That it was too risky. But then they also said Whiskey is a man's drink. For men, they cry. Let them cry. Drink it mute, don't water it down.
A push things forward.
Good morning, ladies and gentlemen, and welcome to our H1 Sales and Results. We will follow the usual format and run you through a quick presentation before taking your questions. We are hosted this morning by Alexandre Ricard, our Chairman and CEO and Helene de Tissot, our Director for Finance, Production and IT. Without further ado, let me hand over to Alexandre.
Thank you very much, Julien, and good morning to all of you. So without further ado, let's start with the presentation of our first half results for fiscal year 2020. I'd like to say that this executive summary is the perfect illustration of the implementation results of our Transform and Accelerate strategic plan. This is year 2 of the plan. And if you look at our first half, you can see that the performance was very solid.
First of all, you see diversified growth, which is extremely important. So growth across all regions and by the way across all subregions as well with a robust performance of our must win markets with the U. S. A, India and China. Dynamic performance as well across all categories of brands, whether it's our strategic international brands, in particular Jameson Martell, Glenlivet, Malibu, Ballantine's, Royal Salute and Beefeater.
We'll dig deeper into these later on. But as well, regarding all the other segments such as local strategic brands, such as specialty brands as well, we'll see this later, And stabilization of wine, which is the direct result of value strategy. Talk about value strategy as well. Strong pricing, 2nd year in a row at +2 percent on our strategic brands, continuation of our operational excellence roadmap with more and more optimal resource allocation with a very clinical approach to the allocation of our resources across the business and across our strategic priorities and all of this driving positive margin operational margin of 51 basis points over the first half. Our reported profit from recurring operations is therefore growing by a little bit more than 8%.
This is driven of course by more than 4% of organic growth, but as well favorable currency impact resulting from the U. S. Dollar, but as well emerging market currencies. As I mentioned it earlier, continued rollout of Transform and Accelerate as well recurring free cash flow, very strong at €627,000,000 despite increasing CapEx and aging stock inventory as expected in order to fuel future growth of our business. We'll briefly talk as well about our sustainability and responsibility road map.
I'll mention a couple of words as well on Project Rocconquette in France. We have finalized the reorganization of our wine business over the last few months as well. We are continuing the dynamic management of our portfolio with the M and A and recently with the completion of TX, Texas Whiskey Rabbit Hole Bourbon and Capsule brand acquisitions. And finally, over the first half, as expected, we started our share buyback program. You have here our key figures, both reported figures and organic figures.
And so as I mentioned it earlier, robust sales growth. On the back of a first half a year ago, which was quite high, Remember exactly a year ago, we were growing top line by close to 8%, mainly driven by the way by Asia, but across the whole business. And we're now growing by roughly 3%. Must win markets are in growth. U.
S. A. Plus 4%, good growth driven by our whiskey brands. You saw we opened with the new The Glenlivet TV commercial, which is currently airing in the U. S.
And by the way, Glenlivet is right now one of our fastest growing brands in the U. S. And is one of the fastest growing new brands across the industry in the U. S. With a great marketing platform, but as well phenomenal innovation behind the Glenlivet with the recent launch of the Glenlivet 14 cognacask finish specialty brands as well nicely growing in the U.
S. So 4% growth over the first half in the U. S. On the back of a 4% growth last year. China plus 11%, I'll dig into it a little bit later on the back of 28% a year ago.
India plus 5%, which is a good first half and quite a challenging, let's say, context over there And again, on a high comparable basis, a year ago over the first half, India was growing by 24%. Travel Retail, robust sell out for our travel retail business. There is some shipment phasing across the business in travel retail. As I mentioned, growth is indeed diversified across all the regions and subregions. Quick snapshot on the Q2 of our first half with sales at 4%, some acceleration versus Q1, which was only up 1%.
So if you look at the markets, as I mentioned, I think the clear point here is diversified sales growth. So let's start with our number one must win market, the U. S. As I mentioned, it good growth driven by whiskeys and as well our specialty brands. If you look at our store brand Jameson, you have the Nielsen and Naprox performance.
There is a little bit of moderation in the growth rate. This is still linked to the fact that we're cycling a very strong launch of Jameson Castmates back a year ago. There are very strong initiatives planned actually as we speak for the run up to St. Patrick's Day. Number 1, a great innovation, which has been launched a couple of weeks ago with the likes of Jameson Cold Brew, which is quite an original, let's say, innovation.
We are expanding geographically, let's say, Jameson footprint across the U. S. In what we call our emerging market states in the U. S. For Jameson with the likes of Texas and Florida.
And as we had mentioned a few months ago as well, we're desistenalizing our strategy across Jameson. It's becoming an everyday brand and not just St. Patrick's Day brand. Our growth relays with The Glenlivet, I mentioned it earlier on, very good growth for The Glenlivet. Continued strong sellout for Martell, in particular, our innovation Blue Swift.
Our tequila brands are still quite dynamic in a dynamic segment as well. And well, happy to start commenting the performance of our more newly acquired brands with the likes of Jefferson's, which is now fully integrated in our mainstream portfolio in Pernod Ricard USA. Future growth charge through our new brand ventures organization in the U. S. Are performing extremely well, especially Monkey 47, which is almost considered as a luxury brand in the gin category in the U.
S. Lillet, again, strong double digit growth for Lillet, Del Maguire, Marfie, newly acquired gin brand as well and the rest of the Irish whiskey portfolio, namely for instance, Red Breast. Again, I mentioned the newly American whiskey portfolio acquisition for Pernod Ricard with the likes of Smooth Ambler, Rabbit Hole, which is performing extremely well and with our partner Cafe and TX, our Texas Whiskey brand. Our Bastions, absolute is still in decline in quite challenging category despite the very successful launch of Absolut Juice, it's Absolut Blue, which is still a challenge in vodka category, which is being challenged. We have the new brand campaign launch on Valentine's Day, so that's a small teaser.
