Analyst presentation annual results 2016/17 Year ended 31 March 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 2016/17 3. Operational review 4. Financials 2016/17 5. Outlook
3 Lucas Bols at a glance
Over 110 countries, margin Great cocktail Amsterdam 53% revenue outside 80.5 e experiences around 1575 Western Europe the world
Emerging Western Markets Europe Strategic framework: 13.4% 23% Build the brand equity North America 20.0%18.5% 46.7% 45.9% 18.2 Lead the development of the cocktail market 22.7% 19.9% Accelerate global brand growth >25 brands Asia-Pacific Revenue EBIT* €m €m 46 Bols liqueur Leverage operational flavours % of total FY 2016/17 revenue FY 2016/17 excellence
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 White Spirits FY 2016/17 Liqueurs
Regional brands
29,8% 28.2% Dutch Jenever portfolio Italian Liqueurs Passoã 70,2%71.8%
Global brands
Value brands
5 1. Lucas Bols at a glance 2. Highlights 2016/17 3. Business review 4. Financials 2016/17 5. Outlook
6 Highlights 2016/17
Strong revenue growth of 10.8% to € 80.5 million as a result of both 3.4% organic growth and consolidation Revenue of the first four months of Passoã
Brand Revenue of the global brands increased by 14.8% (+4.2% organically), while regional brands delivered performance 1.8% revenue growth (+1.6% organically)
Regional All regions performed well, with good revenue growth in Emerging Markets (+20.1% organically) and North performance America (+4.7% organically)
Gross profit was up 13.4% (4.3% organically) and gross margin increased by 130 bps to 60.1% (+50 bps Gross margin organically)
EBIT Substantially increased investments in the commercial organisation and A&P compared to a year ago (+ € 2.3 million) resulted in a slight decline in organic EBIT
Net Profit Net profit increased 28.6% to € 15.1 million (2015/16: € 11.7 million), including one-off tax benefit. Normalized net profit was € 12.3 million.
Dividend Proposed final dividend of € 0.26 per share, bringing total full-year dividend to € 0.57 per share, up 5.6% compared to 2015/16
7 1. Lucas Bols at a glance 2. Highlights 2016/17 3. Business review 4. Financials 2016/17 5. Outlook
8 Lucas Bols: Four strategic pillars
Build the brand equity Lead the development of the cocktail market
Increase market position of the global brands Use marketing techniques and strategic and maintain the competitiveness innovation to optimise the product of regional brands offering and positioning
Accelerate growth global Leverage operational brands excellence
Tailor growth strategies for the brands to Maintain and optimise current business model the markets within our four geographic segments with a mix of in-house and outsourced activities
9 Strengthening of the positioning of the Lucas Bols brands
Optimisation of Bols Liqueurs range portfolio, increase in market share US • Continued introduction of new flavours in various markets worldwide. Bols • New listings, expansion of flavours in various states and the first good Liqueurs results in retail in the US. • Entering new markets, with focus on Africa and Eastern Europe.
Continued good growth rates • Bols Genever launched in Scandinavia, South-Korea, Italy and Poland. • BATW contest accelerated Bols Genever knowledge and experience White among global bartending community. spirits • Damrak Gin gained market share in the Netherlands, achieved growth in the US and was successfully launched in Italy. • Introduction of Bols Vodka in China, Thailand and Vietnam, good performance in Scandinavia and the Netherlands.
10 Strengthening of the positioning of the Lucas Bols brands
Double digit revenue growth on the back of a recovery in Australia
Italian • Full Galliano range introduced in a number of markets, including Italy, Poland and Australia. Liqueurs • Galliano L’Aperitivo was introduced in the Netherlands, Israel, Canada and the US. • Vaccari performed well in the Mexican market and The Netherlands.
The brand is performing well and in line with expectations • Successful establishment and operation of Passoã SAS in France. Passoã • First focus on understanding the Passoã brand, now ready to fully integrate Passoã into brand plans. • Strong performance in UK, Australia and Japan. • Integration of Passoã into Lucas Bols USA.
