Good day, everyone, and welcome to the Nomad Foods Third Quarter 2016 Earnings Conference Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Mr. Paul Kenyon, CFO. Please go ahead, sir.

Good morning, good afternoon, everyone. Before we start, I would draw your attention to the disclaimer on Slide 2. I do not propose to read through it but ask that you do so in your own time. With that, I will hand you over to Stéfan. Stéfan Descheemaeker: Thank you, and good morning, good afternoon, everyone, and thank you for joining us on our third 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 positive results of our strategy and execution. Our focus remains on Must Win Battles and disciplined integration of Findus and it's paying off. As I said at the second quarter results call, we have clear 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. Taking each of these points in turn. Firstly, I was pleased to see a further slowing of the rate of decline in sales in the third quarter. The rate of improvement is lower than what we have seen in recent quarters, but it's important to remember that the autumn cabinet reset only happens at the end of the quarter, from mid-September and onwards, and so the impact of the new product launches is largely limited to the selling to the trade. Our expectations remain that we will see a slowing of the rate of decline in the fourth quarter, although we have some headwinds in the business that means that the rate of improvement will be smaller than the third quarter. Paul will give you a more detailed perspective on…

Thank you, Stéfan. 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 here on will refer to those as adjusted numbers. To aid users of our financial information, we have included within the presentation an appendix from Slide 15 onwards, which will enable you to reconcile non-IFRS financial information to our reported financial information. We will continue to develop the format of these non-IFRS reconciliations as we go forward. 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 conference presentation. As you can see, with a 3.3% decline, the third quarter shows an improvement in the quarter-on-quarter rate of decline for the fourth successive quarter, starting from the 8% decline in the trough of Q3 2015. As Stéfan noted in his comments, our expectation remains that we will see a further improvement in the rate of decline in the fourth quarter as further Must Win Battles are activated, although there are some offsetting headwinds that will limit the rate of progress in the fourth quarter, as I will cover later on. We have also extended the chart to cover 2017 since we will not have completed all of the planned Must Win Battles activations until the end of the first half. We will update our sales guidance for 2017 at our annual results presentation. But for those of you starting to think about sales trends beyond the end of 2016, this is worth remembering that 2017 is not a leap year, so we…

[Operator Instructions] We'll hear first from Steve Strycula, UBS.

First question. Actually, I like have 3 quick questions, but the first is going to be on sales. For sales, can you give us, Paul, any kind of cadence help as to how the quarter progressed month by month? You launched a lot of key initiatives in September. Is that -- was that the strongest month in the quarter? And how should we kind of think about that through -- as you go into 4Q? And then also, can you quantify the drag from what's going on in France right now with the transition issues that you're experiencing and the delisting in Sweden? Just so everyone here on the line can understand the duration and the scope of, call it, that revenue drag that we're experiencing right now. And then I have a margin question afterwards.

Okay. So in terms of, I will take France and Sweden first, and then I'll come back to the phasing of sales through the quarter. So in France, the portfolio transition explained all of the movements that we showed for the French market on Slide 8. So the EUR 2.3 million in France was all explained by portfolio transition. The business underlying was broadly flat in a declining market. In terms of Sweden, the salmon shortage will hit across -- well, at least some of the delisting, as a result of the price activity, will hit across Q4. We have not clarified that or quantified that to be honest, so we don't put a number to that. In terms of the sales profile through the quarter, September was not a bad month. So we did see a bit of a lift in September. As I was saying at the Q2 results, July and August were always slightly strange months for us. In terms of, obviously, the cabinets, particularly in Southern Europe, are focused on ice cream. And we can be quite weather-dependent. So if there's a real heat wave in Europe, we can see lower sales as people eat lighter food and tend to dine outside and therefore not use the ovens and a lot of our products are oven-prepared. So July and August can be always a bit bouncy for us, but September was a solid performance for us year-on-year. Stéfan Descheemaeker: I would even add, September of -- to give a bit more color, for example, U.K. was -- we're starting to see real progress, again, with the activation of the Must Win Battles.

