TIDMSTCK
RNS Number : 1976H
Stock Spirits Group PLC
02 December 2020
Stock Spirits Group PLC
Preliminary results for the year ended 30 September 2020
A resilient performance during uncertain times, with results
ahead of expectations
2 December 2020 : Stock Spirits Group PLC ("Stock Spirits" or
the "Company"), a leading owner and producer of branded spirits and
liqueurs that are principally sold in Central and Eastern Europe
and Italy, announces its results for the year ended 30 September
2020.
Highlights:
Underlying results at constant(1)
currency excluding acquisitions
Reported results made in 2019
All values in EUR millions Underlying
unless otherwise stated 12 mth 12 mth % change Underlying 12 mth
to Sept to Sept 12 mth to to Sept %
2020 2019 Sept 2020 2019 change
---------- ---------- ----------- ------------- ------------ ---------
Volume (millions 9 litre
cases) 14.8 14.4 3.0% 14.6 14.4 1.8%
---------- ---------- ----------- ------------- ------------ ---------
Revenue 341.0 312.4 9.1% 324.5 303.6 6.9%
---------- ---------- ----------- ------------- ------------ ---------
Adjusted EBITDA(2) 71.0 67.0 6.1% 68.9 65.9 4.6%
---------- ---------- ----------- ------------- ------------ ---------
Operating profit before
exceptional expenses 57.8 54.5 6.0%
---------- ---------- ----------- ------------- ------------ ---------
Operating profit 33.6 42.9 -21.5%
---------- ---------- ----------- ------------- ------------ ---------
Profit for the year 19.6 28.4 -31.2%
---------- ---------- ----------- ------------- ------------ ---------
EPS basic - EURcents
per share 9.83 14.33 -31.4%
---------- ---------- ----------- ------------- ------------ ---------
EPS adjusted basic -
EURcents per share(2) 21.42 19.75 +8.5%
---------- ---------- ----------- ------------- ------------ ---------
Net debt 22.7 55.4 -59.1%
---------- ---------- ----------- ------------- ------------ ---------
All comparative figures for the 12 months to September 2019 have
been restated to align with the new IFRS16 requirements, which were
adopted by the Group on 1 October 2019.
-- Underlying volumes up +1.8%, underlying revenue up +6.9% and
adjusted EBITDA up +4.6%: a resilient performance against the
backdrop of the global pandemic in H2, and excise tax increases in
Poland and the Czech Republic in H1
-- Revenue and EBITDA in Poland up +15.1% and +18.3%
respectively (at constant currency), with our market share in the
key vodka category at a five year high of 31.6% as at September
2020
-- A robust response to COVID-19 with no disruption to
operations and no use of furlough schemes or other government
assistance
-- Positive contribution from 2019's acquisitions - Bartida in
the Czech Republic, and Distillerie Franciacorta in Italy - despite
on-trade lockdowns in both of those markets
-- Cash conversion remains strong, delivering 112.1% (2019:
91.5%), with close working capital management through the pandemic.
Net debt of EUR22.7m at 30 September 2020 equates to leverage of
0.32x(3)
-- Exceptional items total a net EUR23.0m; of which a net
EUR21.1m are non-cash items (largely impairment of our traditional
Italian brands and Irish whiskey investment), and EUR1.9m of cash
items
-- Total ordinary dividend for the year +6.8% at 9.55 EURcents
per share (after a proposed final dividend of 6.78 EURcents per
share, up +7.4% up on last year's final dividend(4) ); in addition
the Board is proposing a special dividend of 11.00 EURcents per
share
Commenting on the results, Mirek Stachowicz, Chief Executive
Officer, said:
"We are pleased to have delivered a resilient performance
against the backdrop of a hugely challenging year. In H1, we
successfully navigated excise tax increases in our largest markets
of Poland and the Czech Republic. In H2, we prioritised protecting
and supporting our employees, customers, suppliers and the
communities around us in the face of the COVID-19 pandemic.
Our strategy of sourcing and manufacturing nearly all of our
products locally ensured that there has been no disruption to our
operations. In addition, our longstanding focus on the off-trade
served us well during the closure of the on-trade as a result of
lockdowns. Our portfolio of brands performed strongly, boosted by
consumers opting to buy familiar and trusted local brands during
times of uncertainty, as well as by the trend towards staycations
in our markets. Our strong operational and financial performance
has enabled us to continue to invest in our brands and our
business, and to return surplus cash to our shareholders in the
form of a special dividend.
While there remains some uncertainty in the short-term outlook,
in the longer term we are confident that we will emerge from the
pandemic with an even more loyal and engaged consumer base, closer
customer and supplier relationships, and a stronger business than
ever before. As such, we remain confident in the future prospects
of Stock Spirits."
S
Analyst presentation
Management will be hosting a presentation via an audio webcast
and conference call which will be hosted by CEO Miroslaw Stachowicz
and CFO Paul Bal at 9:00am (GMT) on Wednesday 2 December 2020.
Dial-in details are below. Please dial-in at least 15 minutes prior
in order to ensure a timely start to the briefing.
Audio webcast: https://edge.media-server.com/mmc/p/xq5wybb7
Conference call:
Location Phone Number Passcode
International +44 (0) 2071 928 338 3728837
-------------------- --------
UK 0800 279 6619
-------------------- --------
Please note that questions will only be taken over the
conference call and not the audio webcast.
A replay of the audio webcast will be available shortly
afterwards on the same link as above.
A webcast of the presentation will also be available via
www.stockspirits.com and a recording made available shortly
afterwards.
For further information:
Stock Spirits Group:
Paul Bal +44 (0) 1628 648 500
Powerscourt +44 (0) 207 250 1446
Rob Greening stockspirits@powerscourt-group.com
Lisa Kavanagh
Bethany Johannsen
A copy of this preliminary results announcement ("announcement")
has been posted on ww.stockspirits.com.
Investors can also address any query to
investorqueries@stockspirits.com .
About Stock Spirits Group
Stock Spirits is one of the leading branded spirits and liqueurs
businesses in Central and Eastern Europe and Italy, and offers a
portfolio of products that are rooted in local and regional
heritage. With businesses in Poland, the Czech Republic, Slovakia,
Italy, Croatia and Bosnia & Herzegovina, Stock Spirits also
exports to more than 50 other countries worldwide. Global sales
volumes currently total over 125 million litres per year.
Stock Spirits has production facilities in Poland, the Czech
Republic, Germany and Italy. Its portfolio includes
well-established "millionaire" (selling in excess of one million 9
litre equivalent cases per annum) brands including o dkowa,
Lubelska, Bo kov and Stock Prestige, local leaders such as Stock 84
brandy, Fernet Stock bitters, Keglevich and Limoncè, as well as
more recent innovations including Amundsen Expedition vodka and Bo
kov Republica rum.
Stock Spirits is listed on the main market of the London Stock
Exchange. For the year ended 30 September 2020 it delivered total
revenue of EUR341.0m and operating profit before exceptional items
of EUR57.8m.
For further information, please visit www.stockspirits.com
Chairman's Statement
As Chairman of Stock Spirits Group PLC, I am pleased to present
our preliminary results for the year ended 30 September 2020.
This year has brought challenges like no other, but we have
demonstrated great resilience across the Group. The early response
of governments in our key markets shielded us from the worst
effects of the pandemic, but we have still had to adapt and respond
to protect our people and maintain production for our customers and
consumers. To that end I, and the entire Stock Spirits Board, want
to thank all our teams for their continued hard work,
professionalism and dedication in delivering outstanding service to
our customers in hugely demanding circumstances.
Dividend
Our resilient performance has enabled us to redefine our
progressive dividend policy and deliver a higher pay-out than in
recent years. Our proposed final dividend for the year is 6.78
EURcents per share (2019: 6.31 EURcents) and is a +7.4% increase on
last year's final dividend. There were no acquisitions during the
year and, while we continue to assess a range of opportunities, the
continuing pandemic means that we are unlikely to complete a
meaningful and value-creating acquisition in the near-term. The
Board has consistently said that it would consider additional
distributions to shareholders under such circumstances. Taking into
account our robust operational and financial performance that has
resulted in our strong capital position, the Board is also
proposing a special dividend of 11.00 EURcents. This results in
total dividends for the year of 20.55 EURcents per share, up +130%
on the total dividend for the prior year (2019: 8.94 EURcents per
share).
Looking ahead
We are still in a time of huge uncertainty due to the ongoing
effects of the pandemic, and ensuring that Stock Spirits continues
to stay resilient, agile and responsive will be the Board's key
focus in the coming months. However, I am confident that we have
the right business model and strategy in place, and that our
collegiate, collaborative culture - at Board level and throughout
the Group - will result in decisions and actions being made to
secure the success of Stock Spirits for the long term.
Chief Executive Statement
Against a challenging backdrop, I am pleased to report that we
have delivered revenue of EUR341.0m and adjusted EBITDA of
EUR71.0m, an increase of +9.1% and +6.1% respectively. Excluding
the acquisitions completed in 2019, and on an underlying constant
currency basis, these increases were +6.9% and +4.6% respectively.
Like all companies, we have been tested this year, but our unique
locally-focused business model has proved resilient against the
pandemic, and our culture of small company agility saw every member
of the Stock Spirits team rise to the challenge. I thank all of our
colleagues for their dedication in the face of difficult working
conditions.
H1: good strategic progress whilst responding to significant
excise increases
The year began with uncertainty due to the impending increases
in spirits excise tax in both Poland and the Czech Republic, our
two largest markets which account for more than 80% of our revenue
and profits. However, as reported at our half-year results in May,
we performed above expectations due to extensive preparations and
management of the changes.
