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Pernod Ricard: 2017/18 Full-year Sales and Results

August 29, 2018

PARIS--(BUSINESS WIRE)--Aug 29, 2018--Regulatory News:

Pernod Ricard (Paris:RI):

Press release - Paris, 29 August 2018

VERY STRONG FY18: +6.0% ORGANIC SALES GROWTH (-0.3% REPORTED) 6.3% ORGANIC GROWTH IN PRO 1 (-1.5% REPORTED)

FY19 GUIDANCE: ORGANIC GROWTH IN PRO 1 BETWEEN +5% AND +7%

SALES

Sales for FY18 totalled €8,987m. Organic Sales growth accelerated to +6.0% vs. +3.6% in FY17, thanks to consistent strategy implementation. Reported Sales were down -0.3%.

Sales were very strong, with broad-based growth coming from a wide spectrum of markets…

Americas: continued dynamism +6%, with USA now growing broadly in line with market and acceleration in Mexico and Brazil Asia-Rest of World: acceleration +9%, thanks to return to strong growth in China and India Europe: modest growth +2%, with good momentum in Eastern Europe, Germany and UK but difficulties in France and Spain Travel Retail in good growth, across all regions, thanks in part to new organisation, leading to value market share gains

… and brands:

Strategic International Brands’ acceleration +7% vs. +4% in FY17: 11 out of 13 in growth, 6 improving vs. FY17 Very strong performance of Martell (+14%) and Jameson (+14%) improving trends for overall Scotch portfolio (+3% vs. stable in FY17) and return to growth of Chivas (+5%) Absolut +2%, thanks to success outside of USA (+6%) although USA still in decline significant improvement of Seagram’s Indian whiskies +13% vs. +3% in FY17 Innovation contributing significantly to topline growth.

Q4 Sales were €1,927m with +5% in organic growth (-2% reported), broadly consistent with underlying trends in the first 9 months of the year.

RESULTS

FY18 PRO 1 was €2,358m, with organic growth of +6.3% and -1.5% reported. The PRO margin was up +14bps organically but down -34bps on a reported basis due to adverse FX (-€180m.)

_______________ 1 PRO: Profit from Recurring Operations

Organic PRO 1 growth was in line with the revised annual guidance of c. +6%. It was driven by:

Gross margin +6%, a +15bps margin improvement vs. FY17 on an organic basis, thanks to: Pricing improvingOperational excellence savings limiting impact of cost of goods’ increases (in particular Agave cost and GST in India)strong growth from Martell and Jameson but negative mix from growth in Seagram’s Indian Whiskies and decline of Ricard A&P: +7% to prepare for future growth, remaining broadly stable at c. 19% of Sales Tight management of Structure costs: +5% (+4% excluding Other income and expense), with targeted investment in Emerging markets and growth relays.

The FY18 corporate income tax rate on recurring items was c. 25%, in line with FY17. The expected rate for FY19 is c. 26%.

Group share of Net PRO1was €1,511m, +2% reported vs. FY17.

Group share of Net profit was €1,577m, +13% reported vs. FY17, thanks in particular to a reduction in financial expenses.

FREE CASH FLOW AND DEBT

Free Cash Flow was very strong, increasing to €1,433m, +10% vs. FY17, resulting in a Net debt decrease of -€889m to €6,962m.

The average cost of debt reduced to 3.5% vs. 3.8% in FY17. The expected for FY19 is c. 3.9%.

The Net Debt/EBITDA ratio at average rates was 2.62 at 30 June 2018, significantly down from 3.0 at 30 June 2017.

PROPOSED DIVIDEND

A dividend of €2.36 is proposed for the Annual General Meeting of 21 November 2018, up +17% from FY17, corresponding to an increase in pay-out ratio to 41%, reflecting the Group’s policy of gradually increasing cash distribution from approximately one-third of Group Net Profit from Recurring Operations to c. 50% by FY20.

As part of this communication, Alexandre Ricard, Chairman and Chief Executive Officer, declared, “ FY18 was a very strong year.Consistent strategic implementation has enabled us to deliver a significant improvement in business performance while investing for the future.Our Sales have accelerated and diversified, and our margins improved.

In FY19, in a still uncertain geopolitical and monetary environment, we will continue consistently implementing our strategy. Our guidance for FY19 is organic growth in Profit from Recurring Operations between +5% and +7%.”

