Feltham / UK. (nom) Nomad Foods Limited (Goodfella’s Pizza, Iglo, Findus and other brands) reported financial results for the three and nine month periods ended September 30, 2019. Key operating highlights and financial performance for the third quarter 2019, when compared to the third quarter 2018, include:
- Reported revenue increased 2 percent to EUR 540 million
- Organic revenue growth of 2.5 percent
- Reported Profit for the period of EUR 39 million
- Adjusted Ebitda increased 14 percent to EUR 96 million
- Adjusted EPS of EUR 0.25
Management Comments
Stéfan Descheemaeker, Nomad Foods’ Chief Executive Officer, stated, «We achieved strong growth during the third quarter and made progress against our long-term strategic objectives. Organic revenue growth of 2.5 percent was driven by continued momentum in our core portfolio and the contribution from new product initiatives in fish, vegetables and plant protein. Most of our countries grew organically during the quarter, including the UK, Italy, Germany and France. Finally, we delivered 110 basis points of adjusted gross margin expansion, due in large part to an improved pea harvest. Overall, we are pleased with our performance and remain on pace to achieve our plans for the year.»
Noam Gottesman, Nomad Foods’ Co-Chairman and Founder, commented, «We are pleased with our third quarter and first nine months performance. The team continues to execute well while navigating a dynamic macro landscape, and we expect to report another year of solid earnings and cash generation in 2019. With over EUR 700 million of cash and leverage at 2.8x, our balance sheet has us well positioned to enhance long-term shareholder value through organic growth and accretive M+A. We have been evaluating a handful of acquisition opportunities in recent months and look forward to providing updates in due course.»
Third Quarter of 2019 results compared to the Third Quarter of 2018
- Revenue increased 1.8 percent to EUR 540 million. Organic revenue growth of 2.5 percent was comprised of 4.0 percent growth in price and a 1.5 percent decline in volume/mix.
- Adjusted gross profit increased 6 percent to EUR 159 million. Adjusted gross margin increased 110 basis points to 29.5 percent as a favorable harvest, pricing and promotional efficiencies and mix more than offset cost of goods inflation.
- Adjusted operating expenses increased 1 percent to EUR 80 million, reflecting Advertising and promotion expense growth of 3 percent to EUR 27 million and Indirect expense unchanged at EUR 53 million.
- Adjusted Ebitda increased 14 percent to EUR 96 million, which included a benefit of EUR 4.5 million related to IFRS 16.
- Adjusted Profit after tax increased 9 percent to EUR 49 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 EUR 0.7 million.
- Adjusted EPS decreased 4 percent to EUR 0.25, 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 decreased 5 percent to EUR 0.20.
First Nine Months of 2019 results compared to the First Nine Months of 2018
- Revenue increased 8.9 percent to EUR 1,696 million. Organic revenue growth of 2.2 percent was comprised of 4.0 percent growth in price and a 1.8 percent decline in volume/mix. Revenue growth benefited 7.0 percent from acquisitions.
- Adjusted gross profit increased 7 percent to EUR 510 million. Adjusted gross margin declined 40 basis points to 30.1 percent as pricing and promotional efficiencies were more than offset by cost of goods inflation and acquisition mix.
- Adjusted operating expenses increased 5 percent to EUR 244 million primarily due to inclusion of acquisitions. Advertising and promotion expense increased 3 percent to EUR 86 million while Indirect expense increased 5 percent to EUR 159 million.
- Adjusted Ebitda increased 15 percent to EUR 316 million, which included a benefit of EUR 13.2 million related to IFRS 16.
- Adjusted Profit after tax increased 10 percent to EUR 172 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 EUR 2.0 million.
- Adjusted EPS increased 2 percent to EUR 0.91, 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 EUR 0.01. Reported EPS decreased 23 percent to EUR 0.57.
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 narrowing 2019 guidance to the upper end of the prior range and now expects Adjusted Ebitda of approximately EUR 425 to EUR 430 million and approximately EUR 1.20 to EUR 1.22 EPS. Full year guidance continues to assume organic revenue growth at a low-single digit percentage range.