11 Regional brands performed well, especially outside NL
Increase in market share in still declining market Dutch domestic • Floryn and Legner further strengthened the market position in the Dutch domestic portfolio spirits market. • Market share increase to over 30% of the genever/vieux category.
Other regions are becoming increasingly important • Regional brands are performing increasingly well outside the Netherlands, Outside the contributing to the stabilization of the regional brands. Netherlands • Africa is one of the most promising regions for future growth for spirits. • Leveraging the strong brand equity of the Henkes brand, Henkes Gin and Henkes Whiskey were introduced in various African markets.
12 Full revamp House of Bols Cocktail & Genever Experience
Full revamp • After 10 years with nearly 500,000 visitors, The House of Bols was fully revamped in 2016/17
Redesign focused on: • Craftsmanship: spectacular new extraction and ingredients room • Flavour: new ‘art of flavour’ experience • Do-It-Yourself: new bar for visitors to make their own cocktail
13 Lucas Bols: Four strategic pillars
Build the brand equity Lead the development of the cocktail market
Increase market position of the global brands Use marketing techniques and strategic and maintain the competitiveness innovation to optimise the product of regional brands offering and positioning
Accelerate growth global Leverage operational brands excellence
Tailor growth strategies for the brands to Maintain and optimise current business model the markets within our four geographic segments with a mix of in-house and outsourced activities
14 Bols around the world – the Genever edition 2016/17
• BATW is a global competition that aims to grow bartenders careers, as well as their passion for bartending. • > 2.000 participants from over 75 countries. • Grand final in Amsterdam on 10 May 2017 in ‘The Bols Genever Street’, attended by industry experts and endorsers from around the world. • Jessica Mili from Canada is the proud winner. • Great online exposure and wide international press coverage.
15 Bols Business Class and Bols Bartending seminars
• Bols Business Class aimed at bartenders and bar owners in more sophisticated markets. • Four editions were hosted in 2016/17 in Copenhagen, St. Petersburg, Bristol and Warsaw • Bols Bartending Academy seminars are typically held in countries where the cocktail market is still developing • This year events were organized in amongst others Indonesia, Vietnam, Malta, Spain and South Korea
16 Lucas Bols: Four strategic pillars
Build the brand equity Lead the development of the cocktail market
Increase market position of the global brands Use marketing techniques and strategic and maintain the competitiveness innovation to optimise the product of regional brands offering and positioning
Accelerate growth global Leverage operational brands excellence
Tailor growth strategies for the brands to Maintain and optimise current business model the markets within our four geographic segments with a mix of in-house and outsourced activities
17 Growth trend continues, each region at a different stage
Growth drivers Regional Cocktail development
North America Western Europe
• Sophisticated cocktail culture • Cocktail culture becoming more sophisticated
• Demand for more flavored spirits to • Key cities are getting more use in cocktails international Growing Urbanisation, population of disposable > 21 years income is • Cocktail culture in the home has • UK is the trendsetter in cocktail increasing taken off making innovation
Trend Trend • Authenticity and heritage • Classic cocktails with a modern Cocktail culture is expanding, both in Expenditure on • Classic cocktail with a modern twist twist on-trade and at spirits is increasing home..
Emerging markets Asia-Pacific
Premiumsation, • Cocktail scene is emerging and • Developing cocktail culture & Bartenders set from domestic to bartender scene the quality international growing, particularly in big cities standard brands. • Urbanisation and per capita • Rapid expansion of modern bars Cocktail scene is disposable income is increasing growing. • Large group of female consumers • Growing population of > 21 years . Trend Trend • Premiumsation: consumers • Simple, colourful and sweet becoming more aspirational in drinks cocktails and venue choices
18 4.2% organic growth of the global brands
Growth of the global brands: • Double digit revenue growth of the Italian Liqueurs • Continued strong revenue growth of Bols Genever and Damrak Gin • Low single digit growth of Bols Liqueurs
Strengthening of the commercial organisation: • Appointments on strategic positions, such as Commercial Director Southern Europe and National Accounts Manager Retail in the US. • Increased local presence in the markets.