And can you provide any kind of like anecdote as to how the U.K. environment is improving, specifically as you mentioned in September? Are these new monies they're putting back into the business, whether it's product enhancement, advertising, all these initiatives in the marketplace, is it moving the needle with your retailers? Give us any kind of anecdotal example or Nielsen numbers. And then how do you think about the pricing as we go forward? Because your peers in private label also have to take up pricing. But how do you balance that out once you see about -- like what happened in Sweden in the past quarter? Stéfan Descheemaeker: So let me start with some anecdote. These actions that we're taking in the U.K. from September and onwards and definitely in October, and so what we're doing right now, we have -- actually, we have 3 advertising on air. One is the Captain. Actually, what we did really with the Captain was we just adapt -- readapted the German copy, and I can tell you, it delivers really well. So that's pretty good. That's very inexpensive and you can see that in the very lasting results, which, by the way, says something about the value of the icon in the U.K. We hadn't seen the Captain for 10 years, and it's back on track and everybody remembers the Captain and it delivers. Second, we also said that we need to do something with our peas, which was losing some sort of relevance vis-à-vis the private label because we had not invested in the past behind peas. So again, we have a new copy on air, and again, very, very early results, delivers really well. And third, something which was also going down, is we have a new copy for…

Yes. Just to give you some color on the U.K. from the Nielsen data, Steve, we have seen a lower share loss in the last 4 weeks than the last 12 weeks and a lower share loss in the last 12 weeks than the MAT or moving annual total. And on volume share, we've actually seen volume share growth in the last 4 weeks and 12 weeks and a small loss on an MAT basis. So the lead indicators are that what we're doing in the U.K. is working. We always knew, in the U.K., it would be volume first than value. We're working hard on the value, as you know, from the pricing actions we're taking. But we are starting to see some encouraging signs in the U.K.

Great. And then I have one last question and then I'll pass it along. So then how should investors think about necessarily the next point or inflection where the sales trend should really start to improve in the business? Obviously, you have a little bit of ongoing headwinds continue in the fourth quarter. But should we expect some kind of continued step function higher in the first half of next year? And then related to EBITDA, Paul, you did comment that the EUR 330 million is still a reasonable forecast for this current year. How should we think about the building blocks for next year? Not necessarily guidance, but you had a poor pea harvest this year, the bonus accrual situation as well. What should be the larger building blocks as we think about margins for next year? Stéfan Descheemaeker: Okay, let me start with sales. As Paul told you, we're not going to come at this stage with guidance for 2017 as we're going to take, obviously -- we're going to mention that at the appropriate time, which is later next year. But at the same time, nothing has really changed. As we said, we have still a series of Must Win Battles that need obviously to be activated the 360 way. We said that it's probably the full activation of all the Must Win Battles, which together represent 75% to 80% of our business, is going to be in full motion by end of Q2. And then, which means that, yes, we have no reasons to believe that the strategy is wrong, and that we're very confident that we're going to keep it that way.

In terms of building blocks for next year on EBITDA, obviously, you have on the positive side synergies coming through. We also obviously are expecting to see a lower rate of decline in sales as we head through the year. So we will have a stronger commercial base. And as we evolve the portfolio through the Must Win Battles activations, we will see tail portfolio disappear. So as we progress through the year, incrementally, small step by small step, we should see more of our product range manufactured in our own plants because our Must Win Battles tend to be manufactured in our own plants, so we capture the efficiencies of that. So we do have some positive tailwinds that we're generating through our own cost management programs. Offsetting that obviously are the inflationary headwinds, so we are seeing some input cost inflation in some categories or at least that's the full cost as we see at the moment. And we will certainly have some FX-based inflation as a result of the movements of sterling and the euro and the Swedish kroner -- Norwegian kroner against the dollar, particularly in regard to our fish purchases. The poorer harvests also require you to price because obviously, the price per kilo of harvest has risen. So all of that means we are having to price in an environment that is challenging to pricing, not impossible, but challenging. So we have that to absorb. And then, obviously, we will be looking to reinstate some bonus scheme in the business, although that would obviously only pay out if we achieve our targets. So yes, there will potentially be a headwind from reinstating the bonus scheme but only if we achieve our targets.

And in the meantime, obviously, we will keep the business in a very tight leash more than ever in terms of indirect. That's a fact. And our network new management program is also starting to expand across the organization. That's going to obviously help to finance these rebuilds between Must Win Battles, bonus and also to some extent, also some additional quality investments that we're making.

We'll hear next from Jon Tanwanteng of CJS Securities.

Can you give us a little more detail about how you're managing through the existing currency climate? And I know you don't want to talk about pricing just yet, but what further steps have you taken on the supply chain and the manufacturing side, if any?

