Earnings Release • Sep 28, 2014
Earnings Release
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for the year ended 31 July 2014
Commenting on the results, ARYZTA AG Chief Executive Officer Owen Killian said:
"ARYZTA has delivered a strong performance for FY 2014, with an increase of 17.2% in underlying fully diluted EPS in the final year of our three year transformation. Food Group revenue increased by 10.0%, despite an adverse currency movement of (3.7)%. Underlying revenue increased by 2.1% and acquired businesses contributed an excellent 11.6% increase in revenue during the period.
Our alignment with the requirements of major food corporations will facilitate long-term growth, while the creation of ARYZTA Food Solutions will bring value and differentiation to independent customers.
ARYZTA remains financially disciplined and very cash generative, which will support continued investment and sector consolidation."
The ARYZTA full year results for the year ended 31 July 2014 are available for download from the ARYZTA website and at the following link: http://www.aryzta.com/2014-FullYear-Results
ARYZTA AG ('ARYZTA') is a global food business with a leadership position in speciality bakery. ARYZTA is based in Zurich, Switzerland, with operations in North America, South America, Europe, Asia, Australia and New Zealand. ARYZTA has a primary listing on the SIX Swiss Exchange and a secondary listing on the ISE Irish Exchange (SIX: ARYN, ISE: YZA).
ARYZTA is the majority shareholder (68.1%) in Origin Enterprises plc, which has a listing on the AIM in London and the ESM in Dublin (AIM: OGN, ESM: OIZ).
Paul Meade Communications Officer ARYZTA AG Tel: +41 (0) 44 583 42 00 [email protected]
An analyst call will take place today at 09:00 CET (08:00 BST).
Dial in numbers are: Switzerland: 022 595 4764, Ireland: 01 526 9481, UK: 0871 700 0331, USA: 1 646 741 2123, International: +44 1452 580733.
Please provide the following code: 95863316 to access the call.
A printable version of the slides will be available to download from the ARYZTA website www.aryzta.com 15 minutes before the call.
A conference call webcast replay will be available from the ARYZTA website www.aryzta.com
This document contains forward looking statements which reflect management's current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.
for the year ended 31 July 2014
| in EUR '000 | July 2014 | July 2013 | % Change |
|---|---|---|---|
| Group revenue | 4,809,022 | 4,503,690 | 6.8 % |
| EBITA | 565,807 | 475,584 | 19.0 % |
| EBITA margin | 11.8 % | 10.6 % | – |
| Associates and JVs, net | 13,392 | 22,057 | – |
| EBITA incl. associates and JVs | 579,199 | 497,641 | 16.4 % |
| Finance cost, net | (68,138) | (63,904) | – |
| Hybrid instrument accrued dividend | (29,548) | (19,898) | – |
| Pre-tax profits | 481,513 | 413,839 | – |
| Income tax | (78,180) | (69,689) | – |
| Non-controlling interests | (25,855) | (25,041) | – |
| Underlying fully diluted net profit | 377,478 | 319,109 | 18.3 % |
| Underlying fully diluted EPS (cent) | 422.21 | 360.31 | 17.2 % |
1 The 31 July 2014 weighted average number of ordinary shares used to calculate diluted earnings per share is 89,407,313 (2013: 88,559,475).
2 See glossary in section 20 for definitions of financial terms and references used in the financial and business review.
| in EUR million | Food Europe | Food North America |
Food Rest of World |
Total Food Group |
Origin Total Group | |
|---|---|---|---|---|---|---|
| Group revenue | 1,586.3 | 1,586.6 | 220.9 | 3,393.8 | 1,415.2 | 4,809.0 |
| Underlying growth | 2.1 % | 1.3 % | 7.9 % | 2.1 % | (3.3)% | 0.5 % |
| Acquisitions | 12.0 % | 13.0 % | – | 11.6 % | 3.1 % | 8.9 % |
| Currency | (0.1)% | (5.6)% | (13.6)% | (3.7)% | – | (2.6)% |
| Revenue Growth | 14.0 % | 8.7 % | (5.7)% | 10.0 % | (0.2)% | 6.8 % |
| in EUR '000 | July 2014 | July 2013 | % Change |
|---|---|---|---|
| Food Group | |||
| Food Europe | 230,334 | 185,990 | 23.8 % |
| Food North America | 230,313 | 190,286 | 21.0 % |
| Food Rest of World | 25,647 | 30,419 | (15.7)% |
| Total Food Group | 486,294 | 406,695 | 19.6 % |
| Origin | 79,513 | 68,889 | 15.4 % |
| Total Group EBITA | 565,807 | 475,584 | 19.0 % |
| Associates & JVs, net | |||
| Food JV | – | 201 | (100.0)% |
| Origin associates & JVs | 13,392 | 21,856 | (38.7)% |
| Total associates & JVs, net | 13,392 | 22,057 | (39.3)% |
| Total EBITA incl. associates and JVs | 579,199 | 497,641 | 16.4 % |
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for the year ended 31 July 2014
| in EUR '000 | July 2014 | July 2013 | % Change |
|---|---|---|---|
| Revenue | 3,393,783 | 3,085,517 | 10.0 % |
| EBITA | 486,294 | 406,695 | 19.6 % |
| EBITA margin | 14.3 % | 13.2 % | – |
| JV, net | – | 201 | – |
| EBITA incl. JV | 486,294 | 406,896 | 19.5 % |
| Finance cost, net | (62,604) | (57,761) | – |
| Hybrid instrument accrued dividend | (29,548) | (19,898) | – |
| Pre-tax profits | 394,142 | 329,237 | – |
| Income tax | (65,754) | (57,261) | – |
| Non-controlling interests | (3,800) | (3,619) | – |
| Underlying net profit | 324,588 | 268,357 | 21.0 % |
ARYZTA's Food Group business is primarily focused on speciality baking, a niche segment of the overall bakery market. Speciality bakery consists of freshly prepared food giving the best value, variety, taste and convenience to consumers at the point of sale. ARYZTA's customer channels consist of a mix of large retail, convenience and independent retail, Quick Serve Restaurants ('QSR') and other foodservice categories.
Total Food Group revenue grew by 10.0% to €3.4bn. Underlying revenue growth was 2.1%, acquisitions added 11.6% and currency continued to have a negative (3.7%) impact compared to prior year. Food EBITA increased 19.6% to €486.3m, as a result of the improved efficiencies being derived through the ARYZTA Transformation Initiative ('ATI'), which drove business consolidation and increased operating leverage, thereby expanding overall Food Group margins for the year by 110 bps to 14.3%.
Food Europe has leading market positions in the European speciality bakery market. It has a diversified customer base including convenience retail, gas stations, multiple retail, restaurants, catering, hotels, leisure and QSR.
Food Europe revenue grew by 14.0% to € 1.6 bn. Underlying revenues grew 2.1% during the year, showing strong continued growth in the In Store Bake-off ('ISB') market, as a result of further synergies following the prior year acquisition of Klemme, which was the primary driver of the 12.0% acquisition-related revenue growth. The impact from currency movements were negligible within the region during the year. Food Europe EBITA increased by 23.8% to € 230.3 m, while EBITA margins expanded by 110 bps to 14.5%.
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This improved performance reflects the benefits from the reorganisation of the European business into ARYZTA Food Solutions and ARYZTA Bakeries and the benefits derived from the now substantially completed ATI programme. As part of the ATI programme, during the year Food Europe incurred cash non-recurring costs of € 40.7 m, with an additional € 88.4 m invested in the continued roll-out of the ERP system and other optimisation-related capital projects. A further € 100.0 m was invested in a variety of bakery expansion-related capital projects. As a result of these investments, € 51.7 m of non-cash asset write-downs were recorded throughout the European business for obsolete distribution, manufacturing and administration assets, due to the closure and/or reduction in activities related to those assets.
Food North America is a leading player in the speciality bakery market. It has a diversified customer base, including multiple retail, restaurants, catering, hotels, leisure, hospitals, military, fundraising and QSR. ARYZTA is the leader in high-value artisan bakery via La Brea Bakery, which focuses on the premium branded bakery segment. ARYZTA's well-established partnerships with key global QSR customers, which dominate the North American convenience food landscape, provide the Group with a solid customer base from which to further grow market share.
Food North America revenue grew by 8.7% to € 1.6 bn. Underlying revenues grew 1.3% during the year, with improved momentum reflecting increased customer volumes during the second half of the year, following particularly challenging trading conditions during the first half of the financial year. The 13.0% acquisition-related revenue contribution is primarily related to the acquisition of both Pineridge Bakery and Cloverhill Bakery during the second half of the year. Pineridge is a top-tier speciality bakery in Canada, while Cloverhill Bakery is a leading manufacturer of individually wrapped Ready-To-Eat ('RTE') snacks in the United States. These acquisitions significantly enlarged ARYZTA's manufacturing footprint in North America, extended its customer access in Canada and its product portfolio in the United States while providing an attractive entry point into the high growth North American snacking market. Unfavourable currency movements also impacted the reported performance by (5.6)% in the region during the year. Food North America EBITA grew by 21.0% to € 230.3 m, due to positive underlying revenue growth and a further 150 bps margin expansion during the year to 14.5%.
