3,914 |
|
| Financing costs | (26,780) | (28,319) |
| Profit before tax | 80,174 | 64,700 |
| Income tax | (11,624) | (14,087) |
| Profit for the period | 68,550 | 50,613 |
| Attributable as follows: | ||
| Equity shareholders of the company | 64,371 | 44,729 |
| Minority interest | 4,179 5,884 |
|
| Profit for the period | 68,550 | 50,613 |
| Six months ended 31 January |
|||
|---|---|---|---|
| Earnings per share for the period | Notes | 2010 Euro cent |
2009 Euro cent |
| Basic earnings per share | 4 | 81.54 | 57.40 |
| Diluted earnings per share | 4 | 81.22 | 56.94 |
for the six months ended 31 January 2010
| Six months ended 31 January |
||
|---|---|---|
| in Euro `000 | 2010 Unaudited |
2009 Unaudited |
| Profit for the period | 68,550 | 50,613 |
| Other Comprehensive Income | ||
| Foreign exchange translation effects | ||
| – foreign currency net investments | 28,968 | 54,882 |
| – foreign currency borrowings | (17,736) | (62,361) |
| Cash flow hedges | ||
| – Gains / (losses) arising during the period | 5,464 | 2,562 |
| – Reclassification adjustments for amounts recognised in profit or loss | 511 | (73) |
| – Deferred tax effect of cash flow hedges | (826) | (333) |
| Group defined benefit pension obligations | ||
| – actuarial gain / (loss) arising during the period | 18 | 1,049 |
| – deferred tax effect of actuarial gain / (loss) | 255 | (503) |
| Revaluation of previously held investment in Hiestand | – | 35,632 |
| Total comprehensive income for the period | 85,204 | 81,468 |
| Attributable as follows: | ||
| Equity shareholders of the company | 80,613 | 79,080 |
| Minority interest | 4,591 | 2,388 |
| Total comprehensive income for the period | 85,204 | 81,468 |
as at 31 January 2010
| 31 January | 31 July | |
|---|---|---|
| 2010 | 2009 | |
| in Euro `000 | Unaudited | Audited |
| Assets | ||
| Non current assets | ||
| Property, plant and equipment | 655,288 | 664,532 |
| Investment properties | 63,083 | 62,975 |
| Goodwill and intangible assets | 1,508,187 | 1,498,430 |
| Investments in associates and joint ventures | 147,270 | 139,351 |
| Deferred tax assets | 33,378 | 27,053 |
| Total non current assets | 2,407,206 | 2,392,341 |
| Current assets | ||
| Inventory | 204,343 | 192,646 |
| Trade and other receivables | 323,538 | 406,774 |
| Derivative financial instruments | 3,216 | 599 |
| Cash and cash equivalents | 294,724 | 294,536 |
| Total current assets | 825,821 | 894,555 |
| Total assets | 3,233,027 | 3,286,896 |
| 31 January 2010 |
31 July 2009 |
|
|---|---|---|
| in Euro `000 | Unaudited | Audited |
| Equity | ||
| Called up share capital | 1,005 | 1,005 |
| Share premium | 518,006 | 518,006 |
| Retained earnings and other reserves | 854,922 | 801,345 |
| Total equity attributable to equity shareholders of the company | 1,373,933 | 1,320,356 |
| Minority interest | 46,858 | 47,612 |
| Total equity | 1,420,791 | 1,367,968 |
| Liabilities | ||
| Non current liabilities | ||
| Interest bearing loans and borrowings | 942,423 | 927,252 |
| Employee benefits | 28,497 | 28,544 |
| Deferred income from government grants | 18,476 | 18,941 |
| Other payables | 4,608 | 1,025 |
| Deferred tax liabilities | 208,022 | 203,527 |
| Derivative financial instruments | 389 | 3,244 |
| Deferred consideration | 36,804 | 41,259 |
| Total non current liabilities | 1,239,219 | 1,223,792 |
| Current liabilities | ||
| Interest bearing loans and borrowings | 30,649 | 26,540 |
| Trade and other payables | 487,746 | 614,291 |
| Corporation tax payable | 43,907 | 40,650 |
| Derivative financial instruments | 9,537 | 9,832 |
| Deferred consideration | 1,178 | 3,823 |
| Total current liabilities | 573,017 | 695,136 |
| Total liabilities | 1,812,236 | 1,918,928 |
| Total equity and liabilities | 3,233,027 | 3,286,896 |
for the six months ended 31 January 2010
| for the six months ended 31 January 2010 in Euro `000 |
