Market Overview

Nomad Foods Reports Second Quarter 2019 Financial Results

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Company Reiterates 2019 Guidance

Nomad Foods Limited (NYSE:NOMD), today reported financial results for the three and six month periods ended June 30, 2019. Key operating highlights and financial performance for the second quarter 2019, when compared to the second quarter 2018, include:

  • Reported revenue increased 10% to €538 million
  • Organic revenue growth of 3.5%
  • Reported Profit for the period of €46 million
  • Adjusted EBITDA increased 10% to €98 million
  • Adjusted EPS of €0.27

Management Comments

Stéfan Descheemaeker, Nomad Foods' Chief Executive Officer, stated, "We delivered strong second quarter results, which represent our tenth consecutive quarter of organic revenue growth. Performance continues to be fueled by investments that we have been making in our brands, people and capabilities, combined with an unwavering commitment to superior execution. Our core portfolio continues to outperform the frozen food category. Meanwhile, we are developing a pipeline of adjacent new product lines such as our plant protein sub-brand, Green Cuisine, which will complement the core and help enable the delivery of our growth algorithm for years to come."

Noam Gottesman, Nomad Foods' Co-Chairman and Founder, commented, "The business is responding well to the strategic actions we have taken this year and has us on pace to achieve a third consecutive year of growth. Our ability to deliver consistent performance demonstrates the focus and commitment of the organization, the quality of our portfolio and the potential of the frozen food category. In the meantime, with leverage below 3x, we are well positioned to complement strong organic growth with accretive acquisitions. In sum, we remain excited by our prospects and are eager to drive continued shareholder value."

Second Quarter of 2019 results compared to the Second Quarter of 2018

  • Revenue increased 10.2% to €538 million. Organic revenue growth of 3.5% was comprised of 4.0% growth in price and a 0.5% decline in volume/mix. Revenue growth benefited 7.0% from acquisitions.
  • Adjusted gross profit increased 4% to €160 million. Adjusted gross margin declined 170 basis points to 29.8% as cost of goods inflation and acquisition mix offset pricing and promotional efficiencies.
  • Adjusted operating expenses increased 4% to €79 million primarily due to the inclusion of acquisitions. As a percentage of revenues, Adjusted operating expenses improved from 15.5% to 14.7% reflecting acquisition synergies, expense discipline and phasing. Advertising and promotion expense increased 1% to €26 million while Indirect expense increased 5% to €52 million.
  • Adjusted EBITDA increased 10% to €98 million, which included a benefit of €4.4 million related to IFRS 16.
  • Adjusted Profit after taxincreased 6% to €52 million, reflecting Adjusted EBITDA growth, higher finance costs and a lower effective tax rate. The impact of IFRS 16 reduced Adjusted Profit after tax by €0.6 million.
  • Adjusted EPS decreased 4% to €0.27, as Adjusted Profit growth was offset by an increased share count resulting from the public offering of ordinary shares in the first quarter of 2019. The impact of IFRS 16 was immaterial to this metric. Reported EPS increased 33% to €0.24.

First Six Months of 2019 results compared to the First Six Months of 2018

  • Revenue increased 12.5% to €1,156 million. Organic revenue growth of 2.1% was comprised of 4.1% growth in price and a 2.0% decline in volume/mix. Revenue growth benefited 10.6% from acquisitions.
  • Adjusted gross profit increased 8% to €351 million. Adjusted gross margin declined 120 basis points to 30.4% as cost of goods inflation and acquisition mix offset pricing and promotional efficiencies.
  • Adjusted operating expenses increased 6% to €164 million primarily due to inclusion of acquisitions. As a percentage of revenues, Adjusted operating expenses improved from 15.0% to 14.2% reflecting acquisition synergies, expense discipline and phasing. Advertising and promotion expense increased 4% to €58 million while Indirect expense increased 8% to €106 million.
  • Adjusted EBITDA increased 15% to €220 million, which included a benefit of €8.7 million related to IFRS 16.
  • Adjusted Profit after taxincreased 10% to €123 million, reflecting Adjusted EBITDA growth, higher finance costs and a lower effective tax rate. The impact of IFRS 16 reduced Adjusted Profit after tax by €1.3 million.
  • Adjusted EPS increased 5% to €0.66, as Adjusted Profit after tax growth was partly offset by an increased share count resulting from the public offering of ordinary shares in the first quarter of 2019. The impact of IFRS 16 adversely impacted this metric by €0.01. Reported EPS decreased 30% to €0.37.

IFRS 16 - Leases

As previously disclosed, 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 have not been restated to reflect the new standard.

2019 Guidance

The Company is reiterating 2019 guidance of approximately €420 to €430 million Adjusted EBITDA and approximately €1.18 to €1.22 EPS. Full year guidance continues to assume organic revenue growth at a low-single digit percentage range.

Conference Call and Webcast

The Company will host a conference call with members of the executive management team to discuss these results today, Thursday, August 8, 2019 at 1:30 p.m. BST time (8:30 a.m. Eastern time). Investors interested in participating in the live call can dial +1-866-548-4713 from the U.S. International callers can dial +1-323-794-2093.

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 4440495.

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 six months ended June 30, 2019 and for comparative purposes, the three and six months ended June 30, 2018.

Adjusted financial information for the three and six months ended June 30, 2019 and 2018 presented in this press release reflects the historical reported financial statements of Nomad Foods, adjusted primarily for share based payment expenses and related employer payroll taxes, non-operating M&A related costs, acquisition purchase price adjustments, 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, 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 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 six months ended June 30, 2019 and 2018 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 13, 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 June 30, 2019 and June 30, 2018

 

 

Three months ended

June 30, 2019

 

Three months ended

June 30, 2018

 

€m

 

€m

Revenue

537.8

 

488.2

Cost of sales

(377.5)

 

(336.7)

Gross profit

160.3

 

151.5

Other operating expenses

(84.6)

 

(85.8)

Exceptional items

(1.6)

 

(6.1)

Operating profit

74.1

 

59.6

Finance income

1.1

 

Finance costs

(16.4)

 

(17.9)

Net financing costs

(15.3)

 

(17.9)

Profit before tax

58.8

 

41.7

Taxation

(12.6)

 

(10.7)

Profit for the period

46.2

 

31.0

 

 

 

 

Attributable to:

 

 

 

Equity owners of the parent

46.4

 

31.0

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