Zurich / CH. (aag) Swiss Aryzta AG announced its results for the financial 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 percent in underlying fully diluted EPS in the final year of our three year transformation. Food Group revenue increased by 10,0 percent, despite an adverse currency movement of (3,7) percent. Underlying revenue increased by 2,1 percent and acquired businesses contributed an excellent 11,6 percent 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». Key performance highlights:
Food Group
- Revenue increase of 10,0 percent to 3’394 million EUR
- Food Europe increased by 14,0 percent to 1’586 million EUR
- Food North America increased by 8,7 percent to 1’587 million EUR
- Food Rest of World declined by (5,7) percent to 221 million EUR
- Ebita increase of 19,6 percent to 486 million EUR
- Food Europe increased by 23,8 percent to 230 million EUR
- Food North America increased by 21,0 percent to 230 million EUR
- Food Rest of World declined by (15,7) percent to 26 million EUR
- Ebita margin increased by 110 basis-points to 14,3 percent
- Net Debt: Ebitda ratio of 2,45 times.
Origin
- Revenue declined by (0,2) percent to 1’415 million EUR
- Origin Enterprises underlying fully diluted EPS increased by 10,4 percent to 0,5751 EUR.
- Origin dividend increased by 15,9 percent to 0,20 EUR – a payout ratio of 35 percent.
- Returned 100 million to shareholders via tender offer.
- Net Debt: Ebitda ratio of 0,14 times.
Group
- Group revenue increased by 6,8 percent to 4’809 million EUR
- Group Ebita increased by 19,0 percent to 566 million EUR
- Underlying fully diluted net profit increased by 18,3 percent to 378 million EUR
- Underlying fully diluted EPS increased by 17,2 percent to 4,222 EUR.
Food Group business
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 percent to 3,4 billion EUR. Underlying revenue growth was 2,1 percent, acquisitions added 11,6 percent and currency continued to have a negative (3,7 percent) impact compared to prior year. Food Ebita increased 19,6 percent to 486,3 million EUR, 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 basis-points to 14,3 percent.
Food Europe
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 percent to 1,6 billion EUR. Underlying revenues grew 2,1 percent 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 AG, which was the primary driver of the 12,0 percent acquisition-related revenue growth. The impact from currency movements were negligible within the region during the year. Food Europe Ebita increased by 23,8 percent to 230,3 million EUR, while Ebita margins expanded by 110 basis-points to 14,5 percent.
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 million EUR, with an additional 88,4 million EUR invested in the continued roll-out of the ERP system and other optimisation- related capital projects. A further 100,0 million EUR was invested in a variety of bakery expansion-related capital projects. As a result of these investments, 51,7 million EUR 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
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 percent to 1,6 billion EUR. Underlying revenues grew 1,3 percent 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 percent 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) percent in the region during the year. Food North America Ebita grew by 21,0 percent to 230,3 million EUR, due to positive underlying revenue growth and a further 150 basis-points margin expansion during the year to 14,5 percent.
In North America, the cash costs for non-recurring items were 42,7 million EUR, related primarily to severance and staff-related costs, advisory or other acquisition and integration-related costs. An additional 28,0 million EUR 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 million EUR was invested in a variety of bakery footprint expansion initiatives. As a result of these investments, 32,7 million EUR 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.
Food Rest of World
Aryzta´s operations in the Rest of World include businesses in Australia, Asia, New Zealand and South America. While accounting for less than ten percent of the Food Group business, these locations provide attractive future growth opportunities. Food Rest of World revenues declined by (5,7) percent to 220,9 million EUR, despite solid underlying revenue growth of 7,9 percent, as unfavourable currency movements of (13,6) percent continue to negatively impact the region. Food Rest of World Ebita declined by (15,7) percent to 25,6 million EUR and Ebita margins declined by (140) basis-points to 11,6 percent, 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 13,8 million EUR, 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.
Aryzta Transformation Initiative
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.
Origin Enterprises
Origin Enterprises PLC 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 100 million EUR 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 71,8 million EUR, 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 percent to 68,1 percent. 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 EUR for the year ended 31 July 2014, reflecting a payout ratio of 35 percent. For Origin´s separately published results see b:eu on 2014-09-29.
Outlook
Aryzta´s medium term outlook is to target underlying revenue growth of two to four percent per annum, which is expected to convert to underlying fully diluted EPS growth of four to six percent per annum. Invested capital is expected to further enhance underlying fully diluted EPS by three to six percent per annum.
