Remy Cointreau Sa Ord

Good morning to you all. We are here today to present the financial results of Remy Cointreau for the year 2019-2020. As a non-executive chairman, I will present to you the context in which we ended last fiscal year, then Eric Valla, our new CEO, and Luca Maotta, our CFO, will present to you our detailed results. After that, even more importantly, Eric will describe to you our midterm strategy, then we will answer to your questions. Clearly, the last three months of last year were very singular. Since the previous centuries, the companies which make up now the Remy Cointreau Group have been through severe crisis, destruction of all vineyards, fires, prohibition, wars, economic crashes, epidemics, but not quite as a pandemic like the one we are just having now. And then, as you can see on these photos taken in very different locations around the world, our teams reacted all over to help their communities as much as they could and worked as much as possible to be the most efficient when operations could start again.

This is in that context that we ended last fiscal year. As you know already, our results were down.

Sales were down on an organic basis by 11%. Even Remic-Rentrault Group brands were down by 6%. Our current operating profit was down by 22%. Even our current operating margin was down by nearly 3%. And finally, our net profit was down by nearly 32%.

Yes, the results of last year show a decrease.

But those results are not as bad as they look. and our potential of recovery in the medium term is very high. Now, I will hand over the mic to Eric and Luca, who will explain to you, in spite of those last year's figures, that we are very confident for our future.

Thank you, Marc, and good morning, everyone. Thank you for attending this call. I wish in the coming months I will have the opportunity to meet but meanwhile I'm happy to share, to take advantage of this call to update you on the business in 19-20 and as promised also to share about the strategy in the coming years. I will do this later on after Luca. But let me start by a business update. In 19-20 was indeed a singular year as Marc was saying that led to a decrease of our total sales by 11.2% and our group brand sales by 6.3% in organic terms. Our results have been affected by external factors, among which COVID-19, threats of import taxes in the US, obviously, geopolitical instability, particularly in Hong Kong, and as we all know, this is not going to improve. They have also been impacted, these results, by decisions we took ourselves notably in the EMEA region, with changes in route to market in Italy, in Spain, in Germany, as well as in the Czech Republic and Slovakia. A lot of markets, as you can see. We also terminated several partner branch distribution contracts whose impact was 56 million euros in sales, which accounts for almost 5% of our sales. And 56 million euros sales, this translated into a 9 million euro cup impact. Having said that, the COP is showing good resilience at 21%. The gross margin improved by almost 3 points. This is mainly driven by the refocus on group brands and we benefited from positive currency effects as well. Part of the margin has been reinvested in sustained strategic ANPs despite a slowdown in Q4 due to COVID. Lastly, Structure costs ratio increased substantially due to lower sales as the savings initiated since February will pay off mostly in 2021. Let us now move to the next slide, slide seven, about the non-financial achievements. We could have chosen many, but we chose to focus on three. The first one is that we achieved 100% sustainable agriculture in Cognac with our 900 wine growers now involved in the process of sustainable farming. As a former CEO of Rémy Martin, MSI was quite impressed when coming back of how this accelerated. We were below 50% only one and a half year ago. So it's a great achievement indeed. Second, we were ranked number one of 80 Finances Gaia Rating 2019 among 230 French mid-cap companies. This index, as you may know, ranks companies on their sustainability performance and transparency. And third, we are very proud of our Brookland Distillery, which was awarded the B Corp label during confinement, by the way. It's a worldwide certification, as you know, that rewards businesses for achieving the highest levels of social and environmental performance, public transparency and accountability. As such, the distillery joins a restricted circle of 3,200 plus businesses globally, which have implemented a rigorous approach to business decisions by focusing on people and on the planet in addition to profit. I'm proud to say that Rucladie is the first whiskey and gin distillery in Europe to be granted the label. It has been a long process, but it is paving the road for the future. And one thing that COVID taught us is that businesses can do more than just profits. They can have a positive impact. This gives a purpose and contributes to pride, which is a great source of motivation. The impact of the B Corp label resonates way beyond ILA, I can tell you, within the group. Now let us move to slide 8, which will tell you more about sales growth by product division. This slide actually shows you results which I think are not going to surprise you, excluding Technical factors, sales are almost flat for liquors and spirits, and minus 3.8% for our cognacs. The technical and exceptional factors are the termination of distribution contracts for partner brands, as explained, and obviously COVID impact, which we evaluate at 36 million on last year's in sales. Moving now to slide nine. The breakdown of group sales, nothing really new here. Despite a faster decrease in sales than the rest of the portfolio, the House of Rémy Martin remains predominant, obviously. I just would like to comment that the split by region would have been more balanced between America and Asia without the pandemic crisis. As you know, COVID impacted China from January onwards a few months earlier than the rest of the world. And EMEA is obviously impacted by the route to market changes that I detailed a few slides ago. Moving now to slide 10, which is giving you the breakdown by region. No real news either here. Cognac's business is made mostly in the US and in Asia, which shall not hide the potential to grow in the long run in EMEA and more particularly in Africa. and Russia. I would like to stress here the solid performance of our intermediates for Cognac Club in Asia in 1738 in the US in line with the strategy. Liquors and Spirits achieved a strong growth in the US which was driven notably by very impactful campaigns that ended up paying and we are outperforming a competition and PHD whiskeys also enjoy a great momentum, have been enjoying a great momentum for the past few months and are still today. China is showing strong growth but remains obviously smaller for liquors and spirits division today. I'll also get back to this later on. Moving now to slide 11, the cup, an update on the cup and the waterfall chart. which shows you more details. As already mentioned, COP is down 18.6% and 22% in organic terms. We benefited from a 9.1 million euro positive currency impact, notably from the US dollar, but I will let Luca elaborate later on. The volume mix effect is largely penalized by the volumes, which declined. 10% for the House of Rémy Martin, and 3% for Liquors and Spirits, despite a positive mix. And the positive price mix, on the contrary, is led by the price increases taken in April 2019, and by a positive mix, product mix, but mostly market mix. ANP spend is more or less stable, with an increase in strategic investments, offset by tactical cuts, particularly in Q4, in Asia-Pacific. Others account for €12.6 million, a noticeable amount, that is led by a €9 million increase in strategic distribution costs and the €5 million increase in holding costs, largely related to the reorganization of the Executive Committee. Some cost control measures were partially offsetting these factors. As a result, the margin is down 2.5 points to 21%. Let us now move to slide 12, the net profit. Net profit, excluding non-recurring items, declined by 26.9%. And the net profit group share was down 28.8%, but Luca will come back to that more in detail. I will not elaborate here. Slide 13, so the House of Rémy Martin. Let's move to the division's performance. The House of Rémy Martin organic sales declined by 7.5%. This comes after a record year in 18-19 and three years in a row of double digit growth. In absolute value, sales remain way above historical average track record. Asia-Pacific growth has been driven by China, which achieved a double-digit growth despite COVID impact and enjoyed promising sales in the run-up to Chinese New Year. This has been more than offset by Southeast Asia economic challenges and, more importantly, by travel retail, along with the Hong Kong protests throughout the year. U.S. sales were penalized by the reduced level of inventories carried by U.S. retailers, but the sales in the off-trade since the lockdown have proven their good resilience, particularly our key and iconic products, VSOP, and more importantly, 1738. Lastly, in the EMEA region, the good growth in Africa and in the Nordics was more than offset by the weakness of our sales in Western Europe and in Russia. Moving now to slide 24, just to share a little bit about the marketing initiatives at Rémy Martin, beyond the figures. In 1920, there have been a lot of launches of many marketing initiatives, among which the launch of Terce, whose positioning is bridging a gap between 1738 and EXO. in line with our value strategy. The launch has been monitored very carefully and is driven by sell-out to preserve its long-term potential. 19-20 actually also saw the launch of the new global campaign, Team Up for Excellence, with a great and well-appraised event in Versailles with influencers, press, teams and partners from all over the world. This campaign enhances our know-how and quest for excellence. Behind every success and individual, there is a collective story and teamwork which calls for celebration moments and which, by the way, reflects our values. Moving now to slide 15 about Louis XIII's marketing initiatives. Louis XIII has also been very active. The brand launched its second limited edition of the Time Collection after celebrating the origin in 1874. The limited edition is a tribute to the City of Lights in collaboration with La Monette Paris, a thousand years old institution. It refers to the year 1900 when, by the way, Louis Treize was present at the Universal Exhibition, just to reflect its long historical patrimony. But beyond the product and the PR, this innovation has been designed to engage a direct dialogue with our clients who could register to obtain a medal from La Monnaie de Paris, which you can see in the picture. Louis Treize also launched by year-end its first owned e-boutique in the UK. This is a first move in the industry. Beyond sales, this boutique will increase the visibility of the brand and will help reinforce our understanding of the e-commerce ecosystem and above all, will enable to engage a direct dialogue with our clients. So as you can see, These two examples illustrate that Louis Treize, being one of its kind luxury brand in the industry, is moving forward in all direct to client related activities. Louis Treize unique positioning allows the brand to pioneer direct sales in our industries. It's a fantastic pathfinder for the group and probably even for the industry. Let us move now to slide 16. which shows you the COP waterfall. So COP was down 15.3% in reported terms and 18.2% in organic terms with 6.8 million euro currency gains. Volume mix has been penalized by the 10% decline in volumes, as I said, but the House enjoyed a positive price mix of 10.7 million euro. thanks to solid pricing and some positive mix driven by clubs in Asia and 1738 in the US. ANP expenses increased by 1.8 million euros in the full year. This was driven by the strategic investment in the new global campaign I just described of Rémy Martin, which was partially offset by some tactical cuts in Q4. Other expenses were up 11.3 million euros in the full year. largely due to an €8 million increase in strategic distribution costs, such as brand ambassadors and private client directors. As a result, the COP margin is down to 7.1%. Let us now move to slide 17, about liquors and spirits. So Cointreau enjoyed a robust performance in the Americas, benefiting from sustained A&P investments. The results of Cointreau in the US are a great illustration of a well-thought campaign which can deliver in sales. Another good example, by the way, of this is in Australia, where the Art of the Mix campaign was also well executed. A&P spend is, sorry, It's too early to speak about the ENP spend of Cointreau, but just to say about Metaxa, that it's been impacted by travel retail and route-to-market changes in EMEA in some of its key markets. But this should not hide the product mix improvement with the 12-star share growing. Saremi now. Saremi performance was held back by EMEA and Asia. But the Americas, again, delivered a strong and promising performance thanks to successful marketing initiatives in the US and in Canada. Maungay sales weakness was expected. It is led by the voluntary slowdown in shipments ahead of the gradual restaging of the brand. First feedbacks in the US, which is a key market for Maungay, are encouraging and the liquids have been prized in many competitions. The botanist now. The botanist is enjoying its continued growth. It grew strongly and quickly all across the board, confirming its great potential. The brand with a strong sense of place and nature is well positioned to keep growing in the coming years. Lastly, single malt whiskeys benefited from a strong momentum worldwide, particularly in the U.S. for Bucladi. The launch of the Newport Charlotte bottle is very successful and demand exceeds expectations. Let's now move to slide 18, some marketing initiatives on liquors and spirits. We picked three of them. The first one is about Cointreau and the launch of Le Cocktail Show, a communication campaign which has generated a lot of buzz and which is very meaningful for Cointreau. which is used, as you know, in almost 400 cocktails now. Emphasis is put, obviously, on the Margherita, given its awareness, given its success worldwide, and knowing that the original recipe was made with Cointreau. Metaxa leveraged a great partnership with one of the top bars in the world, the Clemsis, in Athens. This partnership, with the strong involvement of the Clemsis themselves, the bartenders, is a great way to create excitement on the brand and a truly unique liquid in on-trade and beyond. I consider it the best practice in the group. And lastly, the botanist launched its first real communication campaign called Wild, a state of mind. It's a great way to enhance this unique sense of place in nature and an absolute must to leverage awareness and keep growing as the beauty of the botanist is that if you taste it, you buy it. And the other beauty is that there are no volume constraints. But I'll get back to this later on. Slide 19 now. So the Liquors and Spirits COP waterfall. COP was done 3.5% in reported terms and 9.9% in organic terms, despite the 2.5 million euro positive currency impact. The volume mix. was penalized by the decline in volumes, even though it was only despite COVID 3.4%. But there has been a slightly positive price mix of 0.7 million euros thanks to pricing, while mix was less favorable due to the good performance of Cointreau, whose margins are very good, a gross margin, but whose absolute price is less. ANP expenses declined by 2.6 million euros in full year, due to tactical cuts in Q4, and other expenses increased by 1.4 million, reflecting some increase in COGS for Cointreau, Montgay, Metaxa, and the Mols. Lastly, the COP margin, as a result, is down 0.4 points to 14.3%. Let us now move to the last two slides. I'll be quick here because Lucas will elaborate, but not on this one, by the way. He will elaborate more. on the whole PNL analysis, but the sales of our partner brands, sorry, I'm moving to the next slide myself. I don't think I have. The sales of partner brands decreased by 69% due to the termination of sizeable partner brand distribution as I explained in Czech Republic and Slovakia. The impact, as I said, is 56 million euro. It's in line with the group strategy of gradually refocusing on our own group brands. And the last slide for this business update for me, and then I will pass the mic to Luca, is about the COP for our partner brands. And as you can see, and as I said, the 56 million euros impact in sales translates into a 5 million euro impact in COP. Thank you very much. Luca, the floor is yours.

