Campari Group announces 2019 first half results

Consistent solid performance across all key underlying indicators

 

Growth across all regions and brand clusters, with outperformance in key high margin brand and market combinations

 

H1 2019 Results Highlights

  • Reported sales of €848.2 million. Organic growth of +8.0%. On a reported basis, change of +9.0% after the exchange rate and perimeter effects.
  • Strong organic sales growth, driven by continuous sales mix improvement thanks to the key high-margin brand and market combinations, with a recovery in the emerging markets.
  • EBIT adjusted[1]of €180.3 million. Organic growth of +10.6% (+50 bps margin accretion). On a reported basis, change of +12.3%.
  • Group net profit adjusted[2] of €116.7 million, up +11.8%. Group net profit of €122.8 million, -16.6% on a reported basis.
  • Net financial debt of €937.1 million as of June 30th, 2019 (€846.3 million as of December 31st, 2018), driven by the effect of the first-time application of IFRS 16 (effective as of 1 January 2019).

 

Milan, July 30th, 2019-The Board of Directors of Davide Campari-Milano S.p.A. (Reuters CPRI.MI-Bloomberg CPR IM) approved the consolidated results for the first half year ended June 30th, 2019.

 

Bob Kunze-Concewitz, Chief Executive Officer: ‘After a very strong start to the year, our positive business momentum continued in the second quarter 2019, the peak season for aperitifs, helped by the late Easter effect, despite the tough comparable base as well as the poor weather in May across Europe. Key underlying profitability indicators grew ahead of organic sales development, thanks to a very positive sales mix, which more than offset the dilutive impact of the emerging markets recovery and the adverse effect of the agave purchase price, whose growing trend is expected to continue throughout the rest of the year. Reinvestments in brand building and sales capabilities initiatives are also expected to continue in the second half. Looking into the full year, the outlook remains fairly balanced in terms of risks and opportunities. The positive business momentum is expected to continue,with persisting volatility of emerging markets in their key seasonality period. We remain confident in delivering a positive performance across all key underlying business indicators.’.

 

Summary financial information for the first half ended 30 June 2019

 

H1 2019

H1 2018

Reported

Organic

Forex

Perimeter

 

€ million

€ million

change

change

impact

impact

Net sales

848.2

778.2

9.0%

8.0%

2.3%

-1.4%

Gross profit

525.8

471.9

11.4%

9.5%

2.3%

-0.3%

% on sales

62.0%

60.6%

       

EBIT adjusted

180.3

160.5

12.3%

10.6%

2.7%

-1.0%

% on sales

21.3%

20.6%

       

EBIT

171.7

180.1

-4.7%

     

Group net profit adjusted

116.7

104.4

11.8%

     

Group net profit

122.8

147.2

-16.6%

     

 

 

 

 

 

 

 

EBITDA adjusted

215.1

187.9

14.4%

12.7%

2.6%

-0.8%

% on sales

25.4%

24.2%

       

EBITDA

206.5

207.5

-0.5%

     
             

Net financial debt (*)

937.1

 

 

 

 

 

(*) Net financial debt as of December 31st, 2018: €846.3 million.

Guidance for 2019

The outlook remains fairly balanced in terms of risks and opportunities.

The positive business momentum is expected to continue into the second half of the year, with expected volatility in emerging markets in their key seasonality period.

Sustained organic value growth in EBIT is expected to continue driven by positive business momentum, whilst EBIT margin expansion will be moderated by higher than expected increase in agave purchase price exacerbated by Espolòn outperformance.

With regards to the overall results, the strengthening of the US Dollar against the Euro is expected to lessen in the rest of the year, while emerging markets currencies are expected to remain volatile during the second half peak season. The tail end perimeter effects will phase out during the second half of the year.

