Earnings call: Remy Cointreau stays on course amid market headwinds

Remy Cointreau (RCO.PA) CEO and CFO provided an overview of the company's full-year results for fiscal year 2023-2024, outlining the impact of COVID-related restrictions, a competitive market, and currency fluctuations. Despite these challenges, the company has managed to exceed its margin target for the upcoming fiscal year and remains committed to its long-term strategy. The earnings call revealed a decrease in organic sales and profitability, but also highlighted cost-saving measures, a resilient Chinese market, and growth initiatives in the U.S. and e-commerce.

Key Takeaways

• Full-year results for Remy Cointreau showed resilience in China, with a 25.7% margin exceeding the target for the next fiscal year.
• The U.S. market faced headwinds, but the company plans to boost VSOP sales and implement a new organization to reduce costs.
• Travel retail is recovering sharply, and e-commerce growth is notable, especially in China, the UK, and the US.
• The company is focused on sustainability, with efforts to reduce carbon footprint and support regenerative agriculture.
• Despite a decrease in sales and profitability, Remy Cointreau remains on track with its long-term strategy.

Company Outlook

• The company aims for high single-digit top-line growth from 2026 onwards, with a focus on Cognac and Liqueurs & Spirits.
• Remy Cointreau expects low to mid-single digit growth in the coming year and aims to achieve a 33% operating margin by 2029-2030.
• Plans include a boost plan for VSOP in the U.S., smart pricing strategies, and a focus on non-Cognac brands.

Bearish Highlights

• Organic sales were down 19.2% compared to the previous year.
• Gross profits decreased by 20.6% organically, with a decline in gross margin.
• Net profit group share was down 37.1% reported, and net debt increased to €649.7 million.

Bullish Highlights

• The company achieved €145 million in cost savings, with 45% being structural.
• E-commerce accounts for 27% of the company's business and is expected to grow faster than other channels.
• The Liqueurs & Spirits division's return on capital employed (ROCE) increased by 0.6 points.

Misses

• The free cash flow generation for '23-'24 was €13.8 million, a sharp decline from €48.6 million the previous year.
• Operating profit was down 27.8% organically and 29.1% reported.

Q&A highlights

• The company discussed the similarities with the 2013-2014 period, expressing confidence in a similar recovery.
• Updates on the U.S. VSOP boost plan and measures to protect margins were provided.
• The CEO acknowledged overestimation during COVID-19 but remains positive about the impact of the VSOP plan and partner incentives.

Remy Cointreau's earnings call painted a picture of a company navigating through a challenging fiscal year, with strategic initiatives in place to maintain growth and profitability. The company's focus on innovation, sustainability, and market-specific strategies demonstrates its adaptability in a volatile global market. Despite the downturns, Remy Cointreau's leadership remains optimistic about the company's trajectory and its long-term vision.

Full transcript - None (REMYF) Q4 2024:

Marie-Amelie Jacquet: Good morning, everyone, and thank you for being with us this morning for Remy Cointreau's Full Year Results. I'm here with Eric Vallat, our CEO; and Luca Marotta, our CFO. '23-'24 was definitely a challenging year. We are operating in a complex environment as well as facing several headwinds at the same time. After a period of erratic stop-and-go in shipments due to restrictions on logistics and the constrained demand in the U.S. during COVID, we have been facing a sharp normalization of consumption coupled with inflation and its consequences, notably a fiercely promotional market. More generally, we believe the world is entering in a new economic phase with a global slowdown in consumption while China has not yet fully recovered post COVID contrary to general expectations. But this is not the first time in our long history that we are facing challenges and we are well armed to navigate periods of uncertainty such as now. We are fully focused on managing this volatility. '23-'24 highlighted our forceful efforts to deal with destocking in absolute value. This is not over yet as underlying demand has not yet recovered. '24-'25 is a year of transition that will allow these adjustments to be completed. More importantly, these difficulties have not changed our long-term vision. On the contrary, by challenging us every day, they push us to demonstrate even greater agility and innovation as showcased by our large portfolio of innovations and the changes we have made in our commercial structures both in the U.S. and in Europe. Our corporate culture, our strategic vision, our team's passion and dedication are our best assets. We have every confidence in the ability of our teams all around the world to constantly innovate and renew themselves and to carry our values of excellence even further and we thank them very much. I will now let Eric take you through the full year business review. Eric, the floor is yours.

