Analyst presentation H1 2017/18 Half year ended 30 September 2017, - - PowerPoint PPT Presentation

Analyst presentation H1 2017/18 Half year ended 30 September 2017, 16 November 2017

Disclaimer

DISCLAIMER THIS PRESENTATION may contain forward looking statements. These statements are based on current expectations, estimates and projections of Lucas Bols’ management and information currently available to the company. Lucas Bols cautions that such statements contain elements of risk and uncertainties that are difficult to predict and that could cause actual performance and position to differ materially from these statements. Lucas Bols disclaims any obligation to update or revise any statements made in this presentation to reflect subsequent events or circumstances, except as required by law. Certain figures in this presentation, including financial data, have been rounded. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an exact arithmetic aggregation of the figures which precede them.

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1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook

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Am sterdam 1 5 7 5

Lucas Bols at a glance

Note *: EBIT is defined as ‘operating profit’ including ‘share of profit of joint ventures, net of tax’

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Over 1 1 0 countries, 5 3 % revenue outside W estern Europe > 2 5 brands 4 6 Bols liqueur flavours FY 2 0 1 6 / 1 7

% of total FY 2016/ 17 revenue

18.5% 22.7%

23%

margin

EBIT* €m Revenue €m

18.2 80.5

19.9% 20.0% 13.4%

Western Europe North America Asia-Pacific Emerging Markets

46.7%

Strong offering of global brands and regional brands

Regional brands

Liqueurs Value brands Dutch Jenever portfolio FY 2016/17

70,2%

Regional brands Global brands

29,8%

71.8% 28.2%

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Revenue structure Global brands

Italian Liqueurs White Spirits

Passoã Bols Liqueurs range

World-wide presence offers ample room for expansion in existing and new markets

6 Group revenue per geographical segment based on FY 2016/17 Emerging markets 13,4% Asia-Pacific 19,9% North America 20% Western Europe 46,7%

Lucas Bols’ mission & strategic framework

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Mission Lucas Bols

We create great cocktail experiences around the world.

Strategic framework Lucas Bols

• To strengthen and grow our global brands in the international cocktail market
• To maintain the competitiveness of our regional brands in regional and local markets

Build the brand equity Lead the development of the cocktail market Accelerate global brand growth Leverage

• perational

excellence

1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook

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Highlights H1 2017/18

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Revenue Gross margin Net Profit Dividend Regional performance EBIT Overall gross margin was up 190 bps to 62.2%, driven by Passoã and margin growth of the other global brands Net profit, excluding a one-off gain in H1 2016/17 was up 23.5% to € 8.7 million (reported net profit up 12.4%) Interim dividend set at € 0.35 per share in cash (+12.9% compared to last year) EBIT increased 21.4% to € 13.8 million as a result of the inclusion of Passoã Emerging Markets showed good revenue growth (+9.8%) and North America was up 4.8%; Western Europe reported 50.8% growth in revenue on the back of Passoã as well as organic growth of 4.0% Revenue in Asia-Pacific was down 3.3% as a result of phasing of shipments to Asia while the in-market depletions in the region showed growth Revenue of € 48.8 million, an increase of 23.8% compared to last year (+0.5% organically) driven by Passoã which is performing well, in line with expectations Brand performance Global brands reported 34.8% higher revenue in H1 2017/18, with organic growth of 1.6%, while revenue at the regional brands was down 2.2%

1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook

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Operational highlights H1 2017/18

Bols Liqueurs: low single digit revenue growth

• Strong performance in retail markets Germany and UK
• Market share growth in the USA
• Implementation of drink strategies Bolsini (Bols liqueurs with sparkling

wine) and Add Flavor to your Margarita

• Continued expansion of distribution of new flavours

Bols Genever and Damrak Gin: continued the positive growth trend

• Bols Genever new brand identity and drink strategy finalized
• Damrak Gin recorded strong growth in the USA and Italy
• Bols Vodka negatively impacted by competition in Canada, while

in Argentina and the Netherlands double digit growth was recorded

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Italian Liqueurs performed in line with last year

• Galliano L’Aperitivo launched in around 20 markets
• Introduction Galliano range in various new markets
• Galliano Hot Shot is gaining momentum again in Sweden
• New brand identity and label improvement Vaccari was launched

in July The Passoã brand performed well, in line with expectations

• Continued strong performance in the UK
• Listings in 5 additional states in the USA
• Strong promotional retail program implemented in core

markets

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Operational highlights H1 2017/18 - continued

