Market Overview

Rémy Cointreau: 2017/18 Consolidated Annual Results

Share:

(April 2017 – March 2018)

Excellent annual performance

Current Operating Profit grows 14.1%*

Higher targets set for 2019/20 objectives

Regulatory News:

On 31 March 2018, sales for the Rémy Cointreau Group (Paris:RCO) totaled
€1,127.0 million, representing reported growth of 2.9%. In organic terms
(at constant exchange rates and scope), growth accelerated to 7.2%,
thanks to a remarkable performance of the Group Brands (+9.2%).

In organic terms, the Current Operating Profit grew 14.1% and the
Current Operating Margin reached
22.0% (up 1.3 points). The
notable improvement in the profitability of the Group can be attributed
to a healthy increase in the gross margin, fueled by the excellent
performance of our exceptional spirits (> USD50) and a controlled
increase in overheads. It also includes a significant increase in our
communication investments (+9.1% for Group Brands). Adjusting for
unfavorable currency and scope effects, the COP grew 4.7%.

Excluding non-recurring items, net profit was €151.3 million, an
increase of 12.0% (+22.0% in organic terms).
Consolidated net profit
(Group share) was €148.2 million, down -22.1% (net profit from last year
included non-recurring gains amounting to €65.0M).

Key figures

(€ millions)   at 31 March 2018   at 31 March 2017   Change
    Reported   Reported   Reported   Organic(*)
Sales 1,127.0 1,094.9 2.9%   +7.2%
Current Operating Profit 236.8 226.1 +4.7% +14.1%
Current Operating Margin 21.0% 20.7% +0.3pt +1.3pts
Net profit (Group share) 148.2 190.3 (22.1%) (15.0%)
Net profit excluding non-recurring items 151.3 135.0 +12.0% +22.0%
Net margin excluding non-recurring items 13.4% 12.3% +1.1pts +1.7pts
EPS (Group share) 2.98 3.87 (23.1%) -
EPS excluding non-recurring items 3.04 2.75 +10.6% -
Net debt/EBITDA ratio   1.48   1.78   (0.30)   -
 

Current Operating Profit by division

(€ millions)   at 31 March 2018   at 31 March 2017   Change
    Reported   Reported   Reported

 

Organic(*)

House of Rémy Martin 204.4 185.2 +10.4% +18.8%
as % of sales 26.9% 26.2% +0.7pt +1.3pts
Liqueurs & Spirits 42.8 57.5 (25.5%) (16.4%)
as % of sales 16.1% 20.8% -4.7pts -3.2pts
Sub-total Group brands 247.2 242.7 +1.9% +10.4%
as % of sales 24.1% 24.7% -0.6pt +0.2pt
Partner brands 5.3 2.0 +163.2% +175.7%
as % of sales   5.3%   1.8%   +3.5pts   +3.8pts
Holding company costs   (15.7)   (18.6)   (15.5%)   (15.5%)
Total 236.8 226.1 +4.7% +14.1%
as % of sales   21.0%   20.7%   +0.3pt   +1.3pts
 

The House of Rémy Martin

The accelerated organic sales growth of The House of Rémy Martin
(+13.2%*) in 2017/18 was driven by the excellent performance of the
Asia-Pacific region, notably Greater China, Singapore, and Japan. The
United States, Russia, and Travel Retail also contributed to the strong
momentum of the House.

This year's performance results from the brand-upscaling strategy
expressed through several initiatives of the House: Rémy Martin XO
benefited from significant media investments behind its "One Life/Life
Them" campaign, as well as communication activities and "on-trade"
events to recreate XO at the heart of the "Celebration." LOUIS XIII
continued to invest in strengthening the notoriety of the brand and
developing closer relationships with clients. The second opus of the
"100 years" campaign was a great success and a second boutique (in
London) was opened during the year. These initiatives will allow LOUIS
XIII to offer unique and personalized experiences to its clients, and to
nourish an innovative CRM program.

