ANNUAL REPORT 2020/21 ANNUAL REPORT 2020/21 ANNUAL REPORT Strategy and Management Financial The company Governance value creation Board Report Statements INDEX ANNUAL REPORT THE COMPANY* MANAGEMENT BOARD REPORT* 2 Company profile 38 Composition of the Management Board 4 Our heritage 39 Report of the Management Board 7 Highlights 48 Corporate social responsibility 12 Interview with the Management Board 56 Risk management and control 15 Key figures 68 Management Board statement 16 Shareholder information 18 Lucas Bols brands global presence GOVERNANCE 69 Corporate governance* STRATEGY AND VALUE CREATION* 74 Composition of the Supervisory Board 21 Global brands 76 Report of the Supervisory Board 27 Regional brands 80 Remuneration report 30 Strategy FINANCIAL STATEMENTS 33 Creating value 86 Consolidated Financial Statements 2020/21 35 Stakeholder matrix 130 Company Financial Statements 2020/21 OTHER INFORMATION 135 Other information 141 Auditor’s report The paragraphs marked with a * are part of the report of the Management Board as defined in Title 9, Dutch Civil Code 2. 1 COMPANY PROFILE Lucas Bols is a leading global cocktail and spirits player with a strong position in the bartending community and a unique heritage dating back to 1575 in Amsterdam. Our portfolio includes Bols, the world’s oldest distilled spirits brand. Building on this heritage, we have mastered the art of distilling, mixing and blending, creating a portfolio of premium and super- premium global brands, together with strong regional brands. Lucas Bols is active in over 110 countries worldwide with the Bols brand as the number one liqueur range globally (not including the US). Lucas Bols is also the world’s largest player in the genever segment and its portfolio includes the number one passion fruit liqueur Passoã. Our flexible and asset-light business model enables us to focus fully on innovation and strategic marketing to build the Lucas Bols brands. At the Lucas Bols distillery we create new flavours and adapt old recipes, in line with the cocktail trends of today. The House of Bols Cocktail & Genever Experience and the Bols Bartending Academy play a leading role in the development of the cocktail market. 2 LUCAS BOLS ANNUAL REPORT 2020/21 Strategy and Management Financial The company Governance value creation Board Report Statements LUCAS BOLS MISSION We create great cocktail experiences around the world by taking our more than 445 years of history as inspiration for developing our brands, maintaining our innovation leadership and becoming the undisputed bartending authority. 3 OUR HERITAGE For more than 445 years we have been mastering the art of mixing and blending, creating beautiful flavours for our genevers and liqueurs. We invite you to open your senses and experience the past, present and future of Lucas Bols. th 1575 1664 1816 20 century The Bols family establish The Bols family start The widow of the last Acquisition of additional their distillery ‘t Lootsje producing genever which male Bols heir sells the regional brands, such as in Amsterdam and start plays an important role company on condition Dutch genevers, Pisang distilling liqueurs. The in the emergence of the that the Bols name be Ambon and Coebergh. grandson Lucas Bols cocktail culture in de US used in perpetuity on turns the distillery into an in the 19th century. all its products, thereby international company. ensuring its status as the world’s oldest distilled spirits brand. 4 LUCAS BOLS ANNUAL REPORT 2020/21 Strategy and Management Financial The company Governance value creation Board Report Statements CHAPTER BOLD CHAPTER LIGHT Introduction Body 2004-06 2007-08 2015 2016-19 2020-21 Return of the Lucas Opening of the Celebration of Lucas Bols adds Launch of non- Bols head office to House of Bols 440 years of Passoã, the Passion alcoholic Damrak Amsterdam. Relaunch Cocktail & Genever Lucas Bols history fruit liqueur, Virgin 0.0. and of the Bols Liqueurs Experience and the and listing on and Nuvo, the global relaunch bottle, made by & Bols Bartending the Euronext sparkling liqueur, of Bols Liqueurs, for bartenders and Academy. Amsterdam stock to its global brands crafted with natural addition of new International exchange. portfolio. botanicals. bartender brands relaunch of Bols such as Galliano. Genever, based on the original recipe from 1820. 5 It is our objective to strengthen and grow our global brands in the international cocktail market while maintaining the competitiveness of our regional brands in regional and local markets. To accomplish this, we focus on the key strategic initiatives set out below. SHARING TASTES EXPERIENCE NEW FLAVOURS 6 LUCAS BOLS ANNUAL REPORT 2020/21 Strategy and Management Financial The company Governance value creation Board Report Statements FINANCIAL HIGHLIGHTS Revenue Gross margin (in € mln) (in % of revenue) 57.3 52.5 2019/20: 84.0 2019/20: 56.7 Normalised operating profit* Free operating cash flow* (in € mln) (in € mln) 8.6 11.4 2019/20: 17.6 2019/20: 15.8 Normalised net profit* Dividend per share (in € mln) (in €) 3.3 - 2019/20: 11.3 2019/20: 0.35 * These items are non-GAAP measures, normalised numbers are excluding one-off items. For further information about these measures, and the reasons why we believe they are important for an understanding of the performance of our company, please refer to our commentary on non-GAAP measures as of page 136. 