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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello and welcome to the Remy Cointreau 2022-2023 full-year results call. My name is Laura and I will be your coordinator for today's event. Please note, this call is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. [Operator Instructions].
I will now hand you over to your host Marie-Amélie de Leusse Chairwoman to begin today's conference. Thank you.
Good morning, everyone, and thank you for being with us this morning for Remy Cointreau’s Full Year Results. I am here with Eric Vallat, CEO and Luca Marotta, CFO. Full-year ’22, ‘23 has been another year packed with major initiatives in terms of marketing, business operations, and sustainability. For the past three years, the group has started a deep transformation and made some solid progress as you will see in the coming slides. We are proud of what was achieved by the teams across the globe. So first, let me start by thanking all of them for their commitment, agility, creativity, and achievements in a context which remains volatile.
In ’22, ‘23, the group generated 10.1% of organic sales growth led by remarkable growth in APAC and EMEA. In parallel, the US market faced a sharp normalization of consumption as well as a very high base of comparison following two years of exceptional growth. This strong showing reflects steep gains in price mix plus 10.1% in line with the group's value-based strategy and steady volumes.
This leads to a remarkable level of growth, margin, and COP margin reaching new historic records. We are today ahead of our 10-year plan, and thus we confirm our long-term objectives.
I will now let Eric take you through the full-year business review. Eric, the floor is yours.
Thank you, Marie-Amelie, and be prepared now to a more French accent before the Italian accent of Luca. I'm happy to take the marc, indeed. And I would like to start by thanking you for joining us today. And I will hand it over to Luca after a few slides. Now I am on slide five. And as you've seen from the press release this morning, our full year ’22, ‘23 results are excellent. We delivered on what we said and reached a whole new time high, across the board and more particularly on our two-key metrics, gross margin and COP margin. Back in April, you saw our sales numbers. We talked about 10.1% organic growth on top of very high COPs. This represents plus 43.6% of growth versus ’19, ’20.
In terms of profitability the current operating profits to that, €429.6 million up 16.2% on an organic basis, representing 27.7% of margin, which means 1.4 points versus last year up. This performance has been driven by a strong gross margin improvement to a record level of 71.3%, despite the current inflationary context, and by a good control of our overhead costs while investing on key strategic areas. The reported EPS came at €5.79, so more than twice what we recorded in ’19, ‘20. These results are excellent and are even more so considering the strong performance that was already delivered over the previous two years.
I am now on Slide 6. I am proud of what was achieved so far. The group is today clearly reaching a new step in its expansion. With the 6.55 million cases sold, volume grew by 14.3%, while sales value increased by 44% almost, including a meaningful price increase improvement. This translates into a fantastic gross margin improvement of four points at 71.3%. So not far from our ultimate goal in ’29, ‘30. Consequently, we've had the ability to accelerate our ANP investments as showed by the increase of 3.7 points compared to ’19, ‘20, entering into a virtuous circle of value creation, which led to an amazing cup margin expansion of five points.
The Slide 7. Give us the opportunity to stress that these great results have been achieved, thanks to the solid progress made on our four group transversal priorities since the launch of our 2030 plan. Priority number one is to increase value. What matters to us is to make sure we improve our gross margin, which gives us the means to invest behind the future of our brands. In a challenging environment with unprecedented inflation worldwide, we have managed to gain 2.6 points of mixed price at the gross margin level versus last year and 3.1 points versus ‘19, ‘20.
This has been achieved more, particularly thanks to the pricing power of our brands supported by strong ANPs, and thanks to the improvement of the product mix, notably in our cognacs, where the global weight of our intermediates has gained 15 points versus 2019. And we expect this improvement of the mix to continue with the 17, 30, 18 US and with the acceleration of the growth in China, driven by the club and the upper grades.
I am now moving to Slide 8. You may recall that our priority number two is to enhance portfolio management to move from a pure cognac setting culture to real portfolio management. Each brand has been assigned a mission and we have trained our teams building among others on a commercial excellence framework that is being implemented worldwide. We are now starting to harvest the benefits of our efforts. With the growth of the liquids in spirits division that speaks for itself at 18.7% versus last year and plus 54% versus 2019.
This is all across the board, but I would like for ones to highlight a brand that we rarely mention in our conferences, St-Rémy, not only the brand has been growing fast in the past three years, it has also gained more than five points of gross margin since 2019 -2020. Thanks to an outstanding improvement of the mix, Metaxa great too despite its stronger exposure to Russia than the rest of the decor and spirits portfolio. Metaxa grew by more than 20% over the past three years. Last but not least, Quantro, which is having an amazing success since 2019.
The brand enjoyed a 75% sales growth over the past three years, boosted by a solid plan of investments, a relevant marketing strategy around cocktails, and more particularly the Margarita cocktail, which also relies on the great momentum of tequila. Slide 9 now, speaks of our third priority, which is to deploy a consumer-centric culture model. I would like to pose a bit longer here as I believe this is a game changer in our industry and every group is now rightfully making it a top priority.
So, what are we talking about and what differentiates us from our competitors there? In our view, being client-centric means making sure, one, you know your clients as a way to build desirable brands with relevant content and campaigns for them. Two, you leverage their purchasing journey to drive visibility where and when it matters under relevant touchpoints. On these two axes, I would like not to pretend that we are the best in class as they are widely leveraged in our industry, but I can testify that we have made huge progress to support the sharp increase of our A&Ps, leveraging our marketing intelligence team much more than in the past.
Being client-centric also involves more targeted and tailor-made actions. It is not only about knowing your clients and leveraging their purchasing journey, it is also about understanding their motivations to design meaningful experiences and interacting with them to build loyalty. These two axes are not easy to manage in our industry as distribution barriers and layers make it difficult to engage direct dialogue and relationship with our clients. This is a shame as this direct relationship is creating value, it also helps to build a sustainable business as we could witness during COVID in China with stress for instance, where our private client directors never lost the contact with their clients.
And this business is not only more sustainable, it is also margin accretive as it is more direct. This is where I believe lies our competitive edge with our portfolio more focused on the high end. There is so much more we can do and aim at. Take for instance, its status as the only true luxury brand in the spirits industry, enables us to aim at changing the rules and being the first brand to sell direct to a large majority of its end clients by 2030.
By leveraging full-speed direct e-commerce, boutiques, and private client directors, of course, the BRUICHLADDICH [ph] model is not replicable as such, but re TRES is a fantastic laboratory for the group. There is so much we are learning from it, which can be adapted to other brands.
The expertise we acquire in new fields like CRM or direct selling is incredibly valuable for the group in the long run. And the expertise is such that we even managed to launch a brand like, which sells only to end clients by appointment. A good illustration, I believe, of our ability. It'll be a long journey, but so far results are already visible. We recorded plus 25% growth in e-commerce globally with the penetration rate multiplied by. two versus 2019, and we can now count on our 15 e-boutiques.
