Earnings Release • Mar 1, 2019
Earnings Release
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Waarschoot, 1 March 2019 - 07:30 a.m.
This is the first time the results of the companies acquired in 2017 are included in the income statement for a full year. To recapitulate, these are the Dutch company Offerman for the Processed Meats Division and the French company Stefano Toselli, the Polish Pasta Food Company and the English company KK Fine Foods for the Ready Meals Division.
During the full year, these four companies contributed jointly and individually to the turnover and result according to plan.
The consolidated Group turnover increased by 36.8% to EUR 680.5 million, while the recurring business cash flow (REBITDA) increased from EUR 36.9 million to EUR 50.2 million (+36.2%). Ter Beke has herewith achieved its targeted result.
The new companies were quickly integrated in the Group and the acquisitions have brought Ter Beke a step further in its transformation into a diversified food group with sufficient scale. The Group now has more capacity to respond to the needs of consumers who are becoming increasingly aware of what they eat.
When comparing the results of 2017 and 2018, it is important to realise that the operating results for 2018 include EUR 6.8 million in non-recurring expenses, while in 2017 net non-recurring income of EUR 4.4 million was booked.
The non-recurring expenses of 2018 mostly comprise an amount of EUR 3.8 million for restructuring costs to adapt the overhead to the current market conditions, EUR 1.1 million for closing the factory in Zoetermeer, and the EUR 1.3 million costs of a strategic study conducted after the four acquisitions to analyse the potential of the new Group.
As a result of the above:
The net cash flow from operational activities increased from EUR 21.8 million to EUR 39.7 million.
Notwithstanding a key investment programme to expand the capacity of the factories in Veurne and Ridderkerk, we were able to reduce net financial debt from EUR 126.9 million to EUR 122.7 million.
The division's turnover increased by EUR 109.5 million, from EUR 310.6 million to EUR 420.1 million. The company Offerman, acquired in 2017, performed according to plan. The factory in Zoetermeer was closed down and production was relocated to Borculo and Wommelgem. Offerman also switched over to the Group's standard ERP package.
In Belgium (Veurne) a 'slicing and packaging' project was started that covers much of the product range of one of our customers. Following an initially difficult start, progress was booked on all fronts (service level, efficiency, etc.) in the second half of the year.
Despite this progress, the division experienced a difficult year. The Processed Meats category is undergoing a major transformation and there is increasing competition from alternative products. At the same time, the consumption is falling somewhat, threatening to create overcapacity that will only augment competition.
However, Processed Meats remains an important category, with a market penetration of about 98.7% in the Benelux and a good gross margin for Ter Beke's customers. Ter Beke is cooperating intensively with these customers to further develop the category. The following key themes, among others, were targeted in 2018:
The division's turnover increased by EUR 73.5 million, from EUR 186.8 million to EUR 260.3 million. With this result, Ter Beke became a European leader in the Ready Meals market and has reinforced its position as number one supplier of chilled lasagne and pasta meals.
In 2018, the focus was on integrating the three acquisitions by implementing a uniform management reporting system, forging a single team and refining the Division's strategy.
In the coming years the division will continue to seek synergies by combining and sharing the strengths of each of the acquired companies. As reported earlier, the strengths of these companies are as follows: KK Fine Foods excels in product development, frozen technology and knowledge of the food service segment; Stefano Toselli has developed efficient production lines for competitive markets such as Germany and France; and Pasta Food Company has built partnerships with most supermarkets in Eastern Europe.
The market for Ready Meals in Europe offers great prospects for Ter Beke:
With this development and following the 2017 acquisitions, Ter Beke is now able to combine its expertise in both highly automated high-volume production and the development and production of tasty and varied fresh and freshly frozen meals, segments which require far-reaching expertise in product development and freezing techniques.
