Analyst presentation annual results 2017/18 7 June 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.
2 FY 2017/18
1. Lucas Bols at a glance 2. Highlights 3. Operational highlights 4. Financials 5. Outlook
3 Lucas Bols at a glance: Revenue +15%, EBIT +30%
13.4% 18.5% 20.0% 46.7% 22.7%
19.9%
Revenue EBIT* €m €m
4 Strong offering of global brands and regional brands
Global brands Revenue split 2017/18 Regional brands
Regional brands Bols Liqueurs range € 22.3 mln. Liqueurs
24%
76% 29,8% White Spirits Italian Liqueurs 70,2% Dutch Jenever portfolio Global brands € 69.9 mln. Gross Profit split 2017/18 Regional brands € 10.2 mln.
Passoã 18% Value brands
82%
Global brands € 46.9 mln.
5 Sold in more than 110 countries around the world
Group revenue per geographical segment based on FY 2017/18
6 Lucas Bols’ mission & strategic framework
Mission Lucas Bols
We create great cocktail experiences around the world.
Strategic framework Lucas Bols
Lead the Leverage Build the Accelerate global development of operational brand equity brand growth the cocktail market 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 FY 2017/18
1. Lucas Bols at a glance 2. Highlights 3. Operational highlights 4. Financials 5. Outlook
8 Highlights FY 2017/18
Revenue of € 92.2 million, an increase of 14.5% compared to last year, driven by the full year consolidation Revenue of Passoã (+1.8% organically)
Brand Global brands reported 21.0% higher revenue, with organic growth of 3.3%, while the regional brands’ performance reported revenue was down 1.8%
Western Europe reported 27.8% growth in revenue, mainly on the back of Passoã and North America Regional showed growth of 3.1%. Emerging Markets reported revenue was up 5.1% and Asia-Pacific returned to performance growth with a 1.3% rise in revenue. The US market showed strong organic revenue growth of 11.5%
Gross profit increased 18.0% and gross margin was up 190 bps to 62.0%, attributable both to Passoã and Gross margin to margin growth of the global brands
EBIT EBIT increased 29.6% to € 23.6 million at an EBIT margin of 25.6%
Normalised net profit increased 20.1% to € 14.7 million compared to normalised net profit of € 12.3 million Net Profit in 2016/17. Reported net profit of € 20.4 million, includes a one-off tax benefit of € 5.6 million in 2017/18
Proposed final dividend of € 0.25 per share, putting total full-year dividend at € 0.60 per share, up 5.3% Dividend compared to 2016/17
9 FY 2017/18
1. Lucas Bols at a glance 2. Highlights 3. Operational highlights 4. Financials 5. Outlook
10 Operational highlights FY 2017/18
Bols Liqueurs: low single digit revenue growth • Two new flavours developed and introduced, Cucumber and Ginger • Good performance in retail markets Germany and UK • Retail position US significantly strengthened by two large retail chain listings in the last quarter • Introduction of three new flavours in the US in March 2018 • New low alcohol drink strategy with ‘Low Bols’ concept launched
Bols Genever and Damrak Gin: double digit revenue growth
• Bols Genever new brand identity and drink strategy finalized • Damrak Gin recorded strong growth in the US and the Netherlands • Bols Vodka is still experiencing pressure in Canada due to fierce price competition, while in its main markets such as Argentina and the Netherlands the brand continues to perform well
11 Operational highlights FY 2017/18 - continued
Italian Liqueurs performed in line with last year • Further roll-out of the Galliano range in the US • New range extensions of Galliano in various new markets • Revival of the Galliano Hot Shot in Sweden supported by events and brand activations • New brand identity Vaccari well received in key markets
