What's cooking? (formerly: Ter Beke)

Earnings Release • Feb 28, 2020

Lievegem, 28 February 2020 – 7:30 a.m.

Consolidated results for 2019 Substantial organic growth limits the impact of raw material price increases and the major product recall in the Netherlands

Key figures and headlines

Ter Beke Group:

Consolidated turnover increased by 7% from EUR 680.5 million to EUR 728.1 million thanks to substantial organic growth in both divisions.

In the first half of the year, Ter Beke's results improved thanks to a growth rate of 8.8%, despite an initial sharp increase in raw material prices. In the second half of the year, Ter Beke was faced with a second sharp increase in raw material prices and a major product recall, as well as a temporary closure of a production site belonging to its subsidiary Offerman in Aalsmeer.

The underlying EBITDA result is in line with the press release issued on 7 October 2019.

The non-underlying costs in 2019 are relatively high (EUR 11.2 million) and mainly consist of the oneoff product recall expenses and a provision for the social plan negotiated following the partial closure of the site in Aalsmeer. In the days following the product recall, a significant part of the volume was transferred to the Group's other production sites. Due to this rapid response and good collaboration, a considerable portion of the Offerman customer portfolio has been safeguarded for the future.

Due to the implementation of IRFS 16 as of 1 January 2019 - in order to compare the results of 2019 and 2018 - a positive impact of EUR 3.1 million on 2019 EBITDA, and a negative impact of EUR 11.3 million on the 2019 net debt must be taken into account.

Taxes make a positive contribution to the result because the structurally improved results of Pasta Food Company in 2019 enabled us to recognise a significant deferred tax asset.

As a result of the above:

• in 2019, UEBITDA amounts to EUR 48.1 million compared to EUR 50.2 million in 2018 (-4.2%)
• in 2019, EBITDA amounts to EUR 37.2 million compared to EUR 44.0 million in 2018 (-15.4%)
• in 2019, UEBIT amounts to EUR 17.4 million compared to EUR 23.0 million in 2018 (-24.3%)
• in 2019, EBIT amounts to EUR 6.2 million compared to EUR 16.2 million in 2018 (-61.7%)
• in 2019, the result after taxes amounts to EUR 4.4 million compared to EUR 7.2 million in 2018 (- 39.0%)

At EUR 39.7 million the net cash flow from operational activities is almost equal to that in 2018.

Nancy De Sy – Group Communications Manager T +32 9 370 12 69 M +32 492 25 10 57 nancy.desy@terbeke.com 1

Despite the considerably higher raw material prices and the expenses associated with the product recall and social plan for Aalsmeer, the net financial debt could be reduced by EUR 9.6 million, taking the impact of IFRS 16 into account.

Processed Meats Division:

The division's turnover increased from EUR 420.1 million to EUR 437.6 million (+4.2%) despite the constraining effect of the product recall in the Netherlands.

Despite progress in many areas, the division experienced a difficult year. The outbreak of African swine fever in China in April led to an estimated 30% reduction in the pig population. As a result, import, primarily from Europe – which had always been there – increased on a massive scale. This had an inflationary effect throughout the chain, as a result of which some meat cuts experienced price increases of up to 80%. We are doing our utmost best to compensate this with efficiency improvements and price increases, but it is a gradual process.

Several improvements realised within the division are consequently not yet visible, for example:

• The considerably improved efficiency in our factory in Veurne.
• The ongoing impulse for export to Germany and the United Kingdom with new sales teams.
• Strengthening the NPD (New Product Development) portfolio to guarantee our growth in the coming years.

In the coming years, we will be investing primarily in our slicing and packaging activities to launch new packaging concepts with a focus on sustainability, recyclability and convenience. We will also move towards a broader 'sandwich fillings' category, rather than concentrate solely on processed meats. The first of these concepts will be marketed in 2020.

In September 2019, the Group acquired Vleeswaren E. De Kock-De Brie NV, which is based in Antwerp. This small family business specialises in creating tongue and liver products and has a very strong position in this niche segment. We are currently integrating De Kock-De Brie's production activities in our Wommelgem production site.

Ready Meals Division:

The division registered nearly 12% organic growth in 2019, with turnover increasing from EUR 260.3 million to EUR 290.5 million.

Without the sharp rise in raw material prices, which also affected the Ready Meals division, 2019 would have been a very strong year in terms of profitability. The strategy – with the focus on quality, innovation and category management – clearly reaped its rewards. The team is working hard to establish a leading position in the field of Mediterranean cuisine in all of Europe and in world cuisine in the UK, where in addition to food service, the retail market is also developing as an important growth area.

In Belgium we invested considerably in the Come a casa® brand. Giving the brand and its attributes an updated 'look and feel' was supported in the second half of the year with a strong national advertising campaign (TV, radio and social media), the impact of which exceeded our expectations.