This expertise is increasingly sought in both the retail and food service channel to be able to offer the right products at the right price levels. More and more, Ter Beke is being recognised by customers in most European countries as the right partner for these segments. The retail channel (including discount) is increasing shelf space to meet the demand for convenience products and to respond to the competition from home-delivered meals. The food service channel's capacity to produce meals is diminishing and Ter Beke's products offer a solution.
| Consolidated key figures in 000 EUR | 2018 | 2017 | ∆% |
|---|---|---|---|
| Revenu (net turnover) | 680 460 | 497 386 | 36,8% |
| REBITDA (1) | 50 219 | 36 858 | 36,2% |
| EBITDA (2) | 44 036 | 38 409 | 14,7% |
| Recurring operating result (REBIT) | 23 027 | 17 624 | 30,7% |
| Operating result (EBIT) | 16 218 | 22 018 | -26,3% |
| Net financing costs | -3 390 | -1 444 | |
| Operating result | |||
| after net financing costs (EBT) | 12 828 | 20 574 | -37,6% |
| Taxes | -5 587 | -4 006 | |
| Result after tax before share in the result of enterprises | |||
| accounted for using the equity method | 7 241 | 16 568 | -56,3% |
| Share in enterprises accounted for using the equity method | 0 | 571 | |
| Earnings after taxes (EAT) | 7 241 | 17 139 | -57,8% |
| Financial position in 000 EUR | |||
| Total assets | 424 978 | 399 736 | 6,3% |
| Equity | 125 028 | 125 308 | -0,2% |
| Net financial debt (3) | 122 679 | 126 925 | -3,3% |
| Equity/Total assets | 29,4% | 31,3% | -6,2% |
| Gearing ratio (4) | 98,1% | 101,3% | -3,2% |
| In EUR per share | |||
| Number of shares | 1 732 621 | 1 732 621 | 0,0% |
| Average number of shares | 1 732 621 | 1 732 621 | 0,0% |
| Net cash flow | 20,23 | 19,02 | 6,4% |
| Earnings after taxes | 4,18 | 9,89 | -57,7% |
| EBITDA | 25,42 | 22,17 | 14,7% |
(1) REBITDA: EBITDA from recurring operating activities
(2) EBITDA: earnings before taxes + depreciation + write-downs + changes in provisions.
(3) Net financial debts: interest-bearing liabilities – interest-bearing receivables, cash and cash equivalents.
(4) Gearing ratio: Net financial debt/Equity
The IFRS 15 standard (Revenue from contracts with customers) is applicable from 1 January 2018. Ter Beke has opted for the 'full retrospective' method for the first adoption of IFRS 15 for the financial year starting on 1 January 2018. To this end, EUR 11.2 million was deducted from the 2017 turnover and added to the services and miscellaneous goods category. The application of this standard has therefore had no impact on the 2017 results.
On a comparable basis, the turnover of 2018 increased with 1.9% compared to the pro forma turnover of 2017. In the pro forma figures, the effects of the four acquisitions in 2017 were simulated as if they would have been incorporated in the figures of Ter Beke as of 1st January 2017.
This is the first time the results of the companies acquired in 2017 are included in the income statement for a full year. To recapitulate, these are the Dutch company Offerman for the Processed Meats Division and the French company Stefano Toselli, the Polish Pasta Food Company and the English company KK Fine Foods for the Ready Meals Division.
During the full year, these four companies contributed jointly and individually to the turnover and result according to plan.
As a result, the consolidated turnover increased by 36.8% to EUR 680.5 million.
The new companies were quickly integrated in the Group and the acquisitions have brought Ter Beke a step further in its transformation into a diversified food group with sufficient scale. The Group now has more capacity to respond to the needs of consumers who are becoming increasingly aware of what they eat.
The turnover of the Processed Meats Division increased by EUR 109.5 million (+35.3%). This is mainly due to the acquisition of Offerman.
