Half-Year 2014/15 Sales & Results02/12/2015
GRADUAL IMPROVEMENT IN SALES VS. 2013/14
STABLE PROFIT FROM RECURRING OPERATIONS IN H1
2014/15 GUIDANCE CONFIRMED:
ORGANIC GROWTH IN PROFIT FROM RECURRING OPERATIONS
BETWEEN +1% AND +3%
Sales for the first semester of 2014/15 totalled €4,621m. Organic Sales growth was +1% (+2% when restated for later Chinese New Year1). Reported H1 Sales growth was +1% with a modestly positive FX impact on H1 (likely to significantly improve in H2).
This gradual improvement was driven regionally by:
• an improving trend in Asia-Rest of World (stable / +3% restated for CNY phasing vs. -4% in H1 2013/14), with a continued strong performance in India, Africa-Middle East and Travel Retail, and a gradual improvement of underlying trends in China vs FY 2013/14 (yet to be confirmed with upcoming CNY)
• growth in the Americas: +2% (vs. +3% in H1 2013/14) with a good performance in Brazil and Travel Retail but a challenging business environment in the US
• stable sales in Europe (vs. +4% in H1 2013/14), resulting from a slowdown in Eastern Europe (partly due to a technical impact in Poland), Germany and Travel Retail, but improving trend in Spain and UK.
In terms of categories, growth was driven by Whiskies (continued strong performance of Jameson, The Glenlivet, Ballantine’s and Indian whiskies) and also of champagnes Mumm and Perrier-Jouët, both in high single digit growth. Martell displayed an improving trend, with volumes up but Sales still declining due to unfavourable mix. Absolut was impacted by a challenging US market but grew outside the US.
The Top 14 returned to +2% volume growth driven by whiskies and champagnes, but Sales were flat (+2% restated for CNY phasing) due to broadly flat pricing in a more challenging and competitive global business environment and negative mix, largely driven by Martell (increasing weight of Noblige vs. Cordon Bleu/XO in China.)
Priority Premium Wines declined (-2%) due to Jacob’s Creek, despite the continued growth of Campo Viejo (strong momentum in UK).
The 18 Key Local Brands (+3%) reported strong volume growth +11% linked to the Indian whiskies, Passport and 100 Pipers, but unfavourable mix.
Q2 Organic Sales growth was -1% due to the negative impact of CNY phasing. Reported Q2 Sales were up +1%, due to a stronger USD, partly offset by weaker Rouble.
H1 Profit from Recurring Operations was flat at € 1,358 m (+2% restated for later CNY.) There was a small decline in Operating Margin (-22bps), driven by:
• Gross margin decline (-106 bps) due to stable pricing and negative mix from both geography (India growth vs. China decline) and quality (mix of Martell) and exacerbated by technical reasons (CNY phasing and high comparative basis on Cordon Bleu in H1 2013/14)
• slight reduction in A&P ratio to 17.7%, while increasing support for key innovation projects (Elyx, Tequila Avión)
• favourable impact of structure cost reduction (-3%), driven by Allegro. Structure costs are expected in slight decline for the full FY 2014/15.
FX impact on reported profit from recurring operations was +€2m (+0%) in H1 but is expected to be +€140m2 for the full year 2014/15.
The cost of debt was stable at 4.6% in H1 and is still expected to be close to 4.5% for the full FY 2014/15.
The corporate income tax rate on recurring items slightly decreased in H1 2014/15 to 25.3%. The full year 2014/15 tax rate still expected to be near 26%.
Reported group share of net profit from recurring operations was up +1%.
Reported Group share of net profit was down -5%, due to the variation in non-recurring items.
FREE CASH FLOW AND DEBT
Reported Free Cash Flow from recurring operations improved (€492m, +38%) due to tight working capital management.
Non-recurring Free Cash Flow items were -€90m in H1, mainly relating to the Allegro cash-out.
Net debt increased by +€681m to €9,034m mainly driven by a mechanical FX impact (+€517m due to variation of €/$ parity between 30 June 2014 @1.37 and 31 December 2014 @ 1.21.)
As part of this communication, Alexandre Ricard, Chairman and Chief Executive Officer, declared, “Our H1 results are solid and in line with the guidance given in October. Our Sales are gradually improving despite an environment that remains challenging. Heartened by this encouraging first semester, we confirm our full year guidance of growth in Profit from Recurring Operations between +1% and +3%. I am confident in the strength of our portfolio of premium brands and of our global network that support our three strategic growth pillars: premiumisation, expansion and innovation.”
About Pernod Ricard
Pernod Ricard is the world’s n°2 in wines and spirits with consolidated Sales of € 8,682 million in 2015/16. 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, Kahlúa and Malibu liqueurs, Mumm and Perrier- Jouët champagnes, as well Jacob’s Creek, Brancott Estate, Campo Viejo, Graffigna and Kenwood wines. Pernod Ricard employs a workforce of approximately 18,500 people and operates through a decentralised organisation, with 6 “Brand Companies” and 85 “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.
Contacts Pernod Ricard
Julia MASSIES / VP, Financial Communication & Investor Relations
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Adam RAMJEAN / Investor Relations Manager
Tel: +33 (0)1 41 00 42 14
Sylvie MACHENAUD / Director External Communications
Tel: +33 (0)1 41 00 42 74
Emmanuel VOUIN / Press Relations Manager
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Apolline CELEYRON / Press Relations Officer
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