Taposh Bari - Head, IR Stéfan Descheemaeker - CEO Samy Zekhout - CFO.

Bill Chappell - SunTrust Robert Moskow - Credit Suisse Steve Strycula - UBS John Baumgartner - Wells Fargo Rob Dickerson - Deutsche Bank Jon Tanwanteng - CJS Securities.

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 Taposh Bari, Head of Investor Relations. Please go ahead, sir..

Great, thanks so much, and thank you all for joining us to review of our second quarter 2018 earnings results. With me on the call today our Chief Executive Officer, Stéfan Descheemaeker; and Chief Financial Officer, Samy Zekhout. 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 prospect 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 appendixes 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 and 2018, and that all adjusted figures have been adjusted for exceptional items, restructuring, share-based payment and acquisition-related items, and then all comments from here on will refer to those adjusted numbers.

And with that, I will hand the call over to Stéfan..

Thank you, Taposh, and thank you, everyone, for joining us on the call. Earlier today, we reported solid second quarter results, which further reinforce our commitment to driving sustained shareholder value through a combination of organic growth and disciplined M&A.

During the second quarter, we reported organic revenue growth of 1.3%, 80 basis points of adjusted gross margin expansion before the mix effect from M&A. Adjusted EBITDA of €89 million, 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 Aunt Bessie's acquisitions are leading us to raise our guidance. For the year, we now expect EBITDA in the range of €365 million to €370 million, and EPS in the ranges 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 second 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 two discrete factors.

An early Easter, which 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.

Our adjusted second quarter EBITDA of €89 million was driven by better than expected gross margins and the phasing of operating expenses. Samy will cover both in more detail in his remarks. Moving on to M&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 three months since we acquired the business. And as I mentioned, we closed Aunt Bessie's 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 Aunt Bessie's adviser scale and breadth of our UK portfolio, which is anchored by the iconic Birds Eye brand. The UK has had one of the strongest organic growth profiles in our portfolio in both Q2, in the first half. We're enforcing our confidence in this large and strategic growth market.

Furthermore, we believe that sum is greater than the parts 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 2018, we reinforced our market leadership in frozen fish by launching our new Captain campaign in several countries in Q1, and following up with our crispiest ever fish fingers in Q2.

These investments have paid up with sales of fish fingers and coated fish, our two largest Pan European subcategories, up 4% and 5%, respectively, through the first half of 2018. Renovation is an ongoing discipline that we will continue to stress in the coming quarters and years. Given our desire to raise the bar even further on our cost SKUs.

With that said, you will begin to see a greater balance between renovation and innovation beginning in the second half of 2018. Our innovation agenda will build on the strong foundation we have created through relentless focus on our core categories.

Placing 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 combine to account 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, Veggie Power, 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; PEASE, 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 foods are much worse for other category. Q3 marks an exciting new chapter for our company as we being to pursue exciting whitespace opportunities that we see in the market. Slide 6, gives you a little more flavor for what you expect from us on innovation front.

We recently began the activation of Veggie Power in Portugal as part of a multi-country launch. We'll be running this line out to a few other markets, notably Germany, in the third quarter. 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 products 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 first 6 months of 2018, we have 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.

We 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, I look forward to continuing the momentum that we have demonstrated for the past several quarters.

With that, I will hand the call over to Samy to discuss our financial results in more detail.

Samy?.

Thank you, Stéfan, 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% to €488 million, driven by 1.3% organic revenue growth and 6.4 percentage points from the recent acquisition of Goodfella's, which we closed on April 23rd.

Foreign exchange translation offset revenue growth by 1.1 percentage points. As Stéfan mentioned, organic revenue growth of 1.3% was primarily driven by prices as volumes were impacted by that shift of Easter into Q1, and unseasonably hot temperature throughout the quarter. Once again, the U.K. was a key driver of growth, up 3.6% in Q2.

This marks the fourth consecutive quarter of organic revenue growth in this market, which being -- we see is being fueled by strong execution of Must Win Battles and distribution gains. All the 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 other running market.

