Pernod Ricard Sa · EURONEXT:RI
Pernod Ricard Sa — Pernod Ricard S A — H1 2020 Earnings Presentation
64 slides from Pernod Ricard Sa's earnings presentation, Feb 13, 2020
Slide 1: 2019/20 Half-Year Sales and Results
Pernod Ricard Créatecurs de Comivialité 2019/20 HALF-YEAR SALES aNe RESULTS * 4 e 13 February 2020 All growth data specified in this preser:tation refers to ofganic growth (constant FX and Group structure), unless otherwise stated, Data may be subject to rounding. This presentation can be downloaded
Slide 2: Executive Summary / Agenda
24 27 32 36 40 43 Executive Summary Sales Analysis Sustainability & Responsability Profit from Recurring Operations Net Profit Cash Flow and Debt Conclusion and Outlook Appendices a 3% Pernod Ricard Créateurs de cor
Slide 3: Executive Summary
Pernod Ricard ‘a omVviaité
Slide 4: Solid H1 FY20 on high basis of comparison
Solid H1 FY20 on high basis of comparison Solid results in challenging environment, with broad-based growth: 4+2.7% Organic Sales + Diversified growth across Regions and brands: > Robust performance of Must-win markets USA, India and China, further enhanced by earlier Chinese New Yeart » Dynamic per
Slide 5: Key Figures
Key Figures H1 FY20 H1 FY20 (€m) vs. H1 FY19 Reported Organic Sales 5,474 +5.6% +2.7% Mature markets 3,008 +4% +1% Emerging markets 2,466 +8% +5% PRO 1,788 +8.1% +4,3% PRO / Sales 32.7% +75bps +5ibps Net Profit from Recurring Operations! 1,216 +10% Net Profit! 1,032 +1% Recurring Free Cash Flow 627
Slide 6: Robust Sales growth, with very strong basis of comparison
Robust Sales growth, with very strong basis of comparison: +2.7% vs +7.8% in H1 FY19 1 USA: +4 China: Year (ood growth driven by Whiskies and Specialty brands of) strong H1 on high comparison basis (H1 FY19 +28%), enhanced by earlier Chinese New India: +5% good H1 in volatile context, with high basi
Slide 7: Sales Analysis by market
Slide 8: Organic Sales growth by Region
Organic Sales growth by Region Diversified Sales growth on high basis of comparison Good growth in USA, partially offset by weaker Mexican market and phasing in Travel Retail Strong growth in China and India, against high basis of comparison, dampened by transfer of Imperial Korea to third-party dis
Slide 9: USA: Good growth driven by Whiskies and Specialty brands
USA: Good growth driven by Whiskies and Specialty brands + Star: + Jameson (+3%/+8%): mod tion linked to Jameson Caskm Strong initiatives in H2 to re elerate with launch of Jarr on Cold Brew, c raphic expansion in key markets like Texas and Florida and expan: 1s with increased focus on summer + Grow
Slide 10: Sales in China
+11% Sales in China ee Aan —y <a v4 \e FY20 4 Must-win markets China: strong growth +11% Transform & Accelerate FY19-21 ambition: High-Single to Low-Double-Digit growth Strong H1 FY20 growth on high comparison basis (H1 FY19 +28%) + Good Sell-in ahead of Chinese New Year, enhanced by earlier timing
Slide 11: China: building on government measures and emergency actions
13 February Gnalysis China: building on government measures and implementing emergency actions to support employees Pernod Ricard Créateurs de comivialite 11
Slide 12: Royal Stag, Absolut and Pipers limited editions and campaigns
ROYAL STAG LIMITED EDITION PACKS ABSOLUT 100 PIPERS LIMITED EDITION BORN COLOURLESS CAMPAIGN PACKS | LEGACY PROJECT • • • •
Slide 13: Launch of Jameson Triple Triple, Secret Speyside, Martell CB CNY
Launch of Jameson Triple Triple Launch of Secret Speyside single malts Martell CB CNY limited edition • • • • •
