Analyst presentation H1 2015/16 Half year ended 30 September 2015 - - PowerPoint PPT Presentation

18 November 2015

Analyst presentation H1 2015/16

Half year ended 30 September 2015

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Disclaimer

DISCLAIMER THIS PRESENTATION may contain forward looking statements. These statements are based on current expectations, estimates and projections of Lucas Bols¹s 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.

1. Lucas Bols at a glance 2. Highlights H1 2015/16 3. Operational review 4. Financials H1 2015/16 5. Outlook

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Amsterdam 1575

Lucas Bols at a glance

In over 110 countries 24 brands 42 liqueur flavours Focus on cocktails and genever

North America Asia-Pacific Western Europe Emerging Markets

FY 2014/15

>50% of revenue outside Western Europe

Note 1: Excluding IPO costs

Operating profit €m Revenue €m 22.1 1) 77.7 28%

margin 12.9% 45.9% 22.7% 18.5%

Strong offering of global brands and regional brands

Global brands

White Spirits Italian Liqueurs Bols Liqueurs Range

Regional brands

Liqueurs Value brands Dutch Jenever portfolio

69.3% 30.7%

Revenue structure

Regional brands Global brands FY 2014/15 5

1. Lucas Bols at a glance 2. Highlights H1 2015/16 3. Operational review 4. Financials H1 2015/16 5. Outlook

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Highlights H1 2015/16

Revenue FOCF Net Profit Net Debt Gross Margin % Operating Profit Revenue of € 39.4 million, down 2.9% organically, mainly following one-off stock reductions in Asia-Pacific. North America reports healthy 3.4% organic growth as a result of our strategy for growth. Free operating cash flow of € 8.8 million (€ 8.3 million in H1 2014/15). Net profit of € 7.7 million, versus € 2.0 million in H1 2014/15. Net debt significantly reduced to € 53.5 million, with a net debt to EBITDA ratio of 2.4. Operating profit of € 11.6 million, down 5.3% organically over last year. Gross margin of 60.8%, at the same level as last year, at constant currency. EPS Dividend Earnings per share of € 0.61. The interim dividend in cash set at € 0.31 per share.

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Highlights regions in H1 2015/16

Western Europe North America Asia-Pacific

• Western Europe operated in line with H1 last year.
• Strong performance in the on-trade market in Scandinavia and Southern Europe.
• Challenging circumstances in the retail markets Belgium, Germany and the UK.
• Positive trend sales of global brands by Maxxium Netherlands.
• In North America we see our market strategy for growth pay-off.
• Good performance of the US market, in accordance with our expectations, leading to healthy organic revenue growth.
• Growth in an increasing number of states and a growing customer base.
• Decrease in revenues caused by one-off in-market stock reductions in Australia and South East Asia.
• In Australia adjusted supply chain structure, leads to reductions in warehouses by our local distributor.
• South East Asia, in anticipation of a change in distribution partner effective 1 January, 2016.
• The remainder of the Asia Pacific region performed in line with last year.

Emerging Markets

• Emerging Markets showed a slight increase compared to last year.
• Revenues in Eastern Europe (including Russia) were in line with last year.
• In Russia we returned to growth in the market, due to continued A&P investments.
• Revenues in Africa were slightly down balanced by higher sales in Central and South America.

1. Lucas Bols at a glance 2. Highlights H1 2015/16 3. Operational review 4. Financials H1 2015/16 5. Outlook

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Lucas Bols’ mission & strategic framework

Mission Lucas Bols We aim to 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 operational excellence 3 2 4 1

Lead the global Cocktail Market

New product innovations The World’s Oldest Distilled spirit Brand Strong quality recognition Bols Bartending Academy Bols Business Class Bols Around the World Online Bartender Community Bols.com for inspiration Bols brand ambassadors Trade shows Leading the cocktail culture Extensive cocktail database

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Global Bols Bartending program

1 2 3

Ensures Lucas Bols to be at the fore front of the cocktail culture and to be the #1 source of inspiration and education for the global bar industry

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BOLS BARTENDING BOLS BARTENDING SUPPORT BOLS AMSTERDAM EXPERIENCE

BARTENDING ACADEMY BOLS AROUND THE WORLD BOLS BUSINESS CLASS SEMINARS TRAINER TRAINING ONTRADE ACTIVITIES TRADESHOW SUPPORT BARTENDING ACADEMY HOUSE OF BOLS LUCAS BOLS DISTILLERY DAMRAK CANAL TOUR HISTORICAL BAR TOUR COCKTAIL BAR TOUR

Innovations are drivers for growth

Product innovation

In the past months three new liqueur flavors have been introduced: Bols Date Bols Pineapple Chipotle Bols Blackberry (relaunch)

Product development

Product innovation is essential for spirits players to differentiate themselves and capture growth. Introducing new flavours and launching distinctive and appealing packaging are key. Lucas Bols aims at introducing new products regularly.

