Earnings Call: Q2 2018

Aug 9, 2018

Good day, ladies and gentlemen. Welcome to the Nomad Foods Second Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Tapoosh Bari, Head of Investor Relations. Please go ahead, sir. Great. Thanks so much, and thank you all for joining us to review our Q2 2018 earnings results. With me on the call today are Chief Executive Officer, Stefan Deschmaker and Chief Financial Officer, Sami Adekhout. Before we begin, I would like to draw your attention to the disclaimer here on Slide 2 of our presentation. This conference call may make forward looking statements that are based on our view of the company's prospects at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which includes cautionary language. We will also discuss non IFRS financial measures during the call today. These non IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. Users can find the IFRS to non IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Lastly, please note that certain financial information within this presentation represents adjusted figures for 2017 2018 and that all adjusted figures have been adjusted for exceptional items, restructuring, share based payment and acquisition related items, and that all comments from here on will refer to those adjusted numbers. And with that, I will hand the call over to Stephane. Thank you, Taposh, and thank you everyone for joining us on the call. Earlier today, we reported solid Q2 results, which further reinforce our commitment to driving sustained shareholder value through a combination of organic growth and disciplined M and A. During the Q2, we reported organic revenue growth of 1.3 percent, 80 points of adjusted gross margin expansion before the mix effect from M and A, adjusted EBITDA of €89,000,000 and adjusted EPS of €0.20 per share representing 22% growth versus the prior year. Strong year to date performance, visibility into the rest of the year and the closure of the owned Besse's acquisitions are leading us to raise our guidance. For the year, we know expected EBITDA in the range of €365,000,000 to €370,000,000 and EPS in the range of €1.14 to €1.17 per share. This represents estimated EPS growth in the range of 15% to 18% versus the prior year. Turning to slide 4. The underlying drivers of 2nd quarter performance were very much a continuation of what we have seen now for the past 18 months. Organic revenue growth of 1.3% was driven primarily by price as volumes were held back by 2 discrete factors. On earlier Easter, we shifted approximately 1% of growth from Q2 to Q1 and unseasonably warm temperature across most of Europe. Despite these factors, organic revenue growth for Q2 was clearly within our low single digit organic revenue growth algorithm, reflecting the strength of our business model and solid execution by the team. Adjusted second quarter EBITDA of €89,000,000 was driven by better than expected gross margins and the phasing of operating expenses. Sami will cover both in more details in his remarks. Moving on to M and A. We're making good progress on both of our recent acquisitions. Goodfella's which we closed in late April has performed well in the next 3 months since we acquired the business. And as I mentioned, we closed on Besseys just a few weeks ago. We have a robust plan and are excited to integrate both teams into our organization. The acquisitions of Goodfella's and our own Besse's advanced the scale and breadth of our UK portfolio, which is anchored by the iconic Birds Eye brand. The U. K. Has had one of the strongest organic growth profiles in our portfolio in both Q2 and the first half, reinforcing our confidence in this large and strategic growth market. Furthermore, we believe the sum is great under the path and integration will enhance the whole of our UK operations in the coming years. Turning to Slide 5. As most of you know, much of our financial success can be attributed to improved execution and renewed focus around our core. During the first half of twenty eighteen, we reinforced our market leadership in frozen fish by launching our new captain campaign in several countries in Q1 and following up with our crispest ever fish fingers in Q2. These investments have paid off with sales of fish fingers and coated fish, our 2 largest pan European subcategories, up 4% and 5% respectively through the first half of twenty eighteen. Renovation is an ongoing discipline that we will continue to stress in the coming quarters years given our desire to raise the bar even further on our cost use. With that said, you will begin to see a greater balance between renovation and innovation beginning in the second half of twenty eighteen. Our innovation agenda will build on the strong foundation we have created through relentless focus on our core categories. Taking vegetables as an example, our brands have strong market share positions across their respective countries. However, the majority of leadership in the vegetable category today is