Eric Vallat: Thank you, Marie-Amelie, and good morning, everyone. Thank you for joining us today. It's now my privilege indeed to take the mic and to share with you our progress on our strategic journey and our overall results. Luca will then go further into detail as usual. Before sharing with you our results for '23-'24, I would like to provide a quick overview of the year. There is no argument that '23-'24 was a very challenging year, but a year that also saw some positive achievements and progress. Starting with China on Slide 5 now where our Chinese teams have done a tremendous job as evidenced by our resilient results in a complex market. With value depletions growing at low single digits representing an increase of more than 75% compared to '19-'20, Remy Martin won market shares plus 0.5 points, which means plus 2.1 points versus 2019 and also reached an important milestone by gaining market share in XO, 0.3 points, for the first time in a good while. These results crowns a year of in-depth work to revitalize Remy Martin XO, a crucial driver of profitability which offers huge potential over the medium term despite current headwinds on the high end. Remy XO market share remains very low especially when compared to its awareness. So together, these results reflect the solid execution of our teams in China throughout a year full of initiatives including, for instance, meaningful and numerous innovations as you can see on the slide and an efficient communications and activations plan. I am now moving to Slide 6. In the U.S. the group is facing strong headwinds including destocking, inflation, increased promotional activity and last, but not least, a sharp normalization in consumption. Impacted by VSOP, this has led to a loss of market share from last year for Cognac while Cointreau and the Botanist continued to grow their market shares. However, despite a chaotic short-term situation, we are staying the course and resisting the temptation to take short-term measures that could undermine the potential of longer-term value creation. Strong price consistency is a prerequisite for building desirable brands and I am convinced that this consistency will allow us to emerge stronger from the current crisis. Guided by this same desire to maintain a long-term vision, we have also continued to invest in our brands certainly in a more selective and more pragmatic way, but short-term turbulence encourages us to pursue our communication roadmap. With 20% of our sales allocated to A&P in Americas, we have increased our A&P spend by 6 points versus '19-'20. The Slide 7 now shows that besides our 2 main markets, '23-'24 has been marked by a sharp recovery in travel retail, which recorded a plus 40% growth compared to last year and exceeded '19-'20 figures for the first time. And second, a huge number of product innovations launched, most likely a historical record for the group meaning the highest number of innovations. This is important for 2 main reasons. It contributes to brand desirability and it shall hopefully fuel '24-'25 growth with a full year impact. Strong growth in e-commerce, the third axis with a 20% growth, which now represents 14% of our sales worldwide driven by China. And finally, the good resilience of our regional brands and the acceleration of our incubator brands, which at their own level will ultimately contribute to the diversification of the group on an organic basis. A few words now on Slide 8 on CSR. It is obviously a key priority for the group and has remained so despite the current context. We have continued to invest behind our CSR actions and the transformation of our business model. As a result, our total carbon footprint is down 15% versus last year following a decline in volumes distilled as well as a number of actions all along the value chain. Further removal of the gift boxes, light-weighting of bottles, more train transport, more biofuel and cleaner cargoes on the supply chain side and finally, increased circularity by replacing our bottles by 4.5 liters ecoTOTEs so thanks to our partnership with ecoSPIRITS. We have also made progress on embarking our farmers into regenerative agriculture thanks to the deployment of local programs called the Collectives of Regenerative Agriculture. With these programs we form, we individually support all our partners into the transition. It is about lifting the brakes for our farmers into this transition and contributing financially, 3 programs have already proven successful and 2 were launched early 2024. Lastly, we have worked on a water stewardship plan in order to structure and accelerate our adaptation and commitments in that field. We have identified 3 areas of progress and action; water quantity, water quality and water regeneration. With regards to quantity, we are pleased to have reduced our water consumption by 20% almost, 19% to be precise in '23-'24. But we want to go further and improve our water use per liter of spirits produced. Thus, we set ourselves a target to reduce it by 20% by 2030. I am now on Slide 9. As you've seen from the press release this morning, our full year '23-'24 results are in line with our expectations for bottom line despite a meaningful decrease in sales. Back in April you saw our sales numbers down 19% on an organic basis, which represents 16% growth versus '19-'20. In terms of profitability, COP decreased by almost 28% organically, which is a plus 35% compared to '19-'20, leading to a deterioration of 3 points in COP margin at 25.5%. This result reflects first, a slight deterioration of the gross margin versus a record base of comps and on the back of an increase in production costs and a negative brand mix effect. Second, it reflects the implementation of a wide cost saving plan of €145 million versus €100 million expected, which Luca is going to detail a bit. The Slide 10 gives me the opportunity to remind you of our full year sales numbers by division. I will be quick as they were already detailed by Luca in April. Cognac declined by 25% organically versus last year, up 6% on a 4-year stack. And Liqueurs & Spirits recorded a 4.6% decrease versus last year, but a plus 47% versus 4 years ago. On Slide 11 now, just a word on the regions. The slide shows that while America has continued to be impacted by major destocking, APAC and EMEA demonstrated resilience. Consequently, Americas declined by more than 39%, down 4% versus '19-'20; APAC posted a 2% growth representing an increase of 51% versus 4 years ago; and finally, EMEA was up 0.7% organically, which is an almost 8% growth versus '19-'20. Let us now focus on the Cognac division profitability whose key figures are summarized on Slide 12. COP margin decreased by almost 4 points organically. Beyond the sharp decrease of the top line, the organic change reflects an erosion of the gross margin compared to a very high base of comps on the back of the increase in production costs partially offset by the price increase achieved in April '23 and a positive mix effect linked to the underperformance of VSOP. In parallel, the group maintained a high level of investments in A&P, stable in sales ratio alongside a more targeted approach. Finally, controlled increase of the cost structure thanks to the execution of a drastic cost savings plan, which made it possible to reduce the cost base by 16% for the Cognac division. Let's now have a look at the Liqueurs & Spirits division profitability whose key figures are encapsulated on Slide 13. COP margin increased by 2.7 points organically. This evolution includes first, a strong increase in the gross margin by 1.2 points on the back of the price increase achieved last April, which offsets a moderate inflation in COGS. Second, some gains on A&P ratio which remains at a high level, more than 26% of sales, up 4 points versus '19-'20. And lastly, a disciplined management of our structural costs. To conclude this first part on Slide 14, let's take a moment to share where we stand today on our 10-year journey. As you can see in this slide, we achieved a very strong progress on gross margin and have almost reached our 2030 target. '23-'24 gross margin is slightly down from last year, but remains very high, well above what we were targeting internally when we drew up this roadmap. On COP margin, our beat is less impressive obviously, but with the 25.7% margin in '23-'24, we are still above '24-'25 target. This slide is very important as it comforts us in our strategy aimed at maintaining a long-term vision to create value. More importantly, this means that despite the headwinds experienced in '23-'24 and the transition that we plan to undertake in '24-'25, we are still on track. Let me now pass on the mic to Luca, who will take you through the more financial slides.

