Quarterly Report • Sep 26, 2010
Quarterly Report
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Zurich / Switzerland, 27 September 2010 – ARYZTA AG announces financial results for the financial year ended 31 July 2010
Commenting on the results, ARYZTA AG Chief Executive Officer Owen Killian said:
"Economic conditions for consumers remain very challenging. ARYZTA has responded by continuing to focus on operating efficiencies, cost management, innovation and cash flow generation, while working alongside its retail and foodservice partners to provide fresh and convenient, high quality baked goods at competitive prices.
Securing two complementary acquisitions in Fresh Start Bakeries and Great Kitchens substantially enhances ARYZTA's strategic market position by developing partnerships with leading operators in every consumer channel. ARYZTA's expanded product range, increasingly diversified geographical footprint and greater channel access to consumers offers further opportunities for growth over an enlarged business base.
The operating environment is likely to remain difficult in many key markets. ARYZTA's business model is therefore focused on operational resilience, while remaining well positioned to benefit from any economic recovery."
1 Based on EUR 0.3660 per share converted at the foreign exchange rate of one Euro to CHF 1.3121 on 23 September 2010, the date of approval of the ARYZTA financial statements.
ARYZTA AG ('ARYZTA') is a Swiss company based in Zurich with operations in North America, South America, Europe, South East 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 (71.4%) in Origin Enterprises plc, which has a listing on the AIM in London and the ESM in Dublin (AIM: OGN, ESM: OIZ).
Hilliard Lombard Head of Group Finance and Communications ARYZTA AG Tel: +41 (0) 44 583 42 00 [email protected]
Aloys Hirzel Communications and Management Consulting Hirzel. Neef. Schmid. Konsulenten Tel: +41 (0) 43 344 42 42 [email protected]
Alex Money Media and Investor Relations Advisors Temple Bar Advisory Tel: +44 (0) 20 7002 1080 [email protected]
An analyst call will take place today at 09.00 CET (08.00 BST).
Dial in numbers are: Switzerland: 0565 800 007, Ireland: 0143 196 48 or 0150 601 53, the UK: 0844 493 3800, USA: 1866 966 9439, International: +44 1452 555 566. Please supply the following code: 11588858 to access the call.
Printable pdf versions of slides will be available to download from the ARYZTA website www.aryzta.com 15 minutes before the call.
A conference call webcast replay will be available from the ARYZTA website www.aryzta.com.
| in Euro `000 | Food Group 2010 |
Origin 2010 |
Total Group 2010 |
Total Group 2009 |
% Change |
|---|---|---|---|---|---|
| Group revenue | 1,679,417 | 1,330,3094 | 3,009,726 | 3,212,270 | (6.3%) |
| Group operating profit1 | 207,119 | 65,854 | 272,973 | 280,409 | (2.7%) |
| Share of associates and JVs2 | 20,041 | 11,572 | 31,613 | 17,525 | – |
| Operating profit incl. associates and JVs1 | 227,160 | 77,426 | 304,586 | 297,934 | 2.2% |
| Finance cost, net | (36,272) | (15,213) | (51,485) | (50,652) | – |
| Pre tax profits1 | 190,888 | 62,213 | 253,101 | 247,282 | – |
| Income tax1 | (30,571) | (11,027) | (41,598) | (45,085) | – |
| Non-controlling interest3 | (2,630) | – | (17,624) | (17,649) | – |
| Underlying fully diluted net profit | 157,687 | 51,186 | 193,879 | 184,548 | 5.0% |
| Underlying fully diluted EPS (cent) | – | 37.265 | 244.06 | 234.76 | 4.0% |
| in Euro `000 | Food Group 2010 |
Origin 2010 |
Total Group 2010 |
Food Group 2009 |
Origin 2009 |
Total Group 2009 |
|---|---|---|---|---|---|---|
| Reported net profit | 117,4207 | 48,039 | 151,729 | 94,633 | (56,825) | 54,010 |
| Amortisation of intangible assets1 | 46,816 | 3,914 | 50,730 | 42,983 | 3,294 | 46,277 |
| Tax on amortisation | (11,192) | (767) | (11,959) | (10,800) | (380) | (11,180) |
| Property write down | – | – | – | – | 134,543 | 134,543 |
| Tax on property write down | – | – | – | – | (30,940) | (30,940) |
| Non-controlling interest adj. on property write down |
– | – | – | – | – | (29,609) |
| Acquisition and merger costs | 4,643 | – | 4,643 | 22,738 | – | 22,738 |
| Tax on merger costs | – | – | – | (218) | – | (218) |
| Underlying net profit | 157,687 | 51,186 | 195,143 | 149,336 | 49,692 | 185,621 |
| entitlements | – | – | (1,264) | – | – | (1,073) |
|---|---|---|---|---|---|---|
| Underlying fully diluted net profit | 157,687 | 51,186 | 193,879 | 149,336 | 49,692 | 184,548 |
| Underlying fully diluted EPS (cent) | – | 37.265 | 244.06 | – | 36.165 | 234.76 |
|---|---|---|---|---|---|---|
1 Before the impact of non SAP related intangible amortisation, transaction costs, non-recurring items and related tax credits. SAP amortisation for the financial year 2010 is €634,000 (2009: nil).
2 Associates & JVs profit net of tax and interest.
3 Presented after dilutive impact of Origin management equity entitlements, non-recurring items and related tax credits.
4 Origin revenue is presented after deducting intra group sales between Origin and Food Group.
5 Actual Origin 2010 underlying fully diluted EPS is calculated using the weighted average number of shares in issue of 137,376,888 (2009: 137,417,000).
6 Actual 2010 underlying fully diluted EPS is calculated using the weighted average number of shares in issue of 79,443,701 (2009: 78,626,718).
