Remy Cointreau Sa Ord

Good morning to all of you. We are here to present our first half result for our fiscal year 2021. As usual, I'm going to make an introduction. Then our chief executive officer, Eric Valla, will make for you the business review of that first semester. And as usual, and As also for many times before, our Chief Financial Officer, Luca Marotta, will give you a detailed review of our financial results. Of course, after that, we will be ready to answer to your questions. So, you have already seen this morning our results. 1920 was a singular year. Remember that we were nearly all closed down with no operations, nearly no sales at the end of last fiscal year. So 1920 was quite singular. But 2021 started also singular. on a very difficult position for us. With COVID-19 taking its toll on traveling, gifting, gathering, and celebrations, which are the key moments of our spirits. These are the times when people are delighted to drink one of our fine spirits or are ready to buy, well, were ready in the previous regular years, were ready to buy one of our top quality bottles, thinking of a very nice time where they could celebrate with others. So at the beginning of this fiscal year, we had lost all this. But the truth is that despite that global pandemic, The group has managed to revise up its sales and earnings outlook consistently on the last six months. And in fact, we expect to deliver a very, very strong year, 2021, in spite of that context. We think that the group's experience of crisis, its size and agility the amazing commitment of all its employees who worked effortlessly to keep back the company on track, and last but not least, the strengths of our spirits brand equity are making the difference. So, in this first half, our sales declined by nearly only 18%. Why do I say only? It's because we had a very, very low first quarter, but we recovered very much on the second quarter. And our operating margin remained strong at 24%, 24.7%. And our net profit margin, excluding non-recurring items... is only down one point to 15.1%. On September 30th, our balance sheet is extremely strong with a net debt EBITDA ratio of close to two. So clearly, having been around for centuries helped in these challenging times.