The team has made good progress against their plan this year, margins have improved significantly and the company remains on track to rebuilding its economies 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 from 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&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 ranges of 30% to 31% range in the second half, driven primarily by M&A mix, given Goodfella's loss gross margin profile. Moving down to the rest of the P&L.

Adjusted operating expense increased 2% year-over-year, with operating expenses A&P declined 1%, due primarily to phasing out of Q2 into Q3, and indirect expenses increased by 4% due to the acquisition of Goodfella's. Adjusted EBITDA was €89 million, representing a 12% increase versus the prior year.

Adjusted EBITDA margin increased 90 basis points to 18.2% for the quarter. Adjusted EPS was €0.28 for the quarter, an increase of 22%, reflecting higher EBITDA, lowering tariff expense and share repurchase in the prior year. Turning to cash flow on Slide 8.

We generated €104 million of adjusted free cash flow throughout the first six months of the year, which equates to operating cash flow conversion of 70%. Factors contributing to free cash flow through the first half of 2018 are as follows.

Adjusted EBITDA of €190 million -- €192 million, which grew 14% year-on-year; working capital was €48 million offset due to a combination of phasing and acquisition; CapEx was €9 million during the quarter, below last year due to the anniversary of machinery and equipment purchases, related to the Findus integration; cash taxes were EUR 9 million; and finally, cash interest and other were €22 million.

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 yearend. 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 Aunt Bessie, we are raising our full year 2018 guidance. As a result, we now expect 2018 adjusted EBITDA in the range of €365 million to €370 million, and adjusted EPS in the range of €1.14 to €1.17 per share. When translation 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 drive on reported revenues in the third quarter and 90 basis for the full year. Our updated full year guidance include expected contribution from both Goodfella's and Aunt Bessie's.

And for the year 2018, we expect both businesses to combine to contribute to approximately €150 million in revenue and €20 million in -- of EBITDA. For Aunt Bessie's, this implies €60 million of revenues and €10 million of EBITDA, for what will effectively be six month of ownership during 2018.

For Goodfella's, our guidance continue to assume €90 million of revenue contribution and €10 million of EBITDA for the 8 month of ownership during 2018. On operating expense, we expect a significant increase in A&P in Q3, due to the phasing out of Q2.

Based on the timing of expenses and the seasonality of the two acquisitions, we expect second half EBITDA growth to be heavily concentrated in the fourth quarter. That concludes our remarks. I will now turn the session over to Q&A. Thank you. Operator, back to you..

[Operator Instructions] Our first question will come from Bill Chappell with SunTrust..

Stéfan, could you just talk a little bit more, I guess trying to understand that the new product launches in some of the recent acquisitions, I guess, why you've chosen kind of these markets for the launches first? And then on the acquisition so far, it's all really come in the UK.

And so just trying to understand, as you look out on the pipeline going forward, is there a reason why it's been more and more UK based? Or are there other opportunities outside the UK?.

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 happens is, what you see, what you do is, you're presenting in different entities, so the new products should go to the different countries and you see the kind of appetite they have, obviously, for one versus the other, based obviously on the Must Win Battle 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&A. Bill, I'll be very simple, 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&A, it's opportunistic.

When the guys are ready, obviously, 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. When these two 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 will come to us first. That's a great news. But we will not limit ourselves to the UK. However, UK is a great market for us. It's very well managed by Wayne Hudson, the UK execution is very good.

So they can digest both, the focus behind Must Win 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 Aunt Bessie's guys. So very interesting, they fully understand the Must Win Battle concept. And I'm very confident it's going to go well..

And Sammy, just a follow up to you, at the end you said, the EBITDA growth would be more weighted towards the fourth quarter versus third.

I think I understand the rationale behind that, but can you just give me a little bit more color?.

Yes. It's primarily driven by the fact that we are willing to step up our investment in A&P. 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 the [indiscernible] Aunt Bessie, I mean is starting to contribute to [indiscernible] the second half throughout the end of the year, given the fact that it is a seasonal business as well..