The Ready Meals Division achieved an increase in turnover of EUR 73.6 million (+39.4%). This increase is also mainly due to the acquisitions made in 2017.
| Result of operating activities | ||
|---|---|---|
| All amounts in 000 EUR | 31/12/2018 | 31/12/2017 |
| EBITDA | 44 036 | 38 409 |
| Depreciations costs and impairments | -27 126 | -18 830 |
| Impairments, write offs and provisions | -692 | 2 439 |
| Result of operating activities (EBIT) | 16 218 | 22 018 |
| Result of operating activities | ||
|---|---|---|
| All amounts in 000 EUR | ||
| 31/12/2018 31/12/2017 | ||
| EBITDA | 44 036 | 38 409 |
| Severance payment (incl social costs) | 3 822 | 793 |
| Realised gains on sale land | 0 | -721 |
| Costs of phased acquisition | 242 | 2 073 |
| Costs Spencer Stuart Mgt. Cons. | 150 | |
| LT CEO incentive | 2 843 | |
| Result of phased acquisition | 0 | -6 689 |
| Strategic study | 1 252 | 0 |
| Start up costs project new packaging concept | 356 | 0 |
| Realised losses Zoetermeer | 511 | |
| REBITDA | 50 219 | 36 858 |
| Result of operating activities (EBIT) | 16 218 | 22 018 |
| Severance payment (incl social costs) | 3 822 | 793 |
| Realised gains on sale land | 0 | -721 |
| Costs of phased acquisition | 242 | 2 073 |
| Costs Spencer Stuart Mgt. Cons. | 150 | |
| Result of phased acquisition | -6 689 | |
| Strategic study | 1 252 | |
| Start up costs project new packaging concept | 356 | |
| Realised losses Zoetermeer | 511 | |
| Restructuring expenses Zoetermeer | 240 | |
| Impairment Zoetermeer | 386 | |
| Recurring operating result (REBIT) | 23 027 | 17 624 |
REBITDA increased by EUR 13.3 million (+36.2%) from EUR 36.9 million in 2017 to EUR 50.2 million in 2018. This means that, despite a year of integration and consolidation, Ter Beke still managed to achieve its targets.
The Processed Meats Division's recurring results were influenced by the continuing pressure on prices in a market that faces a threat of overcapacity. In addition, various costs were incurred in 2018 that are expected to have a positive influence on the results in subsequent years. In Belgium (Veurne) a 'slicing and packaging' project was started that covers much of the product range of one of our customers. The start-up costs reduced the initial profitability of the project, particularly in the first half of the year. In the Netherlands, the Fairbeleg® label was launched for the food service channel and the costs were booked to the income statement. Furthermore, Offerman switched over to the standard Ter Beke ERP package. It was also decided to close the Offerman site in Zoetermeer sooner than originally planned and to move production to Borculo and Wommelgem. All preparatory work at the two sites has been included in the costs. The fact that Offerman still managed to meet the targets is clearly an impressive achievement.
The Ready Meals Division's results were positively influenced by turnover growth in almost all channels and markets. The Group continues to focus on innovation and product development and profit from the strengths of the various companies of the division in order to fully support the customer's needs.
The non-cash costs in 2018 (EUR 27.8 million) were EUR 11.4 million higher than in 2017. This increase can mainly be accounted to higher depreciation as a result of the acquisitions in 2017.
REBIT increased by EUR 5.4 million from EUR 17.6 million in 2017 to EUR 23.0 million in 2018.
A number of non-recurring results need to be considered in the comparison of 2017 and 2018.
As a result of the above:
The net financing costs were EUR 2.0 million higher than in 2017. This was mainly due to the costs of debts arising from the four acquisitions at the end of 2017, the break cost of several loans for the club deal and the exchange rate differences.
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 financial 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 in the balance are an increase in cash and cash equivalents of EUR 16.7 million, an increase in long-term interest-bearing liabilities of EUR 86.7 million and a decrease in short-term interest-bearing liabilities of EUR 74.2 million.
The equity difference is chiefly the result of the profit after tax minus the dividend that was allocated over the previous financial year.
Net financial debt decreased by EUR 4.2 million to EUR 122.7 million. This decrease can be explained primarily by the cash flow from operating activities of EUR 39.7 million, less EUR 27.0 million in paid investments (adjusted for revenue from disinvestments), as well as paid dividends and interests amounting to EUR 9.1 million.
The Group invested 27.9 million in non-current assets in 2018 as opposed to EUR 13.5 million in 2017 (excluding the acquisitions). 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.