The Passoã brand performed well, in line with expectations • First full year of inclusion in the global brands portfolio of Lucas Bols • Strong growth in the UK on the back of the Porn Star Martini cocktail • Also strong performance in the Netherlands and Switzerland • Expansion to 35 states in the US
12 Bols Genever
Double digit revenue growth driven by the US and the Netherlands
New brand identity and drink strategy takes Bols Genever to the next level as the original spirit of Amsterdam
Bols Genever 100% Malt Spirit – launched in September 2017 in various markets, including the US
Red Light Negroni – signature drink Bols Genever
Ambassadors promoting Bols Genever in key cities around the world
Bols Genever Barrel Aged introduced in the Netherlands
13 Passoã is clearly delivering on its promise
Passoã is successfully integrated into the Lucas Bols organisation
The commercial organisation has taken over all distribution contracts, and new agreements with distribution partners were signed
Lucas Bols USA took over the distribution of Passoã from Rémy Cointreau and expanded the distribution from 15 states to 35 states at the end of March 2018
Strong new visual identity and campaign were developed and implemented
New ‘fresh’ campaign activated in retail markets, including France and Belgium
Porn Star Martini cocktail a continued success in the UK, also launched in other markets such as the US and the Netherlands
Passoã was launched in a number of African countries and in Eastern Europe in H2 2017/18, further expansion is planned for 2018/19
14 Lucas Bols USA
Strong organic revenue growth of 11.5%
Bols Liqueurs Range – three new flavours added; Pineapple Chipotle, Mango and Ginger
Significantly strengthened the retail position of Bols Liqueurs with new listings in two large retail chains
Damrak gin - official gin of Delta Sky clubs as of 1 July 2017
Nuvo was reintroduced in the US in the spring of 2018 by our own organisation.
15 Awards in the USA
Wine & Spirits Wholesalers of America (WSWA) Wine & Spirits Wholesalers of America (WSWA) 2018 Best Liqueur of show & Double gold 2018 Best Genever of show & Double gold
16 Nuvo
In December 2017 Lucas Bols signed an agreement regarding a strategic partnership for the sparkling liqueur brand Nuvo
Created in 2007, Nuvo is made of vodka, sparkling wine and a blend of fruit nectars. The brand is primarily consumed by women and is mostly sold in the retail
The transaction fits within our asset-light business model as it strengthens the company’s existing distribution platform with limited additional overheads required
In the spring of 2018 Nuvo is reintroduced in the US in 10 selected states by Lucas Bols USA
Nuvo will be supported by strong retail activation programs
17 Regional brands
Lucas Bols maintained its strong market-leading position in the Dutch genever and vieux segment
In Western Africa distribution of Henkes Gin and Henkes Whisky was expanded The distribution network in Southern Africa was further strengthened resulting in good growth on the back of a solid performance by Bols Brandy Positive developments offset by significantly lower sales of concentrates in the Southern part of Africa due to a regulatory change and a weaker performance of our regional liqueurs Kontiki Sour Spiritz was introduced in the Netherlands in January 2018
18 FY 2017/18
1. Lucas Bols at a glance 2. Highlights 3. Operational highlights 4. Financials 5. Outlook
19 Strong revenue and EBIT growth
Reported Organic Reported (in €million) FY 2017/18 FY 2016/17 growth growth* Highlights
Revenue 92.2 80.5 14.5% 1.8% Revenue increase of 14.5% compared to last year (+1.8% organically) driven by Cost of sales -35.1 -32.1 9.3% 0.0% Passoã
