Earnings Release • Aug 31, 2018
Earnings Release
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The results of the companies acquired in 2017 are included in the income statement in full for the first time. These companies give Ter Beke a production footprint in countries with 170 million consumers and are:
In the first half of the year, these four companies contributed jointly and individually to the turnover and result according to plan. The integration activities and the accompanying investments were completed on time, and in some cases even ahead of schedule:
Raw material prices fluctuated in different directions whereby the changes balanced each other out. The price of pork was lower, while prices of other major purchasing categories (beef, chicken and packaging) were higher than in 2017.
To compare the results of the first semester of 2017 and 2018, it has to be taken into account that the results in 2018 include EUR 3.9 million non-recurring expenses, while a non-recurring income of EUR 7.3 million was achieved during the same period in 2017.
As a result of the above:
The cash-flow of the operating activities increased from EUR 13.4 million in 2017 to EUR 23.2 million in 2018.
Nancy De Sy - Group Communication Manager T +32 9 370 12 69 M +32 492 25 10 57 [email protected] 1
The turnover of the Processed Meats Division increased by EUR 52 million (+34.4%) from EUR 151.3 million to EUR 203.4 million. The acquired Offerman performed according to plan. The other companies realised a slight increase in volume while some raw material prices (pork) decreased.
In Belgium (Veurne) a 'slicing and packaging' project was started for the major part of a customer's product range. The focus of this project is to meet the service level objectives. However, the start-up costs put pressure on the initial profitability of the project, but this is now increasing steadily.
It was decided to close the Offerman site in Zoetermeer (Netherlands) sooner than originally planned and to move production to Borculo and Wommelgem. It was also decided to accelerate the transition to the standard Ter Beke ERP package at Offerman, which meant that extra costs were incurred for the analysis and implementation.
The processed meat industry – both for products and slicing activities – is still characterised by fierce competition, which ultimately benefits consumers. For this reason, decreases in raw materials prices (pork) cannot be kept entirely in the margin. The focus for this division therefore remains the profitability of the product range and continued cost control.
A wave of consolidation is noticeable across the Benelux, the most important market for Ter Beke in meat products. This is both driven by industrial groups and companies owned by private equity players. A certain scale is essential to meet ever increasing customer needs in the field of innovation, efficiency, traceability and sustainability.
At the beginning of July and after thorough preparation, the Fairbeleg® brand was rolled out in the Dutch food service channel.
Turnover increased by EUR 65.9 million (+109.4%) from EUR 60.3 million to EUR 126.2 million.
The lower margin as a percentage of turnover is due to the consolidation of the figures from Stefano Toselli and Pasta Food Company, which are more focused on high volume products.
The strategy for the division's five companies remains to focus on innovation and to continually modify the product range to meet changing customer requirements for our own brands as well as for the private labels that Ter Beke produces, which serve a large proportion of European retailers.
Unlike the Processed Meats Division, the product focus is sharp and the geographical scope is broad (Europe and initial exports to other parts of the world). Full use will be made of the synergies made possible through the acquisitions, as communicated previously:
The ready meals industry in Europe continues to offer good prospects in all channels:
| Income statement in 000 EUR | |||
|---|---|---|---|
| 30/06/18 | 30/06/17 | ∆ % | |
| Revenue (net turnover) | 329 614 | 211 613 | 55,8% |
| REBITDA | 23 129 | 14 378 | 60,9% |
| EBITDA | 19 838 | 20 971 | -5,4% |
| Recurring operating results | 9 691 | 6 659 | 45,5% |
| Result of operating activities (EBIT) | 5 747 | 13 252 | -56,6% |
| Net financing costs | -2 156 | -221 | 875,6% |
| Result of operating activities after net financing costs (EBT) | 3 591 | 13 031 | -72,4% |
| Taxes | -1 084 | -3 455 | -68,6% |
| Result after tax before share in the result of enterprises | 2 507 | 9 576 | -73,8% |
| accounted for using the equity method | |||
| Share in enterprises accounted for using the equity method | 0 | 571 | -100,0% |
| Earnings after taxes (EAT) | 2 507 | 10 147 | -75,3% |
| 41 | |||
| 2 466 | 10 147 | ||
| Financial position in 000 EUR | |||
| 30/06/18 | 31/12/17 | ||
| Balance sheet total | 423 365 | 399 736 | 5,9% |
| Equity | 120 692 | 125 308 | -3,7% |
| Net financial debts | 123 249 | 126 925 | -2,9% |
| Equity/Total assets (in %) | 28,5% | 31,3% | |
| Gearing Ratio | 102,1% | 101,3% | |
| Key figures in EUR per share | |||
| 30/06/18 | 30/06/17 | ||
| Number of shares | 1 732 621 | 1 732 621 | |
| Average number of shares | 1 732 621 | 1 732 621 | |
| Net cash flow | 9,58 | 9,98 | -4,0% |
| Earnings after taxes | 1,42 | 5,86 | -75,8% |
| EBITDA | 11,45 | 12,10 | -5,4% |
IFRS 15 (Revenue from contracts with customers) is applicable from 1 January 2018. Ter Beke has opted for the 'full retrospective' method for the first time adoption of IFRS 15 for the financial year starting on 1 January 2018. For this reason, EUR 5.7 million was booked from the 2017 turnover and recognised in the services and miscellaneous goods category. So, the application of this standard does not impact the 2017 results.