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US spirits industry – 3-tier system

Lucas Bols USA 24 people dedicated to sales and marketing

MHW – compliance and customer service

Approximately 50 thousand Lucas Bols customer base – 80% on premise and 20% off premise Consumers On-premise and retail activation and social media

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National manufacturers or suppliers

(Breweries, Wineries, Distilleries and Importers)

State wholesalers

(Licensed importers, Distributors and Control Boards)

Local retailers (Licensed Outlets)

(On Premises: Bars, Clubs, Restaurants (Off Premises: Liquor stores, Grocers)

Consumers

Federal Excise Tax

67 distributors nationwide Covering 33 open states and 17 control states

State Excise Tax State Sales Tax

Lucas Bols’ set up for success in the US

• Strong portfolio of liqueurs and spirits to leverage the growing cocktail trend
• Lucas Bols’ route to market in place
• Efficient supply chain / back office model
• Dedicated sales and marketing organization
• Established nationwide distributor partnerships
• Most advanced sales data insights worldwide; every sku to every account
• Account base of approximately 50 thousand nationwide and growing
• Bols liqueurs declining trend, reversed to growth

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Distributors

Lucas Bols US growth potential

Strongly represented with Lucas Bols USA sales team in the largest states. Leading role with the Bols Liqueurs range within our distributor network; at the center of their spirits portfolio when selling the cocktail. Unique position with current Bols Liqueurs sales in the on premise (80%) versus the

• ff premise (20%) where the industry standard is reverse.

Growing number of contracts with national and regional on-premise chains. Known as the cocktail authority with the Bols around the World cocktail competition and the Bols Bartending Academy on tour; educating and inspiring distributors, bartenders and consumers. Dedicated brand ambassador team in place with Bols Genever within nationwide growing bartender community. Reaching and activating the consumer with the Galliano retro drinks strategy. Expanding distribution of Damrak Gin nationwide and building on the growing imported Gin trend.

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1. Lucas Bols at a glance 2. Highlights H1 2015/16 3. Operational review 4. Financials H1 2015/16 5. Outlook

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Corporate P&L H1 2015/16

Highlights

One-off reduction of in-market stocks in Australia and South East Asia:

Reported Organic REPORTED (in €m) H1 2015/16 H1 2014/15 growth growth Revenue 39.4 40.8

• 3.4%
• 2.9%

Cost of Sales (15.4) (15.6) GROSS PROFIT 24.0 25.2

• 4.9%
• 2.9%

60.8% 61.8%

D&A Expenses (12.4) (12.3)

31.4% 30.1%

OPERATING PROFIT 11.6 12.9

• 10.3%
• 5.3%

29.4% 31.7%

Impact on revenue of € 0.9 million Impact on gross profit and operating profit of € 0.7 million

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Important aspects of Lucas Bols’ currency effects

Foreign exchange impact Rates Rates

(in €m)

H1 2015/16 H1 2014/15 Delta % US dollar

USD

1.12 1.27 12.7% Japense yen

JPY

132.59 118.89

• 10.3%

Australian dollar

AUD

1.51 1.44

• 4.5%

Russian rouble

RUB

70.00 50.50

• 27.9%

Revenue denominated in foreign currencies is 53.5% in H1 2015/16

20 60,.8%

Revenue development global and regional brands

Revenue development at constant currencies (in €m)

40.8 (0.9) (0.2) (0.2) 39.4 H1 2015/16

Foreign exchange effect Δ Regional brands

H1 2014/15

Δ Global brands 65.3% 50.9% 61.8%

Gross margin

Group revenue structure (H1 2015/16)

Regional brands Global brands 69.0% 31.0%

• 3.3%
• 1.9%

Revenue Reported Reported Organic

(in €m)