The Current Operating Profit amounted to €204.4 million, up 18.8%
in organic terms and the operating margin stood at 26.9%, an organic
increase of 1.3 points (+0.7 point in reported terms). Very favorable
mix and price effects largely offset a significant increase in
communication investments and strengthened distribution costs dedicated
to the upmarket qualities of the House of Rémy Martin.

Liqueurs & Spirits

The division posted a decline of 1.0%* during the year. Excluding the
deconsolidation of Passoã (a brand managed by a joint venture under the
control of Lucas Bols since December 2016), sales of Liqueurs & Spirits
were up 4% in organic terms over the period.

The Current Operating Profit totaled €42.8 million, an
organic decline of 16.4%. This can be explained by an acceleration of
investments in communication (notably the new campaigns for Cointreau
and Metaxa), as well as the deconsolidation of Passoã during the year.

The current operating margin recorded by the Liqueurs & Spirits division
was 16.1% at the end of March, down -3.2 points organically. In reported
terms, the decline was -4.7 points, resulting from negative currency and
scope effects (Westland distilleries and Domaine des Hautes Glaces,
acquired at an early stage in their development, negatively contributed
to the COP of the division, which is in line with strategic plans).

Partner Brands

The fall in sales can be attributed to changes in the portfolio of
distributed brands. Sales of Passoã, now partially distributed by Rémy
Cointreau on behalf of the joint venture, did not compensate for the
termination of a number of third-party distribution contracts.

The Current Operating Profit grew to €5.3 million.

Consolidated results

The Current Operating Profit amounted to €236.8 million,
representing organic growth of 14.1%. The reported growth (+4.7%)
also includes a negative currency effect of €18.5 million (impact of
currency hedges) and a loss of €2.6 million, corresponding to the scope
effect of the two Single Malt whisky brands acquired in January 2017.

As a result, the current operating margin grew 0.3 point to 21.0% (+1.3
points in organic terms).

Operating profit was €223.1 million, after accounting for
a net non-recurring expense of €13.7 million, which is composed of a 11.8M
write-off of intangible assets related to Mount Gay and a charge of 1.9M
primarily associated with the costs of reorganizing the distribution
network.

Net financial expenses amounted to €22.0 million, an
improvement of €9.9 million over the year. This is primarily the result
of a reduction in the costs of the gross financial debt, thanks to a
partial refinancing of the Group's debt under very favorable conditions
in September 2016. Additionally, the foreign exchange result (a
valuation of the portfolio of hedging instruments according to IFRS
standards), which is volatile by nature, improved by 2.5m.

The income tax charge was €53.5 million, aided by non-recurring
items of €10.5m (including the impact of announced tax rate declines on
deferred taxes in France and in the United States, and reimbursement of
the taxes paid on cash dividends over the last 3 years). Adjusted for
these items, the effective tax rate was 29.7%, a lower rate
compared to March 2017 (30.7%), thanks to a favorable geographic mix.

The share in profits of associates was a gain of €0.5 million.

The net profit (Group share) therefore reached €148.2 million,
down 22.1%. The net profit recorded in the previous year incorporated a
gain of 65.0m, which is linked to a contribution transaction
carried out during the creation of the Passoã joint venture (in return,
a financial asset was recorded on the Rémy Cointreau Group's balance
sheet).

Excluding non-recurring items (+€3.1 million), the net profit (Group
share)
was €151.3 million, up 12.0% (+22.0% in organic terms)
and the net margin showed an increase of 1.1 points to 13.4% (+1.7
points in organic terms). Net earnings per share (excluding
non-recurring items) reached €3.04
(+10.6%).

Net debt totaled €282.8 million at 31 March 2018, a
reduction of €107.3 million over the financial year, due to strong
recurring free cash flow growth (up 54%), which largely offset the share
buyback program and the increase in dividend payments.

