A look back at an excellent FY19

Hélène de Tissot

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Interview of Hélène de Tissot, EVP, Finance, IT & Operations

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"FY19 was an excellent year, with very strong and diversified Sales growth across the portfolio, growing +6.0% on an organic basis."


How would you describe the Group’s performance over FY19? 

FY19 was an excellent year, with very strong and diversified Sales growth across the portfolio, growing +6.0% on an organic basis. This performance was driven by the continued development of our must-win markets, with excellent performance in China and India and continued strengthening of the USA and Global Travel Retail route-to-markets. We also delivered strong pricing at +2%. 

FY19 was also very strong in terms of financial performance, with organic Profit from Recurring Operations (PRO) growing +8.7%, our highest growth since FY12. This generated strong improvement in our operating margin, which expanded +74bps on an organic basis, driven by the accelerated completion of our Operational Excellence FY16-20 programme and by Structure cost discipline more than offsetting Cost of goods headwinds, the negative mix of Seagram’s Indian whiskies and the USA wholesaler inventory optimisation. 

Moving to our cash performance, we maintained a strong cash conversion rate, broadly in line with last year at 88%, whilst increasing our ageing stocks to support our ambition of long-term sustainable growth. This led to a +4% increase in Recurring Free Cash Flow. However, reported Free Cash Flow declined -5% due to positive one-off items in FY18. This strong cash performance reduced Net Debt by €342m to approximately €6.6bn and the Net Debt/EBITDA ratio to 2.3x at end June 19 from 2.6x one year prior. Finally, our proposed dividend of €3.12 per share increases the pay-out ratio to 50%, thereby enabling us to achieve our ambition to gradually increase the pay-out to 50% by FY20. 


Net sales


Sales in emerging markets



Recurring free cash flow 

Our performance indicators

What can we expect for FY20?

We anticipate a particularly uncertain environment in FY20. We will continue to execute our "Transform & Accelerate" strategic plan, which focuses on embedding dynamic top-line growth and delivering operating leverage, thereby maximising long-term value creation. We will see a moderation of growth in China and India, whereas the USA should be dynamic following our wholesaler optimisation in FY19, all of which is in line with the assumptions of our strategic plan. To support our top-line ambition, we will increase investments in our strategic priorities, with CAPEX increasing to roughly 5% of Sales and ageing stocks increasing approximately€300m. We have also announced a two-year share buy-back programme of up to €1bn, starting in FY20. The guidance we have provided for Organic growth in PRO in FY20 is between +5% and +7%. 


What is the ambition of the new "Transform & Accelerate" strategic plan? 

We announced the FY19-21 "Transform & Accelerate" strategic plan at our half-year results in February. The focus of this plan is to embed our dynamic growth and to deliver operating leverage, in line with the objective of maximising long-term value creation. The ambition we outlined was organic top-line growth between +4% and +7%, continued focus on pricing and building on our operational excellence initiatives, with a new plan aiming to deliver an additional €100m in savings by FY21. We will also invest strongly into A&P(1), maintaining a ratio of approximately 16% of Sales, with careful arbitration to support must-win brands, markets and innovation. We will maintain strict discipline on Structure costs, with growth below that of the top-line, while investing in key priorities. With all of this, we can deliver roughly 50-60bps operating leverage annually, provided top-line growth is within the +4% to +7% bracket. 


Profit from Recurring Operations


Organic Profit from Recurring Operations



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