So you have some of the revenue from these new product launches, but just -- it'll be heavily supported with marketing this quarter versus the fourth quarter?.

Yes. There would be increasing support behind the product, behind as well the base business.

We're going to be launching the Captain campaign as well in our Q3, which has been reflected in the A&P spending and plus the fact that, as I have mentioned, there is a factor of seasonality that will help this proportion, Q4 versus Q3 as well with Aunt Bessie..

[Operator Instructions] We'll now hear from Robert Moskow with Credit Suisse..

Just a -- for a little bit of context for those of us who're kind of new to the name. The EBITDA guidance raised 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..

Yes. It's reflecting -- we carry at -- raised our guidance last time to, let's say, bring the, let's say, the range towards the higher end of the range. And now we've worked, we've done is we've added only Aunt Bessie to the total..

And then regarding the innovation that you're launching, can you give us a sense of like -- are there competitive products similar to those 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 only depends on the countries. Some countries are very much the vanguard of food. And I would take the example of the Nordics, probably even ahead of what 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 they're also very -- doing very well. We're also starting this PEASE thing. As you know it 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 -- obviously, in vegetables and more specifically in peas, which is great. So I would not say that we're always number one, and I don't think we have -- we want to be the guy starting everything.

But when we see that we -- there are some very solid trends coming in, then we need to move fast and that's exactly what we're doing..

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, just environmentally kind of just -- prefer paper..

It's a good question. More specifically, the bowls in the -- in Portugal, they are plastic at this stage, because it's easier. But we're working on 2 different avenues, one 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 Iglo, with Findus, we have a lot of -- obviously it's paper -- 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. So there is definitely, and awareness of where we need to do. We 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? Seems like it's more....

Oh, they -- in some countries -- again, Robert, I mean in some countries they literally paranoid about it. And I would say the more north you go, the more paranoid they are, in south it's the other way around. But it's moving fast. It's moving fast. So I can see that -- the southern -- the countries in Southern Europe are catching up.

They -- I think it's becoming more -- it's a very solid trend overall. So sustainability, we need something that is -- it's 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 thinking of all the right boxes..

Our next question will come from Steve Strycula with UBS..

First part would be on the two acquisitions that you've recently done. You're 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, in sense of an overlap where there's planned supply chain? And how does it impacts your route to market? How do you think about scaling, when you already have an infrastructure in this country.

So that would be question one, and then I have a follow-up..

Okay. So let me start with that question. I would [Indiscernible] from the supply chain standpoint or the plant standpoint there is no duplication, very simple. So a fish factory is not [Indiscernible] factory, I can tell you, it's still very different. And so there is no way you can duplicate.

What you can do though, is not so much of the half synergy thing, but you can bring best practice. So I'm a firm believer that synergies do not only come from hard synergies and implication, but also by checking the use -- checking with 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 path, that's exactly what we're doing right now. We are working with the U.K. team. And we definitely have to work hard to make sure that we're going to make one integration instead of two.

And that's going to be, obviously, much, 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're coming with a full range between, obviously, the Aunt Bessie's product, the Goodfella's product and the Birds Eye product. So a lot of -- lets say, there are some implications in hard synergies, that -- things we like. That's mostly the indirect level.

We have a bit of talks, but limited, I must admit it is doing direct -- indirect cost. And then the rest is really, again, it's back to the market. So trade terms, net revenue management, these kind of things we really definitely believe we have made a lot of progress over the last few years.

And these are the kind of things we want to bring to Aunt Bessie's and to Goodfella's..

And then for the follow-up, just wanted to get a little bit of clarity, Stéfan. You're lapping some pretty difficult comparison in the back half, but also appreciate that your business is accelerating, improving from both distribution and inventory or sales velocity.

Is there one quarter, in particular, that you think is maybe more challenging from either a weather compare or a selling that you're lapping that we should keep in mind?.

