Half Year Results – period ended 31st January 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

ARYZTA AG’s (“ARYZTA”) food business is firstly focused on the speciality bakery market, a niche part of the total global bakery market. The total bakery market is made up of both traditional bakery and speciality bakery. Traditional bakery typically relates to shelf stable and scratch (also described as Artisan) bakery whereas speciality bakery relates to freshly prepared bakery offerings giving the best value and taste to consumers at point of sale. The aroma of freshly baked goods at the point of sale drives consumer footfall and represents a point of difference for ARYZTA’s customers in foodservice and retail establishments.

 

 

Food Europe has leading market positions in the speciality bakery market in Switzerland, Germany, UK, Ireland and France. In Europe ARYZTA has a mixture of business to business and consumer brands, including; Hiestand, Cuisine de France, Delice de France and Coup de Pates.

 

Food Europe operates 14 state of the art manufacturing sites producing an unrivalled range of speciality bakery products. It has over 600 direct store delivery (DSD) routes and services a diversified customer base including convenience retail, multiple retail, restaurants, catering, hotels and leisure.

 

Food Europe’s performance in the six month period ended 31 January 2009 was in line with expectation. Like for like revenue growth (excluding impact of acquisitions and foreign exchange) in the period was 2.8%. This reflects the slowdown in growth evident at Q1, as a result of negative volume growth in the Irish and to a lesser extent in the UK markets. Elsewhere in ARYZTA’s other principal European markets of France, Switzerland and Germany growth has been resilient.

 

Food Europe’s operating profit grew by 11.0% to €64.0m in the six months ended 31 January 2009, demonstrating the capability and adaptability of the business model in a rapidly changing macro economic environment and the benefits of increased in-sourcing of production. The business continues to focus on adapting its cost base to achieve improved margins and greater return on its manufacturing investments.

 

The Grangecastle bakery, distribution and R&D centre in Dublin was fully commissioned as at the period end 31 January 2009. This project was on budget and to plan. The Grangecastle completion is timely and offers an opportunity to develop the UK / Irish business into new channels, such as the multiple retail channel in the UK.

 

The Hiestand business has performed well in the six months ended 31 January 2009. We are satisfied with the progress of the integration of Hiestand into ARYZTA. The business is now aligned with the ARYZTA reporting model, integrating its accounting and risk management systems with the Group and has been actively implementing Swiss Internal Control System (ICS) requirements across its businesses.

 

 

Food North America has leading market positions in freshly baked cookies and freshly baked artisan breads. The business has two iconic brands which evoke emotional appeal with the US consumer, namely Otis Spunkmeyer and La Brea Bakery.

 

Food North America operates 7 state of the art manufacturing sites across the US. It has over 300 direct store delivery (DSD) routes and services a diversified customer base with strength and depth in foodservice and retail channels.

 

Food North America’s performance in the six month period ended 31 January 2009 was excellent. Like for like revenue growth (excluding impact of acquisitions and foreign exchange) in the period was 16.6%.

 

Operating profit grew by 25.9% to €34.3m in the six month ended 31 January 2009. Changing consumer patterns in the US have been evident for longer than in the European marketplace. The business has responded well to those changes and is well positioned in the new market environment.

 

La Brea Bakery is well positioned with a significant portion of its business servicing the US multiple retail channel, which is experiencing increased consumer footfall at the expense of other channels in the current economic environment.

 

The acquisition of Otis Spunkmeyer in 2006 has proved a success. It is now yielding excellent results for the Group. It is very well positioned in the current environment with a diversified customer base. It has particular strength across the US foodservice market from restaurants, catering (including hospitals, military and fundraising events), hotels and leisure and quick service restaurants.

 

Otis Spunkmeyer is currently implementing SAP Enterprise Resource Planning System (‘ERP’) across its extensive business platform. This project is on plan and should net substantial recurring cost savings and improve the speed of business intelligence to further enhance this business.

 

 

ARYZTA has embryonic businesses in Japan, Malaysia and Australia. Like for like revenue growth (excluding impact of acquisitions and foreign exchange) in Food Developing markets in the period was 1.0%.