Thank you so much, Eric.

Let's move on to detailed analysis of the financial statement. And let's begin with the income statement as usual. Despite an 11.2% organic sales decline, gross profits showed resilience as they were down 7.3% in organic terms, implying a 2.8 point increase in gross margin. This very good performance was driven by the group refocus on its group grants as we terminated a number of dilutive partner brand contracts as well as a positive leverage from price mix as we continue to take notable price rises across all world regions. So the 2.8 points overall gain in gross margin between a 0.4 point increase for the group brands, on like-for-like basis, and 2.4 points benefit from the termination of the partner brands dilutive contracts. Sales and marketing expenses were flat in organic terms. This reflected an increase in the first nine months of the year, offset by specific tactical cuts in the last quarter, Q4, as the COVID-19 pandemic started putting pressure on the top line. Within this total, we have to highlight that AMP, Advertise and Promotion, expenses were down 1% organically, and distribution expenses were up 2%, as in both basis, despite cuts in the Q4, we maintained our long-term strategic and important investments. Our administrative expenses grew at 5.7% on an organic basis, entirely, totally driven by the 5 million euros increase in holding costs, while other administrative costs were well under control. As Eric said, the increase in holding costs was largely due to the evolution of the Executive Committee. All in all, Current operating profit declined by 22% on organic basis and by 18.6% on a reported basis, i.e., after taking into account positive currency effect for 9.1 million. The next chart is one of the most important of our presentation, financially speaking. is the analysis of the group's current operating margin, which declined by 2.5 points, 250 base points, to 21% over the full year. But why? These breakdowns into an organic decline of 2.9 points and positive currency effects of 0.4. There was no scope perimeter effect this year. The organic decline of the current operating margin basically reflects the significant increase in AMP and distribution and other cost ratios, which resulted from the sharp decline in sales, in particular in Q4, while gross margin was clearly up strongly and all along during the year. So indeed, as already mentioned, the gross margin rose 2.8 points, led by refocus on group brands, pricing benefits, and market mix gains. Second element, the AMP expenses ratio increased by 1.9 points, 190 base points, as AMP spend was down 1%, while sales declined 11.2% organically over the period, as already mentioned. And despite that result, some tactical specific cuts in expenses in the Q4, particularly in Asia-Pacific. Last but not least, the ratio of distribution structure costs increased by 380 base points, 3.8 points. Again, due to the negative leverage of declining sales, and at the same time, distribution costs up 2% and holding costs by 5 million euro over the year. Now let's take a look at the rest of the income statement, the remaining part, beginning with the other operating expenses, which totaled a charge of 19.7 million, of which the biggest part, 18.8, is linked to a partial write-off of Westland brand Goodwill. When we acquired this brand in 2017, the global amount of intangible assets was overall 36 million, of which 10 million for the brands, 10 million euro, and around 26 million euro for Goodwill. This year, impairment tests over the same horizon, 12 years span, showed that the Goodwill need to be revalued at 7 million. So, as a result, an impairment, depreciation of this intangible, which is a non-recurring cost for around 19 million euro. Finance costs decreased to 28 million euro in the full year. I'll come back to this on a later slide. The tax rate. Tax rate, as already guided two months ago, one month ago, sorry, rose from 29 to 36.3% due to a very unfavorable change in the geographical mix, particularly deterioration of Asia Pacific in the Q4. Excluding non-recurring factors impacting this specific line, the tax normative and normal rate would have been 33.9, so around 34%. At this point in time, given the uncertain global tax environment, we think it is reasonable to expect the tax rate to remain stable, around 34%, in the 2021 environment, so out of non-recurring elements. Now, let's move to profit from this continued operation. We recorded 6.4 million net profit gain on the disposal of our Czech and Slovakian distribution subsidiary that occurred in April 2019. As a result, our net profits, bottom line, came in at 113.4 million, down 28.8 year-on-year on a reported basis, but excluding non-recurring items, net profit came in at 124.2 million, so down 26.9, and the net margin stand at a very resilient level of 12.1%. So let's look at the reconciliation table, next slide, between net profits, bottom line, and net profit excluding no recurring item. No recurring items amount to around 11 million, 10.8 to be precise, expenses in the full year. The three main elements in reconciliation, 18.8 million year goodwill write-off on Westland, which is charged, so need to be reversed. 6.4 million Euro gain recorded on disposal of Central Europe distribution subsidiary. It's something that needs to be checked the other way around. And 2.5 million Euro net tax gains related to the different non-recurring elements. Now let's move the chart which will analyze the cash flow generation debt. end of March 2020 our net financial debt stood at 450.9 million euro up more than 100 million compared to the previous year to be precise 107.6 try to make it simple it was largely due to the lower EBITDA level down 45.6 million euro combined with the €132 million dividends paid this year. They have an important generous amount that included an exceptional dividend of €1 per share on top of the €1.65 per share ordinary dividend. Besides, 100% of these dividends were paid in cash in 1920, while 89% dividends were paid in shares last year as most shareholders has opted for this script option in 1819. Now digging into the cash flow statement more in detail let's start with the total recurring free cash flow which was a 15.7 million euro free cash flow cash generation in the full year versus a cash inflow of 8.5 million previous year. So a positive delta even in a very negative, according to the global figures here, of 7.2 on free cash flow. This slight but important improvement was driven by a substantial positive swing in other components of working capital, which was an inflow of 45.9 million euros this year versus an outflow and negative cash out of 47.3 million euros last year. This can be explained by two major factors that we have to remember because next year can be some reverse effect. First one, a phasing effect. Previous year, huge finish of the year. This year with the COVID and lower net safe, also a lower level of accounts receivable and which impact this kind of lines in terms of the Turkish flow. This is a balancing important effect between the two years, which accounts for half of this variation. And the other side, an increased level of factoring programs towards the end of the year to secure the payment of our receivable in the context of COVID-19 crisis, also to be able to have treasury in a positive liquid position in our balance sheet, if you look, and we will, in our balance sheet. uh asset you will find more liquidity available at the end of the year compared to the previous one in contrast on a negative side mathematically speaking but in a very positive side strategically speaking strategic working capital outflow remained roughly stable versus last year but a very high level 119 more than 100 million euros we continue to buy a greater than needed level of cognac eau de vie, but which is very important for the future and also did not borrow as much we should have given the pandemic outbreak in the Q4. So it's a combination of increase in balance supplying eau de vie, mainly cognac, mainly cognac, and also an increase in stock of finished product because of the slowdown in the Q4 linked to the pandemic. always on the negative mathematical side, but very positive on the strategic side. Capital expenditure increased as expected, but we have to say was below our initial expectation. We guided for 70 to 80 millions on CapEx outflow, but we postponed some programs with the pandemic this year, so this figure is lighter. Over the next two, three years, we expect now capital expenditure to be between 50 and 60 million euro per year. Tax outflows as well increased, which is the clear consequence of the strong profit growth posted last year, which has been paid this year on a cash basis. So now let's focus on the non-operating cash flow because the free