Taking the evolution of the results into account, the Board of Directors will propose to the General Meeting of Shareholders to maintain the gross dividend at 4.00 EUR per share.
The Statutory Auditor, DELOITTE Bedrijfsrevisoren BV o.v.v.e. CVBA, represented by Ms Charlotte Vanrobaeys, has confirmed that its auditing work on the consolidated annual accounts, which has been thorough and complete (with the exception of the review of the consolidated annual report and the IFRS notes), has brought no significant correction to light in the bookkeeping information included in this press release, which would have to be executed. The same policies for financial reporting and accounting principles were applied to the drafting of the financial report that were used for the consolidated financial overviews as of 31 December 2017, with the exception of modifications as a result of the application of IFRS 15, 'Revenue from contracts with customers'. As indicated in this report, the Group has opted to restate the corresponding results for 2017.
The Group is confident that, barring unforeseen market circumstances, the results for 2019 will surpass those of 2018.
For questions about this press release or for further information, please contact:
Francis Kint* René Stevens CEO CFO Tel. +32 9 370 13 17 Tel. +32 9 370 13 45 [email protected] [email protected] * Permanent representative of BVBA Argalix
You can also consult this press release and send your questions to us via the Investor Relations module of our website (www.terbeke.com).
For more information on Ter Beke, visit www.terbeke.com.
2018 Annual Report: At the latest on 30 April 2019 2019 General Shareholders Meeting: 29 May 2019
2019 Half-yearly Results: 30 August 2019 before market opening
| Ter Beke Group | ||
|---|---|---|
| as at 31 December 2018 and 2017 | ||
| All amounts in 000 EUR | ||
| Consolidated income statement | ||
| as at 31 December 2018 and 2017 | ||
| 2018 | 2017 | |
| Revenue | 680 460 | 497 386 |
| Trade goods, raw and auxiliary items | -399 416 | -292 646 |
| Services and miscellaneous goods | -116 286 | -88 003 |
| Employee expenses | -119 640 | -87 079 |
| Depreciation costs | -27 126 | -18 830 |
| Impairments, write-downs, and provisions | -692 | 2 439 |
| Other operating income | 3 159 | 3 983 |
| Other operating expenses | -4 241 | -1 921 |
| Result of phased acquisition | 0 | 6 689 |
| Result of operating activities | 16 218 | 22 018 |
| Financial income | 358 | 294 |
| Financial expenses | -3 748 | -1 738 |
| Results of operating activities after net financing expenses | 12 828 | 20 574 |
| Taxes | -5 587 | -4 006 |
| Result for the financial year before result from businesses |
||
| accounted for using the equity method | 7 241 | 16 568 |
| Share in the result of enterprises accounted for using the equity method | 0 | 571 |
| Profit in the financial year | 7 241 | 17 139 |
| Profit in the financial year: share third parties | 56 | 32 |
| Profit in the financial year: share group | 7 185 | 17 107 |
| Basic earnings per share | 4,15 | 9,87 |
| Diluted earnings per share | 4,15 | 9,87 |
| Ter Beke Group | ||
|---|---|---|
| as at 31 December 2018 and 2017 | ||
| All amounts in 000 EUR | ||
| Consolidated balance sheet | ||
| as at 31 December 2018 and 2017 | ||
| 2018 | 2017 | |
| Assets | ||
| Non-current assets | 243 591 | 242 573 |
| Goodwill | 76 456 | 76 523 |
| Intangible non-current assets | 28 651 | 30 163 |
| Tangible non-current assets | 133 382 | 132 807 |
| Participations using equity method | 0 | 0 |
| Loans to joint venture | 0 | 0 |
| Deferred tax assets | 5 027 | 3 003 |
| Other long-term receivables | 75 | 77 |
| Long-term interest-bearing receivables | 0 | 0 |
