Julia Massies - IR Alexandre Ricard - Chairman and CEO Gilles Bogaert - Managing Director, Finance and Operations

Fernando Ferreira - Bank of America Sanjeet Aujla - Credit Suisse Laurence Whyatt - Societe Generale Olivier Nicolai - from Morgan Stanley Edward Mundy - Jefferies Komal Dhillon - JPMorgan Trevor Stirling - Bernstein Carl Walton - UBS

Good morning, ladies and gentlemen, and thank you for joining us to Pernod Ricard's Fiscal '17 Sales and Results Presentation. We're hosted this morning by Alexandre Ricard, our Chairman and CEO; and Gilles Bogaert, our Managing Director, Finance and Operations. They will run you through our presentation and then take your questions. Alexandre, the floor is yours.

Thank you very much, Julia, and good morning to all of you. So let's dive in directly in our full year results. So yes, a strong year with business accelerating, perfectly on track to deliver our mid-term road map, which we had shared with you a couple of years ago, back in June of 2015. Our top line organic growth is accelerating, double the rate of what it was at the same time last year at plus 3.6%. It is getting closer to our mid-term objective, which we recall is anywhere between plus 4% and plus 5%. Our profit from recurring operations was solid organic growth as well, plus 3.3%, in line with the annual guidance we had shared with you. It's actually in the higher part of the 2% to 4% bracket and despite the unforeseen regulatory changes you've seen in India. Our reported operating margin is up 35 basis points, thanks to currency, and organically, it's near stability. And finally, net profit is up 13%. Very significant improvement in our cash flow and on our deleveraging. As you can see, our cash conversion ratios are pretty high. We took two of them because I believe depending on the analyst, you follow one or the other, but both ratios are excellent. Very strong free cash flow at its historical high, up 22%. And over the last two years, I think it's even up 61%. And all this leading to a significant deleveraging with our net debt-to-EBITDA ratio declining to 3.0x, which is 0.4 basis points down. Our net debt is down roughly €900 million to €7.9 billion. There, you have our key financial figures. I won't go into them. We'll see some of them later, in any case. Just to mention, mature markets are up 3% organically, and emerging markets are up 5%. So the sales acceleration is driven by our Strategic International Brands. We'd qualify this as a diversification of our sales. Strategic International Brands are up 4%. The exact number I think is 4.47%. They were stable last year. 11 out of the 13 brands are growing, and 9 out of the 13 brands have improved their performance respective to last year. And we will stress the return to growth for both Martell, up 6%; and Absolut, up 2%. The improvements of our performance is driven by the U.S., our number one market; by China as well, return to growth of China, which we hadn't seen since fiscal year 2013; double-digit growth in Eastern Europe, we'll see this later on; and back to growth for Global Travel Retail. All regions, therefore, are growing. America is up 7%; Asia-Rest of the World, up 1%; and Europe up 3%. Innovation, which is a key strategic pillar of our road map, has driven one-third of our total top line growth. We have continued an active management of our portfolio with the acquisition of majority stakes in promising premium brands like Smooth Ambler in West Virginia, the Mezcal, Del Maguey, or again, the acquisition of Ungava gin and some other assets in Canada. We have also disposed of what we qualify as noncore assets. And over the last 12 months, we disposed of Frïs, which is a vodka in America; of our brandy business under the Domecq name in Mexico; and more recently, the Glenallachie distillery. So approximately one-fourth of the savings of our full year road map, operational excellence road map were delivered during this fiscal. We had shared with you this road map exactly a year ago. At the same time, we've given a project progress on all of the key points. But from a financial point of view, you'll see that approximately €60 million of savings have been delivered from a P&L point of view. Half of that was reinvested behind our strategic priority, brands and markets. And on the working capital side of things, on the cash flow side of things, approximately €50 million were delivered. Just before going to the next slide, I think it's worthwhile stressing as well that there are new initiatives beyond this road map and plan that will be rolled out from this new fiscal year onwards. We gave one example, which is promotional effectiveness. If we dive into our sales growth, most of the growth is organic, up 3.6%. The reported number is up 4%, slightly positively impacted by currencies. Q4, broadly in line with the ninth month underlying trends, up 3%. So as I said it, all regions are growing and improving their sales growth: Americas, principally led by the U.S.; and also Latin America, from 4% a year ago to 7% for this past fiscal; Asia-Rest of the World, up 1%, with as I said, return to growth of China and Travel Retail Asia and some regulatory unforeseen headwinds in India, we can talk about these later on; and persistent difficulties in Korea. Acceleration as well in Europe, both driven by Western Europe, up 2%; and Eastern Europe, up double digit, 11%, therefore, doubling the rate of our growth at global level. By regions, so Americas, I said up 7%. Specifically, the U.S., up 5%. Solid growth for the American market per se, albeit at a slowing rate. If you look at the Nielsen, MAT numbers, they were up 3.1% in value terms. I think a year ago, it was basically 5.9%. Premiumization remains principally driven by mix. Specifically, for Pernod Ricard U.S.A., we see continued strong performance, up 5%. It has been partly enhanced by some destocking in the previous year, in fiscal year '16. We had mentioned this before. Value growth is mainly driven by mix and some operational excellence initiatives on the U.S. market. From a Nielsen point of view, you see our value, roughly up 2% and up -- close to 3.5%. You see here the numbers for our key brands. Obviously, continued very strong momentum for Jameson, which is now surpassed the 3 million case milestone on the U.S. market. Absolut is still down in a category, let's be clear, which is -- which has worsened over the last 12 months, extremely competitive. That being said, a very strong and successful launch of Absolut Lime back in February. Good growth for Malibu, which is clearly outperforming its category. The Glenlivet is in transition year. We launched Founder's Reserve due to the 12 year old Glenlivet limited stock availability. Very strong growth for Martell, fueled by clear increased investments and continued significant growth for Altos. And as I mentioned, the two recent acquisitions were specifically designed to increase our presence in the U.S. market. Sales outside of the U.S. are up double digit, 11%. Travel Retail Americas has returned to growth, driven by Martell. Canada is up 6%, which is quite dynamic, driven by the likes of Jameson, by Wiser's, which is our leading Canadian whiskey over there; by Absolut, which has had a strong year; and clearly, by our wine portfolio. I mentioned we acquired the gin, Ungava. Mexico returned to growth, which is driven by our Strategic International Brands, in particular, Chivas, which we're focusing on over there. We have refocused our portfolio specifically on our strategic brands with the disposal of some local declining brandies. Brazil, down some 2% with some adverse market conditions, but we have led some good price increases across all of our key brands. Strong double-digit growth in Cuba, driven by tourism. And finally, continuous trend of strong growth, partly favored by inflation, but also underlying positive momentum for our portfolio of brands. Moving on to Asia-Rest of the World, up 1%. I think the salient point here is a return to growth of China, which we hadn't seen since fiscal year '13, up 2% versus minus 9% last year. Martell is growing, up 6%. And across the whole range, so our VS, our VSOP, VSB in distinction, VSOP being Noblige and as well our XO brands, both Cordon Bleu and Martell XO, therefore, driving some positive mix for Martell in China. Our value market share is maintained at roughly 42%. Chivas is still struggling, but we have and we're deploying it as we speak a new commercial and marketing strategy behind Chivas to improve its performance in this new fiscal year. Our Premium brands are continuing to develop, in particular, Absolut, growing double digit; and likes of the Glenlivet. But we could have mentioned as well some other brands like Ballantine's. And this is a direct result of the reorganization of China that we announced last year with the second route to market focusing on the Premium brand side of our portfolio and the emerging middle-class consumers that have affordability levels for these kind of brands, and not for prestige brands. India, up 1%, temporary growth deceleration. I think there are three -- there have been three regulatory, let's say, headwinds. First of all, demonetization. We suspect this to have impacted our business throughout the period, November to January, February by 10%, maybe 20% of the consumption. This is behind us, but it did impact Q2 and Q3. The highway ban, which has had an impact specifically on Q4, which we expect to continue to, a lesser extent, over the first half of this new fiscal year. And by then, so in January, it will be behind us as well. And from the point of view, we've had some good news last week. They realized that a lot of urban zones, to get there, you need to take a highway. And so in urban zones, you have outlets, shops and bars, and by the way, hotels. So they now excluded urban zones from this new ban. And