So as we said last quarter, we had hedging in place through to the end of the year and our hedges continue to roll forward. So as we sit here today, we're probably about 40% to 50% hedged for 2017. And that will continue to build as we move through the balance of this year into next year. In terms of how we look at managing that cost and clearly, we endeavor to pass on inflationary trends to customers and consumers and we have a reasonable track record of doing that. So although as I said just now, it's a fairly challenging environment to pass on price rises. But we are, as you all have seen from the press coverage, engaged with the retail trade, particularly in the U.K., which has seen the sharpest depreciation in currency, so we are actively pursuing that. We obviously also have net revenue programs aimed at optimizing our promotional spend, which is a big line for us. We have a very experienced supply chain team who are very focused on efficient cost to manufacture, and we continue to run programs to take costs out of our supply chain base as well. And lastly, we have the lean program on the indirects. We also continue to work very hard on our appetizing line to make sure that we squeeze the maximum number of gross rating points out of our euro -- millions of euros of investment. So as you know, we changed media buying agency again this year to Zenith and we have reaped additional benefits which has allowed us to get more GRPs per euro on the working media spend, and we obviously challenge everything we can on nonworking to maximize the amount of working media we have. So every line of the P&L is subject to challenge. Now that goes for the cash flow statement as well. We work very hard to maximize the cash delivery for the business as I think you can see from our cash statement for Q3.

Okay, great. And mentioning the marketing, you pushed out your A&P spending for a couple of quarters now. I know you started to ramp that in September. How much advertising spend should we expect to see in Q4? And how does that compare to the Q4 2015? And maybe just to follow on, will that increased rate continue into '17 as well?

So we think we have about the right number of euros. As I've just said, we aim to squeeze more gross rating points out of that number of euros than we have in the past. In terms of the phasing this year, it is going to be back end weighted because we decided to hold off until we had the 360-degree activation launches ready to go in September. As I commented in the script, September's A&P was up 58% year-on-year. So that gives you some idea of the weight of advertising we're putting into Q4. And that, we expect to continue, not necessarily 58% increases, but we expect to see significant increases through the end of the year. And our expectation is that the total spend for the year will be broadly the same as 2015. We might not quite get to the 2015 number because obviously, we have a fairly short amount of time left to spend the money, but that's our ambition. Going forward into 2017, a bit early to be giving guidance, but I mean, I think we will -- we have the right amount of money to spend behind the Must Win Battles. We will obviously because we'll be launching them through the first of the year, even out the phasing. So I think you'll see back-end phase -- back-end loaded phasing this year. I think we'll see more even phasing this year, but we don't necessarily feel we need more money next year at this point. Clearly, if we see a significant response to advertising and there's a good case to be made for investing more, we would always look at that. But right now, I think we're comfortable with the current levels of advertising. Stéfan Descheemaeker: So what you really need to remember is it's not savings, it's phasing more than anything else that's very important. So we said that from the start for this year. It makes a lot of sense. Second, it's going to be even more focused next year behind the Must Win Battles, if possible. And third, we're still going to work further on the efficiency between working money and nonworking money. And we still believe that we have some way to go, which is good news.

Great, that's helpful. Paul, can you just break out how much impact the reversal of the bonus accruals had in the quarter?

Yes. In the quarter, we had about EUR 7 million of releases. So in the quarterly statements of that, I think it was [indiscernible]. Stéfan Descheemaeker: [ EUR 7.8 million, EUR 7.6 million. ]

Yes. Of the EUR 14 million, about EUR 7 million is releases. Year-to-date, obviously, because you accrue at different rates in the 2 different years, year-to-date, but EUR 3 million. So we had full accruals through to the end of the first half 2016, which we've released in Q3 2016. In 2015, we fell out of bonus achievement earlier. So we had a relative -- we actually didn't have a release in Q3 last year. But we were still carrying accruals from the first half of about EUR 3 million. So the difference in year-to-date terms is about EUR 3 million, in the quarter, about EUR 7 million.

Got you. And finally, Stéfan, I'm not exactly asking for 2017 guidance, but do you think we might see year-over-year revenue growth sometime in 2017 once you activate all your Must Win Battles at least by the end of Q2? Stéfan Descheemaeker: Thank you, John, for not asking for guidance because it really looks like a guidance, quite frankly. So I'm not going to come to that debate at this stage. We'll come in due time with the right level of guidance. The only thing you need to remember is we're pleased with the results we have achieved so far with Must Win Battles. It's -- when you think back again, something like 12 months ago, we knew we had the right strategy, but we had -- quite frankly, we didn't know exactly how fast the Must Win Battles would activate and how efficiently. And what you've seen so far is we have been everything but disappointed.

And next we'll hear from Brian Holland from Consumer Edge Research.

Just some housekeeping here at the start. What did A&P spend look like relative to your expectation prior to the quarter? Did you make a decision intra-quarter to change the way that you spent A&P this quarter? And if that's the case, just any color on how you thought about that.