Slide 14: Europe
Europe Strong broad-based growth in contrasted environment France: -1% due to phasing but Sell-out at -6%1 * Market still challenging (-4%'), compounded by EGAlim law with particular pressure on Whiskies, Aniseed and Champagne categories + Double-digit performance for growth relays Absolut and Beefe
Slide 15: Other key markets
Sales analysis Other key markets Americas Canada: stable Good growth of Jameson Positive price/mix on Strategic brands Brazil Dynamic growth, thanks in particular to Beefeater, Ballantine’s and Chivas Regal Mexico Decline due to destocking, in difficult macroeconomic context Imported premium spirits
Slide 16: Sales Analysis by brand
Slide 17: Innovation and pricing on Strategic brands
Innovation: contributing c.1/3 of Group topline growth Pricing on Strategic brands: +2%
Slide 18: Launch of Martell Chanteloup XXO
Launch of Martell Chanteloup XXO The second episode of Martell Home Live Martell Millésime 1898, a unique bespoke creation for the annual takes place in Singapore DFS Master of Wine and Spirits exhibition • • • • •
Slide 19: Jameson distillery world tour and Cold Brew launch
Jameson distillery world tour Jameson launches Cold Brew, inspired by the classic Jameson Distillery Bow St. named World’s Leading combination of Irish whiskey and coffee Distillery Tour at World Travel Awards for the second year in a row • • • • • • • •
Slide 20: The Glenlivet, Chivas and Ballantine's campaigns
Global campaign celebrates The Glenlivet’s Chivas brings together a mix of players from Manchester United Ballantine’s 5th Anniversary of Real Music with Boiler Room history of breaking tradition to celebrate its second year as the club’s official spirits partner • • • •
Slide 21: Absolut Comeback, Extrakt and Colourless campaigns
Absolut Comeback limited Absolut Extrakt (France): Nothing but Absolut (Germany), inspiring people to show Absolut Colourless (India), to inspire people to look beyond the edition with >41% recycled glass Swedish shot by nature their true selves simplicity of assessing others based on the colour of
Slide 22: Sales analysis by brand
Sales analysis Beefeater: +12%, g' improvement no lat image: Beefeater Blackberry innovation Havana Club: +6%, growth ac mmercial disputes, and good price/mix rmany image: Havana Club x Arise Arise, mult-media project on drag and trans communities in Havana Malibu: +13%, g} return to growth € ouble-
Slide 23: Market data notes
1. Nielsen 52wk value data ended 25 January 2020 / Nabca 52wk value data ended 31 December 2019 2. Nielsen 52wk value data ended 31 December 2019
Slide 24: Sustainability & Responsibility
en 7 3 y i} & RESPONSIBILITY di Dernoall Ricar a’ Créatorad Ge Geornialtg)
Slide 25: Sustainability & Responsibility: 2030 Strategy Goals
Sustainability & Responsibility 2030 Strategy: Our Goals sy Equality & future leadership Water balance and carbon Equal pay (2022) 100% water balanced in high-risk countries (2030) Gender balanced top management (2030) 50% reduction in carbon intensity (2030) in line with SBTs Employee future-fit tr
Slide 26: 2030 Strategy: making significant progress
Sustainability & Responsibility 2030 Strategy: making significant progress Valuing PEOPLE Circular MAKING Glob compact @ LEAD <q A Strong recognition LEAD status United Nations Global Compact (2"4 year) + One of Fortune Magazine’s Most Admired Companies High level of employee engagement 88% of emplo
Slide 27: Profit from Recurring Operations
