Aryztas investment in Picard was questioned in some quarters

Aryzta's investment in Picard was questioned in some quarters

Aryzta has said buying French frozen food retailer Picard remains important to its plans but the Switzerland-based bakery group has insisted whether it decides to turn into its minority stake into full ownership is subject to a series of metrics.

The company acquired 49% of Picard from private-equity firm Lion Capital last year, a transaction that surprised analysts and garnered a mixed response from investors, with some in the investment community questioning the move. Aryzta has an option to buy the rest of Picard in a period from the company's 2019 financial year to its 2021 fiscal period.

Yesterday, Aryzta discussed its annual results with analysts and brokers covering the business. One analyst asked Aryzta's management if the company still believed buying 100% of Picard was "strategically an important milestone in the medium to long term" for its business.

CEO Owen Killian replied: "That is correct." However, he added: "There is no obligation on Aryzta to exercise the option to acquire Picard. What we have negotiated with Picard is a call option. We have a right to acquire Picard but we've got to go through certain stage gates in order to be able to do that.

"The performance of Picard is a stage gate. The performance of Aryzta unlocking what we have within it is a stage gate and of course the investment case and being satisfied with what we find within Picard. There is nothing we have seen within Picard in the course of the last 12 months that makes us any less attracted to Picard. It's an outstanding leader in France for speciality frozen food. It interfaces directly with very knowledgable consumers whose engagement with food is active. It's passionate, it's ethical and it's very, very discerning. We think there's something very attractive about Picard. We've got to go through stage gates."

just-food's six takeaways from Aryzta's annual results and outlook for 2017

Outlining its results for the year to the end of July, Aryzta said its numbers included an 11-month contribution from Picard. It said Picard's unaudited management accounts suggested the retailer's pro-forma revenues for the period were EUR1.4bn (US$1.57bn), up 0.7% on a year earlier. Reflecting on Picard's sales, Aryzta CFO Patrick McEniff said: "France has seen very little food inflation since 2012."

Picard's pro-forma EBITDA was EUR198.8m, 6.3% higher than the previous 12 months.

On a group level, Aryzta reported a decrease in annual profits during fiscal 2015/16 as the company lapped a one-time gain of EUR551.8m from the spin-off and reclassification of former subsidiary Origin Enterprises. Net earnings for the year fell to EUR67m, down from EUR524.8m in the prior year. Underlying net profit from continuing operations stood at EUR311.5m, down 5.6% on the year.

Sales, however, increased 1.5% up year-on-year at EUR3.9bn. Growth was supported by currency exchange relating to the strength of the US dollar. Underlying revenues increased during the year by 0.5%, reflecting "strong" underlying growth in Europe of 4%, offset by a 3.1% decline in underlying revenues in North America. Aryzta said this was "due entirely to the impact of long-term contract renewals".