Increased A&P spending: • The extensive BMU (brand/market unit) matrix provides in-depth and detailed information, enables swift and very focused and informed decisions on A&P spending. • For example Lucas Bols’s decision to continue investing in Russia is clearly paying off.
19 Adding the Passoã brand to the global brands portfolio
BOLS Liqueurs White spirits Italian liqueurs Passoã
BOLS Vaccari BOLS Vodka Damrak Gin Galliano Genever Sambuca
• Lucas Bols can further build the Passoã brand based on the recent successes of Passoã in the on-trade environment in various markets like the UK. • As Passoã is currently sold in over 40 countries, there are opportunities for distribution expansion into new markets, building on the global presence of the Bols Liqueurs range and Galliano. • Passoã can benefit from the positioning of Bols Liqueurs as the number one brand for the international cocktail market and from Lucas Bols active marketing towards the bartending community. • If Passoã had been consolidated for the full year 2016/17, the estimated contribution to revenue would have been € 18 million, to EBIT € 7 million and to the net profit € 3 million.
20 Lucas Bols: Four strategic pillars
Build the brand equity Lead the development of the cocktail market
Increase market position of the global brands Use marketing techniques and strategic and maintain the competitiveness innovation to optimise the product of regional brands offering and positioning
Accelerate growth global Leverage operational brands excellence
Tailor growth strategies for the brands to Maintain and optimise current business model the markets within our four geographic segments with a mix of in-house and outsourced activities
21 Leveraging our strong asset light platform
Lucas Bols can leverage its strong distribution and production platform to accelerate growth and enhance gross as well as EBIT margins. This can be done by:
• Adding brands to the platform: • As is done with the Passoã brand, to complement our global brands portfolio • As well as the acquisition of the Floryn and Legner brands to strengthen the Dutch domestic portfolio
• Increase the leverage of the blending and bottling joint venture Avandis: • As is done with the acquisition of the Cooymans distillery by Avandis
22 1. Lucas Bols at a glance 2. Highlights 2016/17 3. Business review 4. Financials 2016/17 5. Outlook
23 Strong revenue and net profit growth
Reported Organic Reported (* €million) FY 2016/17 FY 2015/16 Highlights growth growth
Revenue 80.5 72.6 10.8% 3.4% Strong revenue growth of 10.8% to € 80.5 million as a Cost of sales -32.1 -30.0 7.0% 2.2% result of both 3.4% organic growth and consolidation of the first four months of Passoã GROSS PROFIT 48.4 42.7 13.4% 4.3% Gross margin % 60.1% 58.8% Gross profit performance has improved by changes in the regional and product mix D&A expenses -32.4 -26.0 24.7% 8.9% D&A expenses increase reflects the continuous OPERATING PROFIT 16.0 16.7 -4.0% -3.0% investments in the commercial organization and in Operating profit margin % 19.9% 23.0% A&P spend as well as one-off transaction and Share of profit of JVs, net of tax 2.2 0.9 152.1% -2.4% advisory costs EBIT 18.2 17.6 3.8% -3.0% EBIT margin % 22.7% 24.2% Share in income of JVs includes one-off gain of € 1.4 million, related to the badwill recognized upon Finance costs -2.9 -2.6 12.7% acquisition of distillery Cooymans by Avandis PROFIT BEFORE TAX 15.3 15.0 2.2% Reported taxes include a one-off tax benefit of € 3.2 Income tax expense -0.2 -3.3 -92.4% million relating to the application of the research and PROFIT FOR THE PERIOD 15.1 11.7 28.6% development tax incentive over the previous fiscal years Earnings per share € 1.21 € 0.94 28.6%
