Good day, and welcome to the Nomad Foods’ First Quarter 2018 Earnings Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Taposh Bari, Head of Investor Relations. Please go ahead, sir.

Great. Thank you, Darmine. And thank you all for joining us to review our first quarter 2018 earnings results. With me on the call today are Chief Executive Officer, Stéfan Descheemaeker; and our Chief Financial Officer, Samy Zekhout. Before we begin, I would like to draw your attention to the disclaimer here on Slide 2 of our presentation. This conference call may make forward-looking statements that are based on our view of the company’s prospects at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which does include cautionary language. We will also discuss non-IFRS financial measures during the call today. These non-IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. Users can find the IFRS to non-IFRS reconciliations within our earnings release as well as in the appendices at the end of the slide presentation that is available on our website. Finally, please note that certain financial information within this presentation represents adjusted figures for both 2017 and 2018. And that all adjusted figures have been adjusted for exceptional items, restructuring, share-based payment and acquisition-related items. And that all comments from hereon will refer to those adjusted numbers. And with that, I will hand the call over to Stéfan. Stéfan Descheemaeker: Thank you, Taposh, and thank you, everyone, for joining us on the call today. 2018 is off to a strong start. With the momentum that we experienced throughout 2017 continuing into the midyear. We recorded first quarter organic revenue growth of 2.9%. Gross margin expansions of 240 basis points. Adjusted EBITDA of EUR 103 million and adjusted EPS of EUR 0.35 per share, which is up 40% versus…

Thank you, Stéfan. And thank you all for your participation today. It’s a real pleasure to be joining Nomad Foods that puts some exciting time. And I look forward to meeting you in the months to come. Turning to Slide 6. I will provide more detail on our key operating metric beginning with revenue, which increased 1.5% to EUR 539 million, driven by 2.9% organic revenue growth and offset by 140 basis points from unfavorable foreign exchange translation. Organic revenue growth of 2.9% exceeded our guidance of 2%, mainly due to a strong end to Q1. Organic growth currently resembling consumer takeaway as we once again gained market share in a category that grew low single digits. Growth was particularly balanced by geography. We experienced growth in the U.K., Germany and Italy, which grew organic sales by 6%, 8% and 4%, respectively. These are our three largest countries accounting for nearly 60% of sales and an even greater percentage of our EBITDA. They’re also the markets where we are probably tight strategically as we have high margins, high market share and high growth potential. All three countries posted organic revenue growth and increases in market share during Q1. As you may be aware, there were a number of shifts during the first quarter. First, we benefited from an earlier Easter, which helped first quarter sales growth by about 1%. Second, this benefit was partly offset by the phasing of promotion of the Q1, part of which we shifted into the year-ago period. In net, we are pleased with organic revenue growth of 2.9% in Q1. And we remain comfortable with our ability to realize low single-digit organic revenue growth for the year. Moving on to gross margin, which expanded 240 basis points to 31.8%. Gross margin were helped by 180…

Thank you. [Operator Instructions] We’ll take our first question from Steven Strycula with UBS. Please go ahead sir.

Hey, good morning. A quick question for you, Stéfan. Wanted to make sure that it sounds like last time we heard from you up in New York at the CAGNY lunch that the quarter was trending for first quarter, roughly around 2% organic sales. And you guys did a little bit better than that, 2.9%. Was there anything happening kind of at the end of the quarter from maybe a sell-in benefit? Or was it just that you’ve really just finished the month pretty strong in your base business? Stéfan Descheemaeker: Thanks, Steve. Actually, there is low phasing, so no setting is impacted. Just we performed a bit better than expected. Probably, a bit helped by the weather by the way, because the weather was a bit colder. And at the same time, a great market share expansion. So a combination of all these things. You remember what we said is that the category is growing, market share is growing and then on top of that, we were a bit helped by the weather. So that’s the reason. I will put it that way.

Okay. And as we think about the cadence of the year, should we think about the third quarter being the toughest year-over-year organic sales compared due to the strength of the category in the weather from a year-over-year comparison basis? And then if you could spend a moment, Stéfan, talking about the innovation plans in the back half in a little larger detail just because you guys haven’t been that big on innovation, have been more focused on renovation. So just give us a little bit of a feel as to what we should expect changing the revenue trajectory as we get to the back half?