In North America, the cash costs for non-recurring items were €42.7m, related primarily to severance and staff-related costs, advisory or other acquisition and integration-related costs. An additional € 28.0 m was invested in implementing the ERP system within recently acquired businesses and expanding the related system functionality, as well as other bakery network optimisation-related investments. An additional € 46.6 m was invested in a variety of bakery footprint expansion initiatives. As a result of these investments, € 32.7 m of non-cash asset write-downs were recorded in North America for obsolete distribution, manufacturing and administration assets, due to the closure and/or reduction in activities related to those assets.
ARYZTA's operations in the Rest of World include businesses in Australia, Asia, New Zealand and South America. While accounting for less than 10% of the Food Group business, these locations provide attractive future growth opportunities.
Food Rest of World revenues declined by (5.7)% to €220.9m, despite solid underlying revenue growth of 7.9%, as unfavourable currency movements of (13.6)% continue to negatively impact the region. Food Rest of World EBITA declined by (15.7)% to €25.6m and EBITA margins declined by (140)bps to 11.6%, also as the result of unfavourable currency impacts on the cost of finished food products imported from outside the region to service the growing high-end food service channel.
Despite commissioning new bakery capacity during the year and total expansion-related capital investments of €13.8m, the business in the region remains capacity constrained and will continue to require capital allocation to remove capacity bottlenecks and facilitate new revenue growth opportunities. Once commissioned, additional local production capacities will also support reversal of these currency-related margin impacts.
In September 2011, the Group announced the ATI programme, a three year plan focused on supply chain optimisation and ERP implementation with the goal of becoming a leading international bakery company, by leveraging ARYZTA's people, capabilities, partnerships and brands.
Prior to embarking on the ATI programme, the ARYZTA Food Group functioned as over 30 independent bakeries and kitchens, serving specific markets or customer segments, with individual marketing approaches, pricing policies and product portfolios.
Progress has continued on ATI during the year and as of 31 July 2014, the ATI programme has been substantially completed. As a result, there is now a single go-to-market sales strategy with an aligned product listing and full visibility of bakery production capacities and customer delivery channels. These changes have been enabled through dedicated management teams and leveraging the capabilities of the single instance ERP platform.
In addition to the ATI programme, following the acquisitions of Pineridge and Cloverhill, the Food Group has also begun to integrate the ERP systems and operational processes of those recently acquired businesses into the existing Food North America network.
During the three years since the ATI programme announcement, the Food Group has incurred the following amounts:
| ARYZTA Transformation Initiative in EUR '000 |
|||||
|---|---|---|---|---|---|
| Acquisition, disposal and restructuring-related costs |
Cash | Total ATI | Non-cash | Total | |
| Year ended 31 July 2014 | 83,354 | – | 83,354 | 87,357 | 170,711 |
| Year ended 31 July 2013 | 82,459 | – | 82,459 | 37,355 | 119,814 |
| Year ended 31 July 2012 | 77,144 | – | 77,144 | 6,333 | 83,477 |
| Investment capital expenditure |
Optimisation related & ERP |
Total ATI | Expansion related |
Total | |
| Year ended 31 July 2014 | – | 116,452 | 116,452 | 160,391 | 276,843 |
| Year ended 31 July 2013 | – | 61,462 | 61,462 | 111,044 | 172,506 |
| Year ended 31 July 2012 | – | 46,643 | 46,643 | 42,758 | 89,401 |
| Investment to date | 242,957 | 224,557 | 467,514 | ||
Estimated overall ATI investment 460,000 Estimated Pineridge and Cloverhill integration/investment 70,000
The financial goal of the ATI investments is to improve the ARYZTA Food Group Underlying ROIC related to the FY 2011 food assets to 15% by FY 2015. As a result of the successful efforts to date, the improved efficiencies derived from these investments have expanded the overall Food Group margin and positioned the Group well for the continued underlying revenue growth and margin expansion necessary to achieve this measure.
| in EUR million | 2011 | 2012 | 2013 | 2014 |
|---|---|---|---|---|
| Underlying ROIC | ||||
| Underlying net assets | 3,004 | 2,901 | 2,797 | 2,915 |
| EBITA & associates/JVs cont. | 332 | 353 | 364 | 416 |
| Underlying ROIC | 11.1 % | 12.2 % | 13.0 % | 14.2 % |
| Reported ROIC | ||||
| Reported net assets | 3,004 | 3,315 | 3,447 | 4,357 |
| EBITA & associates/JVs cont. | 332 | 376 | 426 | 524 |
| Reported ROIC | 11.1 % | 11.3 % | 12.4 % | 12.0 % |
As of 31 July 2014, and for the comparative periods shown, the definition of 'Net Assets' has been refined to be presented net of non-cash deferred tax liabilities on intangible assets from acquisitions (FY14:€247m, FY11:€252m). These deferred tax liabilities represent a notional non-cash tax impact, which in turn gave rise to a related increase in goodwill upon acquisition. Therefore, inclusion of these deferred tax liabilities within net assets allows for a direct offsetting of these impacts, so that the net assets used for return on investment calculations more closely approximates the consideration transferred.
This refinement had no impact on the UROIC incremental movements since FY 2011 or on the associated management compensation calculations.
ARYZTA's 68.1% subsidiary and separately listed company, Origin, has separate funding structures, which are financed without recourse to ARYZTA. Origin's net debt amounted to €11.9m at 31 July 2014 (2013: €29.6m).
As of 31 July 2014, the Food Group's financing facilities, related capitalised upfront borrowing costs, overdrafts and cash balances outstanding were as follows:
| Debt Funding | Principal | Maturity | Outstanding in EUR '000 |
|---|---|---|---|
| Feb 2014 – Syndicated Bank Loan | CHF 1,977 m | Feb 2019 | (748,932) |
| Feb 2014 – US Private Placement | USD 490 m / EUR 25 m | Feb 2020 – Feb 2024 | (389,854) |
| May 2010 – US Private Placement | USD 350 m / EUR 25 m May 2016 – May 2022 | (285,610) | |
| Dec 2009 – US Private Placement | USD 200 m | Dec 2021 –Dec 2029 | (148,920) |
| Nov 2009 – Swiss Bond | CHF 200 m | Mar 2015 | (164,356) |
| Jun 2007 – US Private Placement | USD 300 m | Jun 2017 – Jun 2019 | (223,380) |
| Food Group gross term debt | (1,961,052) | ||
| Food Group upfront borrowing costs | 15,070 | ||
| Food Group term debt, net of upfront borrowing costs | (1,945,982) | ||
| Food Group finance leases | (268) | ||
| Food Group bank overdraft | (251,091) | ||
| Food Group cash at bank and in hand | 555,262 | ||
| Food Group net debt | (1,642,079) |
| Hybrid Funding | ||||
|---|---|---|---|---|
| Oct 2010 – Perpetual callable subordinated instrument1 |
CHF 400 m | To be called Oct 2014 |
(285,004) | |
| April 2014 – Perpetual callable subordinated instrument1 |
CHF 400 m | No maturity – First call date April 2018 |
(319,442) | |
| Hybrid funding at historical cost, net of associated costs | ||||
| Hybrid funding fair value adjustment to year-end exchange rates | ||||
| Hybrid funding | (657,424) |
1 Traded on SIX Swiss exchange. Treated as 100 % equity for IFRS and bank covenant purposes and 25 % equity for US PP covenant purposes.
