Greenyard : HY report 2018-2019

Half Year Financial Report 2018-2019

for a healthier future

TABLE OF CONTENTS

GREENYARD ................................................................................................................................................................................... 2

INFORMATION FOR SHAREHOLDERS .............................................................................................................................................. 2

HIGHLIGHTS-H1 ending 30 September 2018 ................................................................................................................................ 3

MANAGEMENT COMMENT ............................................................................................................................................................ 3

KEY FINANCIAL INFORMATION ...................................................................................................................................................... 5

SEGMENT PERFORMANCE .............................................................................................................................................................. 6

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ................................................................................................... 7

CONSOLIDATED INCOME STATEMENT ......................................................................................................................................... 7

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ....................................................................................................... 8

CONSOLIDATED STATEMENT OF FINANCIAL POSITION ................................................................................................................ 9

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ............................................................................................................... 10

CONSOLIDATED STATEMENT OF CASH FLOWS .......................................................................................................................... 11

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS ....................................................................... 12

General information ........................................................................................................................................................... 12

Financial reporting principles .............................................................................................................................................. 12

Segment information .......................................................................................................................................................... 14

Notes to the consolidated income statement ...................................................................................................................... 15

Notes to the consolidated statement of financial position .................................................................................................. 19

Other elements ................................................................................................................................................................... 22

STATEMENT OF RESPONSIBLE PERSONS ....................................................................................................................................... 23

REVIEW REPORT ON THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS .......................................................... 24

FINANCIAL DEFINITIONS .............................................................................................................................................................. 26

GREENYARD

Greenyard is a global market leader of fresh, frozen and prepared fruit & vegetables, flowers, plants and growing media. Counting Europe's leading retailers amongst its customer base, the Group provides efficient and sustainable solutions to customers and suppliers through best-in-class products, market-leading innovation, operational excellence and outstanding service.

With more than 10.000 employees operating in 27 countries worldwide, Greenyard identifies its people and its key customer and supplier relationships as the key assets which enable it to deliver goods and services worth almost € 4 billion per annum.

Our Mission: We are committed to grow consumption of fruits and vegetables for a healthy future, by partnering with the best partners in the chain from fork to field to meet consumer needs - creating value for all.

Our Vision: To make lives healthier by helping people enjoy fruit and vegetables at any moment, in an easy, fast and pleasurable way, whilst fostering nature.

INFORMATION FOR SHAREHOLDERS

The Company's shares are listed on the continuous market of Euronext Brussels (ticker: GREEN), more specifically in the compartment B (mid-caps) of this market, since 1 March 2005. The Greenyard share was introduced onto the Brussels Stock Exchange in June 1999. Greenyard NV has a liquidity contract with ABN AMRO Bank and Bank Degroof Petercam.

On 30 September 2018 the share capital was represented by 44.372.585 shares, which have the same rights.

Shareholder structure	Number of shares
Deprez Holding NV	15.327.254	34,5%
Food Invest International NV	6.534.173	14,7%
Sujajo Inv.	3.638.552	8,2%
Kabouter Management LLC	3.834.080	8,6%
Treasury shares	1.363.821	3,1%
Public	13.674.705	30,7%
TOTAL	44.372.585

%

100,00%

HIGHLIGHTS -

H1 ending 30 September 2018

•  Sales. Greenyard suffered from exceptional weather circumstances over the whole of Europe. A persistent drought affected the growth of vegetables and fruit, with a high impact on the availability of the product and/or on market prices. Combined with earlier announced and continuing margin pressure in a number of Greenyard's key markets, this resulted in a net sales decline by 3,6% to € 1.982,8m (excluding discontinued operations). Without taking into account the FX effect (-0,2%), net sales declined by 3,2% versus last year.

  • o Fresh: net sales declined by 3,5% to € 1.647,9m, mainly due to loss of volumes from competitive pressure and pricing impact as a result of the weather conditions.

  • o Long Fresh: net sales declined by 4,1% to € 334,9m, primarily from the discontinuation of certain non-profitable contracts and delay of orders in Prepared, but also a temporary loss of sales due to the Listeria recall in Greenyard's Frozen division.

•  REBITDA. In line with full year expectations as earlier communicated to the market, REBITDA for Greenyard fell with 39,9% to € 41,2m (excluding discontinued operations). The € 27,4m drop is mainly due to:

  • o Fresh: REBITDA in Fresh fell by 49,0% to € 21,7m, given severe competitive pressure in Greenyard's key markets, causing inefficiencies, which was accelerated by the weather impact. Greenyard has taken measures to mitigate these factors, such as reorganisation of its footprint and organisational design.

    Greenyard expects a gradual improvement through a traditionally better second half year and stronger competitive position.

  • o Long Fresh: REBITDA in Long Fresh for the first half year amounts to € 20,5m, representing a 20,3% drop.