The results are particularly visible in China, where our direct sales represent today 25% of our total sales, despite a context which was not supportive this year. We now rely on 11 boutiques including the last ones in Chengdu, [Indiscernible], and in Newport at [Indiscernible] for Remy Martin, alongside a solid opening roadmap for the coming years.
After this long explanation I'm moving now onto slide 10, as we also make progress in terms of sustainability as part of our sustainable exception roadmap. Today, we chose to put the focus on our climate strategy. It is obviously a key topic for group not that we are big polluters, but because climate warming is a threat for our Terroir, and as such, we need to do our fair share. Three pillars behind this climate strategy.
Number one, mitigate our impact. Number two, adapt our Terroir to climate change. And number three, regenerate our Terroir so that they are part of the solution to climate change. So first mitigate, in 2022, we validated our reduction targets. They are all in line with the 1.5-degree scenario warming degree, of course with the science-based target initiative, which is not yet so common, they imply overall a 50% reduction per bottle by 2030, and the achievement of NetZero by 2050.
For that, the focus will be on four big levers of reduction is already on four big levers, energy for distillation, packaging raw material, ingredients, and transports. I'll come back to that in the next slide. Second, we need to adapt our Terroir to a warmer and more unpredictable climate. For that, we are actively investing in R&D to identify climate-resilient crops for all of our key raw material ingredients. We also conducted a climate risk mapping of our Terroir and identified a few ingredient sourcing that might need to be adapted over time.
Third, regenerate, beyond the adaptation of our crops, we want to regenerate our soil for two reasons to make them more resilient in the face of climate change and to maximize their role of carbon sinks. For that, we are deploying regenerative agriculture practices. Today, 100% of our own estate are already in conversion testing and learning, but the real challenge is obviously to embark on our agricultural partners. So, we commit to educate 100% of our direct partners to regenerative agriculture practices by 2030. What is key for us is also to be able to measure the change measure that our farming practices have a positive impact on the planet.
For that, we've been working with the startup Genesis for the past two years. The moody’s of the soil is as we could call it, to measure scientifically the health and the evolution of the health of our soils based on carbon, biodiversity, and water retention. It is also in that context by the way that we partnered with them, the NGO WWF and our competitor and partner on wet and sea, to create an environmental credit larger than just a carbon credit to embark and remunerate the transition of our farmers towards regenerative agriculture.
Just to quickly come back on our CO2 reduction actions on slide 11, with a focus on our four key levels. Starting with energy for distillation in our sites, 38% of the energy used is coming from renewable sources. Our goal is to reach a hundred percent by 2030. This should enable us to largely reach our SBT target, which is to reduce our scope one and two emissions by 42% by 2030.
Packaging is the big lever accounting for 40% of our footprint, here our SBT commitment is to reduce by 25% our emissions by 2030. In order to achieve such, we are deploying our three R, roadmap reduce today 78% of our bottles are sold naked without a gift box, and our goal is to get to 85% by 2025, a topic we are clearly pioneering. We are also working on better eco-designing and our portfolio of bottles.
You might have seen that our 10 bottles is now the lightest of all champagne bottles at just 800 grams. And last but not least, we are working on going more circular. For that, we are testing a number of reuse formats that we shared with you last November. Improving emissions of raw material ingredients is about greener energy for tractors and distillations, but also greener entrance another area of the workforce. The deployment of regenerative agriculture practices in Terroir our own and those of our partners will be a powerful lever to reduce our emissions, but also to store more CO2 soils. This is why our SBT objectives are more ambitious on that metric at minus 30%.
We have now discovered that our soils can be part of the solution. And lastly, transportation, on which we committed to reduce our emissions by 25% by 2030. The good news is that in ’22,‘23, our emissions failed by 13% year on year and by 23% since 2021. Our starting point, is not far from 2030 target. Our no plane policy for goods, actions to replace road by train, and to encourage our track partners to switch to biofuel explain this great performance and have clearly helped.
So, a lot of actions going on, but at the end, we asked ourselves the question, what if tomorrow we had to pay a carbon invoice? What would be the impact on COP? And based on the current regulated carbon price of a hundred euros, it would imply a €15 million invoice.
Assuming we have to pay a tax on our scope one, two, and scope three, this would lower our COP margin by only one point, to 27%. So minimal impact. By the way, this explains why we are part of the index [indiscernible] in English, which is what the cat current index would look like after taking into account each company's carbon invoice on top of its results. I think this is an important metric because it shows that even if carbon regulations strengthen, we have the means to face it and to keep investing, to adapt our business, and make it more circular over time. Let me now take you through a quick business review before giving the mic to Luca.
And this is taking me to Slide 13, which gives me the opportunity to remind you of our full-year sales numbers by division. I will be quick, as they were already detailed by Luca in April. Cognac, which represented 71% of our sales, grew 7.6% organically versus last year at 41.3% --and sorry, and at 41.3% on a three years basis. Liqueurs & Spirits which contributed to 27% of our sales recorded an almost 19% growth versus last year and a plus 54% on a three years basis. Lastly, our partner brands at 2% of group sales, we are down minus 5.3%.
On Slide 14 now, just a word on the regions. The slide shows that total growth was mostly driven by APAC and EMEA this year with a meaningful expansion for all of them on a three-year basis. America's grew 2.5% on top of an extremely high base of comps. America's is up 58% versus ’19, ‘20, and the region growing the fastest. APAC posted a very strong growth of 23%, almost representing an increase of 49% versus three years ago. And lastly, EMEA was up 11% organically, which means plus 9% versus ’19, ‘20.
I am now moving to Slide 15; the histograms here speak for themselves in the US. As a reminder, Nielsen accounts for approximately 40% of our sales and slightly more than 20% for America. We've been growing much faster than the market whether with Remy Martin or with Cognac and we could have shared the same slide and the same results for the Bhutanese, for example.
As a result, we have gained market shares, these comforters in our belief that smart AMPs spent today behind our brands are preparing the growth of tomorrow. This is what we have witnessed in the past three years particularly because our products are of great quality, but their awareness remains relatively low, including for Martin, and I take it as good news, there is still room for growth in the future.
The histograms of Slide 16 also speak for themselves in China, where we gained 1.7% market share versus 2019. As you can see with the histograms on the right of the chart, this has been driven particularly by a club which grew 67% versus 12% for the equivalent grades in Cognac. We made club top priority seven years ago now, and we managed to grow it. Notably thanks to 360 plan, including among others, innovation, and eCommerce.