8
As of 31 July 2014, the Food Group interest cover was 10.72x (excluding hybrid interest). The weighted average maturity of the Food Group gross term debt was 5.43 years. The weighted average interest cost of Food Group debt financing facilities (including overdrafts) was 3.63%. ARYZTA intends to maintain an investment grade position in the range of 2x – 3x net debt to EBITDA. The Food Group's key financial ratios were as follows:
| Net Debt: EBITDA | July 2014 | July 2013 |
|---|---|---|
| Net Debt: EBITDA1 (hybrid as equity) | 2.45 x | 1.57 x |
| Net Debt: EBITDA1 (hybrid as debt) | 3.43 x | 2.77 x |
9
for the year ended 31 July 2014
| Food Group cash generation | ||
|---|---|---|
| in EUR '000 | July 2014 | July 2013 |
| EBIT | 362,532 | 300,053 |
| Amortisation | 123,762 | 106,642 |
| EBITA | 486,294 | 406,695 |
| Depreciation | 102,879 | 93,690 |
| EBITDA | 589,173 | 500,385 |
| Working capital movement | 12,372 | (3,287) |
| Working capital movement from debtor securitisation | 34,224 | (7,911) |
| Maintenance capital expenditure | (59,970) | (43,675) |
| Dividends received from Origin | 16,388 | 14,250 |
| Hybrid dividend paid1 | (29,388) | (16,561) |
| Interest and income tax paid1 | (103,375) | (90,954) |
| Other non-cash (income)/charges | (2,941) | 573 |
| Cash flow generated from activities | 456,483 | 352,820 |
| Investment capital expenditure2 | (276,843) | (172,506) |
| Cash flows generated from activities after investment capital expenditure |
179,640 | 180,314 |
| Underlying net profit | 324,588 | 268,357 |
| Food Group net debt and investment activity | ||
| in EUR '000 | FY 2014 | FY 2013 |
| Food Group opening net debt as at 1 August | (849,228) | (976,283) |
| Cash flows generated from activities | 456,483 | 352,820 |
| Hybrid instrument proceeds | – | 319,442 |
| Origin tender offer proceeds | 71,789 | – |
| Net debt cost of acquisitions | (862,792) | (311,609) |
| Acquisition and restructuring-related cash flows | (105,561) | (86,497) |
| Investment capital expenditure2 | (276,843) | (172,506) |
| Dividends paid | (51,146) | (45,999) |
| Foreign exchange movement3 | (22,682) | 62,024 |
| Other4 | (2,099) | 9,380 |
| Food Group closing net debt as at 31 July | (1,642,079) | (849,228) |
1 Hybrid dividends paid have been reclassified and included within Cash generated from activities. This reclassification was made to apply consistent treatment between these cash payments and the associated Hybrid instrument accrued dividend, which is included as an expense within the Group and Food Group underlying income statements.
2 Includes expenditure on intangible assets.
3 Foreign exchange movement for the year ended 31 July 2014 primarily attributable to the fluctuation in the GBP and CAD to Euro rates between July 2013 or the drawdown date and July 2014.
4 Other comprises primarily proceeds from disposal of property, plant and equipment, net of payments for contingent consideration and amortisation of financing costs.
for the year ended 31 July 2014
| Food | Food | Total | ||||
|---|---|---|---|---|---|---|
| in EUR million | Food Europe |
North America |
Rest of World |
Food Group |
Origin2 | Total2 |
| 2014 | ||||||
| Group share net assets1 | 1,811 | 2,303 | 243 | 4,357 | 432 | 4,789 |
| EBITA & associates/JVs cont.1 | 237 | 261 | 26 | 524 | 93 | 617 |
| ROIC | 13.1 % | 11.3 % | 10.6 % | 12.0 % | 21.5 % | 12.9 % |
| 2013 | ||||||
| Group share net assets1 | 1,652 | 1,556 | 239 | 3,447 | 467 | 3,914 |
| EBITA & associates/JVs cont.1 | 205 | 191 | 30 | 426 | 91 | 517 |
| ROIC | 12.4 % | 12.2 % | 12.7 % | 12.4 % | 19.4 % | 13.2 % |
1 See glossary in section 20 for definitions of financial terms and references used.
2 Origin net assets adjusted for the put option liability and fluctuation in average working capital by € 171.8m (2013: € 144.5m).
3 The Food Group WACC on a pre-tax basis is currently 7.0 % (2013: 7.7 %).
for the year ended 31 July 2014
| Group Balance Sheet in EUR '000 |
Total Group 2014 |
Total Group 2013 |
|---|---|---|
| Property, plant and equipment | 1,374,010 | 1,141,847 |
| Investment properties | 30,716 | 22,984 |
| Goodwill and intangible assets | 3,690,597 | 2,905,242 |
| Deferred tax on acquired intangibles | (255,639) | (248,577) |
| Associates and joint ventures | 54,911 | 45,235 |
| Other financial assets | 42,586 | 39,433 |
| Working capital | (197,394) | (27,656) |
| Other segmental liabilities | (122,708) | (108,560) |
| Segmental net assets | 4,617,079 | 3,769,948 |
| Net debt | (1,653,991) | (878,787) |
| Deferred tax, net | (105,799) | (82,293) |
| Income tax | (60,152) | (46,570) |
| Derivative financial instruments | (5,680) | (1,669) |
| Net assets | 2,791,457 | 2,760,629 |
| Food Group Balance Sheet in EUR '000 |
Food Group 2014 |
Food Group 2013 |
|---|---|---|
| Property, plant and equipment | 1,283,584 | 1,061,200 |
| Investment properties | 23,141 | 15,409 |
| Goodwill and intangible assets | 3,539,225 | 2,775,430 |
| Deferred tax on acquired intangibles | (246,717) | (240,554) |
| Working capital | (149,277) | (71,589) |
| Other segmental liabilities | (93,481) | (92,626) |
| Segmental net assets | 4,356,475 | 3,447,270 |
| Investment in and receivable from Origin | 46,515 | 51,924 |
| Net debt | (1,642,079) | (849,228) |
| Deferred tax, net | (102,102) | (79,582) |
| Income tax | (41,019) | (33,342) |
| Derivative financial instruments | (4,465) | 46 |
| Net assets | 2,613,325 | 2,537,088 |
At the Annual General Meeting on 2 December 2014, shareholders will be invited to approve a proposed dividend of CHF 0.7646 (€0.6333) per share. If approved, the dividend will be paid to shareholders on 2 February 2015. A dividend of CHF 0.6652 per share was paid during the year, as approved by shareholders at the Annual General Meeting on 10 December 2013.
Origin is a leading agri-services group focused on integrated agronomy and agri-inputs in the UK, Ireland, Poland and Ukraine.
During September 2013, Origin announced its intention to return up to €100m of capital to shareholders by way of a tender offer. Following approval from shareholders at Origin's extraordinary general meeting on 18 November 2013, Origin completed the Tender Offer in December 2013. ARYZTA participated in this offer by successfully tendering 9.7 million shares in exchange for €71.8m, net of related costs, thereby reducing ARYZTA's shareholding in Origin to 85.3 million shares. As not all Origin shareholders elected to participate in full, this reduced ARYZTA's shareholding in Origin from 68.6% to 68.1%.
Origin reported financial and operating results in line with expectations for the year. The Origin Board has proposed a dividend per ordinary share of €0.20 cent for the year ended 31 July 2014, reflecting a payout ratio of 35%.
Origin's separately published results, which were released on 24 September 2014, are available at www.originenterprises.com.
Subsequent to year end, during September 2014, the Group announced its intention to repay the CHF 400,000,000 Perpetual callable subordinated instrument funded in October 2010. This repayment is expected to occur in October 2014, in line with the first call date associated with that instrument.
ARYZTA's market valuation has increased by € 4.1 bn over the past five years and has delivered 12.5% CAGR in Underlying fully diluted EPS. In September 2014, ARYZTA was added to the Swiss Leader Index, which comprises the 30 largest and most liquid securities in the Swiss equity market.
In FY 2009, ARYZTA AG acquired IAWS Group Plc (which was listed in FY 1989). Over the 25 years reporting as a publically listed entity, the market capitalisation has increased by € 5.9 bn and Underlying fully diluted EPS CAGR of 13.8% (14.8% including dividends) was achieved.
ARYZTA's medium term outlook is to target underlying revenue growth of 2%–4% per annum, which is expected to convert to underlying fully diluted EPS growth of 4%–6% per annum. Invested capital is expected to further enhance underlying fully diluted EPS by 3%–6% per annum.
The Board and senior management have invested significant time and resources in identifying specific risks across the Group, and in developing a culture of balanced risk minimisation. The Board considers the risks and uncertainties disclosed on page 17 to continue to reflect the principal risks and uncertainties of the Group.
This report contains forward looking statements, which reflect management's current views and estimates. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments.
'Associates and JVs, net' – presented as profit from associates and JVs, net of taxes and interest, before non-ERP amortisation and the impact of associated non-recurring items.
'EBITA' – presented as earnings before interest, taxation, non-ERP related intangible amortisation; before net acquisition, disposal and restructuring-related costs and fair value adjustments and related tax credits.
'EBITDA' – presented as earnings before interest, taxation, depreciation and amortisation; before net acquisitions, disposal and restructuring-related costs and fair value adjustments and related tax credits.
'ERP' – Enterprise Resource Planning intangible assets include the Food Group SAP and Origin Microsoft Dynamics AX software systems.
'Hybrid instrument' – presented as Perpetual Callable Subordinated Instrument in the Financial Statements.
