Nomad Foods Reports Fourth Quarter and Full Year 2018 Financial Results

Reports Fourth Quarter Organic Revenue Growth of 4.2%

Full Year 2018 Adjusted EBITDA of €376 million and Adjusted EPS of
€1.19 Exceed Prior Guidance

Initiates 2019 Guidance of Adjusted EBITDA Growth of 8-10% before the
Impact of IFRS 16

FELTHAM, England–(BUSINESS WIRE)–Nomad Foods Limited (NYSE: NOMD), today reported financial results for
the three and twelve-month periods ended December 31, 2018.

Key operating highlights and financial performance for the fourth
quarter 2018, when compared to the fourth quarter 2017, include:

  • Reported revenue increased 21% to €615 million
  • Organic revenue growth of 4.2%
  • Reported profit for the period of €41 million
  • Adjusted EBITDA increased 23% to €101 million
  • Reported EPS of €0.23; Adjusted EPS increased 7% to €0.29

Key operating highlights and financial performance for the full year
2018, when compared to the full year 2017, include:

  • Reported revenue increased 11% to €2,173 million
  • Organic revenue growth of 2.6%
  • Reported profit for the period of €171 million
  • Adjusted EBITDA increased 15% to €376 million
  • Reported EPS of €0.97; Adjusted EPS increased 19% to €1.19

Management Comments
Stéfan Descheemaeker, Nomad
Foods’ Chief Executive Officer, stated, “We delivered a solid end to
2018, with fourth quarter and full year results exceeding our prior
guidance. Performance during both periods reflected broad based
geographic growth, continued leadership within our core categories and
strong customer acceptance of our new product offerings. We are pleased
with our progress integrating Aunt Bessie’s and Goodfella’s which have
outperformed their plans since being acquired in the middle of 2018.
Finally, we generated significant cash flow during the fourth quarter
and the year which will further enable our growth ambitions for 2019 and
beyond.”

Noam Gottesman, Nomad Foods’ Co-Chairman and Founder, commented, “Our
2018 financial results mark another year of organic growth for Nomad
Foods which demonstrates the sustainability of our growth model, the
power of our brands, and the quality and determination of our people. We
have an exciting set of plans for 2019, and we look forward to building
shareholder value through sustainable growth, cash flow generation and
accretive capital deployment.”

Fourth Quarter of 2018 results compared to the Fourth Quarter of
2017

  • Revenue increased 21% to €615 million. Organic revenue
    growth of 4.2% was comprised of 1.7% growth in volume/mix and 2.5%
    growth in price. Revenue growth benefited 17.3 percentage points from
    the acquisitions of Goodfella’s and Aunt Bessie’s and was partially
    offset by 0.5 percentage points from foreign exchange translation.
  • Adjusted gross profit increased 15% to €184 million. Adjusted
    gross margin declined 160 basis points to 29.9% as positive mix and
    pricing and promotional efficiencies were offset by cost of goods
    inflation and the inclusion of the recently acquired acquisitions.
  • Adjusted operating expense increased 8% to €96 million as
    financial discipline in the base business was offset by the inclusion
    of expenses related to the aforementioned acquisitions. Advertising
    and promotion expense increased 10% to €38 million and Indirect
    expense increased 7% to €58 million.
  • Adjusted EBITDA increased 23% to €101 million.
  • Adjusted profit after tax increased 13% to €52 million and Adjusted
    EPS
    increased 7% to €0.29.

Year ended 2018 results compared to the Year ended 2017

  • Revenue increased 11% to €2,173 million. Organic revenue
    growth of 2.6% was comprised of 1.2% growth in volume/mix and 1.4%
    growth in price. Revenue growth benefited 9.4 percentage points from
    the acquisitions of Goodfella’s and Aunt Bessie’s and was partially
    offset by 1.0 percentage points from foreign exchange translation.
  • Adjusted gross profit increased 9% to €659 million. Adjusted
    gross margin declined 30 basis points to 30.3% with positive mix and
    pricing and promotional efficiencies more than offsetting cost of
    goods inflation and acquisition mix.
  • Adjusted operating expense increased 5% to €329 million as
    financial discipline in the base business was offset by the inclusion
    of expenses related to the aforementioned acquisitions. Advertising
    and promotion expense increased 7% to €121 million and Indirect
    expense increased 3% to €208 million.
  • Adjusted EBITDA increased 15% to €376 million.
  • Adjusted profit after tax increased 19% to €209 million and Adjusted
    EPS
    increased 19% to €1.19.

