Analyst presentation H1 2018/19 Half year ended 30 September 2018, - - PowerPoint PPT Presentation

Analyst presentation H1 2018/19 Half year ended 30 September 2018, 20 November 2018

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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H1 2018/19 1. Lucas Bols at a glance 2. Highlights H1 2018/19 3. Operational highlights 4. Financials H1 2018/19 5. Outlook

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Lucas Bols at a glance

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18.5% 22.7%

EBIT* €m Revenue €m

19.9% 20.0% 13.4% 46.7%

Global brands organic revenue growth of 3%

Regional brands Liqueurs Value brands Dutch Jenever portfolio

70,2%

Regional brands € 4.9 mln. Global brands € 24.0 mln.

29,8%

79% 21%

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Revenue split H1 2018/19 Global brands

Italian Liqueurs White Spirits

Bols Liqueurs range Gross Profit split H1 2018/19 Regional brands € 10.2 mln. Global brands € 37.6 mln.

83% 17%

Passoã Nuvo

Strong and diversified global footprint, with around half

• f the revenues coming from outside of Western Europe

6 Group revenue per geographical segment based on H1 2018/19

Clear strategy to capture the growing cocktail trend and premiumization while maintaining the competitiveness of regional brands

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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

H1 2018/19 1. Lucas Bols at a glance 2. Highlights H1 2018/19 3. Operational highlights 4. Financials H1 2018/19 5. Outlook

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Highlights H1 2018/19*

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Revenue Gross margin Net Profit Dividend Regional performance EBIT The overall gross margin came in at 60.5% (down 110 bps) as a result of relatively lower shipments to higher margin markets Net profit came in at € 7.9 million, which is in line with last year Interim dividend set at € 0.35 per share in cash, equal to last year EBIT amounted to € 12.9 million in line with last year North America achieved double-digit revenue growth on the back of a strong performance in the US. Asia- Pacific showed healthy revenue growth, while both Western Europe and Emerging Markets saw revenue decline due to the performance of the regional brands Revenue of € 47.8 million, in line with last year Brand performance Global brands reported revenue growth of 3.0%, while revenue of the regional brands was down 10.5% mainly as a result of temporary import restrictions in Western Africa and lower jenever/vieux sales in the Netherlands

*All comparisons are on an organic basis, i.e. at constant currencies and excluding one-off items. In H1 2018/19 the one-off items consist of one-off restructuring costs of € 0.3 million (net) at Avandis. Pre-IFRS 15/16.

H1 2018/19 1. Lucas Bols at a glance 2. Highlights H1 2018/19 3. Operational highlights 4. Financials H1 2018/19 5. Outlook

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Operational highlights H1 2018/19 – global brands

11

Bols Liqueurs range: Revenue in line with last year

• Continued growth in the US, driven by increased distribution in retail chains
• Strong performance in China was off-set by a decline in Japan
• Bols Watermelon and Bols Cucumber successfully launched as LowBols heroes
• New flavours added to the ‘Add Flavor To Your Margarita’ program
• Multiple activation programs aimed at both on and off-trade

White spirits : Overall stable performance

• Bols Genever Red light Negroni expansion in the US, activation in several
• ther markets
• Continued double digit growth trend for Damrak Gin in both the US and the

Netherlands

• Damrak Gin launched in South-Korea and listed at Formula 1 in Singapore
• Bols Vodka under pressure in Canada and Argentina. Continued good

performance in the Netherlands

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Operational highlights H1 2018/19 - Global brands

Italian Liqueurs: Performance slightly below last year

• Highest score of Galliano L’Aperitivo in Wine Enthusiast Magazine bitter

test

• Social media campaign for Galliano L’Aperitivo in the US
• Solid performance of Galliano in core market Australia
• Strong performance Vaccari following global brand restyling
• Vaccari on-premise activation in key cities in Mexico

Passoã: Continued good performance with mid-single digit revenue growth

• Distribution expanded in the US to 35 states and new listings, both on- and off-trade
• Recovery in Puerto Rico, growth in Asia-Pacific
• New brand activations in Western Europe
• Signature cocktail “Porn Star Martini” expansion continues in the UK

Nuvo: Relaunch in de US

• Gradually building up the distribution with focus on a limited number of states
• First signs of activations are positive
• Strong retail activation program planned for H2 2018/19