Thank you very much, Mark, and good morning to everyone. I am now going to take you through the business review, and then I will give the mic to Luca Marotta, who will deep dive in the financials. And I will start by saying a few more words on our good margin resilience, as was explained by Mr. Ayer-Dubreuil. Our sales were down 16.4% despite and amid the global pandemic, very much impacted by COVID-19, obviously. and in particular by the weakness of the on-trade channel, as we witnessed from the first quarter across the world, and the collapse in duty-free sales. But this was partially offset by strong off-trade consumption in a number of markets, such as the U.S., the U.K., or Australia, driven notably by e-commerce, but I'll get back to it, but also by the recovery in China, which was gradual but started earlier than what we expected. We had expected a gradual recovery from June and a full recovery in September. Actually, as I said earlier and before, the recovery was almost full speed already last summer with the famous 80-80-80, 80% of the on-trade reopened, 80% of a frequency rate, as well as 80% of the people not wearing their masks anymore. The group sales were down in Q2 4%, which highlights, let's say, not yet a full recovery, but a much better Q2 compared to the initial decline of 33% in Q1. But we will get back to it. In that context, we are pleased with the resilience of our current operating margin, which is standing at 24.7%. This is significant. 2% below last year in organic terms due to the lower gross margin and the better control of our costs on the other side to compensate. But I will further detail. So the gross margin was down two points in H1. But if you look at it over two years, it's actually a gain of two points. As I remind you that last year, we had gained in H1 four points versus the year before. This is due to less celebration, less gifting and less travel retail, which is more particularly impacting the higher range of our portfolio. The ANP ratio was done 0.6% as a percentage of sales. So as you can see, we maintained it, relatively speaking, as in fact the cut in non-strategic investments was partially offset by a significant step up in digital spent, which increased by 135% versus last year. As I said, the distribution and structure costs were well under control, and the ratio is only up 0.4% versus last year. Lastly, and to conclude, we had a slightly favorable impact on the currency side of 0.2%. So all in all, our net profits stand at 65.2 million euros, minus 23%, but the net profit margin stands at a strong 15.1%. If you look at the sales growth by product division, Well, you will see that cognac recorded a minus 18.1% in organic versus last year. This is H1. But Q2 showed a significant improvement as the downside was limited to 2.5% versus a 39% drop in Q1. So we are on the path of recovery, and this will reflect in our expectations for the coming quarters. The liquors and spirits also improved in Q2, although to a much lower extent, with Q2 down 11% compared to 17% in Q1. And partner brands grew 2.1%, led by a strong 26% increase in Q2, and I will further explain later on. Now looking at the breakdown of the sales by product division. As you can see, it did not change much. Cognac is still obviously very important in our portfolio with 71% of sales coming from our cognac brands and 26% coming from our liquors and spirits. I would say that the most noticeable change is on the regional split, which is very much influenced by the pandemic and the very good resilience of the U.S. within America. America is now accounting for 53% of our sales in H1, while this has been at the expense, relatively speaking, of Asia-Pacific. which decreased from 31% last year to 27% this year, and EMEA, which decreased from 24% to 20%. But let's look at it more in detail. So if you look at it by division, the split by region by division, cognac achieved 305 million euros with America's achieving 57 percent led by the U.S. despite a slowdown in Canada, in the Caribbean and in travel retail. This is due to the very strong resilience and I would say even more the performance of off trade in the U.S. But we will have more opportunity to detail. While Asia Pacific was clearly impacted by a much stronger lockdown than in the U.S., we shall remember that on the first quarter of the year, In China, everything was locked down. And when we say everything locked down, it means that one person per building was authorized to go out to buy for the whole building, the food and beverage in the single store that was specifically open for it. So this was a complete lockdown, which does not compare to that of the U.S., which is why China has been much more impacted in Q1. And we saw a quick rebound afterwards. And obviously, Europe and the Middle East impacted by the lockdowns as well. And a stronger exposure to on trade. But I'll get back to it as well. If you look at the liquors and spirits, we have the same kind of phenomenon with America's growing to 51% versus 46% last year. Again, a very good performance of Cointreau and of our whiskeys. Now looking at the COP. In reported terms, we were minus 23.2%. This includes a currency impact of 1 million euro with a weaker dollar and no impact on the scope. So if you look at the organic decrease, it's 22.5% decrease with a strong 66 million impact, obviously of the volume and the price mix and the price in the mix. This is related to the fact that, as I said, gifting, travel, retail and celebration have been toning down, impacting the higher end of our portfolio and our product mix. While also we decided, as we explained last time, to postpone our price increases, as we believe that April last year was not the appropriate timing, given the fact that the world was totally locked down. ANPs were, as you can see, controlled with a savings of 15 million euros, 16 million euros. Again, strategic cuts being partly offset by very strategic investments and digital investment in general. And a good control of our costs, generally speaking, whether it's T&Es, whether it's fees or structural costs. which helped us achieve in organic terms a COP that stands at 24.5% of our sales compared to the 26.4% of last year. Net profit. Well, as mentioned earlier, net profit excluding non-recurring items declined by 23% versus last year. Including non-recurring items, net profit declined by 28.1%. As you shall remember that last year, we benefited from the disposal of our Czech Republic and Slovakian subsidiaries for an amount of 6 million euros. Now, looking at cognac more specifically, as I said, the sales declined 18.1%. This is a combination of a decline of volumes by 8.1% and of value price mix negative impact by 10%. Asia-Pacific. Declined double digits in H1 as growth in China mainland and Taiwan, which started from again end June, beginning July, was more than offset by the decline in most other markets and travel retail. China mainland, now we see a double digit value depletion trends increase since end June, driven by the on trade being largely reopened. And we've witnessed a strong Mid-Autumn Festival and a very strong Double Eleven. We were the best performing international brand on JD.com and on Tmall as well. And this clearly bodes for a promising Chinese New Year. A real difference between first and second quarter and expectations on China to keep growing in the coming months, which are key for China. America's posted a slight growth in the first half, led by a good performance in the U.S., albeit well below the sell-out trends that we've been experiencing, important to notice. And this has been mitigated by, as I said, Canada or Latin America and travel retail, which were much weaker, exposed to tourism much more than the U.S. And lastly, EMEA dropped and dropped a double digit. This is due to the weakness across most domestic markets and travel retail. Again, impacted by lockdowns except for this summer where we witnessed growth in some of our countries. The UK was a dynamic market, unlike the others, led by a strong off-trade consumption and particularly digital off-trade consumption. Now, looking at the marketing initiatives. Well, despite the challenging pandemic context, we've been working on two things. One is getting stronger during the pandemic crisis, and the other one is preparing the future. So this slide is about getting stronger during the pandemic crisis. We believe we can leverage it despite the drama it is, of course, but also as an opportunity business-wise, even though it's impacting us short-term. So we try to take advantage of our agility and our client-centric mindset to adjust to the situation and to strengthen further the brand equity of our brands. And in fact, we think that not everything is negative, as I said, during lockdowns and COVID. In fact, people have more time to spend on being educated. They are more receptive. They also have more money to spend because they're saving on travels and so on. and we witnessed that. We saw a move towards an upmarket move, which we believe Cognac benefited from particularly. I remind you that Cognac market share among the spirits in the U.S. is only 6% pre-COVID, so it's a small market share compared to its overall awareness, and we grew to 7%. I remind you that 25% of the spirits, brown spirits, high-end brown