2019/20: a singular year
Profitability still high
Ambitious new medium-term targets
Regulatory News:
2019/20 was a singular year with the combined effects of (i) a
global pandemic that severely limited consumption of spirits in the
on-trade segment and purchases at airports, (ii) the threat of US
import tariffs, (iii) a degree of global geopolitical instability
and (iv) the consequences of decisions specific to the Group, such
as changes in its European distribution network and its withdrawal
from some Partner Brand distribution contracts.
In the financial year ending March 2020, Rémy Cointreau
(Paris:RCO) posted sales of €1,024.8 million, down
9.0% on a reported basis and 11.2% on an organic basis (assuming
constant exchange rates and consolidation scope).
Current Operating Profit came in at €215.1 million, down
18.6% on a reported basis and 22.0% on an organic basis after a
historically strong financial year 2018/19. The current
operating margin, while declining, came in at a satisfactory
21.0% thanks to a remarkable increase in the gross margin (up
2.8 percentage points on an organic basis) and favourable foreign
exchange effects (up 0.4 percentage point). However, profitability
was pulled down by continued strategic investment in communication
and by structure costs.
Excluding non-recurring items, net profit attributable to the
Group came in at €124.2 million, down 26.9% on a
reported basis.
Key figures
Millions of euros (€m)
To 31/03/20
To 31/03/19
Change
Reported
Reported
Reported
Organic*
Sales
1,024.8
1,125.9
(9.0%)
(11.2%)
Current Operating Profit
215.1
264.1
(18.6%)
(22.0%)
Current operating margin
21.0%
23.5%
-2.5 pts
-2.9 pts
Net profit – Group share
113.4
159.2
(28.8%)
(31.7%)
Net profit excl. non-recurring
items
124.2
169.9
(26.9%)
(29.9%)
Net margin excluding non-recurring
items
12.1%
15.1%
-3.0 pts
-3.2 pts
EPS - Group share (€)
2.28
3.18
(28.4%)
(31.3%)
EPS excluding non-recurring items
(€)
2.49
3.39
(26.6%)
(29.6%)
Net debt/EBITDA ratio
1.86
1.19
+0.67 pt.
Current Operating Profit by division
Millions of euros (€m)
To 31/03/20
To 31/03/19
Change
Reported
Reported
Reported
Organic*
House of Rémy Martin
199.5
235.6
(15.3%)
(18.2%)
As % of sales
27.1%
30.4%
-3.3 pts
-3.5 pts
Liqueurs & Spirits
37.5
38.8
(3.5%)
(9.9%)
As % of sales
14.3%
14.7%
-0.4 pt.
-1.1 pts
Subtotal: Group Brands
237.0
274.4
(13.6%)
(17.0%)
As % of sales
23.8%
26.4%
-2.6 pts
-3.0 pts
Partner Brands
(1.7)
4.9
-
-
As % of sales
-
5.6%
-
-
Holding company costs
(20.1)
(15.2)
+32.6%
+32.3%
Total
215.1
264.1
(18.6%)
(22.0%)
As % of sales
21.0%
23.5%
-2.5 pts
-2.9 pts
House of Rémy Martin
Sales at the House of Rémy Martin declined 7.5% on an organic
basis in 2019/20 (down 5.0% on a reported basis). Mainland China
had another year of very strong growth despite fourth-quarter sales
being hit hard by the pandemic. Performance in other markets was
more mixed, particularly in Travel Retail, the United States (due
to retailers reducing their stocks) and Europe (due to changes in
the distribution network). In spite of an unfavourable environment,
the upscaling strategy continued to filter through into very
positive mix and price effects (adding 2.6% to sales), partly
making up for lower volumes over the period (down 10.1%).
Current Operating Profit totalled €199.5 million,
down 15.3% on a reported basis, while the current operating margin
came out at 27.1%, compared with 30.4% the previous year. Although
the gross margin rose by one percentage point, structure costs and
increased communication investment to support the autumn 2019
launch of the new Rémy Martin “Team Up for Excellence” campaign
weighed on profitability.
