Annual Report Providing solutions. Delivering growth

Transcription

1 Annual Report 2011 Providing solutions Delivering growth

2 Origin at a glance Delivering growth through Agronomy and Innovation Origin Enterprises plc ( Origin or the Group ) is a leading Agri-Services group with associate and joint venture interests in consumer foods and marine proteins and oils. The Group s core focus is to be the leading provider of value added services, technologies and strategic inputs that support the delivery of sustainable and profitable food production solutions for primary food producers. Origin is listed on the ESM and AIM markets of the Irish and London Stock Exchanges respectively and is headquartered in Dublin, Ireland. The Group has operations in Ireland, the United Kingdom, Poland, Norway and Ukraine and currently employs over 1,400 people. Our business Agri-Services Agri-Services incorporates on-farm integrated agronomy services and businessto-business agri-inputs with operations in Ireland, the United Kingdom and Poland. These businesses have market leading positions in the provision of customised solutions that address the efficiency, quality and output requirements of primary food producers. Associates and joint venture Origin has a 50 per cent shareholding in Welcon AS, Europe s largest producer of marine proteins and oils, with operations in Ireland, the UK and Norway. The Group has a 44.1 per cent shareholding in the Irish food company, Valeo, which has a portfolio of leading Irish consumer brands. The Group also holds 24.2 per cent of Continental Farmers Group Plc, a large-scale producer of value added agriculture crops with operations in Northern Poland and Western Ukraine. Welcon AS FERTILISERS (UK) LIMITED NORTHERN IRELAND LIMITED

3 IBC Our locations UK Norway Poland and Ukraine Marine Proteins & Oils Fertiliser Blending Direct Farming Food Animal Feed Ingredients Integrated Agronomy 01 Financial Statements Financial Statements Financial Review Directors Report Statement of Directors Responsibilities Independent Auditors Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Group Accounting Policies Notes to the Group Financial Statements Company Accounting Policies Company Balance Sheet Notes to the Company Balance Sheet Company Information Business Review Business Review Review of Business Operations Overview Agri-Services Food Discontinued Activities Associates and joint venture Board of Directors Overview Overview Strategy 02 Performance (including Financial Highlights) 03 Five years of growth delivered 04 Agronomy explained 06 Chairman s Statement 08

4 Overview Our strategy Origin s strategic priority is to become a leading provider of customised value added services, technologies and inputs that support the primary sectors of the food industry. Since its establishment in 2006 Origin has actively repositioned its business profile and is now firmly focused on a capital light, advice centred and sustainable agri-services model. Having established market leading positions through acquisition and organic growth the Group is now well advanced in building an integrated platform with a unique capability to support primary producers in the management of the complex and evolving requirements of modern farming. This will transform the scope and scale of the business, providing growth opportunity through an extended technological capability, delivering an enhanced range of value added services that meet the needs of primary producers for scale and complete crop solutions. 1. Leading market positions 2. Long-term customer relationships 3. Trusted brands 4. Reputation for expertise and innovation excellence 5. Strategically located and well invested infrastructure 6. Strong cash flow generation 1. Sustainable growth 2. Strong cash conversion 3. Selective acquisitions 4. Build on core competencies 5. Deliver long-term shareholder value Strategic Priorities To become the market leader in the provision of integrated agronomy solutions and sustainable agricultural technologies. Our Vision Create shareholder value Our Goal Strengths 02

5 Our performance Group revenue ( ) 1.3bn (2.6)% Group revenue of 1.3 billion for the year to 31 July 2011, a decrease of 2.6% ,301,738 1,337, ,507, ,504,242 Total Group operating profit ( )* 85.9m +10.9% Total group operating profit* for the year to 31 July 2011 of 85.9 million was 10.9% higher than last year , , , ,178 Overview Business Review Financial Statements Adjusted diluted EPS (cent)** % Adjusted diluted EPS** for the year to 31 July 2011 increased 16.3% to 43.34c Financial highlights 2011 % change Group revenue Agri-Services 1,257,498 1,077, % Food discontinued operations 44, ,056 (83.0)% Total Group revenue 1,301,738 1,337,065 (2.6)% Group operating profit* Agri-Services 65,963 50, % Food discontinued operations 5,051 14,856 (66.0)% 71,014 65, % Associates and joint venture 14,857 11, % Total Group operating profit* 85,871 77, % Adjusted diluted EPS (cent)** % Group net debt 92, ,889 (17.7)% Dividend per ordinary share (cent) % * Before intangible amortisation and exceptional items and includes our share of the profit after tax of associates and joint venture. ** Before intangible amortisation, net of related deferred tax (2011: 2.6m, 2010: 3.1m) and exceptional items, net of tax (2011: 11.6m, 2010: Nil). 03