Luca Marotta: Thank you, Eric. Now let's move on, on detailed analysis of the financial statement and begin with full year income statement, profit and loss. So as already mentioned, organic sales were down 19.2%, i.e. up plus 16.2% versus '19-'20. On that basis, gross profits decreased by 20.6% in organic terms implying an organic deterioration of 1.3 points in gross margin at 71.2% from a very high base as gross margin is already up by 4 points since '19-'20. Sales and marketing expenses were down 15.4% on organic terms reflecting a stricter control of our cost and a more selective approach in the second part of the year on A&P. Within this total, A&P specific expenses decreased by 20.1% organically in line with our sales more or less and remain at very high level of 21.4% in sales ratio. That means plus 3.5 points compared to '19-'20 or in term of increase, plus 39% compared to 4 years ago. This was necessary to continue to fuel brands and to grow their awareness and desirability. This evolution reflects a more targeted approach in all regions in H2, particularly in the Cognac division as well as our decision not to broadcast Super Bowl ads this year on a national scale. Within this total of A&P, most of the spending came from the above the line part. So what is above the line? I remind you classic media, digital and PR; which accounted for around 50%, of which 60% were digital. So consequently 60% or 50%, around 30% of our total spend in A&P were digital. In parallel, distribution costs decreased by 7.1% organically, which mean organic decrease of 5.5% so a massive one on a 4-year basis showing a very solid control of our cost base. Administrative expenses decreased by 18% on organic basis. This evolution year-on-year reflects the optimization of our overhead cost in answer to the current economic condition that I will detail later. All in all operating profit was down 27.8% on an organic basis and down 29.1% on a reported basis after taking into account an unfavorable currency impact, a limited one however, of €5.7 million. Beyond the high comparatives, this decline reflects a steep decrease in sales clearly partially offset by a drastic reduction of our cost totaling €145 million. On a 4-year basis, COP operating profit is up plus 44.9% and COP margin stood at 25.5%, down 3 points on organic basis versus last year, but clearly up 3.4 points versus 4 years ago. Now let's move to the more synthetic analysis of the group current operating margin. As said, it was down 2.3 points as reported reaching 25.5%. This breaks down into an organic decrease of 300 basis points and a positive currency effect of 0.7 points. The organic deterioration of the COP margin reflects the deterioration of the gross margin alongside a stable A&P ratio and a strong reduction in absolute value of our distribution and structural cost. In more details in terms of sales ratio, gross margin was down 1.3 points from a very high level affected by COGS inflation and a negative brand mix effect partially offset by a positive price effect. Second point, A&P ratio was almost stable at 21.4% of sales as already mentioned, a very high level. Third point, talking about cost overheads, the ratio of distribution and structural cost was up 1.9 points on the back clearly of the sharp decrease of the top line partially offset by a drastic control of our cost. So we didn't beat around the bush or as we say in French, we didn't use the back of the spoon to take all these points in absolute value. Compared to '19-'20, the ratio is clearly slowing and showing down of 2.9 points. Slide number 18. As announced last October beyond stimulating our sales performance, we have decided to mitigate the impact of these short-term headwinds with a very pragmatic approach on cost targeting around €100 million of cost saving. This was the guidance end of November. Thanks to a strong disciplined execution of this plan, we clearly overachieved and reached €145 million on full year basis of savings, of which; which is important to highlight; 45% so slightly is less than 50.5% are structural. In parallel so the consequence is that 55% of total saving are oneoff and will automatically reverse in '24-'25 profit and loss. But what there is inside this saving? Let's start with manufacturing and logistics, which contributed to around 20% of the total savings. All of them are structural; will stand, will remain on the baseline; and reflects not only some effort optimization in logistics. For instance the launch of new project to maximize space use inside the containers. And on top we realize long-term lasting saving inside the production cost, field packaging, raw materials, manufacturing cycles and procurement proceedings. Second, by nature point tackled was the A&P, which represented around 45%, more or less the half of the total savings. This has to be split in oneoff savings spread across the globe mainly in the Cognac division with of course a bit more emphasis on the U.S market. Here the objective, as Eric Vallat highlighted, was to protect below the line point-of-sale-specific spends and to be more selective on above the line spends. Second, part of that was structural saving mostly linked to the nonrenewal of the same Super Bowl factor, which corresponded at the time 1 year ago to an investment opportunity made in the context of exceptional growth. Third point, the most interesting one in terms of financials in terms of rigidity is linked to the overheads that represented around 35%, a little bit more than 1/3 of the total savings. The main part here is oneoff saving and included overhead savings linked to the variable compensation benefit, travel and expenses and fees freeze and cut. Structural savings were also embedded in the integrated optimization made in our organization mainly in U.S. and Europe. Now let's get a look at the remaining part of the income statement starting with other nonrecurring operating expenses that stood at €12.8 million in '23-'24 to be compared to €3.1 million last year and net financial charges increased from €17.6 million to €38.5 million this year as guided. I will detail them in the next slides. Talking about taxes. The reported tax rate decreased from 28.4% in '22-'23 to 27.4%, 1 point less reflecting the positive evolution of geographical mix such as the rebound of travel retail worldwide. But excluding the nonrecurring items, the effective tax rate is to be considered at 27.1% in '23-'24 to be compared to 28.3%, apple-to-apples. At this stage, we expect the tax rate to slightly increase in '24-'25 to land around 28% so more or less 1 point more. As a result, net profit group share came in at €184.8 million. That means minus 37.1% on a reported basis, i.e. a net margin of 15.5%, down 3.5 points on a reported basis. But on a clean basis excluding nonrecurring items, net profit came in at €194.8 million, down 34.3% on a reported basis. Net margin excluding nonrecurring items so is higher stood at 16.3%, down 2.8 points on a reported basis. Last, but not least, financial is very important. Reported earnings per share came out at €3.64, down 37.1% on a reported basis, but 50% more than '19-'20, 5-0 more. Excluding nonrecurring items, clean EPS stood at €3.84. Now a word on the analysis of the nonrecurring items, which is something quite unusual for Remy Cointreau at that scale. The reconciliation table between net profit and net profit excluding nonrecurring items. You have to split that in 2 components. €12.8 million of net charges, which mostly include nonrecurring costs linked to the organization implemented in the U.S. and in Europe, EMEA, and plus €2.8 million positive effect or positive nonrecurring tax items linked to this charge. So the net net tax shield included is €10 million. That's the reconciliation. Inside this cost of restructuring out of tax effect, we can split more or less €7 million in the U.S., EMEA for more or less €4 million and other projects done on Bruichladdich on Whiskey on Islay for €2 million. Now a very important slide that is approaching, net debt and cash flow. And we start before that with this impact on income statement, which is net financial expenses, which were a charge of €38.5 million in '23-'24 to be compared to a charge of €17.6 million in '22-'23. I have to remind you that it was clearly anticipated since June 2023 this specific point. So despite the huge increase, the guidance was clearly perfectly spot on and maybe it is slightly beat on that. Net debt servicing costs were up in absolute value reflecting a context of rising interest rates and the renewal, as we've seen, of certain long-term credit lines such as the issuance of a €380 million private bond placement with an average 10-year maturity and an average cost of 5.58% and the renewal 29 of March of the revolving credit facility for an amount increased to €180 million on a maturity of 5 years. So in other words, we increased maturity of our lines. So despite the increase in the interest rate, there is more coherence between the long-term asset and long-term liabilities. As a consequence, our cost of debt was clearly up from on average specific net debt on monthly basis from 1.7% to 3.8%. At this stage, we guide our '24-'25 financial charges to increase by around €10 million corresponding to the integration on full year or the 12-month basis of €380 million private bond placement. As a reminder, it was booked only pro rata temporary this year, only 6 months in '23-'24. Net currency decreased from a loss of minus €2.5 million last year to a loss of €2 million. These charges I remind you are nonoperational linked to the hedging of intragoup financing. Finally, other financial expenses stood at €4.8 million in '23-'24. Now a very important spreadsheet, which is the cash flow generation and net debt. Free cash flow generation stood at €13.8 million in '23-'24 compared to €48.6 million last year i.e. a negative variance of minus €34.8 million. This evolution clearly is linked reflects a sharp decrease of the EBITDA, which was partially offset by 2 major elements. First of all, an improvement of the total working capital items outflows so a positive cash effect of €50.5 million, which need to be split between a decrease on the working capital flow related to eaux-de-vie and spirit in aging process, cash effect positive of EUR35.7 million and while that was driven by lower increase so not a decrease, a lower increase I insist of eaux-de-vie and bulk purchases. On top of high comps, our purchases in eaux-de-vie and our manufactured volumes were slightly lower this year. And a decrease, second point, of the other working capital items outflows for around €15 million, €14.8 million, mostly driven by a decrease of the account receivable clearly in line with the slowdown of the activity and following '22-'23 which witnessed an increase. Second element to explain the free cash flow generation is the decrease of €52 million of the tax outflow. Why that is reflecting a lower level of profit? In the meantime, long-term capital investment outflow were slightly up €5.3 million, and included some investments related to very important strategic matter like CSR, manufacturing and storage sites, IT and e-commerce, hospitality, infrastructure and retail network. In parallel out of free cash flow, other cash flow outflow items strongly decreased by more than €100 million, €105.1 million. This was largely driven by the absence of the share buyback program this year and to a lesser extent a slightly higher level or earlier redemption of the OCEANE. So it is €50.8 million '23-'24 versus €42.9 million last year. This was partially offset by the increase of the cash dividend versus last year. Delta on that point is €41.7 million. As a result, in term of net debt end of March 2024, our net financial debt stood at €649.7 million so up from €536.6 million last year. A ratio is up from 0.84 last year to 1.68. So still very, very moderate and more than under control. So now let's move to the technical strategy, which is very important for you I know, and we highlight more or less every quarter. The group reported a negative translation and transaction impact of respectively €57.2 million on sales and only €5.7 million on operating profit. This mainly reflects the evolution of the U.S. dollar and Chinese renminbi. But inside that is the Chinese renminbi that has total losses and the U.S. dollar was partially positive. As you can see comparing the 2 elements, the delta -- the profitability is more less than 10%, it is lower than the rest. In other words, our hedging policies protect us clearly than the natural consideration of that. A little bit more technically, we faced the deterioration of the average euro-dollar, euro-renminbi translation over the period, which came out at respectively 1.08 compared to 1.04 and 7.79 compared to 7.14. But in terms of average hedge rates, situation is bit different, improved 1.10 on U.S. dollar. That's the reason why I explained you before versus 1.11. That deteriorated RMB 7.59 for €0.10 versus RMB 7.38. But now it's more important to talk about the future, '24-'25. Assuming a conversion rate of 1.09 on euro-U.S. dollar, 7.75 on euro-CNY as well as an hedge rate of 1.08 for dollar or 7.80 on Chinese yuan; we anticipate an impact as highlighted negative one between minus €5 million and minus €10 million on sales with 1/3 of that factor recorded in H1 and on the upside, a positive effect between €3 million and €7 million on operating profit mostly driven by a positive factor in H1. So 2 reverse effect between top line negative, bottom line positive; 2 different reason. As you can read on the slide, the ForEx sensitivity by currency is clearly shown and the evolution of euro-U.S. dollar and also renminbi exchange rate remains very volatile. We will continue to update that with you every quarter. At this stage for '24-'25, we already covered 80% of our net U.S. dollar exposure, of which around 40% on option. And for the RMB, we have covered as well 80% of our net Chinese RMB exposure or around 60%, a bit more of option. So after this long explanation of ForEx that I know it's important for you for your model, let's move on the overview of the balance sheet with total assets and liabilities total to €3.37 billion, up €184 million compared to last year. On the asset side, global inventory increased by €147 million to reach €1.96 billion due to the purchase of young eaux-de-vie as well as an increase of our level inventories in the current context. Inventories account for around 58% of total assets, slightly up in terms of weight compared to last year. On the right side, on the liability side, shareholders' equity is up by €90 million mainly driven by the positive evolution of net income and the early redemption of the OCEANE, the convertible bond for €50 million. This has been partially offset by the payment of the cash dividend. Net gearing so the group's net debt-to-equity ratio was up clearly over the period from 31% to 35% reflecting the increase of our financial debt. Now let's talk about profitability about the employed capital, which is still important for long-term company. Clearly our ratio came in at 15.5% in '23-24, down 8.9 points more or less 9 points on a reported basis and down 8.6 points in organic terms. This includes organic decrease of 9 points in the ROCE of the group brands, a negative swing even if not important at an absolute value of the partner brands' ROCE. The ROCE evolution like that strong decrease is the result of the clear asymmetry between an organic increase of 11.2% in employed capital, therefore, the long term and a strong decline of 27.8% in operating profit as the group continues to invest for the future despite a challenging context over the short term. This is particularly the case for the Cognac division. Its ROCE declined by 11.2 points organically to reach 16.9% on the back of an increase of 10.4% in employed capital and a COP's decline of 32% so clearly in a synergy there. In '23-'24 the group continued to invest in aging inventories and CapEx for Cognac sticking clearly to its long-term strategy. Liqueurs & Spirits division ROCE increased clearly so it's a very positive result by 0.6 points to reach organically 14.6%, but the needle mathematically speaking is clearly more on the Cognac side. This evolution reflects continued investment beyond our brands with employed capital being up plus 13.4%. Organically inside an increase of 18% on COP on operating profit on the back of a solid improvement clearly on the gross margin. A word on the employed capital that this slide is quite speaking. Overall amount increased by €200 million overall mainly split to an organic increase of slightly lower €197.2 million and a positive currency impact of €3.9 million. On the organic side, 11.2% year-on-year increase in capital employed reflected strong rise in hedging inventory, 60% of this increase; CapEx more than €10 million as explained earlier and other inventories. So basically most of the increase is linked to long-term investment. There is de-coloration that you cannot judge that at the same time with the same perspective. Last slide for myself moving to the yearly dividend. Given the short-term headwinds and our confidence for the coming years, an ordinary dividend of €2 per share with the option of payment in cash or share will be put to a shareholder vote at the General Assembly on July 18, 2024. Subject to approval by shareholders, ORPAR, the controlling holding, has informed the group that they will ask for the dividend to be paid entirely in share demonstrating clearly its confidence in the group's further growth. For your information, share will trade ex- dividend on July '24 and dividend will be made payable starting the 1st of October 2024 as usual. Overall, total dividend equates to a payout of 52% based on a recurring EPS at €3.84 and the mathematical yield, it is of 158% considered on the average share price of the fiscal year, which was €126.38. So now let me hand back the mic to my boss, Eric Vallat.