spirits drinkers only drink cognac and 25%, another 25% are considering. So the opportunity is potentially massive for cognac in general. And we've benefited from this time for education probably more than some other categories. We saw an uptrade from brandy and we saw also a move from other brand spirits to cognac that we strongly benefited from. Now it's going to be our job to build on this, but we've gained time in educating on cognac. This is for sure. The second trend we witnessed is the amazing growth of e-commerce worldwide from plus 300% in the U.S., 200% in the UK, 32% in China. This is what we see globally, a very strong acceleration on e-commerce that we also focused on benefiting from, which is why you see three marketing initiatives, let's say three types of marketing initiatives that we wanted to highlight. One on education, on the product superiority. people having more time to dedicate to this. One on at-home entertainment, obviously, in the context to increase brand relevance with animations around the flavor by the grid, food pairing, and associations with DJs and others to have your parties at home. And leveraging, obviously, e-commerce. You have a lot of initiatives worldwide. That one is enhancing the Rémy Martin sidecar that was displayed in Drizzly. On the marketing initiatives, we also are investing on our future. focusing notably on a more client-centric approach and aiming at a more client-centric model, which is one of our pillars for 2030, as you all know. So we've opened new pop-ups. This pop-up you see on the top is an opening that we had in Xiamen for Rémi Martin, very impactful in the very heart of the mall. in Xiamen, and you see two openings of Luitres, one in Shenzhen and one in Hangzhou that took place during the Q2 of the year. So we keep moving forward there. And we also enhanced, obviously, e-commerce as an opportunity for us to acquire client data with the opening of our proprietary e-commerce site in the UK for Luitres. And we've been strengthening our CRM operations. Here you have an example of one of the WeChat programs we've been working on in the UK, allowing to acquire data as well as selling directly to our clients. All in all, what does it translate into? A reported decline of 26.3% for cognac in general. with a slight negative effect from currencies due to the weakening of the U.S. dollar since last summer. But the scope was marginally positive thanks to the initial consolidation of Brille Cognac brand since April. Now, if you look at it in organic terms, it's a decrease of minus 25.1%. And like you saw for the group, cognac cup has been strongly hit by declining volumes. As I said, as a reminder, 8%, but also by adverse price mix. As already mentioned, less celebration and gifting, which impacted the mix. Besides, price increases were delayed to October 1st. They are now and they have taken place now. This has been partially offset by savings in ENP. Not that much, though, as you can see, because we cut non-strategic investment. But again, we insisted and we maintained our strategic investment, particularly on digital. And the main offset came from the other costs, which were pretty well controlled with the minus 15 million euros. even better than what we had initially planned, thanks to the different cost-cutting measures that took place and that I listed when I spoke of the group in general. So overall, the COP margin decline is 2.8 as a ratio to 30.6%. This is it for cognac, switching now to the liquors and spirits. As you can see, the decline is 14%. It's a mix of a 19% decline in volumes, but a positive price mix of 5%, thanks to the good performance of Cointreau in the U.S. and the whiskey portfolio, which has been doing extremely well, except in travel retail, of course. If you look at it by brand, we have a slight organic sales decline for Cointreau, thanks to a robust growth in the U.S., in the U.K., in Germany, in Belgium, and in Australia. In some of these countries, we had initiated campaigns that we've been steadily investing behind, and this starts paying off. This was offset by the weakness in the rest of Europe, Asia-Pacific, and obviously travel retail. If you look at Metaxa quickly, we've witnessed double-digit organic sales declined. You have to bear in mind that Metaxa is pretty much exposed to tourism, particularly in Greece in summer, obviously, but also to travel retail. Saint-Rémy, we saw also a double-digit decline, which is also largely due to a strong exposure to travel retail. While in fact, the brand enjoyed a strong growth in one of its key domestic markets for the future, the U.S., where the brandy-based Sangria cocktail has been very successful over the summer. Mount Gay, same exposure to Barbados, which has been struggling, and exposure to travel retail, so a double-digit growth decline. But this also hides good growth in the U.S. and in the U.K., despite the reshuffling of the portfolio, which we expected to impact more the sales negatively. And the botanists, again, a decline as well within the context, driven by the shortfall in global travel retail, but good depletion trends in the U.S., which is also one of our key markets for the future. Lastly, for the single malt whiskeys, we saw a very strong rebound in Q2 that drove to nearly flat sales. And this is thanks to a growth in almost all regions, but obviously global travel retail. If we exclude travel retail, actually, our Q2 sales would have grown 8%. So, of course, the impact of travel retail is massive. The marketing initiatives, quickly, as I said, a word overall for the group when speaking of Rémi Martin. But as you can see, again, getting stronger during the pandemic crisis. This, for us, means working first on asserting our cocktail legitimacy. We know that cocktails are growing worldwide and obviously key in the U.S. And with Cointreau, we have a fantastic tool to build our legitimacy. We've been also working on leveraging e-commerce. We created the first of its kind, a virtual cocktail studio, explaining that the various cocktails you see there, like the martinis made with the botanist, gin, the margarita made with Cointreau, and the black, sorry, the old fashioned made with Mange. And lastly, we also adapted to the crisis and to the change and the shift that we had to do to lockdowns. And just one example, which might sound anecdotal, but which reflects well what we did is Mange is very strong among the sailing community, sailing community. And we've been working hard on shifting from physical regattas to digital ones. And as such, Mount Gay joined the world sailing as the official e-sailing partner. And 13 nations have launched e-sailing national championships. And with mountain guest support, Barbados has become the 14th with further nations to be launched. So, again, a way to adapt to the context and to switch from physical to digital events during the lockdowns. Of course, we've been also preparing the future through innovation. You see here an innovation at Saint-Rémy which aims at modernizing the image of brandy and keeping on upgrading as well. But we also had a lot of newness on the whiskeys with notably Port Charlotte. innovation. But we did more than that. We invested for the first time ever in a campaign, proper campaign behind Classic Lady, which is the spearhead of future growth with a campaign that is named No Hidden Measures. Further to their recent B Corp certification, in fact, the goal of this campaign is to bring a new level of transparency to single malt scotch savoir-faire. It addresses, in fact, the need for more education and awareness around factors affecting flavor in single malt, namely quality and provenance of the distiller's ingredients. So a nice step forward, enhancing the group and the specificities of Classique Lady. So all in all, if you look at it, we had a reported decline of 11.1% and 13.4% inorganic. The currency effect was slightly positive, as you can see, 0.6 million, and the scope was marginally negative as we started investing behind the newly acquired Belle de Brier brand. In organic, the main negative driver on COP was the volume decline, which was down 19% as a reminder, while price mix was only slightly negative. As I said, thanks to the whiskeys, notably, and the growth of Cointreau in the U.S. This was partially offset by a cut in the NPs, a significant cut, which also reflects, in fact, the importance of on-trade for the liquors and spirits brands. So, obviously, the on-trade investment was naturally came down, which is why the cut in ENPs is, relatively speaking, more on liquors and spirits than it is on cognac. And on other costs, we were down 1.2 million euros, again, which helped to improve the COP or minimize the COP impact. So overall, the COP margin improved as a ratio by 0.6% from 2016, 0.6% from 2016. And looking at partner brands very quickly, a good H1, which was driven by a 26.5% growth in Q2. particularly thanks to the strong performance of key Belgium markets during the summer. As you know now, partner brands' business is much less than it used to be, and the Belgium impact for partner brands in general was huge. Thanks to cost-cutting measures and improved value per case, we also achieved a cop gain of 0.5 million in H1. I am now going to give the mic to Luca, who will take you through the financial results.