Net profit reported in 2019 is expected to benefit from net positive adjustments of approximately €14 million overall. This is due to fiscal benefits coming from the Patent Box tax relief in Italy, in what will be its fifth and final year, for an estimated amount, assumed in line with previous year, of approximately €26 million, which will offset provisions for the completion of certain reorganizational projects for a negative estimated amount of -€16 million and corresponding positive fiscal effects of approximately €4 million.

 

Review of consolidated sales for first half 2019

By geography:

-      Sales in the Americas (45.3% of total Group sales) grew organically by +9.9%, with the North America region growing by +10.3%, thanks to the Group’s largest market, the US, which grew organically by +10.9%, with solid growth across all brands but SKYY, as well as Jamaica, which registered positive organic growth of +18.6%, thanks to the rum portfolio and Campari. The South America region grew by +6.0% organically, thanks to a recovery in Brazil and Argentina, although macroeconomic weakness and political instability remain.

-      Sales in Southern Europe, Middle East and Africa[3] (28.7% of total Group sales) registered positive organic growth of +7.7%. In Italy, organic sales grew +6.7%, driven by solid performance across all aperitif brands in their peak season, while other markets in the region grew +10.9% overall, largely driven by France (+26.4%), thanks to Aperol and Riccadonna, and the African markets.

-      North, Central and Eastern Europe (19.5% of total Group sales) grew organically by +7.0% thanks to positive organic growth in Germany (+3.9%), the UK (+13.8%) and Russia (+10.9%)with continuined positive momentum in Scandinavian and Eastern European markets. The performance was largely driven by double-digit growth of Aperol across the region.

-      Sales in Asia Pacific (6.4% of total Group sales) grew organically by +1.1%, as the largest market Australia registered organic growth of +3.5%, driven by Aperol and Wild Turkey ready-to-drink and bourbon, while the other markets in the region declined organically by -4.3%, largely due to a tough comparison base.

By brand:

-      Global Priorities (59% of total Group sales) registered strong organic growth (+9.8%), despite a low-single digit decline in SKYY due to both the announced de-stocking in the core US market as well as persistent competitive pressure. The performance was driven by Aperol (+22.0%), thanks to solid growth in core Europe, despite bad weather in May, and a double digit increase across all other geographies, a solid performance of Campari (+5.8%), largely driven by core geographies, Wild Turkey (+11.4%), thanks to core US and Australian markets, the Jamaican rums (+7.1%), thanks to core Wray&Nephew Overproof and Appleton Estate brands, and Grand Marnier (+2.3%), driven by core US.

-      Regional Priorities (15% of total Group sales) grew organically by +10.8%, thanks to a very positive performance from Espolòn (+46.5%), driven by core US. Positive growth in Averna, Forty Creek and Riccadonna helped offset some weakness in GlenGrant and Cinzano in a low seasonality period.

-      Local Priorities (12% of total Group sales), registered a positive organic performance of +4.0%, with growth across the whole portfolio, especially single serve aperitifs Campari Soda (+5.8%), driven by Italy, and Crodino (+3.3%), sustained by growth in seeding international markets, ableit from a small base.

 

Review of first half 2019 results

Group sales totaled €848.2 million, up by +9.0% in value on a reported basis. The result reflects a positive organic sales performance of +8.0%, a positive FX effect of +2.3%, thanks to a strengthening US Dollar vs. the Euro, and a negative perimeter effect of -1.4%, driven by the termination of low margin distribution contracts.

Gross profit was €525.8 million, up by +11.4% in value on a reported basis and up +140 basis points to 62.0% of net sales. It grew organically by +9.5%, ahead of sales, generating an organic margin expansion of +90 basis points, driven by favourable sales mix by brand and market, particularly the positive performance of the high-margin aperitifs in the key developed markets. This outperformance more than compensated the dilutive effect of the emerging market recovery and the increasingly more adverse effect of the agave purchase price.

Advertising and Promotion spending (A&P) was €151.5 million, up by +12.3% in value on a reported basis, corresponding to 17.9% of net sales. It grew organically by +9.4%, driven by the phasing of major investments in Global brands, particularly Aperol, Campari, SKYY and Grand Marnier as well as selected Regional priority brands.