Operational highlights H1 2018/19 - Regional brands

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• In Western Africa the company experienced temporary import restrictions into Togo and Benin
• Revenue Dutch domestic jenever/vieux portfolio was down as a result of the declining market
• Planned relaunch of Bols Jenever and Bokma with strong promotional activities in the second half of 2018/19
• Activation Bols Jenevers with new activation program “Bols komt met een biertje” in October
• New drinks strategy Coebergh in the Netherlands and activation programs Pisang Ambon in Belgium and Denmark

Operational developments H1 2018/19 - US

Relaunch of Nuvo with focus on a limited number of states . Strong organic revenue growth of 12.9% Damrak gin - Accelerate distribution in the US by a Social Media campaign “Ride like an Amsterdammer” Strengthened brand awareness Bols Genever through activations such as #redlightnegroni during the Negroni week in the USA Further strengthened the retail position of Bols Liqueurs on the back of the recent listings and continued growth of market share

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Continued strong performance Passoã, with additional retail and on- trade listings secured

Awards

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Galliano L’ Aperitivo

• Wine Enthusiast 94 points

Highest rated bitter

• Listed in the top 100 spirits of

2018

1. Lucas Bols at a glance 2. Highlights H1 2018/19 3. Operational review 4. Financials H1 2018/19 5. Outlook

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Revenue and EBIT in line with last year

Highlights

Revenue amounted to € 47.8 million, which was in line with last year at constant

• currencies. The effect of currencies on revenue was € 0.9 million negative.

The gross margin stood at 60.5%, a decrease compared to 62.2% in the first half of 2017/18. This decrease is the result of currencies, relatively lower shipments to higher margin markets and the introduction of Nuvo. EBIT for the first half of 2018/19 came in at € 12.9 million in line with last year, at constant currencies and excluding the one-off restructuring charge at Avandis of € 0.3 million (net of tax). The EBIT margin came in at 26.9%, organically in line with last year. 17

* Excluding the impact of IFRS 15 and 16 Organic growth: at constant currencies, excluding one-off items

60.5%

Global brands showed an improvement in revenue of 3.0%

Revenue development (in €m)

63.7% 48.4% 62.2%

Reported gross margin

Group revenue structure (H1 2018/19)

Δ FX 1.1

• 0.9

FY 2017/18 Δ Global Brands Δ Regional Brands

• 1.2

FY 2018/19 48.8 47.8

• 2.0%

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* Excluding the impact of IFRS 15 and 16

Organic growth: at constant currencies, excluding one-off items

79% 21%

Global brands Regional brands

Revenue (* €m) H1 2018/19* H1 2017/18 Reported growth % Organic growth % Global brands 37,6

37,4

0,7% 3,0% Regional brands 10,2 11,5

• 11,1%
• 10,5%

Total

47,8 48,8

• 2,0%
• 0,3%

Revenue by region

Revenue development at constant currencies (in €m) Western Europe

• Revenue global brands broadly in line with last year
• Strong growth in the UK and the Netherlands, offset by

lower shipments to France

• Domestic jenever/vieux portfolio was down in line with the

decline of the market

51.9%

Western Europe Asia-Pacific

• At constant currencies revenue was up
• Mainly driven by accelerated growth in China
• Japan is showing a decline due to challenging market

conditions and related stock reductions

• Australia/New Zealand: a small growth in a stable market

environment Asia-Pacific

16.7%

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FY 2017/18 47.8 Δ North America Δ Western Europe Δ Asia- Pacific Δ FX Δ Emerging Markets FY 2018/19

• 0.8

48.8 0.9

• 0.9

0.2

• 0.5

* Excluding the impact of IFRS 15 and 16

Organic growth: at constant currencies, excluding one-off items

Revenue (* €m) H1 2018/19* H1 2017/18 Reported growth % Organic growth % Western Europe 24,8 25,8

• 3,7%
• 3,1%

Asia - Pacific 8,0 8,3

• 3,7%

2,6% North America 9,5 8,7 9,6% 11,2% Emerging Markets 5,5 6,1

• 9,5%
• 7,7%

Total 47,8 48,8

• 2,0%
• 0,3%

Revenue by region

Revenue development at constant currencies (in €m) North America

• Positive growth trend continues
• Double digit growth in the US, mainly driven by Passoã and

Damrak Gin as well as by the introduction of Nuvo

• Bols Liqueurs continues to gain market share
• Lower revenue in Canada more than offset by growth of

