Jameson shines in Pernod Ricard financial results

12 February, 2018

Sales of Jameson Irish whiskey have increased 12% in the first half of the 2018 financial year to become Pernod Ricard’s joint largest whiskey brand in terms of volume.

Pernod Ricard released its financial report for H1 FY18 on Thursday last week, announcing the Jameson is now the joint largest whiskey brand with Ballantine’s on 4m, 9-litre cases.

Alexandre Ricard, chairman and CEO of Pernod Ricard, said: “H1 FY18 was a very good semester, with an acceleration vs. FY 17, in particular in China, India and Global Travel Retail.

“For full-year FY18, we will maintain our focus on digital, innovation and operational excellence (including pricing.) We expect sustained and diversified growth to continue across our regions and brands.

“We are therefore increasing our guidance for full-year FY18 organic growth in Profit from Recurring Operations to between +4% and +6%.”

Sales for H1 FY18 totalled €5,082m, with organic growth of +5.1% and reported growth of +0.4%, which according to Pernod Ricard is due to negative foreign exchange.

Another of Pernod Ricard’s strategic brands which showed significant growth was Martell, which continues to flourish in China. Its organic sales increased by 10%, retaining its position as one of the world’s largest cognac brands.

The overall growth of the company’s 13 strategic international brands, including Chivas Regal, Beefeater and Malibu was reported at +28.1m, 9-litre cases.

The financial results, published by Pernod Ricard are as follows:

H1 FY18 Profit from Recurring Operations 
was €1,496m, with organic growth of +5.7% and -0.3% reported, due to USD weakness. For full-year FY18, the FX impact on PRO is estimated at c. -€180m. The organic PRO margin was up +21bps, driven by:

  • Gross margin ratio: +65bps (partly enhanced by phasing)
  • Price impact improving 

  • Positive mix thanks in particular to Martell, Jameson and Chivas 

  • Tight management of Cost Of Goods Sold thanks to operational efficiency initiatives, but negative impact of agave cost and Goods & Services Tax in India 

  • A&P: +7%
• growth ahead of topline in H1 due to phasing and accelerated spend to 
internationalise Martell 

  • Structure costs ratio stable. 

The H1 FY18 corporate income tax rate on recurring items was c.25% and this rate should carry through for full-year FY18. The USA tax reform is not expected to have a material impact on the corporate income tax rate in future. 

Group share of Net PRO was €994m, +4% reported vs. H1 FY17, despite adverse FX, thanks to a reduction in financial expenses. At constant FX, growth was +10%.

Group share of Net profit was €1,147m, +25% reported vs. H1 FY17, due to a reduction in financial expenses and positive non-recurring items (including a one-off sale of bulk Scotch inventory, the reimbursement of the French 3% tax on FY13-17 dividends and a €55m one-off P&L positive net impact further to the reevaluation of deferred tax assets pursuant to the USA tax reform.) 

IFRS 15 will be implemented from FY19, leading to the reclassification of certain A&P expenses in deduction of Sales and the integration of the activity of certain third-party bottlers in India into Sales and Cost of Goods Sold.

The main proforma estimated impacts are: 

  • Neutral on PRO but PRO margin up c. 70bps 

  • Sales reduced by c.3% 

  • Gross Margin down c. 170bps 

  • A&P / Sales ratio down c. 300bps to c.16%. 

Free Cash Flow increased very strongly to €799m, +21% vs. H1 FY17, resulting in a Net debt decrease of €476m to €7,375m. The Net Debt/EBITDA ratio at average rates2 was down significantly to 2.9x at 31 December 2017. 
The average cost of debt reduced to 3.4% vs. 4.0% in H1 FY17. The expected cost for full-year FY18 is c. 3.6%. 

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