still within frozen peas and spinach, which combined will come for more than 50% of our vegetable business. While we also set a range of mixed vegetables, we believe we have an opportunity to leverage our brand and unique capabilities to significantly expand this part of our portfolio. Slide 5 illustrates some of the most exciting vegetable innovation that we plan to bring to market in the back half of this year. Including on this slide are veggie powder, an exciting new twist of vegetable boosted with healthy grains Pulses, a breakthrough blend of ready to cook vegetables, high in protein and fiber and a great alternative to canned vegetables peas, a new line of plant protein products launching in Sweden and veggie bowls, a range of modern vegetable based single serve meals. You've heard us say that we believe that frozen food has more to offer as a category. Q3 marks an exciting new chapter for our company as we begin to pursue exciting white space opportunities that we see in the market. Slide 6 gives you a little more flavor for what to expect from us on innovation front. We recently began the activation of Veggie Power in Portugal as part of the multi country launch. We'll be rolling this line out to a few other markets notably Germany in the Q3. The early reads in Portugal are very encouraging and set a strong precedent for other countries to deliver against. As you can see, we have an exciting slate of new and on trend product introduction in the second half of this year with much more to come in 2019. So stay tuned. To summarize, we're pleased with the progress that we're making against our strategic agenda with the first half of the year now complete. Through the 1st 6 months of 2018, we've reported organic revenue growth of 2.1%, adjusted EBITDA growth of 14% and EPS growth of 31%. These figures are tracking ahead of the initial full year 2018 guidance that we provided back in March. With that said, there is still work to be done. Have an exciting and ambitious agenda ahead of us in the second half between the integration of 2 acquisitions and the launch of our exciting innovation pipeline. We've been working hard to get to this point and look forward to continuing the momentum that we have demonstrated for the past several quarters. With that, I will hand the call over to Sami to discuss our financial results in more detail. Sami? Thank you, Stephane and thank you all for your participation today. Turning to slide 7, I will provide more detail on our key second quarter operating metrics, beginning with revenues, which increased 6.6 percent to €488,000,000 driven by 1.3 percent organic revenue growth and 6.4 percentage points from the recent acquisition of Goodfella's, which we closed on April 23. Foreign exchange translation offset revenue growth by 1.1 percentage points. As Stephan mentioned, organic revenue growth of 1.3% was primarily driven by prices as volume were impacted by the shift of Easter into Q1 and unseasonably hot temperatures throughout the quarter. Once again, the U. K. Was a key driver of growth, up 3.6% in Q2. This marks the 4th consecutive quarter of organic revenue growth in this market, which is being fueled by strong execution of must win battles and distribution gains. Other key contributors during the quarter were Germany and France, both of which grew 4% and Norway up 8%. Sweden declined 4%, reflecting our continued focus on driving improved EBITDA and margin in this large and under earning market. The team has made good progress against their plan this year. Margin have improved significantly and the country remains on track to rebuilding its economic model in what is one of the fastest and most attractive frozen food countries across our network. Moving on to adjusted gross margin, which were flat versus last year at 31.5%, but expanded 80 basis points before the effect of mix from the Goodfella's acquisition. Gross margin were ahead of our expectation, mainly due to promotion optimization and favorable procurement benefits. Overall, legacy gross margin were helped by 70 basis points for mix, 100 basis points from price and promotion and were offset by 80 basis points from higher cost of sales and 10 basis points from FX translation. M and A mix was an 80 basis points offset to adjusted gross margins for the legacy business. We continue to expect gross margins to be in the range of 30% to 31% range in the second half, driven primarily by M and A mix given Gottfela's lowest gross margin profile. Moving down to the rest of the P and L. Adjusted operating expense increased 2% year over year with operating expenses A and P declined 1% due primarily to phasing out of Q2 into Q3 and indirect expenses increased by 4% due to the acquisition of Goodfella. Adjusted EBITDA was €89,000,000 representing a 12% increase versus the prior year. Adjusted EBITDA margin explained 90 basis points to 18.2 percent for the quarter. Adjusted EPS was €0.28 for the quarter, an increase of 22%, reflecting