Passoã in Puerto Rico North America Emerging Markets

• Global brands revenue at constant currencies is slightly up
• Eastern Europe is showing a decline on high comps
• South America is showing growth. The positive impact of the

change in route to market more than compensates the decline in Argentina

• The Caribbean is recovering from last year’s hurricane impact
• Regional Brands impacted by temporary import restrictions in

Western Africa Emerging Markets

19.9%

11.5%

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FY 2017/18 47.8

• 0.8

FY 2018/19 Δ Western Europe 0.2 Δ Asia- Pacific 0.9 Δ North America

• 0.5

Δ Emerging Markets

• 0.9

Δ FX 48.8

Revenue (* €m) H1 2018/19* H1 2017/18 Reported growth % Organic growth % Western Europe 24,8 25,8

• 3,7%
• 3,1%

Asia - Pacific 8,0 8,3

• 3,7%

2,6% North America 9,5 8,7 9,6% 11,2% Emerging Markets 5,5 6,1

• 9,5%
• 7,7%

Total 47,8 48,8

• 2,0%
• 0,3%

* Excluding the impact of IFRS 15 and 16

Organic growth: at constant currencies, excluding one-off items

Gross profit margin influenced by country mix

58.2% 57.4% 70.6%

Gross profit development (in €m)

62.2% 60.5%

Reported gross margin

Gross margin development at constant currencies

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61.4% FY 2017/18

• 0.7

Δ Western Europe 0.0 Δ Asia-Pacific 0.4 Δ North America

• 0.4

Δ Emerging Markets FY 2018/19

• 0.9

Δ FX 30.4 28.9

49,9% 19,5% 18,9% 11,6%

Western Europe Asia Pacific North-America Emerging Markets

Group gross profit structure (H1 2018/19) Total

• 110 bps

Western Europe

• 80 bps

Asia-Pacific

• 160 bps

North America

• 130 bps

Emerging Markets

• 140 bps

26.9%

EBIT in line with last year

EBIT development (in €m)

28.2%

Reported EBIT margin

30.6% 69.4%

Highlights Organically, EBIT for H1 2018/19 was up 0.7% to € 12.9 million FX negatively impacted EBIT by € 0.7 million In H1 2018/19, Lucas Bols recorded a

• ne-off € 0.3 million net restructuring

charge at Avandis

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42.5%

• 0.2

0.4 FY 2017/18 0.0 Δ Global Brands Δ Unallocated Δ Regional Brands Δ FX 12.9 13.8 Δ One-offs FY 2018/19

• 0.3
• 0.7
• 6.5%

42.5%

Global brands

Highlights

At constant currencies the global brands were up 3.0%. The Passoã brand continued its good performance with mid- single digit revenue growth. EBIT rose 2.2% to € 16.0 million year-on-year at constant currencies (currencies had a negative impact of € 0.7 million in H1 2018/19) and excluding the one-off restructuring charge at Avandis (€ 0.1 million allocated to the global brands).

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Reported (* €m) H1 2018/19* H1 2017/18 Reported growth Organic growth Revenue 37,6 37,4 0,7% 3,0% Cost of sales

• 13,6
• 12,5

GROSS PROFIT 24,0 24,9

• 3,5%
• 0,5%

Gross margin % 63,7% 66,6% 63,8%

D&A expenses

• 7,9
• 8,5
• 7,0%
• 5,8%

% of revenues

• 21,0%
• 22,7%

OPERATING PROFIT 16,1 16,4

• 1,8%

2,3%

Operating margin % 42,8% 43,9%

Share of profit of JVs, net of tax

• 0,1

0,1 EBIT 16,0 16,4

• 2,7%

2,2%

EBIT margin % 42,5% 44,0%

The white spirits segment showed an overall stable performance, with the double-digit growth trend for Damrak Gin continuing in both the US and the Netherlands. Revenue of the Bols Liqueurs range was in line with the year-ago period. The Italian liqueurs performed slightly below last year as a result

• f lower shipments of Galliano that were partially offset by positive

developments for Vaccari in both the Netherlands and Mexico following the restyling of the brand.

* Excluding the impact of IFRS 15 and 16 Organic growth: at constant currencies, excluding one-off items

Regional brands

Highlights

Organically, excluding the one-off restructuring charge at Avandis of € 0.2 million in H1 2018/19, EBIT for the regional brands decreased by 5%. The decline of regional brands was mainly related to Western Africa where the company experienced temporary import restrictions for its brands into Togo and Benin.

