Shares in speciality bakery group Aryzta have soared more than 30% in trading on Monday morning to hit their highest point since early August, despite the company reporting pre-tax losses of €493m for its 2018 financial year.

Aryzta, which owns the Cuisine de France brand and makes burger buns for McDonald’s, reported operating losses of €423m for its financial year to the end of July 2018 as a result of once-off impairment charges related to the sale of a number of non-core assets, including the Cloverhill bakery business in the US.

Decline in pre-tax profits

Excluding these exceptional charges, Aryzta reported a 61% decline in underlying pre-tax profits to just over €82m.

Underlying earnings (EBITDA) fell 28% in the year close to €302m, as earnings margins narrowed from 11.1% in 2017 to 8.8% for 2018.

Aryzta’s turnover for the year declined 10% to €3.4bn, primarily due to a double-digit decline in sales at its business in North America, currency headwinds and the sale of non-core businesses during the year.

Aryzta’s strategy was unfocussed and the business both over-expanded outside of its core sector and also by over-investing in capacity

Currency headwinds and disposals aside, Aryzta reported organic sales growth of 1% in its European business and 8% growth in its rest of the world business. However, underlying sales in its North American business continue to be weak and declined by 5% in 2018.

Unfocussed

Speaking after the release of the 2018 financial results, Aryzta CEO Kevin Toland said the company was undertaking a “back to basics” strategy having become overleveraged in recent years.

“Aryzta’s strategy was unfocussed and the business both over-expanded outside of its core sector and also by over-investing in capacity. We ended up with an overleveraged company, which would be better described as a disparate group of businesses rather than a coherent whole,” said Toland.

The Aryzta boss added that previously announced plans to raise €800m in fresh capital via a rights issue will help strengthen the company’s balance sheet and reduce its highly leveraged position.

With net debts of €1.5bn at year-end, Aryzta’s net debt to EBITDA ratio was on the high side at 3.8 times. However, this is an improvement from last year, when the group debt to earnings ratio was at 4.15 times.