Slide 1: F18 Full Year Results Roadshow
F18 FULL YEAR RESULTS ROADSHOW 29 MAY 2018
Slide 2: Anand Kripalu, Managing Director & CEO
ANAND KRIPALU MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER
Slide 3: What we will cover today
WHAT WE WILL COVER TODAY FY18 REVIEW PROGRESS WE HAVE MADE ON OUR STRATEGIC PRIORITIES F18 FINANCIAL PERFORMANCE CONFIDENCE IN THE FUTURE 3
Slide 4: What we will cover today
WHAT WE WILL COVER TODAY FY18 REVIEW PROGRESS WE HAVE MADE ON OUR STRATEGIC PRIORITIES F18 FINANCIAL PERFORMANCE CONFIDENCE IN THE FUTURE 4
Slide 5: F18 - A year fraught with external headwinds
F18 - A YEAR FRAUGHT WITH EXTERNAL HEADWINDS Underlying* net sales Slowdown in economy due to demonetisation Up 1% Prestige & Above Supreme Court judgment on alcohol sale underlying* net sales and service near national and state highways Up 4% Gross margin 47.5% Effect of GST on input costs Up 465 b
Slide 6: What we will cover today
WHAT WE WILL COVER TODAY PROGRESS WE HAVE MADE ON OUR STRATEGIC PRIORITIES CONFIDENCE IN THE FUTURE 6
Slide 7: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer goods company in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 7
Slide 8: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer goods companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth ✓ Focus on Pre
Slide 9: Focus on Prestige & Above segment
Strengthen & accelerate core brands FOCUS ON PRESTIGE & ABOVE SEGMENT Consumer Focus brands prices* Affluent Luxury >2,000 Premium 1,000 – 2,000 Middle Prestige 400 - 850 Aspiring Popular < 350 *Average consumer prices in India, 750ml bottle, Consumer prices in rupees 9
Slide 10: By leveraging the following pillars
Strengthen & accelerate core brands BY LEVERAGING THE FOLLOWING PILLARS Invest in “Power Purpose-led marketing campaigns Innovation Brands” Up-weighted marketing investment by 18% in FY18 10
Slide 11: Invest in Power Brands - McDowell's No. 1 Yaari Jam
Strengthen & accelerate core brands INVEST IN “POWER BRANDS” - MCDOWELL’S NO. 1 – YAARI JAM No 1 Yaari Jam –a music platform in collaboration with Salim and Sulaiman Video 11
Slide 12: Purpose-led marketing campaigns - Signature Masterclass
Strengthen & accelerate core brands PURPOSE-LED MARKETING CAMPAIGNS - SIGNATURE MASTERCLASS BRINGING TO LIFE OUR BRAND PURPOSE IN POPULAR CULTURE EVENINGS OF INSPIRATION WITH MASTERS WHO CONVERTED THEIR PASSION TO A PAYCHECK 14 STORIES ACROSS A 14 CITY TOUR • North – 6 • West – 4 • East – 2 • South
Slide 13: Innovation - a new offering in rum segment
Strengthen & accelerate core brands INNOVATION – A NEW OFFERING IN RUM SEGMENT Launch activities Trials at mass on-premise outlets Brand building through “Hijack” In-shop display External visibility 13
Slide 14: Efforts to drive premiumization have resulted in growth
AND OUR EFFORTS TO DRIVE PREMIUMIZATION HAVE RESULTED IN 1% Net Sales FY16 P&A underlying NSV growth by quarter 30% Anticipated 45% 24% Demonetisation Highway ban RTM changes 25% 53% 20% 13% 14% 15% 12% 10% Popular P&A Others 9% 10% 5% Net Sales FY18 2% (7%) 0% (5%) (1%) 35% Q1F17 Q2F17 Q3F17 Q4F17
Slide 15: Fit for purpose operating model in Popular segment
FIT FOR PURPOSE OPERATING MODEL IN POPULAR SEGMENT Operating in Popular segment through franchise model in 13 states Popular segment in 9 states successfully franchised in FY18 Franchise income on track in FY18 Out of retained Popular business, the priority states grew net sales by 2% during FY18 15
Slide 16: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer goods companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 16