Stay tuned for tomorrow. Malibu, very strong continued good growth, outperforming the category. If we can mention the category per se, I think Malibu is a category of its own right and it's driven both by original and our innovations around flavors for Malibu. And confirm improved performance for Kahlua, which is one of our most profitable brands in the U. S.
Other must win markets, very important. Of course, China, very strong first half with 11% top line growth for China. Remember, our transform and accelerate ambition for China is high single to low double digit growth. This 11% growth is all the more strong as it's on the basis of a very strong comparable basis, up 28% the previous year. Very good sell in ahead of Chinese New Year.
Martell, the demand for Martell, the consumer driven demand is very strong. We had double digit growth in Q2, enhanced by an on trade rebound. Q1 remember was somewhat soft mainly as well related to closures of on trade accounts. Excellent price and mix for Martell, and we've decided over the last few months to increase our investment behind Martell ahead of Chinese New Year indeed. Chivas, the decline is clearly linked to a challenging on trade environment, particularly Q1.
I won't go back again on what we said in Q1, but back to good growth on Q2 across all channels for Chivas. And finally, our premium brands portfolio is continuing its very strong growth, namely driven by Absolute, The Glenlivet, Ballantine's Finest, our wine, Jacob's Creek, of course, Jameson off of a smaller base and Beefeaters and PJ Champagne. Now Q3 will be severely impacted by COVID-nineteen. I'll get back to it in a couple of minutes. There has been a very strong implementation of our entire program ahead of Chinese New Year with great sell in.
But the reality is over the last few weeks, COVID clearly impacted our performance in China, clearly impacted, let's be clear, not just our business, but China as a country. Our number one priority right now is clearly our colleagues in China. I would just like to take a moment just to obviously praise all the different radical measures taken by the authorities in China by global authorities over there, but also the local authorities. We fully support these measures. I'd like also to praise the exemplary behavior of our own colleagues in China.
And obviously, our thoughts and prayers are go to them, to the Chinese people, to our colleagues and their families. But again, it's in these very difficult moments that you see how amazing people can be. And I have to say, we have a direct link with them, almost daily calls with them and their behavior is absolutely second to none. It's exemplary. Must win markets as well.
There's India, of course. Our transform and accelerate ambition for India is low double digit growth. For the first half, we grew 5%. There again, just as is the case in China, off of a very high basis of comparison, last year we were up 24% for the first half. This year, the first half has been impacted somewhat by weather condition, quite tough weather condition with flooding, which obviously had an impact direct impact on consumer consumption and also a somewhat weaker macroeconomic environment leading to some temporary down trading in India.
I think the GDP growth rate is its lowest it's been in a number of years. Our Seagram's Indian Whiskey portfolio is clearly driven by positive pricing, which is offset by the negative mix due to the very stronger performance of the lower end of our portfolio with Imperial Blue. Our strategic international brands continue their strong momentum with double digit growth across most of the range and particularly in particular, sorry, Chivas, the Glenlivet and Ballantine's. Very strong growth for our wine business, principally led by Jacobs Creek, which is the market leader and as well by Brancot Estates. Global Travel Retail, our 4th must win market is enjoying a good sellout.
The first half has been impacted by shipment phasing and some technical impact. We closed warehouse, we found nothing major. Strong underlying depletions, as I mentioned, driven principally by Martell, especially the higher qualities, the Cordon Bleu, XO, our whiskey brands as well and gin, which is quite buoyant in that channel. Great innovations throughout the whole channel with the launch of Jameson Triple, Triple, Triple Distilled and Finished in 3 different casks. The launch of Sheikrit Speyside, which is rare malts, single malts from Scotland at a very, let's say, high price point.
The launch exclusive launch across the channel of Ballantine's 23, but I could also talk about Royal Sleuth 25 year old and so on. Very strong price and mix across the channel. Just as I mentioned for China, Q3 for travel retail will also be severely impacted by a significant decline in passenger travelers, of course, related to the COVID-nineteen. Europe, well Europe overall up 3% with strong broad based diversified growth in an environment that remains somewhat contrasted. Okay.
France continues to be a difficult market. We're down 1%, but let's be clear, sellout is worse than that minus 1% with a sellout of minus 6%. The market is extremely challenged and that is not helped by the egalim law, which is La Loise sur les etats genero de la limontation, where let me remind you this had a direct impact consumer pricing, which went up for instance for our number one brand here in France, Ricard, by 10%. 10% price increase has obviously an impact on consumer behavior by definition. We do have great performance from our growth relays, particularly absolute growing double digit and beefeater, which is emerging as being a very strong growth relay for us as well.
We're in the middle of Projet Rocounquette, the entire reorganization of our French business with the merger, which will be effective as of July 2020. So in a few months from today, Ricard and Tom have to salute here as well. The remarkable commitment of our teams in these difficult times for France with a very, very, very strong organization and reinvention of our business to drive future top line growth here in France. Spain up 1 percent. The market is in decline, which means we're gaining market share mainly driven by gin, in particularly, Seagram's Gin and Vodka, of course, driven by absolute difficult segment is the whiskey segment.
U. K, we're gaining market share as well. U. K. Is up 2%, but double digits sellout for our spirits business.
Huge continued success for Beefeatr with the rollout of new innovations across the brand franchise business well, great performance for Jameson as well. And we're starting to see the turnaround around of our value strategy starting to pay dividends as well. Germany, double digit sales growth and the acceleration of our gin portfolio, particularly beefeater and Monkey 47. Double digit growth in Russia, up 14% with some market share gains and some good price and mix. Finally, market share gains and great performance of our business in Poland.