24 Global brands
Highlights Growth of the global brands was driven by the addition of the Reported Organic Reported (* €m) FY 2016/17 FY 2015/16 Passoã brand and double-digit revenue growth of the Italian growth growth Liqueurs
Revenue 57.8 50.4 14.8% 4.2% In the white spirits segment, Bols Genever and Damrak Gin Cost of sales -20.7 -18.5 continued to achieve strong revenue growth
GROSS PROFIT 37.0 31.9 16.1% 4.0% Gross margin % 64.1% 63.3% Bols Liqueurs range showed low single-digit growth after an improvement in the second half year D&A expenses -14.6 -12.4 18.3% 5.0% % of revenues -25.3% -24.6% Gross margin rose 80 bps to 64.1% (2015/16: 63.3%) due to OPERATING PROFIT 22.4 19.5 14.8% 3.4% the positive impact of Passoã, while organically the gross Operating margin % 38.8% 38.8% margin was in line with last year
Share of profit of JVs, net of tax 0.6 0.2 EBIT development at constant currencies (in €m) EBIT 23.0 19.7 16.7% 3.1% +16.7% EBIT margin % 39.8% 39.1%
23.0 0.2 1.6 0.5 19.7 0.9
FY 2015/16 Δ Global Badwill Passoa Δ Foreign FY 2016/17 brands exchange effect
25 Regional brands
Highlights Reported Organic Reported (* €m) FY 2016/17 FY 2015/16 growth growth Increase in revenue was mainly the result of the strong performance of our business in Africa as well as a
Revenue 22.7 22.3 1.8% 1.6% further strengthening of our market share of domestic Cost of sales -11.3 -11.5 spirits in the Dutch market to over 30%
GROSS PROFIT 11.4 10.8 5.4% 4.9% Higher gross margin mainly as a result of changes in the Gross margin % 50.1% 48.4% regional mix, with higher sales in Africa
D&A expenses -2.0 -2.0 0.8% 0.0% % of revenues -8.9% -9.0% Excluding the one-off (€ 0.9 million badwill) and at constant currencies, the regional brands reported a OPERATING PROFIT 9.3 8.8 6.4% 6.1% growth of 6% for EBIT compared to last year Operating margin % 41.1% 39.4%
Share of profit of JVs, net of tax 1.7 0.7 EBIT development at constant currencies (in €m) EBIT 11.0 9.5 15.9% 6.0% +15.9% EBIT margin % 48.4% 42.5%
11.0 9.5 0.9 0.0 0.6
FY 2015/16 Δ Regional Badwill Δ Foreign FY 2016/17 brands exchange effect
26 Revenue growth of both global brands(+4.2% organically) and regional brands (+1.6% organically)
Revenue development at constant currencies (in €m)
+10.8% Group revenue structure 80.5 (2016/17) 0.3
Regional brands 5.1
28.2% 0.4 2.1 72.6
71.8%
Global brands
FY 2015/16 Δ Global brands Δ Regional brands Passoa Δ Foreign FY 2016/17 exchange effect 58.8% 64.1% 50.1% 72.5% 60.1% Reported gross margin
27 Revenue growth in all regions
Revenue development at constant currencies (in €m)
+10.8% • Organically revenue remained more or less stable Western 80.5 compared to last year 0.3 Europe • Shipments to Belgium were significantly down due to the 5.1 Revenue* excise duty increase in November 2015. 2016/17 also saw 1.8 72.6 0.7 deliberately lower shipments to the German/Scandinavian -0.8 0.8 border • Good performance in Germany, Italy and Spain 46.7% • The Dutch market of the Global brands remained strong with double-digit growth, mainly from Damrak Gin and
FY Δ Δ Asia - Δ North Δ Passoa Δ Foreign FY Bols Vodka 2015/16 Western Pacific America Emerging Exchange 2016/17 Europe Markets Impact • As a result of the addition of Passoã , revenue increased by 9.2%