cash flow was a good one. The non-operating cash flow were a negative 123.3 outflow in the full year to be compared to a 69 million euro outflow the previous one. So a negative delta of more than 50 million, 54.3. As already mentioned, this negative non-operating cash flow variance was mainly due to the dividend payments mitigated by the procedure received for disposal of the central European subsidiary, but clearly the amounts that we are talking about are not symmetric. Besides, last year, as you can see, the cash flow evolution reflected the early repayment of the vendor loan by 86.8 million euro and a share buyback for a negative 104 million, 103.6. So after this complex but I think important this description of the free cash flow and the net cash flow of the year, we can say that our net debt to EBITDA ratio stands end of March 2020 at 186, a ratio, versus one in 19, one year ago, increasing, but still a very healthy level compared to our business model. Now, let's move in a quicker way to the next chart. Our net financial expenses was a charge of €28 million in the full year, down €4.5 million. This reflected, which is important, an additional, once again, €1 million reduction in the gross debt servicing cost. Thanks, clearly, not to the debt, because the debt is higher, but to a further optimized cost of debt that now stands on weighted average at €1.06 million. to be compared to 1.17 in the previous one. Remember that 3, 4, 5 years ago we were at 5%. We also took profit from lower other financial expenses, but we have to recall that last year they were burdened by a non-cash, non-recurring charge of 5.2 million euro related to the early repayment of the vendor loan. Obviously, there was no such charge in 1920. In contrast, on a negative side, Net currency losses were slightly deteriorated this year to 4.7 million, where there were 4 million euro losses last year. As you know, this is a volatile non-cash charge related to the edging of the group's non-euro debts. Let's talk about exchange rates. Classical chart on that. As mentioned earlier, the group reported fallible translation and transaction effects, which had an impact of €9.1 million on COP in the full year. This impact is in line with the original guidance of €9 to €10 million gain, despite the lower than expected sales and profits. So the absolute value were less important than expected. entirely driven by U.S. dollar and U.S. dollar-linked currencies strength since our publication last June. But for your information, the only negative transaction currency effect was the rubble with a negative 1 million euro. As shown by the green line, the average euro-dollar translation rate came out at 111 over the full year compared to 116. As already mentioned, this is positive for the translation of the group says which enjoyed a 24.5 currency benefit, totally perfect in line with our guidance. Meanwhile, the average hedged rate, the red line, under our currency cautious hedging policies was 1.16 over the full year to be compared to 1.18 over the same period of the last year. This is a chart that we started to implement last year. It's important to try to set the tone and the debate for the expectation in terms of Forex translation and translation for the next year for your model. Assuming an average Euro-US dollar budget rate at 1.14, which is admittedly cautious compared to the current spot rate, even if the dollar is moving in this moment, and the Euro-US dollar edge at the rate of 1.15, We anticipate a guess estimation of the published effect of €20 million headwind on sales and a neutral zero impact on operating profits. The neutral impact on COP could split between €4 million gain in H1 and €4 million loss headwind in H2. The top line translation of 20 million at wind at this stage will be a little bit more on H1 compared to the H2, but we can't be sure of that because the volatility of the top line, considering the pandemic environment, is much, much more important, much important than previous year. Now, as every year, we reckon that the current spot rate of euro-dollar is lower. It's closer to 112, if I'm not mistaken. more than 1.13. If the Euro-US dollar was to remain around this level, the currency impact could improve, bottom line, globally, versus our expectation. The sensitivity, it's written, versus our expectation is the following. One cent increase in US dollar currency linked versus Euro translates everything equals to in 5 million Euro gains on sales and 3 million Euro gain on operating profit, all things alike. At this stage, we have already covered 90% of our expected net US dollar exposure, of which around 50% in auctions. Balance sheet picture. The overview of the balance sheet is showing that the structure strengthened another year with total asset debilities now 2.79 billion euro compared to 2.62 at the end of last one. This was mainly driven by the increase in inventory, as expected, as explained, and in the level of cash. You see, cash is moving. As highlighted in our press release on April 2nd, In the context of COVID-19, the group cautiously maximized drawing with all its means on its available credit lines. Stock rose by €118 million to reach €136 billion end of March 2020 due to the combination of the newly distilled and acquired ODB cognac for €111, €111, so nearly 100%. and a fairly low level of production into village growth for our aged ODV, given the negative sales outlook. In clear, given that we did not anticipate much demand, we left our ODV aging in our sellers, which is totally understandable. It's fine with our long-term strategy. Stock accounts for 49% of our total SEPT, up two points compared to last year. Net gearing, the group net to equity ratio, increased clearly over the period, up 8 points from 24 to 32, due to higher net debt and lower equity. However, it remains at a very healthy level. Let's move on to ROCI, return on employed capital. Ratio declined sharply, 5 points in 1920. This is due to a 4.4 points decline in the group brands ROCHI to reach 18.2 and the swing in the partner brands ROCHI from being very positive and to be now very negative. The lower ROCHI for the group brands is due to a negative evolution of both numerator and denominator. Let's start with the numerator, so the operating profit Both the Cognac and Lacrosse and Spirits division recorded a decline in profitability in 2020. So Group Brands' current operating margin was down 2.6 points to 23.8. And look at the denominator. Capital employed for Group Brands grew by 87.3 million, 7.2, largely due to the significant increase in aging of the V inventories, 111 million euro, as well to the CapEx investment by division. Overall, to be simple, we can say that 70% of the ROCI decline was due to the numerator, so the lower profitability, and 30% to the higher capital employed. Now, post-closing events. Since the closing of the fiscal year on March 31st, two key events occurred. On April 30th, Remy Cointreau acquired the Maison de Cognac Brier. The House of Remy Martin will integrate around 50 5-0 hectares of vineyards located in Grand and Petit Champagne, as well as the Cognac brand Brier in its portfolio. Belle de Brier, which is a liqueur, will join for its part the group's liqueur space division. So there will be a split of these brands into different divisions. And on May 19, as Rigo already mentioned, a very important event, Our Brookladdy distillery, our Scottish single malt and botanist gin, was certified B Corporation, which is very important. Last slide for me. Let's talk about the yearly dividend. As already announced on April the 16th, an ordinary dividend of one euro per share will be put to a shareholder vote, a shareholder meeting on July the 23rd. The dividend will show a significant mathematical decline versus the 2.65 paid last year. But we have to remember, as already said, we included one euro of an exceptional dividend. So the comparison is more one euro compared to 1.65. The group will offer an option to pay the dividend in cash or in share this year for the entire dividend. In this context, the group majority shareholders had already expressed its wish to opt for a full payment in shares. The dividend cut is part of our responsible civic solidarity measure taken by the Group since the beginning of the current sanitary and pandemic crisis. For your technical information, shares will trade ex-dividend on July 28 and dividend will be made payable starting October 1. Total dividend equates to a payout of 40%, 4-0, of the EPS excluding non-recurring items and a technical yield of 0.9% on the average share price over the financial year, which was, as the calculation awaited, a little bit more than 117.3. Thank you for your attention. I will now hand it over to Eric Vallat for 2021 outlook. and very important and sexy strategical.

