Embattled Swiss-Irish baked goods group Aryzta’s ace card to turn its fortunes around – the planned €400 million-plus sale of a 49 per cent stake in French frozen foods company Picard – appears to be more of a joker.
Chairman Gary McGann told analysts this week that Aryzta hasn't managed to get its controlling Picard partner, UK private-equity firm Lion Capital, on board to pursue a joint sale of the French company behind everything from frozen falafels to tiramisus.
This has been his preferred option for months, as this would lure most bid interest and secure the best value.
However, McGann, who joined the company last December, also revealed that Aryzta has failed to even win the necessary approval from Lion Capital to sell its minority stake.
In the meantime, the group has decided to press ahead with unpicking some of the questionable purchases it carried out in the past five years under previous chief executive Owen Killian, which took Aryzta group away from its core frozen baked goods business, selling to wholesalers and retailers.
Killian stepped down in March, along with two other top executives, following a series of profit warnings and disappointing financial results over the space of two years. The final straw came when it warned in January that its US cookies business Otis Spunkmeyer, acquired in 2014 as part of its purchase of Illinois-based Cloverhill Bakery, was losing major contracts after it decided to sell its goods directly on retail shelves.
This put it in direct competition with brands that had outsourced baking to the company.
The cost of venturing off-piste was laid bare on Monday when Aryzta’s results for the year to the end of July included a €860 million impairment charge against its assets, mainly Cloverhill.
“While this action represents a painful acknowledgment, primarily of the cost of moving outside of our core strengths, it is considered necessary in order to right-size the business, reflect reality and allow the management team to focus on the future rather than dwell on the past,” McGann said.
In fairness, Aryzta's new team – including chief executive Kevin Toland, formerly of airport operator DAA – has quenched market concerns about near-term refinancing issues by securing a €1.8 billion five-year deal with its lenders.
Crucially, it also involves an easing of financial covenants on what analysts in Investec, for one, call a "stretched balance sheet".
Now, it needs to make headway on its commitment to raising €1 billion over the next four years through disposals and cash generation from its operations to ease the debt burden.
News that Aryzta is preparing to put its La Rousse Foods business in Dublin on the market will help at the margins. It's a decent business by all accounts, supplying fine foods to restaurants, hotels and catering firms in a recovery economy, and may achieve €30 million. But it's an odd fit with Aryzta's new focus.
There’s also talk of the group exiting its 50 per cent interest in UK flatbreads business Signature.
The massive writedown taken against the Cloverhill asset surely clears the way for this investment to be put on the market, too?
Mind you, the group will first have to sort out some staffing issues at the business. Cloverhill had to say goodbye to 800 experienced immigrant workers – or more than a third of its staff – during the summer as a US federal audit of its staffing agency revealed what has been termed “inadequate documentation”.
Kerry chief Stan McCarthy opts for long goodbye Ireland's top publicly-quoted companies are going through the biggest turnover of chief executives in recent times, with Aryzta's Owen Killian quitting in March, Tullow Oil's Aidan Heavey stepping down the following month to become chairman, Richie Boucher retiring during the week from Bank of Ireland, and the chief executives of Paddy Power Betfair and New York-listed Ardagh Group preparing to head on in the coming months.
At Kerry Group, Stan McCarthy has opted for the long goodbye as he steps down from the helm of the ingredients, flavours and consumer food giant this weekend.
The chief executive, who has presided over an almost 300 per cent surge in Kerry's stock price since he took over in January 2008 (making it the Iseq's second-largest company with a market value of €14.3 billion), has decided against a going-away bash this weekend as he hands over the reins to Edmond Scanlon.
With McCarthy planning to remain on the board until the end of the year, it appears that the departure speeches and customary tipple will be held off until the annual directors’ dinner around Christmas.
Don’t expect much of a change in strategy when Scanlon outlines his medium-term goals on October 11th.
Moulded in the Kerry way, the new chief executive – a Kerry farmer’s son and graduate of the company’s famed training programme – is unlikely to bow to hopes in parts of the investment community that he might move away from consumer foods and double down on the group’s higher-margin taste and nutrition business.
The consumer business – where brands include Dairygold, Denny and EasiSingles – currently makes up just a fifth of total sales and remains the subject of perennial disposal speculation. But it's a prized cash cow and they don't part too easily with those in Tralee.
Twitter: @JoeBrennan10