higher EBITDA, lower interest expense and share repurchase in the prior year. Turning to cash flow on Slide 8. We generated €104,000,000 adjusted free cash flow throughout the 1st 6 months of the year, which equates to operating cash flow conversion of 70%. Factors contributing to free cash flow through the first half of twenty eighteen are as follows: adjusted EBITDA of €190,000,000 went €92,000,000 which grew 14% year on year Working capital was €48,000,000 offset due to a combination of phasing and acquisition. CapEx was €9,000,000 during the quarter, below last year due to the anniversary of machinery and equipment purchases related to the Pindus integration. Cash taxes were 9,000,000 dollars and finally cash interest and other were $22,000,000 In summary, we remain committed to generating strong free cash flow and expect cash flow conversion to be close to our long term annual target range of approximately 90% by year end. Turning to Slide 9 on 2018 guidance, which is based on foreign exchange rate as of August 8, 2018. Based on our year to date performance, visibility into the rest of the year and the recently closed acquisition of ARM and Bessie, we are raising our full year 2018 guidance. As a result, we now expect 2018 adjusted EBITDA in a range of €365,000,000 to €370,000,000 and adjusted EPS in a range of €1.14 to €1.17 per share. When translated into U. S. Dollar, the currency in which our shares trade, adjusted EPS guidance equates to a range of $1.32 to $1.36 per share. Full year guidance continues to be based on an underlying assumption of low single digit organic revenue growth. Based on current exchange rates, we expect FX translation to represent approximately 50 basis points of drag on reported revenues in the Q3 90 basis points for the full year. Our updated full year guidance includes expected contribution from both Goodfella's and our bases. And for the year 2018, we expect both businesses to combine to contribute to approximately $150,000,000 in revenue and $20,000,000 in of EBITDA. For our own basis, this implies $60,000,000 of revenues and $10,000,000 of EBITDA for what will effectively be 6 months of ownership during 2018. For Goodfella, our guidance continue to assume $90,000,000 of revenue contribution and $10,000,000 of EBITDA for the 8 months of ownership during 2018. On operating expense, we expect a significant increase in A and P in Q3 due to the phasing out of Q2. Based on the timing of expenses and the seasonality of the 2 acquisitions, we expect second half EBITDA growth to be heavily concentrated in the 4th quarter. That concludes our remarks. I will now turn the session over to Q and A. Thank you. Operator, back to you. Thank you. Our first question will come from Bill Chappell with SunTrust. Thanks. Good morning. Hey, good morning. Good morning. Good morning. Stephane, could you just talk a little bit more, I guess, trying to understand both the new product launches and some of the recent acquisitions, I guess, why the you've chosen kind of these markets for the launches first. And then on the acquisitions so far, it's all really come in the U. K. And so just trying to understand as you look out on the pipeline going forward, is it is there a reason why it's been more and more U. K. Based? Or are there other opportunities outside the U. K? Okay. Let me start with the product launches. And as I mentioned, we started in Portugal. It's very simple. Portugal is a great country. It's one of our best countries. It's also representative of what the other countries could do. So it's a good pilot for us. And so it gives a very good signal to the other countries what they could do with the product. So that's as simple as that. More fundamentally what it happens is what you see what you do is you're presenting the different NPDs to the new products to the different countries and you see the kind of appetite they have obviously for 1 versus the other based obviously on the mushroom bottle as well. So that's a very much an opportunistic process, but at the same time also very disciplined. So it's interesting to see how it works, but it's working well. Back to M and A, Bill, I'll be very simple. It's what we do is, obviously, we're very disciplined in terms of where we want to invest. And then the rest is, as usual in M and A, it's opportunistic. In other words, when the guys are ready, obviously, it's something we can do. So we've worked very hard and for a long time behind these two targets among others. There are other targets in other countries, but these 2 came to the market at some stage. The good news is we are definitely the consolidator of the frozen food industry. And so somehow naturally a lot of these deals will come to us first. That's a great news, but we will not limit ourselves the U. K. However, U. K. Is a great market for us. It's very well managed by Wayne Hudson. The U. K. Execution is very good. So they can digest both the focus behind Muslim battles and at the same