We were also making good progress against our M&A
objectives. However, work has been interrupted by COVID-19. This
resulted in the write-off of the EUR1.3m invested in preparatory
work. The first pandemic wave also impacted heavily on our
investment in the Quintessential Brands Irish whiskey joint venture
and resulted in an impairment of EUR14.2m.
H2: demonstrating resilience in the wake of COVID-19
With c.15% of the Group's revenues historically coming from the
on-trade, we have inevitably suffered some loss of revenues due to
the widespread closures of on-trade channels as a result of the
pandemic in H2. However, our long-standing focus on the off-trade
and no reliance on duty-free channels stood us in good stead. Our
portfolio of local brands performed very well as shopping habits
changed and consumers reverted to familiar and trusted brands in
uncertain times. This trend was further boosted by "staycations"
during the summer.
The extent of this mitigation was particularly evident in the
Czech Republic where on-trade would normally account for over 30%
of revenues. Despite losing much of the on-trade business for some
four months, underlying Czech revenue for the year was almost flat
and underlying adjusted EBITDA was up +2.3% (all at constant
currency) .
Italy and Croatia, heavily reliant on tourism and on-premise
consumption, were the two markets where we felt the most severe
impact of the pandemic, resulting in the impairment of EUR9.6m
taken against our traditional Italian brands in H2. This impairment
does not involve the newly-acquired Distillerie Franciacorta brands
that performed with pleasing resilience.
Our operating model - built on localised sourcing and
manufacturing prevented disruption to our supply chains by border
closures. Local relationships with our customers were further
strengthened as we temporarily extended credit terms where
necessary. Our close ties with local suppliers ensured continuity
in the supply chain.
During lockdowns, we leveraged our digital platforms to stay in
touch with our consumers and assist key stakeholders. For example
in Italy, our 'Skip the Ordinary' online campaign for Keglevich has
been a significant success, drawing an online audience of over five
million views and making a substantial contribution to
strengthening Keglevich's share in the flavoured vodka category
from 73.6% to 77.7%(5) .
Despite the impact of COVID-19, both of the acquisitions made in
2019 performed strongly. Distillerie Franciacorta in Italy showed
resilience in the face of very challenging market conditions. It
delivered a small positive EBITDA contribution this year, and we
continue to expect it to be earnings enhancing in 2021. Bartida,
the acquisition in the Czech Republic, performed extremely well,
delivering EUR1.5m in EBITDA in the year - well ahead of our
expectations despite its reliance on on-trade distribution.
New Product Development ("NPD")
Another strategic response to COVID-19 involved accelerating our
NPD programme leveraging our strong routes-to-market and
introducing new products faster than our competitors. In Poland,
our NPD focused on the more profitable flavoured vodka. A notable
example was new o dkowa Gorzka Rześka, which sold over one million
litres in its first six months. As a result, we significantly
improved our market share of these higher-margin products.
We also enjoyed positive results from repositioning the Fernet
brand in 2019, with the premium variant Fernet Stock Barrel
commanding a retail price c.28% above mainstream Fernet
Original.
Sustainability
Given the resilience of our performance, we were able to
continue with investments in key projects to develop a more
sustainable business model for the future. Planning work continued
on the new distillery at our Lublin facility and, whilst we have
had to manage the uncertainties around COVID-19, we still expect it
to come on-stream in FY2023 as planned, and deliver a five year
pay-back. Our OneSAP project to develop and implement a Group-wide
enterprise resource planning solution also continued largely
unaffected and is making good progress.
Prioritising our stakeholders
The pandemic has provided us with an opportunity to demonstrate
our firm commitment to the social aspects of our Environmental,
Social and Governance agenda. Although our resilience to the crisis
has benefitted all of our stakeholders, our top priority throughout
remains the health and wellbeing of our people. We implemented an
extensive range of cleaning and social-distancing measures to
provide on-site workers with a safe working environment and
office-based staff have predominantly been working from home since
March.
We have not utilised government support such as furlough schemes
or other similar initiatives. Furthermore, there have been no
lay-offs or pay reductions as a result of the pandemic. In fact, we
rewarded many of our staff with additional incentives for their
hard work and dedication when faced with more demanding working
conditions in our manufacturing and logistics facilities.
We carried out our annual employee engagement survey in March in
the midst of COVID-19 in our main markets. It received a record
response, and showed that our response to the situation improved
engagement levels.
We are proud to be able to help many of our stakeholders as
well. We produced hand-sanitiser in Poland, the Czech Republic and
Germany, donating it to customers, local authorities and hospitals
along with supplies of pure alcohol. We also allowed the Polish
government to use our facilities to produce a spirit that was used
in their own hand-sanitiser. Our support to stakeholders is perhaps
summed up by our Czech business being nationally recognised by the
CZECH TOP 100 Association, acknowledging them as 'heroes in the
fight against Coronavirus'.
For our investors, the pandemic gave us opportunity to
demonstrate how differentiated and resilient our business model is.
While many companies reduced or cancelled dividends, we are pleased
to be able to redefine and enhance what our progressive dividend
policy means, as well as propose a special dividend.
Outlook
Our four-pillar strategy remains successful and as relevant as
ever. We will continue to deliver value by focusing on
premiumisation, millennials and digital, as well as being ready to
re-start M&A activity as conditions permit.
We remain alert to new regulatory developments. In Poland, as
previously announced, legislation was passed in the summer to
implement additional taxes on small format pack sizes (300ml or
smaller) of alcoholic products from 1 January 2021. We have in hand
a range of potential commercial and operational actions to mitigate
the possible impact, and our successful management of the recent
excise changes gives us confidence in our ability to respond to
this new development.
As we near the end of the Brexit transition period, our message
remains that we expect to see no material impact on our business
irrespective of the nature of the UK's final arrangements with the
EU.
We take encouragement from the resilience that our business has
shown in a year of challenges, from excise increases to the
COVID-19 pandemic. Our products have shown themselves to be trusted
brands, our customer and supplier relationships are stronger than
ever before, and our business model has been proven to be strong
throughout the crisis. While there remains some uncertainty in the
short-term outlook due to the pandemic, we continue to see many
opportunities for future growth in our markets, and to be confident
in the long-term prospects of Stock Spirits.
Our markets in detail
Poland
Revenue for the year in Poland was significantly ahead of last
year at EUR193.6m (2019: EUR171.7m), with adjusted EBITDA also
showing strong growth at EUR49.9m (2019: EUR43.1m).
Market overview
Despite the +10.0% excise tax increase on spirits in January
followed subsequently by the COVID-19 crisis, the total spirits
market in Poland achieved value growth of +10.7% and strong volume
growth of +3.7%(6) .
Poland is the world's third largest vodka market by value and
volume, with the highest CAGR growth over the last five years of
the top ten vodka markets in the world. Vodka is by far the largest
spirits category in Poland (c.80% of total spirits volume)(6) .
Clear and flavoured vodka was by far the greatest contributor to
total spirits growth, delivering c.60% of total absolute value
growth, whilst 30% came from the second biggest spirits category,
whisky(6) .
Total vodka category value growth of +8.4% during the last 12
months was well ahead of volume growth at +1.8%, in part driven by
the excise increase, but also by the positive impact of
premiumisation and reduced price-discounting during the pandemic(7)
.
The fastest overall value growth rate was from the flavoured
vodka sub-category at +8.8%, but the far larger clear vodka
category also achieved value growth at +8.2% and was the greatest
contributor to absolute growth(7) .
The global trend to premiumisation in spirits continued to be
visible in Poland also during the period of pandemic. Total premium
vodka achieved value growth of +16.0%, significantly ahead of the
total category, reflecting Polish consumers' readiness to pay more
for premium quality vodka as affluence increases.
Performance of our core brands
Stock Spirits outperformed the total vodka market in Poland,
driving continued share gains as we focused on profitable growth.
Stock grew total vodka volume +2.4% and value +9.2%(7) . Stock's
total vodka volume share grew from 29.0% last year to 29.1% this
year and value share grew from 29.5% to 29.7%(7) . Our market share
growth accelerated in the second half of the year, and we achieved
31.6% value market share in the month of September, the highest in
five years (7) .
The leading contributor to our clear vodka share growth was the
continued success of our largest brand, o dkowa De Luxe, with a
value growth of +11.1%(7) , supported by consistent consumer
activation at the point of purchase.
Our brand leader in the premium segment, Stock Prestige, grew
value by +5.4%(7) and maintained its leadership of this
increasingly competitive segment, despite being heavily impacted by
the reduction in celebratory usage occasions as a result of the
COVID-19 lockdown.
Amundsen Expedition, another of our premium vodkas, grew value
by +15.1%, over triple that of the top premium segment where it is
positioned, whose value growth was +5.0%(7) .
New Product Development
Stock Spirits grew total flavoured category volume and value
versus last year, achieving our ambition to recapture the lead
position in flavoured category growth. o dkowa Gorzka achieved MAT
value growth of +17.5%(7) , supported by the roll-out of our
Kolonialna premium new product development and the introduction of
two new lighter tasting variants under the 'Rześka' ('Fresh')
sub-brand. This broadened the brand's appeal to millennials, in
particular female and young adult drinkers, and especially during
the summer months.
Our largest flavoured brand, Lubelska, delivered +4.7%(7) value
growth despite the reduction in out-of-home small format impulse
purchases, which is usually a significant proportion of the brand
sales. The Saska flavoured range continued to build its position
amongst emerging spirit drinkers, achieving MAT value growth of
23.3%(7) , supported by the roll-out of our highly successful new
flavours such as mango in April 2020.