| Current assets | 181 387 | 157 163 |
| Inventories | 36 304 | 34 788 |
| Trade and other receivables | 121 908 | 115 862 |
| Cash and cash equivalents | 23 175 | 6 513 |
| Total assets | 424 978 | 399 736 |
| Liabilities | ||
| Shareholders' equity | 125 028 | 125 308 |
| Capital and share premiums | 53 191 | 53 191 |
| Reserves | 70 184 | 70 506 |
| Non-controlling interest | 1 653 | 1 611 |
| Deferred tax liabilities | 9 340 | 10 290 |
| Long-term liabilities | 139 683 | 52 164 |
| Provisions | 5 835 | 5 289 |
| Long-term interest-bearing liabilities | 130 042 | 43 306 |
| Other long-term liabilities | 3 806 | 3 569 |
| Current liabilities | 150 927 | 211 974 |
| Current interest-bearing liabilities | 15 812 | 90 132 |
| Trade liabilities and other payables | 115 423 | 101 379 |
| Social liabilities | 15 890 | 16 211 |
| Tax liabilities | 3 802 | 4 252 |
| Total liabilities | 424 978 | 399 736 |
| Ter Beke Group | ||
|---|---|---|
| as at 31 December 2018 and 2017 | ||
| All amounts in 000 EUR | ||
| Consolidated cash flow statement | ||
| as at 31 December 2018 and 2017 | ||
| 2018 | 2017 | |
| Operating activities | ||
| Result before taxes | 12 828 | 20 574 |
| Interest | 2 144 | 1 209 |
| Depreciation | 27 126 | 18 830 |
| Write-downs (*) | 495 | 352 |
| Provisions | 197 | -2 840 |
| Gains and losses on disposal of fixed assets | 757 | -795 |
| Result of phased acquisition | -6 689 | |
| Cash flow from operating activities | 43 547 | 30 641 |
| Change in receivables more than 1 year | 14 | 26 |
| Change in inventory | -2 001 | 1 015 |
| Change in receivables less than 1 year | -5 391 | -11 736 |
| Change in operational assets | -7 378 | -10 695 |
| Change in trade liabilities | 12 716 | 9 438 |
| Change in debts relating to remuneration | -561 | 1 276 |
| Change in other liabilities, accruals and deferred income 906 | -1 389 | |
| Change in operational debts | 13 061 | 9 325 |
| (Change)/decrease in the operating capital | 5 683 | -1 369 |
| Taxes paid | -9 526 | -7 493 |
| Net cash flow from operating activities | 39 704 | 21 779 |
| as at 31 December 2018 and 2017 All amounts in 000 EUR |
||
|---|---|---|
| Consolidated cash flow statement | ||
| as at 31 December 2018 and 2017 | ||
| Investment activities | 2018 | 2017 |
| Acquisition of intangible and tangible non-current assets -27 435 | -13 714 | |
| Acquisition of participating interest in associated companies -66 726 | ||
| Total increase in investments | -27 435 | -80 440 |
| Sale of tangible non-current assets | 452 | 1 227 |
| Total decrease in investments | 452 | 1 227 |
| Cash flow from investment activities | -26 983 | -79 213 |
| Financing activities | ||
| Change in short-term financial debts | -59 575 | 53 753 |
| Increase in long-term debts | 120 000 | 14 555 |
| Repayment of long-term debts | -47 401 | -13 159 |
| Interest paid interest (via income statement) | -2 144 | -1 209 |
| Dividend paid by parent company | -6 930 | -6 064 |
| Cash flow from financing activities | 3 950 | 47 876 |
| Net change in cash and cash equivalents | 16 671 | -9 558 |
| Cash funds at the beginning of the financial year | 6 513 | 16 068 |
| Translation differences | -9 | 3 |
| Cash funds at the end of the financial year | 23 175 | 6 513 |
| (*) Also includes adjustments that are part of the financial result. This was EUR 000 in 2018; EUR 153 000 in 2017 |
| 420 146 | 310 614 | |
|---|---|---|
| 4 174 | 6 644 | |
| 1 227 | 6 839 | |
| 18 935 | 17 593 | |
| 16 614 | 17 788 | |
| 260 314 | 186 772 | |
| 2018 25 581 23 674 35 748 33 841 -6 728 -8 683 -4 464 -6 419 |
2017 16 917 16 653 23 254 22 990 -5 937 -1 474 -3 990 -2 370 |
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