'Net Assets' – Based on segmental net assets, which excludes all bank debt, cash and cash equivalents and tax balances, with the exception of deferred tax liabilities associated with intangible assets, as those deferred tax liabilities represent a notional non-cash tax impact directly linked to segmental intangible assets recorded as part of a business combination, rather than an actual cash tax obligation.
'Non-controlling interests' – always presented after the dilutive impact of related subsidiaries' management incentives.
'Reported ROIC' – Return On Invested Capital is calculated using pro-forma trailing twelve months segmental EBITA and Profit from associates and JVs ('TTM EBITA') reflecting the full twelve months contribution from acquisitions, divided by the respective Net Assets.
'Underlying earnings' – presented as reported net profit, adjusted to include the Hybrid instrument accrued dividend as finance cost; before non-ERP related intangible amortisation; before net acquisition, disposal and restructuring-related costs and fair value adjustments and before any non-controlling interest allocation of those adjustments, net of related tax impacts.
The Group utilises the Underlying earnings measure to enable comparability of the results from period to period, without the impact of transactions that do not relate to the underlying business. It is also the Group's policy to declare dividends based on underlying fully diluted earnings per share, as this provides a more consistent basis for returning dividends to shareholders.
'Underlying ROIC' – Underlying Return On Invested Capital is calculated based on the Net Assets of the Food Group business that existed as of 31 July 2011, using currency rates consistent with 2011, excluding net assets and historical EBITA levels of acquisitions completed after 1 August 2011 and adding back asset impairments (unless recovered once the assets are disposed).
for the financial year ended 31 July 2014
| Origin | |||||
|---|---|---|---|---|---|
| Food Group | Origin | non-controlling | ARYZTA Group | ARYZTA Group | |
| in EUR '000 | 2014 | 2014 | interests | 2014 | 2013 |
| Group revenue | 3,393,783 | 1,415,239 | – | 4,809,022 | 4,503,690 |
| EBITA | 486,294 | 79,513 | – | 565,807 | 475,584 |
| Associates and JVs, net | – | 13,392 | – | 13,392 | 22,057 |
| EBITA incl. associates and JVs | 486,294 | 92,905 | – | 579,199 | 497,641 |
| Finance cost, net | (62,604) | (5,534) | – | (68,138) | (63,904) |
| Hybrid instrument accrued dividend | (29,548) | – | – | (29,548) | (19,898) |
| Pre-tax profits | 394,142 | 87,371 | – | 481,513 | 413,839 |
| Income tax | (65,754) | (12,426) | – | (78,180) | (69,689) |
| Non-controlling interests | (3,800) | – | (22,055) | (25,855) | (25,041) |
| Underlying fully diluted net profit | 324,588 | 74,945 | (22,055) | 377,478 | 319,109 |
| Underlying fully diluted EPS (cent) | – | 57.51 c1 | 422.2 c2 | 360.3 c2 |
| Origin | |||||
|---|---|---|---|---|---|
| Food Group | Origin | non-controlling | ARYZTA Group | ARYZTA Group | |
| in EUR '000 | 2014 | 2014 | interests | 2014 | 2013 |
| Reported net profit3 | 92,252 | 63,487 | (20,226) | 135,513 | 129,415 |
| Intangible amortisation | 123,762 | 6,277 | – | 130,039 | 112,331 |
| Tax on amortisation | (28,710) | (1,438) | – | (30,148) | (31,833) |
| Share of associate intangible amortisation, net of tax | – | 1,548 | – | 1,548 | – |
| Hybrid instrument accrued dividend | (29,548) | – | – | (29,548) | (19,898) |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments |
170,711 | 5,649 | – | 176,360 | 117,356 |
| Tax on asset write-down and costs arising on integration | (3,879) | (578) | – | (4,457) | 10,402 |
| Non-controlling interest portion of acquisition, disposal and restructuring-related costs and fair value adjustments |
– | – | (1,616) | (1,616) | 1,450 |
| Underlying net profit | 324,588 | 74,945 | (21,842) | 377,691 | 319,223 |
| Dilutive impact of Origin management incentives | – | – | (213) | (213) | (114) |
| Underlying fully diluted net profit | 324,588 | 74,945 | (22,055) | 377,478 | 319,109 |
| Underlying fully diluted EPS (cent) | – | 57.51 c1 | 422.2 c2 | 360.3 c2 |
1 Origin FY 2014 underlying fully diluted EPS is calculated using the weighted average number of shares in issue of 130,316,835 (FY 2013: 138,499,155).
2 The 31 July 2014 weighted average number of ordinary shares used to calculate diluted earnings per share is 89,407,313 (2013: 88,559,475).
3 Food Group reported net profit excludes dividend income of € 16,388,000 (2013: € 14,250,000) from Origin and the gain on Origin tender offer share buyback of € 66,568,000.
The Board and senior management continue to invest significant time and resources in identifying specific risks across the Group, and in developing a culture of balanced risk minimisation. The Group has formal risk assessment processes in place through which risks and mitigating controls are evaluated. These processes are driven by local management, who are best placed to identify the significant ongoing and emerging risks facing the business. The outputs of these risk assessment processes are subject to various levels of review by Group management and Internal Audit, and a consolidated Risk Map denoting potential frequency, severity and velocity of identified risks, is reviewed by the ARYZTA Board of Directors on an annual basis. Risks identified and associated mitigating controls are also subject to audit as part of operational, financial and health and safety audit programmes.
1 These risks are not listed in order of importance.
The directors are responsible for preparing the Annual Report and the Group consolidated and Company financial statements, in accordance with Swiss law and regulations.
Company law requires the directors to prepare Group consolidated and Company financial statements for each financial year. Under that law, the directors are required to prepare the Group consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS') and the requirements of Swiss law and to prepare the Company financial statements in accordance with Swiss law and the Company's Articles of Association.
This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of the Group consolidated and Company financial statements that are free from material misstatement, whether due to fraud or error.
In preparing each of the Group consolidated and Company financial statements, the directors are required to:
The directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with IFRS, the requirements of Swiss law and the Company's Articles of Association.
They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website.
On behalf of the Board
Denis Lucey Owen Killian Chairman, Board of Directors CEO, Member of the Board
25 September 2014
of Directors
for the year ended 31 July 2014
| in EUR '000 | Notes | 2014 | 2013 |
|---|---|---|---|
| Revenue | 2 | 4,809,022 | 4,503,690 |
| Cost of sales | (3,472,022) | (3,279,291) | |
| Gross profit | 1,337,000 | 1,224,399 | |
| Distribution expenses | (573,267) | (564,458) | |
| Administration expenses | (327,965) | (296,688) | |
| Operating profit before net acquisition, disposal and restructuring-related costs and fair value adjustments |
435,768 | 363,253 | |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments | 3 | (176,360) | (117,356) |
| Operating profit | 259,408 | 245,897 | |
| Share of profit after tax of associates and joint ventures | 11,844 | 22,057 | |
| Profit before financing income, financing costs and income tax expense | 271,252 | 267,954 | |
| Financing income | 5,233 | 4,739 | |
| Financing costs | (73,371) | (68,643) | |
| Profit before income tax expense | 203,114 | 204,050 | |
| Income tax expense | (43,575) | (48,258) | |
| Profit for the year | 159,539 | 155,792 | |
| Attributable as follows: | |||
| Equity shareholders | 135,513 | 129,415 | |
| Non-controlling interests | 24,026 | 26,377 | |
| Profit for the year | 159,539 | 155,792 | |
| Earnings per share for the year | Notes | 2014 euro cent |
2013 euro cent |
| Basic earnings per share | 4 | 120.2 | 124.3 |
| Diluted earnings per share | 4 | 118.3 | 123.5 |
| in EUR '000 | Notes | 2014 | 2013 |
|---|---|---|---|
| Profit for the year | 159,539 | 155,792 | |
| Other comprehensive income | |||
| Items that may be reclassified subsequently to profit or loss: | |||
| Foreign exchange translation effects | |||
| – Foreign currency net investments | 12,544 | (237,352) | |
| – Foreign currency borrowings | 6 | (28,792) | 91,854 |
| – Recycle of foreign exchange gain on settlement of quasi-equity loans | (1,488) | – | |
| – Recycle on disposal of joint venture | – | (3,653) | |
| – Taxation effect of foreign exchange translation movements | (916) | (1,630) | |
| – Share of joint ventures and associates' foreign exchange translation adjustment | – | (2,035) | |
| Cash flow hedges | |||
| – Effective portion of changes in fair value of cash flow hedges | (1,826) | 4,941 | |
| – Fair value of cash flow hedges transferred to income statement | (2,388) | (1,588) | |