6 Overview Five years of growth delivered A look back since Origin s inception in 2006 Delivering growth : Building foundations: Specialist focus on original activities of IAWS : Acquisitions: Realignment of business portfolio, reducing complexity Phase 1 Phase Origin s formation IPO Acquisition of Masstock Marine Proteins and Oils Consumer Foods Feed consolidation Direct interface with the primary producer 04

7 2011 onwards: Strategic positioning: Repositioned for growth Overview Business Review Financial Statements Phase Acquisitions CSC GB Seeds 2011 Acquisitions United Agri Products Rigby Taylor Carrs Fertilisers Specialist focus on smart agriculture and sustainable crop technologies 05

8 Overview Agronomy How we equip customers with the knowledge, support and technology to farm more profitably Agronomy in detail Providing solutions Delivering growth Step 1: Research & Analysis Origin provides agronomy advice and solutions to over 26,000 farm businesses throughout the UK and Poland. Innovative research Technology transfer via SMART farms This innovative approach delivers a fully integrated production system, based on leading edge research and detailed on-farm agronomic management. The business combines an extensive research and development capability with a major sales, marketing and distribution focus, delivering a superior advisory and inputs offering to primary food producers....crops inspected......farm is visited by an agronomist... The service encompasses varietal seed selection, nutrition, crop protection, application and establishment techniques necessary to ensure high performing marketable crops, which adhere to the highest levels of safety, quality, sustainability and environmental requirements....data analysed... Step 1 Research We invest in leading edge research to develop unique growing systems to maximise crop productivity on a sustainable basis. Our trials teams manage over 40,000 replicated trial plots throughout the UK and Poland. Development of strategic partnerships with the leading global seed breeders and manufacturers of crop protection and nutrition input applications. Analysis Farms are visited regularly throughout the growing season. Crops are closely inspected and monitored for health and development. Soil and tissue analysis is conducted to verify deficiencies. Agronomy in action Providing solutions through the Agronomist Page 11 Delivering growth for the customer Page 13 06

9 Step 2: Prescription Environmental stewardship Growing systems Soil management Step 3: Application Overview Business Review Financial Statements Varietal selection Precision farming Nutrition application Crop protection Step 2 Step 3 Prescription Input programmes are recommended for achievement of yield and quality targets. Agronomists advise across all components of crop and field management. Environmental stewardship and compliance requirements are assured. Computerised treatment plans are communicated to farmer. Application Seed, fertiliser and crop protection technology is delivered to farm from our local distribution centres on same/next day service. Agronomists advise on precise timing of applications to achieve maximum results. Crops continue to be monitored through to harvest. 07