_______________ 1 PRO: Profit from Recurring Operations 2 Average EUR/USD rate of 1.19 in FY18 vs. 1.09 in FY17

All growth data specified in this presentation refers to organic growth, unless otherwise stated. Data may be subject to rounding.

A detailed presentation of FY18 Sales and Results can be downloaded from our website:

Audit procedures have been carried out on the full-year financial statements. The Statutory Auditors’ report will be issued following their review of the management report.

Definitions and reconciliation of non-IFRS measures to IFRS measures

Pernod Ricard’s management process is based on the following non-IFRS measures which are chosen for planning and reporting. The Group’s management believes these measures provide valuable additional information for users of the financial statements in understanding the Group’s performance. These non-IFRS measures should be considered as complementary to the comparable IFRS measures and reported movements therein.

Organic growth

Organic growth is calculated after excluding the impacts of exchange rate movements and acquisitions and disposals.

Exchange rates impact is calculated by translating the current year results at the prior year’s exchange rates.

For acquisitions in the current year, the post-acquisition results are excluded from the organic movement calculations. For acquisitions in the prior year, post-acquisition results are included in the prior year but are included in the organic movement calculation from the anniversary of the acquisition date in the current year.

Where a business, brand, brand distribution right or agency agreement was disposed of, or terminated, in the prior year, the Group, in the organic movement calculations, excludes the results for that business from the prior year. For disposals or terminations in the current year, the Group excludes the results for that business from the prior year from the date of the disposal or termination.

This measure enables to focus on the performance of the business which is common to both years and which represents those measures that local managers are most directly able to influence.

Free cash flow

Free cash flow comprises the net cash flow from operating activities excluding the contributions to Allied Domecq pension plans, aggregated with the proceeds from disposals of property, plant and equipment and intangible assets and after deduction of the capital expenditures.

“Recurring” indicators

The following 3 measures represent key indicators for the measurement of the recurring performance of the business, excluding significant items that, because of their nature and their unusual occurrence, cannot be considered as inherent to the recurring performance of the Group:

- Recurring free cash flow

Recurring free cash flow is calculated by restating free cash flow from non-recurring items.

- Profit from recurring operations

Profit from recurring operations corresponds to the operating profit excluding other non-current operating income and expenses.

- Group share of net profit from recurring operations

Group share of net profit from recurring operations corresponds to the Group share of net profit excluding other non-current operating income and expenses, non-recurring financial items and corporate income tax on non-recurring items.

Net debt

Net debt, as defined and used by the Group, corresponds to total gross debt (translated at the closing rate), including fair value and net foreign currency assets hedging derivatives (hedging of net investments and similar), less cash and cash equivalents.

EBITDA

EBITDA stands for “earnings before interest, taxes, depreciation and amortization”. EBITDA is an measure calculated using the Group’s profit from recurring operations excluding depreciation and amortization on operating fixed assets.

About Pernod Ricard

Pernod Ricard is the world’s n°2 in wines and spirits with consolidated Sales of €8,987m in FY18. Created in 1975 by the merger of Ricard and Pernod, the Group has undergone sustained development, based on both organic growth and acquisitions: Seagram (2001), Allied Domecq (2005) and Vin&Sprit (2008). Pernod Ricard holds one of the most prestigious brand portfolios in the sector: Absolut Vodka, Ricard pastis, Ballantine’s, Chivas Regal, Royal Salute and The Glenlivet Scotch whiskies, Jameson Irish whiskey, Martell cognac, Havana Club rum, Beefeater gin, Malibu liqueur, Mumm and Perrier-Jouët champagnes, as well Jacob’s Creek, Brancott Estate, Campo Viejo and Kenwood wines. Pernod Ricard employs a workforce of approximately 18,900 people and operates through a decentralised organisation, with 6 “Brand Companies” and 86 “Market Companies” established in each key market. Pernod Ricard is strongly committed to a sustainable development policy and encourages responsible consumption. Pernod Ricard’s strategy and ambition are based on 3 key values that guide its expansion: entrepreneurial spirit, mutual trust and a strong sense of ethics.

Pernod Ricard is listed on Euronext (Ticker: RI; ISIN code: FR0000120693) and is part of the CAC 40 index.

Appendices

Emerging Markets

Strategic International Brands’ organic Sales growth

Sales Analysis by Region

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