7 Food Group reported net profit excludes dividend income of €7,600,000 from Origin.
3
| in Euro million | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin1 | Total Group |
|---|---|---|---|---|---|---|
| Group revenue | 1,072.0 | 571.6 | 35.8 | 1,679.4 | 1,330.3 | 3,009.7 |
| Underlying growth | (8.2%) | (4.3%) | 8.4% | (6.7%) | (10.8%) | (8.6%) |
| Acquisitions3 | 2.0% | 8.4% | 57.2% | 4.8% | 0.2%2 | 2.6% |
| Currency | 0.5% | (1.1%) | 9.9% | 0.0% | (0.7%) | (0.3%) |
| Revenue growth | (5.7%) | 3.0% | 75.5% | (1.9%) | (11.3%) | (6.3%) |
1 Origin revenue is presented after deducting intra group sales between Origin and Food Group. 2 Includes the impact of Origin's disposal of its Marine Protein and Oils business in February 2009 which is
now recognised as part of joint ventures. 3 Includes the impact of seven weeks revenue from Great Kitchens and three weeks revenue from Fresh Start Bakeries.
| in Euro '000 | Food Europe |
Food North America |
Food Rest of World |
Total Food Group |
Origin | Total Group |
|---|---|---|---|---|---|---|
| Operating Profit1 | 131,245 | 69,911 | 5,963 | 207,119 | 65,854 | 272,973 |
| Growth | (2.9%) | 3.6% | 180.9% | 1.2% | (13.0%) | (2.7%) |
| Operating Margin | 12.2% | 12.2% | 16.6 % | 12.3% | 5.0% | 9.1% |
| Operating Margin (FY ended 31 July, 2009) |
11.9% | 12.2% | 10.4% | 12.0% | 5.0% | 8.7% |
1 The above figures exclude non SAP intangible amortisation, transaction costs and non-recurring items, and include other income of €82,000. SAP amortisation for the financial year 2010 is €634,000 (2009: nil). During the financial year 2010, the Food Group commenced the implementation of SAP ERP across its businesses. No further material investment is planned in its existing IT infrastructure. As a result of the substantial investment in SAP intangibles, SAP amortisation will no longer be added back to underlying profit.
ARYZTA's Food Group business is primarily focused on speciality baking, a niche segment of the overall bakery market. Speciality bakery consists of freshly prepared offerings giving the best value, variety, taste and convenience to consumers at the point of sale. ARYZTA's customer mix is an evenly balanced mix of convenience and independent retail, large retail, quick service restaurants and other foodservice categories.
Revenues declined during the period across most channels and markets. Convenience retail and foodservice on the island of Ireland and the UK were the most severely impacted channels and markets. Continued pressure on the consumer in Europe and North America made for a challenging year. Operating profit remained stable, underlying ARYZTA's operating leverage. Cost curtailment and operating efficiency initiatives allowed the business to reduce its cost to serve its customers. As a result, ARYZTA's customers were facilitated to increase their value propositions to consumers.
Food Europe has leading market positions in the speciality bakery market in Switzerland, Germany, Poland, the UK, Ireland, France, Sweden and Spain. In Europe, ARYZTA has a mixture of business to business and consumer brands, including Hiestand, Cuisine de France, Delice de France, Coup de Pates and Fresh Start Bakeries. It has a diversified customer base including convenience retail, gas stations, multiple retail, restaurants, catering and hotels, leisure and quick service restaurants.
Food Europe continued to face tough trading conditions in the financial year 2010, with underlying revenue declining 8.2%. Food Europe's operating profit declined 2.9% to €131.2m.
In Europe, the decline in revenue has been mostly evident in the UK and Ireland. The consumer has endured stringent austerity measures, significantly impacting their disposable income. Support was provided to customers, which reduced costs to serve, particularly on the island of Ireland, facilitating operators to increase their value offerings. This was underpinned by ARYZTA's cost curtailment and operating efficiencies initiatives during the period.
Continental Europe revenues remain stable where continued investment in new field sales personnel and growth from new customers, with a particular focus on the independent segment (bakeries, boulangeries and independent restaurants), have aided performance.
The Irish and UK businesses were combined with the Hiestand business following year end. This will provide integrated solutions to their customers and improve cross-selling and skill transfer between businesses.
Food North America is a leading player in the US bakery market. It has a diversified customer base including multiple retail, restaurants, catering and hotels, leisure, hospitals, military, fundraising and quick service restaurants.
Otis Spunkmeyer and La Brea Bakery are two iconic brands which evoke emotional appeal with the consumer. Fresh Start Bakeries (incorporating Pennant Foods and Sweet Life) is a global supplier of speciality bakery products with a leading position in the quick service restaurant segment, while Great Kitchens is a leading supplier of pizza and appetisers with a focus on the deli segment of the retail grocery channel.
Food North America delivered revenues of €571.6m which represented a decline of 4.3% in underlying revenue for the financial year 2010. Operating Profit grew by 3.6% to €69.9m.
In North America, conditions were weak and value propositions for consumers remain centre stage. Cost curtailment and operating efficiencies have compensated for weak revenues (following a high 2009 growth comparator) in the period.
ARYZTA has existing businesses in Japan, Malaysia and Australia. ARYZTA is continuing to understand the customer diversity and opportunity in this vast market. Through the acquisition of Fresh Start Bakeries (and its incorporated business of Sweet Life), ARYZTA now has new business operations in Brazil, Australia and New Zealand as well as joint venture production facilities in Chile and Guatemala.
Food Rest of World delivered revenues of €35.8m which represented an increase of 8.4% in underlying revenue for the financial year 2010. Food Rest of World operating profits grew by 180.9% to €6.0m for the financial year 2010.
The current financial year acquisitions of Fresh Start Bakeries and Great Kitchens are milestones to deliver on ARYZTA's long term strategic objectives. These acquisitions provide additional product expansion in North America, greater geographic expansion across Europe and Rest of World, increased access into retail and quick service restaurant channels and a substantially increased bakery capability and capacity.
As a Group, ARYZTA can now demonstrate leadership across product categories supplied from unmatched international manufacturing capabilities and delivered through well balanced access to customer channels, strategically aligned with the key growth drivers of the industry. The key growth drivers include: declining in-home food, shortage of skilled labour and increasing demand for consistent quality at moderate costs.
Furthermore, significant benefits are expected to accrue to the Group from these new acquisitions through increased cross selling, more efficient capital allocation, enhanced customer service and increased international customer partnerships.
These factors together with the tremendous depth of management skills and industry knowledge across all ARYZTA businesses' executive teams should contribute to the further growth prospects of the Group.
Adding to the implementation of the SAP Enterprise Resource Planning ('ERP') system in Otis Spunkmeyer in 2009, La Brea Bakery has now also been integrated. The implementation in both businesses was completed in line with budgeting and scheduling forecasts.
The continued phased implementation of a global ERP system is enabling the businesses to operate shared common 'best in class' processes and procedures.
This joint venture has yielded a net contribution after interest and tax of €19.9m in the financial year 2010 compared with a net contribution of €13.8m after interest and tax in the financial year 2009.
Subsequent to the closing of the financial year 2010, ARYZTA's subsidiary IAWS Group Ltd. ('IAWS') reached an agreement with Tim Hortons Inc. (its 50-50 partner under the Maidstone Bakery joint venture) to acquire the remaining 50% share of Maidstone Bakery.
