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© 2020 Nomad Fo o ds Ltd . | n om a dfo o ds .com
2 0 1 9 A n n u a l R e p o r t
Nomad Foods is Europe’s leading frozen food company and one of the largest
in the world. Our portfolio of leading niche brands, anchored by Birds Eye,
Findus and iglo, has been serving local European markets for generations and
stand for food that is great tasting, high quality and convenient.
Table of Contents
Letters to Our Shareholders ................................................................................................. 2-4
Financial Statements ............................................................................................................5-168
Corporate Information ............................................................................................................. 169
Sir Martin Ellis Franklin
Co-Chairman
Noam Gottesman
Co-Chairman
growth in market share, Nomad Foods is well-
positioned to continue its organic growth
trajectory. Despite the macro challenges we
all face, Nomad Foods is stronger than ever.
As we look to the future, we are proud of the
commitment and dedication of our 4,800
team members that have pulled together
to deliver quality products at record levels
of production in this pandemic crisis. The
culture and priorities of a company are more
noticeable in tough times, and the best in
human spirit has been on display from the
teams at Nomad.
Keeping our Nomad family safe, productive
and supporting the communities in which we
operate is important now more than ever as
we navigate the current environment. We are
working hard and remain committed to doing
our part to continue delivering high-quality
and nutritious food to our communities.
We look forward to reporting on what looks
like an historic 2020.
Respectfully,
Martin and Noam
Dear Fellow Shareholders,
We formed Nomad Foods
over four years ago with a
belief that market leadership
in frozen food and trusted brands
would provide us with a foundation for
sustainable growth protected by strong,
defensible moats.
As we write this letter, the world and
the global economy are shaken to their
core by the COVID-19 virus and actions
taken to minimize its spread. At the
same time, the core attributes of
Nomad Foods are on full display as your
company, stronger than ever, navigates
its way through this crisis.
Now in our fourth year of consecutive
organic growth, we continue to defend
and grow our base business. Meanwhile,
initiatives started years ago are bearing
fruit. During this past year, we have
lau nched a n ew frozen platform
of sustainable and meat-free foods –
Green Cuisine - as a core strategy, and
we expect it to become a €100 million
new business in 2022.
We strengthened our balance sheet
in 2019 in preparation for a pipeline of
acquisition opportunities in front of us.
Sticking to our acquisition discipline has
paid off in hindsight given the current
dislocation in the markets. In addition
to our capital raise, we have generated
over €200 million in free cash flow,
while earnings have continued to grow.
Given our available resources, we have
dedicated some of our cash to a €300
million share repurchase program as
acquisition activity has slowed within
the current environment.
Consumers gravitate towards brands
t h e y k n o w a n d t r u s t i n t i m e s o f
uncertainty. We also see new consumers
who have found a new appreciation
for the merits of frozen food. With this
Succulent Meat-Free
Meatballs from our
Green Cuisine Range.
2 Nomad Foods Annual Report 2019
Nomad Foods Annual Report 2019 3
Dear Fellow Shareholders,
N omad Food achieved another solid year in 2019,
marking our third consecutive year of organic
revenue growth, healthy profitability and strong
cash generation. Organic revenue growth increased
2%, Adjusted EBITDA grew 15% and Adjusted Free
Cash Flow exceeded €200 million. These results are a
testament of our organization’s focus and commitment
to achieving profitable growth year in and year out, all
the while serving the world with better food.
As the environment for packaged foods experiences
ongoing disruption from changing consumer behavior,
our business continues to benefit from a favorable
category backdrop. In 2019, our Western European
frozen food category footprint grew 2%. We know that
consumers have always valued frozen for convenience
and value. Increasingly, they are being drawn to the
category for other, previously under-appreciated,
benefits such as superior nutrient preservation, waste
reduction and innovative meat-free meal solutions.
Our market-leading brands are amongst the original
pioneers in the frozen category and are well suited
to attract new consumers through our pipeline of
impactful marketing campaigns and break-through
innovation. As the category leader, we know that our
company has an important role to play in elevating
frozen food and delivering high quality, great tasting
food to our consumers.
The future of frozen is very exciting and full of
long-term growth opportunities. Nevertheless, as this
letter goes to print in late April, our organization is
fully engaged in helping tackle the global health crisis
stemming from COVID-19. Throughout Europe, millions
of people are secluded in their homes and, in many
cases, under government lockdown. Out of home
food consumption has all but grinded to a halt. This
is leading to an unprecedented surge in demand for
packaged food and, specifically for our business, frozen
food. In response, our factory colleagues have risen to
the challenge by significantly increasing production
all the while enacting strict procedures and guidelines
to protect the health and safety of our employees. I
am proud of the way our organization has responded
to this crisis and am confident that our business will
emerge stronger than ever.
During these uncertain times, we take comfort knowing
that our products are in high demand and that our
balance sheet is the healthiest that it has ever been. In
2019, we raised $400 million of equity to prepare for
future acquisitions while preserving adequate balance
sheet flexibility. Since that transaction, the business
has generated significant cash flow resulting in 2019
year-end leverage in the mid-2x’s and over €800
million in cash. We will continue to pursue M&A as a
driver of shareholder value while remaining disciplined
and mindful of the current environment.
4 Nomad Foods Annual Report 2019
Stefan Descheemaeker
CEO
On the organic front, we remain optimistic on our near and
long-term growth prospects. Renovation of our existing
products has been the primary driver of organic revenue
growth since 2017 and will remain a high priority as we strive
to raise the bar even further across our existing portfolio. At
the same time, we have plans to further dial up our innovation
agenda through the strategic expansion of Green Cuisine, our
meat-free range, that was introduced in the U.K. and Ireland
in early 2019. As a business anchored in fish and vegetables,
we are very well positioned to win in the rapidly growing
meat-free segment, which presents us a unique opportunity
to develop an adjacent category with high incrementality.
While we are indeed optimistic about the future, we recognize
that we operate in a world full of macro uncertainty. 2020 will
mark a second consecutive year of elevated cost of goods as
we encounter ongoing raw material inflation and transactional
foreign currency headwinds. However, we believe the net
revenue management capabilities that we built will provide
the tools to navigate these headwinds in 2020, as they did
in 2019.
In summary, we have exciting plans for the coming year and
believe we are well positioned to drive shareholder value.
More than ever, our organization is unified and driven by our
purpose to serve the world with better food. Our employees
are fully engaged, our strategy is delivering results and our
business model is well suited to navigate a wide range of
macroeconomic outcomes. We look forward to executing the
year ahead and updating you on our progress along the way.
Respectfully yours,
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
o
Registration Statement Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
(Mark One)
FORM 20-F
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2019
Registration Statement Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
o
o
o
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Fiscal Year Ended December 31, 2019
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
o
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Shell Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
o
Shell Company Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission file number 001-37669
Commission file number 001-37669
Nomad Foods Limited
Nomad Foods Limited
(Exact Name of Registrant as Specified in Its Charter)
(Exact Name of Registrant as Specified in Its Charter)
British Virgin Islands
British Virgin Islands
(Jurisdiction of Incorporation or Organization)
(Jurisdiction of Incorporation or Organization)
No. 1 New Square
No. 1 New Square
Bedfont Lakes Business Park
Bedfont Lakes Business Park
Feltham, Middlesex TW14 8HA
Feltham, Middlesex TW14 8HA
(Address of Principal Executive Offices)
(Address of Principal Executive Offices)
Samy Zekhout
Samy Zekhout
No. 1 New Square
No. 1 New Square
Bedfont Lakes Business Park
Bedfont Lakes Business Park
Feltham, Middlesex TW14 8HA
Feltham, Middlesex TW14 8HA
Telephone:+(44) 208 918 3200
Telephone:+(44) 208 918 3200
Facsimile:+(44) 208 918 3491
Facsimile:+(44) 208 918 3491
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
(Name, Telephone, E-mail and/or Facsimile Number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class
Title of Each Class
Ordinary Shares, no par value NOMD
Ordinary Shares, no par value NOMD
Trading Symbol (s)
Trading Symbol (s)
Name of Each Exchange on which Registered
Name of Each Exchange on which Registered
New York Stock Exchange
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Preferred Shares, no par value
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: Preferred Shares, no par value
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
194,542,957 Ordinary Shares and 1,500,000 Preferred Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes o No
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
194,542,957 Ordinary Shares and 1,500,000 Preferred Shares
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. xYes o No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. o Yes x No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. o Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 90 days. x Yes o No
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of “large accelerated filer, accelerated filer, and emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer x Accelerated filer o Non-accelerated filer o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See
definition of “large accelerated filer, accelerated filer, and emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer x Accelerated filer o Non-accelerated filer o
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use
the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards
the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o
Codification after April 5, 2012.
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards
Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
Emerging growth company o
Emerging growth company o
U.S. GAAPo
International Financial Reporting Standards as Issued
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
Othero
by the International Accounting Standards Boardx
U.S. GAAPo
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow. o Item 17 o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to
follow. o Item 17 o Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
International Financial Reporting Standards as Issued
by the International Accounting Standards Boardx
Othero
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Nomad Foods Annual Report 5
Nomad Foods Annual Report 5
TABLE OF CONTENTS
TERMS USED IN THIS REPORT
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
INDUSTRY AND MARKET DATA
TRADEMARKS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
Item 1:
Identity of Directors, Senior Management and Advisers
Item 2:
Offer Statistics and Expected Timetable
Item 3:
Key Information
Item 4.
Information on the Company
Item 4A. Unresolved Staff Comments
Item 5.
Operating and Financial Review and Prospects
Item 6.
Directors, Senior Management and Employees
Item 7.
Major Shareholders and Related Party Transactions
Item 8.
Financial Information
Item 9.
The Offer and Listing
Item 10.
Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other than Equity Securities
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16F. Change in Registrants’ Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Item 17.
Financial Statements
Item 18.
Financial Statements
Item 19.
Exhibits
6 Nomad Foods Annual Report
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TERMS USED IN THIS REPORT
Unless the context otherwise requires, in this annual report, the term(s) (1) “we,” “us,” “our,” “Company,”
“Nomad” and “our business” refer to Nomad Foods Limited (formerly known as Nomad Holdings Limited) and its
consolidated subsidiaries and (2) “Iglo” and “the Iglo Group” refer solely to Nomad Foods Europe Holdings Limited
(previously named Iglo Foods Holdings Limited) and its consolidated subsidiaries which we purchased on June 1, 2015.
All references in this annual report to the “Predecessor” refer to Iglo for all periods prior to its acquisition by the Company
(the “Iglo Acquisition”) and all references to the “Successor” refer to the Company for all periods after the Iglo Acquisition.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
In this annual report, references to “Euro” and “€” are to the single currency adopted by participating member
states of the European Union ("EU") relating to Economic and Monetary Union, references to “$”, “US$” and “U.S. Dollars”
are to the lawful currency of the United States of America, and references to “Pound Sterling”, “Sterling” and “£” are to the
lawful currency of the United Kingdom ("UK").
The historical financial information for the Company and the Predecessor has been prepared in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS IASB”)
and International Financial Reporting Standards as endorsed by the European Union (together “IFRS”) which can differ in
certain significant respects from U.S. GAAP.
Unless otherwise noted, all financial information for the Company and the Predecessor provided in this annual
report is denominated in Euros.
Historical Financial Information
This annual report includes our consolidated financial statements at and as of the years ended December 31,
2019 (the “Fiscal 2019 Period”), December 31, 2018 (the “Fiscal 2018 Period”) and December 31, 2017 (the “Fiscal 2017
Period”).
Non-IFRS Financial Measures
In this annual report, we present certain supplemental financial measures that are not recognized by IFRS.
These financial measures are unaudited and have not been prepared in accordance with IFRS, SEC requirements or the
accounting standards of any other jurisdiction. The non-IFRS financial measures used in this annual report are Adjusted
EBITDA and Adjusted EBITDA margin. For additional information on why we present non-IFRS financial measures, the
limitations associated with using non-IFRS financial measures and reconciliations of our non-IFRS financial measures to
the most comparable applicable IFRS measure, see Item 5: Operating and Financial Review and Prospects.
INDUSTRY AND MARKET DATA
We obtained the industry, market and competitive position data throughout this annual report from our own
internal estimates and research as well as from industry and general publications and research, surveys and studies
conducted by Euromonitor. Industry surveys and publications generally state that the information contained therein has
been obtained from sources believed to be reliable, but the accuracy and completeness of the information contained in
industry publications is not guaranteed. While we believe that each of these studies and publications is reliable, we have
not independently verified market and industry data from third-party sources. While we believe our internal company
research is reliable and the definitions of our market and industry are appropriate, neither this research nor these
definitions have been verified by any independent source. Further, while we believe the market opportunity information
included in this annual report is generally reliable, such information is inherently imprecise. In addition, projections,
assumptions and estimates of the future performance of the industry in which we operate and our future performance are
necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in
Item 3D: Key Information - Risk Factors. These and other factors could cause results to differ materially from those
expressed in the estimates made by the independent parties and by us. See Cautionary Note Regarding Forward-Looking
Statements.
Market share data presented throughout this annual report is measured by retail sales value. The frozen food
market data we refer to throughout this annual report includes the following categories: Frozen Processed Meat, Frozen
Processed Seafood, Frozen Meat Substitutes, Frozen Pizza, Frozen Ready Meals, Frozen Noodles, Frozen Soup, Frozen
Baked Goods and Processed Frozen Vegetables.
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TRADEMARKS
We operate under a number of trademarks, including, among others, “Iglo,” “Birds Eye”, “Goodfella's”, “Aunt
Bessie's” and “Findus”, all of which are registered under applicable intellectual property laws. This annual report contains
references to our trademarks and service marks and to those belonging to other entities. Solely for convenience,
trademarks and trade names referred to in this annual report may appear without the ® or TM symbols, but such
references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable
law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or
display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or
sponsorship of us by, any other companies.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this annual report constitute forward-looking statements that do not directly or
exclusively relate to historical facts. You should not place undue reliance on such statements because they are subject to
numerous uncertainties and factors relating to our operations and business environment, all of which are difficult to predict
and many of which are beyond our control. Forward-looking statements include information concerning our possible or
assumed future results of operations, including descriptions of our business strategy. These statements often include
words such as “may,” “will,” “should,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate” or similar expressions.
Forward-looking statements included in this annual report include statements regarding:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
our beliefs and intentions regarding our strategic initiatives and their impact on the growth and
profitability of our business;
our intent to profitably grow our business through our strategic initiatives;
our intent to seek additional acquisition opportunities in food products and our expectation regarding
competition for acquisitions;
our beliefs regarding the anticipated impact of the exit by the UK from the EU ("Brexit") on our business;
our expectations concerning our ability to fund our liquidity requirements and to raise cash through equity and
debt offerings;
our expectations concerning our capital expenditures in 2020;
our beliefs regarding our sales, marketing and advertising strategies, competitive strengths and ability to
successfully compete in the markets in which we participate;
our expectations concerning consumer demand for our products, our future growth opportunities, market share
and sales channels, including online channels;
our beliefs and intentions regarding the impact of key industry trends on our business, our actions in response
to such trends and the resulting impact on our profitability and competitive position;
our future operating and financial performance;
our intent to settle any Founder Preferred Shares Annual Dividend Amount (as defined herein) with equity;
our belief that we have sufficient spare capacity to accommodate future growth in our main product categories
and to accommodate the seasonal nature of some of our products;
our beliefs and intentions regarding our sustainability program;
our intent to rely on some of the available foreign private issuer exemptions to the New York Stock Exchange
(the “NYSE”) corporate governance rules; and
the accuracy of our estimates and key judgments regarding certain tax matters and accounting valuations.
The forward-looking statements contained in this annual report are based on assumptions that we have made
in light of our management’s experience in the industry as well as our perceptions of historical trends, current conditions,
expected future developments and other factors that we believe are appropriate under the circumstances. As you read
and consider this annual report, you should understand that these statements are not guarantees of performance or
results. They involve known and unknown risks, uncertainties and assumptions. Although we believe that these forward-
looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual
financial results or results of operations and could cause actual results to differ materially from those in these forward-
looking statements.
8 Nomad Foods Annual Report
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These factors include but are not limited to:
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•
•
•
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•
our ability to successfully implement our strategic initiatives;
the anticipated benefits from the acquisition of the Aunt Bessie's and Goodfella's brands may take longer to
realize and may cost more to achieve than expected;
uncertainty about the terms and timing of the trade agreement between the UK and the EU associated with
Brexit, as well as the potential adverse impact of Brexit on currency exchange rates, global economic
conditions and cross-border agreements that affect our business;
the loss of any of our executive officers or members of our senior management team or other key employees;
the loss of any of our major customers or a decrease in demand for our products;
our ability to effectively compete in our markets;
changes in consumer preferences and our failure to anticipate and respond to such changes or to successfully
develop and renovate products;
our ability to successfully interpret and respond to key industry trends and to realize the expected benefits of
our responsive actions;
our ability to protect our brand names and trademarks;
the commercial success of our Green Cuisine brand of products, including as a result of its expansion into
continental Europe, and other innovations introduced to the markets;
economic conditions that may affect our future performance including exchange rate fluctuations;
fluctuations in the availability of food ingredients and packaging materials that we use in our products;
our ability to effectively mitigate factors that negatively impact our supply of raw materials, including pea
supply;
disruptions in our information technology systems, supply network, manufacturing and distribution facilities or
our workforce or the workforce of our suppliers;
our ability to continue to comply with covenants and the terms of our credit instruments and our ability to obtain
additional financing, as needed, to fund our liquidity requirements and capital expenditures;
availability of debt and equity financing under favorable terms;
increases in operating costs, including labor costs, and our ability to manage our cost structure;
the occurrence of liabilities not covered by our insurance;
our ability to successfully implement, and engage other stakeholders in implementing, our sustainability
program;
the loss of our financial arrangements with respect to receivables factoring;
the loss of our foreign private issuer status;
the effects of reputational damage from unsafe or poor quality food products, particularly if such issues involve
products we manufactured or distributed;
our failure to comply with, and liabilities related to, environmental, health and safety laws and regulations; and
changes in applicable laws or regulations.
These and other factors are more fully discussed in Item 3D: Key Information - Risk Factors and elsewhere in
this annual report. These risks could cause actual results to differ materially from those implied by forward-looking
statements in this annual report.
All information contained in this annual report is materially accurate and complete as of the date of this annual
report. You should keep in mind, however, that any forward-looking statement made by us in this annual report, or
elsewhere, speaks only as of the date on which we make it. New risks and uncertainties come up from time to time, and it
is impossible for us to predict these events or how they may affect us. We do not undertake any obligation to update or
revise any forward-looking statements after the date of this annual report, whether as a result of new information, future
events or otherwise, except as required by law. In light of these risks and uncertainties, you should keep in mind that any
event described in a forward-looking statement made in this annual report or elsewhere might not occur.
Nomad Foods Annual Report 9
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Item 1:
Identity of Directors, Senior Management and Advisers
PART I
A.
B.
C.
Directors and Senior Management
Not applicable.
Advisers
Not applicable.
Auditors
Not applicable.
Item 2:
Offer Statistics and Expected Timetable
A.
B.
Offer Statistics
Not applicable.
Method and Expected Timetable
Not applicable.
Item 3:
Key Information
A. Selected Financial Data
The following table sets forth selected historical consolidated financial and other data for the
Company and the Predecessor for the periods presented. The selected historical consolidated financial data below should
be read in conjunction with our Audited Consolidated Financial Statements and related notes (Item 18), as well as Item
4: Information on the Company and Item 5: Operating and Financial Review and Prospects of this annual report.
and regulations.
Following the Iglo Acquisition, Iglo is considered to be our Predecessor under applicable SEC rules
In June 2015, the Board of Directors approved a change in Nomad’s fiscal year end from March 31
to December 31 in order to align Nomad’s fiscal year with the Iglo Group’s historical reporting calendar. As a result of this
change, the selected historical consolidated financial data includes financial information for the Successor for the twelve
month periods ended December 31, 2019, 2018, 2017 and 2016 and the nine month period from April 1, 2015 to
December 31, 2015.
The statement of income data for the Fiscal 2019 Period, Fiscal 2018 Period and Fiscal 2017
Period and the balance sheet data as of December 31, 2019 and 2018 have been derived from our audited consolidated
financial statements included elsewhere in this annual report. The statement of income data for the twelve months ended
December 31, 2016, for the nine months ended December 31, 2015, for the twelve months ended March 31, 2015, and
for the Predecessor, for the five months ended May 31, 2015 and balance sheet information for Nomad as of December
31, 2016 and 2015 have been derived from audited financial statements not included elsewhere in this annual report.
presented. All results are continuing.
Neither the Successor nor the Predecessor declared or paid cash dividends in the periods
10 Nomad Foods Annual Report
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Successor
Successor
Successor
Successor
Successor
Successor
Predecessor
Year
ended
Dec 31 2019
Year
ended
Dec 31 2018
Year
ended
Dec 31 2017
Year
ended
Dec 31 2016
9 months
ended
Dec 31 2015
Year
ended
Mar 31 2015
5 months
ended
May 31 2015
€m
€m
€m
€m
€m
€m
€m
2,324.3
(1,626.4)
697.9
(359.9)
(54.5)
2,172.8
(1,519.3)
653.5
(352.7)
(17.7)
1,956.6
(1,357.2)
599.4
(319.3)
(37.2)
1,927.7
(1,356.7)
571.0
(298.4)
(134.5)
894.2
(663.0)
231.2
(138.6)
(58.1)
—
—
—
(0.7)
(0.7)
—
—
—
—
—
—
—
—
(349.0)
(165.8)
0.4
(0.4)
640.3
(417.9)
222.4
(109.5)
(84.3)
—
—
283.5
283.1
242.9
138.1
(314.1)
(167.6)
28.6
(73.2)
(56.0)
(74.4)
210.3
(56.7)
227.1
(56.6)
168.5
(32.0)
(62.1)
76.0
(39.6)
(35.5)
0.1
(115.7)
(349.6)
12.3
(167.5)
—
(87.1)
(40.9)
153.6
170.5
136.5
36.4
(337.3)
(167.5)
(128.0)
192,004,803
175,622,538
176,080,272
183,518,743
145,590,810
50,025,000
198,425,877
175,793,631
184,786,162
183,528,621
145,590,810
50,025,000
0.80
0.78
0.97
0.97
0.78
0.74
0.20
0.20
(2.32)
(3.35)
(2.32)
(3.35)
5,904.5
2,556.7
—
5,340.8
2,059.1
—
4,601.7
1,852.6
—
4,709.5
1,902.5
—
4,929.7
1,888.1
—
447.4
274.9
—
n.p.
n.p.
n.p.
n.p.
n.p.
n.p.
n.p.
Statement of
Income data:
Revenue
Cost of sales
Gross profit
Other operating
expenses
Exceptional items
Charge related to
Founder Preferred
Shares Annual
Dividend Amount
Credit/(Charge)
related to Warrant
Redemption
Liability
Operating profit/
(loss)
Net finance (costs)/
income
Profit/(loss) before
tax
Taxation
Profit/(loss) for the
period
Basic weighted
number of shares
Diluted weighted
number of shares
Basic earnings/(loss)
per share
Diluted earnings/
(loss) per share
Balance Sheet
data:
Total assets
Total equity
Share capital
n.p. not presented
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
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Nomad Foods Annual Report 11
D. Risk Factors
An investment in our ordinary shares carries a significant degree of risk. You should carefully
consider the following risks and other information in this annual report, including our consolidated financial statements and
related notes included elsewhere in this annual report, before you decide to purchase our ordinary shares. Additional risks
and uncertainties of which we are not presently aware or that we currently deem immaterial could also affect our business
operations and financial condition. If any of these risks actually occur, our business, financial condition, results of
operations or prospects could be materially affected. As a result, the trading price of our ordinary shares could decline and
you could lose part or all of your investment.
Risks Related to Our Business and Industry
We operate in a highly competitive market and our failure to compete effectively could adversely affect our
results of operations.
The market for frozen food is highly competitive, and further consolidation in the industry would
likely increase competition. Our competitors include retailers who promote private label products and well-established
branded producers that operate on both a national and an international basis across single or multiple frozen food
categories. We also face competition more generally from chilled food, distributors and retailers of fresh products, baked
goods and ready-made meals. Our competitors generally compete with us on the basis of price, actual or perceived
quality of products, brand recognition, consumer loyalty, product variety, new product development, customer service and
improvements to existing products. We may not successfully compete with our existing competitors and new competitors
may enter the market. Discounters are supermarket retailers which offer a narrow range of food and grocery products at
discounted prices and which typically focus on non-branded rather than branded products. The increase in discounter
sales may adversely affect the sales of our branded products. Further, we are increasing our investment in online sales
(sales made through retailers’ online platforms). However, there is no guarantee we will achieve our expected return on
investment from this strategy. The growth of online retailers, and the corresponding growth in our online sales, may also
adversely affect our competitive position.
In addition, we cannot predict the pricing or promotional actions of our competitors or their effect on
consumer perceptions or the success of our own advertising and promotional efforts. Our competitors develop and launch
products targeted to compete directly with our products. Our retail customers, most of which promote their own private
label products, control the shelf space allocations within their stores. As a result, they may allocate more shelf space to
private label products or to our branded competitors’ products in accordance with their respective promotional strategies.
Decreases in shelf space allocated to our products, increases in competitor promotional activity, aggressive marketing
strategies by competitors or other factors may require us to reduce our prices or invest greater amounts in advertising and
promotion of our products to ensure our products remain competitive.
Furthermore, some of our competitors may have substantially greater financial, marketing and other
resources than we have. This creates competitive pressures that could cause us to lose market share or require us to
lower prices, increase advertising expenditures or increase the use of discounting or promotional campaigns. These
competitive factors may also restrict our ability to increase prices, including in response to commodity and other cost
increases. If we are unable to continue to respond effectively to these and other competitive pressures, our customers
may reduce orders of our products, may insist on prices that erode our margins or may allocate less shelf space and
fewer displays for our products. These or other developments could materially and adversely affect our sales volumes and
margins and result in a decrease in our operating results, which could have a material adverse effect on our business,
financial condition and results of operations.
12 Nomad Foods Annual Report
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Sales of our products are subject to changing consumer preferences and trends; if we do not correctly anticipate
such changes, our sales and profitability may decline.
There are a number of trends in consumer preferences which have an impact on us and the frozen
food industry as a whole. These include, among others, preferences for speed, convenience and ease of food
preparation; natural, nutritious and well-proportioned meals; products that are sustainably sourced and produced and are
otherwise environmentally friendly; as well as a recent trend towards meat substitutes. Concerns as to the health impacts
and nutritional value of certain foods may increasingly result in food producers being encouraged or required to produce
products with reduced levels of salt, sugar and fat and to eliminate trans-fatty acids and certain other ingredients.
Consumer preferences are also shaped by concern over waste reduction and the environmental impact of products. The
success of our business depends on both the continued appeal of our products and, given the varied backgrounds and
tastes of our customer base, our ability to offer a sufficient range of products to satisfy a broad spectrum of preferences.
Any shift in consumer preferences in the UK, Germany, France, Italy, Sweden or any other material market in which we
operate could have a material adverse effect on our business. Consumer tastes are also susceptible to change. In
addition, the growing presence of alternative retail channels could negatively impact our sales if we fail to adapt. For
example, consumers with increasingly busy lifestyles are choosing the online grocery channel as a more convenient and
faster way of purchasing their food products, and are also increasingly using the internet for meal ideas. Our
competitiveness therefore depends on our ability to predict and quickly adapt to consumer preferences and trends,
exploiting profitable opportunities for product development without alienating our existing consumer base or focusing
excessive resources or attention on unprofitable or short-lived trends. All of these efforts require significant research and
development and marketing investments. If we are unable to respond on a timely and appropriate basis to changes in
demand or consumer preferences and trends, our sales volumes and margins could be adversely affected.
Our future results and competitive position are dependent on the successful development of new products and
improvement of existing products, which is subject to a number of difficulties and uncertainties.
Our future results and ability to maintain or improve our competitive position depend on our
capacity to anticipate changes in our key markets and to successfully identify, develop, manufacture, market and sell new
or improved products in these changing markets. We aim to introduce new products and re-launch and extend existing
product lines on a timely basis in order to counteract obsolescence and decreases in sales of existing products as well as
to increase overall sales of our products. For example, in 2019 we launched Green Cuisine which offers consumers a
wide range of meat free solutions and we currently intend to expand the brand to continental Europe. The launch and
success of new or modified products are inherently uncertain, especially as to the products’ appeal to consumers, and
there can be no assurance as to our continuing ability to develop and launch successful new products or variations of
existing products. The failure to launch a product successfully can give rise to inventory write-offs and other costs and can
affect consumer perception of our other products. Market factors and the need to develop and provide modified or
alternative products may also increase costs. In addition, launching new or modified products can result in cannibalization
of sales of our existing products if consumers purchase the new product in place of our existing products. If we are
unsuccessful in developing new products in response to changing consumer demands or preferences in an efficient and
economical manner, or if our competitors respond more effectively than we do, demand for our products may decrease,
which could materially and adversely affect our business, financial condition and results of operations.
The nature of the exit of the UK from the EU could adversely impact our business, results of operations and
financial condition.
On June 23, 2016 the UK electorate voted in favor of leaving the European Union (commonly
referred to as “Brexit”), and on March 29, 2017 the UK government formally initiated the withdrawal process. The
European Union (Withdrawal Agreement) Bill has now been passed by the UK Parliament and the UK left the European
Union on January 31, 2020. Following its departure, the UK has commenced negotiations with the European Union to
reach a trade agreement going forward. At present the date for the finalization of such an agreement is December 31,
2020 and until such date a standstill transition period is in place. This lack of clarity continues to create political and
economic uncertainty, which has affected, and may continue to affect, market and macro-economic conditions in both the
UK and EU economies.
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Nomad Foods Annual Report 13
For the year ended December 31, 2019, 95% of our revenue was derived from the EU as a whole
and 30% was derived from the UK, which increased from the prior year due to the acquisitions of Goodfella's and Aunt
Bessie's. In addition, we have manufacturing facilities and employees in both the UK and other European countries. As a
result of Brexit, we may experience adverse impacts on consumer demand and profitability in the UK and other markets.
Depending on the terms of Brexit and any subsequent trade agreement, the UK could also lose access to the single EU
market, or specific countries in the EU, resulting in a negative impact on the general and economic conditions in the UK
and the EU. Changes may occur in regulations that we are required to comply with as well as amendments to treaties
governing tax, duties, tariffs, etc. which could adversely impact our operations and require us to modify our financial and
supply arrangements. For example, the imposition of any import restrictions and duties levied on our products may make
our products more expensive and less competitive from a pricing perspective. To avoid such impacts, we may have to
restructure or relocate some or all of our operations which would be costly and negatively impact our profitability and cash
flow.
Additionally, political instability in the European Union as a result of Brexit may result in a material
negative effect on credit markets, currency exchange rates and foreign direct investments and any subsequent trade
agreement in the EU and UK. This deterioration in economic conditions could result in increased unemployment rates,
increased short and long term interest rates, adverse movements in exchange rates, consumer and commercial
bankruptcy filings, a decline in the strength of national and local economies, and other results that negatively impact
household incomes. Further, a number of our employees in the UK are not UK citizens and, depending on the terms
negotiated, may no longer have the right to work in the UK following the UK’s formal withdrawal from the EU.
results of operations.
Any of these factors could have a material adverse effect on our business, financial condition and
We are exposed to economic and other trends that could adversely impact our operations in our key
geographies.
We conduct operations in our key markets of the UK, Italy, Germany, Sweden, France, and Norway,
from which approximately 80% of our revenue was generated during the year ended December 31, 2019. We are
particularly influenced by economic developments and changes in consumer habits in those countries.
The geographic markets in which we compete have been affected by negative macroeconomic
trends which have affected consumer confidence. For example, Brexit has created political and economic uncertainty both
in the UK and the other EU member states. A deterioration in economic conditions could result in increased
unemployment rates, increased short and long term interest rates, consumer and commercial bankruptcy filings, a decline
in the strength of national and local economies, and other results that negatively impact household incomes. This can
result in consumers purchasing cheaper private label products instead of equivalent branded products. Such
macroeconomic trends could, among other things, negatively impact global demand for branded and premium food
products, which could result in a reduction of sales or pressure on margins of our branded products or cause an
increasing transfer to lower priced product categories.
Our inability to source raw materials or other inputs of an acceptable type or quality, could adversely affect our
results of operations.
We use significant quantities of food ingredients and packaging materials and are therefore
vulnerable to fluctuations in the availability and price of food ingredients, packaging materials, other supplies and energy
costs. In particular, raw materials such as fish, livestock and crops have historically represented a significant portion of our
cost of sales, and accordingly, adverse changes in raw material prices can impact our results of operations.
Specifically, the availability and the price of fish, vegetables and other agricultural commodities,
including poultry and meat, can be volatile. We are also affected by the availability of quality raw materials, most notably
fish, which can be impacted by the fishing and agricultural policies of the European Union including national or
international quotas that can limit volume of raw materials. General economic conditions, unanticipated demand, problems
in manufacturing or distribution, natural disasters, weather conditions during the growing and harvesting seasons, plant,
fish and livestock diseases and local, the impact of Brexit, national or international quarantines can also adversely affect
availability and prices of commodities in the long and short term.
14 Nomad Foods Annual Report
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While we attempt to negotiate fixed prices for certain materials with our suppliers for periods
ranging from one month to a full year, we cannot guarantee that our strategy will be successful in managing input costs if
prices increase for extended periods of time. Additionally, by entering fixed price agreements we may potentially be
limiting our ability to benefit from possible price decreases. Moreover, there is no market for hedging against price volatility
for certain raw materials and accordingly such materials are bought at the spot rate in the market.
Our ability to avoid the adverse effects of a pronounced, sustained price increase in raw materials
is limited. Any increases in prices or scarcity of ingredients or packaging materials required for our products could
increase our costs and disrupt our operations. If the availability of any of our inputs is constrained for any reason, we may
not be able to obtain sufficient supplies or supplies of a suitable quality on favorable terms or at all. Such shortages could
materially adversely affect our market share, business, financial condition and results of operations.
Our inability to pass on price increases for materials or other inputs to our customers could adversely affect our
results of operations.
Our ability to pass through increases in the prices of raw materials to our customers depends,
among others, on prevailing competitive conditions and pricing methods in the markets in which we operate, and we may
not be able to pass through such price increases to our customers. Even if we are able to pass through increases in
prices, there is typically a time lag between cost increases impacting our business and implementation of product price
increases during which time our profit margin may be negatively impacted. Recovery of cost inflation, driven by both
commodity cost increases or changes in the foreign exchange rate of the currency the commodity is denominated in, can
also lead to disparities in retailers’ shelf-prices between different brands which can result in a competitive disadvantage
and volume decline. During our negotiations to increase our prices to recover cost increases, customers may take actions
which exacerbate the impact of such cost increases, for example by ceasing to offer our products or deferring orders until
negotiations have ended. Our inability to pass through price increases in raw materials and preserve our profit margins in
the future could materially adversely affect our business, financial condition and results of operations.
We rely on sales to a limited number of large food retailers and should they perform poorly or give higher priority
to private label or other brands or products or if the concentration and buying power of these large retailers
increase, our business could be adversely affected.
Our customers include supermarkets and large chain food retailers in the UK, Germany, France,
Italy, Sweden and Norway. Throughout our markets, the food retail segments are highly concentrated. For the year ended
December 31, 2019, our top 10 customers account for 36% of sales. In recent years, the major multiple retailers in those
countries have increased their share of the grocery market and price competition between retailers has intensified. This
price competition has led the major multiple retailers to seek lower prices from their suppliers, including us. The strength
of the major multiple retailers’ bargaining position gives them significant leverage over their suppliers in negotiating
pricing, product specification and the level of supplier participation in promotional campaigns and offers, which can reduce
our margins. International alliances among retailers continue to become stronger, and the trend for consolidation in
Europe at a local level and across borders is ongoing. Further consolidation among the major multiple retailers or
disproportionate growth in relation to their competitors could increase their relative negotiating power and allow them to
force a negative shift in our trade terms. Our results of operations could also be adversely affected if these retailers suffer
a significant deterioration in sales performance, if we are required to reduce our prices or increase our promotional
spending activity as a consequence, if we are unable to collect accounts receivable from our customers, if we lose
business from a major customer or if our relationship with a major customer deteriorates.
Our retail customers also offer private label products that compete directly with our products for
retail shelf space and consumer purchases. Private label products typically have higher margins for retailers than other
branded products. Accordingly, there is a risk that our customers may give higher priority to private label products or the
branded products of our competitors, which would adversely affect sales of our products. Our major multiple retail
customers are also expanding into non-food product lines in their stores, thereby exerting pressure on available shelf
space for other categories such as food products. We may be unable to adequately respond to these trends and, as a
result, the volume of our sales may decrease or we may need to lower the prices of our products, either of which could
adversely affect our business, financial condition and results of operations.
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Nomad Foods Annual Report 15
Increased distribution costs or disruption of transportation services could adversely affect our business and
financial results.
Distribution costs have historically fluctuated significantly over time, particularly in connection with
oil prices, and increases in such costs could result in reduced profits. In addition, certain factors affecting distribution costs
are controlled by our third party carriers. To the extent that the market price for fuel or freight or the number or availability
of carriers fluctuates, our distribution costs could be affected. Furthermore, temporary or long-term disruption of
transportation services due to weather-related problems, strikes or other events could impair our ability to supply products
affordably and in a timely manner or at all. Failure to deliver our perishable food products promptly could also result in
inventory spoilage. These factors could impact our commercial reputation and result in our customers reducing their
orders or ceasing to order our products. Any increases in the cost of transportation, and any disruption in transportation,
could have a material adverse effect on our business, financial condition and results of operations. We require the use of
refrigerated vehicles to ship our products and such distribution costs represent an important element of our cost structure.
We are dependent on third parties for almost all of our transportation requirements. In Italy, our distribution network is
shared with Unilever’s ice cream business. Our arrangement with Unilever is governed by a distribution agreement which
expires in 2022. If we change the transportation services we use, we could face logistical difficulties that could delay
deliveries, and we could incur costs and expend resources in connection with such change.
We may not be able to consummate future acquisitions or successfully integrate acquisitions into our business
which could result in unanticipated expenses and losses.
Our strategy is largely based on our ability to grow through acquisitions of additional businesses to
build an integrated group. Consummating acquisitions of businesses, or our failure to integrate such businesses
successfully into our existing businesses, could result in unanticipated expenses and losses. Furthermore, we may not be
able to realize any of the anticipated benefits from completed acquisitions, including the Goodfella's Pizza and Aunt
Bessie's acquisitions.
We anticipate that any future acquisitions we may pursue as part of our business strategy may be
partially financed through additional debt or equity. Any future financial market disruptions or tightening of the credit
markets may make it more difficult for us to obtain financing for acquisitions or increase the cost of obtaining financing. If
new debt is added to current debt levels, or if we incur other liabilities, including contingent liabilities, in connection with an
acquisition, the debt or liabilities could impose additional constraints and requirements on our business and operations,
which could materially adversely affect our financial condition and results of operation. In addition, to the extent our
ordinary shares are used for all or a portion of the consideration to be paid for future acquisitions, dilution may be
experienced by existing shareholders.
In connection with our completed and future acquisitions, the process of integrating acquired
operations into our existing group operations may result in unforeseen operating difficulties and may require significant
financial resources that would otherwise be available for the ongoing development or expansion of existing operations.
Some of the risks associated with acquisitions include:
• unexpected losses of key employees or customers of the acquired company;
• conforming the acquired company's standards, processes, procedures and controls with our
operations;
• coordinating new product and process development;
• hiring additional management and other critical personnel;
• negotiating with labor unions; and
• increasing the scope, geographic diversity and complexity of our current operations.
We may encounter unforeseen obstacles or costs in the integration of businesses that we may
acquire. In addition, general economic and market conditions or other factors outside of our control could make our
operating strategies difficult or impossible to implement. Any failure to implement these operational improvements
successfully and/or the failure of these operational improvements to deliver the anticipated benefits could have a material
adverse effect on our results of operations and financial condition.
16 Nomad Foods Annual Report
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We may be subject to antitrust regulations with respect to future acquisition opportunities.
Many jurisdictions in which we operate have antitrust regulations which involve governmental filings
for certain acquisitions, impose waiting periods and require approvals by government regulators. Governmental authorities
may seek to challenge potential acquisitions or impose conditions, terms, obligations or restrictions that may delay
completion of the acquisition or materially reduce the anticipated benefits (financial or otherwise). Our inability to
consummate potential future acquisitions or to receive the full benefits of such acquisitions because of antitrust
regulations could limit our ability to execute on our acquisition strategy which could have a material adverse effect on our
financial condition and results of operations.
We may face significant competition for acquisition opportunities.
There may be significant competition in some or all of the acquisition opportunities that we may
explore. Such competition may for example come from strategic buyers, sovereign wealth funds, special purpose
acquisition companies and public and private investment funds, many of which are well established and have extensive
experience in identifying and completing acquisitions. A number of these competitors may possess greater technical,
financial, human and other resources than us. We cannot assure investors that we will be successful against such
competition. Such competition may cause us to be unsuccessful in executing any acquisition or may result in a successful
acquisition being made at a significantly higher price than would otherwise have been the case.
Any due diligence by us in connection with potential future acquisitions may not reveal all relevant
considerations or liabilities of the target business, which could have a material adverse effect on our financial
condition or results of operations.
We intend to conduct such due diligence as we deem reasonably practicable and appropriate
based on the facts and circumstances applicable to any potential acquisition. The objective of the due diligence process
will be to identify material issues which may affect the decision to proceed with any one particular acquisition target or the
consideration payable for an acquisition. We also intend to use information revealed during the due diligence process to
formulate our business and operational planning for, and our valuation of, any target company or business. While
conducting due diligence and assessing a potential acquisition, we may rely on publicly available information, if any,
information provided by the relevant target company to the extent such company is willing or able to provide such
information and, in some circumstances, third party investigations.
There can be no assurance that the due diligence undertaken with respect to an acquisition will
reveal all relevant facts that may be necessary to evaluate such acquisition including the determination of the price we
may pay for an acquisition target or to formulate a business strategy. Furthermore, the information provided during due
diligence may be incomplete, inadequate or inaccurate. As part of the due diligence process, we will also make subjective
judgments regarding the results of operations, financial condition and prospects of a potential target. If the due diligence
investigation fails to correctly identify material issues and liabilities that may be present in a target company or business,
or if we consider such material risks to be commercially acceptable relative to the opportunity, and we proceed with an
acquisition, we may subsequently incur substantial impairment charges or other losses.
In addition, following any acquisition, we may be subject to significant, previously undisclosed
liabilities of the acquired business that were not identified during due diligence and which could contribute to poor
operational performance, undermine any attempt to restructure the acquired company or business in line with our
business plan and have a material adverse effect on our financial condition and results of operations.
We do not have long-term contractual agreements with our key customers, which exposes us to increased risks
with respect to such customers.
As is typical in the food industry, sales to our key customers in our major markets are made on a
daily demand basis. We generally do not have long-term contractual commitments to supply such customers and must
renegotiate supply and pricing terms of our products on a regular basis. Customarily, trade terms are renegotiated
annually; however, ad-hoc changes are often made on an informal basis, such as by email, to reflect discounts and
promotional arrangements. Amounts paid are subject to end of period reconciliations to reflect these informal
arrangements. In some cases, our customers seek to claim reimbursement for informal discount arrangements going back
multiple periods. In addition, we do not have written contractual arrangements with a number of our other customers. Most
of our customer relationships or arrangements could be terminated or renegotiated at any time and, in some cases,
without reasonable notice.
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Nomad Foods Annual Report 17
Our customers may not be creditworthy.
Our business is subject to the risks of nonpayment and nonperformance by our customers. We
manage our exposure to credit risk through credit analysis and monitoring procedures, and sometimes use letters of
credit, prepayments and guarantees. However, these procedures and policies cannot fully eliminate customer credit risk,
and to the extent our policies and procedures prove to be inadequate, it could negatively affect our financial condition and
results of operations. In addition, some of our customers may be highly leveraged and subject to their own operating and
regulatory risks and, even if our credit review and analysis mechanisms work properly, we may experience financial
losses in our dealings with such parties. Any future financial market disruptions or tightening of the credit markets could
result in some of our customers experiencing a significant decline in profits and/or reduced liquidity. A significant adverse
change in the financial position of a customer could require us to assume greater credit risk relating to that customer and
could limit our ability to collect receivables. We do not maintain credit insurance to insure against customer credit risk. If
our customers fail to fulfill their contractual obligations, it may have an adverse effect on our business, financial condition
and results of operation.
Failure to protect our brand names and trademarks could materially affect our business.
Our principal brand names and trademarks (such as Birds Eye, Iglo, Findus, Aunt Bessie's and
Goodfella's) are key assets of our business and our success depends upon our ability to protect our intellectual property
rights. We rely upon trademark laws to establish and protect our intellectual property rights, but cannot be certain that the
actions we have taken or will take in the future will be adequate to prevent violation of our proprietary rights. Litigation may
be necessary to enforce our trademark or proprietary rights or to defend us against claimed infringement of the rights of
third parties. In addition, the Birds Eye brand, which we use in the UK, is used by other producers in the United States and
Australia. Even though the brands have different logos, adverse publicity from such other markets may negatively impact
the perception of our brands in our respective markets. Adverse publicity, legal action or other factors could lead to
substantial erosion in the value of our brands, which could lead to decreased consumer demand and could have a
material adverse effect on our business, financial condition and results of operations.
There is also a risk that other parties may have intellectual property rights covering some of our
brands, products or technology. If any third parties bring a claim of intellectual property infringement against us, we may
be subject to costly and time-consuming litigation, diverting the attention of management and our employees. If we are
unsuccessful in defending against such claims, we may be subject to, among other things, significant damages,
injunctions against development and sale of certain products, or we may be required to enter into costly licensing
agreements, any of which could have an adverse impact on our business, financial condition, and results of operations.
We are exposed to risks related to our financial arrangements with respect to receivables factoring.
We enter into factoring arrangements from time to time with financial institutions to sell certain of
our accounts receivables from customers without recourse. If we were to stop entering into these factoring arrangements,
our operating results, financial condition and cash flows could be adversely impacted by delays or failures in collecting
accounts receivables. However, by entering into these arrangements we are exposed to additional risks. If any of these
financial institutions experiences financial difficulties or is otherwise unable to honor the terms of our factoring
arrangements, we may experience material financial losses due to the failure of such arrangements which could have an
adverse impact upon our operating results, financial condition and cash flows.
Health concerns or adverse developments with respect to the safety or quality of products of the food industry in
general, or our own products specifically, may damage our reputation, increase our costs of operations and
decrease demand for our products.
Food safety and the public’s perception that our products are safe and healthy are essential to our
image and business. We sell food products for human consumption, which subjects us to safety risks such as product
contamination, spoilage, misbranding or product tampering. Product contamination, including the presence of a foreign
object, undeclared allergens, substance, chemical or other agent or residue or the introduction of a genetically modified
organism, could require product withdrawals or recalls or the destruction of inventory, and could result in negative
publicity, temporary plant closures and substantial costs of compliance or remediation. In addition, food producers,
including us, have been targeted by extortion attempts that threatened to contaminate products displayed in
supermarkets. Such attempts can result in the temporary removal of products from shelf displays as a precautionary
measure and result in lost revenue. We may also be impacted by publicity concerning any assertion that our products
caused illness or injury. In addition, we could be subject to claims or lawsuits relating to an actual or alleged illness
stemming from product contamination or any other incidents that compromise the safety and quality of our products. Any
significant lawsuit or widespread product recall or other events leading to the loss of consumer confidence in the safety
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and quality of our products could damage our brand, reputation and image and negatively impact our sales, profitability
and prospects for growth. We could also be adversely affected if consumers lose confidence in the safety and quality of
certain food products or ingredients, or the food safety system generally. If another company recalls or experiences
negative publicity related to a product in a category in which we compete, consumers might reduce their overall
consumption of products in this category. Adverse publicity about these types of concerns, whether valid or not, may
discourage consumers from buying our products or cause production and delivery disruptions. In addition, product recalls
are difficult to foresee and prepare for and, in the event we are required to recall one or more of our products, such recall
may result in loss of sales due to unavailability of our products and may take up a significant amount of our management’s
time and attention. We maintain systems designed to monitor food safety risks and require our suppliers to do so as well.
However, we cannot guarantee that our efforts will be successful or that such risks will not materialize. In addition,
although we attempt, through contractual relationships and regular inspections, to control the risk of contamination caused
by third parties in relation to the several manufacturing and distribution processes we outsource, we cannot guarantee
that our efforts will be successful or that contamination of our products by third parties will not materialize.
We are also subject to further risks affecting the food industry generally, including risks posed by
widespread contamination and evolving nutritional and health-related concerns. Regulatory authorities may limit the
supply of certain types of food products in response to public health concerns and consumers may perceive certain
products to be unsafe or unhealthy. In addition, governmental regulations may require us to discontinue certain offerings
or limit the range of products we offer. We may be unable to find substitutes that are as appealing to our customer base,
or such substitutes may not be widely available or may be available only at increased costs. Such substitutions or
limitations could also reduce demand for our products.
We could also be subject to claims or lawsuits relating to an actual or alleged illness or injury or
death stemming from the consumption of a misbranded, altered, contaminated or spoiled product, which could negatively
affect our business. Awards of damages, settlement amounts and fees and expenses resulting from such claims and the
public relations implications of any such claims could have an adverse effect on our business. The availability and price of
insurance to cover claims for damages are subject to market forces that we do not control, and such insurance may not
cover all the costs of such claims and would not cover damage to our reputation. Even if product liability claims against us
are not successful or fully pursued, these claims could be costly and time consuming, increase our insurance premiums
and divert our management’s time and resources towards defending them rather than operating our business. In addition,
any adverse publicity concerning such claims, even if unfounded, could cause customers to lose confidence in the safety
and quality of our products and damage our reputation and brand image.
Potential liabilities and costs from litigation could adversely affect our business.
There is no guarantee that we will be successful in defending ourselves in civil, criminal or
regulatory actions, including under general, commercial, employment, environmental, food quality and safety, anti-trust
and trade, advertising and claims, and environmental laws and regulations, or in asserting our rights under various laws.
For example, our marketing or claims could face allegations of false or deceptive advertising or other criticisms which
could end up in litigation and result in potential liabilities or costs. In addition, we could incur substantial costs and fees in
defending ourselves or in asserting our rights in these actions or meeting new legal requirements. Even when not merited,
the defense of these lawsuits may divert our management’s attention, and we may incur significant costs in defending
these lawsuits. The costs and other effects of potential and pending litigation and administrative actions against us, and
new legal requirements, cannot be determined with certainty and may differ from expectations.
We are exposed to local business and tax risks in many different countries.
We operate in various countries in Europe, predominantly in the UK, Germany, France, Italy,
Sweden and Norway. As a result, our business is subject to risks resulting from differing legal, political, social and
regulatory requirements, economic conditions and unforeseeable developments in these markets, all or any of which
could result in disruption of our activities. These risks include, among others, political instability (including the impact of
Brexit), differing economic cycles, tariffs, duties and adverse economic conditions, unexpected changes in regulatory
environments, currency exchange rate fluctuations, inability to collect payments or seek recourse under or comply with
ambiguous or vague commercial or other laws, changes in distribution and supply channels, foreign exchange controls
and restrictions on repatriation of funds, and difficulties in attracting and retaining qualified management and employees.
Our overall success in the markets in which we operate depends, to a considerable extent, on our ability to effectively
manage differing legal, political, social and regulatory requirements, economic conditions and unforeseeable
developments. We cannot guarantee that we will succeed in developing and implementing policies and strategies which
will be effective in each location where we do business.
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Nomad Foods Annual Report 19
We must comply with complex and evolving tax regulations in the various jurisdictions in which we
operate, which subjects us to international tax compliance risks. Some tax jurisdictions in which we operate have complex
and subjective rules regarding income tax, value-added tax, sales or excise tax, tariffs, duties and transfer tax. From time
to time, our foreign subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties
should the taxing authority assert different interpretations, or different allocations or valuations of our services which could
be material and could reduce our income and cash flow from our international subsidiaries. We currently have several
pending tax assessments and audits in various jurisdictions including Germany, France, Sweden and Italy. The
agreements by which we acquired certain businesses provide for certain indemnifications of tax liabilities which may arise
in certain jurisdictions which we believe are sufficient to address these specific tax matters as far as they relate to those
businesses. We have also established, where appropriate, reserves and provisions for tax assessments which we believe
to be adequate to address potential tax liabilities. However, it is possible that the tax audits referred to above could result
in the volatility of timings of cash tax payment and recoveries.
Our business is dependent on third-party suppliers and changes or difficulties in our relationships with our
suppliers may harm our business and financial results.
We outsource some of our business functions to third-party suppliers, such as the processing of
certain vegetables and other products, the manufacturing of packaging materials and distribution of our products. Our
suppliers are subject to their own unique operational and financial risks, which are out of our control. Our suppliers may
fail to meet timelines or contractual obligations or fail to provide us with sufficient products, which may adversely affect our
business. Certain of our contracts with key suppliers, such as for the raw materials we use in our products, are short term,
can be terminated by the supplier upon giving notice within a certain period and restrict us from using other suppliers.
Also, a number of our supply contracts, including for fish and vegetables, may be terminated by the supplier upon a
change in our ownership. Failure to appropriately structure or adequately manage our agreements with third parties may
adversely affect our supply of products. We are also subject to credit risk with respect to our third-party suppliers. If any
such suppliers become insolvent, an appointed trustee could potentially ignore the service contracts we have in place with
such party, resulting in increased charges or the termination of the service contracts. We may not be able to replace a
service provider within a reasonable period of time, on as favorable terms or without disruption to our operations. Any
adverse changes to our relationships with third-party suppliers could have a material adverse effect on our image, brand
and reputation, as well as on our business, financial condition and results of operations.
In addition, to the extent that our creditworthiness is impaired, or general economic conditions
decline, certain of our key suppliers may demand onerous payment terms that could materially adversely affect our
working capital position, or such suppliers may refuse to continue to supply to us. A number of our key suppliers have
taken out trade credit insurance on our ability to pay them. To the extent that such trade credit insurance becomes
unobtainable or more expensive due to market conditions, we may face adverse changes to payment terms by our key
suppliers or they may refuse to continue to supply us.
The price of energy we consume in the manufacture, storage and distribution of our products is subject to
volatile market conditions.
The price of electricity and other energy resources required in the manufacture, storage and
distribution of our products is subject to volatile market conditions. These market conditions are often affected by political
and economic factors beyond our control, including, for instance, the energy policies of the countries in which we operate.
For example, the German government’s decision to phase out nuclear power generation by 2022 could cause electricity
prices and price volatility in Germany to increase. Any sustained increases in energy costs could have an adverse effect
on the attractiveness of frozen food products for our customers and consumers and could affect our competitive position if
our competitors’ energy costs do not increase at the same rate as ours. In addition, disruptions in the supply of energy
resources could temporarily impair our ability to manufacture products for our customers. Such disruptions may also occur
as a result of the loss of energy supply contracts or the inability to enter into new energy supply contracts on commercially
attractive terms. Furthermore, natural catastrophes or similar events could affect the electricity grid. Any such disruptions,
or increases in energy costs as a result of the aforementioned factors or otherwise, could have a material adverse effect
on our business, financial condition and results of operations.