Share capital |
Share premium |
Treasury shares |
Cash flow hedge reserve |
Revalua tion reserve |
Share based payment reserve |
Foreign currency transla tion reserve |
Retained earnings |
Total sharehol ders equity |
Minority interest |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At 1 August 2009 | 1,005 | 518,006 | (30) | (6,882) | 35,108 | 4,131 | (41,147) | 810,165 1,320,356 | 47,612 1,367,968 | ||
| Total comprehensive income |
– | – | – | 4,040 | – | – | 11,816 | 64,757 | 80,613 | 4,591 | 85,204 |
| Share-based payments | – | – | – | – | – | 739 | – | – | 739 | 131 | 870 |
| Equity dividends | – | – | – | – | – | – | – | (27,861) | (27,861) | – | (27,861) |
| Dividends to minority interest |
– | – | – | – | – | – | – | – | – | (5,898) | (5,898) |
| Other | – | – | – | – | – | – | – | 86 | 86 | 422 | 508 |
| At 31 January 2010 | 1,005 | 518,006 | (30) | (2,842) | 35,108 | 4,870 | (29,331) | 847,147 1,373,933 | 46,858 1,420,791 |
| for the six months ended 31 January 2009 in Euro `000 |
Share capital |
Share premium |
Treasury shares |
Cash flow hedge reserve |
Revalua tion reserve |
Share based payment reserve |
Foreign currency transla tion reserve |
Retained earnings |
Total sharehol ders equity |
Minority interest |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At 1 August 2008 | 39,275 | 59,734 | – | (510) | 127,446 | 19,986 | (60,035) | 599,372 | 785,268 | 61,482 | 846,750 |
| Total comprehensive income |
– | – | – | 1,827 | – | – | (3,491) | 80,744 | 79,080 | 2,388 | 81,468 |
| Issue of shares, net of costs |
3,810 | 183,140 | – | – | – | – | – | – | 186,950 | – | 186,950 |
| Effect of reverse acquisition |
(42,110) | 275,641 | – | – | – | – | – | – | 233,531 | – | 233,531 |
| Issue of treasury shares | 30 | – | (30) | – | – | – | – | – | – | – | – |
| Share-based payments | – | – | – | – | – | 18,442 | – | – | 18,442 | 131 | 18,573 |
| Share-based payment reserve released on cancellation of schemes |
– | – | – | – | – | (37,449) | – | 37,449 | – | – | – |
| Minority interest arising on acquisition |
– | – | – | – | – | – | – | – | – | 7,886 | 7,886 |
| Repurchase/disposal of minority interests |
– | – | – | – | – | – | – | – | – | (1,293) | (1,293) |
| At 31 January 2009 | 1,005 | 518,515 | (30) | 1,317 | 127,446 | 979 | (63,526) | 717,565 1,303,271 | 70,594 1,373,865 |
for the six months ended 31 January 2010
| Six months ended 31 January |
||||
|---|---|---|---|---|
| in Euro `000 | 2010 Unaudited |
2009 Unaudited |
||
| Cash flows from operating activities | ||||
| Profit for period | 68,550 | 50,613 | ||
| Income tax | 11,624 | 14,087 | ||
| Financing income | (3,057) | (3,914) | ||
| Financing costs | 26,780 | 28,319 | ||
| Share of profit of associates and joint ventures | (13,635) | (7,837) | ||
| Merger costs and other expenses | – | 22,738 | ||
| Depreciation of property, plant and equipment | 31,254 | 29,007 | ||
| Amortisation of intangible assets | 23,751 | 22,444 | ||
| Amortisation of government grants | (949) | (205) | ||
| Employee share-based payment charge | 870 | 458 | ||
| Other | – | 159 | ||
| Cash flow from operating activities before changes in working capital | 145,188 | 155,869 | ||
| Decrease/(increase) in inventory | (10,881) | (41,301) | ||
| Decrease/(increase) in trade and other receivables | 79,758 | 105,342 | ||
| (Decrease)/increase in trade and other payables | (122,729) | (128,006) | ||
| Cash generated from operating activities | 91,336 | 91,904 | ||
| Interest paid, net | (20,811) | (24,779) | ||
| Income tax paid | (13,924) | (14,004) | ||
| Net cash flow from operating activities | 56,601 | 53,121 |
| Six months ended 31 January |
||
|---|---|---|
| in Euro `000 | 2010 Unaudited |
2009 Unaudited |
| Cash flows from investing activities | ||
| Proceeds from sale of property, plant and equipment | 1,249 | 814 |
| Purchase of property, plant and equipment | ||