10 Overview Chairman s Statement An overview of this year s performance In 2011 it is expected that the global population will exceed seven billion people. It is against this background that agriculture and farming face a challenging and exciting future. Food production is strategically important. The volatility in prices for grain experienced since 2007 is evidence of a very fragile global supply/demand balance. Feeding the world, while protecting the soil environment for sustainable long-term productivity, is the objective of the sector that Origin services and supports. Origin is in an excellent position to guide and support primary producers in an industry which is becoming more sophisticated, automated and professionally managed. Origin has further repositioned its business in the past financial year with strategic acquisitions in the UK to enhance distribution and to unlock the benefits of its core focus on agronomy and research. This was financed by the divestment of a majority interest in the Group s consumer foods business together with the merger of its feed business during the period. Origin is now focused on building a research led platform focused on sustainable crop technologies and smart farming systems. The Group reported an increase of 16.3 per cent in adjusted diluted EPS to cents. Net debt at year end was 92.1 million or 1.17 times EBITDA. Dividend The Board is recommending a dividend of 11.0 cent per ordinary share, an increase of 22.2 per cent on The dividend, subject to shareholder approval at the Annual General Meeting, will be paid on 6 January 2012 to shareholders on the register on 16 December Agri-Services revenue ( ) 1.25bn +16.8% Agri-Services revenue for the year to 31 July 2011 of 1.25 billon was 16.8% higher than last year. Agri-Services operating profit ( )* 66.0m +29.3% Agri-Services operating profit* for the year to 31 July 2011 of 66.0 million was 29.3% higher than last year. Adjusted diluted EPS (cent)** % Adjusted fully diluted EPS** for the year to 31 July 2011 increased 16.3% to 43.34c. Dividend per ordinary share (cent) % Dividend per ordinary share for the year to 31 July 2011 increased 22.2% to 11.0c. The Group will hold its AGM on Monday, 21 November 2011 at 10.00am in The Westbury Hotel, Dublin. Board changes There were no changes to the Board during the financial year. Outlook The outlook for primary food production remains positive supported by excellent long-term fundamentals. Origin has a strong platform established and remains well positioned for further growth. Owen Killian, Chairman 21 September 2011 * Before intangible amortisation and exceptional items ** Before intangible amortisation, net of related deferred tax (2011: 2.6m, 2010: 3.1m) and exceptional items, net of tax (2011: 11.6m, 2010: Nil). 08

11 Developing solutions through science and technology Crop science In 2011, Masstock in conjunction with University College Dublin ( UCD ) School of Agriculture, Food Science and Veterinary Medicine established a new Professorship, titled the Masstock Chair in Crop Science, endowed by Origin Enterprises plc. Origin, through its integrated agronomy business, is focused on the development of sustainable and profitable systems of primary food production through an integrated approach connecting innovative research with a cutting edge technology portfolio and strategic on-farm advice. This collaboration with UCD creates a new dynamism between science and food production, furthering the integration of applied science with on-farm decision making. New developments in crop breeding, biotechnology and crop production systems place crop science in a pivotal position regarding the future potential of this industry. This initiative strengthens Origin s commitment to be the leading innovator in the development of applied agronomy and crop technology. Overview Business Review Financial Statements Pictured: Clare Bend, Head of Technology and Services 09

12 Business Review Review of Business Operations Overview Origin achieved excellent results in 2011 recording strong increases in operating profit and earnings per share in addition to robust cash generation reflecting strong underlying business momentum and earnings accretive acquisitions. Highlights: Excellent financial and operating result underpinned by a buoyant trading environment for primary producers supporting firm demand for agronomy services and inputs. Significant repositioning of non-core business followed by acquisition development in the year transforming Origin to a focused Agri- Services Group. Operating profit* increase of 29.3 per cent from Agri-Services to 66.0 million. Operating profit* margin from Agri-Services division up 50 basis points to 5.2 per cent. Adjusted diluted earnings per share** up 16.3 per cent to cent. Strong cash flow performance resulting in a net debt reduction of 19.8 million to 92.1 million. Proposed dividend increased by 22.2 per cent to 11.0 cent per ordinary share. The improved backdrop for primary food production together with the sustained recovery in farm incomes has supported good volume growth and margin progression within our Agri-Services business. The acquisition of United Agri Products, Rigby Taylor and the specialist fertiliser business of Carr s Milling Industries Plc in the year underlines the strategic realignment of the Group s business profile and firmly establishes Origin as a premier provider of integrated crop production systems and sustainable agricultural technologies. The transition of Origin s consumer foods and feed ingredient interests, Valeo Foods and R&H Hall respectively from wholly-owned businesses to associates and joint venture in the year released 74.6 million in cash to the Group whilst also enhancing their competitive positioning. These businesses are now strongly positioned to adapt to the changing needs of their customers and consumers in challenging markets. Having established market leading positions through organic growth and acquisition, the Group is now well advanced in building an integrated platform with a unique capability to support primary producers in the management of the complex and evolving requirements of modern farming. This will transform the scope and scale of the business, providing growth opportunity through an extended technological capability, delivering an enhanced range of value added services that meet the needs of primary producers for scale and complete crop solutions. Total Group operating profit* , , , ,178 * Before intangible amortisation and exceptional items. ** Before intangible amortisation, net of related deferred tax (2011: 2.6m, 2010: 3.1m) and exceptional items, net of tax (2011: 11.6m, 2010: Nil). 10