Eric Vallat: Thank you, Luca. Let me now share with you the outlook for the year to come before we take your questions. And before that, I would like to give you some color on what is happening and what our plans are in the markets. I have no doubt questions will come after, but let me try to wrap up our thoughts in the next 10 minutes or so. Starting with the U.S. on Slide 29, this would be no surprise. As most of you know, we have implemented a new organization in the U.S. with the aim of gaining in efficiency while adapting to the context of saving costs. While reducing the overall staffing by 10%, we have focused mainly on 4 priorities. Priority 1, reduce the number of layers to gain in agility initiatives and commitments. Number two, mirror our distributors' footprint to empower our teams who are now accountable for the full P&L. This makes sense in a 3-tier system market to make sure our commercial teams share the same scope and the same objectives as our distributors. It will help anticipate and coordinate activations with way more efficiency. Number three, while acknowledging the specificities of the 3-tier market and 3-tier system, of course also complying with its rules. We made sure we strengthen our sell-out approach by gathering under the same umbrella key accounts on and off trade as well as a team of 24 in-house ambassadors and 35 distributor specialists dedicated to our portfolio nationwide. Number four, lastly, as you know, we are leveraging our commercial excellence program to accelerate the growth of our non-Cognac brands. On top, we have adapted our incentive scheme to our distributors. Let us now look at our plans in the U.S. beyond organizational matters on Slide 30. We are of course in the process of activating a 360 boost plan on VSOP. We have always said that we need VSOP volumes to invest in the upgrade and in the value strategy. Having said that, life was a bit easy during COVID let's be honest and we did not activate enough VSOP while increasing our prices. This year you will witness more product animation and below the line activities in a number of key cities and states to support VSOP. And I would like to remind you here that VSOP is accretive gross margin wise for the group. We are going to work on the desirability also to support the 37.5 centiliter, which is a great format to recruit in times of inflation and it was a bit left over during COVID. But we are not going to decrease its price. So what do I mean by smart pricing for VSOP? I mean ensuring that distributors are focused on VSOP by incentivizing them. I also mean no price increase this year to take into account the lower pricing power. And lastly, I mean recommending a smart retail price bearing in mind psychological thresholds. This will not impact the average price ultimately as it would mean a price decrease in some markets, but an increase in some others. The increase will take a bit more time than the decrease, but this is the result of an in-depth analysis of our sales. Of course these developments should not be performed and will not be performed at the expense of the upper range, which remains the most strategic in the long run with focus on 1738, XO and of course LOUIS XIII. As you can easily imagine, we will keep focusing on proven levers to keep developing successfully the rest of the portfolio beyond Cognac and more particularly Cointreau, the Botanist and Bruichladdich as well as Westland and Telmont whose growth this year has been very strong in the U.S. Let's make sure we build on the momentum there. This slide also gives me the opportunity to highlight that innovations this year is also designed to help address new occasions as you can see with XO Night addressing on-trade of course whose launch in prestigious clubs in the past few months has been a real success. Last, but not least, with our new organization in the U.S., we have opportunities to grow further in on-trade and e-commerce to more resilient channels. Our new organization has been designed to help there as well. Let's now move to Slide 31 with a word on China. China recovery post COVID has been disappointing as said. Here I speak macroeconomically as well. We achieved less than anticipated ourselves in '23-'24, but we managed to grow in depletions thanks to the continued success of CLUB. Our XO also gained market share, but on a price segment which has been negatively impacted by the environment. We believe our investments through innovation, e-commerce and local activations behind XO will pay as did our investments behind CLUB. It's a question of time. We have 2 strong SKUs we can build on and VSOP is very small for us in China highlighting an opportunity in less high end venues than the ones we are targeting with CLUB and XO. We are fortunate to have a best-in-class team in China, which is not a given and which helps activating various levers to grow our business. First, we have always been smaller than our competitors in on-trade, which is an area of focus while it slowly recovers from COVID. CLUBs have turned into live music venues, which are more cosy. It means probably less consumption in quantity, but not necessarily in quality once China starts recovering. We have a very comprehensive and dense plan to keep growing our e-commerce business building on a team who's know-how and relationship with the key players is a true asset and a competitive edge. Third, like in other regions, we are deploying our commercial excellence program. This program also addresses the need to leverage our capabilities for our entire portfolio beyond Remy Martin at the moment when the cocktail begins to break through. This is longer term lastly, but we have an opportunity beyond the South of China in the Tier 1 and Tier 2 cities to grow our Cognac business. Our commercial footprint is less than our competitors and represents an important white space to grow in the coming years. Last, but not least, '24-'25 will mark an acceleration of the transition of Louis XIII towards a more retail direct model meaning an omnichannel approach targeting the end clients. we have developed tools and reorganized ourselves in China mirroring the high end watch brands to go 1 step further. This has driven a lot of innovation in the approach to the end client that we will leverage with Remy Martin like the creation of a real fully integrated consumer data platform for instance. One last word on the rest of the world, I am on Page 32. As we rebalance our geographic mix and in particular in EMEA, in April we put in place a new organization structure to ensure we can seize opportunities faster and build stronger relationships with our distribution partners. We now have 4 business units headed by 2 developed markets Managing Directors and 2 future growth markets Managing Directors. We have also strengthened our marketing capability with new Marketing Directors in 3 of the 4 business units. Short term we see high growth potential in the U.K., France and Italy and medium term in South Africa, Nigeria and more longer term, but we're working on it, India. In Asia Pacific excluding Greater China, we expect Japan to continue to grow driven by high value inbound tourism and also strong appreciation for luxury brands from Japanese consumers. Telmont Champagne for example has demonstrated rapid growth and we believe it will continue to grow fast in Japan. In the United Arab Emirates U.A.E, we believe that the gradual opening up of the markets such as Saudi Arabia, the reduction in sales tax last year in Dubai and Abu Dhabi and the casino sector entering the Middle East in 2026 create potential for high growth for our brand portfolio in the hotels, restaurants and catering and of course GTR airport duty-free channels in the long run. Finally, India will take time albeit demonstrates high potential for bottled at origin as the demographic fundamentals are very positive. However, India remains a market with high barrier to entry and a hyper complex route to market and to the end consumer. So as you can see, the challenging environment is also taken as an opportunity for us to challenge ourselves and to evolve our organization, which we believe will help in the long run. I am now moving on to Slide 33, the last one before the outlook. I would like to summarize our mindset and our approach in the current context. It is all about managing short term with agility and pragmatism while protecting mid and long term with steadiness. We are currently facing headwinds and visibility is low. So our priority in the months to come is to protect volumes while not compromising on the value strategy. Hence the VSOP boost plan as described, the very dense innovation pipe and our investments behind growing channels; namely D2C, e-commerce and travel retail. In a challenging environment to afford a strategy whose focus is more medium and long term than short term, we are also adapting our organization to reduce our costs and to improve our efficiency. Meanwhile, the value strategy is confirmed in the long run. Our portfolio will in part be driven by strategy. And more importantly although inflation is undermining the purchasing power of our customers in the past month, the trend of drinking less but better is not challenged. When given the choice for a given budget, 2/3 of our consumers would go for higher quality rather than more drinks, a trend visible across all countries. This is why we are determined to pursue the value strategy, but this can only work if we add more value to our products and if we boost their desirability. Adding more value means innovating on the high end like we did with Bruichladdich 18 and 30-years old launch or the aged Botanist range. Adding more value means strengthening our sustainable approach. Adding more value also means increasing prices selectively where we can. Growing desirability involves everything you see in the bottom right part of the chart. I'm not going to list them all, but I would like to share about our new digital factory more particularly. Within the development of our digital strategy and to align further with market trends, our objective is to get closer to our customers leveraging our digital ecosystem. To achieve this acceleration, the creation of our digital factory empowers and supports our brands on their unique digital strategy by embracing their DNA and supporting implementation in markets. Ultimately, the goal is to develop customers engagement and to boost our e-commerce sales with the aim of achieving 20% of our total sales in 2030. I would now like to conclude on Page 34. Despite a sharp fall in '23-'24, we continue to exceed milestones set for our 10-year strategic plan. '24-'25 will be a year of transition and '25-'26 will mark a resumption of the trajectory and targets set for '29-'30. High single-digit annual growth in sales on average and on an organic basis. a gradual organic improvement in COP margin. In a complex environment with limited visibility in our main markets, we anticipate a gradual recovery in sales in '24-'25 with H1 negatively affected by continued inventory adjustments in Americas, the high basis of comparison in APAC and mixed consumption levels in EMEA. In this context, the group is determined to use tight cost controls and its value-driven strategy to protect its profitability while continuing to make the investments needed for tomorrow's growth. In '24-'25, the group will build on the resilience of its gross margin thanks to a measured selective rise in prices amid moderate inflation. We'll also build on a normalization of A&P sales ratio at a level much higher than '19-'20. And lastly, a tight control of overheads to offset most of the rise in costs resulting from the reversal of temporary savings achieved in '23-'24. I would now like to thank you for your attention and we are now happy to answer to your questions. Thank you.

