Nomad (NOMD, Financial)’s acquisitions of Iglo and Findus created the leading branded frozen foods business inEurope, ~2.7 times the next largest competitor. It is the market leader in the UK, Italy, Germany, France, Spain, and Sweden. The business is stable, high-margin, and cash-flow generative with low capex requirements and modest cash taxes. Nomad purchased both assets for a total of €3.3 billion or ~8 times EBITDA post-synergies. In 2015, pro forma revenue was €2.1 billion, with €345million EBITDA and €0.95 EPS ($1.06), excluding synergies which are currently estimated at €43 to €48 million.
Recent performance has shown weak top-line trends, with like-for-like sales down 5% for 2015, the result of Iglo’s historic strategy which was to disproportionately invest behind new frozen food categories, at the expense of core offerings, in the hope of driving incremental growth. Recently, Nomad has shifted its focus back to its core offerings. This shift will take some time to impact the Company’s financial performance, but ultimately we believe it will result in renewed growth.
In the near term, the company’s focus is on stabilizing its business, integrating the Findus acquisition, and delivering on its synergy targets. Over the longer-term, Nomad will likely continue to be a consolidator within the global packaged food sector.
From Bill Ackman (Trades, Portfolio)'s first quarter shareholder letter.
