Annual Report • Oct 4, 2009
Annual Report
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Annual Report and Accounts
Markets are places, markets have idiosyncracies and markets have similarities. Noticing these differences and similarities, and adapting products and services to meet the requirements of individual markets, are key for AryztA.
the urban park is a transparent space. It symbolises urbanity, mobility, the pace of modern life and a sense of community. Urban parks can be found throughout the world. Despite their many differences, they have much in common.
| Page | |
|---|---|
| 02 | Financial Highlights |
| 03 | Letter to Shareholders |
| 06 | Business Overview |
| 11 | Financial and Business Review |
| 21 | Corporate Governance Report |
| 37 | Group Risk Statement |
| 38 | Our Responsibility |
| 40 | Group and Company Financial Statements |
| 133 | Food Group Financial Statements |
| 141 | Investor Information |
* Operating profit presented excluding contribution from associates and joint ventures and before intangible amortisation and impact of non recurring items.
** Proforma numbers presented including Hiestand Holding AG in the 2008 comparative.
The 2009 financial year has been a significant one for ARYZTA AG ('ARYZTA') representing, as it did, the Group's maiden financial year. ARYZTA commenced trading in August 2008 following the acquisition of IAWS Group plc ('IAWS') and the merger with Hiestand Holding AG ('Hiestand'). IAWS had been a listed company on the Dublin and London Stock Exchanges since 1988 while Hiestand had been listed on the Swiss Stock Exchange since 1997. Therefore, while ARYZTA is only one year old, it already has a proud heritage building on the success of two very entrepreneurial businesses.
ARYZTA now operates from Zurich where its corporate and group finance functions are located. The Group has implemented Swiss Internal Control System ('ICS'), as required by Swiss regulations and is audited by Swiss auditors. In support of clarity in its regulatory regime, the Company changed the status of the listing of its registered shares on the Irish Stock Exchange ('ISE') from primary to secondary effective, 10 March 2009. The primary listing of ARYZTA shares is now on the SIX Swiss Exchange.
ARYZTA is a Swiss AG with assets invested in its food businesses across four continents from Europe to North America through South East Asia to Australia. The Group holds 71.4% of Origin Enterprises plc ('Origin'), an agri-nutrition business listed on the AIM in London and the IEX in Dublin
ARYZTA operates in the food business and is particularly fortunate to be in the bakery business. Bakery is everyday food. It is basic and sustainable. The creativity and culinary capabilities of bakery are enormous. It can satisfy basic needs and it can also indulge and delight with affordable luxuries. The aroma of a fresh bakery is comforting and evokes a consumer response everyday. Speciality Bakery is one of the most exciting food categories and for over 10 years these heritage businesses, as listed companies, reported double digit growth each year.
ARYZTA's first year was a particularly challenging one. It was not business as usual. The world economy suffered a major slowdown. Credit from banks became very restricted. Consumer spending slowed as consumers reacted to the unfolding financial crisis. What started as a banking problem quickly became a consumer problem and has evolved into a consumer led recession in most of the markets in which ARYZTA operates. Lower consumer spending impacted many customers during the year. This, combined with the reduced availability of capital, has forced customers to reduce costs and postpone expansion plans. This impacted on revenue growth in ARYZTA which declined progressively in each quarter.
Against the backdrop of a deteriorating macro-economic environment the Group posted a resilient performance for the financial year 2009, increasing underlying fully diluted earnings per share by 16.0% to 234.7 cent* which represents an underlying net profit of EUR 184.5m* in the period.
The Board recommends a final dividend of CHF 0.5324** per share to be paid on 10 December 2009 if approved at the General Meeting on 3 December 2009.
The Grangecastle bakery, distribution and R & D centre was fully commissioned during the year and contributed to the Group's increased operating margin. The project was delivered on budget and on plan. The facility provides the Group with the opportunity to develop the business into new channels in the UK and Ireland.
As part of the ARYZTA Technology Initiative ('ATI'), the Group will be implementing a global Enterprise Resource Planning System ('ERP') to be rolled out over the coming three years. The key objective of this initiative is the delivery of a group wide platform that will enable all of our businesses to operate shared common 'best in class' processes and procedures, the effective implementation of which will improve internal business efficiencies.
On 31 October 2008, Mr. Lyndon Lea resigned from his position on the Board. Mr. Wolfgang Werle stepped down from his position as Vice Chairman and resigned from the Board of Directors on 29 December 2008. On 28 July 2009, Mr. Paul Wilkinson and Ms. Beatrice Dardis resigned from the Board. On behalf of the Board, we would like to thank Lyndon, Wolfgang, Paul and Beatrice for their considerable contribution to the creation and development of ARYZTA.
The Board now consists of 11 directors (3 executive directors and 8 non-executive directors). This reduced number is in keeping with the intention to reduce the size of the Board as outlined in the Company Prospectus.
On behalf of the Board, we would like to acknowledge the talent, hard work and commitment of ARYZTA's management and staff. This is an everyday business and our people are the inspiration to excellence every day. We would also like to thank our customers for their support and loyalty and our suppliers for their reliability at all times.
Finally we would like to acknowledge the support of our bankers and finance providers in making ARYZTA AG a reality despite the difficult banking climate.
We believe ARYZTA AG is well positioned to deliver long term sustainable growth.
Denis Lucey Owen Killian
24 September 2009
Chairman, Board of Directors CEO, Member of the Board of Directors
ARYZTA is a Swiss company based in Zurich with operations in Europe, North America, South East Asia and Australia.
ARYZTA was formed in 2008 through the merger of IAWS Group plc ('IAWS') and Hiestand Holding AG ('Hiestand') and has a primary listing on the Swiss Stock Exchange (SIX; Ticker: ARYN) and a secondary listing on the Irish Stock Exchange (ISE; Ticker: YZA).
The Group also holds 71.4% of Origin Enterprises plc, an agri-nutrition business listed on AIM in London (Ticker: OGN) and the IEX in Dublin (Ticker: OIZ).
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.
Food North America has leading market positions in freshly baked cookies and freshly baked artisan bread. the business has two iconic brands which evoke emotional appeal with the US consumer, namely Otis Spunkmeyer and La Brea Bakery.
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.
Coup de Pates is the principal brand of Groupe Hubert, a leading developer and distributor of bakery products to the bakery, craft and foodservice sectors in France. Groupe Hubert offers its customers bread, viennoiserie, patisserie, traiteur and reception products.
www.coupdepates.fr
Cuisine de France Food Europe
Cuisine de France offers the consumer traditional French breads, pastries and also a wide range of continentalstyle breads, confectionery and hot savoury items. Cuisine de France provides a complete bake-off solution primarily to the retail industry, as well as staff training and category management to enable the timely delivery of ready-to-bake products.
www.cuisinedefrance.com
Delice de France Food Europe
Delice de France supplies high quality continental breads, viennoiserie, savoury and confectionery products, including hospitality goods, primarily to the foodservice and catering industry.
the business offers premium solutions tailored to meet future customer and consumer needs. It is the UK's leading provider of innovative and authentic continental bakery products to the foodservice trade.
www.delicedefrance.co.uk
Hiestand Food Europe & Developing Markets
Hiestand offers a broad range of innovative bakery products (croissants, bread, rolls, pastries, snacks, pretzels), and the comprehensive services to actively promote sales. Hiestand provides added value for business to business customers.
through the close-knit logistical and distribution network, assurance is given that products sold to customers are consistently 'fresher than fresh'.
www.hiestand.ch
La Brea Bakery Food North America
La Brea Bakery is widely credited as the pioneer and leader of the artisan bread movement in America. La Brea Bakery offers a wide assortment of rustic breads ranging from baguettes and loaves to sandwich and dinner rolls.
www.labreabakery.com
Otis Spunkmeyer Food North America
Otis Spunkmeyer is a leading, premium fresh baked goods brand in its US market categories. An iconic brand, it has strong recognition and awareness across a national customer base in the foodservice and retail channels.
www.spunkmeyer.com
AryztA is the majority shareholder (71.4%) in Origin Enterprises plc, which has a listing on the AIM in London and the IEX in Dublin (AIM:OGN, IEX:OIz).
Origin is a leading player in the agri-nutrition sector in Ireland, the UK and Poland and has leading ambient food and cereal milling businesses in Ireland.
www.originenterprises.com
| Proforma | |||||
|---|---|---|---|---|---|
| Food Group | Origin | Total Group | Total Group | ||
| in Euro `000 | 2009 | 2009 | 2009 | 20087 | % Change |
| Group revenue | 1,712,754 | 1,499,5164 | 3,212,270 | 3,134,201 | 2.5% |
| Group operating profit1 | 204,707 | 75,702 | 280,409 | 245,017 | 14.4% |
| Share of associates and JVs2 | 13,808 | 3,717 | 17,525 | 17,455 | – |
| Operating profit incl. associates and JVs | 218,515 | 79,419 | 297,934 | 262,472 | 13.5% |
| Finance cost, net | (33,299) | (17,353) | (50,652) | (44,446) | – |
| Pre tax profits1 | 185,216 | 62,066 | 247,282 | 218,026 | – |
| Income tax1 | (32,845) | (12,240) | (45,085) | (42,907) | – |
| Minority Interest3 | (3,035) | (134) | (17,649) | (15,476) | – |
| Underlying fully diluted net profit | 149,336 | 49,692 | 184,548 | 159,643 | 15.5% |
| Underlying fully diluted EPS (cent) | – | 36.16 | 234.75 | 202.26 | 16.0% |
1 Before intangible amortisation and 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 and investment property write down.
4 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
5 Actual 2009 underlying fully diluted EPS calculated using weighted average number of shares in issue
of 78,626,718. 6 Proforma 2008 underlying fully diluted EPS calculated using number of shares issued during IPO in August
2008 of 78,940,460. 7 Prepared on a proforma basis including Hiestand in prior year comparative as disclosed in the
ARYZTA Results Announcement published in September 2008.
| in Euro `000 | Food Group 2009 |
Origin 2009 |
Total Group 2009 |
|---|---|---|---|
| Reported net profit | 94,633 | (56,825) | 54,010 |
| Amortisation of intangible assets | 42,983 | 3,294 | 46,277 |
| Tax on amortisation | (10,800) | (380) | (11,180) |
| Property write down | – | 134,543 | 134,543 |
| Tax on property write down | – | (30,940) | (30,940) |
| Minority interest on property write down | – | – | (29,609) |
| Merger costs | 22,738 | – | 22,738 |
| Tax on merger costs | (218) | – | (218) |
| Underlying net profit | 149,336 | 49,692 | 185,621 |
| Dilutive impact of Origin management incentives | – | – | (1,073) |
| Underlying fully diluted net profit | 149,336 | 49,692 | 184,548 |
1 The total Group share denominator for the year ended 31 July 2009 is 78,626,718 shares. 2 The Origin share denominator for the year ended 31 July 2009 is 137,417,000.
| Food | ||||||
|---|---|---|---|---|---|---|
| Food North | Developing | Total | ||||
| in Euro million | Food Europe1 | America | Markets1 | Food Group | Origin2 | Total Group |
| Group revenue | 1,137.2 | 555.1 | 20.4 | 1,712.7 | 1,499.6 | 3,212.3 |
| Underlying growth | (2.2)% | 12.5% | 1.5% | 1.9% | (8.4)% | (3.0)% |
| Acquisitions | 2.2% | – | – | 1.6% | 16.1% | 8.5% |
| Currency | (2.4)% | 10.0% | 15.3% | 1.2% | (7.6)% | (3.0)% |
| Revenue increase | (2.4)% | 22.5% | 16.8% | 4.7% | 0.1% | 2.5% |
1 Prepared on a proforma basis including Hiestand in prior year comparative as disclosed in the
ARYZTA Results Announcement published in September 2008.
2 Origin revenue is presented after deducting intra group sales between Origin Enterprises and Food Group.
| Food North | Developing | Total | |||
|---|---|---|---|---|---|
| Total Group | |||||
| 135,103 | 67,481 | 2,123 | 204,707 | 75,702 | 280,409 |
| 11.4% | 30.1% | 129% | 17.6% | 6.7% | 14.4% |
| 11.9% | 12.2% | 10.4% | 12.0% | 5.0% | 8.7% |
| 10.4% | 11.4% | 5.3% | 10.6% | 4.7% | 7.8% |
| Food Europe | America | Food Markets |
Food Group | Origin |
1 The above figures exclude intangible amortisation and the impact of non-recurring items.
2 The 2008 comparator is prepared on a proforma basis including Hiestand as disclosed in ARYZTA Results Announcement published in September 2008.
ARYZTA AG's ('ARYZTA') food business is primarily focused on speciality bakery, a niche part of the total global bakery market. 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 world economy suffered a major slowdown during the period and this is reflected in the Food Group's underlying revenues, which swung from double-digit growth to a decline, within the twelve month period.
Credit from banks became very restricted. Consumer spending slowed as consumers reacted to the unfolding financial crisis. What started as a banking problem quickly became a consumer problem and has evolved into a consumer led recession in most markets. Lower consumer spending impacted on most customers during the year. This, combined with the reduced availability of capital, has forced most customers to reduce costs and postpone investment decisions.
ARYZTA is fortunate to be in the food business. It is particularly fortunate to be in the bakery business. 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 available through all dayparts.
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, hotels and leisure.
Food Europe faced tough trading conditions in the financial year 2009 with revenue growth declining in each quarter and like-for-like revenues for the full financial year declining by 2.2% (excluding impact of acquisitions and foreign exchange). Food Europe's operating profit grew by 11.4% to €135.1m demonstrating the capability and adaptability of the business model in a rapidly changing macro-environment.
The Irish and UK business was most affected by the revenue decline and as a result has substantially reduced its cost base. The Grangecastle bakery, distribution and R & D centre was fully commissioned during the year and helped enhance efficiencies. The project was delivered on budget and on plan. The facility provides the Group with the opportunity to develop the business into new channels in the UK and Ireland.
The Continental European market proved resilient in the financial year 2009. The business expanded its channel penetration utilising its unique logistics capability in the market. Merger benefits were unlocked through moving from an initial position of two publicly listed companies to one.
The Hiestand business had an excellent performance in the period ended 31 July 2009. The business has been aligned with the ARYZTA reporting model, integrating its accounting and risk management systems with the Group and has implemented Swiss Internal Control System ('ICS') requirements across the business.
A small bolt-on acquisition was made in France in the third quarter of 2009. This acquisition helps diversify the customer base and leverage product development capability.
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.
Otis Spunkmeyer has a strong diversified customer base with particular strength across the US foodservice market from restaurants, catering (including hospitals, military and fundraising events), to hotels and leisure and quick service restaurants. La Brea Bakery's business is primarily focused on servicing the US multiple retail channel.
Food North America was not able to escape the general recessive trend, exhibiting declining revenue growth in each quarter with most channels experiencing declining revenues. As a result of the consumer slowdown, value conscious US consumers continued to conserve their dollars.
Despite the prevailing environment Food North America delivered revenues of €555.1m which represented a 12.5% increase in like-for-like revenue growth for the full year
(excluding impact of acquisitions and foreign exchange). Operating profit grew by 30.1% to €67.5m while its operating margins increased by 80 basis points to 12.2% for the year ended 31 July 2009.
La Brea Bakery proved resilient during the period, while Otis Spunkmeyer was the main growth driver.
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 1.5%. Food Developing Markets operating profit grew by 129% to €2.1m in the year ended 31 July 2009.
Otis Spunkmeyer is currently implementing SAP Enterprise Resource Planning ('ERP') System across its extensive business platform. The project is on plan and should net cost savings and improve the speed of business intelligence to further enhance its business.
This will provide the blueprint for the rollout of the ARYZTA Technology Initiative ('ATI') across the Food Group. This will involve implementing a global ERP System over the coming three years. This will enable all the businesses to operate shared common 'best in class' processes and procedures. 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 €13.8m in the year ended 31 July 2009 (€15.2m in the year ended 31 July 2008).
In the period the impact of non-recurring items was €96.5m net of minorities and taxes. The non-recurring items had a non-cash impact. They primarily relate to a circa 70% write down of Origin Enterprises plc ('Origin') investment property and merger costs.
The investment property principally comprises 32 acres (13 hectares) of development land located close to the centre of Ireland's second largest city, Cork, at the South Docklands area. The area has long been associated with Origin's port activities. Origin has more recently been considering an overall development of the area. In 2007 (the year of the Origin IPO) the property was revalued and transferred to investment property. Following the unprecedented deterioration in the Irish property market the fair value of the property has substantially reduced.
The merger of IAWS and Hiestand triggered the vesting of all previously granted share awards within IAWS, resulting in a non-cash merger cost charge in the period.
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 €153.8m at 31 July 2009.
The consolidated net debt of the Group excluding Origin's non-recourse debt amounted to €505.5m and relates to the Food segments of the Group.
| in Euro `000 | July 2009 |
|---|---|
| EBIT | 161,724 |
| Amortisation | 42,983 |
| EBITA | 204,707 |
| Depreciation | 54,628 |
| EBITDA | 259,335 |
| Working capital movement | 24,675 |
| Dividends received | 18,830 |
| Ongoing capital expenditure | (15,047) |
| Interest and tax | (53,562) |
| Other | 2,126 |
| Cash flow generated from activities | 236,357 |
| Underlying net profit1 | 149,336 |
| Depreciation | 54,628 |
| 203,964 | |
| Net underlying cash earnings conversion | 115.9% |
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 proforma opening net debt as at 31 July 2008 | (552,562) |
| Cash flow generated from activities | 236,357 |
| Investment capital expenditure | (63,006) |
| Deferred consideration and acquisition costs | (76,497) |
| Foreign exchange movement1 | (42,203) |
| Other | (7,593) |
| Food Group closing net debt 31 July 2009 | (505,504) |
| Net Debt to EBITDA2 | 1.77x |
1 Foreign exchange movement is primarily attributable to the fluctuation in the US Dollar to Euro rate between July 2008 (1.5729) and July 2009 (1.4252).
2 Food Group net debt to EBITDA ratio based on bank covenant definition. EBITDA includes proforma contribution from the Canadian JV and the French acquisition during the year. It is also adjusted for the non-cash share based payments charge.
ARYZTA continues to have a strong balance sheet with excellent free cash flow. At the year ended 31 July 2009, ARYZTA Food Group had net debt of €505.5m; this represented a conservative Net Debt to EBITDA ratio of 1.77 times (based on bank covenant definition). The banking covenant definition of EBITDA includes a proforma contribution from the Canadian joint venture and the French acquisition during the period. It excludes the non-cash cost of share based payments.
ARYZTA's banking facilities and financial covenants (excluding Origin, which is separately financed) are as follows:
| Private | ||
|---|---|---|
| Description | Revolving credit | placement |
| Principal | €795m | \$450m |
| Maturity | 20 June 2013 | 13 June 2014 - 13 June 2019 |
| Net Debt : EBITDA (not greater than) | 3.5 times | 3.5 times |
| Interest Cover (not less than) | 4 times | 4 times |
The weighted average debt maturity of the Food Group's debt is 5.35 years. The revolving facilities are circa. 23.9% net drawdown as at 31 July 2009.
The current banking crisis and severe curtailment of credit availability poses risks for all businesses including ARYZTA in terms of cash and collectables. ARYZTA's primary financial focus is on cash and collectables to ensure the business is not materially impacted by bad debts. This has been managed successfully to date. ARYZTA will continue to be vigilant and focused on the area of cash and collectables.
| Group balance sheet | Total Group |
|---|---|
| in Euro '000 | 2009 |
| Property, plant and equipment | 664,532 |
| Investment properties | 62,975 |
| Goodwill and intangible assets | 1,498,430 |
| Associates and joint ventures | 139,351 |
| Working capital | (14,871) |
| Other segmental liabilities | (93,592) |
| Segmental net assets | 2,256,825 |
| Net debt | (659,256) |
| Deferred tax, net | (176,474) |
| Income tax | (40,650) |
| Derivative financial instruments | (12,477) |
| Net assets | 1,367,968 |
The Food Group's fixed asset base reflects its continued strategic investment in its manufacturing operations, in particular the full commissioning of its Grangecastle facility during the period. These strategic investments have been timely in providing the Group with adaptability in the current changing macro environment.
Goodwill and intangible assets created following the merger reflect the strong value in the brands, customer base and workforce of Hiestand.
These newly recognised goodwill and intangibles, together with those created out of the relatively recent acquisitions of Otis Spunkmeyer and Coup de Pates, reflect the strength of value contained within ARYZTA's businesses. This strength contributes and supports the resilient operating profit growth in these more challenging economic times.
| Food North | Total | ||||
|---|---|---|---|---|---|
| in Euro millions | Food Europe1 | America | Food Group5 | Origin | Total |
| 2009 | |||||
| Group share net assets2 | 1,344 | 638 | 1,986 | 382 | 2,368 |
| EBITA & JVs/associates cont.4 | 135 | 81 | 219 | 79 | 298 |
| ROI | 10.0% | 12.7% | 11.0% | 20.7% | 12.6% |
| 2008 | |||||
| Group share net assets | 1,222 | 592 | 1,815 | 366 | 2,181 |
| EBITA & JVs/associates cont.4 | 119 | 67 | 189 | 73 | 262 |
| ROI | 9.7% | 11.3% | 10.4% | 20.0% | 12.0% |
1 Food Europe and Developing Markets 2008 net assets and operating profit presented on a proforma basis including Hiestand intangibles and net assets as disclosed in the ARYZTA Results Announcement published in September 2008.
2 Net assets exclude all bank debt, cash, cash equivalents and tax related balances.
3 Food Group net assets includes previously written off goodwill of € 51.8 million. Origin net assets includes previously written off goodwill of € 59.4 million.
4 Earnings before interest tax and amortisation (EBITA) is presented before the impact of non-recurring
items. The contribution from associates and JVs is net profit (i.e. presented after interest and tax). 5 Total Food Group includes the net assets and EBITA for Food Developing Markets which are not seperately
shown. 6 The Group WACC is currently 7.6%.
The Board recommends a final dividend of CHF 0.5324* to be paid on 10 December 2009, if approved by shareholders at the General Meeting to be held on 3 December 2009.
ARYZTA operates from Zurich, where its corporate and group finance functions are located. It has now implemented a Swiss Internal Control System ('ICS') framework, as required by Swiss regulations.
Origin has performed strongly in 2009, growing operating profits and delivering excellent cash flow against the backdrop of challenging and competitive market conditions.
The excellent performance was driven from Origin's integrated agronomy services business. This reinforces the relevance of Masstock's knowledge-based systems model in supporting profitable and sustainable agriculture.
The strategic merger of Origin's and Austevoll's European marine proteins and oils businesses provides the foundation for the future development of the enlarged marine proteins and oils business.
The Board of Origin have proposed a dividend per ordinary share of 8 cent for the period ended 31 July 2009. ARYZTA will net approximately €7.6m from its holding of 95 million shares in Origin.
Farming is currently facing significant challenges. Farm incomes and purchasing power are under sustained pressure following a period of very low output prices and tightening farm credit. The outlook for Origin in 2010 is challenging, while the long term outlook is excellent.
Origin's separately published results are available at www.originenterprises.com.
The Group combines a well invested and efficient platform with passionate, motivated people to deliver a proven customer partnership model. ARYZTA will continue to remain focused on cash generation while ensuring, through on-going cost savings programmes and operational initiatives, that the business is well placed to capitalise on opportunities as market and trading conditions develop.
As global stock markets rebound, there may be a temptation to believe that the world is returning to the economic conditions that existed before the financial crisis broke. However, ARYZTA did not predict the severity of the recession last year, and based on the trading environment that has been experienced so far in the new financial year, the Group would certainly not be calling the timing of an economic recovery.
* Based on EUR 0.3520 per share converted at the foreign exchange rate of one Euro to CHF 1.5124 on 24 September 2009, the date of approval of the ARYZTA financial statements.
For all the defensive characteristics of the food industry, the fact is that many customers and consumers remain in survival mode. Underlying revenues last year swung from double digit growth to decline within twelve short months, and early sales trends in the 2010 financial year are indeed markedly weaker than the equivalent period last year.
This report contains forward looking statements which reflect management's current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.
ARYZTA is committed to best practice in corporate governance.
The primary corporate governance instruments adopted by ARYZTA (namely the Articles of Association, Organisational Regulations and Terms of Reference for the Committees of the Board) are available on the Company website at www.aryzta.com. While recognising the importance of these formal instruments, good corporate governance in practice requires a commitment to, and the practice of, values which guide the Group in serving the needs of its stakeholders, be they shareholders (institutional or retail), customers, consumers, suppliers, employees or other interested groups. ARYZTA is committed to keeping its corporate governance framework under review with a view to on-going developments in the area and the on-going evolution of the Group. This framework reflects its evolution and strikes a balance between the norms on the Swiss and Irish markets.
The ARYZTA Corporate Governance Report 2009 follows the SIX Swiss Exchange Directive on Information Relating to Corporate Governance and takes into account the Swiss Code of Best Practice for Corporate Governance.
The ARYZTA Group and Company Financial Statements 2009 comply with International Financial Reporting Standards (IFRS) and are in accordance with Swiss Law. Where necessary, these disclosures have been extended to comply with the requirements of the SIX Swiss Exchange Directive on Information Relating to Corporate Governance.
In this Report, the terms "ARYZTA" and "Company" refer to ARYZTA AG whereas "Group" and "ARYZTA Group" refer to the Company and its subsidiaries. The "Board" refers to the Board of Directors of the Company. "Origin Enterprises" means Origin Enterprises plc (ARYZTA has a 71.4% holding in Origin Enterprises plc), and the "Origin Board" means the Board of Directors of Origin Enterprises plc. In some sections, to avoid duplication, cross-reference is made to the 2009 Financial Statements (comprising the Group Financial Statements and Company Financial Statements of ARYZTA), as well as to the Articles of Association of ARYZTA AG.