Liqueurs & Spirits
The Liqueurs & Spirits division was down 3.0% in the
year on an organic basis (down 1.0% on a reported basis). Changes
in the distribution network in Europe and the impact of the
pandemic on the business in the Asia-Pacific region in the fourth
quarter masked very strong performance in the United States, buoyed
by the success of Cointreau, The Botanist and the Group’s portfolio
of single malt whiskies.
Current Operating Profit totalled €37.5 million,
down 3.5% on a reported basis, while the current operating margin
came in at 14.3% (down 0.4 percentage point), hit by declining
volumes and continued strategic investment.
Partner Brands
As expected, Partner Brand sales fell sharply in the year (down
68.7% on an organic basis and 68.5% on a reported basis) with the
termination of major distribution contracts in the Czech Republic,
Slovakia and the United States.
As a result, Current Operating Profit came in at negative
€1.7 million, compared with positive €4.9 million in the year
to 31 March 2019.
Consolidated results
Current Operating Profit came in at €215.1 million, down
18.6% on a reported basis and 22.0% on an organic basis. This
decrease was the result of a 17.0% organic decline in
Current Operating Profit from Group Brands, together with
the strategic decision to disengage from Partner Brands and the
increase in holding costs, mainly due to the organisational changes
announced in March 2020.
Current Operating Profit benefited from favourable foreign
exchange effects worth €9.1 million in the year: the
average EUR/USD exchange rate improved to 1.11 (from 1.16 at 31
March 2019), while the average collection rate (linked to the
Group’s hedging policy) over the period came out at 1.16, compared
with 1.18 for the period ended 31 March 2019.
Consequently, the current operating margin fell 2.5
percentage points to 21.0% over the full year (down 2.9
percentage points on an organic basis).
Operating profit came in at €195.5 million after
taking into account a net operating expense of €19.7 million,
including an €18.8 million goodwill write-off partially reducing
the amount of Westland’s intangible assets.
Net financial income/expense showed a net expense of
€28.0 million over the period, down €4.5 million. This
reduction was the result of a further decrease in the cost of gross
financial debt and the non-recurrence of the €5.2 million expense
stemming from early repayment of the vendor loan by the EPI Group,
recognised in the first half of financial year 2018/2019.
Conversely, net foreign exchange gains/losses (gains/losses on
future foreign currency flows) slightly deteriorated, down €0.7
million.
The tax expense totalled €60.9 million, giving an
effective tax rate of 36.3% (33.9% excluding non-recurring items),
significantly higher than the rate in the year to March 2019 (29.0%
on a reported basis and 28.5% excluding non-recurring items) due to
the geographical breakdown of profit and, in particular, the
tangible decline in profits in the Asia-Pacific region over the
latter part of the financial year.
After taking into account net proceeds of €6.4 million from the
disposal of the Czech Republic and Slovakia subsidiaries, net
profit attributable to the Group totalled €113.4
million, down 28.8% on a reported basis.
Excluding non-recurring items, net profit attributable to the
Group came out at €124.2 million, down 26.9% on a
reported basis, while the net margin came out at 12.1%.
Excluding non-recurring items, net earnings per share came
in at €2.49, down 26.6%.
Net debt stood at €450.9 million, up €107.6 million from
the position at the end of March 2019. This was mainly due to lower
Group EBITDA and higher capital expenditure and tax cash outflows
over the period, as well as a full payment in cash of the dividend
for the year 2018/19.
The net debt/EBITDA ratio nevertheless remained at a
reasonable level (1.86, compared with 1.19 at the end of
March 2019).
The return on capital employed (ROCE) was 16.5% for the
year ended 31 March 2020, down 5.0 percentage points year-on-year.
This was due to the combined effect of the decline in profitability
of Group Brands and continued strategic purchases of eaux-de-vie
adversely affecting capital employed.
As announced on April 16th, 2020, the Group will propose to its
General Meeting to grant a dividend of € 1.00 per share for the
year 2019/20, a substantial drop compared to the € 2.65 paid
last year (which included an exceptional dividend of € 1.00). It
will also propose an option for the full amount of the dividend to
be payable in cash or shares. This reduction is in keeping with the
socially responsible measures adopted by the Group since the onset
of the ongoing public health crisis.