    This decline is due to the negative impact of the exceptional weather conditions, causing shortages and lower cost absorption in the factories and to a lesser extent, the consequences of the Listeria recall.

  • o Greenyard expects that its partnership strategy will bear fruit and will gradually improve profitability over the next few periods.

•  Non-recurring items.

  • o Listeria. Greenyard incurred a net non-recurring cost of € 22,6m and a recurring cost of € 3,5m related to the recall and destruction of frozen vegetables from its Hungarian facility and other related consequences thereof. The net non-recurring costs and related assets and liabilities are determined based on a conservative estimate of the costs and insurance income. Greenyard updates its estimations for the total costs and expected insurance proceeds to an amount of € 28,0m, which is less than the initially communicated € 30,0m.

  • o Impairment goodwill. Greenyard has decided to impair the goodwill of Greenyard as it was calculated at the time of completion of the business combination in 2015. This goodwill impairment amounts to € 29,2m for

    Long Fresh due to a potential delay in the expected profitability growth, caused by the recent events. The goodwill impairment does not affect the strategy, business or liquidity of Greenyard.

•  The effective tax rate for the first half year amounts to -14,1%. The tax rate is driven by the reported loss and the use and reversal of deferred tax assets.

•  The net result from continued operations amounts to a loss of € 68,1m. This result was negatively impacted by non-recurring items for a total amount of € -53,0m.

•  Net financial debt. Net financial debt increased by € 98,3m to € 517,4m (including Horticulture), predominantly due to a lower profitability, non-recurring recall costs and the inventory build-up in the Long Fresh segment. This led to a leverage ratio of 4,4x end of September. Greenyard appreciates the full support it received from its relationship banks for the waiver on the covenant levels of September (2018) and March (2019). Greenyard is determined to structurally reduce the leverage over the coming periods. In order to strengthen its balance sheet, Greenyard has decided to act decisively by selling its Horticulture segment. Even after the sale of the Horticulture segment, Greenyard's focus

remains on strengthening its balance sheet, now with strong emphasis on the improvement of its profitability and further internal growth.

•  Discontinued operations.

  • o The sale of the Horticulture segment to Straco will lead to total cash proceeds of € 120,0m. The proceeds of the sale of the Horticulture segment will be used to deleverage through the repayment of the € 150,0m retail bond that is due 5 July 2019, without affecting the existing credit facility or credit lines.

  • o As the expected synergies with the Horticulture segment will no longer be realised within Greenyard, the sale entails an important goodwill impairment resulting from the valuation at fair value less cost to sell. The goodwill impairment does not affect the strategy, business or liquidity of Greenyard. Greenyard and Straco will examine how to further develop concepts for sustainably growing healthy and tasty vegetables and fruit, for a healthier future for all in the chain. Greenyard expects the closing of the transaction to occur before the end of this accounting year.

•  Profit/loss for the period. A loss for the period from discontinued operations for an amount of € 44,9m results in a total loss for the period of € 113,0m.

•  CAPEX spent (including discontinued operations) for the first half year amounted to € 40,2m, and includes € 15,1m of payments from investments executed at the end of last accounting year. CAPEX for this year was materially reduced.

•  Greenyard now confidently looks towards the future with the current combination of the two segments: Fresh and Long Fresh. Greenyard has no further plans to sell any core activities. The announced measures for the optimisation of assets and the sale of non-core assets, as well as CAPEX savings and working capital optimisations are on track. In addition, Greenyard is deploying further strategic projects for a renewed focus of both segments, with a view to reinforcing the offer, improving net sales and margins and responding to the ever-changing demand of retailers and consumers. Greenyard will communicate more details as soon as more information is available.

•  For AY 18/19, Greenyard maintains its guidance of REBITDA -25% versus last year, excluding currency impact.

MANAGEMENT COMMENT

CEO Hein Deprez comments on the results and the past 6 months:

"As communicated in August, the first half year of our accounting year 2018/2019 was challenging for Greenyard. Our results reflect the fierce competition and difficult market circumstances in our key markets. Consolidation in these markets puts pressure on all suppliers to find ways to deliver their products, even at low prices.

The current challenging market conditions have also led us to take certain decisive actions, such as the sale of our Horticulture segment, which was needed to strengthen our balance sheet again. We will use these proceeds to repay the retail bond that is due in July 2019. We continue to work hard to further strengthen our company and are fully focused on further internal growth.

Despite this hard market reality, we continue to believe in our strategy to form partnerships with our retailers by working closely and transparently together with them to rationalise the entire supply chain to the benefit of all: consumers, retailers, growers and Greenyard.

We already see good examples and stable growth for those retailers and Greenyard where we are able to build such partnership model. We will do that in the current combination of our Fresh and Long Fresh segments as a unique player in the market offering all categories in fruit and vegetables in all its forms: fresh, frozen and prepared. We are convinced we have the right people, heart, assets and strategy to defend our market position, grow our base and build these partnerships for the future."