The Group is structured conventionally. That is, the ARYZTA General Meeting is the supreme corporate body and the Board is accountable and reports to the shareholders, by whom it is elected. The Board, while entrusted with the ultimate direction of ARYZTA as well as the supervision and control of management, has delegated responsibility for the day to day management of the Group, through the Chief Executive Officer, to Executive Management. The Group's management structure corresponds to its segmental reporting lines, as set out in note 1 of the ARYZTA Group Financial Statements 2009. The Executive Teams within each segment report in to the Executive Management of the Group, which in turn reports to the Board. Origin Enterprises plc constitutes an exception. It is a public company in its own right, with its own Board of Directors, separate executive management team, governance structure and ring-fenced financing arrangements. The executive management team within Origin Enterprises reports to the Origin Board. The Origin Board is accountable and reports to its shareholders, including ARYZTA. Owen Killian and Patrick McEniff, ARYZTA Board members and CEO and CFO respectively are members of the Origin Board. Pat Morrissey, ARYZTA General Counsel and Company Secretary, is also Secretary of Origin Enterprises plc.
| Name and domicile: | ARYZTA AG, 8001 Zurich, Switzerland |
|---|---|
| Primary Listing: | SIX Swiss Exchange, Zurich, Switzerland |
| Swiss Security number: | 4 323 836 |
| ISIN: | CH0043238366 |
| Cedel/ Euroclear common code: | 037252298 |
| Secondary Listing: | ISE Irish Exchange, Dublin, Ireland |
| SEDOL Code: | B39VJ74 |
| Swiss Stock Exchange symbol: | ARYN |
| Irish Stock Exchange symbol: | YZA |
Stock market capitalisation as of 31 July 2009: CHF 2,960,478,788 or €1,926,284,864 based on 78,946,101 registered shares (i.e. disregarding 2,234,359 treasury shares) and closing prices of CHF 37.50 or €24.40 per share)
| Name and domicile: | Origin Enterprises plc, Dublin 8, Ireland |
|---|---|
| Holding: | ARYZTA Group has a 71.4% holding in Origin Enterprises plc |
| Dual Primary Listing: | IEX Irish Exchange, Dublin, Ireland AIM London Stock Exchange, London, United Kingdom |
| ISIN: | IE00B1WV4493 |
| SEDOL Code: | B1WV449 |
| Irish Enterprise Exchange symbol: | OIZ |
| London AIM symbol: | OGN |
Stock market capitalisation as of 31 July 2009: €352,491,266 based on 133,015,572 ordinary shares and closing price of €2.65 per share (excluding 5,555,270 deferred convertible ordinary shares)
Details of the principal subsidiary and associated companies of ARYZTA (being their company names, domicile, share capital, and the Company's participation therein) are set out on note 37 of the ARYZTA Group Financial Statements 2009.
As at 31 July 2009 the Company has been notified of the following shareholdings which amount to 3% or more of the Company's issued ordinary share capital:
| Number of shares |
% of registered shares |
|
|---|---|---|
| Fidelity International Limited * | 4,255,814 | 5.24% |
| Invesco Limited | 4,102,193 | 5.05% |
| Fidelity Management and Research LLC ("FMR LLC") * | 3,825,000 | 4.71% |
| Threadneedle Asset Management Holdings Limited | 2,461,957 | 3.03% |
* Fidelity International Limited and FMR LLC are two separate investment companies, but under common control as part of the Fidelity group of investment companies.
Any significant shareholder notifications during the year and since 31 July 2009 are available from the Group's website at www.aryzta.com.
ARYZTA has no interest in any other company exceeding 5 per cent of voting rights of that other company, where that other company has an interest in ARYZTA exceeding 5 per cent of the voting rights in ARYZTA.
The share capital of the Company amounts to CHF 1,623,609.20 and is divided into 81,180,460 registered shares with a par value of CHF 0.02 per share. The share capital is fully paid-in.
Pursuant to Article 4 of the Articles of Association (governing Conditional Share Capital for Employee Benefit Plans), the amount by which the share capital of the Company may be increased on a non-pre-emptive basis may not exceed CHF 130,152.80 (through the issue of up to 6,507,640 registered shares). The Board has the power to specify the precise conditions of issue including the issue price of such shares. For further details, refer to Article 4 of the Articles of Association.
Pursuant to Article 5 of the Articles of Association (governing Authorised Share Capital for General Purposes), the amount by which the share capital of the Company may be increased for general purposes may not exceed CHF 428,842.76 (through the issue of up to 21,442,138 registered shares). Authority for this purpose expires on 21 August, 2010. The Board has the power to determine the issue price, the period of entitlement to dividends and the type of consideration or the contribution or underwriting in kind for such an issue. The Board may withdraw the pre-emptive rights and allocate them to third parties in the event of the use of shares (1) for acquisitions (2) to broaden the shareholder constituency or (3) for the purposes of employee participation. For further details, refer to Article 5 of the Articles of Association.
Trading in ARYZTA shares on the SIX Swiss Exchange and the Irish Stock Exchange commenced on the 22 August 2008 with the Company then having issued 78,940,460 registered shares. On the 2 December 2008 the Company increased its share capital by issuing 2,240,000 registered shares of CHF 0.02 each. These 2,240,000 registered shares were issued to a subsidiary of ARYZTA as treasury shares to be used in connection with the ARYZTA Long Term Incentive Plan. The share capital of the Company now amounts to CHF 1,623,609.2 divided into 81,180,460 shares with a par value of CHF 0.02. Of the 81,180,460 shares 2,234,359 are now classified as treasury shares.
ARYZTA's capital is composed of registered shares only. As at 31 July 2009, ARYZTA has 81,180,460 fully paid up, registered shares (including 2,234,359 treasury shares) with a nominal value of CHF 0.02 each. Each share entered in the share register with voting rights entitles the holder to one vote at the General Meeting and all shares have equal dividend rights.
As part of the establishment of ARYZTA, former holders of IAWS Group plc shares and options received ARYZTA registered shares, delivered initially in the form of Capita Depository Interests and since replaced by CREST Depository Interests ('CDIs') (I).
As CDI holders are not the legal owners of the shares represented by the CDIs, they are not in a position to directly enforce or exercise rights like a shareholder. CDI holders, however, have an interest in the shares represented by the CDIs and ARYZTA is pursuing arrangements with Euroclear UK and Ireland to enable investors whose interests in ARYZTA shares are so represented to exercise their voting rights.
Investors who wish to be in a position to directly enforce or exercise their rights must have their interests entered in the share register in accordance with Article 7 of the Articles of Association and effectively hold their shares through a member of the Swiss SIS Settlement System.
ARYZTA has not issued any participation certificates (II).
ARYZTA has not issued any profit sharing certificates (II).
I) The CREST system, operated by Euroclear UK and Ireland is the system for the holding and settlement of transactions in uncertificated (UK, Irish and Channel Island) securities, ARYZTA shares are held in trust by Euroclear UK and Ireland for the benefit of CREST members who have been issued with dematerialised interests representing entitlements to ARYZTA registered shares in the form of CDIs.
II) Participation and profit sharing certificates are instruments which have similar features to shares but may differ with regard to their entitlement to dividend payments, voting rights, preferential rights to company assets or other similar rights.
Article 7 of the Articles of Association deals with the Shareholders' Register and Transfer Restrictions.
Pursuant to Article 7 b) of the Articles of Association, persons acquiring registered shares are, on application, entered in the share register without limitation as shareholders with voting power, provided they comply with the disclosure requirement stipulated by the Federal Act on Stock Exchanges and Securities Trading (Stock Exchange Act) of 24 March 1995 and expressly declare that they have acquired the shares in their own name and for their own account.
Pursuant to Article 7 c) of the Articles of Association, nominee shareholders are entered in the share register with voting rights without further inquiry up to a maximum of 1.5% of the outstanding share capital available at the time. Above this 1.5% limit, registered shares held by nominees are entered in the share register with voting rights only if the nominee in question (at the application for registration or thereafter upon request by the Company) discloses the names, addresses and shareholdings of the persons for whose account the nominee holds 0.3% or more of the outstanding share capital available at that time and provided that the disclosure requirement stipulated by the Stock Exchange Act is complied with. The Board has the right to conclude agreements with nominees concerning their disclosure requirements.
Pursuant to Article 7 e) of the Articles of Association, legal entities, or partnerships, or other associations or joint ownership arrangements which are linked through capital ownership or voting rights, through common management or in like manner, as well as individuals, legal entities or partnerships which act in concert with intent to evade the entry restriction, are considered as one shareholder or nominee.
As of 31 July 2009, ARYZTA has not issued any convertible bonds, warrants or options.
The Board of ARYZTA consists of three executive directors and eight non-executive directors. All interests linked to each individual Director in this section correspond to the nationality of that Director, unless otherwise stated.
Diploma in Dairy Science from University College Cork
Denis Lucey has a background in the agricultural cooperative movement in Ireland. In 1982, he was appointed Chief Executive Officer of Mitchelstown Co-operative Agricultural Society Limited, a position he held until the merger of that co-operative with the Ballyclough Co-Operative Creamery Limited in 1990 and the formation of Dairygold Co-Operative Society Limited. He served as Chief Executive Officer of Dairygold Co-Operative Society Limited until March 2003. He joined the Board of IAWS Group plc as a nonexecutive director in September 2000, and was elected Chairman of the Board in 2005. He has served as Chairman of ARYZTA, since its admission to trading on the SIX Swiss Exchange and the Irish Stock Exchange in August of 2008. He is also currently Chairman of the Milk Quota Appeals Tribunal for the Irish Department of Agriculture, Fisheries and Foods. He is also a member of the Governing Body of Cork Institute of Technology.
Albert Abderhalden joined Alfred Hiestand, when the company was a sole proprietorship in 1972. From 1984 to 1999, he was Managing Director of Hiestand Schweiz AG. From 1994 to 1998 he served as Chief Financial Officer of Hiestand Holding AG. From 1997 to 2003, he served as Vice-Chairman of Hiestand Holding AG, and from 2003 to 2007 he served as full-time Chairman of the Hiestand Board of Directors. During 2007 and 2008, he was a member of the Board of Directors of Hiestand Holding AG, before becoming a member of the ARYZTA Board of Directors in August 2008.
Denis Buckley has been a full time farmer throughout his working life. His involvement in farming brought him into the agricultural cooperative movement in Ireland and he served on the board of Kerry Co-op from 1977 to 2003. Since 2003, he has served as Chairman of Kerry Group plc. He joined the Board of IAWS Group plc as a non-executive director in June 1997 and held office until the establishment of ARYZTA. He became a member of the ARYZTA Board of Directors in August 2008. He is also Chairman of One51 plc.
Brian Davy is Chairman of Davy, Ireland's leading provider of stockbroking, wealth management and financial advisory services, and the sponsor of ARYZTA on the Irish Stock Exchange. He graduated from University College Dublin with a Bachelor of Commerce Degree and has spent his entire working career in building up the business and executive team of Davy, where he has worked since 1965. He is a former director of the Irish Stock Exchange and Arnotts plc. He is a member of the Executive Committee of the (Irish) National Maternity Hospital Holles Street. He joined the Board of IAWS Group plc as a non-executive director in December 1995. He became a member of the ARYZTA Board of Directors in August 2008.
Bachelor of Commerce from National University of Ireland, Galway; Fellow of the Institute of Chartered Accountants in Ireland; Associate of the Institute of Taxation in Ireland; Member of the National Association of Estate Agents (Overseas)
Noreen Hynes joined Irish Distillers Group plc in 1981 and worked in various roles, including Internal Auditor and Financial Controller until 1991. From 1991 to 1995, she worked as Managing Director of Coal Distributors Limited and since then she has been engaged in the property and business advisory services sector. She joined the Board of IAWS Group plc in March 2004 and became a member of the ARYZTA Board of Directors in August 2008.
Certificate in Business Management from College of Commerce, Rathmines, Dublin Hugo Kane joined Cuisine de France, a subsidiary of ARYZTA, in 1993 as Operations Director. He was appointed Managing Director of Cuisine de France in 2001, a position which he held until 2004.
In September 2004, he was appointed to the Board of Directors and Head of Food for IAWS Group plc. In 2007, he was appointed Chief Operating Officer for IAWS Group plc. He has been COO and a member of the Board of ARYZTA since its admission to trading. He is also fulfilling a leadership role in the ARYZTA Technology Initiative.
Bachelor of Agricultural Science from University College Dublin Owen Killian joined IAWS in 1977, and worked in various managerial functions until 1988. Upon the public flotation of the Company to form IAWS Group plc in 1988, he held various senior management functions. In October 1999, he was appointed to the Board of Directors of IAWS Group plc as COO, and from 2001 to 2003 he was Head of Food. In 2003 he was appointed CEO of IAWS Group plc. He has been CEO and a member of the Board of ARYZTA since its admission to trading. Owen Killian is also Chairman of Origin Enterprises plc, the Irish domiciled listed company, in which ARYZTA has a controlling 71.4% stake.
Fellow of the Chartered Institute of Management Accountants; Master of Business Administration from Dublin City University
Patrick McEniff joined IAWS Group plc in 1989. In the period from 1989 to 1997, he worked as a financial controller in IAWS focusing on financial reporting and systems development. In 1997, he became Director of Finance in the Food Distribution business and Flour Milling businesses of IAWS Group plc. In 2000, he was appointed Finance Director in the Bakery Business of IAWS Group plc. In 2004, he became Finance Director of IAWS Group plc. In 2008, upon the formation of ARYZTA AG, he was also appointed as CFO and member of the Board of Directors. Patrick McEniff is also a member of the Board of Directors of Origin Enterprises plc, the Irish domiciled listed company, in which ARYZTA has a controlling stake of 71.4%.
William Murphy began his career with the Irish Forestry Department in 1963. He worked with a number of companies before joining Avonmore Creameries Limited in 1977, becoming a member of its Board of Directors in 1989. He served as Deputy Managing Director of Glanbia plc (the successor to Avonmore Creameries Limited) from 2001 to 2005. He remains a non-executive Director of Glanbia plc. He became a member of the ARYZTA Board of Directors in August 2008. He is also Chairman of Grassland Fertilisers (Kilkenny) Ltd and Chairman of the National University of Ireland Maynooth (Kilkenny) Outreach Program.
Commercial Diploma
Hans Sigrist worked as Managing Director of Würth Schweiz AG from 1974 to 2004, and has been Chairman of the Board of Directors since 1981. From 1981 to date, he has been a member of the Board of Management of Würth Group International. He is Executive Vice President of the Würth Executive Board, responsible for South East Asia, Australia and New Zealand. From 1997 to 2008, he was a member of the Board of Directors of Hiestand Holding AG. He became a member of the ARYZTA Board of Directors in August 2008. Hans Sigrist is also Chairman of the Board of Directors of Kisling AG.
PhD in History from the University of Zurich; Master of Law from University of Lausanne; Advanced Management Degree from the Wharton School at the University of Pennsylvania in Philadelphia
Maurice Zufferey worked as a banker with UBS from 1987 to 1998. From 1998 to 2001, he was CEO of Ecole Hôtelière de Lausanne. From 2001 to date, he has been an Executive Search Partner at Spencer Stuart. He is Co-Head of the Spencer Stuart Financial Services Practice for Europe, and Head of the Board & CEO Practice in Switzerland. From 2001 to 2008, he was a member of the Board of Directors of Hiestand Holding AG. He became a member of the ARYZTA Board of Directors in August 2008.
Group General Counsel and Company Secretary
Bachelor of Civil Law (UCD, NUI); Solicitor, Law Society of Ireland From 1988 to 1998, Pat Morrissey spent his career with Irish law firm LK Shields, where he was admitted as a partner in 1995. In 2000, he joined IAWS Group plc as Group General Counsel and was appointed General Counsel and Company Secretary in 2005. He has served as Group General Counsel and Company Secretary of ARYZTA since its
establishment. He is also Company Secretary of Origin Enterprises plc.
With the exception of Albert Abderhalden, who served as full-time Chairman of the Board of Directors of Hiestand Holding AG from 2003 to 2007, none of the non-executive members of the Board of Directors has fulfilled any operational management functions for companies of the ARYZTA Group in the three years immediately preceding the period under review.
Disclosure of related party transactions between ARYZTA and Board members can be found in note 33 of the ARYZTA Group Financial Statements 2009.
The General Meeting has the competence to appoint and remove the members of the Board. Initial appointments to the Board of Directors for each Board member of ARYZTA were for a one year term, ending at the first General Meeting of ARYZTA. Thereafter, the term of office shall correspond to the maximum term legally allowed, but shall not exceed 3 years. The Board determines the first term of office of each Director in such a way that, each year, an equal number of Directors will be elected or re-elected at the General Meeting of ARYZTA and in such manner that all members will have been subject to reelection after a period of 3 years.
The Board has adopted Organisational Regulations that, inter alia, define the essential roles and responsibilities of the Board, the Chairman, the Committees of the Board and Executive Management. The office of Chairman together with membership of the Committees of the Board and the Chair thereof are, under the Organisational Regulations, determined annually by the Board following the General Meeting.
ARYZTA has an Audit Committee and a Nomination and Remuneration Committee. The powers and responsibilities of each Committee are set out in their respective Terms of Reference, as approved by the Board.
| Audit Committee | Nomination & Remuneration Committee |
|
|---|---|---|
| Denis Lucey (Chairman) | X | |
| Owen Killian (CEO) | ||
| Patrick McEniff (CFO) | ||
| Hugo Kane (COO) | ||
| Albert Abderhalden | ||
| Denis Buckley | X | |
| J. Brian Davy | X* | |
| Noreen Hynes | X* | |
| William Murphy | X | |
| Hans Sigrist | ||
| Dr. J. Maurice Zufferey | X | |
| X denotes that the Board Member is on the applicable Committee. |
* denotes the Board Member who Chairs the applicable Committee.
The Audit Committee comprises three non-executive directors, namely Noreen Hynes (Chairman), William Murphy and Dr. J. Maurice Zufferey, each of whom is considered by the Board to be independent. In the 2009 financial year, the Audit Committee met three times and the average duration of the meetings was approximately 5.5 hours.
The Audit Committee's role includes reviewing the Group and Company Financial Statements, the interim and full year results and the significant financial reporting judgements contained therein. The Audit Committee also reviews the Group's internal controls, and the scope and effectiveness of the Group's Internal Audit function. The Head of Internal Audit has access to the Audit Committee at all times and he and the Chief Financial Officer regularly attend meetings of the Audit Committee.
In 2008 the Audit Committee, operating under its terms of reference, discharged its responsibilities by reviewing:
In January 2009, the Board of Directors resolved to merge the then separate Nomination Committee and Remuneration Committee into a new unified Nomination and Remuneration Committee, which now comprises J. Brian Davy (Chairman), Denis Buckley and the Company Chairman, Denis Lucey (all non-executive directors).
The Nomination and Remuneration Committee is responsible for determining the remuneration of the executive and non-executive members of the Board, for recommending directors to the Board for appointment, and for the continuous review of senior management succession plans. In the 2009 financial year, the Nomination and Remuneration Committee met six times and the average duration of the meetings was approximately 1.5 hours.
The Group's remuneration policy for executive and non-executive directors and details of directors' remuneration are contained in note 10 of the ARYZTA Company Financial Statements 2009, in accordance with the Swiss Code of Obligations and the SIX Directive on Information Relating to Corporate Governance.
Eleven Board meetings were held during the year. The average duration of regular Board meetings is approximately 4.5 hours. In addition, the Board held a 2 day meeting during the year to consider ARYZTA Group strategy. At each meeting the Chair of the Committees report to the Board on their activities as necessary. Details of the work methods of the Committees are set out in Section 3.4.2.
The Board of Directors is the ultimate governing body. It has the power and competencies afforded by Swiss law (art. 761a of the Swiss Code of Obligation (CO)) including in particular:
The following fall within the exclusive competency of the Board of Directors:
The Board has delegated responsibility for the day to day management of the Group, through the Chief Executive Officer, to Executive Management.
Group Executive Management report in a regular and structured manner to the Board of Directors. The CEO and CFO report to the Board on a systematic basis. At each Board Meeting, the CEO informs the Board of the status of current business operations, significant developments and major business transactions. Likewise, the CFO reports on financial performance across the Group and key financial figures and parameters. In addition the COO and executives within the Group regularly deliver presentations to the Board.
The Board approves the formal Risk Assessment which is required by Article 663b of the Swiss Code of Obligations. The Board has approved the design, implementation and maintenance of the Internal Control System required under applicable law.
The ARYZTA Internal Audit function reports directly to the Audit Committee. Internal Audit may audit all Group activities and regularly meets with Group Executive Management. Internal Audit discuss audit plans with the Audit Committee on at least an annual basis, but may discuss them more frequently should circumstances require.
The external auditors, KPMG (auditors of the ARYZTA Company and Group Financial Statements), conduct their audit in compliance with Swiss Auditing Standards and International Standards on Auditing.
Group Executive Management consists of Owen Killian (Chief Executive Officer), Patrick McEniff (Chief Financial Officer), Hugo Kane (Chief Operating Officer), and Pat Morrissey (Group General Counsel and Secretary). Details of all Executive Management are provided in Section 3.1.
No member of the Group Executive Management holds management contracts for any company outside of the ARYZTA Group.
Please refer to note 10 of the ARYZTA AG Company Financial Statements for disclosures pertaining to Compensation, Shareholdings and loans, as well as the content and method of determining the compensation and share-ownership programmes.
Each ARYZTA share registered as a share conferring a voting right entitles the holder to one vote at a General Meeting. Proxies are entitled to attend shareholders' meetings and exercise all rights of the represented shareholders at such meetings.
As indicated previously in paragraph 2.4, ARYZTA is pursuing arrangements with Euroclear UK and Ireland to enable investors whose interests in ARYZTA are represented by CDIs to exercise their voting rights. Investors who wish to be in a position to directly enforce or exercise their rights must have their interests entered in the share register in accordance with Article 7 of the Articles of Association and effectively hold their shares through a member of the Swiss SIS Settlement System.
Pursuant to Article 14 of the Articles of Association, resolutions at the General Meeting calling for a quorum of at least two-thirds of the votes represented are required for:
General Meetings are convened by the Board of Directors and, if need be, by the Auditors. Notice of the General Meeting is given by publication in the Swiss Official Gazette of Commerce at least 20 days before the date of the meeting. The notice must state, inter alia, the day, time and place of the Meeting and the agenda.
The Board states the items in the agenda. One or more registered shareholders which jointly represent at least ten percent of the share capital of the Company registered in the Commercial Register may request items to be included in the agenda. Such requests must be in writing, specifying the items and the proposals and be submitted to the Chairman at least 45 days before the date of the General Meeting.
The relevant date to determine the shareholders' right to participate in the General Meeting on the basis of the registrations appearing in the share register is set by the Board in the invitation to the General Meeting.
ARYZTA does not have a provision on opting out or opting up in the Articles of Association. Thus, the provisions regarding the legally prescribed threshold of 33 1/3% of the voting rights for making a public takeover offer set out in art. 32 of the Swiss Stock Exchange Act are applicable.
Benefits under the ARYZTA LTIP vest upon a change of control. Otherwise, the agreements and plans benefiting the members of the Board or the Group Executive Management are unaffected by a change of control. Further details regarding the benefits under the ARYZTA LTIP are set out in note 10 of the ARYZTA Company Financial Statements 2009.
KPMG AG, Zurich, was elected as statutory auditor and group auditor upon the incorporation of the Company in 2008. The term of office is one year. Herbert Bussmann has been the lead auditor since KPMG AG's appointment in 2008.
The total auditing fees charged by the Group auditors in the financial year 2009 amounted to €2,200,000. €390,000 of these fees were charged to Origin Enterprises plc.
The fees for additional services rendered to ARYZTA Group invoiced in the financial year by the auditors, totalled €3,655,000, of which €3,196,000 was for taxation and legal and company secretarial services and €459,000 for corporate finance and transactional services. Of these fees €718,000 were charged to Origin Enterprises plc.
KPMG presents to the Audit Committee a detailed report on the conduct of the 2009 financial statements audit, the findings on significant financial accounting and reporting issues as well as the findings on the Group's internal control system (ICS).
In 2009, KPMG and the Group Head of Internal Audit participated in all three Audit Committee meetings. Other members of the Group Executive Management attended them as invited. In addition, the Head of Internal Audit regularly met with the Chairman of the Audit Committee for interim updates.
The Board of Directors annually reviews the selection of the auditors in order to propose their appointment to the General Meeting of ARYZTA. The Audit Committee assesses the effectiveness of the work of the auditors in accordance with Swiss law. The lead auditor rotates every seven years in accordance with Swiss law.
At each meeting of the Audit Committee, non audit related fees paid to KPMG year to date are reviewed to mitigate the risk of any potential impairment to KPMG's independence. KPMG monitors its independence throughout the year and confirms its independence to the Audit Committee annually.
ARYZTA is committed to pursuing an open and consistent communication policy with shareholders, potential investors and other interested parties. The objective is to ensure that the perception of those parties about the historical record, current performance and future prospects of ARYZTA is in line with management's assessment of the current situation at ARYZTA. The guiding principles of this policy are that ARYZTA gives equal treatment to shareholders in equal situations, that any price sensitive information is published in a timely fashion and that the information is provided in a format that is as complete, simple, transparent and consistent as possible.
ARYZTA publishes its first quarterly trading update, half-year results, nine-months' trading update and full-year results (including Annual Report) on the occasion of its quarterly announcement cycle (announcement dates on next page). These quarterly announcements are accompanied by a presentation which is broadcast live on internet and which anyone can choose to access, whether that person is a shareholder or not. These webcasts can be replayed at any time on the ARYZTA website (www.aryzta.com). An automatic alerting service is also provided through the website. This ensures that interested parties can sign up to the site to be alerted automatically to results and events announcements published on the website. ARYZTA also ensures that news releases are distributed to major wire and news services. These news releases are also made available in the News & Media section of the website immediately after release to the Stock Exchanges. In this way the Company utilises its website and ancilliary communications infrastructure to ensure a rapid and equitable distribution of information for all interested parties.
ARYZTA's Investor Relation's programme for institutional investors will be carried out inline with the quarterly announcement cycle, with management time allocated accordingly and not on an ad-hoc basis. In order to strike a balance between the needs of managing a business and regular transparent communication with investors, investor meetings (i.e. Group meetings, one-to-one meetings and conference calls) will not be held on an ad-hoc basis. These will be organised following quarterly announcements, save as mentioned below. Investors wishing to meet the Group in the aftermath of such quarterly announcements should email the Group's Investor Relations coordinator (see details below). These investor communications focus either on recently announced financial results,
recent corporate activity or the longer term strategy of the Group. They do not serve the purpose of disclosing new information which might encourage an investment decision.
The Group accepts invitations to investor conferences. Attendance at conferences by the Group will be done on a planned and agreed basis in advance of its quarterly announcement cycle and published on its website. The company also communicates with analysts and stockbrokers who follow ARYZTA to facilitate third party research on the company. ARYZTA assumes no responsibility for any statements, expectations, or recommendations made by analysts and stockbrokers. The Group will communicate to investors at the time of any potentially price-sensitive event, such as significant acquisitions and divestments, joint venture agreements and alliances.
