AP NEWS

Pernod Ricard: FY19 Half-year Sales and Results

February 7, 2019

PARIS--(BUSINESS WIRE)--Feb 7, 2019--Regulatory News:

Press release - Paris, 7 February 2019

Pernod Ricard (Paris:RI):

VERY GOOD H1 FY19

+7.8% ORGANIC SALES GROWTH (+5.0% REPORTED)

+12.8% ORGANIC GROWTH IN PRO 1 (+10.6% REPORTED)

+11% NET PROFIT FROM RECURRING OPERATIONS 2

CONTINUED DELEVERAGING: NET DEBT / EBITDA AT 2.6X 3

UPGRADE OF FY19 GUIDANCE 4 :

ORGANIC GROWTH IN PRO BETWEEN +6% AND +8%

FY19-21 PLAN “TRANSFORM & ACCELERATE”:

SALES +4 TO +7% WITH OPERATING LEVERAGE OF C. 50-60 BPS PER ANNUM

SALES

Sales for H1 FY19 totalled €5,185m, with organic growth of +7.8% and reported growth of +5.0%, due to negative FX.

Growth continued to be dynamic, thanks to the consistent implementation of the medium-term growth and operational excellence roadmap:

good diversified growth strong price / mix, in particular on the Strategic International Brands positive impact of earlier Chinese New Year5 which will unwind in H2 significant progress on FY16-20 Operational Excellence roadmap: expectation is to complete €200m P&L savings by end June 2019, one year ahead of plan

Strong dynamism reflected consistent long-term investment:

Americas: robust growth +4%, with USA growing broadly in line with market Asia-Rest of World: strong acceleration +16%, thanks to China and India (with both markets further enhanced by technical factors 5 ) and Africa Middle-East Europe: stable overall, with continued momentum in Eastern Europe but contrasted performance in Western Europe

Very strong performance across portfolio, with strong price/mix at +2.3%:

Strategic International Brands: +10%, strong growth driven by Martell, Jameson, Scotch, Gin and Champagne and very good price/mix effect (+5.9%) Strategic Local Brands: +11%, acceleration thanks to Seagram’s Indian whiskies (including positive pricing) Specialty Brands: +11% with very strong growth of Lillet, Monkey 47 and Altos Strategic Wines: -8%, due to implementation of value strategy and high comparison basis on Campo Viejo (+23% in H1 FY18.)

Q2 Sales were €2,798m, with +5.6% organic growth (+3.2% reported), following a Q1 that was enhanced by phasing and the comparison base.

H2 growth is expected to moderate due to Martell sustainable growth management, wholesaler inventory optimisation in USA and a commercial dispute in France and Germany.

________________________

1 PRO: Profit from Recurring Operations

2 Reported Group share

3 Based on average EUR/USD rates: 1.18 in 2018 vs. 1.13 in 2017

4 Guidance given to market on 29 August 2018 of organic PRO growth between +5% and +7%

5 CNY: Chinese New Year on 5 Feb 2019 vs. 16 Feb 2018; India: low comparison basis due to lapping highway ban in Q1 FY18

RESULTS

H1 FY19 PRO 6 was €1,654m, with organic growth of +12.8% and +10.6% reported. For full-year FY19, the FX impact on PRO is estimated at c. +€30m7.

The H1 organic PRO margin was up very significantly, by +148bps, thanks to:

very strong topline growth Gross margin expansion +71bps, partially favoured by earlier CNY improved pricing driven by Martell, Seagram’s Indian Whiskies, Chivas, Jameson and Perrier-Jouëtnegative mix impact due to acceleration of Seagram’s Indian Whiskies, although their margin is improvingCOGS inflationary pressure mostly offset by Operational excellence initiatives A&P: +5% with reduction in A&P ratio due to H1/H2 phasing Structure cost discipline: +5%.

H2 margin to be softer due to managing Martell growth sustainability, finished goods’ inventory optimisation in USA and A&P phasing.

The H1 FY19 corporate income tax rate on recurring items was c.25%; the rate is expected at c. 26% for full-year FY19.

Group share of Net PRO1was €1,105m, +11% reported vs. H1 FY18, thanks mainly to excellent improvement in PRO.

Group share of Net profit was €1,023m, -11% reported vs. H1 FY18, despite excellent improvement in PRO due to lapping positive non-recurring items in H1 FY18 (one-off Scotch bulk sale, tax reimbursement and re-evaluation of deferred tax pursuant to the USA tax reform.)

FREE CASH FLOW AND DEBT

Free Cash Flow was €585m, in decline vs. H1 FY18, due to positive non-recurring one-offs in H1 FY18.

Net debt decreased by €152m vs. H1 FY18 to €7,223m at 31 December 2018 despite the €93m increase in the dividend payment. The Net Debt/EBITDA ratio at average rates 8 was down significantly to 2.6x at 31 December 2018.

The average cost of debt was 3.8% for H1 FY19 and expected at c. 3.9% for full year FY19.