Our next part is XO, where we are far from our fair market share, to be honest, starting now with the reopening of and trade. Let's now focus on the battery division quickly as well, profitability, who great key figures are summarized on Slide 17. Current operating profit grew by 25.5% on a reported basis, which means a multiplication by two versus three years, representing an increase of the margin of 2.8 points to 36.8%. This is a new record high. This breaks down into an organic increase of 2.2 and a positive currency effect of 0.5.
The organic improvement reflects a meaningful gross margin improvement of 3.9 points, mainly resulting from a very strong contribution of the price mix and particularly the price component. In cognac the main cogs is, the liquid itself, which has been bought several years ago, making the inflation impact much more limited than on other liquids. Consequently, price increases, largely compensated the inflation effects on logistic glass and others. These gross margin gains have been reinvested in our brands in A&P, including an important campaign during the Super Bowl and a busy activation plan in China around the MAF Middletown Festival and Chinese New Year. As you know, China and the US are key priorities in terms of markets.
Finally, those strong operating leverage of the division also contributed to this meaningful improvement with the good control of our OpEx, the ratio remained stable overall. And I'm now on slide 18, looking at the liquids and spirits profitability division whose key figures are encapsulated on slide 18. Current operating profit grew by 35.6 points on a reported basis, representing a margin of 11.5%, up 0.8 pts This performance reflects a stable organic performance alongside a favorable currency effect of 0.9 points. This evolution includes as expected and planned, a sustained level of marketing and communication spend aimed at preparing for future growth.
And as you have seen, sales are accelerating, showing a strong pace of growth, for now, three years. Should we keep the same growth pace, we will benefit from a meaningful operational leverage in the second part of our 10 years plan, as already shared. The gross margin was impacted by rising production costs, that were partially offset by higher sales price. At the same time, the group maintained a strict control of its structural costs. The ratio was down 1.1 point. Let me now have a glass of water and give the mic to Luca who will take you through the more financial slides.
Thank you, Eric. Now, let's move to the detailed analysis of the financial statement and begin with the full-year income statement. So, as already mentioned, organic sales were up plus 10.1%, i.e. up 42.6% compared to full-year ’19, ‘20. On that basis, gross profits increased by 14.2% in organic terms, implying 20 bps and 60 bps organic improvement in gross margin, i.e. plus 400 bps on a three-year basis, reaching a new all-time high.
This excellent performance versus last year was essentially driven by a meaningful price mix effect of €129.1 million, which is mostly linked to a pure price effect for €103 million following price increases in all regions. At the same time, volumes contribution was quite natural following a strong contribution over the last and past two years.
Sales and marketing expenses were up plus 12.9% in organic terms, reflecting our decision to reinforce our investments behind our brands. Within this total AMP expenses grew by 17.1%, organically at 21.6% of sales, meaning an organic increase of 3.7 points compared to sales on a three-year basis. So clearly above our organic sales growth, as we are ahead of our 10-year plan, this ongoing ramp-up reflects our decision to reinvest most of our gross margin gains in AMP to continue to build visible and aspirational brands, while increasing their long-term hourness.
Technically most of the spending comes from the above the line part. What is above the line? Classic media, digital, public relation for around 65% of which of this 65% more than 55% are digital. So as a consequence, around 35%, one-third of our total spend in advertising and promotion is today digital.
In parallel distribution cost increased by 6% organically, i.e. organic increase of only plus 2.3% on a three-year basis. This was reflecting an increase in terms of key headcounts in our international subsidiary, as well as some strategic OpEx to accelerate on retail, direct to client on commercial excellence and revenue management.
Administrative expenses increased by 13.7% on an organic basis i.e. an organic increase of 42.3% on a three-year basis, slightly more than our sales growth. This evolution reflects an increase our brand OpEx related to some additional headcount and key investment in e-commerce CRM, the transformation programs and brands development and protection activities.
All in all, as a consequence, this profit loss is showing that the current operating profit reached an all-time high at €429.6 million on an organic basis operating profit -- current operating profit was up plus 16.2% and up plus 28.5% on a reported basis. After taking to account a favorable currency impact of €41 million, on a three-year basis, operating current operating profit in absolute value has almost doubled versus full-year 1920. Top margins to the 27.7%, up 140 bps on organic basis versus last year and up 505 points versus three years ago.
Now let's move to the analysis of a group of current operating margins. Slide number 21. It was up plus 230 bps as reported reaching 27.7. Again, I repeat. It's very important. This is an all-time high. This breaks down into an organic increase of 140 bps and a positive currency effect of 90. The organic improvement of the current operating margin basically reflect a strong increase of the gross margin, once again reinvested into A&P and an excellent control of our distribution and structure cost ratios.
In more details, gross margin was up 260 bps as a result of very strong price mix, global effect. A&P ratio at the same time increased by alphabet 130 bps. The acceleration A&P was particularly focused in the US magnified by the Super Bowl and in China to support the strong recovery. Lagers and spirits in term of divisions and more particularly the five global brands, priorities has been a key focus in ’22-’23.
The ratio of distribution structure cost was stable, reflecting a very good control of our cost despite a strong sales growth. Now, slide number 22, take a look altogether at the rest, the remaining part of the income statement, other non-recurring operating expenses to at the minus €3.1 million and net financial charges increase to €17.6 million. I will detail them both of them in next slides. The reported tax rate decreased from 31.1% last year to 28.4%, benefiting from the drop-in tax rates in France. Excluding non-recurring items, the effective clean tax rate was similar, 28.3% in ’22, ‘23 compared to 29.3% in ’21, ‘22, so one point less.
At this stage, we expect tax rate to remain stable in ’23, ‘24. As a result, net profit group share came in at €293.8 million up, plus 38.3% on a reported basis, meaning a net margin of 90% up plus 280 on a reported basis, but excluding non-recurring items, net profit came in at €296.6 million up plus 30 on a reported basis. The net margin, excluding non-recurring items to the 19.2 up 180 bps on a reported basis, and a reported EPS came out at €5.79, up 37.5% on a reported basis, meaning that has been multiplied by more than two versus ’19, ‘20.
So, moving to slide number 23, this, the analysis of non-recurring items, the reconciliation table between net profit and net profit excluding non-recurring items. Non-recurring items, mainly integrated two components, first of all, 3.1 million euro of net charges, which include on one side 8.5 million of positive elements of which essentially the reversal, partial reversal or the provision for international customer. risk for €7.7 million.
And on the other side, €11.6 million of negative component split into a depreciation of the remaining Westland Goodwill €7.5 million and a charge not recurring charge related to the early unwinding of edging on the rubble in the current geopolitical contest for €4.1 million. This €3.1 million were reduced by €0.4 million of positive no recurring tax items linked to this charge.