you have the GST, which took effect on July 1, which will cause some margin pressure for this new fiscal, which we will offset by some prices increase, which we have already started taking. We confirm also that we have market leadership with roughly 45% of the market from a value point of view. Fiscal year '18, in terms of what we expect, well, we expect an improvement versus this past fiscal year starting in Q2. Travel Retail Asia, well, returned to a positive trend. Last year, we were actually in deceleration. The commercial environment though remains somewhat challenging. Continued quite strong growth in Japan, across all the range of our strategic brands, and in particular, driven by Jouët. And we have, for a second year in a row, some good pricing. Continued strong double-digit decline in Korea, down 14%. We've launched a new brand focusing on a new appeal from the consumers, which is Imperial 35. And we have reorganized entirely the organization, so we do expect a better performance for this new fiscal year. Africa and Middle East, up 1%. There has been growth deceleration, principally driven by some tough macroeconomic and geopolitical conditions, but also driven by ourselves. We have capped, for instance, our sales in Angola. Strategic International Brands keep on growing, albeit to a lesser extent. But the long-term fundamentals from a demographic point of view and emerging middle class point of view are still there. Jameson, Absolut and Chivas have all three -- experienced a strong year. Good growth across the whole portfolio in Australia, and particularly, very strong performance as well from our wines from Absolut, from Jameson and from Chivas. We've increased our prices, specifically on spirits. But on wine, on the wine competitive environment, as such, is a little bit more complicated. Finally, in terms of -- for Europe, overall good growth, 3%, generally speaking. Western Europe specifically, up 2%, with France slightly up 1%. Adjusting for that famous technical impact, I think it's the last year Gilles will be talking about that technical impact finally. The market remain somewhat subdued with just a slight, a very slight growth in a -- but pricing remains extremely challenged with the price war ongoing in the off trade. We have maintained our market-leading position with roughly 30% of the market. Spain, good growth, up 5%, where we've maintained our leadership with roughly one fourth of the market, and strong performance, driven by our gin portfolio and specifically by Seagram's Gin. Very dynamic growth in the U.K., driven by the whole portfolio, but we can stress the good performance of Jameson, Absolut, very strong growth there, Chivas, Jouët and our wines. We have increased our prices, in particular, on the imported spirits to try and offset the GBP weakening. But we still see some continued pressure on the wine side of our portfolio. And we, for the second or third year in a row, continue to gain market shares there. Returned to good growth in Germany, driven by an extraordinary success story with Lillet, surfing on this operative trend in Germany and very strong performances with the likes of our focused brands there with Absolut, Ballantine's, Malibu, I could also mention Jameson. Some modest positive overall price and a very successful integration of our German gin, craft gin, Monkey 47. Travel Retail is still undergoing a difficult market context. Very dynamic growth in Eastern Europe, up double digit, principally led by Russia where we're enjoying a very good performance with market share gains. As you can see, we've grown our sales by 16% there. Our strategic International portfolio has driven our growth, with the likes of Ballantine's or Jameson, Absolut, Chivas and our local brandy, Armenian brandy, ARARAT, which is enjoying some very good growth there, and strong positive pricing in Russia. We've gained share in Poland in a very competitive environment. And our growth has been driven by our whiskey portfolio. You have Ballantine's, Jameson, Chivas, but also, Absolut has grown there. Now if we look at our net sales by brand. As I mentioned, our Strategic International Brands are back to growth, roughly close to 4.5%. And it's not just Jameson, it's basically 11 out of the 13 brands that are driving our growth there. Strategic Local Brands, up 1%, so they're down versus the trend last year. And this is again driven by a temporary negative impacts of regulatory issues in India. Strategic Wine portfolio, again, another year of good growth, up 4%. And others, in the 3%, you have the innovation, some innovation in our portfolio, which is not yet classified in strategic international or strategic local, so all this leading to a strong global growth. So this is when I say that 11 out of our 13 brands have driven our growth. And nine out of the 13 brands have improved their performance versus last year, and a couple are basically in line with their momentum of last year. So diving into them, continued momentum for Jameson with the U.S., of course, with innovation around Jameson as a brand, but also continuation of the globalization of the brand Jameson with strong performance in Europe and continued momentum in Africa/Middle East. Return to very healthy growth for Martell across all the SKUs. China, up 6%, and also good growth outside of China, fueled by, specifically the U.S. and Travel Retail. Absolut has returned to growth as well, up 2%. The shipments for Absolut has -- the decline for the shipments has slowed down, down 2% versus 7% a year ago, we've had a very strong launch for -- and successful for Absolut Lime in the U.S. And as I mentioned, the category, the vodka category remains extremely competitive. Outside of the U.S., again two thirds of the volume, we see a very strong growth of 6% for Absolut, driven by Latin America, by Europe and as well, by the way, by Africa. And we could also say by China. Our Scotch whiskey portfolio is stable, with Chivas down 3%, due to China where we see a double-digit decline for the brand. Very strong performance in Europe, up 4%, and overall growth in 52 markets for Chivas. The Glenlivet, up 2%. And as I mentioned, transitional year following the launch of Founder's Reserve. Ballantine's, up 3%, driven by good growth both in Americas and Europe and one could mention as well China. Royal Salute is down 3%, driven by Asia. Overall, good growth across the other brands. Ricard, up 4%. That being said, favored by technical impact. Nielsen Panels, the brand is growing, roughly slightly above 1%. Beefeater is up 5%, basically growing across all regions everywhere. Havana Club, up 6%, driven by an acceleration in Cuba and also double-digit growth in France. I think Nielsen Panel is up 18%. Malibu, up 5%, driven by the U.S., outperforming its category. And again, we're deploying the successful biggest summer marketing platform. Mumm is up 3%; and Jouët is up double digit with 11%, with strong performance in Japan, I spoke about it earlier on, but basically, across many other markets. Our Strategic Local Brands, up 1% with a slowdown in the Seagram's Indian whiskies, with Imperial Blue, Blenders Pride and Royal Stag, following the regulatory issues I mentioned earlier. Good growth for Seagram's Gin in Spain, Olmeca Altos in the U.S., or again, ARARAT, as I mentioned, in Russia. And finally, continued difficulties on Imperial, which is our Korean brand and Passport, which is driven by our sales through captive sales. Good and continued performance for the second year in a row of our Strategic Wine portfolio, very strong performer with Campo Viejo. That being said, we have some tough pricing conditions in the U.K., Australia and New Zealand. As I mentioned, innovation, in line with our strategy, has driven one third of our top line growth overall. In other words, plus 1% incremental top line growth for Pernod Ricard, significant momentum behind our key priorities where we really invest our marketing resources. We call them our big bets with the likes of Jameson Caskmates, Chivas Extra, Olmeca Altos, or again, Absolut Elyx. I mentioned the very successful integration of Monkey 47. And our innovation portfolio is having a premium impact overall and is designed for that, by the way, in line with our strategic road map to have a positive impact on our group average margins. Very briefly, some marketing innovation. We have our new film, One Night, which is launching anytime now. For those who want to see it, we can give you access on our website. We have our brand invested behind Chivas, Jameson First Shot, which is extremely successful. The partnership, I like to prefer the word partnership, with our friends from Del Maguey again, which is the leading Mescale brands, enjoying strong growth in a category, which is also often enjoying strong growth. From a sustainability and responsibility point of view, we also launched -- well, we communicated on this just before this summer. And we're launching next week Pernod Ricard University, our new campus, which is approximately 45 minutes from here, next to Haute Vallée de Chevreuse. Many other initiatives, the Paul Ricard Oceanographic Institute also which presented -- which attended and presented at the United Nations Ocean Conference. Very briefly again, a lot of route-to-market initiatives. We picked a few here, luxury or luxury side of the portfolio, which is enjoying some good growth. I'll mention just because it happened over the last weekend, Avión, which partnered with Floyd Mayweather with a limited edition, with the winner of -- for those who saw the box game of a great -- boxing game. So Avión was there and was there also for the after-box celebration party as well. Some initiatives again around one of our key strategic pillars around digital. But enough said with our marketing initiatives, and let's move on to our financial performance with Gilles.