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Any disruptions, failures or security breaches of our information technology systems could harm our business
and reduce our profitability.
We are increasingly dependent upon on our information technology systems for communication
among our suppliers, manufacturing plants, distribution functions, headquarters and customers. Our performance
depends on the availability of accurate and timely data and other information from key software applications to aid day-to-
day business and decision-making processes. We may be adversely affected if our controls designed to manage
information technology operational risks fail to contain such risks. If we do not allocate and effectively manage the
resources necessary to build and sustain the proper technology infrastructure and to maintain the related automated and
manual control processes, we could be subject to adverse effects including billing and collection errors, business
disruptions, in particular concerning our manufacturing and logistics functions, issues with or errors in system's
maintenance and security and migration of applications to the cloud and security breaches. Any disruption caused by
failings in our information technology infrastructure equipment or of communication networks, could delay or otherwise
impact our day-to-day business and decision-making processes and negatively impact our performance. In addition, we
are reliant on third parties to service parts of our IT infrastructure. Failure on their part to provide good and timely service
may have an adverse impact on our information technology network. Furthermore, we do not control the facilities or
operations of our suppliers. An interruption of operations at any of their or our facilities or any failure by them to deliver on
their contractual commitments may have an adverse effect on our business, financial condition and results of operations.
Although our information technology systems are protected through physical and software
safeguards, it is difficult to protect against the possibility of damage or breach created by cyber-attacks or other security
attacks in every potential circumstance that may arise. As cyber-attacks are increasing in frequency and sophistication it
becomes even more difficult to protect against a breach of our information technology systems. Cybersecurity incidents
that impact the availability, reliability, speed, accuracy, or other proper functioning of these information technology systems
could have a significant impact on our operations. If we are unable to prevent physical and electronic break-ins, cyber-
attacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation
or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us
or to our customers, suppliers or employees. The mishandling or inappropriate disclosure of non-public sensitive or
protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or
damage our reputation and brand image. Misuse, leakage or falsification of legally protected information could also result
in a violation of data privacy laws and regulations and have a negative impact on our reputation, business, financial
condition and results of operations.
Changes in the European regulatory environment regarding privacy and data protection regulations, such as the
European Union’s General Data Protection Regulation ("GDPR"), could expose us to risks of noncompliance and
costs associated with compliance.
On May 25, 2018, the EU’s GDPR became enforceable. The GDPR relates to the collection, use,
retention, security, processing and transfer of personally identifiable information of residents of EU countries, and because
of our operations in the EU, including in the UK, we are subject to these heightened standards. The GDPR created a
range of new compliance obligations, and imposes significant fines and sanctions for violations. Among other things, the
GDPR requires companies to meet stringent requirements regarding the handling of personal data of individuals located
in the European Economic Area, or EEA. These more stringent requirements include expanded disclosures to inform
customers about how we may use their personal data through external privacy notices, increased controls on profiling
customers and increased rights for data subjects (including customers and employees) to access, control and delete their
personal data. In addition, there are mandatory data breach notification requirements. The GDPR imposes substantial
fines for breaches and violations (up to the greater of €20 million or 4% of our annual global revenue). The GDPR also
confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR.
Furthermore, there is significant uncertainty with respect to compliance with privacy and data protection laws and
regulations, including the GDPR, because they are continuously evolving and developing and may be interpreted and
applied differently from country to country and may create inconsistent or conflicting requirements. Our efforts to comply
with privacy and data protection laws, including the GDPR, may impose significant costs and challenges that are likely to
increase over time.
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Nomad Foods Annual Report 21
Our supply network and manufacturing and distribution facilities could be disrupted by factors beyond our
control such as extreme weather, fire, terrorist activity, health epidemics and other outbreaks and natural
disasters.
Severe weather conditions and natural disasters, such as storms, floods, droughts, frosts,
earthquakes or pestilence, may affect the supply of the raw materials that we use for the manufacturing of our
products. For example, changing climate may cause flooding and drought in crop growing areas or changes in sea
temperatures may affect marine biomass, fishing catch rates and overall fishing conditions. In addition, drought or floods
may affect the feed supply for red meat and poultry, which in turn may affect the quality and availability of protein sources
for our products. Adverse weather conditions and natural disasters can reduce crop size and crop quality, which in turn
can reduce our supplies of raw materials, lower recoveries of usable raw materials, increase the prices of our raw
materials, increase our cost of transporting and storing raw materials, or disrupt our production schedules. Competing
food producers can be affected differently by weather conditions and natural disasters depending on the location of their
supply sources. If our supplies of raw materials are reduced, we may not be able to find adequate supplemental supply
sources, if at all, on favorable terms, which could have a material adverse effect on our business, financial condition and
results of operation.
Our supply network could also be adversely affected by the outbreak of various diseases, such as
the recent Covid-19, or coronavirus epidemic in China. We currently source some of our fish supply and certain spices
from China. Although we are currently seeking alternative sources of fish supply, there may be delays in procurement or
we may be unable to access such alternative supply on commercially reasonable terms, which may have an adverse
impact on our operating results. In addition, a significant outbreak of a contagious disease in the human population could
result in a widespread health crisis that could adversely affect the economies and financial markets of many countries,
resulting in an economic downturn that could affect demand for our products and have a material adverse effect on our
results of operations.
In addition, our manufacturing and distribution facilities may be subject to damage or disruption
resulting from fire terrorist activity, natural disasters or other causes. For example, our Lowestoft and Bremerhaven
manufacturing facilities are situated in regions which have historically been prone to flooding. Extensive damage to any of
our thirteen major manufacturing facilities as a result of any of the foregoing reasons, could, to the extent that lost
production could not be compensated for by unaffected facilities, severely affect our ability to conduct our business
operations and, as a result, adversely affect our business, financial condition and results of operations.
Furthermore, as we lease parts of our Boulogne, Bremerhaven, Lowestoft, and Tonsberg
manufacturing sites, the use of these properties is subject to certain terms and conditions, the breach of which could
affect our ability to continue use of these properties which in turn may disrupt our operations and may materially adversely
affect our results of operations.
We may be unable to realize the expected benefits of actions taken to align our resources, operate more
efficiently and control costs.
When required we take actions, such as workforce reductions, plant closures and consolidations,
and other cost reduction initiatives, such as our factory optimization program, to align our resources with our growth
strategies, operate more efficiently and control costs. As these plans and actions are complex, unforeseen factors could
result in expected savings and benefits to be delayed or not realized to the full extent planned, could negatively impact
labor relations, including causing work stoppages, and could lead to disruptions in our business and operations and higher
short-term costs related to severance and related capital expenditures. In 2016, we announced the closure of our factory
and pea processing operations in Bjuv, Sweden, and operations ceased in the first half of 2017 with production transferred
to other factories in the Group’s network. In March 2018, we sold the factory building and parts of the premises. We may
be unable to realize the expected benefits of these actions which could potentially adversely affect our profitability and
operations.
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Significant disruption in our workforce or the workforce of our suppliers could adversely affect our business,
financial condition and results of operations.
As of December 31, 2019, we employed approximately 4,775 employees, of which approximately
1,412 were located in Germany, 1,222 were located in the UK, 345 were located in France, 478 were located in Italy, 421
were located in Sweden/Norway and 897 employees in other locations. As of December 31, 2019, approximately 70% of
our employees worked in our manufacturing operations. We have in the past, and may in the future, experience labor
disputes and work stoppages at one or more of our manufacturing sites due to localized strikes or strikes in the larger
retail food industry sector. We have also been involved in negotiations on collective bargaining agreements. A labor
stoppage or other interruption at one of our thirteen manufacturing sites would impact our ability to supply our customers
and could have a pronounced effect on our operations. Further, a number of our employees in the UK are not UK citizens
and, subject to recent policy decisions, will need to apply for settled status to retain the right to work in the UK following
the formal withdrawal from the EU. Future labor disturbance or work stoppage at any of our or our suppliers’ facilities in
Germany, the UK, Italy or elsewhere may have an adverse effect on such facility’s operations and, potentially, on our
business, financial condition and results of operations.
Higher labor costs could adversely affect our business and financial results.
We compete with other producers for good and dependable employees. The supply of such
employees is limited and competition to hire and retain them may result in higher labor costs. Furthermore, a number of
our employees are subject to national minimum wage requirements. If legislation is enacted in these countries that has
the effect of raising the national minimum wage requirements, requires additional mandatory employee benefits or affects
our ability to hire or dismiss employees, we could face substantially higher labor costs. In the UK, the National Minimum
Wage and National Living Wage increased in April 2019. High labor costs could adversely affect our profitability if we are
not able to pass them on to our customers.
We are dependent upon key executives and highly qualified managers and we cannot assure their retention.
Our success depends, in part, upon the continued services of key members of our management.
Our executives’ and managers’ knowledge of the market, our business and our company represents a key strength of our
business, which cannot be easily replicated. The success of our business strategy and our future growth also depend on
our ability to attract, train, retain and motivate skilled managerial, sales, administration, development and operating
personnel.
There can be no assurance that our existing personnel will be adequate or qualified to carry out our
strategy, or that we will be able to hire or retain experienced, qualified employees to carry out our strategy. The loss of one
or more of our key management or operating personnel, or the failure to attract and retain additional key personnel, could
have a material adverse effect on our business, financial condition and results of operations.
Costs or liabilities relating to compliance with applicable directives, regulations and laws could have a material
adverse effect on our business, financial condition and results of operations.
As a producer of food products for human consumption, we are subject to extensive regulation in
the UK, Germany, France, Italy, Sweden, Norway and other countries in which we operate, as well as the European
Union, that governs production, composition, manufacturing, storage, transport, advertising, packaging, health, quality,
labeling, safety and distribution standards. In addition, national regulations that have implemented European directives
applicable to frozen products establish highly technical requirements regarding labeling, manufacturing, transportation and
storage of frozen food products. For example, new regulations of the European Parliament and Council which took effect
in December 2014 changed rules relating to the presentation of nutritional information on packaging and other rules on
labeling. It is unclear how this will be impacted under Brexit but there may be changes and further regulations that the
company has to adhere to. Local governmental authorities also set out health and safety related conditions and
restrictions. Any failure to comply with applicable laws and regulations could subject us to civil remedies, including fines,
injunctions, product recalls or asset seizures, as well as potential criminal sanctions, any of which could have a material
adverse effect on our business, financial condition and results of operations.
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Nomad Foods Annual Report 23
In addition, our facilities and our suppliers’ facilities are subject to licensing, reporting requirements
and official quality controls by numerous governmental authorities. These governmental authorities include European,
national and local health, environmental, labor relations, sanitation, building, zoning, and fire and safety departments.
Difficulties in obtaining or failure to obtain the necessary licenses or approval could delay or prevent the development,
expansion or operation of a given production or warehouse facility. Any changes in those regulations may require us to
implement new quality controls and possibly invest in new equipment, which could delay the development of new products
and increase our operating costs.
All of our products must comply with strict national and international hygiene regulations. Our
facilities and our suppliers’ facilities are subject to regular inspection by authorities for compliance with hygiene regulations
applicable to the sale, storage and manufacturing of foodstuffs and the traceability of genetically modified organisms,
meats and other raw materials. Additionally, in certain jurisdictions, food business operators, including those in the food
storage, processing and distribution sectors, are required to trace all food, animal feed, and food-producing animals under
their control using registration systems that track the source of the products through the supply chain. Despite the
precautions we undertake, should any non-compliance with such regulations be discovered during an inspection or
otherwise, authorities may temporarily shut down any of our facilities, demand a product recall and/or levy a fine for such
non-compliance, which could have a material adverse effect on our business, financial condition and results of operations.
We could incur material costs to address violations of, or liabilities under, health, safety and environmental
regulations.
Our facilities and operations are subject to numerous health, safety and environmental regulations,
including local and national laws, and European directives and regulations governing, among other things, water supply
and use, water discharges, air emissions, chemical safety, solid and hazardous waste management and disposal, clean-
up of contamination, energy use, noise pollution, and workplace health and safety. Health, safety and environmental
legislation in Europe and elsewhere have generally become more comprehensive and restrictive and more rigid over time
and enforcement has become more stringent. Failure to comply with applicable requirements, or the terms of required
permits, can result in penalties or fines, clean-up costs, third party property damage and personal injury claims, which
could have a material adverse effect on our brand, business, financial condition and results of operations. In addition, if
health, safety and environmental laws and regulations in the UK, Germany, France, Italy, Sweden, Norway and the other
countries in which we operate or from which we source raw materials and ingredients become more stringent in the future,
the extent and timing of investments required to maintain compliance may exceed our budgets or estimates and may limit
the availability of funding for other investments.
Furthermore, under some environmental laws, we could be liable for costs incurred in investigating
or remediating contamination at properties we own or occupy, even if the contamination was caused by a party unrelated
to us or was not caused by us, and even if the activity which caused the contamination was legal at the time it
occurred. The discovery of previously unknown contamination, or the imposition of new or more burdensome obligations
to investigate or remediate contamination at our properties or at third-party sites, could result in substantial unanticipated
costs which could have a material adverse effect on our business, financial condition and results of operations.
In certain jurisdictions, we are also subject to legislation designed to significantly reduce industrial
energy use, carbon dioxide emissions and the emission of ozone depleting compounds more generally. If we fail to meet
applicable standards for energy use reduction or are unable to decrease, and in some cases eliminate, certain emissions
within the applicable period required by relevant laws and regulations, we could be subject to significant penalties or fines
and temporary or long-term disruptions to production at our facilities, all of which could have a material adverse effect on
our business, financial condition and results of operations.
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We are subject to a variety of regulatory schemes; failure to comply with applicable rules and regulations could
adversely affect our business, results of operations and reputation.
Our operations are subject to a variety of regulatory schemes which require us to implement
processes, procedures and controls to provide reasonable assurance that we are operating in compliance with applicable
regulations, including the UK Bribery Act, the Modern Slavery Act 2015, the Foreign Corrupt Practices Act of 1977, the
Trade Sanctions and Export Controls and the EU General Data Protection Regulation. Failure to comply (or any alleged
failure to comply) with the regulations referenced above or any other regulations could result in civil and criminal,
monetary and non-monetary penalties, and any such failure or alleged failure (or becoming subject to a regulatory
enforcement investigation) could also damage our reputation, disrupt our business, result in loss of customers and cause
us to incur significant legal and investigatory fees. In addition, our business, including our ability to operate and continue
to expand internationally, could be adversely affected if local and foreign laws or regulations are adopted, interpreted, or
implemented in a manner that is inconsistent with our current business practices and that require rapid changes to these
practices or our products, services, policies and procedures. If we are not able to adapt our business practices or
strategies to changes in laws or regulations, it could subject us to liability, increased costs and reduced product demand.
Additionally, the costs of compliance with laws and regulations may increase in the future as a result of changes in
interpretation. Any failure by us to comply with applicable laws and regulations may subject us to significant liabilities and
could adversely affect our business, results of operations and reputation.
A failure in our cold chain could lead to unsafe food conditions and increased costs.
“Cold chain” requirements setting out the temperatures at which our ingredients and products are
stored are established both by statute and by us to help guarantee the safety of our food products. Our cold chain is
maintained from the moment the ingredients arrive at, or are frozen by, our suppliers, through our manufacturing and
transportation of products and ultimately to the time of sale in retail stores. These standards ensure the quality, freshness
and safety of our products. A failure in the cold chain could lead to wastage, increased costs, food contamination, risks to
the health of consumers, fines and damage to our brands and reputation, each of which could have an adverse effect on
our business, financial condition and results of operations.
Seasonality impacts our business, and our revenue and working capital levels may vary quarter to quarter.
Our sales and working capital levels have historically been affected to a limited extent by
seasonality. In general, sales volumes for frozen food are slightly higher in cold or winter months, partly because there are
fewer fresh alternatives available for vegetables and because our customers typically allocate more freezer space to the
ice cream segment in summer or hotter months. In addition, variable production costs, including costs for seasonal staff,
and working capital requirements associated with the keeping of inventories, vary depending on the harvesting and buying
periods of seasonal raw materials, in particular vegetable crops. For example, stock (and therefore net working capital)
levels typically peak in August to September just after the pea harvest. If seasonal fluctuations are greater than
anticipated, our business, financial condition and results of operations could be adversely affected.
We have risks related to our indebtedness, including our ability to withstand adverse business conditions and to
meet our debt service obligations.
Our ability to make payments on and to refinance our indebtedness, and to fund our operations,
working capital and capital expenditures, depends on our ability to generate cash. To a certain extent, our cash flow is
subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of
which are beyond our control.
We cannot assure you that our business will generate sufficient cash flow from operations or that
future sources of cash will be available to us in an amount sufficient to enable us to pay amounts due on our indebtedness
or to fund our other liquidity needs.
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Nomad Foods Annual Report 25
Additionally, if we incur additional indebtedness in connection with any future acquisitions or
development projects or for any other purpose, our debt service obligations could increase. We may need to refinance all
or a portion of our indebtedness before maturity. Our ability to refinance our indebtedness or obtain additional financing
will depend on, among other things:
• our financial condition and market conditions at the time;
• restrictions in the agreements governing our indebtedness;
• general economic and capital market conditions;
• the availability of credit from banks or other lenders;
• investor confidence in us; and
• our results of operations.
In addition, a significant part of our indebtedness includes provisions with respect to maintaining
and complying with certain financial and operational covenants. Our ability to comply with these covenants may be
affected by events beyond our control. A breach of one or more of these covenants could result in an event of default and
may give rise to an acceleration of the debt. In the longer term, such breach of covenants could have a material adverse
effect on our operations and cash flows.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations
to increase significantly.
An increase in market interest rates may increase our interest expense arising on our existing and
future floating rate indebtedness. Pursuant to the terms of our Senior Facilities Agreement, the interest rate that we pay on
indebtedness incurred under our term loan facilities or revolving credit facility varies based on a fixed margin over a base
reference rate of LIBOR or EURIBOR. As a result, we are exposed to interest rate risk. If interest rates increase, our debt
service obligations on the variable rate indebtedness will increase even though the amount borrowed remained the same,
and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly
decrease. Pursuant to the Company interest rate hedging policy, we may enter into interest rate derivatives that may
involve the exchange of floating for fixed rate interest payments in order to reduce interest rate volatility. However, we may
not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps we enter into may
not fully mitigate our interest rate risk.
Our indebtedness is subject to changes in interest reference rates
Pursuant to the terms of the current Senior Facilities Agreement, the interest rate paid on
indebtedness incurred under our term loan facilities or revolving credit facility varies based on a fixed margin over a base
reference rate of LIBOR or EURIBOR. As a result of decisions taken by national regulators, LIBOR and EURIBOR may
become phased out and replaced by a replacement reference index. If LIBOR or EURIBOR ceases to exist, we may need
to renegotiate our Senior Facilities Agreement with our lenders. As a result of changes to underlying interest reference
rates, the Company may be exposed to volatility with regard to interest costs on indebtedness or linked interest rate
hedging arrangements.
We are exposed to exchange rate risks and such rates may adversely affect our results of operations.
We are exposed to exchange rate risk. Our reporting currency is the Euro and a significant
proportion of our sales and EBITDA are in Pound Sterling through our UK based business, and Norwegian Krone and
Swedish Krona through our Norwegian and Swedish based businesses. We are exposed to foreign exchange translation
risk as we convert the Pound Sterling results of our UK business and the Norwegian Krone and Swedish Krona results of
our Norwegian and Swedish business into our reporting currency of Euro. Pursuant to Company foreign exchange
hedging policy, we have converted a portion of our USD term loan to EUR and from EUR to GBP using cross currency
interest rate swaps that act as a Net Investment hedge for our UK business. We are exposed to transactional exchange
rate risk as many of our raw material purchases may be denominated in non-functional currencies of the purchasing
entity, predominantly U.S. Dollars and Euro. Company policy is to reduce this risk by using foreign exchange forward
contracts that are designated as cash flow hedges. Hedging arrangements may not fully protect us against currency
fluctuations and may or not achieve hedge effectiveness. Fluctuations and sustained strengthening of non-functional
currencies against the functional currency of the operating entities may materially adversely affect our business, financial
condition and results of operations.
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Changes to our payment terms with both customers and suppliers may materially adversely affect our operating
cash flows.
We may experience significant pressure from our key suppliers to reduce trade payable terms. At
the same time, we may experience pressure from our customers to extend trade receivable terms. Any such changes in
commercial arrangements regarding trade payable and trade receivable payment terms, may have a material adverse
effect on our business, financial condition and results of operations.
Changes in accounting standards and subjective assumptions, estimates and judgments by management related
to complex accounting matters could significantly affect our financial results.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not
limited to revenue recognition, leases, estimating valuation allowances and accrued liabilities (including allowances for
returns, doubtful accounts and obsolete and damaged inventory), accounting for income taxes, valuation of long-lived and
intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and involve many
subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or
changes in underlying assumptions, estimates or judgments by our management could significantly change our reported
or expected financial performance, and could have a material adverse effect on our business.
Management continues to assess new accounting pronouncements and their impact on the
Company prior to their adoption dates.
We may incur liabilities that are not covered by insurance.
While we seek to maintain appropriate levels of insurance, not all claims are insurable and we may
experience major incidents of a nature that are not covered by insurance. Our insurance policies cover, among other
things, employee-related accidents and injuries, property damage and liability deriving from our activities. In particular, our
Lowestoft and Bremerhaven manufacturing facilities are situated in regions that have historically been affected by
flooding. We may not be able to obtain flood insurance on reasonable terms or at all with respect to those facilities. We
maintain an amount of insurance protection that we believe is adequate, but there can be no assurance that such
insurance will continue to be available on acceptable terms or that our insurance coverage will be sufficient or effective
under all circumstances and against all liabilities to which we may be subject. We could, for example, be subject to
substantial claims for damages upon the occurrence of several events within one calendar year. In addition, our insurance
costs may increase over time in response to any negative development in our claims history or due to material price
increases in the insurance market in general.
An impairment of the carrying value of goodwill or other intangible assets could negatively affect our
consolidated operating results and net worth.
Goodwill represents amounts arising from acquisitions and is the difference between the cost of the
acquisition and the fair value of the net identifiable assets acquired. Intangible assets can include computer software,
brands, customer relationships and other acquired intangibles as of the acquisition date. Goodwill and other intangibles
expected to contribute indefinitely to our cash flows are not amortized, but must be evaluated by management at least
annually for impairment. If carrying value exceeds its recoverable amount, the intangible is considered impaired and is
reduced to fair value via a charge to earnings. Factors outside of our control which could result in an impairment include,
but are not limited to: (i) reduced demand for our products; (ii) higher commodity prices; (iii) lower prices for our products
or increased marketing as a result of increased competition; and (iv) significant disruptions to our operations as a result of
both internal and external events. Should the value of one or more of the acquired intangibles become impaired, our
consolidated profit or loss and net assets may be materially adversely affected. As of December 31, 2019, the carrying
value of intangible assets totaled €3,946.0 million, of which €1,862.9 million was goodwill and €2,083.1 million
represented brands, computer software, customer relationships and other acquired intangibles compared to total assets of
€5,904.5 million.
We face risks associated with certain pension obligations.
The Company has a mixture of partially funded and unfunded post-employment defined benefit
plans in Germany, Sweden and Austria as well as defined benefit indemnity arrangements in Italy and France.
Deterioration in the value or lower than expected returns on investments may lead to an increase in our obligation to make
contributions to these plans.
Nomad Foods Annual Report 27
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The obligations that arise from these plans are calculated using actuarial valuations which are
based on assumptions linked to the performance of financial markets, interest rates and legislation which changes over
time. Adverse changes to these assumptions will impact the obligations recognized and would lead to higher cash
payments in the long term.
Our obligation to make contributions to the pension plans could reduce the cash available for
operational and other corporate uses and may have a materially adverse impact on our operations, financial condition and
liquidity.
If we fail to or are unable to implement and maintain effective internal controls over financial reporting, the
accuracy and timeliness of our financial reporting may be adversely affected.
We are subject to reporting obligations under U.S. securities laws. The SEC, as required under
Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring every public company to include a report of
management on the effectiveness of such company's internal control over financial reporting in its annual report. In
addition, an independent registered public accounting firm must issue an attestation report on the effectiveness of the
company's internal control over financial reporting.
We recognize that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in
evaluating the cost-benefit relationship of possible controls and procedures. If we fail to maintain effective internal control
over financial reporting in the future, we and our independent registered public accounting firm may not be able to
conclude that we have effective internal control over financial reporting at a reasonable assurance level. This could in turn
result in the loss of investor confidence in the reliability of our financial statements. Furthermore, we have incurred and
anticipate that we will continue to incur considerable costs and use significant management time and other resources in
an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. If we are not able to continue to
meet the requirements of Section 404 in a timely manner or with adequate compliance, we might be subject to sanctions
or investigation by the SEC, the NYSE or other regulatory authorities. Any such action could adversely affect the accuracy
and timeliness of our financial reporting.
We are a holding company whose principal source of operating cash is the income received from our
subsidiaries.
We are a holding company and rely on the earnings and cash flows of our subsidiaries, which are
paid to us by our subsidiaries in the form of dividends and other payments or distributions, to meet our debt service and
other obligations, and to pay dividends on our ordinary shares (which we do not intend to do in any case in the
foreseeable future, as addressed elsewhere in these risk factors). The ability of our subsidiaries to pay dividends or make
other payments or distributions to us will depend on their respective operating results and may be restricted by, among
other things, the laws of their jurisdiction of organization (which may limit the amount of funds available for the payment of
dividends and other distributions to us), their constitutional documents, documents governing any existing indebtedness
and the covenants of any future outstanding indebtedness that our subsidiaries incur, and other factors which may be
outside our control.
The Founders and/or the Founder Entities may in the future enter into related party transactions with us, which
may give rise to conflicts of interest between us and some or all of the Founders and/or the Directors.
Our founders, Martin Franklin and Noam Gottesman (the “Founders”) and/or one or more of their
affiliates, including Mariposa Acquisition II, LLC and TOMS Acquisition I LLC (the “Founder Entities”) may in the future
enter into agreements with us that are not currently under contemplation. While we have implemented procedures to
ensure we will not enter into any related party transaction without the approval of our Audit Committee, it is possible that
the entering into of such an agreement might raise conflicts of interest between us and some or all of the Founders and/or
the directors.
Risks Related to our Ordinary Shares
We have various equity instruments outstanding that would require us to issue additional ordinary
shares. Therefore, you may experience significant dilution of your ownership interests and the future issuance of
additional ordinary shares, or the anticipation of such issuances, could have an adverse effect on our share
price.
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We currently have various equity instruments outstanding that would require us to issue additional
ordinary shares for no or a fixed amount of additional consideration. Specifically, as of February 21, 2020, we had
outstanding the following:
•
•
•
1,500,000 Founder Preferred Shares held by the Founder Entities, which are controlled by the
Founders. The preferred shares held by the Founder Entities (the “Founder Preferred Shares”) will
automatically convert into ordinary shares on a one for one basis (subject to adjustment in
accordance with our Memorandum and Articles of Association) on the last day of the seventh full
financial year following completion of the Iglo Acquisition and some or all of them may be converted
following written request from the holder;
59,375 options held by certain current and former of our Directors which are exercisable to
purchase ordinary shares, on a one-for-one basis, at any time at the option of the holder; and
4,989,522 equity awards issued under the LTIP, which may be converted into ordinary shares
subject, in most cases, to meeting certain performance conditions.
We currently have 13,563,888 ordinary shares currently available for issuance under our LTIP.
Holders of the Founder Preferred Shares are entitled to receive annual dividend amounts subject to
certain performance conditions (the “Founder Preferred Shares Annual Dividend Amount”). The payment of the Founder
Preferred Shares Annual Dividend Amount became mandatory after January 1, 2015 if certain share price performance
conditions are met for any given year. At our discretion, we may settle the Founder Preferred Shares Annual Dividend
Amount by issuing shares or by cash payment, but we intend to equity settle. On December 31, 2019, we approved a
2019 Founder Preferred Share Dividend in an aggregate of 6,421,074 ordinary shares. The dividend price used to
calculate the 2019 Founder Preferred Shares Annual Dividend Amount was $21.7289 (calculated based upon the volume
weighted average price for the last ten trading days of 2019) and the Ordinary Shares were issued on January 2, 2020. In
subsequent years, the Annual Dividend Amount will be calculated based upon the volume weighted average share price
for the last ten trading days of the financial year and the resulting appreciated average share price compared to the
highest price previously used in calculating the Annual Dividend Amount. The issuance of ordinary shares pursuant to the
terms of the Founder Preferred Shares will reduce (by the applicable proportion) the percentage shareholdings of those
shareholders holding ordinary shares prior to such issuance which may reduce your net return on your investment in our
ordinary shares.
Our ordinary share price may be volatile, and as a result, you could lose a significant portion or all of your
investment.
including the following:
The market price of the ordinary shares on the NYSE may fluctuate as a result of several factors,
•
•
•
•
•
•
•
•
•
•
•
•
•
variations in our quarterly operating results;
volatility in our industry, the industries of our customers and suppliers and the global securities
markets;
risks relating to our business and industry, including those discussed above;
strategic actions by us or our competitors;
reputational damage from unsafe or poor quality food products;
actual or expected changes in our growth rates or our competitors’ growth rates;
investor perception of us, the industry in which we operate, the investment opportunity associated
with the ordinary shares and our future performance;
addition or departure of our executive officers;
changes in financial estimates or publication of research reports by analysts regarding our ordinary
shares, other comparable companies or our industry generally;
trading volume of our ordinary shares;
future sales of our ordinary shares by us or our shareholders;
domestic and international economic, legal and regulatory factors unrelated to our performance; or
the release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares.
Nomad Foods Annual Report 29
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Furthermore, the stock markets often experience significant price and volume fluctuations that have
affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have
been unrelated or disproportionate to the operating performance of those companies. These broad market and industry
fluctuations, as well as general economic, political and market conditions such as recessions or interest rate changes may
cause the market price of ordinary shares to decline.
If securities or industry analysts do not publish or cease publishing research reports about us, if they adversely
change their recommendations regarding our ordinary shares or if our operating results do not meet their
expectations, the price of our ordinary shares could decline.
The trading market for our ordinary shares will be influenced by the research and reports that
industry or securities analysts may publish about us, our business, our market or our competitors. Securities and industry
analysts currently publish limited research on us. If there is limited or no securities or industry analyst coverage of our
company, the market price and trading volume of our ordinary shares would likely be negatively impacted. Moreover, if
any of the analysts who may cover us downgrade our ordinary shares, provide more favorable relative recommendations
about our competitors or if our operating results or prospects do not meet their expectations, the market price of our
ordinary shares could decline. If any of the analysts who may cover us were to cease coverage or fail to regularly publish
reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume
to decline.
As a foreign private issuer, we are subject to different U.S. securities laws and NYSE governance standards than
domestic U.S. issuers. This may afford less protection to holders of our ordinary shares, and you may not receive
corporate and company information and disclosure that you are accustomed to receiving or in a manner in which
you are accustomed to receiving it.
As a foreign private issuer, the rules governing the information that we disclose differ from those
governing U.S. corporations pursuant to the Exchange Act. Although we report quarterly financial results and certain
material events, we are not required to file quarterly reports on Form 10-Q or provide current reports on Form 8-K
disclosing significant events within four days of their occurrence and our quarterly or current reports may contain less
information than required for domestic issuers. In addition, we are exempt from the SEC’s proxy rules, and proxy
statements that we distribute will not be subject to review by the SEC. Our exemption from Section 16 rules regarding
sales of ordinary shares by insiders means that you will have less data in this regard than shareholders of U.S. companies
that are subject to the Exchange Act. As a result, you may not have all the data that you are accustomed to having when
making investment decisions with respect to U.S. public companies.
As a foreign private issuer, we are exempt from complying with certain corporate governance
requirements of the NYSE applicable to a U.S. issuer, including the requirement that a majority of our board of directors
consist of independent directors. As the corporate governance standards applicable to us are different than those
applicable to domestic U.S. issuers, you may not have the same protections afforded under U.S. law and the NYSE rules
as shareholders of companies that do not have such exemptions. See Item 16G: Corporate Governance.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and
expenses.
We could cease to be a foreign private issuer if a majority of our outstanding voting securities are
directly or indirectly held of record by U.S. residents and we fail to meet additional requirements necessary to avoid loss of
foreign private issuer status. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic
issuer may be significantly higher than costs we incur as a foreign private issuer, which could have a material adverse
effect on our business and financial results.
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As the rights of shareholders under British Virgin Islands law differ from those under United States law, you may
have fewer protections as a shareholder.
Our corporate affairs are governed by our Memorandum and Articles of Association, the BVI
Business Companies Act, 2004 (as amended, the “BVI Act”) and the common law of the British Virgin Islands. The rights
of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary
responsibilities of our directors under British Virgin Islands law are to a large extent governed by the common law of the
British Virgin Islands and by the BVI Act. The common law of the British Virgin Islands is derived in part from
comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has
persuasive, but not binding, authority on a court in the British Virgin Islands. The rights of our shareholders and the
fiduciary responsibilities of our directors under British Virgin Islands law are not as clearly established as they would be
under statutes or judicial precedents in some jurisdictions in the United States. In particular, the British Virgin Islands has
a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have
more fully developed and judicially interpreted bodies of corporate law. As a result of the foregoing, holders of our ordinary
shares may have more difficulty in protecting their interests through actions against our management, directors or major
shareholders than they would as shareholders of a U.S. company. See Item 16G: Corporate Governance.
The laws of the British Virgin Islands provide limited protection for minority shareholders, so minority
shareholders will have limited or no recourse if they are dissatisfied with the conduct of our affairs.
Under the laws of the British Virgin Islands, there is limited statutory law for the protection of
minority shareholders other than the provisions of the BVI Act dealing with shareholder remedies (as summarized under
Item 16G: Corporate Governance). The principal protection under statutory law is that shareholders may bring an action to
enforce the constituent documents of the company and are entitled to have the affairs of the company conducted in
accordance with the BVI Act and the memorandum and articles of association of the company. As such, if those who
control the company have persistently disregarded the requirements of the BVI Act or the provisions of the Company’s
memorandum and articles of association, then the courts will likely grant relief. Generally, the areas in which the courts
will intervene are the following: (i) an act complained of which is outside the scope of the authorized business or is illegal
or not capable of ratification by the majority; (ii) acts that constitute fraud on the minority where the wrongdoers control the
company; (iii) acts that infringe on the personal rights of the shareholders, such as the right to vote; and (iv) acts where
the company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders,
which are more limited than the rights afforded minority shareholders under the laws of many states in the United States.
To the extent allowed by law, the rights and obligations among or between us, any of our current or
former directors, officers and employees and any current or former shareholder will be governed exclusively by the laws of
the British Virgin Islands and subject to the jurisdiction of the British Virgin Islands courts, unless those rights or
obligations do not relate to or arise out of their capacities as such. Although there is doubt as to whether United States
courts would enforce these provisions in an action brought in the United States under United States securities laws, these
provisions could make judgments obtained outside of the British Virgin Islands more difficult to enforce against our assets
in the British Virgin Islands or jurisdictions that would apply British Virgin Islands law.
British Virgin Islands companies may not be able to initiate shareholder derivative actions, thereby depriving
shareholders of one avenue to protect their interests.
British Virgin Islands companies may not have standing to initiate a shareholder derivative action in
a federal court of the United States. The circumstances in which any such an action may be brought, and the procedures
and defenses that may be available in respect of any such action, may result in the rights of shareholders of a British
Virgin Islands company being more limited than those of shareholders of a company organized in the United
States. Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing
has occurred. The British Virgin Islands courts are also unlikely to recognize or enforce judgments of courts in the United
States based on certain liability provisions of United States securities law or to impose liabilities, in original actions
brought in the British Virgin Islands, based on certain liability provisions of the United States securities laws that are penal
in nature. There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States,
although the courts of the British Virgin Islands will generally recognize and enforce the non-penal judgment of a foreign
court of competent jurisdiction without retrial on the merits. This means that even if shareholders were to sue us
successfully, they may not be able to recover anything to make up for the losses suffered.
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Nomad Foods Annual Report 31
Dividend payments on our ordinary shares are not expected.
We do not currently intend to pay dividends on our ordinary shares. We intend only to pay such
dividends at such times, if any, and in such amounts, if any, as the board determines appropriate and in accordance with
applicable law, and then only if we receive dividends from our operating subsidiaries. Therefore, we cannot give any
assurance that we will be able to pay or will pay dividends going forward or as to the amount of such dividends, if any.
Shareholders may experience a dilution of their percentage ownership if we make non-pre-emptive offers of
ordinary shares in the future.
We have opted-out of statutory pre-emptive rights pursuant to the terms of our Memorandum and
Articles of Association. No pre-emption rights therefore exist in respect of future issuance of ordinary shares whether or
not for cash. Should we decide to offer additional ordinary shares on a non-pre-emptive basis in the future, this could
dilute the interests of shareholders and/or have an adverse effect on the market price of the ordinary shares.
Risks Related to Taxation
Changes in tax law and practice may reduce any net returns for shareholders.
The tax treatment of the Company, our shareholders and any subsidiary of ours (including Iglo and
its subsidiaries), any special purpose vehicle that we may establish and any other company which we may acquire are all
subject to changes in tax laws or practices in the British Virgin Islands, the UK, the U.S. and any other relevant
jurisdiction. Any change may reduce the value of your investment in our ordinary shares.
Failure to maintain our tax status may negatively affect our financial and operating results and shareholders.
If we were to be considered to be resident in or to carry on a trade or business within the United
States for U.S. taxation purposes or in any other country in which we are not currently treated as having a taxable
presence, we could be subject to U.S. income tax or taxes in such other country on all or a portion of our profits, as the
case may be, which may negatively affect our financial and operating results.
Taxation of returns from subsidiaries may reduce any net return to shareholders.
We and our subsidiaries are subject to taxes in a number of jurisdictions. It is possible that any
return we receive from any present or future subsidiary may be reduced by irrecoverable withholding or other local taxes
and this may reduce the value of your investment in our ordinary shares.
If any dividend is declared in the future and paid in a foreign currency, U.S. holders may be taxed on a larger
amount in U.S. Dollars than the U.S. Dollar amount actually received.
U.S. holders will be taxed on the U.S. Dollar value of dividends at the time they are received, even
if they are not converted to U.S. Dollars or are converted at a time when the U.S. Dollar value of the dividends has fallen.
The U.S. Dollar value of the payments made in the foreign currency will be determined for tax purposes at the spot rate of
the foreign currency to the U.S. Dollar on the date the dividend distribution is deemed included in such U.S. holder’s
income, regardless of whether or when the payment is in fact converted into U.S. Dollars.
We may be a “passive foreign investment company” for U.S. federal income tax purposes and adverse tax
consequences could apply to U.S. investors.
The U.S. federal income tax treatment of U.S. holders will differ depending on whether the
Company is considered a passive foreign investment company (“PFIC”). In general, we will be considered a PFIC for any
taxable year in which: (i) 75 percent or more of our gross income consists of passive income; or (ii) 50 percent or more of
the average quarterly market value of our assets in that year are assets that produce, or are held for the production of,
passive income (including cash). For purposes of the above calculations, if we, directly or indirectly, own at least
25 percent by value of the stock of another corporation, then we generally would be treated as if we held our proportionate
share of the assets of such other corporation and received directly our proportionate share of the income of such other
corporation. Passive income generally includes, among other things, dividends, interest, rents, royalties, certain gains
from the sale of stock and securities, and certain other investment income. We do not believe that we will be a PFIC for
our current taxable year. However, because the composition of the Company's income and assets will vary over time, we
can provide no assurance that we will not be a PFIC for any taxable year. See item 10.E., U.S. Federal Income Taxation,
Passive Foreign Investment Company ("PFIC") Considerations.
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Item 4.
Information on the Company
A. History and Development of the Company
We are the leading manufacturer and distributor of branded frozen foods in Western Europe
based on net sales value. We were incorporated with limited liability under the laws of the British Virgin Islands under
the BVI Companies Act on April 1, 2014 under the name Nomad Holdings Limited by the Founder Entities. We were
formed to undertake an acquisition of a target company or business. We completed our initial public offering in the UK
on April 15, 2014.
Our principal executive offices are located at No. 1 New Square, Bedfont Lakes Business Park,
Feltham, Middlesex, TW14 8HA. Our telephone number is +(44) 208 918 3200 and our fax number is +(44) 208 918
3491. Our registered office is located at Nemours Chambers, Road Town, Tortola, British Virgin Islands and its
telephone number is (284) 852-7900. Our registered agent in the United States is Mariposa Capital, LLC, 500 South
Pointe Drive, Suite 240 Miami Beach, Florida 33139.
The SEC maintains an Internet website that contains reports, proxy and information statements,
and other information regarding the Company and other issuers that file electronically with the SEC. The SEC's
Internet website address is http://www.sec.gov. Our Internet website can be found at www.nomadfoods.com.
See Item 5B: Operating and Financial Review and Prospects—Liquidity and Capital Resources
for information regarding our capital expenditures for the past three fiscal years and principal capital expenditures
currently in progress.
B.
Business Overview
Our Company
We are the leading branded frozen food player in Western Europe with a portfolio of best-in-
class food brands within the frozen category, including fish, vegetables, poultry and meals (excluding ice cream). Our
products are sold primarily through large grocery retailers under the brands “Birds Eye”, “Aunt Bessie's” and
“Goodfella's” in the UK and Ireland, “Findus” in Italy, San Marino, France, Spain, Sweden and Norway, “Iglo” in
Germany and other continental markets and “La Cocinera” in Spain. According to Euromonitor, our share of the savory
frozen food market in the countries we operate stood at 12.6% in 2019 (1.9 times greater than the nearest competitor).
We maintain the number one position in seven European geographies, namely the UK, Italy, Germany, Sweden,
Austria, Spain, Belgium, Portugal and Ireland. The countries representing our top six markets, collectively UK, Italy,
Germany, Sweden, Norway and France, represented approximately 68% of the total Western European frozen food
markets. For a description of the principal markets in which we compete and related revenue, see Note 5 “Segment
reporting” to our audited consolidated financial statements which appear elsewhere in this annual report.
Frozen Food Market
The European frozen food market is served by a number of national and international producers,
both with branded and private label offerings, and within single or multiple product categories. We have the broadest
participation by category and geography in Europe.
According to Euromonitor, the savory frozen food market in Western Europe is estimated to have
generated €28 billion in retail sales value in 2019. The frozen food business requires specialized manufacturing,
logistics and distribution functions. There is also a high cost associated with building brand health, brand awareness
and consumer trust. As a result, there are high barriers for profitable entry into the frozen food market in general and
the branded segment in particular.
Frozen food products are particularly attractive because they address important global food
trends. Consumers increasingly prefer products that allow them to prepare meals quickly and with confidence, and
expect products to be healthy and good value for money. In addition, consumers are increasingly focused on reducing
food waste. Frozen food products can have all of these characteristics. They are easy to prepare, they reduce the need
for artificial preservatives, they are often better value for money than chilled alternatives and they reduce waste at all
points in the supply chain and also in-home (due to the long shelf life, and the ease of portionability).
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Over the last five years, notwithstanding the volatile macro-economic environment, the Western
European savory frozen food market has grown on average 1.5% per year, driven by the aforementioned ability to
address global food consumption trends. Furthermore, the amount of space that frozen food as a category occupies
within the grocery retail environment is relatively stable due to the fixed amount of freezer space at the retailer that is
not exposed to reductions in shelf space in favor of other categories or formats, as can be the case in shelf-stable parts
of the retailer.
Our Brands
Our brands are household names with long histories and local heritage in their respective
markets. Our Birds Eye brand was established in 1922 and is primarily marketed in the UK and Ireland, and the Aunt
Bessie's brand was established in 1974 in the UK. The Goodfella's brand was established in Ireland in 1993 and is
marketed also in the UK. The San Marco brand was established in 2003. The Findus brand, which is marketed in Italy,
France, Spain, Sweden and Norway, was formed in Italy in 1941 and has a loyal following in each of its respective
geographies. Iglo, founded in 1956, has a long-standing history and is marketed in Germany and other continental
European countries. La Cocinera has allowed us to establish ourselves in Spain through a brand that was founded in
1962.
Our Competitive Strengths
contribute to our ongoing success.
We believe the following competitive strengths differentiate us from our competitors and
Market leader with solid European platform and strong acquisition opportunities.
As the leading branded frozen food producer in Western Europe, we benefit from economies of
scale and have developed a strong platform for our products throughout Europe in 2019, resulting in leadership
positions in seven geographies and a 12.6% market share of the savory frozen food market in the countries we
operate. We benefit from longstanding relationships with our customers which provide access to our diversified
distribution channels, including supermarkets, discount retailers, the foodservice channel and other food retailers that
sell directly to consumers. We benefit from a diverse category and geographic mix and believe our strong existing
platforms facilitate our expansion within a large addressable market and provide a broad set of potential acquisition
targets in various food categories and geographic markets.
Effective brand equity strategy to leverage and expand well-known brands.
Our brands are well-established household names with long histories and local heritage in their
respective markets. We possess several iconic brand assets and focus on our local "hero" platforms that are designed
to leverage these iconic assets such as the “Captain”. Each of the Birds Eye, Goodfella's, Aunt Bessie's, Iglo and
Findus brands holds a leading position in terms of spontaneous brand awareness in certain European markets. Our
leading brand recognition, broad product offering, and local provenance of these brands are key drivers of consumer
trust and result in demand for our products.
Experienced management team and Board with a proven track record.
Our management team has extensive experience in the food industry and other fast moving
consumer goods markets and has worked with leading multinational consumer goods companies globally. Our
management team is complemented by an experienced Board of Directors, and collectively, they have a proven track
record of successfully acquiring, integrating and managing consumer businesses. We believe our management team
and Board of Directors’ collective industry knowledge, coupled with our track record of achieving growth and
responding to challenging market conditions, will enable us to continue to generate profitable growth.
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Optimized sourcing through established platform and diversified supplier base.
We operate an efficient and centralized procurement and supply chain function which is closely
aligned with our geographic footprint, allowing us to optimize our supply arrangements and reduce distribution costs.
We source our products globally from a diverse supplier base and, as a result, we minimize our dependency on any
one supplier. Our relationships with diverse suppliers enable us to safeguard the security of our supply and raw
materials as well as enhance the quality and sustainability of such materials, while also delivering competitive pricing
and limiting exposure to geographic risk and adverse currency movements.
Strategic and geographically diversified manufacturing facilities.
We own and operate an efficient network of thirteen manufacturing facilities with low capital
expenditure requirements, all of which are located near the major markets we serve, providing for a balance between
manufacturing and logistics costs and allowing for high levels of customer service. These facilities produce
approximately 550 kilo tonnes of frozen product per year and have what we believe to be sufficient spare capacity to
accommodate future growth in our main product categories.
Commitment to innovation and research and development.
We focus our new product efforts and our investment in market research on our Core products -
fish, vegetables, meals and poultry - to ensure that the products we launch and re-launch overcome penetration
barriers and win with consumers. For example, we recently introduced our vegetable based meat free innovations to
meet a growing consumer need and trend. To ensure the development and introduction of successful products, we
follow a structured process through which we move from idea generation, through concept screening, concept/product
development and early volume sizing, to scale up and final validation.
Our Strategy
Our strategy is underpinned by three fundamental pillars which are to expand the category, grow
the core and accelerate innovation. In addition, we have developed and made significant progress in implementing the
following strategic initiatives:
1. Build an integrated group of best-in-class food companies and brands within existing
and related food categories and expand our geographic footprint through strategic
acquisitions.
Our goal is to transform our company into an integrated best-in-class, global manufacturer,
marketer and distributor of food products, within and outside of the frozen food category and the broader food
sector. We believe there are significant growth opportunities in the European and North American markets and that our
acquisitions provide a strong platform on which to grow our business and expand and enhance our market share in the
food industry in key geographic markets.
2. Focus on “Core” products as a foundation for long-term growth.
We continue our strategy which is rooted in relentless focus on our Core products which
currently represent approximately 68% of our sales. These strategies include improving product quality, packaging
renovation and executing in-store initiatives such as ensuring the right product assortment, display strategies and
promotional efficiencies. We believe focusing on these Core product initiatives will accelerate growth, lead to margin
expansion and improve our return on investment. To further accelerate growth, we continue to pursue innovation which
leverages consumer trends such as health, wellness and convenience, but which are anchored in our core categories.
3. Align our business with consumer preferences and trends.
Our goal is to create and acquire food businesses and brands that strongly align with consumer
needs and preferences that have high growth and margin potential and that leverage our existing portfolio of
brands. In addition, we seek to align our product innovation strategies with consumer trends such as increased
demand for nutrition-packed meals that can be prepared in shorter times, vegetarian options, meat substitutes and
sustainably sourced and produced food.
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4. Leverage our acquisition expertise, strong management team and access to capital to
identify and evaluate attractive growth opportunities.
Our Founders and CEO have significant experience and expertise, and have been highly
successful, in identifying, acquiring and integrating value-added businesses. We believe that this expertise, our access
to capital and the deep industry knowledge of our management team will position us to acquire related and
complementary food businesses that can enhance our market position, create synergies and fully leverage our existing
marketing, manufacturing and supply chain capabilities, which we believe will allow us to deliver sustained profitable
growth and maximize shareholder value. For example, on April 21, 2018 we completed the Goodfella's Acquisition
including the Goodfella's and San Marco brands. This has enlarged our portfolio of brands to include the number one
and number two market share positions within the frozen pizza category in Ireland and the UK, a successful frozen
private label pizza business, and two frozen pizza manufacturing facilities. Also, on July 2, 2018 we completed the Aunt
Bessie’s Ltd. acquisition. Aunt Bessie’s is a leading frozen food company based in the UK where it manufactures,
distributes and sells a range of branded frozen food products. The Aunt Bessie’s brand holds number one and number
two market share positions, respectively, within frozen Yorkshire puddings and frozen potatoes, which combine to
represent the majority of its revenues. As a brand closely identified with roast dinners, Aunt Bessie’s has expanded
Nomad Foods’ portfolio into this major eating occasion. The acquisition also included a production facility in Hull,
England.
5. Respond to changing consumer shopping habits and drive advertising efficiency and
impact.
We are responding to the growing consumer shift to digital and mobile technologies, particularly
in the UK, by investing in technology platforms and partnering with retailers that are executing their own e-commerce
strategies to meet changing consumer habits. Online sales represented approximately 4% of our total sales as of
December 31, 2019. We believe that the online sales channel will continue to provide further opportunities to drive
market share gains through improved product content and upselling of our mealtime solution programs. In addition, our
strategies are evolving in response to other consumer shopping trends such as increased purchases through the hard
discounter channel, which has been growing significantly in the UK and Southern Europe.
To further understand consumer trends and communicate with our consumers, we have begun
to use more scientific methods to test creative concepts to better understand and drive consumer reaction and to
optimize our advertising investments.
6. Generate strong margins and cash flow through disciplined net revenue management,
supply chain optimization and disciplined cost management.
We continue to increase our margins and cash flows by strengthening our net revenue
management capabilities and focusing on supply chain optimization and disciplined cost management. These efforts,
which will be implemented over time, will include developing stronger promotional programs, price pack architecture
and trade terms as well as continuing our focus on lean manufacturing, factory footprint optimization, and procurement
productivity.
Products
frozen food products:
During the past three fiscal years, we have manufactured, marketed and distributed the following
Fish: includes frozen fish products such as fish fingers, coated fish and natural fish. These
products were the largest contributor to our revenues in 2019, 2018 and 2017.
Vegetables: includes ready to cook vegetable products such as peas and spinach.
Meals: includes ready to cook noodles, pasta, lasagne, pancakes and other ready-made meals
under the Iglo, Findus and La Cocinera brand names.
Poultry: includes frozen poultry and meat products such as nuggets, grills and burgers.
Others: includes a variety of other offerings such as soups, pizza, bakery goods and, beginning
in 2019, meat substitutes.
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We continue to place a strong emphasis on renovation of our existing Core products, which
include fish, vegetables, meals and poultry, in order to overcome penetration barriers and continue to build loyalty. For
example, in 2019, we introduced under our new innovation platforms our Artisan (coated fish assortment), Veggie
Power (modern vegetable blends) and Green Cuisine (pea protein sub-brand). We manage renovation and innovation
centrally on European common product platforms and have more local involvement where products are differentiated
and country specific. Our research and development continues to be centralized, allowing us to leverage our research
and development investment across our markets and focus on our largest Core products.
Customers
Our customers are typically supermarkets and large food retail chains supplying food products
directly to consumers. Each key market in which we operate has its own distinct retail landscape. We consider our key
retailer clients to be, in the UK, Tesco, Asda and Sainsbury’s; in Italy, Coop, Conad and Esselunga; in Germany, Rewe
and Edeka; in Sweden, ICA, Axfood and Coop; and in France, Carrefour, Auchan and E.Leclerc. For the year ended
December 31, 2019, our top ten customers (in terms of revenue) accounted for 36% of revenues.
The majority of our sales are to established retailers and we expect this channel to remain our
most significant channel for the foreseeable future. We partner with traditional retailers when we identify commercial or
marketing opportunities that can be of interest for both businesses. In addition, we are selectively building partnerships
and are increasing our presence in the growing discounter channel.
We are increasing our investment in online sales, which represented approximately 4% of our
total sales as of December 31, 2019. The online grocery retail channel is growing faster than established grocery retail
formats across developed markets. Frozen foods particularly benefit from the online channel as the advantages to the
consumer of outsourcing transportation of frozen food to the retailer are greater than in other categories, and also
because some of the barriers to purchasing in-store (e.g. colder aisles) are removed for the consumer online.
Approximately 5% of our sales for the twelve month period ended December 31, 2019 were
through the foodservice channel. The majority of these sales were in Sweden and consist primarily of sales of
institutional and public sector customers such as schools and hospitals as well as privately run work canteens and
quick service restaurants.
Sales, Marketing and Pricing
Our commercial strategy is centered around our Core products and our growth model focuses
on three core elements: creating distinctive brands through leveraging our iconic brand assets, innovating to break
penetration barriers balanced between renovation and innovation, and out executing in store through category
leadership driving the right assortment, display and promotional efficiency.
Our brand equity strategy aims to further increase brand awareness. We are utlizing our core
iconic assets at all consumer touchpoints including traditional media, digital media, point of sale and packaging.
Furthermore we have invested and will continue to seek to invest at sufficient levels of media on all our Core products.
We maintain sales teams in each of our key markets and all other markets in which our products
are sold with the exception of the Central and Eastern Europe markets where we operate via a distribution model. Our
sales force is resourced to provide good store coverage. We have been chosen to lead category management projects
by several leading supermarkets in each of our main product categories and have developed innovative presentations
of our frozen food products and in-store marketing concepts with supermarkets in a number of our markets in order to
increase shopper traffic and sales. Most recently, we have developed and are executing our “Perfect Store” concept
which focuses on improving a consumer’s in-store shopping experience through presentation, layout and signage.