Small format tax
Legislation was passed in the summer of 2020 to implement
additional taxes on small format pack sizes (300 ml or smaller) of
alcoholic products from 1 January 2021. Our recent successful
management of the excise changes earlier in the year gives us
confidence in our ability to respond to this new development and we
have in hand a range of commercial and operational actions to
mitigate the impact from this legislation change.
Czech Republic
Revenue for the year also grew strongly in the Czech Republic to
EUR87.3m (2019: EUR81.3m) due to the contribution of the prior year
acquisition, with adjusted EBITDA at EUR26.1m (2019: EUR24.3m).
Excluding the impact of the Bartida acquisition completed last
year and at constant currency, underlying revenue was flat at
EUR78.1m (2019: EUR77.9m) whilst adjusted EBITDA for 2020 was up
+2.3%, delivering EUR24.6m (2019: EUR24.0m).
Market overview
Stock has held spirits market leadership in the Czech Republic
for over 20 years(8) and has brand leaders in the key spirits
categories of rum(9) , vodka and herbal bitter liqueurs(10) .
Total spirits in the Czech Republic's off-trade grew value at
+11.0% and volume +5.6%, despite the spirits excise increase of
13.2% in January of this year and the subsequent impact of
COVID-19(10) . The four core categories on which Stock focuses -
rum, vodka, herbal bitters and whisky - together account for c.75%
of total spirits volume, and are the key drivers of overall spirits
performance. Double-digit value growth was achieved by rum, vodka
and whisky. High growth from those categories off-set lower growth
from herbal bitters(10) .
Performance of our core Brands
Overall performance of our Czech brands for the year was ahead
of our expectations, particularly given our strong participation in
the on-trade. Whilst value share declined slightly from 34.2% last
year to 33.6% this year, the combination of our premium innovation,
the benefits from previously acquired brands, and the contribution
from our distribution brands delivered value growth of +8.8% and
volume growth of +4.8%, maintaining market leadership and
delivering the greatest absolute value growth in the market(10)
.
Stock grew value share of the largest Czech spirits category,
local rum, from 64.6% to 65.8%(10) , driven by our brand-leading Bo
kov Tuzemsky, which gained from shoppers' shift to trusted,
well-known local brands, as well as consumers' increased at-home
consumption during the pandemic. Bo kov Republica maintained brand
leadership of imported rum, supported by premiumisation through its
award-winning new aged variant, Republica Reserva, despite the
launch of an aggressively discounted 'look-alike' competitor.
In the highly price competitive vodka category, Stock maintained
its brand portfolio value share leadership and grew value
+13.4%(10) in the face of aggressive discounting by private label
and competitor brands which maintained their pre-excise increase
price points.
These successes outweighed share decline in herbal bitters,
where Fernet Stock's value share reduced from 28.0% to 26.5%(10) ,
driven by changed retailer promotional strategies coupled with
continued aggressive price discounting by Jagermeister. Fernet
Stock's share has been gradually recovering as the full re-launched
range is established, and the resulting revised price architecture
takes effect.
Acquisitions
Stock Spirits completed the acquisition of Bartida in May 2019,
bringing new brands and step-changing our capabilities in the
premium on-trade channel. Notwithstanding the significant impact of
COVID-19 on the Czech on-trade in the second half of this year, the
contribution from Bartida exceeded our expectations. In line with
our plans, the business is earnings-enhancing in the first year
after acquisition. This was possible thanks to the accelerated
roll-out of the acquired brands and faster attainment of cost
synergies. Bartida's expertise is also beginning to make a wider
contribution across the Group.
Italy
Revenue for the year in Italy was ahead at EUR30.6m (2019:
EUR26.9m), with adjusted EBITDA of EUR2.0m (2019: EUR3.6m).
Excluding the impact of the acquisition of Distillerie
Franciacorta completed last year, underlying revenue and adjusted
EBITDA for 2020 was EUR24.7m and EUR1.9m respectively (2019:
EUR25.4m and EUR3.8m).
Market overview
Of all our markets, Italy was the most heavily impacted by
COVID-19 and the on-trade holds the highest proportion of total
spirits sales. Several spirits categories serve 'higher energy',
social gathering-orientated usage occasions. The on-trade was shut
down for several months during the pandemic lockdown, such usage
occasions were curtailed, and both have yet to recover to
historical levels.
Consequently, total spirits grew +7.8% value and +7.9% volume in
the modern off-trade in 2020(11) but the total market (including
on-trade) declined by -2.3% in value.
Performance of our core Brands
COVID-19 significantly impacted several of Stock's key
categories, notably limoncello, the Beam Suntory range that was
introduced in H2, and flavoured spirits. The resulting impact of
this is an impairment against the carrying value of our historical
Italian brands of EUR9.6m, classed as an exceptional item. At the
same time, spirits categories in which we do not participate were
impacted less severely. Due to the introduction of Beam, Stock
Italia's value share of the total modern trade increased slightly
to 7.2% (versus 6.9% last year)(11) . Encouragingly, the last
quarter of our financial year saw a stronger performance, with
growth from grappa, brandy, clear and flavoured vodka. However,
this was off-set by continued declines from Limoncè, whose usage
occasions remained heavily impacted by COVID-19. Full production
and bottling of Limoncè was restored to Italy during the last
quarter of the financial year, with the expectation that this
should facilitate our marketing of this iconic brand.
Acquisitions
The acquisition of Distillerie Franciacorta, completed in early
June 2019, made Stock the number-one grappa player in the Italian
off-trade. It also enhanced our premium on-trade sales capabilities
and tripled the size of our sales force, bringing growth synergies
across the off and on-trade for all of our categories, and helping
to secure Beam Suntory brands' distribution.
The acquisition provides a strong platform from which to enhance
the provenance of Stock's Italian brand portfolio and generally
rejuvenate our Italian business, starting with the "repatriation"
of Limoncè. The acquisition is performing in line with our
expectations to be earnings-enhancing in the current year despite
the continuing challenging environment in Italy. Additionally, the
stronger on-trade sales force resulting from this acquisition was a
direct reason for gaining Beam-Suntory as a distribution partner in
Italy in April 2020. Coinciding with the peak of COVID-19 in Italy,
and requiring some upfront investment, the Beam agency will begin
making a positive contribution to our results in 2021.
Other markets
'Other' markets include the results of Slovakia, Croatia and
Bosnia & Herzegovina together with our export operations know
as International, our Baltic distillery and UK corporate
office.
Revenue for the year for Other markets was EUR29.5m (2019:
EUR32.5m), with adjusted EBITDA of EUR3.4m (2019: EUR5.2m).
Slovakia
It was a challenging year in Slovakia, but one in which our
expansion in rum - led by Bo kov Republica - coupled with a strong
performance in vodka by Amundsen, enabled Stock to maintain its
position as the second biggest player in the off-trade. Stock's
total spirits value share declined slightly from 12.1% last year to
11.5% this year, and absolute value was -1.6% versus last year(12)
.
Share growth from Fernet Stock, Republica and our leading vodka
brands was off-set by COVID-19-driven declines on the Beam Suntory
range and Golden fruit spirits, whose categories are more dependent
on 'higher energy' social gatherings, which were curtailed by the
pandemic.
Other International markets
Croatia was severely impacted by COVID-19 given its heavy
reliance on tourism and on-trade consumption. Nonetheless, Stock
grew its brand leader Stock 84's share of imported brandy in
absolute volume and value(13) .
In our export markets, COVID-19 had a negative impact on
duty-free volumes as a result of reduced international travel, and
also led to severe local lockdowns across many locations. The
successful reorganisation of our route-to-market in Germany
contributed volume uplift from new retail distribution via our
partner Dovgan, notably for our Polish brand portfolio. The
Distillerie Franciacorta brands acquired in 2019 were successfully
introduced into 32 of our International distribution partners
including Germany, the Netherlands, and the UK.
Chief Financial Officer Statement
Changes in accounting policies
Following adoption of IFRS 16 "Leases" from 1 October 2019, all
comparative figures have been restated to comply with the new
accounting standard and enable reporting on a like-for-like basis.
Full details of the changes are set out in notes 3 and 15 of the
consolidated financial statements. One consequence of this change
is an improvement in EBITDA, operating profit and EBITDA margin, as
certain operating costs associated with leases are now considered
financing costs. The overall impact on operating profit is not
material.
Underlying results
In the second half of the prior year, the Group completed two
acquisitions - Bartida s.r.o. and Bartida Retail
s.r.o. in the Czech Republic, and Distillerie Franciacorta
S.p.A. in Italy. In order to provide a comparison of the Group's
results on a like-for-like basis, we also report underlying growth
rates for key metrics (that exclude the impact of these
acquisitions in both years) and is stated at constant currency.
Financial performance
Performance differed between the two halves of the year. Our
very strong year-on-year growth in the first half of the year was
tempered in the second half as the COVID-19 pandemic impacted the
on-trade and duty-free channels for several months. In the
second-half of the year, underlying volumes, revenues and EBITDA
were lower than the comparable period last year. However, the -1.9%
underlying revenue decline in the second half of the year indicates
that demand significantly shifted to the off-trade channel during
this period.
Volumes for the year were up +1.8% on an underlying basis, as a
result of continued strong performance in Poland. On a reported
basis volumes rose +3.0% helped by the full impact of last year's
two acquisitions. Reported revenue was up +9.1% to EUR341.0m (2019:
EUR312.4m) and underlying revenue was up +6.9% to EUR324.5m (2019:
EUR303.6m).