Now moving to Slide number 24. It's not working, I guess. Net analyze the cash flow generation and net debt. Free cash flow generation stood globally at €48.6 million in ‘22, ‘23 compared to €90.3 million last year. This evolution reflects, first of all a very strong increase of the EBITDA more or less €198.2 million, which is partially offset by different things. First, an increase of the total working capital re requirements for €54.3 million, which has to be considered split in between an increase of the working capital outflow related to ODD and spirits in aging process, €84.9 million additionally and a decrease on other working capital items outflows for €30.6 million.
Inside this mathematical evolution, we have to point out that the increase of our level of ODD and bulk purchases compared to last year is there to clearly prepare the future. And meaning that two third of this strategic working after variation was linked to that increased by pattern. And this is clearly in line with our strategic capital allocation policy.
Second, a congenital specific increase of our level of I inventories mostly due to the Cognac globalization in the US, which count for one-third of the strategic working capital variation in parallel as shown other working cap variation was down for more or less €31 million, €30.6 million driven by a decrease of account receivable for 21.8 compared to last year. Why that? Because in ‘21, ‘22 last year, we reached a pick at the end of the year due to the anticipation of purchases by our customers in a contest or logistic tension. And as a reminder, the corresponding payments were made in H1 ‘22 ‘23.
Second element to explain the freakish flow generation, this very important line is the increase of €51 million 50.8 to be precise of the tax outflow, which is the clear connection reflecting the higher level of profit. In the meantime, CapEx investment outflow were up €21.1 million as expected, as guided, including some investment related to manufacturing, storage site, IT, e-commerce and hospitality infrastructure.
In parallel, so on top of the free cash flow generation variation, other cash flow outflow strongly increase by €102.6 million. And this was largely driven by lower level or earlier redemption of the Ocean €42.9 million of conversion, ‘22, ‘23 versus €154.6 million last year, as well as the increased cash dividend impact compared to last year, €17.3 million. As a result, these multiple variances, which reflect clearly a clear choice in terms of strategical capital location at the end of March ‘23, our net financial debt stood at €536.6 million up from €353.3 million in March ‘22. A ratio still very low, is moving up slightly from 0.79 in ‘21, ‘22 to 0.84 in ’22, ‘23. Now,
slide number 25. A few comments on important slide, which is net financial expenses, which were a charge of 17.6 million euro in ’22, ‘23 up from €13.2 million last year. Net debt servicing cost were up in absolute value, reflecting the context of rising interest rate as well as a continuous use of more credit line to finance our short-term cash needs on a monthly basis. Consequently, our cost of debt was slightly up from 1.2% to 1.7%, but we have to guide for next year and at this stage, we expect our financial charges to more or less double next year to the, to the interest rates rise, context and increase of the average monthly debt.
Net currency inside is part of financial line, financial expenses line increased from a loss of €0.7 million last year to a loss of €2.5 million. These charges are related to edging intergroup financing and finally, other financial residual expenses to the €3.4 million in ’22, ‘23.
Now let's move to a quite technical but important slide in our opinion, which is the impact of currency hedges. The group reported a positive translation and transaction impact of respectively, as you know, €102.8 million on sales, conversion translation and €41 million on COP in ’22, ‘23 transaction. This mainly reflects the strengths of US dollar and the Chinese renminbi.
We enjoyed a strong improvement of the average euro-dollar translation rate over the period, which came out at 1.04 per euro in ’22, ‘23 compared to 1.16 last year. But in addition, our average hedge rate was down at around $1.11 per euro in ’22, ‘23 versus $1.17 last year. More important to look in our opinion to talk about the future and no more the past.
Looking at our forecast for ’22, ‘24, assuming an average Euro US dollar conversion rate at $1.10 and a Euro US dollar hedge rate at $1.11 as per today, we anticipate a negative impact between €50 million and €60 million on sales as a translation, which most of the effects recording in H1 two-thirds of this effect will be in H1 and one-third probably in the H2 and only a minor in proportion effect between minus €10 million and minus €15 million on operating profit with also most of the negative effect recorded in H1.
As the evolution of the Euro, U.S. dollar by all currencies, exchange rate remains variable at tile. As you know, we'll continue to update our model, our estimation, and to share with you and update every quarter. For this year, the sensitivity, which is very important with some news there compared to the way we communicate on that versus our expectation are the following €0.01 cent variation, plus or minus in U.S. dollar versus euro generates in around €6 million to €7 million year impacting sales and €3 million, €4 million year patent operating profit. All things being equal. US dollar and pegged currency to US dollar has a weight today over around 70%.
So that means that Chinese one is the more and more important in our balance in term of conversion, our foreign currency impact €0.10 cents variation in Chinese Yuan versus Euro generates the €67 million impact in sales and €3 million, €4 million impacting costs the same. All things being equal, but Chinese Yuan weight being now approximately 25%. Bear in mind that edging in advance as per hour policy. Our group policy implies cost of $0.04 or to $0.05 on top of edge rates. At this stage for 20 to 24, we have already covered around 95% of our net US dollar exposure, but about 50% of this coverage is composed of option.
Now let's move on the overview of the balance sheet with total asset and liabilities. Total of €3.2 billion, up €208 million compared to last year. On the asset side, global inventory increased by €201 million to reach €1.82 billion due to purchases of young ODV, as well as an increase of our level inventories in the current U.S. context. Inventories account for 57% of our total asset up three points versus last year.
On the liability side, the shareholder equity is up by €93 million, mainly driven by strong progression of the net income. The early redemption of the OCEANE as well as the script dividend decided last year. This has been partially offset by the she back program. Net gearing, so an indicator KPI, which is the group's net dept to equity ratio was up over the period from 21% to 31%, reflecting the increase all over net financial debt.
Now let's move on ROCE return on capital employed. Our ratio came in at 24.2% in ‘22, ‘23 better for 2.2 points on a reported basis and stable flat in organic terms, this was driven by 1.9 points increase in the ROCE of the group brands and a positive swing, even if minor -- absolute value in the partner brands, ROCE from minus 1.4% to plus 6.2%. Employed capital grew at the same pace as the organic growth respectively plus 17% and plus 16.2. As a consequence, the organic performance of ROCE was more or less stable.
Looking the perform by division cognac ROCE rose by 180 points, base point to reach 28.5% on a reported basis, and was down slightly for, 60 bps in organic terms. Why? Because the very strong organic COP growth of the division plus 14.7 was more than offset, slightly more than offset by the 17.5% organic increase in capital employed due to increase of the aging inventories and CapEx. For Liqueurs & Spirits, ROCE increased by 210 bps 2.1 points to reach 14.2% and was slightly up in organic terms for 0.2 points.