Thank you, Luca. I try to embody your words as best as I can. So for the outlook 2021, first, it's difficult to speak about the outlook without speaking about COVID, obviously. As already explained, we evaluated the impact in Q4 and we gave you the numbers. A lot is written in this slide and I'm sorry, I'm on slide 36. I'm not sure you're there yet. A lot is written in this slide and I'm not going to read it. But I would like to say that while the pandemic crisis is a human drama, of course, it also gave us the opportunity to gain in agility and progress in risk management and inclusive communication. COVID has also contributed to reinforce a sense of purpose inherited from our values, terroir, people, and time. Beyond the money given, I must say I have been very impressed by the spontaneous initiatives worldwide to support our communities, initiatives from our teams, but also from the COMEX and from the board, so at all levels of the group. Again, it's a great pride for all of us, and we know how much pride can be a source of motivation again. Aside from this, the focus has been obviously on securing cash and reducing costs while preserving our strategic investments and ability to grow even faster in the future. We even, during confinement, moved forward on the new organization and the strategy I'm going to share. So it's been managing short-term while, of course, preparing long-term. I am now switching to next slide. Just to be a bit more precise on the outlook itself, even though we have no crystal ball, obviously, but we believe that this year will be a year of two halves, largely impacted by COVID. No surprise here. We anticipate, as you have seen, a better Q1 than what we shared in April, with a decrease of 45% of ourselves in organic terms. I recall we were at minus 50, minus 55%. This is mainly driven by a more favorable than expected consumption trend in the U.S. of trade, obviously, over the past few weeks, particularly for VSOP, 1738, Cointreau, and Brooklyn. Actually, a big share of our portfolio. As for H1, we anticipate a COP decline by 45% to 50% in organic terms. This is assuming a fiscal Q2 showing signs of gradual improvements, but still in moderate decline. And lastly, we expect a stronger and a good recovery in H2, largely driven by our two major markets, greater China, mostly, and the US, with a better resilience. That's it for the outlook. I will now move forward and share about the strategy and the roadmap for the coming years. I'll try to do it in 20 minutes, which is not an easy exercise to allocate for time for Q&A. And I am now on slide 39. So first, I would like to confirm once and for all that our intention is to pursue the value strategy. This is a strategy I contributed to, myself, to design and implement under the helm of Valérie Chapulot as the CEO of the House of Rémy Martin for four years. I strongly believe in it and this is my culture. So our ambition as a group has not changed. We want to become the world leader of exceptional spirits. And we believe we can. By exceptional spirits, you will see that we do not necessarily mean products beyond $50, even though this still applies for our cognacs and whiskeys. We mean high-end spirits for which terroir and savoir-faire matter, and as a result, these products, these spirits, are meant to be icons in their categories and to price in the highest tier of their categories. So my presentation will be split into three. The first part will be quick, Recalling the why. After five years, I feel it's important to recall why a value strategy is right for the group. The why is the number one driver for the motivation again. Then I'd like to, in the part two, to tell you about the why. Sorry, about the how. After five years, it is important to draw the lessons and to learn from our successes and difficulties. What worked and what did not? How can we do even better? We maintain the value strategy, but we will refine it and make it even more efficient. I will explain you how. And then, after the why and the how, the what for, there is no strategy with no clear and inspiring vision and ambition. I would like to share with you our 10-year target, financial and non-financial. And now switching to slide 40. I'm not going to detail, sorry, slides for, yeah, that's it. So we have been working on our raison d'être, our purpose lately. I'm not going to elaborate here and to read it, but the sentence you have on the slide encapsulates who we are and what our purpose is. It's true to today and meant to be true for the next decades. This is why it is so powerful. And the good news is that this raison d'être is an advocacy for a value strategy. So the value strategy is not coming out of the blue. It's determined by who we are. The slide 41, I'm not going to detail all brands here. Let me just illustrate with our cognacs given their importance in our portfolio. Louis Trez is unique in the industry. It compares to none. It's a luxury brand, a true one, which resonates beyond spirit. It gives a great competitive edge to lead the exceptional spirits category. I could even say to frame it at some point. At Rémy Martin, because we value terroir, we have chosen decades ago to go for the most sought-after eau de vise from the most prestigious cru in Cognac, Grande et Petite Champagne, which is what Fin Champagne is made of. Fin Champagne takes longer to age, but also ages longer and nicely. This is why the value strategy is so meaningful for Rémy Martin. Why use our eau de vie on a VS? Well, we can value them more on the upper grades, which age longer on top of that. Behind every product of our portfolio, there is a rationale that calls for the value strategy. I'm not going to detail them again, but this is why it fits our brands and spirits. Slide 42. You know, beyond our purpose and products, the value strategy simply makes sense. Because we have a core family shareholder, we look long-term and we can age our liquid longer to value it more. Because we value terroir and time, because we believe it has a positive impact on the taste and the product itself, we believe it should increase pricing power. Because we craft increasingly sustainable spirits, this should translate into superior pricing. It is more costly and it matters to our clients as well. Lastly, we believe we should benefit from a global consumption trend about drinking less but better. Now moving to slide 43, which tells you that on top of that it works. A value strategy makes sense and fits us obviously, but more importantly, the good news is that it works as shown in the chart. It has worked for the industry and it has worked for us. And I do not believe COVID will change this. The growth potential of the high end remains very strong and will be driven by China where our awareness is huge. Clients might be more demanding for the price, this for sure, but they will keep being keen on buying pricey products provided they come with the fair added value. The challenge for us will be more to make sure we deliver the right offer at the right place, but the demand exists and will keep growing. I am now moving to slide 44. So this is it for the why. And now switching to the how. As I said, the value strategy is right. It's even a fact driven by scarcity in the long run for some of our brands. As I said, we prefer to value our eau de vie stocks more in the upper grades. But saying the strategy is right does not mean we are going to apply only the same recipes. We have now reached a mature phase. And we will refine our value strategy. One key success factor will be the implementation of a real portfolio approach and management. We are not as big as some of our competitors, but by assigning clear roles to each brand in our portfolio, which is tighter than our competitors, we can invest smartly and even in a sizable way on the right topics. And being sizable in the investments we make matters as well. So the portfolio management is a filter. And by customizing financial priorities by brands between volumes, prices, and mix, we will improve our group gross margin even more and increase our capacity to invest on our brands to generate desirability and pricing power. This is what portfolio management is about, but I'm going to dig a little bit more into it. I'm going to give you, in fact, this slide is key to illustrate what we have in mind. I have already spoken of Rémy Martin and Wittrez, and we can get back to it in the Q&A, but let me try to be a bit more specific here with three brands to illustrate what we mean by portfolio management. We have a small and consistent portfolio of brands, but it does not mean that one size fits all. Some brands and products will never justify a pricing over $50, given the category of products they craft. but their gross margins are very good and accretive for the group. They are strategic as much as the products above $50 can be. It is about being more inclusive here, and some brands have a specific mission within the group that call for a dedicated role as well and target which might not be purely the retail price. I have chosen three examples to illustrate what we've been working on over the past few months. The botanist first. The botanist's mission is to leverage a category with no volume constraints. That's its mission for the group. And the gross margins are creative for the group. So our obsession is not purely retail price driven as such. Our ambition for the botanist is to grow volumes while obviously protecting the margins, knowing that they are creative. We will invest accordingly and worldwide. So we have ambitious volume targets on the botanist. and we are not speaking only retail prices. Saint-Rémy is key because it's the aspirational gateway to grape spirits, which are so important to us, given the share of our Cognacs business. So it has a mission in the group, obviously. It's a regional power brand, which is leading our portfolio in some markets, where it supports our structure costs and commercial costs. So we will invest selectively and not worldwide. Rather than focusing on the volumes, we will focus on the gross margin here, which is dilutive today, through the mix notably. So as you can see, between the botanist and the SAREMI, the expression of the value strategy at group level is very different. Domaine des Hautes Glaces, a recent acquisition, is the pathfinder of the group. We should not look at the P&L only. We should be prepared to overinvest on Domaine des Hautes Glaces. The impact will be limited at group level anyway, but it will give the brand the opportunity to push even further the boundaries of sustainability. The brand will become the laboratory of the group. We will test sustainable practices before scaling them up with our bigger brands, and we will communicate more on an amazing business model which reinforces our legitimacy and which should have a halo effect on the rest of the portfolio. To summarize, one size does not fit all, and not everything is retail price related. We look at margins beyond prices, and portfolio management consists in investing more on the creative brands, improving margins on dilutive ones, and assigning a clear role and mission to each brand within the group. This is how we will improve our sales capabilities, by setting clear priorities and missions. I'm now moving to slide 46. Sorry, there we are. So what did I mean by refining our value strategy beyond the portfolio? Refining the value strategy does not mean focusing only on portfolio management. It means much more. With this slide, I would like to highlight three topics. Topic number one, over the past few years, we focused on retail price and retails. This was a great focus at that time, and is still, by the way, but to ensure commitment of all teams on the high end. The good news is that this is now the case. It works. The $50 price point, which was easy and catchy, helped tremendously to create this focus. As I just explained, through portfolio management, we are building a tailor-made approach by brand. The $50 target remains critical for some of our brands, namely the cognacs and the whiskeys. But portfolio management will also translate into aggressive volume growth targets for brands which are relative and have no volume constraints. For them, the challenge will be more on the volume on top of the price. The good value strategy can and should drive volumes, including for Rémy Martin, whose product portfolio is large enough to also play a portfolio management at bond level. Of course, we are not giving up on retail pricing nor on retrace, but we go beyond the $50 threshold and we look at gross margins to improve the overall profitability of the group through the mix. Point number two, over the past few years, we successfully infused a real end client culture throughout the organization. We are now implementing a client-centric business model. So it's beyond culture itself. What does this mean? Well, we will move from pure ATL, which is advertising, to 360 brand building. We will keep on investing behind e-retail, but we will even go up to having our own e-boutiques. Again, we started with WeTrace in the UK, and beyond the sales generated, these e-boutiques will have a positive impact on the image of our brand. They will accelerate our knowledge of e-commerce, and they will accelerate the design and the implementation of tools to support and control our e-retail partners worldwide. And we will leverage the group capabilities to implement and roll out CRM guidelines and tools. So, over the past few years, we have expressed our values and we made, sorry, and I have a third point, which is this one. So, over the past few years, we have worked on designing and expressing our values, and we made sure that they are well understood inside and outside. They are very inspiring. The next step is really to embody them even more and to leverage them, and we will turn them into an ambitious sustainability plan. which I will detail a little bit. So as you can see, it's really about continuity and refinement, much more than questioning the past five years. It's the next phase. So you should not be surprised, and this is my slide 49, to see four transversal priorities emerge. The first one is obviously to increase the value per case. looking at the margin on top of the retail price, but of course also playing at the retail price. Implement a real client-centric model with a great focus on digital and e-commerce. No surprise here. The third one is to increase the value of the liqueurs and spirits brands. I gave the example of the botanist. And the last one is to achieve responsible growth And as I said, to go beyond expressing our values, but to fully embody them, like just showed us, and also with the 100% responsible agriculture. We will meanwhile work on improving our management capabilities. It sounds basic, our portfolio management capabilities, sorry. It sounds basic, but in fact it requires a great level of execution. and it will contribute to the four priorities I just listed. I am now moving to slide 50. I'm not going to read it in detail, but just to share our, I think, inspiring and strong ambition on this particular field. We believe, again, it is very meaningful to us and we know how much meaningfulness is important. 100% sustainable agriculture. I mentioned about cognac by 2025. It goes beyond cognac. It's about responsible farming in all our businesses, from the oranges of Cointreau to the vineyards of cognac. It's about net zero carbon emissions with, as you can see, a strong ambition, including on Scope 3, which is the most challenging project axis that we're going to work on, by which we target a 30% decrease of the value per case and 100% of our eco-design packaging. I am now moving to slide 51, just to highlight what we believe the five growth engines will be. Note that the other brands will not contribute, of course, but the champions of our portfolio. Louis Treize, of course, which given its unique positioning can explore the direct selling opportunity more than any other. Remy Martin, whose penetration rate can clearly be improved as a category targeting the high-end whiskey drinkers, but also as a brand in the U.S., building on penetration and distribution, but also on new territories, digital, as well as in China, Tier 3 and Tier 4. and as a brand still by growing our market share on the high end. We are an absolute leader on Louis-Therese and we have room for growth on EXO Steel, which is a great expression of Fin Champagne. Cointreau, obviously leveraging cocktails through the Margarita opportunity. I already spoke about Margarita, so I'm not going to elaborate here, but there are also distribution potential gains in the US. The Botanist, I think I've told a lot about the Botanist, and obviously, Brookladdy Distilleries, whose positioning is great and whose potential overseas is undeniable. And now I'm switching to the what for, after the why and the how. And we chose to highlight a clear ambition for the next 10 years on the, let's say, non-quantitative side. What would success look like in 10 years? Well, we We will have a full-speed business model for Louis XIII, focused on direct sales and breaking the rules of the industry. Point two, we will have an increased share of the intermediates and EXO at Rémy Martin. Point three, the liqueurs and spirits brands will prove sizable and profitable. Point four, brands will be commanding price superiority in each of their categories. And point five, 20% of our sales will be made digital. And I am now switching to my last slide and then you will have the mic for the potential questions. But from a quantitative standpoint, I think it's clear here, I already spoke about the the non-financial ones. For the financial ones, as you can see, we target in 10 years, in 2030, 72% gross margin and 33% COP. Again, I'd like to highlight here that this is also taking into account a normative year, which is last year and not this year, which is a very special one. So last year, I remind you that the COP was 23.5%, which probably reassures you of the feasibility of this target that we strongly believe in. And also, again, it's excluding acquisitions, so at constant perimeter, and obviously also at constant exchange rates for the next 10 years. This concludes my short presentation. update on the strategy and the roadmap. And I think time has come for the questions.