Reported Reported Reported Organic • Clear recovery of shipments to Australia and New Zealand Asia-Pacific Revenue (* €m) FY 2016/17 FY 2015/16 growth % growth % • In South Korea and Indonesia we experienced difficult Revenue* market circumstances Western Europe 37.6 34.4 9.2% -2.3% Asia - Pacific 16.0 14.2 13.2% 5.3% • Bols Liqueurs stabilised in Japan after the price increase North America 16.1 15.0 7.4% 4.7% Emerging Markets 10.8 9.1 18.7% 20.1% • Satisfactory results in the Chinese market, based on the Total 80.5 72.6 10.8% 3.4% expansion of the number of outlets serving cocktails and 19.9% the growing culture of mix drinks and cocktails
*) based on FY 2016/17 revenue 28 Revenue growth in all regions
Revenue development at constant currencies (in €m)
+10.8% North America 80.5 0.3 • Bols Liqueurs continues its good performance in the US Revenue* 5.1 with mid-single-digit revenue growth due to more listings, the expansion of flavours in various states and the first 1.8 72.6 0.7 -0.8 0.8 good results in retail • Market share in the US increased, as the category of range 20.0% liqueurs was slightly down compared to a year ago • Decline in Canada in the second half of the year, mainly due to lower shipments of Bols Vodka FY Δ Δ Asia - Δ North Δ Passoa Δ Foreign FY 2015/16 Western Pacific America Emerging Exchange 2016/17 Europe Markets Impact
Emerging Reported Reported Reported Organic Revenue (* €m) Markets FY 2016/17 FY 2015/16 growth % growth % • Russian and Polish markets achieved strong growth, Revenue* reflecting our continued investments Western Europe 37.6 34.4 9.2% -2.3% Asia - Pacific 16.0 14.2 13.2% 5.3% • First shipments to new markets including the Caucasus 13.4% North America 16.1 15.0 7.4% 4.7% • Lower revenue in South America following deliberately Emerging Markets 10.8 9.1 18.7% 20.1% Total 80.5 72.6 10.8% 3.4% lower shipments to traders in the region • In Africa revenue rose significantly
*) based on FY 2016/17 revenue 29 Gross profit margin increased by 130bps to 60.1% (+50bps organically)
Gross profit development at constant currencies (in €m)
+13.4% Gross margin development at 48.4 constant currencies and 0.2 excluding Passoã 3.7
1.8 42.7 Total +50 bps 0.5 -1.1 0.7 Western Europe ‐210 bps
Asia ‐ Pacific + 90 bps
North America +70 bps
Emerging Markets +540 bps
FY 2015/16 Δ Western Δ Asia - Pacific Δ North Δ Emerging Passoa Δ Foreign FY 2016/17 Europe America Markets Exchange Impact
58.8% 53.3% 73.8% 56.6% 69.2% 72.5% 60.1%
Reported gross margin
30 EBIT broadly in line with last year, despite substantially increased investments
EBIT development at constant currencies (in €m)
Highlights +3.8% EBIT includes the one-off 1.5 -2.0 18.2 badwill impact of 17.6 1.5 0.2 -2.1 1.6 + € 1.4 million, which has been allocated30.6% to global One-off and regional brands, and (+0.9) 69.4% One-off € 2 million advisory and (+0.5) transactions costs
Increase in D&A expenses following increased investments in the commercial organization and A&P spend
Inclusion of Passoa for 4 months added € 1.6 million to EBIT FY 2015/16 Δ Global brands Δ Regional Transactions and Other Passoa Δ Foreign FY 2016/17 brands advisory costs (overheads) exchange effect
24.2% 39.8% 48.4% 31.8% 22.7%
Reported EBIT margin
31 Effective tax rate
Highlights
Reported taxes include a one-off tax benefit of € 3.2 million relating to the application of the research and development tax incentive over the previous fiscal years
Effective tax rate reconciliation FY 2016/17 % Profit before tax
Tax at the Company’s domestic tax rate 25.0 Effect of tax rates in foreign jurisdictions 1.5 Non‐deductible expenses *) 1.5 Effect of share of profits of equity‐accounted investees ‐3.6 Changes in estimates related to prior years 0.7 R&D tax incentive ‐23.5 Effective tax rate 1.6 *) In 2016/17 the non-deductible expenses are mainly related to the Passoã transaction.
