Bakery firm Aryzta has posted a 1.9% increase in underlying EBITDA for full year 2019, with total revenue declining 1.5% across the group in the period.
Announcing the results, Kevin Toland, the group's chief executive, said that the steps the company has taken in the past year as part of its Project Renew strategy "have established foundations on our path towards stability, performance and growth".
Here's how leading retail analysts viewed its performance:
Darren McKinley, Cantor Fitzgerald
Green shoots are visible at Aryzta after a prolonged period of restructuring. Costs are coming out, non-core businesses are being sold, US business model is refocused and EBITDA has stabilised with guidance for improvement in 2020.
The group is on course for 10-12c earnings per share next year, which implies that Aryzta trades on c.5-6x forward earnings. It addition, it trades on 0.28x book value and 6.5x EV/EBITDA.
Our recent recommendation on Aryzta is offside, having raised it on the capital raising, but this result does give us some comfort. I would expect some peer analysts who value their shares at over €1.80 to reiterate this recommendation. At present, you are buying Aryzta at multi-year low valuations despite depressed earnings. If the green shoots can flourish, and earnings grow, then there could be considerable upside from here over the next 6-12 months.
Cathal Kenny, Davy
Better-than-expected margin and cash delivery in FY 2019 (driven by self-help initiatives) was overshadowed by a steep decline in North America volumes for Q4. As such, concerns over the North American operating model remain and continue to encumber the equity.
We anticipate a c.6% to 7% cut to our FY 2020 EBITDA forecast as negative operating leverage dilutes the impact of Project Renew.
Jason Molins, Goodbody
Aryzta this morning reported a solid FY19 operating performance together with a significantly improved balance sheet position, even before the receipt of the Picard disposal proceeds.
Whilst we expect capex to pick up next year driven by further Project Renew rollout, the impending receipt of Picard proceeds will provide Aryzta with significant covenant headroom. Post Picard, Net Debt: EBITDA is closer to 1.9x compared to a covenant threshold of 3.5x.
In terms of outlook, Aryzta is guiding for underlying EBITDA growth in FY20 as the benefits of three-year Project Renew programme continue to flow through. Overall, we consider today’s update to be reassuring as the company continues on its multiyear turnaround plan, and note the Group now has its lowest level of debt since 2013.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
