Greenyard returns to financial health through successful transformation
Sint-Katelijne-Waver, Belgium, 16 June 2020
Key Highlights -Thanks to transformation, a return to normal business
•The fiscal year 2019/2020 was a year of recovery for Greenyard, driven by a successful transformation. The Transformation Plan was meticulously implemented since the beginning of the fiscal year, based on three fundamental pillars: (i) the revitalisation of Greenyard's commercial relationships, (ii) the improvement of Greenyard's operational excellence and leveraging its scale to the benefit of the Group and its customers, and (iii) the rationalisation of Greenyard's footprint, refocusing on its core business and executing divestments where necessary. At the same time, the transformation was culturally embedded in the organisation, creating a mentality of continuous improvement.
•Greenyard is building long-term integrated relationships with Delhaize, Carrefour Belgium, REWE Group and Tesco in respectively the Fresh and Long Fresh segment. Currently, all these partnerships are running or are being ramped up as long-term relationships. The results thereof are starting to become visible in Greenyard's financial results.
•Greenyard has executed various projects to improve its operational excellencethrough new transport flows and way of working, group procurement initiatives, rigorous cost discipline and taking further steps in the development of joint sourcing across Greenyard.
•Several parallel divestment transactions have been initiated to focus on core operations and activities and improve the financial situation. At the end of AY 19/20, Greenyard has closed several of these divestments for a total consideration of € 20,7m. The current COVID-19 pandemic inducing turbulence on the financial markets has accelerated Greenyard's decision to re-evaluate its planned divestments. Greenyard will continue to review its activities and assets and will optimise its business portfolio where needed in line with its strategy.
•The ongoing change of Greenyard's culture and organisation with a continuous improvement and customer-oriented mindset is an excellent basis for a sustainable future. Combined with its refocused operations and 'fit for purpose' footprint, Greenyard is confident to further strengthen its position and secure a continuous profitable growth.
•In addition, during the COVID-19 quarantine period, Greenyard's products and activities have been acknowledged again as highly relevant, and even vital, to consumers and society in general. Using the strength of its strategy to operate with short supply chains and its strong commercial relationships, Greenyard has fully taken up its responsibility to secure the supply of fruit and vegetables to consumers together with its growers and customers. Being a major fruit and vegetables player in retail, demand was thriving as consumers were rebalancing their eating habits towards a healthier diet in a period where out-of-home consumption was replaced by at-home consumption.
•Greenyard is also increasingly paying attention to the sustainability of its operations, socially and ecologically. This has resulted in rephrased ambitions on which Greenyard will report regularly.
Key Financials -A year of financial recovery
•Sales.Overall net sales amounted to € 4.061,0m, indicating an increase of +3,8% YoY.
•Fresh sales amounted to € 3.263,4m, up € 74,7m from € 3.188,7m last year (+2,3%), mainly thanks to the revitalisation of the commercial relationships and ramping up of the partnerships in the second half of the fiscal year. This also includes a recovery of the loss-making volumes that were terminated in the Fresh division.
•Long Fresh sales amounted to € 797,6m, up € 74,9m from € 722,8m (+10,4%). The additional volumes were mainly sold to customers in the food service and industry in the first half of the fiscal year, while sales to retail customers boomed in the second half of the fiscal year, in part due to the new partnership with Tesco in the Frozen division.
Adjusted EBITDA landed above the upper end of the initially given guidance.Greenyard's adjusted EBITDA (excluding the impact of IFRS 16) amounted to € 95,7m. During the last weeks of the financial year, COVID-19 had a positive impact of € 1,5m to € 2,0m. The impact is limited due to significant extra costs incurred to secure sourcing and operations.
•The increase of € 31,2m YoY (+48,4%) is attributable to the following elements:
•Fresh: The adjusted EBITDA recovered to € 43,4m, up € 18,4m versus € 25,0m last year (+73,9%). Greenyard was able to implement its transformation initiatives including a strong cost control, workforce resizing, efficiency improvements and waste control. Moreover, throughout the fiscal year it reconnected with volume growth thanks to its customer-oriented strategy. As a result of this cost rationalisation and the higher volumes, the negative trend of margin pressure on profitability could be reversed.