Operator: [Operator Instructions] We will take the first question from line Edward Mundy from Jefferies.

Edward Mundy: I've got 3 for you. So firstly, just a very big picture question. It's not the first time in your long history where you've seen challenges. I mean in the 2013-2014 period, the challenges were even more severe. When you take a step back and you compare and contrast the current period to back then [Technical Difficulty] how do you think about the differences and similarities? What gives you confidence that we're going to see a similar recovery in the coming years as you saw following that period back in 2013-'14? That's the first question. The second question is really around the U.S. VSOP boost plan. Just any early feedback on how it is being received by wholesalers, retailers and consumers? And the third question up for Luca, clearly from a balance between the long term and the short term, could you talk about some initiatives to [Technical Difficulty] margins as we go through this current financial year?

Eric Vallat: Ed, 1 technical point. We had some technical problem to understand clearly your question. So the second one is very clear, U.S. VSOP. So please to everybody, if you try to formulate that, because we have a very bad sound unfortunately today here, in a very synthetic and straight to the point way clearly because we have really some problem in terms of sound today. Sorry, to bother you with that.

Edward Mundy: Sure. So the first question just to repeat. 2013-2014 you had a severe impact on your business yet you recovered. How do you think about the similarities and differences in the current environment relative to 2013 and '14 and what gives you confidence that we're going to see A similar recovery? That's the first question. And then the third question is what measures are you taking to protect margin in the current environment as you balance both the long term and the short term volatility?

Luca Marotta: I will answer, Eric, the third one on savings.

Eric Vallat: Okay. Sorry, Ed. Question to the VSOP boost plan, what was exactly the question? Sorry about that.

Edward Mundy: Yes. The exact question was any early indication of how it's being received by the wholesalers, by retailers and by consumers?