Bols Genever – new brand identity and drink strategy

The next level in building the Bols Genever brand with bartenders and consumers

Red Light Negroni – signature drink Bols Genever Bols Genever 100% Malt Spirit – launched in September 2017

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Ambassadors promoting Bols Genever in key cities around the world

Successful incorporation of Passoã

• Successful incorporation of Passoã into Lucas Bols with

the joint venture now fully operational

• The commercial organization has taken over all distribution

contracts and new agreements were signed

• Lucas Bols USA has taken over Passoã from RC and will

expand the distribution from 15 states to 35 states at the end of March 2018

• Strong new visual identity and campaign has been

developed and implemented

• Passoa results to date in line with expectations with strong

growth in the UK and overall stabilization in the Benelux Market

• Expansion to new markets expected in H2 of 2017/18

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House of Bols Cocktail & Genever Experience Your best hour in Amsterdam

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After 10 years with nearly 500,000 visitors, the House of Bols was fully revamped in 2016/17 New brand awareness campaign was launched, resulting in a 10% increase in visitors H1 2017/18 vs last year

Lucas Bols USA

Galliano L’Aperitivo - successfully launched in various states Passoã - re-introduced the brand in the US

• Launched in 5 additional states, to a total of 20 states
• Expansion to 35 states in H2 2017/18

Damrak Gin - official gin of Delta Sky clubs starting 1 July 2017 Bols Genever - Red Light Negroni Bols Liqueurs Range - Add flavor to your Margarita Campaign

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14 million guests visit Delta Sky Clubs in the US

Regional brands – operational highlights H1 2017/18

Dutch domestic portfolio

• The decline in the Dutch domestic market is slowing down
• We maintained our strong market share position in the Dutch Genever and Vieux segment

Performance in other regions: continued good performance

• In western Africa the positive revenue growth trend continued
• Significantly lower concentrates sales in southern Africa
• Expansion of distribution of Henkes Gin and Henkes Whisky

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1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook

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Strong revenue and EBIT growth

Highlights

Revenue increase of 23.8% compared to last year, driven by the consolidation of Passoã (organically 0.5%) Gross margin was up 190 bps to 62.2%, driven by Passoã as well as margin growth of the other global brands EBIT increased 21.4% to € 13.8 million driven by the strong performance of Passoã Finance costs increased as a result of the interest costs on “assumed debt” related to Passoã Income tax increased as profits of Passoã are included and are taxed at a higher tax rate in France 19

* at constant currencies, excluding one-off items and Passoã Reported (* €million) H1 2017/18 H1 2016/17 Reported growth Organic* growth Revenue 48.8 39.4 23.8% 0.5% Cost of sales

• 18.5
• 15.6

18.0% 1.6% GROSS PROFIT 30.4 23.8 27.7%

• 0.2%

Gross margin % 62.2% 60.3%

D&A expenses

• 16.8
• 13.4

25.0% 6.5% OPERATING PROFIT 13.6 10.3 31.1%

• 8.9%

Operating profit margin % 27.8% 26.2%

Share of profit of JVs, net of tax 0.2 1.0

• 78.6%
• 18.3%

EBIT 13.8 11.3 21.4%

• 9.1%

EBIT margin % 28.2% 28.8%

Finance costs

• 1.8
• 1.3

39.8% PROFIT BEFORE TAX 12.0 10.1 19.1% Income tax expense

• 3.3
• 2.3

41.9% PROFIT FOR THE PERIOD 8.7 7.8 12.4% Earnings per share € 0.70 € 0.62 12.4%

Global brands

Highlights

Reported growth of the global brands is mainly attributable to the addition of the Passoã brand. Organically the global brands were up 1.6% Gross margin rose 280 bps to 66.6% (2016/17: 63.8%) due to the positive impact of Passoã, while organically the gross margin was 100 bps better than last year D&A expenses have mainly increased as a result of Passoã and are 22.7% of revenues EBIT increased 38.9%, resulting in an EBIT margin of 44.0%

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• 0.2

H1 2016/17 Badwill H1 2016/17 11.8 4.8 16.4 Δ Global brands +38.9% H1 2017/18 Δ Foreign exchange effect 0.0

EBIT development (in €m)

Reported (* €m) H1 2017/18 H1 2016/17 Reported growth Organic growth Revenue 37.4 27.7 34.8% 1.6% Cost of sales