Thank you, Eric. Now let's move on on a detailed analysis of the financial statement and begin with the income statement. As already mentioned, organic sales declined 16.4% in the first half. On that basis, gross profits, gross margin, fell 19.1% in organic terms, implying, meaning... a 2.1 point to 110 basis point organic decrease in gross margin. This margin decline is the consequence of three different effects. First one, volume pressure. Second one, adverse product mix, in particular for the cognac division. And third one, delayed price increases. Recall that during March lockdown, we decided, and we communicate on that, to postpone our usual price increases from April 1 to October 2020 for ethical reasons. These price increases are now live. So our first half did not benefit from these price increases, while H1 last year enjoyed significant price increases taken in April 2019. In terms of sales and marketing expenses, they were down 17.6% in organic terms, in coherence with the evolution of sales. Within this total, AMP increased expenses were down around 20% organically, although with digital expenses, very important, we realize this point, up 135%, and our distribution expenses were down 15%, thanks to the cost-cutting measure put in place since the beginning of the pandemic in February and March. On the same line, our administrative expenses fell 14.3% on an organic basis, also thanks to the cost control measure implemented since the beginning of the pandemic. As a reminder, the cost control measure enabled us to reduce our global SG&A cost base, including an hiring freeze, a massive cut in travel and expenses, and in consultancy fees, and in general day-to-day cost-cutting efforts from all teams. On top of that, salary efforts were made from all employees from top to bottom. It is also important to recall that we achieved the result without the help of any government subsidies. Overall, We are well on track to achieve our 30 million COVID cost reduction target for the full year 2021, as already communicated and stated, of which one third, so around 10 million, will be permanent. All in all. All inclusive, the current operating profit declined by 22.5% on organic basis and 23.2% on reported basis, i.e. after taking into account a slightly negative currency effect and a very marginal nil scope perimeter impact. Now, let's move to a very important slide showing and analyzing the group's current operating margin, which declined by 1.7 percentage points to reach 24.7 in the first half. These breakdowns into an organic decline of 1.9 points and a positive currency effect of 0.02 points. So meaning that the decline in forex of 1 million was lower than the decline that we had in sales in terms of conversion rate. While we started consolidating Brier in April, there was no meaningful scope effect in H1 on operating profit on this line. So no scope impact on the H1. So it's very important to focus ourselves to the organic decline of the current operating margin that was basically driven by the decrease in gross margin, while the AMP and the distribution and structure cost ratios were pretty much flat at the end on a combined basis. So gross margin declined by 2.1 points as a result, as already said, of the volume decline, adverse product mix, and less pricing gains as already mentioned, compared to the previous year. AMP expenses ratio decreased by 0.6 points as ASP spend was down 20% when sales declined 16.4 organically over the period. We cut the number of unnecessary due to the situation on trade events and events associated expenses in the current context and in contrast digital and strategic above the line advertising expenses were up sharply as already mentioned. The ratio of distribution structure costs increased by a very limited 0.4 point as the negative leverage of declining sales was well absorbed by the full benefit of the cost control measure taken since last February to reduce our cost base. Now, let's take a look to the rest, the remaining part of the income statement. Other non-recurring operating items were non-meaningful at the end of the H1 for €0.2 million, while finance costs decreased meaningfully to €8 million in the first half, down from €14.4 million last year. I'll come back to this point later on, on a later slide. As expected, as guided, tax rate rose from 31.7% to 33.8% due to a deterioration of the geographical mix of our profit. By that, we mean that the weakness of the travel retail business and the Asia-Pacific zone in the first half, which both tend to have lower tax rate than the rest of the world, impacted the tax rate. For the full year 2021, we continue to guide to expect on a tax rate of 33% to 34%, meaning flat more or less compared to the previous year. Net profit from this continued operation was nil in H1, while we recorded last year a 6.3 million euro net profit gain linked to the disposal of the Czech and Slovakian distribution subsidiary last year. As a result, our net profit, bottom line, came in at 65 million euro, down 28.1% euro an year on a reported basis. But excluding the non-recurring items, net profit came in at 65.2 million euro, down only 23%. and the net margin, as already said, stands at a very resilient, important level of 15.1%. So the next slide is showing the non-recurring items, which were not meaningful in this half year. This only accounted for €0.2 million, which basically reflected business as usual, other operating and non-recurring expenses. So nothing very important there. Let's now analyze a very important chart, which is the cash flow generation and net debt variation. Despite the context and a lower EBITDA, our recurring free cash flow generation improved in H1 compared to last year. We generated €32.5 million free cash flow to be compared to €5 million free cash flow in the year-ago period. Yes, admittedly, it was driven by tighter grip on strategic investment, including both working capital and capital expenditure, as well, by force, some delayed project due to the COVID-19 impact. We still expect, which is very important to reaffirm now, CapEx capital expenditure to be around 50 to 55 million in the full year at this stage, In terms of strategic working capital, we have to remind you that H1 is not very representative of your trend, as ODV purchases are mainly done in H2. On that line, important point, we continue to expect a 70 to 8 million euro outflow in the fiscal year all over the year 2021. Financial expenses declined in terms of outflow in coherence with the lower level of net debt, the average level of net debt, and tax outflows also decreased as a result of lower profits posted last year. Other non-operational recurring cash flow improved substantially versus last year as they were only a negative 8.9 million euro to be compared to a sharp negative of 120.7 million euro last year. This was largely driven by the dividend payment this year. Firstly, because 80% of our shareholders opted for a dividend payment in share. Besides that, the cash portion, around 10 million euros, was paid in October, so impacting the H2 cash flows. Recall that Last year, 100% of dividends were paid in cash and in September. Beside that, last year, the group granted an additional and exceptional dividend of €1 in top to the ordinary classical dividend, €1.65. Proceed from asset acquisition, where a €9.5 million outflow, reflecting the Brier acquisition in the first half, For your information on debt acquisition, we consolidated as well a €0.6 million net debt along the global assets. So net-net total cash flow for the period was a €23.6 million inflow, leading to a lower net debt compared to March level at €427.3 million. This net debt was also down as well, 31.6 million to be compared to its level in September 2019. Despite the lower net debt level in absolute value, our net debt to EBITDA ratio, A ratio, increased to 2.04 compared to 139 last year, due to the fact that the lower EBITDA level was more important than this stability in terms of absolute value of the net debt. But having said that, 2x net debt to EBITDA ratio remains a very healthy ratio. One word on our net financial expenses, which were a global charge, an overall charge of €8 million in the first half, implying strong €6.4 million improvement compared to the previous year. Gross debt servicing costs improved marginally to €6.1 million compared to €6.3 million last year. along with our cost of net debt, which managed to reduce further to 0.96% in H1 to be compared to 1.15%. Net currency losses also improved to 0.6 million euro losses in the first half compared to a loss of 2.4 million euro last year. As you know, this is a very volatile non-cash item related to the hedging of groups non-euro debts and future non-effective flows. But the main driver of the financial charges improvement in H1 was the other financial expenses line, which amounted to 1.3 million euro this year to be compared to 5.7 million euro expenses last year. This 4.4 million euro reduction, positive impact on net result, reflects a partial change in contractual terms with our wine growers since the start of the financial years that gives this kind of benefit. And in the full year, we expect other financial expenses to land between 2 to 3 million in absolute value. Let's now talk about impact on currencies and currency hedges. As already mentioned, the group reported a slightly negative translation and transaction impact of €1 million in H1 in terms of operating profits. This mainly reflects a deterioration of the average euro-dollar translation rate over the period, which came out at 1.14%, per euro in H1 to be compared to 1.12 last year. This is the gray line on the spreadsheet. Recall this had a negative impact in absolute value of 7.4 million on group sales in the first half. Meanwhile, our average edge rate, the red line, remained broadly stable compared to the previous year at 1.16 US dollar to euro. Now, this edge rate has slightly deteriorated versus its level at the beginning of the year, which was 115. That's the reason why there was a slightly change in the guidance. So we thought it was important to update this guidance, as you can see in the next spreadsheet. And talk a little bit about our best estimation, because the environment is very volatile, also macroeconomics and not only on forex, which sometimes are very important. and very much of a consequence of the macroeconomics movement. Assuming an average euro-US dollar conversion rate, translation rate of 1.16 in the full year, i.e. implying a spot rate of 1.18 in the H2, and the euro-US dollar edge rate of 1.16 for the full year 2021, We now anticipate a 40 million, 4-0 headwind on sales and a 5 million, 5-0 headwind on operating profit on the full year level. Currency being very, very volatile, I repeat, and we remind you what is very important, which is the sensitivity. One cent increase today. theoretical increase in U.S. dollar compared to the Euro in terms of hypothesis is delivering 4 to 5 million Euro gain on sales and around 3 million Euro gain on operating profit and all things alike. At this stage, we covered 85% of our expected net U.S. dollar exposure. of which more than 50% 5-0 with option. So we are in a cautious position, but still flexible. Now, let's move on to an overview of the balance sheet, whose structure strengthened once again in the first half, with total assets and liabilities of 2.62 billion compared to 2.58 in September last year. On the asset side, this was mainly driven by global increase in inventory levels up 110 million euro to reach 1.38 billion euro. This is an historical figure for the group. This H1 overall in terms of crew was not one of the best mathematically speaking, but this indicator is clearly a bidding one. It's clearly a very strong one, as well as free cash flow. So this is an important thing to highlight. This is mostly the result of a significant increase in the purchase of the young ODV in H2 last year, combined with lower sale in the first half. Stocks accounted for 53% of total asset, up four points compared to the previous year. On the liability side, the increase was driven by the equity, up 83 million euro, as dividends were paid in the H2 this year, in October, as the option to choose between cash and share also a little bit lengthened the process, while they were fully paid in cash in H1, the previous one. Net gearing, so the group's net to debt equity, net debt to the equity ratio, decreased over the period from 33% to 29% thanks to a lower net debt compared to a higher equity. Key events during the half year. Three key events occurred during this half year. On April the 30th, Rémi Cointreau acquired Maison de Cognac J.R. Brié. On May 19, our Brookladdy distillery was certified B Corporation. These news were already shared and detailed in June during the full year earnings meetings. And on July 23, the general meeting approved... an ordinary dividend of one euro. Shareholders had the choice to choose between a payment in shares or a payment in cash. As already highlighted, 80% of our shareholders opted for a payment in shares, and the cash portion, as already mentioned, was paid in October. Lastly, a post-closing chart concerning the events, the post-closing events. Since the closing of the half-year on September the 30th, we announced the acquisition of majority stake in the Champagne house, J'ai de tellement, on October 16th. This deal includes the brands. inventory, production facilities, and property assets on its estate as well as vineyards in the Champagne region. We see a significant potential for this brand, for Telmon International Development, while adding a Champagne to our portfolio should also yield top-line synergies with our existing brand, in particular in the on-trade environment. Our ambition should be achieved while respecting the Telmon commitment in a certification process of sustainable and organic agriculture. Second post-closing event on November 12, French newspaper Le Point issued a ranking of the most responsible companies in France. Rémy Cointreau ranked first, number one, among the food and beverage sector and 26th overall among the 250 French companies. This ESG analysis was conducted by a third party, clearly, a German company, Statistat, and we are obviously very, very proud of this ranking that rewards years of commitment and already tangible results towards more responsible growth. Lastly, on November 24, Board of Directors took place, the group, during which a few evolutions were avoided. Caroline Bois, which was previously censored, was named a member of the Board of Directors and member of the Audit Finance Committee in replacement of Monsieur François Redoubreuil, who decided to step down. François Héréal-Dubreuil will, however, remain censor of the board. Caroline Bois is François Héréal-Dubreuil's daughter, and this change is part of the generational transition of the Héréal-Dubreuil family within the board of directors, as announced at the end of the shareholder meetings in July 2019. For your information, the audit finance committee is now composed by So three of the four members are therefore independent members. Finally, the Board of Censors is completed with the appointment of Jacques Héraille, who is also a board member of Andromed, the family controlling holding, Jacques Herraille is the former CFO of the AVAS Group. And the Board of Censors now includes François Herriard-Dugreuil, Elie Herriard-Dugreuil, and Jacques Herraille. Thank you so much. And now I will switch back my... Ah, you have the power. I have my... To Eric Vallat.