ARYZTA AG Talacker 41 8001 Zurich Switzerland Email: [email protected]
| Announcement of the 2009 annual results | 28 September 2009 |
|---|---|
| Issue of the 2009 annual report | 5 October 2009 |
| First quarter trading update | 30 November 2009 |
| Annual General Meeting | 3 December 2009 |
| Payment of dividend | 10 December 2009 |
| Announcement of half-year results 2010 | 15 March 2010 |
| Nine month trading update | 8 June 2010 |
| Announcement of the 2010 annual results | 27 September 2010 |
| Issue of the 2010 annual report | 5 October 2010 |
| First quarter trading update | 29 November 2010 |
| Annual General Meeting 2010 | 2 December 2010 |
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 Group has formal risk assessment processes in place through which risks and mitigating controls are evaluated. These processes are driven by business unit management, who are best placed to identify the significant ongoing and emerging risks facing the businesses. The outputs of these risk assessment processes are subject to various levels of review by management, and a consolidated Risk Map 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.
ARYZTA is committed to building a successful and sustainable business for the long term. At the heart of this commitment is a focus on corporate responsibility. ARYZTA pursues a decentralised approach to corporate responsibility through its various businesses and the different markets within which it operates.
ARYZTA believes in building long-term relationships with its stakeholders, which include consumers, customers, employees and shareholders. The Group recognises its responsibilities as a member of the communities in which it operates, and where appropriate it encourages its businesses to play an active role within them. As well as providing employment opportunities, the Group aims to make positive contributions to its community, building goodwill and earning a positive reputation as a good employer, neighbour and corporate citizen.
With regard to business ethics, ARYZTA expects all commercial dealings by or on behalf of the Group to be conducted with integrity and respect for all parties, as well as in compliance with local and national legislation.
ARYZTA recognises that its continued success is dependent on the quality, commitment and behaviour of its people. It therefore provides clear policies and direction to the management teams of its operating businesses, and strives to achieve the highest standards in management practices. The Group provides equal opportunities for all in recruitment, selection, promotion, employee development, training and reward policies and procedures. ARYZTA also complies with applicable national laws and industry standards on working hours.
ARYZTA maintains comprehensive internal safety management procedures, including policy manuals, verification of regulatory compliance, risk assessments, individual site action plans, safety audits, training, formal accident investigation and the provision of occupational health services. It also maintains a strong focus on the use of key performance indicators, external auditing and achieving exacting external health and safety accreditation for its operations.
To ensure food and product safety, all of ARYZTA's food processing facilities operate under proprietary HACCP (Hazard Analysis and Critical Control Point) systems, or similar. These are reviewed and validated by qualified third parties. ARYZTA's businesses also contribute to various voluntary initiatives on food and product safety by industry associations such as the International Food Standard (IFS), the US Food and Drug Administration (USFDA), the British Retail Consortium (BRC), and the Fertiliser Industries Assurance Scheme (FIAS).
The Earth's ecosystems are both fragile and vulnerable, and the Group realises that protecting the environment is critical to the continued health of the planet. ARYZTA endeavours to comply with and surpass all relevant legislative requirements and industry standards and use the best practicable means to continually improve its environmental performance.
ARYZTA is engaged in a group-wide process to evaluate and reduce its carbon emissions. This incorporates a review of both production and distribution methods, to provide a basis for measuring its performance in reducing the Group's carbon footprint over time. The Group's businesses are also reviewing their water and energy consumption as part of this process, with the aim of increasing efficiencies and lowering the overall environmental impact.
| Page | |
|---|---|
| 41 | Statement of Directors' Responsibilities |
| 42 | Group Income Statement |
| 43 | Group Statement of Recognised Income and Expense |
| 44 | Group Balance Sheet |
| 46 | Group Cash Flow Statement |
| 48 | Group Statement of Accounting Policies |
| 58 | Notes to the Group Financial Statements |
| 118 | Company Income Statement |
| 119 | Company Balance Sheet |
Notes to the Company Financial Statements
The directors are responsible for preparing the Annual Report and the Group and Company Financial Statements, in accordance with applicable law and regulations. Company law requires the directors to prepare Group and Company Financial Statements for each financial year. Under that law, the directors are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards ('IFRSs') and the requirements of Swiss Law.
This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing each of the Group 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 IFRSs and the requirements of Swiss Law.
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
24 September 2009
of Directors
for the year ended 31 July 2009
| in Euro `000 | Notes | 2009 | 2008 |
|---|---|---|---|
| Revenue | 4 | 3,212,270 | 2,660,946 |
| Cost of sales | (2,344,377) | (2,017,580) | |
| Gross profit | 867,893 | 643,366 | |
| Distribution expenses | (415,047) | (304,300) | |
| Administration expenses | (218,714) | (161,760) | |
| Operating profit before fair value adjustment, merger costs and other income and expenses |
234,132 | 177,306 | |
| Fair value adjustment on investment properties | 2 | (134,543) | – |
| Merger costs | 2 | (22,738) | – |
| Other income/ (expenses) | 2 | 106 | 198 |
| Operating profit | 76,957 | 177,504 | |
| Share of profit of associates and joint ventures | 6 | 17,525 | 28,070 |
| Profit before financing income and costs | 94,482 | 205,574 | |
| Financing income | 3 | 7,055 | 8,703 |
| Financing costs | 3 | (57,707) | (46,333) |
| Profit before tax | 43,830 | 167,944 | |
| Income tax | 9 | (2,853) | (25,467) |
| Profit for the year | 40,977 | 142,477 | |
| Attributable as follows: | |||
| Equity shareholders of the company | 54,010 | 129,752 | |
| Minority interest | 28 | (13,033) | 12,725 |
| Profit for the year | 40,977 | 142,477 | |
| 2009 | 2008 | ||
| Earnings per share for the year | Notes | Euro cent | Euro cent |
| Basic earnings per share | 11 | 68.87 | 204.15 |
Diluted earnings per share 11 68.69 200.38
| in Euro `000 | Notes | 2009 | 2008 |
|---|---|---|---|
| Items of income and expense recognised directly in equity | |||
| Foreign exchange translation effects | |||
| – foreign currency net investments | 51,553 | (109,163) | |
| – foreign currency borrowings | (34,336) | 48,102 | |
| Deferred tax effect of capital gains tax rate change in Ireland | (7,035) | – | |
| Share of associates' foreign exchange translation adjustment | (192) | 1,491 | |
| Actuarial (loss) on Group defined benefit pension plans | (3,913) | (19,577) | |
| Deferred tax effect of actuarial loss | 817 | 2,371 | |
| Share of associates' actuarial (loss)/gain on defined benefit plan | (1,576) | 2,455 | |
| Share of associates' deferred tax on actuarial (loss)/gain | 442 | (692) | |
| Effective portion of changes in fair value of cash flow hedge | (2,727) | 5,014 | |
| Fair value of cash flow hedges transferred to income statement | (6,992) | (5,186) | |
| Deferred tax effect of cash flow hedges | 1,314 | 189 | |
| Share of joint ventures gains on cash flow hedges | 848 | 92 | |
| Share of joint ventures deferred tax relating to cash flow hedges | (144) | (11) | |
| Revaluation of previously held investment in Hiestand | 35,077 | – | |
| Revaluation of previously held investment in Odlums | – | 17,960 | |
| Net income/ (expense) recognised directly in equity | 33,136 | (56,955) | |
| Profit for the year | 40,977 | 142,477 | |
| Total recognised income for the year | 27 | 74,113 | 85,522 |
| Attributable as follows: | |||
| Equity shareholders of the company | 93,522 | 74,556 | |
| Minority interest | 28 | (19,409) | 10,966 |
Total recognised income for the year 74,113 85,522
as at 31 July 2009
| in Euro `000 | Notes | 2009 | 2008 |
|---|---|---|---|
| Assets | |||
| Non current assets | |||
| Property, plant and equipment | 12 | 664,532 | 482,991 |
| Investment properties | 13 | 62,975 | 192,418 |
| Goodwill and intangible assets | 14 | 1,498,430 | 835,827 |
| Investments in associates and joint ventures | 15 | 139,351 | 178,131 |
| Deferred tax assets | 24 | 27,053 | 18,911 |
| Total non current assets | 2,392,341 | 1,708,278 | |
| Current assets | |||
| Inventory | 16 | 192,646 | 234,107 |
| Trade and other receivables | 17 | 406,774 | 367,649 |
| Derivative financial instruments | 22 | 599 | 2,709 |
| Cash and cash equivalents | 20 | 294,536 | 150,093 |
| Total current assets | 894,555 | 754,558 | |
| Total assets | 3,286,896 | 2,462,836 |
| in Euro `000 | Notes | 2009 | 2008 |
|---|---|---|---|
| Equity | |||
| Called up share capital | 26 | 1,005 | 39,275 |
| Share premium | 27 | 518,006 | 59,734 |
| Retained earnings and other reserves | 27 | 801,345 | 686,259 |
| Total equity attributable to equity shareholders of the company | 1,320,356 | 785,268 | |
| Minority interest | 28 | 47,612 | 61,482 |
| Total equity | 1,367,968 | 846,750 | |
| Liabilities | |||
| Non current liabilities | |||
| Interest bearing loans and borrowings | 21 | 927,252 | 693,285 |
| Employee benefits | 25 | 28,544 | 25,556 |
| Deferred income from government grants | 23 | 18,941 | 3,906 |
| Other payables | 18 | 1,025 | 406 |
| Deferred tax liabilities | 24 | 203,527 | 149,224 |
| Derivative financial instruments | 22 | 3,244 | 600 |
| Deferred consideration | 19 | 41,259 | 37,705 |
| Total non current liabilities | 1,223,792 | 910,682 | |
| Current liabilities | |||
| Interest bearing loans and borrowings | 21 | 26,540 | 45,123 |
| Trade and other payables | 18 | 614,291 | 586,297 |
| Corporation tax payable | 40,650 | 40,486 | |
| Derivative financial instruments | 22 | 9,832 | 5,524 |
| Deferred consideration | 19 | 3,823 | 27,974 |
| Total current liabilities | 695,136 | 705,404 | |
| Total liabilities | 1,918,928 | 1,616,086 | |
| Total equity and liabilities | 3,286,896 | 2,462,836 |
for the year ended 31 July 2009
| in Euro `000 | Notes | 2009 | 2008 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit for year | 40,977 | 142,477 | |
| Income tax | 9 | 2,853 | 25,467 |
| Financing income | 3 | (7,055) | (8,703) |
| Financing costs | 3 | 57,707 | 46,333 |
| Share of profit of associates and joint ventures | 6 | (17,525) | (28,070) |
| Fair value adjustment on investment properties, merger costs and other expenses | 2 | 157,175 | (198) |
| Depreciation of property, plant and equipment | 12 | 62,195 | 35,882 |
| Amortisation of intangible assets | 14 | 46,277 | 18,997 |
| Amortisation of government grants | 23 | (2,026) | (327) |
| Employee share-based payment charge | 8 | 3,743 | 11,886 |
| Other | (22) | (2,796) | |
| Cash flow from operating activities before changes in working capital | 344,299 | 240,948 | |
| Decrease/(increase) in inventory | 70,296 | (81,115) | |
| Decrease/(increase) in trade and other receivables | 28,840 | (59,080) | |
| (Decrease)/increase in trade and other payables | (72,127) | 154,094 | |
| Cash generated from operating activities | 371,308 | 254,847 | |
| Interest paid, net | (51,574) | (34,500) | |
| Income tax paid | (33,396) | (18,314) | |
| Net cash flow from operating activities | 286,338 | 202,033 |
| in Euro `000 | Notes | 2009 | 2008 |
|---|---|---|---|
| Cash flows from investing activities | |||
| Proceeds from sale of property, plant and equipment | 2,973 | 920 | |
| Purchase of property, plant and equipment | |||
| – ongoing | (22,762) | (15,247) | |
| – new investments | (56,229) | (121,060) | |
| Grants received | 23 | 2,377 | – |
| Purchase of investment properties | (775) | (12,945) | |
| Acquisition of subsidiaries and businesses, net of cash acquired | 30 | (80,546) | (105,060) |
| Purchase of intangible assets | (10,705) | (8,916) | |
| Sale of intangible assets | 2.2 | 6,837 | – |
| Dividends received | 23,004 | 17,643 | |
| Investments in associates and joint venture | 15 | (26,184) | (15,632) |
| Deferred consideration paid | 19 | (27,384) | (1,671) |
| Other | – | (135) | |
| Net cash flow from investing activities | (189,394) | (262,103) | |
| Cash flows from financing activities | |||
| Net proceeds from issue of share capital | (626) | 3,834 | |
| Drawdown of loan capital | 68,242 | 144,725 | |
| Capital element of finance lease liabilities | (1,300) | (1,096) | |
| Dividends paid | – | (20,902) | |
| Net cash flow from financing activities | 66,316 | 126,561 | |
| Net increase in cash and cash equivalents | 163,260 | 66,491 | |
| Translation adjustment | (875) | (8,236) | |
| Cash and cash equivalents at start of year | 106,759 | 48,504 | |
| Net cash and cash equivalents at end of year | 20 | 269,144 | 106,759 |
ARYZTA (the 'Company') is a company domiciled and incorporated in Switzerland. The Group's financial statements for the year ended 31 July 2009 consolidate the individual financial statements of the Company and its subsidiaries (together referred to as the 'Group') and show the Group's interest in associates and joint ventures using the equity method of accounting.
The individual and Group financial statements of the Company were authorised for issue by the directors on 24 September 2009.
The Group financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS').
The IFRS applied by the Group in the preparation of these financial statements are those that were effective for accounting periods beginning on or after 31 July 2008. The following standards and interpretations, issued by the International Accounting Standards Board ('IASB') and the International Financial Reporting Interpretations Committee ('IFRIC'), are effective for the first time in the current financial year and have been adopted by the Group with no significant impact on its consolidated results or financial position:
The following new standards and interpretations, issued by the IASB or IFRIC, have not yet become effective. The Group has not applied early adoption in relation to them.
| Standard / Interpretation | Effective date | Planned implementation by ARYZTA |
|---|---|---|
| IAS 1 (Revised) – Presentation of financial statements 1 January 2009 | Reporting year 2010 | |
| IAS 27 (Revised) – Consolidated and separate financial statements |
1 July 2009 | Reporting year 2010 |
| Amendment to IAS 38 – Intangible assets | 1 January 2009 | Reporting year 2010 |
| Amendment to IFRS 2 – Share-based payments | 1 January 2009 | Reporting year 2010 |
| IFRS 3 (Revised) – Business combinations | 1 July 2009 | Reporting year 2010 |
| IFRS 8 – Operating segments | 1 January 2009 | Reporting year 2010 |
| IFRIC 16 – Hedges of a net investment in a foreign operation |
1 October 2008 | Reporting year 2010 |
| IFRIC 15 – Agreements for the construction of real estate |
1 January 2009 | Reporting year 2010 |
| IAS 23 (Revised) – Borrowing Costs | 1 January 2009 | Reporting year 2010 |
| Amendment to IAS 32 – Financial Instruments: Presentation |
1 January 2009 | Reporting year 2010 |
| Amendment to IFRS 1 – First Time Adoption of International Financial Reporting Standards |
1 January 2009 | Reporting year 2010 |
The Group has undertaken an initial assessment of the potential impact of these standards and interpretations on its consolidated results and financial position. Based on this initial assessment the Group does not currently believe the adoption of these remaining standards or interpretations would have a significant impact on the consolidated results or financial position of the Group.
The Group financial statements are prepared on a historical cost basis except that the following assets and liabilities are stated at their fair value: equity investments held at fair value through profit or loss, investment properties, and derivative financial instruments. The financial statements are presented in Euro, rounded to the nearest thousand, unless otherwise stated, which is the functional currency of a majority of the Group's operations.
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Further information on judgements and accounting estimates is set out in note 36 to these Group Financial Statements.
The Group Financial Statements reflect the consolidation of the results, assets and liabilities of the parent undertaking and all of its subsidiaries, together with the Group's share of profits/losses of associates and joint ventures. Where a subsidiary, associate or joint venture is acquired or disposed of during the financial period, the Group financial statements include the attributable results from, or to, the effective date when control passes, or in the case of associates when significant influence is obtained.
Subsidiary undertakings are those entities over which the Group has the power to control the operating and financial policies so as to obtain economic benefit from their activities. The amounts included in these financial statements in respect of the subsidiaries are taken from their latest financial statements prepared up to the period end. Where necessary, the accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.
Associates are those entities in which the Group has a significant influence over, but not control of, the financial and operating policies. Investments in associates are accounted for using the equity method of accounting. Joint ventures are those entities over whose
operating and financial policies the Group exercises control jointly, under a contractual agreement, with one or more parties. Investments in joint ventures are accounted for using the equity method of accounting.
Under the equity method of accounting, the Group's share of the post-acquisition profits or losses of its associates and joint ventures is recognised in the income statement. The income statement reflects, in profit before tax, the Group's share of profit after tax of its associates and joint ventures in accordance with IAS 28, Investments in Associates, and IAS 31, Interests in Joint Ventures. The Group's interest in their net assets is included as investments in associates and joint ventures in the Group balance sheet at an amount representing the Group's share of the fair value of the identifiable net assets at acquisition plus the Group's share of post acquisition retained income and expenses less dividends received. The Group's investment in associates and joint ventures includes goodwill on acquisition. The amounts included in these financial statements in respect of the post acquisition profits or losses of associates and joint ventures are taken from their latest financial statements prepared up to their respective year ends together with management accounts for the intervening periods to the Group's period end. Where necessary for consolidation, the accounting policies of associates and joint ventures have been changed to ensure consistency with the policies adopted by the Group.
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the Group financial statements. Unrealised gains and income and expenses arising from transactions with associates and joint ventures are eliminated to the extent of the Group's interest in the entity. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that they do not provide evidence of impairment.
The merger of IAWS Group ('IAWS') and Hiestand Holding AG ('Hiestand') has been treated as a reverse acquisition. In accordance with IFRS 3 Business Combinations, IAWS was identified as the acquirer in the business combination transaction. Therefore, the comparative information relates to the financial statements of IAWS, which have been prepared under IFRS. See note 30 to these consolidated financial statements for further details.
Revenue represents the fair value of the sale of goods and services supplied to third parties, after deducting trade discounts, volume rebates, and exclusive of value added tax. Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Income from services supplied is recognised in proportion to the stage of completion at the balance sheet date. Financing income is recognised on an accrual basis, taking into consideration the sums lent and the actual interest rate applied.
A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment) or in providing products or services within
a particular economic environment (geographic segment), which is subject to risks and returns different from those of other segments.
The Group's primary format for segmental reporting is business segments and the secondary format is geographical segments. The risks and returns of the Group's operations are primarily determined by the different products that the Group sells rather than the geographical location of the Group's operations.
Following the merger of IAWS and Hiestand in the current period, the Group has revised its previous three business segments which formed the primary format for segmental reporting to include Food Developing Markets with businesses principally in Japan, Malaysia and Australia. The Group's business segments are now Food Europe, Food North America, Food Developing Markets and Origin. The Group's principal geographical segments are Europe, North America and Developing Markets.
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, hotels and leisure.
Food North America has leading market positions in freshly baked cookies and artisan bread 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.
Segment assets and liabilities consist of property, plant and equipment, goodwill and intangible assets and other assets and liabilities that can be reasonably allocated to the reported segment. Unallocated assets and liabilities principally include current and deferred income tax assets and liabilities together with financial assets and liabilities.
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible, the attributable expenditure can be reliably measured, and the Group has sufficient resources to complete development. The expenditure capitalised includes the cost of materials, direct labour and appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses.
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as the related employee service is received. The Group's net obligation in respect of defined benefit pension plans is calculated, separately for each plan, by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on high quality corporate bonds that have maturity dates approximating the terms of the Group's obligations. The calculation is performed by a qualified actuary using the projected unit credit method. Actuarial gains and losses are recognised in the statement of recognised income and expense. Current and past service costs, interest on plan liabilities and expected return on assets are recognised in the income statement.
As defined in IFRS 2, Share-based Payment, the fair value of equity instruments granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the equity instrument. The fair value of the equity instruments granted is measured using an approved model as appropriate, taking into account the terms and conditions under which the equity instruments were granted. The plans and share option scheme are each subject to a non-market vesting condition and, therefore, the amount recognised as an expense is adjusted to reflect the actual number of equity instruments that vest.
Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity. Current income tax is the expected tax payable on the taxable income for the period, using tax rates and laws that have been enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred income tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred income tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. If the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting or taxable profit or loss, it is not recognised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
A deferred income tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be recovered. Deferred in-
come tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Transactions in foreign currencies are translated to the appropriate functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to Euro at the foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to Euro at the actual rates when the transactions occurred. Foreign exchange differences arising on translation of the net assets of a foreign operation are recognised directly in equity, in a translation reserve.
Exchange gains or losses on long term intra-group loans and on foreign currency borrowings, used to finance or provide a hedge against Group equity investments in non-euro denominated operations, are taken to the translation reserve to the extent that they are neither planned nor expected to be repaid in the foreseeable future or are expected to provide an effective hedge of the net investment. Any differences that have arisen since 1 August 2004, the date of transition to IFRS, are recognised in the currency translation reserve and are recycled through the income statement on the repayment of the intragroup loan or on disposal of the related business.
The principle Euro foreign exchange currency rates used by the Group for the preparation of these financial statements are as follows:
| Currency | Average 2009 | Closing 2009 | Average 2008 | Closing 2008 |
|---|---|---|---|---|
| CHF | 1.5310 | 1.5247 | 1.6276 | 1.6247 |
| USD | 1.3643 | 1.4252 | 1.4855 | 1.5729 |
| CAD | 1.5932 | 1.5372 | 1.4962 | 1.5946 |
| GBP | 0.8615 | 0.8545 | 0.7435 | 0.7911 |
Dividends are recognised in the period in which they are approved by the Company's shareholders.
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure including repairs and maintenance costs is recognised in the income statement as an expense as incurred.
Depreciation is calculated to write off the cost less estimated residual value of property, plant and equipment, other than freehold land and assets under construction, on a straight line basis, by reference to the following estimated useful lives:
| Buildings | 25 to 50 | years |
|---|---|---|
| Plant and machinery | 3 to 15 | years |
| Motor vehicles | 3 to 7.5 years |
The residual value of assets, if significant, and the useful life of assets is reassessed annually.
Gains and losses on disposals of property, plant and equipment are recognised on the completion of sale. Gains and losses on disposals are determined by comparing the proceeds received with the carrying amount and are included in operating profit.
Investment property, principally comprising land, is held for capital appreciation. Investment property is stated at fair value. The fair value is based on market value, being the estimated amount for which a property could be exchanged in an arms length transaction. Any gain or loss arising from a change in fair value is recognised in the income statement. When property is transferred to investment property following a change in use, any difference arising at the date of transfer between the carrying amount of the property immediately prior to transfer and its fair value is recognised in equity if it is a gain. Upon disposal of the property, the gain would be transferred to retained earnings. Any loss arising in this manner, unless it represents the reversal of a previously recognised gain, would be recognised immediately in the income statement.
Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in interest bearing loans and borrowings. The interest element of the payments is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The asset acquired under the finance lease is depreciated over the shorter of the useful life of the asset or the lease term.
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the lease term.
All business combinations are accounted for by applying the purchase method. Goodwill represents amounts arising on acquisition of subsidiaries, associates and joint ventures. Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost or deemed cost less any accumulated impairment losses. In respect of associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment.
Intangible assets acquired as part of a business combination are valued at their fair value at the date of acquisition. These generally include brand and customer related intangible assets. Computer software that is not an integral part of an item of computer hardware is also classified as an intangible asset.
Where intangible assets are separately acquired they are capitalised at cost. Intangible assets with finite lives are amortised over the period of their expected useful lives in equal annual instalments as follows;
| Customer relationship | 4 to 20 | years |
|---|---|---|
| Brands | 13 to 30 | years |
| Patents and other | 4 to 5 | years |
| Computer related | 3 to 5 | years |
| intangibles |
All intangible assets are stated at cost less accumulated amortisation and impairment losses which are incurred. Cost comprises purchase price and other applicable directly attributable costs.
The carrying amounts of the Group's assets, other than inventories (which are carried at the lower of cost and net realisable value), deferred tax assets (which are recognised based on recoverability), and those financial instruments which are carried at fair value, are reviewed to determine whether there is an indication of impairment when an event or transaction indicates that there may be. If any such indication exists, an impairment test is carried out and the asset is written down to its recoverable amount. Goodwill, intangible assets with indefinite lives, and intangible assets not yet available for use are tested for impairment annually.
An impairment loss is recognised whenever the carrying amount of an asset or its cashgenerating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. An impairment loss, other than in the case of goodwill, is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Inventory is stated at the lower of cost on a first in, first out basis and net realisable value. Cost includes all expenditure, which has been incurred in the normal course of business in bringing the products to their present location and condition. Net realisable value is the estimated selling price of inventory on hand less all further costs to completion and all costs expected to be incurred in marketing, distribution and selling.
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
Shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Trade and other receivables are initially measured at fair value and are thereafter measured at amortised cost using the effective interest method less any provision for impairment. A provision for impairment is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
Short term bank deposits of greater than three months maturity which do not meet the definition of cash and cash equivalents are classified as loans and receivables within current assets and stated at amortised cost in the balance sheet.
Other financial investments are recognised at the fair value of the consideration given inclusive of any acquisition charges arising. Subsequent gain or loss arising from a change in fair value is recognised in the income statement.
Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Forward currency contracts and interest rate swaps are marked to market using quoted market values.
All derivatives are initially recorded at fair value on the date the contract is entered into and subsequently, at reporting dates, remeasured to their fair value. The gain or loss arising on remeasurement is recognised in the income statement except where the instrument is a designated hedging instrument.
Derivative financial instruments are used to manage the Group's exposure to foreign currency risk, interest rate risk and commodity price risk through the use of forward currency contracts, interest rate swaps and futures contracts. These derivatives are generally designated as cash flow hedges in accordance with IAS 39. The Group does not enter into speculative derivative transactions.
Subject to the satisfaction of certain criteria, relating to the documentation of the risk, objectives and strategy for the hedging transaction and the ongoing measurement of its effectiveness, cash flow hedges are accounted for under hedge accounting rules. In such cases, any unrealised gain or loss arising on the effective portion of the derivative instrument is recognised in the cash flow hedging reserve, a separate component of equity. Unrealised gains or losses on any ineffective portion of the derivative are recognised in the income statement. When the hedged transaction occurs the related gains or losses in the hedging reserve are transferred to the income statement.
For interest bearing loans and borrowings with a contractual repricing date of less than six months, the nominal amount is considered to approximate fair value for disclosure purposes. For loans with a repricing date of greater than six months, the fair value is calculated based on the expected future principal and interest cash flows, discounted at appropriate current market interest rates.
Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost, using an effective interest rate method.
Fair value for disclosure purposes is based on the present value of future cash flows discounted at appropriate current market rates.
Grants that compensate the Group for the cost of an asset are shown as deferred income and amortised in the Group income statement by instalments on a basis consistent with the depreciation policy of the relevant assets.
Other grants are credited to the income statement to offset the matching expenditure.
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
| l) Segment revenue and result |
Food Europe |
Food North America |
Food Developing Markets |
Origin | Unallocated* | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Segment revenue |
1,137,230 | 708,806 | 555,110 | 453,301 | 20,414 | – 1,499,516 1,498,839 | – | – 3,212,270 2,660,946 | ||||
| Operating profit before non- recurring items |
101,893 | 65,649 | 57,771 | 43,128 | 2,060 | – 72,408 |
68,529 | – | – | 234,132 | 177,306 | |
| Non-recurring items |
(22,738) | (2,262) | – | (534) | – | – (134,437) |
– | – | 2,994 (157,175) | 198 | ||
| Operating profit | 79,155 | 63,387 | 57,771 | 42,594 | 2,060 | – (62,029) |
68,529 | – | 2,994 | 76,957 | 177,504 | |
| Share of profit of associates and joint ventures |
– | 10,615 | 13,808 | 15,203 | – | – 3,717 |
2,252 | – | – | 17,525 | 28,070 | |
| Profit before financing costs |
79,155 | 74,002 | 71,579 | 57,797 | 2,060 | – (58,312) |
70,781 | – | 2,994 | 94,482 | 205,574 |
* In 2008 the Group did not allocate the gain on curtailment associated with the transfer of members to the defined contribution plan.
There are no significant intercompany revenues between the Group's food business segments. There were €8,321,000 (2008: €5,403,000) in intra group revenue between the Origin and food segments of the Group.
| Food | Food | Food | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| ll) Segment assets | Europe | North America | Developing Markets | Origin | Total Group | |||||
| in Euro `000 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Segment assets excluding investments in associates and joint ventures |
1,566,132 | 701,008 | 691,875 | 633,275 | 10,256 | – | 557,094 | 778,709 | 2,825,357 | 2,112,992 |
| Investments in associates and joint ventures |
– | 87,230 | 55,720 | 58,057 | – | – | 83,631 | 32,844 | 139,351 | 178,131 |
| Segment assets | 1,566,132 | 788,238 | 747,595 | 691,332 | 10,256 | – | 640,725 | 811,553 | 2,964,708 | 2,291,123 |
| Reconciliation to total assets as reported in Group balance sheet Derivative financial |
||||||||||
| instruments | 599 | 2,709 | ||||||||
| Cash and cash equivalents | 294,536 | 150,093 | ||||||||
| Deferred tax assets | 27,053 | 18,911 | ||||||||
| Total assets as reported in Group balance sheet |
3,286,896 | 2,462,836 | ||||||||
| lll) Segment liabilities | Food Europe |
Food North America |
Food Developing Markets |
Origin | Total Group | |||||
| in Euro `000 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Segment liabilities | 274,289 | 217,137 | 109,594 | 99,386 | 6,325 | – | 317,675 | 365,321 | 707,883 | 681,844 |
| Reconciliation to total liabilities as reported in Group balance sheet |
||||||||||
| Interest bearing loans and borrowings |
953,792 | 738,408 | ||||||||
| Derivative financial instruments |
13,076 | 6,124 | ||||||||
| Current and deferred tax liabilities |
244,177 | 189,710 | ||||||||
| Total liabilities as reported in the Group balance sheet |
1,918,928 | 1,616,086 |
| lV) Other segment information | Food Europe |
Food North America |
Food Developing Markets |
Origin | Total Group | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Depreciation | 40,928 | 15,226 | 13,177 | 11,596 | 523 | – | 7,567 | 9,060 | 62,195 | 35,882 |
| Amortisation of intangible assets |
33,210 | 7,863 | 9,710 | 8,737 | 63 | – | 3,294 | 2,397 | 46,277 | 18,997 |
| Fair value adjustment | – | – | – | – | – | – | 134,543 | – | 134,543 | – |
| Capital expenditure – property, plant and equipment |
66,063 | 114,861 | 11,331 | 19,201 | 615 | – | 5,854 | 9,033 | 83,863 | 143,095 |
| Capital expenditure – computer related intangibles |
7,050 | 1,158 | 2,827 | 562 | 43 | – | 668 | 74 | 10,588 | 1,794 |
| Capital expenditure – brand related intangibles |
– | – | – | – | – | – | – | – | – | – |
| Capital expenditure – other intangibles |
1,086 | 7,122 | – | – | – | – | – | – | 1,086 | 7,122 |
| Total capital expenditure | 74,199 | 123,141 | 14,158 | 19,763 | 658 | – | 6,522 | 9,107 | 95,537 | 152,011 |
| Europe | North America | Developing Markets | Total Group | |||||
|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| Segment revenue | 2,636,746 | 2,207,645 | 555,110 | 453,301 | 20,414 | – 3,212,270 |
2,660,946 | |
| Segment assets | 2,206,857 | 1,599,791 | 747,595 | 691,332 | 10,256 | – 2,964,708 |
2,291,123 | |
| Capital expenditure | 80,721 | 132,248 | 14,158 | 19,763 | 658 | – 95,537 |
152,011 |
| in Euro `000 | Note | 2009 | 2008 |
|---|---|---|---|
| Fair value adjustment | |||
| Fair value adjustment to investment properties | 2.1 | 134,543 | – |
| Merger costs | |||
| Share based payments | 2.3 | 20,517 | – |
| Bank facilities | 2.4 | 2,221 | – |
| 22,738 | – | ||
| Other expenses/ (income) | |||
| Gain on disposal of operations | 2.2 | (5,562) | – |
| Gain on sale of property, plant and equipment | (1,189) | – | |
| Costs associated with the closure of the Cork | |||
| flour mill | 6,645 | – | |
| Pension curtailment (gain) | 2.5 | – | (2,994) |
| Loss on disposal and termination of operations | 2.6 | – | 2,796 |
| (106) | (198) | ||
| Total | 157,175 | (198) |
Investment property held by Origin Enterprises, plc (the Group's 71.4% owned subsidiary and separately listed company) principally comprises 32 acres (13 hectares) of development land located close to the centre of Ireland's second largest city, Cork, in its South Docklands area. The area has long been associated with Origin's port activities. More recently the Group has been considering an overall redevelopment of the area and in 2007 (the year of the Origin IPO) revalued and transferred the property to investment property.
Since the prior year, the Irish property market has deteriorated due to unprecedented combinations of negative economic factors affecting the Irish economy. The deteriorating market conditions have had a particular impact on the values of Irish land and development properties, which have seen a significant fall in value in recent times. The prior year fair value would have included a significant value attributed to the redevelopment opportunity of this land which has been substantially reduced in the current year.
In accordance with its accounting policy of carrying investment property at fair value, the Group commissioned Savills, independent qualified valuation experts, to conduct a valuation of the Group's investment properties in June 2009. The valuation was on the basis of market value and complies with the requirements of the Valuation and Appraisal Standards issued under the auspices of the Society of Chartered Surveyors. For this purpose, market value was defined by the independent valuation experts as the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.
The respective fair value was therefore estimated based on considerations regarding the Irish economy, the local property market, the property related development plan and its challenges, planning permissions received to date and a property analysis (strengths and
weaknesses, trends and saleability) rather than based on other factors or assumptions. In particular, the valuation expert reflected the impact of the lack of liquidity in the market and based his assessment on the assumption that no forced sale is required, as it may be very difficult to achieve a successful sale of these assets in the short term. The valuation expert also referred to the valuation uncertainty which may lead to a heightened price volatility due to the combination of the above mentioned factors that are contributing to a very difficult trading environment in the property market.
Against the background of current conditions in the Irish property market, and the general economic environment in Ireland, this resulted in a revaluation loss to the carrying value of investment properties of €134,543,000.
On 26 September 2008, the Group disposed of the non core US based McCanns Oatmeal brand and related goodwill for a net cash consideration of €6,837,000.
On 3 February 2009, the Group transferred its 100% shareholding in United Fish Industries Limited and United Fish Industries (UK) Limited together with a cash consideration of €16,000,000 for a 50% shareholding in the enlarged Welcon Invest AS ("Welcon") business. The net assets of the business transferred on 3 February 2009 amounted to €19,822,000. The Group's 50% shareholding in Welcon is treated as a joint venture and is accounted for using the equity method of accounting in accordance with IAS 31 as and from 3 February 2009.
A gain of €5,562,000 arose on these transactions.
The merger between IAWS and Hiestand triggered the vesting of all previously granted IAWS share awards. This resulted in an accelerated share based payment charge of €20,517,000 of which €18,115,000 related to equity settled schemes and €2,402,000 related to cash settled schemes, for which the up front cash payments were made in previous periods. A related deferred tax credit of €218,000 has been reflected within the taxation charge. Net of deferred tax the amount is €20,299,000.
As a result of creating ARYZTA, new banking facilities were negotiated by the enlarged Group. This resulted in the extinguishment of redundant IAWS facilities whose related unamortised facility costs of €2,221,000 were expensed to the income statement.
During the year ended 31 July 2008, a curtailment gain of €2,994,000 was recorded in relation to the restructuring of the IAWS Group Defined Benefit Pension Plan.
During the year ended 31 July 2008, Food Europe and North America businesses recorded costs of €2,796,000 in relation to the restructuring of manufacturing and distribution operations.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Financing income | ||
| Interest income | (1,924) | (3,982) |
| Defined benefit plan expected return on plan assets (note 25) | (5,131) | (4,721) |
| Total financing (income) recognised in income statement | (7,055) | (8,703) |
| Financing costs | ||
| Interest payable on bank loans and overdrafts | 49,061 | 39,960 |
| Interest payable under finance leases | 270 | 186 |
| Defined benefit plan: interest cost on plan liabilities (note 25) | 5,850 | 4,105 |
| Financing charge on deferred consideration (note 19) | 2,526 | 2,082 |
| Total financing costs recognised in income statement | 57,707 | 46,333 |
| Effective portion of changes in fair value of interest rate swaps* | 11,972 | (121) |
| Fair value of interest rate swaps transferred to income statement* |
(862) | (901) |
| Total financing expense/(income) recognised directly in equity | 11,110 | (1,022) |
* No unrealised gains or losses on any ineffective portion of derivatives have been recognised in the income statement.
| Group revenue categories | ||
|---|---|---|
| in Euro `000 | 2009 | 2008 |
| Sale of products | 3,175,223 | 2,627,075 |
| Rendering of services | 37,047 | 33,871 |
| 3,212,270 | 2,660,946 | |
| Group operating profit was arrived at after charging/(crediting) the following amounts in Euro `000 |
2009 | 2008 |
| Depreciation of property, plant and equipment | ||
| – owned assets | 55,154 | 29,570 |
| – leased assets | 7,041 | 6,312 |
| 62,195 | 35,882 | |
| Amortisation of intangible assets | 46,277 | 18,997 |
| Amortisation of government grants | (2,026) | (327) |
| Operating lease rentals | ||
| – plant and machinery | 5,843 | 7,457 |
| – other | 25,176 | 17,884 |
| Research and development expenditure | 5,307 | 13,970 |
| Auditor's remuneration for audit services | 2,200 | 1,377 |
| Auditor's remuneration for non-audit services | 3,655 | 2,528 |
Directors' interests are disclosed in the Corporate Governance Report on pages 21 to 36 inclusive in this Annual Report, and emoluments are disclosed in note 10 of the ARYZTA Company Financial Statements 2009.
| Joint ventures in Euro `000 |
2009 | 2008 |
|---|---|---|
| Group share of: | ||
| Revenue | 89,419 | 52,818 |
| Profit after tax | 16,193 | 15,203 |
| Associates in Euro `000 |
||
| Group share of: | ||
| Revenue | 122,496 | 275,796 |
| Profit after tax | 1,332 | 12,867 |
| Share of profit of associates and joint ventures |
17,525 | 28,070 |
| The average number of persons employed by the Group during the year was as follows |
2009 | 2008 |
|---|---|---|
| Sales and distribution | 3,780 | 2,644 |
| Production | 4,382 | 2,550 |
| Management and administration | 1,182 | 800 |
| 9,344 | 5,994 |
| Aggregate employment costs of the Group are analysed as follows | ||
|---|---|---|
| in Euro `000 | 2009 | 2008 |
| Wages and salaries | 363,255 | 224,075 |
| Social welfare costs | 35,497 | 30,535 |
| Pension costs (note 25) | ||
| – defined benefit plans – statement of recognised income and expense |
(3,913) | (19,577) |
| – defined benefit plans – income statement | 3,400 | (2,313) |
| – defined contribution plans | 2,060 | 4,016 |
| Share-based payment (note 8) | 21,858 | 11,886 |
| 422,157 | 248,622 |
The Group has outstanding grants of equity instruments under the following plans and schemes:
As set out in note 2.3 of these Group Financial Statements, the merger between IAWS and Hiestand triggered the vesting of all previously granted IAWS share awards. This resulted in an accelerated share based payment charge of €20,517,000 of which €18,115,000 related to equity settled schemes and €2,402,000 related to cash settled schemes, for which the up front cash payments were made in previous periods.
The equity settled schemes which vested were granted under the following plans and schemes:
The total expense reported in the Group income statement in the period in relation to equity settled share based payments is €21,858,000 (2008: €11,886,000), including the accelerated share based payment charge upon the merger of IAWS and Hiestand of €18,115,000, as detailed in note 2.3 of these Group Financial Statements.
| Impact on income statement | ||
|---|---|---|
| in Euro `000 | 2009 | 2008 |
| Issued in FY 2009 | 2,827 | – |
| 2,827 | – | |
| Details of equity entitlements issued under the ARYZTA LTIP | Weighted conversion price in Euro 2009 |
Number of equity entitlements 2009 |
| Outstanding at beginning of year | – | – |
| Issued during the year I) | 0.01 | 1,035,000 |
| Outstanding at the end of year | 0.01 | 1,035,000 |
| Vested at end of year | – | – |
I) During the year, employees were granted 1,035,000 equity entitlements in the Company. All equity entitlements granted have a life of ten years.
| Analysis of closing balance – outstanding at the end of the year |
Conversion price |
Number of equity entitlements 2009 |
Actual remaining life (years) 2009 |
|---|---|---|---|
| Equity entitlements by conversion price | 0.01 | 1,035,000 | 9 |
| Total outstanding as at 31 July | 0.01 | 1,035,000 | 9 |
The general terms and conditions applicable to the equity instruments granted under the ARYZTA LTIP are described in note 10 of the ARYZTA Company Financial Statements 2009.
The equity instruments granted under the ARYZTA LTIP are equity-settled share-based payments as defined in IFRS 2, Share-based Payment.
The weighted average fair value assigned to equity entitlements issued under the ARYZTA LTIP represents the full value of an ordinary share on the date of grant adjusted for the lost dividends between date of issue and vesting date.
None of these equity entitlements have vested at the end of the year.
Under the terms of the Origin Plan, 4,682,134 Ordinary Shares were issued to senior executives during the year ended 31 July 2007. As the consideration paid for these shares equalled their fair value, no additional share based compensation charge was recorded under IFRS 2, Share-based Payment. To retain the Ordinary Shares issued under the terms of the Origin Plan, the senior executives must remain with Origin Enterprises plc for five years and financial and business targets must be achieved. If a senior executive leaves before the five year period or the financial and business targets are not achieved, the Ordinary Shares issued under the terms of the Origin Plan may be reacquired by Origin at the lower of the amount paid for the shares and the then fair market value of the shares.
Under the terms of the Origin Plan, senior executive employees are also issued equity entitlements of €0.01 in Origin Enterprises plc at par value which will be converted on a one to one basis into Ordinary Shares in Origin after the expiration of 5 years. The conversion will occur only if specified EPS targets are achieved and the employee remains in employment.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Issued in FY 2007 | 615 | 615 |
| Issued in FY 2008 | 301 | 94 |
| 916 | 709 |
| Details of equity entitlements granted under the long term |
Weighted conversion price 2009 |
Number of equity entitlements |
Weighted conversion price 2008 |
Number of equity entitlements |
|---|---|---|---|---|
| incentive plan | in Euro | 2009 | in Euro | 2008 |
| Equity entitlements outstanding at beginning of year |
0.01 | 5,555,270 | 0.01 | 5,140,770 |
| Issued during the year | – | – | 0.01 | 414,500 |
| Equity entitlements outstanding at end of year |
0.01 | 5,555,270 | 0.01 | 5,555,270 |
| Vested at end of year | – | – | – | – |
The equity entitlements issued under the Origin plan are equity settled share based payments as defined in IFRS 2, Share-based Payment.
The weighted average fair value assigned to equity entitlements issued under the Origin Plan represents the fair value of an ordinary share on the date of grant adjusted for the lost dividends between date of issue and vesting date.
None of these equity entitlements have vested at the end of the year.
The merger of IAWS and Hiestand on 21 August 2008 triggered the vesting of all previously granted options under this scheme.
The measurement requirements of IFRS 2 had been implemented in respect of share options that were granted after 7 November 2002 under this scheme, that had not vested at the date of transition of the Company to IFRS (1 August 2005).
| in Euro `000 | 2009 | 2008 | ||
|---|---|---|---|---|
| Issued in FY 2006 | 3,530 | 2,185 | ||
| 3,530 | 2,185 | |||
| Weighted | Number of | Weighted | Number of equity |
|
| conversion | equity | conversion | entitlements | |
| Details of options granted under the share | price 2009 | entitlements | price 2008 | options |
| option scheme | in Euro | 2009 | in Euro | 2008 |
| Options outstanding at beginning of year | 12.07 | 3,669,300 | 11.35 | 4,540,250 |
| Lapsed during the year | – | – | 9.98 | (437,000) |
| Exercised during the year | – | – | 6.60 | (433,950) |
| Vested on merger I) | 12.07 | (3,669,300) | – | – |
| Options outstanding at end of year | – | – | 12.07 | 3,669,300 |
| Exercisable at end of year | – | – | 8.21 | 1,281,800 |
I) As set out in note 2.3 of these Group Financial Statements, the merger between IAWS and Hiestand in August 2008 triggered the vesting of all previously granted share awards under the 1997 Share Option Scheme.
The merger of IAWS and Hiestand on 21 August 2008 triggered the vesting of all previously granted equity entitlements under this scheme.
The measurement requirements of IFRS 2 had been implemented in respect of the equity entitlements granted under this scheme.
| Impact on income statement | ||||
|---|---|---|---|---|
| in Euro `000 | 2009 | 2008 | ||
| Issued in FY 2007 | 1,161 | 1,161 | ||
| Issued in FY 2008 | 2,495 | 1,247 | ||
| 3,656 | 2,408 | |||
| Details of options granted under the share option scheme |
Weighted conversion price 2009 |
Number of equity entitlements 2009 |
Weighted conversion price 2008 |
Number of equity entitlements 2008 |
| Options outstanding at beginning of year | in Euro 15.65 |
2,230,000 | in Euro 17.10 |
970,000 |
| Issued during the year | – | – | 14.35 | 1,260,000 |
| Vested on merger I) | 15.65 | (2,230,000) | ||
| Options outstanding at end of year | – | – | 15.65 | 2,230,000 |
| Exercisable at end of year | – | – | – | – |
I) As set out in note 2.3 of these Group Financial Statements, the merger between IAWS and Hiestand in August 2008 triggered the vesting of all previously granted EEPS equity entitlements.
The merger of IAWS and Hiestand on 21 August 2008 triggered the vesting of all previously granted equity entitlements under this scheme.
The measurement requirements of IFRS 2 had been implemented in respect of the equity entitlements granted under this scheme.
| in Euro `000 | 2009 | 2008 | ||
|---|---|---|---|---|
| Issued in FY 2008 | 2,239 | 2,239 | ||
| Issued in FY 2009 | 8,690 | 4,345 | ||
| 10,929 | 6,584 | |||
| Details of options granted under the share option scheme |
Weighted conversion price 2009 in Euro |
Number of equity entitlements 2009 |
Weighted conversion price 2008 in Euro |
Number of equity entitlements 2008 |
| Options outstanding at beginning of year | 0.30 | 1,350,000 | 0.30 | 405,000 |
| Issued during the year | – | – | 0.30 | 945,000 |
| Vested on merger I) | 0.30 | (1,350,000) | – | – |
| Options outstanding at end of year | – | – | 0.30 | 1,350,000 |
| Exercisable at end of year | – | – | – | – |
I) As set out in note 2.3 of these Group Financial Statements, the merger between IAWS and Hiestand in August 2008 triggered the vesting of all previously granted ECIS equity entitlements.
| Current tax | ||
|---|---|---|
| in Euro `000 | 2009 | 2008 |
| Current tax on profit for the year | 29,715 | 27,781 |
| Adjustments in respect of prior years | (3,085) | 695 |
| Less: manufacturing relief | – | (609) |
| Total current tax charge | 26,630 | 27,867 |
| Deferred tax: | ||
| Origination and reversal of timing differences I) | (26,457) | (634) |
| Effect of tax rate change | 2,442 | (1,868) |
| Adjustments in respect of prior years | 238 | 102 |
| Total deferred tax (credit) | (23,777) | (2,400) |
| Income tax expense | 2,853 | 25,467 |
| Reconciliation of average effective tax rate to applicable tax rate in Euro `000 |
2009 | 2008 |
| Profit before tax | 43,830 | 167,944 |
| Less share of profits of associates and joint ventures | (17,525) | (28,070) |
| 26,305 | 139,874 | |
| Income tax on profits for the year at 21.2% (2008: 12.5%) II) | 5,577 | 17,484 |
| Expenses not deductible for tax purposes | 6,635 | 2,757 |
| Higher rates of tax on other income | 350 | 914 |
| (Lower)/higher rates of tax on earnings in other jurisdictions | (9,787) | 6,340 |
| Adjustments in respect of prior years | (2,848) | 797 |
| Manufacturing relief | – | (609) |
| Unutilised tax losses | 594 | 16 |
| Other items III) | 2,332 | (2,232) |
| Income tax expense | 2,853 | 25,467 |
| Movement recognised directly in equity | 2009 | 2008 |
| Effect of capital gains tax rate change in Ireland | 7,035 | – |
| Relating to Group employee benefit plans actuarial losses | (817) | (2,371) |
| Derivative financial instruments | (1,314) | (189) |
| 4,904 | (2,560) |
I) Includes impact of the fair value adjustment on investment properties.
II) 21.2% is the standard rate of income tax applicable to trading profits in Zurich, Switzerland. In 2008, 12.5% was the standard rate of income tax applicable to trading profits in Ireland.
III) Other items primarily reflect a once off deferred tax cost in respect of the increase in the Irish capital gains tax rate during the year. The 2008 credit primarily arises in respect of a once off deferred tax benefit associated with a reduction of the US State tax rate on the Group's US activities.
At the 3 December 2009 General Meeting, shareholders will be invited to approve a proposed dividend of CHF 0.5324 (Euro equivalent €0.3520) per share to be paid to shareholders after the balance sheet date. No dividend was paid during the period (2008: no dividend).
On 21 August 2008, the merger of IAWS and Hiestand was completed. Following the merger, the IAWS shareholders received 0.5 shares of ARYZTA for each IAWS share. The basic and diluted earnings per share presented below for the year ended 31 July 2008 has been adjusted to reflect this change in the number of shares.
| 2009 | 2008 | |
|---|---|---|
| Basic earnings per share | in Euro 000 | in Euro000 |
|
| Profit for year attributable to equity shareholders | 54,010 | 129,752 |
| Weighted average number of ordinary shares | 000 |000 |
|
| Issued ordinary shares at 1 August | 63,669 | 63,453 |
| Effect of shares issued during the year | 14,758 | 104 |
| Weighted average number of ordinary shares for the year | 78,427 | 63,557 |
| Basic earnings per share | 68.87 cent | 204.15 cent |
| 2009 | 2008 | |
| Diluted earnings per share | in Euro 000 | in Euro000 |
|
| Profit for year attributable to equity shareholders | 54,010 | 129,752 |
| Effect on minority interest share of profits due to dilutive effect of Origin equity entitlements I) |
– | (1,075) |
| Diluted profit for financial year attributable to equity shareholders |
54,010 | 128,677 |
| Weighted average number of ordinary shares (diluted) | 000 |000 |
|
| Weighted average number of ordinary shares used in basic calculation |
78,427 | 63,557 |
| Effect of equity instruments with a dilutive effect | 200 | 661 |
| Weighted average number of ordinary shares (diluted) for the year | 78,627 | 64,218 |
| Diluted earnings per share | 68.69 cent | 200.38 cent |
I) This dilutive adjustment reflects the dilutive impact of equity entitlements granted to Origin senior management under the Origin Plan as detailed in note 8.2 of these Group Financial Statements. These equity entitlements dilute the Group's share of Origin profits available as part of its diluted earnings per share calculation.