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Manufacturing
We own and operate thirteen manufacturing facilities which are located in Lowestoft and Hull
(UK), Bremerhaven and Reken (Germany), Cisterna (Italy), Loftahammar and Bralanda (Sweden), Tonsberg and Larvik
(Norway), Boulogne-sur-Mer (France), Valladolid (Spain), Longford and Naas (Republic of Ireland). These facilities
produce approximately 550 kilo tonnes of frozen product per year, representing approximately 70% of the total volumes
of our sales. The manufacturing facilities are located near the major markets we serve, providing for a balance
between manufacturing and logistics costs and customer service. Our manufacturing facilities are focused on in house
manufacturing of our main product categories and emphasize quality and efficiency through scale. We have also
invested in automated lines, such as fish fingers, poultry and spinach lines.
Although capacity differs per product line and facility, we estimate that we have sufficient spare
capacity available to accommodate future growth in our main product categories and as necessary to accommodate
the seasonal nature of some of our products, particularly vegetables.
Procurement
Our procurement functions are structured around primes (materials used in manufacturing which
form a part of the end product, such as fish, vegetables, meat, other ingredients and packaging), non-production items
(items purchased and services used to design, market and distribute the product, such as logistics, operations,
including maintenance, sales and marketing) and co-pack (finished products bought from third parties, such as most
vegetables other than peas and spinach).
We have an efficient and centralized supply chain which is closely aligned with our geographic
footprint, allowing us to optimize our supply arrangements and reduce distribution costs. We operate a centralized
procurement function, with all procurement of primes and the majority of non-production items and co-pack
procurement activities centralized to maximize scale efficiencies.
We operate a global sourcing platform. Fish is sourced mainly from the United States, Russia
and China, vegetables are sourced predominantly from Europe and poultry is sourced largely from South America (but
also from Thailand and Eastern Europe). We have contracts in place with pea and spinach growers and third party pea
processors in regions close to the location of pea growers. In addition, we utilize various co-pack suppliers for
vegetables other than peas and spinach. The contract terms we enter into with various suppliers differ extensively with
respect to length and provisions.
We aim to maintain an appropriately diverse supplier base to safeguard the security of our
supply of raw materials as well as enhance the quality and sustainability of such materials, while also delivering
competitive pricing.
We segregate vendors into “strategic” and “tactical” categories based on criteria such as
bargaining power or opportunistic procurement. On that basis, we have identified a number of strategic suppliers with
whom we maintain close relationships, particularly in relation to main product categories for which security of supply is
critical. Raw materials are mostly directly shipped to our manufacturing facilities.
The price of fish, vegetables and other agricultural commodities, including poultry and meat, can
be volatile. We limit our exposure to price increases of raw materials by contractually securing prices for periods
ranging from one month to a full year. Prices of raw materials that are harvested annually are generally fixed for a full
year. Prices for certain other products, such as fish, dairy products and potatoes, are fixed for several months in line
with industry practice.
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Logistics
Our distribution network is made up of our manufacturing facilities, warehouses, local distribution
centers and third party providers of services (such as transport). We outsource the majority of our distribution
processes to third parties seeking to collaborate with shared sites and integrated transport networks. Our distribution
network is well consolidated and aligned with our manufacturing footprint in the UK, Ireland, Germany, Italy, Sweden,
France, Norway and Spain. From our manufacturing plants, our products are sent to regional distribution centers to be
further distributed to local markets. Our primary distribution centers are used to consolidate both local production and
imported products to be sold locally. These sites include Wisbech in the UK, Reken in Germany, Vitulazio, Latina and
Parma in Italy, Lognes in France, Tonsberg and Moss in Norway and Marcilla in Spain.
Seasonality
Our sales and working capital levels have historically been affected to a limited extent by
seasonality. In general, sales volumes for frozen food are slightly higher in colder or winter months, partly because
there are fewer fresh alternatives available for vegetables and because our retailers typically allocate more freezer
space to the ice cream segment in hotter or summer months. In addition, variable production costs, including costs for
seasonal staff, and working capital requirements associated with the keeping of inventories, vary depending on the
harvesting and buying periods of seasonal raw materials, in particular vegetable crops. For example, stock levels
typically peak in August to September just after the pea harvest, and as a result, we require more working capital
during those months.
Corporate Social Responsibility
We continuously review our position to mitigate supply chain risks, working to meet relevant ethical,
environmental and social obligations. We seek to source, manufacture and sell our food to consumers in a responsible
way. We operate a sustainability program called Our Sustainable Path that reflects our commitments.
We do this by endeavoring to:
• Meet all relevant food and safety regulations
• Uphold international sustainability standards
• Lead, manage and review our approach, regularly assessing progress
• Report progress annually through the Nomad Foods’ Sustainability report
We also encourage all our suppliers to have or work towards a culture of continuous improvement.
the UN Sustainability Development Goals (SDGs). It consists of three pillars, securing a “farm to fork” approach:
Our sustainability program is based on the concepts of materiality and salience and aligned with
1. Good Sourcing
• We focus on sustainably, responsibly sourced fish and seafood using independent sustainable
standards, such as the Marine Stewardship Council standard (MSC) and Agriculture
Stewardship Council (ASC). Our sustainable farming standards are expanding from regional
practices to global standards with the introduction of the FSA standard (Farm Sustainability
Assessment) from the Sustainable Agriculture Initiative (SAI).
• We are committed to ethical trading, sourcing and procurement, upholding fundamental
international standards. We are committed to require all suppliers to comply with applicable
human rights laws and regulations. We request our direct suppliers to register to Sedex, one of
the world’s largest collaborative platforms for sharing responsible sourcing data on supply
chains.
• We believe we are in compliance with all relevant environmental laws and regulations and we
expect all suppliers to do the same.
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2. Good Nutrition
Every day our customers serve our food to their families. We want to inspire them to eat a more
balanced diet and live healthier lifestyles.
• We continuously work to improve our product portfolio, applying a nutrition strategy informed
by an independent Nutritional Advisory Board and assessing our products using an externally
verified Nutrient Profiling Tool. We also apply on pack nutritional labeling claims in markets
where this is relevant.
• We assess any new product development to drive higher sustainability across the portfolio.
• We empower consumers to make their own decisions, communicating the nutritional values of
our products on pack.
3. Good Operations
• We recognize the importance of reducing the impact our operations have on the environment
and are committed to reduce carbon emissions per tonne of produced volume from own
production annually.
• We consider the total packaging system when designing packaging, recognizing packaging
plays an important role in terms of food safety, securing shelf life, convenience, communication
as well as sustainability. We aim to minimize packaging material use. We work towards making
all consumer packaging material recyclable, and prioritize packaging material from sustainable
origins.
• We believe that our people make the difference and make sure they have an active voice
through the ‘Our Voice’ employee survey. Sustainability is important for our employees and we
involve them in the work and encourage them to live our values every day.
• We actively work to engage with and add value to the broader communities we operate in,
while contributing to our wider sustainability agenda. We encourage our local businesses to
support social causes in their regions, engaging at a local level. For example, a majority of our
businesses contribute our products to local food banks and charities.
Information Technology
Our IT systems are critical to operating and growing our business, in particular to our general
operations and logistics functions. A single SAP tool underpins the processes to support all of our operations and
management reporting across countries with new tools being introduced to support Sales planning and Net Revenue
Management activities.
The IT architecture is designed as a consolidation platform enabling integration of future
acquisitions. During 2019, Nomad migrated both the Goodfella's and Aunt Bessie's businesses onto the Nomad
platform and the IT team are looking at ways to accelerate future integrations. We believe that the role of data and
analytics will continue to increase in importance in decision-making, and we therefore intend to continue to enhance
our capability to use such data and analytics in our decision-making process.
The ability to integrate potential new acquisitions quickly with little or no adverse business
impact, while maintaining the low cost of ownership, is a fundamental requirement of our IT strategy. Additionally, we
utilize an outsourced infrastructure service provider, maintaining best in class IT cost alongside improved capability to
scale in line with business developments.
Intellectual Property
Good brand protection continues to be of significant importance to our business as we rely on
our brands to implement our master brand strategy. We have a substantial trademark portfolio with around 1,800
trademarks across all of our markets. Our intellectual property is managed centrally, and we work closely with a third
party agency in respect of filings, renewals, recordings and the prosecution and enforcement of intellectual property
matters internationally.
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We own an EU trademark for our Birds Eye brand as well as national trademarks for our Birds
Eye brand in the UK, Ireland and other EU countries, and in other parts of Europe outside the EU, parts of the Middle
East, Asia and parts of Africa. For historical reasons, the Birds Eye trademark is owned by third parties in North
America and Australia.
We own a European Union trademark for our Iglo brand as well as national trademarks in many
EU countries and in other parts of Europe outside the European Union, Australia, Israel, India, Canada, parts of Asia,
South America and parts of Africa.
We own the Findus trademark in many countries globally, other than in Switzerland, as well as
(among others) the brands Lutosa in Belgium (until 2020) and La Cocinera in Spain and Andorra. We have secured
registration for Nomad Foods in Europe and China, and have pending applications for the name in the US.
Goodfella's and Aunt Bessie's joined our portfolio of brands in 2018 and are registered as
European Union trademarks as well as national marks in other key markets of interest to the respective businesses.
We are also in the process of securing registered protection for the new plant-based food sub-brand Green Cuisine
across Europe.
Material Contracts
Each material contract to which we have been a party for the preceding two years, other than
those entered into in the ordinary course of business, is listed as an exhibit to the registration statement to which this
annual report is a part and is summarized elsewhere herein.
Pensions
We operate a number of different pension schemes across our various countries of operation,
the majority of which are defined contribution schemes. We operate defined benefit pension plans in Germany,
Sweden, Italy and Austria which are all closed to new entrants, as well as various defined contribution plans in other
countries, the largest of which include Sweden and the UK. Long term service awards and other employee benefits are
also in operation in a number of countries.
Regulatory Matters
Our activities are subject to laws and regulations regarding food safety, the environment and
occupational health and safety.
Food Safety Regulation
As a manufacturer of foods intended for human consumption, we are subject to extensive
legislation and regulation both from the European Union, the EU Member States and European free trade association
(EFTA) members, in which we operate. The European Commission, Directorate-General for Health and Food Safety, is
responsible for EU policy on food safety and health and for monitoring the implementation of related laws. The
European Food Safety Authority advises the European Commission, the European Parliament and the EU Member
States on food safety matters. EU Member States must ensure adequate enforcement, control and supervision of
principles set forth in numerous EU Directives and Regulations and may be allowed to maintain or establish more
stringent measures in their own legislation. These regulations govern the composition, manufacture, storage, handling,
packaging, labeling, marketing and safety of our products. These regulations generally impose on food business
operators an obligation to ensure that the operations under their control satisfy the relevant food law requirements and
impose a mandatory traceability requirement along the food chain. The tracing information must be kept for a period of
five years and upon request, must be made available to the relevant authorities.
In addition, we are subject to specific food hygiene legislation that establishes rules and
procedures governing the hygiene of food products. This legislation sets forth specific rules governing the proper
hygiene for food products of animal origin and sets forth microbiological criteria for food products. In addition there are
a number of other specific EU requirements relating to specific matters such as contaminants, packaging materials and
additives.
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We are also subject to a broad range of European directives and regulations regarding the
manufacture and sale of frozen foods for human consumption. These directives and regulations define technical
standards of production, transport and storage of frozen foods intended for human consumption and require us to
assure internal quality control at each stage of the “cold chain” and to implement any standards, as established by
public authorities.
continuous compliance with all relevant regulatory and food safety standards:
Listed below are the various internal due diligence procedures we have established to ensure
•
•
•
•
•
•
implementing food hygiene principles across all production sites in accordance with food
hygiene regulations;
annual external auditing of our production sites conducted by independent compliance
companies applying the British Retail Consortium Global Standard for Food Safety Issue 8, its
European equivalent, the International Food Standard or the Global Food Safety Initiative.
Currently 93% of our suppliers are also certified to one or more of these food safety
management systems and it is our long term objective to achieve 100% certification;
ensuring that our Group’s Quality Management Systems comply with ISO 9001 with external
audits to ISO or BRC standard;
conducting internal audits covering all production sites as part of our internal audit program
(including cross-audits where one site's audit team audits another's system);
maintaining a risk-based microbiological and contaminant screening program, including
screening for allergens, that covers raw materials and finished products; and
holding monthly regulatory updates to assess emerging risk areas, update policies and review
outstanding issues as part of the quality forum meeting which is attended by functional heads.
Tariffs and Trade
for our products.
We are subject to specific trade requirements regarding fish and poultry, two main ingredients
Food Labeling Regulation
Pre-packaged food products must comply with provisions on labeling, which are harmonized
throughout the European Union. Pre-packaged food products must also comply with provisions on nutrition labeling,
which are also harmonized throughout the European Union. Under the Food Information for Consumers Regulation
nutrition labeling is mandatory unless exempted.
In addition to general and nutrition requirements, pre-packaged food products must bear a lot
mark declaration via a manufacturing or packaging lot reference, which is also a harmonized system throughout the
European Union. The lot reference allows consumers and businesses to trace the product in the event of a product
withdrawal or recall.
There are also specific labeling requirements for certain ingredients we use in our products.
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Environmental Law
The European Commission, Directorate-General for the Environment is responsible for EU
policy on the environment and for monitoring the implementation of related laws. The European Union has issued
numerous directives relating to environmental protection, including those aimed at improving the quality of water,
addressing air and noise pollution, assuring the safety of chemicals and setting standards for waste disposal and
clean-up of contamination. European directives are given effect by specific regulations in Member States and
applicable regulations have been implemented in each of the countries in which we conduct our manufacturing
activities. Accordingly, our facilities must obtain permits for certain operations and must comply with requirements
relating to, among others, water supply and use, water discharges and air emissions, solid and hazardous waste
storage, management and disposal of waste, clean-up of contamination and noise pollution.
We are also subject to legislation designed to reduce energy usage and carbon dioxide
emissions and also restrictions on the use of ozone depleting substances such as hydrochlorofluorocarbons
(HCFCs). HCFCs are used in refrigeration systems and their use will be phased out as part of our normal
maintenance, repair and replacement activities and we do not expect a need for significant incremental capital
expenditures for this purpose.
Compliance with environmental laws and regulations is managed at the facility level. Our
manufacturing facilities all have a detailed environmental management system which are externally audited on an
annual basis for compliance with ISO 14001 or BRC.
In addition, under some environmental laws and regulations, we could be responsible for
contamination we may have caused and investigating or remediating contamination at properties we own or occupy,
even if the contamination was caused by a prior owner or other third party or was not due to our fault, and even if the
activity which resulted in the contamination was legal at the time it occurred.
We are in full preparation for potential scenarios regarding the impending exit of the UK from the
EU, as we understand the situation at the present time. We believe there will be no impact on our compliance need as
the UK has stated a full and equivalent legislation structure will be in place in the immediate post-exit timeframe.
Occupational Health and Safety
We have a legal responsibility to protect the health and safety of our employees, customers and
any other persons who may be affected by our operations. We strive to provide a safe workplace; controlling and
eliminating risks to health and wellbeing; ensuring that our facilities and the equipment within them are safe and that
the environmental, health and safety procedures are both established and adhered to. We strive to ensure that
dangerous articles and substances are transported, stored and used safely; provide adequate welfare facilities; provide
workers with the information, instruction, training and supervision necessary to preserve and improve their health and
safety; and consult with workers on health and safety matters.
We aim to meet the European Framework Directive on Safety and Health at Work (89/391 EEC)
ensuring we comply with all the local and European legislation in all the countries we have a presence, ensuring we
share best practices and procedures across our business to continuously improve our safety and environmental
performance whilst driving a positive safety culture.
We have established a Health and Safety Management System modeled on the international
Occupational Health & Safety management system specification OHSAS 18001. Our manufacturing facilities in the UK,
Spain, Italy and Germany have achieved full accreditation to OHSAS 18001.
Compliance Programs
We have established policies and procedures aimed at compliance with applicable legislation
and regulations, including policies for Anti-Bribery and Corruption as well as Trade Sanctions. In addition, our Code of
Business Principles is designed to ensure compliance with applicable legal and regulatory requirements to drive a
strong compliance culture. A breach of the Code of Business Principles can lead to disciplinary action, including
termination of employment.
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Nomad Foods Annual Report 43
Our SafeCall Line, which is operated by an external service provider, allows employees to report
issues anonymously. Compliance at the local level is based in large part on building strong local companies and
developing a proper approach in coping with operational dilemmas within the boundaries of applicable laws and
responsible conduct. Local management, assisted by the Internal Audit department, carries out reviews to identify
compliance risks and to ensure that adequate systems to manage those risks are in place. We continually analyze and
assess changes in applicable laws and regulations, and implement appropriate adaptations are implemented when
necessary.
Insurance
We have a comprehensive Global Insurance Program covering all territories that the
organization operates within and undertake regular risk reviews. We continually assess business risks as part of the
review to ensure we maintain an effect insurance program covering risk exposures.
The Global Insurance Program encompasses coverages such as directors and officers, property
damage and business interruption, public liability, product liability, employers liability, personal accident and travel,
advertising, motor and marine.
44 Nomad Foods Annual Report
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C. Organizational Structure
We (Nomad Foods Limited) are a holding company with 43 subsidiaries, the majority of which
are wholly-owned by us. The following table provides a list of all of our significant subsidiaries and country of
incorporation.
Name
Nomad Foods Europe Holdings Limited
Nomad Foods Europe Holdco Limited
Nomad Foods Europe Finco Limited
Nomad Foods Europe Midco Limited
Nomad Foods Bondco Plc
Nomad Foods Lux S.à.r.l.
Nomad Foods Europe Limited
Birds Eye Limited
Nomad Foods Europe Finance Limited
Aunt Bessie's Limited
Birds Eye Ireland Limited
Birds Eye Ireland Oldco Unlimited Company
Iglo Holding GmbH
Iglo Nederland B.V.
Iglo Belgium S.A.
Iglo Portugal
Iglo Austria Holdings GmbH
C.S.I. Compagnia Surgelati Italiana S.R.L.
Findus Sverige Holdings AB
Iglo GmbH
Frozen Fish International GmbH
Liberator Germany Newco GmbH
Iglo Austria GmbH
Findus Sverige AB
Frionor Sverige AB
Findus Holdings France SAS
Findus France SAS
Findus Espana SLU
Findus Danmark A/S
Findus Finland Oy
Findus Norge AS
Findus Norge Holding AS
Toppfrys AB
Activity
Holding
Holding
Holding
Holding/Finance
Finance
Finance
Management
Trading
Finance
Non-Trading
Trading
Non-Trading
Holding
Trading
Trading
Trading
Holding
Trading
Holding
Trading
Trading
Property
Trading
Trading
Holding
Holding
Trading
Trading
Trading
Trading
Trading
Holding
Trading
Country of
incorporation
England
England
England
England
England
Luxembourg
England
England
England
England
Republic of
Ireland
Republic of
Ireland
Germany
Netherlands
Belgium
Portugal
Austria
Italy
Sweden
Germany
Germany
Germany
Austria
Sweden
Sweden
France
France
Spain
Denmark
Finland
Norway
Norway
Sweden
Ownership as
of December 31,
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
81%
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Nomad Foods Annual Report 45
D. Property, Plant and Equipment
The following table sets forth information on the main manufacturing sites used by us in our
Production
(ktons)
Utilization %
Freehold/
Leasehold
Footprint
53%
Leasehold
Buildings: 11,000 m2
business:
Facility
Boulogne,
France
Bralanda,
Sweden
Products
Fish Products
Vegetables
Bremerhaven,
Germany
Fish Products
Cisterna, Italy
Hull, UK
Larvik,
Norway
Vegetables, Free Flow Meals,
Fish Fingers, Sofficini
Yorkshire Puddings,
Accompaniments & Desserts
Vegetables, Free Flow Meals,
Ready Meals
Loftahammar,
Sweden
Bakery Products
Longford, ROI Frozen Pizza Products
Lowestoft, UK
Vegetables, Fish Products,
Poultry, Potato, Beef Burgers
Naas, ROI
Frozen Pizza Products
Reken,
Germany
Tonsberg,
Norway
Valladolid,
Spain
Vegetables, Free Flow Meals,
Ready Meals, Special Foods
French Fries, Vegetables, Free
Flow Meals
Vegetables, Free Flow Meals,
Ready Meals, Pastry Products,
Pizza
21
10
93
71
26
7
3
18
112
44
99
30
16
35%
Freehold
89%
Leasehold
67%
55%
37%
56%
98%
85%
94%
68%
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Freehold
Site: 80,000m2
Buildings: 40,000m2
Site: 90,000 m2
Buildings: 30,000 m2
Site: 269,560 m2
Buildings: 69,198 m2
Site: 39,000 m2
Buildings: 15,000 m2
Site: 57,968 m2
Buildings: 7,246 m2
Buildings: 5,300 m2
Site: 21,000 m2
Buildings: 6,200 m2
Buildings: 12,000 m2
Site: 20,000 m2
Buildings: 118,000 m2
Site: 43,000 m2
Buildings: 30,000 m2
Site: 58,000 m2
87%
Leasehold
35%
Freehold
Buildings: 50,000 m2
Site: 80,000 m2
Mixed
Site: 88,549 m2
For more information on property, plant and equipment see Note 12 “Property, plant and
equipment”. We lease our principal executive offices located at No. 1 New Square, Bedfont Lakes Business Park,
Feltham, Middlesex, TW14 8HA, which is 36,549 square feet in size.
Item 4A.
Unresolved Staff Comments
None.
Item 5.
Operating and Financial Review and Prospects
The following is a discussion of the financial condition and results of operations for the years
ended December 31, 2019 and 2018. Discussion regarding our financial condition and results of operations for the
year ended December 31, 2018 as compared to the year ended December 31, 2017 is included in Item 5 of our Annual
Report on Form 20-F for the year ended December 31, 2018, filed with the SEC on February 28, 2018 (the "2018 Form
20-F").
46 Nomad Foods Annual Report
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Some of the information contained in this discussion and analysis or set forth elsewhere in this
annual report, including information with respect to our plans and strategy for our business and related financing,
includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those
factors set forth in Item 3 Key Information-D. Risk Factors of this annual report, our actual results could differ materially
from the results described in or implied by the forward-looking statements contained in the following discussion and
analysis. This discussion should be read in conjunction with our audited historical consolidated financial statements
and other financial information included elsewhere in this annual report.
The historical financial information has been prepared in accordance with IFRS.
Overview
Nomad operates in the European frozen food market, selling its products primarily to large
grocery retailers either directly or through distribution arrangements primarily in the UK, Italy, Germany, Sweden,
France and Norway.
The countries representing our top six markets collectively represented approximately 68% of
the total Western European frozen food markets (in terms of retail sales value) and generated 80% of our revenue in
2019. We also sell our products in Ireland, Austria, Belgium (including the Belviva/Lutosa brand), Finland, Greece,
Hungary, Ireland, Portugal, Switzerland, Denmark, The Netherlands and Spain (including the La Cocinera brand). The
brands under which we sell our products are “Birds Eye”, "Aunt Bessie's" and "Goodfella's" in the UK and Ireland, "San
Marco" in the UK, “Findus” in Italy, San Marino, France, Spain, Sweden and Norway and “Iglo” in Germany and other
continental markets.
Norway, two in Ireland, two in the UK and one each in Spain, Italy and France.
We currently operate thirteen manufacturing plants, two in Germany, two in Sweden, two in
Financings and Acquisitions
On June 15, 2018, we amended and restated our Senior Facilities Agreement (as defined
herein) establishing a $300.0 million incremental term loan and increasing the amount of U.S. Dollar Term Loans to
$953.4 million. Principal outstanding under the Euro-denominated term loan remained unchanged at €558.0 million.
Maturity dates of May 2024 and May 2023 for both Euro and U.S. Dollar denominated Term Loans, and the €80.0
million Revolving Credit Facility respectively also remained unchanged.
On April 21, 2018 we completed the Goodfella's Acquisition, including the Goodfella's and San
Marco brands, in an all cash deal valued at £209.7 million (€239.0 million). This has enlarged our portfolio of brands to
include the number one and number two market share positions within the frozen pizza category in Ireland and the UK
respectively, a successful frozen private label pizza business, and two frozen pizza manufacturing facilities.
On July 2, 2018 we completed the Aunt Bessie’s Ltd. Acquisition for a purchase price of £209.0
million (€235.9 million). Aunt Bessie’s is a leading frozen food company based in the UK where it manufactures,
distributes and sells a range of branded frozen food products. The Aunt Bessie’s brand holds number one and number
two market share positions, respectively, within frozen Yorkshire puddings and frozen potatoes, which combine to
represent the majority of its revenues. As a brand closely identified with roast dinners, Aunt Bessie’s has expanded
Nomad Foods’ portfolio into this major eating occasion. The acquisition also included a production facility in Hull,
England.
On March 22, 2019 we issued 20,000,000 ordinary shares in a public offering at $20.00 per
share for aggregate gross proceeds of $400.0 million (€353.6 million). Directly attributed transaction costs of €11.1
million were incurred.
Accounting for the Goodfella's Acquisition
in accordance with IFRS from the date of the acquisition, April 21, 2018.
We have reflected the Goodfella's acquisition in our consolidated financial statements prepared
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We have accounted for the acquisition using the purchase method as required by IFRS 3
"Business Combinations". The net assets of the Goodfella's acquisition has been adjusted to fair value as of April 21,
2018, the date when control passed to us. The excess of the costs of acquisition over the fair value of the assets and
liabilities of the Goodfella's acquisition is recorded as goodwill. IFRS 3 "Business Combinations" allows the Company a
year after the acquisition date in which to finalize the purchase price allocation. No changes have been made to the
preliminary findings that were included within our consolidated financial statements as of December 31, 2018.
Accounting for the Aunt Bessie's Ltd. Acquisition
prepared in accordance with IFRS from the date of the acquisition, July 2, 2018.
We have reflected the Aunt Bessie's Ltd. acquisition in our consolidated financial statements
We have accounted for the acquisition using the purchase method as required by IFRS 3
"Business Combinations". The net assets of the Aunt Bessie's Ltd. acquisition has been adjusted to fair value as of July
2, 2018, the date when control passed to us. The excess of the costs of acquisition over the fair value of the assets
and liabilities of the Aunt Bessie's Ltd. acquisition is recorded as goodwill. IFRS 3 "Business Combinations" allows the
Company a year after the acquisition date in which to finalize the purchase price allocation and so preliminary findings
were included within our consolidated financial statements as of December 31, 2018. An adjustment of €1.9 million has
been recognized in the year to December 31, 2019 to recognize pre-acquisition related liabilities.
Critical Accounting Estimates and Judgments
Information relating to “Critical Accounting Estimates and Judgments” are described in Note 4 to
the Financial Statements. The following is a review of the more significant assumptions and estimates as well as
accounting policies we used to prepare our consolidated financial statements.
Discounts and trade promotions
Discounts given by the Company include rebates, price reductions and incentives given to
customers, promotional couponing and trade communication costs. Each customer has a unique agreement that is
governed by a combination of observable and unobservable performance conditions.
Trade promotions comprise of amounts paid to retailers for programs designed to promote
Company products and include pricing allowances, merchandising funds and customer coupons, which are offered
through various programs to customers and consumers. The ultimate costs of these programs can depend upon
retailer performance and is the subject of significant management estimates. The estimated ultimate cost of the
program is based upon the programs offered, timing of those offers, estimated retailer performance based on history,
management’s experience and current economic trends.
At each financial year end date, any discount or trade promotion expense incurred but not yet
invoiced is estimated and accrued for. In certain cases, the estimate for discounts and trade promotions requires the
use of forecast information for future trading periods and therefore a degree of estimation uncertainty exists. These
estimates are sensitive to variances between actual results and forecasts. The estimate is based on accumulated
experience and the principle that revenue is only recognized to the extent that it is highly probable that a significant
reversal will not occur. Management use judgment when considering when accruals can be released.
Business combinations
The Company is required to recognize separately, at the acquisition date, the identifiable assets,
liabilities and contingent liabilities acquired or assumed in a business combination at their fair values. This involves a
judgment as to what intangible assets can be separately identified as well as an estimate of fair value of all assets and
liabilities acquired. Such estimates are based on valuation techniques, which require considerable estimation in
forecasting future cash flows and developing other assumptions. These estimates are based on information available
on the acquisition date and assumptions that have been deemed reasonable by management.
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Significant areas of judgment and estimation include valuing tangible and intangible assets,
including the determination of their remaining useful lives, as well as the consideration of liabilities, including uncertain
tax positions. Where such items are material to the financial statements, we engage third-party valuation firms to assist
in the valuation. The valuation of these assets and liabilities is based on the assumptions and criteria which include, in
some cases, estimates of future cash flows discounted at the appropriate rates. The choice of assumptions and
valuation technique can lead to significant differences in the valuation. We believe that the assumptions and
techniques applied are reasonable based on information available on the date of acquisition.
accounting for acquisitions made in 2018 as disclosed in Note 14 in Item 18.
No acquisitions have been made in 2019, although the Company has finalized the acquisition
Carrying value of goodwill and brands
As of December 31, 2019, the Company has reported Goodwill of €1,862.9 million as well as
indefinite-lived brands of €2,041.8 million. The Company’s goodwill and brand values have been allocated based on
the enterprise value at acquisition of each cash generating unit. Goodwill is monitored at an operating segment level
for which Nomad has one reporting and operating segment, ‘Frozen'. As required by IAS 36 “Impairment of Assets”, an
annual review of the carrying amount of the goodwill and the indefinite life brands is carried out to identify whether
there is any impairment to these carrying values. This is performed in the fourth quarter of each year. A qualitative
review is performed to coincide with all interim reporting periods, which is extended to a full review where indicators of
impairment are identified. Indicators of impairment include a sustained decrease in our market capitalization or
sustained deterioration in any factor that affects profitability, such as market share or competition. The review is
performed using the discounted cash flows model whereby a comparison of the carrying values to the value in use is
made. As there is one reporting and operating segment, value in use is calculated as the net present value of the
projected risk-adjusted cash flows of the Company as a whole.
The estimation of the value in use calculation requires the entity to estimate the future cash
flows expected to arise from the Company and apply a suitable discount rate in order to calculate present value. This
requires us to make assumptions and estimates regarding historical information, future plans and external sources.
Assumptions used are consistent with internal projections and we believe these are comparable to those used by other
participants in the market. Unanticipated changes to the market or wider economy may affect the assumptions made
and lead to reduced cash flows or higher discount rates, which could lead to an impairment being recognized.
The discount rate is calculated using a capital asset pricing model to determine a weighted
average cost of capital expected by a market participant. Observable market data is used, including available
information on comparable companies, such as expected rates of return and equity structure. These variables are
influenced by macroeconomic factors and an increase in these variables could reduce the present values of future
cash flows in the model. A pre-tax discount rate of 7.1% was applied to the cash flows in the 2019 review, as well as a
long-term growth rate of 1.0%. Neither of these assumptions reflect the long-term assumptions used by the Company
for investment planning.
Impairment was not required as at December 31, 2019. Valuations derived from the discounted
cash flow model indicate a sufficient amount of headroom for which any reasonably possible change to key
assumptions is unlikely to result in an impairment of the related goodwill.
Employee benefit obligation
The Group operates a number of defined benefit pension schemes and post-employment benefit
schemes which are valued by estimating the amount of future benefit that employees have earned in return for their
service in the current and prior periods. Each scheme has an actuarial valuation performed and is dependent on a
series of assumptions to estimate the projected obligations. The assumptions include variables which are revised
periodically, that include discount rates, expected salary increases, inflation, employee turnover, retirement age,
mortality and medical care costs. Our assumptions reflect historical experience and management's best judgment
regarding future obligations. The assumptions used affect the current service cost and interest expense as well as
changes in the obligation recognized. Net actuarial gains or losses arising from changes in assumptions and from
experience are recognized in other comprehensive income/(loss).
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Since defined benefit pension schemes and post-employment benefit schemes are measured on
a discounted basis, the discount rate applied has an impact on the expense and obligation recognized. These discount
rates are determined by reference to market yields at the end of the reporting period on high quality corporate bonds,
except for Sweden where a deep market does not exist, where mortgage bonds are used. Our significant schemes
operate in Germany and Sweden, where discount rates of 1.15% and 1.45% have been applied. A 1% increase in
discount rates used throughout the Company would decrease the obligation by €51.4 million, whilst a 1% decrease in
discount rates would increase the obligation by €68.1 million. The impact on profit before tax in either scenario is not
significant. Management consider the discount rate to be the most significant assumption. Note 23 in Item 18 contains
additional details on the schemes and obligation, including a sensitivity analysis over other key assumptions.
Uncertain tax positions
The Company actively seeks to manage tax exposures by proactively engaging with tax
authorities and applying for Advanced Pricing Agreements where appropriate. Where tax exposures can be quantified,
an accrual for uncertain tax positions is made based on best estimates with regard to the amounts expected to be paid
to the relevant tax authority. Given the inherent uncertainties in assessing the outcomes of these exposures (which can
sometimes be binary in nature), the Company could in future periods experience adjustments to these accruals. The
factors considered include the progress of discussions with the tax authorities and the level of documentary support for
historical positions taken by previous owners.
Recently Issued and Not Yet Adopted Accounting Pronouncements under IFRS
to the Financial Statements.
Information relating to “IFRSs not yet adopted” are described in detail and are reported in Note 3
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A. Operating Results
Overview of Results
Statement of Income data:
Revenue
Cost of sales
Gross profit
Other operating expenses
Exceptional items
Operating profit
Finance income
Finance costs
Net finance costs
Profit before tax
Taxation
Profit for the period
Year ended
December 31, 2019
Year ended
December 31, 2018
Year ended
December 31, 2017
€m
€m
€m
2,324.3
(1,626.4)
2,172.8
(1,519.3)
1,956.6
(1,357.2)
697.9
(359.9)
(54.5)
283.5
2.5
(75.7)
(73.2)
210.3
(56.7)
153.6
653.5
(352.7)
(17.7)
283.1
1.6
(57.6)
(56.0)
227.1
(56.6)
170.5
599.4
(319.3)
(37.2)
242.9
7.2
(81.6)
(74.4)
168.5
(32.0)
136.5
The table below presents certain additional key performance indicators:
(€ in millions, except percentages)
Gross margin(1)
Adjusted EBITDA(2)
Adjusted EBITDA margin(3)
Year ended
December 31, 2019
Year ended
December 31, 2018
Year ended
December 31, 2017
€m
€m
€m
30.0%
432.0
18.6%
30.1%
376.4
17.3%
30.6%
328.1
16.8%
(1) Gross Margin. Gross margin represents gross profit as a percentage of revenue for the relevant period.
(2) Adjusted EBITDA. EBITDA is profit or loss for the period before taxation, net financing costs, depreciation and amortization.
Adjusted EBITDA is EBITDA adjusted to exclude, when they occur, the impacts of exited markets, acquisition purchase price
adjustments, chart of account (“CoA”) alignments and exceptional items such as restructuring charges, goodwill and intangible
asset impairment charges and other unusual or non-recurring items. In addition, we exclude other adjustments such as the
impact of share based payment expenses and related employer payroll taxes, and non-operating M&A related costs, because
we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are
unrelated to our underlying operating performance. The Company believes Adjusted EBITDA provides important comparability of
underlying operating results, allowing investors and management to assess operating performance on a consistent basis.
Accordingly, the information has been disclosed in this annual report to permit a more complete and comprehensive analysis of
our operating performance. You should exercise caution in comparing our Adjusted EBITDA with similarly titled measures of
other companies, as the definition may not be comparable. Adjusted EBITDA should not be considered as an alternative to
profit/(loss) for the period, determined in accordance with IFRS, as an indicator of the Company’s operating performance.
(3) Adjusted EBITDA Margin. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue for the relevant
period. Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures and you should not consider them an alternative
or substitute to operating profit or operating margin as a measure of operating performance.
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Nomad Foods Annual Report 51
follows:
The following table reconciles profit for the period to Adjusted EBITDA for the relevant period as
Profit for the period
Taxation
Net financing costs
Depreciation and amortization
Acquisition purchase price adjustments
Exceptional items (1)
Other add-backs (2)
Adjusted EBITDA
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
153.6
56.7
73.2
68.3
—
54.5
25.7
170.5
56.6
56.0
46.3
5.7
17.7
23.6
136.5
32.0
74.4
42.4
—
37.2
5.6
432.0
376.4
328.1
(1) Elimination of exceptional items which management believes are non-recurring and do not have a continuing impact. Details of
what has been identified as exceptional is included in the Results of Operations for each reporting period as set out in this item
and in Item 5 of the 2018 Form 20-F.
(2) Represents the elimination of share-based payment charges and related employer payroll expense of €22.4 million (2018: €14.7
million, 2017: €2.6 million) and elimination of non-operating M&A related costs, professional fees, transaction costs and
purchase accounting related valuations of €3.3 million (2018: €8.9 million, 2017: €3.0 million). We exclude these costs because
we do not believe they are indicative of our normal operating costs, can vary significantly in amount and frequency, and are
unrelated to our underlying operating performance.
Description of Key Line Items and Certain Key Performance Indicators
Set forth below is a brief description of key items from our consolidated statements of
income. For additional information, see Note 3 to our audited consolidated financial statements which appear
elsewhere in this annual report.
Revenue. Revenue is comprised of sales of goods after deduction of discounts and sales taxes.
It does not include sales between Nomad subsidiaries. Discounts given by us include rebates, price reductions and
incentives given to customers, promotional couponing and trade communication costs. At each end date of a reporting
period, any discount incurred, but not yet invoiced, is estimated and accrued. Revenue is recognized when the risks
and rewards of the underlying products have been transferred to the customer. This is usually upon either the dispatch
of a shipment or the delivery of goods to the customer but is dependent upon contractual terms that have been agreed
with a customer. Sales discounts incurred but not yet invoiced are established based on management’s best estimate
at the end of the reporting period.
Cost of Sales. Cost of Sales are comprised of the cost of the inventories and distribution costs.
Cost of inventories includes expenses related to the procurement and purchase of raw materials, as well as conversion
costs including labor costs, depreciation of production assets, fuel, electricity, equipment maintenance and inspection.
Other Operating Expenses. Other operating expenses are comprised of advertising and
promotions and indirect costs. Indirect costs include staff costs, selling and marketing expenses, administration
expenses, research and development expenses, amortization of software, amortization of brands and other expenses.
Exceptional items. The separate reporting of exceptional items which are presented as
exceptional within the relevant income statement category helps provide an indication of our underlying business
performance. Exceptional items have been identified and adjusted by virtue of their size, nature or incidence. In
determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative
factors such as the frequency or predictability of occurrence.
Finance Income. Finance income is comprised of interest income, other financing related
income and net foreign exchange gains on translations of financial assets and liabilities held in currencies other than
the Company’s functional currency.
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Finance Costs. Finance costs are comprised of interest expenses, net interest on net defined
pension plan obligations, amortization of borrowing costs, net foreign exchange costs on translations of financial assets
and liabilities held in currencies other than the Company’s functional currency, financing costs incurred as a result of
amendments of debt terms and other financing related costs.
Taxation. Taxation is comprised of current tax expenses and deferred tax movements.
Gross Margin. Gross margin is gross profit as a percentage of revenue.
We also utilize certain additional key performance indicators, as described below. We believe
these measures provide an important alternative measure with which to assess our underlying trading performance on
a constant basis. Our calculation of Adjusted EBITDA and Adjusted EBITDA margin may be different from the
calculations used by other companies and therefore comparability may be limited. Adjusted EBITDA and Adjusted
EBITDA margin are non-IFRS measures and you should not consider them an alternative or substitute to operating
profit or operating margin as a measure of operating performance.
Adjusted EBITDA. EBITDA is profit or loss for the period before taxation, net financing costs,
depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude, when they occur, the impacts of exited
markets, acquisition purchase price adjustments, chart of account (“CoA”) alignments and exceptional items such as
restructuring charges, goodwill and intangible asset impairment charges and other unusual or non-recurring items. In
addition, we exclude other adjustments such as the impact of share based payment expenses and related employer
payroll taxes, and non-operating M&A related costs, because we do not believe they are indicative of our normal
operating costs, can vary significantly in amount and frequency, and are unrelated to our underlying operating
performance. The Company believes Adjusted EBITDA provides important comparability of underlying operating
results, allowing investors and management to assess operating performance on a consistent basis.
Adjusted EBITDA Margin. Adjusted EBITDA margin is Adjusted EBITDA as a percentage of
revenue.
Currency
Our consolidated financial statements have been presented in Euro, which is our functional
currency. Unless specifically stated otherwise herein, transactions in foreign currencies have been translated at the
foreign exchange rate at the date of the relevant transaction.
Changes in foreign currency rates have a translation impact on our reported operating results.
A significant portion of our operations have functional currencies other than Euro (including
Pound Sterling, Norwegian Krone and Swedish Krona). In preparing our financial statements, translations in currencies
other than our functional currency are recognized at the rates of exchange prevailing at the dates of
transaction. Accordingly, our results for each of the periods presented below have been impacted by fluctuations in
foreign exchange rates. Where material, the impact of translation of currency on results has been provided. For a
discussion on strategies to mitigate the effect of these fluctuations see Note 33 "Financial risk management" to our
consolidated financial statements which appear elsewhere in this annual report.
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Nomad Foods Annual Report 53
Results of Operations for the Year Ended December 31, 2019 and the Year Ended December 31, 2018
Statement of Income data:
Revenue
Cost of sales
Gross profit
Other operating expenses
Exceptional items
Operating profit
Finance income
Finance costs
Net finance costs
Profit before tax
Taxation
Profit for the period
Year ended
December 31,
2019
Year ended
December 31,
2018
€m
2,324.3
(1,626.4)
697.9
(359.9)
(54.5)
283.5
2.5
(75.7)
(73.2)
210.3
(56.7)
153.6
€m
2,172.8
(1,519.3)
653.5
(352.7)
(17.7)
283.1
1.6
(57.6)
(56.0)
227.1
(56.6)
170.5
Revenue for the year ended December 31, 2019 was €2,324.3 million (year ended December
31, 2018: €2,172.8 million). The 7.0% revenue increase was driven by organic growth on the base business of 2.1%
and an increase in revenue from the acquired businesses of 4.9%.
Gross profit, defined as revenue less cost of sales, increased €44.4 million to €697.9 million for
the year ended December 31, 2019 from €653.5 million for the year ended December 31, 2018. The adoption of IFRS
16 Leases on January 1, 2019, has not had a material impact on gross profit for the year ended December 31, 2019.
The increase in gross profit was driven by the increase in revenue partly offset by a change in gross margin. Gross
Margin, defined as gross profit as a percentage of revenue, fell by 10 basis points to 30.0% from 30.1% in the year
ended December 31, 2018 primarily due to:
•
•
•
•
A 20 basis points increase relating to the non-cash fair value uplift of inventory in 2018, recorded
as part of the Goodfella's Pizza and Aunt Bessie's purchase price accounting.
Acquisition mix of 50 basis points decrease due primarily to the acquired businesses product mix
margin profile being lower.
A 330 basis points benefit from pricing, promotional efficiencies and mix;
A 310 basis points decrease due to cost of goods inflation.
Other operating expenses increased to €359.9 million for the year ended December 31, 2019
(year ended December 31, 2018: €352.7 million). The increase of €7.2 million was driven by higher share-based
payment expenses and associated employer payroll tax expense, and the annualized impact from acquired
businesses' expenses. The adoption of IFRS 16 Leases on January 1, 2019, has not had a material impact on gross
profit for the year ended December 31, 2019.
Exceptional items of €54.5 million were incurred in the year ended December 31, 2019 (year
ended December 31, 2018: €17.7 million). Included in this charge are (i) a charge of €44.0 million from the release of
indemnification assets, (ii) costs of integrating the Goodfella’s pizza business and Aunt Bessie's business of €12.5
million (year ended December 31, 2018: €8.3 million), (iii) expenses for the Findus Group integration which relates to
the roll-out of the Nomad ERP system of €3.5 million (year ended December 31, 2018: €10.4 million), (iv) expenses of
€5.7 million relating to a three-year factory optimization program which was initiated in 2018 (year ended December 31,
2018: €1.6 million), and (v) expenses related to preparations for the potential adverse impacts of the United Kingdom
exiting the European Union ("Brexit") of €1.6 million.
Offsetting these charges are a net income on settlement of legacy matters relating to periods
prior to acquisition of the Findus and Iglo businesses of €9.2 million (year ended December 31, 2018: income of €3.8
million), as well as income associated with supply chain reconfiguration, relating to restructuring activities in Sweden of
€3.6 million (year ended December 31, 2018: net expense of €1.2 million).
54 Nomad Foods Annual Report
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Net finance costs of €73.2 million in the year ended December 31, 2019 (year ended
December 31, 2018: €56.0 million) include €57.2 million of interest payable on long term borrowings, lease liabilities
and other cash pay interest expenses net of hedges (year ended December 31, 2018: €49.8 million), losses on
derivatives designated as fair value through profit and loss of €8.8 million (year ended December 31, 2018: gain of
€1.4 million), €3.8 million of other interest and finance costs (year ended December 31, 2018: €4.9 million), €2.0 million
of amortization of capitalized borrowing costs (year ended December 31, 2018: €1.5 million) and a loss of €3.9 million
resulting from the translation of foreign currency-denominated financial assets and liabilities into Euros (year ended
December 31, 2018: €0.3 million). This is offset by finance income of €2.5 million (year ended December 31, 2018:
€0.2 million).
interest payable for the year ended December 31, 2019.
The adoption of IFRS 16 Leases on January 1, 2019, has resulted in a €4.6 million increase to
There was a tax charge in the year ended December 31, 2019 of €56.7 million based on the
underlying taxable profits. A taxation charge of €56.6 million was booked in the year ended December 31, 2018. This
difference is principally caused by higher tax rates applied to profits in other jurisdictions, by greater non-deductible
expenses, and by a reduction in the use of certain tax losses, offset by lower profits.
As noted in Item 3:D. Risk Factors, the future performance of the business is affected by a range
of governmental economic, fiscal, monetary and political factors. In particular, the outcome of Brexit negotiations could
have a material impact on the future results of the business.
B. Liquidity and Capital Resources
Overview
We believe that cash flow from operating activities, available cash and cash equivalents and our
access to our revolving credit facility will be sufficient to fund our liquidity and other requirements for at least the next
12 months. At December 31, 2019, we had €887.6 million of total liquidity, comprising €826.1 million in cash and €62.8
million of available borrowings under our revolving credit facility, offset by bank overdrafts of €1.3 million. We also
expect to continue to raise cash through equity and debt offerings to support the strategic aims of the Company when it
is advisable to do so and market conditions allow. In addition, we may enter into working capital related facilities
including receivables financing, reverse factoring and supply chain financing to support the requirements of the
business. Our principal liquidity requirements are for working capital and general corporate purposes, including capital
expenditures and debt service, as well as to identify and effect strategic acquisitions.
As a holding company, we depend on our receipt of cash dividends from our operating
subsidiaries. For more information, see Item 3D: Key Information - Risk Factors - We are a holding company whose
principal source of operating cash is the income received from our subsidiaries.
Restricted Cash
Nomad had cash and cash equivalents of €826.1 million at December 31, 2019, of which €0.1
million was restricted. This compares with cash and cash equivalents of €327.6 million at December 31, 2018 of which
€0.1 million was restricted. Cash may be restricted for reasons including, but not limited to collateral as support for
issuance of guarantees, or funds held in escrow accounts.
Cash Flows
Our primary sources of liquidity for the periods reported were cash flow from operations and
financing activities. Cash flows from financing activities have in the past included, among other things, borrowings
under credit facilities, high yield notes and shareholder loan notes. Our liquidity requirements arise primarily from the
need to meet debt service requirements, to fund capital expenditures, to meet working capital requirements and to fund
pension and tax obligations. Cash flows generated from operating activities together with cash flows generated from
financing activities, have historically been sufficient to meet our liquidity needs.
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Nomad Foods Annual Report 55
financing activities for the periods indicated:
The following table summarizes net cash flows with respect to our operating, investing and
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at end of the period
Net Cash Provided by Operating Activities
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
315.4
(73.8)
251.4
493.0
824.8
€m
321.3
(513.2)
302.7
110.8
327.6
€m
193.8
(42.6)
(241.8)
(90.6)
219.2
Net cash provided by operating activities was €315.4 million for the year ended December 31,
2019, down from €321.3 million for the year ended December 31, 2018. Due to the adoption of IFRS 16 Leases on
January 1, 2019, the payment of lease liabilities of €21.8 million are now classified within financing activities. The €5.9
million decrease was also the result of a decrease in cash flows related to exceptional items of €15.9 million compared
to €43.4 million in the year ended December 31, 2018, offset by a €51.0 million decrease from the reversal of factoring
of trade receivables, as well as cash flows relating to tax of €45.6 million compared to €32.9 million in the year ended
December 31, 2018.
Net Cash Used in Investing Activities
Net cash used in investing activities was €73.8 million for the year ended December 31, 2019,
compared to net cash used in investing activities of €513.2 million for the year ended December 31, 2018. The outflow
in the year ended December 31, 2019 included the purchase of short-term investments of €25.0 million and capital
expenditures. The net cash used in investing activities of €513.2 million for the year ended December 31, 2018,
included payments totaling €471.6 million for acquisitions and €41.6 million of capital expenditures.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was €251.4 million for the year ended December 31,
2019, compared to net cash provided by financing activities of €302.7 million for the year ended December 31, 2018.
The inflow in the year ended December 31, 2019 relates primarily to the receipt of €354.1 million from the issuance of
ordinary shares, offset in part by share issuance costs of €11.1 million, a repayment of €22.2 million of debt as well as
cash outflows of €21.8 million for the payment of lease liabilities which were previously classified within operating cash
flows. The net cash provided by financing activities of €302.7 million for the year ended December 31, 2018, related
primarily to proceeds of €355.6 million from new loans and borrowings offset by interest payments.
Capital Expenditures
Our capital expenditures as of December 31, 2019 consisted, and in 2020 we expect to consist
of, primarily expenditures for factory capacity expansion and maintenance, cost savings projects, information systems,
innovation, regulatory compliance and other items. The anticipated source of such funds for such capital
expenditures are cash flow from operating activities, available cash and cash equivalents and our revolving
credit facility.
56 Nomad Foods Annual Report
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percentage of revenue:
The following table sets forth our capital expenditures for the periods indicated, including as a
Capital expenditures
Capital expenditure as a % of revenue
Trade Receivables - Factoring
Year ended
December
31, 2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
47.3
2.0%
€m
41.6
1.9%
€m
42.6
2.2%
To assist in managing operating cash flow, we have entered into non-recourse factoring
arrangements whereby we may sell specific account receivables on a true sale basis to one or more external financial
institutions. Under the terms of such arrangements, the Company may continue to collect the cash from the customer
receivables sold, albeit acting solely as a collecting agent on behalf of the purchaser of receivables. The Company
retains no credit loss exposure to the receivables following sale. Factoring fees associated with the sale of factored
receivables for the year ended December 31, 2019 were minimal (2018: €0.5 million, 2017: €nil). No receivables were
factored at the end of December 31, 2019 (2018: €51 million), due to sufficient liquidity resources available to the
Company. However, such facilities may continue to be drawn in future periods for strategic purposes.
Registration Statement
On June 4, 2018, we filed with the SEC an automatic shelf registration statement for well-known
seasoned issuers on Form F-3ASR. This registration statement enables us to issue ordinary shares, preferred shares,
debt securities or warrants, either separately or as units that include any of these securities. Under the rules governing
automatic shelf registration statements, we will file a prospectus supplement and advise the SEC of the amount and
type of securities each time we issue securities under this registration statement. On March 22, 2019, we issued
20,000,000 ordinary shares under this registration statement at $20.00 per share for aggregate gross proceeds of
$400.0 million (€353.6 million).
Funding and treasury policies
The Company uses centralized financial management to oversee access to financial markets,
monitor and manage financial risks, and control liquid assets. This process is conducted according to a policy that
applies to all group entities. All financial risk management strategies employed are for the purposes of risk mitigation
and not for speculation.
The primary objective of our capital structure management is to maintain a strong financial
profile for investor, creditor and customer confidence, and to support the growth of our business. We believe that the
liquid assets of the Company, together with undrawn credit facilities and projections for future cash flows from
operations, are sufficient to support the Company strategy. Access to external financing markets will be considered if
funds are required other than from free cash flow (e.g. supporting acquisitions) to support the viability and growth of the
business.
Debt
Senior Facilities Agreement
We maintain a syndicated senior facilities agreement with certain finance parties and lenders,
originally dated July 3, 2014, as subsequently amended and restated on October 23, 2015, April 28, 2017, December
20, 2017 and June 15, 2018 (the “Senior Facilities Agreement”). Credit Suisse AG, London Branch, is currently both
the agent and the security agent.
The Senior Facilities Agreement governs our term loan facilities and our revolving credit facility.
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Nomad Foods Annual Report 57
Term Loan Facilities
U.S. Dollar Denominated Term Loan Facility
The U.S. Dollar (USD) denominated term loan facility consists of term loans in an aggregate
principal amount of $935.6 million. The USD denominated term loans bear interest at a rate per annum equal to
LIBOR (subject to a zero floor) plus 2.25% per annum. As of December 31, 2019, the amount outstanding under the
USD denominated term loan facility was accruing interest at a rate of 3.99% per annum.
Euro Denominated Term Loan Facility
The Euro (EUR) denominated term loan facility consists of term loans in an aggregate principal
amount of €553.2 million. The EUR denominated term loans bear interest at a rate per annum equal to EURIBOR
(subject to a zero floor) plus 2.75% per annum. As of December 31, 2019, the amount outstanding under the EUR
denominated term loan facility was accruing interest at a rate of 2.75% per annum.
Both the USD denominated term loan facility and the EUR denominated term loan facility are
fully drawn and mature on May 15, 2024.
Revolving Credit Facility
The Senior Facilities Agreement provides for an €80.0 million revolving credit facility, of which up
to €50 million can be used for the issuance of letters of credit and other ancillary facilities. The revolving credit facility
matures on May 15, 2023 and bears interest at a rate per annum equal to LIBOR or, in relation to any loan in Euro,
EURIBOR (subject in each case to a zero floor), plus the applicable margin. The applicable margin is 2.75% per
annum. Interest on the revolving credit facility is payable at the end of each interest period. As of December 31, 2019,
the amount outstanding under the revolving credit facility by way of issued letters of credit and bank guarantees was
€17.2 million.
Indebtedness at December 31, 2019
As of December 31, 2019, we had approximately €1,787.9 million (December 31, 2018: €1,394.5
million) of indebtedness outstanding under our term loan facilities and no amounts outstanding under our revolving
credit facility, other than €17.2 million (December 31, 2018: €16.8 million) in relation to stand-by letters of credit and
bank guarantees.
Terms of the Senior Facilities Agreement
The Senior Facilities Agreement contains certain customary operating covenants (certain of
which are not applicable depending on the ratio of Consolidated Total Net Debt to Consolidated EBITDA) and other
customary provisions relating to events of default, including non-payment of principal, interest or fees,
misrepresentations, breach of covenants, creditor process, cross default to other indebtedness of the borrowers and its
subsidiaries. If, in respect of any Relevant Period, the aggregate amount of: (i) all Revolving Facility Loans; (ii) drawn
Letters of Credit; and (iii) Ancillary Outstanding’s (but excluding Ancillary Outstanding’s by way of undrawn letters of
credit and undrawn bank guarantees under the relevant Ancillary Facility) calculated as at the last day of each such
Relevant Period, is equal to or exceeds 40% of the Total Revolving Facility Commitments as at such date, Debt Cover
in respect of that Relevant Period shall not exceed 8.00:1. (Each of the foregoing terms is defined in the Senior
Facilities Agreement). As of December 31, 2019, we were in compliance with all financial and other covenants
contained in our Senior Facilities Agreement.
