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ISEQ higher-Aryzta results examined

Monday, March 11 09:13:16

The ISEQ is higher this morning at 3,856, up 31 points as European markets edge a little lower on unimpressive Chinese data.

Aryzta is examined by NCB Stockbrokers:

Aryzta reported H1 results this morning (6 months to end of Jan). Group revenue was E2.07 bn (+8.2pc underlying), EBITA E186.3m (9.0pc margin, -40bps yoy), and EPS of 146.4 cent (+0.5pc yoy). FY13 EPS guidance is maintained at 363.5 cent representing 7.7pc yoy growth vs our estimate of 368 cent.

Analysis: Food Europe (c.36pc of Group EBITA): Underlying revenue increased in H1 by 0.5pc vs. -0.2pc in Q1, implying c.1.2pc growth in Q2. Selling prices remained unchanged, implying growth was through volumes, but price increases are expected in H2. EBITA margin expanded 30bps yoy to 12.1pc due to ATI implementation and product changes.

Food North America (c.41pc of Group EBITA): Underlying revenue increased in H1 by 2.2pc vs. +1.3pc in Q1, implying +3.1pc in Q2. Growth was due to product mix and volumes with benefits from ATI possibly helping growth. EBITA margin declined yoy by 40bps to 12.3pc, which is expected to be temporary, but is a negative surprise given expected benefits from the ATI program. Food Rest of World (c.7pc of Group EBITA): Underlying revenue increased in H1 by 5.6pc vs. +4.8pc in Q1, implying +6.4pc growth in Q2. Growth is driven by partnerships with QSR customers. Margin increased 10bps yoy to 13.2pc due to improved capacity utilisation.

Origin Enterprises (c.15pc of Group EBITA; 68.6pc Aryzta owned): reported in line H1 results last week. Net debt came in broadly in line with expectations at E1.4bn (including hybrid debt), similar to year-end, which is as expected given Origin's large working capital outflow in H1.

Conclusion & Action: Overall, the results were broadly in line, but full year guidance is reiterated as in line with current guidance of 363.5c (NCB: 368c). Spend on the ATI efficiency and integration program has increased 15pc to E460m due to recent acquisitions although the implementation timeline is expected to stay the same. Valuing the 68.6pc Origin stake at market values, Aryzta Food Group is trading on c.9.5x FY13E EV/EBITDA or 12.8x P/E, falling to c.8.3x and c.11.4x respectively on our FY14 Estimates according to NCB Stockbrokers.