Thank you, Alexandre. Good morning, everybody. So let's go back to the figures with the profit from recurring operations. We have here the P&L, as you can see, our reported margins, both gross margin and EBIT margin are up due to ForEx. Organically, they are near stable. So let's start with the gross margin after logistics costs. So it was up, as I said, due to ForEx, stable organically, with the mix turning positive mainly due to the growth of Jameson and Martell. Pricing still muted. And we benefited from a tight management of our cost of goods sold, thanks to our operational efficiency initiatives. And we had to absorb a few adverse one offs like the high inflation of Grain Neutral Spirits, in particular in India, and the strong agave cost on tequila. As you can see on the graph below, the gross margin pressure has progressively eased in particular, thanks to the operational excellence initiatives. And in the last couple of years, the gross margin ratio was slightly up. And you also saw an improvement on an organic basis. A&P, plus 3%. The ratio is almost stable at approximately 19%, so we have increased our support for the key innovation projects. We are focused obviously on the key must win markets, in particular the U.S. And at the same time, we benefited from the fact that operational excellence initiatives that also encompass A&P are driving stronger efficiency. Structural cost, up 5%. If we exclude the other income expenses, which are technical items, the growth is 3%. So I think this highlights strong discipline, again has a positive impact of some operational excellence initiatives. And I think it highlights our continued discipline following the implementation of the Allegro efficiency program a few years ago. And as you can see, the ratio had gone down post-Allegro and since then has stabilized. So the change of operating profit from recurring operations, so reported growth of 5%, driven by 3.3% organic growth. So group structure impact was nonsignificant. And we have the positive ForEx impact on the EBIT of €47 million, up 2%, with the positive impact of the dollar, sustaining pounds and the rubles, offset by the adverse evolution of the Chinese renminbi. You have here the detail of the ForEx impact for the past year. In Q3, we have said that our estimation of that time based on the separation of the rate at that time was €80 million, so the ForEx impacts in '17 was lower than that, mainly due to the adverse evolution of the U.S. dollar and the sterling pound in Q4. For fiscal '18, based on the current rates, we expect these ForEx impact to be negative by €125 million, mainly due to the weakening dollar. I want to highlight the fact that we are still very early in the year, and we are very little hedged. Let's have a look at the performance by region, starting with the split between emerging market and mature markets. As you can see, both in sales and profit from recurring operations, a good balance, unchanged between emerging markets and mature markets, contributing both, as Alexandre said in the introduction, to the overall growth of Pernod Ricard. By region, healthy geographical balance between Americas, Europe and Asia-Rest of the World. Let's start with the performance in the Americas, so a good performance, further enhanced by the ForEx. Alexandre commented the strong sales growth there. The gross margin rate was broadly stable with slightly positive pricing and the benefit of the operational excellence initiative in the U.S., offset by some adverse product and country mix and lower tequila margin due to the higher agave cost. Some increase of A&P are ahead, slightly ahead of sales, driven by the need to support our strategic priorities. And structural cost increase below that of sales, with additional investment in the U.S., offset by savings, in particular, the closing of the American regional office. So reported operating profit was up double digit in the Americas, thanks to both the dynamic organic growth, 8%, and also the favorable ForEx. Asia-Rest of the World, so return to profit growth, driven by China and in spite of the temporary slowdown in India, and I think Alexandre commented the 1% sales growth. The gross margin is still down organically, but the pressure is easing. The reduction was limited to 80 basis points -- 18, sorry, basis points, with an improved margin of Martell, better performance of Martell, better mix and also a more positive geographical mix, but we have the adverse margin evolution in India. The A&P was stable, making sure that we maintain our investments behind the key strategic priorities. And the ForEx was modestly favorable, resulting from some positive movements in certain emerging currencies and also sterling pound, offset by the evolution of the Chinese renminbi. Europe, I think it was a good performance in all key markets, 3% top line growth, gross margin ratio broadly stable, tight management of resources and a favorable ForEx, largely driven by the appreciation of the Russian ruble. So let's go down the P&L, starting with the financial expenses. As you can see, again, like previous years, a significant improvement there, €46 million, driven by the reduction, the continued reduction of the cost of debt from 4.1% to 3.8%, in particular, thanks to the cost of bond decrease. So it represents €26 million of improvement out of the €46 million. The positive impact of the improved cash flow and a few other items, plus €24 million. And we had a negative ForEx impact on the financial expenses by €4 million. For the fiscal year '18, we expect the cost of debt to be stable at roughly 3.8%. But we also expect to benefit from the good cash flow generation. Corporate income tax on recurring items, close to 25%, slightly above fiscal year '16. For fiscal year '18, we expect a rate of circa 26%, obviously subject to possible evolution of tax regulations, in particular, in the U.S. and in France. As a consequence, the group share of net profit from recurring operations was up 7%, so a higher growth than the growth of the profit from recurring operations, thanks to the positive evolution of the financial expenses. Non-recurring items, a positive evolution as compared to last year. We had a €96 million expense on capital gains losses and impairment charge. So it includes, in particular, the impairment charge of €73 million, largely linked to our South Korean brand, Imperial, where we also had some capital gain and losses linked to the M&A activity and namely the Domecq and the Frïs disposals. The restructuring and the reorganization profiling to the changes of organization we've done during the year to deliver our mid-term strategy, in particular, in the Americas, in the globalization of DTR and also with the creation of new sales force, new entirely Chinese sales force in China for Premium brands. So as a consequence, the group share of net profit after non-recurring items is up 13%. So let's spend a few minutes on the cash flow and the debt. I think it was a very strong year, very strong [indiscernible] in free cash flow, plus 22% last year. It was even the growth of 61% in the last two years, thanks to, in particular, our operational efficiency initiatives. So you'll see the evolution of the free cash flow in the last four years, it's quite strong. You also have the evolution of the conversion rates, so both the conversion of the EBIT into cash, that's the red line, so 92%, which is a strong improvement as compared to the previous years and also the conversion of the recurring net profit into cash where we are nearly at 100%. So you have here the detail of the free cash flow. So reaching a historical high, of almost €1.3 billion, up €238 million, as I said, with a very high conversion of our profit into cash. It was driven obviously by the good organic growth accelerating on the operating profit, the positive ForEx on both profit and cash, a lower growth in the strategic inventory build. In fiscal year '16, it was an increase of €192 million. It was only €168 million in fiscal year '17, so a reduction of €23 million. We have continued implementation of our strategy, adjusting supply to long-term growth as we do on a permanent basis. And we have temporarily reduced our cash out on Scotch to adjust, obviously, our inventories to the future growth, thanks to a proactive supply and inventory management. We also had a tight management of operating working capital, reducing by €123 million, in particular thanks to the implementation of operational excellence initiatives, especially in supply chain, where the positive impact of those initiative of circa €50 million on working capital, in particular finished good inventories in fiscal year '17. CapEx were up €20 million, with a CapEx to net sales ratio almost stable at 4%, which is our long-term objective. The net debt decrease was very significant, €865 million, down to a indiscernible €7.9 billion, obviously thanks to a very significant improvement in the net cash generation. Post dividend, post M&A, this net cash generation was €800 million as compared to €461 million a year before. We also had a favorable transition adjustments at the closing of last year, €63 million, mainly due to the euro-dollar evolution closing rates, 1.11 at the end of June '16 to 1.14 at the end of June '17. This is, obviously, the consequence of our natural hedging, having 55% of the gross debt in dollar to match our EBIT and cash flows by currencies. Deleveraging, a strong deleveraging in fiscal '17 at 0.4, with a ratio of net debt-to-EBITDA going down from 3.4x to 3x. So after a few years of modest deleveraging, significantly accelerated our deleveraging in the last fiscal year. The proposed dividends of -- at the next AGM is €2.02 per share, so it's a proposed increase of 7%. It's in line with our customary policy of cash distribution of approximately one third of the group net profit from recurring operations. I hand over to Alexandre for the conclusion and the outlook.

