With €3.8bn in revenues, almost €4bn has been wiped off the value of the group over the past 12 months. The share price has fallen by 45% and hit a three-year low of €37.04 last September. Since then, it has been on a long and bumpy road, slow to recover.

And results announced today have not been received well by the market as the company admitted that growth will be erratic over the next 18 months.

Margin under pressure

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While margin growth is expected to continue into the second half, margins are set to remain under pressure due to supply chain contract renewals, bakery commissioning and increased brand support investment.

The first half results announced this Monday show that group revenues increased 5.5% to €1.96bn. However, once the effect of currency is taken out (+5%), underlying growth was a modest 0.2%, while mergers and acquisitions accounted for 0.3%. Earnings margins fell 30 basis points to 11.8%.

So, what has gone wrong?

French retail acquisition

The company’s decision last March to plough €446.6m into a 49% stake in premium French frozen retailer Picard has left shareholders scratching their heads, despite Aryzta having an option to buy the remainder in three to five years should it so wish.

While Picard has delivered consistent revenue, profit and market share growth over 40 years, as Aryzta is mainly a business-to-business player, getting involved in retail did not seem to sit well with investors.

Aryzta funded the Picard deal by reducing its stake in Origin Enterprises PLC, which was a legacy asset from the IAWS era. This raised a total of €398m in the first sale and a further €225m a few months later. The sale was seen as helping Aryzta focus on its core speciality food.

North America, which accounts for 51% of the business, saw its revenues increase by 3.6% to €971m for the first six months. When the effect of disposals and currency are stripped back, underlying revenue declined by 4% as management embarked on a drive to improve manufacturing efficiency.

The company took lower-volume items off the manufacturing line to free up room to make more products for big customers without having to build new capacity, which affected revenue growth.

Questions for Killian

Whether chief executive Owen Killian can survive this 12-month rout remains to be seen. There are lots of questions for one of Ireland’s highest-paid company bosses, who earned €5.8m in 2014. The first is how he intends to bed Picard into the overall business and how efficiencies can be gained in the US arm? Shareholders will want to know where the value destruction can be rebuilt.

Repositioning the investment in Origin to a related food sector does make sense. After all, Picard is a food business that on its own is a good business, is adjacent and has complementary aspects to Aryzta’s business in France. But how can it complement Aryzta overall, and can efficiencies and synergies be achieved?

Right now, it looks like it may be some time yet before shares hit €73 again, as they bounce along at €40 in Monday’s trade.