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Reported (* €m) H1 2018/19* H1 2017/18* Reported growth Organic growth Revenue 10,2 11,5

• 11,1%
• 10,5%

Cost of sales

• 5,3
• 6,0

GROSS PROFIT 4,9 5,5

• 10,4%
• 9,2%

Gross margin % 48,4% 48,0%

D&A expenses

• 0,6
• 0,9
• 26,9%
• 26,9%

% of revenues

• 6,1%
• 7,4%

OPERATING PROFIT 4,3 4,7

• 7,3%
• 5,9%

Operating margin % 42,3% 40,6%

Share of profit of JVs, net of tax

0,0 0,2 EBIT 4,3 4,8

• 9,9%
• 5,0%

EBIT margin % 42,5% 42,0%

Revenue of the domestic genever/vieux portfolio in the first half of the year was down as a result of the declining market.

* Excluding the impact of IFRS 15 and 16 Organic growth: at constant currencies, excluding one-off items

Net profit in line with last year

Highlights

The effective tax rate was approximately 29% for the first half of 2018/19 (H1 2017/18: 27%), higher than the Dutch nominal tax rate as profits of Passoã are taxed at a higher rate in France.

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Earnings per share (pre-IFRS 16) of € 0.64 (post-IFRS 16: € 0.63). Excluding one-off costs the earnings per share came in at € 0.66. Interim dividend set at € 0.35 per share in cash, equal to last year. Number of shares outstanding are 12,477,298.

* Excluding the impact of IFRS 15 and 16 Organic growth: at constant currencies, excluding one-off items

Given the envisaged reduction in the Dutch corporate tax rate, a significant one-off gain is expected in the second half of the year, related to the deferred tax liability.

Amounts in EUR '000 for the six months period ended 30 September 2018 reported IFRS15 & 16 adoption impact 2018 pre-IFRS

Revenue 45.208 2.618 47.826 Cost of sales (18.873) (33) (18.906) Gross profit 26.335 2.585 28.920 Distribution and administrative expenses (13.331) (2.633) (15.964) Operating profit 13.004 (48) 12.956 Share of profit of joint ventures, net of tax (81)

• (81)

Finance income 46

• 46

Finance costs (1.816) 90 (1.726) Profit before tax 11.153 42 11.195 Income tax expense (3.262) (10) (3.272) Profit for the period 7.891 32 7.923

Amounts in EUR '000 as at 30 September 2018 reported IFRS16 adoption impact 30 September 2018 pre-IFRS

Assets Property, plant and equipment 9.614 (7.084) 2.530 Other non-current assets 314.242

• 314.242

Total non-current assets 323.856 (7.084) 316.772 Total current assets 44.790

• 44.790

Total assets 368.646 (7.084) 361.562 Equity Total equity 188.108 32 188.140 Liabilities Loans and borrowings 40.976

• 40.976

Other non-current financial liabilities 75.245 (6.346) 68.899 Employee benefits 293

• 293

Deferred tax liabilities 45.242 10 45.252 Total non-current liabilities 161.756 (6.336) 155.420 Loans and borrowings 4.608

• 4.608

Trade and other payables 12.854

• 12.854

Corporate income tax payable 129

• 129

Other current financial liabilities, including derivatives 1.191 (780) 411 Total current liabilities 18.782 (780) 18.002 Total equity and liabilities 368.646 (7.084) 361.562

IFRS 15 and 16 impact

Extract from Interim report for H1 2018/19 26

H1 financing update: a new financing structure with ample covenant headroom and significantly lower rates

Refinancing results

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Rationale for refinancing

• The current facilities have an aggregate of € 96m of committed

facilities with a tenor until February 2021, provided by Rabobank and NIBC

• Existing facilities provide little operational flexibility and no room

to fund potential add-on acquisitions

• Main objectives of the refinancing:
• Achieve lower rates by benefitting from improved credit profile

and favorable loan market environment

• Extend tenor by 5 years
• Maintain sufficient covenant flexibility and liquidity to exercise

Passoã and be able to exercise Nuvo options

• Headroom under facilities to (partially) fund future add-on

acquisitions

• Increase operational flexibility by loosening of loan

documentation (information undertakings, acquisition criteria)

• ABN AMRO to join the syndicate as new lender alongside

encumbered banks (Rabobank and NIBC)