Notes to the Group Financial Statements (continued) for the year ended 31 July 2009
| 31 July 2009 | Land and | Plant and | Motor | Assets under |
|
|---|---|---|---|---|---|
| in Euro `000 | buildings | machinery | vehicles | construction | Total |
| Cost | |||||
| At 1 August 2008 | 180,963 | 395,577 | 12,247 | 154,488 | 743,275 |
| Additions | 4,345 | 35,512 | 1,983 | 42,023 | 83,863 |
| Transfer from assets under construction | 120,357 | 76,154 | – | (196,511) | – |
| Arising on business combination (note 30) | 91,181 | 85,429 | 12,727 | – | 189,337 |
| Disposals | (10,538) | (63,378) | (4,539) | – | (78,455) |
| Translation adjustments | (11,762) | 8 | (1,829) | – | (13,583) |
| At 31 July 2009 | 374,546 | 529,302 | 20,589 | – | 924,437 |
| Accumulated depreciation | |||||
| At 1 August 2008 | 37,342 | 214,479 | 8,463 | – | 260,284 |
| Depreciation charge for year | 9,580 | 47,782 | 4,833 | – | 62,195 |
| Disposals | (2,767) | (49,621) | (3,800) | – | (56,188) |
| Translation adjustments | (2,298) | (3,309) | (779) | – | (6,386) |
| At 31 July 2009 | 41,857 | 209,331 | 8,717 | – | 259,905 |
| Net book amounts | |||||
| At 31 July 2009 | 332,689 | 319,971 | 11,872 | – | 664,532 |
| At 31 July 2008 | 143,621 | 181,098 | 3,784 | 154,488 | 482,991 |
| Assets | |||||
|---|---|---|---|---|---|
| 31 July 2008 | Land and | Plant and | Motor | under | |
| in Euro `000 | buildings | machinery | vehicles | construction | Total |
| Cost | |||||
| At 1 August 2007 | 150,863 | 358,851 | 3,389 | 52,634 | 565,737 |
| Additions | 3,521 | 37,337 | 383 | 101,854 | 143,095 |
| Arising on business combination (note 30) | 35,971 | 45,737 | 9,699 | – | 91,407 |
| Disposals | (439) | (6,876) | (932) | – | (8,247) |
| Translation adjustments | (8,953) | (39,472) | (292) | – | (48,717) |
| At 31 July 2008 | 180,963 | 395,577 | 12,247 | 154,488 | 743,275 |
| Accumulated depreciation | |||||
| At 1 August 2007 | 27,191 | 179,394 | 2,659 | – | 209,244 |
| Depreciation charge for year | 4,575 | 30,226 | 1,081 | – | 35,882 |
| Arising on business combination (note 30) | 7,382 | 30,536 | 5,805 | – | 43,723 |
| Disposals | (225) | (6,381) | (744) | – | (7,350) |
| Translation adjustments | (1,581) | (19,296) | (338) | – | (21,215) |
| At 31 July 2008 | 37,342 | 214,479 | 8,463 | – | 260,284 |
| Net book amounts | |||||
| At 31 July 2008 | 143,621 | 181,098 | 3,784 | 154,488 | 482,991 |
| At 31 July 2007 | 123,672 | 179,457 | 730 | 52,634 | 356,493 |
The net book value in respect of assets held under finance leases and accordingly capitalised in property, plant and equipment is as follows:
| in Euro `000 | Buildings | Plant and equipment |
Motor vehicles |
Total |
|---|---|---|---|---|
| At 31 July 2009 | 8,728 | 2,959 | 942 | 12,629 |
| At 31 July 2008 | 10,414 | 1,830 | 1,548 | 13,792 |
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Contracted but not provided for in the financial statements | 7,474 | 46,028 |
| Authorised by the directors but not contracted for | 8,687 | 5,215 |
| Total | 16,161 | 51,243 |
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Balance at beginning of year | 192,418 | 165,473 |
| Fair value adjustment | (134,543) | – |
| Arising on business combination (note 30) | 3,747 | 14,000 |
| Development costs capitalised | 1,339 | 12,945 |
| Translation adjustment | 14 | – |
| Balance at end of year | 62,975 | 192,418 |
Investment property principally comprises development land located in Ireland in areas destined for future development and regeneration. Rental income from these properties is negligible from a Group perspective and is not disclosed separately.
Development costs capitalised relates to various works carried out on development land held as investment properties.
Investment property held by Origin Enterprises, plc (the Group's 71.4% owned subsidiary and separately listed company) principally comprises 32 acres (13 hectares) of development land located close to the centre of Ireland's second largest city, Cork, in its South Docklands area. The area has long been associated with Origin's port activities. More recently the Group has been considering an overall redevelopment of the area and in 2007 (the year of the Origin IPO) revalued and transferred the property to investment property.
Since the prior year, the Irish property market has deteriorated due to unprecedented combinations of negative economic factors affecting the Irish economy. The deteriorating market conditions have particularly impacted the values of Irish land and development properties, which have seen a significant fall in value in recent times.The prior year fair value would have included a significant value attributed to the redevelopment opportunity of this land which has been substantially reduced in the current year.
In accordance with its accounting policy of carrying investment property at fair value, the Group commissioned Savills, independent qualified valuation experts, to conduct a valuation of the Group's investment properties in June 2009. The valuation was on the basis of market value and complies with the requirements of the Valuation and Appraisal Standards issued under the auspices of the Society of Chartered Surveyors. For this purpose market value was defined by the independent valuation experts as the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arms length transaction after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.
The respective fair value was therefore estimated based on considerations regarding the Irish economy, the local property market, the property related development plan and its challenges, planning permissions received to date and a property analysis (strengths and weaknesses, trends and saleability) rather than based on other factors or assumptions. In particular, the valuation expert reflected the impact of the lack of liquidity in the market and based his assessment on the assumption that no forced sale is required as it may be very difficult to achieve a successful sale of these assets in the short term. The valuation expert also referred to the valuation uncertainty which may lead to a heightened price
volatility due to the combination of the above mentioned factors that are contributing to a very difficult trading environment in the property market.
Against the background of current conditions in the Irish property market, and the general economic environment in Ireland, this resulted in a revaluation loss to the carrying value of investment properties of €134,543,000.
| Goodwill | relationships | Brands | related | and other | Total |
|---|---|---|---|---|---|
| 558,634 | 160,747 | 136,848 | 30,530 | 7,874 | 894,633 |
| 360,031 | 160,227 | 114,741 | 1,208 | – | 636,207 |
| – | – | – | 10,588 | 1,086 | 11,674 |
| (1,520) | (2,400) | (2,400) | (2,984) | – | (9,304) |
| 376 | – | – | – | – | 376 |
| 51,893 | 10,189 | 5,980 | 485 | (56) | 68,491 |
| 969,414 | 328,763 | 255,169 | 39,827 | 8,904 | 1,602,077 |
| – | 18,694 | 17,052 | 22,973 | 87 | 58,806 |
| – | 27,519 | 14,364 | 3,974 | 420 | 46,277 |
| – | (80) | (160) | (2,895) | – | (3,135) |
| – | 722 | 278 | 704 | (5) | 1,699 |
| – | 46,855 | 31,534 | 24,756 | 502 | 103,647 |
| 969,414 | 281,908 | 223,635 | 15,071 | 8,402 | 1,498,430 |
| 558,634 | 142,053 | 119,796 | 7,557 | 7,787 | 835,827 |
| Customer | Computer | Patents |
| 31 July 2008 | Customer | Computer | Patents | |||
|---|---|---|---|---|---|---|
| in Euro `000 | Goodwill | relationships | Brands | related | and other | Total |
| Cost | ||||||
| At 1 August 2007 | 531,340 | 137,389 | 127,738 | 31,429 | – | 827,896 |
| Arising on business combination (note 30) | 79,746 | 38,012 | 18,651 | 1,533 | 800 | 138,742 |
| Additions | – | – | – | 1,794 | 7,122 | 8,916 |
| Disposals | – | – | – | (1,098) | – | (1,098) |
| Other | (361) | – | – | – | – | (361) |
| Translation adjustments | (52,091) | (14,654) | (9,541) | (3,128) | (48) | (79,462) |
| At 31 July 2008 | 558,634 | 160,747 | 136,848 | 30,530 | 7,874 | 894,633 |
| Accumulated amortisation | ||||||
| At 1 August 2008 | – | 10,181 | 11,358 | 21,876 | – | 43,415 |
| Arising on business combination (note 30) | – | – | – | 1,127 | – | 1,127 |
| Amortisation | – | 9,383 | 6,334 | 3,187 | 93 | 18,997 |
| Disposals | – | – | – | (1,074) | – | (1,074) |
| Translation adjustments | – | (870) | (640) | (2,143) | (6) | (3,659) |
| At 31 July 2008 | – | 18,694 | 17,052 | 22,973 | 87 | 58,806 |
| Net book amounts | ||||||
| At 31 July 2008 | 558,634 | 142,053 | 119,796 | 7,557 | 7,787 | 835,827 |
| At 31 July 2007 | 531,340 | 127,208 | 116,380 | 9,553 | – | 784,481 |
Goodwill acquired through business combinations has been allocated at acquisition to the appropriate cash generating units that are expected to benefit from the business combination. The carrying amount of goodwill allocated to cash generating units across the Group is summarised as follows:
| in Euro `000 | Discount rate 2009 |
Projection period |
Growth rate |
2009 | 2008 |
|---|---|---|---|---|---|
| Hiestand Holding AG | 10.1% | 4 years | 2% | 365,046 | – |
| Otis Spunkmeyer Inc. | 10.4% | 4 years | 2% | 265,461 | 240,534 |
| Groupe Hubert | 13.0% | 4 years | 2% | 111,822 | 90,884 |
| Masstock Group Holdings Limited | 11.9% | 4 years | 2% | 49,521 | 50,574 |
| La Brea Bakery | 10.4% | 4 years | 2% | 51,170 | 46,490 |
| Other I) | – | – | – | 126,394 | 130,152 |
| 969,414 | 558,634 | ||||
| Goodwill arising on investments in joint venture and associates |
21,980 | 41,235 |
I) Other is comprised of goodwill in a number of cash generating units which are individually insignificant.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. No impairment losses have been recognised in respect of the Group's cash generating units in the years ended 31 July 2009 and 31 July 2008.
The recoverable amounts of cash generating units are based on value in use calculations. Those calculations use cash flow projections based on expected future operating results and cash flows. The cash flow projections are based on current operating results of the individual cash generating units and an assumption regarding future organic growth. For the purposes of the calculation of value in use, the cash flows are projected over a 4 year period with additional cash flows in subsequent years calculated using a terminal value methodology, unless a shorter period is appropriate to the circumstances of a particular cash generating unit. The cash flows are discounted using appropriate risk adjusted discount rates as disclosed in the table above averaging 11.2% (2008: 12.0%), reflecting the risk associated with the individual future cash flows and the risk free rate. Any significant adverse change in the expected future operational results and cash flows may result in the value in use being less than the carrying amount of a cash-generating unit and would require that the carrying amount of the cash-generating unit be impaired and stated at the greater of the value in use or the recoverable amount of the business unit. However the results of the impairment testing undertaken at 31 July 2009 provide sufficient headroom such that any reasonable realistic movement in any of the underlying assumptions would not give rise to an impairment charge.
Key assumptions include management's estimates of future profitability and replacement capital expenditure requirements.
The term of the discounted cashflow model is a significant factor in determining the fair value of the cash-generating units. The term has been arrived at taking account of the Group's strong financial position, its established history of earnings growth and cash flow generation and its proven ability to pursue and integrate value enhancing acquisitions. The goodwill included within the carrying amount of investments in associates and joint ventures is subject to annual impairment testing on a similar basis to the goodwill arising on the Group's subsidiaries.
| Share of | Share of | |||
|---|---|---|---|---|
| 31 July 2009 in Euro `000 |
Note | associates net assets |
joint ventures net assets |
Total |
| At 1 August 2008 | 120,074 | 58,057 | 178,131 | |
| Share of profits after tax | 1,332 | 16,193 | 17,525 | |
| Additions | 15.1 | 7,013 | 45,991 | 53,004 |
| Associate becoming a subsidiary |
15.2 | (87,266) | – | (87,266) |
| Dividends received | (1,986) | (21,018) | (23,004) | |
| Gains recognised directly through equity |
(1,326) | 704 | (622) | |
| Translation adjustments | (1,010) | 2,593 | 1,583 | |
| At 31 July 2009 | 36,831 | 102,520 | 139,351 | |
| 31 July 2008 | ||||
| in Euro `000 | ||||
| At 1 August 2007 | 104,297 | 64,708 | 169,005 | |
| Share of profits after tax | 12,867 | 15,203 | 28,070 | |
| Additions | 15.3 | 15,632 | – | 15,639 |
| Associate becoming a subsidiary |
15.4 | (10,450) | – | (10,450) |
| Dividends received | (4,149) | (16,041) | (20,190) | |
| Gains recognised directly through equity |
3,254 | 81 | 3,335 | |
| Translation adjustments | (1,377) | (5,894) | (7,278) |
On 3 February 2009, the Group transferred its 100% shareholding in United Fish Industries and United Fish Industries (UK) together with cash consideration of €16,000,000 for a 50% shareholding in the enlarged Welcon business. The net assets of the business transferred on 3 February 2009 amounted to €19,822,000 and the Group's shareholding is treated as a joint venture and is accounted for using the equity method of accounting. A breakdown of the carrying amount is presented in the following table:
At 31 July 2008 120,074 58,057 178,131
| in Euro `000 | Total |
|---|---|
| Net assets transferred | 19,822 |
| Cash consideration | 16,000 |
| Transaction costs paid | 2,146 |
| Gain arising on transfer | 5,562 |
| Other | 2,461 |
| Total | 45,991 |
The cash consideration of €16,000,000 together with transaction costs paid of € 2,146,000 and the cash element of the net assets transferred of €1,025,000 resulted in a total cash flow impact from this transaction of €19,171,000.
During 2009 Origin increased its shareholding in Continental Farmers Group plc, a large scale producer of high value agriculture crops operating in Poland and the Ukraine from 20% to 36.9% for a cash consideration of €7,013,000.
The total cash flow impact of the two additions above is €26,184,000.
On 1 August 2008, the Group's ownership in Hiestand Holding AG was increased from 32% to 64%. As a result and from that date Hiestand has been accounted for as a subsidiary undertaking and not as an associate undertaking. The remaining 36% holding was subsequently absorbed by ARYZTA by means of a statutory merger under Swiss Law as disclosed in note 30 to these Group Financial Statements.
In June 2008 the Group acquired a 20% interest in Continental Farmers Group plc ("Continental Farmers"), a large scale producer of high value agriculture crops operating in Poland and the Ukraine. Continental Farmers primary objective is to significantly extend its farming business in the Ukraine and the funds invested by the Group will be used to achieve this.
In June 2008, the Group acquired 2,500,000 preference shares in BHH Limited (holding company for John Thompson & Sons) for £2,500,000.
During the prior year, the Group completed the acquisition of the remaining 50% interest in the Odlum Group ("Odlums") that it did not previously own. As a result, Odlums is now accounted for as a subsidiary undertaking and not as an associate undertaking. Further disclosures in relation to this acquisition are set out in note 30.
The amounts included in these Group Financial Statements in respect of the income and expenses of associates and joint ventures are taken from their latest financial statements prepared up to their respective year ends together with management accounts for the intervening periods to the Group's year end. The joint ventures, Cillryan's Bakery Limited and Welcon AS, both have a 31 December year end.
The investment in associates and joint ventures is analysed as follows:
| 31 July 2009 | Joint | ||
|---|---|---|---|
| in Euro `000 | Associates | ventures | Total |
| Non current assets | 25,871 | 82,786 | 108,657 |
| Current assets | 29,003 | 46,730 | 75,733 |
| Non current liabilities | (5,583) | (21,410) | (26,993) |
| Current liabilities | (12,840) | (27,186) | (40,026) |
| Net assets | 36,451 | 80,920 | 117,371 |
| Goodwill | 380 | 21,600 | 21,980 |
| At 31 July 2009 | 36,831 | 102,520 | 139,351 |
| 31 July 2008 | |||
| in Euro `000 | |||
| Non current assets | 102,181 | 48,923 | 151,104 |
| Current assets | 63,079 | 16,372 | 79,451 |
| Non current liabilities | (34,313) | (3,578) | (37,891) |
| Current liabilities | (46,281) | (9,487) | (55,768) |
| Net assets | 84,666 | 52,230 | 136,896 |
| 35,408 | 5,827 | 41,235 | |
| Goodwill |
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Raw materials | 64,557 | 85,827 |
| Finished goods | 119,928 | 145,334 |
| Consumable stores | 8,161 | 2,946 |
| Total inventory | 192,646 | 234,107 |
A total expense of €2,393,000 (2008: €2,906,680) was recognised in the income statement arising from write down of inventory.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Current | ||
| Trade receivables | 352,595 | 296,496 |
| Trade receivables due from associates | 216 | 2,503 |
| VAT recoverable | 6,536 | 11,137 |
| Prepayments and accrued income | 22,864 | 36,906 |
| Other receivables | 24,563 | 20,607 |
| 406,774 | 367,649 |
A total expense of €4,536,000 (2008: €2,817,000) was recognised in the income statement arising from impairment of trade receivables.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Non current | ||
| Other payables | 1,025 | 406 |
| Current | ||
| Trade payables | 335,008 | 316,560 |
| Trade payables due to associates and joint ventures | 2,984 | 610 |
| Accruals and other payables I) | 260,319 | 256,439 |
| Income tax and social welfare | 9,907 | 5,194 |
| Value added tax | 6,073 | 7,494 |
| 614,291 | 586,297 |
(I) Accruals and other payables consist in the majority of balances due for goods and services received not yet invoiced.
Provisions comprise the net present value of the amounts expected to be payable in respect of deferred consideration arising on business combinations. Residual deferred consideration is due entirely within 5 years and is payable subject to the achievement of earnings based targets.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Balance at 1 August | 65,679 | 73,063 |
| Arising on business combination (note 30) | 3,800 | – |
| Discounting charge | 2,526 | 2,082 |
| Payments of deferred consideration | (27,384) | (1,671) |
| Translation adjustment | 461 | (7,795) |
| Balance at 31 July | 45,082 | 65,679 |
| Classified as: | ||
| Current | 3,823 | 27,974 |
| Non-current | 41,259 | 37,705 |
| 45,082 | 65,679 |
As set out further in note 21 of these Group Financial Statements, the Group operates two distinct debt funding structures which are segregated in line with its segmental and corporate reporting structures. One Group funding structure finances the Food segments of the Group ('Food') as a whole and the second funding structure finances the Origin segment and its related subsidiaries ('Origin').
In accordance with IAS 7, Cash Flow Statements, cash and cash equivalents comprise cash balances held for the purposes of meeting short-term cash commitments and investments which are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts are included within current interest bearing loans and borrowings in the Group balance sheet.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Food cash at bank and in hand | 204,586 | 74,861 |
| Origin cash at bank and in hand | 89,950 | 75,232 |
| Total cash at bank and in hand | 294,536 | 150,093 |
| Food bank overdraft | (15,276) | (43,109) |
| Origin bank overdraft | (10,116) | (225) |
| Bank overdrafts (note 21) | (25,392) | (43,334) |
| Included in the Group cash flow statement | 269,144 | 106,759 |
Cash at bank and in hand earns interest at floating rates based on daily deposit bank rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates.
This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost.
The Group operates two distinct debt funding structures which are segregated in line with its segmental and corporate reporting structures. The Group's 71.4% subsidiary, Origin Enterprises plc has a separate funding structure which is financed without recourse to ARYZTA AG or its Europe, North America and Developing Market Food business segment subsidiaries.
Each of the Food and Origin funding structures have been independently negotiated by the Group. There are no cross guarantees or recourse obligations between the Food and Origin segments of the Group in respect of their separate funding facilities. As a result these two parts of the Group effectively act as separate independent parties from a third party borrowing perspective.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Included in non-current liabilities | ||
| Food loans | 692,622 | 442,112 |
| Origin loans | 231,870 | 248,301 |
| Total bank loans | 924,492 | 690,413 |
| Finance leases | 2,760 | 2,872 |
| Non current interest bearing loans and borrowings | 927,252 | 693,285 |
| Included in current liabilities | ||
| Bank overdrafts | 25,392 | 43,334 |
| Finance leases | 1,148 | 1,789 |
| Current interest bearing loans and borrowings | 26,540 | 45,123 |
| Total bank loans and overdrafts | 949,884 | 733,747 |
| Analysis of net debt in Euro `000 |
1 August 2008 |
Cashflow | Arising on business combination |
Non cash movements |
Translation adjustment |
31 July 2009 |
|---|---|---|---|---|---|---|
| Cash | 150,093 | 145,486 | – | – | (1,043) | 294,536 |
| Overdrafts | (43,334) | 17,774 | – | – | 168 | (25,392) |
| Cash and cash equivalents | 106,759 | 163,260 | – | – | (875) | 269,144 |
| Loans | (690,413) | (68,242) | (128,633) | (2,868) | (34,336) | (924,492) |
| Finance leases | (4,661) | 1,300 | (659) | – | 112 | (3,908) |
| Net debt | (588,315) | 96,318 | (129,292) | (2,868) | (35,099) | (659,256) |
| Arising on | ||||||
|---|---|---|---|---|---|---|
| Split of net debt in Euro `000 |
1 August | business | Non cash | Translation | 31 July | |
| 2008 | Cashflow | combination | movements | adjustment | 2009 | |
| Food net debt | (413,190) | 79,029 | (126,272) | (2,868) | (42,203) | (505,504) |
| Origin net debt | (175,125) | 17,289 | (3,020) | – | 7,104 | (153,752) |
| Net debt | (588,315) | 96,318 | (129,292) | (2,868) | (35,099) | (659,256) |
| Year of | Face value | amount |
|---|---|---|
| 2009 Currency maturity |
in Euro 000 | in Euro000 |
|
| Food loans | ||
| Unsecured ARYZTA loan facility EUR 2013 |
379,738 | 376,661 |
| Unsecured private placement | ||
| Series A USD 2014 |
105,248 | 105,248 |
| Series B USD 2017 |
175,414 | 175,414 |
| Series C USD 2019 |
35,083 | 35,083 |
| Other EUR 2011 |
217 | 217 |
| Origin loans | ||
| Facility A EUR 2012 |
115,000 | 113,207 |
| Facility D EUR 2012 |
16,000 | 16,000 |
| Facility E GBP 2012 |
43,622 | 43,622 |
| Facility G GBP 2012 |
9,040 | 9,040 |
| Facility G EUR 2012 |
50,000 | 50,000 |
| 929,362 | 924,492 | |||
|---|---|---|---|---|
| Year of | Face value | Carrying amount |
||
| 2008 | Currency | maturity | in Euro 000 | in Euro000 |
|
| Food loans | ||||
| Unsecured IAWS loan facility | EUR | 2011 | 157,957 | 155,735 |
| Unsecured private placement | ||||
| Series A | USD | 2014 | 95,365 | 95,365 |
| Series B | USD | 2017 | 158,942 | 158,942 |
| Series C | USD | 2019 | 31,788 | 31,788 |
| Other | EUR | 2011 | 282 | 282 |
| Origin loans | ||||
| Facility A | EUR | 2012 | 115,000 | 115,000 |
| Facility B | EUR | 2012 | 10,987 | 10,987 |
| Facility C | EUR | 2010 | 50,000 | 50,000 |
| Facility E | GBP | 2010 | 47,118 | 47,118 |
| Facility F | GBP | 2010 | 25,196 | 25,196 |
| 692,635 | 690,413 |
At 31 July 2009, the weighted average effective interest rate in respect of the Group's interest bearing liabilities was 4.18% (2008: 5.27%)
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Less than one year | 25,392 | 43,334 |
| Between one and five years | 713,995 | 404,317 |
| After five years | 210,497 | 286,096 |
| Loans and overdrafts | 949,884 | 733,747 |
| Repayment schedule – finance leases in Euro `000 |
Minimum lease payments 2009 |
Interest 2009 |
Present value of payments 2009 |
Minimum lease payments 2008 |
Interest 2008 |
Present value of payments 2008 |
|---|---|---|---|---|---|---|
| Less than one year | 1,258 | 110 | 1,148 | 1,854 | 186 | 1,788 |
| Between one and five years | 3,191 | 431 | 2,760 | 3,203 | 366 | 2,802 |
| After five years | – | – | – | 71 | 1 | 71 |
| Total | 4,449 | 541 | 3,908 | 5,128 | 553 | 4,661 |
As set out previously in this note, the Group operates two separate funding structures. All Group borrowings within the Food funding structures are secured by guarantees from ARYZTA and cross guarantees from various companies within the Food Group.
All Group borrowings within the Origin structure are guaranteed by Origin Enterprises plc with fixed and floating charges over the Origin Group assets totalling €736,000,000. The Origin borrowings do not have recourse to ARYZTA or any Group subsidiaries outside of the Origin Group.
The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows;
| Fair value | Total | |||||
|---|---|---|---|---|---|---|
| through income | Hedge | Loans and | Liabilities at | carrying | Fair | |
| statement | instruments | receivables | amortised cost | amount | value | |
| in Euro `000 | 2009 | 2009 | 2009 | 2009 | 2009 | 2009 |
| Trade and other receivables | – | – | 383,910 | – | 383,910 | 383,910 |
| Cash and cash equivalents | – | – | 294,536 | – | 294,536 | 294,536 |
| Derivative financial assets | – | 599 | – | – | 599 | 599 |
| Total financial assets | – | 599 | 678,446 | – | 679,045 | 679,045 |
| Trade and other payables | – | – | – | (615,316) | (615,316) | (615,316) |
| Bank overdrafts | – | – | – | (25,392) | (25,392) | (25,392) |
| Bank borrowings | – | – | – | (924,492) | (924,492) | (981,611) |
| Finance lease liabilities | – | – | – | (3,908) | (3,908) | (3,908) |
| Derivative financial liabilities | – | (13,076) | – | – | (13,076) | (13,076) |
| Total financial liabilities | – | (13,076) | – | (1,569,108) | (1,582,184) | (1,639,303) |
| in Euro `000 | Fair value through income statement 2008 |
Hedge instruments 2008 |
Loans and receivables 2008 |
Liabilities at amortised cost 2008 |
Total carrying amount 2008 |
Fair value 2008 |
|---|---|---|---|---|---|---|
| Trade and other receivables | – | – | 330,743 | – | 330,743 | 330,743 |
| Cash and cash equivalents | – | – | 150,093 | – | 150,093 | 150,093 |
| Derivative financial assets | – | 2,709 | – | – | 2,709 | 2,709 |
| Total financial assets | – | 2,709 | 480,836 | – | 483,545 | 483,545 |
| Trade and other payables | – | – | – | (586,703) | (586,703) | (586,703) |
| Bank overdrafts | – | – | – | (43,334) | (43,334) | (43,334) |
| Bank borrowings | – | – | – | (690,413) | (690,413) | (731,943) |
| Finance lease liabilities | – | – | – | (4,661) | (4,661) | (4,661) |
| Derivative financial liabilities | (100) | (6,024) | – | – | (6,124) | (6,124) |
| Total financial liabilities | (100) | (6,024) | – | (1,325,111) | (1,331,235) | (1,372,765) |
Set out below are the major methods and assumptions used in estimating the fair values of the financial assets and liabilities disclosed in the preceding table.
For receivables and payables with a remaining life of less than six months or demand balances, the carrying value less impairment provision, where appropriate, is deemed to reflect fair value. All other receivables and payables are discounted to fair value on initial recognition and in relation to subsequent fair value.
For short term bank deposits and cash and cash equivalents, all of which have a remaining maturity of less than three months, the nominal amount is deemed to reflect fair value.
Forward currency contracts are marked to market using quoted forward exchange rates at the balance sheet date. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows.
For interest bearing loans and borrowings with a contractual repricing date of less than six months, the nominal amount is deemed to reflect fair value. For loans with repricing dates of greater than six months, the fair value is calculated based on the present value of the expected future principal and interest cash flows discounted at interest rates effective at the balance sheet date.
Fair value is based on the present value of future cash flows discounted at market rates at the balance sheet date.