32 Net profit increased 28.6% to € 15.1 million
Reported Organic Reported (* €million) FY 2016/17 FY 2015/16 growth growth Highlights Revenue 80.5 72.6 10.8% 3.4% Cost of sales -32.1 -30.0 7.0% 2.2%
GROSS PROFIT 48.4 42.7 13.4% 4.3% Earnings per share of € 1.21 Gross margin % 60.1% 58.8%
D&A expenses -32.4 -26.0 24.7% 8.9% Normalized earnings per share of € 0.98
OPERATING PROFIT 16.0 16.7 -4.0% -3.0% Operating profit margin % 19.9% 23.0% Dividend of € 0.57 per share, up 6% Share of profit of JVs, net of tax 2.2 0.9 152.1% -2.4% EBIT 18.2 17.6 3.8% -3.0% EBIT margin % 22.7% 24.2% Number of shares outstanding are 12,477,298
Finance costs -2.9 -2.6 12.7% PROFIT BEFORE TAX 15.3 15.0 2.2%
Income tax expense -0.2 -3.3 -92.4% PROFIT FOR THE PERIOD 15.1 11.7 28.6%
Earnings per share € 1.21 € 0.94 28.6%
33 Balance sheet
FY 2016/17 FY 2015/16 Highlights ASSETS (in €m) Net working capital € 12.7million, below last year Intangible assets 306.5 214.9 Investments in joint ventures 7.8 5.8 Other 2.4 2.2 Intangibles include Passoã brand (€ 70.3 million) and goodwill (€ 20 NON‐CURRENT ASSETS 316.8 222.9 million)
8.4 3.3 Cash and cash equivalents Investments in joint ventures increased mainly due to € 1.4million Net working capital 12.7 13.3 badwill on Cooymans transaction, € 0.5 million contribution to Avandis, TOTAL 337.8 239.6 and a capital contribution of € 0.4 million to BolsKyndal India
Funded by Other non-current liabilities include an assumed debt of € 66.6 million LIABILITIES & EQUITY (in €m) related to the call/put option related to Passoã Loans and borrowings 48.7 49.7 Deferred tax liabilities 46.5 22.2 Increase of deferred tax assets in 2016/17 is mainly due to R&D tax Other 67.8 1.2 incentive NON‐CURRENT LIABILITIES 163.0 73.1 Deferred tax liabilities increased as a result of the Passoa transaction
Loans and borrowings 4.0 4.0 Derivative financial instruments - 0.7 FY 2016/17 FY 2015/16 CURRENT LIABILITIES 4.0 4.7 Deferred Tax (in €m)
Deferred tax assets -8.0 -7.4 EQUITY 170.8 161.8 Deferred tax liabilities 54.5 29.6 TOTAL 337.8 239.6 Total 46.5 22.2
34 Continued strong cash flows from operations funded investments and dividends
Cash flow development (in €m) Highlights
+4.7% Strong operating cash flow was supported by an
17.5 improvement in working capital compared to 2015/16
0.7 16.7 Cash flows were used to pay dividends (€6.7 million), and invest in Distillery Cooymans (€1.8 million) 0.5 1.1 16.0 -0.8 Net debt remained stable despite the investment in Passoã (€5 million)
Operating DepreciationCAPEXOther items Working FOCF FOCF profit capital 2016/17 2015/16 2016/17
35 Important aspects of Lucas Bols’ currency effects
50.9% of revenue is denominated in foreign currencies in 2016/17 (compared to 52.8% in 2015/16)
USD exchange rate JPY exchange rate
AUD exchange rate
36 1. Lucas Bols at a glance 2. Highlights 2016/17 3. Mission & strategy 4. Financials 2016/17 5. Outlook
37 Outlook
The underlying market dynamics in the global cocktail market remain healthy. The growth trend is continuing, although each region is at a different stage of development.
Market developments strengthen our belief in the potential of our global brands and we therefore continue to foresee medium-term revenue growth for the global brands, in line with our strategy.
Lucas Bols will continue its investments to support the revenue growth of the global brands.
The company will benefit from the inclusion of the Passoã results for the full 12 months of 2017/18
38 Q & A