Thank you very much, Gilles. And as a conclusion, we qualify this year and its performance is as strong and accelerating, which is perfectly in line with our mid-term strategic road map. Acceleration of our top line, including a return to growth in China and driven by almost all our Strategic International Brands. There is, and it's in line with our intent, diversification of growth from a brand's point of view, we mentioned it earlier. From a market's point of view, all regions growing and continued focused investment, particularly behind our innovations. Very good progress on the deployment of our operational excellence road map. And you've seen the impact specifically on the cash flow, but as well on our P&L. And therefore, resulting in an organic growth of our profit from recurring operations of 3.3%, which is in the upper part of our guidance, and this is despite the unfortunate or unforeseen, whichever way you'd like to see it, a regulatory conjunction changes in India. And finally and as Gilles presented it, very good cash flow performance, which results directly in a strong acceleration in our deleveraging. In terms of outlook, well, continued execution of our strategy, being consistent. We had shared that strategy with you a couple of years ago. We're very confident. Just as a reminder, it was a top line mid-term growth of 4% to 5% of our sales and an improvement of our margin. So for this new fiscal year, which started now a couple of months ago, we expect the momentum to continue with good growth of our top line, driven by the likes of the U.S., by the likes of China, by the likes of Europe again of Jameson, but a lot of our Strategic International Brands. Our sales are also expected to improve in India, we already spoke about it, and for Chivas as a brand which has gone through a rough year. We will have 3 key focuses, which is innovation, and we're starting to see this pay dividends; digital, which is absolutely critical; and finally, our operational efficiency road map with new initiatives as well ramping up. We expect also to continue to deliver strong cash flow. And finally, there will be, and based on today's -- not today's last week's rates, we expect some adverse effects impact. But as Gilles mentioned, so far, we're still early in the year, and who knows what the dollar will end up with, and that's life in any case. So all this gives us a clear guidance of profit from recurring operations, expected to grow organically anywhere between plus 3% and plus 5%. Last year, the numbers were plus 2% and plus 4%. And two years ago, it was plus 1% and plus 3%. I would say, it's on the right track. Julia, thank you.

