Good day, and welcome to the Nomad Foods second quarter earnings call. Today's conference is being recorded. And at this time, I'd like to turn it over to Paul Kenyon. Please go ahead.

Good morning, good afternoon, everyone. And before we start, I would, as always, draw your attention to the disclaimer on Slide 2. I do not propose to read it through, but ask that you do so in your own time. With that, I will hand you over to Stéfan. Stéfan? Stéfan Descheemaeker: Thank you, and good morning, good afternoon, everyone, and thank you for joining us on our second quarter 2016 results call. As you just heard, I'm joined today by Paul Kenyon, our CFO, and I will start by saying that we continue to see some early positive results of our strategy and its execution. Our focus remains on core categories and disciplined integration of Findus, and it's paying off. We have key priorities in 2016. Firstly, stabilizing sales by progressively slowing the rate of decline in the top line through the balance of the year. Secondly, delivering on our synergy commitments from the Findus deal and thirdly, pursuing consolidation of the European frozen category. So I'm going to take each of these points in turn. So firstly, I was really pleased to see a further slowing of the rate of decline in sales in the second quarter. We have now halved the rate of decline since the bottom of -- in Q3 2015, with only the early stages of our new strategy reaching the consumer. We look forward to the remainder of the year, where we see this trend continuing as more demands of the new strategic line in the market. All teams are highly focused on what they can do to support the Must Win Battles ahead of the strategic rollout and have been extremely creative in refreshing all advertising with up-to-date logos and pack shops. As I noted in my comments last time, we have succeeded…

Thank you, Stéfan, and good morning, good afternoon, everyone. Before turning back to the presentation, please note that the financial information represents pro forma as-adjusted figures for 2015 and as-adjusted figures for 2016. All figures have been adjusted for exceptional items, restructuring and transaction-related items, and all of my comments from hereon will refer to those as adjusted numbers. Turning to Slide 5. We thought that it would be helpful to continue to fill in the quarter-on-quarter growth for the group that we originally published as part of the CAGNY presentation. As you can see, with a 3.8% decline, the second quarter shows a step-up in the rate of improvement quarter-on-quarter versus that seen over the prior 2 quarters, where the decline slowed at about 1% each quarter, from an 8% decline in the trough of Q3 2015 to a 7% decline in Q4 and a 6% decline in Q1 2016. As Stéfan noted in his comments, we have succeeded in halving the rate of decline over the last 3 quarters, and our expectation remains that we will continue to see a progressive improvement in the rate of decline through the balance of the year as the various elements of the new strategy start to impact the market from the new refreshed creative work carrying from the third quarter onwards, augmented by the implementation of the new promotional tactics to the launch of the first wave of core renovation projects in the autumn cabinet reset, which will mainly impact sales in the fourth quarter. Turning to Slide 6. We show the year-on-year performance for the second quarter of 2016. Net revenue was down EUR 32.1 million or 6.6% year-on-year. Adjusting for currency impacts and the exit from Russia, the like-for-like decline was 3.8%, a 2.3% improvement on the rates of…

[Operator Instructions] We'll take our first from Steve Strycula with UBS.

Nice revenue quarter. So quick question for you on the revenue piece, and then I have a margin question. So for the revenues, you mentioned that we should continue to see sequential revenue improvement as we move through the balance of the year. I guess I would like to see you comment on twofold: first, talk about what proactively we should see, like underlying improvements in your businesses across key markets, stuff that is within your control. And then secondarily, I would like to hear what like nonrecurring headwinds are going away and should be no longer part of a revenue drag for the business, like your bankruptcy in Austria, or factory service levels. Stéfan Descheemaeker: So a result, obviously -- and please, Paul, complement to what I could say, proactively, across the board, as we said repeatedly, we have only started all the Must Win Battles. And when you think about these Must Win Battles, which represents about 75% of all our business, you have different stages. You will see we have the promotion stage. You have the, let's say, the copy -- the copy stage and you have heard that we're really going to start intensively in Q3. You have the renovation, which already have started but it's really going to hit Q3, Q4 and then Q1 and later on, in 2017 and obviously, as I said, the packaging side, which is really starting to impact again positively in the business starts in Q3, Q4. So that's really under our control. Just to give you an example, we going only to start in the U.K. So U.K. for [indiscernible] reasons a bit more complex, is really starting a bit later than, for example, Germany. So that is really across -- it's really under our control and what we…

Just one...