time obviously the execution of these two countries. As an example today, actually we had the presentation of the products from the on Besseo guys. So very interesting. They have fully they fully understand the Muslim battle concept and I'm very confident it's going to go well. Got it. Thanks. And Sami, just follow-up. I think at the end you said the EBITDA growth would be more weighted towards Q4 versus 3rd. I think I understand the rationale behind that, but can you just give me a little bit more color? Yes. It's probably driven by fact that we are going to step up our investment in A and D. There's a pretty significant phasing from Q2 into Q3, which is effectively bringing Q3 down and Q4 is coming across as a very strong contributor over the second half. And plus the fact that, effectively, on Besi, I mean, it's starting to contribute, particularly, in the second half towards the end of the year, given the fact that it is a seasonal business as well. So you'll have some of the revenue from these new product launches, but just it will be heavily supportive of marketing this quarter versus the 4th quarter? Yes. There will be increasing support behind the product, but behind as well the base business. We're going to be launching the captain campaign as well, I mean, over Q3, which has been reflected in the E and P spending. And plus the fact that, as I had mentioned, there is a factor of seasonality that will help disproportionate Q4 versus Q3 as well with our ambition. Got it. Thanks so much. No problem. We'll now hear from Robert Moskow with Credit Suisse. Hi, thank you. Just for a little bit of context for those of us who are kind of new to the name, the EBITDA guidance raise year to date, is that exclusively for the impact of the acquisitions or has there been any change this year for the base business as well? And then I'll have a follow-up. Thanks. Yes. It's reflecting we clearly had raised our guidance last time to, let's say, bring the let's say, the range to the higher end of the range. And then now what we've done is we've added only on Besi to the total. Okay. All right, good. And then regarding the innovation that you're launching, can you give us a sense of like are there competitive products similar to these already on the market in Portugal or in your other markets? How new is this to the consumer? We're familiar with a lot of these ideas, just watching the U. S. Competitors, but I'm not sure how the European consumer views these kinds of things. What's really breakthrough for the European consumer? Robert, it all depends on the countries. Some countries are very much at the vanguard of food. And I would take the example of the Nordics, probably even ahead of what the U. S. Is doing, where others, for example, Portugal, the veggie bowls, it's very new for them. It's very new. And so most of the time, we are the vanguard. But at the same time, private label is there and sometimes and they're also doing very well. We're also starting this pea thing, as you know, which is plant protein based on peas. It's great, but we're not the only ones. But we definitely believe that we have more than the right to play on this category given our credentials in vegetables and more specifically in peas, which is great. So I would not say that we always number 1 and I don't think we have we want to be the guy starting everything. But when we see that there are some very solid trends coming in, then we need to move fast and that's exactly what we're doing. Okay. And this is just an execution kind of question. But the bowls themselves, like the materials you're using, are you using plastic or are you using paper? I know environmental expenses prefer paper. Go ahead. It's a good question. Balls in both the guns, they are plastic at this stage because it's easier. But we're working on 2 different avenues. 1 is, can we obviously improve the recyclability ratio in terms of plastic? That's one thing. And we're making great progress. And as you know, most of the time by the way when you see all packaging in with the Birds Eye, with Igloo, with Finsus, we have a lot of obviously, it's paper based, which obviously is great. It used to be very boring. And then we can see that people little by little start to understand, yes, by the way, it's good for the planet. So it's doing well. Important also have given ourselves, by the way, in terms of recyclability, some very good targets for the future. So and that's going to be part of it. To what degree does the consumer pay attention to that in your markets? It seems like it's more They in some countries, again, Robert, I mean, in some countries, they're literally paranoid about it. And I would say the more north you go, the more paranoid they are. And south is the other way around. But it's moving fast. It's moving fast. So I can see that the countries in the Southern Europe are catching up. They I think it's becoming more it's a very solid trend overall. So sustainability is really