Thank you, Alexandre. So on that note, we will take questions. We'll maybe start with the room. We have a question there, Fernando? Q - Fernando Ferreira: It's Fernando from Bank of America. Three questions, if I may, please. First one, on India. What percentage of the outlets can now go back to selling right alcohol or within the city limits? And on the GST impact, are you looking for cost savings as well as price increases in order to offset the impact? Second question on A&P. How should we think about expenses on this line because, on the one hand, you mentioned all the savings that you're having from internalizing the content creation. And on the other hand, you plan to invest, right, €100 million more from the reinvestment of the cost savings? And then a third question on the cost-savings front, if I'm not mistaken, you achieved the €15 million in fiscal '16 and now €60 million. So that's about 40% of your overall plan. So how should we think about the remainder, right, let's say, €125 million for the next three years?

Okay. Maybe on the outlets, what we have said initially and globally before the new news of last week, we expected roughly one-third, anywhere between 30% and 40% of outlets to be impacted. Last week's news is good news. We don't have the number. And what we can guide you to is just basically say, we do expect this to be behind us by the end of the first half. So by the second half, the market will have adapted. So Q1, Q2 will still be impacted, albeit at a lesser rate. And overall, for the full fiscal year in India, we do expect an improvement of our performance relative to this year. So we expect improved good growth in India; we don't quantify it. From a GST point of view, obviously, we do have some price initiatives, which were already started in India. And in terms of costing, they won't come out of India. That's part of our operational efficiency road map because in India, we're in full investment mode. Because let me just remind you, the underlying fundamentals for India are very strong. Demographics, 15 million, 20 million new potential consumers every year. We need to go get them. The economy is still growing with very attractive rates, 6%, 7%, whatever percent. And urbanization rates, which are intertwined with the growth of Western Style Spirits, is still strong. So the fundamentals are there. We need to invest for that. In terms of A&P, and then I'll let Gilles complete on the A&P question and the operational efficiency question, just bear in mind that our Strategic International Brands have a much higher investment rate than does our overall 19% average rates. And so a lot of the reinvestments that we do, it's just to compensate for the increasing weight of the Strategic International Brands behind our portfolio.