Well, I wouldn't say so. I think we're sticking to our low-single digit targets, that's 2.1% at the end of H1. And that's our target and our guidance for the full year. So nothing in particular as we mentioned. By definition, you have the weather, but the weather is part of the business..

We'll now hear from John Baumgartner with Wells Fargo..

Samy, wanted to come back to the gross margin for a minute. It was pretty strong, especially given the perceived dilution from Goodfella's.

So just wondering if you could 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 not repeat into half two.

We have, at the same time, a negative mix from acquisition in half two. I mean, we guided you through the impact of Goodfella's and that's what's creating, let's say, guidance of we're delivering a strong margin, I mean increasing margin over the first half and about a 30% to 31% over half two. That's how it works..

And then, Stéfan, just thinking more through the acquisitions, Goodfella's and Aunt Bessie's, you mentioned some of the synergies there, but as you kind of think about the back half of 2018 first half of '19 for Goodfella's and Aunt 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, how would you compare the synergy opportunities between Aunt Bessie's and Goodfella's?.

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 with it. And that should be fully integrated by, let's say, starting in 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 that will be management by definition, it takes always more time, because you have to do these in sync with additional A&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 have a conversation in both trade terms and net revenue management. And that takes you, obviously, much more time. So in other words, I would say, part of that particularly the hard synergies will come first, the soft synergies will come later..

And then in terms of the timing, you think you're more phasing larger synergies coming through in 2020 versus 2019 at this point?.

It's '19, '20, both, yes. It's going to come in the course of, let's say, second half of '19 and then in the course of '20. Following the normal calendar with trade..

[Operator Instructions] We'll go to Rob Dickerson with Deutsche Bank..

So just to return the question regarding the back half of the year and kind of cadence in volumes, pricing.

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 asked because, obviously, the [indiscernible] in Western Europe won't document, I just got back from there and still hot, people are still complaining.

And what we saw, we saw a decent amount of pricing in the quarter, 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 bless 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 Stéfan, I mean [indiscernible]. 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&P, and if you look at, let's say, Q4 for instance, it's going to be the highest quarter for A&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 we were making earlier.

But at the same time, there's as well new initiatives, there's the launch of the Captain campaign and there's the integration of all of the businesses that we have that are clearly creating the differentiation between the 2 quarters 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 a bit -- enough color commentary, I mean, to get the perspective over both quarters. But usually, we'd 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 we are commenting there.

But I think the comment on A&P probably going to give you enough guidance, I think, to understand how it works..

But -- I'm just looking really from color with respect to kind of volume performance, right? It's just -- look, I mean, it's been very hot and obviously, we did [indiscernible] versus correlation between heat and frozen fish stick 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 year ago? And I understand everything that's happening with new initiatives. I'm just trying to focus on the weather piece, really..

Yes. So the good news is, structurally September is by nature the biggest month of Q3 because it's back-to-school -- particularly, a back-to-school month. So that doesn't prove that it's going to be equally hot, so that's one thing.

Second, 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 summer time. And we don't promote that much anyway during these times. So that's the good news. It's very diligent to start -- begin back to Q3.

And I would put it that way, looking backward, no, look at Q2. Q2 was hot overall, May and June were hot and we've managed to demonstrate and we've managed to come up with growth at the right margin..

The one, I mean, like -- 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 condition -- the market condition as well. And we are we redoing everything we can to maximize the return on our trading promotion investment.

And it makes more sense, frankly, to invest at the time the market is more, let's say, conduced to growth, so....

Okay, makes sense. Okay. And then just quickly on Aunt Bessie's.

Could 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 million. And €50 million of revenues..

And then you said approximately, I think, €0.04 in EPS contribution. Is that slightly higher than you may have thought up front. 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 may be 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 deals, it's not year one, it's really just kind of half the year.

So just try giving any color as to how Aunt Bessie's is now versus when you first looked at it?.

