Lotus Bakeries: «2008 was an outstanding year»

Lembeke / BE. (lbbv) The consolidated turnover of Lotus Bakeries NV grew during the past year by 14 percent to 256,7 million EUR. Current operating result (REBIT) grew significantly in absolute terms from 28,7 million EUR to 34,0 million EUR. The financial result amounted in 2008 to a cost of 6,9 million EUR on an annual basis. This is 3,0 million EUR higher than in 2007 – the Belgian company said in a statement, announcing the results of fiscal year 2008. Details (all figures in the following table fully conform to IFRS standards):

Income statement (in EUR thousands)	2008	2007	Evolution
Turnover	256’687	224’528	14,3%
Depreciation	(10’129)	(9’693)	4,5%
Current operating result (REBIT)	34’040	28’695	18,6%
Current operating cash flow (REBITDA) (1)	45’691	38’750	17,9%
Non-current operating result	(779)	(937)	16,9%
Operating result (EBIT) (2)	33’261	27’758	19,8%
Financial result	(6’939)	(3’970)	-74,8%
Profit before taxes	26’322	23’788	10,7%
Taxes	(6’405)	(3’440)	86,2%
Result after taxes	19’917	20’348	-2,1%
Share in results of equity-consolidated enterprises	248	309	-19,7%
Net result	20’165	20’657	-2,4%
Net result: minority interest	125	144	-13,2%
Net result: Group share	20’040	20’513	-2,3%
Self financing (in EUR thousands)
Net cash flow (3)	36’504	29’705	22,9%
Investments (4)	10’809	7’331	47,4%
Balance sheet statement (in EUR thousands)
Balance sheet Total	227’912	195’327	16,7%
Equity	85’855	68’924	24,6%
Net financial debts (5)	40’392	42’250	-4,4%
Key figures per share (in EUR)
Current operating result (REBIT)	44,63	37,64	18,6%
Current operating cashflow (REBITDA) (1)	59,91	50,82	17,9%
Net result: Group share	26,28	26,90	-2,3%
Weighted average number of shares	762’664	762’453	0,0%
Net dividend (6) (in EUR per share)	5,10	4,05	25,9%

Explanation

General: The results of Anna´s Pepparkakor have been consolidated since 01 December 2008. This means that just one month of Anna´s results (December) are included in the consolidated annual results for 2008. The Spanish company Lopez Market, taken over in the beginning of 2008, has been consolidated since 01 February 2008.

Turnover: The consolidated turnover of Lotus Bakeries grew during the past year by 14 percent to 256,7 million EUR. Internally generated growth amounted to twelve percent, due primarily to the introduction of caramelized biscuit spread in Belgium and the Netherlands, the continuing strong international growth of caramelized biscuits, the significant growth in sales of waffles in France, and increased gingerbread sales in the Netherlands and Belgium.

Operating profit: Current operating result (REBIT) grew significantly in absolute terms from 28,7 million EUR to 34,0 million EUR. REBIT as a percentage of turnover was slightly higher in 2008 (13,3 percent) than in 2007 (12,8 percent). Current operating cash flow (REBITDA) for 2008 amounted to 45,7 million EUR. At 17,8 percent, REBITDA as a percentage of turnover was slightly higher than in 2007 (17,3 percent).

2008 confirmed the strong REBIT and REBITDA percentages of the previous year. The launch of caramelized biscuit spread in the Netherlands and Belgium was supported by a strong TV campaign in autumn 2008. The marketing efforts mean that the REBIT(DA) percentages of the second half are slightly lower than in the first half of 2008.

The non-current operating result of kEUR – 779 reflects primarily to the amortization of amortizable brand names from the «purchase price allocation» related to the takeover of Koninklijke Peijnenburg.

Financial result: The financial result amounted in 2008 to a cost of 6,9 million EUR on an annual basis. This is 3,0 million EUR higher than in 2007. This rise is almost entirely due to the fall in the «marked to market» value of the interest rate hedges of this financing produced by the application of IFRS rules. In 2008 this cost was around 2,6 million EUR higher than in 2007, mainly a non-cash cost.

Taxes: The tax charge for 2008 amounts to 6,4 million EUR, representing an effective tax rate of around 24 percent. The reduction of the tax rate in the Netherlands from 29,6 percent to 25,5 percent had the effect in 2007 of reducing deferred tax liabilities relating to the «purchase price allocation» by more than 2,3 million EUR. This reduction in deferred tax liabilities runs via the income statement and explains the low tax charge for 2007. Excluding this income item, the effective tax rate in 2007 is in line with that of 2008.