Post-closing events
On 30 April 2020, the Rémy Cointreau Group announced that
it had acquired the cognac house J.R. Brillet.
On 19 May 2020, the Bruichladdich distillery was
certified a “B Corporation”.
2020/21 and Medium-Term Outlook
In an uncertain public health, economic and geopolitical
environment, the Rémy Cointreau Group remains confident of its
ability to emerge stronger from the crisis.
More favourable trends in the consumption of spirits in the
United States over the past few weeks mean the Group can slightly
upgrade its forecasts for the first quarter of 2020/21: it
now expects sales to decline by around 45% on an organic
basis (previously 50-55%). Based on what looks set to be a moderate
decline in the second quarter, the Group expects Current
Operating Profit to decline by 45-50%, on an organic basis, in the
first half of 2020/21. However, the second half of 2020/21
should see a strong recovery, buoyed by China and the United
States.
In the medium term, Rémy Cointreau reiterates its aim of
becoming the global leader in exceptional spirits, a segment in
which the growth outlook remains attractive, particularly in a
world of more responsible consumption.
To this end, Rémy Cointreau will be pursuing its value
strategy and its work to build a business model that
delivers profitable and responsible growth. The Group is
therefore setting itself ambitious financial and non-financial
targets: improved portfolio management should enable it to deliver
a gross margin of 72% and a current operating margin of
33% by 2030. At the same time, the Group will be rolling out
its “Sustainable Exception 2025” plan, which aims to achieve
sustainable agriculture across all land on which its spirits
depend, as well as reductions in its carbon emissions of 25%
(across Scopes 1 and 2, in absolute terms) and 30%
(across Scope 3, in relative terms) by 2025. This will
be a first step towards achieving the Group’s ambition of “Net
Zero carbon” by 2050.
NOTES
Sales and Current Operating Profit by division
Millions of euros (€m)
To 31/03/20
To 31/03/19
Change
Reported
Organic*
Reported
Reported
Organic*
A
B
C
A/C-1
B/C-1
Sales
House of Rémy Martin
735.5
716.6
774.4
(5.0%)
(7.5%)
Liqueurs & Spirits
261.9
256.4
264.4
(1.0%)
(3.0%)
Subtotal: Group Brands
997.3
973.1
1,038.8
(4.0%)
(6.3%)
Partner Brands
27.5
27.3
87.2
(68.5%)
(68.7%)
Total
1,024.8
1,000.3
1,125.9
(9.0%)
(11.2%)
Current Operating Profit
House of Rémy Martin
199.5
192.7
235.6
(15.3%)
(18.2%)
As % of sales
27.1%
26.9%
30.4%
-3.3 pts
-3.5 pts
Liqueurs & Spirits
37.5
35.0
38.8
(3.5%)
(9.9%)
As % of sales
14.3%
13.6%
14.7%
-0.4 pts
-1.1 pts
Subtotal: Group Brands
237.0
227.7
274.4
(13.6%)
(17.0%)
As % of sales
23.8%
23.4%
26.4%
-2.6 pts
-3.0 pts
Partner Brands
(1.7)
(1.6)
4.9
-
-
As % of sales
-
-
5.6%
-
-
Holding company costs
(20.1)
(20.1)
(15.2)
+32.6%
+32.3%
Total
215.1
206.0
264.1
(18.6%)
(22.0%)
As % of sales
21.0%
20.6%
23.5%
-2.5 pts
-2.9 pts
Summary income statement
Millions of euros (€m)
To 31/03/20
To 31/03/19
Change
Reported
Organic*
Reported
Reported
Organic*
A
B
C
A/C-1
B/C-1
Sales
1,024.8
1,000.3
1,125.9
(9.0%)
(11.2%)
Gross profit
676.9
659.1
710.9
(4.8%)
(7.3%)
As % of sales
66.0%
65.9%
63.1%
+2.9 pts
+2.8 pts
Current Operating Profit
215.1
206.0
264.1
(18.6%)
(22.0%)
COP as a % of sales
21.0%
20.6%
23.5%
-2.5 pts
-2.9 pts
Other operating income and expenses
(19.7)
(18.9)
1.7
-
-
Operating profit
195.5
187.1
265.8
(26.5%)
(29.6%)
Net financial income (charge)
(28.0)
(27.3)
(32.5)
-
-
Corporate income tax
(60.9)
(57.8)
(67.7)
-
-
Tax rate
36.3%
36.2%
29.0%
+7.3 pts
+7.2 pts
Share in profit (loss) of
associates/minority interests
0.4
0.4
(6.5)
-
-
Net profit after tax from discontinued
operations
6.4
6.4
0.0
-
-
Net profit – Group share
113.4
108.7
159.2
(28.8%)
(31.7%)
Net profit excluding non-recurring
items
124.2
119.0
169.9
(26.9%)
(29.9%)
Net profit (excluding non-recurring
items)/sales
12.1%
11.9%
15.1%
-3.0 pts
-3.2 pts
Group earnings per share (€)
2.28
