What to expect as Aryzta prepares to publish results?

A shareholder plan to oust a chunk of Aryzta’s board will be a key focus for investors tomorrow as the embattled Swiss-Irish baked goods company releases third quarter figures.

The Cuisine de France owner’s performance during the three months to the end of April is likely to make for stark reading.

It could also fuel activist shareholders’ calls for an extraordinary general meeting – requested last week by Switzerland-based Veraison and Spanish firm Cobas – at which they want to remove four members of the Aryzta board including chairman and veteran businessman Gary McGann.

Chief executive Kevin Toland would remain in his role but would not be a board member under the activists’ proposals. Aryzta must convene the EGM within two months under its company rules. Between them, Veraison and Cobas control 17.8pc of Aryzta. Another shareholder, London-based J O Hambro Capital Management, has said it will back them. It owns just over 4pc.

Even before the coronavirus crisis, Aryzta was trying to claw its way out of a hole. And that was in a buoyant economic environment. The outbreak and its expected legacy now make Aryzta’s prognosis distinctly more unsavoury.

Last year, the company reported revenue of €3.3bn and underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of €308m.

Quick service restaurants accounted for 29pc of revenue, large retailers 33pc and other food service customers 28pc. Convenience stores contributed just 10pc. Its top 20 customers contributed 53pc of revenue.

Up to the end of January, Aryzta had insisted that its business was performing reasonably well, with margin and EBITDA growth in Europe. While its operations in North America were behind in EBITDA terms, Mr Toland said that Aryzta expected a better performance there in the second-half of the financial year. He also pointed out that Aryzta’s net debt was at its lowest level since 2013.

Mr Toland, a former Glanbia executive who was CEO at airport operator DAA before being parachuted into Aryzta in late 2017 to help turn around the troubled company, had an unenviable task ahead of him when he landed.

The group has made some tangible progress under his leadership, but steering an oil tanker away from the rocks doesn’t happen quickly.

The results for the six months to the end of January underscored Aryzta’s continuing difficulties. Organic revenue in Europe in the period fell 2pc, while it declined 5.3pc in North America. It also recorded total impairment, disposal and restructuring-related costs of €902m in the period.

And then the world changed.

Aryzta’s big customers, such as McDonald’s and Subway, pulled down the shutters as the pandemic broke out, depriving the company of a big chunk of its revenue.

Last month, Aryzta hired investment bank Rothschild to review options for the food group. It’s due to report back to the board by the end of July, but every avenue – including a sale and radical restricting – is certain to be evaluated.

The activist shareholders claim the Aryzta board has “overseen significant and consistent value destruction for shareholders in recent years”.

“Four of the current eleven members of the board of directors have been in office since 2016 or longer and share responsibility for the problems that have remained unresolved for years (and also after the capital increase in 2018),” they claimed last week.

The activists plan to replace Mr McGann with Urs KJordi, a former head of Aryzta Europe and ex-CEO of Hiestand, the Swiss company that Irish firm IAWS merged with in 2008 to form Aryzta.

Aryzta raised €800m in late 2018, using €500m of it to repay a term loan and earmarking €150m to pay for its Project Renew plan designed to generate cost savings and introduce efficiencies.

Cobas opposed that capital raising exercise and insisted that it was “doomed to fail”. But Aryzta managed to persuade shareholders to stump up the cash.

Two years on, it might be tougher to convince those shareholders who opened their chequebooks to give the current board their unqualified support. But just how deep the dissatisfaction with the board runs among investors won’t be clear until that EGM is held.