CAAP (Contribution after A&P) was €374.3 million, up by +11.1% in value on a reported basis (up organically by +9.5%), corresponding to 44.1% of net sales.

Structure costs, i.e. selling, general and administrative costs, totalled €194.0 million, up by +9.9% in value on a reported basis (up organically by +8.6%), to 22.9% of net sales.

EBIT adjusted was €180.3 million, up by +12.3% in value on a reported basis and up +70 basis points to 21.3% of net sales. It grew organically by +10.6%, ahead of sales growth, leading to a margin accretion of +50 basis points, as the solid gross margin expansion more than offset marketing and structural investments. The forex and perimeter changes had a combined effect of +1.7% in value, corresponding to +20 bps margin accretion. The adoption of IFRS16-‘Leases’[4] accounting principle from 1 January 2019 generated a positive effect of €1.3 million on EBIT adjusted.

EBITDA adjusted was €215.1 million, up by +14.4% in value on a reported basis (up organically +12.7%), corresponding to 25.4% of net sales. The increase includes a positive effect generated by the adoption of IFRS 16-‘Leases of €7.7 million, driven by the incremental depreciation on the rights of use.

EBIT and EBITDA reached €171.7 million (20.2% of net sales) and €206.5 million (24.3% of net sales) respectively, after negative Operating adjustments of -€8.6 million, mainly attributable to provisions for restructuring initiatives.

Net financial costs were €15.1 million, up by €0.3 million vs. the same period in 2018, reflecting the negative carry effect on excess cash and the effect of IFRS 16-‘Leases’ application generating additional financial charges of €1.7 million in the semester.

Group pre-tax profit adjusted was €162.3 million (+12.1%). Group pre-tax profit was €153.7 million, down -7.4%.

Tax charges were -€30.9 million and included a Patent Box tax benefit of €12.5 million in the first half 2019.

Group net profit adjusted[5]was €116.7 million (+11.8%). Group net profit was €122.8 million, decreased -16.6%vs. the first half 2018.

Net financial debt stood at €937.1 million as of June 30th, 2019 (€846.3 million as of December 31st, 2018), an increase of €90.9 million, driven by the incremental figurative debt generated by the first-time adoption of IFRS 16 (effective as of 1 January 2019) of €81.4 million.

Net debt to EBITDA pro-forma ratio was 2.1 times as of June 30th, 2019, up from 1.9 times as of December 31st, 2018.

 

Filing of documentation

 

The half-year report at 30 June 2019 has been made available to the general public at the Company's head office and on the 1INFO circuit for the storage of Regulated Information, operated by Computershare (www.1Info.it). The documentation is also available in the ‘Investor’ section of the website www.camparigroup.com/en and by all other means allowed by applicable regulations.

 

The Executive responsible for preparing Davide Campari-Milano S.p.A.’s financial reports, Paolo Marchesini, certifies-pursuant to article 154-bis, paragraph 2 of the Legislative Decree 58/1998-that the accounting disclosures in this statement correspond to the accounting documents, ledgers and entries.

 

Disclaimer

This document contains forward-looking statements that relate to future events and future operating, economic and financial results of Campari Group. By their nature, forward-looking statements involve risk and uncertainty because they depend on the occurrence of future events and circumstances. Actual results may differ materially from those reflected in forward-looking statements due to a variety of factors, most of which are outside of the Group’s control.

 

Analyst conference call

At 1:00 pm (CET) today, July 30th, 2019, Campari’s management will hold a conference call to present the Group’s results for the first half 2019. To participate, please dial one of the following numbers:

  • from Italy: 02 805 88 11
  • from abroad: + 44 121 281 8003


The presentation slides can be downloaded before the conference call from the main investor relations page on Campari Group’s website, at http://www.camparigroup.com/en/investors.