2.18
3.18
(28.4%)
(31.3%)
Earnings per share excluding
non-recurring items (€)
2.49
2.39
3.39
(26.6%)
(29.6%)
Reconciliation between net profit
and net profit excluding non-recurring items
Millions of euros (€m)
To 31/03/20
To 31/03/19
Net profit attributable to the
Group
113.4
159.2
Westland’s partial goodwill write-off
18.8
-
Non-recurring tax items
(2.5)
0.1
Net profit after tax from discontinued
operations
(6.4)
-
Expense on vendor loan (finance costs)
-
5.2
Disposal of stake in Diversa
-
7.0
Other
0.9
(1.6)
Net profit excluding non-recurring
items attributable to the Group
124.2
169.9
Definitions of alternative performance
indicators
Rémy Cointreau’s management process is based on the following
alternative performance indicators, selected for planning and
reporting purposes. The Group’s management considers that these
indicators provide users of the financial statements with useful
additional information for understanding the Group’s performance.
These alternative performance indicators should be considered as
supplementing those included in the consolidated financial
statements and the resulting movements.
Organic growth in sales and Current Operating Profit
Organic growth is calculated excluding the impact of exchange
rate fluctuations, acquisitions and disposals. This indicator
serves to focus on Group performance across both financial years,
which local management is more directly capable of influencing.
The impact of exchange rates is calculated by converting sales
and Current Operating Profit for the current financial year using
average exchange rates (or, for COP, the hedged exchange rate) from
the previous financial year.
For acquisitions in the current financial year, sales and
Current Operating Profit of acquired entities are not included in
organic growth calculations. For acquisitions in the previous
financial year, sales and Current Operating Profit of acquired
entities are included in the previous financial year; however, they
are only included in current year organic growth calculations with
effect from the anniversary date of the acquisition.
For significant disposals, data is post-application of IFRS 5,
under which results of entities disposed of are systematically
reclassified under “Net earnings from discontinued operations”.
Indicators “excluding non-recurring items”
The two items set out below constitute key indicators for
measuring recurring business performance, since they exclude
significant items which, by virtue of their unusual nature, cannot
be considered inherent to the Group’s ongoing performance:
- Current Operating Profit corresponds to operating profit
before other non-recurring operating income and expenses.
- Net profit attributable to the Group, excluding
non-recurring items: Net profit attributable to the Group
excluding non-recurring items corresponds to net profit
attributable to the Group adjusted to exclude other non-recurring
operating income and expenses, associated tax effects, profit from
deconsolidated, divested and discontinued operations and the
contribution from dividends paid in cash.
Gross operating profit (EBITDA)
This measure, which is used in particular to calculate certain
ratios, equates to Current Operating Profit less amortisation and
depreciation expenses on intangible assets and property, plant and
equipment for the period, expenses arising from stock option plans,
and dividends received from affiliates during the period.
Net debt
Net financial debt as defined and used by the Group corresponds
to the sum of long- and short-term financial debt and accrued
interest, less cash and cash equivalents.
Regulated information in connection with this press release can
be found at www.remy-cointreau.com
(*) Organic growth is calculated assuming constant exchange
rates and consolidation scope.
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Laetitia Delaye — +33 (0) 7 87 25 36 01
Remy Cointreau (EU:RCO)
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