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 €111.9m at 31 July 2010.
The consolidated net debt of the Group excluding Origin's non-recourse debt amounted to €1,115.6m and relates to the food segments of the Food Group. This represented a Net Debt to EBITDA ratio of 2.96 times (based on banking facility covenant definition).
| Food Group cash generation | ||
|---|---|---|
| in Euro `000 | July 2010 | July 2009 |
| EBIT | 160,252 | 161,724 |
| Amortisation | 47,450 | 42,983 |
| EBITA1 | 207,702 | 204,707 |
| Depreciation | 60,363 | 54,628 |
| EBITDA | 268,065 | 259,335 |
| Working capital movement from debt factoring | 21,554 | – |
| Working capital movement | 3,264 | 24,675 |
| Dividends received4 | 24,158 | 18,830 |
| Maintenance capital expenditure | (10,330) | (15,047) |
| Interest and tax | (54,224) | (53,562) |
| Other2 | (1,469) | 2,126 |
| Cash flows generated from activities | 251,018 | 236,357 |
| Underlying net profit3 | 157,687 | 149,336 |
| Depreciation | 60,363 | 54,628 |
| 218,050 | 203,964 | |
| Net underlying cash earnings conversion | 115.1% | 115.9% |
1 Food Group EBITA is shown before other income of €51,000, contribution from joint ventures and deduction of SAP related amortisation. SAP related amortisation for financial year 2010 is €634,000 (2009: nil).
2 "Other" comprises predominantly of non-cash share-based charges and government grants amortisation.
3 Underlying net profit before non SAP related intangible amortisation, transaction costs, non-recurring items and related tax credits.
4 Includes dividend received from Origin of €7,600,000.
| in Euro `000 | Food Group |
|---|---|
| Food Group opening net debt as at 31 July 2009 | (505,504) |
| Cash flows generated from activities | 251,018 |
| Cost of acquisitions (incl. transaction costs and net debt acquired) | (860,313) |
| Share placement | 115,001 |
| Investment capital expenditure | (46,546) |
| Deferred consideration | (2,128) |
| Dividends paid | (30,599) |
| Foreign exchange movement1 | (33,148) |
| Other | (3,404) |
| Food Group closing net debt 31 July 2010 | (1,115,623) |
| Net Debt to EBITDA2 | 2.96x |
1 Foreign exchange movement is primarily attributable to the fluctuation in the US Dollar to Euro rate between July 2009 (1.4252) and July 2010 (1.3079).
2 Food Group net debt to EBITDA ratio based on banking facility covenant definition (EBITDA including pro forma TTM contribution from Fresh Start Bakeries and Great Kitchens and dividend contribution from Canadian JV). Food Group net debt to EBITDA ratio based on Private Placement covenant definition (EBITDA including pro forma TTM contribution from Fresh Start Bakeries and Great Kitchens and EBITDA contribution from Canadian JV, and excluding non-recurring items) is 2.84x.
ARYZTA's funding facilities and key financial covenant (excluding Origin, which has separate ring-fenced structures which are financed without recourse to ARYZTA) are as follows:
| Description | Principal | Maturity |
|---|---|---|
| May 2010 – Syndicated Bank Loan | CHF 600m | Dec 2014 |
| May 2010 – US Private Placement | USD 420m / EUR 25m | May 2013 –May 2022 |
| Dec 2009 – US Private Placement | USD 200m | Dec 2021–Dec 2029 |
| Nov 2009 – Swiss Bond | CHF 200m | March 2015 |
| Jun 2007 – US Private Placement | USD 450m | Jun 2014–Jun 2019 |
| Key Covenant |
| Net debt: EBITDA (not greater than) | 3.5 times |
|---|---|
40%
Weighted average interest cost of the Food Group is circa. 4.24%. The current weighted average maturity is 7.1 years.
| 2011 | |
|---|---|
| 2012 | |
| 2013 | 4% |
| 2014 | 8% |
| 2015 | |
| 2016 | 2% |
| 2017 | 14% |
| 2018 | 3% |
| 2019 | 3% |
| 2020 | 2% |
| 2021 | 8% |
| 2022 | 10% |
| 2025 | 2% |
| 2030 | 4% |
1 Profile of term debt maturity is set out based on the Group's financial year end. Food Group gross term debt at 31 July 2010 of €1.4bn (excluding overdrafts of €42.8m). Total Food Group net debt at 31 July 2010 of €1.1bn.
During the financial year 2010, ARYZTA negotiated a new syndicated bank loan of CHF 600m maturing in December 2014. Credit Suisse and Zürcher Kantonalbank (ZKB) acted together with Bank of America, BNP Paribas, Rabobank and UBS as mandated lead arrangers. Ten Swiss Cantonal banks participated in the syndicated bank facility1 . ARYZTA also placed notes in the United States under private placements of USD 200m in December 2009 and USD 420m and EUR 25m in May 2010 which had an average maturity of 9.2 years at issuance. The Group also completed a CHF 200m Swiss bond issue in November 2009.
These funding initiatives enhanced operating funding facilities for the Group and replaced previous ARYZTA banking facilities due to expire in June 2013.
1 Cantonal Banks - Aargauische Kantonalbank, Bank Cantonale Vaudoise, Bank Coop AG, Basler Kantonalbank, Basellandschaftliche Kantonalbank, Schaffhauser Kantonalbank, Luzerner Kantonalbank AG, Raiffeisen Schweiz Genossenschaft, Banca dello Stato del Cantone Ticino, Thurgauer Kantonalbank.
| Group balance sheet | Total Group | Total Group |
|---|---|---|
| in Euro '000 | 2010 | 2009 |
| Property, plant and equipment | 945,100 | 664,532 |
| Investment properties | 20,648 | 62,975 |
| Goodwill and intangible assets | 2,264,421 | 1,498,430 |
| Associates and joint ventures | 162,881 | 139,351 |
| Working capital | (58,672) | (14,871) |
| Other segmental liabilities | (79,336) | (93,592) |
| Segmental net assets | 3,255,042 | 2,256,825 |
| Net debt | (1,227,512) | (659,256) |
| Deferred tax, net | (294,096) | (176,474) |
| Income tax | (53,209) | (40,650) |
| Derivative financial instruments | (6,375) | (12,477) |
| Net assets | 1,673,850 | 1,367,968 |
| Food Group balance sheet | Food Group | Food Group |
|---|---|---|
| in Euro '000 | 2010 | 2009 |
| Property, plant and equipment | 815,918 | 577,772 |
| Investment properties | 4,646 | 3,761 |
| Goodwill and intangible assets | 2,149,826 | 1,382,431 |
| Joint ventures | 73,140 | 55,720 |
| Investment in Origin | 51,045 | 51,045 |
| Working capital | (49,997) | (28,744) |
| Other segmental liabilities | (56,024) | (55,544) |
| Segmental net assets | 2,988,554 | 1,986,441 |
| Net debt | (1,115,623) | (505,504) |
| Deferred tax, net | (280,665) | (162,355) |
| Income tax | (47,437) | (38,116) |
| Derivative financial instruments | (1,778) | (5,432) |
| Net assets | 1,543,051 | 1,275,034 |
The movement in the Food Group's fixed asset base reflects its strategic investment in its new businesses, Fresh Start Bakeries (incorporating Pennant Foods and Sweet Life) and Great Kitchens.