• 12.5
• 10.0

GROSS PROFIT 24.9 17.7 40.6% 3.1%

Gross margin % 66.6% 63.8%

D&A expenses

• 8.5
• 6.2

37.9% 7.4%

% of revenues

• 22.7%
• 22.2%

OPERATING PROFIT 16.4 11.5 42.0% 0.7%

Operating margin % 43.9% 41.6%

Share of profit of JVs, net of tax

0.1 0.3 EBIT 16.4 11.8 38.9% 0.8%

EBIT margin % 44.0% 42.7%

Regional brands

Highlights

Organically, excluding the one-off gain of € 0.5 million in H1 2016/17, EBIT for the regional brands decreased by 11.4%, fully explained by the lower gross profit margin The decline in revenue was mainly related to the phasing of shipments in Asia-Pacific The gross margin decreased by 410 bps, on an organic basis, mainly as a result of lower concentrates sales in southern Africa

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• 18.8%

4.8 H1 2017/18 Δ Foreign exchange effect 0.0 Δ Regional brands

• 0.6

5.9 H1 2016/17 Badwill H1 2016/17

• 0.5

EBIT development (in €m)

Reported (* €m) H1 2017/18 H1 2016/17 Reported growth Organic growth Revenue 11.5 11.7

• 2.2%
• 2.2%

Cost of sales

• 6.0
• 5.6

GROSS PROFIT 5.5 6.1

• 9.8%
• 9.7%

Gross margin % 48.0% 52.0%

D&A expenses

• 0.9
• 0.9
• 2.4%
• 2.2%

% of revenues

• 7.4%
• 7.5%

OPERATING PROFIT 4.7 5.2

• 11.0%
• 11.0%

Operating margin % 40.6% 44.6%

Share of profit of JVs, net of tax

0.2 0.7 EBIT 4.8 5.9

• 18.8%
• 11.4%

EBIT margin % 42.0% 50.5%

62.2%

Revenue growth of 23.8%

Revenue development (in €m)

66.6% 48.0% 60.3%

Reported gross margin

Group revenue structure (H1 2017/18)

Global brands Regional brands 23.5% 76.5% 0.4 Δ Foreign exchange effect H1 2016/17 48.8 39.4 Δ Regional brands

• 0.3

Δ Global brands

• 0.2

H1 2017/18 9.6 +23.8% Passoa

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71.8%

Revenue (* €m) Reported H1 2017/18 Reported growth % Organic growth % Global brands 37.4 34.8% 1.6% Regional brands 11.5

• 2.2%
• 2.2%

Total 48.8 23.8% 0.5%

Revenue by region

Revenue development (in €m)

*) based on H1 2017/18 revenue +23.8% 48.8 Δ Foreign Exchange Impact 0.5 Δ Emerging Markets H1 2017/18

• 0.4

39.4 0.7 Δ Asia - Pacific Δ North America H1 2016/17 8.9

• 0.2

Δ Western Europe

• Western Europe reported very strong growth of 50.8%
• Excluding Passoã, solid revenue growth of 4.0%
• The Belgium market recovered from the excise duty

increase

• Global brands achieved good growth in the Netherlands,

Germany and the UK

• The decline in the Dutch domestic market is slowing

down, strong market share was maintained

5 3 .3 %

Western Europe

Revenue*

• Asia-Pacific reported a decline of 3.3% as a result of the

phasing of shipments to Japan and China between H1 and H2 2017/18

• Underlying in-market depletions show growth
• Passoã contributed to this region

Asia-Pacific

1 7 .0 %

Revenue*

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Revenue (* €m) Reported H1 2017/18 Reported H1 2016/17 Reported growth % Organic growth % Western Europe 26.0 17.3 50.8% 4.0% Asia - Pacific 8.3 8.6

• 3.3%
• 14.4%

North America 8.7 8.3 4.8% 4.6% Emerging Markets 5.8 5.3 9.8% 6.8% Total 48.8 39.4 23.8% 0.5%

Revenue by region

Revenue development (in €m)

*) based on H1 2017/18 revenue

• North America reported a plus of 4.8%
• Continued growth in the US market, somewhat

hampered by impact of hurricane season

• Bols Liqueurs continued to gain market share, driven

by gradual expansion in retail

• In Canada heavy price competition resulted in lower

sales of Bols Vodka North America

Revenue*

• Emerging markets achieved strong revenue growth of

9.8%

• Eastern Europe - mainly Russia and Poland - again

achieved strong growth

• New markets, incl. the Caucasus, show good growth
• In Central America revenue declined, due to intentional

lower shipments and the impact of the hurricanes

• In western Africa the positive revenue growth trend

continued, while in southern Africa lower sales of concentrates were recorded Emerging Markets