Ladies and gentlemen, if you would like to ask a question, you can do so by pressing star 1 on your telephone. That's star 1 if you'd like to ask a question. We will now take our first question. Please go ahead, caller. Your line is open.

Hi, Eric, three questions from these leads. Firstly, can you just talk about the staging of that long-term marketing target? Should we anticipate that to be linear or perhaps a bit more upfront investment and more back-and-loading delivery? That's the first question. And the second question, you know, a lot of focus on the high-end part of the portfolio. How much of the sales today is direct and where do you anticipate that going to? Thank you.

Thank you. So three questions. Sorry, I'm just making sure I have them all in mind. Okay. So the first question was on the gross margin and margin improvement. Clearly, it is not going to be linear, and I'd like to make it clear here. It should not translate into a percentage divided by the number of years, for sure. It does not mean that we are not ambitious. A long-term plan does not work if it does not deliver in three years. So again, we are working also on the three and five year plans that deliver on the margin. But again, it will not be linear. This year, obviously, is a very special one. And you can expect an acceleration once we have accelerated and cracked the model on the... So again, delivering in three years, but acceleration after once we have implemented the model. Sorry, there was a strange sound, that's why I stopped. on the VSOP and given the focus on the high end of the portfolio. Again, I'd like to insist that it really makes sense. Finch champagne ages nicely. It delivers a better potential of aging. And what would not make sense for sure would be to... Sorry, maybe someone could put himself in mute. It's very noisy. Thank you. Okay. So, again, I insist it is critical for us indeed not to dispose of our volumes in VS or VSOP and to be short of liquid on the upper grades where we value much more and where FinChampagne delivers even more than other liquids potentially. This is, again, the why. Now, coming back to your question, we are proud of VSOP. VSOP is an icon of our brand, and the idea is not in itself to decrease the volumes of VSOP. The idea is to leverage VSOP, to overinvest on the high end, and to grow the higher end. So, basically, what it means is that VSOP volumes in the long run are meant to decrease at the expense of the upper grade volumes. It's because we will need the liquid for the upper grades. So the number one challenge is to grow the volumes of the upper grades, and this is what we need to the decrease of VSOP. So in the short term, we will keep on investing selectively on VSOP so as to be able to leverage VSOP and to invest on the upper grades. This is portfolio management, again. but applied to Rémi Martin. And the last point was on sales direct. What's the share of direct sales? I guess the question applies to Louis Treize. It's developing quickly. If you take China, it's now a sizable share of our business. What's interesting here, it's the fact that It showed a great resilience during COVID, much more than the non-direct channels, and it accounts for a third of our business in China. The growth potential there is huge. I remind you, it's a model we implemented only five years ago. It takes time to build, but there is still a lot of room for growth, whether it's through our private client directors, which are the kind of personal shoppers of the jewelry industry, Why does it make sense for Retrez, by the way? I remind you, Retrez is 3,000 euros a decanter, which is the price of a high-end watch. And our average price is that of the high-end watches. So with Retrez, we can do things we don't do with others. So the potential is huge through private line directors, through e-boutiques. You saw we launched our first e-boutique in the UK. And so through digital, sorry, and through our own boutiques. The resilience also of the boutique and its quick... start in April, restart in April in China is very encouraging.

