Business context and reporting period
Nomad Foods Limited filed this Form 20-F for the fiscal year ended December 31, 2021; it is an annual report, not a standalone fourth-quarter earnings report. The company is a European frozen-food producer with one reported operating segment, “Frozen,” and reports under IFRS in euros. The year included the September 2021 Fortenova frozen-food acquisition, expanding the business into southeastern Europe and ice cream.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | €2,606.6m | €2,515.9m |
| Gross profit / margin | €744.3m / 28.6% | €762.5m / 30.3% |
| Adjusted gross margin | 28.9% | 30.3% |
| Operating profit | €342.7m | €359.2m |
| Profit before tax | €236.7m | €295.5m |
| Profit for the year | €181.0m | €225.1m |
| Basic / diluted EPS | €1.02 / €1.02 | €1.16 / €1.14 |
| Adjusted EBITDA (non-IFRS) / margin | €486.7m / 18.7% | €466.8m / 18.6% |
| Net cash from operating activities | €306.3m | €457.0m |
| Cash and cash equivalents at year-end | €254.2m | €393.2m |
Total assets were €6,170.8m and equity €2,299.0m at year-end. Total borrowings were €2,227.4m, including lease liabilities; the company separately reported €2,155.9m of indebtedness under term facilities and no cash drawn on its revolving credit facility. Available liquidity was €426.4m: €254.2m cash plus €172.2m of available revolving borrowings. The company reported covenant compliance.
Material changes versus 2020
- Revenue rose 3.6%, driven by acquisitions; organic revenue declined 2.1%, excluding the leap-year effect and foreign-exchange translation.
- Gross margin fell 170 basis points to 28.6%. Management attributed the decline to acquired businesses’ lower margins, the unwind of acquisition inventory fair-value adjustments, pricing/promotional and mix effects, and cost-of-goods inflation.
- Adjusted EBITDA increased 4.3%, while reported operating profit and net profit declined. Net finance costs rose to €106.0m from €63.7m, including refinancing charges, derivative losses and an €8.6m impairment loss on short-term investments.
- Operating cash flow fell €150.7m, principally reflecting working-capital movements, higher cash outflows for exceptional items and increased tax paid. Investing outflow increased to €660.0m, including €597.3m net acquisition cash outflow, mostly for Fortenova.
- Fortenova was acquired for €640.1m consideration. Its preliminary allocation included €192.6m goodwill and €301.9m intangible assets; purchase accounting remained subject to finalization. The 2020 balance sheet was restated to finalize Findus Switzerland acquisition accounting.
- Debt was refinanced: €400m of 3.25% notes due 2024 were repaid and €800m of 2.5% notes due 2028 issued; the €553.2m euro term loan was extended to 2028, and the revolving facility increased from €80m to €175m.
Outlook, risks and unusual items
- Management said cash flow from operations, cash and available revolving credit were expected to fund liquidity needs for at least 12 months. It expected 2022 capital expenditure to increase, citing growth and the multi-year transformation program; no specific total forecast was provided.
- Management described cost inflation as unprecedented and said it planned pricing actions to recover inflation. It cited market expectations for consumer-goods cost increases ranging from mid-single-digit to mid-double-digit in 2022, while warning that customer retaliation could limit recovery.
- Key risks include volatile input, energy, freight and labor costs; the ability to pass increases through; concentrated retail customers (top ten represented 40% of revenue); supply-chain and transport disruption; changing consumer demand; COVID-19; Brexit-related costs and administration; foreign exchange and variable-rate debt; and acquisition integration and execution.
- COVID-19 had supported elevated in-home frozen-food demand, but management noted potential demand normalization, prior capacity constraints, and continued uncertainty. Food-service demand remained affected by pandemic restrictions, with a modest improvement as restrictions eased in 2021.
- Exceptional items were €45.3m, versus €20.6m in 2020, including business-transformation costs (€18.8m), Findus Switzerland and Fortenova integration, IT transformation, factory optimization, Brexit costs and release of indemnification assets. Cash outflows relating to exceptional items were €48.8m.
- No goodwill impairment was recorded. Goodwill was €2,099.4m and total intangible assets €4,555.1m; impairment testing used a 6.4% pre-tax discount rate and 1.0% long-term growth rate. Uncertain tax positions are material: the auditor highlighted €163.4m of provisions disclosed within current tax payable and deferred tax assets. Tax audits were ongoing in several jurisdictions, including Germany and Italy.
- The company reported no material legal proceedings. PwC gave an unqualified opinion on the financial statements and internal controls; the Fortenova entities, representing 3.9% of assets and 1.6% of revenue, were excluded from the 2021 internal-control assessment while integration was underway.
- The company reported no ordinary-share cash dividend plan. It repurchased €67.1m of shares under a new $500m authorization in 2021; further repurchases of $30.5m were disclosed after year-end through March 2, 2022.
Important facts for investors to verify
- Assess the underlying trajectory beyond acquisitions: organic revenue declined 2.1%, while reported revenue growth reflected acquired businesses.
- Verify whether pricing and productivity can offset continued input-cost inflation without materially reducing volumes or margins.
- Review cash conversion, working-capital trends and the sustainability of liquidity given lower operating cash flow and acquisition-related spending.
- Check debt maturities, interest-rate and benchmark-transition exposure, refinancing needs, covenant headroom and the effect of share repurchases on financial flexibility.
- Monitor Fortenova integration, final purchase-price allocation, acquired-business profitability and the sensitivity of goodwill and brand valuations.
- Review the assumptions and potential outcomes underlying the €163.4m uncertain-tax-position provisions, and confirm the Fortenova entities’ integration into internal controls.
- Use the audited annual figures for year-over-year analysis; the filing does not provide a clear standalone Q4 2021 income statement or quarterly cash-flow figures.