The USD denominated term loans include the requirement to repay 1% of notional per annum.
In addition to the mandatory 1% per annum amortization, the Senior Facilities Agreement also includes an excess
cashflow calculation whereupon an amount of principal shall be repaid based upon terms including cash generated
during the year and Company leverage.
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Hedging
In order to mitigate underlying foreign exchange exposure, reduce overall interest charge, and
mitigate interest rate risk, the Company has entered into a number of cross-currency interest rate swaps. In exchange
for receiving cash flows in USD matching all of the payments of principal and interest due under the Senior USD debt,
the Company pays fixed amounts of interest and principal on notional amounts of GBP and EUR. All USD to EUR
swaps have been designated as a cash flow hedge whilst the majority of EUR to GBP swaps have been designated as
a net investment hedge of the UK business.
As a result of decisions taken by national regulators, LIBOR and EURIBOR may become phased
out and replaced by an alternative reference index. If LIBOR or EURIBOR ceases to exist, we may need to renegotiate
our Senior Facilities Agreement with our lenders and associated cross currency interest rate swaps. Our expectation is
that both debt agreements and hedging contracts will be aligned to the new benchmarks as they become known, and
as such it is highly probable that the existing hedging relationships can be continued.
Fixed Rate Senior Secured Notes due 2024
On May 3, 2017, we entered into an indenture with Nomad Foods Bondco Plc and Deutsche
Trustee Company Limited as trustee, pursuant to which we issued €400.0 million of 3.25% Fixed Rate Senior Secured
Notes due May 15, 2024, payable semi-annually in arrears. The Fixed Rate Senior Secured Notes are currently
admitted to the Official List of the Luxembourg Stock Exchange and for trading on the Euro MTF Market. As of
December 31, 2019, we had €400.0 million of Fixed Rate Senior Secured Notes outstanding.
The indenture contains customary events of default and customary covenants including
limitations on indebtedness, restricted payments, liens, restrictions on distributions from restricted subsidiaries, sales of
assets and subsidiary stock, affiliate transactions, our activities, such as merger, conveyance, transfer or lease of all or
substantially all of our assets, and compliance requirements with respect to additional guarantees, reporting, additional
intercreditor agreements, payment of notes, withholding taxes, change of control, compliance certificate, payments for
consent and listing requirements. The Fixed Rate Senior Secured Notes are redeemable at our option in whole or in
part on the terms detailed in the indenture.
Intercreditor Agreement
The finance parties under the Senior Facilities Agreement and the holders of the Fixed Rate
Senior Secured Notes share the benefit of a security and guarantee package. The rights and obligations of the senior
creditors and other creditors (including intra group creditors) between themselves is controlled by an Intercreditor
Agreement originally dated June 3, 2014, as subsequently amended and restated on April 28, 2017.
Pension Plans
We maintain defined benefit pension plans in Germany, Sweden, Italy and Austria as well as
various defined contribution plans in other countries. The defined benefit pension plans are partially funded in Germany
and Austria and unfunded in Sweden and Italy. All defined benefit pension plans are closed to new entrants and there
is no current requirement to fund the deficit in any plan. We also maintain various defined contribution pension plans in
other countries, the largest of which include Sweden and the UK. In most countries, long term service awards are in
operation.
for the net employee benefit obligations equaled €237.5 million (December 31, 2018: €200.6 million).
For accounting purposes, as of December 31, 2019 (based on the assumptions used), the deficit
For the year ended December 31, 2019 pension costs related to defined benefit, defined
contributions and long-term benefit plans equated to €16.8 million (2018: €16.9 million; 2017: €18.2 million). This
includes all costs related to the pension schemes and other long-term benefits plans as well as associated interest
costs.
statements in Item 18.
For additional information, see Note 23 “Employee benefits” to our consolidated financial
Nomad Foods Annual Report 59
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set out in Note 3 and Note 4 to our audited consolidated statements which appear elsewhere in this annual report.
A description of our principal accounting policies, critical accounting estimates and judgments is
C. Research and development, patents and licenses, etc.
We focus our efforts on renovation of core products and our investment in market research on
ensuring that the products we launch overcome penetration barriers. In addition, we operate a structured stage gate
process through which we take new products from idea generation, through concept screening, concept/products
laboratories and early volume sizing, to final validation.
Since 2017 we have operated a dual governance process with a “Central Monthly Operating
Review Board” (“CMOR”) which is responsible for reviewing and approving innovations across the Company in our
core areas that stretch across multiple markets. "Local Monthly Operating Reviews" ("LMOR") occur within each
market on areas within local control. Our research and development team has global and local teams. This allows us
to leverage our investment in research development across our markets where scale can be achieved and move fast
within individual markets to address local tastes, thus maximizing our ability to generate successful innovations
efficiently.
D. Trend information
may continue to impact, our business, operations and financial performance:
We are subject to the following key industry trends and challenges which have impacted, and
1.
2.
Consumer Preferences. Consumer preferences drive demand for our products. There
are a number of trends in consumer preferences which are having an impact on us
and the frozen food industry as a whole. These include preferences for speed,
convenience and ease of food preparation; natural, nutritious and well-proportioned
meals; and products that are sustainably sourced and produced and are otherwise
environmentally friendly. Our results of operation depend in large part on the
continued appeal of our products and, given the varying backgrounds and tastes of
our customer base, our ability to offer a sufficient range of products to satisfy a broad
spectrum of preferences. For example, there is a growing trend towards greater
consumption of vegetarian and vegan foods, especially by meat eaters, which resulted
in 40% of households in the UK purchasing meat substitutes in 2019. In order to
address consumer needs and ensure the continued success of our products, we aim
to introduce new products, renovate core products and extend existing product lines
on a timely basis.
Competition. In addition to the competition we face from traditional, well-established
branded frozen food manufacturers, over the last few years we have seen increased
competition from the discounter channel. Discounters are supermarket retailers which
offer food and grocery products at discounted prices and which typically focus on non-
branded rather than branded products. The discounter channel has been growing at a
faster rate than the traditional retailer channels over the last several years. To address
this growing trend, we continue to pursue opportunities to increase our presence with
the discounter channel, particularly the hard discounter channel. With the growth of
the discounter channel, in an effort to compete, our traditional retail customers have
increased their offering of their own private label products. Because these customers
control the shelf space allocations within their stores, they may allocate more shelf
space to their private label products in accordance with their respective promotional
strategies. To address decreases in shelf space allocated to our products, we have
expanded our focus on “category management projects". We have been chosen to
lead category management projects by several retailers and provide objective advice
regarding the strategic development of our food categories. As we increase our
influence with retailers, we expect this will translate into an increased share of shelf
space and provide more favorable positioning of our products relative to the
competition.
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3.
Shopping Habits. The online grocery retail channel is growing faster than traditional
grocery retail formats across developed markets. Consumers with increasingly busy
lifestyles are choosing the online grocery channel as a more convenient and faster
way of purchasing their food products, and are also increasingly using the internet for
meal ideas. Frozen foods particularly benefit from the online channel as the
advantages to the consumer of outsourcing transportation of frozen food to the retailer
are greater than in other categories, and also because some of the barriers to
purchasing in-store (e.g. colder aisles) are removed for the consumer online. We are
responding to the growing consumer shift to digital and mobile technologies,
particularly in the UK, by investing in technology platforms and partnering with retailers
that are executing their own e-commerce strategies to meet changing consumer
habits.
E. Off-balance sheet arrangements
We did not have any material off-balance sheet arrangements during the reported periods.
F.
Tabular disclosure of contractual obligations
The following table summarizes our estimated material contractual cash obligations and
commercial commitments as of December 31, 2019, and the future periods in which such obligations are expected to
be settled in cash:
(€ in millions)
Long term debt
Long term debt—interest (1)
Cross currency interest rate swap
payments (2)
Cross currency interest rate swap
receipts (2)
Forward contracts - Sell (2)
Forward contracts - Buy (2)
Lease liabilities and operating
leases (3)
Purchase commitments (4)
Total (5)
Cash payments due by period
Total
1,791.0
264.4
Less than 1 year
10.8
61.1
1-3 years
18.2
119.2
3-5 years
1,762.0
84.1
After 5 years
—
—
1,215.8
38.8
1,177.0
(1,233.6)
666.2
(658.5)
153.1
246.0
2,444.4
(49.4)
666.2
(658.5)
18.9
207.1
295.0
(1,184.2)
—
—
32.1
33.6
195.9
—
—
—
—
16.4
4.9
1,867.4
—
—
—
—
85.7
0.4
86.1
(1) Represents estimates of future interest payable, which will depend upon the timing of cash flows as well as fluctuations in the
applicable interest rates and the Company’s debt structure. These forecasts have been compiled using the debt structure as at
December 31, 2019 with constant foreign exchange and interest rates until the debt matures in 2024.
(2) Cross currency interest rate swap payments and forward contracts are presented alongside receipts to show the net liability.
(3) Excludes contractual annual increases linked to inflation indices.
(4) Represents capital and raw material expenditures as well as long term service contracts which we have committed to make but
which are not yet payable.
(5) Retirement benefit obligations of €237.5 million are not presented above as the timing of the settlement of these obligations is
uncertain. Certain long-term liabilities related to income taxes, insurance accruals, other accruals and provisions included on the
consolidated balance sheet are excluded from the above table as we are unable to estimate the timing of payments for these
items.
G. Safe harbor
beginning of this annual report.
See the section entitled “Cautionary Statement Regarding Forward-Looking Statements” at the
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Nomad Foods Annual Report 61
Item 6.
Directors, Senior Management and Employees
A. Executive Officers and Directors
and positions as of February 21, 2020.
The following table lists each of our executive officers and directors and their respective ages
Name
Sir Martin E. Franklin
Noam Gottesman
Ian G.H. Ashken
Stéfan Descheemaeker
Jeremy Isaacs CBE
James E. Lillie
Stuart MacFarlane
Lord Myners of Truro CBE
Victoria Parry
Simon White
Samy Zekhout
Director since
April 4, 2014
April 4, 2014
June 16, 2016
June 1, 2015
February 16, 2016
May 28, 2015
May 8, 2019
April 4, 2014
February 16, 2016
November 30, 2016
April 1, 2018
Age
Position
55 Co-Chairman
58 Co-Chairman
59 Director
59 Chief Executive Officer and Director
55 Director
58 Director
52 Director
71 Lead Independent Director
54 Director
61 Director
57 Chief Financial Officer and Director
Set forth below is a brief biography of each of our executive officers and directors.
Sir Martin Ellis Franklin, KGCN, our co-founder and co-Chairman is the founder and CEO of
Mariposa Capital LLC, a Miami-based family investment firm focused on long-term value creation across various
industries, and Chairman and controlling shareholder of Royal Oak Enterprises, LLC. Sir Franklin is also the Founder
and Executive Chairman of Element Solutions Inc (previously known as Platform Specialty Products Corporation), and
co-founder and co-Chairman of APi Group Corporation (previously known as J2 Acquisition Limited). Sir Franklin was
the co-founder and Chairman of Jarden Corporation ("Jarden") from 2001 until April 2016 when Jarden merged with
Newell Brands Inc ("Newell"). Sir Franklin became Chairman and Chief Executive Officer of Jarden in 2001, and
served as Chairman and Chief Executive Officer until 2011, at which time he began service as Executive Chairman.
Prior to founding Jarden in 2001, Sir Franklin served as the Chairman and/or Chief Executive Officer of three public
companies: Benson Eyecare Corporation, Lumen Technologies, Inc., and Bollé Inc. between 1992 and 2000. In the last
five years, Sir Franklin served as a director of the following public companies: Newell Brands, Inc., Restaurant Brands
International Inc. and Burger King Worldwide, Inc. (until its transaction with Tim Hortons, Inc. and the creation of
Restaurant Brands International Inc. in December 2014).
Noam Gottesman, our co-founder and co-Chairman is the Founder and Managing Partner of
TOMS Capital LLC, which he founded in 2012. Mr. Gottesman is also a co-founder and non-executive director of
Digital Landscape Group, Inc. (previously known as Landscape Acquisition Holdings Limited), a global aggregator of
real property interests underlying wireless telecommunications cell sites. Mr. Gottesman was the co-founder of GLG
Partners Inc. and its predecessor entities where he served in various chief executive capacities until January 2012.
Mr. Gottesman served as GLG’s chief executive officer from September 2000 until September 2005, and then as its co-
chief executive officer from September 2005 until January 2012. Mr. Gottesman was also chairman of the board of
GLG following its merger with Freedom Acquisition Holdings Inc. and prior to its acquisition by Man Group plc.
Mr. Gottesman co-founded GLG as a division of Lehman Brothers International (Europe) in 1995 where he was a
Managing Director. Prior to 1995, Mr. Gottesman was an executive director of Goldman Sachs International, where he
managed global equity portfolios in the private client group.
Ian G.H. Ashken serves as a director of APi Group Corporation and Element Solutions Inc.
Previously, he was the co-founder of Jarden and served as its Vice Chairman and President until the consummation of
Jarden’s business combination with Newell in April 2016. Mr. Ashken was appointed to the Jarden board on June 25,
2001 and served as Vice Chairman, Chief Financial Officer and Secretary from September 24, 2001. Mr. Ashken was
Secretary of Jarden until February 15, 2007 and Chief Financial Officer until June 12, 2014. Prior to Jarden, Mr.
Ashken served as the Vice Chairman and/or Chief Financial Officer of three public companies, Benson Eyecare
Corporation, Lumen Technologies, Inc. and Bollé Inc. between 1992 and 2000. Mr. Ashken is also a director or trustee
of a number of private companies and charitable institutions. During the last five years, Mr. Ashken also previously
served as a director of Newell Brands, Inc.
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Stéfan Descheemaeker was appointed as the Chief Executive Officer of the Company on
June 1, 2015. He was previously at Delhaize Group SA, the international food retailer, where he was Chief Financial
Officer between 2008 and 2011 before becoming Chief Executive Officer of its European division until October 2013.
Since leaving Delhaize Group SA, Mr. Descheemaeker held board positions with Telenet Group Holdings N.V. and
Group Psychologies, served as an industry advisor to Bain Capital and is currently a professor at the Université Libre
de Bruxelles. Between 1996 and 2008, Mr. Descheemaeker was at Interbrew (now Anheuser-Busch InBev) where he
was Head of Strategy & External Growth responsible for managing M&A and strategy, during the time of the merger of
Interbrew and AmBev in 2004, and prior to that he held operational management roles as Zone President in the U.S.,
Central and Eastern Europe, and Western Europe. Mr. Descheemaeker started his career with Cobepa, at that time the
Benelux investment company of BNP-Paribas. Mr. Descheemaeker served as a Director on the Board of Anheuser-
Busch InBev, a position he has held from 2008 to 2019. Since June 2019, Mr. Descheemaeker has served as
Chairman of the Board of Verlinvest.
Jeremy Isaacs is a Founding Partner of JRJ Group. At JRJ Group, Mr. Isaacs is closely involved
with the implementation and guidance of fund strategy, as well as the development and execution of portfolio company
strategy. Prior to establishing JRJ Group, in late 2008, Mr. Isaacs held senior executive positions with Lehman Brothers
with responsibility for businesses outside North America. Mr. Isaacs serves as a non-executive director of Marex
Spectron and served as a non-executive director of Landscape Acquisition Holdings Limited from
November 2017 until its business combination with Associated in February 2020. He participates in numerous
philanthropic activities, holding a range of positions, including Trustee of The J Isaacs Charitable Trust, and Trustee of
the Noah’s Ark Children’s Hospice. Mr. Isaacs is an Honorary Fellow of the London Business School. He served as
non-executive director of Imperial College Healthcare NHS Trust from October 2013 to September 2016, and was a
member of the British Olympic Advisory Board between 2007 and 2012 and a member of the Bridges Development
Fund Advisory Board between 2008 and March 2018. Mr. Isaacs was appointed Commander of the Order of the British
Empire (CBE) in the 2015 Queen’s Birthday Honours for his services to the NHS. In May 2019, Mr. Isaacs received
Doctor of Philosophy Honoris Causa from the Haifa University, Israel.
James E. Lillie serves as co-Chairman of APi Group Corporation since October 2019, and
previously served as its director from October 2017. Mr. Lillie has also served on the board of directors of Tiffany & Co.
since February 2017. He served as Jarden’s Chief Executive Officer from June 2011 until the consummation of
Jarden’s business combination with Newell in April 2016. He joined Jarden in 2003 as Chief Operating Officer and was
named President in 2004 and CEO in June 2011. From 2000 to 2003, Mr. Lillie served as Executive Vice President of
Operations at Moore Corporation, Limited. From 1999 to 2000, he served as Executive Vice President of Operations at
Walter Industries, Inc., a Kohlberg, Kravis, Roberts & Company (KKR) portfolio company. From 1990 to 1999, Mr. Lillie
held a succession of senior level management positions across a variety of disciplines including human resources,
manufacturing, finance and operations at World Color, Inc., another KKR portfolio company.
Stuart MacFarlane joined the Whitbread Beer Company in 1992, which was later acquired by
Interbrew and, subsequently, Anheuser-Busch InBev ("ABInBev"). At ABInBev, Mr. MacFarlane held various senior
roles throughout the course of his career, including in Finance, Marketing, Sales and as Managing Director for the
company's business in Ireland. He was appointed President of ABInBev UK & Ireland in 2008 and in 2012 became a
member of the Executive Board of Management, serving as President of Central & Eastern Europe. Mr. MacFarlane
most recently served as ABInBev's President of a combined Europe & Middle East from 2014 to May 2019. Mr.
MacFarlane is currently serving as a director and member of the Corporate Governance Committee of Anadolu EFES,
a brewer company, until May 28, 2019. He previously served as a director of ABI-EFES Russia & Ukraine, a joint
venture of Anadolu EFES and ABInBev. Mr. MacFarlane has a degree in Business Studies from Sheffield University in
the UK and is also a qualified Chartered Management Accountant.
Lord Myners is Chancellor of the University of Exeter and a member of Court and Council of the
London School of Economics and Political Science. He served as the Financial Services Secretary in Her Majesty’s
Treasury, the United Kingdom’s finance ministry, from October 2008 to May 2010. Prior to his service at the Treasury,
Lord Myners served as chairman or a member of the board of several organizations, including as chairman of
Guardian Media Group from 2000 to 2008, director of GLG Partners Inc. from 2007 to 2008, Director of Land Securities
Group plc from 2006 to 2008 (chairman from 2007 to 2008), chairman of Marks & Spencer plc from 2004 to 2006, and
chairman of Aspen Insurance Holdings Ltd from 2002 to 2007. Lord Myners served as chairman of Platform Acquisition
Holdings Limited (now known as Element Solutions Inc) from April 2013 until its business combination with MacDermid,
Incorporated in October 2013. He also served as the chairman of of Landscape Acquisition Holdings Limited from
November 2017 until its business combination with Associated in February 2020 and of Justice Holdings Limited, a
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special purpose acquisition company, from February 2011 until its business combination with Burger King Worldwide,
Inc. in June 2012. From 1986 to 2001, he served as a director of Gartmore Investment Management Limited. He has
also served in an advisory capacity to the United Kingdom Treasury and the United Kingdom Department of Trade &
Industry, with particular focus on corporate governance practices. Other positions held by Lord Myners have included
chairman of the Trustees of Tate, chairman of the Low Pay Commission, a member of the Court of the Bank of
England, a member of the Investment Board of GIC, Singapore’s sovereign wealth fund. Lord Myners is currently
serving as a non-executive director of Windmill Hill Asset Management. He is vice chairman of Global Counsel,
chairman and a partner of Cevian Capital LLP and Chairman of Daniel J Edelman (UK). Lord Myners is a graduate,
with honors, from University of London and has an honorary doctorate from the University of Exeter. He is a Visiting
Fellow at Nuffield College, Oxford and an Executive Fellow at London Business School. He is a crossbench member of
the UK’s House of Lords, the senior chamber in Parliament.
Victoria Parry was Global Head of Product Legal for Man Group plc until April 2013 and now
acts as an independent non-executive director to the funds industry. Prior to the merger of Man Group plc with GLG
Partners, Inc. in 2010, she was Senior Legal Counsel for GLG Partners LP. Ms. Parry joined Lehman Brothers
International (Europe) in April 1996 where she was Legal Counsel with responsibility for inter alia the activities of the
GLG Partners division and left Lehman Brothers in September 2000 upon the establishment of GLG Partners LP. Prior
to joining Lehman Brothers in 1996 Ms. Parry practiced as a solicitor with a leading London based firm of
solicitors. Ms. Parry graduated from University College Cardiff, with a LLB (Hons) in 1986. Ms. Parry is a solicitor and a
member of the Law Society of England and Wales. Ms. Parry is a director of a number of other companies.
Simon White was, until 2014, Chief Operating Officer of Man Group PLC where he was a
member of the Executive Committee. Prior to the merger of Man Group PLC with GLG Partners, Inc. in 2010, Mr.
White served as Chief Operating Officer of GLG Partners, Inc. from its inception and was also Chief Financial Officer
until mid-2008. From 1993 to 2000 he worked at Lehman Brothers in a number of different roles. Since 2014, Mr. White
has been involved in leadership roles in a range of early stage businesses with a special focus on FinTech, and is
currently a director of Smike Consulting Limited, formed in September 2019. In 2017, he became a non-executive
director of Ask Inclusive Finance and has previously served as a non-executive director of Bridge Invest Limited and
Axim Holdings Limited. In February 2020, he became a non-executive director of DMS Investment Management
Services (UK) Limited. Mr. White is a Fellow of the Institute of Chartered Accountants in England and Wales.
Samy Zekhout has served as Chief Financial Officer of Nomad since April 1, 2018. Prior to
joining the Company, Mr. Zekhout most recently served as CFO and Vice President of Global Grooming at Procter &
Gamble since 2007. Mr. Zekhout has held various finance roles at Procter & Gamble throughout the course of his more
than 30 year career at that company.
B. Compensation of Executive Officers and Directors
This section sets forth for the year ended December 31, 2019: (i) the compensation and benefits
provided to our executive officers, (ii) a brief description of the bonus programs in which our executive officers
participated, and (iii) the total amounts set aside for pension, retirement and similar benefits for our executive officers.
This section also describes the Nomad Foods Amended and Restated Long Term 2015 Incentive Plan (“LTIP”)
including a summary of the material terms of the LTIP, a description of current executive employment agreements and
equity awards granted thereunder, and a description of our director compensation program.
Executive Compensation
Executive Officer Compensation and Benefits for the year ended December 31, 2019
For the year ended December 31, 2019, Nomad’s executive officers received total
compensation, including base salary, cash and equity bonus, and certain perquisites, equal to €9.7 million in the
aggregate.
Pension, Retirement and Similar Benefits
Our executive officers who participate in our money purchase pension plans do so on generally
the same terms as our other employees. The aggregate amount of the employer contributions to this plan for our
executive officers during the year ended December 31, 2019 was less than €0.1 million.
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Employment Agreements
Chief Executive Officer. Stéfan Descheemaeker was appointed as the Chief Executive Officer of
the Company and as a Director of the Company effective on June 1, 2015. He entered into his Service Agreement with
us on June 17, 2015. Under the agreement, Mr. Descheemaeker will receive an annual salary of £700,000 that will be
reviewed, but not necessarily increased, on an annual basis. Mr. Descheemaeker's salary was reviewed in 2019
resulting in an increase of his salary to £750,000. Mr. Descheemaeker is entitled to receive the following benefits under
the terms of his agreement:
(a) an annual contribution of £75,000 (based on an increase in 2019) paid either to a pension plan
or to Mr. Descheemaeker directly (as he so directs);
(b) eligibility for performance-related discretionary cash bonuses (target performance equates to
100% of base salary), subject to the achievement of financial and other performance targets as
we may decide;
(c) a one-time award of 2,000,000 ordinary shares remaining in the Company, 50% of which will
vest on the Company exceeding an agreed EBITDA target and 50% of which will vest subject to
the Company’s shares achieving a specified target price. Both tranches of shares are also
subject to further vesting conditions relating to Mr. Descheemaeker’s tenure as Chief Executive
Officer; and
(d) an annual car allowance of £14,400, death in service benefit (three times salary), group income
protection (offering 75% of base salary less £5,000) and family medical insurance.
We have the right to place Mr. Descheemaeker on paid leave for up to six months of his 12
month notice period. Mr. Descheemaeker is subject to confidentiality provisions and to non-competition and non-
solicitation restrictive covenants for a period of between six and 12 months after the termination of his employment,
subject to an off-set for paid leave. We may terminate Mr. Descheemaeker’s employment at any time by serving a
notice stating that we will pay to Mr. Descheemaeker within 14 days a sum equal to the basic salary (as at the date of
the employment agreement), pension payment and car allowance in lieu of any required period of notice less certain
deductions. We may also terminate Mr. Descheemaeker’s employment agreement without any payment of
compensation, damages, payment in lieu of notice or otherwise under certain circumstances, including, among other
things, gross misconduct, material breach of the terms of such agreement or charge or conviction of a criminal offence.
Chief Financial Officer. Samy Zekhout was appointed as the Chief Financial Officer of the
Company and as a Director of the Company effective on April 1, 2018. He entered into his Service Agreement with us
on February 15, 2018. Under the agreement, Mr. Zekhout will receive an annual salary of £425,000 that will be
reviewed, but not necessarily increased, on an annual basis. The first review took place in 2019 resulting in an
increase of his salary to £437,000. Mr. Zekhout was or is entitled to receive the following benefits under the terms of
his agreement:
(a) an annual contribution of 10% of his base salary, paid either to a pension plan or to Mr. Zekhout
directly (as he so directs);
(b) eligibility for performance-related discretionary cash bonuses (up to 100% of salary with an
opportunity to increase this to 200% depending on business performance), subject to the
achievement of financial and other performance targets as the Company may decide;
(c) a one-time award of 300,000 ordinary shares as incentive compensation under the Company's
LTIP, subject to performance-based vesting conditions and the other terms and conditions set
forth in a share grant award agreement; and
(d) an annual car allowance of £13,200, death in service benefit (three times salary), group income
protection (offering 75% of base salary less £5,000) and family medical insurance.
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Nomad Foods Annual Report 65
We have the right to place Mr. Zekhout on paid leave for his notice period. Mr. Zekhout is subject
to confidentiality provisions and to non-competition and non-solicitation restrictive covenants for a period of 12 months
after the termination of his employment, subject to an off-set for paid leave. We have the right to terminate Mr.
Zekhout’s employment at any time by serving a notice stating that we will pay to Mr. Zekhout within 14 days a sum
equal to the basic salary (as at the date of the employment agreement), in lieu of any required period of notice less
certain deductions. We also have the right to terminate Mr. Zekhout’s employment agreement without any payment of
compensation, damages, payment in lieu of notice or otherwise under certain circumstances, including, among other
things, gross misconduct, material breach of the terms of such agreement or charge or conviction of a criminal offence.
Nomad Foods Limited Amended and Restated Long Term 2015 Incentive Plan (“LTIP”)
Eligibility
The LTIP is discretionary and will enable the Compensation Committee to make grants
(“Awards”) to any director or employee of the Company, although the current intention of the Committee is that Awards
be granted only to directors and senior management.
Awards
Under the LTIP, the Committee or Board may grant Awards in the form of rights over ordinary
shares. Where an Award vests, the participant will receive ordinary shares free and clear of any restrictions, other than
those imposed by applicable securities laws.
Performance conditions
The vesting of Awards will be subject to conditions determined by the Committee. The current
policy of the Committee is for vesting to be both time-based and related to the financial performance of the
Company. Generally, the vesting period (i.e. the period over which performance is to be measured) will be between
three and five years, and the ordinary shares subject to the Award will vest subject to the participant remaining an
employee of the Company and not being on notice of termination at the vesting date and any performance targets
relating to the Award having been fulfilled.
Permitted dilution
No Award may be granted on any date if, as a result, the total number of ordinary shares issued
or remaining issuable pursuant to Awards or options granted in the previous ten years under the LTIP or any other
employees’ share plan operated by the Company would exceed 10% of the issued ordinary share capital of the
Company on that date.
Awards may at the discretion of the Committee be satisfied out of new issue shares, treasury
shares or shares provided out of an employee trust. Ordinary shares issued will rank pari passu with ordinary shares in
issue at that time, save in relation to rights arising by reference to a record date before the date of issue. Participants
will not be entitled to votes or dividends on the ordinary shares subject to Awards until such Awards vest.
Early vesting
Unless otherwise determined by the Committee, if a participant ceases to be employed by the
Company due to death, disability, or otherwise as a good leaver, as determined by the Committee Awards will vest to
the extent performance targets (adapted, if necessary, at the discretion of the Committee, to take into account the
shortened vesting period) have been achieved and subject to the Committee’s discretion to waive the performance
targets in whole or in part. If a participant ceases employment for any other reason their Award(s) will lapse to the
extent unvested at the date of cessation.
Change of Control
Unless otherwise determined by the Committee, in the event of a Change of Control or winding
up of the Company (including by reason of an offer or scheme of arrangement), Awards will vest in accordance with the
performance targets applied at the date of the Change of Control, subject to the Committee’s discretion to waive such
targets in whole or in part.
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Variation in share capital
The Committee may make such adjustments to Awards as it considers appropriate to preserve
their value in the event of any variation in the ordinary share capital of the Company or to take account of any
demerger or special dividend paid (or similar event which materially affects the market price of ordinary shares).
Amendments
The Committee may amend the LTIP as it considers appropriate, subject to the written consent
of participants to changes to their disadvantage to existing Awards. Shareholder approval is required to increase the
permitted dilution limits.
General
Benefits under the LTIP will not be pensionable. Awards are not transferable except to the
participant’s personal representatives on death.
Director Compensation
In 2019, each of our non-executive directors (other than Messrs. Gottesman and Franklin)
received, and are entitled to receive in 2020, $50,000 per year together with an annual restricted stock grant issued
under the LTIP equal to $100,000 of ordinary shares valued at the date of issue, which vest on the earlier of the date of
the following year’s annual meeting of shareholders or 13 months from the issuance date. For those Directors who are
members of board committees, each member is entitled to receive an additional $2,000 per year. The chairman of the
Audit Committee, currently, is entitled to receive $10,000 per year and the chairmen of the Compensation and
Nominating and Corporate Governance Committees, currently and respectively, are entitled to receive $7,500 per year.
Messrs. Gottesman and Franklin will not receive a fee in relation to their services as Directors.
reimbursed by us for travel, hotel and other expenses incurred by them in the course of their directors’ duties.
Director fees are payable quarterly in arrears. In addition, all of the Directors are entitled to be
C.
Board Practices
Board Composition and Election of Directors
Our board of directors currently consists of eleven members. Our Memorandum and Articles of
Association provides that our board of directors must be composed of at least one director. The number of directors is
determined from time to time by resolution of our board of directors. Messrs. Gottesman and Franklin serve as Co-
Chairmen of our board of directors. The Co-Chairmen have primary responsibility for providing leadership and
guidance to our board and for managing the affairs of our board. Lord Myners is our lead independent director.
Pursuant to our Memorandum and Articles of Association, our directors are appointed at the
annual meeting of shareholders for a one year term, with each director serving until the annual meeting of
shareholders following their election. In addition, for so long as an initial holder of Founder Preferred Shares holds 20%
or more of the Founder Preferred Shares in issue, such holder is entitled to nominate, and the directors are required to
appoint, a person as director. For additional information regarding our board of directors, see Item 6A: Directors, Senior
Management and Employees - Executive Officers and Directors.
Our non-executive directors do not have service contracts with us or any of our subsidiaries
providing for benefits upon termination of employment.
Committees of the Board of Directors
Committee and a Nominating and Corporate Governance Committee.
Our board of directors has three standing committees: an Audit Committee, a Compensation
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Nomad Foods Annual Report 67
Audit Committee
Our Audit Committee consists of three directors: Messrs. Lillie, White and MacFarlane, and
Mr. Lillie serves as its chairman. Our Audit Committee is responsible for, among other things, assisting the board of
directors in its oversight of the integrity of our financial statements, of our compliance with legal and regulatory
requirements, and of the independence, qualifications and performance of our independent auditors. In addition, it
focuses on compliance with accounting policies and ensuring that an effective system of internal and external audit and
financial controls is maintained, and oversees our policies and procedures with respect to risk assessment and risk
management. Our Audit Committee will meet at least quarterly with management and the independent auditors and
report on such meetings to the board of directors. The responsibilities of our Audit Committee as set forth in its charter
include oversight of the following: external audit, financial reporting, public disclosure, internal controls, risk
management and compliance and whistleblowing.
Compensation Committee
Our Compensation Committee consists of three directors: Messrs. Isaacs, Ashken, and
Ms. Parry, and Mr. Isaacs serves as its chairman. Our Compensation Committee is responsible for determining the
compensation of our executive officers. The responsibilities of our Compensation Committee as set forth in its charter
include the following: assisting the board in evaluating potential candidates for executive positions, determining the
compensation of our chief executive officer, making recommendations to the board with respect to the compensation of
other executive officers, reviewing our incentive compensation and other equity-based plans, and reviewing, on a
periodic basis, director compensation.
Nominating and Corporate Governance Committee
three directors: Lord Myners, Ms. Parry, and Mr. Lillie and Lord Myners serves as its chairman.
Our Nominating and Corporate Governance Committee (the “N&CG Committee”) consists of
Our N&CG Committee is responsible for considering and making recommendations to the board
of directors in respect of appointments to the board. The responsibility of our N&CG Committee as set forth in its
Charter include the following: recommending directors to the board to serve as members of each committee,
developing and recommending a set of corporate governance principles applicable to our company and overseeing
board evaluations. It is also responsible for regularly reviewing the structure, size and composition of the board and
making recommendations to the board with regard to any changes it deems necessary.
D. Employees
As of December 31, 2019, we had approximately 4,775 employees. We also employed on
average 370 temporary staff, in addition to 720 agency workers in 2019. We source the majority of our temporary
workers from agencies to allow us to quickly respond and adapt to production demands. Approximately 70% of our
employees work in our manufacturing operations, with the remaining employees involved in sales, marketing, finance,
administration, procurement, logistics, product development, IT and other areas. Following are the number of
employees by region for the last three years:
Region
United Kingdom
Germany
Italy
Sweden/Norway
France
Other
Total
2019
1,222
1,412
478
421
345
897
4,775
2018
1,223
1,394
456
467
346
927
4,813
2017
801
1,267
451
536
335
485
3,875
A number of our employees are members of trade unions in the UK, Germany, Italy, France,
Sweden, Norway or Spain. Trade union membership is not required to be disclosed by employees, however, we
estimate that less than 40% of our employees are members of a trade union. Many of our plants are governed by
collective agreements with the respective unions. Our relationships with the trade unions are currently stable.
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E. Share Ownership
beneficial ownership of our ordinary shares by:
The following table sets forth, as of February 21, 2020, certain information regarding the
•
•
•
each of our current directors;
each of our named executive officers for the fiscal year ended December 31, 2019; and
all of our current directors and current executive officers as a group.
Percentages are based on the 201,127,847 ordinary shares that were issued and outstanding
on February 21, 2020.
Director and Executive Officers:
Martin E. Franklin
Noam Gottesman
Ian G.H. Ashken
Stéfan Descheemaeker
Jeremy Isaacs
James E. Lillie
Stuart MacFarlane
Lord Myners of Truro CBE
Victoria Parry
Simon White
Samy Zekhout
Directors and Executive Officers as a Group (11 persons)
Number
11,451,700 (1)
13,340,236 (2)
967,891 (3)
2,600,647 (4)
23,624 (5)
967,996 (6)
- (7)
95,652 (8)
13,818 (9)
28,557 (10)
- (11)
27,601,587
Percentage
5.7
6.6
*
1.3
*
*
-
*
*
*
-
13.7
*
(1)
(2)
(3)
Represents beneficial ownership of less than one percent of ordinary shares outstanding.
Consists of (i) 5,539,705 ordinary shares held indirectly through the Martin E. Franklin Revocable Trust, (ii)
750,000 Founder Preferred Shares held indirectly through Mariposa Acquisition II, LLC (which are convertible
at any time at the option of the holder into ordinary shares on a one-for-one basis) , (iii) 3,147,559 ordinary
shares held indirectly through RSMA, LLC and (iv) 944,267, 944,267 and 125,902 ordinary shares held by
other members of Mariposa Acquisition II, LLC, respectively, which Sir Franklin has the sole power to vote
pursuant to irrevocable proxy agreements dated each of June 15, 2018 and January 7, 2019. In addition,
Sir Franklin indirectly owns 69% of Mariposa Acquisition II, representing 517,500 Founder Preferred Shares.
Sir Franklin disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
Includes (i) 11,168,647 ordinary shares of which 4,460,537 are held by TOMS Acquisition I LLC and 6,708,110
are held by TOMS Capital Investments LLC, (ii) 750,000 Founder Preferred Shares which are convertible at
any time at the option of the holder into ordinary shares on a one-for-one basis and all of which are held by
TOMS Acquisition I LLC and (iii) an aggregate of 1,421,589 ordinary shares held by the members of TOMS
Acquisition I LLC that are subject to an irrevocable proxy agreement granted to Mr. Gottesman. Mr. Gottesman
is the managing member and majority owner of TOMS Acquisition I LLC and TOMS Capital Investments LLC
and may be considered to have beneficial ownership of TOMS Acquisition I LLC’s and TOMS Capital
Investments LLC’s interests in the Company. In addition, Mr. Gottesman owns or controls, directly or indirectly,
77.5% of TOMS Acquisition I LLC and 100% of TOMS Capital Investments LLC. Mr. Gottesman disclaims
beneficial ownership of such shares except to the extent of his pecuniary interest therein.
Includes 944,267 ordinary shares held by Tasburgh, LLC, all of which are subject to an irrevocable proxy
agreement granted to Sir Franklin (see note 1 above). Mr. Ashken is the Managing Manager of Tasburgh, LLC.
Excludes an indirect pecuniary interest in 56,250 Founder Preferred Shares (which are convertible at any time
at the option of the holder into ordinary shares on a one-for-one basis) held by Mariposa Acquisition II, LLC.
Also excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP,
all of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or
(ii) July 19, 2020.
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Nomad Foods Annual Report 69
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
Represents an indirect interest held by Olidipoli Sprl, a company owned by Mr. Descheemaeker. Excludes (i)
598,600 ordinary shares issuable under the LTIP that vested on February 24, 2020 (after giving effect to
ordinary shares withheld to satisfy certain tax liabilities), (ii) 350,000 ordinary shares issuable under the LTIP
that will vest on January 1, 2021 (the performance based vesting conditions for which have been satisfied),
and (iii) 600,000 ordinary shares issuable under the LTIP, which will vest subject to performance based vesting
conditions (and in each of cases (ii) and (iii), subject to further vesting conditions relating to
Mr. Descheemaeker’s tenure as Chief Executive Officer).
Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all
of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii)
July 19, 2020.
Includes 944,267 ordinary shares held by Powder Horn Hill Partners II, LLC, all of which are subject to an
irrevocable proxy agreement granted to Sir Franklin (see note 1 above).Mr. Lillie is the Managing Member of
Powder Horn Hill Partners II, LLC. Excludes an indirect pecuniary interest in 56,250 Founder Preferred Shares
(which are convertible at any time at the option of the holder into ordinary shares on a one-for-one basis) held
by Mariposa Acquisition II, LLC. Also excludes 4,921 ordinary shares issuable under currently outstanding
equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual
meeting of shareholders in 2020 or (ii) July 19, 2020.
Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all
of which will vest on the earlier of (i) the date of the Company's annual meeting of shareholders in 2020 or (ii)
July 19, 2020.
Includes 50,000 ordinary shares issuable pursuant to a five-year option that expires on June 2, 2020 at a
purchase price of $11.50 per share. Excludes 4,921 ordinary shares issuable under currently outstanding
equity awards issued under the LTIP, all of which will vest on the earlier of (i) the date of the Company’s annual
meeting of shareholders in 2020 or (ii) July 19, 2020.
Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all
of which will vest on the earlier of (i) the date of the Company’s annual meeting of shareholders in 2020 or (ii)
July 19, 2020.
Excludes 4,921 ordinary shares issuable under currently outstanding equity awards issued under the LTIP, all
of which will vest on the earlier of (i) the date of the Company's annual meeting of shareholders in 2020 or (ii)
July 19, 2020.
Excludes 300,000 ordinary shares issuable under the LTIP, which will vest subject to performance based
vesting conditions (and subject to further vesting conditions relating to Mr. Zekhout's tenure as Chief Financial
Officer).
There are no arrangements for involving the employees in the capital of the Company, including
any arrangement that involves the issue or grant of options or shares or securities of the Company, other than those
described under Item 6. Directors, Senior Management and Employees—B. Compensation of Executive Officers and
Directors—Nomad Foods Limited Amended and Restated Long Term 2015 Incentive Plan (“LTIP").
Item 7.
Major Shareholders and Related Party Transactions
A.
Major Shareholders
The following table sets forth certain information regarding the beneficial ownership of our ordinary
shares by each person known by us to be a beneficial owner of more than 5% of the ordinary shares. Currently we only
have one class of listed shares issued and outstanding, that being ordinary shares, which have no par value. All of our
ordinary shares have the same voting rights. Percentages are based on the 201,127,847 ordinary shares that were issued
and outstanding on February 21, 2020.
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Name of Beneficial Owner:
5% Shareholders:
T. Rowe Price Associates Inc.
100 East Pratt Street
Baltimore, MD 21202
Noam Gottesman
c/o TOMS Acquisition I, LLC
450 W. 14th Street, 13th Floor
New York, NY 10014
Boston Partners
One Beacon Street, 30th Floor
Boston, MA 02108
Martin E. Franklin
c/o Mariposa Capital, LLC
500 South Pointe Drive, Suite 240
Miami Beach, FL 33139
FMR LLC
245 Summer Street
Boston, MA 02210
Ordinary Shares Beneficially
Owned
Number
Percentage
14,835,761 (1)
13,340,236 (2)
13,030,867 (3)
11,451,700 (4)
10,308,881 (5)
7.4
6.6
6.5
5.7
5.1
(1)
(2)
(3)
(4)
(5)
Based on a Schedule 13G/A filed by T. Rowe Price Associates Inc. on February 14, 2020.
Based on a Schedule 13D/A filed by Mr. Gottesman, TOMS Acquisition I LLC and the other reporting persons
described therein on January 6, 2020.
Based on a Schedule 13G/A filed by Boston Partners on February 10, 2020.
Based on a Schedule 13D/A filed by Sir Franklin, Martin E. Franklin Revocable Trust and the other reporting
persons described therein on January 6, 2020.
Based on a Schedule 13G filed by FMR LLC on February 7, 2020.
As of February 21, 2020, we also have 1,500,000 preferred shares (Founder Preferred Shares)
issued and outstanding, which have the same voting rights as the ordinary shares. Each of Mariposa Acquisition II, LLC
and TOMS Acquisition I, LLC, our Founder Entities, owns 750,000 Founder Preferred Shares.
In addition, on September 12, 2017, Pershing Square Capital Management L.P., which as of March
28, 2017, beneficially owned 18.3% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially
owned any of our ordinary shares. On July 18, 2017, Birds Eye Iglo Limited Partnership Inc., which as of March 28, 2017,
beneficially owned 7.6% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any
of our ordinary shares. On February 9, 2018, Third Point LLC, which as of March 28, 2017, beneficially owned 5.8% of our
ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any of our ordinary shares. On
February 14, 2018, Corvex Management, LP filed a Schedule 13G/A to report that its percentage ownership in our
ordinary shares decreased from 9.6%, as of March 31, 2017, to 4.9%. On January 10, 2017, Wellington Management
Group LLP, which, as of March 31, 2016, beneficially owned 13.9% of our ordinary shares, and as of September 12, 2016,
beneficially owned 8.2% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned any
of our ordinary shares. On February 7, 2017, T. Rowe Price Associates Inc. filed a Schedule 13G to report that it
beneficially owned 5.7% of our ordinary shares. On January 13, 2020, Elliott Associates, L.P. which as of September 18,
2017, beneficially owned 5.4% of our ordinary shares, filed a Schedule 13G/A to report that it no longer beneficially owned
any of our ordinary shares. Except for the foregoing, no major shareholder has disclosed a significant change in its
percentage ownership of our ordinary shares during the three years ended December 31, 2019.
B.
Related Party Transactions
consolidated financial statements which appear elsewhere in this annual report.
For a description of our related party transactions, see Note 37, Related Parties, to our audited
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Nomad Foods Annual Report 71
Related Party Transactions Procedures
The Audit Committee Charter provides that the Audit Committee shall review all related party
transactions, as defined under Item 404 of Regulation S-K under the Securities Act of 1933, as amended. Following such
review, the Audit Committee determines whether such transaction should be approved based on the terms of the
transaction, the business purpose for the transaction and whether the transaction is in the best interest of the Company
and its shareholders.
No member of the Audit Committee shall participate in any review, consideration or approval of any
related party transaction with respect to which such member or any of his or her immediate family members is the related
party.
Item 8.
Financial Information
A. Consolidated Statements and Other Financial Information
Financial Statements
Export Sales
Please see Item 18 below.
information - External revenue by geography in Item 18, Note 5 below.
For a description of our export sales which constitute all of our sales, please see Geographical
Legal Proceedings
We are not currently subject to any legal proceedings, nor to the best of our knowledge, is any
proceeding threatened, the results of which would have a material impact on our properties, results of operation, or
financial condition. Tax audits are taking place in a number of countries. Whenever there is a difference in view between
local tax authorities and the Company, to the extent deemed necessary, provisions are made for exposures for which it will
be probable that they will lead to additional tax liabilities. To the best of our knowledge, none of our officers or directors is
involved in any legal proceedings in which we are an adverse party.
Dividend Policy
We have not declared or paid any dividends on our ordinary shares since our inception on April 1,
2014, and have no current plans to pay dividends on our ordinary shares. The declaration and payment of future
dividends to holders of our ordinary shares will be at the discretion of our board of directors and will depend upon many
factors, including our financial condition, earnings, legal requirements, restrictions in our debt agreements and other
factors deemed relevant by our board of directors. In addition, as a holding company, our ability to pay dividends depends
on our receipt of cash dividends from our operating subsidiaries, which may further restrict our ability to pay dividends as
a result of the laws of their respective jurisdictions of organization, agreements of our subsidiaries or covenants under
future indebtedness that we or they may incur. See Item 3D: Key Information - Risk Factors - Risks Related to our
Ordinary Shares - Dividend payments on our ordinary shares are not expected, and for a discussion of taxation of any
dividends, see Item 10E: Additional Information - Taxation.
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The Founder Preferred Shares are entitled to receive an annual stock dividend based on the
market price of our ordinary shares if such market price exceeds certain trading price minimums and to participate in any
dividends on the ordinary shares. On December 31, 2019, we approved a 2019 Founder Preferred Share Dividend in an
aggregate of 6,421,074 ordinary shares. The dividend price used to calculate the 2019 Founder Preferred Shares Annual
Dividend Amount was $21.7289 (calculated based upon the volume weighted average price for the last ten trading days of
2019) and the Ordinary Shares were issued on January 2, 2020. For the year ended December 31, 2018, we approved a
2018 Founder Preferred Share Dividend in an aggregate of 171,092 ordinary shares. The dividend price used to calculate
the 2018 Founder Preferred Shares Annual Dividend Amount was $16.7538 and the Ordinary Shares were issued on
January 2, 2019. For the year ended December 31, 2017, we approved a 2017 Founder Preferred Share Dividend in an
aggregate of 8,705,890 ordinary shares. The dividend price used to calculate the 2017 Founder preferred Shares Annual
Dividend Amount was $16.6516 (calculated based upon the volume weighted average price for the last ten trading days of
2017) and the Ordinary Shares were issued on January 2, 2018. For the year ended December 31, 2016, no Founder
Preferred Shares Annual Dividend Amount was payable pursuant to the terms of the Founder Preferred Shares. On
January 12, 2016, we had approved the 2015 Founder Preferred Share Dividend in an aggregate of 3,620,510 ordinary
shares. The dividend price used to calculate the 2015 Founder Preferred Shares Annual Dividend Amount was $11.4824
(calculated based upon the volume weighted average price for the last ten trading days of 2015) and the Ordinary Shares
were issued on January 12, 2016. In subsequent years, the Founder Preferred Shares Annual Dividend Amount will be
calculated based upon the volume weighted average price for the last ten trading days of the year and the appreciated
average share price compared to the highest price previously used in calculating the Founder Preferred Shares Annual
Dividend Amount. We currently expect to retain all our future earnings for use in the operation and expansion of our
business and do not anticipate paying any cash dividends for the foreseeable future. The declaration and payment of
future dividends to holders of our ordinary shares will be at the discretion of our board of directors and will depend upon
many factors, including our financial condition, earnings, legal requirements, and restrictions in our debt agreements,
including the Revolving Credit Facility, and other factors deemed relevant by our board of directors. As a holding company,
our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries, which may further
restrict our ability to pay dividends as a result of the laws of their respective jurisdictions of organization, agreements of
our subsidiaries or covenants under future indebtedness that we or they may incur. Furthermore, under British Virgin
Islands law, we may pay dividends to our shareholders only if, immediately after the dividend, the value of our assets
would exceed our liabilities and we would be able to pay our debts as they fall due.
B.
Significant Changes
No significant change has occurred since the date of the annual financial statements included in
this annual report.
Item 9.
The Offer and Listing
A. Offer and Listing Details
Our ordinary shares are currently listed for trading on the NYSE under the symbol “NOMD”.
As of February 21, 2020, approximately 179,711,111 ordinary shares, representing approximately
89.4% of our outstanding ordinary shares, were held by approximately 18,980 United States beneficial holders and one
record holder and all of our preferred shares were held by two United States record holders.
There is no public market for our preferred shares and the preferred shares will not be listed for
trading on any exchange.
Item 10.
Additional Information
A. Share Capital
Not applicable.
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Nomad Foods Annual Report 73
B. Memorandum and Articles of Association
A copy of our Memorandum and Articles of Association have been previously filed as Exhibit 99.1 to
our Report of Foreign Private Issuer on Form 6-K (File No. 001-37669), filed with the SEC on January 14, 2016, and is
incorporated by reference into this annual report. The information called for by this Item 10B: Additional Information -
Memorandum and Articles of Association has been reported previously in our Registration Statement on Form F-3 (File
No. 333-225402), filed with the SEC on June 4, 2018 (the “Registration Statement”), under the heading “Description of
Share Capital,” and is incorporated by reference into this annual report. There are no limitations on the rights to own
securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities
imposed by the laws of the British Virgin Islands or by our Memorandum.
C. Material Contracts
Each material contract to which the Company has been a party for the preceding two years, other
than those entered into in the ordinary course of business, is listed as an exhibit to the Registration Statement and is
summarized elsewhere herein.
D. Exchange Controls
We are not aware of any governmental laws, decrees, regulations or other legislation in the British
Virgin Islands that restrict the export or import of capital, including the availability of cash and cash equivalents for use by
our affiliated companies, or that affect the remittance of dividends, interest or other payments to non-resident holders of
our securities.
E. Taxation
U.S. Federal Income Taxation
General
The following discussion is a summary of certain U.S. federal income tax issues relevant to the
acquisition, holding and disposition of the ordinary shares. Additional tax issues may exist that are not addressed in this
discussion and that could affect the U.S. federal income tax treatment of the acquisition, holding and disposition of the
ordinary shares.
This discussion does not address U.S. state, local or non-U.S. income tax consequences. The
discussion applies, unless indicated otherwise, only to holders of ordinary shares who acquire the ordinary shares as
capital assets. It does not address special classes of holders that may be subject to different treatment under the Internal
Revenue Code of 1986, as amended (the “Code”), such as:
•
•
•
•
•
•
•
•
•
•
certain financial institutions, insurance companies, underwriters, real estate investment trusts,
or regulated investment companies;
controlled foreign corporations or passive foreign investment companies;
dealers and traders in securities;
persons holding ordinary shares as part of a hedge, straddle, conversion or other integrated
transaction;
partnerships or other entities or arrangements classified as partnerships for U.S. federal
income tax purposes;
persons liable for the alternative minimum tax;
tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other
tax-deferred accounts;
certain U.S. expatriates or former long-term residents of the United States;
a person that is required to accelerate the recognition of any item of gross income with
respect to ordinary shares as a result of such income being recognized on an applicable
financial statement;
a person that acquired ordinary shares as compensation for services;
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•
•
persons holding ordinary shares that own or are deemed to own 10 percent or more (by vote
or value) of the Company’s voting stock; or
persons that do not use the U.S. Dollar as their functional currency.
This section is based on the Code, its legislative history, existing and proposed Treasury
regulations, published rulings by the Internal Revenue Service (“IRS”) and court decisions, all as currently in effect. These
laws are subject to change, possibly on a retroactive basis. Holders of ordinary shares should consult their own tax
advisers concerning the U.S. federal, state, local and non-U.S. tax consequences of acquiring, holding and disposing of
ordinary shares in their particular circumstances.
As used herein, a “U.S. Holder” is a beneficial owner of ordinary shares that is, for U.S. federal
income tax purposes: (i) an individual who is a citizen or resident of the United States; (ii) a corporation or other entity
taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision
thereof; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or (iv) a trust
if (1) a court within the United States is able to exercise primary supervision over the administration of the trust and one or
more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the
trust, or (2) it has a valid election in effect under applicable Treasury regulations to be treated as a “United States person”.
This discussion does not consider the tax treatment of partnerships or other pass-through entities
that hold ordinary shares, or of persons who hold ordinary shares through such entities. If a partnership (or other entity or
arrangement classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of ordinary shares,
the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and
the activities of the partnership.
This discussion is based upon certain understandings and assumptions with respect to the
business, assets and shareholders, including that the Company is not, does not expect to become, nor at any time has
been, a controlled foreign corporation as defined in Section 957 of the Code (a “CFC”). The Company believes that it is
not and has never been a CFC, and does not expect to become a CFC. In the event that one or more of such
understandings and assumptions proves to be inaccurate, the following discussion may not apply and material adverse
U.S. federal income tax consequences may result to U.S. Holders.
Passive Foreign Investment Company (“PFIC”) Considerations
Company is considered a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes.
The U.S. federal income tax treatment of U.S. Holders will differ depending on whether the
In general, the Company will be considered a PFIC for any taxable year in which: (i) 75 percent or
more of its gross income consists of passive income; or (ii) 50 percent or more of the average quarterly market value of its
assets in that year are assets (including cash) that produce, or are held for the production of, passive income. For
purposes of the above calculations, if the Company, directly or indirectly, owns at least 25 percent by value of the stock of
another corporation, then the Company generally would be treated as if it held its proportionate share of the assets of
such other corporation and received directly its proportionate share of the income of such other corporation. Passive
income generally includes, among other things, dividends, interest, rents, royalties, certain gains from the sale of stock
and securities, and certain other investment income.