Right. I would focus instead of Q3, I would say – I will take the two to three quarters just to highlight that we’re just confirming the low single-digit organic revenue growth. We feel confident we’re going to get there. So that’s – and again, back to the same combination of category growing and we taking market share, bit by bit, quarter-by-quarter. So that’s that. And so I would not pinpoint any specific quarter. Then back to innovation, which is a good point, maybe a bit upright with respect to, Steve, if you remember. I think what the difference is indeed, we’re very much focused on renovation for the first 2.5 years. And I really believe rightly so, we had to make the foundations of business sound again. And in the meantime, I think we’ve taken a more mature approach towards innovation that we’re back to innovation, but instead of diversifying us away from off our business, it’s really focused on a limited number of big bets. So it’s more focused. It’s focused behind the core business, number two. And then we’re obviously taking into consideration the big trends what we see and mature consumer trends like convenience and health and wellness. And so that’s going to really hit us in a pretty big way in the second part of the year, especially quarter four. I would put it that way. So that’s more to come. You’ve seen some examples in our presentation. So again, keywords, it’s core, it’s key consumer trends and it’s more focused behind a more limited number of big bets. And it’s too more specifically for the core. Does it answer your question?

Yes, you did. Thank you.

We’ll take our next question from Brian Holland with Consumer Edge Research.

Hey, thanks. Hello, everyone. So I guess, just to confirm on the margins. I know you talked about some benefit there or something things that happened in Q1 that won’t repeat in Q2. Just to confirm, is there anything that when you talk about phasing, et cetera, is there anything where you benefited in Q1 where that benefit actually reverses or maybe stole a little bit from Q2 on the margin side or maybe just because of the shift sequentially that anything changes there? And then carrying the margin question forward, as you go over the balance of the year, anything we should be sensitive to on our models with respect to launch cost, et cetera, around the innovation that you’ve described?

Yes. Let me come back actually just to make sure we recap the point there. We’ve – the gross margin has been expanded by 240 basis points as I have mentioned. There’s roughly about 180 basis points from mix, 100 basis points from price and promotion and it was offset by the cost of sale effectively that has been up effectively by about 40 basis points, which has impacted there. We have seen some shifts of promotion effectively from Q1 and which effectively will have a marginal effect, if you want, I mean, moving forward. But the reality is that there is nothing that’s effectively of large nature that is going to change the pattern, if you want, moving forward. The key point there is, that’s very important is, frankly, that we look at the total year where effectively we are growing to roughly improve, if you want, our gross margin that is year ago that is very clear. And I mean, based on effectively the calculation we have made, I mean, Goodfella’s will be impacting our gross margin by roughly about 100 basis points, if you want, per quarter moving forward. So that’s going to be affecting one change that we look forward. So on the base over – let’s say, base business, our base business gross margin will be improving. And the one element effective to answer your question specifically that is effective, going to have an impact on the shift, is going to be promotion.

That’s helpful. Just quickly shifting to the top line, maybe at a category level. Obviously, you talked about January being soft. I guess, this is dating back to the Q4 call. January was surprisingly soft and then you saw some rebound over subsequent months, February, March, I think you talked about at the CAGNY lunch that there’s always one more month to add on to that, but are we continuing to see that trend and anything just that you’re seeing at a category level that would change your view near to intermediate term about the backdrop there?

No, the honest answer is no. Then back to – let me start again with we’ve seen. Indeed, you’re right, Brian. I mean, it’s – January was soft. It was really a big gap between Jan, February and March. So March, it’s maybe back to, by the way, to Steve’s question. March was really very solid. And then it’s really premature to come with any expectations for the year. So we – back to the model, we put together, which is we believe that this category is growing – grows, is growing and will grow. And on the back of that, we’re going to get market share. So that’s been working that like this. And we don’t see any reason to change, one way or another the model.

Okay. And then the last one for me. A few weeks ago, had a transaction announced on the retail side in the U.K. Just curious if you would give us a sense your exposure to Sainsbury and Asda, and also, just maybe some high level commentary about how you think that might or could impact the market and sort of just reiterate your stance on how you’re positioned on the retail side such that maybe this is or isn’t an issue going forward or risk to pricing, et cetera?

I’ll be very factual. Number one, it’s U.K. represents around 25% of gross sales. So it’s not 100%. So that’s one thing. Second, we have all obviously what they put together. And indeed, they have been identifying procurement synergies, which is part of the game. And as I said, it’s part of the game, so the game. So we’d been through these kind of games in the past with the merger of [indiscernible] for example or the buying groups in France. So that’s our job, and we have to get there. I think it opens also some opportunities, especially for us as brand leader, and especially in the middle of this recovery where we’re moving from one strength – from strength to strength. So that’s part of the game. And we’re going to have some conversation. It’s going to take some time. And as you know, it’s not going to close apparently. Again, we’re going to speculate and then evaluate the merger, but apparently it’s not going to close before next year. So we’re going to have conversations and that’s it. So I would say, it’s business as usual, but it’s part of the game.

Thanks, appreciate the color. Thanks a lot.

We’ll now take our next question from Rob Dickerson with Deutsche Bank. Please go ahead.