something that is absolutely fundamental for us and that we definitely believe it's also going to become a competitive advantage. So and from that standpoint again, frozen food as you know is really, really well positioned in terms of waste, in terms of packaging, in terms of nutrition. So we're ticking all the right boxes. Okay. Thank you very much. You're welcome. Our next question will come from Steve Strycula with UBS. Hi, good morning. So 2 part question. First part would be on the 2 acquisitions that you've recently done. You clearly are building scale in the U. K, your largest region already. So my question centers on how do we think about what is duplicative assets layering on top of one another and in sense of an overlap, whether it's planned supply chain And how does this impact your route to market? How do you think about scaling when you already have an infrastructure in this country? So that would be question 1. And then I have a follow-up. Okay. So let me start with that question. I would put that way. From the supply chain standpoint, so the plant standpoint, there is no duplication, very simple. So a fish factory is not a Yorkshire pudding factory, I can tell you. It's totally different. And so there is no way you can duplicate. What you can do though is not so much the hard synergy thing, but you can bring best practice. So I'm a firm believer that synergy do not only come from the hard synergies and duplication, but also by checking the yields, checking who is best in class and then bringing the best practice from one country or from one plant to another. But that's for the supply chain side. Then in terms of overhead and obviously, the non let's say, the overhead beef path, that's exactly what we're doing right now. We're working with the UK team and we definitely have to work hard to make sure that we're going to make one integration instead of 2. And that's going to be obviously much faster, much easier for us. And definitely, we need to start from a blank piece of paper and then determine exactly how many people we need now given the different ranges we have. And then I'll let you imagine in terms of obviously go to market, there are definitely synergies. The way you obviously you can present yourself to the retailers is much better when you come in with a full range between obviously the HomeBase products, the Goodfella's products and the BirdLife product. So a lot of let's say, there are some duplication in hard synergy that things we like. That's mostly at the indirect level. You have a bit of COGS, but limited, I must admit it, to indirect cost. And then the rest is really again is back to the market. So trade terms, net revenue management, these kind of things we really definitely believe where we have made a lot of progress over the last few years as you know. And these are the kind of things we want to bring to our bases and to good sellers. Okay, great. And then for the follow-up, just wanted to get a little bit of clarity, Stephane. You're lapping some pretty difficult compares in the back half, but I also appreciate that your business is accelerating, improving from both distribution and inventory or sales velocity. Is there 1 quarter in particular that you think is maybe more challenging from either a weather compare or a sell in that you're lapping that we should keep in mind? Well, I wouldn't say so. I think we're going to stick to we're sticking to our low single digit targets. That's 2.1% after at the end of H1. And that's our target and our guidance for the full year. So nothing in particular to mention. As by definition, you have the weather, but the weather is part of the business. Okay. All right. Thank you. I'll pass it along. We'll now hear from John Baumgartner with Wells Fargo. Good morning. Thanks for the question. Sandy, why don't I come back to the gross margin for a minute. It was pretty strong, especially given the, I guess, the perceived dilution from GoodFellas. So just wondering if you can maybe detail that a bit more in terms of any factors that came in stronger than expected relative to just timing issues. And then should we still think about a 30% to 31% range for gross margin in 2018 in totality? Yes. Let me just give you just some perspective there, which is the fact that the upside in Q2 gross margin came from lower promotional spend, I mean, given the hot weather across Europe. That was clear. And the half one gross margin benefited from some procurement timing, which we'll not repeat into half two. We have at the same time a negative mix from acquisition in half 2. I mean, we guided you through the impact of Godsella's And that's what's creating, let's say, guidance of we are delivering a strong margin, I mean, pretty strong margin over the first half and about the 30% to 30 1% over the half too. That's how it works. Okay. And then, Stefan, just thinking more through the acquisitions, Goodfellow and Bessie, you mentioned some of the synergies there. But