A recording of the conference call will be available from today, July 30th, until Tuesday, August 6th, 2019.

 

To listen to it, please call the following numbers:

  • from Italy:    02 72495
  • from abroad: +44 1212 818005

(Access code: 753#).

 

For further information

Investor Relations

 

 

Chiara Garavini

Tel. +39 02 6225 330

Email: chiara.garavini@campari.com

Thomas Fahey

Tel. +44 (0)20 31009618

Email: thomas.fahey@campari.com

Francesco Pintus

Tel. +39 02 6225416

Email: francesco.pintus@campari.com

 

 

 

Corporate Communications

 

 

Enrico Bocedi

Tel. +39 02 6225 680

Email: enrico.bocedi@campari.com

 

http://www.camparigroup.com/en/investor

http://www.camparigroup.com/en

http://www.youtube.com/campariofficial
https://twitter.com/GruppoCampari

 

Visit Our Story

About Campari Group

Campari Group is a major player in the global spirits industry, with a portfolio of over 50 premium and super premium brands, spreading across Global, Regional and Local priorities. Global Priorities, the Group’s key focus, include Aperol, Campari, SKYY, Grand Marnier, Wild Turkey and Appleton Estate. The Group was founded in 1860 and today is the sixth-largest player worldwide in the premium spirits industry. It has a global distribution reach, trading in over 190 nations around the world with leading positions in Europe and the Americas. Campari Group’s growth strategy aims to combine organic growth through strong brand building and external growth via selective acquisitions of brands and businesses.

Headquartered in Milan, Italy, Campari Group owns 18 plants worldwide and has its own distribution network in 20 countries. Campari Group employs approximately 3,700 people. The shares of the parent company Davide Campari-Milano S.p.A. (Reuters CPRI.MI - Bloomberg CPR IM) have been listed on the Italian Stock Exchange since 2001. For more information: http://www.camparigroup.com/en. Please enjoy our brands responsibly

 

-   Appendix to follow   -


CAMPARI GROUP

 

Consolidated net sales breakdown by brand for the first half 2019

 

% on Group sales

% change, of which:

 

 

total

organic

exchange rate effect

external growth

Global Priorities

58.8%

13.0%

9.8%

3.2%

0.0%

Regional Priorities

15.1%

13.0%

10.8%

2.1%

0.0%

Local Priorities

12.0%

3.8%

4.0%

-0.2%

0.0%

Rest of portfolio

14.0%

-4.8%

2.4%

1.4%

-8.5%

Total

100.0%

9.0%

8.0%

2.3%

-1.4%

 

Consolidated net sales by geographic area for the first half 2019

 

1 January-30 June 2019

1 January-30 June 2018

%

 

€ million

%

€ million

%

Change

Americas

384.6

45.3%

333.3

42.8%

15.4%

SEMEA (Southern Europe, Middle East and Africa)

243.6

28.7%

236.2

30.3%

3.2%

North, Central & Eastern Europe

165.5

19.5%

154.4

19.8%

7.2%

Asia Pacific

54.4

6.4%

54.3

7.0%

0.2%

Total

848.2

100.0%

778.2

100.0%

9.0%

 

 Breakdown of % change

 total

% change

organic growth

exchange rate effect

external growth

Americas

15.4%

9.9%

5.5%

-0.1%

SEMEA (Southern Europe, Middle East and Africa)

3.2%

7.7%

-0.1%

-4.4%

North, Central & Eastern Europe

7.2%

7.0%

0.2%

0.0%

Asia Pacific

0.2%

1.1%

-0.9%

0.0%

Total

9.0%

8.0%

2.3%

-1.4%

 

Consolidated EBIT adjusted by geographic area for the first half 2019

 

1 January-30 June 2019

1 January-30 June 2018

change

change

 

€ million

%

€ million

%

% total

% organic

Americas

76.1

42.2%

65.8

41.0%

15.6%

8.5%

SEMEA (Southern Europe, Middle East and Africa)