This evolution reflects for of course, our decision to intensify our investment behind our brands, but also a strong eye in operating profit as volume continued to accelerate, and this is very important in the optical of the 10-year roadmap. Looking at the capital employed more closely. Slide number 29. The overall amount increased by €255.6 million mainly split between an organic increase of more or less the same value, €256.6 million negative currency impact minus €1 million. On the organic side the plus 17% year on year increase in capital employed reflected by nature, a strong increase in aging inventories, more or less 60% of the total, and to a lower extent, an increase in CapEx including manufacturing, storage capacity, and other inventories.
So basically, most of the increase is linked to specific effect and even more to long term strategic investment. Last two slides. Slide number 30, entering in a TSR lens. Finally, moving to the yearly late dividend. Given our strong, very strong record year annual result and our confidence for the coming years, an ordinary dividend, two euro per share in cash will be put to a share-holders vote at the general assembly on the general shareholder meeting on 20th of July, 2023. In addition, an exceptional dividend of one year per share also in cash will be proposed overall, the represent an all-time high in absolute value.
For your technical information share will trade ex-dividend on September 28th, and dividend will be made payable like this year, every year starting from October the 2nd. Overall, very important, the total dividend equates to a payout of more than 51%, which is the best in class in the industry, and a yield of 174% on the average share price over the fiscal year. That was €172.31.
Last slide on my side before giving the mic back to Eric Vallat for the outlook. Moving to slide 31, a quick last important word in our opinion on our cash allocation policy, aiming at preparing the future. In ’22, ‘24 we will continue to ensure a well-balanced allocation on the back of the solid balance sheet. This will include, first of all, investing on future organic growth through strong focus on strategic working capital. Once again, meaning, inventories in -- for cognac, an aging liquid for Whiskeys, and Rum Champagne as well.
Sourcing is the key priority, we intend to continue to buy to prepare the future. We are oriented medium to long term, not short term. Overall, we expect to spend about €110 million, €120 million. Additional variation in this strategic working capital item. CapEx capital expenditure will be between €70 million and €80 million for aging, manufacturing, IT, and digital.
Second, element M&A to drive synergies and value creation. As you can see on the slide, we have several options, potential new category fitting with our values, including terroir and aging potential, increasing even more our cognac vertical capabilities, reinforcing our route to market not only in Europe and as already partially done with -- diversifying our business such as we did. And we continue to explore.
Third, global, very important point. Commitment to maintain an attractive level of total shareholder returns, including dividends such as this year and share buyback like with the ones we did in the over the past two years. The last two share buyback totaling more than €330 million cash out has been generating accumulative our credit impact on EPS of more than 4%, in money than €0.20.
So, now, I give back the mic to Éric Vallat to drive you to the future outlook.
Thank you, Rika. And I'll try to make it quick to allow time for questions. So, I am now trying to move to Slide 33. There we are before talking about the outlook for ’23, ‘24. Let me just share with you where we stand today with our tenure roadmap. As you can see on the slide, we have achieved a strong progress our gross margin and cup margin improved year after year, quite significantly. More importantly, what was achieved in ’22, ‘23 was much above what was expected internally.
Indeed, we have already reached in ’22, ‘23. So, in year three more than what was expected for year five. Even if we include a transition year for ’23, ‘24, we will remain much ahead of our tenure plan, and this has given us means to invest more than what we would have expected in the future of our brands. And sorry for hammering this again, but the investments of today are the sales of tomorrow.
Moving on to Slide 34. Now, at the same time, we are facing some short-term headwinds in the US. In H1, we will face a challenging environment. This is not new, and you already know what our main challenges are. First an extremely high base of comps. As a reminder, in ’22, ‘23 Q1, we generated 185% sales growth on a three-year basis. This is absolutely huge and much more than the growth on the second semester, which was 30%.
Second, consumption will continue to normalize. In addition, promotion intensity is increasing. On this topic, we have been quite clear. No compromise for us. We will resist and protect our price positioning. Our objective is to create value over the long term and not to be tempted by quick volume wins. When it comes to building brand, keeping price consistencies a prerequisite, you lose confidence in a brand if you do not know what its fair price is.
Finally, Tequila is obviously gaining some market share of course this puts additional pressure, but this is part of the game and I'll come back to it in the next slides and probably during the Q&A. On slide 35 now, our priorities, of course, to manage the current context while preparing the recovery that we expect in H2. In the US the objective will be to leverage some current positive drivers such as the comps that will gradually ease from 185% in Q1 to 30% in H2. Nothing compares between both.
The destocking that will start to be less impacting as a big part will be done in H1, the continued rebalancing of our cognac business towards the upper ranges, including 1738 and wheat res with the help of rare cask that we just recently launched that will support our price mix improvement.
And last but not least, a strong activation plan in Liqueurs & Spirits, particularly on Quantro. It is too early to share precisely our marketing investments for ’23, ‘24. Several activations are already in the pipe and will notably support the celebration of Quantros 75th anniversary and more broadly our cocktail strategy starting in Q1 with the week of Cinco de Mayo, very exciting results so far on Quantro, which was ranked second brand, within the cordials category on a weekly basis on that Cinco de Mayo Week.
At the same time, we will, of course activate some levels in the rest of the world to mitigate the US performance. And this is the last pie of the chart, part of the chart, accelerating in the fastest growing channels, such as on trade and travel retail, leveraging our most dynamic market China while continuing to overinvest on our booming brands like Quantro and Club notably and 1738. Finally, we will continue to benefit from price increases effective since April 1st.
On slide 36 beyond these factual drivers that will shape our H1 and H2 phasing, I would like to spend a couple of minutes or even less on slide 36 and our strong fundamentals, that reinforce our confidence in our ability to recover in H2. Before everything else our strategy is fitting perfectly well with consumer trends and our past three years results have confirmed the relevance of our strategic plan.
During COVID we have benefited from certain consumer trends that have been accentuated by the pandemic drink less, but better premiumization at home mixology. We were poised to ride the wave of these trends. All three play to our strength and tie in with our strategy. I am convinced that in the coming years, our portfolio will embrace their full potential. Leveraging these trends, we are lucky to count on a 300-year-old brands endowed with an authentic heritage and which have their roots in exceptional Terroir.
I am sure that we echo the current aspirations of consumers including cultural relevance and environmental consciousness obviously. The slide 37 speaks of the desirability of the cognac category. We perform every two years a brand health tracker survey together with Ipsos, it measures among others the desirability of the categories we are in and of the brands we own. It is just hot from the press, which gives me the opportunity to share some rhythms with you.