Thank you, Luca. And I will conclude with one slide sharing with you the outlook for 2021, so the remainder of the year. Just to tell you that on the back of the first half, which was strong and better than we expected, we now anticipate the following for the remainder of the fiscal year 2021. One, a strong recovery in H2. I insist on strong, which for us equals to real, but it's a strong recovery starting in Q3, largely driven by the US and greater China. Current operating profit to grow. organically in the full year 2021. And lastly, currencies and scope to reduce COP by 5 million and 3 million euros respectively in the full year 2021. Lastly, I would like to finish by saying again that the COVID pandemic does not change our 2030 strategic vision. In fact, it even comforts our choices, as it has been an accelerator of some trends that we strongly believe in, among which the move of market of the spirits industry, at-home consumption and mixology, the rise of e-commerce, a growing environmental concern that is going to switch from a constraint to a real marketing tool somehow, And last but not least, the opportunity for the cognac category to recruit drinkers from other high-end spirits of alcoholic beverages. So thank you very much for your attention, and we will now be happy to take your questions. Thank you.

Thank you. As a reminder that if you would like to ask a question on today's call, please press star 1 on your telephone keypad. Please ensure your line is unmuted locally and you will be advised when to ask your question. And our first question comes in from the line of Lawrence Wyatt calling from Barclays. Lawrence, please go ahead.

Hi, good morning, Mark, Eric, and Luca. Thank you very much for the questions. It's free from me if that's okay. Firstly, on China, you mentioned that price mix in cognac has been a challenge through the COVID situation. As we see China recovering and with a strong Mid-Autumn Festival, strong 11-11, and hopefully a strong Chinese New Year, What are you seeing in terms of price mix in the market at the moment? Is there any sign that we're seeing a recovery in high-end products, particularly going into things like Louis Treads? Secondly, in terms of AMP, you mentioned that you were expecting an increase in AMP towards the end of this year on previous calls. The news of a potential vaccine hopefully hitting the population of the world over the next few months, would you expect a faster recovery to the on-trade and therefore accelerate some of your AMP plans? And then finally, on a similar basis, with the news of the vaccine, does that affect your thoughts around the travel retail business? And I was wondering if you could give us any real-time insight on what you're seeing currently in travel retail, and particularly if there was any impact from the Aynan Island opening for spirit sales. Thank you very much.

Okay, I'll take the questions, but Luca, feel free. complement should you want to. First, on the China price mix and the current recovery we are witnessing and the reopening of on trade, your question was whether we could witness something special on the higher end on the price mix. So, just as a reminder or to precise a bit more, indeed, we saw and we witnessed a strong double-digit increase during MAF and we expect a strong Chinese New Year. This has been driven more particularly by Club, which has been growing steadily. And it's, let's say, a move, we consider it as a move toward a market compared to VSOP, which is now almost anecdotical in China. As to the higher end, you were mentioning more particularly with Trez and EXO. We noticed also a steady increase during MAF on EXO and on WITRES, where our sell-in is lower than our depletions. We're cleaning our stocks. We had high levels of stocks as COVID started just after Chinese New Year pipe filling last year. So the answer is yes, we witness a comeback of the Louis XIII and Exoskews, for instance. Again, Club being, for instance, for the moment, the main driver. It's a bit early to tell more. As you all know, as we all know, what I believe is that the higher-end portfolio is usually the one which is the number one driver. to be hit during a crisis because it suffers from gifting being much less, from travel retail and from less celebration. But it's also the first one meant to recover. So let's wait and see for the month to come. But, yes, that's what we are witnessing currently. As to ANPs, as you have heard, we are willing to invest in the coming semester, to invest in our future. We believe we can afford it. We are not going to be crazy and the ratio of ANPs is going to stay stable. Having said that, we're going to generate more sales and we're going to invest more. We reinvest as much as we can on ENP. This is driven by our confidence in the ability, our ability to grow in our key markets, notably the U.S. and China. And this is also driven by an expected growth. recovery overall next year. Now it's very early to say when it will happen exactly. Honestly, we remain, as usual, confident in the medium term and the long term, but still cautious in the short term. And that includes travel retail, which was the last element of your question. Indeed, there are some good news on the vaccines around in the air. We are still very cautious for next year on travel retail. We don't expect it to rebound quickly. We are still expecting it to take probably another one to two years before it comes back to normal and even more before it comes back to what it could have been before. with no COVID. So the message is, let's say, investment in our future. We see a recovery next year, but it's very difficult to assess when exactly, and we remain very cautious in the short term. And that's what I think we reflected in our comments.

One point to complement the first answer. It is that we are very optimistic for the Chinese New Year, for 2013, and also XO, because XO was growing very much in the Mid-Autumn Festival. And for the second part of the year, Chinese New Year, clearly we are very optimistic. And we talk about stock level when you have a long route to market, a long chain of distribution, which is still growing. a little bit the case because we are much more direct than before but still we have a part of the indirect business made by our you discover that you are overstocked only when you have the final depletion. And in case of pandemics, we're clearly an external factor. So coming back to normal, and this is already the case in depletions level, having a more clear and transparent, classical on-trading environment will speed up the depletions and refurbish the sell-in in a much faster way than we might think. So we are very optimistic as well.

And sorry, you had a question on Hainan. So just very quickly here to say that Hainan is indeed a fantastic opportunity. It's China-related tourism, Chinese-related tourism. We expect almost 100 million visitors next year. And obviously, we are proactively discussing with the key partners there that include, obviously, CDFG, among others. We believe it's a fantastic opportunity for us to benefit from the touristic traffic that Previously, it was probably going to Hong Kong and somewhere else in Asia as well. We believe that it's a great opportunity to have a good retail and nice retail presence to enhance. our brands, particularly Louis XIII and Rémy Martin, of course. But we also want to make sure we do it the right way. And I'm speaking also here of price control. We want to make sure that we do not disrupt the great work we've been doing this year in making sure we have a good pricing control and policy. We want to invest behind I9, but not at any cost. And this is the fine line we are working on, like many other brands. Things are going forward, obviously, the Chinese way, so quickly.

That's all very clear. And Luca, you mentioned the... The benefits of the channel in China, I was wondering if you could just expand on what you think the stock levels are in China and in the U.S. at the moment.

So generally speaking, in the U.S., we are on a low side at this stage in terms of stock. In China, we are depending on the categories, or slightly low or slightly higher, but can be mathematically reassessed before the impact of the Chinese New Year. And the rest, remaining part of the world, emerging market in Europe, with some exceptions like UK, Australia, some cherry-picking countries, we are more on the high side. So it's a very different situation, country by country. USA, low side. China more or less overall fine, remaining part of the world high side. Excellent. Thank you very much.