While other key markets, stable business in Canada with good growth for Jameson, which is our strategic brand over there dynamic growth in Brazil with share gains decline in Mexico principally led by destocking, but share gains for our imported premium spirit brands And for Asia Rest of the World, continued growth and momentum in Japan around our champagne business, PJ and mom, but Chivas and The Glint of it as well. To some extent, I could mention as well, Jameson, positive mix on most of our brands, if not all of them and double digit growth for absolute. Korea down 28%, no surprise there, but up 11% excluding Imperial. We will have a favorable comparable basis as of April 1, because as you know, last year we decided to basically outsource distribution of Imperial and refocus our business in Korea on our imported strategic brands. And finally, good performance across Africa and Middle East with very good growth in Turkey driven by whiskey and Havana Club and continued dynamism in Sub Saharan Africa, especially linked by Jameson, which is becoming basically a regional strong growth brand in Africa.
And finally, somewhat of a challenging environment in Middle East. Very briefly by brand, just to say, as I mentioned it during the executive summary, all brand categories now growing, strategic international brands up 4%, strategic local brands up 3%, specialty brands up 17% and finally, our value strategy starting to pay dividends with the stability of our wine business. Not to mention innovation is contributing above of our strategic plan, 1 third of our top line growth and we have strong pricing of up 2% for the 2nd year in a row. Good growth on Martell with a clear value strategy, so driven by price and mix. We continue the internationalization of Martell.
First half, Martell was up 4% with positive pricing basically across every single SKU and across all regions and channels. Double digit sell in in China ahead of Chinese New Year with strong pricing particularly in China. 11% decline in the U. S, but this is literally due to the recycling of the strong launch of Blue Swift. Remember last year we had triple digit growth for Blue Swift across the U.
S. And again strong pricing across the whole range in the U. S. As well, good growth in travel retail, very good performance in Eastern Europe. I could have mentioned here Sub Saharan Africa as well.
Our strategy here is clear international of internationalization of Martell as a brand. It's a different word, but the same strategy for Jameson. We want to globalize Jameson to make a strong global brand and the performance over the first half is perfectly in line with that strategy. The brand is growing literally basically almost everywhere. If I start with the U.
S. Accelerating acceleration of the underlying And as I mentioned it And as I mentioned it earlier, we very recently launched Jameson Cold Brew a couple of weeks ago. Double digit growth in Europe as well driven by Russia, Ukraine, Kazakhstan, France, in fact, the U. K, Ireland, Germany and positive price mix across the whole region. And as I mentioned, all other markets basically in very good growth for Jameson.
So the brand is on it's perfectly on track with our globalization
strategy. Scotch
up 4% excluding Imperial. So very good performance for our scotch performance, again perfectly in line with our strategic plan for scotch, which is one of the key growth drivers. And of course, with the impact on CapEx and aging inventory, of course. Chivas down 2%. So we have strong growth in Eastern Europe, which is offset by the decline in China, which I referred to, but with a tale of 2 stories, a weak Q1, but actually a very strong Q2 over there, some negative phasing in travel retail.
The Glenlivet, up 15%, great success story for The Glenlivet. Ballantine's plus 5% as well perfectly in line with our plan and great performance for Royal Salute, which is our luxury scotch proposition, up 17%, principally driven by Asia, but not only. Absolutes continued international development of Absolutes. Our strategy is very clear. Expand beyond the vodka category to become the natural choice of an experience seeking generation, which is the Gen Z LDA plus generation sales outside of the U.
S. Plus 2%. Actually the underlying trends are slightly better than that. Asia continued strong growth. China plus 25 percent good growth across Europe with strong double digit performance in France, Germany, Poland, for instance, market share gains across most Western European markets as well.
America's decline is principally driven by some phasing in our travel retail shipments, very strong performance in Brazil. In the U. S, however, the brand is down percent despite the successful launch of Absolut Juice. And as I mentioned it during the introduction, as a small teaser, stay tuned for tomorrow in fact. Other key brands, Beefsteer up double digit, Havana Club up 6, Malibu I mentioned double digit.
Ricard no need to dwell over it, but the issue of the egalim law, which is a painful law, impacted by the commercial one of the commercial conflicts that started a year ago, which is still ongoing for mum in some specific accounts here in France, so be it, that's life. P. J. Up 1%. And I mentioned our value strategy for our strategic wines portfolio.
No need to dwell over this. All I'll say is specialty brands of 2017, innovation of 15, luxury of 5, direct, results of Transform and Accelerate. Sustainability and responsibility, a little bit less than a year ago, I think it was in April. We basically shared with the markets through a live presentation out of cognac our 2,030 sustainability and responsibility strategic road map with 8 very ambitious, very strong objectives. So we're perfectly again in line with our road map here.
I won't go through all these. I would just like to share a few recent events here for instance. And again, Pernod Ricard is all about people first. When you see the level of engagement of our colleagues from around the world, you see these levels of engagement, which are absolutely extraordinary. 88% of our employees with very strong levels of engagement across the group, 94% of the people are proud to be associated with Pernod Ricard.
And equally as important, 92% of our colleagues view Pernod Ricard as a socially responsible organization. I'm very and I'm personally very proud to see these numbers. In terms of terroir, we'll just pick one number, which again is a very strong number. We're down 50% almost in terms of use of synthetic agrochemicals since 2013 and still focusing to bring that number down. We more recently had announced that we're banning Glifosat across all our cognac vineyards.
In terms of circular making, I would just stress for instance that we plan by 2025 to have 100% of our 86 production sites to be 100% renewable energy sites. We're currently at 76%. We more recently announced as an industry, whom we're a proud member of, of IARD, International Alliance For Responsible Drinking, very, very strong commitments focusing on basically underage drinking. So we have undertaken the commitments for instance just to name one of them to have a symbol on every single bottle produced by and marketed and sold by Panmureka with a clear mention regarding age restrictions. That's one example amongst the many that are absolutely important.
And right now, actually, we're also rolling out a mandatory MOOC. MOOC is massive online, of course, across all 19,000 colleagues around the world regarding responsible consumption. So we're perfectly on track in terms of sustainability and responsibility, which is at the core of everything we do. That's very important to our people within the organization, very important to our talents to attract them, to retain them, but equally as important, very important for all stakeholders, whether it's our suppliers, whether it's our customers and of course, our consumers around the world. Now that being said, I'm passing the floor to Helene to go through our financial performance.