Global result: Net result amounts to 20,2 million EUR compared with 20,7 million EUR in 2007. In 2008 the operating result was up strongly compared with the previous financial year. In 2007, however, the net result was flattered by 2,2 million EUR owing to the reduction in deferred tax liabilities as described above. In addition the valuation allowances on interest hedging were around 2,6 million EUR lower in 2007. Net cash flow rose by 22,9 percent from 29,7 million EUR in 2007 to 36,5 million EUR in 2008.

Net financial debts: In 2008 Lotus Bakeries was able to realize two acquisitions, that of Anna´s Pepparkakor Group and that of the Spanish company Lopez Market. During the year, major expansion investments were also undertaken, mainly at the Lembeke caramelized biscuits plant. It should also be mentioned that in the first half of the year a one-off cash-out was taken in order to re-hedge the financial hedging instruments relating to the financing structure to give a fixed interest rate (interest rate swap). Despite these expenditures, strong operating cash flow brought net financial debts down from 42,3 million EUR at the end of 2007 to 40,4 million EUR at the end of 2008. The ratio net financial debts versus the recurring EBITDA evolves positively from 1,1 at the end of 2007 to 0,88 at the end of 2008.

Harry´s Benelux

In 1999 Lotus Bakeries and Harry´s founded a joint venture, Harry´s Benelux NV, to sell pre-packaged bread products and morning goods in Belgium. Harry´s, which is part of Italy´s Barilla Group, produces the products which Lotus Bakeries markets through its sales organization under the Harry´s brand.

Lotus Bakeries has decided to sell its 40 percent share in Harry´s Benelux to the Harry´s Group. The agreed takeover price, which will be paid to Lotus Bakeries at the end of May 2009, is based on a value of 5,6 million EUR for 100 percent of Harry´s Benelux NV. This divestment will allow Lotus Bakeries Belgium´s commercial organization to focus fully on its own Lotus brand products. Total sales in 2008 of Harry´s products amounted to 6,5 million EUR. The marketing, sales and logistics of Harry´s products in Belgium will be integrated into the Barilla Group, so this turnover will no longer be included in the Lotus Bakeries consolidated accounts from the beginning of 2009.

Cooperation with McVities

McVities Cake Company, a part of United Biscuits, has decided to manufacture its Jaffa Cake Bars itself in future. It has now been agreed that Lotus Bakeries will produce these McVities cake bars until August 2009. The production of McVities Jaffa Cake bars represents, on an annual basis, a turnover of around 6,5 million EUR and an EBIT and fixed cost coverage of around 1,8 million EUR.

Lotus Bakeries UK

Lotus Bakeries UK was founded in 2005 as a joint venture between Lotus Bakeries and Mr. John Bowmer. Lotus Bakeries has used in the beginning of 2009 its call option to acquire John Bowmer´s remaining 25 percent shareholding for 300’000 GBP. In this way Lotus Bakeries has become the 100 percent owner of Lotus Bakeries UK.

Conclusion

2008 was an outstanding year for the Lotus Bakeries Group. First of all the Group achieved a high internal growth of twelve percent combined with very good profitability. The past year also featured the exceptionally successful launch of caramelized biscuit spread in Belgium and the Netherlands.

The acquisition of Anna´s is of major strategic importance. As well as gaining a strong brand and product, this will provide further growth in North America and the Nordic countries. By acquiring Lopez Market at the beginning of 2008, the Lotus Bakeries Group has gained a sales organization which can focus on the further marketing of Lotus products in Spain.

Lotus Bakeries in a nutshell

Lotus Bakeries NV focuses on authentic specialities from the biscuit and cake world: caramelized biscuits (speculoos), gingerbread, cake specialties, waffles and pepparkakor biscuits. Lotus Bakeries, with headquarters in Belgium, is a dynamic, internationally oriented company with production facilities in Belgium, the Netherlands, France, Sweden and Canada, own sales organizations in 9 European countries and in the United States of America/Canada and an export department for the other countries. With 1228 employees, Lotus Bakeries produces and sells high-quality, tasty products under the Lotus, Peijnenburg and Annas brand names. By maintaining a health balance between tradition and innovation, Lotus Bakeries indulges consumers with a unique range of products. In 2008 the Group achieved a turnover of EUR 256,7 million EUR. The shares of Lotus Bakeries are listed on Euronext Brussels.