Based on the current and anticipated composition of the income, assets and operations of the
Company and its subsidiaries, the Company believes that it will not be a PFIC in its current taxable year and is not likely
to be a PFIC in future taxable years. However, there is no assurance that the Company will not be a PFIC in any taxable
year because PFIC status is factual in nature, depends upon factors not wholly within the Company's control, generally
cannot be determined until the close of the taxable year in question, and is determined annually. If the Company is a PFIC
for any taxable year during which a U.S. Holder holds (or, in the case of a lower-tier PFIC, is deemed to hold) its ordinary
shares, such U.S. Holder will be subject to significant adverse U.S. federal income tax rules. U.S. Holders should consult
their tax advisors on the federal income tax consequences of the Company being treated as a PFIC.
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Nomad Foods Annual Report 75
Tax Consequences for U.S. Holders if the Company is not a PFIC
Dividends
In general, subject to the PFIC rules discussed above, a distribution on an ordinary share will
constitute a dividend for U.S. federal income tax purposes to the extent that it is made from the Company’s current or
accumulated earnings and profits as determined under U.S. federal income tax principles. If a distribution exceeds the
Company’s current and accumulated earnings and profits, it will be treated as a non-taxable reduction of basis to the
extent of the U.S. Holder’s tax basis in the ordinary share on which it is paid, and to the extent it exceeds that basis it will
be treated as capital gain. For purposes of this discussion, the term “dividend” means a distribution that constitutes a
dividend for U.S. federal income tax purposes.
The gross amount of any dividend on an ordinary share (which will include the amount of any
foreign taxes withheld) generally will be subject to U.S. federal income tax as foreign source dividend income, and will not
be eligible for the corporate dividends received deduction. The amount of a dividend paid in foreign currency will be its
value in U.S. Dollars based on the prevailing spot market exchange rate in effect on the day the U.S. Holder receives the
dividend. A U.S. Holder will have a tax basis in any distributed foreign currency equal to its U.S. Dollar amount on the date
of receipt, and any gain or loss realized on a subsequent conversion or other disposition of foreign currency generally will
be treated as U.S. source ordinary income or loss. If dividends paid in foreign currency are converted into U.S. Dollars on
the date they are received by a U.S. Holder, the U.S. Holder generally should not be required to recognize foreign
currency gain or loss in respect of the dividend income.
Subject to certain exceptions for short-term and hedged positions, a dividend that a non-corporate
holder receives on an ordinary share will be subject to a maximum federal income tax rate of 20 percent if the dividend is
a “qualified dividend” not including the Medicare Contribution Tax described below. A dividend on an ordinary share will be
a qualified dividend if (i) either (a) the ordinary shares are readily tradable on an established market in the United States
or (b) the Company is eligible for the benefits of a comprehensive income tax treaty with the United States that the
Secretary of the Treasury determines is satisfactory for purposes of these rules and that includes an exchange of
information program, and (ii) the Company was not, in the year prior to the year the dividend was paid, and is not, in the
year the dividend is paid, a PFIC. Since the ordinary shares are listed on the New York Stock Exchange, the ordinary
shares should be treated as readily tradable on an established securities market in the United States. Even if dividends on
the ordinary shares would otherwise be eligible for qualified dividend treatment, in order to qualify for the reduced qualified
dividend tax rates, a non-corporate holder must hold the ordinary share on which a dividend is paid for more than 60 days
during the 120-day period beginning 60 days before the ex-dividend date, disregarding for this purpose any period during
which the non-corporate holder has an option to sell, is under a contractual obligation to sell or has made (and not closed)
a short sale of substantially identical stock or securities, is the grantor of an option to buy substantially identical stock or
securities or, pursuant to Treasury regulations, has diminished its risk of loss by holding one or more other positions with
respect to substantially similar or related property. In addition, to qualify for the reduced qualified dividend tax rates, the
non-corporate holder must not be obligated to make related payments with respect to positions in substantially similar or
related property. Payments in lieu of dividends from short sales or other similar transactions will not qualify for the reduced
qualified dividend tax rates.
A non-corporate holder that receives an extraordinary dividend eligible for the reduced qualified
dividend rates must treat any loss on the sale of the stock as a long-term capital loss to the extent of the dividend. For
purposes of determining the amount of a non-corporate holder’s deductible investment interest expense, a dividend is
treated as investment income only if the non-corporate holder elects to treat the dividend as not eligible for the reduced
qualified dividend tax rates. Special limitations on foreign tax credits with respect to dividends subject to the reduced
qualified dividend tax rates apply to reflect the reduced rates of tax.
The U.S. Treasury has announced its intention to promulgate rules pursuant to which non-corporate
holders of stock of non-U.S. corporations, and intermediaries through whom the stock is held, will be permitted to rely on
certifications from issuers to establish that dividends are treated as qualified dividends. Because those procedures have
not yet been issued, it is not clear whether the Company will be able to comply with them.
Non-corporate holders of ordinary shares are urged to consult their own tax advisers regarding the
availability of the reduced qualified dividend tax rates with respect to dividends received on the ordinary shares in light of
their own particular circumstances.
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Capital Gains
Subject to the PFIC rules discussed above, on a sale or other taxable disposition of an ordinary
share, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference between the U.S. Holder’s
adjusted basis in the ordinary share and the amount realized on the sale or other disposition, each determined in U.S.
Dollars. Such capital gain or loss will be long-term capital gain or loss if at the time of the sale or other taxable disposition
the ordinary share has been held for more than one year. In general, any adjusted net capital gain of an individual is
subject to a maximum federal income tax rate of 20 percent, not including the Medicare Contribution Tax, discussed
below. Capital gains recognized by corporate U.S. holders generally are subject to U.S. federal income tax at the same
rate as ordinary income. The deductibility of capital losses is subject to limitations.
Any gain a U.S. Holder recognizes generally will be U.S. source income for U.S. foreign tax credit
purposes, and, subject to certain exceptions, any loss will generally be a U.S. source loss. If a non-U.S. income tax is paid
on a sale or other disposition of an ordinary share, the amount realized will include the gross amount of the proceeds of
that sale or disposition before deduction of the non-U.S. tax. The generally applicable limitations under U.S. federal
income tax law on crediting foreign income taxes may preclude a U.S. Holder from obtaining a foreign tax credit for any
non-U.S. tax paid on a sale or other disposition of an ordinary share. The rules relating to the determination of the foreign
tax credit are complex, and U.S. holders are urged to consult with their own tax advisers regarding the application of such
rules. Alternatively, any non-U.S. income tax paid on the sale or other disposition of an ordinary share may be taken as a
deduction against taxable income, provided the U.S. Holder takes a deduction and not a credit for all foreign income taxes
paid or accrued in the same taxable year.
Medicare Contribution Tax
Dividends received with respect to ordinary shares and capital gains from the sale or other taxable
disposition of the ordinary shares recognized by certain non-corporate U.S. Holders will be includable in computing net
investment income of such U.S. Holder for purposes of the 3.8 percent Medicare Contribution Tax.
Tax Consequences for Non-U.S. Holders of Ordinary Shares
Holder nor a partnership (or entity or arrangement classified as a partnership) for U.S. federal income tax purposes.
As used herein, a "non-U.S. Holder" is a beneficial owner of ordinary shares that is neither a U.S.
Dividends
A non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding on
dividends received from the Company with respect to ordinary shares, other than in certain specific circumstances where
such income is deemed effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United
States. If a non-U.S. Holder is entitled to the benefits of a U.S. income tax treaty with respect to those dividends, that
income is generally subject to U.S. federal income tax only if it is attributable to a permanent establishment maintained by
the non-U.S. Holder in the United States. A non-U.S. Holder that is subject to U.S. federal income tax on dividend income
under the foregoing exception generally will be taxed with respect to such dividend income on a net basis in the same
manner as a U.S. Holder unless otherwise provided in an applicable income tax treaty; a non-U.S. Holder that is a
corporation for U.S. federal income tax purposes may also be subject to a branch profits tax with respect to such item at a
rate of 30 percent (or at a reduced rate under an applicable income tax treaty).
Sale, Exchange or Other Taxable Disposition of Ordinary Shares
respect to any gain recognized on a sale, exchange or other taxable disposition of ordinary shares unless:
A non-U.S. Holder generally will not be subject to U.S. federal income tax or withholding with
•
•
the gain is treated as effectively connected with the conduct by the non-U.S. Holder of a trade
or business in the United States (and, if an applicable income tax treaty so requires, such
gain is attributable to a permanent establishment maintained by the non-U.S. Holder in the
United States); or
the non-U.S. Holder is an individual and is present in the United States for 183 or more days
in the taxable year of the sale, exchange or other taxable disposition, and meets certain other
requirements.
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Nomad Foods Annual Report 77
If the first exception applies, the non-U.S. Holder generally will be subject to U.S. federal income
tax with respect to such item on a net basis in the same manner as a U.S. Holder unless otherwise provided in an
applicable income tax treaty; a non-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be
subject to a branch profits tax with respect to such item at a rate of 30 percent (or at a reduced rate under an applicable
income tax treaty). If the second exception applies, the non-U.S. Holder generally will be subject to U.S. federal income
tax at a rate of 30 percent (or at a reduced rate under an applicable income tax treaty) on the amount by which such non-
U.S. Holder’s capital gains allocable to U.S. sources exceed capital losses allocable to U.S. sources during the taxable
year of disposition of the ordinary shares.
Tax Consequences for Holders of Preferred Shares
Generally, the U.S. federal income tax consequences of holding preferred shares is the same as
the U.S. federal income tax consequences of holding ordinary shares, as discussed above. Holders of preferred shares
may be eligible for a distribution of ordinary shares as a dividend with respect to the holding of preferred shares. The
distribution of a stock dividend may under certain circumstances be received free of U.S. federal income taxes. In that
case, the adjusted tax basis of the ordinary shares distributed will be determined based on an allocation of the basis of the
preferred shares in accordance with the fair market value of the preferred shares and the ordinary shares
distributed. Holders of preferred shares are urged to consult their own tax advisers about the U.S. federal, state and local
Tax consequences of receiving a stock dividend.
Information Reporting and Backup Withholding
Under U.S. federal income tax laws, certain categories of U.S. Holders must file information returns
with respect to their investment in, or involvement in, a foreign corporation (including IRS Forms 926). Persons who are
required to file these information returns and fail to do so may be subject to substantial penalties. Pursuant to
Section 1298(f) of the Code, for any year in which the Company is a PFIC, each U.S. Holder will be required to file an
information statement, Form 8621, regarding such U.S. Holder’s ownership interest in the Company. U.S. Holders of
ordinary shares should consult with their own tax advisers regarding the requirements of filing information returns.
Furthermore, certain U.S. Holders who are individuals and to the extent provided in future
regulations, certain entities, will be required to report information with respect to such U.S. Holder’s investment in “foreign
financial assets” on IRS Form 8938. An interest in the Company constitutes a foreign financial asset for these purposes.
Persons who are required to report foreign financial assets and fail to do so may be subject to substantial penalties.
Potential shareholders are urged to consult with their own tax advisers regarding the foreign financial asset reporting
obligations and their application to an investment in ordinary shares.
Payments of dividends and sales proceeds that are made within the United States or through
certain U.S.-related financial intermediaries generally are subject to information reporting and to backup withholding
unless the U.S. Holder is a corporation or other exempt recipient or, in the case of backup withholding, the U.S. Holder
provides a correct taxpayer identification number and certifies that no loss of exemption from backup withholding has
occurred. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the
U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required
information is furnished to the IRS.
Non-U.S. Holders generally are not subject to information reporting or backup withholding with
respect to dividends paid on ordinary shares, or the proceeds from the sale, exchange or other disposition of ordinary
shares, provided that each such non-U.S. Holder certifies as to its foreign status on the applicable duly executed IRS
Form W-8 or otherwise establishes an exemption.
Foreign Account Tax Compliance Act
Under certain circumstances, the Company or its paying agent may be required, pursuant to the
Foreign Account Tax Compliance Act ("FATCA"), to withhold U.S. tax at a 30 percent rate on all or a portion of payments
of dividends or other corporate distributions to holders of ordinary shares that are treated as "foreign pass-thru payments"
made on or after the date that is two years after the issuance of final regulations concerning such foreign pass-thru
payments are published, if such payments are not in compliance with FATCA. Such regulations have not yet been issued.
The rules regarding FATCA and "foreign pass-thru payments," including the treatment of proceeds from the disposition of
ordinary shares, are complex and holders of ordinary shares are encouraged to consult their own tax advisers regarding
the impact of the FATCA rules on them.
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This summary is for general information only and it is not intended to be, nor should it be construed to be, tax or
legal advice to any prospective shareholder. Further, this summary is not intended to constitute a complete
analysis of all U.S. federal income tax consequences relating to holders of their acquisition, ownership and
disposition of the ordinary shares. Accordingly, prospective holders of ordinary shares should consult their own
tax advisers about the U.S. federal, state, local and non-U.S. tax consequences of the acquisition, ownership and
disposition of the ordinary shares.
British Virgin Islands Taxation
The Company
capital or stamp duties are levied in the British Virgin Islands on the issue, transfer or redemption of ordinary shares.
We are not subject to any income, withholding or capital gains taxes in the British Virgin Islands. No
Shareholders
Shareholders who are not tax resident in the British Virgin Islands will not be subject to any income,
withholding or capital gains taxes in the British Virgin Islands, with respect to the ordinary shares of the Company owned
by them and dividends received on such ordinary shares, nor will they be subject to any estate or inheritance taxes in the
British Virgin Islands.
United Kingdom Taxation
General
The following is a general summary of material UK tax considerations relating to the ownership and
disposal of our ordinary shares. The comments set out below are based on current UK tax law as of the date of this
summary, which is subject to change, possibly with retrospective effect. This summary does not constitute legal or tax
advice and applies only to shareholders holding our ordinary shares as an investment and who are the beneficial owners
thereof, whose ordinary shares are not held through an individual savings account or a self-invested personal pension and
who have not acquired their or another person’s ordinary shares by reason of their or another person’s employment.
These comments may not apply to certain classes of persons, including dealers in securities, insurance companies and
collective investment schemes.
This summary is for general information only and is not intended to be, nor should it be considered
to be, legal or tax advice to any particular investor. It does not address all of the tax considerations that may be relevant to
specific investors in light of their particular circumstances or to investors subject to special treatment under UK tax
law. Potential investors should consult their own tax advisers concerning the overall tax consequences of acquiring,
holding and disposing of our ordinary shares in their particular circumstances.
The Company
and therefore became resident in the UK for UK taxation purposes.
As previously stated, on January 12, 2016, we became centrally managed and controlled in the UK
Accordingly, since that date, we are subject to UK taxation on our income and gains, except where
an exemption applies. Dividend income will generally be exempt from UK corporation tax on income if certain conditions
are met.
We may be treated as a dual resident company for UK tax purposes. As a result, our right to claim
certain reliefs from UK tax may be restricted, and changes in law or practice in the UK could result in the imposition of
further restrictions on our right to claim UK tax reliefs.
Shareholders
Sale, Exchange or Other Taxable Disposition of Ordinary Shares
Subject to their individual circumstances, shareholders who are resident in the UK for UK taxation
purposes will potentially be liable to UK taxation, as further explained below, on any gains which accrue to them on a sale
or other disposition of their ordinary shares which constitutes a “disposal” for UK taxation purposes.
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Nomad Foods Annual Report 79
A shareholder who is not resident in the UK for UK tax purposes will not generally be subject to UK
tax on chargeable gains on a disposal of ordinary shares unless such a shareholder carries on a trade, profession or
vocation in the UK through a branch or agency or, in the case of a corporate shareholder, a permanent establishment. For
shareholders in such circumstances, a gain on a disposal of our ordinary shares may be subject to UK taxation.
An individual shareholder who acquires ordinary shares while UK resident, who temporarily ceases
to be UK resident or becomes resident in a territory outside the UK for the purposes of double taxation relief
arrangements, and who disposes of our ordinary shares during that period of temporary non-UK residence, may on his or
her return to the UK be liable to UK capital gains tax on any chargeable gain realized on that disposal.
For an individual shareholder within the charge to capital gains tax, a disposal of ordinary shares
may give rise to a chargeable gain or allowable loss for the purposes of UK capital gains tax. The rate of capital gains tax
is 10% for individuals who are subject to income tax at the basic rate and 20% to the extent that an individual
shareholder’s chargeable gains, when aggregated with his or her income chargeable to income tax, exceeds the basic
rate band for income tax purposes. However, an individual shareholder is entitled to realize £12,000 of gains (the annual
exempt amount) in the UK tax year ended April 5, 2020, without being liable to tax.
For a shareholder within the charge to UK corporation tax, a disposal (or deemed disposal) of
ordinary shares may give rise to a chargeable gain or allowable loss for the purposes of UK corporation tax. Corporation
tax is charged on chargeable gains at the rate applicable to that company, subject to any available exemption or
relief. Indexation allowance may reduce the amount of chargeable gain that is subject to corporation tax (but may not give
rise to or increase an allowable loss). No indexation allowance is available in respect of any period of ownership falling
after December 2017.
Dividends on Ordinary Shares
No UK tax will be withheld or deducted at source from dividends paid by us on our ordinary shares.
circumstances, be liable to UK income tax or, as the case may be, UK corporation tax on dividends paid to them by us.
Shareholders who are resident in the UK for tax purposes may, subject to their individual
The UK Government has introduced an annual dividend tax allowance per tax year. For the year
ended April 5, 2020, it is £2,000. If and to the extent that an individual shareholder who is subject to UK income tax
receives dividends in each tax year which, in aggregate, do not exceed that allowance, the individual will not be liable to
UK income tax on those dividends. If and to the extent that an individual shareholder who is subject to UK income tax
receives dividends in each tax year which, in aggregate, exceed that allowance, the individual will be subject to UK
income tax on those dividends at the rate of 7.5% (in the case of basic rate taxpayers), 32.5% (in the case of higher rate
taxpayers) and 38.1% (in the case of additional rate taxpayers), and the individual will not be entitled to any tax credit in
respect of those dividends.
Shareholders who are within the charge to UK corporation tax are generally likely to be exempt
from corporation tax on dividends they receive from us, provided the dividends fall within an exempt class and certain
conditions are met.
Stamp duty/stamp duty reserve tax
(i) Issue of Ordinary Shares
No UK stamp duty or stamp duty reserve tax will be payable on the issue of ordinary shares.
(ii) Transfers of Ordinary Shares
UK stamp duty will in principle be payable on any instrument of transfer of our ordinary shares that
is executed in the UK or that relates to any property situated, or to any matter or thing done or to be done, in the UK. An
exemption from stamp duty is available on an instrument transferring ordinary shares where the amount or value of the
consideration is £1,000 or less and it is certified on the instrument that the transaction effected by the instrument does not
form part of a larger transaction or series of transactions in respect of which the aggregate amount or value of the
consideration exceeds £1,000. Shareholders should be aware that, even where an instrument of transfer is in principle
subject to stamp duty, stamp duty is not required to be paid unless it is necessary to rely on the instrument for legal
purposes, for example to register a change of ownership or in litigation in a UK court. An instrument of transfer need not
be stamped in order for the British Virgin Islands register of ordinary shares to be updated, and the register is conclusive
proof of legal ownership.
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Provided that the ordinary shares are not registered in any register maintained in the UK by or on
behalf of us and are not paired with any shares issued by a UK incorporated company, any agreement to transfer ordinary
shares will not be subject to UK stamp duty reserve tax.
We currently do not intend that any register of our ordinary shares will be maintained in the UK.
F. Dividends and Paying Agents
Not applicable.
G. Statements by Experts
Not applicable.
H. Documents on Display
Documents concerning us that are referred to herein may be inspected at our principal executive
offices at: No. 1 New Square, Bedfont Lakes Business Park, Feltham, Middlesex, TW14 8HA. Those documents, which
include our registration statements, periodic reports and other documents which were filed with the SEC, may be obtained
electronically from the Investor section of our website at www.nomadfoods.com or from the SEC’s website at
www.sec.gov. We do not incorporate the information contained on, or accessible through, our website into this annual
report, and you should not consider it a part of this annual report.
I. Subsidiary Information
Not applicable.
Item 11.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to certain market risks during the normal course of our business, such as risk
arising from fluctuations in foreign currency exchange rates, as well as fluctuations in interest rates. In attempts to
manage these risks, we employ certain strategies to mitigate the effect of these fluctuations. For a detailed discussion of
these risks, see Note 33 “Financial risk management” to our audited consolidated financial statements which appear
elsewhere in this annual report.
Item 12.
Description of Securities Other than Equity Securities
Not applicable.
Item 13.
Defaults, Dividend Arrearages and Delinquencies
None.
Item 14.
Material Modifications to the Rights of Security Holders and Use of Proceeds
Use of Proceeds
None.
None.
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Nomad Foods Annual Report 81
Item 15.
Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, our principal executive officer and principal financial
officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined
in Rules l3a-15(e) and l5d - 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of
the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this
annual report in providing a reasonable level of assurance that information we are required to disclose in reports that we
file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods in SEC
rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in
such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief
Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
During the period covered by this report, there have been no changes to our internal controls over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Management’s annual report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
Company’s assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of the Company’s management and
directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use,
or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
Management has assessed the effectiveness of our internal control over financial reporting as of
December 31, 2019 using criteria described in Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
Based on this assessment, management concluded that the internal control over financial reporting
was effective as of December 31, 2019 based on the criteria established in this Internal Control-Integrated Framework
(2013).
Attestation report of the independent registered public accounting firm
The independent registered public accounting firm that audited the Consolidated Financial
Statements, PricewaterhouseCoopers LLP, has issued an attestation report on the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2019, appearing under Item 18.
Item 16A.
Audit Committee Financial Expert
The board of directors has determined that Mr. Lillie qualifies as an audit committee financial expert
as defined in Item 16A of Form 20-F, and that he is also “independent,” as defined in Rule 10A-3 under the Exchange Act
and applicable NYSE standards. For more information about Mr. Lillie, see Item 6A: Directors, Senior Management and
Employees - Directors and Senior Management.
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Item 16B.
Code of Ethics
We have adopted a Code of Ethics that applies to our Chief Executive Officer and all senior
financial officers. The Code of Ethics is located on our Internet website at www.nomadfoods.com under "Investor
Relations - Corporate Governance".
website within five business days following the date of the amendment or waiver.
We intend to provide disclosure of any amendments or waivers of our Code of Ethics on our
Item 16C.
Principal Accountant Fees and Services
PricewaterhouseCoopers LLP (“PwC”) acted as our independent auditor for the years ended
December 31, 2019 and 2018. The table below sets out the total amount billed to us by PwC, for services performed in
the years ended December 31, 2019 and 2018, and breaks down these amounts by category of service:
(€ in millions)
Audit fees
Audit-related fees
Tax fees
All other fees
Total
Audit Fees
For the year ended
December 31, 2019
3.3
0.1
1.5
0.1
5.0
For the year ended
December 31, 2018
2.8
0.1
1.1
—
4.0
Audit fees in the years ended December 31, 2019 and 2018 are related to the audit of our
consolidated financial statements and other audit or interim review services provided in connection with statutory and
regulatory filings or engagements.
Audit-Related Fees
services on capital market transactions.
Audit-related fees in the years ended December 31, 2019 and 2018 are related to other assurance
Tax Fees
tax related services.
All Other Fees
Tax fees in the years ended December 31, 2019 and 2018 are related to tax compliance and other
Other fees in the year ended December 31, 2019 relate to other non-audit assurance services.
There were no other fees in the year ended 2018.
Pre-Approval Policies and Procedures
been delegated, is required for all audit and non-audit services provided by our auditors.
The advance approval of the Audit Committee or members thereof, to whom approval authority has
All services provided by our auditors are approved in advance by either the Audit Committee or
members thereof, to whom authority has been delegated, in accordance with the Audit Committee’s pre-approval policy.
No such services were approved pursuant to the procedures described in Rule 2-01(c)(7)(i)(C) of Regulation S-X, which
waives the general requirement for pre-approval in certain circumstances.
Item 16D.
Exemptions from the Listing Standards for Audit Committees
None.
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Item 16E.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 16F.
Change in Registrants’ Certifying Accountant
Not applicable.
Item 16G.
Corporate Governance
Comparison of Shareholder Rights
We are incorporated under, and are governed by, the laws of the British Virgin Islands. The
following discussion summarizes material differences between the rights of holders of our ordinary shares and the rights
of common shareholders of a typical corporation incorporated under the laws of the State of Delaware.
Director’s Fiduciary Duties
Under Delaware corporate law, a director of a solvent Delaware corporation owes fiduciary duties to
the corporation and its shareholders. These duties have two components: the duty of care and the duty of loyalty. The
duty of care requires that a director inform himself of all material information regarding a decision. The duty of loyalty
requires that a director act in a manner he reasonably believes to be in the best interests of the corporation and its
shareholders. A director must not use his corporate position for personal gain or advantage. The duty of loyalty prohibits
self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence
over any interest possessed by a director, officer or controlling shareholder that is not shared by the shareholders
generally. In general, the “business judgment rule” presumes that actions of the board of directors are made on an
informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation and
its shareholders. This presumption may be rebutted by evidence of a breach of the directors’ fiduciary duties. If this
presumption is rebutted, the board of directors bear the burden of proving that the actions were “entirely fair” to the
corporation or its minority shareholders. In addition, Delaware common law imposes “heightened” judicial scrutiny on
actions of directors in certain circumstances, such as upon a sale of the corporation.
British Virgin Islands law provides that every director of a British Virgin Islands company in
exercising his powers or performing his duties, shall act honestly and in good faith and in what the director believes to be
in the best interests of the company. Additionally, the director shall exercise the care, diligence, and skill that a reasonable
director would exercise in the same circumstances taking into account the nature of the company, the nature of the
decision and the position of the director and his responsibilities. In addition, British Virgin Islands law provides that a
director shall exercise his powers as a director for a proper purpose and shall not act, or agree to the company acting, in a
manner that contravenes British Virgin Islands law or the memorandum and articles of association of the company.
Amendment of Governing Documents
Under Delaware corporate law, with very limited exceptions, a vote of the shareholders of a
corporation is required to amend the certificate of incorporation. In addition, Delaware corporate law provides that
shareholders have the right to amend the corporation’s bylaws, but the certificate of incorporation may also confer such
right on the directors of the corporation.
Consent in Lieu of Meeting
Under Delaware corporate law, a consent in lieu of a meeting of the directors must be unanimous to
take effect. Under British Virgin Islands law and our Memorandum and Articles, only a majority of the directors are
required to sign a written consent.
Under Delaware corporate law, unless otherwise provided in the certificate of incorporation, any
action to be taken at any annual or special meeting of shareholders of a corporation may be taken without a meeting by
consent of the holders of outstanding stock having not less than the minimum number of votes that would be necessary to
take that action at a meeting at which all shareholders entitled to vote were present and voted. If any shareholder action is
taken by less than unanimous consent, notice of such action must be given to those shareholders who have not consent
and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for
notice of such meeting had been the date that consents signed by a sufficient number of shareholders were delivered to
the corporation.
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Our Memorandum and Articles provides that any shareholder action permitted to be taken at a
shareholder meeting may also be taken by written consent of a majority of the votes of shares entitled to vote thereon. If
any shareholder resolution is adopted otherwise than by the unanimous written consent of all shareholders, a copy of
such resolution shall be sent to all shareholders not consenting to such resolution.
Shareholder Proposals
Under Delaware corporate law, a shareholder has the right to put any proposal before the annual
meeting of shareholders, provided it complies with the relevant provisions (if any) in the corporation’s certificate of
incorporation or bylaws. A meeting of shareholders may be called by the board of directors or any other person authorized
to do so by the corporation’s certificate of incorporation or bylaws; shareholders may be precluded therein from calling
special meetings. British Virgin Islands law and our Memorandum and Articles provide that our directors shall call a
meeting of the shareholders if requested in writing to do so by shareholders entitled to exercise at least 30% of the voting
rights in respect of the matter for which the meeting is requested.
Sale of Assets
Under Delaware corporate law, a vote of the shareholders is required to approve a sale, lease or
exchange of property and assets of a corporation (including property and assets of its qualifying subsidiaries) only when
all or substantially all of the corporation’s property and assets are being sold other than to a qualifying subsidiary of the
corporation. Under British Virgin Islands law generally, shareholder approval is required when more than 50% of a
company’s total assets by value are being disposed of or sold to any person if not made in the usual or regular course of
the business carried out by the company. Under our Memorandum and Articles, this requirement of British Virgin Islands
law has been disapplied and accordingly no shareholder approval is required in relation to such a disposal or sale.
Redemption of Shares
Under Delaware corporate law, by provision of the certificate of incorporation, any class or series of
stock may be made subject to redemption by the corporation at its option, at the option of the holders of that stock or upon
the happening of a specified event, provided that after such redemption shares of a class or series of stock with full voting
power remain outstanding. The class or series of stock may, by provision of the certificate of incorporation, be made
redeemable for cash, property or rights, as specified in the certificate of incorporation or in the resolution of the board of
directors providing for the issue of the stock pursuant to the power expressly vested in the board of directors by the
certificate of incorporation. Under Delaware corporate law, shares also may be repurchased with the consent of both the
corporation and the holder, except that shares may not be repurchased for more than the price at which such shares may
then be redeemed at the option of the corporation. Both the redemption and repurchase of shares of a Delaware
corporation are subject to certain solvency limitations established by Delaware corporate law and Delaware common law.
As permitted by British Virgin Islands law and our Memorandum and Articles, shares may be repurchased, redeemed or
otherwise acquired by us. However, the consent of the shareholder whose shares are to be repurchased, redeemed or
otherwise acquired must be obtained, except as specified in the terms of the applicable class or series of shares.
Squeeze-Out Merger
Under the Delaware General Corporation Law § 253, in a process known as a “short form” merger,
a corporation that owns at least 90% of the outstanding shares of each class of voting stock of another corporation and
where at least one of the corporations is a Delaware corporation and the laws of the jurisdiction of the other corporation
don’t prohibit such action, may either merge the other corporation into itself or merge itself into the other corporation by
executing, acknowledging and filing with the Delaware Secretary of State a certificate of ownership and merger setting
forth a copy of the resolution of its board of directors authorizing such merger. If the parent corporation is a Delaware
corporation that is not the surviving corporation, the merger also must be approved by a majority of the outstanding stock
of the parent corporation entitled to vote thereon and the resolution must include provision for the pro rata issuance of
stock of the surviving corporation to the holders of the stock of the parent corporation on surrender of any certificate
therefor. If the parent corporation does not own all of the stock of the subsidiary corporation immediately prior to the
merger, the minority shareholders of the subsidiary corporation party to the merger have appraisal rights as set forth in §
262 of the Delaware General Corporation Law.
Under the BVI Act, subject to any limitations in a company’s memorandum and articles of
association, members holding 90% of the votes of the outstanding shares entitled to vote, and members holding 90% of
the votes of the outstanding shares of each class of shares entitled to vote, may give a written instruction to the company
directing the company to redeem the shares held by the remaining members. In our Memorandum and Articles, we have
opted out of the BVI Act’s squeeze out provisions.
Nomad Foods Annual Report 85
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Variation of Rights of Shares
Under Delaware corporate law, a corporation may vary the rights of a class of stock with the
approval of a majority of the outstanding shares entitled to vote thereon, and, in certain circumstances, including if such
variation would change the rights of such class so as to affect them adversely, with the approval of a majority of the
outstanding shares of such class, voting separately as a single class.
As permitted by British Virgin Islands law and our Memorandum and Articles, we may vary the
rights attached to any class with the written consent of at least 50% of the holders of each class of shares affected or by a
resolution passed by at least 50% of the votes cast by eligible holders of the issued shares of the affected class at a
separate meeting of the holders of that class.
Election of Directors
Under Delaware corporate law generally, unless otherwise specified in the certificate of
incorporation or bylaws of a corporation, directors are elected by a plurality of the votes of the shares entitled to vote on
the election of directors and vacancies and newly created directorships resulting from an increase in the number of
directors may be filled by a majority of the directors then in office (although less than a quorum) or by the sole remaining
director. Subject to the BVI Act and pursuant to our Memorandum and Articles, directors shall be appointed at any time,
and from time to time, by our directors, without the approval of shareholders, either to fill a vacancy or as an alternate or
additional director. The shareholders may, by a majority vote, appoint any person as a director. In addition, for so long as
an initial holder of Founder Preferred Shares holds 20% or more of the Founder Preferred Shares in issue, such holder is
entitled to nominate, and the directors are required to appoint, a person as director. If such holder notifies the Company to
remove any director nominated by him or her, the other directors shall remove such director, and the holder will have the
right to nominate a director to fill the resulting vacancy. In the event an initial holder ceases to be a holder of Founder
Preferred Shares or holds less than 20% of the Founder Preferred Shares in issue, such initial holder will no longer be
entitled to nominate a person as a director, and the holders of a majority of the Founder Preferred Shares in issue will be
entitled to exercise that initial holder’s former rights to appoint a director instead.
Removal of Directors
Under Delaware corporate law generally, a director of a corporation without a classified board may
be removed, with or without cause, by the holders of a majority (or such larger portion set forth in the certificate of
incorporation) of the outstanding shares entitled to vote at an election of directors. Under Delaware corporate law,
generally a director of a corporation with a classified board may be removed only for cause with the approval of a majority
(or such larger portion set forth in the certificate of incorporation) of the outstanding shares entitled to vote at an election
of directors, unless the certificate of incorporation provides otherwise. Under Delaware corporate law, generally a director
may resign at any time upon notice given in writing or by electronic transmission to the corporation.
Our Memorandum and Articles provide that a director may be removed at any time if: (i) he resigns
by written notice to the Company; (ii) he is requested to resign by written notice of all of the other directors; (iii) he ceases
to be a director by virtue of any provision of law or becomes prohibited by law from or is disqualified from being a director;
(iv) he becomes bankrupt or makes any arrangement or composition with his creditors generally or otherwise has any
judgment executed on any of his assets; (v) he becomes of unsound mind or incapable; (vi) he is absent from meetings of
directors for a consecutive period of 12 months and the other directors resolve that his office shall be vacated; (vii) he
dies; or (viii) a resolution of shareholders is approved by a majority of the shares entitled to vote on such matter passed at
a meeting of shareholders called for the purposes of removing the director or for purposes including the removal of the
director or a written special resolution of shareholders is passed by at least 75% of the votes of shares entitled to vote
thereon.
86 Nomad Foods Annual Report
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Mergers
Under Delaware corporate law, one or more constituent corporations may merge into and become
part of another constituent corporation in a process known as a merger. A Delaware corporation may merge with a foreign
corporation as long as the law of the foreign jurisdiction permits such a merger. To effect a merger under Delaware
General Corporation Law § 251, an agreement of merger must be properly adopted and the agreement of merger or a
certificate of merger must be filed with the Delaware Secretary of State. In order to be properly adopted, the agreement of
merger must be adopted by the board of directors of each constituent Delaware corporation by a resolution or unanimous
consent in lieu of a meeting. In addition, the agreement of merger generally must be approved at a meeting of
shareholders of each constituent Delaware corporation by a majority of the outstanding stock of such corporation entitled
to vote, unless the certificate of incorporation provides for a supermajority vote. In general, the surviving corporation is
vested in all of the assets and liabilities of the disappearing corporation or corporations as a result of the merger.
Under the BVI Act, two or more companies may merge or consolidate in accordance with the
statutory provisions. A merger means the merging of two or more constituent companies into one of the constituent
companies, and a consolidation means the uniting of two or more constituent companies into a new company. In order to
merge or consolidate, the directors of each constituent company must approve a written plan of merger or consolidation,
which must be authorized by a resolution of shareholders. One or more companies may also merge or consolidate with
one or more companies incorporated under the laws of jurisdictions outside the British Virgin Islands if the merger or
consolidation is permitted by the laws of the jurisdictions in which the companies incorporated outside the British Virgin
Islands are incorporated. In respect of such a merger or consolidation, a British Virgin Islands company is required to
comply with the provisions of the BVI Act, and a company incorporated outside the British Virgin Islands is required to
comply with the laws of its jurisdiction of incorporation.
Shareholders not otherwise entitled to vote on the merger or consolidation may still acquire the right
to vote if the plan of merger or consolidation contains any provision that, if proposed as an amendment to the
memorandum and articles of association, would entitle them to vote as a class or series on the proposed amendment. In
any event, all shareholders must be given a copy of the plan of merger or consolidation irrespective of whether they are
entitled to vote at the meeting or consent to the written resolution to approve the plan of merger or consolidation.
Inspection of Books and Records
Under Delaware corporate law, any shareholder of a corporation may, upon proper demand, and for
any proper purpose, inspect or make copies of the corporation’s stock ledger, list of shareholders and other books and
records. Members of the public, on payment of the requisite fee, can obtain a copy of a Delaware corporation’s certificate
of incorporation.
Under British Virgin Islands law, members of the general public, on payment of a nominal fee, can
obtain copies of the public records of a company available at the office of the British Virgin Islands Registrar of Corporate
Affairs, including the company’s certificate of incorporation, its memorandum and articles of association (with any
amendments), records of license fees paid to date, any articles of dissolution, any articles of merger and a register of
charges if the company has elected to file such a register.
A shareholder of a company is entitled, on giving written notice to the company, to inspect:
(a)
(b)
(c)
(d)
the memorandum and articles of association;
the register of members;
the register of directors; and
the minutes of meetings and resolutions of shareholders and of those classes of shares
of which he is a shareholder.
In addition, a shareholder may make copies of or take extracts from the documents and records
referred to in (a) through (d) above. However, subject to the memorandum and articles of association of the company, the
directors may, if they are satisfied that it would be contrary to the company’s interests to allow a shareholder to inspect
any document, or part of any document, specified in (b), (c) or (d) above, refuse to permit the shareholder to inspect the
document or limit the inspection of the document, including limiting the making of copies or the taking of extracts from the
records. Where a company fails or refuses to permit a shareholder to inspect a document or permits a shareholder to
inspect a document subject to limitations, that shareholder may apply to the court for an order that he should be permitted
to inspect the document or to inspect the document without limitation.
Nomad Foods Annual Report 87
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Where a company keeps a copy of the register of members or the register of directors at the office
of its registered agent, it is required to notify the registered agent of any changes to the originals of such registers, in
writing, within 15 days of any change; and to provide the registered agent with a written record of the physical address of
the place or places at which the original register of members or the original register of directors is kept. Where the place at
which the original register of members or the original register of directors is changed, the company is required to provide
the registered agent with the physical address of the new location of the records within 14 days of the change of location.
A company is also required to keep at the office of its registered agent or at such other place or
places, within or outside the British Virgin Islands, as the directors determine the minutes of meetings and resolutions of
shareholders and of classes of shareholders, and the minutes of meetings and resolutions of directors and committees of
directors. If such records are kept at a place other than at the office of the company’s registered agent, the company is
required to provide the registered agent with a written record of the physical address of the place or places at which the
records are kept and to notify the registered agent, within 14 days, of the physical address of any new location where
such records may be kept. The Company’s registered agent in the British Virgin Islands is: Intertrust Corporate Services
(BVI) Limited, Ritter House, Wickhams Cay II, Road Town, Tortola, British Virgin Islands.
Conflict of Interest
Under Delaware corporate law, a contract or transaction between a corporation and a director or
officer, or between a corporation and any other organization in which a director or officer has a financial interest or is a
director or officer, is not void or voidable as long as (i) the material facts as to the director’s or officer’s relationship or
interest are disclosed or known and either (A) a majority of the disinterested directors authorizes the contract or
transaction in good faith or (B) the shareholders vote in good faith to approve the contract or transaction or (ii) the contract
or transaction is fair to the corporation when it is authorized, approved or ratified by the board of directors, a committee
thereof or the shareholders. Delaware corporate law permits the corporation to renounce, in its certificate of incorporation
or by action of its board of directors, any interest or expectancy of the corporation in, or in being offered an opportunity to
participate in, specified business opportunities or specified classes or categories of business opportunities that are
presented to the corporation or one or more of its officers, directors or stockholders.
The BVI Act provides that a director shall, forthwith after becoming aware that he is interested in a
transaction entered into or to be entered into by the company, disclose that interest to the board of directors of the
company. The failure of a director to disclose that interest does not affect the validity of a transaction entered into by the
director or the company, so long as the director’s interest was disclosed to the board prior to the company’s entry into the
transaction or was not required to be disclosed because the transaction is between the company and the director himself
and is otherwise in the ordinary course of business and on usual terms and conditions. As permitted by British Virgin
Islands law and our Memorandum and Articles, a director interested in a particular transaction may vote on it, attend
meetings at which it is considered and sign documents on our behalf that relate to the transaction. In addition, if our
directors have other fiduciary obligations, including to other companies on whose board of directors they presently sit and
to other companies whose board of directors they may join in the future, to the extent that they identify business
opportunities that may be suitable for us or other companies on whose board of directors they may sit, our directors are
permitted to honor those pre-existing fiduciary obligations ahead of their obligations to us. Accordingly, they may refrain
from presenting certain opportunities to us that come to their attention in the performance of their duties as directors of
such other entities unless the other companies have declined to accept such opportunities or clearly lack the resources to
take advantage of such opportunities.
Transactions with “Interested Stockholders”
Delaware corporate law contains a business combination statute applicable to Delaware public
corporations whereby, unless the corporation has specifically elected not to be governed by that statute by appropriate
action, it is prohibited from engaging in certain business combinations with an “interested stockholder” for three years
following the date that the person becomes an “interested stockholder.” An “interested stockholder” generally is a person
or group that owns or owned 15% or more of the company’s outstanding voting stock within the past three years. This
statute has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the company in which all
shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which
the shareholder becomes an “interested stockholder,” the board of directors approves either the business combination or
the transaction that resulted in the person becoming an “interested stockholder.”
British Virgin Islands law has no comparable provision. However, although British Virgin Islands law
does not regulate transactions between a company and its significant shareholders, it does provide that these
transactions must be entered into in the bona fide best interests of the company and not with the effect of constituting a
fraud on the minority shareholders.
88 Nomad Foods Annual Report
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Independent Directors
There are no provisions under Delaware corporate law or under the BVI Act that require a majority
of our directors to be independent.
Cumulative Voting
Under Delaware corporate law, cumulative voting for elections of directors is not permitted unless
the company’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the
representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the
votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect
to electing such director. There are no prohibitions on cumulative voting under the laws of the British Virgin Islands, but
our Memorandum and Articles do not provide for cumulative voting.
Shareholders’ Rights under British Virgin Islands Law Generally
The BVI Act provides for certain remedies that may be available to shareholders. Where a company
incorporated under the BVI Act or any of its directors engages in, or proposes to engage in, conduct that contravenes the
BVI Act or the company’s memorandum and articles of association, British Virgin Islands courts can issue a restraining or
compliance order. However, shareholders cannot also bring derivative, personal and representative actions under certain
circumstances. The traditional English basis for shareholders’ remedies has also been incorporated into the BVI Act:
where a shareholder of a company considers that the affairs of the company have been, are being or are likely to be
conducted in a manner likely to be oppressive, unfairly discriminating or unfairly prejudicial to him, he may apply to the
court for an order based on such conduct. In addition, any shareholder of a company may apply to the courts for the
appointment of a liquidator of the company and the court may appoint a liquidator of the company if it is of the opinion that
it is just and equitable to do so.
The BVI Act also provides that any shareholder of a company is entitled to payment of the fair value
of his shares upon dissenting from any of the following: (i) a merger, if the company is a constituent company, unless the
company is the surviving company and the shareholder continues to hold the same or similar shares; (ii) a consolidation, if
the company is a constituent company; (iii) any sale, transfer, lease, exchange or other disposition of more than 50% in
value of the assets or business of the company if not made in the usual or regular course of the business carried on by
the company but not including (a) a disposition pursuant to an order of the court having jurisdiction in the matter, (b) a
disposition for money on terms requiring all or substantially all net proceeds to be distributed to the shareholders in
accordance with their respective interest within one year after the date of disposition, or (c) a transfer pursuant to the
power of the directors to transfer assets for the protection thereof; (iv) a redemption of 10% or fewer of the issued shares
of the company required by the holders of 90% or more of the shares of the company pursuant to the terms of the BVI Act;
and (v) an arrangement, if permitted by the court.
Generally any other claims against a company by its shareholders must be based on the general
laws of contract or tort applicable in the British Virgin Islands or their individual rights as shareholders as established by a
company’s memorandum and articles of association.
Foreign Private Issuer Exemption
As a “foreign private issuer,” as defined by the SEC, we are permitted to follow certain corporate
governance practices of our home country, the British Virgin Islands, instead of those otherwise required under the NYSE
for domestic issuers. While we voluntarily follow most NYSE corporate governance rules, we intend to take advantage of
the following limited exemptions:
•
Unlike NYSE corporate governance rules, under BVI law, there is no requirement that our board of
directors consist of a majority of independent directors and our independent directors are not
required to hold executive sessions. Currently, however only seven out of our eleven board
members are independent based on NYSE independence standards. Also, while our board’s non-
management directors will meet regularly in executive session without management, our board
does not intend to hold an executive session of only independent directors at least once a year as
called for by the NYSE.
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Nomad Foods Annual Report 89
•
•
The NYSE rules applicable to domestic issuers require disclosure within four business days of any
determination to grant a waiver of the code of business conduct and ethics to directors and
officers. Although we will require board approval of any such waiver, we may choose not to disclose
the waiver in the manner set forth in the NYSE rules, as permitted by the foreign private issuer
exemption.
We are exempt from the rules and regulations under the Exchange Act and NYSE related to the
furnishing and content of proxy statements. Therefore, we intend to hold annual shareholder
meetings in accordance with the corporate governance practices of the British Virgin Islands and
our Memorandum and Articles of Association. Similarly, with respect to matters on which
shareholders will have a right to vote, we intend to comply with corporate governance practices of
the British Virgin Islands and the voting requirements under the NYSE rules applicable to foreign
private issuers.
Item 16H.
Mine Safety Disclosure
None.
Item 17.
Financial Statements
Not Applicable.
90 Nomad Foods Annual Report
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Item 18.
Financial Statements
The following financial statements, together with the report of PricewaterhouseCoopers LLP thereon, are filed
as part of this annual report:
NOMAD FOODS LIMITED AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Financial Position
Consolidated Statements of Profit or Loss
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Page
F-1
F-4
F-5
F-6
F-7
F-10
F-11
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Nomad Foods Annual Report 91
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Nomad Foods Limited
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying Consolidated Statements of Financial Position of Nomad Foods Limited and its
subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related Consolidated Statements of Profit or
Loss, of Comprehensive Income, of Changes in Equity, and of Cash Flows for each of the three years in the period
ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial
statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2019 in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board and in conformity with International
Financial Reporting Standards as adopted by the European Union. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item
15. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered
with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide a reasonable basis for our opinions.
F-1 Nomad Foods Annual Report
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Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i) relate
to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which
they relate.
Goodwill impairment assessment
As described in Note 3, 4 and 13 to the consolidated financial statements, the Company’s consolidated goodwill
balance was €1,862.9 million at December 31, 2019. Management performs an annual review of the carrying amount
of the goodwill to identify whether there is any impairment to these carrying values. Potential impairment is identified by
comparing the value in use of the cash-generating unit (“CGU”) to its carrying value, including goodwill. Value in use is
calculated as the net present value of the projected risk-adjusted cash flows of each CGU. Estimating value in use
required various management judgments and assumptions including revenue and profit margin growth rates, long-term
growth rate and discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment
assessment is a critical audit matter are there was significant judgment by management when developing the value in
use of the CGUs using the discounted cash flows technique. This in turn led to a high degree of auditor judgment,
subjectivity, and effort in performing procedures and evaluating audit evidence obtained related to management’s cash
flow forecasts and significant assumptions, including revenue and profit margin growth rates, long-term growth rate and
discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to
assist in performing these procedures and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to management’s goodwill impairment assessment, including controls over the valuation of the
Company’s CGUs. These procedures also included, among others, testing management’s process for developing the
value in use estimates; evaluating the appropriateness of the discounted cash flow model; testing the completeness,
accuracy and relevance of underlying data used in the model; and evaluating the reasonableness of the significant
assumptions used by management including the revenue and profit margin growth rates, long-term growth rate and
discount rate. Evaluating the reasonableness of management’s assumptions related to the Company’s cash flow
forecasts involved evaluating whether the revenue and profit margin growth rates were reasonable considering (i) the
current and past performance of the CGUs, (ii) the consistency with external market and industry data, (iii) whether
these assumptions were consistent with evidence obtained in other areas of the audit and (iv) performing sensitivity
analyses. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s
discounted cash flow model, and certain significant assumptions, including the long-term growth rate and discount rate.
Nomad Foods Annual Report F-2
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Uncertain tax positions
As described in Note 3, 4 and 11 to the consolidated financial statements, the Company operates in many different
jurisdictions and in some of these, certain matters are under discussion with local tax authorities. These discussions
are often complex and can take many years to resolve, and are in different stages with respect to assessments,
appeals and refunds. Where tax exposures can be quantified, a provision is made based on management’s estimates
and judgments with regard to the amounts expected to be paid to the relevant tax authority. As of December 31, 2019,
the current tax payables of €217.2 million and deferred tax assets of €96.4 million included €137.8 million of provisions
for tax uncertainties. As management has further disclosed, given the inherent uncertainties in assessing the outcomes
of these exposures, the Company could in future periods experience adjustments to these accruals.
The principal considerations for our determination that performing procedures relating to uncertain tax positions is a
critical audit matter are there was significant judgment by management when determining uncertain tax positions,
including a high degree of estimation uncertainty relative to the numerous and complex tax laws, frequency of tax
audits, and potential for significant adjustments as a result of such audits. This in turn led to a high degree of auditor
judgment, subjectivity, and effort in performing procedures to evaluate the timely identification and accurate
measurement of uncertain tax positions. Also, the evaluation of audit evidence available to support the tax liabilities for
uncertain tax positions is complex and required significant auditor judgment as the nature of the evidence is often
highly subjective, and the audit effort involved the use of professionals with specialized skill and knowledge to assist in
evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of
controls relating to the identification and recognition of the liability for uncertain tax positions, and controls addressing
completeness of the uncertain tax positions, as well as controls over measurement of the liability. These procedures
also included, among others, (i) testing the information used in the calculation of the liability for uncertain tax positions;
(ii) testing the calculation of the liability for uncertain tax positions by jurisdiction, including management’s assessment
of the technical merits of tax positions and estimates of the amount of tax benefit expected to be sustained; (iii) testing
the completeness of management’s assessment of both the identification of uncertain tax positions and possible
outcomes of each uncertain tax position; and (iv) evaluating the status and results of income tax audits with the
relevant tax authorities. Professionals with specialized skill and knowledge were used to assist in the evaluation of the
completeness and measurement of the Company’s uncertain tax positions, including evaluating the reasonableness of
management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of
potential benefit to be realized, the application of relevant tax laws, and estimated interest and penalties.
/s/ PricewaterhouseCoopers LLP
London, United Kingdom
February 27, 2020
We have served as the Company’s or its predecessor's1 auditor since 2006.
1Nomad Foods Europe Holdings Limited (previously Iglo Foods Holdings Limited) and its subsidiaries
F-3 Nomad Foods Annual Report
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Consolidated Statements of Financial Position
Non-current assets
Goodwill
Intangibles
Property, plant and equipment
Other non-current assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Current assets
Cash and cash equivalents
Inventories
Trade and other receivables
Indemnification assets
Short-term investments
Derivative financial instruments
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax payable
Provisions
Loans and borrowings
Derivative financial instruments
Total current liabilities
Non-current liabilities
Loans and borrowings
Employee benefits
Other non-current liabilities
Provisions
Derivative financial instruments
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital and capital reserve
Share-based compensation reserve
Founder Preferred Shares Dividend Reserve
Translation reserve
Cash flow hedging reserve
Accumulated deficit reserve
Equity attributable to owners of the parent
Non-controlling interests
Total equity
December 31,
2019
December 31,
2018
Note
€m
€m
13
13
12
18
34
16
20
17
18
19
34
34
22
24
21
34
21
23
22
24
34
16
25
26
27
28
29
1,862.9
2,083.1
422.4
1.9
17.5
96.4
4,484.2
826.1
323.2
206.7
35.4
25.0
3.9
1,420.3
5,904.5
525.2
217.2
40.9
27.7
12.1
823.1
1,847.6
237.5
2.7
5.9
32.8
398.2
2,524.7
3,347.8
2,556.7
2,095.4
22.6
370.1
94.8
(13.2)
(11.8)
2,557.9
(1.2)
2,556.7
1,861.0
2,087.2
348.8
2.6
35.7
68.7
4,404.0
327.6
342.5
173.9
79.4
—
13.4
936.8
5,340.8
571.6
201.2
44.3
21.4
1.5
840.0
1,742.9
200.6
1.3
69.4
35.4
392.1
2,441.7
3,281.7
2,059.1
1,748.5
9.4
372.6
88.8
8.5
(167.9)
2,059.9
(0.8)
2,059.1
The accompanying notes are an integral part of these consolidated financial statements.
Nomad Foods Annual Report F-4
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Consolidated Statements of Profit or Loss
Revenue
Cost of sales
Gross profit
Other operating expenses
Exceptional items
Operating profit
Finance income
Finance costs
Net financing costs
Profit before tax
Taxation
Profit for the period
Attributable to:
Equity owners of the parent
Non-controlling interests
Earnings per share:
Basic earnings per share
Diluted earnings per share
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
Note
5
€m
2,324.3
(1,626.4)
€m
2,172.8
(1,519.3)
€m
1,956.6
(1,357.2)
7
6
10
10
11
697.9
(359.9)
(54.5)
283.5
2.5
(75.7)
(73.2)
210.3
(56.7)
153.6
154.0
(0.4)
153.6
653.5
(352.7)
(17.7)
283.1
1.6
(57.6)
(56.0)
227.1
(56.6)
170.5
171.2
(0.7)
170.5
30
30
€0.80
€0.78
€0.97
€0.97
599.4
(319.3)
(37.2)
242.9
7.2
(81.6)
(74.4)
168.5
(32.0)
136.5
136.5
—
136.5
€0.78
€0.74
The accompanying notes are an integral part of these consolidated financial statements.
F-5 Nomad Foods Annual Report
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Consolidated Statements of Comprehensive Income
Profit for the period
Other comprehensive (loss)/income:
Actuarial (losses)/gains on defined benefit pension plans
Taxation credit/(charge) on remeasurement of defined benefit pension
plans
Items not reclassified to the Consolidated Statement of Profit or
Loss
Gain/(loss) on investment in foreign subsidiary, net of hedge
Effective portion of changes in fair value of cash flow hedges
Taxation credit/(charge) relating to components of other
comprehensive income
Items that may be subsequently reclassified to the Consolidated
Statement of Profit or Loss
Other comprehensive (loss)/income for the period, net of tax
Total comprehensive income for the period
Attributable to:
Equity owners of the parent
Non-controlling interests
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
Note
€m
€m
€m
153.6
170.5
136.5
23
11
29
11
(35.9)
(12.9)
6.7
(29.2)
6.0
(27.3)
5.6
(15.7)
(44.9)
108.7
109.1
(0.4)
108.7
3.3
(9.6)
5.6
15.5
(4.0)
17.1
7.5
178.0
178.7
(0.7)
178.0
2.9
(2.0)
0.9
(0.8)
(16.4)
5.0
(12.2)
(11.3)
125.2
125.2
—
125.2
The accompanying notes are an integral part of these consolidated financial statements.