The underlying revenue increase was predominantly driven by
pricing (+4.5%), primarily in Poland where the excise tax increase
was fully passed on, with a small margin. In Czech, the excise tax
increase was only passed on where competition considerations
allowed. There was a benefit from the 2019 acquisitions (+3.9%),
but a negative impact from foreign currency movements (-1.7%), due
to a slight weakening in the Polish z oty and the Czech koruna
during the year versus the euro.
Revenue per litre(14) increased +6.0% to EUR2.55 (2019: EUR2.41)
mainly reflecting the mix benefit of last year's acquisitions, as
well as the increased pricing in Poland and Czech following the
excise increases. Cost of goods sold per litre(14) increased +7.8%
to EUR1.37 (2019: EUR1.27), mainly due to last year's acquisitions
and an increase in third party distribution brand cost of goods.
This mix reduced reported gross profit margin by 90bps to 46.4%
(2019: 47.3%). Underlying gross margin was less impacted 47.0%
(2019: 47.4%).
Selling expenses increased +8.1% to EUR65.9m (2019: EUR61.0m)
from a combination of the full year impact of 2019's acquisitions
and increased investment behind our brands and salesforce
capabilities. Other operating expenses increased by +6.7% to
EUR33.4m (2019: EUR31.3m) mainly due to higher staff costs,
particularly in Central Europe, plus the increase from the full
year impact of 2019's acquisitions.
Adjusted EBITDA increased by +6.1% to EUR71.0m (2019: EUR67.0m)
representing an Adjusted EBITDA margin of 20.8% (2019: 21.4%). On
an underlying basis, Adjusted EBITDA was up +4.6% at EUR68.9m
(2019: EUR65.9m), resulting in an underlying Adjusted EBITDA margin
of 21.2% (2019: 21.7%).
Operating profit before exceptional items was EUR57.8m, an
increase of +6.0% versus 2019 (EUR54.5m). Underlying operating
profit before exceptional items increased by +3.3% to EUR57.0m
(2019: EUR55.2m).
Exceptional items
We have had five exceptional items in the year, totalling a net
EUR23.0m (including tax), which were primarily non-cash
related.
As reported at the half year, there was a non-cash impairment
expense of EUR14.2m against the carrying value of the investment in
our Irish whiskey venture, Quintessential Brands Irish Whiskey
Limited ("QBIWL").The second was a non-cash credit of EUR1.5m
relating to the net overall release in provisions for contingent
consideration in respect of past acquisitions. This predominantly
related to the investment in QBIWL (EUR1.8m), as most of the
metrics for payment are unlikely to be met as a result of the
impact of COVID-19 on sales and the closure of the visitor centre
at the Dublin distillery. The third was an expense of EUR1.3m
relating to the write-off of advisory and legal costs incurred in
pursuit of the Group's mergers and acquisitions strategy. Work in
this area had to be curtailed as a result of the impact of the
COVID-19 pandemic.
Then, in the second half of the year, the carrying value of our
traditional Italian brands incurred a non-cash impairment charge of
EUR9.6m, with a related deferred tax credit of EUR1.1m. This
reflected both the considerable impact of the pandemic on the
near-term prospects for the Italian market as well as the
corresponding increase in discount rates used in the impairment
review. Finally, there was also EUR0.6m in restructuring charges as
a result of management changes. Further details are set out in note
6 of the attached Consolidated Financial Statements.
Finance costs
Net finance costs were EUR3.8m (2019: EUR4.5m), including
EUR0.5m (2019: EUR0.6m) of interest payable on lease liabilities
following the adoption and implementation of IFRS 16 "Leases". The
underlying decrease was primarily due to the reduction of bank
facility-drawings.
Taxation
The income tax expense for the year was EUR10.3m and included an
exceptional tax credit of EUR1.1m recognised in respect of the
Italian brands impairment charge. The underlying income tax expense
(total income tax expense excluding exceptional items) was EUR11.4m
(2019: EUR10.9m). As detailed in note 9 of the Consolidated
Financial Statements, the income tax expense reflects a number of
factors including the tax expense for the current period, changes
in provisions for taxation relating to prior years, and movements
in deferred tax. The underlying effective tax rate (excluding
exceptional and prior year items) of the Group was 22.2% (2019:
25.3%). The underlying decrease is principally due to a greater
proportion of taxable profits coming from Poland and Czech, where
the tax rates are 19%.
Group tax provisions totalled EUR3.5m at 30 September 2020, a
decrease of EUR0.8m from 30 September 2019.
The decrease primarily relates to the release of provisions in
the Czech Republic in respect of the 2012-2017 tax years, based on
the length of time that has elapsed with no challenge or
assessments raised by the tax authorities. As set out in the
Principal Risks, the Group is exposed to a number of tax risks in
the countries in which it operates. There have been a number of
developments with respect to the Group's unsettled tax years in
several countries. This includes Poland, where we continued with
the appeal process against the EUR4.5m assessment issued by the
Polish tax authorities in respect of our 2013 Corporate Income Tax
return and historical tax positions. In February 2020 the
administrative court of first instance upheld the assessment and we
lodged a final appeal, to the Supreme Administrative Court, in May
2020. In respect of intellectual property restructuring,
representing EUR3.7m of the total assessment, our view remains
unchanged and, on the basis of all the available evidence and
professional opinions, we consider that the position adopted by the
Group will ultimately prevail. Therefore, we continue to recognise
a receivable against the assessed taxes which, in accordance with
the local requirements, have been paid in full to the tax
authorities to facilitate the appeal. No receivable has been
recognised in respect of the remaining EUR0.8m relating to the
deductibility of the intra-group management recharges. Audits have
also commenced during the year into aspects of the 2014 and 2015
tax years, but we have yet to receive any assessments. Further
details are set out in note 9 of the Consolidated Financial
Statements.
Earnings per share
The basic earnings per share for the year was 9.83 EURcents per
share (2019: 14.33 EURcents per share). Adjusted basic earnings per
share, removing the impact of exceptional items, was 21.42 EURcents
per share (2019: 19.75 EURcents per share).
Cash flow and working capital
The Group continues to generate strong cash flow from operating
activities. Using a measure by which we judge our underlying
operational cash flow, the Group generated free cash flow of
EUR79.6m (2019: EUR61.3m). This represents a strong conversion rate
from Adjusted EBITDA of 112.1% (2019: 91.5%), and reflects an
increased focus on managing working capital levels during the
pandemic, particularly Trade Receivables.
The Lublin distillery project has been initiated, with planning
work and permit applications underway. Capital expenditure on the
project during the year has been minimal. The plant is expected to
be operational by the end of 2022. The Italian bottling plant
project is at an earlier stage of planning. The OneSAP project is
around its mid-way stage, and it has proceeded largely to plan
notwithstanding the pandemic. The new standardised technology
platform is expected to be operational during the first half of the
year-ending 30 September 2022.
Dividend and reserves
The Board has proposed a final dividend to shareholders which
represents a step-up interpretation of our progressive dividend
policy. The Board proposes a final dividend of 6.78 EURcents per
share (2019: EUR6.31EURcents per share), an increase of +7.4%. When
combined with the interim dividend of 2.77 EURcents per share paid
in June 2020 (2.63 EURcents interim dividend paid in June 2019),
this totals 9.55 EURcents per share for the year (2019: 8.94
EURcents per share), an increase of +6.8% on the prior year
total.
Given that we have not been able to complete any meaningful
M&A projects in the year due to the disruption resulting from
COVID-19, and the ongoing pandemic means that we are unlikely to
complete a meaningful acquisition in the near-term, the Board has
proposed an additional special dividend of 11.00 EURcents per share
payable alongside the final dividend.
Net debt and maturity profile
The Group's Revolving Credit Facility ("RCF"), which was taken
out in 2015, expires in November 2022. Debt can be drawn and repaid
at the Group's discretion without penalty or charge. At 30
September 2020, EUR14.0m of the RCF is utilised to back excise duty
guarantees in Italy and Germany. We also retain a factoring
facility capability of EUR70.0m, which remains unused.
The continued strong cash flow during the year resulted in Net
Debt (now including IFRS 16 adjustments) of EUR22.7m at 30
September 2020, a decrease of EUR32.8m from 30 September 2019.
Leverage has also reduced from 0.83x (as at 30 September 2019) to
0.32x reflecting the significantly increased Adjusted EBITDA and
reduced borrowings.
Our financing facility covenants are: Net Debt/EBITDA 3.5x
maximum and interest cover 4.0x minimum. We currently operate, and
expect to remain, comfortably within these levels and to retain
significant unused bank facilities. Our relatively low leverage,
combined with the significant headroom in our bank facilities,
leaves us well-placed to finance our strategic aspirations.
Foreign exchange
The Group remains exposed to the impact of foreign currency
exchange movements, with the major trading currencies continuing to
be the Polish z oty and the Czech koruna. At 30 September 2020,
there were no formal hedging instruments in place.
A net foreign currency exchange transactional loss of EUR0.6m
was reported within the Adjusted EBITDA for the year. This has
arisen on the weakening of the Polish z oty and the Czech koruna
versus the Euro.
Brexit
As reported previously, the Group does not expect a material
impact from the UK's forthcoming exit from the European Union
irrespective of the nature of the final arrangement with the EU. As
the Group reports in euros and the main trading currencies are the
Polish z oty and the Czech koruna, the volatility of pound sterling
is not a material factor for our operations. Nevertheless, the
implications of Brexit will continue to be monitored as will all
the principal risks that the Group faces.
Equity structure
There has been no change to the equity structure of the business
in the year to 30 September 2020. The issued share capital remains
at 200 million Ordinary shares with a nominal value of GBP0.10
each.