IFRS 16 – Leases
Nomad Foods has adopted IFRS 16, a
new standard on lease accounting which requires certain operating leases
to be capitalized on the balance sheet effective January 1, 2019. Based
on the adoption method selected by the Company, prior year results will
not be restated to reflect the new standard. IFRS 16 is expected to have
the following impact on 2019 results:

  • EBITDA is expected to be approximately €15 million higher due to lower
    lease expense, which will be replaced by higher depreciation and
    interest expense charges.
  • Profit before tax is expected to be approximately €5 million lower and
    EPS is expected to be approximately €0.02 lower.
  • Assets are expected to be €84 million higher and liabilities are
    expected to be €120 million higher.
  • While IFRS 16 will not affect company cash flow, the standard will
    reclassify lease payments from operating activities to financing
    activities within the Statements of Cash Flows.

2019 Guidance
The Company is initiating 2019
guidance, which includes the anticipated impact of IFRS 16. Full year
2019 Adjusted EBITDA is expected to be approximately €420 to €430
million, inclusive of approximately €15 million of anticipated benefit
related to IFRS 16. This equates to expected 2019 Adjusted EBITDA growth
of approximately 8-10% before the effect of IFRS 16.

Adjusted EPS is expected to be in the range of approximately €1.28 to
€1.32, inclusive of approximately €0.02 of anticipated dilution related
to IFRS 16. Full year guidance assumes organic revenue growth at a
low-single digits percentage rate.

Conference Call and Webcast
The Company will host a
conference call with members of the executive management team to discuss
these results today, Thursday, February 28, 2019 at 1:30 p.m. GMT time
(8:30 a.m. Eastern time). Investors interested in participating in the
live call can dial +1-800-263-0877 from the U.S. International callers
can dial +1-646-828-8143.

In addition, the call will be broadcast live over the internet hosted at
the “Investor Relations” section of the Company’s website at http://www.nomadfoods.com.
The webcast will be archived for 30 days. A replay of the conference
call will be available on the Company website for two weeks following
the event and can be accessed by listeners in North America by dialing
+1-844-512-2921 and by international listeners by dialing
+1-412-317-6671; the replay pin number is 9227872.

About Nomad Foods
Nomad Foods (NYSE: NOMD) is a
leading frozen foods company building a global portfolio of
best-in-class food companies and brands within the frozen category and
across the broader food sector. The company’s portfolio of iconic
brands, which includes Birds Eye, Findus, Iglo, Aunt Bessie’s and
Goodfella’s, have been a part of consumers’ meals for generations,
standing for great tasting food that is convenient, high quality and
nutritious. Nomad Foods is headquartered in the United Kingdom.
Additional information may be found at www.nomadfoods.com.

Non-IFRS Financial Information
Nomad Foods is
presenting Adjusted and Organic financial information, which is
considered non-IFRS financial information, for the three and twelve
months ended December 31, 2018 and for comparative purposes, the three
and twelve months ended December 31, 2017.

Adjusted financial information for the three and twelve months ended
December 31, 2018 and 2017 presented in this press release reflects the
historical reported financial statements of Nomad Foods, adjusted
primarily for share based payment charges, exceptional items and foreign
currency exchange charges/gains.

EBITDA is profit or loss for the period before taxation, net financing
costs, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted
to exclude, when they occur, exited markets, acquisition purchase price
adjustments, chart of account (“CoA”) alignments and exceptional items
such as restructuring charges, goodwill and intangible asset impairment
charges and other unusual or non-recurring items. In addition, we
exclude other adjustments such as the impact of share based payment
expenses and related employer payroll taxes, and non-operating M&A
related costs, because we do not believe they are indicative of our
normal operating costs, can vary significantly in amount and frequency,
and are unrelated to our underlying operating performance. The Company
believes Adjusted EBITDA provides important comparability of underlying
operating results, allowing investors and management to assess operating
performance on a consistent basis.