96214_164pg_Body.indd 93
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Nomad Foods Annual Report F-6
Consolidated Statements of Changes in Equity
Consolidated Statements of Changes in Equity
Share
capital and
capital
reserve
Share-based
compensation
reserve
Balance at January 1, 2017
Profit for the year
Share
capital and
capital
reserve
Note
€m
Share-based
compensation
reserve
1,800.7
—
€m
Founder
preferred
shares
dividend
reserve
€m
Note
€m
Cash flow
hedging
reserve
493.4
—
Accumulated
deficit
reserve
€m
€m
€m
Equity
attributable
84.0
to owners
of the
parent
—
€m
Other comprehensive (loss)/income for
Balance at January 1, 2017
the year
Profit for the year
Other comprehensive (loss)/income for
Total comprehensive (loss)/income
1,800.7
—
€m
1.0
Translation
reserve
—
€m
84.0
—
—
(0.8)
—
—
(0.8)
—
—
—
(0.7)
—
—
2.6
—
1.9
83.2
2.9
1.0
—
—
493.4
—
—
—
(177.1)
—
—
(0.5)
—
(0.7)
2.6
0.6
—
—
—
—
—
—
—
—
—
(177.1)
(0.5)
0.6
—
(177.0)
1,623.7
—
493.4
1.9
(177.0)
2.9
1,623.7
Founder
preferred
shares
dividend
reserve
€m
Translation
reserve
Cash flow
hedging
reserve
Accumulated
deficit
reserve
Equity
attributable
to owners
of the
parent
Non-
controlling
interests
€m
€m
€m
€m
8.4
Non-
controlling
interests
—
€m
—
(11.4)
—
—
(11.4)
—
—
—
—
—
—
—
—
—
—
—
—
(3.0)
Total
Equity
(485.0)
136.5
€m
1,902.5
136.5
0.9
(11.3)
137.4
—
125.2
(177.1)
(0.5)
—
—
—
(0.1)
2.6
1,902.5
136.5
(11.3)
125.2
(177.1)
(0.5)
(0.1)
2.6
(175.1)
1,852.6
—
(347.6)
(175.1)
1,852.6
Total
Equity
€m
1,902.5
136.5
(11.3)
125.2
(177.1)
(0.5)
(0.1)
2.6
(175.1)
1,852.6
—
—
—
—
—
—
—
—
—
—
8.4
—
(11.4)
(11.4)
—
—
—
—
—
—
—
—
—
—
—
—
(3.0)
493.4
(485.0)
136.5
1,902.5
136.5
(0.8)
0.9
137.4
—
—
—
—
(11.3)
(0.8)
—
125.2
(177.1)
(0.5)
—
—
—
(0.1)
2.6
—
(347.6)
(175.1)
—
1,852.6
83.2
the year
for the year
for the year
Total comprehensive (loss)/income
Repurchase of ordinary shares
Repurchase of ordinary shares
Listing and share transaction costs
Listing and share transaction costs
Vesting of Non-Executive Restricted
Vesting of Non-Executive Restricted
Stock award
Stock award
Share based payment charge
Share based payment charge
Total transactions with owners,
Total transactions with owners,
recognized directly in equity
recognized directly in equity
Balance as of December 31, 2017
Balance as of December 31, 2017
F-7 Nomad Foods Annual Report
F-7 Nomad Foods Annual Report
F-7 Nomad Foods Annual Report 2019
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Consolidated Statements of Changes in Equity (Continued)
Consolidated Statements of Changes in Equity (Continued)
Share
capital and
capital
reserve
Share-based
compensation
reserve
Share
capital and
capital
reserve
Note
Share-based
€m
compensation
reserve
Founder
preferred
shares
dividend
reserve
€m
Translation
reserve
Cash flow
€m
hedging
reserve
Accumulated
deficit
reserve
€m
Translation
reserve
Equity
attributable
to owners
of the
parent
Founder
preferred
shares
dividend
reserve
€m
493.4
(3.0)
—
—
€m
(347.6)
18.1
€m
83.2
1,852.6
—
18.1
Cash flow
hedging
reserve
Non-
€m
controlling
interests
(3.0)
€m
—
—
—
Equity
attributable
to owners
of the
parent
Non-
controlling
interests
€m
€m
Accumulated
deficit
reserve
€m
Total
Equity
€m
(347.6)
18.1
1,852.6
18.1
1,852.6
18.1
€m
1,623.7
—
1,623.7
—
—
—
Balance at January 1, 2018
Balance at January 1, 2018
Change in accounting policy (IFRS 9)
Change in accounting policy (IFRS 9)
Restated Equity as at January 1,
Restated Equity as at January 1,
Note
2018
2018
Profit/(loss) for the year
Profit/(loss) for the year
Other comprehensive income/(loss) for
Other comprehensive income/(loss) for
the period
the period
for the period
Total comprehensive income/(loss)
Total comprehensive income/(loss)
Founder Preferred Shares Annual
for the period
Dividend Amount
Founder Preferred Shares Annual
Vesting of Non-Executive Restricted
Stock award
Dividend Amount
Issue of ordinary shares
8
Vesting of Non-Executive Restricted
Share based payment charge
8
8
Stock award
Reclassification of awards for
Issue of ordinary shares
settlement of tax liabilities
Non-controlling interests on acquisition
Share based payment charge
of subsidiary
26
14
27
120.8
€m
1,623.7
—
2.9
—
€m
493.4
—
1,623.7
2.9
—
—
493.4
—
—
—
—
—
—
—
—
(120.8)
0.6
3.4
—
—
—
27
8
8
8
120.8
(0.8)
(3.3)
13.0
0.6
(2.4)
3.4
—
—
—
—
—
—
—
Reclassification of awards for
Total transactions with owners,
recognized directly in equity
settlement of tax liabilities
Balance as of December 31, 2018
Non-controlling interests on acquisition
of subsidiary
124.8
1,748.5
26
6.5
9.4
—
(120.8)
372.6
14
—
Total transactions with owners,
recognized directly in equity
Balance as of December 31, 2018
124.8
1,748.5
€m
2.9
83.2
—
—
2.9
83.2
—
—
5.6
—
5.6
—
—
—
—
—
—
(0.8)
(3.3)
—
13.0
—
—
(2.4)
88.8
—
6.5
9.4
493.4
(3.0)
—
—
(329.5)
171.2
83.2
1,870.7
171.2
—
(3.0)
—
(0.7)
—
1,870.7
170.5
(329.5)
171.2
1,870.7
171.2
(0.7)
(9.6)
7.5
5.6
—
11.5
7.5
(9.6)
161.6
178.7
(0.7)
178.0
7.5
5.6
—
11.5
—
161.6
—
178.7
(0.7)
178.0
11.5
11.5
—
—
—
—
(120.8)
—
—
—
—
—
8.5
—
—
—
—
—
(120.8)
372.6
—
—
—
—
—
—
—
—
—
—
(0.2)
0.1
13.0
(2.4)
—
—
(167.9)
10.5
—
2,059.9
—
—
88.8
—
—
—
—
—
—
—
—
(0.1)
(0.1)
—
(0.8)
—
(0.2)
0.1
13.0
(2.4)
(0.1)
10.4
2,059.1
—
—
—
—
—
—
—
(0.2)
0.1
13.0
(2.4)
—
—
8.5
—
(167.9)
10.5
2,059.9
—
—
—
—
—
—
—
—
—
Total
Equity
€m
1,852.6
18.1
1,870.7
170.5
7.5
—
(0.2)
0.1
13.0
(2.4)
(0.1)
(0.1)
(0.1)
(0.8)
10.4
2,059.1
Nomad Foods Annual Report F-8
Nomad Foods Annual Report F-8
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Nomad Foods Annual Report 2019 F-8
Consolidated Statements of Changes in Equity (continued)
Consolidated Statements of Changes in Equity (continued)
Share
capital
and
capital
reserve
€m
Balance at January 1, 2019
Note
Change in accounting policy (IFRS 16)
Balance at January 1, 2019
Restated Equity as at January 1, 2019
Change in accounting policy (IFRS 16)
Restated Equity as at January 1, 2019
Profit/(loss) for the year
Profit/(loss) for the year
Other comprehensive income/(loss) for the
Other comprehensive income/(loss) for the
year
year
—
Total comprehensive income/(loss) for the
Total comprehensive income/(loss) for the
year
—
year
1,748.5
—
1,748.5
—
27
award
Founder Preferred Shares Annual Dividend
Founder Preferred Shares Annual Dividend
Amount
Amount
Vesting of Non-Executive Restricted Stock
award
Vesting of Non-Executive Restricted Stock
Issue of ordinary shares
Listing and share transaction costs
Issue of ordinary shares
Share based payment charge
Listing and share transaction costs
Reclassification of awards for settlement of
tax liabilities
Share based payment charge
Total transactions with owners,
recognized directly in equity
Reclassification of awards for settlement of
Balance as of December 31, 2019
8
25
25
8
26
tax liabilities
2.5
—
355.5
(11.1)
—
—
346.9
2,095.4
Total transactions with owners,
recognized directly in equity
Share
capital
and
capital
reserve
Founder
preferred
shares
dividend
reserve
1,748.5
€m
—
9.4
1,748.5
—
9.4
—
—
372.6
—
372.6
—
—
—
—
—
—
—
—
(2.5)
2.5
—
(0.8)
(1.3)
—
355.5
14.9
(11.1)
—
0.4
—
—
—
—
—
13.2
22.6
(2.5)
370.1
—
346.9
€m
27
8
25
25
8
26
The accompanying notes are an integral part of these consolidated financial statements.
Balance as of December 31, 2019
2,095.4
Note
Share-based
compensation
reserve
€m
€m
Translation
reserve
€m
Cash flow
hedging
reserve
Accumulated
deficit
€m
Share-based
compensation
reserve
Founder
preferred
shares
dividend
reserve
Translation
reserve
Cash flow
hedging
reserve
Equity
attributable
to owners
of the
88.8
parent
€m
—
2,059.9
31.3
88.8
2,091.2
—
154.0
€m
Non-
controlling
8.5
interests
€m
—
(0.8)
8.5
—
(0.8)
—
(0.4)
Equity
attributable
to owners
of the
parent
Accumulated
deficit
Non-
controlling
interests
Total Equity
€m
€m
€m
€m
Total Equity
€m
(167.9)
31.3
2,059.1
(136.6)
31.3
154.0
2,090.4
153.6
2,059.9
31.3
2,091.2
154.0
(0.8)
2,059.1
—
(0.8)
(0.4)
31.3
2,090.4
153.6
€m
€m
9.4
—
88.8
9.4
—
—
88.8
—
372.6
—
8.5
372.6
—
—
8.5
—
€m
(167.9)
31.3
(136.6)
154.0
—
6.0
(21.7)
6.0
—
(21.7)
—
—
(29.2)
6.0
(44.9)
(21.7)
—
(29.2)
(44.9)
(44.9)
—
(44.9)
124.8
109.1
6.0
(0.4)
(21.7)
108.7
124.8
109.1
(0.4)
108.7
—
—
—
—
(0.8)
—
(1.3)
—
—
—
14.9
—
94.8
0.4
13.2
22.6
—
—
—
—
—
—
—
(13.2)
(2.5)
—
—
—
—
—
—
—
—
—
—
—
—
(11.8)
—
—
(0.8)
354.2
—
(11.1)
14.9
—
—
0.4
—
357.6
2,557.9
—
—
—
—
—
—
—
—
—
—
—
—
—
(1.2)
—
—
(0.8)
354.2
(11.1)
14.9
0.4
357.6
2,556.7
—
—
—
—
—
—
—
(0.8)
354.2
(11.1)
14.9
0.4
(2.5)
370.1
—
94.8
—
(13.2)
—
(11.8)
357.6
2,557.9
(1.2)
2,556.7
—
—
—
—
—
—
—
—
(0.8)
354.2
(11.1)
14.9
0.4
357.6
The accompanying notes are an integral part of these consolidated financial statements.
F-9 Nomad Foods Annual Report
F-9 Nomad Foods Annual Report
F-9 Nomad Foods Annual Report 2019
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Consolidated Statements of Cash Flows
Cash generated from operations before tax and exceptional items
Cash flows relating to exceptional items
Tax paid
Net cash flows from operating activities
Cash flows from investing activities
Purchase of subsidiaries, net of cash acquired
Purchase of property, plant and equipment and intangibles
Purchase of investments
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of Ordinary Shares
Share issuance costs
Proceeds from new loans and notes
Repayment of loan principal
Payment of lease liabilities
Payment of financing fees
Repurchase of ordinary shares
Interest paid
Interest received
Other financing cash flows
Net cash provided by/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rate fluctuations
Cash and cash equivalents at end of period
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
376.9
(15.9)
(45.6)
315.4
(1.5)
(47.3)
(25.0)
(73.8)
354.1
(11.1)
2.0
(22.2)
(21.8)
—
—
(48.4)
2.4
(3.6)
251.4
493.0
327.6
4.2
824.8
397.6
(43.4)
(32.9)
321.3
(471.6)
(41.6)
—
(513.2)
0.1
—
355.6
(5.9)
—
(2.6)
—
(45.3)
0.2
0.6
302.7
110.8
219.2
(2.4)
327.6
358.5
(99.5)
(65.2)
193.8
—
(42.6)
—
(42.6)
—
—
1,470.5
(1,469.5)
(1.6)
(16.7)
(177.6)
(48.8)
0.3
1.6
(241.8)
(90.6)
329.5
(19.7)
219.2
Note
32
14
34
25
25
20
20
The accompanying notes are an integral part of these consolidated financial statements.
96214_164pg_Body.indd 97
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Nomad Foods Annual Report F-10
Notes to the Consolidated Financial Statements
1)
General information
Nomad Foods Limited (the “Company” or “Nomad”) was incorporated in the British Virgin Islands on April 1,
2014. The address of Nomad’s registered office is Nemours Chambers, Road Town, Tortola, British Virgin Islands. The
Company is domiciled for tax in the United Kingdom.
Nomad Foods Limited (NYSE: NOMD) is a leading frozen foods company building a global portfolio of best-
in-class food companies and brands within the frozen category and in the future across the broader food sector. Nomad
produces, markets and distributes brands in 17 countries and has the leading market share in Western Europe. The
Company’s portfolio of leading frozen food brands includes Birds Eye, Iglo, Findus, Goodfella's and Aunt Bessie's.
2)
Basis of preparation
The consolidated financial statements of Nomad and its subsidiaries (the “Company” or “Nomad”) have
been prepared in accordance with International Financial Reporting Standards issued by the International Accounting
Standards Board. These consolidated financial statements are also in accordance with International Financial
Reporting Standards as adopted by the European Union. References to "Iglo" or "Findus" refer to the groups of
companies separately acquired by Nomad in June and November 2015, respectively.
Impact of adoption of IFRS 16
On January 1, 2019, the Company adopted IFRS 16 Leases, which sets out the principles for the
recognition, measurement, presentation and disclosure of leases and replaces IAS 17 ‘Leases’. The standard
introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with
a term of more than 12 months, unless the underlying asset is of low value. The Standard also contains enhanced
disclosure requirements for lessees.
The Company has applied the modified retrospective approach allowed by IFRS 16 and so comparative
figures have not been restated. All right-of-use assets have been measured at the amount of the lease liability on
adoption (adjusted for any prepaid or accrued lease expenses). The Company has also elected to apply the practical
expedients in IFRS 16 for short-term leases and leases for which the underlying asset is of low value. The weighted-
average incremental borrowing rate for lease liabilities initially recognized as of January 1, 2019, was 2.9%, with the
exception of a significant lease of a cold store in Bjuv, Sweden for which a rate of 6.3% has been used to reflect the
specific nature of the asset and length of the lease term.
As a result of the adoption of this standard, the Company has capitalized eligible operating leases under
the classification right-of-use assets within property, plant & equipment. The total amount capitalized on transition is
€83.9 million. The discounted present value of lease payments has also been recognized as a lease payable of €120.8
million.
As a consequence of transition, the onerous lease recognized in relation to a factory and cold store in
Bjuv, Sweden as presented in Note 24 of €66.9 million has been released as an adjustment to opening equity
attributable to the parent as at January 1, 2019. The value of the right-of-use-asset recognized in relation to this lease
has been subject to an impairment review on transition so that the value of the asset recognized is €35.6 million less
than the lease payable. The net effect of these two adjustments of €31.3 million has been recognized as an increase in
equity attributable to the parent.
Payments for leases recognized in the Statement of Financial Position have become financing cash
flows. As a result, the Company has seen a reduction in operating cash outflows, with a corresponding increase in
financing cash outflows, based on leases in place as of the transition date.
Within the Statement of Profit or Loss, a straight-line depreciation expense on the right-of-use-asset over
the life of the lease and a front-loaded interest expense on the lease payable has replaced the operating lease
expense. The actual impact of IFRS 16 on our profits depends not only on the lease agreements in effect at the time of
adoption but also on new lease agreements entered into or terminated in 2019. The profit before tax for the year ended
December 31, 2019, has been negatively impacted by €2.8 million as a result of adopting the new rules. Adjusted
EBITDA for the year ended December 31, 2019, has increased by €17.7 million as the operating lease expenses were
previously included within Adjusted EBITDA but the depreciation on the right-of-use-asset for the year ended
December 31, 2019, of €16.1 million as well as the interest on the lease liability are excluded. The impact of IFRS 16
adversely impacted EPS by €0.01.
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Summary of adjustments to the Statement of Financial Position arising from application of IFRS 16 as of
January 1, 2019:
Property, plant and equipment
Current loans and borrowings
Non-current loans and borrowings
Current provisions
Non-current provisions
Trade and other payables
Accumulated deficit reserve
Opening balance
as reported
Transition
adjustments
Opening balance
IFRS 16
€m
€m
€m
348.8
(21.4)
(1,742.9)
(44.3)
(69.4)
—
167.9
83.9
(20.4)
(100.4)
3.6
63.3
1.3
(31.3)
432.7
(41.8)
(1,843.3)
(40.7)
(6.1)
1.3
136.6
Reconciliation from operating lease commitments to lease liability
On adoption of IFRS 16, the group recognized lease liabilities in relation to leases which had previously
been classified as ‘operating leases’ under the principles of IAS 17 Leases. These liabilities were measured at the
present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of
January 2019.
Operating lease commitments disclosed as at December 31, 2018
Discounted using the incremental borrowing rate at January 1, 2019
Less: short-term and low value leases recognized on a straight-line basis as expense
Less: contracts assessed as service agreements
Add: adjustments as a result of a different treatment of extension and termination options
Lease liability as at January 1, 2019
Amended standards early adopted
€m
181.6
(54.9)
(2.0)
(8.1)
4.2
120.8
The Company has elected to early adopt the ‘Amendments to IAS 39 and IFRS 7 Interest Rate
Benchmark Reform’ issued in September 2019. In accordance with the transition provisions, the amendments have
been adopted retrospectively to hedging relationships that existed at the start of the reporting period and to the amount
accumulated in the cash flow hedge reserve at that date.
The amendments provide temporary relief from applying specific hedge accounting requirements to
hedging relationships directly affected by IBOR reform. The reliefs have the effect that IBOR reform should not
generally cause hedge accounting to terminate. However, any hedge ineffectiveness continues to be recorded in the
Statement of Profit or Loss.
In summary, the reliefs provided by the amendments that apply are:
• When considering the ‘highly probable’ requirement, the Company has assumed that the LIBOR
interest rate on which our hedged debts are based does not change as a result of IBOR reform.
• In assessing whether the hedge is expected to be highly effective on a forward-looking basis, the
Company has assumed that the LIBOR interest rate on which the cash flows of the hedged debt and the
interest rate swap that hedges it are based is not altered by IBOR reform.
• The Company will not discontinue hedge accounting during the period of IBOR-related uncertainty
solely because the retrospective effectiveness falls outside the required 80-125% range.
• The Company has not recycled the cash flow hedge reserve relating to the period after the reforms are
expected to take effect.
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Nomad Foods Annual Report F-12
Note 33 provides the required disclosures of the uncertainty arising from IBOR reform for hedging
relationships for which the reliefs have been applied.
Other
The Company’s financial statements and notes are presented in the reporting currency of millions of
Euros. All financial information has been rounded to the nearest €0.1 million, except where otherwise indicated.
The consolidated financial statements were approved for issuance by the Board of Directors of Nomad
Foods Limited on February 25, 2020. The Directors have, at the time of approving the financial statements, a
reasonable expectation that Nomad has adequate resources to continue in operational existence for the foreseeable
future given the cash funds available and the current forecast cash outflows. Thus, Nomad continues to adopt the
going concern basis of accounting in preparing the financial statements.
3)
Accounting policies
The accounting policies set out below have, unless otherwise stated, been applied consistently.
Judgments made by the Directors in the application of these accounting policies that have a significant effect on the
financial statements and key sources of estimation uncertainty are discussed in Note 4.
3.1
Measurement convention
The financial statements are prepared on the historical cost basis with the exception
of derivative financial instruments, business combinations, share based payments, and founder
preferred shares which are stated at fair value.
3.2
Business combination
The Company uses the acquisition method to account for business
combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the
assets transferred, the liabilities incurred and the equity interest issued by the Company. The
consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition
date. Acquisition-related costs are expensed as incurred.
Non-controlling interests arise from business combinations in which the Company
acquires less than a 100 per cent interest. Non-controlling interests are initially measured at either fair
value or at the non-controlling interest’s proportionate share of the fair value of the acquiree’s
identifiable net assets. Nomad determines on a transaction by transaction basis which measurement
method is used.
The excess of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the acquisition-date fair value of any previous equity interest in the
acquiree over the fair value of the identifiable net assets is recorded as goodwill.
Where selling shareholders have contractually agreed to indemnify Nomad Foods
Limited for contingent liabilities, an indemnification asset is recognized equivalent to the fair value of
the liability recognized by Nomad. The indemnification asset is deducted from consideration
transferred for the business combination. The indemnification asset value will subsequently be
revised where revisions are made to the value of the liability or where there are doubts over the ability
to recover losses from the selling shareholders.
3.3
Basis of consolidation
The consolidated financial statements include the accounts of the Company and its
subsidiaries. Intercompany balances and transactions, and any unrealized income and expenses
arising from intra-group transactions are eliminated. Accounting policies are applied consistently
across the Company.
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Subsidiaries are all entities (including structured entities) over which Nomad has
control; directly or indirectly. The Company controls an entity when the Company is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date on which
control is transferred to the Company. They are deconsolidated from the date that control ceases.
Where the Company owns less than a 100 per cent interest in a subsidiary, a non-
controlling interest is recognized. The carrying amount of non-controlling interests is increased or
decreased by the non-controlling interest’s share of subsequent changes in equity and payments to
the non-controlling interest. Total comprehensive income is attributed to the non-controlling interests
even if this results in the non-controlling interests having a negative balance.
3.4
Foreign currency
i)
Foreign currency transactions
Transactions in foreign currencies (currencies other than the
functional currency) are translated into the functional currency at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated into the functional currency at the
foreign exchange rate ruling the financial year end. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies at year end
exchange rates are generally recognized in profit or loss. They are deferred in equity
if they relate to qualifying cash flow hedges, qualifying net investment hedges or are
attributable to part of a net investment in a foreign operation.
Non-monetary assets and liabilities in a foreign currency are
translated into the functional currency to establish historical cost, using the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated
in foreign currencies that are stated at fair value are translated at foreign exchange
rates ruling at the date the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as part of the fair value gain or
loss.
The revenues and expenses of foreign operations are translated at
an average rate for the period (unless this is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transaction).
ii)
Assets and liabilities of foreign operations
For the purposes of presenting consolidated financial statements, the
assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on consolidation, are translated at foreign exchange rates ruling
at the financial year ended December 31, 2019 of £1:€1.17 (December 31, 2018: £1:
€1.11, December 31, 2017: £1:€1.13). The revenues and expenses of foreign
operations are translated at an average rate for the period where this rate
approximates to the foreign exchange rates ruling at the dates of the transactions.
Foreign exchange gains and losses that relate to these assets and
liabilities are presented in the Consolidated Statement of Profit or Loss within ‘finance
income or costs’, except where hedge accounting applies.
iii)
Net investment in foreign operations
Exchange differences arising from the translation of foreign
operations and of related qualifying hedges are taken directly to the translation
reserve within equity. They are realized through the Consolidated Statement of Profit
or Loss upon disposal of the related foreign operation.
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3.5
Goodwill
Goodwill represents amounts arising on acquisition of subsidiaries. Goodwill is the
difference between the cost of the acquisition and the fair value of the net identifiable assets
acquired.
Goodwill is stated at cost less any accumulated impairment losses. Gains and losses
on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is not monitored below the operating segment. Goodwill is not amortized but
is tested annually for impairment.
3.6
Other intangible assets
Intangible assets acquired separately are recorded at cost and those acquired as
part of a business combination are recorded at fair value as at the date of acquisition.
i)
Computer software
Capitalized software costs include the cost of acquired computer
software licenses and costs that are directly associated with the design, construction
and testing of such software where this relates to a major business system. Costs
associated with identifying, sourcing, evaluating or maintaining computer software
are recognized as an expense within other operating expenses as incurred.
The assets are stated at cost less accumulated amortization and
impairment losses. Software costs are amortized by equal monthly installments over
their estimated useful economic life of five to seven years once the software is
capable of being brought into use.
ii)
Brands
Based on the market position of the brands, the significant levels of
investment in advertising and promoting the brands, and the fact that Goodfella's and
Aunt Bessie's brands have been established for over 20 years, with the Birds Eye,
Iglo and Findus brands established for over 50 years, the Directors consider that the
brands have indefinite lives. Therefore these brands are not amortized, but instead
held at historical cost less provision for any impairment.
Brands that are deemed to not have an indefinite life are being
amortized by equal monthly installments within other operating expenses over the
course of their remaining useful economic life.
iii)
Customer relationships
Long standing Food Service customer relationships have been
identified as intangible assets as part of the Findus Acquisition. These are deemed to
not have an indefinite life and are being amortized by equal monthly installments
within other operating expenses over 14 years.
3.7
Impairment of non-current assets
The carrying amounts of the Company’s non-current assets are reviewed annually to
determine whether there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount is estimated. Impairment losses are recognized in the Consolidated Statement of
Profit or Loss in the period in which they arise. For goodwill and assets that have an indefinite useful
life an impairment review is performed at least annually.
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Assets that are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the net carrying amount may not be recoverable. An
impairment loss is recognized whenever the carrying amount of an asset or its cash-generating unit
exceeds its recoverable amount.
i)
Calculation of recoverable amount
Recoverable amount is the greater of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows of the
business are discounted to their present value using a discount rate that reflects
current market assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset
belongs.
ii)
Allocation of impairment losses
Impairment losses recognized in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to cash-
generating units, then to reduce the carrying amount of the other assets in the unit on
a pro rata basis. A cash-generating unit is the smallest identifiable group of assets
that generates cash inflows that are largely independent of the cash inflows from
other assets or groups of assets.
iii)
Reversals of impairment
An impairment loss in respect of goodwill is not reversed. In respect
of other assets, an impairment loss is reversed when there is an indication that the
impairment loss may no longer exist and there has been a change in the estimates
used to determine the recoverable amount. An impairment loss is reversed only to
the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortization, if no impairment
loss had been recognized.
3.8
Property, plant and equipment
i)
Owned assets
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses. Cost includes the original purchase price of the
asset and the costs attributable to bringing the asset to its working condition for its
intended use.
Where parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items of property, plant and
equipment.
ii)
Leased assets
As a result of the adoption of IFRS 16, the Company has changed its
accounting policy for leased assets. Until December 31, 2018, leases of property,
plant and equipment where the Company, as a lessee, has substantially all the risks
and rewards of ownership were classified as finance leases and all others as
operating leases.
The Company leases various properties, equipment and cars. Since
January 1, 2019, the Company assesses whether a contract is, or contains, a lease.
A contract is, or contains, a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange for consideration.
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Where a contract contains both lease and non-lease components,
the Group has elected to account for the contract as a single lease.
Leases are recognized as a right-of-use asset and a corresponding
liability at the date at which the leased asset is available for use by the group. Each
lease payment is allocated between the liability and finance cost. The finance cost is
charged to profit or loss over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. The right-of-
use asset is classified within property, plant and equipment and is depreciated over
the shorter of the asset's useful life or the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities are presented within loans and borrowings and
include the net present value of expected lease payments, including those from
extension options if the Company reasonably expects to exercise them. The lease
payments are discounted using the interest rate implicit in the lease, if that rate can
be determined, otherwise the Company’s incremental borrowing rate is used. Right-
of-use assets are measured at cost comprising the amount of the lease liability,
adjusted for payments made or received before the commencement date, initial direct
costs and restoration costs.
Payments associated with short-term leases and leases of low-value
assets are recognized on a straight-line basis as an expense in profit or loss. Short-
term leases are leases with a lease term of 12 months or less. Low-value assets
primarily comprise IT equipment and small items of office furniture.
iii)
Depreciation
Depreciation is charged to the Consolidated Statement of Profit or
Loss on a straight line basis over the shorter of the lease term and the estimated
useful lives of each part of an item of property, plant and equipment once the item is
brought into use. Land is not depreciated. The estimated useful lives are as follows:
•
•
•
Buildings 40 years
Plant and equipment 5 to 14 years
Computer equipment 3 to 5 years
The assets’ residual values and useful lives are reviewed on a
frequent basis.
3.9
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is based on
the weighted average principle and includes expenditure incurred in acquiring the inventories and
bringing them to their existing location and condition. Inventories that are acquired through business
combinations are fair valued at the time of acquisition. In the case of manufactured inventories and
work in progress, cost includes an appropriate share of direct costs and overheads based on normal
operating capacity. Provision is made for slow moving, obsolete and defective inventories.
3.10
Employee benefits
i)
Defined contribution plans
Obligations for contributions to defined contribution pension plans
are recognized as an expense in the Consolidated Statement of Profit or Loss as
incurred. Prepaid contributions are recognized as an asset to the extent that a cash
refund or reduction in the future payments is available.
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ii)
Defined benefit plans
The Company’s net obligation in respect of defined benefit pension
plans and other post-employment benefits is calculated separately for each plan by
estimating the amount of future benefit that employees have earned in return for their
service in the current and prior periods. That net obligation is discounted to determine
its present value. The calculation is performed by a qualified actuary using the
projected unit credit method.
The current service cost of the defined benefit plan, recognized in
the Consolidated Statement of Profit or Loss in staff costs included within Operating
profit/(loss), except where included in the cost of an asset, reflects the increase in the
defined benefit obligation resulting from employee service in the current year, benefit
changes, curtailments and settlements.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity in Other
Comprehensive Income in the period in which they arise.
The net interest cost is calculated by applying the discount rate to
the net balance of the defined benefit obligation and the fair value of plan
assets. This cost is included in employee benefit expense in the Consolidated
Statement of Profit or Loss.
Past service cost is recognized immediately.
iii)
Share-based payment schemes
Employee benefits given through share-based payment schemes are
discussed further in section 3.15 of this note.
3.11
Founder Preferred Shares
Nomad Foods issued Founder Preferred Shares to both TOMS Acquisition I, LLC and
Mariposa Acquisition II, LLC (collectively the “Founder Entities”) in connection with its initial public
offering in April 2014. Holders of the Founder Preferred Shares are entitled to receive annual dividend
amounts subject to certain performance conditions (the “Founder Preferred Shares Dividend
Amount”). The instrument and its component parts were analyzed under IFRS 2. The Company
intends that any future Founder Preferred Shares Annual Dividend Amount will be equity
settled. Accordingly, the Founder Preferred Shares Annual Dividend Amount as of June 1, 2015, of
€531.5 million (the “Founder Preferred Shares Dividend reserve”) was classified as equity and no
further revaluations will be required or recorded.
Should a Founder Preferred Share Annual Dividend Amount become due and
payable, the market value of any dividend paid will be deducted from the Founder Preferred Shares
Dividend reserve, with any excess deducted from the accumulated profit/(deficit) reserve within
equity.
3.12
Provisions
Provisions are recognized when the Company has a legal or constructive present
obligation as a result of a past event and it is probable that the Company will be required to settle that
obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to
settle the obligation at the financial year end date and are discounted to present value where the
effect is material.
Where it is not possible to make a reliable estimate of the estimated financial effect of
a provision, appropriate disclosure of the resulting contingent liability is made, but no provision is
recognized.
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The Company has concluded its discussions with the tax authorities in one of its
markets regarding the treatment of the acquisition of the Iglo Group in 2006 by the previous owners.
The Company has an indemnity in respect of this tax issue and expects to recover the amount due
during 2020.
3.13
Financial instruments
Financial assets and liabilities are recognized in the Company’s Statement of
Financial Position when the Company becomes a party to the contractual provisions of the
instrument.
i)
Trade receivables
Trade receivables are amounts due from customers for goods sold
when control of the products has transferred, being when the products are delivered
in accordance with the contractual arrangements. At this point, there is no unfulfilled
performance obligation that could affect the customer’s acceptance of the product,
except for returns due to quality. The Company holds the trade receivables with the
objective of collecting the contractual cash flows and so they are subsequently
measured at amortized cost using the effective interest method, less any loss
allowance. Since trade receivables are due within one year, this equates to initial
carrying value less any loss allowance.
To assist in managing operating cash flow, we may enter into non-
recourse factoring arrangements with certain receivables whereby we sell specific
account receivables on a true sale basis to one or more external financial institutions.
These trade receivables are sold on a true sale basis when we have surrendered
control over the related assets. Up to the point of sale, these receivables are treated
as held for sale and measured at fair value through Profit or Loss. Under the terms of
the contractual arrangements, the Company may continue to collect the cash from
the customer receivables sold, albeit acting solely as a collecting agent on behalf of
the purchaser of receivables. Any cash received from customers which is due to be
paid to the agent is presented as a financial liability in the Statement of Financial
Position and as a financing activity within the Statement of Cash Flows. Factoring
fees associated with the sale of factored receivables were minimal for the year ended
December 31, 2019 (December 31, 2018: €0.5 million, December 31, 2017:
minimal). See Note 18.
The Company applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all trade
receivables. Trade receivables are grouped by days past due. Expected loss rates
are based on historical credit losses experienced in each market as well as forward
looking information where this is significant. Trade receivables are written off when
there is no reasonable expectation of recovery. Appropriate allowances for expected
credit losses and estimated irrecoverable amounts are recognized in the
Consolidated Statement of Profit or Loss.
Trade receivables are presented net of associated contract liabilities,
referred to as 'trade terms'.
ii)
Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and deposits
and are measured at amortized cost. Deposits held in money market funds are
measured at fair value through Profit or Loss as the cash flows do not only represent
principal and interest.
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iii)
Loans and borrowings
a.
Valuation
Interest bearing borrowings are recognized initially
at fair value less attributable transaction costs.
Subsequent to initial recognition, interest bearing
loans and borrowings are stated at amortized cost with any
difference between cost and redemption value being recognized in
the Consolidated Statement of Profit or Loss over the expected
period of the borrowings.
b.
Capitalization of transaction costs
Fees paid on the establishment of loan facilities are
recognized as transaction costs of the loan to the extent that it is
probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw-down occurs.
iv)
Trade payables
Trade payables are measured at initial recognition at fair value and
are subsequently measured at amortized cost using the effective interest
method. Since trade payables are largely due within one year, this equates to initial
carrying value.
v)
Derivative financial instruments and hedge accounting
Derivative financial instruments are recognized at fair value. When a
derivative financial instrument is not designated in a hedge accounting relationship,
all changes in its fair value are recognized immediately in the Consolidated
Statement of Profit or Loss. However, where derivatives qualify for hedge accounting,
recognition of any resultant gain or loss depends on the nature of the item being
hedged.
The fair value of all financial derivative instruments (including but not
limited to forward foreign exchange contracts, currency swaps and cross currency
interest rates swaps), is determined per market standard using forward foreign
exchange and interest rates at the balance sheet date, with the resulting value
discounted back to present value.
Cross currency interest rate swaps can be entered into in order to
mitigate perceived risks to foreign exchange translation risk and interest rate risk.
The Company applies the hedge accounting requirements of IAS 39
to all hedging relationships.
a.
Cash flow hedges
Where a derivative financial instrument is
designated as a hedge of the cash flow of a recognized asset or
liability, (including a highly probable forecast transaction) the
effective part of any gain or loss on the derivative financial
instrument is recognized directly in the cash flow hedging
reserve. Any ineffective portion of the hedge is recognized
immediately in the Consolidated Statement of Profit or Loss.
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When a hedging instrument expires or is sold,
exercised or otherwise terminated, or the entity revokes designation
of the hedge relationship but the hedged forecast transaction is still
expected to occur, the cumulative gain or loss at that point remains
in equity and is recognized when the transaction occurs. If the
hedged transaction is no longer expected to take place, the
cumulative unrealized gain or loss recognized in equity is
recognized in the Consolidated Statement of Profit or Loss
immediately.
b.
Net investment hedges
Foreign currency differences arising on the
retranslation of a financial liability designated as a hedge of a net
investment in a foreign operation are recognized in Other
Comprehensive Income to the extent that the hedge is effective, and
are presented in the translation reserve within equity. To the extent
that the hedge is ineffective, such differences are recognized in the
Consolidated Statement of Profit or Loss. When the hedged net
investment is disposed of, the relevant amount in the translation
reserve is transferred to the Consolidated Statement of Profit or Loss
as part of the gain or loss on disposal.
vi)
Short-term investments
The Company invests surplus cash positions in short-term
investments to manage liquidity and credit risk. Short‐term investments are held
within managed investment funds and are measured at fair value. All changes in fair
value are recognized immediately in the Consolidated Statement of Profit or Loss.
The short-term investments are held within managed investment funds which invest
in supply chain financing receivables, the creditworthiness of which are enhanced by
an insurance wrapper as provided by established insurance companies with a long-
term credit rating of at least A.
Short-term investments are valued using inputs that are derived
principally from or corroborated by observable market data.
3.14
Revenue from contracts with customers
The Company manufactures and sells a range of frozen foods to retail, wholesale
and Food Service markets. Revenue is recognized when control of the products has transferred,
being when the products are delivered to the customer in accordance with the contractual
arrangements. At this point, there is no unfulfilled performance obligation that could affect the
customer’s acceptance of the product, except for returns due to quality. A provision for product return
allowances, which is estimated based upon the Company’s historical performance and management’s
experience, is recorded as a reduction of sales in the same period that the revenue is recognized.
Revenue excludes sales taxes and intra-company sales.
Products are often sold with variable pricing arrangements, including payment
discounts, trade promotions and slotting fees. Discounts given by the Company include rebates, price
reductions and incentives to customers, promotional couponing and trade communication costs.
Trade promotions consist of pricing allowances, merchandising funds and customer coupons, which
are offered through various programs to customers and consumers. Certain retailers require the
payment of slotting fees to obtain space for the Company’s products on the retailers’ store shelves.
Where variable pricing arrangements are in place, revenue is only recognized to the
extent that it is highly probable that the amount recognized is unlikely to be reversed. Accumulated
experience is used to estimate and provide for the discounts. Revenue is only recognized to the
extent that it is highly probable that a significant reversal will not occur. Accruals for expected pay-
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outs under these programs are collectively known as ‘trade terms’ and are included within trade and
other receivables or within trade and other payables in the Consolidated Statement of Financial
Position. No element of financing is deemed present as the sales are made in line with market
practice and accruals are typically settled within twelve months of the sale.
3.15
Share based payments
The Nomad Foods Long-term Incentive Plan known as the (the "Management Share
Awards"), which incorporates an annual Non-Executive Directors Restricted Stock Scheme, falls
within the provisions of IFRS 2 “Share-based Payment” and awards under the Management Share
Awards represent equity settled share based payments. A charge is taken to the Consolidated
Statement of Profit or Loss for the difference between the fair value of the shares at grant date and
the amount subscribed, spread over the vesting period.
Share based payment arrangements in which Nomad receives goods or services as
consideration for its own equity instruments are accounted for as equity-settled share based payment
transactions, regardless of how the equity instruments are obtained by Nomad.
The grant date fair value of share-based payment awards granted to any Director or
employee is recognized as an expense, with a corresponding increase in equity, over the period that
any Director or employee becomes unconditionally entitled to the awards.
The fair value of the awards granted is measured using a valuation model, taking into
account the terms and conditions upon which the awards were granted. The amount recognized as
an expense is adjusted to reflect the actual number of awards for which the related service and non-
market vesting conditions are expected to be met, such that the amount ultimately recognized as an
expense is based on the number of awards that do meet the related service and non-market
performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant date fair value of the share-based payment is measured to reflect such
conditions and there is no true-up for differences between expected and actual outcomes.
See Note 8(b) for further information on the Company’s share-based payment
arrangements and details of the valuation model used.
3.16
Interest income
Interest income is recognized in the Consolidated Statement of Profit or Loss on an
accruals basis using the effective interest method.
3.17
Expenses
i)
Operating lease payments
Payments associated with short-term leases, leases of low-value
assets, variable lease payments and leases assessed as service agreements are
recognized on a straight-line basis as an expense in profit or loss and presented as
"operating leases". Lease incentives received are recognized on a straight line basis
in the Consolidated Statement of Profit or Loss as an integral part of the total lease
expense.
ii)
Borrowing costs
Unless capitalized as part of the cost of borrowing (see Note 3.13
(iii)), borrowing costs are recognized in the Consolidated Statement of Profit or Loss
in the period in which they are incurred.
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Nomad Foods Annual Report F-22
iii)
Exceptional items
The separate reporting of exceptional items which are presented as
exceptional within the relevant Consolidated Statement of Profit or Loss category,
helps provide an indication of the Company’s underlying business performance.
Exceptional items have been identified and presented by virtue of their size, nature or
incidence. In determining whether an event or transaction is exceptional,
management considers quantitative as well as qualitative factors such as the
frequency or predictability of occurrence. Exceptional items comprise restructuring
costs, impairments or reversal of impairments of intangible assets, operational
restructuring, integration and acquisition costs relating to new acquisitions,
implementation of strategic opportunities and other significant items (see Note 7).
iv)
Research and development
Expenditure on research activities is recognized in the Consolidated
Statement of Profit or Loss as an expense as incurred.
3.18
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is
recognized in the Consolidated Statement of Profit and Loss except to the extent that it relates to
items recognized in Other Comprehensive Income, in which case it is recognized within the
Statement of Other Comprehensive Income.
Current tax is the expected tax payable on the taxable income for the year, using tax
rates enacted or substantively enacted at the financial year end date, and any adjustment to tax
payable in respect of previous years. Where tax exposures can be quantified, an accrual for uncertain
tax positions is made based on the best estimates and management’s judgments. Given the inherent
uncertainties in assessing the outcomes of these exposures (which can sometimes be binary in
nature), the Company could in future periods experience adjustments to these accruals.
Deferred tax is provided on temporary differences between the carrying amounts of
assets and liabilities recognized for financial reporting purposes and the amounts used for taxation
purposes on an undiscounted basis. The following temporary differences are not provided for: the
initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting
nor taxable profit other than in a business combination, and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of realization or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or substantively enacted at the financial year
end date.
A deferred tax asset is recognized only to the extent that it is probable that future
taxable profits will be available against which the asset can be utilized.
3.19
Segment reporting
The Chief Operating Decision Maker (“CODM”) has been determined to be the Chief
Executive Officer as he is primarily responsible for the allocation of resources to the segments and
the assessment of performance of the segments.
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Nomad’s operations are organized into one operating unit, "Frozen", which comprises
all the brands, as well as the factories, private label business units and certain corporate overheads.
The CODM primarily uses “Adjusted EBITDA”, disclosed in Note 5, as the key measure of the
segment’s results. Adjusted EBITDA is EBITDA adjusted to exclude, when they occur, the impacts of
exited markets, acquisition purchase price adjustments, chart of account (“CoA”) alignments and
exceptional items such as restructuring charges, goodwill and intangible asset impairment charges
and other unusual or non-recurring items. In addition, we exclude other adjustments such as the
impact of share based payment expenses and related employer payroll taxes, and non-operating
M&A related costs, because we do not believe they are indicative of our normal operating costs, can
vary significantly in amount and frequency, and are unrelated to our underlying operating
performance.
EBITDA, disclosed in Note 5, is defined as profit/(loss) for the period before taxation,
net financing costs, depreciation and amortization.
3.20
Onerous contracts provisions
Where the costs of fulfilling a contract exceed the economic benefits that the
Company expects to receive from it, an onerous contract provision is recognized for the net
unavoidable costs. In estimating the net unavoidable costs, management estimate foreseeable
income that may be received and offset this against the minimum future cash outflows from fulfilling
the contract. All cash flows are discounted at an appropriate discount rate.
3.21
Unfavorable contracts
Unfavorable contracts recognized from business combinations in relation to leases
are classified as a liability, discounted and recognized over the term of the underlying contract as a
reduction in the associated expense. As a result of the adoption of IFRS 16 Leases, unfavorable
contracts are no longer recognized where the contract falls into the scope of this standard.
3.22
IFRSs not yet adopted
At the date of authorization of these financial statements, there are no Standards and
Interpretations relevant to the Company which are in issue but not yet effective.
4)
Critical accounting estimates and judgments
The preparation of financial statements in accordance with IFRS requires the use of judgment in
applying the accounting policies and estimation.
Significant judgments are made in the process of applying accounting policies for Business
Combinations that have a significant effect on the amounts reported in the consolidated financial statements. The
Company is required to recognize separately, at the acquisition date, the identifiable assets, liabilities and
contingent liabilities acquired or assumed in a business combination at their fair values. This involves judgment over
whether intangible assets can be separately identified.
Information about accounting estimates and assumptions that have significant effects on the amounts
reported in the consolidated financial statements is as follows:
a)
Discounts and trade promotions
Discounts given by the Company include rebates, price reductions and incentives
given to customers, promotional couponing and trade communication costs. Each customer has a
unique agreement that is governed by a combination of observable and unobservable performance
conditions.
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Nomad Foods Annual Report F-24
Trade promotions comprise of amounts paid to retailers for programs designed to
promote Company products and include pricing allowances, merchandising funds and customer
coupons, which are offered through various programs to customers and consumers. The ultimate
costs of these programs can depend upon retailer performance and is the subject of significant
management estimates. The estimated ultimate cost of the program is based upon the programs
offered, timing of those offers, estimated retailer performance based on history, management’s
experience and current economic trends.
At each financial year end date, any discount or trade promotion expense incurred
but not yet invoiced is estimated and accrued for. In certain cases, the estimate for discounts and
trade promotions requires the use of forecast information for future trading periods and therefore a
degree of estimation uncertainty exists. These estimates are sensitive to variances between actual
results and forecasts. The estimate is based on accumulated experience and the principle that
revenue is only recognized to the extent that it is highly probable that a significant reversal will not
occur.
The accruals are presented as ‘trade terms’ and offset against trade receivables due
to the same customer, or as trade term payables where there is no receivable to be offset. The
balance of the reduction in trade receivables for trade terms as of December 31, 2019 is disclosed in
Note 18 and the balance classified as a trade term payable is disclosed in Note 22. Management use
judgment when considering when accruals can be released.
b)
Business combinations
The Company is required to recognize separately, at the acquisition date, the
identifiable assets, liabilities and contingent liabilities acquired or assumed in a business combination
at their fair values. This involves an estimate of fair value of all assets and liabilities acquired. Such
estimates are based on valuation techniques, which require considerable estimation in forecasting
future cash flows and developing other assumptions. These estimates are based on information
available on the acquisition date and assumptions that have been deemed reasonable by
management. The following estimates and assumptions can materially affect our financial position
and profit:
• The fair value and expected useful economic life of acquired intangible and
tangible assets that are subject to depreciation or amortization in future periods.
• Future changes to the assumptions over forecast future profitability used in
estimating the value of intangible assets and goodwill may result in additional
expenses or income.
• Future changes to the assumptions used in estimating the value of uncertain tax
positions may result in additional expenses or income.
c)
Carrying value of goodwill and brands
Determining whether goodwill and brands are impaired requires an estimation of the
value in use of the cash generating unit to which goodwill and brands have been allocated. The value
in use calculation requires the entity to estimate the future cash flows expected to arise from the cash
generating unit and a suitable discount rate in order to calculate present value. Details of impairment
reviews are provided in Note 13.
d)
Employee benefit obligation
The Group operates a number of defined benefit pension schemes and post-
employment benefit schemes which are valued by estimating the amount of future benefit that
employees have earned in return for their service in the current and prior periods. Each Scheme has
an actuarial valuation performed and is dependent on a series of assumptions. See Note 23 for
details of these assumptions and a sensitivity analysis on material assumptions.
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e)
Uncertain tax positions
Where tax exposures can be quantified, an accrual for uncertain tax positions is
made based on best estimates and judgments with regard to the amounts expected to be paid to the
relevant tax authority. Given the inherent uncertainties in assessing the outcomes of these exposures
(which can sometimes be binary in nature), the Company could in future periods experience
adjustments to these accruals. The factors considered include the progress of discussions with the
tax authorities and the level of documentary support for historical positions taken by previous owners.
f)
Fair value of derivative financial instruments.
Note 34 includes details of the fair value of the derivative instruments that the
Company holds at each balance sheet period. Management has estimated the fair value of these
instruments by using valuations based on discounted cash flow calculations.
g)
Share-based payments
At the end of each reporting period, the Company, in estimating its share-based
payment charge, assesses and revises its estimates of the number of interests that are expected to
vest based on the non-market vesting conditions. Note 8b contains details of these assumptions and
of the valuation model used.
5)
Segment reporting
Nomad has one reporting and operating segment, "Frozen", reflected in the segment presentation below for
the periods presented. The CODM primarily uses (“Adjusted EBITDA”), disclosed in Note 3.19, as the key measure of the
segment’s results, which is considered non-IFRS financial information.
Segment Adjusted EBITDA
Profit for the period
Taxation
Net financing costs
Depreciation and amortization
EBITDA
Acquisition purchase price adjustments
Exceptional items
Other add-backs
Adjusted EBITDA
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
Note
€m
€m
€m
153.6
56.7
73.2
68.3
351.8
—
54.5
25.7
432.0
170.5
56.6
56.0
46.3
329.4
5.7
17.7
23.6
376.4
136.5
32.0
74.4
42.4
285.3
—
37.2
5.6
328.1
7
Acquisition purchase price adjustments relate to the reversal of the non-cash increase applied to inventory
acquired in business combinations to value it at fair value as opposed to cost.
Other add-backs include the elimination of share-based payment expense and related employer payroll
expense of €22.4 million (2018: €14.7 million, 2017: €2.6 million) and elimination of non-operating M&A related costs,
professional fees and transaction costs of €3.3 million (2018: €8.9 million, 2017: €3.0 million). We exclude these costs
because we do not believe they are indicative of our normal operating costs, can vary significantly in amount and
frequency, and are unrelated to our underlying operating performance.
No information on segment assets or liabilities is presented to the CODM.
Product information
Management considers the products it sells belong to one category, being "Frozen".
Nomad Foods Annual Report F-26
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Geographical information
External revenue by geography
United Kingdom
Italy
Germany
Sweden
France
Norway
Austria
Spain
Rest of Europe
Total external revenue by geography
Non-current assets by geography
United Kingdom
Germany
Italy
Sweden
Norway
France
Rest of Europe
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
712.5
394.1
329.6
175.7
176.6
120.4
108.2
79.5
227.7
585.4
383.6
310.2
192.7
174.1
122.5
102.4
76.7
225.2
411.9
371.4
300.3
208.0
170.0
123.3
96.7
81.2
193.8
2,324.3
2,172.8
1,956.6
December 31,
2019
December 31,
2018
€m
€m
131.3
124.9
68.2
51.1
29.6
17.2
56.0
141.5
121.8
52.5
26.5
14.3
17.0
52.4
Total non-current assets by geography
478.3
426.0
Non-current assets exclude deferred tax assets, goodwill and brands which are not bound to one
geographical area and as explained in Note 2, as of January 1, 2019, include leased assets resulting in a significant
increase in the year ended December 31, 2019.
6)
Operating profit
Operating profit is stated after charging:
Staff costs
Depreciation of property, plant and equipment (1)
Impairment of property, plant and equipment
Amortization of software and brands
Operating lease charges(1)
Exchange (gains)/losses
Research & development expenditure
Note
8
12
12
13
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
308.6
59.7
0.1
8.6
4.5
(14.6)
18.9
299.7
39.3
—
7.0
18.5
2.9
15.5
257.4
35.9
0.3
6.5
15.0
(1.2)
15.4
Inventories recognized as an expense within cost of goods sold
1,536.0
1,410.0
1,273.3
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(1) As a result of the adoption of IFRS 16 Leases on January 1, 2019, which is explained in Note 2, the majority of leases
have been capitalized and are being depreciated. Expenses relating to leases that are not capitalized continue to be
shown within Operating Profit.
7)
Exceptional items
Exceptional items are made up as follows:
Implementation of strategic opportunities (1)
Supply chain reconfiguration (2)
Findus Group integration expenses (3)
Expenses related to transactions (4)
Brexit (5)
Goodfella's Pizza & Aunt Bessie's integration expenses (6)
Factory optimization (7)
Settlement of legacy matters (8)
Release/remeasurement of indemnification assets (9)
Total exceptional items
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
—
(3.6)
3.5
—
1.6
12.5
5.7
(9.2)
44.0
54.5
—
1.2
10.4
—
—
8.3
1.6
(3.8)
—
17.7
18.8
14.0
15.1
3.2
—
—
—
(5.6)
(8.3)
37.2
We do not consider these items to be indicative of our ongoing operating performance.
(1)
Implementation of strategic opportunities
In the year ended December 31, 2017, the Company incurred expenses in relation to the
implementation of the Nomad strategic vision, which primarily relates to changes to the organizational
structure to align behind core products and implement net revenue management initiatives.
(2)
Supply chain reconfiguration
Supply chain reconfiguration relates to activities associated with the closure of the Bjuv
manufacturing facility in Sweden which ceased production in 2017. The income of €3.6 million in the year
ended December 31, 2019 (2018: charge of €1.2 million, 2017: charge of €14.0 million) includes income on
sale of the agricultural land which completed in May 2019 and the finalization of consideration received for
the sale of the industrial property which completed in 2018. Costs in prior years relate to the closure and
relocation of production and have been partially offset by income from the disposal of tangible assets.
(3)
Findus Group integration expenses
Following the acquisition of the Findus Group on November 2, 2015, the Company initiated a
substantial integration project. Expenses of €3.5 million have been incurred in the year ended
December 31, 2019 (2018: €10.4 million, 2017: €15.1 million). Expenses incurred since 2017 primarily
relate to the roll-out of the Nomad ERP system which completed in 2019.
(4)
Expenses related to transactions
The expense for the year ended December 31, 2017 relates to enhanced control compliance
procedures in territories following the acquisition of the Iglo Group.
(5)
Brexit
With the uncertainty of the United Kingdom exiting the European Union, commonly referred to
as Brexit, we have begun preparations for the potential adverse impacts of Brexit to our supply chain, such
as tariffs and delays at ports of entry and departure.