| – Deferred tax effect of cash flow hedges | 465 | (817) | |
| – Share of joint ventures and associates' gains on cash flow hedges, net of deferred tax | 565 | 339 | |
| Total of items that may be reclassified subsequently to profit or loss | (21,836) | (149,941) | |
| Items that will not be reclassified to profit or loss: | |||
| Defined benefit plans | |||
| – Actuarial loss on Group defined benefit pension plans | (1,852) | (3,840) | |
| – Deferred tax effect of actuarial loss | 221 | 356 | |
| – Share of associates' actuarial gain/(loss) on defined benefit plans, net of deferred tax | 1,959 | (4,552) | |
| Deferred tax effect of change in tax rates | (1,415) | (462) | |
| Total of items that will not be reclassified to profit or loss | (1,087) | (8,498) | |
| Total other comprehensive loss | (22,923) | (158,439) | |
| Total comprehensive income/(loss) for the year | 136,616 | (2,647) | |
| Attributable as follows: | |||
| Equity shareholders of the Company | 109,440 | (21,913) | |
| Non-controlling interests | 27,176 | 19,266 | |
| Total comprehensive income/(loss) for the year | 136,616 | (2,647) | |
as at 31 July 2014
| in EUR '000 | Notes | 2014 | 2013 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Property, plant and equipment | 1,374,010 | 1,141,847 | |
| Investment properties | 30,716 | 22,984 | |
| Goodwill and intangible assets | 3,690,597 | 2,905,242 | |
| Investments in associates and joint ventures | 54,911 | 45,235 | |
| Other receivables | 42,586 | 39,433 | |
| Deferred income tax assets | 72,748 | 71,146 | |
| Derivative financial instruments | 342 | – | |
| Total non-current assets | 5,265,910 | 4,225,887 | |
| Current assets | |||
| Inventory | 362,469 | 297,641 | |
| Trade and other receivables | 614,326 | 678,845 | |
| Derivative financial instruments | 1,077 | 1,821 | |
| Cash and cash equivalents | 6 | 694,838 | 626,922 |
| Total current assets | 1,672,710 | 1,605,229 | |
| Total assets | 6,938,620 | 5,831,116 |
| in EUR '000 | Notes | 2014 | 2013 |
|---|---|---|---|
| Equity | |||
| Called up share capital | 1,172 | 1,172 | |
| Share premium | 773,735 | 773,735 | |
| Retained earnings and other reserves | 1,928,798 | 1,888,112 | |
| Total equity attributable to equity shareholders | 2,703,705 | 2,663,019 | |
| Non-controlling interests | 87,752 | 97,610 | |
| Total equity | 2,791,457 | 2,760,629 | |
| Liabilities | |||
| Non-current liabilities | |||
| Interest-bearing loans and borrowings | 6 | 1,898,435 | 1,157,435 |
| Employee benefits | 12,451 | 22,339 | |
| Deferred income from government grants | 21,261 | 25,251 | |
| Other payables | 73,742 | 48,190 | |
| Deferred income tax liabilities | 434,186 | 402,016 | |
| Derivative financial instruments | 3,445 | 2,136 | |
| Contingent consideration | 7,100 | 8,570 | |
| Total non-current liabilities | 2,450,620 | 1,665,937 | |
| Current liabilities | |||
| Interest-bearing loans and borrowings | 6 | 450,394 | 348,274 |
| Trade and other payables | 1,174,189 | 1,004,142 | |
| Income tax payable | 60,152 | 46,570 | |
| Derivative financial instruments | 3,654 | 1,354 | |
| Contingent consideration | 8,154 | 4,210 | |
| Total current liabilities | 1,696,543 | 1,404,550 | |
| Total liabilities | 4,147,163 | 3,070,487 | |
| Total equity and liabilities | 6,938,620 | 5,831,116 |
| 31 July 2014 | Share | Share | Treasury | Other equity |
Cash flow hedge |
Revalua tion |
Share based payment |
Foreign currency trans lation |
Retained | Total share holders |
Non controlling |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in EUR '000 | capital | premium | shares | reserve | reserve | reserve | reserve | reserve | earnings | equity | interests | Total |
| At 1 August 2013 | 1,172 | 773,735 | (56) | 604,446 | (106) | 13,380 | 8,862 | (7,726) 1,269,312 2,663,019 | 97,610 2,760,629 | |||
| Profit for the year | – | – | – | – | – | – | – | – | 135,513 | 135,513 | 24,026 | 159,539 |
| Other comprehensive (loss)/income |
– | – | – | – | (3,523) | – | – | (21,419) | (1,131) | (26,073) | 3,150 | (22,923) |
| Total comprehensive (loss)/income |
– | – | – | – | (3,523) | – | – | (21,419) | 134,382 | 109,440 | 27,176 | 136,616 |
| Release of treasury shares due to exercise of LTIP |
– | – | 1 | – | – | – | – | – | – | 1 | – | 1 |
| Share-based payments | – | – | – | – | – | – | 10,597 | – | – | 10,597 | 243 | 10,840 |
| Equity dividends | – | – | – | – | – | – | – | – | (47,898) | (47,898) | – | (47,898) |
| Dividends to non-controlling interests |
– | – | – | – | – | – | – | – | – | – | (10,751) | (10,751) |
| Dividend accrued on perpetual callable subordinated instrument |
– | – | – | – | – | – | – | – | (29,548) | (29,548) | – | (29,548) |
| Total contributions by and distributions to owners |
– | – | 1 | – | – | – | 10,597 | – | (77,446) | (66,848) | (10,508) | (77,356) |
| Origin tender offer share buyback and dilution |
– | – | – | – | 13 | (58) | (5) | 100 | (1,956) | (1,906) | (26,526) | (28,432) |
| Total transactions with owners recognised directly in equity |
– | – | 1 | – | 13 | (58) | 10,592 | 100 | (79,402) | (68,754) | (37,034) (105,788) | |
| At 31 July 2014 | 1,172 | 773,735 | (55) | 604,446 | (3,616) | 13,322 | 19,454 | (29,045) 1,324,292 2,703,705 | 87,752 2,791,457 |
| At 1 August 2012 1,172 773,735 (57) 285,004 (2,381) 15,403 10,148 140,298 1,199,808 2,423,130 86,225 2,509,355 Profit for the year – – – – – – – – 129,415 129,415 26,377 155,792 Other comprehensive (loss)/income – – – – 2,268 – – (148,078) (5,518) (151,328) (7,111) (158,439) Total comprehensive (loss)/income – – – – 2,268 – – (148,078) 123,897 (21,913) 19,266 (2,647) Issue of perpetual callable subordinated instrument – – – 319,442 – – – – – 319,442 – 319,442 Transfer of share-based payment reserve to retained earnings – – – – – – (8,699) – 8,699 – – – Release of treasury shares due to exercise of LTIP – – 1 – – – – – – 1 – 1 Share-based payments – – – – – – 7,416 – – 7,416 395 7,811 Equity dividends – – – – – – – – (43,517) (43,517) – (43,517) Dividends to non-controlling interests – – – – – – – – – – (8,935) (8,935) Transfer of revaluation reserve to retained earnings – – – – – (1,993) – – 1,993 – – – Dividend accrued on perpetual callable subordinated instrument – – – – – – – – (19,898) (19,898) – (19,898) Total contributions by and distributions to owners – – 1 319,442 – (1,993) (1,283) – (52,723) 263,444 (8,540) 254,904 Dilution due to vesting of Origin management equity entitlements – – – – 7 (30) (3) 54 (687) (659) 659 Non-controlling interest forward contract – – – – – – – – (983) (983) – (983) Total transactions with owners recognised directly in equity – – 1 319,442 7 (2,023) (1,286) 54 (54,393) 261,802 (7,881) 253,921 At 31 July 2013 1,172 773,735 (56) 604,446 (106) 13,380 8,862 (7,726) 1,269,312 2,663,019 97,610 2,760,629 |
31 July 2013 in EUR '000 |
Share capital |
Share premium |
Treasury shares |
Other equity reserve |
Cash flow hedge reserve |
Revalua tion reserve |
Share based payment reserve |
Foreign currency trans lation reserve |
Retained earnings |
Total share holders equity |
Non controlling interests |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| – | |||||||||||||
| in EUR '000 | Notes | 2014 | 2013 |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit for the year | 159,539 | 155,792 | |
| Income tax expense | 43,575 | 48,258 | |
| Financing income | (5,233) | (4,739) | |
| Financing costs | 73,371 | 68,643 | |
| Share of profit after tax of associates and joint ventures | (11,844) | (22,057) | |
| Net gain on acquisitions, disposals and dilution | 3 | – | (20,249) |
| Asset write-downs and fair value adjustments | 3 | 87,357 | 51,595 |
| Other restructuring-related payments in excess of current-year costs | (21,996) | (7,804) | |
| Depreciation of property, plant and equipment | 2 | 99,595 | 92,852 |
| Amortisation of intangible assets | 2 | 141,110 | 120,215 |
| Recognition of deferred income from government grants | (4,249) | (2,644) | |
| Share-based payments | 9,017 | 7,344 | |
| Special pension contribution on wind-up | (6,500) | – | |
| Other | (7,437) | (2,527) | |
| Cash flows from operating activities before changes in working capital | 556,305 | 484,679 | |
| Increase in inventory | (45,679) | (27,167) | |
| Decrease/(increase) in trade and other receivables | 22,873 | (23,071) | |
| Increase in trade and other payables | 80,932 | 35,562 | |
| Cash generated from operating activities | 614,431 | 470,003 | |
| Interest paid | (68,766) | (70,544) | |
| Interest received | 1,688 | 2,530 | |
| Income tax paid | (48,124) | (40,014) | |
| Net cash flows from operating activities | 499,229 | 361,975 |
| in EUR '000 | Notes | 2014 | 2013 |
|---|---|---|---|
| Cash flows from investing activities | |||
| Proceeds from sale of property, plant and equipment | 4,863 | 10,230 | |
| Purchase of property, plant and equipment | |||
| – maintenance capital expenditure | (72,042) | (51,568) | |
| – investment capital expenditure | (174,271) | (112,195) | |
| Grants received | 214 | 79 | |
| Acquisitions of subsidiaries and businesses, net of cash acquired | 5 | (875,784) | (311,609) |