Nancy De Sy - Group Communication Manager T +32 9 370 12 69 M +32 492 25 10 57 [email protected] 4
The consolidated group turnover in the first six months increased by EUR 118 million (+55.8%) from EUR 211.6 million to EUR 329.6 million.
The Processed Meats Division turnover increased by EUR 51.1 million (+34.4%). This is mainly due to the acquisition of Offerman.
The Ready Meals division achieved an increase in turnover of EUR 65.9 million (+109.4%). This increase is also mainly due to the new acquisitions made last year.
| in '000 EUR | 30/06/2018 30/06/2017 | |
|---|---|---|
| EBITDA | 19 838 | 20 971 |
| Depreciation costs | -13 872 | -7 662 |
| Impairments, write-downs, and provisions | -219 | -57 |
| Profit from operating activities (EBIT) | 5 747 | 13 252 |
| in '000 EUR | 30/06/2018 30/06/2017 | |
|---|---|---|
| Profit from operating activities (EBIT) | 5 747 | 13 252 |
| Severance payments | 1 299 | 317 |
| Realised added value on sale of property | 0 | -721 |
| Acquisition costs | 242 | 500 |
| Results of the phased acquisition | 0 | -6 689 |
| 'Strategic study' | 1 330 | |
| Start-up costs of new packaging concept project | 420 | |
| Restructuring costs Zoetermeer | 170 | |
| Impairment Zoetermeer | 483 | |
| Current profit from operating activities (REBIT) | 9 691 | 6 659 |
| EBITDA | 19 838 | 20 971 |
| Severance payments | 1 299 | 317 |
| Realised added value on sale of property | 0 | -721 |
| Acquisition costs | 242 | 500 |
| Results of the phased acquisition | 0 | -6 689 |
| 'Strategic study' | 1 330 | 0 |
| Start-up costs of new packaging concept project | 420 | 0 |
| REBITDA | 23 129 | 14 378 |
The REBITDA increased by EUR 8.8 million (+60.9%) from EUR 14.4 million in the first semester of 2017 to EUR 23.1 million in the same period in 2018.
The non-cash costs in the first semester of 2018 (EUR 14.1 million) were EUR 6.4 million higher than the same period in 2017. This increase can be accounted for mainly by higher depreciation as a result of the acquisitions in 2017.
The REBIT increased by EUR 3.0 million from EUR 6.7 million in 2017 to EUR 9.7 million in 2018.
To compare the results of the first semester of 2017 and 2018, a number of non-recurring results must be taken into account:
As a result of the above:
In the first half of 2018, the net financing costs were EUR 1.9 million higher than in the same period in 2017. This is mainly due to the costs of debt arising from the four acquisitions at the end of 2017 (EUR 1.1 million), the break cost of several loans when entering the club deal (EUR 0.2 million) and the exchange rate differences (EUR 0.6 million).
The tax rate in the first half of 2018 (30.2%) was slightly higher than in June 2017 (26.5%).
Under IAS 34, the balance sheet figures of 30 June 2018 are to be compared with those of 31 December 2017. The differences can be accounted for primarily by the effect of the long-term financing agreement that Ter Beke signed on 26 June 2018. On 26 June 2018 Ter Beke concluded a long-term financing agreement with a consortium of three banks in the form of a 'Revolving Credit Facility' (RCF).
The RCF has been agreed for a period of five years, with two possible extensions, each for one year. This provides the group with EUR 175 million in guaranteed credit lines that can be extended to EUR 250 million if required. The RCF conditions include maintaining a net debt to adjusted EBITDA ratio of 3.0. In the event of new acquisitions, a temporary ratio of 3.5 will be accepted.
The main differences are an increase in the cash and cash equivalents of EUR 21 million, an increase in the long-term interest-bearing liabilities of EUR 93.4 million and a decrease in the short-term interestbearing liabilities of EUR 76.2 million.
The equity difference is chiefly the result of the profit after tax in the first six months minus the dividend that was allocated over the previous financial year.
Net debt decreased by EUR 3.7 million to EUR 123.2 million. This decrease can be explained primarily by the cash flow from operating activities of EUR 23.2 million, less EUR 11.7 million of paid investments (adjusted for revenue from disinvestments), as well as paid dividends and interests amounting to EUR 7.9 million.
The group invested EUR 15.0 million in non-current assets as opposed to EUR 5.7 million in 2017. These relate primarily to the continuation of efficiency investments, infrastructure adjustments at the various sites, the further roll-out of the ERP package, and most importantly, investments to expand the slicing capacity in Veurne.
The group is confident that, barring unforeseen market circumstances, the recurring operating results for 2018 will surpass the pro forma recurring operating results for 2017.
The unaudited pro forma figures were explained in the press release of the annual results. For this, the consolidated figures for 2017 were adjusted for:
The half-year financial report of the group is available on www.terbeke.com in the Investor Relations module.
The half-year financial report contains the condensed consolidated financial statements drawn up in accordance with IAS 34, the declaration without reservations of the auditor on this limited review and the other legally required specifications.
If you have any questions regarding this half-year financial report or you would like further information, please contact:
Francis Kint* René Stevens CEO CFO *permanent representative of BVBA Argalix
Tel. + 32 (0)9 370 13 17 Tel. +32 (0)9 370 13 45
[email protected] [email protected]
You can also review this half-yearly report and send us your questions through the Investor relations module on our website (www.terbeke.com)
The Dutch version of this half-yearly report is the sole official version.
Annual Report 2018: At the latest on 30 April 2019 General Shareholders Meeting 2019: 29 May 2019
Annual Results 2018: 1 March 2019 before market opening
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