Therefore, the "net debt/EBITDA" ratio markedly
improved to 1.48
at the end of March 2018 versus 1.78 at the end of
March 2017.

The return on capital employed (ROCE) reached 21.9% at 31
March 2018, representing a healthy increase of 0.7 point over the
financial year (up 2.5 points in organic terms).

A dividend of 1.65 euro per share (unchanged compared to the
prior year) shall be put to a shareholders' vote at the general meeting
on 24 July 2018. Payment will be with an option in cash or in shares for
the entire dividend distributed.

Outlook

Due to its unique business model and its portfolio of exceptional
spirits, the Rémy Cointreau Group pursues its long-term strategy of
focusing on its high-end products, founded on the excellence of
terroirs, the mastery of savoir-faire and the importance of time.

On the heels of a strong rise in profitability in 2017/18 (1.3 points in
organic terms), the Rémy Cointreau Group revises its target to
increase the Current Operating Margin
over the three-year period
ending March 2020. For the financial years 2017/18, 2018/19, and
2019/20, Rémy Cointreau now anticipates a cumulative increase of
2.4-3.0 points
(compared with the target of +0.8-1.8 points set last
year), at constant exchange rates and scope.

For 2018/19, Rémy Cointreau anticipates another year of growth
in its Current Operating Profit, at constant exchange rates and scope
.

Definitions of alternative performance measures

Rémy Cointreau's management process is based on the following
alternative performance measures, chosen for scheduling and reporting.
The Group's management believes that these measures provide useful
additional information for users of financial statements to understand
the Group's performance. These alternative performance measures must be
considered complementary to those shown in the consolidated financial
statements and the transactions resulting from them.

Organic growth in sales and in Current Operating Profit (COP)

Organic growth is calculated by excluding the impacts of exchange
rate fluctuations in addition to acquisitions and disposals. This
measure emphasizes the Group's performance over the two financial years,
a performance that local management is able to influence more directly.

The impact of exchange rates is calculated by converting the sales
and the Current Operating Profit for the current financial year into
average exchange rates (or into the hedged exchange rate for the Current
Operating Profit) for the previous financial year.

For the current financial year's acquisitions, the sales and the
Current Operating Profit of the acquired entity are excluded from the
organic growth calculations. For the previous financial year's
acquisitions, the sales and Current Operating Profit of the acquired
entity are included in the previous financial year, but are only
included in the calculation of the organic growth over the current
financial year from the anniversary date of acquisition.

In the event of a major disposal, the data is used after applying
IFRS 5 (which systematically reclassifies the assigned entity's results
as "net profit from discontinued operations" for the current financial
year and the previous financial year).

The "excluding non-recurring items" measures

The 2 measures referred to below correspond to key indicators for
measuring recurring business performance, by excluding significant items
which, due to their nature and non-habitual character, cannot be
considered as inherent to the Group's current performance:

  • Current Operating Profit: Current Operating Profit
    corresponds to the operating profit before other non-current operating
    income and expenses.
  • Net profit (Group share), excluding non-recurring items:
    Current net profit (Group share) corresponds to the net profit (Group
    share) adjusted for other non-current operating income and expenses,
    associated tax effects, profit from discontinued operations and taxes
    on the payment of cash dividends.

Gross operating profit (EBITDA)

This aggregate amount, which is used particularly in the calculation
of certain ratios, is the sum of the current operating profit, the
amortization expense for intangible and tangible fixed assets for the
period, the expense associated with share option plans and dividends
paid during the period by associates.

Net debt

Net finance costs as defined and used by the Group correspond to the
sum of the long-term financial debt, short-term financial debt and
accrued interest, less cash and cash equivalents.