13 Providing solutions through the Agronomist Agronomy in action SMART Farming is a unique and innovative approach to enable primary food producers to utilise the latest research and technology to maximise the performance and profitability of their crops. At its foundation is an advanced programme of fully replicated, independent and scientific trials examining crop varieties, growing systems and evaluation of new technologies, carried out at our research centres in key regions of the UK and Poland. Once proven, we take the research and development know-how and examine the practical do-how of applying the research into practical farming situations across our network of SMART Farms, where we run a series of field days through the growing season. Farmers and growers discuss the new approaches with agronomists and industry specialists against the back-drop of a working farm with similar soil types. Origin has over 40,000 trial plots throughout the UK and Poland, with 25 SMART Demonstration Farms. We host on average 150 grower events annually with in excess of 6,000 visitors attending the SMART Farms throughout the season. Overview Business Review Financial Statements Providing Solutions 40,000 trial plots throughout the UK and Poland with over 6,000 visitors attending the SMART farms in a season. 11

14 Business Review Review of Business Operations Agri-Services Agri-Services comprises on-farm integrated agronomy services and business-to-business agri-inputs (feed and fertiliser sourcing, handling and distribution). These businesses provide customised solutions that address the efficiency, quality and output requirements of primary food producers in Ireland, the United Kingdom and Poland. Agri-Services delivered an excellent performance during the year reflecting a buoyant agricultural operating environment which supported strong demand for agronomy services and inputs. Revenue increased by 16.8 per cent to 1,257.5 million reflecting strong volume growth resulting from sustained recovery in farm incomes and higher nutrition pricing. Operating profit* increased by 29.3 per cent to 66.0 million or 8.2 per cent on a like for like basis (excluding the impact of acquisitions, the transition of R&H Hall to associates and joint venture and currency movements). Integrated agronomy services UK and Poland Masstock and Dalgety Agra Polska, the Group s integrated agronomy services business in the UK and Poland respectively delivered an excellent performance during the year driven by increased on-farm activity. Ideal planting conditions during the autumn of 2010 coupled with a favourable output price environment supported an increased combinable crop area leading to growth in demand for full service agronomy applications. During the year many primary producers faced significant spring weather challenges as near-drought conditions across much of the United Kingdom and Northern Europe impacted crop yields and grass growth. Masstock and Dalgety successfully responded to these challenges on behalf of their customers through the delivery of active crop management programmes designed to protect returns. During the year the Group endowed the Masstock Chair in Crop Science at University College Dublin ( UCD ). The link with UCD and other universities and research centres establishes an important connection and dynamism between science, information technology and food production. New developments in crop breeding, biotechnology and crop production systems place crop science in a pivotal position regarding the future potential of primary food production. Acquisition of United Agri Products and Rigby Taylor In March 2011, the Group acquired United Agri Products Limited ( UAP ) and Rigby Taylor, which significantly enhance and extend the Group s capability and market position in the provision of integrated crop production systems and sustainable agricultural technologies. UAP, based in the United Kingdom, is a leading service provider to arable, fruit and vegetable growers. The business supports over 8,000 growers through a team of 100 agronomists. UAP provides tailored systems incorporating advice on crop selection, establishment, nutrition, protection and precision agronomy combined with the sale and distribution of strategic inputs. The acquisition provides important customer extension opportunity for the Group s integrated service offering as well as enabling the development of new and innovative service propositions. The integration of Masstock and UAP will create a premier agri-services platform that is best placed to meet the requirements of the increasing professionalisation of farming and the growing demand for more sophisticated inputs and farming systems. Rigby Taylor is the brand leader in the provision of advice and product solutions to the professional sports turf, landscape and amenity sectors in the United Kingdom. The business delivers an important complementary channel extension for the Group s technology platform, product portfolio and distribution network. Both UAP and Rigby Taylor were strongly earnings enhancing in the period, benefiting from favourable market conditions which underpinned strong demand for advice and prescription inputs. Masstock s commitment to a fully integrated research-based agronomy offering ensures the delivery of the most robust, innovative and scientifically based advice and technology for the benefit of primary food producers. This process greatly enhances the influence of the business in guiding on-farm strategic choices through a service offering that fully meets the needs of primary producers in optimising the economic yield of their enterprises. Agri-Services operating profit* , ,998 Agri-Services operating profit %* % % *Before intangible amortisation and exceptional items. 12