| Disposal of joint ventures and associates | 3 | 94,002 | 18,260 |
| Purchase of intangible assets | (105,541) | (66,432) | |
| Dividends received | 2,278 | 6,908 | |
| Net receipts from/(contributions to) associates and joint ventures | (423) | 21 | |
| Contingent consideration paid | (4,190) | (9,114) | |
| Net cash flows from investing activities | (1,130,894) | (515,420) | |
| Cash flows from financing activities | |||
| Net proceeds from issue of perpetual callable subordinated instrument | – | 319,442 | |
| Gross drawdown of loan capital | 6 | 915,004 | 27,405 |
| Gross repayment of loan capital | 6 | (124,761) | (53,950) |
| Capital element of finance lease liabilities | 6 | (836) | (2,177) |
| Dividend paid on perpetual callable subordinated instrument | (29,388) | (16,561) | |
| Origin tender offer paid to non-controlling interest and related costs | (28,432) | – | |
| Dividends paid to non-controlling interests | (10,751) | (8,935) | |
| Dividends paid to equity shareholders | (47,898) | (43,517) | |
| Net cash flows from financing activities | 672,938 | 221,707 | |
| Net increase in cash and cash equivalents | 41,273 | 68,262 | |
| Translation adjustment | 5,058 | (20,875) | |
| Net cash and cash equivalents at start of year | 392,476 | 345,089 | |
| Net cash and cash equivalents at end of year | 6 | 438,807 | 392,476 |
ARYZTA AG (the 'Company') is domiciled and incorporated in Zurich, Switzerland. The consolidated financial statements for the year ended 31 July 2014 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 financial information included on pages 19 to 38 of this News Release has been extracted from the ARYZTA Group financial statements for the year ended 31 July 2014, which are subject to approval by the shareholders at the General Meeting on 02 December 2014.
The Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'). These policies have been consistently applied to all years presented, unless otherwise stated. In the preparation of these Group consolidated financial statements, the Group has applied all standards that were effective for accounting periods beginning on or before 1 August 2013. The following standards and interpretations, issued by the International Accounting Standards Board ('IASB') and the IFRS Interpretations Committee, are effective for the first time in the current financial year and have been adopted by the Group:
While the above standards and interpretations adopted by the Group modify certain presentation and disclosure requirements, these requirements are not significantly different than information presented as part of the 31 July 2013 year-end financial statements and have no material impact on the consolidated results or financial position of the Group.
The consolidated financial information is presented in Euro, rounded to the nearest thousand, unless otherwise stated.
The principal euro foreign exchange currency rates used by the Group for the preparation of these consolidated financial statements are as follows:
| Currency | Average 2014 | Closing 2014 | Average 2013 | Closing 2013 |
|---|---|---|---|---|
| CHF | 1.2250 | 1.2169 | 1.2204 | 1.2339 |
| USD | 1.3601 | 1.3430 | 1.2996 | 1.3280 |
| CAD | 1.4590 | 1.4611 | 1.3080 | 1.3644 |
| GBP | 0.8291 | 0.7933 | 0.8303 | 0.8630 |
| Total Group | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| 220,948 | |||||||||||
| 167,067 | 141,287 | 19,434 | 73,236 | 363,253 | |||||||
| (92,441) | (51,795) | (2,940) | (5,649) | ||||||||
| 89,492 | 245,897 | ||||||||||
| – | – | – | 201 | – | – | – | 11,844 | 21,856 | 11,844 | 22,057 | |
| 267,954 | |||||||||||
| 4,739 | |||||||||||
| (68,643) | |||||||||||
| 204,050 | |||||||||||
| net acquisition, disposal and restructuring related and restructuring related 74,626 74,626 |
Food Europe |
135,483 176,031 (68,019) (75,330) 67,464 100,701 67,464 100,701 |
Food North America 1,586,275 1,391,525 1,586,560 1,459,805 89,693 |
16,494 16,494 |
Food Rest of World |
23,283 362,532 23,283 191,821 23,283 191,821 2,762 (65,366) 129,217 |
Total Food Group |
300,053 – (170,711) (119,814) 67,587 180,239 201 79,431 180,440 2,471 2,040 (8,005) (59,801) 73,897 122,679 |
Origin 2,699 |
234,187 3,393,783 3,085,517 1,415,239 1,418,173 4,809,022 4,503,690 63,200 435,768 2,458 (176,360) (117,356) 65,658 259,408 87,514 271,252 5,233 (8,842) (73,371) 81,371 203,114 |
1 There were no significant intercompany revenues between business segments.
2 Certain central executive and support costs have been allocated against the operating profits of each business segment.
3 Finance income/(costs) and income tax expense are managed on a centralised basis for the Food Group and separately for Origin. Therefore, these items are not allocated between business segments for the purposes of presenting information to the Chief Operating Decision Maker.
| Food | Food | Food | Total | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| II) Segment assets | Europe | North America | Rest of World | Food Group | Origin | Total Group | ||||||
| in EUR '000 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Segment assets excluding investments in associ ates and joint ventures |
2,315,520 2,162,369 2,770,263 1,894,380 | 310,814 | 307,428 5,396,597 4,364,177 | 675,521 | 682,382 6,072,118 5,046,559 | |||||||
| Investments in associates and joint ventures and |
||||||||||||
| related financial assets | – | – | – | – | – | – | – | – | 97,497 | 84,668 | 97,497 | 84,668 |
| Segment assets | 2,315,520 2,162,369 2,770,263 1,894,380 | 310,814 | 307,428 5,396,597 4,364,177 | 773,018 | 767,050 6,169,615 5,131,227 | |||||||
| Reconciliation to total assets as reported in the Group Consolidated Balance Sheet |
||||||||||||
| Derivative financial instruments |
847 | 1,329 | 572 | 492 | 1,419 | 1,821 | ||||||
| Cash and cash equivalents | 555,262 | 501,438 | 139,576 | 125,484 | 694,838 | 626,922 | ||||||
| Deferred income tax assets |
68,938 | 66,642 | 3,810 | 4,504 | 72,748 | 71,146 | ||||||
| Total assets as reported in Group Consolidated Balance Sheet |
6,021,644 4,933,586 | 916,976 | 897,530 6,938,620 5,831,116 | |||||||||
| III) Segment liabilities | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
| in EUR '000 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Segment liabilities | 504,389 | 510,371 | 467,559 | 338,119 | 68,174 | 68,417 1,040,122 | 916,907 | 512,414 | 444,372 1,552,536 1,361,279 | |||
| Reconciliation to total liabilities as reported in Group Consolidated Balance Sheet |
||||||||||||
| Interest-bearing loans and borrowings |
2,197,341 1,350,666 | 151,488 | 155,043 2,348,829 1,505,709 | |||||||||
| Derivative financial instruments |
5,312 | 1,283 | 1,787 | 2,207 | 7,099 | 3,490 | ||||||
| Current and deferred income tax liabilities |
212,059 | 179,566 | 26,640 | 20,443 | 238,699 | 200,009 | ||||||
| Total liabilities as reported in Group Consolidated Balance Sheet |
3,454,834 2,448,422 | 692,329 | 622,065 4,147,163 3,070,487 |
| IV) Other segment information |
Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in EUR '000 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Depreciation | 49,254 | 43,929 | 35,710 | 34,688 | 9,252 | 8,866 | 94,216 | 87,483 | 5,379 | 5,369 | 99,595 | 92,852 |
| ERP amortisation | 4,515 | 2,069 | 4,148 | 4,138 | – | – | 8,663 | 6,207 | 2,408 | 1,677 | 11,071 | 7,884 |
| Amortisation of other intangible assets |
63,267 | 50,507 | 54,282 | 48,999 | 6,213 | 7,136 123,762 | 106,642 | 6,277 | 5,689 130,039 | 112,331 | ||
| Capital expenditure | ||||||||||||
| – Property, plant and equipment |
145,909 | 82,739 | 83,965 | 35,375 | 21,060 | 44,858 250,934 | 162,972 | 11,688 | 7,964 262,622 | 170,936 | ||
| – Intangibles | 71,176 | 46,270 | 27,579 | 14,529 | 433 | 1,781 | 99,188 | 62,580 | 3,018 | 6,121 102,206 | 68,701 | |
| Total capital expenditure | 217,085 | 129,009 111,544 | 49,904 | 21,493 | 46,639 350,122 | 225,552 | 14,706 | 14,085 364,828 | 239,637 |
| Europe | North America | Rest of World | Total Group | |||||
|---|---|---|---|---|---|---|---|---|
| in EUR '000 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Revenue by geography1 | 3,001,514 | 2,809,698 | 1,586,560 | 1,459,805 | 220,948 | 234,187 | 4,809,022 | 4,503,690 |
| Assets by geography | 3,088,538 | 2,929,419 | 2,770,263 | 1,894,380 | 310,814 | 307,428 | 6,169,615 | 5,131,227 |
| IFRS 8 non-current assets2 | 2,375,882 | 2,177,166 | 2,530,613 | 1,717,422 | 286,325 | 260,153 | 5,192,820 | 4,154,741 |
1 Revenues from external customers attributed to the Group's country of domicile, Switzerland, are 5.0% (2013: 4.9%) of total Group revenues. Revenues from external customers attributed to material foreign countries are United States 26.8% (2013: 29.1%), United Kingdom 24.4% (2013: 26.9%) and Germany 12.2 % (2013: 9.5 %). For the purposes of this analysis, customer revenues are allocated based on geographic location of vendor. As is common in this industry, the Group has a large number of customers, and there is no single customer with a share of revenue greater than 10% of total Group revenue.