Yes. Alexandre, maybe you were [indiscernible] on that point, yes, we announced as part of the operational efficiency road map initiative, €200 million of savings between '16 and 2020. You're right, we delivered €50 million in '16. We delivered €60 million in '17. Half of it being, by the way, reinvested into A&P. In total, we estimate that the A&P efficiencies represent, more or less, half of the €200 million. And as you know, we decided to invest also half of the €200 million into A&P. So as a consequence, so net-net impact on the A&P ratio would be more or less neutral. But with, in reality, more efficiency behind our brands. And then we don't disclose the phasing of the saving for the next three years, but your figures are right. So if you do the math, €125 million are left. And you have 3 that's left. You can make an easy assumption, I think.

Thank you. Another question from the room? So we'll move to our callers, please.

We'll now take our first question from Sanjeet Aujla from Credit Suisse. Please go ahead. Your line is open.

Hi, three questions from me, please. Firstly, can you talk a little bit about the underlying trends you're seeing in the U.S. if you strip out the impact of destocking in the base and the Absolut Lime launch? Secondly, you talk about expectations of improvement in India and Chivas. Is that enough to improve the top line trajectory from 3.6% this year into the 4% to 5% target range? And thirdly, you talk about technical factors driving structural cost up 5%. Can you just give a bit more color on what those are and whether those will repeat going into fiscal '18? Thanks.

Okay. Gilles, as you prepare for the third question, very, very briefly, the -- first of all, we estimate the U.S. market, as a whole, to grow roughly close to 4%. If you take the NABCA numbers, you take the Nielsen numbers, which tend to underestimate the real growth rate, it's close to 4%. And you can estimate that Pernod Ricard USA's performance is roughly, slightly lower than that of the market. That's for the U.S. Well, return to growth, India is already growing, but we expect, improved by 1%. We expect the trend to improve clearly. And we also set ourselves as an objective to improve the trend for Chivas. What we did say in our conclusion is that our -- we expect to improve our top line momentum. This year was, this past fiscal was 3.6%. You should expect that number to improve, but we don't tend to give a guidance of our top line.

Yes. On the last question, you're right to say the structural cost, including other income and expense were up organically 5%. Excluding other income and expenses, it was up 3%. So there's a 2% gap, which represent more or less, a €60 million adverse evolution of the other income and expenses. So what are those other income and expenses? It's a line in the P&L, including different, I would say, technical items, not directly linked to the organic top line growth, like bad debt evolution, inventories, write downs, sales of Camp subsidies. And it happened that it was more positive in fiscal year '16 than in fiscal year '17. It tends to be a volatile line, so that's why we wanted to separate that line, highlighting the fact that the structural cost growth was, I would say, 3% and not 5%.

Our next caller, please?

Our next question comes from Laurence Whyatt from Societe Generale. Please go ahead. Your line is open.

Firstly, in the U.S., Absolut's still having a bit of a problem, especially given the pricing war that's going on there. Could you -- we understood previously that you weren't going to reduce prices on Absolut, but have seen recent news reports that the prices have come down quite significantly. Could you give us your current thoughts on where Absolut should be priced, and how you plan on doing promotions given the issues on vodka at the moment? And secondly, in China, you're expecting a new commercial marketing strategy on Chivas. Could you just give us a bit more information on what that involves, and why that's going to be different this time around in order to turn that brand around in China? And also on China, are you seeing any examples of any changes in conspicuous consumption or consumption in general ahead of the election in the country? And finally, just a quick one, could you give us the -- on adjusted growth in France? You said it was 1%, growth when it was adjusted for the technical impact, but what would that be unadjusted? Thank you very much.

Do you want to do Absolut?

Well, I think that when we have a look at the evolution of pricing of vodka in the U.S. in the last two to three years, clearly, the evolution of the price of Absolut, which was, you're right, slightly negative, was far less negative than most other vodka brand of the markets. So I think we have resisted better than the others to that price pressure. I think going forward for next year, fiscal year '18, we intend to invest a bit more in terms of promotions in the on trade because that's one third of the sales of Absolut in the U.S. It's a very important channel where we have underperformed. And we want to activate the brand more in that channel to regain some more traction. And we'll leverage strong activation and stronger promotion on the brand in the on-trade next year on the brand.

Yes. For China, first of all, Chivas, Chivas has declined double digit in China. We have our global platform for Chivas, which is Win the Right Way. The execution thereof is what our Chinese team have worked with in partnership with the brand company for this new year. It's going to be leveraging the NBA, which is the U.S. basketball in China, which is extremely influential and dynamic. It's one of the biggest sports platforms. So Chivas is going to partner there with the NBA. We have the launch of the new extension of Chivas as well on the domestic market. But from a financial point of view, let's be clear, we deliberately cut investments over the last few years behind Chivas to focus on two things. Number one, the whole Martell range, and it's back to paying dividends. And the second thing is investing behind our future growth, really in China, which is the Premium brands portfolio. And we had to take that money from somewhere. We're back into reinvestment mode in Chivas in China with a strong execution platform, which is being deployed as we speak. It started a few weeks ago. So that's basically -- On conspicuous consumption, to be fair, I mean we're not at double-digit growth rates in China. Martell grew 6% across all the SKUs: VS, VSOP and XO. And the VSOP range for Martell, which is Noblige, has always grown over the last few years. And we also started seeing very good growth of the second part of the business, which we fueled through that investment I referred to earlier, growing as well. And these are completely affordable prices $15, $20, $25. So it's difficult to really say what's going on from a conspicuous point of view. If you look at the channels, it's fair to say that the off-trade channel is growing, and it's also fair to say that the on-trade channel is still suffering. So there's still pressure from that point of view.