In 2020, we will invest more than EUR 8 million to expand production capacity in the Polish factory in Opole, our operating base for Central and Eastern Europe. The market for Mediterranean ready meals is growing even faster in those countries than in our established markets. In 2020, we will also invest more than EUR 6 million in our British subsidiary, KK Fine Foods, which we acquired in 2017. We need to expand its existing production capacity substantially in order to continue to meet increasing demand from food service and retail customers. The team's constant focus on quality, service, and innovation in particular, is the reason for this success.

Furthermore, the factories in Belgium and France are being prepared to enter the next growth phase together with the strategic customers.

Proposed dividend

Despite the lower net result, the Board of Directors will propose to the General Meeting of Shareholders to maintain the gross dividend per share at EUR 4.00 for 2019; this in view of the strong organic growth, the exceptional nature of the product recall operation, and the rise in raw material prices.

Prospects for 2020

The Group is confident that in 2020, barring unforeseen market circumstances, it will be able to exceed the underlying EBITDA result of 2018 (EUR 50.2 million).

New CFO for Ter Beke

Last but not least, Ter Beke announces that on 15 March 2020 René Stevens, CFO, will leave Ter Beke. He will be succeeded by Yves Regniers (Esroh BV), who is currently Group Controller. René Stevens has a long track record at Ter Beke, including the last 15 years as CFO. In that period, he guided the company financially through several difficult phases (including the horsemeat scandal in 2012 and the recent product recall in the Netherlands) and he managed the financing of the 'quantum leap' in 2017, in which the company grew by 80% through four acquisitions. He is therefore one of the key people who have made Ter Beke what it is today.

Consolidated results for 2019

Consolidated key figures in 000 EUR	2019	2018	∆%
Revenu (net turnover)	728 132	680 460	7,0%
UEBITDA (1)	48 099	50 219	-4,2%
EBITDA (2)	37 243	44 036	-15,4%
Underlying operating result (UEBIT)	17 431	23 027	-24,3%
Operating result (EBIT)	6 205	16 218	-61,7%
Net financing costs	-3 247	-3 390
Operating result
after net financing costs (EBT)	2 958	12 828	-76,9%
Taxes	1 457	-5 587
Earnings after taxes (EAT)	4 415	7 241	-39,0%
Financial position in 000 EUR
Total assets	439 022	424 978	3,3%
Equity	124 176	125 028	-0,7%
Net financial debt (3)	124 434	122 679	1,4%
Equity/Total assets	28,3%	29,4%	-3,7%
Gearing ratio (4)	100,2%	98,1%	2,1%
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%
Earnings after taxes	2,55	4,18	-39,0%
EBITDA	21,50	25,42	-15,4%

(1) UEBITDA: EBITDA from underlying operating activities

(2) EBITDA: operating result + depreciations + impairments + changes in provisions

(3) Net financial debts: interest-bearing liabilities – interest-bearing receivables, cash and cash equivalents

(4) Gearing ratio: Net financial debts/Equity

Additional information on the consolidated results for 2019

Valuation and interpretation rules

IFRS 16 requires the lessee to activate all lease and rental obligations on the balance sheet. The liability reflects all lease payments associated with the lease agreement, the asset reflects the right to use the asset during the agreed term of the lease.

Ter Beke has applied IFRS 16 with effect from 1 January 2019, in accordance with the transitional provisions, using the adjusted retrospective method. In other words, this means that the cumulative effect of applying IFRS 16 is recognised as a restatement in the opening balance of the transferred result at 1 January 2019, without restatement of the comparative figures.

The impact of this on the published figures for 2019 is as follows:

	31/12/2019
Tangible non-current assets (right of use)	11 185
Impact on total assets	11 185
Transferred losses	-126
Deferred taxes	-39
Long-term lease liabilities	8 619
Short-term lease liabilities	2 722
Revenue to be transferred	9
Impact on total equity and liabilities	11 185
Impact on EBITDA	3 138
Impact on EBITDA	209
Impact on net financing costs	-375
Impact on EAT	-127

Notes to the balance sheet

The increase in goodwill is mainly due to the acquisition of Vleeswaren E. De Kock-De Brie NV in September 2019.

The increase of EUR 2.2 million in tangible and intangible non-current assets is mainly due to the application of IFRS 16. This resulted in an increase of EUR 11.2 million. This increase was partially limited as depreciation (EUR -30.6 million) was higher than investment (EUR +21.4 million).

The Group invested EUR 21.4 million in non-current assets in 2019 as opposed to EUR 27.9 million in the same period in 2018. These relate primarily to the continuation of efficiency investments, infrastructure adjustments at the various locations and the further roll-out of the ERP package.