• Annual interest costs assumed to be reduced by around

€ 0.4m

• Additional liquidity headroom of € 34m
• Leverage Ratio covenant improved from 3.0x to 4.0x
• Pay-back of one year with capitalised fees write off of

€ 0.4m

• One-off advisory costs and the accelerated amortization
• f the financing costs for the existing facilities will be

charged to the second half of the year

Balance sheet and cash flow

Highlights

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Other non-current liabilities include an assumed debt of € 68.7 million related to the call/put option related to Passoã The net debt to EBITDA ratio is 2.9. The net debt to EBITDA ratio including assumed debt was 4.3

6.1 13.0 Δ Other 0.5 FOCF H1 2017/18 Operating profit H1 2018/19 0.3 6.7

• 0.8

Δ Depreciation Δ CAPEX Δ Income tax Δ Working capital

• 3.8

FOCF H1 2018/19

• 3.1
• 8.9%

Cash flow development (in €m)

Cash flow was temporarily impacted by catch up on income tax payable in France as well as CAPEX investments in our headquarters and € 0.7 million negative currency impact Cash flows were used to pay dividends (€ 3.1 million), and debt reduction (€ 4 million)

Actual Actual

Actual

Actual Reported (* €m) H1 2018/19* FY 2017/18

FY 2017 H1 2017/18 Intangible assets 306,9 306,9 306 306,5 Investments in joint ventures 6,8 7,4 7,79 7,4 Other 3,1 2,6 0,6 2,5 NON-CURRENT ASSETS

316,8 316,9

317

316,4

Cash and cash equivalents 12,2 12,4 12,4 9,0 Net working capital 19,6 14,4 18,4 Other 0,0 0,1 0,05 0,7 TOTAL

348,6 343,8

359

344,6

Funded by equity and liabilities EQUITY

188,1 183,6

184

176,9

Loans and borrowings 41,0 43,9 43,9 45,3 Deferred tax liabilities 45,2 43,1 43,1 48,4 Other 69,2 68,8 68,5 68,3 NON-CURRENT LIABILITIES

155,4 155,8

156

162,0

Loans and borrowings 4,6 4,0 4,04 5,4 Derivative financial instruments 0,4 0,4 0,4 0,3 CURRENT LIABILITIES

5,0 4,4

20

5,7

TOTAL

348,6 343,8

359

344,6 Actual Actual Actual Actual Reported (* €m) H1 2018/19* FY 2017/18 FY 2017 H1 2017/18 Deferred tax assets 3,3 5,3 8,03 6,4 Deferred tax liabilities

• 48,6
• 48,4
• 54,5
• 54,8

Total deferred tax

• 45,2
• 43,1 -46,5
• 48,4

Net working capital € 19.6 million, traditionally higher in the first half of the year

Important aspects of Lucas Bols’ currency effects

29 JPY exchange rate USD exchange rate AUD exchange rate GBP exchange rate

• 54% of revenue is denominated in foreign

currencies in H1 2018/19 (compared to 49.7% in FY 2017/18 and 50.6% in H1 2017/18 )

• Lucas Bols has a policy of hedging 60 - 80% of its

net cashflows in foreign currencies at the start of the financial year

• In H1 2018/19, as a result of the stronger euro,

foreign currencies had a negative impact of € 0.9 million on revenue and € 0.7 million on EBIT

• Taking into account the foreign currency positions

already hedged and assuming the current level of the euro, all foreign currencies combined are expected to have a negative impact of around € 1.2 million on EBIT in FY 2018/19 vs. the 2017/18 rates

FY 2018/19 1. Lucas Bols at a glance 2. Highlights H1 2018/19 3. Operational highlights 4. Financials H1 2018/19 5. Outlook

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Outlook

We expect revenue growth from the global brands to further increase in the second half of the 2018/19 financial year, mainly driven by the strong growth in the US market. The performance of the regional brands will remain under pressure in the second half of the year. The underlying dynamics in the global cocktail markets remain healthy.

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Taking into account the impact of the aforementioned items and the one-offs, we remain confident in delivering an

• verall performance in line with our mid-term strategic ambitions.

Currencies will have a negative impact of around € 1.2 million on full-year 2018/19 EBIT. Furthermore as stated before, given the initially higher A&P investments and royalty payments, the revenue of Nuvo will translate into a limited contribution to EBIT.