H1 2015/16 growth % growth %

Global Brands 27.2

• 3.8%
• 3.3%

Regional Brands 12.2

• 2.6%
• 1.9%

Total 39.4

• 3.4%
• 2.9%

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Revenue structure (H1 2015/16)

Revenue development per geographical segment

40.8 (0.4) (1.1) 0.2 0.1 (0.2) 39.4

• 2.3%
• 11.1%

+3.4% +2.5%

H1 2015/16

Foreign exchange effect Δ Emerging markets Δ North America Δ Asia- Pacific Δ Western Europe

H1 2014/15

Revenue development at constant currencies (in €m)

47.4% 20.7% 19.2% 12.7%

Emerging Markets North America Western Europe Asia-Pacific Revenue Reported Reported Organic (in €m) H1 2015/16 growth % growth % Western Europe 18.7

• 1.9%
• 2.3%

Asia Pacific 8.1

• 17.0%
• 11.1%

North America 7.6 15.4% 3.4% Emerging Markets 5.0

• 7.0%

2.5% Total 39.4

• 3.4%
• 2.9%

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Gross profit development per geographical segment

25.2 (0.5) (0.7) 0.1 0.3 (0.5) 24.0

• 4.6%
• 9.3%

+2.7% + 8.8%

H1 2015/16

Foreign exchange effect Δ Emerging markets Δ North America Δ Asia- Pacific Δ Western Europe

H1 2014/15

55.3% 71.8% 67.2% 58.6%

Gross profit development at constant currencies (in €m)

61.8% 60.8%

Gross margin

Gross margin development at constant currencies

Total +0bps Western Europe

• 130 bps

Asia Pacific +150 bps North America

• 40 bps

Emerging Markets +410 bps

23 29.4%

Operating profit development global and regional brands

Operating profit development at constant currencies (in €m)

12.9 (0.2) (0.4) (0.1) (0.6) 11.6

• 1.6%
• 6.9%
• 1.6%

H1 2015/16

Foreign exchange effect Δ Regional brands

H1 2014/15

Δ Global brands 44.0% 43.2% 31.7%

Operating margin

Operating profit structure (H1 2015/16)

Regional brands Global brands 30.6%

Δ

Unallocated 69.4%

D&A expenses Reported Reported Organic

(in €m)

H1 2015/16 growth % growth %

Global Brands 5.8

• 4.2%
• 3.0%

Regional Brands 0.9 5.1% 5.7% Unallocated 5.6 5.5% 1.6% Total 12.4 0.7%

• 0.4%

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We have maintained healthy margins

D&A expenses were broadly stable at last year’s level. Transfer of the blending and bottling of Bols Vodka to our production joint-venture Avandis. Overall, gross margin stable at last years level and operating margin down 80 bps. Brands’ reported gross margin development

% of organic revenue Gross Gross Operating Operating

Delta H1 2014/15 - H1 2015/16

Profit Margin Profit Margin Company 24.0 +0 bps 11.6

• 80 bps

Global Brands 17.8 +90 bps 12.0

+80 bps

Regional Brands 6.2

• 180 bps

5.3

• 230 bps

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Post IPO significantly lower finance costs

REPORTED (in €m) H1 2015/16 H1 2014/15 Revenue 39.4 40.8 Cost of Sales (15.4) (15.6) GROSS PROFIT 24.0 25.2

60.8% 61.8%

D&A Expenses (12.4) (12.3)

31.4% 30.1%

OPERATING PROFIT 11.6 12.9

29.4% 31.7%

Share of profit of JV, net of tax 0.0 0.0 EBIT 11.6 13.0

29.5% 31.8%

Finance costs (1.3) (9.0) PROFIT BEFORE TAX 10.3 3.9 Income tax expense (2.6) (2.0) PROFIT FOR THE PERIOD 7.7 2.0 Finance costs (in €m) H1 2015/16 H1 2014/15 Senior debt (& Mezzanine) 1.2 4.6

• Cum. preference shares

0.0 3.9 Amortisation fees 0.1 0.5 Total 1.3 9.0 Finance ratio's (in €m) H1 2015/16 H1 2014/15 FY 2014/15 Debt 57.3 118.7 61.8 Cash (3.8) (2.9) 0.6 Net Debt 53.5 115.8 61.2 Leverage ratio 2.4 5.3 2.6