Nancy De Sy – Group Communications Manager T +32 9 370 12 69 M +32 492 25 10 57 nancy.desy@terbeke.com 5

The net debt increased by EUR 1.7 million to EUR 124.4 million. This increase can be attributed to the recognition of EUR 11.3 million of lease liabilities as a result of applying IFRS 16. This means that, prior to the application of IFRS 16, the net financial debt decreased by EUR 9.6 million, and this in a year with two raw material price surges and the product recall in Aalsmeer.

The net cash flow from operational activities is equal to that of 2018 (EUR 39.7 million), and is mainly due to improvements in net operating capital. In 2019, expenditure on investments amounted to EUR 19.7 million (adjusted for revenue from disinvestments), while EUR 9 million was paid in interest and dividends.

The net debt on 31 December 2019 and 2018 has been calculated as follows:

	31/12/2019	31/12/2018
Cash and cash equivalents	-26 825	-23 175
Long-term interest-bearing liabilities	139 279	130 042
Short-term interest-bearing liabilities	11 980	15 812
Net financial debts	124 434	122 679
of which IFRS 16	11 341	0

Notes to the income statement

The most important points were explained in the Key figures and headlines section of this report.

UEBIT and UEBITDA – which reflect the underlying business performance – are now referred to as the underlying EBIT or underlying EBITDA respectively. The calculation of this for Ter Beke is as follows:

	31/12/2019	31/12/2018
EBITDA	37 243	44 036
Depreciations costs and impairments	-30 602	-27 126
Impairments, write offs and provisions	-436	-692
Result of operating activities (EBIT)	6 205	16 218

	31/12/2019 31/12/2018
Result of operating activities (EBIT)	6 205	16 218
Severance payment (incl social costs)	3 125	3 822
Claim vs sellers Stefano Toselli	-438	0
Costs of acquisitions	125	242
Recall	7 914	0
Strategic study	0	1 252
Start up costs project new packaging concept	0	356
Realised losses Zoetermeer	0	511
Restructuring expenses Zoetermeer	0	240
Impairment on building Aalsmeer	500	0
Impairment Zoetermeer	0	386
Underlying operating result (UEBIT)	17 431	23 027
EBITDA	37 243	44 036
Severance payment (incl social costs)	3 255	3 822
Claim vs sellers Stefano Toselli	-438	0
Costs of acquisitions	125	242
Recall	7 914	0
Strategic study	0	1 252
Start up costs project new packaging concept	0	356
Realised losses Zoetermeer	0	511
UEBITDA	48 099	50 219

External control

The Statutory Auditor, DELOITTE Bedrijfsrevisoren, 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 drafting the financial report that were used for the consolidated financial overviews as of 31 December 2018, with the exception of modifications as a result of the application of IFRS 16. The Group has opted to use the adjusted retrospective method, as indicated in this press release.

Contacts

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 francis.kint@terbeke.be rene.stevens@terbeke.be * Permanent representative of BV 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 about Ter Beke, visit www.terbeke.com.

Financial calendar

Annual Report 2019: Latest on 28 April 2020 General Shareholders Meeting 2020: 28 May 2020

Results first semester of 2020: 28 August 2020 before market opening

as at 31 December 2019 and 2018 All amounts in 000 EUR Consolidated income statement as at 31 December 2019 and 2018 2019 2018 Revenue 728 132 680 460 Trade goods, raw and auxiliary items -442 586 -399 416 Services and miscellaneous goods -116 124 -116 286 Employee expenses -127 100 -119 640 Depreciation costs and impairments -30 602 -27 126 Write-downs and provisions -436 -692 Other operating income 2 235 3 159 Other operating expenses -7 314 -4 241 6 205 16 218 385 358 -3 632 -3 748 Results of operating activities after net financing expenses 2 958 12 828
	Ter Beke Group
	Result of operating activities
	Financial income
	Financial expenses
	Taxes	1 457	-5 587
4 415 7 241	Profit in the financial year
190 56	Profit in the financial year: share third parties
4 225 7 185	Profit in the financial year: share group
2,44 4,15	Basic earnings per share
2,44 4,15	Diluted earnings per share

Ter Beke Group
as at 31 December 2019 and 2018
All amounts in 000 EUR
Consolidated balance sheet
as at 31 December 2019 and 2018
	2019	2018
Assets
Non-current assets	252 148	243 591
Goodwill	78 224	76 456
Intangible non-current assets	26 116	28 651
Tangible non-current assets	138 126	133 382
Deferred tax assets	9 604	5 027
Other long-term receivables	78	75
Current assets	186 874	181 387
Inventories	40 733	36 304
Trade and other receivables	119 316	121 908
Cash and cash equivalents	26 825	23 175
Total assets	439 022	424 978
Liabilities
Shareholders' equity	124 176	125 028
Capital and share premiums	53 191	53 191
Reserves	69 051	70 184
Non-controlling interest	1 934	1 653
Deferred tax liabilities	5 768	9 340
Long-term liabilities	147 970	139 683
Provisions	4 588	5 835
Long-term interest-bearing liabilities	139 279	130 042
Other long-term liabilities	4 103	3 806
Current liabilities	161 108	150 927
Current interest-bearing liabilities Trade liabilities and other payables	11 980 127 725	15 812 115 423
Social liabilities	19 291	15 890
Tax liabilities	2 112	3 802