15 Delivering growth for the customer Agronomy in action Based on an innovative in-house research programme and detailed agronomic input, we delivered a completely new approach to the establishment and management of the Winter Oilseed Rape crop. Through integrating varietal selection, seeding rates, establishment cultivations, crop protection and nutrition programmes, we have been able to significantly enhance the yield and financial performance of this crop for our customers. Last harvest, at our Brackley SMART Farm, we demonstrated yield improvement from 3.9t/ha to 6.12t/ha using this approach. Overview Business Review Financial Statements Delivering growth +56.9% Yield improvement in the Winter Oilseed Rape crop through the development of this new approach in relation to the establishment and management of this crop. 13

16 Business Review Review of Business Operations Agri-Services (continued) Food Discontinued Activities Business-to-business Agri Inputs Ireland and the UK In Ireland primary producers are experiencing renewed optimism underpinned by strongly performing output markets, principally in the case of cereals, dairy, beef and sheep enterprises. The balance of animal numbers has continued to move in favour of dairy as farmers prepare for the expected expansion in milk output post the cessation of quota in Fertiliser Ireland achieved a satisfactory result in the period, albeit on lower volumes largely reflecting the impact of excellent grass growing conditions during the year. Feed ingredients had a challenging year as milk quota constraints and high fodder availability suppressed demand while customers continued to adopt a cautious approach to the timing of volume commitments due to significant price volatility across major ingredients. Origin Foods For the year under review Food incorporates the discontinued activities of Origin Foods for the period 1 August 2010 to 26 November Food generated revenue for this period of 44.2 million. Operating profit* was 5.1 million a decrease of 66.0 per cent on the prior full year profits. The decreases are attributable to the completion of the Valeo Foods transaction in November 2010 and the related wind-down of the Masterfoods contract from August The performance of the Food business for the eight months to 31 July 2011 is covered in the associates and joint venture section. In January 2011, the Group and W&R Barnett Limited ( Barnett ) completed the establishment of an all-ireland grain and feed handling, logistics and trading business. The all-ireland business was formed through the integration of Origin s wholly owned R&H Hall business in the Republic of Ireland and the business of Origin and Barnett in Northern Ireland. The combined business brings together two of Ireland s leading indigenous grain and non-grain feed ingredient importing businesses, servicing the animal feed and cereal milling industries. Committed and long-established partnerships with global ingredient shippers combined with an extensive procurement, logistics and handling capability provide proven access to international markets and sources of supply. The combination creates a single logistics platform which will support enhanced procurement synergies and a superior service offering to customers. The Group s UK fertiliser business made excellent progress in the year, growing margins and volumes as the combination of favourable nutrition pricing and the positive outlook for output prices supported firm buying interest at farm level. Acquisition of Carrs Fertilisers In June 2011, Origin announced the acquisition of the fertiliser business of Carr s Milling Industries PLC. The business, based in Scotland and the North of England, is a leading provider of branded specialist fertilisers and nutrient management systems to the arable, grassland, horticulture and forestry sectors. The business services a complementary geographic footprint and markets an extensive range of technically-based nutrition applications that strongly support Origin s existing position in the UK. *Before intangible amortisation and exceptional items. 14