Directors' responsibility statement
Each of the Directors, whose names and functions are listed
below, confirms that:
To the best of their knowledge, the consolidated financial
statements and the Company financial statements, which have been
prepared in accordance with IFRS as issued by the IASB and IFRS as
adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit of the Company
on a consolidated and individual basis; and to the best of their
knowledge, the announcement includes a fair summary of the
development and performance of the business and the position of the
Company on a consolidated and individual basis, together with a
description of the principal risks and uncertainties that it
faces.
Directors
David Maloney, Non-Executive Chairman
Mirek Stachowicz, Chief Executive Officer
Paul Bal, Chief Financial Officer
John Nicolson, Senior Independent Non-Executive Director
Mike Butterworth, Independent Non-Executive Director
Tomasz Blawat, Independent Non-Executive Director
Diego Bevilacqua, Independent Non-Executive Director
Kate Allum, Independent Non-Executive Director
Principal risks
Stock Spirits Group believes the following to be the principal
risks facing its business and the steps we take to manage and
mitigate these risks. Risks are identified and assessed through a
combined bottom-up and top-down approach. If any of these risks
occur, Stock Spirits' business, financial condition and performance
might suffer and the trading price and/or liquidity of the shares
may decline. Not all of these risks are within our control and this
list cannot be considered to be exhaustive, as other risks and
uncertainties may emerge in a changing business environment.
Clearly the impact of COVID-19 remains a major uncertainty
facing almost every business. The impact on our key markets of
Poland and the Czech Republic has not been material to date,
however, it is almost impossible to predict the future impact,
given the uncertain duration of the pandemic and the resulting
longer-term macro-economic impact. At this point in time, we are
assuming that when the outbreak is contained, whether through the
deployment of an effective vaccine or otherwise, and restrictions
are lifted, our markets will return largely to normal. However, the
overall impact on the economies and consumer spending in our
markets and the duration of that impact remains highly uncertain.
There may be some longer lasting changes within the trade channels
e.g. some bars, restaurants and other outlets may decide not to
re-open when the pandemic ends. International travel is likely to
continue to be subdued, impacting economies that depend on a high
level of tourism such as Italy, even after allowing for a
compensating increase in domestic tourism. Online purchasing could
become more significant for all categories, including alcohol.
There may also be other longer lasting changes in consumer
behaviours, but it is not yet clear whether that might entail a
reduction in social gatherings,
or an increase. Taking all these uncertain factors into account,
we are currently assuming that underlying consumer demand and
trends will not be significantly altered post COVID-19 in a way
which would materially impact our Group as a whole. This is broadly
the position we have observed over the preceding 6 months since
COVID-19 became widespread across our markets, during which our
businesses demonstrated strong resilience, although firm
conclusions about the future cannot yet be drawn. Based on that,
the Board considers the principal risks and uncertainties for the
Group are:
(Note: References to changes in 2020 mean changes in the 12
month period ended 30 September 2020).
Risk description and impact Change in 2020 How we manage and Rating
mitigate
Risk 1 Increased High
Economic and political
change
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Results are affected by overall economic conditions * We have not been significantly impacted by major * We monitor and analyse economic indicators and
and consumer confidence in key geographic markets in economic or political changes in our key markets consumer consumption trends which, in turn, influence
Central and Eastern European markets and Italy where during 2020. our product portfolio, new product development and
economic uncertainty and political instability is route to market.
considered to be higher than other European
countries.
* Further diversification of our geographic footprint
through strategic M&A will also mitigate the risk of
exposure to less stable political environments.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 2 Increased High
Taxes
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Increases in taxes, particularly excise duty rates * Changes to excise duty on spirits by 13% in the Czech * Membership of local spirits trade associations, to
and VAT, could adversely affect demand for the Republic and 10% in Poland occurred from 1 January engage with tax authorities and government
Group's products. Demand for the Group's products is 2020. The strength of our brands and market position, representatives and, where appropriate, provide
particularly sensitive to fluctuations in excise combined with careful planning, resulted in minimal informed input to the unintended consequences of
taxes, since excise taxes generally constitute the impact. excise increases e.g. growth of illicit alcohol and
largest component of the sales price of spirits. potential harm to consumers.
* Looking ahead, a small formats tax will be
* The Group may be exposed to tax liabilities resulting implemented in Poland from 1 January 2021. See note 9 * Professional tax advice and regular audits of our own
from tax audits. (Income Taxes) in the notes to the Consolidated tax policies, processes, documentation and
Financial Statements for details of the ongoing tax compliance.
inspections, assessments and disputes and other tax
* Changes in tax laws and related interpretations and matters.
increased enforcement actions and penalties may * Appropriate provisions where tax liabilities appear
increase the cost of doing business. probable.
* Certain tax positions taken by the Group are based on * New product development focused on lower alcohol
industry practice and external tax advice and/or strength, resulting in lower excise duty impact as
involve a significant degree of judgement. well as offering consumers greater choice.
* Legal challenges
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 3 Increased High
Laws and regulations
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* The Group is subject to extensive laws and * Increased intensity of regulatory proposals related * The key countries that we currently operate in are
regulations limiting advertising, promotions and to both alcohol in general and spirits in particular. part of the European Union (EU) and, therefore, are
access to its products, as well as laws and In Czech Republic, a proposal to ban TV and digital subject to relatively consistent EU regulation,
regulations relating to its operations, such as advertising of alcohol has been proposed. although the EU is taking action against Poland in
anti-trust, anti-bribery, data protection, health, relation to judicial independence, the functioning of
safety and environmental laws. These regulations and its legislative and electoral system and the
any changes to them could limit the Group's business * In Poland, the Competition Protection Authority protection of fundamental rights.
activities or increase costs. (UOKiK) increased enforcement action to counteract
delay in payment of creditors.
* Monitoring legislative proposals and ensuring
appropriate representation of our interests through
local spirits trade associations and where
appropriate, direct contact with government
departments.
* Clear processes and controls to monitor compliance
with laws and regulations.
* We operate detailed anti-bribery, anti-trust and data
protection compliance policies and processes.
* Regular update training is conducted across the
business and we undertake regular reviews and
independent internal audits to assess the adequacy
and effectiveness of our policies and processes.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 4 No change Medium
Marketplace and competition
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Highly competitive markets may result in pressure on * In Poland and the Czech Republic we continued to * The Group has mechanisms and strategies in place to
prices and loss of market share. This has been respond to price reductions by competitors and mitigate the damage of profit erosion but there is no
particularly evident in Poland historically. demonstrated our resilience by growing our market assurance they will work in the economies and
share in key categories without a significant impact competitive environments in which we operate.
on our profit margins
* Changes in the Group's distribution channels may also
have an adverse effect on profitability. * We constantly review our distribution channels and
* Ongoing tight control over costs, including our customer relationships. We understand the
consolidation of our Czech and Slovakia businesses changing nature of the trade channels and customer
* A significant portion of the Group's revenue is and central operations roles, resulting in the positions within those channels. We trade across all
derived from a small number of customers. The Group reduction of two senior manager positions. channels and actively manage our profit mix by both
may not be able to maintain its relationships with channel and customer.
these customers or renegotiate agreements on
favourable terms, or may be unable to collect
payments from some customers, which would lead to an * We have well-established credit control policies and
impact in its financial condition. procedures and we put in place trade receivables
insurance where it is cost effective to do so.
* The Group is also dependent on a few key products in
a limited number of markets which contribute a
significant portion of its revenue and/or profits.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 5 No change Medium
Strategic transactions
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Key objectives of the Group are: (i) the development * Our new product development process continues to * We continue to seek value-accretive acquisition
of new products and variants; (ii) expansion through deliver successful innovations such as Bo kov targets and have an experienced management team
the acquisition of additional businesses; and (iii) Republica rum in the Czech Republic. capable of pursuing and executing transaction
distribution agreements with world-class brand opportunities swiftly and diligently; however, the
partners. Unsuccessful launches, or failure by the owners of target businesses may have price
Group to fulfil its expansion plans or integrate * During 2020, we fully integrated the acquisitions of expectations that are beyond the valuation that we
completed acquisitions, or to maintain and develop Distillerie Franciacorta in Italy and Bartida in the can place on their business.
its third-party brand relationships could have a Czech Republic completed in 2019.
material adverse effect on the Group's growth
potential and performance. * We use detailed criteria aligned with our strategy to
evaluate potential M&A targets.
* High hurdle rates, in excess of our Group WACC rate,
are used in M&A valuations.
* If we are unable to complete meaningful acquisitions,
we will consider distributing surplus cash to
shareholders.
* We continue to invest significant resources in our
NPD process as well as exploring opportunities to
extend and enhance our third-party distribution
arrangements.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 6 No change Medium
Consumer preferences
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Shifts in consumer preferences or decline in social * Continued general decline in consumption of higher * The Group undertakes extensive consumer and route to
acceptability of alcohol may lead to a decrease in alcohol drinks, particularly by young-adult drinkers. consumer research and has a track record of
revenue. successful NPD to constantly meet changing consumer
needs.
* We are responding to the rise in consumer and general
awareness of climate change, sustainability and other
environment, social and governance (ESG) issues * We have developed a range of lower alcohol products
through a comprehensive review of the impact of our and feel confident that we have the expertise to
business and products and the implementation of continue to develop products that meet and satisfy
action plans to reduce that impact consumer needs.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 7 No change Medium
Disruption to operations
or systems
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* The Group's operating results may be adversely * Ongoing IT project to upgrade to a single version of * Insurance cover to protect the business in the event
affected by disruption to its production and storage SAP S4/Hana, to improve access to consistent of a production disruption or other business
facilities, in particular its main production information across the Group, deliver analytical interruption.
facilities in Poland and the Czech Republic, or by a reports and insights and further automate controls
breakdown of its information or management control and standardise processes across the Group.
systems. * Our two primary bottling sites are capable of
bottling all of our core SKUs.