I hope I addressed your question.

Thank you.

Thank you. We will now take our next question. Please go ahead, caller. Your line is now open.

Thank you. Morning, Mark. Morning, Erica. Morning, Luca. I've got a couple of questions as well. Eric, I wonder if I could just sort of follow up on... On the last question, a little bit around how we think about the delivery of those long-term targets in the nearer term. If we put, obviously, the COVID situation to one side and the impact that's going to have on the business over the next sort of 12 months ago, how do we think about how big a change that you're making in terms of this move to portfolio management? Is it really about evolving technology? the culture and execution internally, or are there going to be, do you think, more substantial upfront costs that are associated with that? How do we think about the level of marketing perhaps over the next two to three years in aggregate or the need to perhaps reinvest more into certain areas of OPEX? So that was the first question. And then secondly, obviously, you've talked in the short term about improving trends as we've moved through Q1 of the new fiscal year driven by the U.S. Can you give us a bit more flavor as to what you're really seeing in the U.S. market? We're all tracking very strong Nielsen and other data, other scanner data. Is that representative of the sell-through you're seeing at your end, or should we expect that lower than those scanner data would suggest?

So question one, it's difficult. Ten years obviously makes sense for us because we are who we are and because we wanted to show the magnitude of the ambition. Now, short term, more short term, we are not even able to tell you the landing of this year, so don't expect me to be too precise here. What I can tell you, referring to your question, about indeed whether it's more about execution or about upfront investment. First, on the short term, we are obviously managing our P&L with COVID. If you exclude COVID, it is, of course, about investing, but it is not a change versus what happened in the previous years. I strongly believe in the level of execution. I think portfolio management capabilities is a real game changer for us. notably in some of our countries. And I think that if we highlight, clarify our priorities by brands, by clusters, and we come up with selling techniques, you know, I come from a retail culture, but we shall not underestimate how much it can improve our performance. So the biggest focus will be there on training, on the message, and so on. It does not mean we are going to stop on investing. We are going to keep on investing. taking into account the environment. So no specific upfront overinvestment. And we will see once the COVID crisis is over how we catch up. I think this answers your question. For the more short-term outlook in the US, we are expecting, we were expecting a minus. So we... We are, the figures indeed are very good. The figures you get and we get as well. By the way, we are outperforming. We are doing much more than what we expected. Our portfolio is growing 68%, if you take Iri's statement. And it's even a three-digit growth for Cointreau. So this is very encouraging. We expect Q1 to be at minus 20%. in sales which in a country where you know off trade accounts usually for 80% so it shows a good resilience of the off trade definitely this is encouraging but you know I'm not comfortable in detailing more also because of the recent events that have happened lately last week was still very good when you look at sell out but is this going to last Given the context, I think nobody knows today. We are being cautious. We are managing it day by day with a strong focus on the safety of our teams and on inclusiveness and diversity as a group. We don't want to communicate necessarily on it because it's a political matter, but of course it's internally a very important matter at group level for us. So this is monitored carefully and I think gives us a bit less visibility on the coming weeks.

Got it. Thank you. Can I just sort of follow up on the last point on the U.S., just around pricing? I mean, I think Luca had indicated at the Q4 sales call that you hadn't actually taken pricing in the U.S. at the beginning of this fiscal year. I assume that's still the case, but are you more confident about taking some pricing now, given the resilience that you've seen in the off-trade?

You know, we never intended not to increase, huh? to make it clear. We just felt that from an ethical point of view, discussing price increases with our partners while everybody was going to lockdown was not really the right approach. But it does not question nor challenge our ambition to increase our pricing later on in the year. I don't know, Lucas, if you want to add something. No, no.

It is something that this year We made it. It's also not only U.S., it's more worldwide. So in our estimation, the gross margin evolution for this year, we take into account more mix than price because price will be automatically negative compared to the previous year, which will be taken later on in the coming months, not only in the U.S. The global pandemic situation was not calling, in our opinion, for increase of partial prices. which does not mean that we give up on general strategy, as Eric said, and does not mean that we are increasing promotional pressure as well. So we don't have devalorization per se out of the non-price increase. So we will increase price overall, not only the U.S., later in the year. And in the short term, compared to the long term, to be back to your question, in terms of a little bit more granularity, it is not a straight line journey. So the objectives of the operating profits, same scope, same exchange rate of 30%, would be not linear, would be not straight, would be a little bit lower base for the first year, at least because the starting point, mathematically speaking, is the situation right now, even if it's not a normal year. Then gross margin would be, as usual, the first level. It's so important we highlighted that. We are taking into account six points. In that case, the normative year is not 18-19, it's 19-20, because 19-20 takes into account the exit of the non-group brands. At least we have only 3% to 20% that left. So that point, the starting point, is right now 66% to 72%. Gross margin, first lever. Then in the short term, it could be a bit more difficult because of what's happening, but it will still be the first driver. And then AMP and operating costs will be a little bit stable, maybe increasing in the very short term because of the top-line volatility, but then strong development. So we will not Portfolio management is not investing of a lot of different stuff, different brands, because we want to have a lot of dishes on the same kitchen. It's not that. So it would be not dilution in terms of intellectual effort and not increase of spending per brand for the sake of the portfolio management per se in terms of a quantitative point of view. So it would be very selectively, as Enrique said, Every brand has a DNA, and we will spend what is important, strategic, and what we can spend. Because we are also concerned by you, by increasing our profitability in the most steadily way we can. We are targeting a profitable, sustainable, and resilient model for growth for the next 10 years. Why 10? Because of the magnitude and the way we are thinking. Five is not enough. So I hope this helps you and helps you all to try to cope with the short-term volatility and turbulence with the long-term journey. Perfect. Many thanks, Luca. Thanks, Eric.

Thank you. We will now take our next question. Please go ahead, caller. Your line is open.

Hi, good morning, Eric, Luca, and Mark. I've got... Two questions, please. Actually, three, if I may. Could you just elaborate a bit more on the transition from e-retail to e-boutique? Just explaining the difference between the two. And by e-boutique, are you talking about direct-to-consumer e-commerce business, essentially? Second question is on EXO. You are under-indexed in the EXO category. What do you think has been the issue in the past and over the next few years, maybe even 10 years? What is your strategy to get your fair share in these price points? And just lastly, going back to the U.S., on the very strong demand in the off-trade that you've seen, do you expect these trends towards making cocktails at home to stay once the on-trade reopens? Thank you very much.

Okay, thank you.

