INTERNATIONAL. Pernod Ricard today unveiled a strong set of annual results for the year ended 30 June 2006.
The year was marked by the integration of Allied Domecq, following its acquisition on 26 July 2005, described as “a total success”.
Driven by that deal, profit from recurring operations rose +72% to € 1,255 million (+72%). Group net profit increased by +32% to € 639 million.
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Patrick Ricard, Chairman and CEO of Pernod Ricard, welcomed members of the press to the media lunch held in June last year in London Photo by Salina Christmas |
Some 11 months after the Allied transaction, the integration has been completed at a lower cost than anticipated (between €350 and €400 million, compared to an initial estimate of € 450 million). As early as the 2006/07 financial year, Pernod Ricard will benefit from the full € 270 million expected synergies in structure costs – a year earlier than initially planned.
The company said that the contribution after advertising and promotion expenses of acquired Allied Domecq brands is in line with expectations (about €1,000 million over a full 12-month period).
At the same time, Pernod Ricard has transferred a number of Allied Domecq brands to Fortune Brands together with Larios Gin for around € 4,300 million and disposed of non-strategic assets or assets conflicting with competition regulations for close to €2,600 million before tax (including Dunkin’Brands, Britvic, Bushmills and Glen Grant).
Sales (excluding tax and duties) increased by +68% to €6,066 million. Growth not only resulted from the contribution of Allied Domecq brands (Group structure
effect: + 61%) but also from the sustained +4.3% organic growth (excluding spirit bulk sales) achieved by Pernod Ricard’s original brands.
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Jameson, the world-leading Irish whiskey brand owned by French group Pernod Ricard, has reached sales of two million cases for the first time this year (The Moodie Report, 19/06/06) |
Growth by Pernod Ricard’s original portfolio primarily relied on the “great vitality” of premium and deluxe brands, which in their majority experienced double-digit growth rates (Chivas Regal +11%, Martell +11%, Jameson +12%, The Glenlivet +10%).
The acquired Allied Domecq brands achieved sales of €2,390 million. The performance was adversely affected by de-stocking in a number of markets (such as Spain and Mexico) and the termination of sales that generated parallel imports to other markets, in particular in Central America.
“In this first financial year, we have increased advertising and promotion (A&P) expenditure on acquired brands,” Pernod Ricard noted. “The A&P expenditure/sales ratio thus increased to 16.3% from around 14.5%. The 11-month contribution after A&P expenditure by Allied Domecq brands reached €881 million, or a contribution after A&P expenditure to sales ratio of 36.9%, lower than Pernod Ricard brands due to a different portfolio mix.”
Analysis of performance by region
Asia/Rest of World and Americas were again the primary profit growth drivers over the financial year, with respective organic growth rates of +10.1% and +5.5% of Pernod Ricard brands contribution after advertising and promotion expenditure.
Contribution by Allied Domecq brands further enhanced the significance of these two regions for Pernod Ricard, by increasing the Group’s leadership in Asia and doubling its size in America. Overall, the two regions generated profit from recurring operations of €680 million, or 54% of Group profit.
Europe (organic sales growth, excluding bulk sales:+0.8%) and France (organic sales decline of -1.1%) experienced a more difficult financial year. However, controlled advertising and promotion expenditure enabled a significant increase in Pernod Ricard brands contribution in Europe (organic growth: +3%) and stable contribution by France.
Conclusion and outlook
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Live The Action Chivas Regal, a World Cup competition held at Asia Pacific airports, was credited for boosting sales of Chivas Regal 18yo by over +50% |
Following the successful integration of Allied Domecq, Pernod Ricard said it is beginning the 2006/07 financial year with confidence.
“Allied Domecq brands remained adversely affected over the first months of the 2005/06 financial year by a number of non-recurring items (overstocking in certain markets around the time of closing of the transaction, progressive disengagement from commercial networks in Central America generating parallel). These effects on 2006/07 financial year bases for comparison will gradually disappear as the year progresses.
“The quality of the Pernod Ricard brand portfolio and the strength of its distribution network should enable the Group to generate strong organic sales and profit growth during the financial year. In addition, the new strategic platforms (positioning, advertising, packaging) of acquired brands will be implemented from the end of 2006, which should enhance the vitality of Allied Domecq brands.
“We also anticipate 2006/07 organic sales growth to be at the top end of our +4% to +6% long term objective. Finally, we maintain our guidance of a strong double-digit growth in underlying net profit (excluding foreign impact).”