Adjusted EBITDA should not be considered as an alternative to
profit/(loss) for the period, determined in accordance with IFRS, as an
indicator of the Company’s operating performance.

Adjusted EPS is defined as basic earnings per share excluding, when they
occur, the impacts of exited markets, acquisition purchase price
adjustments, chart of account (“CoA”) alignments and exceptional items
such as restructuring charges, goodwill and intangible asset impairment
charges, unissued preferred share dividends, as well as certain other
items considered unusual or non-recurring in nature. In addition, we
exclude other adjustments such as the impact of share based payment
expenses and related employer payroll taxes, and non-operating M&A
related costs, because we do not believe they are indicative of our
normal operating costs, can vary significantly in amount and frequency,
and are unrelated to our underlying operating performance. The Company
believes Adjusted EPS provides important comparability of underlying
operating results, allowing investors and management to assess operating
performance on a consistent basis.

Organic revenue for the three and twelve months ended December 31, 2018
and 2017 presented in this press release reflects reported revenue
adjusted for currency translation and non-comparable trading items such
as expansion, acquisitions, disposals, closures, chart of account
(“CoA”) alignments, trading day impacts or any other event that
artificially impact the comparability of our results.

Adjustments for currency translation are calculated by translating data
of the current and comparative periods using a budget foreign exchange
rate that is set once a year as part of the Company’s internal annual
forecast process.

Adjusted and Organic non-IFRS financial information should be read in
conjunction with the unaudited financial statements of Nomad Foods
included in this press release as well as the historical financial
statements of the Company previously filed with the SEC.

Nomad Foods believe its non-IFRS financial measures provide an important
additional measure with which to monitor and evaluate the Company’s
ongoing financial results, as well as to reflect its acquisitions. Nomad
Foods’ calculation of these financial measures may be different from the
calculations used by other companies and comparability may therefore be
limited. The Adjusted and Organic financial information presented herein
is based upon certain assumptions that Nomad Foods believes to be
reasonable and is presented for informational purposes only and is not
necessarily indicative of any anticipated financial position or future
results of operations that the Company will experience. You should not
consider the Company’s non-IFRS financial measures an alternative or
substitute for the Company’s reported results and are cautioned not to
place undue reliance on these results and information as they may not be
representative of our actual or future results as a Company.

Please see on pages 8 to 17, the non-IFRS reconciliation tables attached
hereto and the schedules accompanying this release for an explanation
and reconciliation of the Adjusted and Organic financial information to
the most directly comparable IFRS measure.

 

Nomad Foods Limited As Reported
Statements of
Profit or Loss (unaudited)

Three Months Ended December
31, 2018 and December 31, 2017

         

Three Months Ended
December 31, 2018

Three Months Ended
December 31, 2017

€ millions € millions
Revenue 614.8 508.2
Cost of sales (431.1 ) (348.2 )
Gross profit 183.7 160.0
Other operating expenses (99.6 ) (91.7 )
Exceptional items (6.0 ) (20.4 )
Operating profit 78.1 47.9
Finance costs (19.9 ) (17.4 )
Net financing costs (19.9 ) (17.4 )
Profit before tax 58.2 30.5
Taxation (17.4 ) (3.2 )
Profit for the period 40.8   27.3  
 
Attributable to:
Equity owners of the parent 41.1 27.3
Non-controlling interests (0.3 )  
40.8   27.3  
 
Basic earnings per share
Profit for the period attributable to equity owners of the parent in
€ millions
41.1 27.3
Weighted average shares outstanding in millions 175.8 166.8
Basic earnings per share in € 0.23 0.16
Diluted earnings per share
Profit for the period attributable to equity owners of the parent in
€ millions
41.1 27.3
Weighted average shares outstanding in millions 175.9 175.6
Diluted earnings per share in € 0.23 0.16
 