Revenue*

1 7 .8 % 1 1 .8 %

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Revenue (* €m) Reported H1 2017/18 Reported H1 2016/17 Reported growth % Organic growth % Western Europe 26.0 17.3 50.8% 4.0% Asia - Pacific 8.3 8.6

• 3.3%
• 14.4%

North America 8.7 8.3 4.8% 4.6% Emerging Markets 5.8 5.3 9.8% 6.8% Total 48.8 39.4 23.8% 0.5%

+23.8% 48.8 Δ Foreign Exchange Impact 0.5 Δ Emerging Markets H1 2017/18

• 0.4

39.4 0.7 Δ Asia - Pacific Δ North America H1 2016/17 8.9

• 0.2

Δ Western Europe

Gross profit margin increased by 190 bps to 62.2%

59.4% 58.7% 73.8%

Gross profit development (in €m)

60.3% 62.2%

Reported gross margin

Gross margin development at constant currencies and excluding Passoã

• 0.3

Δ Foreign Exchange Impact Δ Emerging Markets 0.6 Δ North America Δ Asia - Pacific

• 0.1

6.4 Δ Western Europe 0.0 +27.7% 30.4 H1 2017/18 23.8 H1 2016/17

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63.2%

Total ‐40 bps Western Europe +140 bps Asia ‐ Pacific ‐ 100 bps North America +160 bps Emerging Markets ‐510 bps

28.2%

EBIT up 21.4%, driven by Passoã

EBIT development (in €m)

44.0% 42.0% 28.8%

Reported EBIT margin

30.6% 69.4%

• 0.7

4.8 H1 2016/17

• 1.1

+21.4% 10.6 Badwill 13.8 0.0 Δ Foreign exchange effect H1 2017/18 Δ Global brands H1 2016/17

• excl. One-
• ffs

+29.4% Δ Unallocated Δ Regional brands

• 0.6

11.3

Reported EBIT for H1 2017/18 was up 21.4% to € 13.8 million (H1 2016/17: € 11.3 million), fully attributable to Passoã The increase in Unallocated is mainly due to additional overheads as a result

• f integration of Passoã, total overhead

as a % of revenue decreased from 16.3% to 15.3% In H1 2016/17, Lucas Bols recorded a

• ne-off gain of € 0.7 million related to

the acquisition of the Cooymans distillery by Avandis. Excluding this one-

• ff gain, the EBIT margin increased

1.2%, from 27.0% last year to 28.2% in the first half of 2017/18

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27.0%

Highlights

* at constant currencies, excluding one-off items and Passoã Reported (* €million) H1 2017/18 H1 2016/17 Reported growth Organic* growth Revenue 48.8 39.4 23.8% 0.5% Cost of sales

• 18.5
• 15.6

18.0% 1.6% GROSS PROFIT 30.4 23.8 27.7%

• 0.2%

Gross margin % 62.2% 60.3%

D&A expenses

• 16.8
• 13.4

25.0% 6.5% OPERATING PROFIT 13.6 10.3 31.1%

• 8.9%

Operating profit margin % 27.8% 26.2%

Share of profit of JVs, net of tax 0.2 1.0

• 78.6%
• 18.3%

EBIT 13.8 11.3 21.4%

• 9.1%

EBIT margin % 28.2% 28.8%

Finance costs

• 1.8
• 1.3

39.8% PROFIT BEFORE TAX 12.0 10.1 19.1% Income tax expense

• 3.3
• 2.3

41.9% PROFIT FOR THE PERIOD 8.7 7.8 12.4% Earnings per share € 0.70 € 0.62 12.4%

Effective tax rate

Highlights

The effective tax rate was approximately 27% for H1 2017/18, slightly higher than the Dutch nominal tax rate, as profits of Passoã are taxed at a higher tax rate in France

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Effective tax rate reconciliation % (in €m) % (in €m) Profit before tax Tax at the Company’s domestic tax rate 25.0

• 3.0

25.0

• 2.5

Effect of tax rates in foreign jurisdictions 3.6

• 0.4

0.4

• 0.0

Non‐deductible expenses 0.1 0.0 0.0 0.0 Effect of share of profits of equity‐accounted investees ‐0.4 0.0 ‐2.5 0.2 R&D tax incentive ‐1.0 0.1 0.0 0.0 Effective tax rate 27.3 (3.3) 22.9 (2.3) H1 2017/18 H1 2016/17