| – maintenance | (9,180) | (10,890) |
| – new investments | (22,591) | (42,830) |
| Acquisition of subsidiaries and businesses, net of cash acquired | – | (38,795) |
| Sale of intangible assets | – | 6,797 |
| Sale of other investments | – | 1,305 |
| Dividends received | 9,714 | 9,489 |
| Investments in associates and joint venture | (2,455) | (3,507) |
| Deferred consideration paid | (2,128) | (22,342) |
| Other | 10 | (7) |
| Net cash flow from investing activities | (25,381) | (99,966) |
| Cash flows from financing activities | ||
| Net proceeds from issue of share capital | – | (260) |
| (Repayment) / drawdown of loan capital | (3,016) | 174,872 |
| Capital element of finance lease liabilities | (801) | (754) |
| Dividends paid to minority interests | (2,742) | – |
| Dividends paid to equity shareholders | (27,861) | – |
| Net cash flow from financing activities | (34,420) | 173,858 |
| Net increase in cash and cash equivalents | (3,200) | 127,013 |
| Translation adjustment | (1,089) | (641) |
| Cash and cash equivalents at start of period | 269,144 | 106,759 |
| Net cash and cash equivalents at end of period | 264,855 | 233,131 |
for the six months ended 31 January 2010
The Group Condensed Interim Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (IAS 34).
These condensed 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 annual financial statements in respect of the year ended 31 July 2009, which have been prepared in accordance with IFRS.
These condensed interim financial statements for the six months ended 31 January 2010 and the comparative figures for the six months ended 31 January 2009 are unaudited and have not been reviewed by the Auditors. The summary financial statements for the year ended 31 July 2009 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 2009 and 31 July 2009 comparative financial statement figures and related notes have been reclassified to conform to the 31 January 2010 presentation. The reclassifications have no effect on total revenues, total expense, profit for the period or total equity 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.
Except as described below, the condensed consolidated interim financial information has been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out on pages 48 to 57 of the ARYZTA AG 2009 Annual Report and Accounts.
The following Accounting Standards are mandatory for the first time for the financial year beginning 1 August 2009:
The following Accounting Standards or interpretations are effective for the financial year beginning 1 August 2009 but do not have a material impact on the Group:
There were also additional amendments to various existing standards and interpretations as the result of the IASB 2009 and 2008 Annual Improvement Projects that are effective for the financial year beginning 1 August 2009. These amendments were a collection of relatively minor changes and do not have a material impact on the Group.
The following Accounting Standards or Interpretations are not yet effective and have not been early adopted by the Group:
Management has determined the operating segments based on the reports regularly reviewed by the Group's Chief Operating Decision Maker (Chief Executive Officer) in making strategic decisions, allocating resources and assessing performance. The Group is primarily organised into four main operating segments: Food Europe, Food North America, Food Developing Markets and Origin.
Food Europe has leading market positions in the speciality bakery market in Switzerland, Germany, the UK, Ireland and France. In Europe, ARYZTA has a mixture of business to business and consumer brands, including; Hiestand, Cuisine de France, Delice de France and Coup de Pates. Food Europe has a diversified customer base including convenience retail, gas stations, multiple retail, restaurants, catering and hotels and leisure.