Nancy De Sy – Group Communications Manager T +32 9 370 12 69 M +32 492 25 10 57 nancy.desy@terbeke.com 10

Ter Beke Group
as at 31 December 2019 and 2018
All amounts in 000 EUR
Consolidated cash flow statement
as at 31 December 2019 and 2018
	2019	2018
Operating activities
Result before taxes	2 958	12 828
Interest	2 038	2 144
Depreciation	30 602	27 126
Write-downs (*)	296	495
Provisions	10	197
Gains and losses on disposal of fixed assets and trade receivables	132	757
Cash flow from operating activities	36 036	43 547
Decrease/(increase) in receivables more than 1 year	0	14
Decrease/(increase) in inventory	-4 477	-2 001
Decrease/(increase) in receivables less than 1 year	2 579	-5 391
Decrease/(increase) in operational assets	-1 898	-7 378
Increase/(decrease) in trade liabilities	5 436	12 716
Increase/(decrease) in debts relating to remuneration	3 520	-561
Increase/(decrease) in other liabilities, accruals and deferred income	4 355	906
Increase/(decrease) in operational debts	13 311	13 061
(Increase)/decrease in the operating capital	11 413	5 683
Taxes paid	-7 766	-9 526
Net cash flow from operating activities	39 683	39 704

Investment activities
Acquisition of intangible and tangible non-current assets	-18 519	-27 435
Acquisition of subsidiary	-1 490	0
Total increase in investments	-20 009	-27 435
Sale of tangible non-current assets	303	452
Total decrease in investments	303	452
Cash flow from investment activities	-19 706	-26 983
Financing activities
Increase/(decrease) in short-term financial debts	-1 657	-59 575
Increase in long-term debts	1 299	120 000
Repayment of long-term debts	-7 031	-47 401
Interest paid interest (via income statement)	-2 038	-2 144
Dividend paid by parent company	-6 930	-6 930
Cash flow from financing activities	-16 357	3 950
Net change in cash and cash equivalents	3 620	16 671
Cash funds at the beginning of the financial year	23 175	6 513
Translation differences	30	-9
Cash funds at the end of the financial year	26 825	23 175
(*) Also includes adjustments that are part of the financial result.
This was nihil in 2018; 130 in 2019

Key data per business segment
	Processed meats	2019 Ready Meals	Total
Segment income statement
Segment net turnover	437 594	290 538	728 132
Segment results Non-allocated results Net financing cost Taxes	-12 146	24 984	12 838 -6 633 -3 247 1 457
Share in businesses accounted for using the equity method Consolidated result			0 4 415
Segment balance sheet
Segment non-current assets Non-allocated non-current assets Total consolidated non-current assets	129 309	115 852	245 161 6 987 252 148
Segment liabilities Non-allocated liabilities Total consolidated liabilities	97 432	58 264	155 696 283 326 439 022
Other segment information
Segment investments Non-allocated investments Total investments	11 637	6 271	17 908 1 189 19 097
Segment depreciation and non-cash costs Non-allocated depreciation and non-cash costs Total depreciation and non-cash costs	18 131	10 459	28 590 2 448 31 038

Comparison of key data per business segment	Processed Meats	Ready Meals	Not allocated	Total
EBIT 2019	-12 146	24 984	-6 633	6 205
EBIT 2018	1 227	23 674	-8 683	16 218
Variance	-13 373	1 310	2 050	-10 013
EBITDA 2019	5 985	35 443	-4 185	37 243
EBITDA 2018	16 595	33 664	-6 223	44 036
Variance	-10 610	1 779	2 038	-6 793
IFRS-16 impact
EBIT 2019	185	17	7	209
EBITDA 2019	2 426	494	218	3 138
Comparison of key data per business segment	Processed	Ready	Not allocated	Total
	Meats	Meals
U-EBIT 2019	-1 935	26 360	-6 994	17 431
U-EBIT 2018	4 174	25 581	-6 728	23 027
Variance	-6 109	779	-266	-5 596
				48 099
U-EBITDA 2019	15 826	36 819	-4 546
U-EBITDA 2018 Variance	18 935 -3 109	35 748 1 071	-4 464 -82	50 219 -2 120
IFRS-16 impact
U-EBIT 2019	185	17	7	209