One output is that Cognac remains a very attractive category. It is in the top five most desirable premium spirits categories like two years ago. It is number four in the U.S. and number two in China. Has Cognac suffered from the boom of tequila, maybe more particularly on its lower grades. And this is not the first time it happens. Cognac might be hit temporarily, but history has proven a great level of resilience. Cognac being somehow timeless and don't forget that out of the high-end brown spirits drinkers 25% only drink Cognac and another 25% consider drinking it. And we know that the younger generations are inclined to taste and discover more than the previous ones, which we are loyal to a category, the level of penetration of a Cognac being low. This is an opportunity in the long run.
I am now moving to slide 38, which shares the results of our bronze hair striker for Remy Martin, not only for the Cognac, but for Remy Martin in the U.S. beyond the Cognac category. As you can see, we have increased our AMP as a percentage of our cells in the U.S. and cells are way more than what they were three years ago. And we are still activating the Super Bowl and advertising below the line. These efforts have not been useless as Remy Martin is now the number two most desirable brand in the Cognac category and has entered the top 15 most desirable bronze in spirits in the US for the first time.
I am speaking of state-of-the-art here, which I believe is very encouraging for the future share value speaks for the future. In conclusion, on slide 39 we are confirming the guidance disclosed by Luca end of April following two outstanding years Remy Cointreau full year ‘23, ‘24 to show a continued strong normalization of consumption in the U.S.
However, it should settle at a new normal levels significantly above 1920. And at the same time, we expect a strong organic sales growth throughout the year in the rest of the world, including China, where we forecast major sales gains, EMEA and rest of Asia. That should generate a very good performance and of course GTR, global travel retail that should reach this year pre-COVID levels. In this context, the group expects total cells to remain stable on an organic basis in ‘23, ‘24, with a strong decline in cells in the first half, reflecting essentially a very strong fall in the U.S. and high basis of comparison and a strong recovery in the second half driven by a sharp rebound in the U.S. from Q3 notably.
Meanwhile, Rémy Cointreau intends to confirm its organic level of profitability based on a continued rollout of our value driven strategy built on a firm pricing policy and improved price mix, a resilient gross margin in a persistently inflationary context, a stabilization of the NP ratio as a percentage of sales and a tight control of overhead costs. I would now like to thank you for your attention and Luka and I are now happy to take your questions should you have any, which might be the case. Thank you very much.
[Operator Instructions]. We'll now take our first question from Edward Mundy at Jefferies. Your line is open. Please go ahead.
Good morning, Eric. Morning, Luca. Three questions from me, please. The first is on the brand health tracker survey, on cognac within the US. I'd love to get a little bit more detail on what the detail was around why, cognac remains an attractive category, per the survey, and why are you confident that some of the current challenges are cyclical as opposed to structural? That's the first question in the US.
Second question is on China. Just any sort of updates since quarter end on whether the momentum has continued, perhaps a bit more color on recovery by channel. And then specifically, what are you doing differently to tap into the XO opportunity within China.
And then third question is really a question just to clarify around finance charges. Luca you said, you said that finance charges would roughly double in fiscal ‘24. Just want to make sure I got that correctly.
Okay. Luca, maybe you want to answer the third question? Yes. And then I can take the first ones.
Yes. So, more or less, almost double because there is increase in interest rate. It is a public information that our resources are based on long term. Part of that also in short term and short term is more linked what is the interest, the stage, and the, on a short term, the dephasing of H1, H2 in term of business already guided imply that an increased investment expenses basis in term of cash out, and the same time turnover being more skewed to the second part of the year, makes an increase of the monthly average net debt, meaning the average amount to finance is bigger.
The combination of that makes an increase from this €70 million to something around €29 million, €30 million. So, to be roughly precise, I say almost double. It does not mean probably double, but once again, this linked to the short-term business and the spike in interest rate. So, it is a very technical mechanical impact two element interest on the short term, means that we have inside our resources and the increase of the monthly average debt compared to the previous year on the first part of the year.
Thank you, Luca. So, on the BHT, so it's just heard from the press from last week, so, I'm not going to share details as I need further discussion with the teams. But what I can tell you is that, basically, this is addressing two topics. One is the desirability of the brand. So beyond classic topics like its awareness and so on, really, the share of art meanings, the appetite for the brand. Is it a brand that is liked or not, and why?
And compared to its competitors and to other categories when it comes to cognac, it is also measuring a funnel. A funnel, which addresses first the awareness of the brand and then the consideration, and then the conversion. And what I see very interesting in this survey is that we've made good progress on awareness and consideration, which is preparing conversion. These are the two ones where we are probably a bit weaker than our competitors because our awareness historically was less.
And obviously, the less awareness you have, the less likability as well as the less consideration set. We've made good progress there and I believe it is notably thanks to our huge investments in the past three years. And I still believe it is work in progress and I still take it as an opportunity, but I'll be happy to share more if it's a topic that people are interested in the coming month. It's just hot of the press now and we do it only every two years, and it's a big survey that deserves some more investigation than these big highlights, which is why I'm not going too much into detail.
Now, your question on the US and here I'm going to answer much more precisely was about if I have understood correctly what makes us believe there is, it's conjuncture and not structural and stuff like this. For me, the way we should look at what is happening in the US is actually fourfold. So, there are four drivers to look at it. The first one is mechanical. Somehow, it's just a very high basis of comp of last year. I remind you that growth was 185% in the US versus three years ago compared to 30% for H2.
And this was driven not only by demand, it was also driven by supply chain constraints and the fact that the pipes, so the stocks of the retailers and the wholesalers were totally empty at end March ‘22. And at that time, we started delivering again beginning April, and we filled the pipe and the depletions were massive.
But, so part of it is really mechanical, not linked to demand. And this will clearly normalize. This for me is something I don't call either conjunctional or structural. It's mechanical and it is going to mechanically improve from -- sequentially from Q2 and more particularly in H2. The second key to radar results is indeed the conjunctional part. What do I feel is conjunctional in what is happening today?
I would say one is inflation and the current macroeconomic context. But here, I would somehow minimize it for our brand in cognac region being that it is affecting more VSOP than the rest of the portfolio. And we are probably less exposed to entry price points and to people who have less money to spend than the average of the industry. But it is a fact that in some states where we are more exposed, like Illinois for instance, we do for sure have a conjunctional impact.
And the second one is tequila. And I put it in conjunctional and not structural because we see cells of tequila normalizing now, and again, it's part of the history of cognac to be attacked by categories. But as being a non-fashion product and a very timeless one, we see our resurgence every time. The third key is strategic. In fact, we have decided not to go for promotions.
We are even increasing our prices now in the US less than we were in the past, because we're not crazy, but we are increasing our prices. And you know what? I believe that when you increase prices, there's always a hit. And this hit never lasts forever because people tend to get accustomed to prices. Plus, it is part of our strategy. Our products deserve pricing and I strongly believe that when you change your prices, you lose a certain level of credibility, which I said when speaking of the of, in the presentation.