Thank you, Alexandre. Good morning, everyone. So let's look now at the profit from recurring operations. You have here the figures in term of organic performance, so plus 4.3 percent. And the reported figures is a +8.1 figures in term of growth due to the positive FX impact that Alexandre mentioned as an introduction.
So strong pricing on strategic brands, plus 2%. As already mentioned, this is very consistent with the performance we delivered on that topic last year. And obviously, pricing ambition is a key driver of our ambition moving forward. So that's a good performance here. Gross margin and slight decline in term of impact on profit from recurring operation, minus 15 bps.
We have to remind that last year, we had a very strong H1 on that matter as well. The gross margin ratio was improving by 71 bps. And this is due this year to a positive impact of earlier Chinese New Year, but a negative mix of India and as well cost of goods headwinds, in particular, agave and as well G and S Brain Neutral Spirits in India. Our A and P increase is broadly in line with the sales, plus 3%, with strong arbitration and focus behind strategic priorities. Structure are down 2%, thanks to strong discipline, but as well favorable phasing.
We expect for the full year growth in term of structure cost. When we look at the impact on the margin, so 51 bps improvement driven by pricing and tight resource allocation. And as I mentioned briefly, a positive FX impact on the profit from recurring operation for 59 €1,000,000 thanks to U. S. Dollar, but as well emerging market currency appreciation versus euro.
So if we look now at the performance by regions, starting with Americas. So continued good growth in the U. S, we mentioned it already, and Brazil, dampened by travel retail and Mexico, with as well the strong basis of comparison last year, where the profit from recurring operation was growing by 8%. Here are the figures for this first half, minus 2% in term of organic performance, plus 3% when it comes to the reported profit from recurring operation growth. So let's look now at the different drivers of that performance.
Gross margin is decreasing is increasing by 1%, which is below top line growth. So translating into 72 bps negative impact on the profit from recurring operation, and this is mainly linked to adverse mix. And as well, cost of goods pressure, we mentioned already the agave increase, which is obviously impacting Americas P and L. A and P overall stable, but important to mention that we are increasing investment in our number one market, the U. S.
We have the investment growing by 6% and this is particularly linked to Jameson, Mater and the Glenlivet in this first half. This is offset at Americas level by phasing mainly in Canada and Latin America. Structure are growing by 6% and this is mainly linked to phasing and as well some technical one offs last year. Despite that number, we have strong discipline obviously, in our structure cost management in Americas. Strong favorable effects that we mentioned already linked to the USD appreciation.
Moving now to Asia Rest of the World. So good growth lapping a very strong basis of comparison. So the profit from recurring operation are growing organically by 5% compared to a plus 26% last year at the same time. And this 5% organic growth is translating into a 9% reported growth. So gross margin growing by 3%, which is slightly lower than the top line with this minus 13 bps impact on the profit from recurring operation.
Indian margin linked to adverse product mix. Imperial Blue is driving the growth in this first half. And as well, as I mentioned before, some significant headwinds in terms of COGS, especially on the grain neutral spirit. And this is partially offset by a significant margin improvement in China, thanks to a very strong market pricing impact in this first half and as well early Chinese New Year 11 days earlier than the year before. A and P increasing significantly ahead of sales, plus 7%, which obviously is the translation of our strategic priorities in that region and as well some phasing impact.
China and India are as you know the top priorities for us in term of investment. Structure at minus 6%, this is driven mainly by the impact of the Korean restructuring that we performed at the beginning of the calendar year 2019 and as well tied to resource management in that part of the world as everywhere else. Obviously, we are still investing strongly behind our priority markets, notably China, India and Turkey. Positive effects, in fact, that I mentioned already, boosting the reported growth in that region. Moving to Europe.
So very strong H1 profit from recurring operation growth, double digit both in terms of organic performance, but as well reported performance, plus 10% and plus 12%, respectively, with a plus 3% top line growth that Alex already explained, translating into gross margin expansion. Gross margin are growing by 4%, so 39 bps, a positive impact, thanks mainly to pricing and country mix, notably the acceleration of Germany in this first half. A and P are broadly stable with a strong arbitration, but as well some favorable phasing. We expect some acceleration of those investments in the second half of the fiscal year. Structure, minus 3%.
This is thanks to the implementation of several efficiency projects and very strong discipline, in particular, in France and as well in the Nordics. And we have as well some favorable phasing in this first half. So very strong increase in profit from recurring operation margin, plus close to plus 200 bps, driven by positive pricing and mix and gross margin improvement and structural cost discipline. So moving now to the net profit. So if we look at the net profit from recurring operation, it's growing by 10% and so is the EPS with profit from recurring operation at plus 8% from a reported viewpoint, as I mentioned before, a slight increase in financial expense from recurring operation, which is resulting mainly from the implementation of IFRS 16 norm, which has a €6,000,000 impact in those figures and more modestly from the issuance of the new bonds back in October.
The tax charge is increasing consistently with the profit growth. Our tax rate is close to 20 percent versus 25% last year in the first half, which is the translation of the positive impact of the tax reform in India. As you know, India has decided to reduce its corporate income tax rate from closely 35% to 25%, which is a very positive move to support investment there. And I would say to align as well the CIT rate to OECD standards. So recurring tax rate for the year is expected at circa 25%.
Moving now to the nonrecurring items. So nonrecurring expenses for the first half amounts to 152 €1,000,000 which is driven mainly by restructuring and reorganization costs for €115,000,000 So this is the translation of the adaptation of our operation, especially in France with the project Rauponquette that Alexandre mentioned already and as well the adaptation of organization within our wine business. Non recurring corporate income tax is at €31,000,000 which is driven by some technical effect on deferred tax further to the Indian tax reform I was mentioning before. So moving to the group share of net profit. Operating profit is 3% and group share of net profit is plus 1%, despite the strong growth of profit from recurring operation, mainly due to the non recurring items I just described.