* We retained our Cyber Essentials certification and
implemented insurance cover specifically for cyber
risks. * Business Continuity and Disaster Recovery policies.
* Our information and management control systems are
subject to internal audit following a risk-based
methodology.
* Independent specialists assess and test security and
resilience of our network against hacking and other
cyber threats.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 8 No change Medium
Supply of raw materials
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Commodity price changes may increase cost of raw and * European and global grain prices were adversely * We closely monitor the key procurement markets to
packaging materials. affected by lower than expected harvests and higher optimise our procurement strategies.
than forecasted demand from Asia. Raw and rectified
alcohol market prices increased double digit versus
* The Group may not be able to pass on increases in last year. * Where possible and appropriate, the Group will
costs to customers or adjustments may be delayed and negotiate term contracts for the supply of core raw
may not fully off-set extra costs or cause a decline materials and services on competitive terms to manage
in sales. * However, our cost optimisation initiatives in pricing fluctuations.
procurement, including more centralised purchasing
and strategic partnerships with key suppliers, have
* Extreme weather conditions and climate change may provided relative price stability and reliability of
damage supplies of key raw materials such as grain, supply and ensured that overall cost of goods remains
causing extreme price spikes. at manageable levels comparable with the prior year.
* Energy price fluctuations impact us both directly and
indirectly through our supply chain.
* Labour costs may also rise ahead of our ability to
pass through such costs.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 9 No change Medium
Exchange rates
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Group revenue, assets and liabilities are primarily * Recent world trade volatility, including tariffs * The Group aims to hedge transaction risk by matching
in Polish z oty and Czech koruna while results are imposed by the US, EU and China together with the cash flows, assets and liabilities through normal
reported in euros and the share price is in pounds strength of the US dollar and Brexit, have led to commercial business arrangements where possible. For
sterling. Additionally, the Group's financial increased currency fluctuations globally but there example, all debt is currently drawn in local
covenants are tested in euros. has been no significant impact on the Group. currency by market.
* Historically, volatility between the euro, the z oty * We monitor currency exposure as an integral part of
and the koruna has been low, but we cannot predict our monthly review process and, where appropriate,
future volatility. implement hedging instruments.
* Further diversification of our geographic footprint
through strategic M&A will also mitigate exchange
rate risk.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
NEW Risk 10 - Funding Increase Medium
and Liquidity
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Refinancing requirements or investment plans could * Liquidity has been challenging for some customers due * The Group maintains a strong focus on cash, our
subject the Group to unexpected needs for liquidity, to COVID-19. Credit markets have 'hardened' and future requirements for funding and the overall
which may require the Group to increase its levels of become more expensive, also as a result of the external market for financing. We undertake regular
indebtedness. COVID-19 pandemic. and detailed reviews of both short-term and
longer-term liquidity requirements by market,
including our growth ambitions.
* Access to financing in the longer-term depends on a
variety of factors outside the Group's control,
including capital and credit market conditions. * We are confident that we have the appropriate
Higher interest rates and more stringent borrowing processes and relationships in place to respond to
requirements could increase the Group's financing any refinancing or liquidity needs and that we have
charges and reduce profitability. placed ourselves in the best position to access
funding at appropriate commercial rates in the longer
term.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Risk 11 No change Low
Talent
----------------------------------------------------------------- ----------------------------------------------------------------- ------
* Loss of any member of the senior management team * During the year we continued to strengthen our * Competitive remuneration policy to retain, motivate
could have an adverse effect on the Group's management team with the appointment of a new and attract key individuals.
operations. Managing Director in our enlarged Italian business,
following the acquisition of Distillerie
Franciacorta. * Leadership framework to guide talent management and
* The Group may also not be successful in attracting succession planning process to mitigate risk of
and retaining such individuals in the future, losing key personnel.
particularly due to low unemployment and higher wage * The results of our annual Employee Engagement Survey
inflation in Poland and the Czech Republic. showed continued improvements and action plans
arising from those results continue to be * Annual Employee Engagement Survey enables us to
implemented. assess employee engagement levels across the Group
and act upon the feedback in a systematic way.
----------------------------------------------------------------- ----------------------------------------------------------------- ------
Consolidated Income Statement
for the year ended 30 September 2020
Year to Year to
30 September 30 September
2019
2020 Restated*
Notes EUR000 EUR000
Revenue 3 340,988 312,419
Cost of goods sold (182,757) (164,600)
Gross profit 158,231 147,819
Selling expenses (65,922) (60,987)
Other operating expenses (33,409) (31,319)
Impairment loss on trade and other receivables (902) (430)
Share of loss of equity-accounted investees, net of tax 11 (165) (536)
Operating profit before exceptional items 57,833 54,547
Exceptional income 6 1,510 3,766
Exceptional expenses 6 (25,700) (15,459)
Operating profit 33,643 42,854
Finance income 7 179 312
Finance costs 7 (3,970) (4,799)
Profit before tax 29,852 38,367
Income tax expense 9 (11,436) (10,868)
Exceptional tax credit 6, 9 1,142 948
--------------- ---------------
Total income tax expense (10,294) (9,920)
Profit for the year 19,558 28,447
=============== ===============
Attributable to:
Equity holders of the Parent 19,558 28,447
=============== ===============
Earnings per share (EURcents) attributable to equity holders of the
Parent
Basic 10 9.83 14.33
Diluted 10 9.73 14.24
*Restated for the adoption of IFRS 16, as explained in note
15.
Consolidated Statement of Financial Position
as at 30 September 2020
30 September 30 September 30 September
2020 2019 2018
Notes EUR000 EUR000 EUR000
Restated* Restated*
Non-current assets
Intangible assets - goodwill 46,795 49,800 45,940
Intangible assets - other 306,431 326,718 311,129
Property, plant and equipment 51,639 53,532 47,011
Right-of-use assets 11,635 11,817 9,932
Investment in equity-accounted investee 11 2,100 16,458 16,994
Deferred tax assets 9 1,903 674 589
Other assets 4,483 4,720 4,742
424,986 463,719 436,337
------------- --------------------- ---------------------
Current assets
Inventories 44,986 43,059 30,711
Trade and other receivables 92,383 111,039 119,238
Other assets - - 135
Current tax assets 9 3,870 3,588 863
Short-term deposits 18,132 - -
Cash and cash equivalents 13 42,747 63,437 50,143
202,118 221,123 201,090
------------- --------------------- ---------------------
Total assets 627,104 684,842 637,427
============= ===================== =====================
Non-current liabilities
Borrowings 70,539 105,425 81,300
Other financial liabilities 11,632 16,034 11,168
Deferred tax liabilities 9 47,229 53,500 47,696
Provisions 1,249 1,234 1,082
Trade and other payables 355 331 287
131,004 176,524 141,533
------------- --------------------- ---------------------
Current liabilities
Trade and other payables 79,903 77,362 70,634
Borrowings - 2 16
Other financial liabilities 5,894 4,408 3,019
Income tax payable 9 4,562 5,883 8,149
Indirect tax payable 57,824 59,714 62,058
Provisions 805 173 717
148,988 147,542 144,593
------------- --------------------- ---------------------
Total liabilities 279,992 324,066 286,126
------------- --------------------- ---------------------
Net assets 347,112 360,776 351,301
============= ===================== =====================
*Restated for the adoption of IFRS 16, as explained in note
15.
Consolidated Statement of Financial Position
as at 30 September 2020
30 September 30 September 30 September
2020 2019 2018
Notes EUR000 EUR000 EUR000
Restated* Restated*
Capital and reserves
Issued capital 23,625 23,625 23,625
Merger reserve 99,033 99,033 99,033
Consolidation reserve 5,130 5,130 5,130
Own share reserve (3,938) (2,718) (3,370)
Other reserve 12,935 12,566 11,406
Foreign currency translation reserve (4,472) 9,774 13,915
Retained earnings 214,799 213,366 201,562
Total equity 347,112 360,776 351,301
Total equity and liabilities 627,104 684,842 637,427
============= ============= =============
*Restated for the adoption of IFRS 16, as explained in note
15.
Consolidated Statement of Cash Flows
for the year ended 30 September 2020
Year to Year to
30 September 30 September
2020 2019
Notes EUR000 EUR000
Restated*
Operating activities
Profit for the year 19,558 28,447
Adjustments to reconcile profit for the year to net cash flows:
Income tax expense recognised in income statement 9 10,294 9,920
Interest expense and bank commissions 7 3,970 4,718
Loss on disposal of intangible and tangible assets 866 50
Other financial income 7 (151) (312)
Depreciation of property, plant and equipment 7,140 6,744
Depreciation of right-of-use assets 3,568 3,158
Amortisation of intangible assets 2,319 1,966
Impairment of goodwill and brands 6 9,591 14,295
Impairment of investment 6, 11 14,193 -
Net release of contingent consideration 6, 11 (1,510) -
Gain on liquidation of subsidiary 6 - (3,766)
Net foreign exchange (gain)/loss 7 (28) 81
Share-based compensation charge 2,864 2,492
Share of loss of equity-accounted investees, net of tax 11 165 536
Increase/(decrease) in provisions 668 (443)
-------------- ------------------
73,507 67,886
Working capital adjustments
Decrease in trade receivables and other assets 18,656 9,962
Increase in inventories (1,927) (7,815)
Increase in trade payables and other liabilities 513 1,384
-------------- ------------------
17,242 3,531
-------------- ------------------
Cash generated by operations 90,749 71,417
Income tax paid 9 (17,451) (15,196)
-------------- ------------------
Net cash flows from operating activities 73,298 56,221
-------------- ------------------
Investing activities
Interest received 7 151 195
Funds placed on short-term deposit (18,132) -
Payments to acquire intangible assets (3,583) (1,628)
Proceeds from sale of property, plant and equipment 148 21
Purchase of property, plant and equipment (7,723) (8,556)
Acquisition of subsidiaries, net of cash acquired - (31,801)
Payment of contingent consideration (1,350) -
-------------- ------------------
Net cash flow from investing activities (30,489) (41,769)
-------------- ------------------
Financing activities
(Decrease)/increase in borrowings (32,379) 24,981
Interest paid (3,624) (5,361)
Purchase of own shares (3,841) -
Payment of lease liabilities (3,887) (3,234)
Dividends paid to equity holders of the Parent (17,999) (17,121)
-------------- ------------------
Net cash flow from financing activities (61,730) (735)
-------------- ------------------
Net (decrease)/increase in cash and cash equivalents (18,921) 13,717
Cash and cash equivalents at the start of the year 63,437 50,143
Effect of exchange rates on cash and cash equivalents (1,769) (423)
Cash and cash equivalents at the end of the year 13 42,747 63,437
-------------- ------------------
*Restated for the adoption of IFRS 16, as explained in note 15.