Yes. Go ahead, Paul, please explain a little bit more and then I also like to hear, any kind of sales velocity comments that you're seeing from some of these new recent Must Win Battles? Like, Stéfan, how have your conversations evolved with retailers over the past years to kind of correct some of the decisions that were made under the old strategy? And how are the retailers receiving the conversations? And are they actually changing how they manage your product on the shelf space and where your placement is? Stéfan Descheemaeker: Okay. Maybe I will cover that piece and then, Paul, you will obviously complement what I said. In terms of sales velocity, again, it's a question, Steve, of common sense. All the retailers, and it's a growing trend, like simplicity, so they want to make sure that the shelves are not cluttered and that they have the right SKUs. So instead of coming with new initiatives, new, let's say, new product development, starting from a very low baseline, focusing obviously on the SKUs that work, which is somehow the essence of the Must Win Battle, is obviously something that is music to their ears. And that's what we've seen obviously in negotiation with the retailer is always a process, as you know, it's always a battle, as always, but we've seen a really easy spike at the very difficult 2015, what we've seen is, yes, they like what they see, they like the simplicity and they like the focus.

Okay. And then just to come back on your point about headwinds in the sales line, Steve, I think, being honest, with the European grocery channel as competitive as it is, we're always going to see small players fall out of the market, so you got a kind of steady group of those. We manage our business very carefully to make sure we don't get a big hit from it but there are small retailers who are either being taken over or falling out. You probably got 1 per half year, maybe 2. I guess the other comment I would make is inevitably, we are in difficult discussions with at least one retailer across our whole European business at any one time, that's just the nature of the industry and it's part of normal business. It's unusual to be out of supply for 2 quarters as we were in Germany, but every so often, you have to make a stand to manage your business in the right way. So I think those things, I would characterize as part of normal course of business. A couple of the others we've called out probably aren't, so it's unusual for a species to be in short supply across the industry as hake is in Italy at the moment. And as I commented on our first quarter results call, we have set up a new supply route, which will come online in the second half. So that probably is more unusual. And the other unusual one obviously is being off promotion in Sweden in the second quarter, which was a direct consequence of our announcement of the closure of the Bjuv plant. So clearly, that would be more one-off in nature because we don't regularly close plants so hopefully, that gives you a bit more color behind the kind of headwinds we faced.

Okay, great. And one last question and I'll pass it on. Just wanted to get an understanding. I think, just to be clear, the EBITDA in euros for year-on-year is going to be roughly flat from the adjusted baseline pro forma of last year, is that correct? And two, can you kind of talk about the A&P spend shift that you guys are talking -- discussing? What is the magnitude into the back half? I know I think you said A&P's going to be flat year-over-year, but just talk about the nature of the shift and how should we think about A&P spend going forward? Stéfan Descheemaeker: My suggestion, Paul, if you take the EBITDA question and then, together we will cover the A&P shift.

Sure. So yes, as you will recall, in the revised 2015 pro forma numbers we put out in the Q1 results, we delivered EUR 331 million of EBITDA post currency, and that would be our current expectation for this year. On A&P, the precise number we have rephased, we've spent EUR 15 million, 1-5, less in the first half of 2016 than we did in 2015. That was a decision that was subject to a lot of debate in the business, but it was felt that we needed to wait for the good copy and also to keep our powder dry until we had new products and new promotional tactics to advertise behind. So we felt that we would get a bigger bang for our buck by waiting until Q3, Q4 when we had a more complete strategy to invest behind, but Stéfan, perhaps you would like to build on that? Stéfan Descheemaeker: Yes. To be very clear, obviously, there is no pushback from the sense that you will spend less in terms of A&P, so it's really, we want to make sure that we're going to spend the right amount of money behind the right copies. So that's, that. And in the meantime, which is also an ongoing process, by the way, we also -- we keep optimizing the A&P, the nonworking side. We just closed a deal with [indiscernible], that should also obviously improve the nonworking side of A&P. But the number of GRPs is obviously very crucial for us and it's really one of the cornerstones of this Must Win Battle. So in each and every Must Win Battle over time is to receive the right number of GRPs to obviously feed some of the growth in the future.