Risk management is a fundamental element of the Group's business practice on all levels and encompasses different types of risks. This overall Group risk management process includes the performance of a risk assessment that is described in more detail in note 7 of the Company Financial Statements 2009. Financial risk management specifically is described in further detail below.
The Group's international operations expose it to different financial risks that include;
The Group has a risk management programme in place which seeks to limit the impact of these risks on the financial performance of the Group. The Board has determined the policies for managing these risks. It is the policy of the Board to manage these risks in a non-speculative manner.
Credit risk arises from credit to customers arising on outstanding receivables and outstanding transactions as well as cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions.
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer. There is no concentration of credit risk by dependence on individual customers or geographically.
The Group has detailed procedures for monitoring and managing the credit risk related to its trade receivables based on experience, customer's track record and historic default rates. Individual risk limits are generally set by customer and risk is only accepted above such limits in defined circumstances. The utilisation of credit limits is regularly monitored. Impairment provisions are used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point the amount is considered irrecoverable and is written off directly against the trade receivable.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified.
Cash and short term bank deposits are invested with institutions with the highest short term credit rating with limits on amounts held with individual banks or institutions at any one time. For banks and financial institutions, only independently rated banks with a minimum rating of "A1/P1" are accepted.
The carrying amount of financial assets, net of impairment provisions, represents the Group's maximum credit exposure. The maximum exposure to credit risk at year end was as follows:
| Carrying | Carrying | ||
|---|---|---|---|
| amount | amount | ||
| in Euro `000 | 2009 | 2008 | |
| Trade and other receivables | 383,910 | 330,743 | |
| Cash and cash equivalents | 294,536 | 150,093 | |
| Derivative financial assets | 599 | 2,709 | |
| 679,045 | 483,545 |
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
| in Euro `000 | Carrying amount 2009 |
Carrying amount 2008 |
|---|---|---|
| Europe | 301,155 | 255,468 |
| North America | 45,619 | 40,908 |
| Developing Markets | 5,821 | – |
| Other | – | 120 |
| 352,595 | 296,496 |
The maximum exposure to credit risk for trade receivables at the reporting date by type of customer was:
| Carrying | Carrying | ||
|---|---|---|---|
| amount | amount | ||
| in Euro `000 | 2009 | 2008 | |
| ARYZTA food | 171,493 | 115,005 | |
| Origin food businesses | 33,264 | 37,884 | |
| Origin agribusiness | 147,838 | 143,607 | |
| 352,595 | 296,496 |
The aging of trade receivables at the reporting date was:
| in Euro `000 | Gross 2009 |
Impairment 2009 |
Gross 2008 |
Impairment 2008 |
|---|---|---|---|---|
| Not past due | 269,318 | 2,079 | 232,014 | – |
| Past due 0-30 days | 70,112 | 1,170 | 47,585 | – |
| Past due 31-120 days | 21,852 | 5,438 | 22,889 | 6,367 |
| Past due more than 121 days | 4,909 | 4,909 | 7,436 | 7,061 |
| Total | 366,191 | 13,596 | 309,924 | 13,428 |
All other receivables are due in less than 6 months and are deemed to be fully recoverable.
Analysis of movement in impairment provisions in respect of trade receivables was as follows:
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Balance at 1 August | 13,428 | 6,850 |
| Acquired | 691 | 3,761 |
| Charge / (release) to income statement | (523) | 2,817 |
| Balance at 31 July | 13,596 | 13,428 |
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group's objective is to maintain a balance between flexibility and continuity of funding. The Group's policy is that not more than 40% of total bank borrowing facilities should mature in any proceeding twelve month period. 97% of the Group's total borrowings at the year end will mature between two and ten years.
The Food Group has syndicated loan facilities totalling €795,000,000 as well as a US\$450,000,000 private placement facility. Short-term flexibility is achieved through the availability of overdraft facilities totalling €68,892,000.
Origin has syndicated loan facilities totalling €450,000,000. Short-term flexibility is achieved through the availability of overdraft facilities totalling €49,195,000.
The following are the contractual maturities of financial liabilities including estimated interest payments:
| 2009 | Carrying | Contractual | More than | ||||
|---|---|---|---|---|---|---|---|
| in Euro `000 | amount | cash flows | 6 mths or less | 6-12 mths | 1-2 years | 2-5 years | 5 years |
| Non-derivative financial liabilities |
|||||||
| Fixed rate bank loans | (315,939) | (448,990) | (9,195) | (9,195) | (18,390) | (160,420) | (251,790) |
| Variable rate bank loans | (608,553) | (617,873) | (4,256) | – | (217) | (613,400) | – |
| Finance lease liabilities | (3,908) | (4,449) | (950) | (308) | (2,232) | (959) | – |
| Bank overdrafts | (25,392) | (25,392) | (25,392) | – | – | – | – |
| Trade and other payables | (615,316) | (615,316) | (597,274) | (17,017) | – | (1,025) | – |
| Derivative financial instruments |
|||||||
| Interest rate swaps used for hedging |
(9,355) | (9,355) | (3,071) | (3,068) | (2,897) | (319) | – |
| Currency forward contracts used for hedging |
|||||||
| - Inflows | 65,342 | 44,299 | 19,215 | 1,828 | – | – | |
| - Outflows | (3,122) | (68,464) | (46,495) | (20,148) | (1,821) | – | – |
| (1,581,585) | (1,724,497) | (642,334) | (30,521) | (23,729) | (776,123) | (251,790) |
| 2008 | Carrying | Contractual | More than | ||||
|---|---|---|---|---|---|---|---|
| in Euro `000 | amount | cash flows | 6 mths or less | 6-12 mths | 1-2 years | 2-5 years | 5 years |
| Non-derivative financial liabilities |
|||||||
| Fixed rate bank loans | (286,377) | (415,159) | (8,332) | (8,332) | (16,663) | (49,990) | (331,842) |
| Variable rate bank loans | (404,036) | (413,370) | (9,053) | – | (281) | (404,036) | – |
| Finance lease liabilities | (4,661) | (5,128) | (963) | (891) | (1,422) | (1,781) | (71) |
| Bank overdrafts | (43,334) | (43,334) | (43,334) | – | – | – | – |
| Trade and other payables | (586,703) | (586,703) | (571,095) | (15,202) | – | (406) | – |
| Derivative financial instruments |
|||||||
| Interest rate swaps used for hedging |
1,755 | 1,755 | 434 | 470 | 586 | 265 | – |
| Currency forward contracts used for hedging |
|||||||
| - Inflows | – | 122,710 | 85,937 | 30,184 | 6,589 | – | – |
| - Outflows | (5,070) | (127,780) | (88,652) | (31,953) | (7,175) | – | – |
| Non designated as cash flow hedges |
(100) | (100) | (100) | – | – | – | – |
| (1,328,526) | (1,467,109) | (635,158) | (25,724) | (18,366) | (455,948) | (331,913) |
The fair value of derivative financial assets and liabilities at the balance sheet date is set out in the following table:
| in Euro `000 | Assets 2009 |
Liabilities 2009 |
Assets 2008 |
Liabilities 2008 |
|---|---|---|---|---|
| Cash flow hedges | ||||
| Currency forward contracts | 599 | 3,721 | 954 | 6,024 |
| Interest rate swaps | – | 9,355 | 1,755 | – |
| Not designated as hedges | – | – | – | 100 |
| At 31 July | 599 | 13,076 | 2,709 | 6,124 |
Cash flow hedges are those of highly probable forecasted future income or expenses. In order to qualify for hedge accounting, the Group is required to document the relationship between the item being hedged and the hedging instrument and demonstrate, at inception, that the hedge relationship will be highly effective on an ongoing basis. The hedge relationship must be tested for effectiveness on subsequent reporting dates.
There is no significant difference between the timing of the cash flows and the income statement effect of cash flow hedges.
The prior year balance relates to an agreement entered into by the Group with the Cofounder of Cuisine de France, Ronan McNamee, under which he had been granted a call option to take ownership of a Group subsidiary which currently owns facilities and land at Tallaght. The option was terminated with no additional costs associated.
Market risk is the risk that changes in market prices and indices, such as foreign exchange rates and interest rates, will affect the Group's income or the value of its holdings of financial instruments.
In addition to the Group's operations carried out in euro-zone economies, it also has significant operations in the UK, Switzerland and North America. As a result the Group balance sheet is exposed to currency fluctuations including, in particular, sterling, US dollar and Swiss franc movements. The Group manages its balance sheet having regard to the currency exposures arising from its assets being denominated in a wide range of currencies.
As part of its approach towards mitigating its exposure to foreign currency risk the Group will, when required, fund foreign currency assets in the currency of the related assets. These relationships are typically designated by the Group as net investment hedges of foreign currency exposures on net investments in foreign operations using the borrowings as the hedging instrument. These hedge designations allow the Group to mitigate the risk of foreign currency exposures on the carrying amount of net assets in foreign operations in its Group Financial Statements.
The borrowings designated in net investment hedge relationships are measured at fair value with the effective portion of the change in value of the borrowings being recognised directly through equity in the foreign currency translation reserve. Any ineffectiveness arising on such hedging relationships is recognised immediately in the income statement.
The Group also hedges a portion of its currency exposure through the use of currency swaps. Transactional exposures arise from sales or purchases by an operating unit in currencies other than the unit's functional currency. The Group requires its operating units to use forward currency contracts to eliminate the currency exposures on certain foreign currency purchases. The forward currency contracts must be in the same currency as the hedged item.
The following table details the Group's exposure to foreign currency risk at the balance sheet date.
| 2009 | |||||||
|---|---|---|---|---|---|---|---|
| in Euro `000 | GBP | USD | CAD | CHF | EUR | Other | Total |
| Trade receivables | 1,480 | 2 | 1,686 | 702 | 31,336 | 6,356 | 41,562 |
| Other receivables | – | 14 | 77 | 61 | 3,064 | 189 | 3,405 |
| Bank | 548 | (5,412) | 2,001 | 877 | 8,426 | 388 | 6,828 |
| Trade payables | (6,556) | (8,780) | (701) | (191) | (23,727) | (2,114) | (42,069) |
| Other payables | (1,959) | (1,719) | (504) | (10,087) | (26,265) | (2,614) | (43,148) |
| Derivative financial instruments |
(2,469) | (1,403) | – | (1,851) | (616) | – | (6,339) |
| At 31 July 2009 | (8,956) | (17,298) | 2,559 | (10,489) | (7,782) | 2,205 | (39,761) |
The following table details the Group's exposure to foreign currency risk at 31 July 2008.
| 2008 | |||||||
|---|---|---|---|---|---|---|---|
| in Euro `000 | GBP | USD | CAD | CHF | EUR | Other | Total |
| Trade receivables | 2,584 | 1,273 | 1,775 | 630 | – | 325 | 6,587 |
| Other receivables | 166 | – | 148 | 117 | – | – | 431 |
| Bank | 10,791 | 1,648 | 15 | – | 27 | – | 12,481 |
| Trade payables | (2,845) | (10,224) | (100) | (203) | (8,640) | (3,345) | (25,357) |
| Other payables | (4,955) | (476) | (476) | (212) | (9,259) | (4,770) | (20,148) |
| Derivative financial instruments |
(928) | (3,138) | – | – | 221 | – | (3,845) |
| At 31 July 2008 | 4,813 | (10,917) | 1,362 | 332 | (17,651) | (7,790) | (29,851) |
A 10% strengthening of the Euro against the following currencies at 31 July 2009 would have increased/ (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2008.
| 2009 in Euro `000 |
10% strengthening profit and loss |
10% strengthening equity |
10% weakening profit and loss |
10% weakening equity |
|---|---|---|---|---|
| GBP | 590 | 6,076 | (721) | (7,426) |
| USD | 1,445 | 128 | (1,766) | (156) |
| CAD | 256 | – | (512) | – |
| CHF | (864) | (4,384) | 1,728 | 8,899 |
| At 31 July 2009 | 1,427 | 1,820 | (1,271) | 1,317 |
| 2008 in Euro `000 |
10% strengthening profit and loss |
10% strengthening equity |
10% weakening profit and loss |
10% weakening equity |
|---|---|---|---|---|
| GBP | (522) | 6,787 | 638 | (8,295) |
| USD | 707 | 76 | (864) | (93) |
| CAD | (124) | 677 | 151 | (827) |
| CHF | (30) | 9,320 | 37 | (11,391) |
| At 31 July 2008 | 31 | 16,860 | (38) | (20,606) |
The Group's debt bears both floating and fixed rates of interest as per the original contracts. The Group's policy is to maintain between 40% and 70% of overall Group average annual borrowings at fixed rates. This is achieved through the issuing of fixed rate debt or the use of interest rate swaps. At 31 July the interest rate profile of the Group's interest bearing financial instruments was as follows:
| Carrying amount |
Carrying amount |
||
|---|---|---|---|
| in Euro `000 | 2009 | 2008 | |
| Fixed rate instruments | |||
| Bank borrowings | (315,939) | (286,377) | |
| Finance lease liabilities | (3,908) | (4,661) | |
| (319,847) | (291,038) | ||
| Variable rate instruments | |||
| Cash and cash equivalents | 294,536 | 150,093 | |
| Bank overdrafts | (25,392) | (43,334) | |
| Bank borrowings | (608,553) | (404,036) | |
| Total interest bearing financial instruments | (659,256) | (588,315) |
A change of 50 basis points in interest rates at the reporting date would have had the effect as shown below on the income statement and equity. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2008.
| 2009 in Euro `000 |
Principal amount |
Impact of 50 Bp increase on income statement |
Impact of 50 Bp increase on equity |
|---|---|---|---|
| Variable rate instruments | (608,553) | (3,043) | – |
| Bank overdrafts | (25,392) | (127) | – |
| Interest rate swaps | (308,249) | – | 1,541 |
| Cash flow sensitivity (net) | (942,194) | (3,170) | 1,541 |
| Impact of 50 Bp increase |
Impact of | ||
|---|---|---|---|
| 2008 | Principal | on income | 50 Bp increase |
| in Euro `000 | amount | statement | on equity |
| Variable rate instruments | (404,036) | (2,020) | – |
| Bank overdrafts | (43,334) | (217) | – |
| Interest rate swaps | (106,883) | – | 534 |
| Cash flow sensitivity (net) | (554,253) | (2,237) | 534 |
Notes to the Group Financial Statements (continued) for the year ended 31 July 2009
The Group purchases and sells certain commodities for the purposes of receipt or delivery and uses derivative contracts to protect itself from movements in prices other than exchange differences. These contracts are classified as 'own use' contracts, as they were entered into and continue to be held for the purpose of the receipt or delivery of the non financial item, in accordance with the business unit's expected purchase, sale or usage requirements. 'Own use' contracts are outside the scope of IAS 39, Financial Instruments: Recognition and Measurement, and are accounted for on an accruals basis. Where a commodity contract is not entered into or does not continue to be held to meet the Group's own purchase, sale or usage requirements, it is treated as a derivative financial instrument, and the recognition and measurement requirements of IAS 39, Financial Instruments: Recognition and Measurement, are applied.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| At 1 August | 3,906 | 2,929 |
| Arising on business combination (note 30) | 14,657 | 1,453 |
| Received in the period | 2,377 | – |
| Translation adjustment | 27 | (21) |
| Repayment of government grants | – | (128) |
| 20,967 | 4,233 | |
| Amortised in Group income statement | (2,026) | (327) |
| At 31 July | 18,941 | 3,906 |
Government grants received in the period are principally in relation to compensation for the funding of capital investments.
The deductible and taxable temporary differences at the balance sheet date in respect of which deferred tax has been recognised are analysed as follows:
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Deferred tax assets (deductible temporary differences) | ||
| Pension related | 3,814 | 3,697 |
| Employee compensation | 2,120 | 2,865 |
| Financing related | 4,032 | 3,470 |
| Property, plant and equipment | 2,732 | 331 |
| Intangible assets | 104 | – |
| Other deductible temporary differences | 14,251 | 8,548 |
| Total | 27,053 | 18,911 |
| Deferred tax liabilities (taxable temporary differences) | ||
| Pension related | (204) | (183) |
| Employee compensation | (83) | – |
| Financing related | (1,391) | – |
| Property, plant and equipment | (54,257) | (39,956) |
| Investment properties | (7,262) | (28,302) |
| Intangible assets | (133,062) | (80,780) |
| Other | (7,268) | (3) |
| Total | (203,527) | (149,224) |
| Unrecognised deferred tax assets | 2,577 | 1,230 |
|---|---|---|
| ---------------------------------- | ------- | ------- |
Movement in temporary differences, during the year, were as follows:
| 2009 | Property, plant | Investment | Intangible | Employee | Pension | Financing | ||
|---|---|---|---|---|---|---|---|---|
| in Euro `000 | & equipment | properties | assets | compensation | related | related | Other | Total |
| At 1 August 2008 | (39,625) | (28,302) | (80,780) | 2,865 | 3,514 | 3,470 | 8,545 | (130,313) |
| Recognised in group income statement |
(7,154) | 30,166 | 11,180 | (932) | 282 | (1,113) | (8,652) | 23,777 |
| Recognised in group statement of recognised income and expense |
(121) | (6,914) | – | – | 817 | 1,314 | – | (4,904) |
| Arising on business combination (note 30) |
(5,821) | (2,201) | (60,513) | (86) | 96 | (1,283) | 9,463 | (60,345) |
| Arising on disposal | 2,217 | – | – | – | (893) | – | (89) | 1,235 |
| Foreign exchange and other | (1,021) | (11) | (2,845) | 190 | (206) | 253 | (2,284) | (5,924) |
| At 31 July 2009 | (51,525) | (7,262) | (132,958) | 2,037 | 3,610 | 2,641 | 6,983 | (176,474) |
| 2008 | Property, plant | Investment | Intangible | Employee | Pension | Financing | ||
|---|---|---|---|---|---|---|---|---|
| in Euro `000 | & equipment | properties | assets | compensation | related | related | Other | Total |
| At 1 August 2007 | (30,726) | (25,502) | (90,155) | 2,405 | 1,542 | 3,156 | 6,928 | (132,352) |
| Recognised in group income statement |
(6,805) | – | 6,905 | 458 | (504) | 356 | 1,990 | 2,400 |
| Recognised in group statement of recognised income and expense |
– | – | – | – | 2,371 | 189 | – | 2,560 |
| Arising on business combination |
(2,831) | (2,800) | (7,696) | – | 296 | – | 36 | (12,995) |
| Foreign exchange and other | 737 | – | 10,166 | 2 | (191) | (231) | (409) | 10,074 |
| At 31 July 2008 | (39,625) | (28,302) | (80,780) | 2,865 | 3,514 | 3,470 | 8,545 | (130,313) |
The Group operates a number of pension plans, comprising three defined benefit plans and a number of defined contribution plans, with assets held in separate trustee-administered funds.
The Group's principal defined benefit plan (the "Plan") was restructured in the year ended 31 July 2007. Prior to this IAWS Group Limited (formerly IAWS Group, plc) was the principal employer of the Plan. A number of the Origin Enterprises plc ("Origin") businesses participated in this Plan. Following the formation of Origin, a restructuring of this Plan was approved. On completion of the restructuring, Origin replaced IAWS Group Limited (formerly IAWS Group, plc) as principal employer, such that the Plan now only includes active members employed by Origin and the current deferred members of the Plan. As part of the Plan restructuring, the Trustees purchased annuities for the Plan's existing pensioners. This extinguished the Group's liability in the Plan relating to those pensioners. All non-Origin members were transferred to a new defined contribution plan during the prior year.
Outside of this principle Origin employee defined benefit plan, the Group operates two smaller defined benefit plans within its Food business segments.
Under IAS 19, Employee Benefits, the total deficit in the Group's defined benefit plans, including the main plan, for which as outlined above, Origin is the principle employer, at 31 July 2009 was €25,236,000 (2008: €23,365,000).
The pension charge recorded in the income statement for the year in respect of the Group's defined benefit plans was €3,400,000 (2008: credit of €2,313,000) and a cost of €2,060,000 (2008: €4,016,000) was recorded in respect of the Group's defined contribution plans.
Employee benefits included in the Group balance sheet comprises the following:
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Deficit in ARYZTA Food defined benefit plans | 2,183 | 677 |
| Deficit in Origin defined benefit plans | 23,053 | 22,688 |
| Other (a) | 3,308 | 2,191 |
| Total | 28,544 | 25,556 |
(a) In 1989, a provision was made to meet pension fund deficiencies in subsidiaries acquired, mostly relating to unfunded pensions. The residual actuarial deficit is being paid over the remaining lifetime of the pensioners.
The valuation of the defined benefit plans used for the purposes of the following disclosures are those of the most recent actuarial valuations to 31 July 2009 by an independent, qualified actuary. The valuations have been performed using the projected unit credit method.
The main assumptions used by the actuary, averaged across the plans, were as follows:
| 2009 | 2008 | |
|---|---|---|
| Rate of increase in salaries | 2.37% | 4.18% |
| Rate of increases in pensions in payment and deferred benefits | 2.26% | 2.70% |
| Discount rate in plan liabilities | 5.15% | 5.74% |
| Inflation rate | 2.26% | 2.70% |
Assumptions regarding future mortality experience are set based on advice from published statistics and experience. The average life expectancy in years of a pensioner retiring at age 65 is as follows:
| 2009 | 2008 | |
|---|---|---|
| Male | 21.8 | 21.8 |
| Female | 24.8 | 23.7 |
The expected and applied long term rate of return on the assets of the plans were:
| 2009 | 2008 |
|---|---|
| 8.75% | 7.82% |
| 4.11% | 4.77% |
| 6.98% | 6.99% |
| 3.27% | 3.96% |
| Net pension liability | ||||
|---|---|---|---|---|
| in Euro `000 | 2009 | 2008 | 2007 | 2006 |
| Fair value of plan assets: | ||||
| Equities | 34,896 | 38,579 | 39,751 | 60,811 |
| Bonds | 14,886 | 16,785 | 3,354 | 19,039 |
| Property | 5,086 | 6,743 | 6,285 | 5,345 |
| Other | 40,191 | 972 | 279 | 4,132 |
| Total fair value of assets | 95,059 | 63,079 | 49,669 | 89,327 |
| Present value of plan liabilities | (120,295) | (86,444) | (56,128) | (95,893) |
| Deficit in the plans | (25,236) | (23,365) | (6,459) | (6,566) |
| Related deferred tax asset | 3,610 | 3,514 | 1,542 | 1,537 |
| Net pension liability | (21,626) | (19,851) | (4,917) | (5,029) |
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Fair value of plan assets at 1 August | 63,079 | 49,669 |
| Expected return on plan assets | 5,131 | 4,721 |
| Employer contributions | 4,182 | 2,065 |
| Employee contributions | 2,015 | 588 |
| Arising on business combination | 36,310 | 36,860 |
| Foreign exchange | 7 | (2,124) |
| Benefit payments | (5,546) | (9,830) |
| Experience adjustment on plan assets | (10,119) | (18,870) |
| Fair value of plan assets at 31 July | 95,059 | 63,079 |
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Value of plan obligations at 1 August | (86,444) | (56,128) |
| Current service cost | (2,681) | (1,297) |
| Interest on plan obligations | (5,850) | (4,105) |
| Employee contributions | (2,015) | (588) |
| Arising on business combination | (35,623) | (41,078) |
| Benefit payments | 5,546 | 9,830 |
| Experience adjustment on plan liabilities | 6,206 | (707) |
| Translation adjustments | 566 | 2,810 |
| Other | – | 1,825 |
| Curtailment gain relating to transfer of members to defined contribution plan |
– | 2,994 |
| Present value of plan obligations at 31 July | (120,295) | (86,444) |
| Movement in net liability recognised in the balance sheet | ||
|---|---|---|
| in Euro `000 | 2009 | 2008 |
| Net liability in plans at 1 August | (23,365) | (6,459) |
| Current service cost | (2,681) | (1,297) |
| Contributions | 4,182 | 2,065 |
| Other finance (expense)/income | (719) | 616 |
| Actuarial (loss)/gain | (3,913) | (19,577) |
| Arising on acquisition | 687 | (4,218) |
| Curtailment gain relating to the transfer of members to defined contribution plan |
– | 2,994 |
| Other | – | 1,825 |
| Foreign exchange translation | 573 | 686 |
| Net liability in plans at 31 July | (25,236) | (23,365) |
| Analysis of defined benefit expense recognised in the Group income statement |
||
| in Euro `000 | 2009 | 2008 |
| Current service cost | 2,681 | 1,297 |
| Curtailment gain relating to transfer of members to defined contribution plan |
– | (2,994) |
| Non financing (income)/expense recognised in Group income statement |
2,681 | (1,697) |
| Expected return on plan assets | (5,131) | (4,721) |
| Interest cost on plan liabilities | 5,850 | 4,105 |
| Included in financing costs, net | 719 | (616) |
| Net (credit)/charge to Group income statement | 3,400 | (2,313) |
| Actual return/(loss) on pension plan assets | (4,987) | (14,149) |
| Defined benefit pension expense recognised in the Group statement of recognised income and expense |
||
| in Euro `000 | 2009 | 2008 |
| Actual loss less expected return on plan assets | (10,119) | (18,870) |
| Experience gains/(losses) on plan liabilities | 3,177 | (1,714) |
| Changes in demographic and financial assumptions | 3,029 | 1,007 |
| Actuarial (loss)/gain | (3,913) | (19,577) |
| Deferred tax effect of actuarial (loss)/gain | 817 | 2,371 |
| Actuarial (loss)/gain recognised in Statement of recognised income and expense |
(3,096) | (17,206) |
| History of experience gains and losses: |
||||
|---|---|---|---|---|
| 2009 | 2008 | 2007 | 2006 | |
| Difference between expected and actual return on plan assets |
||||
| - Amount (in €`000) | (10,119) | (18,870) | 4,991 | (1,305) |
| - % of plan assets | (10.64)% | (29.91)% | 10.0% | (1.5)% |
| Experience losses on plan obligations |
||||
| - Amount (in €`000) | 3,177 | (1,714) | (538) | (1,066) |
| - % of plan obligations | 2.64% | (1.98)% | (1.0)% | (1.1)% |
| Total actuarial (gain)/loss recognised in statement of total recognised income and expenses |
||||
| - Amount (in €`000) | (3,913) | (19,577) | 9,060 | 4,811 |
| - % of plan liabilities | (15.51)% | (22.65)% | 16.1% | 5.2% |
| Registered shares of CHF 0.02 each (2008: € 0.30 each) - |
2009 | 2009 | 2008 | 2008 |
|---|---|---|---|---|
| authorised, issued and fully paid | 000 | in Euro000 |
000 | in Euro000 |
||
| At 1 August | 127,339 | 38,201 | 126,905 | 38,071 |
| Issue of shares prior to reverse acquisition (€ 0.30) |
12,700 | 3,810 | – | – |
| Effect of reverse acquisition | (61,099) | (41,036) | – | – |
| Opening issued share capital of ARYZTA (CHF 0.02) I) |
78,940 | 975 | ||
| Issue of registered shares post reverse acquisition (CHF 0.02) II) |
2,240 | 30 | – | – |
| Issued on exercise of options | – | – | 434 | 130 |
| Total | 81,180 | 1,005 | 127,339 | 38,201 |
(I) After the merger with Hiestand the issued share capital of ARYZTA consisted of 78,940,460 registered shares with a nominal value of CHF 0.02 each fully paid up. Shareholders are entitled to dividend as declared. The ARYZTA shares rank pari passu in all respects with each other. The share capital for the comparative periods is that of IAWS Group Limited.