Slide 17: Route to consumer: key focus areas
Evolve route to consumer ROUTE TO CONSUMER: KEY FOCUS AREAS Leverage Digital as an engine Build extensive brand Direct consumer reach of growth imagery through events Collaborate with start-ups On-premise/off-premise channels Bespoke consumer winning Greater investment in digital activations media O
Slide 18: Digital as an engine of growth
Evolve route to consumer DIGITAL : AS AN ENGINE OF GROWTH Collaborate with START Higher spends on digital Party & Night-Life Key areas UPs to unlock growth media to get greater CONTENT eco-system opportunities REACH Identify & nurture start- Higher proportion of www.liveinstyle.com Outcome ups for s
Slide 19: Extensive brand imagery #JW Paint the World Black
Evolve route to consumer EXTENSIVE BRAND IMAGERY #JW PAINT THE WORLD BLACK 19
Slide 20: Extensive brand imagery #JW Paint the World Black
Evolve route to consumer EXTENSIVE BRAND IMAGERY #JW PAINT THE WORLD BLACK Johnnie Walker house - Mumbai 20
Slide 21: Direct consumer reach through events
Evolve route to consumer DIRECT CONSUMER REACH THROUGH EVENTS 21
Slide 22: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer goods companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 22
Slide 23: Driving productivity across all lines
Driving productivity DRIVING PRODUCTIVITY ACROSS ALL LINES Net Revenue • Efficient commercial spends Management Gross margin • Positive price / mix from P&A growth improvement • Tramlining and Brand Value Engineering +465 bps COGS • Manufacturing footprint optimisation • Efficiency in agency and poi
Slide 24: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer goods companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 24
Slide 25: Corporate citizenship
Corporate citizenship CORPORATE CITIZENSHIP Leadership role in shaping the regulatory landscape Highest compliance and governance standards Building thriving communities Alcohol in Society 25
Slide 26: Don't drink and drive campaigns
Corporate citizenship DON’T DRINK AND DRIVE CAMPAIGNS IRTE Event –Kolkata Traffic Police 26
Slide 27: Building thriving communities
Corporate citizenship BUILDING THRIVING COMMUNITIES ▪ 10 Water ATMs ▪ 10 Villages of Nagpur ▪ 150 Women Self Help Groups ▪ 12,500 litres/hour ▪ Rs. 5 for 20 litres ▪ Serving 1,14,608 people 27
Slide 28: Our strategic priorities
OUR STRATEGIC PRIORITIES To be one of the best performing, most trusted and respected consumer goods companies in India 5 Strategic Priorities Strengthen Drive Evolve route to Corporate Winning & accelerate productivity to consumer citizenship organization core brands invest in growth 28
Slide 29: Creating a winning organisation
Winning Organisation CREATING A WINNING ORGANISATION Automation and simplification across systems and processes Enhanced capabilities in Digital, Corporate Relations, Legal & Compliance Investment in talent & diversity Shared Service Centre Integration with Diageo 29
Slide 30: What we will cover today
WHAT WE WILL COVER TODAY FY18 REVIEW PROGRESS WE HAVE MADE ON OUR STRATEGIC PRIORITIES F18 FINANCIAL PERFORMANCE CONFIDENCE IN THE FUTURE 30
Slide 31: Sanjeev Churiwala, Executive Director & CFO
SANJEEV CHURIWALA EXECUTIVE DIRECTOR & CHIEF FINANCIAL OFFICER 29 MAY 2018
Slide 32: F18 - Delivery across all lines of the P&L
F18 – DELIVERY ACROSS ALL LINES OF THE P&L Underlying* net sales up 1% Prestige & Above underlying* net sales up 4% Gross margin expansion 465 bps EBITDA margin expansion 114 bps Interest cost reduction 29% Profit after tax 562 Cr EPS Rs. 38.7 per share, up 231% * Underlying movement excludes the on