Notes to the Consolidated Financial Statements
at 30 September 2020
1. Corporate information
The consolidated financial statements were approved and
authorised for issue by the Board of Directors of Stock Spirits
Group PLC (the Company) on 2 December 2020.
Stock Spirits Group PLC is domiciled in England. The Company's
registered office is at Solar House, Mercury Park, Wooburn Green,
Buckinghamshire, HP10 0HH, United Kingdom.
The Company, together with its subsidiaries (the Group), is
involved in the production and distribution of branded spirits in
Central and Eastern Europe and Italy.
2. Basis of preparation
These financial statements are consistent with the consolidated
financial statements of the Group for the year ended 30 September
2020. The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards (IFRS), as adopted by the European Union. International
Financial Reporting Standards are issued by the International
Accounting Standard Board (IASB).
The consolidated financial statements have been prepared on a
going concern basis as the Directors believe there are no material
uncertainties that lead to significant doubt that the Group can
continue as a going concern for a period of at least 12 months from
the date of approval of the financial statements.
3. Revenue
An analysis of the Group's revenue is set out below:
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Revenue from the sale of spirits, gross of excise taxes 948,131 878,249
Other sales 3,521 4,059
Excise taxes (610,664) (569,889)
Revenue 340,988 312,419
-------------- --------------
4. Segmental analysis
In identifying its operating segments, management follows the
Group's geographic split, representing the main products traded by
the Group. The Group is considered to have five reportable
operating segments: Poland, Czech Republic, Italy, Other
Operational and Corporate. The 'Other Operational' segment consists
of the results of operations of the Slovakian, International and
Baltic Distillery entities. The 'Corporate' segment consists of
expenses and central costs incurred by non-trading Group
entities.
Each operating segment is managed separately, as each of these
geographic areas requires different marketing approaches. All
inter-segment transfers are carried out at arm's length prices. The
measure of revenue reported to the Chief Operating Decision-Maker
to assess performance is based on external revenue for each
operating segment and excludes Intra-group revenues. The measure of
Adjusted EBITDA reported to the Chief Operating Decision-Maker to
assess performance is based on operating profit and excludes
Intra-group profits, depreciation, amortisation, share of results
of equity-accounted investees and exceptional items.
Total assets and liabilities are not disclosed, as this
information is not provided by segment to the Chief Operating
Decision-Maker on a regular basis.
Other
Poland Czech Republic Italy Operational Corporate Total
2020 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
External
revenue 193,600 87,325 30,559 29,504 - 340,988
-------- --------------- --------- --------------- ---------- ---------
Alternative
performance
measures
Statutory
revenue 193,600 87,325 30,559 29,504 - 340,988
Adjust for
acquisitions - (9,184) (5,877) (1,468) - (16,529)
-------- --------------- --------- --------------- ---------- ---------
Underlying
revenue 193,600 78,141 24,682 28,036 - 324,459
Impact of
foreign
exchange
movements - - - - - -
-------- --------------- --------- --------------- ---------- ---------
Underlying
revenue at
constant
currency 193,600 78,141 24,682 28,036 - 324,459
-------- --------------- --------- --------------- ---------- ---------
EBITDA before
exceptional
expenses 49,817 25,749 (7,618) 2,915 (24,028) 46,835
Net exceptional
expenses (note
6) 127 317 9,591 479 13,676 24,190
-------- --------------- --------- --------------- ---------- ---------
Adjusted EBITDA 49,944 26,066 1,973 3,394 (10,352) 71,025
-------- --------------- --------- --------------- ---------- ---------
Alternative
performance
measures
Adjusted EBITDA
(note 5) 49,944 26,066 1,973 3,394 (10,352) 71,025
Adjust for
acquisitions - (1,471) (61) (578) - (2,110)
-------- --------------- --------- --------------- ---------- ---------
Underlying
adjusted
EBITDA 49,944 24,595 1,912 2,816 (10,352) 68,915
Impact of - - - - - -
foreign
exchange
movements
-------- --------------- --------- --------------- ---------- ---------
Underlying
adjusted
EBITDA at
constant
currency 49,944 24,595 1,912 2,816 (10,352) 68,915
-------- --------------- --------- --------------- ---------- ---------
Other
Poland Czech Republic Italy Operational Corporate Total
2019 - restated EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
External
revenue 171,670 81,338 26,896 32,515 - 312,419
-------- --------------- --------- --------------- ---------- ---------
Alternative
performance
measures
Statutory
revenue 171,670 81,338 26,896 32,515 - 312,419
Adjust for
acquisitions - (2,237) (1,516) (322) - (4,075)
-------- --------------- --------- --------------- ---------- ---------
Underlying
revenue 171,670 79,101 25,380 32,193 - 308,344
Impact of
foreign
exchange
movements (3,502) (1,214) - - - (4,716)
-------- --------------- --------- --------------- ---------- ---------
Underlying
revenue at
constant
currency 168,168 77,887 25,380 32,193 - 303,628
-------- --------------- --------- --------------- ---------- ---------
EBITDA before
exceptional
expenses 43,136 24,012 (11,597) 5,225 (5,518) 55,258
Net exceptional
expenses (note
6) - 242 15,217 - (3,766) 11,693
-------- --------------- --------- --------------- ---------- ---------
Adjusted EBITDA 43,136 24,254 3,620 5,225 (9,284) 66,951
-------- --------------- --------- --------------- ---------- ---------
Other
Poland Czech Republic Italy Operational Corporate Total
2019 - restated EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Alternative performance
measures
Adjusted EBITDA (note 5) 43,136 24,254 3,620 5,225 (9,284) 66,951
Adjust for acquisitions - (10) 211 (92) 59 168
------- --------------- ------- ------------- ---------- ----------
Underlying adjusted EBITDA 43,136 24,244 3,831 5,133 (9,225) 67,119
Impact of foreign exchange
movements (906) (205) - - (145) (1,256)
------- --------------- ------- ------------- ---------- ----------
Underlying adjusted EBITDA at
constant currency 42,230 24,039 3,831 5,133 (9,370) 65,863
------- --------------- ------- ------------- ---------- ----------
As well as the impact of IFRS 16, Adjusted EBITDA for the year
ended 30 September 2019 has also been restated for the impact of
reallocation of group-wide costs. Previously group-wide costs,
including insurance and internal audit costs, were included in the
Corporate segment. During the year there was a change in the
presentation of these costs to the Chief Operating Decision-Maker,
with these now included in the relevant segment based on the amount
recharged. Consequently, Adjusted EBITDA by segment for the year
ended 30 September 2019 has been restated for comparability. This
has served to reduce Corporate costs by EUR3.8m, with reallocation
of costs into each of the operating segments of between EUR0.2m and
EUR1.7m.
Disaggregation of revenue is by operating segment only. This
also equates to primary geographical market. Revenue other than
from sales of branded spirits represents a very small proportion of
total revenue. Products are largely transferred at a point in time
and so there is limited variance in the timing of revenue
recognition.
5. Adjusted EBITDA and Free Cash Flow
The Group defines Adjusted EBITDA as operating profit before
depreciation and amortisation, exceptional items and the share of
results of equity-accounted investees. The Group defines Adjusted
EBITDA margin as Adjusted EBITDA as a percentage of revenue.
Adjusted EBITDA, Adjusted EBITDA margin and Adjusted free cash flow
conversion are supplemental measures of the Group's performance and
liquidity that are not required to be presented in accordance with
IFRS.
The directors use the Adjusted EBITDA and Adjusted free cash
flow conversion as key performance measures of the business. They
remove significant items that would otherwise distort
comparability.
The use of these alternative performance measures is consistent
with how institutional investors consider the performance of the
Group. These measures are not defined in IFRS and thus may not be
comparable to similarly titled measures by other companies.
Adjusted EBITDA Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Restated
Operating profit 33,643 42,854
Net exceptional expenses (note 6) 24,190 11,693
Share of results of equity-accounted investees, net of tax (note 11) 165 536
-------------- --------------
57,998 55,083
Depreciation and amortisation 13,027 11,868
Adjusted EBITDA 71,025 66,951
-------------- --------------
Adjusted EBITDA margin 20.8% 21.4%
-------------- --------------
The Group defines Free cash flow as cash generated from
operating activities (excluding income tax paid), plus the proceeds
from the sale of property, plant and equipment and proceeds from
the disposal of intangible assets less cash used for the
acquisition of property, plant or equipment and for the acquisition
of intangible assets. Adjusted free cash flow conversion is free
cash flow as a percentage of Adjusted EBITDA.