GROSS PROFIT 57.1 48.4 18.0% 3.1% Gross margin was up 190bps attributable to Passoã and margin growth of the Gross margin % 62.0% 60.1% ## 200.1% global brands D&A expenses -34.5 -32.4 6.5% OPERATING PROFIT 22.6 16.0 41.3% 43.1% A&P as a percentage of revenue amounted to 16.6%, as we continue to invest in Operating margin % 24.5% 19.9% ## 460.1% global brands that show strong growth potential in various strategic markets
Share of profit of JVs, net of tax 1.0 2.2 -55.3% EBIT 23.6 18.2 29.6% 36.6% EBIT increased 29.6% to € 23.6 million with the EBIT margin coming in at 25.6% EBIT margin % 25.6% 22.7% ## 464.4% Income taxes included one-off tax benefits in both years, € 5.6 million in 2017/18 Finance costs -3.5 -2.9 20.4% and € 3.2 million in 2016/17 PROFIT BEFORE TAX 20.1 15.3 31.4% Income tax expense 0.3 -0.2 -216.3% Normalised net profit increased 20.1% to € 14.7 million (EPS of € 1.18) compared PROFIT FOR THE PERIOD 20.4 15.1 35.5% to normalised net profit of € 12.3 million in 2016/17 (EPS of € 0.98)
Earnings per share € € 1.63 1.64 € 1.21 35.5% * at constant currencies, excluding one-off items and the first eight months of Passoã in 2017/18
20 Global brands
Reported Organic Highlights Reported (in €million) FY 2017/18 FY 2016/17 growth growth*
Revenue 69.9 57.8 21.0% 3.3% Reported growth of the global brands is mainly attributable to the Cost of sales -23.0 -20.7 10.9% -3.6% addition of the Passoã brand. Organically the global brands were up 3.3% GROSS PROFIT 46.9 37.0 26.6% 7.2% Gross margin % 67.1% 64.1% Gross margin rose significantly by 300 bps to 67.1% (2016/17: D&A expenses -17.7 -14.6 20.6% 9.5% 64.1%) due to both the positive impact of Passoã and to margin % of revenues -25.3% -25.3% growth of the other global brands OPERATING PROFIT 29.2 22.4 30.5% 5.6% Operating margin % 41.8% 38.8% EBIT increased 28.3%, resulting in an EBIT margin of 42.2% Share of profit of JVs, net of tax 0.2 0.6 EBIT 29.5 23.0 28.3% 6.1% EBIT margin % 42.2% 39.8% EBIT development (in €m) * at constant currencies, excluding one-off items and the first eight months of Passoã in 2017/18 +28.3%
29.5 7.7 -0.6 23.0 -0.5
FY 2016/17 Badwill Δ Global Δ Foreign FY 2017/18 FY 2016/17 brands exchange effect
21 Regional brands
Highlights Reported Organic Reported (in €million) FY 2017/18 FY 2016/17 growth growth* Revenue slightly down compared to last year
Revenue 22.3 22.7 -1.8% -2.0% The gross margin decreased by 430 bps, on an organic basis, Cost of sales -12.1 -11.3 6.4% 6.4% mainly as a result of lower concentrates sales in the Southern part of Africa GROSS PROFIT 10.2 11.4 -9.9% -10.4% Gross margin % 45.9% 50.1% ## EBIT decreased 18.5%, explained by lower gross margin as D&A expenses -2.0 -2.0 0.6% 0.7% well as the effect of the one-off gain of € 0.9 million in FY % of revenues -9.1% -8.9% ## 2016/17 OPERATING PROFIT 8.2 9.3 -12.2% -12.8% Operating margin % 36.8% 41.1% EBIT margin is at 40.2% Share of profit of JVs, net of tax 0.8 1.7 EBIT 9.0 11.0 -18.5% -11.7% EBIT margin % 40.2% 48.4% ## EBIT development (in €m)
* at constant currencies and excluding one-off items -18.5% 11.0 -0.9 -1.2 0.1
9.0
FY 2016/17 Badwill FY Δ Regional Δ Foreign FY 2017/18 2016/17 brands exchange effect
22 Global brands driving revenue growth
Revenue development (in €million)
Group revenue structure +14.5% (FY 2017/18)
-0.5 Regional brands
13.8 -1.6 24.2% 92.2
80.5
75.8%
Global brands
Reported Reported Organic Revenue (* €m) FY 2016/17 Δ Global brands Δ Regional brands Δ Foreign FY 2017/18 FY 2017/18 growth % growth % exchange effect Global brands 69.9 21.0% 3.3% Regional brands 22.3 -1.8% -2.0% Total 92.2 14.5% 1.8% 60.1% 67.1% 45.9% 62.0%