as you kind of think about the back half of twenty eighteen, first half of twenty nineteen for Goodfellow and Bessie's, where should we be looking for the first phases of the synergies being realized? Is it more on the trade promotion side? Is it more on the OpEx line? And I guess, compare the synergy opportunities between Aunt Bessie's and Goodfellas? Well, usually what's happening is you're going to start first to make sure that you're going to have one single team and obviously all the savings that come with it. And that should be fully integrated by, let's say, starting in 2000 starting Jan 2019. So that's one thing. The little, let's say, procurement synergies will already be implemented by that time. And then the question of trade terms and network management by definition, it takes always more time, because you have to do this in sync with additional A and P to make sure that your message is consistent to the trade. The message to the trade is, yes, we're coming with a superior, obviously, consumer proposition. And at the same time, we're in a good position with you to negotiate to have a conversation about trade terms in network new management. And that takes you obviously much more time. So in other words, I would say paradoxically, the hard synergies will come first, the soft synergies will come later. Okay. And in terms of timing, you're thinking more phasing, larger synergies coming through in 2020 versus 2019 at this point? It's 2019 2020 both. Yes, it's going to come in the course of let's say second half of twenty nineteen and then in the course of twenty twenty. Great. Thanks for your time. Following the normal calendar with the trade. Right, right. Thanks, Stefan. You're welcome. We'll go to Rob Dickerson with Deutsche Bank. Great. Thank you so much. So just to return to the question regarding the back half of the year and kind of cadence and volumes pricing. I'm just trying to get a better understanding of why or let's say how Q3 and the back half would be a bit different than what we're seeing in Q2, right? I just ask because obviously the peat in Western Europe is well documented. I just got back from there and still hot. People are still complaining. And we saw a decent amount of pricing in the quarter. It seems like some of that was due to a reduction in promotional expense, which helped gross margin. As you get into Q3, it sounds like you're going to now promote that back to try to lift the volume as you also face a tougher volume compare. So I'm just trying to get a sense, basically strategically as we think about the back half, are we thinking it's still likely now more volume heavy versus pricing heavy, which is a reversal from Q2 and part of this is really driven by just what's happened with the heat? I'll start there. Yes, maybe I'll take that one and Stefan, I mean, if you're free to go to us. The one thing that's important on this is the fact that from a promotion standpoint, it's not just the promotion, but it's overall if you want A and P. And if you look at, let's say, Q4, for instance, is going to be the highest quarter for A and P, which we have never reached, I mean, there. And Q3, we have the highest growth year on year. So it's a shift on the one hand of Q2 into Q3, driven by the point you were making earlier. But at the same time there's as well new initiatives, the launch of the captain campaign and the integration of all of the businesses that we have that are clearly creating the differentiation between the 2 quarter and versus the first half. And then the other point is, I mean, September is our biggest month, I mean, in Q3. And we overall, that gives you enough color commentary, I mean, to get the perspective of the both quarter. But usually, we've said that in the past. I mean, we don't provide quarterly guidance. We clearly look at the business for the total year and first half, second half, which you are commenting there. But I think the comment on A and C probably going to give you any guidance I'd say to understand how it works. Okay. But I mean, I'm just looking really for more color with respect to kind of volume performance, right? It's just look, I mean, it's been very hot. And obviously, we thought there's an inverse correlation between heat and frozen fish sticks sales and ice cream is doing well. It's still been hot. So in terms of profitability and how you manage the business, is it you kind of try to promote less if you think the heat is a headwind that's not worth fighting against? And but as you get in the back half of the year, kind of that promotional spend now lifts more than it naturally would or it would just be normalized relative to the year ago? And I understand everything that's happening with new initiatives. I'm just trying to focus on the weather piece really. So the good news is structurally September is by nature the biggest month of Q3 because it's back to school typically back to school a month. So it doesn't prove yet that it's going to be equally hot. So that's one thing. 