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. 2
1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook 3
Lucas Bols at a glance Amsterdam 1575 Over 110 countries, 53% revenue outside Western Europe North America Emerging Markets 13.4% 18.5% 20.0% 46.7% 22.7% 19.9% Western Europe 80.5 margin 23% 18.2 >25 brands 46 Bols liqueur Asia-Pacific Revenue m flavours % of total FY 2016/17 revenue FY 2016/17 EBIT* m Note *: EBIT is defined as operating profit including share of profit of joint ventures, net of tax 4
Strong offering of global brands and regional brands Global brands Revenue structure Regional brands Bols Liqueurs range Liqueurs Regional brands White Spirits Italian Liqueurs 70,2% 71.8% 29,8% 28.2% Dutch Jenever portfolio Global brands Passoã FY 2016/17 Value brands 5
World-wide presence offers ample room for expansion in existing and new markets Group revenue per geographical segment based on FY 2016/17 North America 20% Western Europe 46,7% Emerging markets 13,4% Asia-Pacific 19,9% 6
Lucas Bols mission & strategic framework Mission Lucas Bols We create great cocktail experiences around the world. Strategic framework Lucas Bols Build the brand equity Lead the development of the cocktail market Accelerate global brand growth Leverage operational excellence 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 7
1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook 8
Highlights H1 2017/18 Revenue 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% Regional performance 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 Gross margin Overall gross margin was up 190 bps to 62.2%, driven by Passoã and margin growth of the other global brands EBIT EBIT increased 21.4% to 13.8 million as a result of the inclusion of Passoã Net Profit 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%) Dividend Interim dividend set at 0.35 per share in cash (+12.9% compared to last year) 9
1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook 10
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 11
Operational highlights H1 2017/18 - continued 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 12
Bols Genever new brand identity and drink strategy The next level in building the Bols Genever brand with bartenders and consumers Bols Genever 100% Malt Spirit launched in September 2017 Red Light Negroni signature drink Bols Genever Ambassadors promoting Bols Genever in key cities around the world 13
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 14
House of Bols Cocktail & Genever Experience Your best hour in Amsterdam 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 15
Lucas Bols USA 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 Bols Liqueurs Range - Add flavor to your Margarita Campaign Bols Genever - Red Light Negroni Damrak Gin - official gin of Delta Sky clubs starting 1 July 2017 Galliano L Aperitivo - successfully launched in various states 14 million guests visit Delta Sky Clubs in the US 16
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 17
1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Operational review 4. Financials H1 2017/18 5. Outlook 18
Strong revenue and EBIT growth Reported (* million) H1 2017/18 H1 2016/17 Reported growth Organic* growth Highlights 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% 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 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% * at constant currencies, excluding one-off items and Passoã 19
Global brands Highlights Reported (* m) H1 2017/18 H1 2016/17 Reported growth Organic growth Reported growth of the global brands is mainly attributable to the addition of the Passoã brand. Organically the global brands were up 1.6% 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% 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% EBIT development (in m) +38.9% 11.8-0.2 4.8 0.0 16.4 H1 2016/17 Badwill H1 2016/17 Δ Global brands Δ Foreign exchange effect H1 2017/18 20
Regional brands Highlights Reported (* m) H1 2017/18 H1 2016/17 Reported growth Organic growth The decline in revenue was mainly related to the phasing of shipments in Asia-Pacific 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% The gross margin decreased by 410 bps, on an organic basis, mainly as a result of lower concentrates sales in southern Africa 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 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% 5.9 EBIT development (in m) -18.8% -0.5-0.6 0.0 4.8 H1 2016/17 Badwill H1 2016/17 Δ Regional brands Δ Foreign exchange effect H1 2017/18 21
Revenue growth of 23.8% Revenue development (in m) +23.8% Group revenue structure (H1 2017/18) -0.2 48.8 Regional brands 9.6 23.5% 39.4 0.4-0.3 76.5% Global brands Revenue (* m) Reported H1 2017/18 Reported growth % Organic growth % H1 2016/17 60.3% Δ Global brands Δ Regional brands 66.6% 48.0% Passoa 71.8% Δ Foreign exchange effect H1 2017/18 62.2% Global brands 37.4 34.8% 1.6% Regional brands 11.5-2.2% -2.2% Total 48.8 23.8% 0.5% Reported gross margin 22