2 Non-current assets as reported under IFRS 8, Operating Segments, include all non-current assets as presented in the Group Consolidated Balance Sheet, with the exception of deferred taxes and derivative financial instruments. Non-current assets attributed to the Group's country of domicile, Switzerland, are 7.4% of total Group non-current assets (2013: 8.9%). Non-current assets attributed to material foreign countries are: United States 33.8 % (2013: 28.3 %), Canada 13.7% (2013: 11.7%) and Germany 13.6 % (2013: 16.2 %).
| Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| in EUR '000 | Notes | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Acquisition-related costs | 3.1 (2,566) (3,427) (4,668) (2,063) | – | – | (7,234) (5,490) (1,124) | – | (8,358) (5,490) | |||||||
| Net gain/(loss) on acquisition, disposals and dilution |
3.2 | – | – | – | (705) | – | – | – | (705) | – | 20,954 | – | 20,249 |
| Restructuring-related costs and fair value adjustments |
|||||||||||||
| Asset write-downs | (51,751) (23,228) (32,666) (13,149) (2,940) | – | (87,357) (36,377) | – (8,612) | (87,357) (44,989) | ||||||||
| Fair value adjustments of investment properties |
– | (273) | – | – | – | – | – | (273) | – (6,333) | – (6,606) | |||
| Severance and other staff related costs |
(24,369) (23,179) (22,801) (15,460) | – | – | (47,170) (38,639) (3,065) (3,227) | (50,235) (41,866) | ||||||||
| Contractual obligations | (316) | (82) (1,229) (5,278) | – | – | (1,545) (5,360) | – | – | (1,545) (5,360) | |||||
| Advisory and other costs | (13,439) (17,830) (13,966) (15,140) | – | – | (27,405) (32,970) (1,460) | (324) | (28,865) (33,294) | |||||||
| Total restructuring-related costs and fair value adjustments |
3.3 (89,875) (64,592) (70,662) (49,027) (2,940) | – (163,477) (113,619) | (4,525) (18,496) (168,002) (132,115) | ||||||||||
| Total acquisition, disposal and restructuring-related costs and fair value adjustments |
(92,441) (68,019) (75,330) (51,795) (2,940) | – (170,711) (119,814) | (5,649) | 2,458 (176,360) (117,356) |
During the year ended 31 July 2014 the Group incurred acquisition-related costs of €8,358,000 (2013: €5,490,000). These costs primarily related to Food Group acquisition-related activities and include share purchase tax, due diligence and other professional services fees.
During the year ended 31 July 2013, the Food Group completed the disposal of its interest in a joint venture, previously held as part of the Food North America segment. Consideration received on disposal was €1,941,000, which was less than the investment carrying value of €2,646,000 at the time, resulting in a loss of €705,000.
During financial year 2013, Origin agreed to dispose of its 50% interest in Welcon to its joint venture partner, Austevoll Seafoods ASA, for cash consideration of NOK 740 million. As all conditions were fulfilled by 31 July 2013, the transaction, along with the consideration receivable in the amount of €94,002,000 were reflected in the financial statements for the year ended 31 July 2013. As these proceeds were in excess of the €73,873,000 carrying value of the investment, the transaction resulted in a gain on
disposal of €20,631,000, net of foreign exchange gains recycled from other comprehensive income of €3,653,000 and disposal-related costs of €3,151,000. The transaction was completed during August 2013 and these proceeds were received in full, as shown in the Group consolidated cash flow statement for the year ended 31 July 2014.
During financial year 2013, Continental Farmers Group was acquired by United Farmers Holding Company. As a result, Origin no longer has an investment in Continental Farmers Group. Consideration on disposal was €16,910,000, which was in excess of Origin's carrying value of the investment of €16,587,000, resulting in a gain on disposal of €323,000.
During financial year 2014, progress has continued on the Food Group ATI programme to integrate or rationalise existing business assets in order to enable optimised manufacturing and business support throughout the Group. As of 31 July 2014, the ATI program has been substantially completed, other than the continuing integration of acquisitions completed during the second half of the fiscal year. Origin has also continued to progress on its own separate business transformation programme during the year. As a result of these programmes the Group has recognised costs, including providing for amounts as required by IAS 37, 'Provisions, Contingent Liabilities and Contingent Assets', in the Group Consolidated Income Statement as follows:
The Group incurred €87,357,000 (2013: €44,989,000) of asset write-downs during the year. These amounts relate to the write-down of certain distribution, manufacturing and administration assets, due to the closure and/or reduction in activities related to those assets, due to those obsolete assets having been replaced as part of the Food Group integration and rationalisation programme.
During the year ended 31 July 2013, the Group incurred €6,606,000 of fair value adjustments related primarily to the carrying value of Origin investment properties. These prior year adjustments were based on independent valuations and were the result of the Irish property market decline, lack of transactions, restricted bank financing for propertyrelated deals, generally difficult economic environment, and in particular the indication that the value of development land in regional areas was converging to that of agricultural land. No further material fair value adjustments were incurred during the year ended 31 July 2014.
The Group incurred and provided for €50,235,000 (2013: €41,866,000) in severance and other staff-related costs during the year. These primarily related to costs associated with employees whose service was discontinued following certain rationalisation decisions throughout the Group and to the continued evaluation and optimization of the manufacturing and distribution footprint across the various Food North America and Food Europe business locations.
The operational decisions made as a result of the Group's integration and rationalisation projects triggered early termination penalties and resulted in certain operational contracts becoming onerous. The Group incurred total costs of €1,545,000 (2013: €5,360,000) during the year to either exit or provide for such onerous contractual obligations.
