Pernod Ricard's the financial statements for the 2010/11 financial year(1)
The Pernod Ricard Board of Directors’ meeting of 31 August 2011, chaired by Patrick Ricard, approved the financial statements for the 2010/11 financial year ended 30 June 2011.
In 2010/11, against the backdrop of a recovery in consumer spending in its markets, Pernod Ricard demonstrated the efficiency of its strategy, which notably enabled the Group to exceed its financial targets, with:
- dynamic sales, including an all-time volume record for the Top 14 and for 7 of its brands
- strong advertising and promotion support and numerous initiatives in the field of innovation
- acceleration of organic growth in profit from recurring operations of +8% (+4% growth in 2009/10, initial target of +6% for 2010/11) with growth(1) in every region of the Group
- continued debt reduction and refinancing
Sales
2010/11 full-year and fourth quarter sales:
Full-year sales totalled 7,643 million (excl. tax and duties), a sustained growth of +8%, resulting from:
- organic growth of +7%, with a recovery in mature markets, which grew +1.5%(1) and the return to very strong growth in emerging markets, up +17%(1),
- a favourable foreign exchange effect of 277 million for a +4% positive effect over the full financial year, which weakened however in the second half of the year, totalling 325 million at the end of the first half,
- a negative group structure effect of -2%, primarily due to the disposal of certain Scandinavian, Spanish and New Zealand operations.
Consolidated sales for the 4th quarter 2010/11 declined by a moderate -1% to 1,741 million, resulting from +6% organic growth, a negative 5% foreign exchange effect and a negative 2% Group structure effect. This 4th quarter was in line with the trend noted over the first nine months of the financial year, with sustained growth of the Top 14 (+8%(1)), very strong development in emerging markets (+20%(1)) and stable(1) sales in mature markets.
Regions:
Growth in all regions:
- Asia/Rest of the World, with growth of +19% (organic growth of +15%), remained the driving force for Group growth, primarily due to Asia (particularly China, India, Vietnam, Taiwan and Duty Free markets). Growth was also very strong in Africa/ME and Turkey. Sales grew +3%(1) during the financial year in Japan, with the impact of the tsunami having been less significant than anticipated (sales down -7%(1) in the 4th quarter).
- Americas reported growth of +8% (organic growth of +5%). In the US, sales increased +2%(1), which included renewed growth by Absolut and the continued success of Jameson. Sales also grew in all other markets in the region, except in Venezuela. Brazil’s sales grew +12%(1), driven by the Top 14 (+41%(1)), particularly due to the success of Absolut and Scotch whiskies.
- In Europe excluding France, the trend improved markedly, with stable(1) sales over the full financial year (compared to a decline of -5% in 2009/10). This resulted from a robust recovery in Eastern and Central Europe (+9%(1)) and a moderate decline in Western Europe (-2%(1)) which was primarily related to two markets : Greece (-33%(1)) and Spain (-5%(1)). Nonetheless, sales in Western Europe clearly improved when compared to the previous financial year (-5%(1)).
- In France, sales grew +4%(1) due to the commercial performance of the Top 14 brands, especially Ricard, Ballantine’s, Mumm, Chivas, Havana Club, Perrier-Jou.t, Jameson and Absolut.
Brands:
The Top 14 (58% of group sales) grew +6% in volume and reached an all-time record high during the financial year, as did seven of its brands: Absolut, Chivas, Jameson, Havana Club, Martell, Royal Salute and The Glenlivet. The Top 14 brands grew +10% in value(1), and five of them reported double-digit growth(1): Royal Salute (+27%), Martell (+22%), Jameson (+20%), Perrier
Jou.t (+17%) and The Glenlivet (+14%). Only Kahlua slipped back modestly -1%(1) (launch of the new “Delicioso” advertising campaign during the financial year).
The priority premium wine brands grew +0.4%(1), with the confirmed growth of Campo Viejo and Graffigna offsetting the moderate decline of Jacob’s Creek and Brancott Estate. The “value” strategy implemented for these brands generated a +6%(1) increase in their contribution after advertising and promotion during the financial year.
The 18 key local spirits brands continued to grow and increased overall by +3% in value(1), driven by local whisky brands in India, which reported a +30%(1) rise. The overall performance was adversely affected however by the decline of Seagram’s Gin in the US (-12%(1)) and 100 Pipers in Thailand (-13%(1)).
Premium brands(3) represented 71% of Group sales during the 2010/11 financial year, a two-percentage point increase compared to the previous year.
Gross margin and advertising and promotion expenditure
Gross margin (after logistics costs) was 4,610 million, an increase of +8%(1), with a gross margin to sales ratio which substantially improved to 60.3% in 2010/11, compared to 59.6% in the previous year (+75 bps). This was the result of a favourable mix effect relating to the percentage rise in total sales of the Top 14 brands and superior qualities particularly on Martell, Ballantine’s and Chivas, price increases (+1.5% on average for the Top 14) and good control of COGS (+1.5% on average).
Advertising and promotion expenditure increased +11%(1) to 1,441 million. As announced, Pernod Ricard significantly increased expenditure to support its brands with an advertising and promotion expenditure to sales ratio of 18.9%. 76% of investment focused on the Top 14, which benefited from a 24.7% advertising and promotion expenditure to sales ratio in 2010/11, compared to 24.3% in the previous year. Expenditure priority was given to emerging markets, which attracted 54% of total expenditure growth.
Structure costs
Structure costs increased +5%(1) to 1,260 million, growing more slowly than sales. This resulted from the allocation of resources based on potential for market growth. The distribution network has therefore been substantially reinforced in emerging markets: China (+24%(1)), India (+29%(1)), Russia (+23%(1)), Brazil (+17%(1)). Two subsidiaries were created in Vietnam and Sub-Saharan Africa. At the same time, structure costs moderately declined(1) in Western Europe. In total, the structure costs to sales ratio was 16.5% in the 2010/11 financial year, a decrease of 15 bps on a like-for-like basis and a reported increase of 10 bps due to the impact of disposals.