And on your last question, you're right, the underlying growth in France was 1%. The organic growth we posted was 4%, so the difference is the technical impact we mentioned.

Excellent, thank you very much.

We will now take our next question from Olivier Nicolai from Morgan Stanley. Please go ahead, your line is open.

Hi, good morning, I've got three question, please. First of all, on Brazil, performance was down 2% this year after a big decline in H1. Now I know you're not going to give us a guidance by country, of course, but could you just tell us what is the underlying trend there? Another question is on Russia. It's been growing strongly. Now how much of that is linked to the ruble because the ruble obviously is now weakening compared to strengthening last year? And should we expect Russia to deteriorate this year? And lastly, question for Gilles. On Slide 54, you're expecting a tax rate for 2018 of 26%. Now Alexandre mentioned about the corporate tax rate in France and the U.S. Just on the corporate tax rate in France, could you tell us what your corporate tax rate for the group will if the corporate tax rate in France were to drop from 33% to 25%, for instance? Thank you very much.

So on Brazil, you're right in anticipating we're not going to give a guidance. So we're not going to give a guidance. The Nielsen MAT trends, latest ones I've seen, which go back to April, May of 2017, the market is roughly down 6%. That's where the market stands at. We have increased our prices quite heftily in Brazil, but we will not give a guidance. On Russia, by the way, I'm going to give you the Nielsen trends where we posted 16%. The market is up 3%. Pernod Ricard is up 11%. We had finished a little bit destock a year ago because we were changing in terms of route-to-market distribution operators. That being said, we have a very strong performance relative to markets. We're growing roughly 3 times, 4 times, 3 times or 4 times the rate of the market. And we have increased quite significantly our prices in Russia, when was that, 18 months ago, double-digit price increases, very strong. So we're pretty happy with the performance of Pernod Ricard in Russia.

On your question in France, first on the balance sheet items related to tax for different tax assets and liabilities, we took into account the rate which has been announced, enacted and launched at 28%, so this is going down to 25%. We welcome that, and that's so far just an announcement. Then, as you know in France, it represents roughly 7% of the group net sales, we also export cognac and champagne. And we also have our headquarters, which tend to be more, I would say, a cost center from a tax standpoint. And so as a consequence, net-net, we don't expect to have a major impact of the reduction of the tax rate in France on the P&L of Pernod Ricard. We also need to see what are going to be the, potentially, the other modification than the rate. Because the rate is one thing, but the possibility of the negativity of interest is another thing, which is going to happen to the 3% tax on dividend. I think there are still very many unknown topics that's making things premature a full answer to that question.

Perfect. Thank you very much.

We'll now take our next question from Edward Mundy from Jefferies. Please go ahead. Your line is open.

Hi, good morning everyone. Three questions, please. The first is on China. I think you agreed 2% for the full year after nine months flat, which implies Q4 up high singles. Could you provide a bit of color as to what drove that acceleration? The second is on India, just a point of clarification on Slide 16. I think you're implying the highway ban would have a dampening effect, to a lesser extent, in the first half. Does this imply that you don't expect H1 to be lower than the 1% in Q4, i.e. do you expect H1 to be better than 1%? And then the third question is on financial expenses, one for Gilles. I mean how should we think about financial expenses into fiscal '18, assuming the euro dollar stays where it is, giving it quite a big positive, albeit from the FX line?

Maybe on China, again, as you know, we have the Chinese New Year, which is usually in Q3. And we have the results of the Chinese New Year, which is in Q4. So the only thing I can say is we finished our year on the 30 June in China with roughly, actually even slightly lower inventory than at the beginning, at broadly very normal levels, which is 2x 30 days, basically on average.

On India, well, we'll still have the impact of the highway ban in fiscal '18, particularly in the first half because the implementation started in the 1st of April, but is taking place until end of September because implementation is faced depending on when statutory licenses are coming to maturity on a step-by-step basis. The impact would be a bit less negative than initially expected because of what Alexandre said a bit earlier, which is the flexibilization of the implementation of that and the fact that municipalities and urban places would not be affected. In terms of -- we expect India to deliver a stronger top line growth next year than in fiscal year '17 because the impact of all those negative changes should get smaller going forward. Q1 should be probably less strong than the following three quarters.

And financial expenses.

And on financial expenses, well, as I said, cost of debt should be stable next year. We expect obviously to have the benefit from the stronger cash flow generation and the strong deleveraging that we presented earlier this morning, so I think you can do the calculation of what it could deliver. And in terms of ForEx, I think you have an interesting slide, by the way, we publish every year. Slide 80 in the appendix is called, Sensitivity of Profit and Debt to Euro-Dollar Exchange. And we highlight the impact of 1% appreciation or devaluation, which seems to be more the case today of the dollar and the linked currencies vis-à-vis the euros. And so 1% variation has an impact of €17 million on the profit from recurring operations and €3 million on the financial expenses. So it means that a devaluation of the dollar, obviously should have a positive impact, as you said, on the financial expenses. And also, by the way, on the debt because, as you know, 55% of the gross debt is in dollars. So the weaker the dollar is, the lower the debt is, even if net-net, we would prefer the dollar to be stronger, for sure.

Just to bring that all together, if your cost of debt is unchanged. I assume you should be able to throw up as much organic cash flow on the €24 million or so. And then you're going to get a benefit of -- depending on what type of spot euro you're going to use as much as may be €30 million if you could see your overall interest charge down from €50 million versus fiscal '17. Is that the right ballpark type of number assuming FX remains unchanged?