During the year ended 31 July 2014, the Group incurred €28,865,000 (2013: €33,294,000) in other costs related directly to the integration and rationalisation programs. These costs are composed principally of restructuring-related advisory costs, site restoration costs, costs associated with establishing shared service centres for centralisation of certain administrative functions and other incremental costs directly attributable to the integration and rationalisation programs.
| 2014 | 2013 | |
|---|---|---|
| Basic earnings per share | in EUR '000 | in EUR '000 |
| Profit attributable to equity shareholders | 135,513 | 129,415 |
| Perpetual callable subordinated instrument accrued dividend | (29,548) | (19,898) |
| Profit used to determine basic earnings per share | 105,965 | 109,517 |
| Weighted average number of ordinary shares | '000 | '000 |
| Ordinary shares outstanding at 1 August1 | 88,120 | 88,038 |
| Effect of exercise of equity instruments during the year2 | 24 | 67 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,144 | 88,105 |
| Basic earnings per share | 120.2 cent | 124.3 cent |
| 2014 | 2013 | |
| Diluted earnings per share | in EUR '000 | in EUR '000 |
| Profit used to determine basic earnings per share | 105,965 | 109,517 |
| Effect on non-controlling interests share of reported profits, due to dilutive impact of Origin management equity entitlements3 |
(186) | (116) |
| Profit used to determine diluted earnings per share | 105,779 | 109,401 |
| Weighted average number of ordinary shares (diluted) | '000 | '000 |
| Weighted average number of ordinary shares used to determine basic earnings per share |
88,144 | 88,105 |
| Effect of equity-based incentives with a dilutive impact2 | 1,263 | 454 |
| Weighted average number of ordinary shares used to determine diluted earnings per share4 |
89,407 | 88,559 |
| Diluted earnings per share | 118.3 cent | 123.5 cent |
1 Issued share capital excludes treasury shares.
2 The change in the equity instruments with a dilutive impact is due to continued vesting of management share-based incentives, offset by the impact of incentives exercised during the year, which are now included in the weighted average number of ordinary shares used to determine basic earnings per share.
3 Reflects the dilutive impact of equity entitlements granted to Origin senior management under the Origin Plan. These equity entitlements dilute the Group's share of Origin profits available as part of its diluted earnings per share calculation.
4 The 31 July 2014 weighted average number of ordinary shares used to calculate diluted earnings per share is 89,407,313 (2013: 88,559,475).
In addition to the basic and diluted earnings per share measures required by IAS 33, Earnings per Share, as calculated above, the Group also presents an underlying fully diluted earnings per share measure, in accordance with IAS 33 paragraph 73. This additional measure enables comparability of the Group's underlying results from period to period, without the impact of transactions that do not relate to the underlying business. It is also the Group's policy to declare dividends based on underlying fully diluted earnings per share, as this provides a more consistent basis for returning dividends to shareholders.
As shown below, for purposes of calculating this measure, the Group adjusts reported net profit by the following items and their related tax impacts:
| 2014 | 2013 | |
|---|---|---|
| Underlying fully diluted earnings per share | in EUR '000 | in EUR '000 |
| Profit used to determine basic earnings per share | 105,965 | 109,517 |
| Amortisation of non-ERP intangible assets (notes 2) | 130,039 | 112,331 |
| Tax on amortisation of non-ERP intangible assets | (30,148) | (31,833) |
| Share of associate intangible amortisation, net of tax | 1,548 | – |
| Net acquisition, disposal and restructuring-related costs and fair value adjustments (note 3) |
176,360 | 117,356 |
| Tax on net acquisition, disposal and restructuring-related costs and fair value adjustments |
(4,457) | 10,402 |
| Non-controlling interest portion of acquisition, disposal and restructuring-related costs and fair value adjustments |
(1,616) | 1,450 |
| Effect on non-controlling interests share of adjusted profits due to dilutive impact of Origin management equity entitlements3 |
(213) | (114) |
| Underlying fully diluted net profit | 377,478 | 319,109 |
| Weighted average number of ordinary shares used to determine | ||
| basic earnings per share | 88,144 | 88,105 |
| Underlying basic earnings per share | 428.3 cent | 362.2 cent |
| Weighted average number of ordinary shares used to determine diluted earnings per share |
89,407 | 88,559 |
Underlying fully diluted earnings per share 422.2 cent 360.3 cent
During the year ended 31 July 2014, the Group completed the 100% acquisitions of Cloverhill Bakery, a leading manufacturer of individually wrapped Ready-To-Eat snacks in the United States and Pineridge Bakery, a top-tier speciality bakery in Canada, as well as multiple other smaller acquisitions, by acquiring all outstanding shares of these individual entities.
The details of the net assets acquired and goodwill arising from these business combinations are set out below. The goodwill arising on these business combinations is attributable to the skills and talent of the in-place work-force and the synergies expected to be achieved from integrating the acquired operations into the Group's existing businesses.
| Provisional | ||||
|---|---|---|---|---|
| in EUR '000 | Cloverhill | Pineridge | Other | fair values |
| Provisional fair value of net assets acquired: |
||||
| Property, plant and equipment | 67,308 | 30,134 | 43,248 | 140,690 |
| Intangible assets | 223,368 | 87,577 | 60,573 | 371,518 |
| Inventory | 8,654 | 9,619 | 14,402 | 32,675 |
| Trade and other receivables | 12,406 | 8,147 | 8,937 | 29,490 |
| Trade and other payables | (33,570) | (27,253) | (16,863) | (77,686) |
| Employee benefits | – | – | (22) | (22) |
| Finance leases | (24) | – | – | (24) |
| Deferred income tax | (9,722) | (24,580) | (9,234) | (43,536) |
| Income tax payable | (1,094) (2,191) |
(2,390) | (5,675) | |
| Net assets acquired | 267,326 | 81,453 | 98,651 | 447,430 |
| Goodwill arising on acquisitions | 245,405 | 136,968 | 68,119 | 450,492 |
| Consideration | 512,731 | 218,421 | 166,770 | 897,922 |
| Satisfied by: | ||||
| Cash consideration | 516,078 | 218,885 | 147,112 | 882,075 |
| Cash acquired | (3,347) | (2,757) | (187) | (6,291) |
| Net cash consideration | 512,731 | 216,128 | 146,925 | 875,784 |
| Contingent consideration | – | 2,293 | 4,061 | 6,354 |
| Put option liability | – | – | 15,784 | 15,784 |
| Total consideration | 512,731 | 218,421 | 166,770 | 897,922 |
The net cash outflow on these acquisitions during the year is disclosed in the Group Consolidated Cash Flow Statement as follows:
| in EUR '000 | Total |
|---|---|
| Cash flows from investing activities | |
| Cash consideration | 882,075 |
| Cash acquired | (6,291) |
| Net cash consideration | 875,784 |
Costs of €8,358,000 related to the acquisitions were charged to the net acquisition, disposal, and restructuring-related costs and fair value adjustments in the Group Consolidated Income Statement during the year ended 31 July 2014.
The impact of these business combinations during the year on the Group Consolidated Income Statement is set out in the following table:
| in EUR '000 | Total |
|---|---|
| Revenue | 256,010 |
| Profit for the year | 9,281 |
If these acquisitions had occurred on 1 August 2013, management estimates that the consolidated revenue would have been €5,124,807,000 and profit for the year would have been €171,321,000. In making this determination, management has assumed that the fair value adjustments that arose on the date of the acquisition would have been the same if the acquisitions had occurred on 1 August 2013.
For the identification and estimation of the fair value of the intangibles acquired as part of these acquisitions, ARYZTA was assisted by a non-audit independent appraisal firm. The identified intangibles acquired primarily related to customer relationships, which were valued using the income approach method.
The fair values presented in this note are based on provisional valuations, due to the complexity of the transactions.
| 1 August | Non-cash | Translation | 31 July | ||
|---|---|---|---|---|---|
| in EUR '000 | 2013 | Cash flows | movements | adjustment | 2014 |
| Cash | 626,922 | 61,230 | – | 6,686 | 694,838 |
| Overdrafts | (234,446) | (19,957) | – | (1,628) | (256,031) |
| Cash and cash equivalents | 392,476 | 41,273 | – | 5,058 | 438,807 |
| Loans | (1,269,976) | (790,243) | (3,253) | (28,792) | (2,092,264) |
| Finance leases | (1,287) | 836 | (24) | (59) | (534) |
| Net debt | (878,787) | (748,134) | (3,277) | (23,793) | (1,653,991) |
| Split of net debt in EUR '000 |
1 August 2013 |
Cash flows | Non-cash movements |
Translation adjustment |
31 July 2014 |
| Food Group net debt | (849,228) | (767,523) | (2,646) | (22,682) | (1,642,079) |
| Origin net debt | (29,559) | 19,389 | (631) | (1,111) | (11,912) |
| Net debt | (878,787) | (748,134) | (3,277) | (23,793) | (1,653,991) |
At the Annual General Meeting on 2 December 2014, shareholders will be invited to approve a proposed dividend of CHF 0.7646 (€0.6333) per share. If approved, the dividend will be paid to shareholders on 2 February 2015. A dividend of CHF 0.6652 per share was paid during the year, as approved by shareholders at the Annual General Meeting on 10 December 2013.
Subsequent to year end, during September 2014, the Group announced its intention to repay the CHF 400,000,000 Perpetual callable subordinated instrument funded in October 2010. This repayment is expected to occur in October 2014, in line with the first call date associated with that instrument.
As of 25 September 2014, the date of preliminary approval of the Group consolidated financial statements by the Board of Directors, there have been no other material significant events that would require adjustment or disclosure within the Group consolidated financial statements.
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