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Income Tax Expense

REPORTED (in €m) H1 2015/16 H1 2014/15 Revenue 39.4 40.8 Cost of Sales (15.4) (15.6) GROSS PROFIT 24.0 25.2

60.8% 61.8%

D&A Expenses (12.4) (12.3)

31.4% 30.1%

OPERATING PROFIT 11.6 12.9

29.4% 31.7%

Share of profit of JV, net of tax 0.0 0.0 EBIT 11.6 13.0

29.5% 31.8%

Finance costs (1.3) (9.0) PROFIT BEFORE TAX 10.3 3.9 Income tax expense (2.6) (2.0) PROFIT FOR THE PERIOD 7.7 2.0 Tax (in €m) H1 2015/16 H1 2014/15 Profit before tax 10.3 3.9

• Cum. Pref. Dividend
• 3.9

Result/ Dividend subsidiaries 0.0 0.0 10.3 7.9 Tax Expense (2.6) (2.0) Tax rate 25.6% 50.1%

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Net profit

Highlights

Earnings per share of € 0.61 Interim cash dividend of € 0.31 per share Number of shares outstanding are 12,477,298 REPORTED (in €m) H1 2015/16 H1 2014/15 Revenue 39.4 40.8 Cost of Sales (15.4) (15.6) GROSS PROFIT 24.0 25.2

60.8% 61.8%

D&A Expenses (12.4) (12.3)

31.4% 30.1%

OPERATING PROFIT 11.6 12.9

29.4% 31.7%

Share of profit of JV, net of tax 0.0 0.0 EBIT 11.6 13.0

29.5% 31.8%

Finance costs (1.3) (9.0) PROFIT BEFORE TAX 10.3 3.9 Income tax expense (2.6) (2.0) PROFIT FOR THE PERIOD 7.7 2.0

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Balance sheet

Net working capital in line with H1 2014/15

Highlights

Deferred Tax (in €m) H1 2015/16 H1 2014/15 FY 2014/15 Deferred tax assets (8.1) (7.2) (9.3) Deferred tax liabilities 30.7 28.6 29.4 Total 22.6 21.4 20.0

Traditional higher working capital in first half year

Assets (in €m) H1 2015/16 H1 2014/15 FY 2014/15 Intangible assets 214,9 214,9 214,9 Investments in joint-ventures 5,1 5,7 5,1 Other 2,0 2,2 2,0 Non-current assets 222,0 222,8 222,1 Cash and cash equivalents 3,8 2,9 0,6 Net working capital 16,9 17,1 14,5 Total 242,7 242,9 237,2 Funded by: Liabilities & equity (in €m) H1 2015/16 H1 2014/15 FY 2014/15 Loans and borrowings 52,7 74,8 52,7 Other non-current fin. Liabilities 0,6 69,7 0,9 Deferred tax liabilities 22,6 21,4 20,0 Other 0,7 0,5 0,7 Non-current liabilities 76,6 166,4 74,4 Loans and borrowings 4,0 42,5 8,4 Derivative financial instruments 0,5 1,4 1,2 Current Liabilities 4,5 43,9 9,6 Equity 161,6 32,6 153,2 Total 242,7 242,9 237,2

29 (0.1) 0.2 (0.2) (0.0) (2.7) 8.8 8.3 Δ NWC (Capex) D&A (Taxes) Operating profit 11.6 H1 2014/15 FOCF

Continued high cash generation

(Other items) H1 2015/16 FOCF

Free Operating Cash Flow H1 2015/16 Delta vs. (in €m) H1 2014/15 Operating profit 11.6 (1.3) Taxes (0.1) (0.1) Depreciation & amortisation 0.2 (0.0) Capital expenditure (0.2) (0.0) Other items (0.0) 0.4 Δ Working capital (2.7) 1.5 Free operating cash flow 8.8 0.5

1. Lucas Bols at a glance 2. Highlights H1 2015/16 3. Mission & strategy 4. Financials H1 2015/16 5. Outlook

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Outlook

Further development in our global brands, due to an on going improvement in the global economies, contributing to a growing cocktail culture. Less impact from currency fluctuations expected on operating profit in the second half, due to hedges in place. Lesser effect of one-off stock reductions in Asia Pacific. Continued focus on accelerated growth of our brands in the US, with our organisation Lucas Bols USA. Continued long-term growth of the global brands and stabilisation of the regional brands. Positive view about the future developments of our brands, although a number of markets will remain challenging.

Q&A