Yes. So far -- I mean the one limit that's important is, it is a seasonal business, okay? So that'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, we've -- the acquisition [Indiscernible] have been reflected so far. We're just in the process of integrating the business. And the €60 million revenue and €10 million EBITDA is very much consistent with the acquisition economies that we have been sharing with you at the time we announced..

And then quickly, just more, kind of, big picture for you, Stéfan. Obviously, you're, kind of, top four markets have been driving the impressive top line growth over the past, call it, six quarters. With the new introduction of, I guess, PEASE, right? Instead of more on the Nordic area.

How are you thinking strategically internally kind of as we look out in the '19? Have we now officially started, kind of, the strategic push into some of those underperforming markets that you didn't really focus on upfront and the Must Win Battles and hopefully it's more of a balanced push? Or do you continue to think that you got the lights in U.K., Italy, Germany, and Germany would be kind of the majority of the top line driver?.

Well, let me start to your point. Very much 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. And given market share, I mean, we're driving 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 progression of the different countries, I would put it that way, '17 was very much Germany and Italy contribution and '18 and still doing well, by the way.

And '18, as we know, I mean, UK 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 Must Win Battles versus the rest was lower. So relative 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, Netherlands that we tend probably not to mention systematically, but they're doing extremely well.

I think there's good news is also we have still some gaps like, for example, in the Nordics, in terms of gross margin and 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 opportunities for us in the coming years to make up the difference with these countries. So that said, to your point, you obviously have to make sure that you have your Must Win Battles for first Q in that 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'll have differences because it's an opportunity to obviously to close these differences..

And we have one additional question from Jon Tanwanteng with CJS Securities..

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 happen on your predecessors.

Maybe what were the major factors that happened last time around and how you're avoiding them this time?.

Yes. I give it some thought, thank you very much. You're right, you're right, by the way. So you know what, you may remember, two, three years ago, that somehow the word innovation was a bad word. And we did that with a purpose. We saw that the first thing we had to do was to restore the foundation behind our key SKUs.

And so that's why it's 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 head of the curve and they were not. So all the effort was really behind renovation.

Now that we have done this, that we're not going to stop renovation, but we have some algorithm as well, which is how many SKUs that we need to renovate on a yearly basis, and at the end of the day, within five 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 now, the big difference with, probably something like four years ago, is we're going to be very disciplined, it's going to be all about the Must Win 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 repairs and all that things, same thing with vegetables. So it's a -- 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 apply in FMCG, which is the last we use.

So that's a very, very different context. We're very mindful of this Must Win Battle focus. We also very mindful of making sure that all the existing products are going to be renovated on the 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 to going through something which is way too fragmented. So that's a long answer, John, for -- but it's a key question indeed..

And just -- I think you've mentioned the past that both Goodfella's and Aunt Bessie's were more under-invested from an A&P standpoint. The A&P 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 [indiscernible]..

No, I think you should probably think it's a consideration, small phasing within the existing business more than anything else. So we still need to prepare the A&P plans for Goodfella's and Aunt Bessie's. Once it's ready, obviously, we'll start to invest.

But you may remember, when -- the way we consider the Must Win Battles, it took a bit of time in the -- probably, it was difficult in terms of patience. But we always said that we need to be ready, Must Win Battle by Must Win Battle, 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. Than we have a 360 approach, including obviously A&P, once it's ready packaging wise, in-store activation, quality, then -- and obviously, the message then we can reinvestment. But it takes a bit of time. It's always frustrating, but that's life.

And that's what we've been doing, in '15, '16 and '17. And we also have learned that you need to do that in a very disciplined way otherwise it's not going to work..

And my final question.

Samy, did you quantify how much A&P you pushed out from Q2 into Q3? Can we get that number?.

Yes, it's about €5 million..

Thank you. I'd like to turn the conference back over to Stéfan for any additional or closing comments..

Thank you very much. And thank you for all of you. We're pleased by our second 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've provided at the start of the year as well ahead of the long-term growth algorithm that was provided by Cagney.

We have an exciting and ambitious agenda on plan for the second half of the year, and look forward to updating you on our progress when we report our third quarter 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..