7 SHARING MOMENTS EXPERIENCE THE UNUSUAL 8 LUCAS BOLS ANNUAL REPORT 2020/21 Strategy and Management Financial The company Governance value creation Board Report Statements BRAND HIGHLIGHTS 1575 446 Oldest distilled spirits years of craftsmanship & brand in the world cocktail history More than 25 brands Revenue split 2020/21 € 42.1 € 15.2 +110 million 73% million 2 Global brands Regional brands Sold in more than 110 countries around the world 9 MARKET POSITION SHARING CRAFTSMANSHIP EXPERIENCE QUALITY 10 LUCAS BOLS ANNUAL REPORT 2020/21 Strategy and Management Financial The company Governance value creation Board Report Statements MARKET POSITION LIQUEURS GENEVER #1 #1 World’s No.1 World’s No.1 liqueurs range * genever * Not including the US DAMRAK PASSOA 1st Virgin #1 World’s first Gin brand The No.1 Passion Fruit to launch a Virgin 0.0 liqueur Passoã 11 INTERVIEW WITH THE MANAGEMENT BOARD IT IS SAFE TO SAY THAT THIS PAST The strong relationships with our distribution partners YEAR WAS UNPRECEDENTED. THE allowed us to stay well connected to our markets still. IMPACT OF COVID-19 ON LUCAS BOLS Our partners have truly been our ears and eyes in the WAS SEVERE. WHAT WAS IT LIKE TO local markets, enabling us to act swiftly. Evenly important: MANAGE THE COMPANY THROUGH we have been very conscious about managing this crisis THESE TIMES? in the short run whilst simultaneously continuing focus on further building our future. Despite all extraordinary “Lucas Bols was in fact really in the eye of the storm; efforts necessary to navigate this crisis – which is not over the start of the lockdowns outside China more or less yet – we managed to stay innovative and even launched a coincided with the start of our new fiscal year, and being number of exciting new products – right on trend.” an on-trade driven company, our business was severely impacted,” said Lucas Bols CEO Huub van Doorne. “Our Huub van Doorne concludes, “All in all, I am proud that first priority was obviously the health and wellbeing of our our business model and especially our teams have shown people and business partners. We organised that everyone resilience – we have not only managed the crisis thus far, could work from home almost overnight. At the same but truly used it to strengthen the fundamentals of the time we had to assess the impact on the business and to company.” decide on the measures we had to take. There was a lot of uncertainty and we had different scenarios and many assumptions to consider. We took cost control measures COULD YOU ELABORATE A BIT MORE ON decisively, agreed amended covenants with the banks to HOW YOUR BUSINESS MODEL ALLOWED ensure sufficient financial flexibility and increased our focus YOU TO EFFECTIVELY NAVIGATE on cash. We also monitored the supply chain carefully, THROUGH THIS VOLATILE AND making sure that we would be able to purchase raw EXCEPTIONAL MARKET SITUATION? materials and deliver our products to the global markets. In times like these the importance of strong partnerships “Our asset light business model provides flexibility, becomes apparent: due to the relationship with our allowing us to quickly adapt to changing market production and logistical partners we did not experience circumstances”, Huub van Doorne said. “What made any significant interruptions in our supply chain.” this crisis unique was that it ultimately hit all our markets in some way or form. The timing and intensity of the “Furthermore, the travel restrictions also meant we could impact on our business varied widely between markets, not physically meet our distribution partners abroad,” depending to some extent on how local authorities CFO Frank Cocx added. “That is quite a change for responded to it. This called for a very targeted and a commercial company doing business worldwide. market-by-market approach. Our Brand Market Unit “ I am confident we will emerge from this crisis as a stronger company HUUB VAN DOORNE, CEO “ 12 LUCAS BOLS ANNUAL REPORT 2020/21 Strategy and Management Financial The company Governance value creation Board Report Statements “ What confirms the strong position of our brands, is that we are directly back in business once markets reopen FRANK COCX, CFO “ structure was instrumental in this. It allowed us to control importance not to lose sight of your mid- and long-term A&P spending in a focused manner: downscaling quickly plans and to seize opportunities as they come.