17 Review of Business Operations Associates and joint venture Valeo Foods Group Limited ( Valeo ) Valeo, formed through the merger of Origin Foods and Batchelors in November 2010, is a leading consumer foods company with a portfolio of some of Ireland s most iconic staple food brands. Valeo made satisfactory progress against the background of declining consumer confidence which is reflective of the current intensely competitive trading environment. A key focus of the business is the development of new customer sales channels and supporting existing brand portfolios through the introduction of complementary product lines. A number of tactical initiatives were implemented to meet consumer and retailer demand for greater value including the realignment of existing category and promotional support programmes. The integration of Origin Foods and Batchelors is progressing to plan and will ensure Valeo s ongoing operating cost alignment with a challenging market environment. Welcon Invest AS ( Welcon ) Welcon, jointly owned by Origin and Austevoll Seafoods ASA, is Europe s largest manufacturer of marine proteins and oils servicing the aquaculture, pig and poultry feed sectors. Welcon delivered another very strong performance in the year reflecting firm demand for marine proteins from the aquaculture feed sector and limited global unsold stocks of fishmeal and fish oil. North Atlantic raw material intake was lower as anticipated due to reduced quotas. Fishmeal usage within the pig and poultry feed markets remained stable during the period. During the latter part of the year global fishmeal markets weakened due to an increase in production resulting from a strong recovery in the South American fishing resource. Prices are stable currently reflecting increased Chinese demand and firm relative pricing for vegetable proteins. Overview Business Review Financial Statements On 11 August 2011, Valeo announced that it reached conditional agreement to acquire Jacob Fruitfield Food Group Limited ( Jacob Fruitfield ). The acquisition of Jacob Fruitfield is in line with Valeo s strategy to grow its business and following the acquisition, Valeo will have pro forma annual revenues of approximately 300 million. Jacob Fruitfield s portfolio of brands comprises some of Ireland s best known consumer food offerings including Jacob s biscuits, Chef sauces, Fruitfield jams and marmalades, Silvermints and Scots Clan sweets and confectionery. Origin will subscribe 7.9 million for additional equity in Valeo and will have a 32.1 per cent shareholding in the enlarged entity, reduced from a current shareholding of 44.1 per cent. The transaction is expected to complete by 30 September Continental Farmers Group Plc ( Continental ) Continental is a large scale producer of value added agriculture crops with operations in northern Poland and Ukraine. Continental s proven farming know-how together with the benefit of operational scale facilitates the implementation of diversified cropping plans that optimise productivity and output price realisations. In June 2011, Continental listed on the AIM and ESM markets in London and Dublin respectively raising 16.7 million. Following the flotation, Origin s shareholding was reduced from 38.7 per cent to 24.2 per cent. As the largest strategic shareholder in Continental, Origin will continue to support the business through the transfer of integrated crop production technologies and on-farm advisory portfolios. The fundraising provides the business with access to appropriate sources of capital for infrastructure development and farm land expansion. Continental will announce its Interim Results for the six months ending 30 June 2011 on 27 September Tom O Mahony, Chief Executive Officer 21 September 2011 Associates and joint venture profit after interest and tax* , ,572 *Before intangible amortisation and exceptional items. 15

18 Business Review Board of Directors The Board of Origin Enterprises plc ( Origin ) consists of three executive directors, a non-executive chairman and three non-executive directors. Owen Killian (58) Chairman Owen Killian is CEO of ARYZTA AG and has been since its admission to trading in He was previously CEO of IAWS Group plc since Prior to this he held several executive positions within IAWS Group plc since it was listed in Hugh Cooney (59) Non-Executive Director Hugh Cooney has specialised in corporate finance since In that period, he was managing director of NCB Corporate Finance and a global corporate finance partner for Arthur Andersen. He is currently a consultant with KPMG. Hugh is also Chairman of Enterprise Ireland and is a non-executive director of a number of companies including Siteserv plc. Hugh has a B.Comm from University College Dublin and is a Fellow of the Institute of Chartered Certified Accountants in Ireland. Tom O Mahony (49) Executive Director Tom O Mahony was appointed CEO of Origin Enterprises on its formation in Prior to this he held the role of Chief Operations Officer of IAWS. Tom joined IAWS in 1985 and on its public flotation in 1988 to form IAWS Group plc he held a number of senior management functions and was involved in acquisitions, disposals, business integration and financial control within the Group, until his appointment as CEO of Origin. Alan Gray (53) Non-Executive Director Alan Gray is Managing Partner of Indecon International Economic Consultants, a leading European consulting practice and is also Managing Partner of Indecon Ireland. He is a director of Tedcastle Holdings and is Chairman of the Board of Directors of London Economics and has previously served on the board of a number of commercial companies. Brendan Fitzgerald (48) Executive Director Brendan Fitzgerald joined Origin in 2006 as Chief Financial Officer. A former director with NCB Corporate Finance he has held senior financial positions with Greencore Group plc and Waterford Foods plc. He qualified as a Chartered Accountant with Arthur Andersen. Patrick McEniff (43) Non-Executive Director Patrick McEniff joined IAWS Group plc after its listing on the Irish Stock Exchange in 1988 and has fulfilled various senior management roles, focused on finance and systems development. In 2004 he was appointed to the board of IAWS Group plc as its Group Finance Director. In 2008, upon the formation of ARYZTA AG, he was also appointed as CFO and member of the Board of Directors. Declan Giblin (55) Executive Director Declan Giblin is Head of Corporate Development and Executive Chairman of Masstock Group Holdings Limited ( Masstock ). He was formerly Chief Executive of Masstock and has been the driving force behind the development of Masstock over a 20-year period. 16