 

Nomad Foods Limited As Reported
Statements of
Profit or Loss (audited)

Twelve months Ended
December 31, 2018 and December 31, 2017

         

Twelve months ended
December 31, 2018

Twelve months ended
December 31, 2017

€ millions € millions
Revenue 2,172.8 1,956.6
Cost of sales (1,519.3 ) (1,357.2 )
Gross profit 653.5 599.4
Other operating expenses (352.7 ) (319.3 )
Exceptional items (17.7 ) (37.2 )
Operating profit 283.1 242.9
Finance income 1.6 7.2
Finance costs (57.6 ) (81.6 )
Net financing costs (56.0 ) (74.4 )
Profit before tax 227.1 168.5
Taxation (56.6 ) (32.0 )
Profit for the period 170.5   136.5  
 
Attributable to:
Equity owners of the parent 171.2 136.5
Non-controlling interests (0.7 )  
170.5   136.5  
 
Basic earnings per share
Profit for the period attributable to equity owners of the parent in
€ millions
171.2 136.5
Weighted average shares outstanding in millions 175.6 176.1
Basic earnings per share in € 0.97 0.78
Diluted earnings per share
Profit for the period attributable to equity owners of the parent in
€ millions
171.2 136.5
Weighted average shares outstanding in millions 175.8 184.8
Diluted earnings per share in € 0.97 0.74
 
         

Nomad Foods Limited As Reported
Statements of
Financial Position (audited)

As at December 31, 2018
and December 31, 2017

 
As at December 31, 2018 As at December 31, 2017
€ millions € millions
Non-current assets
Goodwill 1,861.0 1,745.6
Intangibles 2,087.2 1,724.4
Property, plant and equipment 348.8 295.4
Other receivables 2.6 4.3
Derivative financial instruments 35.7 18.6
Deferred tax assets 68.7   64.3  
Total non-current assets 4,404.0   3,852.6  
Current assets
Cash and cash equivalents 327.6 219.2
Inventories 342.5 306.9
Trade and other receivables 173.9 147.1
Indemnification assets 79.4 73.8
Derivative financial instruments 13.4   2.1  
Total current assets 936.8   749.1  
Total assets 5,340.8   4,601.7  
Current liabilities
Trade and other payables 571.6 477.5
Current tax payable 201.2 145.3
Provisions 44.3 68.0
Loans and borrowings 21.4 3.3
Derivative financial instruments 1.5   7.8  
Total current liabilities 840.0   701.9  
Non-current liabilities
Loans and borrowings 1,742.9 1,395.1
Employee benefits 200.6 188.4
Trade and other payables 1.3 1.8
Provisions 69.4 72.8
Derivative financial instruments 35.4 61.4
Deferred tax liabilities 392.1   327.7  
Total non-current liabilities 2,441.7   2,047.2  
Total liabilities 3,281.7   2,749.1  
Net assets 2,059.1   1,852.6  
Equity attributable to equity holders
Share capital
Capital reserve 1,748.5 1,623.7
Share based compensation reserve 9.4 2.9
Founder Preferred Share Dividend reserve 372.6 493.4
Translation reserve 88.8 83.2
Cash flow hedging reserve 8.5 (3.0 )
Accumulated deficit reserve (167.9 ) (347.6 )
Equity attributable to owners of the parent 2,059.9   1,852.6  
Non-controlling interests (0.8 )  
Total equity 2,059.1   1,852.6  
 
         

Nomad Foods Limited As Reported
Statements of Cash
Flows (audited)

Twelve months Ended December 31, 2018
and December 31, 2017

 