 

Food developing markets operating profit grew by 50.9% to €0.9m in the six months ended 31 January 2009.

 

 

This joint venture yielded a net contribution after tax and interest of €7.3m in the six months ended 31 January 2009.

 

 

 

 

 

 

 

 

 

 

ARYZTA continues to have a strong balance sheet with excellent free cash flow.

The Food Group’s free cash flow grew by 24.8% to €91.4m in the six months ended 31 January 2009. ARYZTA negotiated total financing facilities of over €1bn in 2008. At the period ended 31 January 2009, ARYZTA had pro forma net debt of €625.5m; this represented a conservative Net Debt: EBITDA ratio of 2.32 times (based on covenant definition).

 

 

ARYZTA’s banking facilities (excluding Origin, which is separately financed) are as follows:

 

 

The current banking crisis and severe curtailment of credit poses risks for all businesses including ARYZTA in terms of cash and collectables. ARYZTA’s main focus is on cash and collectables to ensure the business is not materially impacted by bad debts. This has been managed successfully to date. ARYZTA will continue to be vigilant and focused on the area of cash and collectables.

 

 

 

The growth in the Food Group’s fixed asset base reflects its continued strategic investment in its manufacturing operations, in particular the full commissioning of its Grangecastle facility during the period. These strategic investments have been timely in providing the Group with adaptability in the current changing macro environment.

 

The merger with Hiestand has added goodwill of €336.6m and intangibles of €253.2m reflecting the strong value in the brands, customer base and workforce of Hiestand as well as the value of synergies to be obtained by ARYZTA.

 

These newly recognised goodwill and intangibles, together with those created out of the more recent acquisitions being Otis Spunkmeyer and Coup de Pates, reflect the strength of value contained within ARYZTA’s businesses. This strength contributes and supports the resilient underlying revenue and operating profit growth in these more challenging economic times.

 

 

In support of clarity in its regulatory regime, the Company is changing the status of the listing of its registered shares (ISIN number CH0043238366) on the Irish Stock Exchange (ISE) from primary to secondary, effective March 10, 2009.  Going forward, the sole primary listing of ARYZTA shares will be on the SIX Swiss Exchange.  The secondary listing on the Irish Stock Exchange allows for continued trading in Dublin as before and ARYZTA continues to be included in the ISEQ Index.

 

 

ARYZTA operates from Zurich where it’s corporate, legal and group finance functions are located.  It is in the process of implementing Swiss Internal Control System (ICS), as required by Swiss regulations. This project is on plan and progressing well as a result of the strong control environment within ARYZTA.

 

 

ARYZTA plans to arrange the replacement of the paper based settlement system currently applying to trades between the Swiss and Irish markets with an electronic system.  

 

 

Origin Enterprises plc (“Origin”) has reported an excellent first half performance, recording a 34.6% increase in operating profit to €27.2 million, reflecting the benefits from significant strategic development since its IPO in 2007. Origin is now well positioned to deliver long term sustainable earnings growth.

 

The highlight of the period has been the performance of Masstock’s fully serviced agronomy business across the United Kingdom and Poland, acquired by Origin in February 2008.  Masstock’s proactive development of crop management programmes underpinned by fundamental research applied to current growing conditions tangibly demonstrates to customers that investment remains the key to securing yield and improved profitability.  Masstock’s customer relationships ensure that the business maintains its core influence in on-farm decision making and product specification.

 

The recently completed agreement between Austevoll Seafoods ASA to combine their respective Irish, UK and Norwegian fishmeal and fish oil operations, represents a major realignment of the fishmeal and fish oil industry and furthers the strategic development of Origin.  This strategic consolidation initiative will enhance the position of the combined business in the globally traded marine proteins and oils sector.  Benefits will include improved raw material landing and conversion efficiencies, a world class product offering supported by superior customer logistics together with the optimisation of North Atlantic production capacity. 

 

Notwithstanding the current economic environment and its associated risks, the business is well positioned, for the seasonally more important second half of the year and Origin remains on target to deliver growth for the full year.

 

Origin has separately published, today, its interim results for the same period.  These results are available at www.originenterprises.com .

 

 

 

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.