FY20 Half-year Sales and Results

Press Release 13/02/2020



Sales for H1 FY20 totalled '5,474m, with organic growth of +2.7% and reported growth of +5.6%, with a favourable FX impact linked to USD and Emerging market currency appreciation vs. Euro.

Pernod Ricard delivered solid results in a challenging environment, with broad-based growth:
'    Diversified growth across Regions, with robust performance of Must-win markets USA, India and China, further enhanced by earlier Chinese New Year 
'    Dynamic performance of Strategic International Brands, in particular Jameson, Martell, The Glenlivet, Malibu, Ballantine's, Royal Salute and Beefeater
'    Continued strong pricing: +2% on Strategic brands
'    Focus on operational excellence and resource allocation, driving strong organic improvement in PRO margin +51bps.

We continued to roll-out the Transform & Accelerate 3-year strategic plan:
'    Implementation of 2030 Sustainability & Responsibility roadmap
'    Launch of Reconquer project to resume growth in France and reorganisation of Wine business to reignite its performance
'    Active portfolio management: completion of TX, Rabbit Hole and Castle Brands acquisitions.

Sales growth was robust, with a very strong basis of comparison: +2.7% vs +7.8% in H1 FY19. The Must-win markets posted the following performance:
'    USA: +4%, good growth driven by Whiskies and Specialty brands
'    China: +11%, strong H1 on a high comparison basis (H1 FY19 +28%), enhanced by earlier Chinese New Year3
'    India: +5% good H1 in a volatile context, with a high basis of comparison (H1 FY19 +24%)
'    Travel Retail: robust Sell-out, but H1 FY20 impacted by shipment phasing.

There was diversified growth throughout the Regions:
'    Americas +2%: good growth in USA partially offset by weaker Mexican market and phasing in Travel Retail
'    Asia-RoW +3%: growth driven mainly by China and India, dampened by the transfer of Imperial Korea to a third-party distributor
'    Europe +3%: strong growth with improving trends, driven by Germany, UK and Eastern Europe acceleration, but difficulties remaining in France.

Q2 Sales were '2,991m, with +3.8% organic growth (+6.9% reported), following a soft Q1 FY20 (at +1%), and enhanced by earlier Chinese New Year.

H1 FY20 PRO was '1,788m, with organic growth of +4.3% and +8.1% reported. For full-year FY20, the FX impact on PRO is estimated at c. +'70m4.

The H1 organic PRO margin was up by +51bps, thanks to:
'    Strong pricing on Strategic brands: +2%
'    Gross margin in slight decline -15bps, following particularly strong H1 FY19 (+71bps):
       '    Positive impact of earlier Chinese New Year but negative mix of India
       '   Cost of Goods headwinds (in particular agave and grain neutral spirit (GNS) in India)
'    A&P: increase broadly in line with Sales, with strong arbitration and focus behind strategic priorities
'    Structure: -2% thanks to strong discipline and favourable phasing (growth expected for full-year FY20)
'    Positive FX impact of +'59m thanks mainly to USD (EUR/USD 1.11 in H1 FY20 vs. 1.15 in H1 FY19) and Emerging market currency appreciation vs. Euro

The H1 FY20 corporate income tax rate on recurring items was c.24%; the rate is expected at c. 25% for full-year FY20.

Group share of Net PRO was '1,216m, +10% reported vs. H1 FY19, thanks mainly to strong improvement in PRO.

Group share of Net profit was '1,032m, +1% reported vs. H1 FY19, despite strong improvement in PRO due mainly to non-recurring items.

Free Cash Flow was '570m, while increasing Capex and the ageing stock inventory build, as expected.

Net debt increased by '1,608m5 vs. 30 June 2019 to '8,228m at 31 December 2019 due mainly to increased M&A cash-out, an increased dividend payment and the start of the share buy-back programme  with '223m purchased in H1 FY20. In H2 FY20, the programme6 will continue, with a new clip of '300m maximum, to be executed by 30 June 2020.

The Net Debt/EBITDA ratio at average rates7 was 2.7x at 31 December 2019.

As part of this communication, Alexandre Ricard, Chairman and Chief Executive Officer, declared,  'H1 FY20 demonstrated solid growth and resilience of our business model. Our 3 year-plan Transform& Accelerate is driving success, as evidenced by the diversification of the sources of growth in terms of geographic footprint and categories, continued strong pricing and ultimately the improvement in operating leverage.  
Looking to H2 FY20, the environment remains particularly uncertain from a geopolitical standpoint, with the additional pressure related to the COVID-19 outbreak.  While we cannot currently predict the duration and extent of the impact, we remain confident in our strategy.  Our first priority is to ensure the safety and wellbeing of our employees and business partners. I would like to praise the exemplary behaviour of our teams during this difficult time.  We fully support their efforts, as well as those of the Chinese people and authorities to contain the epidemic.
Assuming a severe impact of COVID-19, mainly on Q3 FY20, we are at this stage providing a guidance of organic growth in Profit from Recurring Operations for full-year FY20 of +2% to +4% and will continue to closely monitor our environment.  We will stay the strategic course and maintain priority investments in order to continue maximising long-term value creation.'

  1 PRO: Profit from Recurring Operations
  2Guidance given to market on 29 August 2019 of organic PRO growth between +5% and +7%
  3Chinese New Year: 25 January 2020 vs. 5 February 2019
  4Based on average FX rates projected on 11 February 2020, particularly a EUR/USD rate of 1.11
  5Including '531m of lease liability, pursuant to implementation of IFRS16 norm
  6of up to '1bn over FY20 and FY21, announced on August 29th, 2019
  7Based on average EUR/USD rates: 1.12 in 2019


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 FY20 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.


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