Not really. We did -- I guess, as we looked back at the spend levels, we did in a couple of markets trial advertising over the summer period last year. So we trialed advertising in Italy, for example, which we don't normally do because, obviously, your base sales are lower and you tend to try and advertise against higher-base sales periods because you get a bigger uplift. But last year, we had some advertising running through July, August. This year, we pretty much pulled back to barely maintenance levels to preserve firepower in September, which is why you see such a big hike in September. So year-on-year, the phasing was different, but that wasn't out of line with our expectations as we headed into the quarter. Stéfan Descheemaeker: 360 activation is the real criteria for us.

Sure. So to clarify, on synergy delivery, you're expecting the levels seen in Q3 to sort of persist through the first half of next year? And then how do we think about the cadence from there? Should synergies start to move higher again sequentially in the back half of '17?

Yes. I mean, as the French portfolio finishes its transition, you'll have that break taken off. You'll also start to see benefits from the closure of the Bjuv site come through in the second half of next year. And as we progressively roll through contract renegotiation, you'll see some procurement benefits coming through as well. Stéfan Descheemaeker: And to Paul's point, we're not changing our guidance in terms of synergies, which is EUR 43 million to EUR 48 million by the end of 2018. So yes, definitely, it will accelerate.

And then most of my questions have been answered. So just in closing, can you refresh for us how you're approaching M&A, I guess, thinking about your balance sheet, ongoing strategic initiatives and integration on your core portfolio? Do you feel you're in a position to do a deal today? Second, what are kind of -- if you could just sort of reset for us what the ideal parameters you're targeting with respect to size, temperature class, geography, valuation, et cetera.

Sure, Brian. So the answer is we're very well positioned to do deals today. We have a reasonably significant amount of cash on the balance sheet due to the inherent cash-generative nature of the business, and we continue to scan the horizon for deals. I think my ideal deal would be a business that came with probably no factories that we could drop the volumes into our own factories and get significant scale economies from whilst being able to sell or market it without taking on a single extra person. There aren't many of those businesses around, to be honest, but I think we... Stéfan Descheemaeker: The same category.

Yes. So we remain focused on highly synergistic deals. So that would be ideally deals in fish, vegetables, poultry or meals in either our current geographies or adjacent geographies where we have gaps in our portfolio. And the Barclays conference had that slide with the kind of 13 markets, 4 key categories, 52 potential leadership positions, which we have leadership in 35, I think it was. So coloring that chart Nomad blue remains our ambition. We'd also look at adjacent geographies. So if there are good quality markets that we're not currently present in, where we get opportunity to buy a market-leading position, we would certainly look at that as well. And again, if it comes with or without a factory, it just changes the level of synergies and level of onetime costs you invest as part of the deal. Stéfan Descheemaeker: And then on the other extreme, you have obviously a factory where we're doing private labels only, which was obviously something they lack, the other extremes, the things we don't want. And then you have a lot of situations in between. Obviously, the closer we get to what the ideal picture described by Paul, the better we are.

And just as a follow-on there or to clarify, looking for top 1, 2 or 3 market position in the respective categories, is that an important parameter?

Yes. We believe that there is a strong correlation between return and market position. So I mean, we're obviously #1 in European frozen by a factor of 2.8x and our margins, I think, reflect that kind of position. Within the markets we operate in, we do tend to see a difference in margin between player #1 and where we're #2 or #3. So we do believe that there is value for our investors in establishing ideally strong #1 positions in each category in each market. Failing that, a decent #2 position can still create a lot of value for our shareholders, particularly if it's part of the business that is #1 overall in the market. And it's a simple question of scale with customers. So if you're #1 in our 4 key categories, it's very easy to position yourself as a category captain with retailers. And if we build in fish, vegetable, poultry and meals, it allows us to extract scale economies, which again benefits our investors. Stéfan Descheemaeker: Yes. The correlation between margin and market share is obviously a very important one. And from that, you can immediately see the kind of obvious synergies between a midsized player in one category and the -- or footprint.

Thank you. And there are no further questions at this time. I'd like to turn the call back to Mr. Stéfan Descheemaeker for any additional or closing remarks. Stéfan Descheemaeker: Very good pronunciation, by the way, fantastic. Thank you. So let me finish by thanking you for -- all for attending the call today. While I take encouragement from the progress made on implementing our strategy so far, there is still much to do and we remain focused on our key objectives for the year: firstly, to stabilize top line; secondly, to deliver the predicted synergies; and thirdly, pursuing the highly synergistic deal in European frozen as well as broader strategic transactions globally as a means of delivering value for our shareholders. With that, I wish you a good day, and I hand back to the operator.

And thank you. That does conclude today's presentation. Thank you for your participation. You may now disconnect.