Food North America has leading market positions in freshly baked cookies and artisan breads with two principle brands, namely Otis Spunkmeyer and La Brea Bakery. Food North America has a diversified customer base within the foodservice and retail channels.
Food Developing Markets is an embryonic business in Japan, Malaysia and Australia.
Origin is an agri-nutrition and food group. The agri-nutrition business is focused primarily in Ireland, the UK and Poland with activities in the supply of animal feeds, fertiliser and integrated agronomy services. Origin also operates ambient food and cereal milling businesses in Ireland.
Net finance costs and income tax are managed on a centralised basis and therefore these items are not allocated between operating segments for the purpose of presenting information to the Chief Operating Decision Maker.
| Food Europe |
Food North America |
Food Developing Markets |
Origin | Unallocated | Total Group | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| l) Segment revenue and result |
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 Euro `000 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 |
| Segment revenue |
533,624 | 578,485 | 254,657 | 276,584 | 12,640 | 10,009 | 593,132 | 706,091 | – | – 1,394,053 1,571,169 | ||
| Operating profit before non- recurring items |
43,439 | 47,851 | 30,819 | 29,477 | 2,073 | 917 | 13,931 | 25,761 | – | – | 90,262 | 104,006 |
| Non-recurring items |
– | – | – | – | – | – | – | – | – | (22,738) | – | (22,738) |
| Operating profit | 43,439 | 47,851 | 30,819 | 29,477 | 2,073 | 917 | 13,931 | 25,761 | – | (22,738) | 90,262 | 81,268 |
| Share of profit of associates and joint ventures |
– | – | 8,468 | 7,275 | – | – | 5,167 | 562 | – | – | 13,635 | 7,837 |
| Profit before financing costs |
43,439 | 47,851 | 39,287 | 36,752 | 2,073 | 917 | 19,098 | 26,323 | – | (22,738) | 103,897 | 89,105 |
| Financing costs | (23,723) | (24,405) |
Profit before tax as reported in Group
Income Statement 80,174 64,700
* There are no significant intercompany revenues between the Group's food business segments. There were €3,661,000 (2009: €4,008,000) in intra group revenue between the Origin and food business segments of the Group.
| Food Europe |
Food North America |
Food Developing Markets |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ll) Segment assets in Euro `000 |
as at 31 Jan 2010 |
as at 31 Jul 2009 |
as at 31Jan 2010 |
as at 31 Jul 2009 |
as at 31Jan 2010 |
as at 31 Jul 2009 |
as at 31Jan 2010 |
as at 31 Jul 2009 |
as at 31Jan 2010 |
as at 31 Jul 2009 |
| Segment assets excluding investments in associates and joint ventures |
1,557,558 | 1,566,132 | 695,525 | 691,875 | 11,387 | 10,256 | 489,969 | 557,094 | 2,754,439 | 2,825,357 |
| Investments in associates and joint ventures |
– | – | 60,118 | 55,720 | – | – | 87,152 | 83,631 | 147,270 | 139,351 |
| Segment assets | 1,557,558 | 1,566,132 | 755,643 | 747,595 | 11,387 | 10,256 | 577,121 | 640,725 | 2,901,709 | 2,964,708 |
| Reconciliation to total assets as reported in Group balance sheet |
||||||||||
| Derivative financial instruments |
3,216 | 599 | ||||||||
| Cash and cash equivalents | 294,724 | 294,536 | ||||||||
| Deferred tax assets | 33,378 | 27,053 | ||||||||
| Total assets as reported in Group balance sheet |
3,233,027 | 3,286,896 |
| Six months ended 31 January |
||||
|---|---|---|---|---|
| 2010 | 2009 | |||
| Basic earnings per share | in Euro 000 | in Euro000 |
|||
| Profit for period attributable to equity shareholders | 64,371 | 44,729 | ||
| Weighted average number of ordinary shares | 000 |000 |
|||
| Issued ordinary shares at 1 August | 78,946 | 63,669 | ||
| Effect of shares issued during the period | – | 14,253 | ||
| Weighted average number of ordinary shares for the period | 78,946 | 77,922 | ||
| Basic earnings per share | 81.54 cent | 57.40 cent | ||
| 2010 | 2009 | |||
| Diluted earnings per share | in Euro 000 | in Euro000 |
|||
