Nomad Foods Limited Announces Financial Results

Nomad Foods Limited ("Nomad" or the "Company"), today issues the following trading update for the three, nine and twelve month periods ended December 31, 2015. 

Nomad Foods acquired Iglo Foods Holdings Limited and its subsidiaries (the "Iglo Group") on June 1, 2015 and Findus Sverige AB and its subsidiaries (the "Findus Group") on November 2, 2015.  Prior to June 1, 2015 Nomad Foods did not have any operations.  Accordingly, Nomad Foods' reported results for the nine months ended December 31, 2015 include the seven month results of the Iglo Group from June 1, 2015 only and the two month results of the Findus Group from 2 November, 2015 only. In May 2015, Nomad Foods changed its financial year end to December 31 from March 31 in order to align with the Iglo Group's historical reporting calendar.  As a result, Nomad Foods' as reported results for the 2015 financial year are for the nine month period ended December 31, 2015.

Highlights for the three months ended December 31, 2015

• Revenue for the three months ended December 31, 2015 was €475.9 million, resulting in a €53.0 million profit after tax, which includes exceptional costs of €20.3 million.
• For the three months ended December 31, 2014, revenue was €nil, resulting in a profit after tax of €0.1 million.

Highlights for the nine months ended December 31, 2015

• Revenue for the nine months ended December 31, 2015 was €894.2 million resulting in a loss after tax of €337.3 million, resulting from non-cash charges related to the Founder Preferred Shares Annual Dividend Amount and warrant redemption amount of €348.6 million and exceptional costs of €58.1 million.
• For the twelve months ended March 31, 2015, revenue was €nil resulting in a loss after tax of €167.5 million, due to €166.2 million non-cash charges related to the Founder Preferred Shares Annual Dividend Amount and warrant redemption amount.

Pro Forma As Adjusted Results

Highlights for the three months ended December 31, 2015

Nomad Foods is presenting Pro Forma As Adjusted financial information for the three months ended December 31, 2015. Pro Forma As Adjusted financial information for the three months ended December 31, 2015 includes the reported results of Nomad Foods for such period, from which the results of the Findus Group from November 2, 2015 have been removed and replaced with the reported results of the Findus Group for the three months ended September 30, 2015, as they have been derived from audited carve out consolidated financial statements of the Findus Group. 

For comparative purposes, the reported results of the Iglo Group for the three months ended December 31, 2014 and the reported results of the Findus Group for the three months ended September 30, 2014, have been added to the reported results of Nomad Foods for such periods.

The Pro Forma As Adjusted results have been adjusted for exceptional items, restructurings and transaction-related items.  Please see the non-IFRS reconciliation tables attached hereto and the schedules accompanying this release for an explanation and reconciliation of the Pro Forma As Adjusted financial information to the reported results of Nomad Foods.

• Pro Forma As Adjusted revenue for the three months ended December 31, 2015 decreased by €18.2 million, or 3.3%, to €528.8 million from €547.0 million for the three months ended December 31, 2014. Allowing for currency impacts, the impact of exits from Romania, Slovakia, Turkey & Russia and business acquisitions, like-for-like revenue decline was 6.6%; a 1.0% improvement against the prior quarter's rate of decline. The decline in sales was driven by our three largest markets, the UK, Italy & Germany, although each of these markets showed reduced decline year-on-year compared to the prior quarter. The Findus Group markets were in total broadly flat on a like-for-like basis.
• Pro Forma As Adjusted gross profit for the three months ended December 31, 2015 decreased by €25.8 million, or 14.2%, to €155.4 million from €181.2 million for the three months ended December 31, 2014. The decrease is primarily due to sales performance and a decline in gross margin. Pro Forma As Adjusted gross margin fell, decreasing by 3.7% to 29.4% from 33.1%. The decrease in Pro Forma As Adjusted gross margin is driven by the volume decreases leading to reduced efficiencies and increased promotional investment to remain relevant to value seeking consumers. A deterioration in $:€ exchange rate drove higher cost inflation in the three months ended December 31, 2015.
• Pro Forma As Adjusted EBITDA for the three months ended December 31, 2015 decreased €18.6 million, or 17.2%, to €89.6 million from €108.2 million for the three months ended December 31, 2014. Pro Forma As Adjusted EBITDA margin decreased by 2.9% to 16.9% due to the reduction in gross margin discussed above, offset by lower indirect costs, primarily due to lower bonus pay-out levels aligned to business performance. Advertising and promotion expenditure, as a percent of revenue for the three months ended December 31, 2015 improved 100 basis points year-over-year to 4.7%.
• Pro Forma As Adjusted profit for the three months ended December 31, 2015 decreased €14.8 million, or 24.9%, to €44.7 million from €59.5 million for the three months ended December 31, 2014. This is due to the reduction in As Adjusted EBITDA margin, offset by a €6.9 million quarter on quarter decrease in Pro Forma As Adjusted taxes, driven by a combination of lower profitability and an improved mix of taxable profits across the group.
• Pro Forma As Adjusted EPS is €0.25 for the three months ended December 31, 2015 as compared to €0.33 for the three months ended December 31, 2014, a decrease of 24.2% due to the decrease in Pro Forma As Adjusted profit discussed above.