49.2

27.3%

44.0

27.4%

11.7%

14.9%

North, Central & Eastern Europe

49.1

27.2%

46.0

28.6%

6.9%

6.9%

Asia Pacific

6.0

3.3%

4.7

3.0%

26.0%

35.0%

Total

180.3

100.0%

160.5

100.0%

12.3%

10.6%

               

 

 


 

CAMPARI GROUP

 

Consolidated income statement for the first half 2019

 

 

1 January-30 June 2019

1 January-30 June 2018

 

 

€ million

%

€ million

%

Change

Net sales

848.2

100.0%

778.2

100.0%

9.0%

Total cost of goods sold(1)

(322.3)

-38.0%

(306.3)

-39.4%

5.2%

Gross profit

525.8

62.0%

471.9

60.6%

11.4%

Advertising and promotion

(151.5)

-17.9%

(134.9)

-17.3%

12.3%

Contribution after A&P

374.3

44.1%

337.0

43.3%

11.1%

SG&A(2)

(194.0)

-22.9%

(176.5)

-22.7%

9.9%

EBIT adjusted(3)

180.3

21.3%

160.5

20.6%

12.3%

Operating adjustments

(8.6)

-1.0%

19.6

2.5%

-144.0%

Operating profit=EBIT

171.7

20.2%

180.1

23.1%

-4.7%

Financial income (expenses)

(15.1)

-1.8%

(14.8)

-1.9%

2.2%

Adjustments to financial income (expenses)

(0.0)

0.0%

1.6

0.2%

-100.1%

Profit (loss) related to companies valued at equity

0.1

0.0%

(0.1)

0.0%

-217.1%

Put option, earn out income (charges) and hyperinflation effects

(3.0)

-0.4%

(0.9)

-0.1%

251.3%

Profit before taxes and non-controlling interests

153.7

18.1%

166.0

21.3%

-7.4%

Group profit before taxes adjusted

162.3

19.1%

144.8

18.6%

12.1%

Income Tax expense

(30.9)

-3.6%

(18.8)

-2.4%

64.4%

Net Profit

122.8

14.5%

147.2

18.9%

-16.6%

Minority interests

-

0.0%

-

0.0%

0

Group net profit

122.8

14.5%

147.2

18.9%

-16.6%

Group net profit adjusted(4)

116.7

13.8%

104.4

13.4%

11.8%

 

 

 

 

 

 

Depreciation and amortisation

(34.8)

-4.1%

(27.4)

-3.5%

26.8%

EBITDA adjusted(3)

215.1

25.4%

187.9

24.2%

14.4%

EBITDA

206.5

24.3%

207.5

26.7%

-0.5%

 

(1)     Includes cost of material, production and logistics expenses.

(2)     Includes selling, general and administrative costs.

(3)     EBIT and EBITDA before negative operating adjustments of -€8.6 million in H1 2019, mainly attributable to restructuring operations. Positive operating adjustments of €19.6 million in H1 2018.

(4)     Group net profit before total net positive adjustments of €6.1 million in H1 2019, including operating adjustments of -€8.6 million, related fiscal effects and other tax adjustments of €2.2 million and Patent Box tax benefits of €12.5 million. Total positive adjustments of €42.8 million in H1 2018.

 


 

Consolidated balance sheet as of 30 June 2019

 

30 June 2019

30 June 2018

 

€ million

€ million

ASSETS

 

 

Non-current assets

   

Net tangible fixed assets

450.0

454.4

Right of use assets

73.8

-

Biological assets

1.0

1.0

Investment property

120.9

122.8

Goodwill and trademarks

2,349.8

2,341.0

Intangible assets with a finite life

41.6

42.9

Investments in associates and joint ventures

0.5

0.4

Deferred tax assets

42.1

38.4

Other non-current assets

28.7

23.9

Total non-current assets

3,108.3

3,024.9

Current assets

 