e-retail, e-boutique. So indeed, we consider e-commerce as a whole ecosystem. So e-boutique is not meant to replace e-retail. E-retail, you know, is when we sell through some of our clients who sell digital or when we sell through specific e-retailers. You also have marketplaces. So it's a whole ecosystem. We are already doing great in China with e-commerce. and it is mostly D2C indeed. Now, why did I speak about eBoutique? eBoutique is probably going to be anecdotical for a while in the sales, but it is a fantastic image lever. It is going to increase our digital visibility while we invest less than our competitors because we know that the first motivation For people who look for names on digital, it's because they want to buy. And we prefer them to fall at least on our website where the image is good and so on. So it is going to increase the visibility of the brand. But again, we are also going to learn a lot from this e-boutique and we are going to acquire a database of clients, which is critical. So I don't see it at all as a competition to the rest. of e-retail or other ecosystems, which are also worth it and which we're working on, I see it as a complementary approach. And same for our wholesalers, by the way. This has become now, I consider it, one more service we offer to our clients. This reminds me when we were at Viviton when we first launched the e-boutique. Our store manager were afraid of the competition, but in fact, no, it's a complementary tool. That's how I see the e-boutique. It does not fit all our brands, but for Louis Très, it's perfect. EXO. EXO, indeed, we are underrepresented, while we have a great product. So the first reason why I believe we have potential for growth is we have a fantastic product. You know, if you don't have the product, there's not much you can do. If you have a product that tastes well, there's a lot you can do. And I think it will help... EXO will benefit first from us speaking even more of our terroir of Fin Champagne, which is making us so specific. EXO is the best expression of Fin Champagne. I think EXO will also benefit from a greater focus from our teams worldwide. Focus was on Vitrez, and we are going to keep focusing on Vitrez, but we are also making EXO a focus. It's a very important topic for us. And we do have a fantastic opportunity there. It is going to be through a better spend, also more spend on EXO. Again, the beauty of portfolio management is not necessarily that you're spending more, but you're meant to spend better because you know where your priorities are. I think this is where we can progress, and EXO will benefit from this portfolio management approach. Now, I'm not going to detail more for obvious reasons, but I hope you appreciate the level of confidence on EXO. It's going to take time, for sure, but it's a no-brainer in the long run. EXO is a brand in itself on top of that. Beyond, I mean, Rémy Martin, NSC, whoever brand, I mean, EXO in itself is a very strong brand. Lastly, about the US. Is consumption at home going to continue after lockdown and the reopening on trade? I don't know. I believe yes. To what extent? I don't know. Difficult to appreciate. But I believe indeed that some long-lasting habits have taken place. This is what we hear from our clients. We ourselves have been animating this a lot, as you can imagine. Our teams have been very proactive lately. in animating consumption at home with our ambassadors, live sessions, and so on. This proves to work incredibly well and to increase our reach. So ourselves, we are going to continue to invest on it, and for sure there is some kind of a habit that has accelerated. I would say two things have accelerated and will keep going. At what pace? I don't know. Is it going to reduce or keep the same pace? I don't know. One is consumption at home, and the other one, particularly in the U.S., is the sensitivity to digital. I think now our distributors, the whole chain, everyone has realized that digital is also part of our future, and this is going to help us in our strategy.

Thank you very much, Eric.

Thank you. We will now take our next question. Please go ahead. The line is open.

Hello, can you hear me?

Yes.

Hello.

A couple of questions, please. Firstly, on the 10-year plan in terms of the development of margin. Within that, in terms of your sales and distribution network that you have, which sort of markets are you making big incremental bets in? You talk about targeting the premium whiskey drinker for your sort of intermediate XO and above portfolio. Which market should we expect you to upweight investment? And then secondly, you set these ambitious 2030 margin targets. How are you linking management remuneration into the achievement of those targets?

Thanks. Okay. I'm not sure I'm going to answer your second question. Sorry about that. But obviously we have long-term incentives at Rémy Cointreau, like many of groups similar to us, that will play on this. But your first question, indeed. I spoke a lot about the brands and not so much about the markets. It won't be a surprise for you that our two key markets will be two strong drivers of the growth, for sure. I don't like to answer globally because this is not exactly the way it works. For instance, if we speak about XO, China, is a make-it-or-break-it market for sure. If you speak of the botanist, there is a growth potential worldwide. But coming back to the markets, US and Asia and China will be the stronger growth engines. And then we have some... Some markets where we have room for growth, for sure, if you take Russia, Africa, but their contribution will be less in the total, of course, given their size today.

Thank you. Thank you. We will now take our next participant. If you will please state your name before posing your question. Thank you.

Good morning, Eric and Luca. It's Trevor Sterling from Bernstein. Three questions from my side, please. First one, Eric, you're coming back to the question of markets, and particularly the House of Rémi Martin. Clearly, it looks that everything's in pretty good shape in mainland China with double-digit growth, but it also looks like the U.S. has a lot more work to be done. Would you perhaps just expand a little bit on where you think the opportunities and the priorities are in the United States for Rémi Martin, both the SOP and EXO? Second question, probably for Luca. Luca, you've said that we should probably expect tax rates this year to be broadly in line with F20. But in the longer term, how quickly do you think tax rates can come back towards where we were in F19, towards that 28.5%? And the third question, probably the most difficult to answer. If we're thinking about F21 operating profit, would it be crazy to dream that we might end up similar to F20? I appreciate there's very many, many moving parts, but is that a realistic possibility?

Okay, I'm going to take the first question and then I'll give the mic to Luca on the markets and more specifically the house of Rémi Martin. So as you said, mainland China is expected to grow and to grow rather steadily. It's mostly China itself, by the way. And one driver of the growth beyond EXO, which I mentioned, is I believe also the fact that consumption will be more and more made in China by the Chinese. You know, I think it's something other luxury groups might share as a few, but we believe that the China market itself will grow more than Chinese tourism, which is totally impacted now, but even in the more longer run. Our business in China should benefit from this. A brand like Buitres, for instance, can clearly benefit from that. If you speak about the U.S., again, I think we should not underestimate portfolio management capabilities. The U.S. market is our number one market. It's a market where most of our brands are present and are sizable. So it's where the challenge of portfolio management is the highest, and it's where If we come up with clear priorities, great training, right tools, there's a lot we can leverage for sure. And this applies to the portfolio of Rémi Martin himself. Then, as I said, we believe in VSOP. We are proud of VSOP, and our intention is certainly not to kill VSOP, so we will have some targeted spends on VSOP, whose volumes are... key for us to invest on the higher ends. But, again, this is short-term. If you ask me, in the next 10 years, the growth will be driven mostly by the upper grades. We have very encouraging results on 1738, which is sizable now. We've just launched Terce, and we have Exo, which will be a focus. Growth will come from these layers, and then obviously there are a lot of tactical opportunities, whether it's geographies, some states, where we can gain more presence, as well as some communities.

Maybe Lucas, if you want to... No, no, no.

I have to answer to the second or third one. And the third is tax rate. Tax rate in the short-term guidance is flat. In more medium-term, it's very complicated and it's a questionable question, but trying to imagine what will be, knowing that there will be a lot of variables linked to the needs for the countries, also to finance, also what's happening right now with the pandemic and so on. We should have in the next coming years a progressive decrease of the tax rate only, and if only, one of the biggest countries which is important for us, our main country in terms of localization, France, will reduce its corporate taxation. It is planned right now, 3034 this year, 1920, 32, 2021, and then 28 and 26. I'm rounding because it's not the way that I'm rounding year after year, but we don't need to remain, to be actual. Otherwise, knowing the impact of the French corporate tax on our operation, because corporate tax are based not on consolidated account but on local account, clearly, it will be impossible. The switch we are witnessing right now in China home is very positive on a business level, but its profit is not so positive in net result. China taxation rate is 25, but it's a partial taxation rate, because then with other permanent differences, it's comparable to French tax rate. So the switch between rest of Asia and China is dilutive in terms of net result compared to the previous mix. So French tax rate is very important and business in the U.S. as well because the lower taxation rate is the average of the group. So we target to decrease that but it's not 100% in our end. And for the other question which is the consensus 2021, we are okay, we think that the consensus makes sense, the actual consensus, which is a very modest decline. Then when you say we can dream, I dream a lot every night, but then I don't know if I dream also to have a huge villa and other things I cannot detail right now. But dreams that maybe sometimes are realized, sometimes not. Maybe we will realize that, but at this stage, I think that the consensus makes sense. We are okay with it, but once again, we can't bet on the short-term situation. It's very volatile. It can change one week or the other for many factors which do not depend on our action and decision and execution.

Thank you very much, Luca and Erika.

Thank you. We will now take our next question. Please state your name before posing your question. Your line is open.

Thanks very much. It's Lawrence White here from Barclays. A couple from me. Firstly, you've made it very clear that the growth expectation should be coming from the higher end of your product. I was wondering what effect that will have on your AMP spend going forward. Usually, we see that higher end products require an increase in marketing spend as a percentage of sales. And I'm wondering if that's your expectation as well as we look forward for the next 10 years. And then secondly, a couple of key markets, notably travel retail and Hong Kong, are facing some quite seismic changes at the moment. And I was wondering what your expectations for those two markets in particular are as they relate to your long-term plans. Thank you very much.