The next question comes in from the line of Simon Hales, calling from City. Simon, please go ahead.

Thank you. Morning, everybody. A few from me as well, please. Can I just ask around the finance costs, Luca? I mean, could you give us a little bit more detail as to what's really changed with those O2V contracts? And I suppose crucially, you know, are those changes sustainable beyond fiscal 21? And also to the financials, the 3 million negative scope, impact that you expect in the second half. Can you just give us a bit more detail where that's coming from? Secondly, in terms of trading, as we head into Q3, you've obviously talked very positively about mid-autumn festival and the strength of club and the share gain you've seen on some of the e-commerce platforms. You've gained share in aggregate of the cognac category through mid-autumn festival. And then also in terms of Q3 trading, I appreciate that U.S. stock levels, as you said, are still quite low. But have you started to see some wholesaler replenishment that you expected in the U.S. ahead of holiday season? And then just one final quick one. Eric, I think in your commentary around the liqueurs and spirits division, you talked about the fact that sales in quarter would have been, I think, plus 8%, excluding travel retail. I just wanted to clarify what that number relates to. Was that the liqueurs and spirits division?

It was a total group. So it was not liqueurs and spirits only. I'll let Luca answer the question. The previous questions, but this was the talk group.

Okay. You want me to start with the first two questions? So, finance costs. We talked a little bit the previous year, but I will try to be more clear on that one because you have a clear benefit this year. It won't be forever. It is a clear benefit this year. We have partially changed our contractual terms with some wine growers. To make it simple, some of our wine growers were aging our Eau de Vie for us because in terms of capabilities, they were not totally there on our side during a few years. But repatriating them into our own cellars after this aging period. For that reason, We are paying some financial charges. And now, given our extra capacity in Cognac and all the work that we've done by the teams of Remy Martin to increase the young ODV, we have the capabilities to internalize all that, and we are fully aging our ODV. positively impacting our financial cost on a specific basis because it is the year where you change, then it will be a recurring item. So it's a specific one-off, but recurring in terms of it's not extraordinary impact on our net result. It's not clearly something impacting our operating profit. It is impacting our net result. Scope, minus 3 million. The scope impact, we said that already some months ago, but no problem. The integration of the two new brands, Grille and Detelmon, will deliver this year in terms of top-line net sales. between 2 and 3 million euro, but the fact that we need to invest to begin to develop the brand awareness of this brand and to make some adjustments also in terms of internal operation of these two brands makes that the starting of this journey, there will be a negative impact It's quite usual to have that on acquisition for the first year, which is minus 3 million. So it's the combined impact of the two acquisitions. I repeat, two or three positive scope impact on a million euro in top line and around 3 million negative in scope in terms of operating profit.

And sorry, just to make it clear, growth for Q2 would have moved from minus 8 to plus 3. excluding GTR. It's not liquors and spirits specifically.

Okay. And then just around the Middleton Festival share and the US stock replenishment trend.

You want me to answer, Enrico? As you wish. So Mi Doton Festival has an impact, had an impact clearly in our vision of the year. So it will be some impact. But just remember that also the time of the Chinese New Year is later this year. So we have a reverse impact compared to the previous year. We might have between 8 and 10 million for China, for Asia-Pacific, lower sales in the Q3 than the normative one, and increase in the Q4 because of the time of the Chinese New Year at this stage. But still, be reassured that greater China will continue to increase its performance, not only in the depreciation, but also in sell-in. China was up in sell-in, low to mid single digit, and depletions in value, high single, low double digit for China. This will still continue to increase in terms of sell-in and sell-out, even taking into account the 8 to 10 million switch between Q3 and Q4 compared to the historical pattern of Chinese New Year. Q3 USA, there will be a strong realignment between sell-in and sell-out. So the recovery at group level clearly will be driven in the H2 by already a strong Q3 and profiting of strong US and strong greater China. Then some other countries, as said, UK, Australia, some other countries inside Europe that It's not important to detail this stage. Partially Germany, partially some was a little bit more than better than Spain. But overall, the remaining part will still be very complicated travel retail on top. On stock level, I repeat, in the U.S., we are on a low side, and Q3 will see a realignment, progressive realignment between Europe. sell in and the best approximation of sell out in this part of this world, which is very benefit for our top line and profit and loss overall.

Market share wise, we've gained market share in China and club from a small base because we still have a great opportunity there.

That's all very clear. Thank you.

question comes in from the line of Trevor Sterling, calling from Bernstein. Trevor, please go ahead.

Good morning, Mark. Two questions on my side, please. In the U.S., in the first half, we saw in the order of 70% volume sellout in the numbers. Since then, economic support has been reduced, and we've seen increased COVID. Has there been a deceleration, do you think, in the rate of sale in the U.S.? That's an amazing sellout number. And second question, again, your supply situation and the ability to catch up in the U.S., is that still going to be constrained in the second half?

So as to the sellout growth, we've seen a slight slowdown, but it's still a very strong double-digit growth we're witnessing week after week and gaining market share, particularly on our cognacs, but not solely. We also see it on the whiskeys, on Cointreau. So no real slowdown, still a very strong acceleration versus last year. And we don't see it fading until maybe on trade reopens. Now you mentioned about the... The subsidies that could have boosted this demand, this might be difficult, of course, to analyze deeply. What I'd like to say is we witnessed an increase from April while the subsidies started in July, so I'm not sure it's purely subsidies related. Second thing is, I think it's what we see is a real move towards the upgrade, a real upgrade that was already started before COVID and that is accelerating now. And again, I believe the last past few months have accelerated. Made us gain time in educating on cognac. I remind you that we are only six percent of the total wine spirits before before COVID. So I think it's accelerating the opportunity for us as to potential supply chain constraints. Obviously, we were not prepared for such an increase. Now we've managed to adapt, and that's why we expect a good, a strong second semester, driven notably by cognac in the U.S., reflecting the sell-out trend. Having said that, for me, the risk is more, you know, maybe on the bottling side. With COVID, imagine we have one case, two cases, three cases of COVID, and that forces us to close one line of production. This would have an impact, probably even more if you look at the remaining part of the year than the liquid availability itself. So this is where we see the risk, and this is where we're really being very cautious, taking all the measures that can be taken to protect our employees and our staff and to make sure there is no discontinuation in the bottling factory.

Super. Thank you very much, Eric.

The next question comes in from the line of muted. Please go ahead.

Yes, good morning. I have two questions, please. First of all, I mean, at the strategy update in June, you talked about focus on XO and the upgrades of qualities in the cognac segment. Can you talk a bit about the initiatives that you are deploying to realize that? And the second question is, maybe can you share your thoughts on the pricing power in cognac versus other spirits categories in U.S. market?

