Nomad Foods Reports Second Quarter 2019 Financial Results

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 tax increased 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 tax increased 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.