[Operator Instructions] We'll move to our next from Jon Tanwanteng with CJS Securities.

Aside from the currency impact, have you seen any other demand impact from Brexit? And are you making any changes to how you purchase and process fish in response to the currency headwinds there? Stéfan Descheemaeker: At this stage, no, we're not changing anything. Quite frankly, the currency thing is more driven by -- in terms of fish, by the way, it's more driven by the dollar, so it's not changing. We're not changing anything in terms of policy. It's mostly T12 anyway. Besides that, obviously, as Paul mentioned, we're going to -- in the future, we're going to adapt in the U.K. more and more so as to become some sort of, let's say, less dependent upon obviously the currency impacts, especially at the transformation level. Paul, anything else?

No. I mean, I think, if I look at the pound-euro rate, it's -- I've been in the business 4 and a bit years now and I've seen rates range between 1.16 and 1.45, so we're still in the kind of range we've experienced and we didn't decide to move production when it was at 1.16. I think if we see sterling has settled at a much slower rate on a sustainable basis, that might change our thinking, but I think we'd like to see how things play out. The U.K. government hasn't yet invoked Article 50. There seems to be plenty of time before that happens, so I think we'd like to see how the negotiations between the relevant governments pan out before we start moving production around, but we obviously keep it under constant review. Stéfan Descheemaeker: The good news is that, let's say, footprint wise we're reasonably well hedged between the different sites between continental Europe and U.K.

And given the issues with currency, or perhaps, a more adverse harvest and various supplier retailer issues, what's offsetting that and giving you the confidence in being able to deliver on that EUR 200 million free cash flow target? Stéfan Descheemaeker: Series of things. Let me start, Paul, and obviously, you will complement it. Synergies is one. Obviously, big great focus behind indirect. Also, you may have seen that, at the gross margin level, on this review program is really starting to generate some very interesting results. And yes, little by little, as we said, moving from minus 8 to minus 6 to minus 3.8 to obviously an improvement Q3, Q4, all these things obviously will -- I mean, are making us more confident to hit the target that was mentioned by Paul. Anything else, Paul?

Yes. I mean, I think we've always called out that the cash generation from the legacy Findus business was at a much lower level than the old Iglo business. While it's early days, we are working very hard to improve debtor management, inventory control. And as you can see from the CapEx line, we really have a very, very rigorous control of CapEx, which, as a discipline, we've had in the old Iglo business for years. So I think we see still a route to deliver the EUR 200 million, and that's why we have reaffirmed it today.

