VERY STRONG FY18:
+6.0% ORGANIC SALES GROWTH (-0.3% REPORTED)
+6.3% ORGANIC GROWTH IN PRO (-1.5% REPORTED)
FY19 GUIDANCE:
ORGANIC GROWTH IN PRO 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 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.)
Organic PRO 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 improving
' Operational 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 PRO1 was '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 2.6 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%.'
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