Second, I believe that, if you look at it in the long run, it is part of our strategy and we said it, we said it one or two years ago, to lower the volumes of VSOP and to increase the volumes of 1738. So, of course several VSOPs impacted in the short term by what is happening in the overall context. But if you take it in the long run, we still believe that we are in a business which is driven by more demand than offer. So, this also gives us an opportunity to rebalance our business a bit quicker than expected. Indeed.
And this is where the conjuncture part is playing a role for sure. I'm not denying it. Last, structural, what is happening from a structural standpoint. And here maybe it's because I'm Remy Martin, but I strongly believe that the structural is positive for us. Meaning the conjunctural is not changing the structural, meaning the drinking less but better is a trend that will not fade out. It is temporarily a minority bit by the context, but it's clearly something that we witness. And you know what? We did a survey on the motivations for our clients to buy alcohol. And when they buy a bottle of alcohol, their number one motivation is their health. So, this can be very surprising. This surprised me.
What it means is this trend of drinking less but better is far from being, slowing down. So, this is the way I look at our results today with the sequential improvement as I said strong impact in the short term, very strong one, but at the same time also good reasons to be confident for H2. And I think you had one last question on China, and I'm going to try to…
So, you know, has the momentum continued towards the end of the quarter, any color in recovery by China and what are you going to be doing differently to tap into the excise on opportunity? Thanks. Thanks Eric.
Yeah. So, it's a good question on China cause you see some, you know, macroeconomic figures on China, which might not be very encouraging. There are three reasons why on our side we are particularly confident. Number one is, we shall not forget that our business is a bit different than others. And we are benefiting from the reopening of on-trade. So, whatever the global news, there's one fact which is on-trade is reopening and on trade before COVID was 45% of our business. Okay? It is now 20%. So, there is room for growth with on trade. And this is something we witness. Second reason to stay on a more macro perspective at Remy level, we are a commodity. Good. We are a luxury and high-end on part of our portfolio, but also, we are commodity good.
We did not benefit like the true luxury brands from the repatriation of the business that was done in their stores into China cause we have no stores elsewhere and we are a commodity good. So, we have always been both in China, so we benefited less from COVID and we are going to be less impacted by outflow tourism as well. Third reason is we have club. Club is, has become a fantastic weapon for us. We have multiplied by more than two of the volumes while increasing the value and it's still growing fast.
I think the job we've done in the past seven years on Club is fantastic and it's exactly what we am at doing for XO. So, I said seven years? So, it takes time. So, it's the kickoff for XO. The kickoff was meant to be last year but with the closure of
On-Trade, and XO is very exposed to on-trade, it made it difficult. So, the 360 plan for XO is driven by a first specific and dedicated campaign that will be on air soon. It was planned for last year with the celebrity. We had problems with our celebrity, so we had to restart again.
We have worked on new on a new campaign that is going to be on air. And meanwhile, we have adapted the visuals of the previous campaign without the celebrity, but this is only part of it. Then you have a fantastic opportunity with the banquets where we are less present than our competitors. With XO, I remind you, our share market share is 7% versus an 80% market share overall. So, there is much we can do there. And these addresses, notably the banquets, which is a big driver for a brand like XO.
So, there is some commercial tactics or so on behind it for sure. And then the -- we are relying on the survey we made, which shows that XO is a very strong brand, actually Remy Martin as well in China, of course, but a bit dusty. So, we are going to leverage the campaign as well as some more tactical social networks actions to rejuvenate XO like we did with club. This is going to take time before it pays off, but if you look at our 2030 vision, it's a fantastic unluckier of the gross margin and of the business in China.
We’ll now move to our next question from Mitch Collett at Deutsche Bank. Your line is open. Please go ahead.
So, the first one is you said a big step up in your investment in aging stock. Can you confirm whether that's driven by volume, so higher volume of ODV purchase or is it partly driven by the price of ODV, increasing and is that the right level to assume you purchase going forward? Secondly, you mentioned that you are interested in M&A and that there's opportunities. Can you just comment on whether there's enough assets out there and the price expectations of vendors, given that the cost of financing has obviously increased? And then the third question is that you guided to a flat tax rate. Can you just comment on the drivers of that given the changing geographic mix of your business this year? Thank you.
Can you, sorry, can you just repeat your question number two on the M&A? I'm not sure I got exactly the question.
Yes, I just wanted to know whether you really see there's enough assets out there that are available and whether there's been a change at -- in the price expectations of potential vendors, given that the cost of doing a transaction is obviously higher now than it was a year ago.
Okay. Step up in aging, you can complement as well. Yes, we can feel free, but to your question is driven by volume and value. But we now see prices normalizing. Clearly, so -- if you take at the normative purchasing in value for the coming years, I think it's important for us to tell you that first it's not necessarily easy to predict, because it depends on also the seasons. I mean, you have some very good, crops and some others which are much less.
So, when the crop is good, the price is a bit less and there is more you can get. And when the crop is not good, and this happens as well, then prices are higher and you don't get the same quantities. So, it's also linked to the crop itself. So, it's hard to predict, but what I can tell you is that we believe that as I said, it's driven by volume and value. And today we have in our stocks the necessary stocks to drive our growth in the future, to achieve our plan, and even slightly more, on all the grades of the range.
So, we are in a good position, which has improved versus two years ago, thanks to the actions we undertook. And it was important to take them two years ago because I remind you that our stock is aging. So, we are quite comfortable there, and I don't see a dramatic increase of our purchasing in the future, particularly if prices keep normalizing. But again, this is also dependent on the number of factors that we do not master.
Yes. To compliment on that. Actually, it is quite stable in prices, not because they're not stable, the price, because the term of the mix of the length of the contract and the mix of the types of ODV. So, no worries on increasing of the price on a single hectoliter. It is clearly volume, volume driven.
And I'll try to answer quickly to take some other potential questions before 10:30, 10:35 max. So just to say on the M&A opportunities, so we are looking at assets. Now, as I said we are not looking at it for the sake of it and not, we have no deadline. We want to make sure the acquisition we do fits perfectly, our portfolio, our values, and has potential.
So, no change in the strategy, no change in what we are looking at. Indeed, the change could be that particularly in some categories, and that includes tequila. But prices could normalize. So, it's an opportunity we would be prepared to seize. But again, what matters beyond everything for us is not solely the price of the acquisition made, but more importantly, it's fit within our values and our strategy.