Let's move now to the cash flow and debt evolution. You have here all the details of the free cash flow performance that I'm going to comment in the using the following slides. So free cash flow of €570,000,000 with a strong increase in the profit from recurring operation and as well as strategic investments as expected. And again, this is the perfect translation in term of use of our cash generation to support the future growth of the business. So recurring free cash flow at €627,000,000 which is plus €5,000,000 versus the first half last year, the strong profit from recurring operation I already mentioned, increase in strategic investments.
So both aged inventory and CapEx, you have the figures here. It accounts for €84,000,000 in this first half. We are obviously reinforcing our aged inventory to support our ambition both for whiskies and cognac. And we are as well increasing our CapEx in this first half mainly to link to the cash purchase at Abu Dhabi series, the building of our new malt delivery that we talked about a few months ago in China in the EMEA Shan region and as well the completion of the new bottling hole at Chivas Provost. Our operating working capital request is as well increasing in line with the business growth.
And we have some positive impact of the IFRS 16 in this result for circa €40,000,000 in the recurring free cash flow. We're going to talk about the impact on the net debt in a minute. Non recurring free cash flow at minus €57,000,000 due mainly to the restructuring cost that I mentioned already. Let's look now at the evolution of the net debt and the translation in term of net debt to EBITDA ratio. So net debt increasing by €1,600,000,000 translating it into a net debt to EBITDA ratio of 2.7.
If I focus first on the cash generation, so free cash flow that I already commented, we have as well an increase in the M and A cash out, which is reflecting the active portfolio management we talked about already with the closing of some of our U. S. Whiskey acquisition in this 1st semester. We as well started the share buyback program in this first half. As you know, we announced global program up to €1,000,000,000 over fiscal year 2020 fiscal year 2021.
And we did a bit higher than €220,000,000 in this first half. We have as well, obviously, increased the dividend payout up to 50% as announced. And you have all the impact in this first half. So talking about IFRS 16, we have an additional lease liability resulting from that new norm for a bit more than €500,000,000 in this first half. As a reminder, we as well successfully I would say very successfully placed a new bond issuance back in October for 1.5 €1,000,000,000 in freight ranches with an average coupon of 0.46%.
And I hand over to Alexandre for the conclusion and outlook.
Well, thank you, Helene. So as I mentioned earlier, the COVID-nineteen is clearly impacting this current year. We made a number of assumptions to appreciate the impact it can have on our current year performance. I'd like to stress just that these are Pernod Ricard working assumptions. They're not predictions.
They're pure assumptions that we share we'd like to share with you completely transparently so that you can see how this can or could impact our business. Again, it's assumptions. It's not predictions. We don't know frankly what's going to happen. But we made a number of assumptions with our teams in Asia and in China.
So for the on trade in China, we took as an assumption that all the outlets are closed in February across China and that all the outlets are closed until the end of June in the province of Hubei where you have Wuhan. We then believe and that's again an assumption that there could be a gradual recovery starting from the month of March to get somewhat back to normal by the month of June. That's for the on trade. For the off trade, obviously, there's a significant impact on both traditional and modern outlets that started in late June, clearly ongoing for the full month of February. Again, we took an assumption of a recovery in March.
So that's for Mainland China. In terms of travel retail, specifically travel retail Asia, the assumption we basically took into consideration is a reduction in Chinese passenger numbers of roughly 2 thirds in February. And also for the full month of March, we assume a gradual recovery starting from the month of April with again some situation which could be back tomorrow by the month of June. So taking these assumptions into consideration and having run our numbers, we believe based on these assumptions that the impact would be of 2% on our top line and 3% on profit from recurring operations. I think it's very, very important also to stress that we are maintaining our priority investments throughout the group.
As you can see, they are delivering. Our plan, Transform and Accelerate, is fully ongoing. Of course, we are activating specific targeted measures where we believe we can. But we are adopting a very clear, very very confident and very long term approach to the situation. So in terms of outlook, again, I won't go back on H1, which shows and clearly demonstrates the resilience of our business, of our business model.
For full year fiscal year 2020, in particular, given the uncertain environment, we do expect clear continued execution of Transform and Accelerate. It's 2nd year of our strategic plan. We're right in the middle of it with a strong focus on operational excellence and sustained investment, as I mentioned earlier on, behind our strategic priorities in terms of markets, brands and initiatives. So good diversified growth is expected to continue, albeit clearly the 3rd quarter January to March will be that's for sure severely impacted by COVID-nineteen in China and Travel Retail Asia. We will continue our share buyback program as planned.
And also we could expect now that as well can be quite volatile, but based on our the most recent currency numbers we have, we also expect a very positive currency impact of roughly €70,000,000 for the full year on profit from recurring operations. So taking all of this into account and again based on the assumptions, we decided to share in full transparency with you our new guidance for the full year is we expect organic growth in profit from recurring operations to grow anywhere between plus 2 percent and plus 4%. On that note, I'll let Julia start maybe the Q and A.
Thank you, Alexandre. Thank you, Helene. We'll start with some questions from the room, if there are any. Okay, we'll turn to our callers then, please.
Gentlemen, we will now begin the question and answer session. We will now take our first question from the line of Edouard Mundy from Jefferies. Please go ahead. Your line is now open.
Good morning, Alex. Good morning, Helane. Two questions from me. I think in one of your earlier slides, Alex, you pointed to the very high level of employee engagement within Pernod. As part of the Transform and Accelerate program, I was wondering whether you could highlight some of the biggest changes in your view as to how the business is being run and what are the biggest opportunities from here still to come?
The second question is on Jameson Cold Brew. Obviously a very early stage in that rollout within the U. S. I'd love to hear some early feedback on what particular consumption occasion does this play to? And then the third question around your updated commentary around both China and travel retail in Asia to reflect the coronavirus.
Does this take into consideration a potential inventory build into the into Chinese New Year given that the coronavirus was unforeseen prior to really accelerating?