 

Inventories

628.6

565.3

Current biological assets

0.7

0.8

Trade receivables

284.1

285.9

Short-term financial receivables

4.6

29.1

Cash and cash equivalents

768.8

613.9

Income tax receivables

18.0

22.4

Other receivables

44.0

32.3

Total current assets

1,748.9

1,549.7

Assets held for sale

9.4

7.8

Total assets

4,866.6

4,582.5

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

Shareholders’ equity

   

  Share capital

58.1

58.1

  Reserves

2,180.4

2,104.7

Parent company’s portion of shareholders’ equity

2,238.5

2,162.8

Non-controlling interests' portion of shareholders' equity

-

-

Total shareholders’ equity

2,238.5

2,162.8

Non-current liabilities

 

 

Bonds

928.7

778.7

Other non-current liabilities

499.9

463.7

Defined benefit obligations

31.0

31.6

Provisions for risks and charges

116.0

118.7

Deferred tax liabilities

374.8

368.2

Total non-current liabilities

1,950.3

1,760.9

Current liabilities

 

 

Payables to banks

4.6

4.5

Bonds

218.9

218.6

Other financial liabilities

90.9

52.5

Trade payables

195.4

216.0

Income tax payables

26.9

13.9

Other current liabilities

141.1

153.3

Total current liabilities

677.7

658.8

Liabilities held for sale

-

-

Total liabilities

2,628.0

2,419.6

Total liabilities and shareholders’ equity

4,866.6

4,582.5

 

 

 

Consolidated cash flow statement as of 30 June 2019

 

30 June 2019

30 June 2018

€ million

€ million

 EBITDA Adjusted

215.1

187.9

 Provisions and other changes from operating activities

(23.0)

(13.4)

 Taxes paid

(9.1)

(24.2)

 Cash flow from operating activities before changes in working capital

183.1

150.3

 Changes in net operating working capital

(77.2)

(21.1)

 Cash flow from operating activities 

105.8

129.2

 Net interests paid

(3.0)

(1.1)

 Adjustments to financial income (charges) 

(0.0)

1.6

 Net capital expenditure

(21.6)

(18.8)

 Free cash flow 

81.2

110.9

(Acquisition) and sale of companies or business division

 -

22.3

Dividend paid out by the Parent Company

(57.3)

(57.5)

Other changes

(13.2)

(21.4)

 Total cash flow used in other activities

(70.5)

(56.6)

 Exchange rate differences and other changes

(19.3)

(27.1)

 Change in net financial position due to operating activities

(8.6)

27.2

Put option and earn-out changes

(0.8)

7.6

 IFRS16 adoption

(81.4)

 -

 Net cash flow of the period = change in net financial position

(90.9)

34.7

 

 

 

Net financial position at the beginning of the period

(846.3)

(981.5)

Net financial position at the end of the period

(937.1)

(946.8)

 

 



[1] EBIT before negative operating adjustments of -€8.6 million in H1 2019, mainly attributable to restructuring operations. Positive operating adjustments of €19.6 million in H1 2018.

[2] Group net profit before total net positive adjustments of €6.1 million in H1 2019, including operating adjustments of -€8.6 million, related fiscal effects and other tax adjustments of €2.2 million and Patent Box tax benefits of €12.5 million. Total positive adjustments of €42.8 million in H1 2018.

[3] Includes Global Travel Retail.

 

[4] The new accounting standard IFRS 16, effective as of 1 January 2019, introduces a single accounting model for leases in the financial statements of tenants.

[5] Group net profit before total net positive adjustments of €6.1 million in H1 2019, including operating adjustments of -€8.6 million, related fiscal effects and other tax adjustments of €2.2 million and Patent Box tax benefits of €12.5 million. Total positive adjustments of €42.8 million in H1 2018.

Publishing date: 
30 Jul 2019
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Last updated Jul 30 2019