2nd, when it's so hot at this stage, and the good news is also that Q2 most of the time is the smallest quarter by definition because it's really summertime. And we don't promote that much anyway during these times. So that's the good news. It's going to begin to start and we'll get back to Q3. And I would put it that way looking backwards now. Look at Q2. Q2 was hot overall. May June were hot and we've managed to demonstrate and we've managed to come up with growth at the right margin. The one element I would add is that just shows actually the dynamic aspect of the management of our business, which is we adapt our business to the market condition as well and we are really doing everything we can to maximize the return on our trade and promotional investment. And it makes more sense, frankly, to invest at the time the market is more, let's say, conduced to growth. Okay. Makes sense. Okay. And then just quickly on Amvetsys, can you just quickly repeat for me, I didn't hear it, the EBITDA contribution for the year? So the EBITDA contribution for the year is going to be €10,000,000 and €50,000,000 of revenues. Got it. Okay. And then you said approximately, I think, dollars 0.04 in EPS contribution. Is that slightly higher than you may have thought upfront? And the reason why I ask is, I feel like when you announced Aunt Bessie's, we could kind of back into a pretty decent assumption from margin what maybe EBITDA would be. It just it seems like it's a little bit better than we thought and also seems like the EPS could be a little bit better given the timing of the deers. It's not year 1, it's really just kind of half the year. So just kind of giving any color as to how Amvesys is now versus when you first looked at it? Thanks. Yes. So far, I mean, the one limit that's important is it is a seasonal business, okay? So there's effectively a higher concentration towards the second half of the business. But the point is where we are to address your question specifically is what you get from us now is very much consistent with what we have guided you through. I mean with the acquisition economies that have been reflected so far, we're just in the process of integrating the business And the €60,000,000 revenue €10,000,000 EBITDA is very much consistent with the acquisition economics that we have been sharing with you at the time we announced. Okay, great. And then quickly, just more kind of big picture for you, Stefan. Obviously, kind of top four markets have been driving the impressive top line growth over the past, call it, 6 quarters. With the new introduction of, I guess, peas, right, instead of more in the Nordic area, how are you thinking strategically internally strategic push into some of those under strategic push into some of those underperforming markets that you didn't really focus on upfront and must win battles and hopefully it's more of a balanced push? Or do you continue to think that the likes of the UK, Italy, Germany and Germany would be kind of the majority of the top line driver? Thanks. Let me start to your point very much from macro standpoint. Let me start with the algorithm that we've put together. This category can and will generate something like a 1% plus per annum and we believe we have what it takes to do a bit more than that given market share I mean, we're grabbing market share ahead of this. So hence, obviously, the low single digit revenue growth algorithm that we've put together. At the same time, when you see the progression of the different countries, I would put it that way. 2017 was very much a German and Italy contribution and 2018 is and still doing well by the way. And 2018 is really now I mean U. K. If you remember was a bit behind the curve and we always told you it's coming, it's coming. There are some reasons for this because they have more the ratio of machine bottles versus the rest was lower. So a variety of reasons. And also they have to take a lot of price successfully by the way. And so they're doing well. So that's really 2018. And at the same time, we have a series of countries like Austria and Netherlands that we tend to probably not think there are the good news is also we have sealed some gaps. I think there are the good news is also we have still some gaps like for example in the Nordics in terms of gross margin, in terms of EBITDA that we believe that we have a key difference in terms of gross margin and EBITDA margin versus other countries. We don't believe it is structural. So it's a great opportunity for us in the coming years to make up the difference with these countries. So that's to your point, you obviously have to make sure that you have your must win battles per SKU and per range, but you also have your must win countries and you have to manage the whole thing. And the good news is we still have a lot of differences and we love differences because it's an opportunity to make to close these differences. Super. Thank