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Slide 28: Group Profit from Recurring Operations
• • ➢ ➢ • • • • 1. Including customs duties 2. Including OIE and Royalties 3. Chinese New Year: 25 January 2020 vs. 5 February 2019
Slide 29: Profit from Recurring Operations bridge
• • • • 1. Including OIE and Royalties; Headquarters, Regional headquarters and Brand company costs reallocated in proportion to CAAP
Slide 30: Gross margin and A&P analysis
• • • • 1. Including customs duties 2. Including OIE and Royalties; Headquarters, Regional headquarters and Brand company costs reallocated in proportion to CAAP 3. Chinese New Year: 25 January 2020 vs. 5 February 2019
Slide 31: Europe
Europe € milli j organic mend HIFYI9 -H1F¥20 «= Teported = organic impact on PRO Sales 1,530 1,598 +4% +3% GM 944 991 45% +4% ASP (214) (216) 41% Stable CAAP 730 175 +6% +5% Structure! (312) (306) 2% 3% PRO 418 468 +12% +10% + Gross margin expansion at +39bps thanks mainly to pricing and country mix
Slide 32: Net Profit
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Slide 33: Double-digit EPS growth
Double-digit EPS growth € millions Hi FY19 Hi FY20 reported Profit from Recurring Operations 1,654 1,788 +8.1% Financial income (expense) from (157) (164) recurring operations Income tax on recurring operations (379) (392) Minority interests and other (13) (15) Group share of Net Profit from Recurri
Slide 34: Net profit table
(€ millions) H1 FY19 H1 FY20 • •
Slide 35: Group share of Net profit
Group share of Net profit € millions H1 FY19 Hi FY20 reported Profit from Recurring Operations 1,654 1,788 +8.1% Non-recurring operating income and expenses (66) (152) Operating profit 1,588 1,636 +3% Financial income (expense) (156) (166) Corporate income tax (397) (423) Non-controlling interests a
Slide 36: Cash Flow & Debt
Slide 37: Cash Flow statement
Cash Flow statement € millions HIFY19 -HiFy20° —*ePorted if Profit from Recurring Operations “!) 1,654 1,788 +134 48.1% Amortisation, depreciation, provision movements and other aot iis oe Self-financing capacity from recurring Seerations 1,756 1,962 +206 +12% Decrease/(increase) in strategic stocks
Slide 38: Free Cash Flow of €570m with strong increase in PRO and strategic investments
Free Cash Flow of €570m with strong increase in PRO and strategic investments Recurring Free Cash Flow at €627m, +€5m vs. H1 FY19 + Strong Profit from Recurring Operations: +8.1% + Increase in strategic investments, as expected: -€84m + Ageing inventory build, driven mainly by whiskies and cognac to
Slide 39: Net Debt and Leverage
Net Debt € millions Leverage Net Debt / EBITDA 2.3 2.7 +1,608 30 June 2019 FCF Share buyback, Dividends Lease Translation 31 Dec 2019 M&A and Liability adjustment other (IFRS16) & others • • • • • •
Slide 40: Conclusion and Outlook
Pernod Ricard Créaleurs de comivialité
Slide 41: COVID-19 assumptions
oO) 7 = 5 O Results COVID-19 Current assumptions for impact on FY20 China + On-trade + Alloutlets closed in February, and till end of June in Hubei province + Gradual recovery starting from March, back to normal by June + Off-trade + Significant impact on Traditional and Modern outlets in late Janua
Slide 42: Conclusion and FY20 guidance
1 c te U? a .S) e O O H1 FY20 Sale: ruc rh e) O rs ~) O Ww Solid H1 FY20, with broad-based growth, demonstrating business resilience, on very high basis of comparison For full-year FY20, in particularly uncertain environment, Pernod Ricard expects: + Continued execution of Transform & Accelerate str
Slide 43: Appendices