•Long Fresh: the adjusted EBITDA amounted to € 53,9m for AY 19/20 versus € 41,9m last year (+28,8%). Long Fresh has significantly improved adjusted EBITDA compared to last year when the Frozen division suffered from the Listeria recall. Improvement is also thanks to a better capacity utilisation and production efficiency as well as savings on logistics and overhead costs. A key driver in this was the better cooperation between the various Greenyard entities and production facilities. This profitability increase was realised despite some adverse impact from price pressure in mushrooms and the external sourcing of corn after the sale of the Frozen factory in Baja, Hungary.
•EBIT. EBIT amounted to a loss of € 2,6m compared to a loss of € 133,4m last year. On the one hand, last year was impacted by a goodwill impairment which amounted to € 78,9m as compared to a much lower asset impairment of € 7,6m this year. On the other hand, last year € 49,9m of one-off adjustments were recorded mainly related to the Listeria recall and reorganization accruals. This year one-off adjustments were lower at € 28,4m and mainly related to a loss on the sale of Greenyard Flowers UK (primarily due to a write-off of biologic assets). The application of IFRS 16 Leases as from AY 19/20 had a positive net impact of € 5,7m on current year's EBIT.
•Net result.Net result from continued operations amounted to a loss of € 68,0m, up from a loss of € 192,0m last year. The application of IFRS 16 Leases had a total negative impact of € 5,4m on the net result of AY 19/20.
•Net financial debt reducing.Net financial debt (NFD) decreased by € 30,7m to € 425,6m in AY 19/20. This translates into a leverage of 4,4x in March 2020 (excluding IFRS 16), down from 7,1x in March 2019. The decrease is driven by the improvement in profitability and working capital, the gaining of disposal proceeds and the re-installed cash focus within Greenyard to bring down nominal debt. As regards indebtedness and leverage, Greenyard has obtained consent from its relationship banks on 15 November 2019 to waive its leverage and interest covenants until December 2021, which is the maturity date of the syndicated bank financing. The adjusted EBITDA
was corrected for IFRS 16 to an amount of € 133,4m, with a net debt of € 660,1m, resulting in a post-IFRS 16 leverage of 4,9x.
•Dividend.The Board of Directors will propose not to pay a dividend for AY 19/20.
•Outlook.Based on the current expectations, Greenyard expects adjusted EBITDA (excluding IFRS 16 impact) for the full year ending 31 March 2021 to range between € 100,0m and € 105,0m.
•Interested parties are invited to listen in on a live webcast today by visiting the following link:https://globalmeet.webcasts.com/starthere.jsp?ei=1331743&tp_key=2d23fa39fe, or through the following dial-in: +32 342 07 47, passcode: 25616601#. The call will begin promptly at 2.00 p.m. (CET). An audio replay of the conference call will be available on Greenyard's Investor Relations webpage in the coming days.
Quote of the co-CEOs:
Hein Deprez, co-CEO said today: "We live in turbulent times. Our society and our customer landscape have changed. Also, our company has changed. This change was needed and will gear us up for the future. The way we have responded to the challenge of securing the food supply chain during the COVID-19 quarantine period, clearly demonstrates Greenyard's strength and relevance. Therefore, I am grateful for the resilience and hard work of all our colleagues in order to regain our position in the market and increasingly earn the confidence of our customers, growers and suppliers."
Marc Zwaaneveld, co-CEO adds: "This fiscal year started just after the announcement of the Transformation Plan, followed by the strong implementation thereof. It was paramount to install an agile organisation with a continuous improvement culture. From the start, the Transformation Plan showed an untapped efficiency and profitability potential. Throughout the year, the recovery continued and exceeded expectations. Greenyard is on its way to regain financial health and will be ready for sustainable growth."
Figure 1 - Key financials
The adjusted EBITDA of € 95,7m includes a positive effect of around € 1,5m to € 2,0m from higher volumes induced by COVID-19 effects in March 2020.
Sales increased again by +2,3% YoY thanks to the revitalisation of the commercial relationships and the ramping up of the partnerships in the second half of the fiscal year. The segment showed an organic growth of +2,4%, with slight foreign exchange tailwind of +0,2%, and M&A and divestitures impact of -0,2%. This entails a recovery of the loss-making volumes that were terminated in the Fresh segment.