Slide 33: Underlying net sales growth of 1%
UNDERLYING* NET SALES GROWTH OF 1% Reported net sales down 4% Rs Crore 46 (492) Underlying* net sales up 1% 8,548 269 8,170 (201) Impacted by highway ban, anticipated route to market changes F17 FY Customer claim in Operating model Volume Price/mix F18 FY Reported F17 changes Reported Reported net s
Slide 34: Gross profit growth of 6%, gross margin expansion of 465bps
GROSS PROFIT GROWTH OF 6%, GROSS MARGIN EXPANSION OF 465BPS Underlying* Gross margin up 294bps 42.9% 31bps 139bps 47.5% Rs Crore 202 3,881 46 (99) 3,663 69 F17 FY Customer claim in Operating model Increase in NSV Savings in COGS F18 FY Reported F17 changes Reported * Underlying movement excludes the
Slide 35: EBITDA growth of 5%, EBITDA margin expansion of 114bps
EBITDA GROWTH OF 5%, EBITDA MARGIN EXPANSION OF 114BPS; AS WE REINVEST IN OUR BRANDS 11.4% 465bps (185)bps (27)bps (138)bps 12.5% 218 (122) Rs Crore 7 (53) 1,021 971 Underlying* EBITDA margin broadly flat for the year driven by: ▪ One-off customer claim of Rs 46 cr. in F17 : 85 bps impact ▪ Higher o
Slide 36: PAT growth of 231%, PAT margin improvement of 489bps
PAT GROWTH OF 231%, PAT MARGIN IMPROVEMENT OF 489BPS 114bps 122bps (10)bps 112bps 393bps (242)bps 335 (194) Rs Crore 6.9% 562 2.0% 108 95 (3) 51 170 F17 FY EBITDA Other income Depreciation Interest cost Exceptional Tax F18 FY Reported saving items Reported 36
Slide 37: Further deleveraging the balance sheet
FURTHER DELEVERAGING THE BALANCE SHEET Net debt Interest Reduction of Rs. 807 Cr. Interest cost saving of Rs. 108 Cr. 8.8% Rs Crore 4,071 Rs Crore 369 7.3% 3,265 261 F17 FY F18 FY F17 FY F18 FY Long-Term credit rating upgrade to Maiden NCD issuance in December 2017 AA+ by CRISIL and ICRA Competitive
Slide 38: EPS on the right trajectory
EPS ON THE RIGHT TRAJECTORY EPS Rs/share (not annualized) Up 361% 38.7 # 14.5 10.2 11.7 10.5 9.3 8.4 5.7 3.0 4.3 (7.2) F16 FY F17 Q1 F17 Q2 F17 Q3 F17 Q4 F17 FY F18 Q1 F18 Q2 F18 Q3 F18 Q4 F18 FY 38
Slide 39: What we will cover today
WHAT WE WILL COVER TODAY F18 FINANCIAL PERFORMANCE CONFIDENCE IN THE FUTURE 39
Slide 40: Confidence in the future
CONFIDENCE IN THE FUTURE Attractive long term fundamentals Our evolution in line with the consumer landscape Progress and delivery of our strategy even while transforming the company 40
Slide 41: India's per capita consumption is one of the lowest in Asia Pacific
INDIA’S PER CAPITA CONSUMPTION IS ONE OF THE LOWEST IN ASIA PACIFIC Per capita volumes in select APAC countries 90 80 70 Per capita in litres 60 50 40 APAC 30 Average(21.8) 20 10 0 South Japan China Vietnam Thailand Hong Singapore Taiwan Philippines Sri Lanka Malaysia India Bhutan Korea Kong, China
Slide 42: Rising income levels are re-shaping the consumer landscape
RISING INCOME LEVELS ARE RE-SHAPING THE CONSUMER LANDSCAPE Annual income per households 2015 2025 • Globally travelled >10 Lakh Affluent 1% 4% • Seek luxury experiences 2% 12% 2 Lakh – • Brand conscious 10 Lakh Middle • Willingness to pay for value 23% 34% 0.9 Lakh – • Price conscious 2 Lakh Aspirin
Slide 43: Delivery of our strategy - all lines of our P&L moving in the right direction
DELIVERY OF OUR STRATEGY- ALL LINES OF OUR P&L ARE MOVING IN THE RIGHT DIRECTION Gross Margin PAT margin 48% 8% 7% 46% 6% 44% 5% EBITDA margin 4% 42% 3% 13% 2% 40% 12% 1% 38% 0% F16 F17 F18 11% F16 F17 F18 10% 9% A&P (% of Sales) EPS (Rs/share) 8% 10% 38.7 7% F16 F17 F18 9% 8% 11.7 8.4 7% F16 F17 F1
Slide 44: Diageo - Celebrating life, every day, everywhere
DIAGEO CELEBRATING LIFE, EVERY DAY, EVERYWHERE