Reported gross margin
23 Revenue by region
Revenue development at constant currencies (in €million)
+14.5% Western Europe 0.7 -1.6 92.2 1.7 • Western Europe reported 27.8% growth, mainly as a 0.3 result of the addition of Passoã Revenue* • Global brands achieved good growth in the Netherlands 10.7 and the UK
80.5 • The strong market share of the regional brands in the 52.1% Dutch domestic market was maintained
FY Δ Δ Asia - Δ North Δ Δ Foreign FY 2016/17 Western Pacific America Emerging Exchange 2017/18 Asia-Pacific Europe Markets Impact
Reported Reported Reported Organic Revenue* Revenue (in €million) FY 2017/18 FY 2016/17 growth % growth % • Asia-Pacific reported 1.3% growth for the full year after posting a slight decline in revenue in H1
Western Europe 48.0 37.6 27.8% 1.4% • Passoã contributed to the growth, mainly in Japan Asia - Pacific 16.2 16.0 1.3% -4.9% North America 16.6 16.1 3.1% 7.0% • Organic revenue was slightly down mainly as a result of Emerging Markets 11.3 10.8 4.8% 5.6% still challenging circumstances in Indonesia Total 92.2 80.5 14.5% # 1.8% 17.6%
*) based on FY 2017/18 revenue 24 Revenue by region
Revenue development at constant currencies (in €million)
+14.5% • In North America the growth path continued with 7.0% organic growth North America 0.7 -1.6 92.2 1.7 0.3 • US reported strong organic growth of 11.5% driven by Revenue* growth for Bols Liqueurs, Bols Genever and Damrak Gin as well as pricing adjustments 10.7 • Retail position Bols Liqueurs was strengthened 80.5 18.0% • In Canada heavy price competition resulted in lower revenue of Vodka, whereas sales of Passoã in Puerto Rico were impacted by the hurricanes
FY Δ Δ Asia - Δ North Δ Δ Foreign FY 2016/17 Western Pacific America Emerging Exchange 2017/18 Europe Markets Impact • Emerging Markets region achieved good growth of Emerging 5.1%, attributable to the strong performance of Markets Reported Reported Reported Organic Eastern Europe (mainly Russia) Revenue (in €million) FY 2017/18 FY 2016/17 growth % growth % Revenue* • New markets, including the Caucasus, also showed good growth Western Europe 48.0 37.6 27.8% 1.4% 12.3% Asia - Pacific 16.2 16.0 1.3% -4.9% North America 16.6 16.1 3.1% 7.0% • The Caribbean was impacted by the hurricanes and Emerging Markets 11.3 10.8 4.8% 5.6% revenue in Central America declined Total 92.2 80.5 14.5% # 1.8% • In the Southern part of Africa significantly lower sales of concentrates were recorded
*) based on FY 2017/18 revenue 25 Gross profit margin increased by 190bps to 62.0%
Gross profit development (in €million)
Gross margin development +18.0% 0.1 (organic) -1.3 1.7 57.1 0.2 Total 70bps
8.1 Western Europe 160bps
Asia - Pacific 10bps 48.4 North America 340bps
Emerging Markets -430bps
FY 2016/17 Δ Western Δ Asia - Pacific Δ North Δ Emerging Δ Foreign FY 2017/18 Europe America Markets Exchange Impact
60.1% 58.0% 74.3% 59.8% 64.2% 62.0%
Reported gross margin
26 EBIT up 29.6%, driven by growth of global brands
EBIT development (in €million)
Highlights
EBIT for the full year 2017/18 came in at € 23.6 million (2016/17: € 18.2 -1.2 million) -1.3 23.6 -0.5 Currency effects had a limited30.6% negative 7.7 impact of € 0.5 million on EBIT as the company was still benefiting69.4% from favourable hedging contracts
18.9 18.2 0.7 As a result of the addition of Passoã, total overhead as a percentage of revenue decreased from 16.5% to 15.5%
The EBIT margin rose by 290 bps from 22.7% last year to 25.6% in 2017/18
FY Badwill & FY Δ Global Δ Regional Δ Δ Foreign FY 2016/17 transaction 2016/17 brands brands Unallocated exchange 2017/18 costs excl. effect One-offs 22.7% 23.4% 25.6%