\\ Ws SSS WR i @Qows H1 FY20 Sales & Results 13 Febru
Slide 44: Definitions and reconciliation of non-IFRS measures
Appendices Definitions and reconciliation of non-IFRS measures to IFRS measures Pernod Ricard’s management ' progess is based on the Jonas non-! measures which are chosen for planning and S ort e The Group’s management believes these measures provide valugble additional information, for users of the
Slide 45: Upcoming communications
Upcoming communications Date? Event Tuesday 10 March 2020 North America conference call Thursday 23 April 2020 Q3 FY20 Sales Tuesday 26 May 2020 Sustainability & Responsibility conference call 1. Dates are indicative and liable to change 13 February 2020 Créateurs de comivialité
Slide 46: Market classification by region
Asia-Rest of World Americas Europe Algeria Mongolia Argentina Albania Angola Morocco Bolivia Armenia Cambodia Mozambique Brazil Azerbaijan Cameroon Myanmar Caribbean Belarus China Namibia Chile Bosnia Congo Nigeria Colombia Bulgaria Egypt Persian Gulf Costa Rica Croatia Ethiopia Philippines Cuba Geo
Slide 47: Volumes H1 FY20
Volumes H1 FY20 Organic Sales growth Volumes Price/mix H1 FY20 (in 9Lcs millions) Absolut 6.3 -1% 1% -2% Chivas Regal 2.6 -2% -3% 1% Ballantine's 4.4 5% 3% 1% Ricard 2.4 -5% -5% 0% Jameson 4.6 9% 9% 0% Havana Club 2.5 6% 0% 6% Malibu 2.0 13% 9% 4% Beefeater 1.9 12% 13% -1% Martell 1.6 4% -3% 8% The
Slide 48: Net Sales by region
Net Sales H1 FY19 H1 FY20 Change Organic Growth Group Structure Forex impact (€ millions) Americas 1,389 26.8% 1,461 26.7% 72 5% 22 2% 15 1% 35 2% Asia / Rest of World 2,266 43.7% 2,415 44.1% 149 7% 68 3% 16 1% 64 3% Europe 1,530 29.5% 1,598 29.2% 69 4% 47 3% 7 0% 14 1% World 5,185 100.0% 5,474 100.
Slide 49: Consolidated profit and loss account
(€ millions) H1 FY19 H1 FY20 Change Net sales 5,185 5,474 6% Gross Margin after logistics costs 3,239 3,419 6% Advertis i ng a nd promotion expens es (799) (842) 5% Contribution after A&P expenditure 2,440 2,577 6% Structure cos ts (786) (789) 0% Profit from recurring operations 1,654 1,788 8% Fi na
Slide 50: World and Americas results
World (€ millions) H1 FY19 H1 FY20 Change Organic Growth Group Structure Forex impact Net sales (Excl. T&D) 5,185 100.0% 5,474 100.0% 289 6% 137 3% 39 1% 113 2% Gross margin after logistics costs 3,239 62.5% 3,419 62.5% 180 6% 78 2% 20 1% 82 3% Advertising & promotion (799) 15.4% (842) 15.4% (43) 5%
Slide 51: Asia / Rest of the World and Europe results
Asia / Rest of the World (€ millions) H1 FY19 H1 FY20 Change Organic Growth Group Structure Forex impact Net sales (Excl. T&D) 2,266 100.0% 2,415 100.0% 149 7% 68 3% 16 1% 64 3% Gross margin after logistics costs 1,353 59.7% 1,442 59.7% 89 7% 38 3% 6 0% 45 3% Advertising & promotion (309) 13.6% (341
Slide 52: Average rates evolution and forex impact
Average rates evolution On Profit from Forex impact H1 FY20 On Net Sales Recurring (€ millions) H1 FY19 H1 FY20 % Operations US dollar USD 1.15 1.11 -3.7% 50 29 Chinese yuan CNY 7.91 7.80 -1.3% 8 6 Indian rupee INR 81.93 78.59 -4.1% 25 8 Russian rouble RUB 76.13 71.19 -6.5% 10 8 Other 20 7 Total 113
Slide 53: Estimated impact of a 1% appreciation of the USD
Estimated impact of a 1% appreciation of the USD and linked currencies (1) Impact on the income statement (2) (€ millions) Profit from recurring operations 15 Financial expenses (1) Pre-tax profit from recurring operations 14 Impact on the balance sheet (€ millions) Increase/(decrease) in net debt +
Slide 54: Assets