Twelve months ended
December 31, 2018

Twelve months ended
December 31, 2017

€ millions € millions
Cash flows from operating activities
Profit for the period 170.5 136.5
Adjustments for:
Non-cash fair value purchase price adjustment of inventory 5.7
Exceptional items 17.7 37.2
Share based payment expense 13.0 2.6
Depreciation and amortization 46.3 42.4
Loss on disposal of property, plant and equipment 0.3 0.5
Finance costs 57.6 81.6
Finance income (1.6 ) (7.2 )
Taxation 56.6   32.0  
Operating cash flow before changes in working capital, provisions
and exceptional items
366.1 325.6
(Increase)/decrease in inventories (20.2 ) 16.7
Increase in trade and other receivables (10.8 ) (1.6 )
Increase in trade and other payables 64.5 18.1
Decrease in employee benefits and other provisions (2.0 ) (0.3 )
Cash generated from operations before tax and exceptional items 397.6 358.5
Cash flows relating to exceptional items (43.4 ) (99.5 )
Tax paid (32.9 ) (65.2 )
Net cash generated from operating activities 321.3   193.8  
Cash flows from investing activities
Purchase of subsidiaries, net of cash acquired (465.1 )
Settlement of contingent consideration (6.5 )
Purchase of property, plant and equipment (35.0 ) (38.0 )
Purchase of intangibles (6.6 ) (4.6 )
Cash used in investing activities (513.2 ) (42.6 )
Cash flows from financing activities
Proceeds from issuance of Ordinary Shares 0.1
Repurchase of ordinary shares (177.6 )
Proceeds from new loans and notes 355.6 1,470.5
Repayment of loan principal (5.9 ) (1,469.5 )
Cash received from factored receivables 3.4
Payment of finance leases (1.6 )
(Loss)/proceeds on settlement of derivatives (2.8 ) 1.6
Payment of financing fees (2.6 ) (16.7 )
Interest paid (45.3 ) (48.8 )
Interest received 0.2   0.3  
Net cash from/(used in) financing activities 302.7   (241.8 )
Net increase/(decrease) in cash and cash equivalents 110.8   (90.6 )
Cash and cash equivalents at beginning of period 219.2 329.5
Effect of exchange rate fluctuations (2.4 ) (19.7 )
Cash and cash equivalents at end of period 327.6   219.2  
 

Nomad Foods Limited

Adjusted Financial Information

(In € millions, except per share data)
 
The following table reconciles Adjusted financial information for
the three months ended December 31, 2018 to the reported results of
Nomad Foods for such period.
               

 

Adjusted Statements of Profit or Loss (unaudited)
Three
Months Ended December 31, 2018

 
€ in millions, except per share data

As reported for the
three months ended
December
31, 2018

Adjustments

As Adjusted for the
three months ended
December
31, 2018

Revenue 614.8 614.8
Cost of sales (431.1 )   (431.1 )
Gross profit 183.7 183.7
Other operating expenses (99.6 ) 3.8 (a) (95.8 )
Exceptional items (6.0 ) 6.0   (b)  
Operating profit 78.1 9.8 87.9
Finance income
Finance costs (19.9 ) (0.7 ) (20.6 )
Net financing costs (19.9 ) (0.7 ) (c) (20.6 )
Profit before tax 58.2 9.1 67.3
Taxation (17.4 ) 1.7   (d) (15.7 )
Profit for the period 40.8   10.8   51.6  
 
Profit for the period attributable to equity owners of the parent 41.1 10.8 51.9
Weighted average shares outstanding in millions – basic 175.8 175.8
Basic earnings per share 0.23 0.29
Weighted average shares outstanding in millions – diluted 175.9 (0.2 ) (e) 175.7
Diluted earnings per share 0.23 0.29
 
(a)   Share-based payment charge including employer payroll taxes.
(b) Exceptional items which management believes are non-recurring and do
not have a continuing impact. See table ‘EBITDA and Adjusted EBITDA
(unaudited) three months ended December 31, 2018’ for a detailed
list of exceptional items.
(c) Elimination of €1.0 million of realized gains on foreign currency
derivatives as well as €0.3 million of realized and unrealized
foreign exchange translation losses.
(d) Tax impact of the above at the applicable tax rate for each
adjustment, determined by the nature of the item and the
jurisdiction in which it arises.
(e) Adjustment to eliminate the dilutive effect of the Founder Preferred
Share Dividend earned as of December 31, 2018 but for which shares
were issued on January 2, 2019.
 