Tax rate, very quickly. So, guidance repeaters to be more or less flat, which is behind the lines, is an improvement because when you have a year in which U.S. is clearly lower than China in terms of mix, we are able to absorb it. So, in a comparable basis, it's an improvement to being able to be stable. Clearly, the tax rates in France being now far lower than some years ago, it's helping.
Thank you, Dave.
Thank you. We'll now move on to our next question from Frederick [indiscernible] at Stifel. Your line is open, please go ahead.
Yes. Thank you. Good morning, Eric, and Luca, I have a follow-up on the U.S. and a question on the Liqueurs & Spirits business. On the U.S., could you maybe update us on, you said promotional intensity was still strong. Maybe you could update us on the kind of price gap between your prices that you don't move and competitions that are moving to a category to let us know how this gap has evolved and what consequence for the consumer and to make it maybe more straightforward.
What are your basic assumptions on sellout for the category and for your plan? And if things went different from your expectations, what could be the magnitude of the delay? Like plus or minus one quarter. for the normalization of the start of the improvement. That's question number one. It's a long timing given the type context in the U.S.
No, the second one on ANP, just what's the threshold that you are targeting to be considered the ANP investment? Where do you want to be before you put foot on the brake, on ANP as a percentage, let's say? Just to understand the threshold. Thank you, very much.
So, quickly on question two. The threshold, we believe we are at the threshold roughly, which is what we said when we launched our plan in 2020. We said the first years would be dedicated to a sharp increase of our ANP ratio versus sales. Actually, we increased more than expected. So, what was meant to increase in five years as a percentage of sales has increased quicker thanks to the gains and gross margin. And we believe today we are at a normative level in terms of percentage of sales. So, it doesn't mean that we are putting our feet on the brake because we still are ambitious and ourselves in the medium terms. So, in absolute value, ANP will grow, but in relative share they should stabilize.
And for the U.S. I try to be quick as well as we don't have much time left, but so first the promotion intensity to be -- I don't want to go too much into detail and to speak too much of competition directly as well, but if you take cognac, which I think is more your question. It's more on the entry price point and on the VS category that there is more price aggressivity than on the upper ranges.
So, the gap between our products and others is probably not moving that much. If you consider the upper ranges, even though, we are the only ones to increase but not necessarily we at a higher percentage except for XO. But the gap between VSOP and the grades below is increasing between our VSOP and the grades below, which we take as a good news because we -- champagne and we need to position VSOP at the right price point, relatively speaking. And this is what's happening now. And we are kind of solving a 10 years issue when the VSOP had been decreased 10 years ago, and was too close from VS. There we are -- at least now we are getting close to what our target positioning is and should be.
And I remind you that in the long run, our betting volumes is 1738. And not that we kill VSOP, we're very proud of it, but stabilizing sales it would help us grow 1738, which is our number one objective.
As to the sellout, it's a bit early today to speak of sellout. You see it in innocent figures and you see it in the official figures. What you can witness is that, it has improved if you compare it to two month ago, it is still negative, clearly, but it has improved. If you look at it versus three years ago, it's still incredibly positive, particularly for Remy Martin, with which tells us, and which comforts us in the fact that when the comps will ease, we will naturally improve. Because we are between if you compared to three years ago, we have a very strong double-digit growth even though we are decreasing versus last year. And last, the magnitude of the delays clearly too early to say, of course at this stage cause it'll depend on the magnitude as well. For the moment we don't see any reason to change our guidelines for the year. That's the best answer I could give. But you can if you…
No, no. Yes.
Jumping on these two points be some question that because we are running late, I anticipate maybe some question that are not, you are not able to ask in terms of timing. What about the early consensus? At this stage, we are brought in line with your full year consensus in terms of the top-line organic sales top line in terms of operating profit. So, we are borderline. The two points in which you need to adjust the consensus, I insist, but then you need also to moderate that in term of absolute value impact is that the net financial charges need to be increased to almost double. It is not double, almost double.
I'm quite precise when I say thing. So, it is 29 to 30 at this stage because of the increased amount, average debt, and so also the net debt because if there is a part in which you can improve your model is the net debt and, in a ratio, a ratio will be always remaining in a very moderate modest trend.
This was for the yearly picture. I can confirm the rhythm. So, we will start slow in the Q1 at group level will start in the mid-thirties negative, being positive everywhere and then ever or more or less everywhere. And clearly realigning, still realigning in the U.S. And then sequential improvement, Q2, Q3, Q4, year. Year two halves, H1 will be negative overall, because the rhythm is start increasing from the Q2 and then positive in the H2. This is the 0.2 major point on the yearly consensus and the rhythm, slow start mid-thirties and then improvement. Sequential improvement. Last point. Very important. We will never be at group level reaching a lower point whenever in the year compared to ’19, ‘20 will be always up compared to ’19, ‘20. I hope it helps.
Thank you. And we'll take our last question from Trevor Sterling at Bernstein. Your line is open. Please go ahead.
Thank you, Luca, Eric, and thank you Marie-Amelie. Two quick questions. One in the U.S. on pricing. Are you taking pricing right across the portfolio including VSOP or is just only on the higher grades? And second question Luca, maybe just talk a little bit about the moving parts on margins next year. I know you've guided a stable, but where is the pressure and where is the offset?
Okay, Luca, I let you answer question two and I take question one. Okay.
Okay. I start a little bit quick and let's make it in five minutes max, three minutes max if we can. So, thanks for the question on pricing. Yes, we are increasing VSOP price as well, but at low single digit. So, we have a pricing strategy in the U.S. which is very tailor-made grade by grade. So, a strong high single-digit price increase on XO low single-digit increase on VSOP.
Organic COP margin flat on a yearly level. So clearly H1 for was the H2? Because there's linked also to the top line, and ended of investment gross margin will be more or less flat. So, we are able to more or less compensate all that. Also, the negative impact mathematically of the U.S. negative figures on a full-year, mainly in the first part of the year. AMP more or less flat compared to the turnover. So, stabilizing the ratio.
And the same thing for OpEx i.e., being able to absorb strategic OpEx increases, being able to absorb important salary increases linked to inflation, and the result being inorganic, organic stability in terms of profitability. But as you have noticed, clearly you have a negative impact in publish, because you have a top line and bottom line impact of OX.
One last word, because I know that many of you will be at that, their model of the net financial comment I made on guidance. Don't forget that we are here for the future, and we're covering the needs to invest in the future. This year you have under your highs more than 100 million positive price mix effect. The spike in interest is 10 million, 30 million, so 1/10or this positive impact. So, when you compare that, you understand where is the needle for the future. Thank you.
Thank you very much, Eric and Luka.
Thank you. I think this concludes our session thank you very much for your attention [indiscernible] through the organizer Marie.
Thank you, ladies and gentlemen this concludes today’s call, thank you for your participation. You may now disconnect.