I'll start with the first two questions. Question number 1, for me, it's the most important question by the way of them all. You can have you can probably have the best strategy in the world if you don't have the right people, the right talent, ruthlessly committed to delivering. It will only remain some good looking slides. Reality is, I think what I can really share with you is the ruthless, absolutely ruthless commitment of our teams across the world to deliver, transform and accelerate.
That's point 1. 0.2, transform and accelerate starts with that word transform. We have seen and we are seeing and we will continue to see within the course of that 3 year plan and even beyond because some of the initiatives we have undertaken go obviously beyond 3 years in terms of horizon. We're witnessing a huge transformation of our business. That transformation is tied to just 2 things.
If I had to really oversimplify things, which sometimes is a good thing to do, tied to number 1, our consumer focus, our consumer centricity more and more in our discussions and I can feel it, I can see it and obviously hear it, the name the word consumer is pronounced. So everything we do, we say what is it for from a consumer standpoint. So that's the number one, I would say, trigger of transformation, because today's consumer has transformed and will keep on transforming. And the second big trigger, which is by the way impacting the whole world, not just ourselves, but for us it's a great opportunity is technology and digital, which is which has radically changed our interaction with consumers, which is radically changing our ways of working, which is radically changing every single function within Perneurigard. I think we had mentioned Dream, Transform and Accelerate Finance 4.0, where we will be leveraging a lot of artificial intelligence in terms of predictology and so on.
It is radically changing our marketing approach and we had a huge transversal marketing transformation approach. It is transforming our sales teams. It doesn't mean we'll have less. It just means that they'll do things differently. We are working on sales teams of the future and so on.
So the 2 big changes is ruthless commitment to delivering the plan based on the 2 triggers consumers and technology. Regarding Cold Brew, it is currently exclusively available only in the U. S. It is being rolled out as we speak right now nationally to achieve maximum distribution by St. Patrick's Day mid March.
Initial feedback is very, very positive. By the way, obviously, outside the U. S, that product doesn't exist except in Ireland, where it was actually tested. Part of our transformation is TLO test learn optimized. So very clearly, very quickly tested in market and in my bar by the way.
So I tested it. I had my friends test it. It's a very quite groundbreaking proposition, leveraging a little bit the Irish coffee kind of sentiment. So it's line priced as well with Jameson Original, which was simplified and facilitated as well the franchise planning across the U. S.
So we'll see within the next let's see next comp fee, which is on April 20 3, I'm talking under control of Julia. But by then, we should have some initial concrete results of cold brew. But from a qualitative standpoint, so far, we're quite bullish. And maybe on your third question, I'll let Helane answer.
Yes. So on the coronavirus assumption, so first, I would like to repeat what Alex said. Obviously, it's very difficult to have a clear view of what would be the extent and the duration of the virus impact. What we shared with you, I believe, in a very transparent and hopefully very understandable way is our current assumption of what could be the impact for us in term of business. So as well, as we mentioned, we had a strong execution of our Chinese New Year program in December and early January.
So everything I would say was there to have a great Chinese New Year season. We don't have the visibility at this time of the year. We only mix up what would have been the depletion on Chinese New Year. So it's too early to have the visibility of what could be the stock replenishment to happen in the coming days weeks. So that's why in our assumption, we are as well assuming some gradual recovery in March.
That could be more or less what I would say, depending on the level of stock we're going to have post Chinese New Year.
Thank you.
Our next question comes from the line of Laurence Wyatt from Barclays. Please go ahead. Your line is now open.
Hi, good morning everyone. Thanks very much for the questions. Just firstly, I've got 3 questions in total. Firstly, on the COVID-nineteen, you mentioned that you believe your working assumption is that it will end in June in terms of the impact on your business. Other beverages companies have suggested this might last a little bit longer in terms of the using their sales playbook from 2,003, sort of 6 to 8 months has been suggested by other companies.
Could you give some detail as to why you think June is why you're using that as the working assumption date for recovery? Secondly, in terms of the effect on cognac in China in particular, during the anti corruption clampdown earlier last decade, you moved cognac around the world quite successfully and sold more in other countries. Is that something you would be looking to do at the moment? Or is that is this too short a term to do that? And then finally, there was news reports on the egalimlaw in France suggesting it might be reduced, in particular on champagne but also on other products.
I was wondering if you could share with us any working assumptions you have on that law in particular. Thank you.
Yes. So listen on COVID-nineteen at this stage your guess is as good as ours. We do believe as a central scenario that taking these assumptions into account is a good working scenario and you see the impact. Listen, if it lasts 1 more month, it will last 1 more month. If it lasts 1 month less, it will last 1 month less.
Again, what we're trying to do here is to work on reasonable assumptions. Listen, if it runs into July, May, The one thing and maybe the 2 things we do see and read in the media by the way is that by August, there will be a vaccine that's 0.1. We also know that flu generally speaking not just COVID-nineteen tends to weaken and then disappear during summer days. But if it's one more month, it will be one more month. That's we're basically monitoring the situation almost on a daily basis.
And by the way, not only is there the timing of getting back to normal, but there's also the rapidity then or the impact it can have, which again we don't know what it will be. So it's difficult to say more on that side. You have our assumptions and you see their impact. And then based on the evolution of the situation, we'll obviously keep you updated. But thinking more long term, I just want to stress the fundamentals in China are very strong.
We saw them over the first half year. The emerging middle class in China is still growing. Our penetration strategy and ambition of doubling by 2025 going from 1% to 2% is fully on track. We're above 1.2%, close to 1.3%. So we're really on track from that point of view.
And so I think we really need to keep focused on the underlying strong fundamentals and the longer term when it goes down to China. Regarding Cognac, by the way, and it's good to transition, we started internationalizing Martell as a brand a number of years ago, maybe 4 or 5 years ago. So basically for the brand to move out of being just a Chinese Asian brand to being an international brands with clear must win battlegrounds for Martell. Obviously, China remains very important and critical to Martell's success, but more broadly speaking, Asia as well, broadly speaking as well travel retail as a channel. U.
