UK frozen food manufacturer Iglo Group has booked an increase in first-half profits but warned it expects markets in the second half of the year to remain "challenging".
EBITDA in the six-month period climbed 12.8% to GBP180.3m (US$283.4m), the company reported today (20 August). CEO Martin Glenn said a focus on operational execution drove EBITDA growth despite a "challenging" retail environment.
Iglo's underlying sales growth was broadly flat on a like-for-like basis but positive currency movements and a greater number of trading days boosted net sales by 3.5%.
Glenn sounded a cautious note on the outlook and said the company expects markets to remain "challenging" in the second half of the year. However he added that Iglo remains "on-track" to deliver "full-year core category sales growth".
Iglo has been under the spotlight in recent months after private-equity owner Permira asked Credit Suisse to prepare a sales and marketing document in preparation for a potential sale of the firm in March. A number of bids were made but subsequently rejected and in June Permira said it would look at "other options" for the company, including refinancing debt.
IGLO GROUP REPORTS 12.8% EBITDA GROWTH IN FIRST HALF 2012
FISH AND POULTRY DRIVING GROUP GROWTH
20 August 2012. Feltham, UK. Iglo Group, Europe?s leading frozen foods business, today provides its mid-year performance update.
Key H1 2012 highlights include:
Group net sales growth of 3.5%
Core category sales growth (at constant currency (1)) of 3.7% (Fish, Poultry and Vegetables). Fish sales increased 6.1%, closely
followed by poultry sales up 5.4%, whilst Vegetables recorded a slight decline of 1%
EBITDA before exceptional items increased 12.8% to ?180.3m from ?159.9m in 2011
Results benefited from both positive currency movements and greater number of trading days in 1H12. Underlying sales growth broadly
flat on a like-for-like basis (2)
Successful new product launches in the UK, Italy and Germany
Total frozen food in the UK grew faster than total food over the first half of 2012 ? indicating possible on-going trend
Leverage continues to be reduced, supported by strong cash flows, and capex investment is now at record levels
Martin Glenn, Chief Executive said:
Following a successful 2011, the group continued to grow strongly in fish and poultry through the first half of 2012, while our focus on operational execution drove EBITDA growth despite a challenging retail environment.
The first half of 2012 has seen several new product launches which have delivered strong performance in their respective markets. In particular, our innovative fish portfolio delivered strong year-on-year growth in Italy, demonstrating our ability to deliver revenue
synergies from acquisitions. We are now investing in the business at record levels and up-scaling our core product production capabilities.
While we expect markets in the second half of the year to remain challenging, we remain on track to deliver full year core category sales growth. Through the ongoing support of our owner Permira Funds, our category approach, and our industry leadership, we will continue to innovate and grow across both existing and new markets; organically and as Europe?s natural consolidator of the frozen food market.?
Business Review
1. Frozen Food Market Growth
Despite the challenging European retail market, over the first half of 2012 frozen food has performed robustly in comparison to the ?total food? segment. In Germany, core frozen categories (Fish, Poultry and Vegetables) grew faster than total food over the first quarter of 2012, a situation mirrored in Fish and Poultry in Italy. Additionally, ?total frozen food? in the UK grew faster than total food over the first half of 2012. This is the first time that total frozen food has grown faster than total food and it will be an indicator we will be watching closely.
2. New Product Development
In the UK, the successful second quarter launch of "Takeaway Treats" Poultry (a takeaway style snacking product) including ?Classic Crumb Chicken Goujons?, has delivered an impressive ?6m of sales during the period. Similarly, the first quarter launch of ?Fish Fusions? has added to an already popular new range, catering to the consumer trend of convenient and healthy dining in. In the battered fish category, a dual branded offer with Harry Ramsden?s has been launched, linking to its fish shop heritage.
The Bake to Perfection range, which continues to enjoy UK success, has been migrated to Italy, where it has delivered strong performance, particularly the Sea Bass recipe. The group continues to explore further opportunities to take successful products and introduce them group-wide.
In Germany, the group extended its range of innovative vegetable products with the introduction of ?Spinach Fingers? and ?Vegetable Nuggets?; both performing very well.
3. Market Highlights
Growth in the UK was driven by strong performances across all core categories, with notable contributions from Fish Fingers, Coated Fish, Rice Fusions, and Poultry.
The turnaround in France continued with strong sales and share growth on the back of a strong performance in Fish and Poultry.
Turkey and Russia both continue to experience rapid growth albeit from a small base, supported by continued investment in advertising and promotion. The group remains the brand leader of Fish Fingers in the key areas of Moscow and St Petersburg.
4. Business Investment
Strong cash generation has enabled Iglo to continue to reduce leverage during the first half. At the same time, the group has invested in the business at record levels in the last six years, particularly by expanding production capabilities in our core products, including a new poultry line in Lowestoft, UK and a new coated fish line in Bremerhaven, Germany.
Notes:
(1) Constant currency information, which is presented in addition to our reported financial information, is a non-GAAP measure which management believe is useful to enhance understanding of the Company?s underlying financial performance and the key business drivers thereto. Constant currency results have been determined by translating the local currency denominated results for the period ended 30 June 2012 at the exchange rate for the comparable period in the prior year. The reported ?/£ exchange rate for H1 2011 was 1.15, and for H1 2012 was 1.21.
(2) Like-for-like measures are adjusted to ensure that comparative periods include the same number of trading days.
