•  Post-tax 2013 loss rises to EUR41.2m, from EUR78.1m profit in 2012
  •  EBITDA down 14.3% to EUR300.1m
  •  Sales down 2.8% to EUR1.53bn
Iglo earnings plummet

Iglo earnings plummet

Higher one-time costs, lower sales and weaker margins meant Iglo Group booked a sharp jump in losses during 2013.

In its annual report, the maker of Birds Eye frozen foods said net losses plummeted 152.7% in the year.

Gross margin fell 1.2 percentage points to 33.4% and sales declined 2.8% due to "the increasingly competitive trading environment", particularly in Italy. Iglo said it saw sales trends improve in the final quarter of the year as NPD fed through.

The bottom line was also dented by increased exceptional items, which totalled EUR83.8m (US$115.6m) compared to EUR53.6m in 2012.

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TRADING RESULTS

 

Trading results to EBITDA before exceptional items are presented using constant currency exchange rates.

 

Net Sales

 

Total Net Sales decreased by 2.8% Year on year to €1,529.2 million. In the first three quarters of the year, our Italian business experienced a particularly challenging trading environment, with companies across the FMCG sector seeing sales decline. This impacted negatively on both Net Sales and Gross Margin. Performance improved in the final quarter of the year, as innovation helped to deliver a marginal Year on year sales growth.

 

Gross Margin

 

Gross Margin worsened this year decreasing by 1.2 ppts to 33.4% as a result of the increasingly competitive trading environment.

 

EBITDA

 

EBITDA before exceptional items decreased to €306.6 million, a 12.5% decrease on 2012.

 

Results at reported and constant currency

Table 1: Reported currency

 20132012€m%
Revenue (Net Sales) 1,505.8 1,572.7 (66.9) (4.3)
Gross Profit1 502.2 543.6 (41.4) (7.6)
Gross Margin 33.4% 34.6%   (1.2)
EBITDA before exceptional items 300.1 350.2 (50.1) (14.3)
Exceptional items (83.8) (53.6)    
Depreciation (23.3) (24.4)    
Amortisation (4.5) (4.4)    
Operating profit 188.5 267.8    

Table 2: Constant currency

 20132012€m%
Revenue (Net Sales) 1,529.2 1,573.2 (44.0) (2.8)
Gross Profit1 510.3 543.8 (33.6) (6.2)
Gross Margin 33.4% 34.6%   (1.2)
EBITDA before exceptional items 306.6 350.2 (43.6) (12.5)

1 Stated after cost of sales and distribution costs.
The reported average €/£ exchange rate for 2013 was 1.20. The constant currency results have been determined by translating the local currency denominated results for the year ended 31 December 2013 at the exchange rate for the comparable period in the prior year. The reported €/£ exchange rate for 2012 was 1.23.

 

Exceptional items

 

Exceptional items during the year were €83.8 million (2012: €53.6 million).

Of the total charge for the year, €27.4 million is a goodwill impairment charge. This represents a full write down of the goodwill of the Belgium operation. Market conditions in Belgium have been challenging for an extended period of time, and the impact of the horsemeat scandal on the meals market has been particularly significant. Management have therefore concluded that it would be prudent to impair these assets. This in no way reflects a lack of support to our Belgium subsidiary and its brand value but is a reflection of the impact of the current economic circumstances on the Belgian frozen food market.

€20.9 million relates to the payment of registration tax related to the acquisition of Findus Italy. Iglo Group are appealing the ruling and have elected to pay the assessed taxes in order to avoid incurring penalties and interest.

€10.5 million relates to restructuring activity, principally in our Italian factory.

The Group also invested €25.0 million related to various costs arising as a result of the development and implementation of the new Better Meals Together strategy, including management incentive schemes.

 

Finance costs

 

Group net finance costs were €227.6 million (2012: €302.4 million).

Of the total costs for the year, €95.7 million (2012: €83.4 million) related to interest on bank loans and €116.7 million (2011: €192.4 million) to interest on Investor Loan Notes. In the November 2012 refinancing process, Investor Loan Notes were replaced with bank loans. This means the interest charge on bank loans has increased compared to prior year, whilst the interest on Investor Loan Notes has decreased. In addition, the interest rate on the Investor Loan Notes has been reduced to 11% from a range of 17% to 15%.

The remaining interest charge relates to €11.8 million of amortisation of deferred borrowing costs, a gain of €5.0 million of exchange differences arising on retranslation of financial assets and liabilities and €8.4 million of other finance related costs.

 

Taxation

 

The tax expense for the year was €2.0 million (2012: €43.5 million).

This charge is split between a current tax expense of €16.6 million (2012: €42.0 million) and a net deferred tax credit of €14.6 million (2012: charge of €1.5 million).

The decrease in the current tax charge for the year arises primarily as a result of a recognition of a provision for tax uncertainties in 2012 as well as a decrease in the amount of non-deductible interest charged in the current year. The variance in the deferred tax charge arises mainly as a result of an adjustment to the calculation of the deferred tax liability on intangibles as well as the impact of the change in deferred tax rates in the UK.

 

Loss after tax

 

Overall, the Group made a loss after tax of €41.2 million (2012: €78.1 million).

Original source: Iglo Group