Highlights for the twelve months ended December 31, 2015

In May 2015, Nomad Foods changed its financial year end to December 31 in order to align with the Iglo Group's historical reporting calendar. Nomad Foods is presenting Pro Forma As Adjusted financial information for the twelve months ended December 31, 2015 for the combined results of Nomad Foods, the Iglo Group and the Findus Group. Pro Forma As Adjusted financial information for the twelve months ended December 31, 2015 includes the reported results of Nomad Foods for such period (which includes  the results of the Iglo Group from June 1, 2015 and the Findus Group from November 2, 2015) and have had (i) the reported results of the Iglo Group for the five months ended May 31, 2015 added to them; (ii) the audited consolidated carve out results of the Findus Group for the twelve months ended September 30, 2015 added to them and (iii) the results of the Findus Group from November 2, 2015 removed.                                                  

For comparative purposes, the reported results of the Iglo Group for the twelve months ended December 31, 2014 and the reported results of the Findus Group for the twelve months ended September 30, 2014, have been added to the reported results of Nomad Foods for such periods.

The Pro Forma As Adjusted results have been adjusted for exceptional items, restructurings and transaction-related items.  Please see the non-IFRS reconciliation tables attached hereto and the schedules accompanying this release for an explanation and reconciliation of the Pro Forma As Adjusted financial information to the reported results of Nomad Foods.

• Pro Forma As Adjusted revenue for the twelve months ended December 31, 2015 decreased by €61.6 million, or 2.9%, to €2,051.7 million from €2,113.3 million for the twelve months ended December 31, 2014. The sales performance was impacted by a continuation of the tough grocery retail environment across our top three markets as consumers continue to exhibit value seeking behaviour. Allowing for currency impacts, the impact of exits from Romania, Slovakia, Turkey & Russia, business acquisitions and business disposals, like-for-like revenue decline was 4.9%. This decline reflects challenging market conditions in three of our key markets (UK, Germany and Italy).
• Pro Forma As Adjusted gross profit for the twelve months ended December 31, 2015 decreased by €54.3 million, or 8.1%, to €618.6 million from €672.9 million for the twelve months ended December 31, 2014. The reduction is driven by sales performance and a decline in gross margin. Pro Forma As Adjusted gross margin decreased by 1.6% to 30.2% from 31.8%. This is primarily due to reduced efficiencies in the supply network due to the impact of lower volumes and increased promotional investment to remain relevant to value seeking consumers. A deterioration in $:€ exchange rate drove higher cost inflation in the latter part of 2015.
• Pro Forma As Adjusted EBITDA for the twelve months ended December 31, 2015 decreased €26.5 million, or 7.1%, to €345.2 million from €371.7 million for the twelve months ended December 31, 2014. Pro Forma As Adjusted EBITDA margin of 16.8% was in line with expectations, but decreased by 0.8% from 17.6% for the twelve months ended December 31, 2014 due to the reduction in gross margin discussed above, offset by advertising and promotion expenditure being €16.3 million lower than the comparative year, driven by a more effective media buying deal allowing us to deliver broadly flat Gross Rating Points ("GRP") year over year at a lower cost. Additionally, indirect costs declined by €8.4 million as we adjusted our costs (primarily bonuses which are earnings performance based) to reflect current market performance.
• Pro Forma As Adjusted profit for the twelve months ended December 31, 2015 decreased €14.8 million, or 8.0%, to €170.1 million from €184.9 million for the twelve months ended December 31, 2014. This is due to the reduction in As Adjusted EBITDA margin, offset by €14.8 million year on year decrease in Pro Forma As Adjusted taxes, driven by a combination of lower profitability and an improved mix of taxable profits across the group.
• Pro Forma As Adjusted EPS is €0.95 for the twelve months December 31, 2015 as compared to €1.03 for the twelve months ended December 31, 2014, a decrease of 7.8% due the decrease in Pro Forma As Adjusted profit discussed above.

Recent Developments

On March 31, 2016, the Company announced the decision to request negotiations with the relevant trade unions about a potential closure of the Group's Bjuv factory and pea processing operations by the end of 2016. The factory produces a range of vegetable and meal products for the retail and food service markets in Sweden, Denmark and Finland. Production will move to the Group's Reken and Bremerhaven factories in Germany. The consolidation of operations is expected to create a more efficient supply chain.

