Aryzta to grow cash for possible Picard buyout
Published 29/09/2015 | 02:30
Swiss-Irish bakery firm Aryzta has said that it is focusing on growing its cash pile as it mulls whether to acquire the whole of French food company Picard.
The Irish-listed firm took a 49pc stake in the French frozen foods business earlier this year at a cost of €446.6m and has a call option to acquire the remaining 51pc in 2019.
Announcing the company's full year results yesterday chief executive Owen Killian, inset, said that the firm is looking to increase its free cash generation to "€200m+ and building further thereafter."
A spokesman for Aryzta confirmed that cash generation is now a priority for the business, saying: "Free cash is expected to grow tenfold to €200m which will strengthen the balance sheet. We have the option to take a 100pc stake in Picard in 2019 and we have to prepare for that." When asked if the possible acquisition of the remainder of Picard was one of the reasons for the focus on cash growth he said: "Yes".
The initial Picard acquisition, which is still awaiting regulatory approval, was greeted with scepticism when announced, with some analysts questioning the company's move into the frozen food business.
The spokesman also said that the majority of the cash from the sale of the company's stake in Irish agri-services business Origin Enterprises has already been spent on acquisitions throughout the year. Aryzta raised €404m from the sale of 49m shares in Origin in March before by selling its remaining 29pc stake in the business for €225m. Aryzta realised a net gain of €523m overall from the sale of its entire Origin stake after adjustments and factors such as transaction costs are taken into account.
However, the company also spent another €26.5m on the purchase of La Rousse Foods and incurred just under €88m of costs relating to the integration of prior acquisitions.
"When we announced the [first] divestment of Origin and the investment in Picard, €450m was invested in Picard, then we invested further in acquisitions since then so the net proceeds of the Origin sale have been reinvested," the spokesman said.
Despite the money raised from the Origin sale Mr Killian admitted that the 2015 financial year had been a "disappointing" one. Underlying net profits dropped to €360m in the 12 months to the end of July, a fall of 4.7pc.
Despite a 12.6pc increase in sales to €3.8bn underlying revenue also dropped by 2.2pc. Although its European and international operations both saw modest underlying sales growth, underlying revenue at Aryzta's North American arm dropped by 6.2pc.
The company's EBITA margin also dropped from 14.2pc to 13.5pc while earnings per share dropped from 402.2 cent to 422 cent. Aryzta's share price fell by 1.5pc to €41.6 in mid-afternoon trading in Dublin yesterday.