19 Financial Statements Financial Review 18 Directors Report 23 Statement of Directors Responsibilities 29 Independent Auditors Report 30 Consolidated Income Statement 32 Consolidated Statement of Comprehensive Income 33 Consolidated Statement of Financial Position 34 Consolidated Statement of Changes in Equity 36 Consolidated Statement of Cash Flows 37 Group Accounting Policies 38 Notes to the Group Financial Statements 44 Company Accounting Policies 80 Company Balance Sheet 82 Notes to the Company Balance Sheet 83 Company Information IBC Overview Business Review Financial Statements 17

20 Financial Statements Financial Review Accounting policies and basis of preparation The 2011 Group financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS s) and their interpretations issued by the International Accounting Standards Board ( IASB ) as adopted by the EU. Details of the significant accounting policies adopted by the Group are set out on pages 38 to 43. Capital structure bank facilities The financial structure of the Group is managed to maximise shareholder value while providing the Group with the flexibility to take advantage of opportunities to develop the business. The Group targets acquisition and investment opportunities that are value enhancing and the Group s policy is to fund these transactions in the most efficient manner. During the year, the Group refinanced its then existing secured bank facilities which had been due to expire in August New five year unsecured bank facilities were put in place with a syndicate of five banks. These facilities mature in July Analysis of results A comprehensive commentary on the Group s performance for 2011 is included in the review of business operations on pages 10 to 15. Key performance indicators The Group considers the following measures to be important indicators of the underlying performance of the business: Summary segmental analysis m m Change Revenue Agri-Services 1, , % Food discontinued (83.0%) Total 1, ,337.1 (2.6%) Group operating profit* Agri-Services % Food discontinued (66.0%) % Associates and joint venture % Total Group operating profit % Operating profit %* Agri-Services 5.2% 4.7% +50bps Revenue Group revenue was 1.3 billion, a reduction of 2.6 per cent on the previous year. The Agri-Services businesses achieved revenues of 1.3 billion, an increase of 16.8 per cent over the previous year. On a like for like basis (excluding the impact of acquisitions, the transition of R&H Hall to associates and currency movements), the increase in revenue was 19.0 per cent reflecting higher global feed and fertiliser prices and strong volume growth. The Food business, which is now presented as discontinued following the transition of Food to associates, generated revenue in the period to November 2010 of 44.2 million, a decrease of million (83.0 per cent) over the previous year to 31 July 2010 reflecting both the effect of the disposal and the related wind down of the Masterfoods contract. Operating profit* Operating profit* for the year increased by 10.9 per cent to 85.9 million from 77.4 million in the previous year million of operating profit* was generated in the seasonally more important second-half of the year an increase of 5.5 million (9.8 per cent) on the second half of The performance over the year compared to last year can be summarised as follows: Quarter Cumulative Quarter % 39.1% Quarter 2 (26.2%) 13.9% Quarter 3 4.1% 8.0% Quarter % 10.9% *Before intangible amortisation and exceptional items. 18