Thank you very much. So just, I guess, a couple of questions, more mechanical burst on margins, just cadence for the year that you walked through fairily specifically. One is just on the gross margin, you’re saying 30% to 31% for the remainder of the year then essentially, I think, for the full year. So that implies basically flat gross margin kind of from Q2 to Q4. And then you said there – I think you said, there was approximately 100 basis point offset that would come from the Goodfella’s tuck-in. So I just want to be clear that when we see gross margin or we expect to see gross margin flat for the rest of the year that, obviously, the base business would be up approximately 100 basis points for the quarter. Stéfan Descheemaeker: Rob, just a quick correction on your comment. We didn’t comment on gross margins for the year. What we said is Q2 through Q4 for the next three quarters cumulatively, and we expect gross margins in that range of 30% to 31% after Goodfella’s.

Including Goodfella’s.

Yes, including Goodfella’s. Okay, got it. And then just in terms of the Goodfella’s drag, I think the commentary was kind of that would drag on margin until basically, I guess, it’s kind of fully integrated or better revenue management, et cetera. So I was curious as to kind of all thoughts as you bring that into the Nomad structure in Q2. The plan is basically to kind of better operate the business through revenue management to try to improve the margin and, therefore, 19% and that wouldn’t – that hopefully would no longer be a margin drag, that would be more in line with regular Nomad base. Is that right?

Let me first requalify this drag. For me, drag to some extent is an opportunity. So it means that we can bring value to the organization and that’s part of the acquisition game, obviously. So we believe that in terms of networking management, more specifically in terms of promo efficiency, for example, something that we have done quite efficiently in the rest of the group, we can bring value. So that will, obviously, improve the gross margin for Goodfella’s. That’s one thing. At the same time, let’s put it that way. We also have private label and private label comes to us in terms of gross margin as the revenues come with most probably a lower gross margin. And that will not change as such. And that’s obviously the mix between gross margin and between our net revenue – between private label and brand is changing over time. That’s not going to happen anytime soon, taking some time. More importantly as well, say, if you’re moving downwards from gross margin to EBITDA, it also comes with a much lower organization in six-plus organization. So what is a drag at the gross margin level is much, much lesser from the – also of the drag at the EBITDA level. And so as you know, I mean, objective is to move within the next few years to EUR 25 million EBITDA. And that’s ultimately our goal within the perimeter of what’s open for us.

Okay, perfect. And then quickly, Stéfan, just given your penchant and, I guess, the explicit business strategy to continue to basically roll out frozen within Western Europe, I’m just curious as to how you view the current M&A environment within Western Europe, just more specifically in frozen and expectation that potentially more assets could come to market from larger companies is still in the cards.

Oh, yes. I think, to your point, number one, I can only agree with you, it’s the right focus. So we focus behind the consolidation of the growth of the frozen food industry in Europe. And we still have some interesting assets to be acquired at some stage. But by definition of M&A, you have to prepare yourself. And we’re preparing ourselves. And that these two, three years have been very good in terms of preparation. And obviously, what we talked or predicted, obviously, when the sellers, I mean, the current owners will decide to sell. So that’s the definition of M&A. But the good news is you still have some interesting assets to be acquired. And we have...

Great job, thank you.

Thank you.

We’ll take our next question from Bill Chappell with SunTrust. Please go ahead.

Thanks, good morning. Can you maybe walk around the kind of a little bit just in kind of how some of the specific countries you’re trending? In particular, I think you’ve said that looking back, Germany is the only place that’s really trending above where you were two, three years ago, and whereas, U.K., Sweden, France still had some room to go. So maybe kind of an update there of what you see and whether they will kind of get back to where they were a couple years ago by the end of this year? Stéfan Descheemaeker: Bill, we’re not fixated by when they’re going to cross a magic line. So that’s more what can they offer, what can they lodge into potential. But let’s face it. As Samy explained, 60% of our business is in these U.K., Italy and Germany. These are the most three countries, where we have the core businesses, the core categories but we also have in western countries. And together, obviously, they’re very important to us. You remember that U.K. was a bit slower than the others. And now it’s catching up, which is a very good news. And so that’s very good news in line with Goodfella’s. So that means that the organization is ready. And then we have – indeed, we have countries like Sweden, which has been negative as expected by the way. We knew that we have to digest a series of things. Among others, some nonprofitable food service businesses among others. Spain is a bit weak, but it’s a small country. But all others like France, for example, is growing despite a negative industry. That’s one of the few countries where frozen food is going backward. But despite that, we’re growing, the business is growing, not only market share, but business is growing. And then very interestingly in that, we have countries like Austria, where we have a very, very strong position like a 30% market share plus, where we currently – we’re growing in a very spectacular way. We mentioned – Samy mentioned that we’re taking – we’re working now with Hofer, which is the brand for us in Austria and that’s a big plus for us. So in terms of additional excuse, we just have to work differently with these guys. As you work more limited assortment, you have to make sure that your margin is comparable to the margins you have with your traditional players. Otherwise, you’re shooting yourself in your foot and we don’t want to do that. But once you have achieved this, thanks to the strength of our brands. We can, obviously, [indiscernible] becomes an opportunity for us. So that’s good news.