Eric Vallat: So sorry. We are in our budget concern we are doing in-house for the first time. So we are going to improve time after time and I guarantee you that having you repeat the question is not a way to gain time and have less questions. We'll be happy to take them all. So just answering the 2 questions that are for me. First, on the U.S. VSOP boost plan. It gives me the opportunity to insist on the fact that we've always said that VSOP is a key pillar definitely so there is no change in the strategy there. But of course while we want to grow faster the upper grades, we need to support short-term VSOP. It's early to say because this 360 is just being implemented now and as you know in the U.S., things take time before they are fully implemented. What I can tell you is that in the states where we have started the 360, we do have positive signs. In 1 of the 2 states, we even have turned positive on VSOP. Now it's been only a few weeks and I would not draw conclusions on this. I am convinced that the whole will have a positive impact. I have no idea of the magnitude. And of course, as you can imagine, the plan is well received by our distributors. That includes also a well-received part on the idea of the [375] because in fact when you look at VSOP, this is where we have lost the most in market share and in sales, it's the 375. While it's a good format in this inflation time and that's why we believe it's a format that deserves some more activation. And on the point 1, which is what makes us confident on a similar recovery. First, I have no crystal ball. Crisis were different and actually I would probably more compare what is happening now to what happened in 2009 than probably in '13-'14 because '13-'14 was for us a very difficult time in China. While we are quite resilient in China today, the overall environment indeed is not helpful. But on-trade is only 10% of our business today. It used to be 45% in China and it was not a profitable business. Today, it is only 10%. So for instance there are some anti-levies and measures taken against on-trade from time to time in cities with closures and so on. But the impact for us today is little because on-trade is only 10% of our business and we are confident in our new model on [indiscernible]. So it's more the global environment than the specific measures against the high end that we saw in '13-'14 that are, let's say, a concern. Having said that again, we have a great team and great plans in place and still geographical expansion potential in China, which is huge. On the U.S., it's a bit of a different story. I think that first, we don't see a lack of desirability for our brands. This is not what we witness except on VSOP, which we have to again activate and which we haven't activated properly. Second, we don't see in every survey we make and so on and I shared some of the figures, but for sure the trend of drinking less but better is the one that is going to last and even recover. Question is when exactly of course. But the future in our business is not made of more volume at lower prices. It is made of flat or less volume, but at better prices because people want to treat themselves and they pay more attention to quality and the younger you are, the more it applies. So I am confident in the fact that it will recover. It's hard for me to say when exactly. As you can see, we anticipate from second semester also because our comps will make it easier. Lastly, and I'm done, don't forget that once the trends start reversing even if it's not crazily positive, it has a kind of exponential effect on our sell-in, which we will have to monitor by the way because our stocks are high in a number of months, but in fact they are low in absolute value. So the day it starts reversing the trend, the impact will not be neglectable for sure. Luca, maybe you want to take question 3?

Luca Marotta: Yes. Let's talk about saving and giving more color because I understand some points need to be clarified on this Q&A. So let's take the question in another way if you allow me. We clearly beat the €100 million guidance, we're at €145 million. So what has made for this 45 bps in the H2. It made of €18 million in A&P to be adjusted also to the fact that the net sales were in the lower range of the guidance, minus €15 million to minus €20 million and these are one-off and €27 million on overheads, of which €2 million mainly in logistics once again and they will last stand and the remaining part €25 million in overheads. But this is overall. In term of split, €145 million, oneoff is €80 million and what we need to be focused is not logistics and manufacture because of where we stand. It is first of all the A&P, we said 70% of that A&P saving are one-off. So the answer is on the guidance, normalization of A&P sales ratio in terms of A&P at very high level. So whatever is the growth of the top line, the evolution of the A&P next year will be maximum equal, probably a touch lower because of the efficiency, because the fact that we already achieved a high level 21.4% ratio compared to sales. So we need to focus to overheads clearly, which is the big part of the reversal, which is the dilemma financially speaking. The saving on overheads we said were €50 million all over the year in terms of duration. The structure are €20 million so that will remain will last and third year oneoff. If you apply €30 million to the overheads of the group, it means that normally if you don't do anything; no more costs, no saving; the overheads next year should be increasing more or less 11%, 12%. This is not what will happen. This is clearly not what will happen. The guidance for next year is to have overheads low to mid-single-digit increase. So we will continue to recreate saving considering also the fact that we want to realize the budget, want to realize our goal. So we are not counting now on saving on short-term benefits because bonuses are there to be delivered in terms of budget realization. So what we can do to offset a major part of the €30 million. First of all, we made the restructuring plan. We have an exceptional short-term payback on the €13 million of restructuring overall; U.S., Europe, partially in Islay for the risk operation. We account for more or less a little bit less than €10 million saving that will drive the overheads containment on '24-'25 so remain €20 million. And how we can reach that? I don't think we will reach a 0 net effect, will remain some million. That major part of that will be offset by continuing our discipline in terms of continuous improvement in term of processes, efficiencies, T&E, reducing again consultancy fees that are not necessary, continue to not restructure clearly, but to rightsize and to cut costs as we cut our nails when they grow. So continuous improvement once again to be able to respect and we will a low to mid-single digit on overheads next year. So don't be scared about the mathematical 12% of overheads increase, that will not happen. We will continue without anxiety and being focused to cut chunky costs to realize that. And I repeat, restructuring that has been done this year has been done with a very short payback, around €10 million that will be realized next year. I hope to have answered to your question.

Operator: [Operator Instructions] We will take the question from Olivier Nicolai from Goldman Sachs (NYSE:GS).

Olivier Nicolai: I've got 2 questions, please. Firstly, you highlighted that Americas is below COVID level. Do you see further risk on VSOP by holding on price while the rest of the industry is becoming more aggressive on promotion and your core VSOP consumer appears a bit more under pressure? And the second question more specifically for Luca. In the context of slower demand, can we expect a stronger cash flow generation in 2025 as you always say you need to buy as much aged eaux-de-vie as you did over the last few years?

Eric Vallat: Thank you for the question. So indeed aggressivity is more than expected. This is a fact. Now you have to look at it state by state. As you know, the U.S. is not 1 country. It's a number of countries and obviously it varies from 1 state to another. And it's true, it's a fact also that, let's say, a $50 range for an entry price is high definitely. Well, the question is more where do we stand now and can we grow from where we are? Personally, I believe that the combination of the VSOP plan which I described now, which again is the first time we activate the 360 plan on VSOP since years. And I think we have to be humble and acknowledge that probably we had overestimated ourselves and seen ourselves too beautiful during COVID and it is needed. But I believe that the only fact of putting the focus behind it of incentivizing our partners and of activating it should have a positive impact. Now the question in fact is what is a normative level for VSOP? First, I think should competition become even more aggressive, I think we've taken the hit somehow. We are now disconnected from NABCA and it's been a number of months. We consider it a good news in a way because we are a VSOP from Petite and Grand Champagne and we shall not any way be in the same bracket. This hit we have taken I believe that the potential including in the short medium term for VSOP in sell-in is more than our current trends, whatever competition aggressivity and so on. Depletions, it's too early to say. But clearly in sell-in, we do have potential for more on VSOP. And despite the current context now, we are still in the process of destocking and this will take a bit of time and the time it will take will depend on the speed of recovery in H2. Cash flow?

Luca Marotta: Cash flow in '24-'25 without guiding in a very precise way because it's not our habits at all. But clearly we'll be improving compared to this year, but for other reasons compared what you highlighted because we are committed on long term. We have a long-term contract. You can see that in our balance sheet committed with our partners. So we will not drastically lower or we respect our contract. We continue to buy to build the future. So far as you have seen inventory as a little bit less than €2 billion, of which 85%, 86% is Cognac. We continue to build the future. So this positive delta will not be built by the strategic working capital part. And on the opposite, the fact of this year we'll end the year with a very low level of countries. We might have in classical working capital a slight increase. So why we will increase the free cash flow before talking about dividends and so on. Really free cash flow, operational cash flow because we will make some savings and sacrifice a reduction on capital expenditure where it's not totally linked to the build of the strategic future. So we'll continue to invest, but the guidance that normally is €70 million to €80 million will be reduced to €60 million more or less. Then will be some slightly saving on the financial part and even more on taxes part in term of cash outflows because clearly it's linked to the level of profit of this year. This is also deferred and so on. So there are more other operational component than the fact that we think to reduce our buying pattern compared to our partners. It will not happen in '24-'25. We continue to respect our commitment. Like serious partner there for the long term. This is for the free cash flow. But then there is another part, other cash flow that will impact the debt and I will not guide on that because the debt at the end is a result of many, many things. But you can see clearly that it's clearly shown the decision of the controlling shareholder to receive the €2 dividend this year in cash will determine everything equal so everything is a substantial saving. I don't want to quantify that very clearly, but very substantial saving compared to this year outflow. So all in all, they will have an impact on overall cash flow and on debt, reducing debt compared to normal flows. Free cash flow, I repeat will improve not at the expenses of reducing the strategic partnership and compromising our future. We are very serious. We are there for the long term. Remy Martin this year is 300 years, in 300 years we'll be there.