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Nomad Foods Annual Report F-28
(6)
Goodfella's Pizza & Aunt Bessie's integration costs
Following the acquisition of the Goodfella’s pizza business in April 2018 and the Aunt
Bessie's business in July 2018, the Company has initiated an integration project.
(7)
Factory optimization
In 2018, the Company initiated a three-year factory optimization program. The focus of the
program is to develop a new suite of standard manufacturing and supply chain processes, that will provide
a single network of optimized factories. The program is expected to provide a number of benefits, including
an optimized supply chain infrastructure, benefits derived from the implementation of a standardized global
manufacturing and planning processes, and an increased level of sustainable performance improvement.
(8)
Settlement of legacy matters
A net income of €9.2 million has been recognized associated with the release of acquired tax
liabilities relating to periods prior to acquisition by the Company. Net income of €3.8 million was recognized
in the year ended December 31, 2018. This includes an income of €2.7 million recognized on settlement of
contingent consideration for the La Cocinera acquisition and net income of €0.7 million associated with
settlements of tax audits. Net income of €5.6 million were recognized in the year ended December 31,
2017. This includes a charge of €3.9 million associated with settlements of tax audits, offset by gains of
€4.2 million from the reassessment of sales tax provisions, €1.2 million from the reassessment of interest
on sales tax provisions, a €2.8 million gain on a legacy pension plan in Norway and a €1.3 million gain on
disposal of a non-operational factory.
(9)
Release/remeasurement of indemnification assets
The charge in 2019 relates to the release of shares held in escrow as part of the
consideration on the acquisition of the Findus Group, as discussed in Note 19. The charge in 2017 relates
to the remeasurement of the indemnification asset following a movement in the value of shares that are
held in escrow, which are limited to the value at which the asset was originally recognized, as well as the
release of indemnification assets associated with the acquisition of the Iglo Group.
Tax impact of exceptional items
The tax impact of the exceptional items amounts to a credit of €3.1 million in the year ended December 31,
2019 (year ended December 31, 2018: €3.2 million, year ended December 31, 2017: €13.8 million).
Cash flow impact of exceptional items
Included in the Consolidated Statements of Cash Flows for the year ended December 31, 2019 is €15.9
million (year ended December 31, 2018: €43.4 million, year ended December 31, 2017: €99.5 million) of cash outflows
relating to exceptional items. This includes cash flows related to the above items as well as the cash impact of the
settlement of provisions brought forward from previous accounting periods.
8)
Payroll costs, share based payments and management incentive schemes
(a)
Payroll costs
The average number of persons employed by the Company (excluding non-Executive Directors) is
analyzed and set out below:
Production
Administration, distribution & sales
Total number of employees
F-29 Nomad Foods Annual Report
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
3,308
1,448
4,756
2,915
1,510
4,425
2,285
1,572
3,857
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The increase in the average number of employees in the table above for the year ended December 31,
2019 compared with the year ended December 31, 2018 is primarily due to the acquisitions of Goodfella's and Aunt
Bessie's in 2018.
The table below discloses the Company’s aggregate payroll costs of these persons. Payroll costs
exclude long term management incentive scheme and share based payment costs, but includes bonus costs.
Wages and salaries
Social security costs
Other pension costs
Total payroll costs
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
250.4
45.2
13.0
308.6
240.6
46.0
13.1
299.7
200.8
42.0
14.6
257.4
(b)
Share based payments
The Company's discretionary share award scheme, the LTIP, enables the Company’s
Compensation Committee to make grants (“Awards”) in the form of rights over ordinary shares, to any
Director, Non-Executive Director or employee of the Company. However, it is the Committee’s current
intention that Awards be granted only to Directors and senior management, whilst recognizing a separate
annual Restricted Stock Award for Non-Executive Directors.
All Awards are to be settled by physical delivery of shares.
Non-Executive Director Restricted Share Awards
In accordance with the Board approved independent Non-Executive Director
compensation guidelines, each independent Non-Executive Director is granted $100,000 of restricted
shares annually on the date of the annual general meeting, valued at the closing market price for such
shares on this date. The restricted shares vest on the earlier to occur of the date of the Company’s
annual meeting of shareholders or thirteen months from the date of grant.
The Non-Executive Directors restricted share awards granted on June 16, 2016, which
consisted of 55,680 shares at a share price of $8.98, vested on June 19, 2017 and were issued at a
share price of $14.38, resulting in a €0.3 million increase in the share based compensation reserve. Of
the total 55,680 number of shares vesting, 9,384 shares were held back from issue by the Company as
settlement towards personal tax liabilities arising on the vested shares.
The Non-Executive Directors restricted share awards granted on June 19, 2017, which
consisted of 53,498 shares at a share price of $14.38, vested on June 14, 2018 and were issued at a
share price of $17.94, resulting in a €0.2 million increase in the share based compensation reserve. Of
the total 53,498 number of shares vesting, 12,312 shares were held back from issue by the Company as
settlement towards personal tax liabilities arising on the vested shares.
The Non-Executive Directors restricted share awards granted on June 19, 2018, which
consisted of 32,172 shares at a share price of $18.07, vested on June 14, 2019 and were issued at a
share price of $20.74, resulting in a €0.1 million increase in the share based compensation reserve. Of
the total 44,272 number of shares vesting, 12,100 shares were held back from issue by the Company as
settlement towards personal tax liabilities arising on the vested shares.
On June 14, 2019, after the Company's annual general meeting of shareholders, the
current Non-Executive Directors were granted 39,370 restricted share award at a share price of $20.32.
In July 2019, following the resignation of a Non-Executive Director, 2,460 shares were
vested and issued.
Nomad Foods Annual Report F-30
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The total charge for Non-Executive Director grants within the Statement of Consolidated
Profit or Loss for the year ended December 31, 2019 for stock compensation awards was €0.9 million
(year ended December 31, 2018: €0.9 million; year ended December 31, 2017: €0.8 million).
Director and Senior Management Share Awards
As part of its long term incentive initiatives, the Company has outstanding awards over
4,518,964 ordinary shares granted to certain members of its management team (the “Management
Share Awards”) as of the following four award dates:
January 1,
2016 Award
January 1,
2017 Award
January 1,
2018 Award
January 1,
2019 Award
Total
Number of awards outstanding at
January 1, 2019
New awards granted in the period
Awards vested and issued in the period
Forfeitures in the period
Number of awards outstanding at
December 31, 2019
3,025,953
—
—
(60,439)
1,015,000
—
(85,315)
(91,562)
583,700
—
—
(34,800)
—
166,427
—
—
4,624,653
166,427
(85,315)
(186,801)
2,965,514
838,123
548,900
166,427
4,518,964
The 2016, 2017 and 2018 awards have vesting conditions based on cumulative EBITDA
performance and over four years and Company share price performance over two to five years. During
2019, the Compensation Committee of the Board of Directors amended the targets for these awards
resulting in a revaluation of the awards reflected in the expense taken in 2019. The share price and
EBITDA performance conditions are weighted 50% each per award.
•
•
•
For the 2016 award, the initial two-year period is through to January 1, 2018 and the
subsequent revised three-year period is through to January 1, 2021.
For the 2017 award, the initial two-year period is through to January 1, 2019 and the
subsequent two-year period is through to January 1, 2021.
For the 2018 award, the initial two-year period is through to January 1, 2020 and the
subsequent revised three-year period is through to January 1, 2023.
If the revised respective four-year cumulative EBITDA Performance Condition is
satisfied, up to 50% of such award will vest on January 1, 2020, 2021 and 2022, respectively, as the
case may be.
The incremental fair value granted as a result of the modifications made to the January
1, 2016 and 2017 awards was $9.9 million (€8.7 million), $1.1 million (€1.0 million), respectively. There
was no incremental fair value on modification for the January 1, 2018 award.
In September 2019, 166,427 restricted share awards were granted as part of the 2019
Management Share Award. The performance period associated with the award began as of January 1,
2019. The 2019 awards have vesting conditions based on three-year cumulative EBITDA and net sales,
and Company share price performance measures. One third of the total share award is assigned to each
type of performance measure. All shares are subject to a holding period of an additional year and require
that the participants to the scheme are still actively employed during the entire four year period, through
January 1, 2023.
In September 2018, 294,810 restricted shares granted as part of the 2016 Management
Share Awards vested based on share price performance, resulting in the issuance of 181,054 ordinary
shares in October 2018 (net of 113,756 ordinary shares held back from issue by the Company as
settlement towards personal tax liabilities arising on the vested ordinary shares).
F-31 Nomad Foods Annual Report
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In January 2019, 85,315 restricted shares granted as part of the 2017 Management
Share Awards vested based on share price performance, resulting in the issuance of 51,932 ordinary
shares (net of 33,383 ordinary shares held back from issue by the Company as settlement towards
personal tax liabilities arising on the vested ordinary shares).
The stock compensation charge reported within the Consolidated Statement of Profit or
Loss for the year ended December 31, 2019 related to the director and senior management share
awards is €14.0 million (year ended December 31, 2018: €12.1 million: year ended December 31, 2017:
€1.8 million).
The Company calculates the cost of the Management Share Awards based upon their
fair value using the Monte Carlo Model, which is considered to be the most appropriate methodology
considering the restricted shares only vest once the market performance conditions have been satisfied.
Following the revisions to the EBITDA Performance Conditions and benchmark market share price
targets described above, and the addition of the January 1, 2019 scheme, the inputs and assumptions
underlying the Monte Carlo models for all awards outstanding as of valuation date are now as follows:
January 1, 2016
award
January 1, 2017
award
January 1, 2018
award
January 1, 2019
award
Revised grant date price
Exercise price
Expected life of restricted share
Expected volatility of the share price
Dividend yield expected
Risk free rate
Employee exit rate
EBITDA Performance Target Condition
$
— $
16.72
$
$
1.00 - 2.00 years
22.6%
—%
2.65%
6.0%
93.0%
16.72
$
— $
16.72
$
— $
2.00 years
22.6%
—%
2.65%
14.0%
72.0%
1.5 - 4.00 years
22.7%
—%
2.55%
14.0%
35.0%
20.15
—
4.00 years
24.0%
—%
1.33%
14.0%
35.0%
The expected volatility of the share price inputs above were estimated by referencing
selected quoted companies which are considered to exhibit some degree of comparability with the
Company, as the Company has only been listed for approximately four years.
Based on the revised assessment in the current period of fair value and the number of
shares expected to vest, the total fair values in respect of the Restricted Shares are:
• 2016 award - $28.2 million (€24.7 million)
• 2017 award - $5.2 million (€4.6 million)
• 2018 award - $1.6 million (€1.3 million)
• 2019 award - $1.4 million (€1.2 million)
Initial Director Options
In 2014, certain Non-Executive Directors were granted options (“Initial Options”) to
purchase a maximum of 125,000 Ordinary Shares at an exercise price of $11.50 per ordinary share. The
awards were valued at issuance and expensed during the two years ended April 1, 2016.
In June 2018, a former Non-Executive Director exercised 9,375 of 125,000 initial options
granted to them for €0.1 million.
Throughout 2019, former Non-Executive Directors exercised a further 56,250 of the
125,000 initial options granted to them for €0.6 million. The remaining 59,375 options expire on May 31,
2020.
The awards are exercisable within a 5 year period, which commenced on the trading
day immediately following the Iglo Group acquisition on June 1, 2015.
Nomad Foods Annual Report F-32
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9)
Directors and Key Management compensation
Short-term employee benefits
Share-based payment expense
Termination benefits
Non-Executive Director fees
Total Directors' and executive officers' compensation
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
2.8
7.6
—
0.4
10.8
3.3
6.3
0.1
0.4
10.1
2.0
1.4
0.4
0.3
4.1
All significant management decision making authority is vested within the Board of Directors and the
executive team, therefore key management are considered to be the Directors and executive Officers.
Benefits are accruing to the following number of key management
personnel under:
Defined contribution plans
Share based payment schemes
10)
Finance income and costs
Interest income
Net fair value gains on derivatives held at fair value through profit or
loss
Finance income
Interest and finance charges paid/payable for lease liabilities and
financial liabilities not at fair value through profit or loss (1)
Cross-currency interest rate swaps: cash flow hedges, transfer from
equity
Net pension interest costs
Amortization of borrowing costs
Net foreign exchange losses on translation of financial assets and
liabilities
Interest on unwinding of discounted items
Net fair value losses on derivatives held at fair value through profit or
loss
Financing costs incurred in amendment of terms of debt (2)
Finance costs
Net finance costs
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
2
2
3
3
2
2
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
2.5
—
2.5
0.2
1.4
1.6
0.2
7.0
7.2
(79.0)
(64.4)
(54.0)
21.8
(3.8)
(2.0)
(3.9)
—
(8.8)
—
(75.7)
(73.2)
14.6
(3.8)
(1.5)
(0.3)
(1.1)
—
(1.1)
(57.6)
(56.0)
3.9
(3.6)
(2.7)
(3.9)
(1.2)
—
(20.1)
(81.6)
(74.4)
(1) Following the adoption of IFRS 16 Leases on January 1, 2019, this caption includes the unwinding of discounting on
lease liabilities.
(2) A one-off charge of €20.1 million was incurred as a consequence of the refinancing in May 2017 and repricing in
December 2017. Of this, deferred transaction costs of €15.7 million relating to the previous senior debt were written off.
F-33 Nomad Foods Annual Report
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11)
Taxation
Current tax expense
Current tax on profits for the period
Adjustments in respect of prior periods
Deferred tax income/(expense)
Origination and reversal of temporary differences
Impact of change in tax rates
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
Note
€m
€m
€m
(66.4)
—
(66.4)
9.7
—
9.7
(63.9)
2.8
(61.1)
4.5
—
4.5
16
(37.5)
3.2
(34.3)
(2.1)
4.4
2.3
(32.0)
Total tax expense
(56.7)
(56.6)
Reconciliation of effective tax rate:
Profit before tax
Tax charge at the standard UK corporation tax rate 19% (2018: 19%;
2017: 19.25%)
Difference in tax rates
Non tax deductible interest
Other income and expenses not taxable or deductible
Unrecognized tax assets
Provisions for uncertainties
Impact of change in deferred tax rates
Prior period adjustment
Total tax expense
Effective tax rates
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
210.3
227.1
168.5
(39.9)
(11.9)
0.6
(1.2)
(0.9)
(3.4)
—
—
(56.7)
(43.2)
(14.8)
—
5.3
0.6
(7.3)
—
2.8
(32.5)
(10.0)
4.4
16.8
(19.3)
1.0
4.4
3.2
(56.6)
(32.0)
Effective from and including January 12, 2016, the Company become a resident in the United Kingdom for
United Kingdom tax purposes. The effective tax rate for the year ended December 31, 2019 was 27.0% (year ended
December 31, 2018: 24.9%). The change is principally caused by higher tax rates applied to profits in other jurisdictions
and by an increase in non deductible expenses.
The Company operates in many different jurisdictions and in some of these, certain matters are under
discussion with local tax authorities. These discussions are often complex and can take many years to resolve, and are in
different stages with respect to assessments appeals and refunds. The Company actively seeks to manage the
associated risks by proactively engaging with tax authorities and applying for Advanced Pricing Agreements where
appropriate. Accruals for tax contingencies require management to make estimates and judgments with respect to the
ultimate outcome of a tax audit, and actual results could vary from these estimates. Where tax exposures can be
quantified, a provision is made based on best estimates and management’s judgments. Given the inherent uncertainties
in assessing the outcomes of these exposures (which can sometimes be binary in nature), the Company could, in future
years, experience adjustments to this provision, including releases of provisions when those exposures become time-
barred.
Notwithstanding this, management believes that the Company’s position on all open matters including those
in current discussion with local tax authorities is robust and that the Company is appropriately provided. As of December
31, 2019, the current tax payable of €217.2m and deferred tax assets of €96.4m includes provisions for tax uncertainties
of €137.8m. As of December 31, 2018, the current tax payable of €201.2m and deferred tax assets of €68.7m included
provisions for tax uncertainties of €135.9m.
Nomad Foods Annual Report F-34
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Following the enactment of the Finance Act 2016, the standard rate of corporation tax in the UK is 19% for
2019 (2018: 19%). The standard rate of corporation tax in the UK reduced from 20% to 19% with effect from April 1, 2017
and was due to reduce by a further 2% to 17% from April 1, 2020. As the reductions to 19% and 17% were substantially
enacted on September 6, 2016, these rates are reflected in these financial statements. The UK government has indicated
that this further reduction will not now take place, the impact of which will be reflected in the financial statements once it is
substantially enacted.
The tax (credit)/charge relating to components of other comprehensive income is as follows:
Year ended December 31, 2019
Remeasurement of post-employment benefit liabilities
Net investment hedge
Cash flow hedges
Other comprehensive loss/(income)
Current tax
Deferred tax
Year ended December 31, 2018
Remeasurement of post-employment benefit liabilities
Net investment hedge
Cash flow hedges
Other comprehensive (income)/loss
Current tax
Deferred tax
Year ended December 31, 2017
Remeasurement of post-employment benefit liabilities
Net investment hedge
Cash flow hedges
Other comprehensive loss/(income)
Current tax
Deferred tax
Before
tax
€m
Note
Tax
credit
€m
After tax
€m
29.2
(6.0)
21.7
44.9
After tax
€m
9.6
(5.6)
(11.5)
(7.5)
35.9
(6.0)
27.3
57.2
(6.7)
—
(5.6)
(12.3)
—
(12.3)
(12.3)
Before
tax
€m
Tax
(credit)/
charge
€m
12.9
(5.6)
(15.5)
(8.2)
(3.3)
—
4.0
0.7
—
0.7
0.7
Before
tax
€m
Tax
charge/
(credit)
€m
After tax
€m
(2.9)
0.8
16.4
14.3
(0.9)
0.8
11.4
11.3
2.0
—
(5.0)
(3.0)
—
(3.0)
(3.0)
16
Note
16
Note
16
F-35 Nomad Foods Annual Report
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12)
Property, plant and equipment
Owned property, plant and equipment (i)
Right-of-use assets (ii)
Property, plant and equipment
December 31,
2019
December 31,
2018
€m
€m
350.0
72.4
422.4
348.8
—
348.8
As detailed in Note 2, the right-of-use assets have been recognized following the adoption of IFRS 16
Leases on January 1, 2019.
(i)
Owned property, plant and equipment
Cost
Balance at December 31, 2017
Acquisitions through business combinations
Additions
Disposals
Effect of movements in foreign exchange
Balance at December 31, 2018
Additions
Disposals
Effect of movements in foreign exchange
Balance at December 31, 2019
Accumulated depreciation and impairment
Balance at December 31, 2017
Depreciation
Effect of movements in foreign exchange
Balance at December 31, 2018
Depreciation
Impairment
Disposals
Effect of movements in foreign exchange
Balance at December 31, 2019
Net book value December 31, 2017
Net book value December 31, 2018
Balance at December 31, 2019
Assets under construction
Land and
buildings
€m
Plant and
equipment
Computer
equipment
€m
€m
Total
€m
117.4
32.7
6.7
(3.5)
(1.5)
151.8
4.1
(1.5)
1.8
156.2
8.2
7.2
(1.1)
14.3
7.7
—
—
1.0
23.0
109.2
137.5
133.2
242.5
28.1
24.5
(0.5)
(4.4)
290.2
34.7
(1.1)
8.1
331.9
57.4
31.7
(3.6)
85.5
34.4
0.1
(0.3)
5.3
125.0
185.1
204.7
206.9
3.2
0.5
5.3
—
—
9.0
4.7
—
0.1
13.8
2.1
0.4
(0.1)
2.4
1.5
—
—
—
3.9
1.1
6.6
9.9
363.1
61.3
36.5
(4.0)
(5.9)
451.0
43.5
(2.6)
10.0
501.9
67.7
39.3
(4.8)
102.2
43.6
0.1
(0.3)
6.3
151.9
295.4
348.8
350.0
Additions to for the year ended December 31, 2019 includes assets under construction of €13.1 million
(year ended December 31, 2018: €10.2 million).
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Nomad Foods Annual Report F-36
Security
Borrowings have been provided by a syndicate of third party lenders, (the “Syndicate”). The Syndicate
together with holders of the bond issue have security over the assets of the "Guarantor Group". The "Guarantor Group"
consists of those companies which individually have more than 5% of consolidated total assets or EBITDA (as defined in
the Senior Facilities Agreement) of the Company and in total comprise more than 80% of consolidated total assets or
EBITDA at any testing date.
(ii)
Right-of-use assets
Net book value
Land and Buildings
Plant and equipment and motor vehicles
Computer equipment
Right-of-use assets
December 31,
2019
December 31,
2018
€m
€m
62.8
9.2
0.4
72.4
—
—
—
—
Additions to the right-of-use assets during the year ended December 31, 2019 were €6.2 million.
Lease liabilities are included within loans and borrowings in Note 21. Interest on lease liabilities is presented
as a finance cost in Note 10. Payments of lease liabilities are included as a financing activity within the Statement of Cash
Flows.
Depreciation
Land and Buildings
Plant and equipment
Computer equipment
Depreciation expense of right-of-use assets
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
10.7
5.2
0.2
16.1
—
—
—
—
—
—
—
—
F-37 Nomad Foods Annual Report
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13)
Goodwill and Intangibles
Cost
Balance at December 31, 2017
Acquisitions through business combinations
Additions
Effect of movements in foreign exchange
Balance at December 31, 2018
Acquisitions through business combinations
Additions
Disposals
Effect of movements in foreign exchange
Balance at December 31, 2019
Accumulated amortization and impairment
Balance at December 31, 2017
Amortization
Effect of movements in foreign exchange
Balance at December 31, 2018
Amortization
Effect of movements in foreign exchange
Balance at December 31, 2019
Net book value December 31, 2017
Net book value December 31, 2018
Net book value December 31, 2019
Goodwill
Brands
Computer
software
Customer
relationships
€m
€m
€m
€m
Total
€m
1,745.6
1,688.9
115.4
362.2
—
—
—
—
1,861.0
2,051.1
1.9
—
—
—
—
—
—
—
1,862.9
2,051.1
18.3
1.1
6.6
(0.6)
25.4
—
4.8
(0.1)
(0.3)
29.8
31.0
3,483.8
—
—
—
31.0
—
—
—
—
478.7
6.6
(0.6)
3,968.5
1.9
4.8
(0.1)
(0.3)
31.0
3,974.8
Goodwill
Brands
Computer
software
Customer
relationships
€m
€m
€m
€m
Total
€m
—
—
—
—
—
—
1.5
1.2
—
2.7
1.7
—
—
1,745.6
1,861.0
4.4
1,687.4
2,048.4
1,862.9
2,046.7
7.5
3.6
(0.5)
10.6
4.7
(0.1)
15.2
10.8
14.8
14.6
4.8
2.2
—
7.0
2.2
—
9.2
26.2
24.0
21.8
13.8
7.0
(0.5)
20.3
8.6
(0.1)
28.8
3,470.0
3,948.2
3,946.0
Amortization of €8.6 million (December 31, 2018: €7.0 million; December 31, 2017: €6.5 million) is included
in ‘other operating expenses’ in the Consolidated Statement of Profit or Loss.
The Company’s goodwill, brand and customer relationships values have been allocated based on the
enterprise value at acquisition of each cash generating unit (“CGU”). Goodwill is monitored at an operating segment level.
As required by IAS 36 'Impairment of Assets', an annual review of the carrying amount of the goodwill and the indefinite
life brands is carried out to identify whether there is any impairment to these carrying values. This is done by means of
comparison of the carrying values to the value in use of the CGU. Value in use is calculated as the net present value of
the projected risk-adjusted cash flows of each CGU.
Key assumptions
The values for the key assumptions were arrived at by taking into consideration detailed historical
information and comparison to external sources where appropriate, such as market rates for discount factors.
•
Budgeted cash flows: the calculation of value in use has been based on the cash flow forecasts
by management for 2020 to 2022. The trends in these forecasts have been extrapolated to
produce 2023 and 2024 forecast cash flows. Beyond 2024 the same assumptions have been
applied for future periods in the absence of longer term detailed forecasts. These plans have
been prepared and approved by management, and incorporate past performance of the entities
acquired in the period, historical growth rates and projections of developments in key markets.
Nomad Foods Annual Report F-38
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•
•
•
•
•
Revenue: projected revenues are built up with reference to markets and product
platforms. They incorporate past performance, historical growth rates and projections of
developments in key markets.
Profit margins: projected margins reflect historical performance.
Capital expenditure forecast includes an allowance for the replacement of leased right-of-use
assets.
Discount rate: a pre-tax discount rate of 7.1% (2018: 8.2%) was applied to the cash flows. This
discount rate has been calculated using a capital asset pricing model using observable market
data, including the share price of Nomad Foods Limited.
Long-term growth rates: the growth rate used in the testing after the detailed forecasting period
was 1.0% (2018: 1.0%). These rates do not reflect the long-term assumptions used by the
Company for investment planning.
Sensitivity to changes in assumptions
Impairment was not required at either December 31, 2019, or December 31, 2018. In each case the
valuations derived from the discounted cash flow model indicate a sufficient amount of headroom for which any
reasonably possible change to key assumptions is unlikely to result in an impairment of the related goodwill.
14)
Acquisitions
(a)
Goodfella’s Pizza
On April 21, 2018, the Company completed its acquisition of all of the share capital of Green Isle Foods
Limited (“Goodfella’s Pizza”) for £209.7 million (€239.0 million), including post-acquisition working capital and net debt
adjustments. Goodfella’s Pizza (legal entity subsequently renamed Birds Eye Pizza Limited and then Birds Eye Ireland
Limited), is a pizza producer based in Ireland that complements our existing business model.
The purchase price allocation exercise over the assets and liabilities of Birds Eye Pizza Limited/Birds
Eye Ireland Limited at the date acquisition and the consideration paid, was finalized on April 20, 2019, without any
changes to the provisional estimates reported as at December 31, 2018. These were as follows:
Assets:
Intangible assets
Property, plant and equipment
Current assets
Inventories
Deferred tax assets
Total assets
Liabilities:
Current liabilities
Deferred tax liabilities
Total liabilities
Total identifiable net assets acquired
Total purchase consideration
Total identifiable net assets acquired
Goodwill
F-39 Nomad Foods Annual Report
April 21, 2018
€m
158.0
33.2
7.5
10.7
0.9
210.3
31.2
22.6
53.8
156.5
239.0
(156.5)
82.5
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Goodwill recognized on acquisition is €82.5 million. The goodwill recognized is attributable mainly to the
growth prospects for the business expected organically and operational synergies.
(b)
Toppfrys AB
Effective March 2, 2018, the Company acquired a 60% stake of the outstanding share capital of Toppfrys
AB, a pea processing business in Sweden that complements our existing business model. The Company paid €1.7
million (SEK 17.0 million) for the equity share acquired and subsequently provided loans of €1.5 million (SEK 13.6
million), bringing the total payments to €3.2 million (SEK 30.6 million). The Company had consolidated the business
and has recognized a 40% non-controlling interest as it was determined to have control based on an assessment of
the acquired business. The shareholder arrangements include a put option for the non-controlling interest to sell their
remaining shares from 2020 and call options for the Company to acquire the remaining shares from 2022.
The purchase price allocation exercise for the acquisition was finalized on March 1, 2019, valuing the
60% stake of net liabilities acquired were valued at €0.1 million and resulting in goodwill recognized of €1.8 million. The
Company believes the future value of goodwill will be obtained through its market position in Sweden.
On December 29, 2018, the Company increased its stake in Toppfrys AB to 81%, acquiring newly issued
shares for consideration of €3.0 million (SEK 30.7 million). The shares were settled in exchange for loans payable by
the subsidiary to another wholly owned subsidiary. The Company continues to consolidate the business and has
recognized a 19% non-controlling interest from this date.
(c)
Aunt Bessie's
On July 2, 2018, the Company completed its acquisition of all the share capital of Aunt Bessie’s Limited
(“Aunt Bessie's”) from William Jackson & Son Limited for a purchase price of £209.0 million (€235.9 million). Aunt
Bessie’s is a leading frozen food company in the United Kingdom where it manufactures, distributes and sells a range
of branded frozen food products. The Aunt Bessie’s brand holds number one and number two market share positions,
respectively, within frozen Yorkshire puddings and frozen potatoes, which combine to represent the majority of its
revenues.
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Nomad Foods Annual Report F-40
The purchase price allocation exercise over the assets and liabilities of Aunt Bessie's Limited at the date
of acquisition and the consideration paid, was finalized on July 1, 2019. An adjustment of €1.9 million has been
recognized in the year to recognize pre-acquisition related liabilities. The consideration paid is the same as that
reported as at December 31, 2018. These were as follows:
Assets:
Intangible assets
Property, plant and equipment
Current assets
Inventories
Total assets
Liabilities:
Current liabilities
Deferred tax liabilities
Total liabilities
Total identifiable net assets acquired
Total purchase consideration
Total identifiable net assets acquired
Goodwill
July 2, 2018
€m
205.3
23.1
19.5
13.2
261.1
20.6
37.6
58.2
202.9
235.9
(202.9)
33.0
Goodwill recognized on acquisition is €33.0 million. The goodwill recognized is attributable mainly to the
growth prospects for the business expected organically and operational synergies.
(d)
Purchase consideration - cash outflow
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less cash acquired
Contingent consideration paid related to acquisitions
24
Net outflow of cash - investing activities
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
€m
€m
€m
—
—
1.5
1.5
474.9
(9.8)
6.5
471.6
—
—
—
—
F-41 Nomad Foods Annual Report
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15)
Investments
The following are the Company's significant investments as of December 31, 2019.
Nomad Foods Europe Holdings Limited
Nomad Foods Europe Holdco Limited
Nomad Foods Europe Finco Limited
Nomad Foods Europe Midco Limited
Nomad Foods Bondco Plc
Nomad Foods Lux S.à.r.l.
Nomad Foods Europe Limited
Birds Eye Limited
Nomad Foods Europe Finance Limited
Aunt Bessie's Limited
Birds Eye Ireland Limited
Activity
Holding
Holding
Holding
Holding/
Finance
Finance
Finance
Management
Trading
Finance
Non-Trading
Trading
Birds Eye Ireland Oldco Unlimited Company
Non-Trading
Iglo Holding GmbH
Iglo Nederland B.V.
Iglo Belgium S.A.
Iglo Portugal
Iglo Austria Holdings GmbH
C.S.I. Compagnia Surgelati Italiana S.R.L
Findus Sverige Holdings AB
Iglo GmbH
Frozen Fish International GmbH
Liberator Germany Newco GmbH
Iglo Austria GmbH
Findus Sverige AB
Frionor Sverige AB
Findus Holdings France SAS
Findus France SAS
Findus Espana SLU
Findus Danmark A/S
Findus Finland Oy
Findus Norge AS
Findus Norge Holding AS
Toppfrys AB
Holding
Trading
Trading
Trading
Holding
Trading
Holding
Trading
Trading
Property
Trading
Trading
Holding
Holding
Trading
Trading
Trading
Trading
Trading
Holding
Trading
Country of
incorporation
England
England
England
Class of
shares held
Ordinary
Ordinary
Ordinary
England
Ordinary
England
Luxembourg
England
England
England
England
Republic of
Ireland
Republic of
Ireland
Germany
Netherlands
Belgium
Portugal
Austria
Italy
Sweden
Germany
Germany
Germany
Austria
Sweden
Sweden
France
France
Spain
Denmark
Finland
Norway
Norway
Sweden
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ownership
as of December
31, 2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
81%
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Nomad Foods Annual Report F-42
16)
Deferred tax assets and liabilities
Recognized deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Property, plant and equipment
Intangible assets
Employee benefits
Tax value of loss carry forwards
Derivative financial instruments
Other
Tax assets/(liabilities)
December 31, 2019
December 31, 2018
Assets
Liabilities
€m
23.0
0.4
40.2
20.7
3.2
8.9
96.4
€m
(29.3)
(357.0)
(0.4)
—
(0.3)
(11.2)
(398.2)
Total
€m
(6.3)
(356.6)
39.8
20.7
2.9
(2.3)
(301.8)
Assets
Liabilities
€m
15.6
0.3
30.0
19.1
—
3.7
68.7
€m
(28.0)
(354.4)
(0.4)
—
(2.5)
(6.8)
(392.1)
Total
€m
(12.4)
(354.1)
29.6
19.1
(2.5)
(3.1)
(323.4)
Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of
the related tax benefit through future taxable profits is probable.
Deferred tax assets that the Company has not recognized in the financial statements amount to €70.3
million (December 31, 2018: €66.3 million). These deferred tax assets had not been recognized as the likelihood of
recovery is not probable.
The aggregate deferred tax relating to items that have been credited directly to equity is €12.3 million
(December 31, 2018: debit of €0.7 million).
Movement in deferred tax during the year:
Property, plant and equipment
Intangible assets
Employee benefits
Tax value of loss carry forwards
Derivative financial instruments
Other
Total deferred tax
Opening
balance Jan 1,
2019
Recognized
in Statement of
Profit or Loss
Recognized
in Other
Comprehensive
Income
€m
€m
€m
Movement
in foreign
exchange
€m
Closing
balance Dec 31,
2019
€m
(12.4)
(354.1)
29.6
19.1
(2.5)
(3.1)
(323.4)
6.3
(2.5)
3.5
1.6
—
0.8
9.7
—
—
6.7
—
5.6
—
12.3
(0.2)
—
—
—
(0.2)
—
(0.4)
(6.3)
(356.6)
39.8
20.7
2.9
(2.3)
(301.8)
F-43 Nomad Foods Annual Report
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Opening
balance
Jan 1,
2018
€m
Opening
balance
restatement
due to IFRS 9
transition
Acquired in
business
combinations
Recognized
in
Statement
of Profit or
Loss
Recognized
in Other
Comprehensive
Income
Movement
in foreign
exchange
€m
€m
€m
€m
€m
Closing
balance
Dec 31,
2018
€m
Property, plant and
equipment
Intangible assets
Employee benefits
Tax value of loss carry
forwards
Derivative financial
instruments
Other
(15.2)
(295.0)
28.2
15.6
1.4
1.6
Total deferred tax
(263.4)
17)
Inventories
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Total inventories
—
—
—
—
—
(3.7)
(3.7)
—
(59.3)
—
—
—
—
(59.3)
3.2
0.2
(1.5)
3.5
0.1
(1.0)
4.5
—
—
3.3
—
(4.0)
—
(0.7)
(0.4)
—
(0.4)
—
—
—
(12.4)
(354.1)
29.6
19.1
(2.5)
(3.1)
(0.8)
(323.4)
December 31,
2019
December 31,
2018
€m
€m
86.8
48.3
188.1
323.2
81.6
50.7
210.2
342.5
During the year ended December 31, 2019, €9.0 million (year ended December 31, 2018 €7.1 million, year
ended December 31, 2017: €7.6 million) was charged to the Consolidated Statement of Profit or Loss for the write down
of inventories.
18)
Trade and other receivables
Current assets
Trade receivables
Prepayments and accrued income
Other receivables
Tax receivable
Total current trade and other receivables
Non-current assets
Other receivables
Total non-current trade and other receivables
Total trade and other receivables
December 31,
2019
December 31,
2018
€m
€m
143.6
8.0
31.0
24.1
206.7
1.9
1.9
98.3
9.2
38.4
28.0
173.9
2.6
2.6
208.6
176.5
Trade receivables, prepayments and other receivables, except for those defined as non-current, are
expected to be recovered in less than 12 months. Other receivables includes VAT receivable.
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Nomad Foods Annual Report F-44
The ageing of trade receivables is detailed below:
December 31, 2019
Not past due
Past due less than 1 month
Past due 1 to 3 months
Past due 3 to 6 months
Past due more than 6 months
Sub-total
Reduction in trade-terms(1)
Total trade receivables
December 31, 2018
Not past due
Past due less than 1 month
Past due 1 to 3 months
Past due 3 to 6 months
Past due more than 6 months
Sub-total
Reduction in trade-terms (1)
Total trade receivables
Gross
€m
Impaired
€m
Net
€m
288.1
32.5
7.5
3.6
7.9
339.6
(0.2)
(0.3)
(0.2)
(0.2)
(3.9)
(4.8)
287.9
32.2
7.3
3.4
4.0
334.8
(191.2)
143.6
Gross
€m
Impaired
€m
Net
€m
228.5
20.9
4.8
1.6
5.6
261.4
—
—
—
(0.2)
(4.1)
(4.3)
228.5
20.9
4.8
1.4
1.5
257.1
(158.8)
98.3
(1) Refer to Note 4(a). Reduction in trade term amounts are primarily not past due.
Trade receivables have been provided against based on expected credit losses.
The maximum exposure to credit risk at the reporting date is the fair value of each class of
receivable. The Company does not hold any collateral as security.
Debts past due are not impaired where there are eligible trade terms deductions which can be offset
against them.
The Company entered into facilities with third-party banks in which the Company may sell qualifying
trade debtors on a non-recourse basis. Under the terms of the agreements, the Company has transferred substantially
all the credit risks and control of the receivables, which are subject to this agreement, and accordingly €nil (December
31, 2018: €51.0 million) of trade receivables has been derecognized at the period end.
Liabilities related to contracts with customers
The Company has recognized the following liabilities related to contracts with customers:
Trade terms liabilities reported within trade receivables
Trade terms liabilities reported within trade and other payables (Note 22)
Total trade terms liabilities
Significant changes to trade terms
December 31,
2019
December 31,
2018
€m
(191.2)
(59.4)
(250.6)
€m
(158.8)
(79.5)
(238.3)
No significant changes to trade terns occurred in the year ended December 31, 2019.
F-45 Nomad Foods Annual Report
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Revenue recognized in relation to trade terms
Trade terms relate to sales made with variable consideration and are an estimate as disclosed in Note 4
(a). Revenue recognized in the year ended December 31, 2019 relating to performance obligations that were satisfied
in the prior year was €17.3 million (2018: €17.2 million).
19)
Indemnification assets
Balance at January 1
Recognized through business combinations
Utilized
Release of indemnified provision
Balance at December 31
Year ended
December 31,
2019
Year ended
December 31,
2018
€m
€m
79.4
—
—
(44.0)
35.4
73.8
6.1
(0.5)
—
79.4
As at December 31, 2019, €29.8 million (December 31, 2018: €73.8 million) of the indemnification assets
relate to the acquisition of the Findus Group for which 1,583,627 shares are held in escrow and are valued at $22.37
(€19.96) (December 31, 2018: 6,964,417 shares valued at $16.72 (€14.62)) each. The shares placed in escrow will be
released in stages over a four-year period beginning January 2019 and each anniversary thereafter. During 2019,
5,380,790 shares were released from escrow. As a consequence, the indemnification asset was reduced by €44.0 million
with a corresponding charge to the Statement of Profit or Loss.
In January 2020, 965,528 shares were released from escrow. As a consequence the indemnification asset
will be reduced by approximately €17.8 million with a corresponding charge of to the Statement of Profit or Loss within the
financial statements for the year ended December 31, 2020.
The indemnification asset of €5.6 million (2018: €5.6 million) recognized in relation to the Goodfella’s Pizza
acquisition relates to several contingent liabilities that arose prior to acquisition.
20)
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Cash and cash equivalents
Bank overdraft
Cash and cash equivalents per Statement of Cash Flows
December 31,
2019
December 31,
2018
Note
€m
€m
826.0
0.1
826.1
(1.3)
824.8
22
327.5
0.1
327.6
—
327.6
‘Cash and cash equivalents’ comprise cash balances and deposits. Restricted cash comprises money that
is primarily reserved for a specific purpose and therefore not available for immediate or general business use. Bank
overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a
component of cash and cash equivalents for the purposes of the Statement of Cash Flows.
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Nomad Foods Annual Report F-46
21)
Loans and borrowings
The repayment profile of the syndicated and other loans held by the Company is as follows:
Current liabilities/(assets)
Syndicated loans
Lease liabilities
Less deferred borrowing costs to be amortized within 1 year
Total due in less than one year
Non-current liabilities
Syndicated loans
2024 fixed rate senior secured notes
Lease liabilities
Less deferred borrowing costs to be amortized in 2-5 years
Less deferred borrowing costs to be amortized in more than 5 years
Total due after more than one year
Total borrowings
December 31,
2019
December 31,
2018
€m
€m
10.8
18.9
(2.0)
27.7
1,364.4
400.0
90.1
(6.9)
—
1,847.6
1,875.3
23.4
—
(2.0)
21.4
1,351.8
400.0
—
(7.9)
(1.0)
1,742.9
1,764.3
As detailed in Note 2, following the adoption of IFRS 16 Leases on January 1, 2019, loans and borrowings
now includes €109.0 million relating to lease liabilities.
On May 3, 2017 the Company completed a refinancing of its Senior debt. All Senior debt as at the balance
sheet date was repaid and replaced with new Senior Euro debt of €500.0 million and Senior U.S. Dollar debt of $610.0
million. Both are repayable on May 15, 2024. The Senior U.S. Dollar debt requires a mandatory repayment of 1% of
notional, of which $6.6 million was repaid in 2018 and $9.6 million in 2019. The existing revolving credit facility was also
replaced with a new €80.0 million facility, which is available until May 15, 2023 and may be utilized to support working
capital requirements, including letters of credit and bank guarantees.
Concurrent to the refinancing, the Company repaid the senior secured notes due 2020 and completed a
private offering of €400.0 million of 3.25% senior secured notes due May 15, 2024 (the “Notes”), payable semi-annually in
arrears. Both the new Senior debt and the Notes are guaranteed on a senior basis by the Company and certain
subsidiaries thereof. Eligible transaction costs of approximately €9.8 million were capitalized as part of the refinancing and
will be amortized over the life of the debt.
On December 20, 2017 we further amended and restated our Senior Facilities Agreement to reprice our
$610.0 million and €500.0 million term loan facilities. The margin was reduced by 50 basis points on the U.S. Dollar-
denominated term loan and 25 basis points on the Euro-denominated term loan. There were no changes to the maturity
dates of the term loan facilities. These amendments were accounted for as a modification of the existing loan, so that the
modified cash flows are recognized at the original effective interest rate, with a corresponding reduction to the carrying
value of the loans. We also established a $50.0 million incremental term loan facility and a €58.0 million incremental term
loan facility which were fully drawn down on January 31, 2018 and February 9, 2018 respectively. Eligible transaction
costs of approximately €2.5 million have been capitalized as part of this amendment and will be amortized over the life of
the debt.
On June 15, 2018, we amended and restated our Senior Facilities Agreement to establish an incremental
U.S. Dollar denominated term loan that increased the amount of U.S. Dollar Term Loans by $300.0 million to $953.4
million. Principal outstanding under the Euro-denominated term loan remained unchanged at €558.0 million. The maturity
dates remained May 2024 for both Euro and U.S. Dollar denominated Term Loans. The €80.0 million multicurrency
revolving credit facility remained unchanged and matures in May 2023.
As at December 31, 2019 €17.2 million (December 31, 2018: €16.8 million) has been utilized for issuance
of letters of credit and bank guarantees.
F-47 Nomad Foods Annual Report
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Guarantees and secured assets
The Senior Facility Agreement that governs the Company’s Senior debt, establishes security over the
assets of the “Guarantor Group”. The Guarantor Group consists of those companies that individually have more than 5%
of consolidated total assets or EBITDA (as defined in the Senior Facilities Agreement) of the Company and in total
comprise more than 80% of consolidated total assets or EBITDA at any testing date.
The Senior Facilities Agreement includes an excess cash flow calculation whereupon an amount of principal
shall be repaid based upon terms including cash generated during the year and leverage. In 2019 the amount repaid was
€12.1 million relating to the calculation performed at the end of 2018. Based on the calculation performed for
December 31, 2019, there will be no excess cash flow repayment in 2020.
In connection with its pension scheme, Findus Sverige AB, a 100% owned subsidiary, is required to obtain
credit insurance with PRI Pensionsgaranti (“PRI”), a credit insurance company that provides insurance annually against
the risk of a sponsoring company’s insolvency. In connection with such credit insurance, as at December 31, 2019 Findus
Sverige AB has granted floating charges over certain assets in favor of PRI in an amount of SEK 300 million (€28.7
million) (December 31, 2018: €29.3 million) and Nomad Foods Limited has issued a parent guarantee to PRI which will
not exceed SEK 450 million (€43.0 million) (December 31, 2018: €43.9 million) and has a maturity date of March 31,
2021.
22)
Trade and other payables
Current liabilities
Trade payables
Accruals and deferred income
Trade terms payable
Social security and other taxes
Other payables
Financial payables
Bank overdrafts
Total current trade and other payables
Non-current liabilities
Accruals and deferred income
Total non-current trade and other payables
Total trade and other payables
23)
Employee benefits
December 31,
2019
December 31,
2018
€m
€m
306.5
109.4
59.4
25.7
18.8
4.1
1.3
525.2
2.7
2.7
527.9
321.1
125.3
79.5
19.0
19.0
7.7
—
571.6
1.3
1.3
572.9
The Company operates defined benefit pension plans in Germany, Italy, Sweden and Austria, as well as
various defined contribution plans in other countries.
i.
Defined contribution plans
The total expense relating to defined contribution plans for the year ended December 31, 2019 was €9.0
million (year ended December 31, 2018: €9.1 million, year ended December 31, 2017: €8.5 million)
ii.
Defined benefit plans
The Company operates partially funded defined benefit pension plans in Germany and Austria as well as
unfunded plans in Sweden and Italy. In addition, an unfunded post-retirement medical plan is operated in Austria. In
Germany and Italy, long term service awards are in operation and various other countries provide other employee
benefits.
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Nomad Foods Annual Report F-48
Net employee benefit obligations-Germany
Net employee benefit obligations-Sweden
Net employee benefit obligations-Italy
Net employee benefit obligations-Austria
Sub-total
Net employee benefit obligations- total of other countries
Total net employee benefit obligations
December 31,
2019
December 31,
2018
€m
€m
151.3
71.7
4.8
5.8
233.6
3.9
237.5
128.0
60.5
4.7
4.3
197.5
3.1
200.6
The net obligation of €3.9 million (December 31, 2018: €3.1 million) in respect of other countries is the
aggregate of a number of different types of minor schemes, each one not being considered material individually or in
aggregate. Consequently detailed disclosure of these schemes is not provided.
The amount included in the Statement of Financial Position arising from the Company’s obligations in
respect of its defined benefit retirement plans and post-employment benefits is as follows:
December 31, 2019
Present value of unfunded defined benefit obligations
Present value of funded defined benefit obligations
Subtotal present value of defined benefit obligations
Fair value of plan assets
Recognized liability for net defined benefit obligations
December 31, 2018
Present value of unfunded defined benefit obligations
Present value of funded defined benefit obligations
Subtotal present value of defined benefit obligations
Fair value of plan assets
Recognized liability for net defined benefit obligations
Defined
benefit
retirement
plans
€m
Post-
employment
medical
benefits
and other
benefits
€m
77.6
237.3
314.9
(86.4)
228.5
5.1
—
5.1
—
5.1
Defined
benefit
retirement
plans
€m
Post-
employment
medical
benefits
and other
benefits
€m
65.8
208.4
274.2
(81.5)
192.7
4.8
—
4.8
—
4.8
Total
€m
82.7
237.3
320.0
(86.4)
233.6
Total
€m
70.6
208.4
279.0
(81.5)
197.5
F-49 Nomad Foods Annual Report
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Movements in recognized liability for net defined benefit obligations:
Opening balance January 1, 2019
Current service cost
Interest cost
Actuarial losses
Contributions to plan
Benefits paid
Exchange adjustments
As at December 31, 2019
Opening balance January 1, 2018
Current service cost
Interest cost
Actuarial losses
Contributions to plan
Benefits paid
Exchange adjustments
As at December 31, 2018
Defined
benefit
retirement
plans
€m
Post-
employment
medical
benefits
and other
benefits
€m
192.7
4.0
3.6
35.3
(0.6)
(5.2)
(1.3)
228.5
4.8
0.2
—
—
—
—
0.1
5.1
Defined
benefit
retirement
plans
€m
Post-
employment
medical
benefits
and other
benefits
€m
180.5
3.9
3.6
12.9
(0.6)
(5.4)
(2.2)
192.7
4.9
(0.1)
—
—
—
—
—
4.8
Total
€m
197.5
4.2
3.6
35.3
(0.6)
(5.2)
(1.2)
233.6
Total
€m
185.4
3.8
3.6
12.9
(0.6)
(5.4)
(2.2)
197.5
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Nomad Foods Annual Report F-50
Movements in present value of defined benefit obligations:
Opening balance January 1, 2019
Current service cost
Interest cost
Actuarial experience losses
Actuarial losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Contributions to plan
Benefits paid
Exchange adjustments
As at December 31, 2019
Opening balance January 1, 2018
Current service cost
Interest cost
Actuarial experience losses
Actuarial losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Contributions to plan
Benefits paid
Exchange adjustments
As at December 31, 2018
Defined
benefit
retirement
plans
€m
Post-
employment
medical
benefits
and other
benefits
€m
274.2
4.0
5.0
0.2
43.2
(3.0)
0.4
(7.8)
(1.3)
314.9
4.8
0.2
—
—
—
—
—
—
0.1
5.1
Defined
benefit
retirement
plans
€m
Post-
employment
medical
benefits
and other
benefits
€m
261.8
3.9
5.2
0.5
13.8
(1.1)
0.4
(8.1)
(2.2)
274.2
4.9
(0.1)
—
—
—
—
—
—
—
4.8
Movements in fair value of plan assets of defined benefit retirement plans:
Opening balance January 1, 2019
Interest income
Actuarial gains arising from the return on plan assets, excluding interest income
Contributions by employer
Contributions by members
Benefits paid
As at December 31, 2019
Total
€m
279.0
4.2
5.0
0.2
43.2
(3.0)
0.4
(7.8)
(1.2)
320.0
Total
€m
266.7
3.8
5.2
0.5
13.8
(1.1)
0.4
(8.1)
(2.2)
279.0
2019
€m
81.5
1.4
5.1
0.5
0.5
(2.6)
86.4
F-51 Nomad Foods Annual Report
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Opening balance January 1, 2018
Interest income
Actuarial gains arising from the return on plan assets, excluding interest income
Contributions by employer
Contributions by members
Benefits paid
As at December 31, 2018
Expense recognized in the Consolidated Statement of Profit or Loss:
Current service cost
Interest cost
For the year ended December 31, 2019
Current service cost
Interest cost
For the year ended December 31, 2018
Defined
benefit
retirement
plans
2019
€m
4.0
3.6
7.6
Defined
benefit
retirement
plans
2018
€m
Post-
employment
medical
benefits
and other
benefits
2019
€m
0.2
—
0.2
Post-
employment
medical
benefits
and other
benefits
2018
€m
3.9
3.6
7.5
(0.1)
—
(0.1)
2018
€m
81.3
1.6
0.3
0.5
0.5
(2.7)
81.5
Total
2019
€m
Total
2018
€m
4.2
3.6
7.8
3.8
3.6
7.4
Current service cost is allocated between cost of sales and other operating expenses. Interest on net
defined benefit obligation is disclosed in net financing costs.
Amount recognized in the Consolidated Statement of Comprehensive Income:
Actuarial experience losses
Actuarial losses arising from changes in financial assumptions
Actuarial gains arising from changes in demographic assumptions
Actuarial gains arising from the return on plan assets, excluding interest income
Total actuarial losses
Cumulative amount of actuarial losses recognized in Consolidated Statement of
Comprehensive Income
Year ended
December 31,
2019
Year ended
December 31,
2018
€m
€m
0.2
43.2
(3.0)
(5.1)
35.3
0.5
13.8
(1.1)
(0.3)
12.9
Year ended
December 31,
2019
Year ended
December 31,
2018
€m
€m
49.5
14.2
Nomad Foods Annual Report F-52
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The fair value of plan assets, all at quoted prices are as follows:
Equities
Debt instruments
Property
Other
Total
December 31,
2019
December 31,
2018
€m
€m
20.5
40.3
13.1
12.5
86.4
20.2
47.2
10.9
3.2
81.5
Post-employment medical
benefits and other
benefits
Defined benefit
retirement plans
December 31, 2019
Discount rate
Inflation rate
Rate of increase in salaries
Rate of increase for pensions in
payment
Long term medical cost of inflation
Germany
Sweden
Austria
Italy
Germany
Austria
1.15%
2.00%
2.80%
1%-2%
—
1.45%
1.80%
2.80%
—
—
1.00%
1.53%
2.00%
2.00%
—
0.67%
1.50%
—
—
—
0.45%
2.00%
2.80%
—
—
0.30%
1.53%
3.00%
—
2.00%
December 31, 2018
Discount rate
Inflation rate
Rate of increase in salaries
Rate of increase for pensions in
payment
Long term medical cost of inflation
Defined benefit
retirement plans
Post-employment medical
benefits and other
benefits
Germany
Sweden
Austria
Italy
Germany
Austria
1.75%
2.00%
2.80%
1%-2%
—
2.25%
2.00%
2.75%
—%
—
2.00%
2.00%
3.00%
2.00%
—
1.60%
1.50%
—
—
—
1.20%
2.00%
2.80%
—
—
1.00%
2.00%
3.00%
—
2.00%
In valuing the liabilities of the pension fund at December 31, 2019 and December 31, 2018, mortality
assumptions have been made as indicated below. The assumptions relating to longevity underlying the pension liabilities
at the financial year end date are based on standard actuarial mortality tables and include an allowance for future
improvements in longevity. The assumptions are based on the following mortality tables:
•
•
•
•
Germany: Richttafeln 2018 G
Sweden: DUS 14
Austria: AVÖ 2018 - P
Italy: RG48
These four references are to the specific standard rates of mortality that are published and widely used in
each country for the use of actuarial assessment of pension liabilities and take account of local current and future average
life expectancy.
December 31, 2019 (years)
Retiring at the end of the year:
Male
Female
Germany
Sweden
Austria
Italy
21
24
22
24
23
25
19
22
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December 31, 2018 (years)
Retiring at the end of the year:
Male
Female
Germany
Sweden
Austria
Italy
21
24
22
24
23
25
19
22
The history of experience adjustments from inception of the Company for the defined benefit retirement
plans is as follows:
Present value of defined benefit obligations
Fair value of plan assets
Recognized liability in the scheme
Experience losses on scheme liabilities
Experience gains on scheme assets
December 31,
2019
December 31,
2018
December 31,
2017
€m
€m
€m
314.9
(86.4)
228.5
0.2
(5.1)
274.2
(81.5)
192.7
0.5
(0.3)
261.8
(81.3)
180.5
0.5
(1.9)
Post-employment medical benefits- sensitivity analysis
The effect of a 1% movement in the assumed medical cost trend rate is not significant.
Defined benefit obligation- sensitivity analysis
The effect of a 1% movement in the most significant assumptions for the year ended December 31, 2019 is
as follows:
Discount rate
Inflation rate
Rate of increase in salaries
Rate of increase for pensions in payment
Increase
Decrease
€m
€m
(51.4)
43.5
16.6
44.9
68.1
(35.4)
(12.3)
(36.3)
There are no deficit elimination plans for any of the defined benefit schemes. Expected contributions and
payments to post-employment benefit plans for the period ending December 31, 2020 are €5.5 million. The weighted
average duration of the defined benefit obligations is 19.6 years years.