Okay, that’s helpful. And then looking back to Goodfella’s, now that have owned it for a few months, and I think the initial comments were promotions were high from kind of what you’re comfortable with and advertising was low. And you’re going to at least change the advertising in the near term and hold promotions there. Is that still kind of the keys for the next six months, as you kind of learn the business and learn what – how to do with the business? Or any other changes in kind of strategy? Stéfan Descheemaeker: Actually, it’s more a question of weeks by the way than months. And it doesn’t change anything to what you said, Bill. It’s exactly that. The plan – the business plan is exactly what you mentioned. So we’re going to optimize networking management. So we’re going to further invest behind the plan.

And in terms of like the advertising, does that happen immediately this quarter? Or is that kind of ramp as we move for the year? Stéfan Descheemaeker: No, we don’t, we don’t. The answer is, we don’t need that at this stage. So the sales are pretty good. So we just need to prepare ourselves more for, let’s say, end of something like Q3, Q4 to just to have the real impact. So we’re going to do that in due time. In the meantime, we’re working very hard in terms of integration. So it’s doing well.

Great. Thank you so much. Stéfan Descheemaeker: Thanks, Bill.

We’ll take our next question from Adam Mizrahi with Berenberg. Please go ahead.

Good morning guys, thank you. I have a quick question for Samy. Samy, I know it’s early days for you at Nomad, but I’ll be interested to hear if there are any areas of the business you’ve identified as a priority for you to work on or any opportunities that immediately stand out for you?

Thank you very much, I mean, Adam. Actually, I mean, let me reiterate the fact as I’m extremely excited, I mean, joining Nomad. I mean, and one of the big driver, if you want, is effective, a huge opportunity in the category, I mean, represents. I think, I’m coming at a very specific time where this category is now resuming growth, I would say, in many markets. And I think, Nomad can definitely clear that growth acceleration. I would say, also if you think about – I think, one of the things I’m seeing is effectively continued, I mean, net sales acceleration. I think, the company has done a fabulous job, I mean, already at, let’s say, taking the cost down – the cost structure down through the DD and a lot of, let’s say, cost management intervention, a few A&P. So the key point there is effectively trying to further inflection point to frankly accelerate growth further to really create the scale that we need to frankly deliver the plan we have over the [indiscernible] growth acceleration in a very profitable way. That’s the whole idea. That will be solid. The opportunity is on clearly focusing our attention on where the growth is. Stéfan Descheemaeker: So that’s a good news. I mean, basically, Samy is coming to the conclusion, there are many things that we can improve, which is a great news.

Great. Thank you.

We’ll take our next question from Jon Tanwanteng with CJS Securities. Please go ahead.

Good morning, gentlemen. Congrats on the quarter and the outlook as well. My first question. How should we think of the ramp of the Goodfella’s EBITDA margin? Should we think there’s improvement there as a straight line over two years? And kind of second, what will be the cash cost to realize our synergies? And what kind of revenue growth assumptions are you using to get there? Stéfan Descheemaeker: Okay. So actually, your point about it’s a straight line. It’s never a straight line as such, but it’s a regular buildup, which is very close to your – to what you said. That’s one thing. Second, you may remember the nature of the synergies will come from two things. One, some indirect cost, that’s one thing. It’s also predominantly a networking management, which doesn’t require a lot of restructuring. So there will be restructuring, the magnitude of around 15 million, there or thereabouts. So – but the rest will definitely come in terms of synergy. Once we have this, obviously, the rest of the synergies will come from networking management, which is good, which is again back to the low organic revenue growth, a single-digit organic revenue growth.

Great, thank you very much. Stéfan Descheemaeker: Does that answer your question?

It did. Thank you.

It appears that we do not have any further questions at this time. I will now turn the conference back to Mr. Stéfan Descheemaeker to have any additional closing remarks. Stéfan Descheemaeker: Thank you. And to conclude, we are off to a strong start of the year with Q1. Our largest growth of the year, that’s all complete. Our strategy continues to drive improved financial results. We’re confident in the plans and guidance that we have outlined for the rest of the year and look forward to updating you on our progress when we report second quarter results in August.

This concludes today’s conference call. Ladies and gentlemen, thank you for your participation. You may now disconnect your lines.