Great. And one more for you, Stéfan, just can you talk a bit more about the prospects for M&A today? Are they better or worse than they were in the previous couple of quarters? And what have you seen change in that environment? Stéfan Descheemaeker: Again, at this stage, I will first and foremost -- I will focus really behind frozen food in Europe, let's say, priority #1 and for the right reasons, for us was really first stabilize the sales line, the synergies. Now that we're starting to get there, we're focusing more and more behind what could happen. And what we've seen is, at least, at the bolt-on level, there is a series of potential targets that could be available in the coming, let's say, quarters or years. Obviously, you may know that I spent a bit of my life in M&A, you need to be true to do this. So it's an unpredictable process but at least, we're starting to obviously to be more focused and be more proactive. But let's say, again, focused on frozen food at this stage, and I will cover the non-frozen food later. On the non -- on the frozen food, you can see that you still have a lot of categories and countries where we -- there are some opportunities for us and we like it. To complement to when we have 2 Must Win Battles or 3 Must Win Battles in the country to come up with a fourth one with the same kind of cost structure makes a lot of sense. And we're demonstrating with Findus that, yes, we can move obviously this margin from a reasonably lower level to a level that is becoming acceptable to us. That's the kind of model we like, moving from a pre-acquisition of something like -- I'm just making it up, don't take this as an indication, but 9x EBITDA to something like 5.5 post acquisition is the kind of deal that makes a lot of sense and we think there are some let's say midsized deals that might be available in the coming quarters and years. Back to other bigger things, again, we're going to be -- to remain very disciplined. We've repeated that for the investment criteria that we set for ourselves in the past, starting from a very strong obviously position and Iglo was a great position, not a dominant position but definitely a leadership position, which was great, great people, potentially, some of you see similarities with frozen food might be helpful, synergies potential, very strong brands so that's the kind of things obviously. We're not going to lose sight but obviously, it's also something which is outside frozen food but that could become available as well in the future.

We'll take a follow-up from Steve Strycula with UBS.

Just a quick follow-up. Stéfan, would like to hear your thoughts given your background and experience in revenue management. How those initiatives are tracking. What stage are you in terms of building revenue management team internally? And at what point -- I know it takes time to implement revenue management, but what could it do, at what point? Like is it a 2017 catalyst for the company? Is it 2018? How should investors kind of think about that? And then, a follow-up question for Paul, on EBITDA margins, looking forward to next year, if you just exclude synergies, which will obviously be a benefit for the company, is there an opportunity on a like-for-like business basis to just make the business stand-alone basis more profitable from a margin perspective? Stéfan Descheemaeker: So to be very clear with your question, it's 2017, it shouldn't be 2018. So definitely, we're starting to see some results already in 2016, but we're just scratching the surface at this stage. But 2017 should be definitely an important year. So back to revenue management, as such, revenue management is a very generic term that includes many different components. And I would just limit myself to 3 at this stage. Each and every country within the Nomad food scope will receive targets in terms of conditionality. So obviously, the more conditionality, the better it is in terms of trade terms with the retailers, that's one thing. And you have very different situations from one country to another, from one retailer to another, so it's really something -- it's something that is -- something we need to develop year after year, so that's one thing. Second is obviously is to make sure that we have retailer by retailer, store by store, the must-have assortments. It could be a must-have assortment for the hypermarkets, could be for supermarkets, could be for convenience, so but that's the kind of discipline that's going to pay off, and we have the data that prove this. And last but not least, and it's really going to hit positively the results in 2017 is, when you go through the data and you need to have the right transparency for this, you'd be surprised by the number of promotions that are just useless and sometimes even negative for both and for both, for the retailers and for us. So this is something that we are tracking. We're bringing the right level of visibility. Right now, we're investing behind this with some providers, some service providers. And then again, we're going to provide -- to come up with targets by country. So that's the kind of program starting 2016, generating results already early in 2016 but bigger -- I mean, more to expect in '17, '18, '19.

And then taking your question on EBITDA margin, Steve. I mean, obviously, we have a well-honed continuous improvement program that rolls every year through our supply chain. Stéfan's just talked to the net revenue management and he talked earlier to our efforts to squeeze the maximum benefit out of A&P. I think the organic terms, ex synergies, whatever we throw off we would much rather at this stage reinvest into A&P, because we think with the Must Win Battle concept, we have something that really could drive sustainable progress for the company. And I guess, we would prefer to invest more behind that to give it a real chance of success than drop it to the bottom line at this point. But Stéfan, you may want to build on that. Stéfan Descheemaeker: Well, I think you mentioned there all the right thing. That's why we said, obviously, we want to see progress behind indirect, that's very clear. But within A&P, obviously, you need to make the difference between the nonworking costs and on that one we'll keep the same kind of discipline. But at the same time, we need to reinvest behind our brands, behind our Must Win Battles. And yes, I think, obviously, the number of GRPs per category is absolutely fundamental. And so we still have some further investments to make sure that we have the right level, and we're not going to compromise on that.