The newly recognised goodwill and intangibles reflect the strength of value contained within ARYZTA's businesses. This strength contributes and supports the resilient operating profit growth in these challenging economic times.
| Food | Food North |
Food Rest of |
Total Food |
|||
|---|---|---|---|---|---|---|
| in Euro million | Europe | America | World | Group | Origin | Total |
| 2010 | ||||||
| Group share net assets1 | 1,427 | 1,281 | 230 | 2,938 | 3824 | 3,320 |
| EBITA & associates/JVs cont.2 | 141 | 137 | 23 | 301 | 77 | 378 |
| ROI | 9.9% | 10.7%3 | 10.0% | 10.2% | 20.3% | 11.4% |
| 2009 | ||||||
| Group share net assets1 | 1,292 | 638 | 4 | 1,934 | 3874 | 2,321 |
| EBITA & associates/JVs cont.2 | 135 | 81 | 3 | 219 | 79 | 298 |
| ROI | 10.4% | 12.7% | 56.7% | 11.3% | 20.4% | 12.8% |
1 Net assets exclude all bank debt, cash and cash equivalents and tax related balances.
2 Pro forma earnings before interest, tax and non SAP 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). SAP amortisation for the financial year 2010 is €634,000 (2009: nil).
3 Re-translating July 2010 pro forma EBITA & associates/JVs contribution for Food North America at the July 2010 closing rate of 1.3079 would result in an ROI of 11.3%.
4 Origin net assets adjusted for the fluctuation in its average quarterly working capital by €64,000,000. 5 The Group WACC on a pre-tax basis is currently 8.1% (2009: 9.4%). Group WACC on a post-tax basis is currently 6.5% (2009: 7.6%).
The Board recommends a final dividend of CHF 0.48021 to be paid on 1 February 2011, if approved by shareholders at the General Meeting to be held on 2 December 2010.
In order to allow both Swiss and non-Swiss shareholders to avail of the cash flow and administrative advantages from the introduction into Swiss tax legislation of a 0% withholding tax rate on dividend distributions made from "unrestricted contributed reserves" after 1 January 2011, the Group is proposing to delay the 2010 dividend distribution until 1 February 2011, being the most efficient date from a Group administrative perspective for the dividend distribution, after the Group's interim close date of 31 January 2011.
1 Based on EUR 0.3660 per share converted at the foreign exchange rate of one Euro to CHF 1.3121 on 23 September 2010, the date of approval of the ARYZTA financial statements.
Origin results for the period were robust, and as a result, its return on investment was maintained at circa 20%. Outlook for the financial year 2011 has improved, arising from the current positive trend in agri-markets. Subsequent to the closing of the financial year 2010, Origin created an Irish food consolidation with CapVest that has sharpened its strategic focus on its agri-business. Origin's strong balance sheet with a net debt to EBITDA ratio of 1.41x provides support for further strategic growth.
The Board of Origin have proposed a dividend per ordinary share of 9 cent for the period ended 31 July 2010. ARYZTA has a holding of 95 million shares in Origin Enterprises.
Origin's separately published results are available at www.originenterprises.com.
ARYZTA will continue to focus on operating efficiencies, cost management, innovation and cash flow generation. ARYZTA's opportunity will be to unlock the full potential across its enlarged business base.
In recent times, there has been a re-emergence of commodity inflation which underpins a long term trend of higher food prices. ARYZTA's business model supports stable margins, and bakery offers a most compelling food value proposition for the consumer, providing resilience in an inflationary environment.
ARYZTA believes, through its newly acquired businesses, which have diversified its geographical scope, product expansion and channel access points, it is better equipped to deliver a robust and sustainable performance in the future through all economic cycles.
As previously guided in its Strategic Acquisitions Announcement of 8 June 2010, the Group expects an EPS uplift of 45.0 cent arising from acquisitions in the financial year 2011.
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.
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.