Hello? Yeah, okay. So for the first question, EXO, and more generally speaking, the upgrade initiatives. First, I think it's important, again, to understand To stress the fact that for us, upgrading means two different things. In the U.S., the first step is really upgrading from VSOP to 1738. And in China, it is upgrading from VSOP to Club and Exo because the market is more mature. for the high-end cognacs. And by the way, for, let's say, our intermediates, which are part of the upgrade strategy, and we shall not reduce it to EXO. EXO is a great opportunity as well. But we own... this segment. So the challenge for us here is to take advantage of the market move and the fact that we can take advantage of a growing category overall. For EXO, it is more gaining and regaining some of our fair market share, knowing that we are much below than our overall market share on EXO. So what are the initiatives we're taking? I think it's a Still a bit early to assess because it's a full plan we are building on EXO. As you have understood, driven by China, but not solely. It's a plan that goes from ETL to BTL, but also to a client-centric model because EXO has a price point that deserves a specific client-centric approach as well. which is what we are working on also with the Chinese team. So it's a full plan that, to be totally transparent to you, is going to be implemented from January onwards. Now, the only fact of highlighting our priorities, we shall not underestimate that the beauty of portfolio management is to making sure our teams, commercially speaking, in the field, focus on the right topics. And I've been in a store myself. I spent three years managing a Louis Vuitton store in Avenue Montaigne in Paris, 60 sales staff. I can tell you that the number one driver of the volumes is the motivation of the sales staff and their understanding of where their priorities are. And what we've done over the past few months is this refocus, choosing our facts, our fights, picking our battles, and this refocus. contributes to the results we have achieved so far, but much more to come. And the pricing power of cognac, I like to say usually that we shall not take it the wrong way. It's not because we increase prices that we are high-end. Prices are the consequence of everything we do. So the pricing power of cognac is the consequence of everything we do as a category and everything we do as a brand ourselves. As to the category, I think when we see the move-up market benefiting cognac over the past few months, we see that we do have a pricing power. I think that it's our job to leverage this to grow our volumes, which will increase demand and desirability and reinforce pricing power. So pricing power is the consequence. It happens that if you take the U.S., Definitely, the current trend is giving us some more pricing power than we probably had a year ago, demand being very strong. Now, again, that's also why we invest on ENPs and for the future of our brands, because pricing power also comes from desirability. And this is what we are working on with some campaigns that will come next year and that will contribute to this desirability and to make people By beyond pure rational, which is the quality, outstanding quality of the product, but which will add to this rational, the less rational and more effective relationship with the brand and the category. And this is very important. This is how the big brands have been built. And this is also what we're working on.

And to avoid any misunderstanding, not on this strategic answer, but in a pragmatical way, Point of view, the fact that we are increasing the prices of October 1st do not mean that we will not increase again our prices in April. So it was for ethical reasons switched for six months, but we re-enter in a normal game of price increase at the beginning of the fiscal year, USA as well.

Very clear, gentlemen. Thank you.

The next question comes in from the line of Edward Mundy, calling from Jefferies. Edward, please go ahead.

Morning, everyone. I've got a couple of questions. The first, Eric, is coming back to your comments around the chronic market being 6% of the U.S. pre-COVID and about 7% today. I guess to that question, do you have a target as to where you think that could get to? And second of all, do you think this has increased frequency of consumption by existing cognac consumers, or are you bringing new consumers into the category? The second question is around shipment-centered depreciation. We've had a lot of color on the call, but I was just hoping you might be able to provide a view as to whether you think that shipments will be ahead of depreciations at a group level in H2. And then the third question is around price increases. You got back into normal cadence on the 1st of October. Are you able to quantify what that price increase was and how does that fare to the price increase relative to last year in April 2019?

Take the second one. Or you can do it. I take the H2 depletions. Okay, fine.

Let's split. It's better to switch the speakers. So I'll take question one and three, and you'll take question two? Yeah. Okay. On question one, so sorry, the sound was quite poor, but I understood that you were asking, knowing that we grew from 6% to 7%, if I have an idea of how far we can get to. And to be transparent to you, I am not going to reply precisely to this because I don't know. What I know for sure is we do have potential to grow our share. Tequila is 12%. We are only six, seven. This highlights the potential. Again, as I said, 25% of the high-end brown spirit drinkers only drink cognac. Another 25% are considering. So the opportunity is there. How far will it take us to? It's hard to say, and it's a category challenge. I believe that we do have room to grow more and that we have an opportunity to leverage what happened over the past few months. And you asked also whether it comes from recruitment or it's our clients drinking more of our products. We know for a fact that it's both. I cannot assess the split between both, but we know that we see a recruitment movement. Either brandy drinkers who've been switching to cognac. partly thanks to the fact that indeed there is less to spend on travels and they take advantage of it to upgrade but again this gives us the opportunity to educate on our products and we are gaining time there but also we saw some people moving also from other high-end spirits to cognac so we are recruiting indeed and it is not purely and solely coming from our clients drinking more We see the upgrade, by the way, in the amazing growth of 1738, which is even higher than that of VSOP, and which has been a three-digit growth in many of the weeks we've been witnessing over the past few months.

The second question is what we have to expect as a financial community in terms of H2 growth. sell-in to be compared to the sell-out. So the situation is very different state by state, country by country, and the stock situation is clearly a different one. But overall, in a simple word, we expect to increase sell-in in a very strong way. The word real is not softer than strong. It's the same thing. Real meaning, if you want, clear connection between sell-out. So everything equals. If possible, we think that we will increase, be more aligned overall at group level, sell-in with sell-out in the H2.

And your third question on price increases. So yes, we have increased our prices on October 1st, as Lucas said. And we've increased them, let's say, low single digit for Rémy Martin and for Liquors and Spirits, and high single digit for Louis Treize. What I'd like to say, and we had no pushback from our distributors, and as Lucas said, we plan another increase to come at the beginning of next fiscal year. I'd like to say also that price... Equally important to price increases is the way we manage also our stocks. And on WeTrace particularly, we witness a more healthy stock, which is also driving our pricing power. Very good. Thank you.

The next question comes in from the line of Chris Patcher calling from Redburn. Chris, please go ahead.

Good morning, everyone. Thank you for the questions. Just a couple from me. The dramatic uplift you've seen in consumption in the United States, I mean, if you can hold on to those new consumers, has it radically changed your inventory planning? And does that affect your O2V purchases in the short term? Are you needing to buy perhaps some more older aged O2V to plug gaps to allow more for the VSAP and above products? and then secondly a question on sort of interpretation you said in the outlook statement this morning that you expect organic growth to be slightly tempered by effects and scope which i would interpret to mean the organic organic growth will be above eight eight million i higher than four percent can i just confirm i've interpreted that you don't mention that phrase in the presentation thanks oh and finally on that how much flexibility do you have in the cost base if the sell-in, sell-out doesn't pan out perhaps as much as you think to achieve that confidence in operating profit growth.