(II) On 2 December 2008, the issued shares were increased to 81,180,460 registered shares by the issue of 2,240,000 registered shares of nominal value of CHF 0.02 each in the capital of ARYZTA pursuant to a share subscription on behalf of ARY LTIP Trustee Limited.
| Treasury shares of CHF 0.02 each - allotted, called up and fully | 2009 | 2009 | ||
|---|---|---|---|---|
| paid I) | 000 | in Euro000 |
|||
| At 1 August | – | – | ||
| Issue of shares | 2,240 | 30 | ||
| Movement on treasury shares | (6) | – | ||
| Total | 2,234 | 30 | ||
| Deferred Convertible Ordinary | ||||
| Shares of € 0.30 each - | 2009 | 2009 | 2008 | 2008 |
| authorised, issued and fully paid |
000 | in Euro000 |
000 | in Euro000 |
||
| At 1 August | 3,580 | 1,074 | 1,375 | 103 |
| Effect of reverse acquisition | (3,580) | (1,074) | ||
| Issued during the year | – | – | 2,205 | |
| Final call on deferred convertibles issued in 2008 |
– | – | – | 662 309 |
(I) On 2 December 2008, the issued shares were increased to 81,180,460 registered shares by the issue of 2,240,000 registered shares of nominal value of CHF 0.02 each in the capital of ARYZTA pursuant to a share subscription on behalf of ARY LTIP Trustee Limited.
ARY LTIP Trustee Limited is a wholly owned subsidiary of ARYZTA formed for the purposes of holding shares subject to the ARYZTA Long Term Incentive Plan 2008 ("LTIP") and ARY LTIP Trustee Limited holds these shares in treasury, pending satisfaction of the applicable terms of the LTIP.
| 31 July 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 |
| Issue of shares, net of costs |
3,810 | 182,631 | – | – | – | – | – | – | 186,441 | – | 186,441 |
| Effect of reverse acquisition |
(42,110) | 275,641 | – | – | – | – | – | – | 233,531 | – | 233,531 |
| Issue of treasury shares | 30 | – | (30) | – | – | – | – | – | – | – | – |
| Foreign exchange translation |
– | – | – | – | – | – | 19,025 | – | 19,025 | (1,808) | 17,217 |
| Share of associates foreign exchange translation reserve |
– | – | – | – | – | – | (137) | – | (137) | (55) | (192) |
| Transfer to retained earnings |
– | – | – | – | (92,338) | – | – | 92,338 | – | – | – |
| Share based payments | – | – | – | – | – | 21,594 | – | – | 21,594 | 264 | 21,858 |
| Share based payment reserve released on cancellation of schemes |
– | – | – | – | – | (37,449) | – | 37,449 | – | – | – |
| Group defined benefit plans |
– | – | – | – | – | – | – | (2,507) | (2,507) | (1,406) | (3,913) |
| Deferred tax on defined benefit pension plans |
– | – | – | – | – | – | – | 584 | 584 | 233 | 817 |
| Share of associates defined benefit plans |
– | – | – | – | – | – | – | (1,576) | (1,576) | – | (1,576) |
| Share of associates deferred tax on defined benefit plans |
– | – | – | – | – | – | – | 442 | 442 | – | 442 |
| Effective portion of changes in fair value of cash flow hedges |
– | – | – | (1,189) | – | – | – | – | (1,189) | (1,538) | (2,727) |
| Fair value of cash flow hedges transferred to income statement |
– | – | – | (6,992) | – | – | – | – | (6,992) | – | (6,992) |
| Deferred tax on cash flow hedges and other |
– | – | – | 1,105 | – | – | – | (5,024) | (3,919) | (1,802) | (5,721) |
| Share of joint venture gains relating to cash flow hedges |
– | – | – | 848 | – | – | – | – | 848 | – | 848 |
| Share of joint venture deferred tax relating to cash flow hedges |
– | – | – | (144) | – | – | – | – | (144) | – | (144) |
| Profit for the year | – | – | – | – | – | – | – | 54,010 | 54,010 | (13,033) | 40,977 |
| Net revaluation of previously held interest in associate |
– | – | – | – | – | – | – | 35,077 | 35,077 | – | 35,077 |
| Arising on business combination |
– | – | – | – | – | – | – | – | – | 8,092 | 8,092 |
| Repurchase/disposal of minority interests |
– | – | – | – | – | – | – | – | – | (2,817) | (2,817) |
| At 31 July 2009 | 1,005 | 518,006 | (30) | (6,882) | 35,108 | 4,131 | (41,147) | 810,165 1,320,356 | 47,612 1,367,968 |
| 31 July 2008 in Euro `000 |
Share capital |
Share premium |
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 2007 | 38,174 | 57,001 | (470) | 114,627 | 9,015 | (3,084) | 500,834 | 716,097 | 50,631 | 766,728 |
| Foreign exchange translation | – | – | – | – | – | (58,442) | – | (58,442) | (2,619) | (61,061) |
| Share of associates' foreign exchange translation reserve |
– | – | – | – | – | 1,491 | – | 1,491 | – | 1,491 |
| Group defined benefit pension plans | – | – | – | – | – | (14,001) | (14,001) | (5,576) | (19,577) | |
| Deferred tax on defined benefit pension plans |
– | – | – | – | – | 1,692 | 1,692 | 679 | 2,371 | |
| Share of associate defined benefit plan |
– | – | – | – | – | 1,791 | 1,791 | 664 | 2,455 | |
| Share of associates' deferred tax on defined benefit pension plan |
– | – | – | – | – | (506) | (506) | (186) | (692) | |
| Effective portion of changes in fair value of cashflow hedges |
– | 4,856 | – | – | – | – | 4,856 | 158 | 5,014 | |
| Fair value of cashflow hedges transferred to income statement |
– | (5,186) | – | – | – | – | (5,186) | – | (5,186) | |
| Deferred tax relating to cash flow hedges |
– | 209 | – | – | – | – | 209 | (20) | 189 | |
| Share of joint venture gains relating to cash flow hedges |
– | 92 | – | – | – | – | 92 | – | 92 | |
| Share of joint venture deferred tax relating to cash flow hedges |
– | (11) | – | – | – | – | (11) | – | (11) | |
| Revaluation of previously held investment in Odlums |
– | – | – | 12,819 | – | – | – | 12,819 | 5,141 | 17,960 |
| Profit for the year | – | – | – | – | – | – | 129,752 | 129,752 | 12,725 | 142,477 |
| Issue of ordinary shares | 130 | 2,733 | – | – | – | – | – | 2,863 | – | 2,863 |
| Issue of deferred convertible ordinary shares |
971 | – | – | – | – | – | – | 971 | – | 971 |
| Share–based payments | – | – | – | – | 11,683 | – | – | 11,683 | 203 | 11,886 |
| Share based payments reserve released on reserves |
– | – | – | – | (712) | – | 712 | – | – | – |
| Dividends paid | – | – | – | – | – | – | (20,902) | (20,902) | – | (20,902) |
| Other | – | – | – | – | – | – | – | – | (318) | (318) |
| At 31 July 2008 | 39,275 | 59,734 | (510) | 127,446 | 19,986 | (60,035) | 599,372 | 785,268 | 61,482 | 846,750 |
This reserve comprises amounts credited to reserves in connection with equity awards less the effect of any exercises of such awards.
The cash flow hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to hedged transactions that have not yet occurred.
The translation reserve comprises all foreign exchange differences from 1 August 2004, arising from the translation of the net assets of the Group's non-euro denominated operations, including the translation of the profits of such operations from the average exchange rate for the year to the exchange rate at the balance sheet date, net of hedging.
The revaluation reserve relates to revaluation surpluses arising on revaluations of investment property and previously held interest in an associate.
The capital managed by the Group consists of the Group equity of €1,367,968,000. The Group has set the following goals for the management of its capital:
As set out in note 21 of these Group Financial Statements, the Group operates two distinct debt funding structures. The Group's 71.4% subsidiary and separately listed company, Origin Enterprises plc, has separate funding structures, which are financed without recourse to ARYZTA AG. Origin Enterprises plc net debt amounted to €153,752,000 at 31 July 2009. The consolidated net debt of the Group excluding Origin's non-recourse debt amounted to €505,504,000 and relates to the ARYZTA Food segments of the Group.
The Group employs two ratio targets to monitor equity and to be compliant with its banking covenants:
These ratios are reported to the Board of Directors at regular intervals through internal financial reporting.
* Calculated based on banking covenant definition of EBITDA. This is the Food Group EBITDA for the year ended 31 July 2009 including EBITDA from its joint venture, adjusted for non cash share based incentive charge in the year and for the pro forma full year contribution of Food Group acquisitions.
The proposed payout ratio to shareholders for the Group's financial year to 31 July 2009 is 15% of fully diluted underlying earnings per share. Underlying earnings per share excludes intangible amortisation and the impact of merger costs and fair value adjustments on investment properties as detailed in note 2.1, 2.3 and 2.4 of these Group Financial Statements. The payout will be in the form of a dividend. The payout ratio and form of payout proposed by the Board will be reviewed on an annual basis and is subject to the decision of the General Meeting of the shareholders.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Balance at 1 August | 61,482 | 50,631 |
| Share of (loss)/ profit for the year | (13,033) | 12,725 |
| Arising on business combination | 8,092 | – |
| Share of income and expenses recognised directly in equity | (6,376) | (1,759) |
| Share of share based payment charge | 264 | 203 |
| Disposals | (1,522) | – |
| Repurchase of minority interest | (1,295) | – |
| Other | – | (318) |
| Balance at 31 July | 47,612 | 61,482 |
During the year ended 31 July 2008, the Group repurchased a minority interest held in a subsidiary of the Food Europe business.
Non-cancellable operating lease rentals are payable as set out below. These amounts represent minimum future lease payments, in aggregate, that the Group is required to make under existing lease agreements.
| in Euro `000 | 2009 | 2008 |
|---|---|---|
| Operating leases which expire: | ||
| Within one year | 18,216 | 9,165 |
| In two to five years | 59,733 | 33,468 |
| After more than five years | 47,777 | 23,017 |
| Balance at 31 July | 125,726 | 65,650 |
During the year the Group completed the acquisitions of Hiestand Holding AG, Fresca SAS and a number of smaller acquisitions mainly in the Origin agri-business, the principal ones being CSC Crop Protection Limited and GB Seeds Limited.
IAWS' relationship with Hiestand began in 2003 when IAWS acquired its 22% shareholding in Hiestand, a gourmet bakery business with manufacturing and distribution facilities principally in Switzerland and Germany as well as Eastern Europe and Asia.
IAWS' initial 22% shareholding was increased to 32% in the financial year 2006. On 7 June 2008, IAWS entered into an agreement to purchase Lion Capital's 32% shareholding in Hiestand which would bring IAWS' total shareholding in Hiestand to 64%. This transaction was completed on 1 August 2008 and since this date Hiestand has been consolidated.
The investment was accounted for using the equity method up to the end of July 2008. The carrying amount as at 31 July 2008 was €87,266,000. At the date of acquisition any changes in the carrying amount of the investment recognised in the past were reversed. Secondly, the changes in fair values that occurred since the original shareholdings were obtained were recognised based on the respective interests held. Both items in the total amount of €35,077,000 were recognised against equity.
On 9 June 2008, the IAWS Board and the Hiestand Board announced the proposed merger of IAWS and Hiestand with a view to creating the global leader in speciality bakery. Following the merger on 21 August 2008, ARYZTA became the holding company of the enlarged Group.
On 7 February 2009, the Group completed the acquisition of Fresca SAS. Fresca is a French based food distribution business concentrated on the Greater Paris region and serving principally the local catering and restaurant markets.
During the current year Origin completed a number of bolt-on acquisitions in the United Kingdom. The principal transactions were the acquisition of CSC Crop Protection Limited in April 2009 and GB Seeds Limited in June 2009. These acquisitions improve the strategic position of Origin's integrated agronomy services business. The Group also acquired holdings in a Food Europe distribution business. The results of these other acquisitions were not material to the Group.
The goodwill arising on the principal Hiestand and Fresca business combinations is attributable to the skills and talent of the acquired businesses' work force and the synergies expected to be achieved from integrating the companies into the Group's existing business.
Details of net assets acquired and goodwill arising from the business combinations during the year are set out below;
| 2009 | Acquiree's carrying |
Fair value |
||||
|---|---|---|---|---|---|---|
| in Euro `000 | amount | adjustments | Fair value | Hiestand | Fresca | Other |
| Net assets acquired: | ||||||
| Property, plant and equipment | 165,313 | 24,024 | 189,337 | 183,474 | 1,070 | 4,793 |
| Investment property | 3,297 | 450 | 3,747 | 3,747 | – | – |
| Goodwill | 106,408 | (106,408) | – | – | – | – |
| Intangible assets | 42,595 | 233,581 | 276,176 | 256,786 | 9,300 | 10,090 |
| Inventory | 38,121 | (23) | 38,098 | 27,005 | 2,166 | 8,927 |
| Trade and other receivables | 101,392 | (1,293) | 100,099 | 83,564 | 7,061 | 9,474 |
| Trade and other payables | (91,895) | (15,615) | (107,510) | (84,265) | (7,487) | (15,758) |
| Debt acquired | (128,633) | – | (128,633) | (126,238) | – | (2,395) |
| Finance leases | (659) | – | (659) | – | – | (659) |
| Deferred tax | (20,885) | (39,460) | (60,345) | (54,343) | (3,254) | (2,748) |
| Deferred government grants | – | (14,657) | (14,657) | (14,657) | – | – |
| Defined benefit and other pension obligations | (1,194) | (1,489) | (2,683) | (2,128) | (207) | (348) |
| Corporation tax | (9,855) | 1,055 | (8,800) | (9,606) | 395 | 411 |
| Net assets acquired before minority interest | 284,170 | 263,339 | 9,044 | 11,787 | ||
| Minority interest | (8,092) | (8,092) | – | – | ||
| Net assets acquired after minority interest | 276,078 | 255,247 | 9,044 | 11,787 | ||
| Goodwill arising on acquisition | 360,031 | 335,811 | 20,929 | 3,291 | ||
| Consideration | 636,109 | 591,058 | 29,973 | 15,078 | ||
| Satisfied by: | ||||||
| Equity consideration: | ||||||
| Fair value of shares exchanged for 32% Lion Capitals holding (see 30.1) |
187,960 | 187,960 | – | – | ||
| Equity based consideration for remaining 36% interest in Hiestand Holding AG (see 30.2) |
233,531 | 233,531 | – | – | ||
| Total equity consideration | 421,491 | 421,491 | – | – | ||
| Cash consideration | 70,119 | 30,000 | 25,488 | 14,631 | ||
| Transaction costs | 33,907 | 30,514 | 2,887 | 506 | ||
| Deemed consideration of previously held 32% interest (see 30.3) |
121,854 | 121,854 | – | – | ||
| Deferred consideration | 3,800 | – | 3,800 | – | ||
| Cash acquired | (15,062) | (12,801) | (2,202) | (59) | ||
| Consideration | 636,109 | 591,058 | 29,973 | 15,078 |
There have been no material revisions of the provisional fair value adjustments since the initial values were established at the time of each acquisition.
For the identification and estimation of the fair value of the acquired intangibles of Hiestand, ARYZTA was assisted by an independent accounting firm. The identified intangibles include the fair value of contract related intangibles, brands and the customer relationships. To value the contract related intangibles and brands, the relief-fromroyality methodology (income approach method) has been applied. The excess earnings method (income approach method) was the basis for the fair value valuation of customer relationships.
Net cash outflow on acquisitions during the period amounted to €80,546,000 and is composed as follows:
| in Euro `000 | Hiestand | Fresca | Other | Total |
|---|---|---|---|---|
| Cash consideration | 30,000 | 25,488 | 14,631 | 70,119 |
| Transaction costs paid | 23,740 | 287 | 479 | 24,506 |
| Cash acquired | (12,801) | (2,202) | (59) | (15,062) |
| Cash spend on purchase of minority interests* |
– | – | 983 | 983 |
| Cash spend per cash flow statement |
40,939 | 23,573 | 16,034 | 80,546 |
* Goodwill arising on the acquisition of minority interest was €376,000.
The impact of the business combinations during the year on the income statement of the Group is set out in the following table;
| in Euro `000 | Hiestand | Fresca | Other |
|---|---|---|---|
| Revenue | 509,935 | 17,556 | 29,891 |
| Operating profit | 61,050 | 655 | 4,503 |
If the acquisitions had occurred on 1 August 2008, management estimates that consolidated revenue would have been €3,264,171,000 and consoldiated operating profit for the period would have been €76,238,000. In determining these amounts management has assumed that the fair value adjustments that arose on the dates of the acquisition would have been the same if the acquisitions occurred on 1 August 2008.
This amount is represented by the issuance of 12,700,000 IAWS shares issued at a market value of €14.80, being the opening quoted price of IAWS shares on 31 July 2008.
This is the fair value of the equity consideration as defined by IFRS 3, Business Combinations, for use in reverse acquisition accounting. The fair value is calculated by determining the number of IAWS shares which would need to have been issued to non-IAWS shareholders of Hiestand to give them the same stake in IAWS Group Limited as they will have in ARYZTA going forward.
This would be satisfied by the issuance of 13,737,143 IAWS shares to the non-IAWS shareholders of Hiestand at a market value of €17.00 being the opening quoted price of IAWS shares on 21 August 2008, the date of the merger. The fair value of €233,531,000 so calculated is presented in equity.
Also included in equity is an adjustment that was required to show the share capital of ARYZTA in the consolidated balance sheet rather than that of IAWS. This step in the acquisition accounting is effectively a reclassification.
The net impact of both these steps is an increase in equity of €233,531,000.
The deemed consideration of the previously held 32% interest in Hiestand is comprised of the current fair value of IAWS's original 32% share in the net assets of Hiestand of €85,607,000 and the current fair value of the goodwill arising thereon of €36,247,000.
On 30 August 2007, Origin completed the acquisition of the remaining 50% interest in the Odlum Group, not previously owned.
On 1 February 2008, Origin completed the acquisition of 100% of Masstock Group Holdings Limited ("Masstock"). Masstock, with operations in the United Kingdom and Poland, is the leading provider of specialist agronomy services directly to arable and grassland farm enterprises.
During the prior year, the Food Europe segment also purchased two additional businesses, the results of which are not individually material to the Group.
Details of the net assets acquired and goodwill arising from all the business combinations are as follows:
| Acquiree's | Fair | |||||
|---|---|---|---|---|---|---|
| 2008 | carrying | value | ||||
| in Euro `000 | amount | adjustments | Fair value | Masstock | Odlums | Other |
| Net assets acquired: | ||||||
| Property, plant and equipment | 48,351 | (667) | 47,684 | 14,095 | 25,256 | 8,333 |
| Investment property | – | 14,000 | 14,000 | – | 14,000 | – |
| Intangible assets | 5,176 | 52,693 | 57,869 | 14,718 | 28,900 | 14,251 |
| Inventory | 29,924 | (855) | 29,069 | 18,456 | 8,377 | 2,236 |
| Trade and other receivables | 81,029 | (586) | 80,443 | 52,992 | 20,524 | 6,927 |
| Trade and other payables | (67,218) | (893) | (68,111) | (53,926) | (8,602) | (5,583) |
| Debt acquired | (67,548) | – | (67,548) | (36,776) | (27,085) | (3,687) |
| Finance leases | (3,097) | – | (3,097) | (2,144) | – | (953) |
| Deferred tax | (233) | (12,762) | (12,995) | (3,276) | (7,604) | (2,115) |
| Deferred government grants | (1,453) | – | (1,453) | – | (248) | (1,205) |
| Defined benefit pension obligations | (4,218) | – | (4,218) | (1,794) | (2,424) | – |
| Corporation tax | (53) | (576) | (629) | 90 | (156) | (563) |
| Net assets acquired | 71,014 | 2,435 | 50,938 | 17,641 | ||
| Goodwill arising on acquisition | 79,746 | 53,804 | 10,019 | 15,923 | ||
| Consideration | 150,760 | 56,239 | 60,957 | 33,564 | ||
| Satisfied by: | ||||||
| Cash consideration including acquisition expenses of (€2,705,000) |
104,272 | 42,037 | 35,350 | 26,885 | ||
| Contingent consideration | 23,157 | 12,987 | – | 10,170 | ||
| Cash acquired | (5,080) | 1,215 | (2,804) | (3,491) | ||
| Fair value of previously held 50% interest | 28,411 | – | 28,411 | – | ||
| Consideration | 150,760 | 56,239 | 60,957 | 33,564 |
Post acquisition revenues and operating profit relating to these acquisitions amounted to €395,562,000 and €18,319,000, respectively. Masstock contributed revenue of €300,613,000 and operating profit of €12,104,000. Odlums contributed revenue of €77,355,000 and operating profit of €4,797,000.
If the acquisitions had occurred on 1 August 2007, management estimates that consolidated revenue would have been €2,888,597,000 and consolidated operating profit for the period would have been €177,550,000. In determining these amounts, management has assumed that the fair value adjustments that arose on the dates of acquisition would have been the same if the acquisition occurred on 1 August 2007.
The goodwill recognised on the acquisitions is attributable to the skills and technical talent of the acquired business's work force, and the synergies expected to be achieved from integrating the company into the Group's existing business.
| 2009 | 2008 | ||
|---|---|---|---|
in Euro 000 | in Euro000 |
|||
| a) | Government grants repayable if grant conditions | ||
| are not met | 5,458 | 7,724 | |
A former Hiestand shareholder has taken legal action against the company asserting, in essence, entitlement under the merger to a price for its 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.
In the normal course of business, the Group undertakes arm's length transactions with its associates, joint ventures and other related parties. A summary of transactions with these related parties, which relate primarily to transactions with associates and joint ventures during the year, are as follows:
| 2009 | 2008 | |
|---|---|---|
in Euro 000 | in Euro000 |
||
| Sale of goods | 65,673 | 63,246 |
| Purchase of goods | (7,586) | (7,807) |
| Provision of services | 1,841 | 876 |
| Receiving of services | (989) | (4,624) |
The trading balances owing to the Group from related parties were €923,000 (2008: €2,511,000) and the trading balances owing from the Group to these related parties were €850,000 (2008: €4,852,000).
For the purposes of the disclosure requirements of IAS 24, Related Party Disclosures, the term "key management personnel" (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Group) comprises the Board of Directors and the Group Executive Management (as set out on page 26 of the annual report), which manages the business and affairs of the Group.
A summary of the compensation to key management is as follows:
| 2009 | 2008 | |
|---|---|---|
in Euro 000 | in Euro000 |
||
| Short term employee benefits | 4,928 | 5,920 |
| Post employment benefits | 312 | 251 |
| Share based payments | 2,134 | 403 |
| Total key management compensation | 7,374 | 6,574 |
Further detailed disclosure in relation to the compensation entitlements of the Board of Directors and executive management is provided in note 10 of the ARYZTA Company Financial Statements 2009.
The Group is not aware of any other transactions between the Group and related parties with the exception of J. Brian Davy. During the year Davy, an Irish based stockbroking wealth management and financial advisory firm, of which J. Brian Davy is Chairman, provided advisory services in relation to the merger between IAWS and Hiestand. The total invoiced value of these services was €1,750,000.
There have been no significant events, outside the ordinary course of business, affecting the Group since 31 July 2009.
The Group has set out a general risk statement on page 37 of this report. In addition the risk statement required under the Swiss Code of Obligation is set out in note 7 of the ARYZTA Company Financial Statements 2009.
The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses.
In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described below:
| Note | Name |
|---|---|
| Note 8 | Share Based Payments |
| Note 13 | Investment Properties |
| Note 14 | Goodwill and Intangible Assets - Measurement of the Recoverable Amounts of |
| CGU's | |
| Note 19 | Deferred consideration |
| Note 22 | Financial instruments and financial risk |
| Note 24 | Deferred Tax |
| Note 25 | Retirement Benefit Obligations |
| Note 30 | Acquisitions |
Impairment testing of assets, particularly of goodwill, involves estimating the future cash flows for a cash generating unit and an appropriate discount rate to determine a recoverable value. The estimation of employee benefit costs requires the use of actuaries and the determination of appropriate assumptions such as discount rates and expected future rates of return as set out in note 25.