Operator: We will take the next question from line Laurence Whyatt from Barclays (LON:BARC).

Laurence Whyatt: I was just wondering on your overall growth rate, your sort of high single-digit growth rate that you're expecting from 2026 onwards. Could you give us a more specific expectation on what you expect in China? I appreciate that you mentioned on the quarter perhaps the current status in the country is not where you'd hope it would be. But are you assuming that you're no longer going to hit the sort of double-digit growth rates in that country?

Luca Marotta: So only 1 question. So the medium-term guidelines overall, as you see, is high single digits clearly starting from '25-'26 and all the regions will contribute. The slightly difference compared to the footprint '19-'20 that's Europe and travel retail is showing improved footprint on the medium to long term. We are not talking 1 quarter now. We are talking with some breadth. Our brain need to have this kind of vision. U.S. high single and China will be as before the high single to low double-digit long-term value algorithm to obtain a high single digit as a group. If you want to complete with more or less mathematical element or more, Eric, I don't know if you want to hold him.

Eric Vallat: No, no. The question was more about indeed the percentage as such and you perfectly said it.

Laurence Whyatt: If I could just have the second question. In terms of your overall guidance for 2025 I think for an improvement in top line. Can we assume that means you're expecting positive growth in organic sales in FY '25?

Eric Vallat: You mean this year, right? Well, it's too early to say. As we highlighted, visibility is rather low. Having said that, we do have good reasons to anticipate recovery from H2. Question will be when will it start and the speed of the recovery. Now we believe that we are in a much better position than last year. In fact what impacted us severely last year is also the fact that we did not anticipate to be honest we'll have such a sharp drop in sales. This year I mean first, we have adapted our existing structure, we are well prepared. And second, we do not anticipate such a sharp drop in sales. We even expect the low comps of the second semester and the recovery in some of our key markets to support the business and to help recover from the H1.

Laurence Whyatt: Understood. And just to clarify that the guidance of an improvement simply means better than the FY '24 growth rate rather than necessarily positive growth? Is that fair?

Eric Vallat: It means definitely exactly a better second semester and by the improvement in the second semester, I mean growth. Now I can tell you that what we anticipate in depletions is at group level overall positive as well for the sell-in, it's too early to say. But positive depletions will change the picture. As I said and it depends also on a number of factors, which is why it's too early to say; it could be that the recovery is way more or way less than expected. This spending depending also on the cash disposal of our partners and so on.

Luca Marotta: Sorry to jump in. The aim, the will is to improve the upper footprint. But remember what we said 1 month ago, a little more, we need also the spark. So there is a rhythm of the alignment between depletions and value in sell-in. So everybody is committed to that.

Operator: We will take the fourth question from the line Trevor Stirling from Bernstein.

Trevor Stirling: I lost you there for a minute or 2, Eric. But I wonder if you could just make a little comment on the current level of sellout in the U.S. and China and what you're seeing at the moment? Is there any slowdown in the rate of decline in the U.S. and are you still in positive territory in China? And then maybe if I can squeeze in a second one, which is around e-commerce. Do you see much opportunity for e-commerce outside China or do you expect China to continue to be the big engine of e-commerce growth?

Eric Vallat: So the sellout in the U.S. and in China so currently we don't see an improvement on the depletions in the U.S., but we don't see a deterioration either. If you look at April and May, we are not going to give details, but it's broadly in line with what we anticipated. So there is no bad surprise, but there is no good surprise either. It's roughly aligned. If you take China, the thing is April and May are very small months so I would not draw conclusions on April and May depletions trends. As I said, we expect positive depletions in China for the year. CNY was challenging. Having said that, our level of stocks are healthy. So overall, we are quite confident in our ability to grow in China. Current depletions are no surprise to us either. But again these are very small months. I think the next big rendezvous in fact is October and the mid-autumn festival. There is also 618 in e-commerce, which is a big day, which for the moment is on track, but it's only June 6. So it's a bit early to say as you know probably, but we start working on 618 a month ago. It's a number of activations for a month. For the moment it proves to be good. I would say that in China, in fact banquets are quite resilient. Off-trade is okay. On-trade is still in a very low recovery mode with on and offs with a changing landscape. So I am, let's say, probably a bit more negative on on-trade short term than I am on the rest, particularly e-commerce. That's it for China. For e-commerce: first, indeed we expect China to keep growing and to keep growing at a faster pace than our total sales. I was in China not so long ago and I must say we are quite fortunate to have a fantastic team of close to 35 people, quite skilled. They've been working with us. They launched e-commerce a few years ago now. And by the way, our Head of E-commerce was doing yesterday a live stream himself -- the Head of E-commerce on Tmall gathering 1 million people attending. So I think we have a fantastic team and we have the recipe, I would say, to succeed in e-commerce. So we expect China to keep growing and to keep being the biggest contribution to the growth of e-commerce because of what I just described. Now e-commerce has been growing faster everywhere than our total sales last year of course and it's been growing. I mean if you take for instance the U.K. we grew 25% last year and it's now 27% of our business. If you take the U.S., it grew 20% so it's also a sharp growth. So we are betting still on e-commerce to grow faster than the rest and we are still investing heavily behind it. And if you ask me beyond China, I would say U.K. first and the U.S. second. U.S. being more B2B and U.K. being more B2B and B2C. While China is interesting because it's B2C and D2C also a lot in fact. We have the biggest database in China just to say because it's quite revolutionary in our business. It's something I have witnessed at Richemont before at LVMH, but in our business it's so the case. But we have now a database which is huge and which is totally integrated because we have our own boutiques on Tmall and on JD (NASDAQ:JD). So we have a database that is omnichannel and we can see who's buying on WeChat and what's their habits of buying elsewhere and so on. So we have a fantastic database that we just gathered a few months ago. So e-commerce remains a key driver in China.

Operator: We will take the next question from line Sanjeet Aujla from UBS.

Sanjeet Aujla: Two questions for me, please. Firstly, just a clarification coming back to the FY '25 outlook. I think your outlook comments talk about protecting profitability. Should I infer from that taking absolute profitability so kind of flattish organic EBIT growth or was that a message about protecting the percentage margin? So, clarification there would be great. And then just more long term. Eric, I think when you became CEO a few years ago when you were framing the medium-term growth ambitions for the group, there was a clear shift of emphasis more towards Liqueurs & Spirits than in the past. So if you look out and think about the high single-digit growth algorithm or growth ambition from fiscal '26, is your expectation that Liqueurs & Spirits still to grow faster so more in the double-digit range? How does that thinking evolve?

Eric Vallat: You want to answer the first one?

Luca Marotta: First question, we are thinking margin. So speed or growth of EBIT, operating profit, bottom line to be compared to the top line symmetry with the levels of gross margin will be resilient as we said very clearly, A&P normalized so it means that probably will follow a pattern was lower than the top line dynamics and overhead, I repeat is a point that I acknowledge that we are the most clear in term of guidance for next year low to mid-single digit to be able to deliver that. So clearly this is the equation. So we are talking about margin. But at the same time, don't forget what I said to Olivier Nicolai, cash flow improved. The first line of free cash flow is EBITDA.

