Correction: PRESS RELEASE – Func Food Group Q3 2018 Financial Report

Func Food Group has today published its Q3 2018 financial report. The report is available in English at http://www.funcfood.com/investors/?lang=en.

SUMMARY

Third quarter 2018

  • Consolidated Group revenues amounted to MEUR 7.1 (MEUR 10.6 in consolidated 2017).
  • Revenues decreased by MEUR 3.5 or 32,8% in comparison to 2017.
  • Consolidated Group EBITDA amounted to MEUR -0.9 (MEUR 1.2 in consolidated 2017).
  • EBITDA decreased by MEUR 2.1 in comparison to 2017.
  • EBITDA adjusted for items affecting comparability was MEUR 0.2 in 2018 and MEUR 1.3 in 2017 (reduction of MEUR 1.1).

Year-to-date September 2017

  • Consolidated Group revenues amounted to MEUR 25,7 (MEUR 31,1 in consolidated 2017).
  • Revenues decreased by MEUR 5,5 or -17,6% in comparison to 2017.
  • Consolidated Group EBITDA amounted to MEUR -2,0 (MEUR 1,8 in consolidated 2017).
  • EBITDA decreased by MEUR 3,8 in comparison to 2017.
  • EBITDA adjusted for items affecting comparability was MEUR -0,6 in 2018 and MEUR 2,0 in 2017 (reduction of MEUR 2,6).

In Q3 2018 the Group’s total revenue decreased mainly due to Celsius sales cycling in Sweden. Group’s EBITDA was also affected by write-offs in FAST and Cocovi for discontinued products as part of on-going portfolio transformation. In order to account for seasonal imbalances and strategic decisions to exit private label manufacturing, report also includes pro forma revenue growth comparisons without Freddy Store Ab and private label sales. In Q3 2018 pro forma net revenue also decreased.

Celsius revenues decreased by MEUR 2.6 and FAST revenues by MEUR 0.3 vs. PY. The discontinuation of private label sales had a MEUR 0.1 impact in revenue vs. PY.

Revenue for Finland in Q3 decreased 25,5% due to increased private label competition in puddings and higher amount of discount sales related to portfolio transformation. 2018 launches of Muscle Series and three additional flavours for ROX bar generated new sales. Finland’s revenue in Q3 was still slightly affected by exit from private labels (excl. private label -25,1 % vs PY).

In Sweden, Q3 net revenue decreased by 31,6% vs. previous year in local currency SEK (excluding intercompany sales) and decreased by 37,9% in EUR. Excluding the Freddy business the quarterly net revenue in SEK was -33,6% and in EUR -37,8% vs. previous year. Celsius sales were decreasing due to different sales cycling and increased competition.

Finland’s EBITDA (MEUR -1.2) and adjusted EBITDA (MEUR -0.2) were negative in Q3. Decrease came from low sales performance, changes in portfolio and increased promotional pressure. Sweden’s EBITDA (MEUR 0.3) and adjusted EBITDA (MEUR 0.4) were positive and partly due to cumulative inventory value correction.

Total sales margin-% was at 20,4% vs. 40,1% in Q3 2017 and was impacted by promotional pressure, increased logistics expenses and change in periodization of purchases.

Norway has been in an emerging phase since Q4 2017. Norway’s impact to the Group’s overall net revenue and EBITDA figures stayed at a low level in Q3.

The retail index for Sweden was positive 1,6% YTD, bringing the 12 month rolling to +1,8%. In Finland the retail index was +4,2% including an increase of the retail price index by +2,4%).

The bondholders of the Group approved changes to the bond terms on January 15 2018. The Group had proposed that Func Food Sweden Ab may convert up to 10.0 million euros of the originally 33.1 million, and at year-end 23.1 million euros of intra-group loan granted by Func Food Group Oyj into an equity instrument.

The Group had also proposed that the planned bond repayment of 4.5 million euros can be omitted in September 2018. At the same time, the Group proposed an increase in the amount of permitted financial leasing debt and a permission to use recourse factoring arrangements with large retail customers, where the credit risk remains with the Group.

The Group also proposed changes to the bond terms in relation to discontinuing the Freddy business operations and the possible merger of Finnish subsidiaries.

As a condition for the implementation of the changes, the Group arranged 3.0 million euros of additional funding from its shareholders between November 2017 and January 2018.

The Group arranged 0.8 million euros of additional funding from its shareholders at end of September.

The Group is continuously evaluating options for refinancing the bond, which is due at 26thJune 2019.

The Group announced a reorganisation of business activities on February 19, 2018. One of the Group’s subsidiaries Func Food Finland Oy started co-operation negotiations, which ended on March 12, 2018. As a result of the negotiations, the job duties of ten employees will ended or changed, and the Group closed its office in Tampere at end of Q2 2018.

Total consolidated EBIT for the Group was MEUR -1.8 for the quarter (MEUR 0.1 in Q3 2017). The development of revenue and sales margin-% combined had a MEUR 1.9 negative impact on the EBIT line. Investments in marketing decreased by MEUR 0.6 and other operating expenses by MEUR 0.1, while personnel remained the same vs. PY. Total depreciations and amortizations decreased MEUR 0,2 compared to Q3 2017.

Consolidated cash and cash equivalents on 30 September 2018 amounted to MEUR 0.3 (MEUR 1.3 in the beginning of the year). The Group’s net cash flow from operations in the quarter was MEUR -0.8 (YTD MEUR -2.3), mainly driven by aggressive inventory reduction, debt service costs and negative EBITDA. Net working capital in total was MEUR 2.9 lower than in the beginning of the year.

Net cash flow from YTD investing activities was MEUR 0.1, and the Group had withdrawn shareholder loans in the amount of MEUR 1.5. Payments relating to financial leasing liabilities amounted to MEUR 0.3.

Based on YTD results and YTG outlook, the Group estimates that the total revenue will be declining from PY. As a result, full-year EBITDA outlook will be declining significantly from previous year.

For further information please contact:

Robin Lybeck, CEO, Func Food Group Oyj

email robin.lybeck@funcfood.com

mobile +358 40 735 2464

Jani Partanen, CFO, Func Food Group Oyj

email jani.partanen@funcfood.com

mobile +358 40 518 3076.

The information contained in this press release is such information that Func Food Group Oyj is required to publish in accordance with the Swedish Securities Market Act (2007:528) and/or the Swedish Financial Instruments Trading Act (1991:980). The information was submitted for publication on 31 August 2018, at 6.00 CET.

Func Food Group Oyj, Mannerheimintie 105, 00280 Helsinki, Finland. The board is resident in Helsinki. For further information about the company please visit http://www.funcfood.com/?lang=en.

Func Food Group Oyj