A list of all of the Group's principal subsidiary undertakings as at 31 July 2009 is provided in the table below.
| Share | Group | Regis | |||
|---|---|---|---|---|---|
| Name | Nature of business Currency | capital millions |
% share |
tered office |
|
| (a) Food subsidiaries - Ireland | |||||
| Cuisine de France Limited | Food manufacturing and distribution | EUR | 0.635 | 100 | 3 |
| IAWS Management Services Limited | Management | EUR | 0.00005 | 100 | 1 |
| IAWS Technology and Global Services Limited | Research and development | EUR | 0.152 | 100 | 1 |
| Gallagher's Bakery Limited | Food manufacturing and distribution | EUR | 0.034 | 100 | 1 |
| (b) Food subsidiaries - United Kingdom | |||||
| Cuisine de France (UK) Limited | Food distribution | GBP | 0.250 | 100 | 6 |
| Delice de France, plc | Food manufacturing and distribution | GBP | 0.250 | 100 | 10 |
| (c) Food subsidiaries - Mainland Europe | |||||
| IAWS France SA | Food distribution | EUR | 28.750 | 100 | 7 |
| Hiestand Schweiz AG I) | Food | CHF | 3.500 | 100 | 13 |
| Hiestand International AG I) | Food | CHF | 0.200 | 100 | 13 |
| HiCoPain AG | Food | CHF | 20.000 | 60 | 17 |
| Hiestand Beteiligungsholding GmbH & Co KG I) | Food | EUR | 0.026 | 100 | 5 |
| (d) Food subsidiaries - United States of America | |||||
| Cuisine de France, Inc. | Bread distribution | USD | 0.002 | 100 | 8 |
| La Brea Bakery Holdings, Inc. | Bread manufacturing and food distribution | USD | 0.007 | 100 | 9 |
| Otis Spunkmeyer, Inc. | Baked good manufacturing and distribution | USD | 0.00001 | 100 | 14 |
| (e) Food joint venture | |||||
| CillRyan's Bakery Limited | Bread manufacturing and distribution | CAD | 21.105 | 50 | 1 |
| (f) Origin subsidiaries - Ireland | |||||
| Origin Enterprises plc | Holding company | EUR | 1.386 | 71.4 | 1 |
| Goulding Chemicals Limited | Fertiliser blending and distribution | EUR | 6.349 | 71.4 | 1 |
| R. & H. Hall Limited | Grain and feed trading | EUR | 6.865 | 71.4 | 1 |
| Shamrock Foods Limited | Food distribution | EUR | 0.0001 | 71.4 | 1 |
| Odlum Group | Flour milling | EUR | 4.493 | 71.4 | 12 |
| (g) Origin subsidiaries - United Kingdom | |||||
| Origin Fertilisers (UK) Limited | Fertiliser blending and distribution | GBP | 0.550 | 71.4 | 2 |
| Masstock Group Holdings Limited | Specialist agronomy services | GBP | 0.010 | 71.4 | 15 |
| (h) Origin associates and joint venture | |||||
| Welcon Invest AS I) | Fish processing | NOK | 12.000 | 35.7 | 11 |
| BHH Limited | Provender millers | STG | 5.020 | 35.7 | 4 |
| Continental Farmer's Group Plc | High value agricultural crop production | EUR | 0.652 | 26.4 | 16 |
(I) During the year Hiestand Schweiz AG, Hiestand International AG and Hiestand Beteiligungsholding GmbH & Co KG were added to the list of significant subsidaries. Welcon Invest AS was added as a new joint venture with Origin.
The country of registration is also the principal location of activities in each case.
As statutory auditor, we have audited the accompanying consolidated financial statements of ARYZTA AG, which comprise the income statement, statement of recognised income and expense, balance sheet, cash flow statement and notes on pages 42 to 115 for the year ended 31 July 2009.
The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the consolidated financial statements for the year ended 31 July 2009 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Report of the Statutory Auditor on the Consolidated Financial Statements to the General Meeting (continued)
We confirm that we meet the legal requirements on licensing according to the Auditor Over-sight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.
We recommend that the consolidated financial statements submitted to you be approved.
KPMG AG
Herbert Bussmann Roman Wenk Licensed Audit Expert Licensed Audit Expert Auditor in Charge
Zurich, 24 September 2009
for the 19 month period ended 31 July 2009
| Total 2009 |
|
|---|---|
| in CHF `000 Income |
|
| Revenues from licences and management fees | 31,121 |
| Financial income | 17,231 |
| Dividend income | 34,093 |
| Total income | 82,445 |
| Expenses | |
| Depreciation and amortisation | (78,264) |
| Personnel expenses | (5,126) |
| Financial expenses | (21,395) |
| Other operating expenses | (34,797) |
| Service fees | (4,751) |
| Total expenses | (144,333) |
| Loss before taxes | (61,888) |
| Taxes | (3,972) |
| Net loss after taxes | (65,860) |
as at 31 July 2009
| Total 2009 |
|
|---|---|
| in CHF `000 | |
| Assets | |
| Non-current assets | |
| Property, plant and equipment | 1,085 |
| Intangible assets | 170,242 |
| Financial assets | |
| - investments | 1,318,954 |
| - loans to group companies | 157,580 |
| Total non-current assets | 1,647,861 |
| Current assets | |
| Cash and cash equivalents | 5,779 |
| Trading accounts receivable from third parties | 563 |
| Other receivables | |
| - from third parties | 1,679 |
| - from group companies | 23,694 |
| Total current assets | 31,715 |
| Total assets | 1,679,576 |
| Total | |
|---|---|
| in CHF `000 | 2009 |
| Equity | |
| Called up share capital | 1,624 |
| Share premium | 1,065,653 |
| Reserves for own shares | 75,167 |
| Net loss for the year | (65,860) |
| Total equity | 1,076,584 |
| Liabilities | |
| Non-current liabilities | |
| Provisions | 5,630 |
| Intercompany non-current liabilities | 572,047 |
| Total non-current liabilities | 577,677 |
| Current liabilities | |
| Trade accounts payable | 843 |
| Accrued expenses and deferred income | 12,444 |
| Other accounts payable | |
| - to third parties | 141 |
| - to group companies | 11,887 |
| Total current liabilities | 25,315 |
| Total liabilities | 602,992 |
| Total equity and liabilities | 1,679,576 |
The Company's accounting period runs from 1 January 2008 to 31 July 2009.
The Company is party to cross guarantees on ARYZTA AG Group borrowings.
As of 21 August 2008, the Swiss ARYZTA entities formed a VAT subgroup and, hence, every company participating in the subgroup is liable for VAT payables of the other subgroup participants.
The values of property, plant and equipment as per the fire insurance policy have been disclosed.
| 2009 | |
|---|---|
| in CHF `000 | |
| Fire insurance value of property, plant and equipment | 1,500 |
| Share capital millions |
Percentage 2009 |
|
|---|---|---|
| CHF | 3.500 | 100 |
| CHF | 0.200 | 100 |
| Hiestand Beteiligungsholding GmbH & Co. KG, Gerolzhofen EUR |
0.026 | 100 |
| PLN | 60.637 | 100 |
| EUR | 0.036 | 100 |
| JPY | 185.000 | 100 |
| MYR | 2.400 | 100 |
| CHF | 0.200 | 100 |
| CHF | 0.100 | 100 |
| EUR | 43.085 | 100 |
(i) The amount disclosed represents limited liability capital.
| 2009 | 2009 | |
|---|---|---|
| Authorised | 000 | in CHF000 |
|
| Shares of CHF 0.02 each | 109,130 | 2,183 |
| 2009 | 2009 | |
000 | in CHF000 |
||
| Shares of CHF 0.02 each (2008: €0.30 each) - Authorised, issued and fully paid |
||
| On incorporation | 100 | 2 |
| Issued during the period | 81,080 | 1,622 |
| As at 31 July 2009 | 81,180 | 1,624 |
On 21 August 2008, after the merger of ARYZTA AG with Hiestand Holding AG, the issued share capital of ARYZTA consisted of 78,940,460 ordinary shares with a nominal value of CHF 0.02 each fully paid up. On 2 December 2008, the issued share capital was increased to 81,180,460 by the issue of 2,240,000 registered shares of nominal value of CHF 0.02 each in the capital of ARYZTA pursuant to a share subscription on behalf of ARY LTIP Trustee Limited.
ARY LTIP Trustee Limited is a wholly owned subsidiary of ARYZTA formed for the purposes of holding shares subject to the ARYZTA Long Term Incentive Plan 2008 ("LTIP") and ARY LTIP Trustee Limited will hold these shares in treasury pending satisfaction of the applicable terms of the LTIP.
Shareholders are entitled to dividends as declared. The ARYZTA shares rank pari passu in all respects with each other
On 2 December 2008, the Company increased its share capital to 81,180,460 by the issue of 2,240,000 registered shares of nominal value of CHF 0.02 each in the capital of ARYZTA. These 2,240,000 registered shares were issued to a subsidiary of ARYZTA, ARY LTIP Trustee Limited, as treasury shares for use in connection with the ARYZTA Long Term Incentive Plan.
ARY LTIP Trustee Limited was formed for the purposes of holding shares, subject to the ARYZTA Long Term Incentive Plan ('LTIP') and ARY LTIP Trustee Limited will hold these shares in treasury pending satisfaction of the applicable terms of the LTIP.
| 000 | in CHF000 |
|-------|-------------|
| | |
| - | - |
| 2,240 | 75,357 |
| (6) | (190) |
| 2,234 | 75,167 |
| | |
ARYZTA AG, Zurich, as the ultimate parent company of the ARYZTA Group, is fully integrated into the group wide internal risk assessment process.
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 Group has formal risk assessment processes in place through which risks and mitigating controls are evaluated. These processes are driven by management of the businesses, who are best placed to identify the significant ongoing and emerging risks facing their businesses. The outputs of these risk assessment processes are subject to various levels of review by management, and a consolidated Risk Map 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.
As at 31 July 2009 the Company has been notified of the following shareholdings which amount to 5% or more of the Company's issued ordinary share capital:
| Number of shares |
% of registered shares |
|
|---|---|---|
| Fidelity International Limited * | 4,255,814 | 5.24% |
| Invesco Limited | 4,102,193 | 5.05% |
| Fidelity Management and Research LLC ("FMR LLC") * | 3,825,000 | 4.71% |
* Fidelity International Limited and FMR LLC are two separate investment companies, but under common control, as part of the Fidelity group of investment companies.
Any significant shareholder notifications during the year and since the 31 July 2009 are available on the Group's website www.aryzta.com.
The pension fund liability was CHF 140,000 at 31 July 2009.
The Nomination and Remuneration Committee of the Board (the "NRC") is responsible for determining the remuneration of executive and non-executive members of the Board and for approving the remuneration of other members of senior management.
The Group's policy on executive remuneration recognises that employment and remuneration conditions for senior executives must reward and motivate senior executives to perform in the best interests of the shareholders, while striking an appropriate balance between long-term and short-term goals.
Executives are remunerated in line with the level of their authority and responsibility within the Group. The elements of the remuneration package for Executive Management, all of which are reviewed annually by the NRC comprise: (i) basic salary and benefits (including retirement benefits), (ii) short-term performance related bonus (measured by reference to performance in the financial year) and (iii) long-term incentives.
Basic salary of executive directors is reviewed annually with regard to personal performance, Group performance and competitive market practice. Employment related benefits consist principally of a car allowance and pension. Pension benefits are determined solely in relation to basic salary.
The short term performance related bonus is contingent on a range of performance related factors and in no case in the year exceeded 100% of basic salary.
The ARYZTA Long Term Incentive Plan ("LTIP") is designed to incentivise executives for driving the achievement of superior financial targets measured over the long term (three financial years) and to align their interests with the shareholders through the promotion and encouragement of share ownership. The LTIP allows a mix of tools to be employed to this end. During the year, the Company made awards under the Matching Scheme LTIP. Participants with Matching Scheme Awards have the prospect of receiving up to 3 shares for each recognised qualifying interest held throughout the performance period. Vesting is determined by reference to underlying fully diluted EPS growth. Compound growth in EPS in any three consecutive financial years ending after 31 July 2008 must, in each case, exceed 10%, with vesting accruing as per the following table:
| Multiple (re | |
|---|---|
| Qualifying Invest | |
| EPS Growth | ment Shares) |
| 15% or more | 3 |
| >12.5% < 15% | 2 |
| 10% to 12.4% | 1 |
| < 10% | 0 |
Awards under the Matching Scheme are subject to additional conditions including notably: (a) the requirement to hold recognised qualifying interests throughout the performance period and (b) the requirement that ARYZTA's return on invested capital over the performance period is not less than its weighted average cost of capital.
The costs of the Matching Awards under the LTIP is charged to the income statement of ARY LTIP over the vesting period of three financial years. The total estimated charge over the vesting period is CHF 24,998,000, of which CHF 18,115,000 relates to Executive Management. The remaining charge of CHF 6,883,000 relates to awards granted to members of Group management. The fair value assigned to these equity instruments represent the full value of an ordinary share on the date of grant adjusted for lost dividends between the date of issue and vesting date.
Non-executive Board members are paid a yearly fee which reflects the time commitment and responsibilities of the role. Additional compensation is payable for service on a Board Committee (including the Chair thereof). The level of fees is kept under review by reference to comparable external figures. Non-executive Board members are not eligible for performance-related payments and do not participate in the Group's long term incentive plan.
* B. Dardis and P. Wilkinson resigned from the Board on 28 July 2009, W. Werle resigned from the Board on 29 December 2008 and L. Lea resigned from the Board on 31 October 2008.
** A. Casutt and P. Haas, partners of the law firm Nieder Kraft & Frey, acted as transaction advisors and served as members of the Board upon the formation of ARYZTA and prior to admission to trading on the SIX Swiss Exchange and Irish Stock Exchange commencing on the 22 August 2008. They were not compensated in their role as members of the Board of ARYZTA up to their date of retirement from the Board on 21 August 2009.
With the exception of AndreasCasutt and PhilippHaas who were appointed upon formation of ARYZTA, and Denis Lucey, OwenKillian and PatrickMcEniff who were appointed on 6 June 2008 all other Directors were appointed to the ARYZTA Board upon the admission of ARYZTA to trading on the SIX Swiss Exchange and Irish Stock Exchange on 22 August 2008.
Depending on when they commenced their service with the Group, the compensation paid to the members of the Board of Directors covers the period from either 1 August 2008 or the date of their appointment to the Board of Directors of ARYZTA to 31 July 2009.
| Total Executive | ||
|---|---|---|
| in CHF `000 | Management | Owen Killian |
| Basic salaries | 3,188 | 1,277 |
| Variable compensation | 2,920 | 1,277 |
| Benefits in kind | 240 | 83 |
| Pension contributions | 478 | 191 |
| Executive Incentive Plan | 3,267 | 1,307 |
| Total compensation paid to members of ARYZTA Executive | ||
| Management | 10,093 | 4,135 |
The highest total compensation in the reporting period was received by OwenKillian, and his total remuneration is disclosed separately above. Executive Management, as per the ARYZTA Group's Corporate Governance Report at page 21, consists of Owen Killian (CEO), PatrickMcEniff (CFO), HugoKane (COO), and PatMorrissey (Group General Counsel and Company Secretary).
The compensation to members of the Executive Management disclosed, includes compensation for their roles as members of the Board of ARYZTA for the period from 1 August 2008 to 31 July 2009 and in the case of Owen Killian, Patrick McEniff and Pat Morrissey their service as officers of Origin Enterprises plc (respectively, Chairman, nonexecutive Director and Company Secretary).
The directors and Company Secretary who held office at 31 July 2009 had no interests, other than those shown below, in the ordinary shares in, or loan stock of, the Company or other Group undertakings. Beneficial interests at 31 July 2009 were as follows:
| No. of shares | |
|---|---|
| Shares in ARYZTA at CHF 0.02 each | 2009 |
| Denis Lucey | 1,250 |
| Albert Abderhalden | 313,788 |
| Denis Buckley | 2,250 |
| J Brian Davy | 58,186 |
| Noreen Hynes | 1,000 |
| Hugo Kane | 280,978 |
| Owen Killian | 523,731 |
| Patrick McEniff | 321,506 |
| William Murphy | 6,171 |
| Hans Sigrist | 14,000 |
| Dr J Maurice Zufferey | 396 |
| Company Secretary | |
| Pat Morrissey | 93,251 |
| Total | 1,616,507 |
Details of the interests of OwenKillian, PatrickMcEniff, HugoKane, and PatMorrissey in share entitlements under the Matching Scheme are set out below. There have been no changes in the interests as shown on the previous page between 31 July 2009 and 24 September 2009.
| Matching Scheme | ||||
|---|---|---|---|---|
| 1) | 2) | 3) | 4) | |
| Directors | ||||
| Owen Killian | 300,000 | 300,000 | 31 July 2011 | 6 April 2019 |
| Patrick McEniff | 180,000 | 180,000 | 31 July 2011 | 6 April 2019 |
| Hugo Kane | 180,000 | 180,000 | 31 July 2011 | 6 April 2019 |
| Company Secretary | ||||
| Pat Morrissey | 90,000 | 90,000 | 31 July 2011 | 6 April 2019 |
| Total | 750,000 | 750,000 |
1) Maximum number of shares available based on Matching Scheme Awards made during the year
2) Maximum number of shares available based on Matching Scheme Awards made during the year and held at 31 July 2009
3) Earliest date by which qualifying conditions can be met
4) Latest date by which qualifying conditions must be met
The Board of Directors will propose to the General Meeting of Shareholders the following appropriation of earnings:
| in CHF `000 | 2009 |
|---|---|
| Transfer from share premium to unrestricted reserves | 1,065,329 |
| Net loss for the year | (65,860) |
| Available earnings | 999,469 |
| Payment of a dividend in the amount of | 42,031 |
| To be carried forward | 957,438 |
| Total | 999,469 |
As statutory auditor, we have audited the accompanying financial statements of ARYZTA AG, which comprise the income statement, balance sheet and notes on pages 118 to 128 for the period from 1 January 2008 to 31 July 2009.
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company's articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity's preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the financial statements for the period from 1 January 2008 to 31 July 2009 comply with Swiss law and the company's articles of incorporation.
We confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circumstances incompatible with our independence.
In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists, which has been designed for the preparation of financial statements according to the instructions of the Board of Directors.
We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company's articles of incorporation. We recommend that the financial statements submitted to you be approved.
KPMG AG
Herbert Bussmann Roman Wenk Auditor in Charge
Licensed Audit Expert Licensed Audit Expert
Zurich, 24 September 2009
| Page 134 |
Basis of Preparation |
|---|---|
| 135 | Food Group Income Statement |
| 136 | Food Group Statement of Recognised Income Expense |
| 137 | Food Group Balance Sheet |
| 139 | Food Group Cash Flow Statement |
These unaudited Food Group Financial Statements comprise designated individual legal entities which are consolidated as subsidiaries of ARYZTA AG and show the Food Group's interest in associates and joint ventures of ARYZTA AG using the equity method, and which do not form part of Origin Enterprises, plc.
The accompanying financial statements comprise the Income Statement, Statement of Recognised Income and Expense, Balance Sheet and Cash Flow Statement ("the Food Group Financial Statements") of the Food Group for the year ended 31 July 2009 with 31 July 2008 comparatives.
The Directors have prepared the Food Group Financial Statements by applying accounting policies consistent with those applied by ARYZTA AG and extracting the differences between the audited financial statements of ARYZTA AG and the audited financial statements of Origin Enterprises, plc after reflecting appropriate adjustments deemed necessary to prepare the Food Group Financial Statements. The investment in Origin is carried at historic cost.
The comparative information comprises designated individual statutory entities which were consolidated as subsidiaries, associates or joint ventures of IAWS Group Limited (formerly IAWS Group plc), and did not form part of Origin Enterprises, plc.
The ARYZTA AG and Origin Enterprises, plc Group Financial Statements have been reported on by the ARYZTA AG auditor without qualification.
for the year ended 31 July 2009
| Total | Total | |
|---|---|---|
| 2009 | 2008 | |
| unaudited | unaudited | |
| Revenue | 1,712,754 | 1,156,704 |
| Cost of sales | (1,026,643) | (682,548) |
| Gross profit | 686,111 | 474,156 |
| Distribution expenses | (360,112) | (263,429) |
| Administration expenses | (164,275) | (101,950) |
| Operating profit before merger and other expenses | 161,724 | 108,777 |
| Merger and other expenses | (22,738) | 198 |
| Operating profit | 138,986 | 108,975 |
| Share of profit of joint venture | 13,808 | 25,818 |
| Profit before financing income and costs | 152,794 | 134,793 |
| Financing income | 1,785 | 3,416 |
| Financing costs | (35,084) | (26,474) |
| Profit before tax | 119,495 | 111,735 |
| Income tax expense | (21,827) | (13,720) |
| Profit for the year | 97,668 | 98,015 |
| Attributable as follows: | ||
| Equity shareholders | 94,633 | 97,825 |
| Minority interest | 3,035 | 190 |
| Profit for the year | 97,668 | 98,015 |
| 2009 | 2008 | |
|---|---|---|
| unaudited | unaudited | |
| Items of income and expense recognised directly in equity | ||
| Foreign exchange translation effects | ||
| - foreign currency net investments | 66,597 | (97,970) |
| - foreign currency borrowings | (42,995) | 46,823 |
| Actuarial (loss) / gain on Group defined benefit pension schemes net of deferred tax | (115) | 8 |
| Effective portion of changes in fair value of cash flow hedge | (2,727) | (1,272) |
| Fair value of cash flow hedges transferred to income statement | (1,610) | 547 |
| Deferred tax effect of cash flow hedges | 583 | 260 |
| Share of joint venture's gains/(losses) on cash flow hedges | 848 | 92 |
| Share of joint venture's deferred tax relating to cash flow hedges | (144) | (11) |
| Revaluation of previously held investment in Hiestand | 35,077 | – |
| Net income /(expense) recognised directly in equity | 55,514 | (51,523) |
| Profit for the financial year | 97,668 | 98,015 |
| Total recognised income for the year | 153,182 | 46,492 |
| Attributable as follows: | ||
| Equity shareholders | 150,147 | 46,302 |
| Minority interest | 3,035 | 190 |
| Total recognised income and expense for the year | 153,182 | 46,492 |
as at 31 July 2009
| 2009 | 2008 | |
|---|---|---|
| unaudited | unaudited | |
| ASSETS | ||
| Non current assets | ||
| Property, plant and equipment | 577,772 | 376,892 |
| Investment property | 3,761 | – |
| Goodwill and intangible assets | 1,382,431 | 719,460 |
| Investments in associates and joint venture | 55,720 | 145,287 |
| Other investments | 51,045 | 51,045 |
| Deferred tax assets | 21,754 | 14,260 |
| Total non current assets | 2,092,483 | 1,306,944 |
| Current assets | ||
| Amounts owed by Origin Enterprises plc | 1,629 | 1,227 |
| Inventory | 96,381 | 73,438 |
| Trade and other receivables | 207,918 | 164,495 |
| Derivative financial instruments | 534 | 751 |
| Cash and cash equivalents | 204,586 | 74,861 |
| Total current assets | 511,048 | 314,772 |
| TOTAL ASSETS | 2,603,531 | 1,621,716 |
| 2009 unaudited |
2008 unaudited |
|
|---|---|---|
| EQUITY | ||
| Called up share capital | 1,005 | 39,275 |
| Share premium | 518,006 | 59,734 |
| Retained earnings and other reserves | 745,302 | 574,554 |
| Total equity attributable to equity shareholders of parent | 1,264,313 | 673,563 |
| Minority interest | 10,721 | 855 |
| TOTAL EQUITY | 1,275,034 | 674,418 |
| LIABILITIES | ||
| Interest bearing loans and borrowings | 694,511 | 444,013 |
| Employee benefits | 5,108 | 2,485 |
| Deferred income from government grants | 16,465 | 1,262 |
| Other payables | 1,025 | 406 |
| Deferred tax liabilities | 184,109 | 106,483 |
| Derivative financial statements | 801 | 600 |
| Deferred consideration | 29,123 | 25,222 |
| Total non current liabilities | 931,142 | 580,471 |
| Current liabilities | ||
| Interest bearing borrowings | 15,579 | 44,038 |
| Trade and other payables | 334,672 | 259,176 |
| Corporation tax payable | 38,116 | 33,735 |
| Derivative financial instruments | 5,165 | 1,904 |
| Deferred consideration | 3,823 | 27,974 |
| Total current liabilities | 397,355 | 366,827 |
| TOTAL LIABILITIES | 1,328,497 | 947,298 |
| TOTAL EQUITY AND LIABILITIES | 2,603,531 | 1,621,716 |
| 2009 unaudited |
2008 unaudited |
|
|---|---|---|
| Cash flows from operating activities | ||
| Profit before tax | 119,495 | 111,735 |
| Financing income | (1,785) | (3,416) |
| Financing costs | 35,084 | 26,474 |
| Share of profit of associates and joint venture | (13,808) | (25,818) |
| Merger and other expenses | 22,738 | (198) |
| Depreciation of property, plant and equipment | 54,628 | 26,822 |
| Amortisation of intangible assets | 42,983 | 16,600 |
| Amortisation of government grants | (1,881) | (212) |
| Employee share-based payment charge | 2,827 | 11,177 |
| Other | 1,180 | (2,796) |
| Operating profit before changes in working capital | 261,461 | 160,368 |
| Decrease/(Increase) in inventory | 8,466 | (8,310) |
| Decrease/(Increase) in trade and other receivables | 45,997 | (9,260) |
| (Decrease)/Increase in trade and other payables | (29,788) | 14,689 |
| Cash generated from operating activities | 286,136 | 157,487 |
| Interest paid | (33,694) | (24,838) |
| Income tax paid | (19,868) | (5,231) |
| Net cash inflow from operating activities | 232,574 | 127,418 |
| 2009 | 2008 |
|---|---|
| unaudited Cash flows from investing activities |
unaudited |
| Proceeds from sale of property, plant and equipment 1,551 |
509 |
| Purchase of property, plant and equipment | |
| - ongoing (15,047) |
(9,237) |
| - new investments (56,229) |
(118,246) |
| Grants received 2,377 |
– |
| Acquisition of subsidiaries and businesses, net of cash acquired (66,312) |
(29,262) |
| Purchase of intangible assets (10,705) |
(8,916) |
| Dividends received 18,830 |
17,485 |
| Deferred consideration and acquisition costs paid (27,384) |
(1,671) |
| Other – |
(139) |
| Net cash outflow from investing activities (152,919) |
(149,477) |
| Cash flows from financing activities | |
| Net proceeds from issue of share capital (626) |
3,834 |
| Drawdown of loan capital 78,437 |
40,530 |
| Capital element of finance lease liabilities (646) |
(697) |
| Dividends paid – |
(20,902) |
| Net cash inflow from financing activities 77,165 |
22,765 |
| Net increase in cash and cash equivalents 156,820 |
706 |
| Translation adjustment 738 |
(6,160) |
| Cash and cash equivalents at start of year 31,752 |
37,206 |
| Cash and cash equivalents at end of year 189,310 |
31,752 |
| Announcement of the 2009 annual results | 28 September 2009 |
|---|---|
| Issue of the 2009 annual report | 5 October 2009 |
| First quarter trading update | 30 November 2009 |
| Annual General Meeting | 3 December 2009 |
| Payment of dividend | 10 December 2009 |
| Announcement of half-year results 2010 | 15 March 2010 |
| Nine month trading update | 8 June 2010 |
| Announcement of the 2010 annual results | 27 September 2010 |
| Issue of the 2010 annual report | 5 October 2010 |
| First quarter trading update | 29 November 2010 |
| Annual General Meeting 2010 | 2 December 2010 |
All enquiries regarding investor meeting requests should be sent by email.
Hilliard Lombard Head of Group Finance and Communications
Talacker 41 8001 Zurich Switzerland Tel: +41 (0) 44 583 42 00 Fax: +41 (0) 44 583 42 49 [email protected] www.aryzta.com
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