Thank you. So to your first question on the high end of our products, I'd just like to make it clear that it's not the only focus, and part of the portfolio management strategy is precisely also to focus and grow on brands where the price is not necessarily the highest, but they price well versus their category, and they deliver good margins. And this is what I call looking beyond purely pricing. So we are going to invest on the accretive brands at group level, not necessarily on the high end. Of course, it includes the high end brands, but it's a bit more, let's say, subtle than just this, to make it clear. Then there will not be, as was said already, but... specific huge increase in spend. The portfolio management is giving us a filter to invest on more targeted topics and in more specific markets. I think probably one thing that we are going to improve is rather than assigning the same target to every brand in every market, we are going to select markets for the brands. We are going to be a bit more selective in our investments. So we will invest more. in some topics, which includes the growth engines that we shared in the presentation. But overall, we will invest according to sales as well. Probably have some years of overinvestment, but again, we want to start delivering not in 10 years. Otherwise, it doesn't work. For travel retail in Hong Kong, travel retail is very difficult to say. It can change quickly first. I think we should all be very humble in our assumptions. I have no crystal ball either. The discussions I have make me think that we can expect a recovery from, let's say, between summer 21 and 22. Will this recovery be completely full speed? I don't know. We will need to monitor. We expect a partial recovery from September, but partial, very partial. We already see some lines that are reopening in Asia. One interesting discussion I had was that we might be moving in the long run from less corridor business, so intercontinental flights, which call for long shopping sessions in airports because the flights are long themselves, to probably more regional flights, bubbles, which might lead to a bit less spending because the flights are shorter, but it's very difficult to say. Timing-wise, again, summer 21 or beginning 22, back to, let's say, hopefully, the new normal. And for Hong Kong, here, I don't know. The latest developments make us very cautious. I think that these are not good news in the long run for Hong Kong. In the past decades, we like to say that Hong Kong was dropping very quickly and sharply and recovering very quickly. I don't think we can expect this this time, but I cannot say much more. We've taken the hit already, mostly this year, but it is not going to improve.

Understood. Thank you. Maybe just as a follow-up, I wonder if you could just give a quick characterization of the current state of the Chinese or Asian economy. markets as we further come out of lockdown? What are you seeing in the restaurants and the entree and the KTV bars?

Yeah, sure. Well, sorry. And then when Rick has to do that, I will precise one point on your first question, because I think you are making, there is a misjudgment in the mathematical logic of your question. So I will try to clarify that.

Okay. I'm not the expert in mathematics, so I'll leave that to Lucas.

I know, I know.

That is a mistake, in my opinion. So to your question, honestly, we see good news in China and earlier than what we would have expected. We can now say that 100% of the bars and restaurants and even clubs have reopened in Guangdong, which is a key region for us. People are not even wearing masks anymore. And last weekend, they were very busy. So this is encouraging, for sure. And this applies to Shanghai. So it's not all across the board in China. Some regions are still 70%, 80% reopened. But Guangdong... has fully recovered. Now, business-wise, how does it translate? It's a bit too early to say. And as you know, we have a number of tiers. But clearly, this recovery is a bit earlier than expected. It's coming a bit earlier than expected.

Maybe, Lucas, if you want to elaborate on your... Yes. Your question, if I'm not mistaken, was The fact that you are highlighting the high end of your product or the range of your product will need on the medium to long term an increase in AMP that will impact your profit and loss also in the medium to long term, increasing the rigidity, the AMP spend, and the impact on bottom line, if I'm not mistaken.

Yes, fair enough.

Is that enough?

Yes.

Yes. My answer is the same of Eric with some point of clarification, mathematically speaking. These kind of products have a big potential of development in terms of the net value per product, per case, and globally in terms of return on investment. So even if in the short term you might have an increase in absolute value and a dilution in bottom line, in a theoretical segment, profit and loss for the high end, in the very short term, much before the 10-year span, you will have a return because you have a deleverage. It's a little bit more complex for mature products, like for instance Cointreau, in which big awareness, increasing consumption, which to put additional spend and the top line in terms of net average per bottle is not moving at the same fastness. So the return on investment makes that in a very quick time, if our spend is strategical and well-executed, send back a repayment because the margin of profit will be higher than before on this specific segment, profit and loss. Meaning that the EMP was spending on these flexible with the positive elasticity product will send back a positive halo effect on the global profit and loss. So, if our AMP investments are worth doing it, right, well done, the payback will be much quicker on the high end than the mainstream, using an incorrect word, range. It is a short, very short-term impact, not the medium. The opposite. The medium is accretive to the bottom line.

Thank you very much for the clarification.

Thank you. We will now take our next question. Please state your name before posing your question. Your line is now open. Thank you.

Good morning. This is Richard Mithagen at Kettler Schubert. I would like to ask two questions, please. First of all, you talked about digital. What changes to the organization are you implementing to accelerate in this area? And could you talk about the investments required? And then the second question is on the liquors and spirits brands. How do you plan to differentiate the liquors and spirit brands to be able to command price superiority in what are more fragmented spirit market segments with a much wider choice of alternatives for consumers.

So, Digital. Digital is going to report to, you know, we changed the organization with a new international markets director, who is Laurent Veneau, who will take his position in April 1st. I believe that e-commerce, so there are two things in digital. One is communication, which is brand-driven mostly, and one is e-commerce. Today, e-commerce was reporting to the brand side. I believe that if we want it to work and be sizable, it works better if it's reporting to the head of the markets because it's managed by the markets and because it's a commercial topic. So in terms of organization, we are going to hire someone who will join as a manager of e-commerce worldwide and who will drive initiatives worldwide and who will report to this head of markets from April 1st, once appointed. And I believe this can really help us change things. The challenge in e-commerce then is managing prices and managing, you know, who we sell to and so on but that's where I believe that it's something that could not exist before because we have no head of markets but with the head of markets we can ensure a level of consistency of pricing worldwide which is very important and I believe that and that's why I created this position but that it's a position we needed in the organization that's it for digital for liquors and spirits so Again, to make sure it's fully understood, my portfolio management view leads to potentially maybe easing the price pressure on a brand like Botanist Funds. It's already well-priced. If you look at it, it's already in the high end of its category. So the challenge for me is more on volume than pricing. But we're already priced there. We already have a good pricing. We already have a great margin. So I strongly believe that if we manage to control margin and prices while activating the brand, given its very strong positioning, strong sense of place in nature, which is a growing concern, we can really leverage it. And for each brand, I could give you a specific answer, which I'm not going to do here. It's not the purpose. But if you take Cointreau, we have some issues in some markets, but its price positioning is good too. And the challenge is more how do we increase the awareness or do we increase the occasion or make it clear what the occasion is. For Cointreau, this is the main challenge, for instance. And the latest campaigns are proving incredibly efficient. Our growth in the US and we are getting market share for Cointreau is stunning. It just shows that it doesn't work overnight. You need to steadily invest, and it ends up paying for sure. Again, I am not going to detail by brand. I don't think there is an overall answer to that, but obviously in the portfolio management strategy, we have a plan per brand, which is maybe the biggest difference compared to before. We are prioritizing markets by brand so that we can be sizable in the markets we invest on. We don't want every brand to be everywhere.

Very good. Thank you.

Thank you. We will now take our next question. Please state your name, caller, before posing your question. Thank you.

Good morning, gentlemen. I'm here from J.P. Morgan. Two questions for me, please. Just following on from the last question on liqueurs and spirits, how would you see the 33% group margin by 2030? coming out between the cognac business and the cures and spirits. And in the midterm, I guess, would your ambition be to accelerate the cures and spirits from the low single-digit growth that we've seen historically up more towards the cognac, the high single-digit growth ranges? And secondly, just in terms of your overall portfolio, do you see scope for either further acquisitions to fill some gaps, or conversely, maybe would you consider some non-core disposals?

OK. On eCourse and spirits, I'll start with cognacs. I don't think you'd be surprised here, but our ambition and vision on cognac is to grow volumes by 2% and maybe the value by 6% or 7% with an impact of the mix. So basically, as you can imagine, it means that the contribution in 10 years will be above 33%. For the liquors and spirits, our ambition is to grow quicker than cognacs, starting from a lower base. And again, with a new and renewed focus on some key brands, not all of them everywhere, again, with a selective approach. So this is what I can tell you about your first question. I think you had a second question, but I forgot it, I'm sorry. M&A. M&A, yes, thank you. Scope effect M&A, so acquisition or maybe disposal. So the only thing I can say here is that I'm happy with the acquisitions that have been made. I think they are very meaningful for the group. But we shall not underestimate as well what it takes to develop them. And I want to make sure that we make them all a success. And this is our number one priority. What it tells is that acquisitions are not our number one priority in the short term. Even though we are not crazy, and given the context, we shall look at opportunities, obviously. And what opportunities? Well, obviously, a champagne brand would make sense in our portfolio. And everything that calls for terroir, people and time, and which embodies our values would really make sense as well. It is not a top priority. It does not prevent us from being tactical, and there might be opportunities in the months to come. For disposals, I believe, as I said, we've been working with the team in making sure that every brand has a mission for the group. Again, I'm not talking of their mission statement for the clients, but the mission for the group. And honestly, I believe everyone has a role to play. So let's make it successful. That's our number one priority.

Great. Thank you very much.

Thank you. We will now take our next question. Please state your name, caller, before posing your question. Please go ahead.

please go ahead caller your line is open they seem to have stepped away there are no further questions in the queue at this time I will turn the call back to your host okay well thank you very much everyone for having listened very happy to have spent these two hours with you looking forward to meeting face to face one day hopefully and wishing you a good day. Thank you very much, everyone.