Thanks. So, Lucas, I'll leave you question two, and I'll take question one. For sure. With pleasure. No, as to, sorry, the sound was quite poor as well. But my understanding on your question is whether what's happening in the U.S. and the dramatic increase we see, is it impacting all the V purchasing? So first, I'd like to say that obviously in quantities, yes, we are doing more than expected. And yes, there is tension in the region, as usual. It has not eased, let's say, despite COVID on the sourcing side. And we are. prepared to fight as well on our side and to get our fair share. So this impacts the quantities in total. Does it impact the split between the SKUs? I would say yes and no, but much less than the overall quantities. Because the way I see it is it's also an opportunity for us to gain pricing power on VSOP. And the challenge is not purely necessarily in the long run to address the volumes of VSOP. While we know that this will end up being at the expense of the higher grades, it's a balance between addressing the request on VSOP, but also taking advantage of it to increase its pricing power year after year. Again, it is not dogmatic. The increase of VSOP is linked to the demand rather than the other way around. But what we're seeing currently, as you said, the strong and sharp increase is reinforcing our pricing power. So, yes, it is impacting the total demand. liquid we are buying but we keep our strategy of using VSOP as a great hook and tool to invest further on the upper grades and we will manage VSOP pricing according to its demand as well as we do not want to jeopardize the upper grades in the long run.

The second question is about the the journey to the consensus on operating profit. So we are guiding a growth in organic basis, meaning that mathematically speaking, starting from 215 million euros last year, so same exchange rate, same scope, so without considering the 8 million that you are mentioning, 5 on forex at this stage, 3 on scope, The minimum at the published level we are engaging here, the vision, which is 223. But we don't look at it that way because let's imagine that Forex impact will be 12 million. We will not adjust. investment in terms of strategic AMP in the second part of the year to support H2 and the strong H1 that will probably appear in the year 2021-2022 to be able to adjust in what we get in terms of published downturn. So we are guiding an increase in terms of operating profits on the same scope and on the same exchange rate of last year. Consider at this stage, I repeat, 8 million of published non-organic impact, 5 on Forex and 3 on Scope. In published rate, the consequence is 223 at this stage, but it's not the figure you have to retain at organic one.

Thank you.

The next question comes in from the line of Olivier and Nikolai, calling from Goldman Sachs. Please go ahead.

Hi, good morning, Marcia and Luca. Most of my questions have already been asked, but I've got one left. You've entered the champagne category with a 10-month acquisition last month. What does the brand bring compared to people's high-tape points that you sold a few years ago? And are you keen to expand further in the champagne category?

Thank you. So, it's a good question because, indeed, we quit champagne a few years ago and we are back. So I totally get it. My view, I was not there at that time, but my view is that Piper Heidsieck had one difficulty, additional one, that was making the move towards the upgrade difficult. They had Heidsieck monopole. So a competitive brand leveraging the name as well. So I don't know if this is the reason why we quit at that time, but definitely this was making for sure our life difficult. Why are we coming back to Champagne? I would say before understanding why we come back to Champagne, it's interesting to understand why Telmon. Because, in fact, Telmon is interesting as it reflects our values. It's generations. It's a fourth generation now. And staying on board in charge of sourcing, by the way, it's terroir we acquire. And it's terroir, the terroir we acquire is in the path of being 100% agro-consumers. So that's also something very important, obviously, to us. It's highly qualitative. It's gotten a lot of prizes. And it is well appraised by all the certifiers you can find worldwide. And it makes sense, the category for us and Champagne. for many reasons one it can help us increase our presence in countries where cognac is potentially weaker but also it's about addressing a clientele which is in some countries at least younger and more feminine which is of interest for us and lastly it's a way for us also to uh Reinforce our attractiveness in high-end gastronomic restaurants and obviously also in on trade and the night. Having a champagne in our portfolio is going to help the rest of the portfolio. This is for sure. So for these reasons that we came back to Champagne, we believe we have a great brand that is a great addition to our portfolio. Now as to whether it's the beginning of, let's say, more investment behind Champagne and so on, You know, we have some brands whose mission in the group is to help sell also the rest of the portfolio or to enhance specific know-how. This is also typically the case of champagne with everything I raised. So we are going to invest behind Telmon. to grow it, and this is our number one priority. As to potential acquisitions, further acquisitions, our number one priority is to focus in the next two years, at least to make it clear, on our game changer, which is implementing a real portfolio management, and this is going to take two years, a real portfolio management approach throughout the group. Once we have achieved such, we will be prepared for more acquisitions. Thank you very much.

The next question comes in from the line of Vincent Ryan, a colleague from JP Morgan. Please go ahead.

Good morning, Mark. Eric Luca. Thanks for taking my questions. Two from me, please. Firstly, could you give some colour on the price increase that you've taken and how that compares to what some of your peers have done so far in the market? And clearly, if you get into a situation what you've seen a few years ago, whereby you took extra pricing increases, were ahead of competitors, would you reconsider taking the price increase in April? Just in terms of, I know you reiterated the 2030 guidance or outlook, but at that time back in June when you were presenting, I think you were saying the first two or three years were years of essentially reinvestment. ahead before you sort of see the ramp of margins to 2030 goals. Given what the outlook is for the second half of the year and just how the world has evolved generally in that time frame, is there any change to what your thoughts around the reinvestment into 2022 and 2023? In particular, I guess, the balance between gross margins and the A&P investments going in. Thank you.

You take the second one, you take the first one. No? I was about to say the other way around, but as you wish, no? You will plant the two? So... So on price increases, I think we hinted that basically we have gone for a low single price increase digit on Cognac, Rémy Martin, and on the Liquors and Spirits, and high single price increase on Ritres on October 1st. We saw no pushback. Are we considering, is this more than our competitors? To my knowledge, not everyone has increased prices already since the beginning of COVID. So I think we are in the first movers. We expect some other price increases from our competitors to come soon. On our side, yes, we plan on a second price increase for the beginning of next fiscal year. So that's in less than six months now. And it means basically that we are going to have two price increases in a row because we considered it ethical not to do it in April last year. But we also felt like we should not give up on this pricing strategy, which again has to be driven by the desirability of our brands. I guess this answers the first question. And the second question, maybe you can take it and I'll complement you. Yeah, sure.

So the journey to 32% in operating profit is clearly based on increase of gross margin that need to reach in 10 years 72%. So what we are witnessing in the H1 is really linked with these three effects that I highlighted before. So adverse volume loss, adverse product mix, and the cycling of price increases taken last year that were not there. It will be an increase in the H2 because we are seeing, expecting a gross margin to be in the global 2021 year, flat to slightly negative, so strong recoverance in terms of gross margin profile of our business. And... We think that we want to be able to increase gross margin in the next coming semester and years. So the intensity of the AMP will be fed by gross margin and also partially the leverage on OPEX compared to their growth lower the top line. But the leverage on OPEX OPEX, apart from this specific period of pandemic reaction, will be more temperate, will be more in the second part of the 10-year plan. At the beginning, the gross margin is the clear key driver for the first five years to give ourselves the possibility to invest more in EMP. But all in all, before ratios, EMP, leverage, We have to remind that the most important thing is sales, because without sales, ratios also look very, very different. So every single effort is there to improve not only our ratios, but clearly our sales, our market share, both on depreciation, but also even if sometimes there is some delayed effect in terms of sell-in. If you want to complement some point. No. Great, thank you very much.

Okay, and there are currently no further questions coming through, so I'll turn the call back across to yourself.

We are about to say it's 10.45, good time to close down this session. So thank you very much, everyone, in the name of Marc-Hierdy Boy and Luca, and looking forward to speaking to you soon or ideally meeting you soon. Thank you very much. Have a good day. Thank you.