Management Comments

Stéfan Descheemaeker, Nomad Foods' Chief Executive Officer, stated, "While market conditions remain challenging, we managed to slow the rate of sales decline in the final quarter and maintained margins and cash generation in line with expectations.  I remain confident that our strategy is the right one and will deliver progressive improvement through 2016.  The integration of the Findus businesses continues to proceed in line with our expectations, and I am pleased with the pace we are realizing synergies and merging our business processes. Optimizing our manufacturing footprint is a critical step towards achieving our objectives and today we have announced that we have requested negotiations with the relevant trade unions about a potential closure of the Bjuv manufacturing plant in Sweden. Regrettably, should the factory close, this would involve the loss of approximately 500 jobs.  We are committed to supporting our employees through this difficult period."

Noam Gottesman, Nomad Foods' Co-Chairman and Founder, commented, "We are focused on supporting and nurturing our iconic brands to stabilize sales and are executing upon our strategic vision to deliver long-term growth.  We believe Stefan and the whole team are making the right decisions, and we expect to experience meaningful signs of improvement through the course of 2016.  While we have some challenges, there are also ample opportunities – organic and external. I believe that as we look ahead, we are well-positioned to build upon a great business and create significant value for all of our stakeholders."

Conference Call

A conference call with members of the executive management team will be held to discuss the results with additional comments and details.

The conference call is scheduled to begin at 10:00 AM Eastern Daylight Time (3:00 PM British Summer Time) on Thursday, March 31, 2016. To participate on the live, call listeners in the United State may dial 1866 928 7517 and enter pin code: 53283077# and listeners in the United Kingdom may dial 0808 2370030.

For a list of all international dial-in numbers, please click here. Additionally, the call is being webcast and can be accessed at Nomad's website at www.nomadfoods.com under Investor Relations; the event password is 669542.

Pro Forma As Adjusted Financial Information

Pro Forma As Adjusted financial information presented in this press release is based on the historical financial statements of Nomad Foods, as well as the historical financial statements of the Iglo Group and the Findus Group and has been prepared to reflect the acquisition of both the Iglo Group and the Findus Group and the changes in the financing structure associated with the acquisition of both Groups.  Pro Forma As Adjusted financial information should be read in conjunction with the audited financial statements of Nomad Foods included in this press release.

The Pro Forma adjustments presented herein are based upon certain assumptions that Nomad Foods believes to be reasonable.  Pro Forma As Adjusted financial information is presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations that would have been realized had the acquisition of the Iglo Group or the Findus Group occurred on an earlier date, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that the combined group will experience.  Pro Forma As Adjusted financial information is not compliant with SEC rules and does not reflect the cost of any integration or benefits from the acquisition of the Iglo Group and Findus Group that may be derived in the future.

Non-IFRS Financial Measures

Nomad Foods also utilizes certain additional key performance indicators described below.  Nomad Foods believe these indicators provide an important alternative measure with which to monitor and evaluate the Company's ongoing financial results, as well as to reflect its acquisitions.  Nomad Foods' calculation of EBITDA and Pro Forma As Adjusted EBITDA may be different from the calculations used by other companies and comparability may therefore be limited.  EBITDA and Pro Forma As Adjusted EBITDA are non-IFRS measures and you should not consider them an alternative or substitute for Profit and Loss after tax as a measure of operating performance.

EBITDA is Profit/Loss before tax for the period before net financing costs, depreciation, amortization, exceptional items, charges relating to the Founders Preferred Shares Annual Dividend Amount, charges relating to the redemption of warrants and other similar items. Pro Forma As Adjusted EBITDA is EBITDA further adjusted to add the results of the Iglo Group and Findus Group to the reported results of Nomad Foods for periods when the Iglo Group and the Findus Group, respectively, were not owned by Nomad Foods.  We believe EBITDA and Pro Forma As Adjusted EBITDA are useful indicators and can assist securities analysts, investors and other parties to perform their own evaluations.  Accordingly, the information has been disclosed to permit a more complete and comprehensive analysis of our operating performance.  EBITDA and similar measures are used by different companies for different purposes and are often calculated in ways that reflect the individual needs and circumstances of these companies.  You should exercise caution in comparing EBITDA or Pro Forma As Adjusted EBITDA with similarly titled measures of other companies. EBITDA and Pro Forma As Adjusted EBITDA are not measures of liquidity or performance calculated in accordance with IFRS and should be viewed as a supplement to, not a substitute for, our results of operations presented in accordance with IFRS.