Assets 30/06/2019 31/12/2019 (€ millions) (Net book value) Non-current assets Intangi bl e a s s ets a nd goodwi l l 17,074 17,640 Ta ngi bl e a s s ets a nd other a s s ets 4,002 3,626 Deferred tax a s s ets 1,590 1,615 Total non-current assets 22,665 22,882 Current assets Inventori es 5,756 6,046
Slide 55: Liabilities and shareholders' equity
Liabilities and shareholders’ equity 30/06/2019 31/12/2019 (€ millions) restated* Group Shareholders’ equity 15,987 15,687 Non-control l i ng i nteres ts 195 220 of which profit attributable to non-controlling interests 27 12 Total Shareholders’ equity 16,182 15,907 Non-current provi s i ons a nd de
Slide 56: Working capital
June December June December H1 FY19 WC H1 FY20 WC (€ millions) 2018 2018 2019 2019 change* change* Aged work i n progres s 4,532 4,581 4,788 5,047 64 123 Adva nces to s uppl i ers for wi ne a nd a gei ng s pi ri ts 10 29 12 13 19 1 Pa ya bl es on wi ne a nd a gei ng s pi ri ts (96) (172) (105) (182)
Slide 57: Net financial debt
30/06/2019 31/12/2019 (€ millions) Current Non-current Total Current Non-current Total Bonds 944 6,071 7,015 948 7,618 8,566 Syndicated loan - - - - - - Commercial paper - - - - - - Other loans and long-term debts 177 363 540 226 81 307 Other financial liabilities 177 363 540 226 81 307 Gross Financ
Slide 58: Cash flow reconciliation
(€ millions) 31/12/2018 31/12/2019 Opera ting profi t 1,588 1,636 Depreci a tion a nd a mortis a tion 111 174 Net cha nge i n i mpa i rment of goodwi l l , PPE a nd i ntangi bl e a s s ets 26 8 Net cha nge i n provi s i ons 4 75 Retrea tment of contri butions to pens i on pl a ns a cqui red from Al
Slide 59: Debt maturity profile
1.5 1.0 0.3 1.3 1.1 1.1 0.5 1.0 0.9 0.8 0.7 0.7 0.5 0.5 0.0 0.0 0.0 0.0 19/20 20/21 21/22 22/23 23/24 24/25 25/26 … 27/28 … 30/31 31/32 … 41/42 -0.5 Cash Other debts Commercial paper -1.2 Bonds Syndicated credit -1.0 • •
Slide 60: Bond details
Hi FY20 Sales & Results 13 February 2020 . Bond Details 2.000% 20/03/2014 22/06/2020 €650m 2.125% 29/09/2014 27/09/2024 EUR 1.500% 17/05/2016 18/05/2026 CALLIN 24/10/2019 0.51 $1,500 m 4.450% 25/10/2011 15/01/2022 12/01/2012 $201 m Libor 6m + spread 26/01/2016 26/01/2021 v ae Pernod Ricard Créateurs
Slide 61: Leverage ratio and FX rates
(1) Closing rate Average rate EUR/USD rate Jun FY19 -> Dec FY20 1.14 -> 1.12 1.14 -> 1.12 Ratio at 30/06/2019 2.3 2.3 EBITDA & cash generation excl. Group structure effect and forex impacts 0.1 0.1 Group structure(2) and forex impacts 0.2 0.3 Ratio at 31/12/2019 2.7 2.7 (3) (1) Last-twelve-month rat
Slide 62: Shares and diluted EPS calculation
(x 1,000) H1 FY19 H1 FY20 Number of shares in issue at end of period 265,422 265,422 Weighted average number of shares in issue (pro rata temporis) 265,422 265,422 Weighted average number of treasury shares (pro rata temporis) (1,215) (1,462) Dilutive impact of stock options and performance shares 1
Slide 63: United Nations Global Compact 'Lead' Company
United Nations Global Compact ‘Lead’ Company « Only Wine & Spirits company « One of only 32 companies worldwide recognised as LEAD « Highest level of engagement including involvement in 2 action platform working groups - reporting on the UN SDGs and decent work in the supply chain oe”, Global Compac
Slide 64: ESG Ratings
H1 FY20 Sales & Results 13 February 2020 ESG Ratings vi ee OCQBiris Ranked #1/39, in the Beverage industry Inclusion in Vigeo’s 2 indices Prime rated by oekom rle|s|elalrc h Among 7.3% companies that classify as Prime (out of 178) ecoYadis SUPPLIER SUSTAINABILITY RATINGS > Gold Recognition 2018 leve