Published On 08/29/2019

2018/2019 full-year Sales and Results

EXCELLENT FY19, DEMONSTRATING CLEAR BUSINESS ACCELERATION:
 +6.0% ORGANIC SALES GROWTH (+5.3% REPORTED) 
+8.7% ORGANIC GROWTH IN PRO1(+9.5% REPORTED)
FY20 GUIDANCE: ORGANIC GROWTH IN PRO BETWEEN +5% AND +7%
FINANCIAL POLICY INFLECTION:
DIVIDEND INCREASED TO €3.12/SHARE (50% PAYOUT) FROM FY19
UP TO €1BN SHARE BUY-BACK PROGRAMME ACROSS FY20 AND FY21

 

SALES
Sales for FY19 totalled €9,182m, with very strong organic growth at +6.0% (+5.3% reported) and continued development of Must-win markets:
•    USA: Sell-out broadly in line with market2 and strengthening of route-to-market;
•    China: +21%, excellent performance thanks to continued strong dynamism of Martell and growth relays;
•    India: +20%, with continued expansion of Seagram’s Indian whiskies and Strategic International Brands;
•    Travel Retail: +6%, strong growth driven by all regions.
Regionally, FY19 Sales were driven mainly by Asia:
•    Americas: +2%, acceleration in Canada, strong growth in Latam and Sell-out broadly in line with market in USA, but Sales dampened by USA wholesaler inventory optimisation;    
•    Asia-Rest of World: +12%, strong acceleration driven mainly by China, India and Turkey and continued strong growth in Japan
•    Europe: +1%, slight growth in contrasted environment, with continued strong growth in Eastern Europe partly offset by Western Europe (difficult market in France and commercial disputes.)
Pernod Ricard continued to leverage its premium portfolio. There was strong growth across all key spirits categories:
•    Strategic International Brands: +7%, continued strong growth, notably on Jameson, with acceleration on Martell and Scotch, dampened by impact of USA wholesaler inventory management
•    Strategic Local Brands: +12%, acceleration driven by Seagram’s Indian Whiskies
•    Specialty Brands: +12%, continued strong momentum, particularly for Lillet, Altos, Monkey 47, Ultra premium Irish Whiskey range and Smooth Ambler
•    Strategic Wines: -5%, due to value strategy in UK and USA inventory management
•    Innovation: contributing c.25% of Group topline growth, in particular thanks to Martell Blue Swift, Chivas XV, Beefeater Pink, Lillet and Monkey 47
Q4 Sales were €1,994m, +5% organic growth (+7% reported), with the continuation of dynamic growth dampened by USA wholesaler inventory management.
 

1 PRO: Profit from Recurring Operations
2 Internal estimate of USA Spirits market growing +4.5%
 

RESULTS
FY19 PRO1 was €2,581m, with organic growth of +8.7% and +9.5% reported. The PRO margin expanded by +74bps organically (+108bps on a reported basis mainly due to positive FX of +€25m.)
Organic PRO  growth of +8.7%, the highest since FY12, was driven by:
•    Gross margin +7%, +39bps margin improvement vs. FY18 on an organic basis, thanks to:
•    strong pricing on Strategic brands of +2%
•    Cost of Goods headwinds offset by accelerated completion of Operation excellence FY16-20 roadmap, 1 year ahead of schedule
•    negative mix linked mainly to Seagram’s Indian whiskies and USA wholesaler inventory management.
•    A&P: +6%, increase broadly in line with Sales, with strong arbitration and focus behind strategic priorities (China and India in particular)
•    Structure: +4%, moderate increase in context of business acceleration, thanks to strong discipline and resource focus on key priorities.
The FY19 corporate income tax rate on recurring items was close to 26%, a slight increase vs. FY18 driven by profit increase in countries with higher tax rates.
Group share of Net PRO1 was €1,654m, +9.5% reported vs. FY18.
Group share of Net profit was €1,455m, -8% reported vs. FY18, a decrease driven mainly by one-off items in FY19 and an unfavourable basis of comparison (positive one-off effects in FY18.)