Reported EBIT margin
27 Taxation
Reported Organic Reported (in €million) FY 2017/18 FY 2016/17 growth growth* Highlights
Revenue 92.2 80.5 14.5% 1.8% Income taxes included one-off tax benefits in both years, € 5.6 Cost of sales -35.1 -32.1 9.3% 0.0% million in 2017/18 and € 3.2 million in 2016/17
GROSS PROFIT 57.1 48.4 18.0% 3.1% The one-off in 2017/18 is mainly due to the positive impact on Gross margin % 62.0% 60.1% ## 200.1% the company’s deferred tax liabilities of upcoming reductions D&A expenses -34.5 -32.4 6.5% in the French corporate tax rate OPERATING PROFIT 22.6 16.0 41.3% 43.1% Operating margin % 24.5% 19.9% ## 460.1% Excluding the one-offs, the effective tax rate increased to Share of profit of JVs, net of tax 1.0 2.2 -55.3% 26.5% (last year 23%) as a result of incorporation of Passoa EBIT 23.6 18.2 29.6% 36.6% and lower share of profit of JV's EBIT margin % 25.6% 22.7% ## 464.4%
Finance costs -3.5 -2.9 20.4%
PROFIT BEFORE TAX 20.1 15.3 31.4% Income tax expense 0.3 -0.2 -216.3% PROFIT FOR THE PERIOD 20.4 15.1 35.5%
Earnings per share € € 1.641.63 € 1.21 35.5%
* at constant currencies, excluding one-off items and the first eight months of Passoã in 2017/18
28 Normalised net profit was up 20.1% to € 14.7 million
Reported Organic Reported (in €million) FY 2017/18 FY 2016/17 growth growth* Highlights
Revenue 92.2 80.5 14.5% 1.8% Earnings per share of € 1.64 Cost of sales -35.1 -32.1 9.3% 0.0%
GROSS PROFIT 57.1 48.4 18.0% 3.1% Dividend of € 0.60 per share, up 5.3% Gross margin % 62.0% 60.1% ## 200.1%
D&A expenses -34.5 -32.4 6.5% OPERATING PROFIT 22.6 16.0 41.3% 43.1% Number of shares outstanding are 12,477,298 Operating margin % 24.5% 19.9% ## 460.1%
Share of profit of JVs, net of tax 1.0 2.2 -55.3% EBIT 23.6 18.2 29.6% 36.6% Normalised net profit increased 20.1% to € 14.7 million EBIT margin % 25.6% 22.7% ## 464.4% (EPS of € 1.18) compared to normalised net profit of € 12.3 million in 2016/17 (EPS of € 0.98) Finance costs -3.5 -2.9 20.4%
PROFIT BEFORE TAX 20.1 15.3 31.4% Income tax expense 0.3 -0.2 -216.3% PROFIT FOR THE PERIOD 20.4 15.1 35.5%
Earnings per share € € 1.64 1.63 € 1.21 35.5%
* at constant currencies, excluding one-off items and Passoã
29 Balance sheet
ASSETS (in € million) FY 2017/18 FY 2016/17 Highlights Net working capital € 14.4 million, higher due to higher inventory and higher Intangible assets 306.9 306.5 payables end of last year, following inclusion of Passoã Investments in joint ventures 7.4 7.8 Other 2.6 2.5 Other non-current liabilities include an assumed debt of € 68.2 million NON-CURRENT ASSETS 316.9 316.8 representing the call/put option related to Passoã
Cash and cash equivalents 12.4 8.4 Net working capital 14.4 12.7 The net debt to EBITDA ratio is 2.8 (the net debt to EBITDA ratio including the Other 0.1 0.3 assumed debt was 4.3 at 31 March 2018) TOTAL 343.8 338.2
Funded by FY 2017/18 FY 2016/17 Deferred tax LIABILITIES & EQUITY (in € million) Loans and borrowings 43.9 48.7 Deferred tax FY 2017/18 FY 2016/17 Deferred tax liabilities 43.1 46.5 (in €million) Other 68.8 67.8 Deferred tax assets 5.3 8.0 NON-CURRENT LIABILITIES 155.8 163.0 Deferred tax liabilities (48.4) (54.5) Total (43.1) (46.5) Loans and borrowings 4.0 4.0 Derivative financial instruments 0.4 0.4 CURRENT LIABILITIES 4.4 4.4 The decrease in DTL is mainly the result of upcoming reductions in the French corporate tax rate
EQUITY 183.6 170.8 TOTAL 343.8 338.2
30 Continued strong cash flows as a result of our asset- light model
Cash flow development (in €million) Highlights
Cash flows were used to pay dividends (€7.6 million), and reduce the net debt position (down €8 million) as well as pay interest 22.6 0.4 -0.5
