• Gross margin contracting -108bps, driven by: 

• Soft pricing, with fewer price increases and on solid comparison basis (H1 FY20 +2% on Strategic Brands, benefiting from FY19 Martell price increases)
• Adverse mix primarily linked to decline in Travel Retail
• Higher Cost of Goods mainly from continued agave cost pressures and lower fixed cost absorption, offsetting Operational Excellence initiatives

• A&P: +132bps, resulting from purpose-based investment, with strong reduction in markets and channels with subdued demand, and favourable phasing (ratio of c. 16% expected for FY21, with strong double-digit increase in H2)

• Structure costs: improving +27bps, reflecting dynamic management of resources and FY20 reorganisations

• Strong negative FX impact on PRO -€155m due to USD and Emerging market currency depreciation vs. Euro. A significant negative FX impact is also expected for full-year FY21.

The H1 FY21 corporate income tax rate on recurring items was 23.4% vs. 24.2% for H1 FY20, due to a reduction in the French tax rate and geographical mix.

Group share of Net PRO was €1,087m, -11% reported vs. H1 FY20 and the Group share of Net profit €966m, -6% reported, reflecting decline in Profit from Recurring Operations partially offset by lower non-recurring items.

Earnings Per Share were -9%, reflecting decline in PRO and positive impact of FY20 Share buy-back.

FREE CASH FLOW AND DEBT

Recurring Free Cash Flow was very strong at €995m. The decline in Profit from Recurring Operations was offset by a significant improvement in operating Working Capital Requirement (inventory normalisation and payables rebuilding vs. June, leading to very strong cash conversion[2] at 79%), a lower increase in strategic inventories and broadly stable capital expenditure.

The average Cost of debt stood at 3.2% vs. 3.7% in H1 FY20, thanks to successful US Dollar bond debt refinancing.

Net debt decreased by €443m vs. 30 June 2020 to €7,980m. The Net Debt/EBITDA ratio at average rates[3] was 3.4x at 31 December 2020.

SUSTAINABILITY & RESPONSIBILITY

Pernod Ricard continued to drive its 2030 Sustainability & Responsibility roadmap, with progress in each of the 4 pillars (Nurturing Terroir, Circular Making, Valuing People and Responsible Hosting.) Significant achievements were attained in particular regarding packaging: all single-use Point-of-Sales plastic will be removed from June 2021.

Alexandre Ricard, chairman and CEO said: “We are particularly encouraged by our Must-win domestic markets returning to growth in H1 FY21. The first half confirms the long-term sustainability and underlying strength of our business.

Despite an uncertain and volatile environment, with disruption in the On-trade and a prolonged downturn in Travel Retail, we anticipate organic Sales growth for full-year FY21, thanks in particular to our dynamic performance in domestic Must-win markets USA, China and India.

We will continue to implement our strategy, in particular accelerating our digital transformation, while dynamically managing resources. Thanks to our solid fundamentals, our teams and our brand portfolio, I am confident that Pernod Ricard will emerge from this crisis stronger.

I would like to take this opportunity to praise our teams, whose engagement and performance are exemplary in these very challenging times, and to express our support to our On-trade and Travel Retail partners who continue to be impacted by the pandemic.”