That does not seem to be an absolute assumption.

Our next question comes from Komal Dhillon from JPMorgan. Please go ahead. Your line is open.

Just two questions from me, please. First one is on gross margins. And I'm wondering how we should be thinking about that for fiscal '18? Just seeing that in '17 on an organic basis, it was stable despite a slowdown in India and with Martell in China improving and robust growth in the U.S. So that's the first one. And then the second one is in the U.S. specifically and Jameson, it seems like there's been a slowdown there if you look at the Nielsen numbers. And it's obviously a much bigger base now. But how should we be thinking about which brands in the U.S. can compensate for the slowdown, please?

Well, on the gross margin, I think, yes, we saw some improvement of the trend in the last couple of years. Clearly, you're looking at mid-term at the next two to three years. It's our intention to improve the gross margin rate organically. It would be very gradual because we still face a tough pricing environment. We are confident we can improve the pricing in the future, thanks to our promotional effectiveness programs, thanks to the fact that the demand starts to get a bit stronger on some brand spirits in some emerging markets. But it will be gradual. So pricing, which was muted than last year, we expect it to gradually improve next year. We expect also to keep benefiting from the gross margin, the operational efficiency initiatives that we are implementing. But at the same time, we still have to deal with a few one-offs, like for instance, the GST, whose cost -- is estimated to be €15 million. We have to absorb that. So that's why, yes, we're confident we will improve the gross margin rate in the next two to three years, but it will be gradual, and we expect the impact would be stronger in 12 months than in the very short term.

Yes, on Jameson in U.S., just a quick recall, we like to balance the -- strike the right balance between volume and value growth and have the right balance as well between our stock availability and demand, which is perfect, of course. I wouldn't pay too much attention to a one four-week period on Nielsen Panels. That being said, the brand is still extremely healthy. And our team is still extremely confident. That being said, it doesn't mean we're not diversifying our sources of growth in the U.S. Again, as we mentioned it earlier, if you look at Martell, which we've been investing behind, over last couple of years now, behind Martell in the U.S. with a clear globalization strategy on that brand, Martell is growing very strongly in the U.S. I think the latest Nielsen is up 25% on Martell. Likewise, for tequila, which is enjoying very good growth in the U.S. And if you take Tequila Altos, which is also growing double digit. But I wouldn't also -- I would mention as well, Malibu, which is outperforming its own category and which is already of quite significant size. So our innovation portfolio in the U.S. is growing. It's starting to have some scale and weight, but Jameson is still very dynamic.

Thank you very much. May I check if we have any more questions in the room? No? Okay, we'll move to our final two callers then, please. Be mindful of time, we should close it down afterwards.

Our next question comes from Trevor Stirling from Bernstein, please go ahead your line is open.

Good morning Alex and Gilles. Three questions from my side as well. There's two more technical, one a bit more strategic. First question in the Americas, the Americas ex U.S. growth was 11%. But all the individual countries you named were coming in below that growth rate. So was the very high growth rate, was that in the duty-free zones? Second question in Europe, the contribution margin was up 23 basis points organically, but the PRO margin was down 41 basis points. Was that part of this operating, other operating income, the swings you're talking about earlier on? And the final question, and it's the first time it's amazing that I'm asking this question. With leverage at 3 times and very strong cash flow likely to continue. How should we be thinking about cash return to shareholders going forward?

Well, I'll start with your final question, just say it's still an early question. Our focus is very clear. We want to remain investment grade for the long run, number one. Our priority is to keep on deleveraging, notwithstanding obviously, tactical opportunities, of course. And at some point in the future, we will be having this kind of discussion. But right now, it's a bit early. As you mentioned, it's 3.0.

Good morning, Trevor, on your question on the Americas, I think that's a -- there are many countries in the Americas. And we have not listed all of them. We are not, by the way, indicated the growth of all single markets because we don't want to give figures on each single brand, each single market everywhere. Otherwise, it will be too much for you to digest. And I think, yes, you have the right to say that duty-free in the Americas has improved its performance, and it's part of the global performance. You also have Argentina, you have Colombia, Peru, Chile, many, many markets that contributed to the overall growth. And that's a lot to deliver, a very strong performance in the Americas despite, as you rightly highlighted, the fact that Brazil was slightly down. And on Europe, I think you, yourself, brought the answers to your question. You're right, the operating income and expenses, technical impact mainly affects Europe.

Great. Thank you very much, Gilles.

Our next question comes from Carl Walton from UBS. Please go ahead. Your line is open.

Thanks for the questions. Just a couple of small clarification points on India. With the price increases you've taken, are you willing to share the level of price increases you've taken? Or at least, how should we think about some of the phasing? Is it -- has it been sort of uniform across the state given the complexities of passing through price increases? Or is there some phasing we should be aware of through the sort of quarters? And with the margin pressure from GST, is there any quantification you can give on that at this stage? Thank you.

Well, good thing is that most of the price increases, still by states in India, but we needed to do to offset the GST impact have been secured, so there's still a few of them, which are being on the discussion. But most of it is, I would say, is done. So that's good. The policy is that, considering the fact that it was price increases mainly aimed at offsetting the negative impact of the GST, which as a reminder, as I said earlier, is minus €15 million, 1-5 million euros. And because of the strong inflation that you have in India impacting negativity input costs, yes, you're right to say that there will be some margin compression in India next year. That said, we still expect to be able to deliver some organic EBIT growth in India next year, but lower than the expected net sales growth.

Thank you very much, Alexandre and Gilles. Thank you very much, ladies and gentlemen, for joining us. And have a good day.