-1.7 +6.9%
18.7
-3.6 1.4 17.5
Operating Depreciation CAPEX Income Working Dividends FOCF FY FOCF FY profit FY taxes capital from JV 2017/18 2016/17 2017/18
31 Important aspects of Lucas Bols’ currency effects
USD exchange rate JPY exchange rate Highlights
49.7% of revenue is denominated in foreign currencies in 2017/18 (compared to 50.9% in 2016/17)
Lucas Bols has a policy of hedging 60 - 80% of its net cashflows in foreign currencies at the start of the financial year
In 2017/18, as a result of the stronger euro, foreign currencies had a negative impact of € 1.6 million on revenue and € 0.5 million on EBIT
Taking into account the foreign currency positions already hedged and assuming the current level of the euro, all AUD exchange rate GBP exchange rate foreign currencies combined are expected to have a negative impact of around € 1.2 million on EBIT in 2018/19 vs. the 2017/18 rates
2018/19 EBIT exchange rates outlook
EUR/USD 1.21 EUR/JPY 131.48 EUR/AUD 1.56 EUR/GBP 0.89
32 IFRS 15 and 16 update
Reported Organic IFRS 15 update Reported (in €million) IFRS 15 FY 2017/18 FY 2016/17 impact growth growth* • Lucas Bols has completed an initial assessment of the potential impact of the adoption of the new revenue recognition standard Revenue 92.2 80.5 14.5% 1.8% Cost of sales -35.1 -32.1 9.3% 0.0% IFRS15 Revenue from Contracts with Customers • IFRS 15 is expected to primarily trigger the reclassification of certain GROSS PROFIT 57.1 48.4 18.0% 3.1% advertising and promotional expenses as reduction of revenue, with Gross margin % 62.0% 60.1% ## 200.1% an estimated mid-single digit percentage impact on revenue D&A expenses -34.5 -32.4 6.5% OPERATING PROFIT 22.6 16.0 41.3% 43.1% • Overall we currently do not expect any material effect on the Operating margin % 24.5% 19.9% ## 460.1% presentation of the company’s financial position, results of operations as a whole, or earnings per share Share of profit of JVs, net of tax 1.0 2.2 -55.3% EBIT 23.6 18.2 29.6% 36.6% EBIT margin % 25.6% 22.7% ## 464.4% IFRS16 replaces existing guidance on lessee accounting for leases. Finance costs -3.5 -2.9 20.4% The most significant impact identified is that the company will recognise
PROFIT BEFORE TAX 20.1 15.3 31.4% assets and liabilities for its operating leases of real estate Income tax expense 0.3 -0.2 -216.3% PROFIT FOR THE PERIOD 20.4 15.1 35.5%
Earnings per share € € 1.63 1.64 € 1.21 35.5%
33 FY 2017/18
1. Lucas Bols at a glance 2. Highlights 3. Operational highlights 4. Financials 5. Outlook
34 Outlook
The underlying market dynamics in the global cocktail market remain healthy. We continue to believe in the potential of our global brands in all four regions around the world and focus on further growing our global brands, in line with our strategy. We continue to invest in A&P for global brands that show strong growth potential in various strategic markets.
Lucas Bols has a hedging policy in place. Taking into account the foreign currency position already hedged and assuming the current level of the euro, foreign currencies are expected to have a negative impact of around € 1.2 million on EBIT in 2018/19 vs the 2017/18 financial year.
Lucas Bols USA relaunched the Nuvo brand in the spring of 2018, which will contribute to the revenue growth of the global brands in the US. Given the initially higher A&P investments behind Nuvo and the royalty payments, the contribution to EBIT will be limited while the impact on Lucas Bols’s earnings per share is expected to be neutral to slightly positive in the short term.
We will continue to monitor potential add-ons of brands which can be integrated into our platform.
35 Q&A