you so much. You're welcome. Thank you. And we have one additional question from Jon Tanwanteng with CJS Securities. Good morning, gentlemen. Thanks for taking my questions. How are you doing? Stefan, I know you've probably thought about this a lot, but can you give investors a bit of reassurance that your investments in innovation won't result in the kind of attrition in the core businesses that happened on your predecessors? Maybe what were the major factors that happened last time around? And how are you avoiding them this time? Yes. I gave it some thoughts. Thank you very much. You're right. You're right by the way. So you may remember 2, 3 years ago that somehow the word innovation was a bad word, and we did that with a purpose. We thought that the first thing we had to do was to restore the foundation behind our key SKUs, SKUs. And so that was all about renovation. And that's really the essence of a brand business. You need to make sure that your core SKUs are going to be ahead of the curve and they were not. So all the effort was really behind renovation. Now that we have done this, it's not going to that we're not going to stop renovation, but we have some algorithm as well, which is how many SKUs do we need to renovate on a yearly basis and at the end of the day, every 5 years, where do we need to stand with the renovation. And with that, so we don't lose that focus, but obviously, it's also generating some resources that we can further develop behind innovation. Back to innovation, the big difference with probably something like 4 years ago is we're going to be very disciplined. It's going to be all about the mushroom battles. So that's very, very important. So when you see the new innovation in terms of fish, it's all about fish, it's about natural fish, it's about prepared and all these things, same thing with vegetables. So it's very, very, very different. And at the same time, we don't we're not going to risk the whole thing by thinking that innovation is going to cover something like 20%, 30% of the new of the additional sales. It should be still something like less than 10% of the net sales given the methodology that we all apply in FMCG, which is the last 2 years. So that's a very, very different context. We're very mindful of this mushroom bottle focus. We're also very renovated on a regular basis and that's what we're going to do. And we're going also to go to fuel innovation by the way and instead of and with bigger innovation instead of going to something which is way too fragmented. So that's a long answer, John, for but it's a key question indeed. Great. Thanks for the color. And just I think you've mentioned in the past that both Goodfella's and Aunt Bessie's were more under invested from an A and P standpoint. The NPE that you're spending in the second half to get those businesses ramped up, is that more representative of a normalized rate? Or is it more intense than it should be and you'll ramp it back down? How should we think about that as we head into the back half of the year? You should probably take into consideration small phasing within the existing business more than anything else. So we still need to prepare the E and P plans for good finance and on DECIS. Once it's ready, obviously, we start to invest. But you may remember when the way we consider the Muslim bottles, it took a bit of time and probably it was difficult in terms of patients, but we always said that we need to be ready muscle and bottle by muscle and bottle before reinvesting. And so that's exactly what we're doing right now with the teams. We are adjusting exactly what the must win battles are. And then we have a 360 approach, including obviously A and P. Once it's ready, packaging wise, in store activation, quality then and obviously the message then we can reinvest. But it takes a bit of time. It's always frustrating, but that's life. And that's what we've been doing in 2015, 2016, 2017. And we also have learned that you need to do that in a very disciplined way, otherwise it's not going to work. Got it. And my final question, Sami, did you quantify how much A and P you pushed out from Q2 into Q3? Can we get that number? Yes. It's about $5,000,000 $5,000,000 Great. Thank you so much. Thank you. I'd like to turn the conference back over to Stephane for any additional or closing comments. Thank you very much and thank you for all of you. We're pleased by our 2nd quarter results, which demonstrate the strength of our business model and execution by the team. So first half results are tracking ahead of the guidance that we provided at the start of the year as well as ahead of the long term growth algorithm that we provided at CAGNY. We have an exciting and ambitious shutdown planned for the second half of the year and look forward to updating you on our progress when we report our Q3 results in November. Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you all again for your participation. You may now disconnect.