S. With the launch, I mentioned it during the presentation of Blue Swift in a half years ago, very successful launch, great rollout and still ongoing in the U. S. With strong investments behind Martell Blue Twist in the U. S.
But of course, as well investing behind the brand in some sub Saharan African markets in particular Nigeria where we see great potential for Martel, but as well in Eastern Europe. So there's no change in strategy for Martell. The keyword here is internationalization of the brand. And we are investing behind the brand across all regions to make it a global brand. As for L'Eau Gallim, listen, we read the media as well.
My dream is for this to go away. But so far, there's not much I can really comment. Obviously, it's hitting our champagne brands fine, but the reality is it's mainly hitting Ricard. Again, the price went from €18, 2 years ago to now €22,400,000 today, euros 22 plus in France for a leader of Ricard is huge. It's not great for consumers.
Purchasing power is critical for our consumers. But if that law could go, I'd be happy. It's a lose lose law by the way, because obviously if our volumes are significantly down, it's not good for us. It's not good for state income either. It's not good as well for consumers that are trading down to distributor brands, private labels.
And it's not good for our commercial partners as well because they make more money on Lake Elle than they do on their private label stuff. So that's what I call a lose, lose, lose, lose scenario. All stakeholders lose. So equal treatment, that's the good news, but not sure it's good.
Excellent. Thank you very much.
We will take our next question from the line of Simon Howes from Citi. Please go ahead. Your line is now open.
Thank you. Good morning, Alex. Good morning, Helane. 3 for me as well, please, I'm afraid. Firstly, Alex, I wonder
if I could just clarify with you some
of your comments you made with regards to your outlook on investment spending for the rest of the year. I understand that you're maintaining investment spend. From that, do I assume that actually you're going to continue to be investing in China despite what's happening in the short term? Or should I assume that perhaps you are reducing marketing investment and just transferring that to another part of the group? That's the first question.
Secondly, just around the potential impact of U. S. EU tariffs, what are you now assuming within your guidance for that? Are you still assuming there is a risk of some further carouseling of those tariffs going forward? Or has that risk look at from both the top line standpoint and also on COGS, particularly the inflation we've seen on neutral grain spirit?
I'll do the first question. I'll let Helene answer the second and third ones. Just on the outlook, it's very important for us to stress the fact that because of this very unfortunate and terrible situation, It's not going to deter us from investing behind our clear priorities. Of course, specifically in China and specifically in some channels, travel retail, Nobody goes out in outlets. We're not going to activate these outlets.
So remember what we said. We said we are maintaining our investments and we very clearly intend to do so. But we also just stress the fact that we would have some specific targeted mitigation measures. And these obviously are specifically regarding some investments in China and travel retail just because people aren't there. But other than that, we remain fully determined to invest across all our priorities, in particular, by the way, the U.
S.
So talking about the U. S, it's true that the U. S. Tariff situation is one of the points of the uncertainty, I would say, and this is still a valid one. As you know, there was the increase of the tariff back in October on the single malts and wines, so impacted us mainly on the Glen Uvette, Abertolot and the Campo Viejo for the U.
S. So this is already happening. And by the way, we are improving the Glenlivet increasing the price on the Glenlivet early February. So we took some assumption for the what could be the impact for the full year because there is still uncertainty, as I mentioned. We have the carouseling risk, which is the flexibility for the U.
S. Authorities to revisit the perimeter and the quantum of the tariff as soon as next week. In our guidance, it's fair to say that we are already well advanced in the fiscal year. So even obviously, we hope that there won't be any increase happening next week. And by the way, we'll be obviously even more in favor of the constellation of this tariff in the future, the impact should be manageable for this fiscal year.
Let's go now to India. So in terms of outlook, as we mentioned, we had in this first half a very, let's say, complex environment, which was definitely less favorable than last year. For the second half, we are obviously still super committed on our strategic investment in that market. So we believe the top line could be slightly better than in the first half, Let's say, strong mid single to high single digit growth would be probably a good ambition for us in the second half in terms of top line. Talking about COGS, grain neutral spirit, significant increase impacted our margin in this first half.
Hopefully, the major impact is behind us, but I would like to be very cautious on what could happen in the second half in term of COGS. By the way, we mentioned grain neutral spirit, glass as well has some impact on our margin. Having said that, as you know, our ambition is to improve our margin as well in India and we are improving our pricing strategy there and premiumizing our brands, investing significantly behind our strategic local brands and as well strategic international brands.
That's great. Thank you very much.
We will now take our next question from the line of Sanjay Aujla from Credit Suisse. Please go ahead. Your line is now open.
Hi, Alex and Helane. Three questions also from me, please. Firstly, on Jameson in the U. S. Helane, I think at Q1, you talked about depletions being up around high single digit.
In the release today, you talked about an acceleration in the second half of the year. So can you just give us a bit of a feel for how Jameson depletions really accelerated from high single digit in Q1? And within the Jameson franchise, how big are Texas and Florida today? Just trying to get a sense of how under indexed it is to those 2 big states in the U. S.
And just finally on Martell in the U. S, appreciate you're cycling some tough shipment comparatives. But just to clarify, are depletions also running negative in the first half as well? Thanks.
Okay. Thank for the question. So I'll start with Jameson in the U. S. So first, I would like to say that when we look at the October, November, December period, which is obviously extremely critical in the U.
S, we see a stronger particularly from American whiskey brands. So that's one of the reasons of the performance of Jameson sellout in this first half. No need, I guess, to come back to what is our ambition in terms of second half with strong activation and innovation to support Jameson ambition. You mentioned the what is the position of Jameson in Texas and Florida. I don't think we gave the exact number I'm looking at Julia.
But it's fair to say that in those key states, we have room for stronger acceleration of TEMSA compared to its weight in other key states like California and New York. So now moving to Martell. So Martell, we had obviously a very successful launch of Martell Blue Swift in a comparable basis, if I can call it that way. This is a successful launch on a small basis, and the brand is performing strongly on a small basis. We believe this is a great innovation and we want to support that innovation with the right investment and build the brand in the U.