The regulatory information related to this press release is available at www.remy-cointreau.com

APPENDICES

Sales and Current Operating Profit by division

(€ millions)   at 31 March 2018   at 31 March 2017   Change
Reported   Organic(*) Reported Reported   Organic(*)
    A   B   C   A/C-1   B/C-1
Sales                    
House of Rémy Martin 760.0 800.8 707.5 +7.4% +13.2%
Liqueurs & Spirits 266.8 273.5 276.3 (3.4%) (1.0%)
Sub-total Group brands 1026.8 1074.3 983.8 +4.4% +9.2%
Partner Brands 100.2 99.5 111.0 (9.8%) (10.4%)
Total   1,127.0   1,173.8   1,094.9   +2.9%   +7.2%
Current Operating Profit
House of Rémy Martin 204.4 219.9 185.2 +10.4% +18.8%
as % of sales 26.9% 27.5% 26.2% +0.7pt +1.3pts
Liqueurs & Spirits 42.8 48.1 57.5 (25.5%) (16.4%)
as % of sales 16.1% 17.6% 20.8% -4.7pts -3.2pts
Sub-total Group brands 247.2 268.0 242.7 +1.9% +10.4%
as % of sales 24.1% 24.9% 24.7% -0.6pt +0.2pt
Partner brands 5.3 5.6 2.0 +163.2% +175.7%
as % of sales   5.3%   5.6%   1.8%   +3.5pts   +3.8pts
Holding company costs   (15.7)   (15.7)   (18.6)   (15.5%)   (15.5%)
Total 236.8 257.9 226.1 +4.7% +14.1%
as % of sales   21.0%   22.0%   20.7%   +0.3pt   +1.3pts

(*) Absolute values and organic growth are calculated at constant
exchange rates and scope.

Summary profit and loss account

             
(€ millions)   at 31 March 2018   at 31 March 2017   Change
Reported   Organic(*) Reported Reported   Organic(*)
    A   B   C   A/C-1   B/C-1
Sales 1,127.0 1,173.8 1,094.9 2.9% 7.2%
Gross Profit 760.7 797.4 730.7 4.1% 9.1%
Gross Profit/Sales 67.5% 67.9% 66.7% +0.8pt +1.2pts
Current Operating Profit 236.8 257.9 226.1 4.7% 14.1%
Current Operating Profit/Sales 21.0% 22.0% 20.7% +0.3pt +1.3pts
Other operating income and expenses (13.7) (13.7) (4.8) - -
Operating profit 223.1 244.2 221.3 - -
Financial result (22.0) (24.5) (31.9) - -
Income tax (53.5) (58.6) (44.5) - -
Tax rate 26.6% 26.7% 23.5% - -
Share in profits of associates 0.5 0.5 (19.6) - -
Net profit/(loss) from deconsolidated and discontinued operations 0.0 0.0 65.0 - -
Minority interests 0.2 0.2 0.0 - -
Net profit (Group share) 148.2 161.7 190.3 (22.1%) (15.0%)
Net profit excluding non-recurring items 151.3 164.8 135.0 12.0% 22.0%
Net profit (excluding non-recurring items)/Sales 13.4% 14.0% 12.3% +1.1pts +1.7pts
Earnings Per Share -- Group share (in euros) 2.98 3.25 3.87 (23.1%) -
Earnings Per Share -- excluding non-recurring items (in euros)   3.04   3.31   2.75   10.6%   -

Reconciliation between the net profit and the net profit excluding
non-recurring items

         
(€ millions)   at 31 March 2018   at 31 March 2017
Net profit (Group share)   148.2   190.3
Net profit/(loss) from deconsolidated and discontinued operations 0.0 (65.0)
Provision for equity interests 0.0 19.6
Impact of tax rate changes on deferred taxes (assets and
liabilities) in France and in the US
(5.8) (14.1)
3% tax on the payment of cash dividends and reimbursement (7.0) 0.4
Special taxes on corporations in France 2.3 0.0
Write-off of intangible assets related to Mount Gay 11.8 0.0
Other operating income and expenses, net of tax 1.8 3.8
Net profit excluding non-recurring items   151.3   135.0
 

(*) Absolute values and organic growth are calculated at constant
exchange rates and scope.

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