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Nomad Foods Annual Report F-54
24)
Provisions
Balance at December 31, 2017
Acquired through business
combinations
Additional provision in the period
Release of provision
Utilization of provision
Unwinding of discounting
Foreign exchange
Balance at December 31, 2018
Impact of transition to IFRS 16
Balance at January 1
2019
Acquired through business
combinations
Additional provision in the period
Release of provision
Utilization of provision
Unwinding of discounting
Foreign exchange
Balance at December 31, 2019
Analysis of total provisions:
December 31,
2019
Current
Non-current
Total
Restructuring
40.9
5.9
46.8
Restructuring
Onerous/
unfavorable
contracts
Provisions
related to
other taxes
Contingent
consideration
€m
€m
€m
€m
Other
€m
Total
€m
26.3
—
4.0
(1.5)
(16.5)
—
—
12.3
—
12.3
—
3.2
(1.5)
(6.7)
—
0.1
7.4
75.4
10.2
10.4
18.5
140.8
—
—
—
(4.3)
0.8
(3.1)
68.8
(66.9)
1.9
—
—
—
(0.9)
—
0.2
1.2
—
0.3
—
(4.7)
—
—
5.8
—
5.8
—
2.4
(1.3)
—
—
—
6.9
—
—
(2.7)
(6.5)
0.3
—
1.5
—
1.5
—
—
—
(1.5)
—
—
—
7.0
4.1
(2.0)
(2.3)
—
—
25.3
—
25.3
1.9
10.2
(5.7)
(0.5)
—
0.1
31.3
7.0
8.4
(6.2)
(34.3)
1.1
(3.1)
113.7
(66.9)
46.8
1.9
15.8
(8.5)
(9.6)
—
0.4
46.8
December 31,
2018
Impact of
transition to
IFRS 16
Restated
balance as of
December 31,
2018
44.3
69.4
113.7
(3.6)
(63.3)
(66.9)
40.7
6.1
46.8
The €7.4 million (2018: €12.3 million) provision relates to committed plans for certain restructuring activities
of exceptional nature which are due to be completed within the next 12 months.
The amounts have been provided based on the latest information available on the likely remaining
expenditure required to complete the committed plans. €6.7 million has been utilized in the year ended December 31,
2019 which mainly relates to the closure of the production facilities in Bjuv as well as other reorganizational activities
across the Company.
Onerous/unfavorable contracts
Of the onerous/unfavorable contracts provision reported as of December 31, 2018, €66.9 million was held in
relation to a lease for a warehouse and factory facility in Bjuv, Sweden. The factory is vacant and the Company currently
anticipates the warehouse space will not be fully utilized by the Company or other third parties, so the lease was identified
as being onerous. As disclosed in Note 2, upon transition to IFRS 16 Leases the full lease liability is now recognized in the
Statement of Financial Position so that the provision has been released.
The remaining provision of €1.2 million relates to a service contract covering the same warehouse facility.
Provisions relating to other taxes
The €6.9 million (2018: €5.8 million) provision relates to other, non-income taxes due to tax authorities after
tax investigations within certain operating subsidiaries within the Nomad Group.
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Contingent consideration
During the year ended December 31, 2019, the contingent consideration provision was utilized to settle all
remaining liabilities in respect of the Lutosa Brand, which is being used under license until 2020. This payment has been
presented as an investing cash flow within the Statement of Cash Flows.
Other
Other provisions include €6.6 million (December 31, 2018: €6.6 million) of contingent liabilities acquired as
part of the Goodfella’s Pizza acquisition that are indemnified by the Seller’s insurance policies, €4.7 million (December 31,
2018: €5.0 million) of obligations in Italy, €6.0 million (December 31, 2018: €5.9 million) for asset retirement
obligations, €1.9 million (December 31, 2018: nil) of pre-acquisition related liabilities recognized in the year as an
adjustment to the acquisition date liabilities of Aunt Bessie's Limited, €8.3 million (December 31, 2018: €1.0 million) of
additional provisions in the period relate to employer taxes on the Long-term Incentive Plan (see Note 8) which would
become payable on the issuance of shares, and other obligations from previous accounting periods.
25)
Share capital and capital reserves
Share capital and capital reserve
Authorized:
Unlimited number of Ordinary Shares with nil nominal value issued at $10.00 per share
Unlimited number of Founder Preferred Shares with nil nominal value issued at $10.00 per
share
Issued and fully paid:
194,542,957 (December 31, 2018: 174,229,051) Ordinary Shares with nil nominal value
1,500,000 (December 31, 2018: 1,500,000) Founder Preferred Shares with nil nominal value
Total share capital and capital reserve
Listing and share transaction costs
Total net share capital and capital reserve
Ordinary Shares
Balance at December 31, 2017
Shares issued in the year
Balance at December 31, 2018
Shares issued in the year
Balance at December 31, 2019
As at
December 31,
2019
As at
December 31,
2018
€m
€m
n/a
n/a
2,109.7
10.6
2,120.3
(24.9)
2,095.4
n/a
n/a
1,751.7
10.6
1,762.3
(13.8)
1,748.5
Issued and
Repurchased
Ordinary shares
(in millions)
165.3
8.9
174.2
20.3
194.5
Note 8(b) sets out the Non-Executive Director, Initial Director Options and Director and Senior Management
Restricted share awards.
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Nomad Foods Annual Report F-56
On January 2, 2018, the Company issued a share dividend of 8,705,890 ordinary shares (the "Founder
Preferred Share Dividend") calculated as 20% of the increase in the market price of our ordinary shares compared to
2015 dividend price of $11.4824 multiplied by Preferred Share Dividend Equivalent. The Dividend Price used to calculate
the Annual Dividend Amount was $16.6516 (calculated based upon the volume weighted average price for the last ten
consecutive trading days of 2017).
On January 2, 2019, the Company issued a share dividend of 171,092 ordinary shares calculated as 20%
of the increase in the market price of our ordinary shares compared to 2017 dividend price of $16.6516 multiplied by
Preferred Share Dividend Equivalent. The Dividend Price used to calculate the Annual Dividend Amount was $16.7538
(calculated based upon the volume weighted average price for the last ten consecutive trading days of 2018).
On March 22, 2019, the Company issued 20,000,000 ordinary shares in a public offering at $20.00 per
share for aggregate gross proceeds of $400.0 million (€353.6 million). Directly attributed transaction costs of €11.1 million
were incurred.
Listing and share transaction costs
As at December 31, 2019, cumulative listing and share transaction costs, which includes the total cost of
admission and share issuance expenses, as well as costs associated with share repurchases were €24.9 million and are
disclosed as a deduction directly against the capital reserve.
At December 31, 2017
Placement fees
At December 31, 2018
Share transaction costs
At December 31, 2019
€m
13.8
—
13.8
11.1
24.9
Founder Preferred Shares Annual Dividend Amount
Each of the Founder Entities holds 750,000 shares for a total of 1,500,000 Founder Preferred Shares which
were issued at $10.00 per share. The Founder Preferred Shares are intended to incentivize the Founders to achieve
Nomad’s objectives. In addition to providing long term capital, the Founder Preferred Shares are structured to provide a
dividend based on the future appreciation of the market value of the ordinary shares thus aligning the interests of the
Founders with those of the holders of ordinary shares on a long term basis. The Founder Preferred Shares are also
intended to encourage the Founders to grow Nomad to maximize value for holders of ordinary shares. There are no
Founder Preferred Shares held in Treasury. Founder Preferred Shares confer upon the holder the following:
1.
2.
the right to one vote per Founder Preferred Share on all matters to be voted on by
shareholders generally and to vote together with the holders of ordinary shares;
commencing on January 1, 2015 and for each financial year thereafter:
a.
b.
once the average price per ordinary share for the Dividend Determination
Period, i.e. the last ten consecutive trading days of a year is at least $11.50
(which condition has been satisfied for the year ended December 31,
2015), the right to receive a Founder Preferred Shares Annual Dividend
Amount (as more fully described below), payable in Ordinary Shares or
cash, at the Company’s sole option; and
the right to receive dividends and other distributions as may be declared
from time to time by the Company’s board of directors with respect to the
Ordinary Shares (such dividends to be distributed among the holders of
Founder Preferred Shares, as if for such purpose the Founder Preferred
Shares had been converted into Ordinary Shares immediately prior to such
distribution) plus an amount equal to 20% of the dividend which would be
distributable on such number of Ordinary Shares equal to the Preferred
Share Dividend Equivalent (as defined below); and
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3.
4.
5.
in addition to amounts payable pursuant to clause 2 above, the right, together with the
holders of Ordinary Shares, to receive such portion of all amounts available for distribution
and from time to time distributed by way of dividend or otherwise at such time as
determined by the Directors; and
the right to an equal share (with the holders of Ordinary Shares on a share for share basis)
in the distribution of the surplus assets of Nomad on its liquidation as are attributable to the
Founder Preferred Shares; and
the ability to convert into Ordinary Shares on a 1-for-1 basis (mandatorily upon a Change of
Control or the seventh full financial year after an acquisition)
See Note 27 for further information on the Founder Preferred Shares Dividends issued.
26)
Share-based compensation reserve
The Company's discretionary share award scheme, the LTIP, enables the Company’s Compensation
Committee to make grants (“Awards”) in the form of rights over ordinary shares, to any Director, Non-Executive Director or
employee of the Company. However, it is the Committee’s current intention that Awards be granted only to Directors and
senior management, whilst recognizing a separate annual Restricted Stock Award for Non-Executive Directors.
All Awards are to be settled by physical delivery of shares. Note 8(b) sets out the Non-Executive Director
and Director and Senior Management Restricted share awards.
Balance as of January 1, 2019
Non-Executive Director restricted share awards charge
Directors and Senior Management share awards charge
Vesting of Non-Executive Director restricted shares
Vesting of LTIP Share awards
Reclassification of awards for settlement of tax liabilities
Balance as of December 31, 2019
Share based
compensation
reserve
€m
9.4
0.9
14.0
(0.8)
(1.3)
0.4
22.6
27)
Founder Preferred Shares Dividend Reserve
Nomad has issued Founder Preferred Shares to its Founder Entities. A summary of the key terms of the
Founder Preferred Shares is set out in Note 25.
The Founder Preferred Shares Annual Dividend Amount is structured to provide a dividend based on the
future appreciation of the market value of the ordinary shares, thus aligning the interests of the Founders with those of the
investors on a long term basis. Commencing in 2015, the Founder Preferred Share Annual Dividend Amount became
payable because the Company’s volume weighted average ordinary share price was above $11.50 for the last ten
consecutive trading days of the 2015 financial year.
The Preferred Shares Annual Dividend amount is determined with reference to the Dividend Determination
Period of a financial year, ie the last ten consecutive trading days and calculated as 20% of the increase in the volume
weighted average share price of our ordinary shares across the determination period compared to the highest price
previously used in calculating the Founder Preferred Share Annual Dividend Amounts (currently $21.7289) multiplied by
140,220,619 Preferred Share Dividend Equivalent (the “Preferred Share Dividend Equivalent”). The Preferred Share
Dividend Equivalent is equal to the number of ordinary shares outstanding immediately following the Iglo Acquisition, but
excluding the 13.7 million ordinary shares issued to the seller of the Iglo Group. The Founder Preferred Shares Annual
Dividend Amount is paid for so long as the Founder Preferred Shares remain outstanding.
The amounts used for the purposes of calculating the Founder Preferred Shares Annual Dividend Amount
and the relevant numbers of ordinary shares are subject to such adjustments for share splits, share dividends and certain
other recapitalization events as the Directors in their absolute discretion determine to be fair and reasonable in the event
Nomad Foods Annual Report F-58
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of a consolidation or sub-division of the ordinary shares in issue, as determined in accordance with Nomad Foods’
Memorandum and Articles of Association.
Dividends on the Founder Preferred Shares are payable until the Founder Preferred Shares are converted
into Ordinary Shares. The Founder Preferred Shares automatically convert on a one for one basis (i) on the last day of the
seventh full financial year following our acquisition of Iglo Foods (or if such day is not a trading day, the next trading day)
or (ii) in the event of a change of control (unless the independent directors of our board of directors determine
otherwise). The holders of Founder Preferred Shares may also be converted to Ordinary shares on a one for one basis at
the option of the holder. In the event of an automatic conversion, a dividend on the Founder Preferred Shares shall be
payable with respect to the shorted dividend year on the trading day immediately prior to the conversion. In the event of
an optional conversion by the holder, no dividend on the Founder Preferred Shares shall be payable with respect to the
year in which the conversion occurred.
On December 29, 2017, the Company’s Board of Directors approved a share dividend of an aggregate of
8,705,890 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2015
dividend price of $11.4824 multiplied by Preferred Share Dividend Equivalent. The Dividend Price used to calculate the
Annual Dividend Amount was $16.6516 (calculated based upon the volume weighted average price for the last ten
consecutive trading days of 2017) and the ordinary shares underlying the Founder Preferred Share Dividend were issued
on January 2, 2018.
On December 31, 2018, the Company’s Board of Directors approved a share dividend of an aggregate of
171,092 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2017
dividend price of $16.6516 multiplied by the Preferred Share Dividend Equivalent. The Dividend Price used to calculate
the Annual Dividend Amount was $16.7538 (calculated based upon the volume weighted average price for the last ten
consecutive trading days of 2018) and the ordinary shares underlying the Founder Preferred Share Dividend were issued
on January 2, 2019.
On December 31, 2019, the Company’s Board of Directors approved a share dividend of an aggregate of
6,421,074 ordinary shares calculated as 20% of the increase in the market price of our ordinary shares compared to 2018
dividend price of $16.7538 multiplied by the Preferred Share Dividend Equivalent. The Dividend Price used to calculate
the Annual Dividend Amount was $21.7289 (calculated based upon the volume weighted average price for the last ten
consecutive trading days of 2019) and the ordinary shares underlying the Founder Preferred Share Dividend were issued
on January 2, 2020.
Balance as of January 1, 2019
Settlement of dividend through share issue
Balance as of December 31, 2019
28)
Translation reserve
Founder
Preferred
Shares
Dividend
Reserve
€m
372.6
(2.5)
370.1
The translation reserve comprises all foreign exchange differences arising from the translation of the
financial statements of foreign operations, as well as from the translation of liabilities that hedge the Company’s net
investment in a foreign subsidiary.
Balance as of January 1
Foreign currency translation adjustments
Net deferred (losses)/gains on net investment hedges (1)
Total presented in Other Comprehensive Income
Balance as of December 31
F-59 Nomad Foods Annual Report
Year ended December 31,
2019
€m
2018
€m
2017
€m
88.8
19.2
(13.2)
6.0
94.8
83.2
2.2
3.4
5.6
88.8
84.0
(8.9)
8.1
(0.8)
83.2
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(1) (Losses)/gains on net investment hedges are offset by €19.0 million of gains (2018: losses of €3.7 million, 2017:
losses of €8.7 million) on GBP net investments included within the foreign currency translation adjustments.
The translation reserve as at December 31, 2019, includes €3.8 million (2018: €15.8 million) relating to
continuing hedging relationships in respect of GBP net investments, as well as €46.4 million (2018: €47.6 million) relating
to a discontinued hedging relationship in respect of GBP net investments.
29)
Cash flow hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash
flow hedging instruments related to hedged transactions that have not yet occurred. Details of the Company's cash flow
hedge accounting is detailed in Note 33. The reserve relating to forward currency contracts will be reclassified to the
Statement of Profit or Loss within 12 months whilst the reserve relating to the cross currency interest rate swaps will be
reclassified over the life of the instruments which mature in 2022.
The table below shows the movement in the cash flow hedging reserve during the year, including the gains
or losses arising on the revaluation of hedging instruments during the year and the amount reclassified from Other
Comprehensive Income ("OCI") to the Consolidated Statement of Profit or Loss in the year.
Balance as of January 1, 2017
Change in fair value of hedging instrument recognized in OCI for the year
Reclassified to cost of goods sold
Reclassified from OCI to finance costs
Deferred tax
Balance as of December 31, 2017
Change in fair value of hedging instrument recognized in OCI for the year
Reclassified to cost of goods sold
Reclassified from OCI to finance costs
Deferred tax
Balance as of December 31, 2018
Change in fair value of hedging instrument recognized in OCI for the year
Reclassified to cost of goods sold
Reclassified from OCI to finance costs
Deferred tax
Balance as of December 31, 2019
30)
Earnings per share
Basic earnings per share
Cross
currency
interest rate
swaps
Forward
currency
contracts
Total Cash
flow hedge
reserve
€m
€m
€m
—
(56.8)
—
56.3
0.1
(0.4)
49.5
—
(47.9)
(0.3)
0.9
28.1
—
(37.4)
1.6
(6.8)
8.4
(19.7)
3.8
—
4.9
(2.6)
20.3
(6.4)
—
(3.7)
7.6
3.8
(21.8)
—
4.0
(6.4)
8.4
(76.5)
3.8
56.3
5.0
(3.0)
69.8
(6.4)
(47.9)
(4.0)
8.5
31.9
(21.8)
(37.4)
5.6
(13.2)
Profit for the period attributable to equity owners of the parent (€m)
Weighted average Ordinary Shares and Founder Preferred Shares
Basic earnings per share (€’s)
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
154.0
171.2
136.5
192,004,803
175,622,538
176,080,272
0.80
0.97
0.78
For the year ended December 31, 2019, basic earnings per share is calculated by dividing the profit
attributable to the shareholders of the Company of €154.0 million (year ended December 31, 2018: €171.2 million, year
ended December 31, 2017: €136.5 million) by the weighted average number of Ordinary Shares of 190,504,803
Nomad Foods Annual Report F-60
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(December 31, 2018: 174,122,538, year ended December 31, 2017: 174,580,272) and Founder Preferred Shares of
1,500,000 (December 31, 2018: 1,500,000, year ended December 31, 2017: 1,500,000).
Diluted earnings per share
Profit for the period attributable to equity owners of the parent (€m)
Weighted average Ordinary Shares and Founder Preferred Shares
Diluted earnings per share (€’s)
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
154.0
171.2
136.5
198,425,877
175,793,631
184,786,162
0.78
0.97
0.74
For the year ended December 31, 2019, the number of shares in the diluted earnings per share calculation
include 6,421,074 shares for the dilutive impact of the Ordinary shares to settle the Founder Preferred Shares Annual
Dividend for the year ended December 31, 2019, which were issued in January 2020. Refer to Notes 27 and 38 for further
details.
31)
Reconciliation of liabilities arising from financing activities
The table below details changes in the Company's liabilities arising from financing activities, including both
cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash
flows will be classified in the Company's consolidated statements of cash flows from financing activities.
Cash /
non-cash
Total loans and
borrowings
(Note 21)
Financial
payables (Note
22)
Derivatives: (Net) Fair
value of forward
foreign exchange and
currency swap
contracts FVPTL
Derivatives: (Net)
Fair value of cross
currency interest
rate swaps
Opening balance January 1, 2019
Restatement on adoption of IFRS 16
(Note 2)
Restated opening balance January 1,
2019
Cash inflow (1)
Cash outflow (2)
Interest accretion
Exchange movement
Fair value changes
Other non-cash adjustments
Closing balance December 31, 2019
€m
1,764.3
Non-cash
120.8
Cash
Cash
Cash
Non-cash
Non-cash
Non-cash
1,885.1
2.0
(44.0)
5.3
15.7
—
11.2
1,875.3
€m
€m
€m
7.7
—
7.7
—
(72.7)
73.7
(1.1)
—
(3.5)
4.1
0.1
—
0.1
4.7
—
—
—
(5.0)
—
(0.2)
(0.3)
—
(0.3)
20.9
(4.0)
—
—
(1.3)
—
15.3
F-61 Nomad Foods Annual Report
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Cash / non-
cash
Total loans and
borrowings
(Note 21)
Financial
payables (Note
22)
Derivatives: (Net) Fair
value of forward
foreign exchange and
currency swap
contracts FVPTL
Derivatives: (Net)
Fair value of cross
currency interest
rate swaps
Opening balance January 1, 2018
Restatement on adoption of IFRS 9
(Note 2)
Restated opening balance January 1,
2018
Cash inflow (1)
Cash outflow (2)
Interest accretion
Cash
Cash
Cash
Acquired through business combinations Non-cash
Exchange movement
Fair value changes
Other non-cash adjustments
Closing balance December 31, 2018
Non-cash
Non-cash
Non-cash
€m
1,398.4
Non-cash
(21.8)
€m
€m
€m
3.1
—
3.1
3.4
(59.1)
64.4
—
(0.8)
—
(3.3)
7.7
0.7
—
0.7
0.8
—
—
—
—
(1.4)
—
0.1
42.8
—
42.8
13.8
(3.6)
—
—
—
(53.3)
—
(0.3)
1,376.6
355.6
(5.9)
—
2.5
32.7
—
2.8
1,764.3
(1) Cash inflows from cross currency interest rate swaps are part of effective cash flow hedging relationships and are
presented within interest paid within the Consolidated Statements of Cash Flows.
(2) Cash outflows from cross currency interest rate swaps are not part of a cash flow hedge and are presented within
proceeds on settlement of derivatives within the Consolidated Statements of Cash Flows.
Note: IFRS 16 Leases became effective as of January 1, 2019, at which point operating lease liabilities have been added
to loans and borrowings.
32)
Cash flows from operating activities
Cash flows from operating activities
Profit for the period
Adjustments for:
Exceptional items
Non-cash fair value purchase price adjustment of inventory
Share based payments expense
Depreciation and amortization
Loss on disposal and impairment of property, plant and equipment
Net finance costs
Taxation
Operating cash flow before changes in working capital,
provisions and exceptional items
Decrease/(increase) in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Increase/(decrease) in employee benefit and other provisions
Cash generated from operations before tax and exceptional items
Year ended
December 31,
2019
Year ended
December 31,
2018
Year ended
December 31,
2017
Note
€m
€m
€m
153.6
170.5
136.5
7
5
10
11
54.5
—
14.9
68.3
0.6
73.2
56.7
421.8
23.5
(34.4)
(40.6)
6.6
376.9
17.7
5.7
13.0
46.3
0.3
56.0
56.6
366.1
(20.2)
(10.8)
64.5
(2.0)
397.6
37.2
—
2.6
42.4
0.5
74.4
32.0
325.6
16.7
(1.6)
18.1
(0.3)
358.5
Nomad Foods Annual Report F-62
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33)
Financial risk management
Overall risk management policy
The Company’s activities expose it to a variety of financial risks, including currency risk, interest rate risk,
credit risk and liquidity risk.
The Company’s overall risk management program focuses on minimizing potential adverse effects on the
Company’s financial performance. Where appropriate, the Company uses derivative financial instruments to hedge certain
risk exposures.
Risk management is led by senior management and executed according to Company policy. All hedging
activity is carried out by a central treasury department that evaluates and hedges financial risks according to forecasts
provided by the Company’s operating units.
Derivatives and hedging
Derivatives are used for economic hedging purposes and not as speculative investments. Where
derivatives do not meet hedge accounting criteria, they are classified as 'fair value through profit or loss' for accounting
purposes and are accounted for at fair value through profit or loss. They are presented as current assets or liabilities to
the extent they are expected to be settled within 12 months after the end of the reporting period. The Company's
derivative financial instruments are disclosed within Note 34.
Hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the
hedged item. The effective portion of the change in the fair value of the hedging instrument is accounted for in the
translation reserve or cash flow hedge reserve through Other Comprehensive Income and will be recognized in profit or
loss in the same period as the hedged item. Movements in the Company's translation reserve and cash flow hedging
reserve are presented in Notes 28 & 29 respectively. The Company's accounting policy for hedge accounting is disclosed
within Note 3.
As at December 31, 2019, the Company has $935.6 million of U.S. Dollar LIBOR floating rate debt. The
Company uses cross currency interest rate swaps to convert this into €845.1 million of debt with a fixed rate of interest,
designated as a cash flow hedge. Additionally cross currency interest rate swaps have been entered into which receive
€309.7 million with fixed interest flows and pays £260.8 million with fixed interest flows. £222.5 million of these swaps
have been designated as a net investment hedge of the Company's investments in Pound Sterling.
In creating cash flow hedges over U.S. Dollar debt, the Company enters into cross currency hedging
arrangements with similar critical terms as the hedged item, such as reference rate, reset dates, payment dates, and
notional amount. As all critical terms matched during the year, the economic relationship was 100% effective. If due to
certain circumstances one or more critical terms do not match, the economic relationship and the hedge effectiveness will
be assessed quantitatively using a cumulative dollar-offset test.
Hedge ineffectiveness may occur due to:
the credit value/debit value adjustment on the cross currency interest rate swaps that is
-
not matched to the underlying liability, and/or
differences in critical terms between the cross currency interest rate swaps and
-
underlying liability, and/or
the effects of the forthcoming reforms to LIBOR, because these might take effect at a
-
different time and have a different impact on the hedged item and the hedging instrument.
There was no material ineffectiveness during 2019 in relation to the cross currency interest rate swaps.
The effects of the cash flow hedging instruments on the Company's financial position and performance are
as follows:
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All amounts stated in €m, unless otherwise stated
Derivative financial instruments - cross currency interest rate swaps
Carrying amount of asset/(liability)
Notional amount (USD)
Maturity date
Change in fair value of outstanding hedging instruments since January 1
Change in value of hedged item used to determine effectiveness
Weighted average hedged rate for the year
December 31,
2019
December 31,
2018
(18.5)
$935.6
5/15/2022
7.1
(7.1)
1.11
(25.6)
$953.4
5/15/2022
35.6
(35.6)
1.11
The effects of the net investment hedging instruments on the Company's financial position and performance
are as follows:
All amounts stated in €m, unless otherwise stated
UK cross-currency interest rate swaps hedge
Carrying amount of cross-currency interest rate swaps
Notional amount (GBP)
Maturity Date
Change in fair value of cross-currency interest rate swaps as a result of foreign
currency movements since January 1
Change in value of hedged item used to determine hedge effectiveness
Weighted average hedged rate for the year
December 31,
2019
December 31,
2018
2.4
£222.5
5/15/2022
21.6
£224.7
5/15/2022
(13.2)
13.2
1.19
3.7
(3.4)
1.19
The impact of the net investment hedge is taken directly to equity via the foreign currency translation
reserve. The amount taken to this reserve that arose on the translation of the notional component of cross currency
interest rate swaps was a loss of €13.2 million (2018: €3.4 million gain).
In determining hedge effectiveness for a net investment hedge, the economic relationship between hedging
instrument and balance sheet exposure should be established including the notional amount and currency of the
underlying investment. Hedge ineffectiveness may arise due to the value of the hedged item being less than the notional
value of the hedging instrument. There was no material ineffectiveness in the net investment hedge in either 2019 or
2018. The ineffective amount taken through the Consolidated Statements of Profit or Loss in 2019 amounted to €nil (2018:
€0.3 million).
The Company's policy is to reduce its risk of foreign exchange movements on material operating cash flows
in currencies other than the operating entity's functional currency using forward foreign exchange contracts designated as
cash flow hedges.
In order to qualify as a cash flow hedge, the hedging instrument must meet the requirements of IAS 39,
including that the hedging instrument must align with the hedged item. The group designates the forward component of
forward contracts as the hedging instrument.
Hedge ineffectiveness may arise if the timing of the forecast transaction changes from what was originally
estimated.
The effects of the foreign currency hedging instruments on the Company's financial position and
performance are as follows:
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Nomad Foods Annual Report F-64
As at December 31, 2019
EUR/USD
GBP/USD
GBP/EUR
SEK/EUR
Other
Currencies
€m
€m
€m
€m
€m
Derivative financial instruments - forward
currency contracts
Carrying amount of asset/(liability)
Notional amount
Fair value (gains)/losses of outstanding hedging
instruments since January 1
Weighted average hedge rate for the year
2.1
220.6
10.5
1.14
(1.7)
56.5
(0.7)
1.28
(8.3)
217.4
(10.9)
1.12
(0.3)
70.1
2.1
0.09
(0.3)
42.3
0.2
0.21
As at December 31, 2018
EUR/USD
GBP/USD
GBP/EUR
SEK/EUR
Other
Currencies
€m
€m
€m
€m
€m
Derivative financial instruments - forward
currency contracts
Carrying amount of asset/(liability)
Notional amount
Fair value losses of outstanding hedging instruments
since January 1
Weighted average hedge rate for the year
8.4
224.9
14.1
1.20
2.0
47.2
4.5
1.34
1.4
97.4
1.9
1.12
(0.6)
65.6
1.5
0.10
0.5
38.5
0.8
—
Gains in the year from foreign exchange swap contracts used for liquidity purposes designated as fair value
through the Consolidated Statements of Profit or Loss amounted to €4.8 million (2018: €1.0 million loss, 2017: €3.5 million
loss).
Losses in the year from cross currency interest rate swap contracts designated as fair value through the
Consolidated Statement of Profit or Loss amounted to €13.6 million (2018: €0.4 million gain, 2017: €3.9 million gain).
Market risk (including foreign exchange and interest rate risk)
In managing market risks, the Company aims to minimize the impact of short term fluctuations on the
Company’s earnings. Over the longer term, permanent changes in both foreign exchange rates and interest rates will
have an impact on consolidated earnings.
Currency risk
Foreign currency risk on assets and liabilities in currencies other than functional currency
Foreign Exchange
translation risk
The Company is exposed to foreign exchange translation risk arising from the translation of
assets and liabilities denominated in currencies other than the Euro. Key areas of foreign
currency exposure include non-Euro debt and investments in subsidiaries not held in Euro.
Company policy is to mitigate the potential foreign exchange translation risk by converting where
appropriate, borrowings into Euro. This has been achieved on the U.S. Dollar debt through the
use of cross currency swaps designated as a cash flow hedge. The Company also hedges
translational exposure on consolidation of GBP net assets through the use of currency swaps
designated as a net investment hedge.
Mitigation & Impact on
Statement of Financial Foreign exchange translation risk resulting from the translation of non-Euro
Position
Denominated borrowings into Euros, to the extent that they are hedged will be mitigated by the
translation of the underlying cross currency interest rate hedging arrangements.
As at 31 December 2019, 85.3% of the Company’s Pound Sterling cross currency interest rate
swaps are designated as hedges against the Company’s investment in its UK subsidiaries (2018:
85.3%, 2017: 82.8%). As at December 31, 2019, this represented 104% of the net assets held in
GBP (2018: 103%).
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Sensitivity analysis
During 2019, the Euro weakened by 5.3% against Pound Sterling (2018: strengthened by 1.3%).
The notional amount of Pound Sterling cross currency interest rate swaps designated as a Net
Investment hedge is £222.5 million. A 1% movement in the GBP-EUR foreign exchange rate
would result in a gain or loss of €2.6 million (2018: €2.5 million) which would be taken to equity.
Hedge accounting is not applied to 14.7% of the Company's Pound Sterling cross currency
interest rate swaps. A 1% movement in the GBP-EUR foreign exchange rate would result in a
gain or loss of €0.5 million (2018: 0.5 million).
In addition, the impact on the related interest charge for each 1% movement in the GBP-EUR
foreign exchange rate would be to decrease or increase the charge by €0.1 million, (2018: €0.1
million) within the Company Consolidated Statements of Profit or Loss.
Currency risk
Foreign currency risk on purchases
The Company is exposed to foreign exchange risk where a business unit has material operating
cash flows in a currency other than the functional currency of that entity.
The most significant exposures for the Company are the purchase of raw materials, stock and
services purchased in U.S. Dollars and Euros.
Mitigation & Impact on The Company’s policy is to reduce this risk by using foreign exchange forward contracts
Statement of Financial which are designated as cash flow hedges.
Position / Equity
As at December 31, 2019, the fair value of forward contracts entered into to hedge the future
purchase of U.S. Dollars is an asset of €0.4 million (2018: €10.6 million asset). All forecast
transactions are still expected to occur. As at December 31, 2019, 82.7% (2018: 85.2%) of
forecast future U.S. Dollar payments to the end of 2019 were hedged through the use of forward
contracts and existing cash. All forward contracts have been designated as cash flow hedges and
have a maturity within the next 12 months.
The fair value of the Euro forward contracts with reference to non-Euro functional currencies as at
December 31, 2019, is a liability of €9.0 million (2018: €1.1 million). As at December 31, 2019,
95.2% (2018: 69.5%) of forecast future net Euro payments to the end of 2019 were hedged
through the use of forward contracts and existing cash. All forward contracts have been
designated as cash flow hedges and have a maturity within the next 12 months.
Sensitivity analysis
During 2019, the Euro weakened by 5.3% against Pound Sterling (2018: strengthened by 1.3%,
2017: strengthened by 3.9%), weakened by 2% against the U.S.Dollar (2018: weakened by 4.5%,
2017: strengthened by 13.9%) and strengthened by 2.2% against the Swedish Krona (2018:
strengthened by 4.1%, 2017: strengthened by 2.7%).
On an annualized 2019 basis, and assuming all other factors remain constant, for each 1%
movement in value of the Euro against Pound Sterling, the impact to the Company profit or loss
before tax would be approximately €1.4 million (2018: €1.2 million), excluding the impact of any
forward contracts.
On an annualized 2019 basis, and assuming all other factors remain constant, for each 1%
movement in value of the Euro against the U.S.Dollar, the impact to the Company profit or loss
before tax would be approximately €2.8 million (2018: €2.3 million), excluding the impact of any
forward contracts.
On an annualized 2019 basis, and assuming all other factors remain constant, for each 1%
movement in value of the Euro against Swedish Krona, the impact to the Company profit or loss
before tax would be approximately €1.2 million (2018: €1.3 million), excluding the impact of any
forward contracts.
We do not expect purchase levels to be materially different in the coming year.
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Interest rate risk
Description
The Company is exposed to changes in interest rates to the extent that it enters into floating rate
borrowings.
Mitigation & Impact on
Equity / Income The Company’s policy on interest rate risk is to mitigate the Company’s exposure to fluctuations
Statement
in interest rates.
As a result of decisions taken by national regulators, LIBOR and EURIBOR may become phased
out and replaced by a replacement reference index. If LIBOR ceases to exist, we may need to
renegotiate our Senior Facilities Agreement with our lenders and cross currency interest rate
swaps, and continue to discuss the topic with our external banking counterparties. Our
expectation is that these contracts can be aligned to the new benchmarks as they become
known, and that it is highly probable that the existing hedging relationships can be continued.
Sensitivity analysis
During 2019, three month EURIBOR rates remained below zero (2018: no change). Within the
Euro denominated senior loans, there is a EURIBOR floor of 0%.
If interest rates were to move by 1%, this would have a correspondingly decrease or increase in
the Company’s profit/(loss) before tax by approximately €5.6 million (2018: €5.7 million).
Credit risk
Description
Credit risk arises on cash and cash equivalents, derivative financial instruments with banks and financial
institutions, any short term investments, as well as on credit exposures to customers. See Note 18 for
analysis of the trade receivables balance and Note 20 for analysis of the cash and cash equivalents
balance.
Mitigation
The Company limits counterparty exposures by monitoring each counterparty carefully and where
possible, sets credit limits according to approved treasury policy. The Company limits its exposure to
individual financial institutions by diversification of exposure across a range of financial institutions.
The credit quality of customers is assessed taking into account their financial position,
past experience and other factors. Credit limits are set for customers and regularly monitored to mitigate
ongoing payment risk.
Liquidity risk
Description
Mitigation
The Company is exposed to the risk that it is unable to meet its commitments as they fall due. The
Company has financial conditions, including financial covenants as part of the Senior debt arrangements
which it must comply with in order to maintain its current level of borrowings. There have been no
breaches of the covenants throughout the year.
The Company ensures that it has sufficient cash and available funding through regular cash flow and
covenant forecasting. In addition, the Company has access to a revolving credit facility of €80.0 million,
expiring in May 2023 and receivables financing facilities. This is available to finance working capital
requirements and for general corporate purposes. Currently €17.2 million is utilized for letters of credit,
overdrafts, customer bonds and bank guarantees.
Capital risk management
The objective of the Company when considering total capital is to protect the value of capital investments
and to generate returns on shareholder funds. Total capital is defined as including Loans and Borrowings and equity,
including derivatives used for the purpose of hedging currency and interest exposure on Loans and Borrowings, but
excluding the cashflow hedging reserve.
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In support of its objectives, the Company may undertake actions to adjust its capital structure accordingly.
Actions may include, but not limited to, raising or prepayment of Borrowings together with related derivative instruments,
issuance of additional share capital, payment of dividends or share buy-back.
Maturity analysis
The USD denominated term loans include the requirement to repay 1% of notional per annum. In 2019 this
amounts to €8.6 million (2018: €8.4 million) In addition, the Senior Facilities Agreement also includes an excess cashflow
calculation whereupon an amount of principal shall be repaid based upon terms including cash generated and leverage.
Based upon the calculation as at December 31, 2019, no excess cashflow will be repayable in 2020 (2018: €12.1 million,
repaid in 2019). Amounts have been reflected as current borrowings in the tables below.
The tables below show a maturity analysis of contractual undiscounted cash flows prepared using forward
interest rates where applicable, showing items at the earliest date on which the Company could be required to pay the
liability:
2019
Borrowings-principal
Borrowings-interest
Forward contracts Sell
Forward contracts Buy
Cross Currency Interest Rate Swaps Pay
Cross Currency Interest Rate Swaps
Receive
Lease Liabilities
Trade and other payables excluding non-
financial liabilities
Total
2020
€m
10.8
61.1
666.2
(658.5)
38.8
2021
€m
9.6
59.8
—
—
38.6
2022
€m
8.6
59.4
—
—
1,138.4
(49.4)
16.8
(48.2)
15.2
(1,136.0)
13.3
2023
€m
8.6
59.1
—
—
—
—
7.5
2024
€m
1,753.4
25.0
—
—
—
Over 5
years
€m
Total
€m
— 1,791.0
264.4
—
666.2
—
(658.5)
—
— 1,215.8
—
7.0
— (1,233.6)
145.5
85.7
483.4
569.2
—
75.0
—
83.7
—
75.2
—
1,785.4
—
85.7
483.4
2,674.2
As detailed in Note 2, following the adoption of IFRS 16 Leases on January 1, 2019, loans and borrowings
now include lease liabilities.
2018
Borrowings-principal
Borrowings-interest
Forward contracts Sell
Forward contracts Buy
Cross Currency Interest Rate Swaps Pay
Cross Currency Interest Rate Swaps
Receive
Trade and other payables excluding non-
financial liabilities
Total
2019
€m
23.4
67.9
671.9
(686.7)
40.1
2020
€m
2021
€m
2022
€m
8.4
67.6
—
—
8.4
67.1
—
—
8.4
66.7
—
—
39.8
39.6
1,130.8
(56.7)
(56.4)
(55.9)
(1,130.1)
534.9
594.8
—
59.4
—
59.2
—
75.8
2023
€m
8.4
66.3
Over 5
years
€m
1,737.4
26.3
Total
€m
1,794.4
361.9
—
—
—
—
—
—
—
671.9
(686.7)
— 1,250.3
— (1,299.1)
—
534.9
74.7
1,763.7
2,627.6
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Nomad Foods Annual Report F-68
34)
Financial instruments
Categories of financial instruments
The following table shows the carrying amount of each Statement of Financial Position class split into
the relevant category of financial instrument as defined in IFRS 9 'Financial Instruments'.
Financial
assets at
amortized
cost
Financial
Assets at
Fair Value
through
profit or
loss
Derivatives at
fair value
through profit
or loss
Derivatives
used for
hedging
Financial
liabilities at
amortized
cost
€m
€m
€m
€m
€m
2019
Assets
Trade receivables
Derivative financial instruments
Cash and cash equivalents
Short - term investments
Liabilities
Trade and other payables
excluding non-financial liabilities
Derivative financial instruments
Loans and borrowings (1)
143.6
—
747.4
—
—
—
—
—
—
78.7
25.0
—
—
—
Total
891.0
103.7
Total
€m
143.6
21.4
826.1
25.0
—
—
—
—
(483.4)
—
(1,884.2)
(2,367.6)
(483.4)
(44.9)
(1,884.2)
(1,396.4)
—
1.0
—
—
—
—
—
1.0
—
20.4
—
—
—
(44.9)
—
(24.5)
(1) Loans and borrowings excludes €8.9 million of deferred borrowing costs which are included within €1,875.3 million
of total loans and borrowings in Note 21.
2018
Assets
Trade receivables
Derivative financial instruments
Cash and cash equivalents
Liabilities
Trade and other payables
excluding non-financial liabilities
Derivative financial instruments
Loans and borrowings (2)
Financial
assets at
amortized
cost
Financial
Assets at
Fair Value
through
profit or
loss
Derivatives at
fair value
through profit
or loss
Derivatives
used for
hedging
Financial
liabilities at
amortized
cost
€m
€m
€m
€m
€m
98.3
—
297.0
—
—
—
—
—
30.6
—
—
—
—
4.6
—
—
(0.3)
—
4.3
—
44.5
—
—
(36.6)
—
7.9
Total
€m
98.3
49.1
327.6
—
—
—
(534.9)
—
(1,775.2)
(2,310.1)
(534.9)
(36.9)
(1,775.2)
(1,872.0)
Total
395.3
30.6
(2) Loans and borrowings excludes €10.9 million of deferred borrowing costs which are included within €1,764.3 million
of total non-current loans and borrowings in Note 21.
F-69 Nomad Foods Annual Report
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Fair values
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. In determining fair value, Nomad uses various
methods including market, income and cost approaches. Based on these approaches, Nomad utilizes certain
assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and
the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, market
corroborated, or generally unobservable inputs. The fair value hierarchy ranks the quality and reliability of the
information used to determine fair values.
Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following
three categories:
Level 1—Quoted prices for identical assets and liabilities traded in active exchange markets, such as the
New York Stock Exchange.
Level 2—Observable inputs other than Level 1 including quoted prices for similar assets or liabilities,
quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data.
Level 3—Unobservable inputs supported by little or no market activity for financial instruments whose
value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as
instruments for which the determination of fair value requires significant management judgment or estimation; also
includes observable inputs for non binding single dealer quotes not corroborated by observable market data. Where
market information is not available to support internal valuations, reviews of third party valuations are performed.
While Nomad believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different estimate of fair value at the reporting date.
The following is a description of the valuation methodologies and assumptions used for estimating the
fair values of financial instruments held by the Company.
(i)
Derivative financial instruments
Derivative financial instruments are held at fair value. There is no difference between carrying value and
fair value. The valuation technique utilized by the Company maximizes the use of observable market data where it is
available. All significant inputs required to fair value the instrument are observable. The Company has classified its
derivative financial instruments as level 2 instruments as defined in IFRS 13 ‘Fair value measurement’.
(ii)
Trade and other payables/receivables
The notional amount of trade and other payables/receivables are deemed to be carried at fair value,
short term and settled in cash.
(iii)
Cash and cash equivalents
The carrying value of cash and cash equivalents is deemed to equal fair value.
(iv)
Short-term investments
Short-term investments are valued using inputs that are derived principally from or corroborated by
observable market data. The Company has classified these as level 2 instruments as defined in IFRS 13 “Fair value
measurement”.
(v)
Interest bearing loans and liabilities
The fair value of secured notes is determined by reference to price quotations in the active market in
which they are traded. They are classified as level 1 instruments. The fair value of the senior loans is calculated by
discounting the expected future cash flows at the year end’s prevailing interest rates. They are classified as level 2
instruments. There is no requirement to determine or disclose the fair value of lease liabilities.
Nomad Foods Annual Report F-70
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Senior EUR/USD loans
Other external debt
2024 fixed rate senior secured notes
Less deferred borrowing costs
Derivatives
Cross Currency Interest Rate Swaps
Forward foreign exchange contracts
Total assets
Cross Currency Interest Rate Swaps
Forward foreign exchange contracts
Total liabilities
Total
Offsetting of derivatives
Fair value
Carrying value
December 31,
2019
December 31,
2018
December 31,
2019
December 31,
2018
€m
1,396.9
3.3
411.3
—
1,811.5
€m
1,347.2
3.0
395.2
—
1,745.4
€m
1,371.9
3.3
400.0
(8.9)
1,766.3
€m
1,372.2
3.0
400.0
(10.9)
1,764.3
As at
December 31,
2019
As at
December 31,
2018
€m
€m
17.5
3.9
21.4
(32.8)
(12.1)
(44.9)
(23.5)
35.7
13.4
49.1
(35.4)
(1.5)
(36.9)
12.2
Derivative contracts are held under International Swaps and Derivatives Association (ISDA) agreements
with financial institutions. An ISDA is an enforceable master netting agreement that permits the Company to settle net
in the event of default.
The following table sets out the carrying amounts of recognized financial instruments that are subject to
the above agreements.
As at Dec 31, 2019
Derivatives - assets
Derivatives - liabilities
As at Dec 31, 2018
Derivatives - assets
Derivatives - liabilities
Gross amount
of financial
instruments as
presented upon
balance sheet
Related
financial
instruments
that are offset
€m
€m
Net amount
€m
21.4
(44.9)
(21.4)
21.4
—
(23.5)
Gross amount
of financial
instruments as
presented upon
balance sheet
Related
financial
instruments
that are offset
€m
€m
49.1
(36.9)
(29.8)
29.8
Net amount
€m
19.3
(7.1)
F-71 Nomad Foods Annual Report
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35)
Operating leases
As detailed in Note 2, following the adoption of IFRS 16 Leases on January 1, 2019, a number of leased
assets have been capitalized. Certain operating leases do not qualify for capitalization.
Non-cancellable operating lease rentals relate to total future aggregate minimum lease payments and are
payable as follows:
Less than one year
Between one and three years
Between three and five years
More than five years
Total
As at
December 31,
2019
As at
December 31,
2018
€m
€m
2.1
3.6
1.9
—
7.6
22.2
38.5
26.0
94.9
181.6
Non-cancellable operating leases relate to equipment, motor vehicles and land and buildings and may be
subject to contractual annual increases linked to inflation indices. The payments shown above exclude the impact of these
contractual increases which cannot be reliably estimated.
36)
Capital commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
Property, plant and equipment
Intangible assets
Total
37)
Related parties
Founder Preferred Shares
As at
December 31,
2019
As at
December 31,
2018
€m
€m
11.5
0.6
12.1
6.8
2.8
9.6
Nomad has issued Founder Preferred Shares to its Founder Entities.
The conditions of the Founder Preferred Shares Annual Dividend Amount in 2017, 2018 and 2019 were
met and further details relating to these dividends is set out in Note 27.
Advisory Services Agreements
On June 15, 2015, the Company entered into an Advisory Services Agreement with Mariposa Capital,
LLC, an affiliate of Mr. Franklin, and TOMS Capital LLC, an affiliate of Mr. Gottesman. Pursuant to the terms of the
Advisory Services Agreement, Mariposa Capital, LLC and TOMS Capital LLC provide high-level strategic advice and
guidance to the Company. Under the terms of the Advisory Services Agreement, Mariposa Capital, LLC and TOMS
Capital LLC are entitled to receive an aggregate annual fee equal to $2.0 million, payable in quarterly installments. This
agreement expires on June 1st annually and will be automatically renewed for successive one-year terms unless any
party notifies the other parties in writing of its intention not to renew the agreement no later than 90 days prior to the
expiration of the term. The agreement may only be terminated by the Company upon a vote of a majority of its
directors. In the event that the agreement is terminated by the Company, the effective date of the termination will be six
months following the expiration of the initial term or a renewal term, as the case may be.
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Nomad Foods Annual Report F-72
Expenses of €0.2 million and €0.3 million for certain travel costs of Mariposa Capital, LLC and TOMS
Capital LLC respectively in the year ending December 31, 2019 were reimbursed (year ended December 31, 2018:
€0.2 million and €0.1 million respectively).
Directors and Key Management
All significant management decision making authority is vested within the Board of Directors and the
Executive Team, therefore key management are considered to be the Directors and Executive Officers. Their
remuneration has been disclosed in Note 9.
As part of the sale of the Iglo Group to Nomad Foods Limited, former Executive Officer and former Non-
Executive Director, Paul Kenyon acquired shares in the Company from Birds Eye Iglo Group LP Inc. Mr. Kenyon
acquired 37,060 shares at a price of $10.50 (€9.71) per share which was deemed to be at fair value. In connection with
the Permira share repurchase in 2017 (and upon removal of certain transfer restrictions relating to their shares), Mr.
Kenyon sold 26,372 shares, respectively, and no further shares were sold in 2018 or 2019.
Lord Myners of Truro CBE, a Non-Executive Director, holds 95,652 Ordinary Shares in Nomad Foods
Limited which includes 50,000 Ordinary Shares granted pursuant to a five-year option that expires on June 2, 2020 at a
purchase price of $11.50 per share.
The Non-Executive Directors are eligible to an annual restricted stock grant issued under the LTIP which
will vest on the earlier to occur of the date of the Company’s annual meeting of shareholders or thirteen months from
the date of grant. Details of the annual restricted stock grants under the LTIP can be found in Note 8(b).
As part of its long term incentive initiatives, the Company has granted 4,518,964 restricted shares to the
management team (the “Management Share Awards”). The Directors and Executive Officers have all been awarded
shares. The associated performance metrics and valuation method is detailed in Note 8(b).
38)
Significant events after the Statement of Financial Position date
On December 31, 2019, the Company’s Board of Directors approved a Founder Preferred Share dividend
of an aggregate of 6,421,074 Ordinary Shares calculated as 20% of the increase in the market price of our Ordinary
Shares compared to 2018 dividend price of $16.7538 multiplied by Preferred Share Dividend Equivalent. The Dividend
Price used to calculate the Annual Dividend Amount was $21.7289 (calculated based upon the volume weighted average
price for the last ten consecutive trading days of 2019) and the Ordinary Shares underlying the Founder Preferred Share
Dividend were issued on January 2, 2020.
F-73 Nomad Foods Annual Report
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Item 19.
Exhibits
The following exhibits are filed as part of this annual report:
EXHIBIT INDEX
Incorporation by Reference
Exhibit
No.
1.1
2.1
Exhibit Description
Amended and Restated Memorandum and Articles of
Association.
Registration Rights Agreement dated as of June 1,
2015 among Nomad Holdings Limited, Birds Eye Iglo
Limited Partnership Inc, Mariposa Acquisition II, LLC,
TOMS Acquisition I LLC, TOMS Capital Investments
LLC and funds managed by Pershing Square.
Form
6-
K (001-37669)
F-1 (333-20818
1)
Period
Covered or
Date of
Filing
1/14/2016
Exhibit
No.
99.1
4.1
11/24/2015
Filed with
this
Annual
Report
2.2
2.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
8.1
Indenture dated as of May 3, 2017 among Nomad
Foods Bondco PLC, Nomad Foods Limited, Deutsche
Trustee Company Limited, Deutsche Bank AG,
London Branch, Deutsche Bank Luxembourg S.A.,
and Credit Suisse AG, London Branch and the
Subsidiary Guarantors named therein.
Description of Securities.
6-K
(001-37669)
99.3
5/3/2017
Share Sale and Purchase Agreement, dated as of
October 29, 2015, among Liongem Sweden 1 AB, Iglo
Foods Group Limited and Nomad Foods Limited
F-1 (333-20818
1)
2.2
11/24/2015
Intercreditor Agreement, originally dated as of July 3,
2014, as amended and restated from time to time
including, pursuant to the 2017 Amendment and
Restatement Agreement among Nomad Foods
Limited, Credit Suisse AG, London Branch, Deutsche
Bank Company Limited and certain entities named
therein.
Amendment and Restatement Agreement, dated June
15, 2018, relating to Senior Facilities Agreement,
originally dated July 3, 2014, as amended and restated
from time to time, including pursuant to Amendment
and Restatement Agreement dated December 20,
2017 for Nomad Foods Limited with Credit Suisse AG,
London Branch.
Nomad Foods Limited Amended and Restated Long-
Term 2015 Incentive Plan.
Nomad Foods Limited Long Term 2015 Incentive Plan
Restricted Share Unit Agreement.
Service Agreement between the Company and Stéfan
Descheemaeker.
Service Agreement, dated as of February 15, 2018,
between the Company and Samy Zekhout.
Advisory Services Agreement, dated as of June 15,
2015, among Nomad Foods Limited, Mariposa Capital,
LLC and TOMS Capital LLC.
List of Significant Subsidiaries.
6-K
(001-37669)
99.2
5/3/2017
F-1
(333-208181)
20-F
(001-37669)
F-1
(333-208181)
10.3
11/24/2015
4.7
3/22/2018
10.5
11/24/2015
12.1 Rule 13a-14(a)/15d-14(a) Certification of Chief
Executive Officer.
X
X
X
X
X
X
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Nomad Foods Annual Report F-74
Exhibit
No.
12.2 Rule 13a-14(a)/15d-14(a) Certification of Chief
Exhibit Description
Financial Officer.
13.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
13.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
15.1 Consent of PricewaterhouseCoopers LLP
101.I
NS
101.S
CH
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
101.D
EF
XBRL Taxonomy Extension Definition Linkbase
Document
101.C
AL
XBRL Taxonomy Extension Calculation Linkbase
Document
101.L
AB
XBRL Taxonomy Extension Label Linkbase Document
101.P
RE
XBRL Taxonomy Extension Presentation Linkbase
Document
Incorporation by Reference
Form
Exhibit
No.
Period
Covered or
Date of
Filing
Filed with
this
Annual
Report
X
X
X
X
X
X
X
X
X
X
F-75 Nomad Foods Annual Report
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The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly
caused and authorized the undersigned to sign this Annual Report on Form 20-F on its behalf.
Date:
February 27, 2020
SIGNATURES
NOMAD FOODS LIMITED
By: /s/ Samy Zekhout
Name: Samy Zekhout
Title: Chief Financial Officer
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Nomad Foods Annual Report F-76
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Annual Report 2019 Corporate Information
Independent Registered
Public Accounting Firm
PriceWaterhouseCoopers LLP
London, UK
Investor Relations
Taposh Bari, CFA
Head of Investor Relations
718-290-7950
taposh.bari@nomadfoods.com
If you would like a free copy of
the annual report please e-mail
investors@nomadfoods.com
or write to:
Investor Relations
1, New Square
Bedfont Lakes Business Park
Feltham
Middlesex
TW14 8HA
Transfer Agent
Computershare
Toll Free Telephone US
800-368-5948
Toll and International Telephone
781-575-4223
By Regular Mail
P.O. BOX 505000
Louisville, KY 40233-5000
United States
By Overnight Delivery
462 South 4th Street
Suite 1600
Louisville, KY 40233-5000
United States
vwww.computershare.com/
investor
Securities Listing
Our shares of common stock
are listed on the NYSE
Ticker symbol: NOMD
Board of Directors
and Executive Officers
Noam Gottesman
Founder
Co-Chairman and
Non-Executive Director
Sir Martin Ellis Franklin, KGCN
Founder
Co-Chairman and
Non-Executive Director
Ian G.H. Ashken
Independent Non-Executive Director
Stefan Descheemaeker
Chief Executive Officer and Director
Jeremy Isaacs CBE
Independent Non-Executive Director
James E. Lillie
Independent Non-Executive Director
Stuart M. MacFarlane
Independent Non-Executive Director
Lord Myners of Truro CBE
Independent Non-Executive Director
Victoria Parry
Independent Non-Executive Director
Simon White
Independent Non-Executive Director
Samy Zekhout
Chief Financial Officer and Director
Nomad Foods Annual Report 2019 169
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