S. In the coming months.
Just a quick follow-up on Absolute. Clearly, the base brand seems to have deteriorated in the period. Are you seeing any impact on the brand from hard solstice?
So on absolute, as you know, this is obviously a difficult category. By the way, I think the last 4 weeks have been even a bit more difficult for the category globally. Absolut Blue is still in decline. We have a successful launch of Absolut Juice as mentioned, but with no significant impact of on Absolut Blue even if we have some, let's say, good figures in terms of consideration for the brand. Talking about the Harte Sells' performance and dynamism, it's obviously a very strong one.
We don't see at that stage any impact on the premium spirits category. It's really more, let's say, impacting the beer drinking occasion.
Got it. Thank you.
This We'll take questions from our 2 final callers, please.
We will now take our next question from the line of Trevor Stirling from Bernstein. Please go ahead. Your line is now open.
Good morning, Alex and Helene. Two questions from my side. Firstly, just to say thank you very much for sharing those detailed assumptions on COVID, very helpful and it makes lots of sense. But the second question on China underlying trends. You talk about premium growth in China, Alex.
Can you just give us a little more color? Is that group of products, are they growing broadly in line with Martell on underlying basis slightly faster? So maybe a sort of update on what you told us in Shenzhen would be great. And the second question around Glenlivet, it looks like the brand is picking up and accelerating again. Is your supply Glendlywitt in a better position now that you can actually supply the right levels of the qualities that you want to?
Well, thank you for your questions. Listen, what our strategic plan for China is remaining completely unchanged. The dynamics we saw over the first half are definitely in line with what we had in mind. Now performance may vary from one brand to another just because some brands are more skewed towards the on trade, other ones are more skewed towards the off trade. We did mention softness for Chivas in Q1, because Chivas is clearly skewed towards some of the on trade outlets, which were hit in Q1.
And then we saw a strong rebound in Q2 for Chivas as a brand. But across we see growth across the entire portfolio. And of course, whether it's Jacobs Creek, which is our strategic wine brand over there, whether it's at Lake Lynn Levitt in China, along with, by the way, single malt category, whether it's Valentine's Finest, which is really picking up specifically targeting middle class consumers over there and as well our key focus champagne brand PJ. All of this, of course, alongside for sure Martell. But we see strong growth across the whole portfolio, perfectly in line with our plan of transform and accelerate and penetration rates, also which have grown since last time we had our Capital Market Day in China have grown by roughly 30%.
Regarding the Glenlivet supply, I'd love to have supply issues, because when we have supply issues, it's a great problem to have. Reality is now we have a good comprehensive portfolio of SKUs within the Glenlivet franchise. We have both aged propositions, of course, but as well non aged propositions as well. Again, not driven by a supply strategy, but driven by a consumer centric approach. Some consumers like aged and specifically aged products with the age statement just because they're reassured by the age and they like comparing different ages and so on and so forth.
Others like non aged statements, but flavored statements around the finishing of the product and so on and so forth. And finally, some like both. And what we most recently launched in the U. S, which is proving to be quite a huge, let's say, early success is the Glenlivet 14. So it is aged, but finished in cognac casks.
So with a twist to the flavor. I'll remind you that 4 years ago, we had launched Founders Reserve, which is a non age statement, specifically targeted to consumers that would like to enter into the single malt category. So very simple, accessible, versatile flavor, recruiting into the category as market leaders in the U. S. Within that category and then trading them up progressively into aged or non aged and flavored or non flavored expressions.
I hope this answers your question.
We will now be taking our last question from the line of Chris Pitzer from Redburn.
Two questions. Firstly, on Jameson going into St. Patrick's Day. Can you give us an idea of what sort of lessons were learned from last St. Patrick's Day where the movement in the whisky category was quite dynamic?
Will you be quite as aggressive in promotional reduction this time around? And then secondly, on China and the COVID impact, can you tell us where you think your e commerce revenues are right now as a percentage of sales? And have you factored in some lost on trade and off trade sales shifting into e commerce in your analysis?
Yes. On your first question, I'm not going to be very extensive just because St. Patrick's Day is coming soon and we have a plan, which we don't really fundamentally want to disclose. But overall, some of the key lessons learned are, Jameson is not only a St. Patrick's Day brand anymore.
It has now the size and scale of a brand that can basically be everybody's everyday kind of brand, which means that we are progressively maybe, maybe 1Q lesson is we started deseasonalizing our investment strategy behind Jameson a little bit too quickly, maybe a little bit too quickly. But we really want to drive activations around the brand, both from a promotional point of view, but also from an experiential point of view around the year. So obviously, the next one coming is the run up to St. Patrick's Day and St. Patrick's Day, of course.
But as well we'll be quite active around Januson during the summer. So we want it to be not a seasonal brand, but basically an annual brand. It deserves it by the way, and what we're going to do. And again, from an innovation standpoint, the way we launch innovations and the way we're executing against cold brew this year, I think is going to be quite remarkable. On your second point, I'll let maybe Helene answer.
Yes. So on the e commerce in China, so first, in the current assumption of the impact of coronavirus, I guess, you saw that we are assuming a recovery of the trade in China in March. We have some, let's say, strong ambition in those assumptions in terms of e commerce. So that's part of our current assumption. Having said that, e commerce is a strategic channel for us moving forward.
It's not so far very big in term of weight. It's probably below 10% in term of weight of the upgrade. So to cut a long story short, we have some bullish assumption in term of e commerce. Our current understanding is that there is some disruption in terms of home delivery. But again, we have this assumption of recovery in March in the current assumption we presented to you today and that we have in our new guidance.
And I just confirm, you said 10% of the off trade, so roughly 5% of total China sales? Is that the sales book?
I said, below 10% of the off trade.
Below 10% of the off trade. Thanks.
That was our final question. I would like now to hand the call back to
Thank you, Alexandre. Thank you, Helene. Ladies and gentlemen, thank you for your time and have a good day.