Revenue by region Revenue development (in m) +23.8% 39.4 8.9-0.4 0.7 0.5-0.2 48.8 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 Western Europe Revenue* 53.3% The decline in the Dutch domestic market is slowing down, strong market share was maintained H1 2016/17 Δ Western Europe Δ Asia - Pacific Δ North America Δ Emerging Markets Δ Foreign Exchange Impact H1 2017/18 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% 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 Revenue* 17.0% *) based on H1 2017/18 revenue 23
Revenue by region Revenue development (in m) 39.4 8.9-0.4 +23.8% 0.7 0.5-0.2 48.8 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 17.8% Revenue* H1 2016/17 Δ Western Europe Δ Asia - Pacific Δ North America Δ Emerging Markets Δ Foreign Exchange Impact H1 2017/18 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% 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* 11.8% *) based on H1 2017/18 revenue 24
Gross profit margin increased by 190 bps to 62.2% Gross profit development (in m) +27.7% 0.0-0.1 30.4 Gross margin development at constant currencies and excluding Passoã 0.6 Total 40 bps 6.4-0.3 Western Europe +140 bps Asia Pacific 100 bps 23.8 North America Emerging Markets +160 bps 510 bps H1 2016/17 Δ Western Europe Δ Asia - Pacific Δ North America Δ Emerging Markets Δ Foreign Exchange Impact H1 2017/18 60.3% 59.4% 73.8% 58.7% 63.2% 62.2% Reported gross margin 25
EBIT up 21.4%, driven by Passoã EBIT development (in m) Highlights 11.3 +21.4% -0.7 10.6 4.8-0.6 +29.4% -1.1 0.0 13.8 Reported EBIT for H1 2017/18 was up 21.4% to 13.8 million (H1 2016/17: 11.3 million), fully attributable to Passoã 30.6% 69.4% The increase in Unallocated is mainly due to additional overheads as a result of integration of Passoã, total overhead as a % of revenue decreased from 16.3% to 15.3% H1 2016/17 28.8% Badwill H1 2016/17 excl. Oneoffs 27.0% Δ Global brands Δ Regional brands 44.0% 42.0% Δ Unallocated Δ Foreign exchange effect H1 2017/18 28.2% In H1 2016/17, Lucas Bols recorded a one-off gain of 0.7 million related to the acquisition of the Cooymans distillery by Avandis. Excluding this oneoff gain, the EBIT margin increased 1.2%, from 27.0% last year to 28.2% in the first half of 2017/18 Reported EBIT margin 26
Effective tax rate Reported (* million) H1 2017/18 H1 2016/17 Reported growth Organic* growth Highlights 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% 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 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% Effective tax rate reconciliation Profit before tax H1 2017/18 H1 2016/17 % (in m) % (in m) 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) Earnings per share 0.70 0.62 12.4% * at constant currencies, excluding one-off items and Passoã 27
Net profit (excl. the one-off gain in H1 2016/17) was up 23.5% to 8.7 million Reported (* million) H1 2017/18 H1 2016/17 Reported growth Organic* growth Highlights 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% Earnings per share of 0.70 Interim dividend of 0.35 per share, up 12.9% Number of outstanding shares 12,477,298 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% * at constant currencies, excluding one-off items and Passoã 28
Balance sheet ASSETS (in m) H1 2017/18 FY 2016/17 H1 2016/17 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 Highlights Net working capital 18.4 million, traditionally higher in the first half of the year as well as influenced by the inclusion of Passoã Other non-current liabilities include an assumed debt of 67.6 million related to the call/put option related to Passoã 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 Deferred Tax (in m) H1 2017/18 FY 2016/17 H1 2016/17 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 29
Continued strong cash flows as a result of our asset-light model Cash flow development (in m) Highlights 13.6 0.2-0.2 Cash flows were used to pay dividends ( 3.2 million), and debt reduction ( 3.6 million) -1.1-1.4-13.3% 7.8-4.3 6.7 Operating profit H1 2017/18 Depreciation CAPEX Income taxes Passoa working capital Other working capital FOCF H1 2017/18 FOCF H1 2016/17 30
Important aspects of Lucas Bols currency effects 50.6% of revenue is denominated in foreign currencies in 2017/18 (compared to 54.3% in 2016/17) USD exchange rate JPY exchange rate AUD exchange rate 31
1. Lucas Bols at a glance 2. Highlights H1 2017/18 3. Mission & strategy 4. Financials H1 2017/18 5. Outlook 32
Outlook The underlying market dynamics in the global cocktail market remain healthy 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 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 Due to our hedging policy the currency effect is expected to be limited on an EBIT level for the full year 2017/18 The company will continue to benefit from the inclusion of the Passoã results for the full 12 months of 2017/18 33