1 These risks are not in order of importance.
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 the Group and Company 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
of Directors
23 September 2010
| in Euro `000 | Notes | 2010 | 2009 |
|---|---|---|---|
| Revenue | 3,009,726 | 3,212,270 | |
| Cost of sales | (2,169,030) | (2,344,377) | |
| Gross profit | 840,696 | 867,893 | |
| Distribution expenses | (416,666) | (415,047) | |
| Administration expenses | (201,869) | (218,714) | |
| Operating profit before fair value adjustment, acquisition and merger costs and other income |
222,161 | 234,132 | |
| Fair value adjustment on investment properties | – | (134,543) | |
| Acquisition and merger costs | (4,643) | (22,738) | |
| Other income | 82 | 106 | |
| Operating profit | 217,600 | 76,957 | |
| Share of profit after tax of associates and joint ventures | 31,613 | 17,525 | |
| Profit before financing income and costs | 249,213 | 94,482 | |
| Financing income | 10,230 | 7,055 | |
| Financing costs | (61,715) | (57,707) | |
| Profit before tax | 197,728 | 43,830 | |
| Income tax | (29,639) | (2,853) | |
| Profit for the year | 168,089 | 40,977 | |
| Attributable as follows: | |||
| Equity shareholders of the company | 151,729 | 54,010 | |
| Non-controlling interest | 16,360 | (13,033) | |
| Profit for the year | 168,089 | 40,977 | |
| Earnings per share for the year | Notes | 2010 Euro cent |
2009 Euro cent |
Basic earnings per share 3 190.99 68.87 Diluted earnings per share 3 189.49 68.69
| in Euro `000 | 2010 | 2009 |
|---|---|---|
| Profit for the year | 168,089 | 40,977 |
| Other comprehensive income | ||
| Foreign exchange translation effects | ||
| – Foreign currency net investments | 101,287 | 51,553 |
| – Foreign currency borrowings | (44,173) | (34,336) |
| – Recycle of foreign exchange gain on settlement of quasi equity loans | (4,679) | – |
| – Share of joint ventures and associates' foreign exchange translation adjustment | (679) | (192) |
| Cash flow hedges | ||
| – Effective portion of changes in fair value of cash flow hedge | 3,933 | (2,727) |
| – Fair value of cash flow hedges transferred to income statement | 2,209 | (6,992) |
| – Deferred tax effect of cash flow hedges | (990) | 1,314 |
| – Share of joint ventures (loss)/gain on cash flow hedges | (368) | 848 |
| – Share of joint ventures deferred tax effect of cash flow hedges | 48 | (144) |
| Defined benefit plans | ||
| – Actuarial (loss) on Group defined benefit pension plans | (2,336) | (3,913) |
| – Deferred tax effect of actuarial loss | 563 | 817 |
| – Share of associates' actuarial (loss) on defined benefit plan | (973) | (1,576) |
| – Share of associates' deferred tax effect of actuarial loss | 272 | 442 |
| Deferred tax effect of capital gains tax rate change in Ireland | – | (7,035) |
| Revaluation of previously held investment in Hiestand | – | 35,077 |
| Total other comprehensive income | 54,114 | 33,136 |
| Total comprehensive income for the year | 222,203 | 74,113 |
| Attributable as follows: | ||
| Equity shareholders of the company | 204,649 | 93,522 |
| Non-controlling interest | 17,554 | (19,409) |
| Total comprehensive income for the year | 222,203 | 74,113 |
| in Euro `000 | 2010 | 2009 |
|---|---|---|
| Assets | ||
| Non current assets | ||
| Property, plant and equipment | 945,100 | 664,532 |
| Investment properties | 20,648 | 62,975 |
| Goodwill and intangible assets | 2,264,421 | 1,498,430 |
| Investments in associates and joint ventures | 162,881 | 139,351 |
| Deferred tax assets | 62,290 | 27,053 |
| Total non current assets | 3,455,340 | 2,392,341 |
| Current assets | ||
| Inventory | 212,085 | 192,646 |
| Trade and other receivables | 426,917 | 406,774 |
| Derivative financial instruments | 889 | 599 |
| Cash and cash equivalents | 394,587 | 294,536 |
| Total current assets | 1,034,478 | 894,555 |
| Total assets | 4,489,818 | 3,286,896 |
| in Euro `000 | 2010 | 2009 |
|---|---|---|
| Equity | ||
| Called up share capital | 1,061 | 1,005 |
| Share premium 632,951 |
518,006 | |
| Retained earnings and other reserves 980,190 |
801,345 | |
| Total equity attributable to equity shareholders of the company 1,614,202 |
1,320,356 | |
| Non-controlling interest | 59,648 | 47,612 |
| Total equity 1,673,850 |
1,367,968 | |
| Liabilities | ||
| Non current liabilities | ||
| Interest bearing loans and borrowings 1,575,265 |
927,252 | |
| Employee benefits | 15,454 | 28,544 |
| Deferred income from government grants | 18,477 | 18,941 |
| Other payables | 7,107 | 1,025 |
| Deferred tax liabilities 356,386 |
203,527 | |
| Derivative financial instruments | 804 | 3,244 |
| Deferred consideration | 25,829 | 41,259 |
| Total non current liabilities 1,999,322 |
1,223,792 | |
| Current liabilities | ||
| Interest bearing loans and borrowings | 46,834 | 26,540 |
| Trade and other payables 697,674 |
614,291 | |
| Corporation tax payable | 53,209 | 40,650 |
| Derivative financial instruments | 6,460 | 9,832 |
| Deferred consideration | 12,469 | 3,823 |
| Total current liabilities 816,646 |
695,136 | |
| Total liabilities 2,815,968 |
1,918,928 | |
| Total equity and liabilities 4,489,818 |
3,286,896 |
| 31 July 2010 in Euro `000 |
Share capital |
Share premium |
Treasury shares |
Cash flow hedge reserve |
Re valuation reserve |
Share based payment reserve |
Foreign currency trans lation reserve |
Retained earnings |
Total share holders equity |
Non controlling interest |
Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| At 1 August 2009 | 1,005 | 518,006 | (30) | (6,882) | 35,108 | 4,131 | (41,147) | 810,165 1,320,356 | 47,612 1,367,968 | ||
| Profit for the year | – | – | – | – | – | – | – | 151,729 | 151,729 | 16,360 | 168,089 |
| Foreign exchange translation effects |
– | – | – | – | – | – | 50,844 | – | 50,844 | 912 | 51,756 |
| Cash flow hedges | – | – | – | 4,279 | – | – | – | – | 4,279 | 553 | 4,832 |
| Defined benefit plans | – | – | – | – | – | – | – | (2,203) | (2,203) | (271) | (2,474) |
| Total comprehensive income |
– | – | – | 4,279 | – | – | 50,844 | 149,526 | 204,649 | 17,554 | 222,203 |
| Issue of shares, net of costs |
56 | 114,945 | – | – | – | – | – | – | 115,001 | – | 115,001 |
| Equity dividends | – | – | – | – | – | – | – | (27,861) | (27,861) | – | (27,861) |
| Dividends paid to non-controlling interest |
– | – | – | – | – | – | – | – | – | (5,779) | (5,779) |
| Share-based payments | – | – | – | – | – | 2,057 | – | – | 2,057 | 261 | 2,318 |
| At 31 July 2010 | 1,061 | 632,951 | (30) | (2,603) | 35,108 | 6,188 | 9,697 | 931,830 1,614,202 | 59,648 1,673,850 |
| Cash flow |