Eric Vallat: And to your second question, first to clarify, the idea was not a shift of emphasis to put it the way at least I wanted to express it. It's more moving from a Cognac driven organization to a real portfolio management, which is a bit different of course because Cognac remains a key asset and obviously there is a huge emphasis on Cognac as well as on Liqueurs & Spirits. This is where the newness is. And this has proven to work as we grew Liqueurs & Spirits 47% and we keep growing them and at least depletions are still rather positive. So what does it mean indeed for the future, let's say '25-26 and beyond. Does it mean double-digit growth? So it will depend on the brands of course. But in the algorithm, it could be that on year 1 and 2, it could be that Cognac in fact grows faster because of the recovery. As I explained once the trends start to reverse, there could be a positive exponential effect. So I would say that in fact it's somehow similar to Cognac over the 5 years with probably a sharper recovery of Cognac if you take year 1 and 2. But if you take the 5 years, you could consider indeed that it's a double-digit growth for Liqueurs & Spirits and less so for Cognac if you take the average.

Operator: We will take the next question from line Celine Pannuti from JPMorgan (NYSE:JPM).

Celine Pannuti: Two questions, please. So first one, the cadence of growth for the year. So you mentioned a challenging H1. Is there any color you can give to us? You mentioned the issue of inventory stock in the U.S. You did say that China is stocking very heavily, but I understood that you have got a very tough comparative base. So could you talk about how we think about Q1, Q2 in terms of growth rate versus the exit rate of H2, which what I think is down in the double-digit level and obviously what it meant for H2 recovery that you are baking in? And then the second question is on A&P. So I understood that you have €50 million of oneoff benefit from A&P last year. You get into A&P ratio flat more on growth that seems to be more flattish to in fact negative. So this €50 million, they are not coming back? And how are you funding the VSOP reinvestment that you mentioned in the U.S.? Would be great if you could clarify that.

Eric Vallat: Okay. As to the guidance of growth, obviously I'm not going to give too many details. But as we said, H1 is expected to be challenging so both quarters. Now if you take China for instance, the challenging comps are on Q1 and Q4,more particularly. You have to remember that last year we were going out of COVID in China, the end of the confinement and refilling the pipe and so on. So it's challenging comps. In the U.S. also, challenging comps for S1, but more particularly for Q1 and it's linked to the oneoff you're referring to. But in fact last year, we had the windfall and the benefits of the heavy investment behind the Super Bowl on Cognac in the U.S. So indeed in Q1 for instance, we had 2,000 HPPs so 2,000 merchandising, specific exposure of VSOP and 1738 building on our investment on the Super Bowl in 2,000 stores. So this did not repeat this year. So Q1 is more challenging for our 2 biggest markets. Now again the whole semester we expect to be challenging. On A&P, so indeed there was a oneoff. So there were a number of oneoff savings. It's a total indeed that you refer to. It's a number of actions that have been taken everywhere. Part of it is cuts, part of it is also better spend meaning we get the same for a lower cost because the beauty is that when it's tough for us obviously and in the industry, it's also tough for the media industry. So you get better prices for the same exposure. So it's not only about cutting, it's also about optimizing the spend, renegotiating the fees everywhere and so on and that's something that's ready. We are disciplining more and more. Money was easy until 1.5 years ago. Money is less for the past 18 months, which has driven better efficiency somehow. How are we financing our VSOP plan? Our spend is €75 million more than what it was 4 years ago. Four years ago, we were spending much more behind value distraction on VSOP, on promotions and so on. So we do have an amount of money that used to be spent on promotions that is now available for these kind of actions. And this will not prevent us from keeping on activating our share on the above the line. You will see things happening in the course of the year. But definitely we will rebalance some of the spend on BTL and more targeted towards VSOP and 1738 again on the total amount, which allows for a number of activations. Anyway it's a much higher amount than the one we used to have. In fact in our original plan, the 2030 plan, the plan was not to increase as much as we did on A&P. It's the fact that we are ahead of the plan on the gross margin and on the top line that drove to more A&P. But we have what we need to properly activate VSOP in the U.S.

Luca Marotta: If I may add 1 point, Celine. Clearly the oneoff nature is always the same whatever the type of cost we are talking about. But the implicit flexibility is not the same. So when you have overheads, you have people that are hired, you build, you have depreciation. A&P there for the long term, but is a more liquid concept inside that. There are companies also that are considering the mix between operating profit and A&P as a strategic disposal. The company I was working before Remy Cointreau for instance. So meaning that there is a much more liquid in term of flexible. So part of this oneoff, which is totally sure needs to be linked to the level, as Eric said, of the top line. Top line is lower, we need to also to rightsize that and the implicit criteria inside that is much more flexible than overheads.

Operator: We will take the last question from line Jeremy Fialko from HSBC.

Jeremy Fialko: So 2 questions. First of all, travel retail. Could you tell us what percentage of sales that was in '24 and what you think it can grow at in '25? And then the second question I've got is on your 33% COP margin target for '29 and '30. Obviously it would be around, say, 25%, 26% in fiscal '25, which means you'll have 700 basis points or 800 basis points to do in 5 years. Now that doesn't strike me as a particularly kind of gradual process as per your medium-term guidance. So I guess how helpful is it having that 33% margin there given actually it now seems to require a pretty significant annual increase from '26 onwards?

Eric Vallat: Luca, you want to answer question 2? It gives me some time to try to recollect in my mind on the figure of travel retail and I will.

Luca Marotta: The '25-'26 average natural high single-digit top line is enough to feed the 33%. So far we are beating, which is clearly shown and said by Eric. Even if despite the fact that '23-'24 was a bad year, we are beating the trajectory and '24-'25 will be on the same type of picture. So compared to the plan in terms of ratio, gross margin 72% and 33%. Today with the compounders -- highlighters starting from '25-'26 is not in danger. So your question is you can you realize 8 points? Where they come from? Gross margin after 1 or 2 years of course will be more accretive Top line will determine will implicit additional gross margin in value to be reinvested. This journey of stabilization, normalization of A&P efficiency will last maybe a little bit more than the original plan also because Eric just said it. We improved the baseline very fast and much more at the speed, which is a faster than the estimated forecast in '19/'20, or I'll be fired, overheads need to be accretive big time to the total equation. So with high single digits, our mission will be to be a CAGR and overheads clearly lower, low to mid trying to remain in the low part. This is the global question. In terms of absolute value, I repeat the high single-digit top line growth starting from '25-'26 for 4 years, it's more than enough.

Eric Vallat: Luca, you've been a bit too fast for me, but still I can of course answer the question. Our percentage of GTR sales in total was below 10%. But I just don't have the exact figure in mind, but it was below 10%. While if you take the normative level pre-COVID, it was 12%. So there is still potential for growth obviously and we do plan and we do expect double-digit growth on GTR. Unlike for other regions, we are more positive and we are more ambitious with GTR. Two things to keep in mind, 1 on the positive side is our sales. We are, let's say, overinvesting on GTR because of the recovery meaning why do we control our costs on every single BU. It's one of the business units where we hire people and where we strengthen our organization for obvious reasons. We are also reorganizing because during COVID obviously we had to streamline and now we are again reinforcing that. That's the point one. Point two is we see GTR as an image driver and obviously we are going to also over invest at our scale, but on visibility focusing on the image-driven selling areas meaning more importantly the airports. So we are probably, let's say, a bit more targeted than we are pre-COVID on our investment, investing where we are building image for our brands. Of course lastly, in everything we do, we are driven by our value strategy. So we are making sure also that pricing is correct everywhere because price consistency over time and worldwide is a key enabler in the long run.

Operator: Thank you very much. There's no further question at this time. We'll hand it back over to your host for closing remarks.

Eric Vallat: Well, thank you very much. There is no specific closing remark except to thank you for your attention and maybe see some of you next Tuesday in London. Thank you very much for your attention. And the sound was getting better and better so I think we now have a setup. Thank you very much. Bye-bye.

Operator: Thank you for joining today's call.

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