Nomad Foods Limited

Adjusted Financial Information

(In € millions)
 
The following table reconciles EBITDA and Adjusted EBITDA for the
three months ended December 31, 2018 to the reported results of
Nomad Foods for such period.
       

EBITDA and Adjusted EBITDA (unaudited)
Three Months
Ended December 31, 2018

 
€ in millions

As reported for the
three months ended
December
31, 2018

Profit for the period 40.8
Taxation 17.4
Net financing costs 19.9
Depreciation 10.9
Amortization 1.8  
EBITDA 90.8
Exceptional items:
Supply chain reconfiguration (0.1 ) (a)
Findus Group integration costs 3.3 (b)
Goodfella’s Pizza & Aunt Bessie’s integration costs 5.3 (c)
Factory optimization 0.7 (d)
Settlement of legacy matters (3.2 ) (e)
Other Adjustments:
Other add-backs 3.8   (f)
Adjusted EBITDA(g) 100.6  
 
(a)   Supply chain reconfiguration costs following the closure of the
factory in Bjuv, Sweden. Following the closure in 2017, the Company
has incurred costs relating to the relocation of production to other
factories. The costs are partially offset by income from the
disposal of the remaining tangible assets.
(b) Non-recurring costs related to the roll-out of the Nomad ERP system
following the acquisition of the Findus Group in November 2015.
(c) Non-recurring costs associated with the integration of the
Goodfella’s pizza business in April 2018 and the Aunt Bessie’s
business in July 2018.
(d) Non-recurring costs associated with a three-year factory
optimization program to develop a new suite of standard
manufacturing and supply chain processes, that will provide a single
network of optimized factories.
(e) Non-recurring income and costs associated with liabilities relating
to periods prior to acquisition of the Findus and Iglo Groups,
settlements of tax audits, settlements of contingent consideration
for acquisitions and other liabilities relating to periods prior to
acquisition of the Findus and Iglo businesses by the Company
including an income of €2.7 million recognized on settlement of
contingent consideration for the purchase of the La Cocinera
acquisition.
(f) Represents the elimination of share-based payment charges including
employer payroll taxes.
(g) Adjusted EBITDA margin of 16.4% for the three months ended December
31, 2018 is calculated by dividing Adjusted EBITDA by Adjusted
revenue of €614.8 million per page 8.
 

Nomad Foods Limited

Adjusted Financial Information

(In € millions, except per share data)
 
The following table reconciles Adjusted financial information for
the three months ended December 31, 2017 to the reported results of
Nomad Foods for such period.
               

Adjusted Statements of Profit or Loss (unaudited)
Three
Months Ended December 31, 2017

 
€ in millions, except per share data

As Reported for the
three months ended
December
31, 2017

Adjustments

As Adjusted for the
three months ended
December
31, 2017

Revenue 508.2 508.2
Cost of sales (348.2 )   (348.2 )
Gross profit 160.0 160.0
Other operating expenses (91.7 ) 3.2 (a) (88.5 )
Exceptional items (20.4 ) 20.4   (b)  
Operating profit 47.9 23.6 71.5
Finance income
Finance costs (17.4 ) 3.7   (13.7 )
Net financing costs (17.4 ) 3.7   (c) (13.7 )
Profit before tax 30.5 27.3 57.8
Taxation (3.2 ) (9.1 ) (d) (12.3 )
Profit for the period 27.3   18.2   45.5  
Weighted average shares outstanding in millions – basic 166.8 166.8
Basic earnings per share 0.16 0.27
Weighted average shares outstanding in millions – diluted 175.6 (8.7 ) (e) 166.9
Diluted earnings per share 0.16 0.27
 

Contacts

Investor Relations Contacts
Taposh Bari, CFA
Nomad
Foods Limited
+1-718-290-7950

John Mills
ICR, Partner
+1-646-277-1254

Media Contact
Felipe Ucros / Josh Clarkson
Gladstone
Place Partners
+1-212-230-5930

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