Re | Share based |
Foreign currency trans |
Total share |
Non | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 31 July 2009 in Euro `000 |
Share capital |
Share premium |
Treasury shares |
hedge reserve |
valuation reserve |
payment reserve |
lation reserve |
Retained earnings |
holders equity |
controlling 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 |
| Profit for the year | – | – | – | – | – | – | – | 54,010 | 54,010 | (13,033) | 40,977 |
| Foreign exchange translation effects |
– | – | – | – | – | – | 18,888 | – | 18,888 | (1,863) | 17,025 |
| Cash flow hedges | – | – | – | (6,372) | – | – | – | – | (6,372) | (1,329) | (7,701) |
| Defined benefit plans | – | – | – | – | – | – | – | (3,057) | (3,057) | (1,173) | (4,230) |
| Deferred tax effect of capital gains tax rate change in Ireland |
– | – | – | – | – | – | – | (5,024) | (5,024) | (2,011) | (7,035) |
| Revaluation of previously held interest in Hiestand |
– | – | – | – | – | – | – | 35,077 | 35,077 | – | 35,077 |
| Total comprehensive income/(loss) |
– | – | – | (6,372) | – | – | 18,888 | 81,006 | 93,522 | (19,409) | 74,113 |
| 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) | – | – | – | – | – | – | – | – |
| 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 | – | – | – |
| Arising on business combination |
– | – | – | – | – | – | – | – | – | 8,092 | 8,092 |
| Repurchase/disposal of non-controlling 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 |
| in Euro `000 | 2010 | 2009 |
|---|---|---|
| Cash flows from operating activities | ||
| Profit for the year | 168,089 | 40,977 |
| Income tax | 29,639 | 2,853 |
| Financing income | (10,230) | (7,055) |
| Financing costs | 61,715 | 57,707 |
| Share of profit after tax of associates and joint ventures | (31,613) | (17,525) |
| Fair value adjustment on investment properties, merger costs and other income | (82) | 157,175 |
| Depreciation of property, plant and equipment | 66,888 | 62,195 |
| Amortisation of intangible assets | 51,364 | 46,277 |
| Recognition of deferred income from government grants | (2,994) | (2,026) |
| Share-based payments | 2,318 | 3,743 |
| Other | 26 | (22) |
| Cash flows from operating activities before changes in working capital | 335,120 | 344,299 |
| (Increase)/decrease in inventory | 13,956 | 70,296 |
| (Increase)/decrease in trade and other receivables | 52,926 | 28,840 |
| Increase/(decrease) in trade and other payables | (35,829) | (72,127) |
| Cash generated from operating activities | 366,173 | 371,308 |
| Interest paid | (46,626) | (54,989) |
| Interest received | 1,446 | 3,415 |
| Income tax paid | (30,424) | (33,396) |
| Net cash flows from operating activities | 290,569 | 286,338 |
| in Euro `000 | Notes 2010 |
2009 |
|---|---|---|
| Cash flows from investing activities | ||
| Proceeds from sale of property, plant and equipment | 1,866 | 2,973 |
| Purchase of property, plant and equipment | ||
| – maintenance capital expenditure | (16,305) | (22,762) |
| – investment capital expenditure | (29,632) | (56,229) |
| Grants received | 1,117 | 2,377 |
| Purchase of investment properties | – | (775) |
| Acquisitions of subsidiaries and businesses, net of cash acquired 1 | (564,419) 4 |
(80,546) |
| Purchase of intangible assets | (18,037) | (10,705) |
| Sale of intangible assets | – | 6,837 |
| Dividends received | 22,365 | 23,004 |
| Investments in associates and joint ventures | (3,052) | (26,184) |
| Deferred consideration paid | (2,128) | (27,384) |
| Net cash flows from investing activities | (608,225) | (189,394) |
| Cash flows from financing activities | ||
| Net proceeds from issue of share capital | 115,001 | (626) |
| Gross drawdown of loan capital | 1,776,942 | 2,467,751 |
| Gross repayment of loan capital | (1,467,590) | (2,399,509) |
| Capital element of finance lease liabilities | (1,693) | (1,300) |
| Dividends paid to non-controlling interests | (5,779) | – |
| Dividends paid to equity shareholders | (27,861) | – |
| Net cash flows from financing activities | 389,020 | 66,316 |
| Net increase in cash and cash equivalents | 71,364 | 163,260 |
| Translation adjustment | 7,841 | (875) |
| Net cash and cash equivalents at start of year | 269,144 | 106,759 |
| Net cash and cash equivalents at end of year | 348,349 | 269,144 |
1 Total cash flow impact of acquisitions for the period was €860,313,000. This is made up of €569,062,000 of directly related net acquisition costs and total debt acquired including finance leases of €292,251,000.
The financial information included on pages 14 to 28 of this News Release have been extracted from the ARYZTA Group financial statements for the year ended 31 July 2010 on which the auditor has issued an unqualified audit opinion.
The financial information has been prepared in accordance with the accounting policies set out in the Group's financial statements for the year ended 31 July 2009 which were prepared in accordance with International Financial Reporting Standards (IFRS), and have been updated for changes in IFRS applicable to the financial year 2010 as outlined in the Group accounting policies note to the interim financial statements for the period ended 31 January 2010.
The consolidated financial information is presented in Euro, rounded to the nearest thousand, unless otherwise stated.
| l) Segment revenue and result | Food Europe |
Food North America |
Food Rest of World |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Segment revenue1 | 1,072,010 | 1,137,230 | 571,585 | 555,110 | 35,822 | 20,414 | 1,330,309 | 1,499,516 | 3,009,726 | 3,212,270 | |
| Operating profit before non- recurring items |
95,518 | 101,893 | 59,079 | 57,771 | 5,655 | 2,060 | 61,909 | 72,408 | 222,161 | 234,132 | |
| Non-recurring items2 | 118 | (22,738) | (4,710) | – | – | – | 31 | (134,437) | (4,561) | (157,175) | |
| Operating profit | 95,636 | 79,155 | 54,369 | 57,771 | 5,655 | 2,060 | 61,940 | (62,029) | 217,600 | 76,957 | |
| Share of profit after tax of associates and joint ventures |
– | – | 19,923 | 13,808 | 118 | – | 11,572 | 3,717 | 31,613 | 17,525 | |
| Profit before financing income and costs |
95,636 | 79,155 | 74,292 | 71,579 | 5,773 | 2,060 | 73,512 | (58,312) | 249,213 | 94,482 | |
| Financing income | 10,230 | 7,055 | |||||||||
| Financing costs | (61,715) | (57,707) | |||||||||
| Profit before tax as reported |
in Group Income Statement 197,728 43,830
1 There are no significant intercompany revenues between the Group's food business segments. There were €6,756,000 (2009: €8,321,000) in intra group revenue between the Origin and food segments of the Group.