ACTIVE PORTFOLIO MANAGEMENT
Pernod Ricard continued to implement its M&A strategy during FY19:
•    leverage high-growth categories through Super-premium acquisitions:
•    Malfy, leveraging gin boom
•    strengthen key markets:
•    Rabbit Hole2 bourbon and TX3 American whiskey to reinforce USA footprint
•    develop new route-to-markets and geographies
•    distribution partnership with Domaines Barons de Rothschild (Lafitte) in China to boost Premium Business Unit on-trade route-to-market
•    JV with local partner in Myanmar to capture Emerging Middle Class opportunity
•    acquisition of Bodeboca platform to accelerate e-commerce capability
•    disposal of non-core assets
•    Argentinian wine portfolio
•    third-party distribution for Imperial (Korea)

1 PRO: Profit from Recurring Operations
2 majority stake, closing in FY20
3 agreement announced 5th August 2019

FREE CASH FLOW AND DEBT
Very strong cash performance continued, with Recurring FCF reaching €1,477m, +4% vs. FY18,  but Free Cash Flow decreasing to €1,366m, -5% vs. FY18, due to positive one-off items in FY18. This resulted in a Net debt decrease of -€342m to €6,620m.
The Net Debt/EBITDA ratio at average rates was 2.3  at 30 June 2019, down from 2.6 at 30 June 2018, with increased dividend and dynamic M&A.

FINANCIAL POLICY
Supported by continued strong cash generation and deleveraging, the financial policy has been updated.  The priorities, while retaining an investment grade rating, are:
1.    increased investment in future organic growth, in particular through strategic inventories and capex
2.    continued active portfolio management and value-creating M&A
3.    accelerated dividend distribution increase to c.50% payout from FY19
4.    up to €1bn share buy-back programme across FY20 and FY21
Accordingly, a dividend of €3.12 is proposed for the Annual General Meeting of 8 November 2019.
In addition to the increase in the dividend payout ratio, Pernod Ricard is further announcing its intention to implement a share buy-back programme for a maximum amount of €1bn.  This programme is due to be implemented over FY20 and FY21 and the shares acquired through this programme are due to be cancelled.    
This share buy-back programme will be implemented depending on market conditions. As a result, the timing, volumes and purchase price will be decided from time to time. Furthermore, Pernod Ricard may decide to suspend or terminate this programme at any time, without further notice or justification.
This buy-back programme is undertaken in the context of continued implementation of the Group’s strategic plan, in consistency with its financial policy priorities

As part of this communication, Alexandre Ricard, Chairman and Chief Executive Officer, declared, “FY19 was an excellent year, demonstrating clear business acceleration, while investing for long-term value creation.  Our PRO growth, at +8.7%, is our highest since FY12. For FY20, we will continue implementing our FY19-21 “Transform & Accelerate” plan, with increasing support for our priority brands, markets, strategic investments and Sustainability & Responsibility 2030 Roadmap. In a particularly uncertain environment, our guidance for FY20 is organic growth in PRO of between +5% and +7%.”
 

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About Pernod Ricard

Pernod Ricard is the No.2 worldwide producer of wines and spirits with consolidated sales of €9,182 million in FY19. Created in 1975 by the merger of Ricard and Pernod, the Group has developed through organic growth and acquisitions: Seagram (2001), Allied Domecq (2005) and Vin&Sprit (2008). Pernod Ricard, which owns 16 of the Top 100 Spirits Brands, holds one of the most prestigious and comprehensive brand portfolios in the industry, including: 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, Malibu liqueur, Mumm and Perrier-Jouët champagnes, as well Jacob’s Creek, Brancott Estate, Campo Viejo, and Kenwood wines. Pernod Ricard’s brands are distributed across 160+ markets and by its own salesforce in 73 markets. The Group’s decentralised organisation empowers its 19,000 employees to be true on-the-ground ambassadors of its vision of “Créateurs de Convivialité.” As reaffirmed by the Group’s three-year strategic plan, “Transform and Accelerate,” deployed in 2018, Pernod Ricard’s strategy focuses on investing in long-term, profitable growth for all stakeholders. The Group remains true to its three founding values: entrepreneurial spirit, mutual trust, and a strong sense of ethics. As illustrated by the 2030 roadmap supporting the United Nations Sustainable Development Goals (SDGs), “We bring good times from a good place.” In recognition of Pernod Ricard’s strong commitment to sustainable development and responsible consumption, it has received a Gold rating from Ecovadis and is ranked No. 1 in the beverage sector in Vigeo Eiris. Pernod Ricard is also a United Nation’s Global Compact LEAD company.
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
Tel: +33 (0)1 41 00 41 07

Adam RAMJEAN Investor Relations Manager
Tel: +33 (0)1 41 00 41 59

Fabien Darrigues External Communications Director
Tel: +33 (0)1 41 00 44 86

Alison DONOHOE Press Relations Manager
Tel: +33 (0)1 41 00 44 63

Emmanuel VOUIN Press Relations Manager
Tel: +33 (0)1 41 00 44 04