And we'll take our next question from Brian Holland with Consumer Edge Research.

Quick housekeeping question, if I could just start. Just thinking about the back half of the year briefly, and I apologize if you've addressed this earlier, we're looking at sequential improvement. Can you kind of help us think about the cadence for that? You've got easier comps in the back half. You've obviously got some staggered initiatives rolling in and benefiting. If we think about the kind of sequential improvement we've seen the last 3 quarters, is it the same kind of pace of improvement? Are there reasons why it should be slower or maybe accelerate faster? Stéfan Descheemaeker: I will pass this question to my CFO. Paul?

Thanks, Stéfan. Yes, I mean, we've always said it was difficult to predict precisely how fast the new strategy would impact given the range of markets and the range of products within the Must Win Battle categories. Clearly, we've delayed advertising spend to the second half of the year to ensure that we really get the more for the bang. It's very difficult to predict how fast those products in those markets will respond. So I guess, we were heartened to see that in Q2, where we've managed to get old copy of the Captain back on air with refreshed logos and refreshed pack shots, that we have seen a bit of a pickup in the business or the rate of improvement. So I think our ambition is still to deliver quarter-on-quarter improvement. While I understand the point people make about soft comps, it's easier to lose consumers than gain them in this channel in Europe. So I wouldn't underestimate the challenge we face in getting the business back to stable but currently, we feel in reasonable shape after Q2.

Got it, thank you. And then if I could just circle back on your M&A comments. You've obviously talked about -- and I appreciate that you're focusing on the day-to-day, where your priorities are with stabilizing the core and integrating Findus, but again, looking forward on the M&A, and you sort of talked about Europe. I guess, can we just maybe get some commentary about the North American market? How you're thinking about that? I know it's been out there as a potential for you. I know it may be a longer-term initiative, but maybe how you would think about that or prioritize and continuing to roll up Europe, which seems like it may be a smaller opportunity as opposed to maybe building a platform in North America, so if you could maybe provide any updated thoughts you have about that? Stéfan Descheemaeker: Okay. Let me -- number one, food overall, in Europe and in North America, the food market is reasonably fragmented and I think we could say the same for North America. So as a result, starting from strong platform and, obviously, a bolt-on acquisition process later on should create value. So there are obviously other categories that we should contemplate in North America. I don't think we should limit ourselves to frozen food. Because quite frankly, the frozen food synergies between North America and Europe are quite limited, obviously, you have best practice and some scale, but very limited. So that shouldn't be the criteria. So the criteria remains the same and we know that we have -- there are some interesting targets, same thing. Starting from a very strong brand. Obviously, if you're starting from a new category, you need to make sure that you have the right management, something we inherited and at the end of the day, with Iglo and with Findus but definitely with Iglo as a starting point and, obviously, in markets where we have a leading position. So with that, I don't think you can afford to go to something which is too small in the U.S. because if it's too small a search probably starting from the right starting position, reasonably leading position that something, the kind of things we had with Iglo. So don't expect something like a bolt-on in the U.S. or necessary something in frozen food, but expect something that responds to the same criteria as the one that we had described and used for Iglo. But there are different categories that fit the bill.

And at this time, I like to turn it back to management for any additional or closing remarks. Stéfan Descheemaeker: Okay. So with that, again, as you said, let me finish by thank you all for attending the call today. While I take encouragement for progress made on implementing our strategy so far, as Paul said and as I said, there is still much to do, and we remain focused on our key objectives for the year. Firstly, to stabilize the top line. Secondly, to deliver the product the predictive synergies and thirdly, pursuing a highly synergistic deal in European frozen. So Paul and I look forward to seeing many of you in the U.S. in the coming weeks, in Boston, more specifically. And with that, I wish you a good day, and hand back to the operator.

That concludes today's conference. We thank you for your participation. You may now disconnect.