2 Non-recurring items in the financial year 2010 comprise transaction costs of €4,643,000 and gain on sale of property, plant and equipment of €82,000.
| Food | Food | Food | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| ll) Segment assets | Europe | North America | Rest of World | Origin | Total Group | ||||||
| in Euro `000 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Segment assets excluding investments in associates and joint ventures |
1,716,751 | 1,566,132 | 1,387,060 | 691,875 | 243,862 | 10,256 | 521,498 | 557,094 | 3,869,171 | 2,825,357 | |
| Investments in associates and joint ventures |
293 | – | 69,584 | 55,720 | 3,263 | – | 89,741 | 83,631 | 162,881 | 139,351 | |
| Segment assets | 1,717,044 | 1,566,132 | 1,456,644 | 747,595 | 247,125 | 10,256 | 611,239 | 640,725 | 4,032,052 | 2,964,708 | |
| Reconciliation to total assets as reported in Group Balance Sheet |
|||||||||||
| Derivative financial instruments |
889 | 599 | |||||||||
| Cash and cash equivalents | 394,587 | 294,536 | |||||||||
| Deferred tax assets | 62,290 | 27,053 | |||||||||
| Total assets as reported in Group Balance Sheet |
4,489,818 | 3,286,896 | |||||||||
| Food | Food | Food | |||||||||
| lll) Segment liabilities | Europe | North America | Rest of World | Origin | Total Group | ||||||
| in Euro `000 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |
| Segment liabilities | 290,001 | 274,289 | 175,808 | 109,594 | 17,544 | 6,325 | 293,657 | 317,675 | 777,010 | 707,883 | |
| Reconciliation to total liabilities as reported in Group Balance Sheet |
|||||||||||
| Interest bearing loans and borrowings |
1,622,099 | 953,792 | |||||||||
| Derivative financial instruments |
7,264 | 13,076 | |||||||||
| Current and deferred tax liabilities |
409,595 | 244,177 | |||||||||
| Total liabilities as reported in Group Balance Sheet |
2,815,968 | 1,918,928 |
| lV) Other segment information in Euro `000 |
Food Europe |
Food North America |
Food Rest of World |
Origin | Total Group | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||
| Depreciation | 45,324 | 40,928 | 14,057 | 13,177 | 982 | 523 | 6,525 | 7,567 | 66,888 | 62,195 | |
| Amortisation of intangible assets |
35,609 | 33,210 | 11,533 | 9,710 | 308 | 63 | 3,914 | 3,294 | 51,364 | 46,277 | |
| Fair value adjustment | – | – | – | – | – | – | – | 134,543 | – | 134,543 | |
| Capital expenditure | |||||||||||
| – Property, plant and equipment |
24,155 | 66,063 | 13,967 | 11,331 | 581 | 615 | 6,169 | 5,854 | 44,872 | 83,863 | |
| – Computer related intangibles |
6,076 | 7,050 | 11,074 | 2,827 | 30 | 43 | 1,062 | 668 | 18,242 | 10,588 | |
| – Other intangibles | – | 1,086 | – | – | – | – | 160 | – | 160 | 1,086 | |
| Total capital expenditure | 30,231 | 74,199 | 25,041 | 14,158 | 611 | 658 | 7,391 | 6,522 | 63,274 | 95,537 |
| Europe | North America | Rest of World | Total Group | |||||
|---|---|---|---|---|---|---|---|---|
| in Euro `000 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 |
| Segment revenue1 | 2,402,319 | 2,636,746 | 571,585 | 555,110 | 35,822 | 20,414 | 3,009,726 | 3,212,270 |
| Segment assets | 2,328,283 | 2,206,857 | 1,456,644 | 747,595 | 247,125 | 10,256 | 4,032,052 | 2,964,708 |
| IFRS 8 non-current assets | 1,820,547 | 1,700,830 | 1,346,701 | 661,959 | 225,802 | 2,499 | 3,393,050 | 2,365,288 |
1 Revenues from external customers attributed to the Group's country of domicile, Switzerland, is 5.8% of total Group revenues (2009: 5.3%). Revenues from external customers attributed to material foreign countries are United States 19.0% (2009: 17.3%), Ireland 28.5% (2009: 31.2%) and the United Kingdom 23.6% (2009: 25.4%). For the purposes of this analysis customer revenues are allocated based on geographic location of vendor.
As is common in this industry the Group has a large number of customers, and there is no single customer with a share of revenue greater than 10% of total group revenue.
| 2010 | 2009 | |
|---|---|---|
| Basic earnings per share | in Euro 000 | in Euro000 |
|
| Profit for year attributable to equity shareholders | 151,729 | 54,010 |
| Weighted average number of ordinary shares | 000 |000 |
|
| Issued ordinary shares at 1 August1 | 78,946 | 63,669 |
| Effect of shares issued during the year | 498 | 14,758 |
| Weighted average number of ordinary shares for the year | 79,444 | 78,427 |
| Basic earnings per share | 190.99 cent | 68.87 cent |
| 2010 | 2009 | |
| Diluted earnings per share | in Euro 000 | in Euro000 |
|
| Profit for year attributable to equity shareholders | 151,729 | 54,010 |
| Effect on non-controlling interests share of profits due to dilutive effect of Origin management equity entitlements2 |
(1,187) | – |
| Diluted profit for financial year attributable to equity shareholders |
150,542 | 54,010 |
| Weighted average number of ordinary shares (diluted) | 000 |000 |
|
| Weighted average number of ordinary shares used in basic calculation |
79,444 | 78,427 |
| Effect of equity instruments with a dilutive effect | – | 200 |
| Weighted average number of ordinary shares (diluted) for the year | 79,444 | 78,627 |
| Diluted earnings per share | 189.49 cent | 68.69 cent |
1 Issued share capital excludes 2,234,359 treasury shares issued during the financial year 2009.
2 This adjustment reflects the dilutive impact of equity entitlements granted to Origin senior management under the Origin Long Term Incentive Plan. These equity entitlements dilute the Group's share of Origin profits available as part of its diluted earnings per share calculation.
During the year, the Group completed the acquisitions of Fresh Start Bakeries on 08 July 2010 and Great Kitchens on 07 June 2010.
Fresh Start Bakeries (incorporating Pennant Foods and Sweet Life) (FSB) is a global supplier of speciality bakery products with a leading position in the quick service restaurant segment. It operates 29 specialist production facilities across the US, Canada, Germany, Poland, Sweden, Spain, Brazil, Australia and New Zealand and has three joint ventures located in North America, Chile and Guatemala. Pennant Foods is a leading provider of speciality bakery products and solutions to the North American quick service restaurant, foodservice and retail in-store bakery channels. Sweet Life is a leading innovator and manufacturer of sweet baked goods servicing the North American and Asian quick service restaurant channel.
Great Kitchens, a wholly owned subsidiary of Arbor Frozen Foods, Inc. is a leading supplier of pizza and appetisers with a focus on the deli segment of the North American retail grocery channel.