__________________________

6 PRO: Profit from Recurring Operations; A&P: Advertising & Promotional expenditure

7 Based on average FX rates projected on 24 January 2019, particularly a EUR/USD rate of 1.14

8 Based on average EUR/USD rates: 1.18 in 2018 vs. 1.13 in 2017

TRANSFORM & ACCELERATE 3-YEAR PLAN

“Transform & Accelerate” started in FY19 with the objective of embedding dynamic growth and improving operational leverage, in line with the objective of maximising long term value creation.

FY19-21 ambition:

+4% to +7% topline growth, leveraging key competitive advantages and consistent investment behind key priorities focus on pricing and building on operational excellence initiatives, with new plan aiming at delivering additional savings of €100m by FY21 strong A&P investment, maintained at c.16% of Sales, with careful arbitration to support must-win brands and markets while stimulating innovation discipline on Structure costs, investing in priorities while maintaining agile organisation, with growth below topline growth rates Operating leverage of c.50-60 bps, provided topline is in +4 to +7% bracket.

REMINDER OF FINANCIAL POLICY

progressively increase dividend distribution to c. 50% of Net profit from Recurring Operations by FY20 (NB FY18 dividend at 41%) commitment to active portfolio management and value-creating M&A while retaining investment grade rating.

As part of this communication, Alexandre Ricard, Chairman and Chief Executive Officer, declared,

“ H1 FY19, the first semester of our new Transform & Accelerate 3-year plan, was very strong.While enhanced by phasing, it confirms the acceleration of our growth, resulting from our long-term investment strategy.

For full year FY19, in an environment that remains uncertain, we aim to continue dynamic and diversified growth across our regions and brands. By the end of June 2019, we will have completed our operational excellence plan announced in 2016, delivering €200m of P&L savings one year ahead of plan.

We are increasing our guidance for FY19 organic growth in Profit from Recurring Operations to between +6% and +8% while improving operating leverage by c. 50bps. We will continue to roll out our strategic plan, focused on investing for sustainable and profitable long-term growth.”

All growth data specified in this press release refers to organic growth (at constant FX and Group structure), unless otherwise stated. Data may be subject to rounding.

A detailed presentation of H1 FY19 Sales and Results can be downloaded from our website: www.pernod-ricard.com

Audit procedures have been carried out on the half-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.

Profit from recurring operations

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

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 Period and Region

Note:

Bulk Spirits are allocated by Region according to the Regions’ weight in the Group

FY18 numbers restated for IFRS 15 norm as per Press Release 25 September 2018

Summary Consolidated Income Statement

Note:

FY18 numbers restated for IFRS 15 norm as per Press Release 25 September 2018

Profit from Recurring Operations by Region

Note:

Bulk Spirits are allocated by Region according to the Regions’ weight in the Group

FY18 numbers restated for IFRS 15 norm as per Press Release 25 September 2018

Foreign Exchange Impact

For full-year FY19, a positive FX impact on PRO of c. +€30m is expected 1

Notes:

Impact on PRO includes strategic hedging on Forex

1. Based on average FX rates for full FY 19 projected on 24 January 2019, particularly EUR/USD = 1.14

Sensitivity of profit and debt to EUR/USD exchange rate

Balance Sheet

Analysis of Working Capital Requirement

Net Debt

Change in Net Debt

Net Debt Maturity at 31 December 2018

[Missing charts are available on the original document and on  ]

Note: Available cash at end December 2018: €0.9bn in cash and €2.5bn syndicated credit not used (syndicated credit coming to maturity in June 2023)

Gross Debt after hedging at 31 December 2018 1

[Missing charts are available on the original document and on  ]

Natural debt hedging maintained: EUR/USD breakdown close to that of EBITDA

77% of Gross debt at fixed rates

1.  includes fair value and net foreign currency asset hedge derivatives

Bond details

Net Debt / EBITDA ratio evolution

Diluted EPS calculation

Upcoming Communications

View source version on businesswire.com:https://www.businesswire.com/news/home/20190206005832/en/

CONTACT: Julia Massies / VP, Investor Relations & Internal Audit +33 (0)1 41 00 41 07

Adam Ramjean / Investor Relations Manager +33 (0)1 41 00 41 59

Fabien Darrigues / External Communications Director +33 (0)1 41 00 44 86

Emmanuel Vouin / Press Relations Manager +33 (0)1 41 00 44 04

KEYWORD: UNITED STATES EUROPE NORTH AMERICA FRANCE NEW YORK

INDUSTRY KEYWORD: PROFESSIONAL SERVICES FINANCE RETAIL FOOD/BEVERAGE WINE & SPIRITS

SOURCE: Pernod Ricard

Copyright Business Wire 2019.

PUB: 02/07/2019 01:30 AM/DISC: 02/07/2019 01:30 AM

http://www.businesswire.com/news/home/20190206005832/en

AP RADIO
Update hourly