* at constant currencies, excluding one-off items and Passoã Reported (* €million) H1 2017/18 H1 2016/17 Reported growth Organic* growth Revenue 48.8 39.4 23.8% 0.5% Cost of sales

• 18.5
• 15.6

18.0% 1.6% GROSS PROFIT 30.4 23.8 27.7%

• 0.2%

Gross margin % 62.2% 60.3%

D&A expenses

• 16.8
• 13.4

25.0% 6.5% OPERATING PROFIT 13.6 10.3 31.1%

• 8.9%

Operating profit margin % 27.8% 26.2%

Share of profit of JVs, net of tax 0.2 1.0

• 78.6%
• 18.3%

EBIT 13.8 11.3 21.4%

• 9.1%

EBIT margin % 28.2% 28.8%

Finance costs

• 1.8
• 1.3

39.8% PROFIT BEFORE TAX 12.0 10.1 19.1% Income tax expense

• 3.3
• 2.3

41.9% PROFIT FOR THE PERIOD 8.7 7.8 12.4% Earnings per share € 0.70 € 0.62 12.4%

Net profit (excl. the one-off gain in H1 2016/17) was up 23.5% to € 8.7 million

Highlights

Earnings per share of € 0.70 Interim dividend of € 0.35 per share, up 12.9% Number of outstanding shares 12,477,298

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Balance sheet

Net working capital € 18.4 million, traditionally higher in the first half of the year as well as influenced by the inclusion of Passoã

Highlights

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Other non-current liabilities include an assumed debt of € 67.6 million related to the call/put option related to Passoã

H1 2017/18 FY 2016/17 H1 2016/17 Deferred Tax (in €m) Deferred tax assets

• 6.4
• 8.0
• 5.4

Deferred tax liabilities 54.8 54.5 29.6 Total 48.4 46.5 24.2 H1 2017/18 FY 2016/17 H1 2016/17 ASSETS (in €m) Intangible assets 306.5 306.5 216.2 Investments in joint ventures 7.4 7.8 7.3 Other 2.5 2.4 2.3 NON‐CURRENT ASSETS 316.4 316.7 225.8 Cash and cash equivalents 9.0 8.4 2.2 Net working capital 18.4 12.7 16.4 Other 0.7 0.0 TOTAL 344.6 337.8 244.4 Funded by LIABILITIES & EQUITY (in €m) Loans and borrowings 45.3 48.7 47.4 Deferred tax liabilities 48.4 46.5 24.2 Other 68.3 67.8 1.4 NON‐CURRENT LIABILITIES 162.0 163.0 73.1 Loans and borrowings 5.4 4.0 4.0 Derivative financial instruments 0.3

• 1.1

CURRENT LIABILITIES 5.7 4.0 5.1 EQUITY 176.9 170.8 166.2 TOTAL 344.6 337.8 244.4

Continued strong cash flows as a result of our asset-light model

Highlights

Other working capital

• 13.3%
• 4.3

6.7 7.8 0.2 Operating profit H1 2017/18

• 1.4

13.6 Income taxes FOCF H1 2017/18 Passoa working capital Depreciation FOCF H1 2016/17

• 0.2

CAPEX

• 1.1

Cash flow development (in €m) 30

Cash flows were used to pay dividends (€ 3.2 million), and debt reduction (€ 3.6 million)

Important aspects of Lucas Bols’ currency effects

31 50.6% of revenue is denominated in foreign currencies in 2017/18 (compared to 54.3% in 2016/17) JPY exchange rate USD exchange rate AUD exchange rate

1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Mission & strategy 4. Financials H1 2017/18 5. Outlook

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Outlook

We expect continued revenue growth of the global brands in Western Europe, Emerging Markets and the USA. Asia-Pacific is expected to gradually return to revenue growth in the second half of 2017/18. The aftermath of the hurricane season in the Caribbean is expected to have a negative impact of around 1% on global brands revenue growth for the full year Due to our hedging policy the currency effect is expected to be limited on an EBIT level for the full year 2017/18 The underlying market dynamics in the global cocktail market remain healthy

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The company will continue to benefit from the inclusion of the Passoã results for the full 12 months of 2017/18 On the regional brands we expect the current trends in revenue and margins to continue in the second half of 2017/18. For the mid-term we maintain our view of stabilization of the regional brands on an EBIT-level