| Profit for period attributable to equity shareholders | 64,371 | 44,729 | ||
| Effect on minority interest share of profits due to dilutive effect of Origin equity entitlements |
(251) | (318) | ||
| Diluted profit for financial period attributable to equity shareholders |
64,120 | 44,411 | ||
| Weighted average number of ordinary shares (diluted) | 000 |000 |
|||
| Weighted average number of ordinary shares used in basic calculation |
78,946 | 77,922 | ||
| Effect of equity instruments with a dilutive effect | – | 77 | ||
| Weighted average number of ordinary shares (diluted) for the period |
78,946 | 77,999 | ||
| Diluted earnings per share | 81.22 cent | 56.94 cent |
| in Euro '000 | 1 August 2009 |
Cash flow | Non-cash movement |
Translation adjustment |
31 January 2010 |
|---|---|---|---|---|---|
| Cash | 294,536 | 1,273 | – | (1,085) | 294,724 |
| Overdrafts | (25,392) | (4,473) | – | (4) | (29,869) |
| Cash and cash equivalents | 269,144 | (3,200) | – | (1,089) | 264,855 |
| Loans | (924,492) | 3,016 | (911) | (17,736) | (940,123) |
| Finance leases | (3,908) | 801 | – | 27 | (3,080) |
| Net debt | (659,256) | 617 | (911) | (18,798) | (678,348) |
| Split of net debt | 1 August | Non cash | Translation | 31 July | |
|---|---|---|---|---|---|
| in Euro `000 | 2008 | Cash flow | movements | adjustment | 2009 |
| Food net debt | (505,504) | 34,852 | (478) | (16,727) | (487,857) |
| Origin net debt | (153,752) | (34,235) | (433) | (2,071) | (190,491) |
| Net debt | (659,256) | 617 | (911) | (18,798) | (678,348) |
Finance leases include amounts due within 1 year of €780,000 (2009: €1,148,000).
ARYZTA's 71.4% subsidiary and separately listed company, Origin, has separate ringfenced funding structures, which are financed without recourse to ARYZTA.
In October 2009, a CHF 200m fixed rate Swiss bond was launched for ARYZTA AG (Listing SIX. ISIN CH00106840579). The bond matures 18 March 2015. A US private placement deal of USD 200m was finalised in December 2009 and is due to mature between December 2021 and December 2029. The combined proceeds were used for general corporate purposes.
The proposed dividend covering the 12 month period to 31 July 2009, after deduction of Swiss withholding tax of 35%, of CHF 0.3461 per registered share was approved at the annual shareholders' meeting held on 3 December 2009. The total resulting dividend of CHF 42,031,000 was paid in December 2009, to those shareholders holding shares in ARYZTA AG on 4 December 2009.
The Group is not aware of any new major changes with regard to contingent liabilities in comparison with the situation as of 31 July 2009.
A former Hiestand shareholder has taken legal action against the Company asserting, in essence, entitlement under the merger to a price for its former Hiestand shares equal to the price IAWS Group paid Lion Capital for its former Hiestand shares under their contract. While such an action is permitted under Swiss Law (based on Article 105 of the Swiss Merger Act), it does not affect the implementation of the merger. The Group considers the case to be without merit. A complete defence to the claim, based on the law and the facts, is being vigorously pursued.
There were no other events since the balance sheet date on 31 January 2010 that would require adjustments of assets or liabilities or a disclosure.
The Origin business is typically a seasonal business and is weighted to the second half of the financial year.
There have been no related party transactions or changes in related party transactions other than those described in the ARYZTA AG 2009 Annual Report and Accounts that could have a material impact on the financial position or performance of the Group in the six months to 31 January 2010.
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.
for the six months ended 31 January 2010
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
of Directors
15 March 2010
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