The goodwill arising on these 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.
| Total | |||
|---|---|---|---|
| 2010 | Provisional | Fresh Start | Great |
| in Euro `000 | Fair value | Bakeries | Kitchens |
| Net assets acquired: | |||
| Property, plant and equipment | 246,378 | 239,751 | 6,627 |
| Intangible assets | 391,076 | 317,077 | 73,999 |
| Investments in associates and JVs | 4,747 | 4,747 | – |
| Inventory | 28,674 | 21,767 | 6,907 |
| Trade and other receivables | 68,591 | 51,258 | 17,333 |
| Trade and other payables | (89,949) | (75,656) | (14,293) |
| Debt acquired | (289,882) | (266,301) | (23,581) |
| Finance leases | (1,369) | – | (1,369) |
| Deferred tax | (122,279) | (93,926) | (28,353) |
| Income tax | (1,518) | (1,518) | – |
| Net assets acquired | 234,469 | 197,199 | 37,270 |
| Goodwill arising on acquisition | 329,950 | 244,635 | 85,315 |
| Consideration | 564,419 | 441,834 | 122,585 |
| Satisfied by: | |||
| Cash consideration | 582,973 | 460,281 | 122,692 |
| Cash acquired | (18,554) | (18,447) | (107) |
| Consideration | 564,419 | 441,834 | 122,585 |
The net cash outflow on acquisitions during the period was disclosed in the Group Cash Flow Statement as follows:
| in Euro `000 | Total |
|---|---|
| Cash flows from operating activities | |
| Transaction costs paid | 4,643 |
| Cash flows from investing activities | |
| Cash consideration | 582,973 |
| Cash acquired | (18,554) |
| 564,419 | |
| Cash flows from financing activities | |
| Debt acquired including finance leases | 291,251 |
| Total cash spend on acquisitions | 860,313 |
For the identification and estimation of the fair value of the acquired intangibles of Great Kitchens and FSB, ARYZTA was assisted by an independent appraisal 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-fromroyalty 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.
The fair values presented in this note for the acquisitions of Fresh Start Bakeries and Great Kitchens are based on provisional valuations.
| Arising on | ||||||
|---|---|---|---|---|---|---|
| Analysis of net debt | 1 August | business | Non cash | Translation | 31 July | |
| in Euro `000 | 2009 | Cash flow | combination | movements | adjustment | 2010 |
| Cash | 294,536 | 92,130 | – | – | 7,921 | 394,587 |
| Overdrafts | (25,392) | (20,766) | – | – | (80) | (46,238) |
| Cash and cash equivalents | 269,144 | 71,364 | – | – | 7,841 | 348,349 |
| Loans | (924,492) | (309,352) | (289,882) | (4,376) | (44,173) | (1,572,275) |
| Finance leases | (3,908) | 1,693 | (1,369) | – | (2) | (3,586) |
| Net debt | (659,256) | (236,295) | (291,251) | (4,376) | (36,334) | (1,227,512) |
| Arising on | ||||||
| Split of net debt | 1 August | business | Non cash | Translation | 31 July | |
| in Euro `000 | 2009 | Cash flow | combination | movements | adjustment | 2010 |
| Food Group net debt | (505,504) | (282,148) | (291,251) | (3,572) | (33,148) | (1,115,623) |
| Origin net debt | (153,752) | 45,853 | – | (804) | (3,186) | (111,889) |
| Net debt | (659,256) | (236,295) | (291,251) | (4,376) | (36,334) | (1,227,512) |
A former Hiestand shareholder has taken legal action against the company asserting, in essence, entitlement under the Hiestand and IAWS merger of August 2008 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.
At the 2 December 2010 General Meeting, shareholders will be invited to approve a proposed dividend of CHF 0.4802 (Euro equivalent €0.3660) per share to be paid to share holders after the balance sheet date. A dividend of CHF 0.5324 per share was paid during the period (2009: no dividend paid during the period).
On 10 September 2010, ARYZTA's 71.4% subsidiary; Origin Enterprises Plc (Origin), concluded a strategic agreement with CapVest Limited facilitating the consolidation of Irish consumer food brands by establishing a new food business venture, Valeo Food Group (Valeo), in which Origin will hold an associate interest of 45%.
As part of this agreement, Origin will transfer its food business which includes the premier Irish food brands, Odlums, Shamrock and Roma into Valeo for net cash proceeds of €26 million and a deferred consideration in the form of loan notes of €35 million. This transfer will conclude the exit by Origin of a direct involvement in its previously reported Food business segment, which contributed revenues of €253 million, operating profits of €13.8 million to the ARYZTA AG 31 July 2010 Group financial statements.
The disposal of the Origin Food business assets into Valeo is expected to result in a loss on disposal of approximately €8 million and will be shown as a non-recurring item in the financial statements for the year ended 31 July 2011. In addition to acquiring Origin's food business, Valeo has also reached agreement on the same date to acquire Batchelors, a leading manufacturer and retail category partner for a number of Ireland's most iconic ambient food and drink brands including Batchelors, Erin, Squeez and Lustre servicing the canned vegetables, dry sauces & mixes, juices and canned fruit categories in Ireland. The Batchelors transaction will not have a material impact on ARYZTA's share of profit from associates.
Valeo is being financed through a combination of external ring-fenced senior bank debt facilities and equity funding provided by CapVest.
For the year ended 31 July 2011, Origin's 45 per cent interest in Valeo will be treated as an associate undertaking and will be accounted for using the equity method in accordance with IAS 28.
On 12th August 2010, ARYZTA announced that its subsidiary IAWS Group Limited reached agreement with Tim Hortons Inc. (Tim Hortons), its 50-50 partner under the CillRyan's joint venture, to acquire Tim Hortons 50% share of CillRyan's for consideration of CAD 475 million (€349 million).
CillRyan's principle operating entity Maidstone Bakery Limited (Maidstone), operates in Brantford, Ontario from a purpose built c.400,000 square foot bakery. Currently Maidstone exclusively services the Tim Hortons network under a contractual arrangement which extends to 2016 (or 2017 at Tim Hortons' option) and may be extended beyond this point by mutual agreement. Following this investment, Maidstone will be under ARYZTA's 100% ownership. The carrying value of the investment in Maidstone JV at 31 July 2010 is €68.3 million. Completion of the Maidstone transaction will close at earliest by end of calendar year 2010.
Separately ARYZTA's US subsidiary, Fresh Start Bakeries, is in the process of completing an investment in three bakeries in Asia (located in Taiwan, Singapore and Malaysia) and will commence the construction of a new bakery in Brazil. These bakeries principally service a leading international quick service restaurant operator, which continues to expand in these regions. The cost of these investments by Fresh Start Bakeries is expected to total in the order of USD 48 million (€36 million).
It is planned that ARYZTA will issue a Perpetual Callable Subordinated Instrument ('Hybrid instrument') in the near term as the principal financing for these strategic investments.
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