In the last weeks of the fiscal year, the COVID-19 induced quarantine measures resulting in a shift from out-of-home consumption to at-home consumption. This has resulted in higher volumes in Fresh.
Greenyard was able to reverse the negative trend in its adjusted EBITDA by a strong cost control, workforce resizing, efficiency improvements and waste control. Together with volume growth in the second half of the fiscal year, this has offset continuing margin pressure. The adjusted EBITDA increased by +73,9% YoY.
Greenyard expects its margin to become less volatile over the coming periods thanks to an increasing part of sales being generated in the partnership models which are long-term oriented and partially cost-plus based.
In its Long Fresh segment, Greenyard was able to generate an important volume increase, resulting in a double-digit growth of +10,4% (of which 0,1% FX impact, -0,8% M&A and divestitures and an organic growth of 11,0%), proving the full recovery after the recall of last year. The additional volumes were mainly sold to customers in the food service and industry in the first half of the year, while sales to retail customers boomed in the second half of the year, in part due to the new partnership with Tesco in the Frozen division.
In the last weeks of the fiscal year, the COVID-19 induced quarantine measures resulting in a shift from out-of-home consumption to at-home consumption. In addition, consumers hoarded long fresh products in fear of running out. Both tendencies have resulted in higher volumes in the Long Fresh segment through its retail customers, though this was slightly compensated by lower volumes in the food service.
The Long Fresh segment has shown a better adjusted EBITDA than last year thanks to better capacity utilisation and production efficiency as well as savings on logistics and overhead costs. This increase of +28,8% was realised despite some adverse impact from price pressure in mushrooms and the external sourcing of corn after the sale of the Frozen factory in Baja, Hungary.
Figure 4 - Adjustments made for one-off items from operating activities
EBIT - Adjusted EBITDA
Long Unallocated Fresh €'000 €'000
Long Unallocated Fresh €'000 €'000
Depreciation and amortisation Impairment goodwill Impairment property, plant & equipment
Reorganisation costs and reversal of provision for reorganisation costs (-) Disposal project costs
Financing project costs Costs related to legal claims Impairment long-term receivables Result on change in control of equity accounted investments
Result on sale of subsidiaries Result on sale of assets Listeria related net result Other
Adjustments IFRS 16 impact
Divestitures (not in IFRS 5 scope) Net intercompany transactions between continuing and discontinued operations
57.313 -37.382 -1.181 -95.876 -
-7.566 - 7.566
57 144 456 2.463
-998 1.186 170 494
780 - - 780 1.375 - - 1.375 22.538 - - 22.538
-3.814 - 77324.774 -32.902 3.030
81 - -3.733 -1.746 - -1.746
223-589 -4.470 1.112
78.910 - 78.910
- - 118
- 1.879 1.879
250 - 368
4.228 - - 4.228
593 - - 593
- -400 - 52915.469 - - -
--373 - -773
25.661 - 25.661
29.187 5.243 49.899
-- - 353
Based on an impairment test on the level of Greenyard Prepared Netherlands an impairment loss was recorded bringing the equipment to its fair value.
Reorganisation costs have mainly been accrued for in the previous fiscal year consequent to the Transformation Plan and mostly relate to redundancy costs. This cost saving program has been diligently executed and the accrual could be partially reversed.
Disposal and financing project costs relate to several corporate finance processes that have been explored aiming for deleveraging as a part of the Transformation Plan. This includes several disposals of core (up to November 2019) and non-core assets/business, the search for a cornerstone investor (up to November 2019) and the bank waiver process.
With respect to the sale of Greenyard Flowers UK, a loss was accounted for because long-term cashflow projections on biological assets became non-realisable. On the contrary, a gain was realised on the sale of several assets in Germany and the Netherlands.
As to the Listeria recall, insurance proceeds have been fully received and agreements on most of the Listeria-related costs have been reached. A remaining cost accrual on pending cases with customers has been reviewed. On a net basis, this has led to a positive result as compared to the estimation end of March 2019.