Free cash flow Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Restated
Cash generated from operations 90,749 71,417
Payments to acquire property, plant and equipment (7,723) (8,556)
Payments to acquire intangible assets (3,583) (1,628)
Proceeds from sale of property, plant and equipment 148 21
Free cash flow 79,591 61,254
-------------- --------------
Adjusted free cash flow conversion 112.1% 91.5%
-------------- --------------
6. Exceptional items
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Exceptional income:
Net release of contingent consideration(1) 1,510 -
Realisation of exchange differences following liquidation of Stock Spirits Group
Services
A.G(2) - 3,766
Total exceptional income 1,510 3,766
-------------- --------------
Exceptional expense:
Impairment of Italian brands and goodwill(3) 9,591 14,295
Impairment of equity-accounted investment in Quintessential Brands Ireland Whiskey Limited(4)
14,193 -
Costs associated with mergers and acquisitions(5) 1,310 1,164
Restructuring costs(6) 606 -
Total exceptional expense 25,700 15,459
Net exceptional expenses 24,190 11,693
========= =======
1. There has been a net release in provisions for contingent
consideration relating to past acquisitions totalling EUR1,510,000.
This is predominantly in respect of the investment in
Quintessential Brands Ireland Whiskey Limited at EUR1,827,000. Due
to the size of the change in the provision, and for consistent
presentation with the impairment expense (refer to reference 4
below), this has been disclosed as an exceptional item.
2. A gain of EUR3,766,000 was recorded in 2019 on realisation of
exchange differences following the liquidation of Stock Spirits
Group Services A.G..
3. There has been a non-cash impairment on brands in Italy of
EUR9,591,000 in the year ending 30 September 2020.
Performance in Italy during the year was below budget, and
therefore an indicator of impairment was identified. An assessment
of recoverable amount was performed at the cash-generating unit
(CGU) level as this is the lowest level of separately identifiable
cash flows. It was not possible to estimate the recoverable amount
at the brand level.
The occurrence of the Coronavirus pandemic has been a global
issue affecting every single business sector and every country to
some degree. It has had a significant impact on the global economy,
and significant changes with an adverse effect have taken place in
the markets and economic environment in which the Group operates -
particularly in Italy where there is a larger proportion of sales
to the on-trade channel than in other markets in which the Group
operates. These sales were particularly impacted by the prolonged
closure of bars, restaurants and hotels.
Following slow recovery and uncertainty over the impact of a
second wave, the latest financial projections are insufficient to
support the carrying value of the CGU. Therefore an impairment loss
on the value of brands totalling EUR9,591,000 has been recognised
in the year. There has been a corresponding reduction in deferred
tax liabilities of EUR1,142,000, which has been recorded as an
exceptional tax credit.
Due to the nature and size of the impairment loss this has been
disclosed as an exceptional expense. Also refer to note 9.
In 2019, the impairment review for goodwill and other intangible
assets identified the need to impair the carrying value of goodwill
and brands in the Italian CGU by EUR7,732,000 and EUR6,563,000,
respectively. There was a corresponding reduction in deferred tax
liabilities of EUR948,000, which was recorded as an exceptional tax
credit.
4. The impact of the pandemic also provided objective evidence
that the Group's equity investment in Quintessential Brands Ireland
Whiskey Limited (QBIWL) may be impaired. The latest three-year plan
for QBIWL considers a range of economic conditions, together with
reasonable and supportable assumptions that may exist over the next
three years. The three-year plan indicates that the cash flow
projections under the value-in-use approach are no longer
sufficient to support the carrying value of the investment,
indicating a possible impairment. Consequently, the Group estimated
the recoverable amount of the investment in QBIWL using the "fair
value less costs of disposal" approach. Under this approach, the
fair value of the investment less costs of disposal was estimated
to be higher than the value-in-use, but still lower than the
carrying value of the investment, thereby indicating an
impairment.
A non-cash impairment loss of EUR14,193,000 has therefore been
recognised in the year. The impairment loss reduced the carrying
value of the investment in QBIWL to EUR2,100,000. Due to the nature
and size of the impairment this has been disclosed as an
exceptional expense. Also refer to note 11.
5. Expenses of EUR1,310,000 were incurred in the year ending 30
September 2020, relating to advisory and legal costs incurred in
pursuit of the Group's strategy in respect of mergers and
acquisitions.
In 2019 costs were incurred in association with the acquisitions
of Distillerie Franciacorta S.p.A., Bartida s.r.o. and Bartida
Retail s.r.o. These principally comprised professional fees and
totalled EUR922,000 for Distillerie Franciacorta and EUR242,000 for
the Bartida entities. Due to the nature of these costs these have
been disclosed as an exceptional expense.
6. Severance costs totalling EUR606,000 have been incurred in
the year ending 30 September 2020, resulting from internal
reorganisations in the sales and manufacturing divisions, as well
as in Group management. Due to their nature, these have been
disclosed as an exceptional expense.
7. Finance income and costs
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Restated
Finance income:
Foreign currency exchange gain 28 -
Interest income 151 195
Change in fair value of consideration paid in business combinations - 117
Total finance income 179 312
============== ==============
Finance costs:
Interest payable on bank overdrafts and loans 1,659 2,243
Foreign currency exchange loss - 81
Bank commissions, guarantees and other payables 738 633
Interest payable on lease liabilities 503 585
Change in fair value of deferred and contingent consideration 292 82
Other interest expense 778 1,175
Total finance costs 3,970 4,799
============== ==============
Net finance costs 3,791 4,487
-------------- --------------
Other interest includes interest and fees paid by Stock Polska
Sp. z.o.o under reverse factoring arrangements totalling EUR772,000
(2019: EUR737,000).
8. Operating profit
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Restated
Alternative performance measures
Statutory operating profit before exceptional items 57,833 54,547
Adjust for acquisitions (864) 609
-------------- --------------
Underlying operating profit before exceptional items 56,969 55,156
-------------- --------------
9. Income taxes
(i) Income tax recognised in profit or loss:
Income tax expense: Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Income tax expense comprises:
Current tax expense 16,419 11,977
Tax credit relating to prior year (570) (1,802)
Deferred tax (credit)/charge (4,446) 602
Other taxes 33 91
Income tax expense 11,436 10,868
-------------- --------------
Year to Year to
30 September 30 September
2020 2019
Exceptional tax credit: EUR000 EUR000
Deferred tax credit - impact of impairment of brands (note 6) (1,142) (948)
-------------- --------------
There have been no tax charges to other comprehensive income or
directly to equity, with the exception of the transition impact in
relation to the implementation of IFRS 16 as detailed in note
15.
Reconciliation of effective tax rate
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Restated
Profit before tax 29,852 38,367
Accounting profit multiplied by United Kingdom rate of corporation tax 19.00% (2019:
19.00%)
- Underlying items 10,268 9,511
- Exceptional items (4,596) (2,221)
Expenses not deductible for tax purposes
- Underlying items 1,428 883
- Exceptional items 2,532 2,605
Gains not taxable - Exceptional items - (716)
Deductible timing differences for which no deferred tax is recognised
- Underlying items 223 259
- Exceptional items 249 -
Utilisation and recognition of previously unrecognised deferred tax assets (741) (126)
Tax losses for which no deferred tax is recognised 2,039 1,582
Share of loss of equity-accounted investees, net of tax 31 102
Effect of differences in applicable tax rates in foreign jurisdictions
- Underlying items (16) 368
- Exceptional items 673 (616)
Revaluation of deferred tax balances on changes in applicable rates of corporation
tax (1,259) -
Tax credit relating to prior periods (570) (1,802)
Other taxes 33 91
Total tax charge 10,294 9,920
-------------- --------------
Effective tax rate 34.5% 25.9%
============== ==============
Exceptional items above represent the impact on the tax charge
of the exceptional items (note 6).
(ii) Income tax recognised in the balance sheet:
Current tax liability:
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Tax prepayments as of start of period 3,588 863
Current tax liability as of start of period (5,883) (8,149)
-------------- --------------
(2,295) (7,286)
Tax credit relating to prior periods 570 1,802
Payments in the period 17,451 15,196
Current tax expense (16,419) (11,977)
Other taxes (33) (91)
Interest on open tax enquiries 58 141
Tax liabilities assumed in business combinations - (61)
Foreign exchange differences (24) (19)
Net current tax liability (692) (2,295)
-------------- --------------
Analysed as:
Tax prepayment as of end of period 3,870 3,588
Current tax liability as of end of period (4,562) (5,883)
(692) (2,295)
============== ==============
Group tax provisions
The Group is a sizeable international drinks business, operating
across multiple jurisdictions, subject to different tax regimes
with intercompany cross-border transactions being subject to
transfer pricing regulations. As tax, and especially transfer
pricing (where regulations and their interpretation may vary
considerably), is an area of inherent risk, tax positions adopted
by the Group and its cross-border intercompany transactions may be
subject to challenge by the relevant tax authorities. Although the
Group aims to comply with applicable laws and regulations and
operates an OECD principles-based transfer pricing model, at each
balance sheet date the Group undertakes a review of potential tax
risks and tax positions and, whilst it is not possible to predict
the outcome of any pending enquiries, ensures that adequate
provisions are made in the Group accounts to cover any associated
cash outflows and estimated future settlements.
Provisions against uncertain tax positions are based on
management's assessment of the most likely or expected outcome,
however, due to the nature of the underlying items and likelihood
of further developments, there is a reasonable possibility of
material changes to these estimates over the next 12 months.
Although the Group's transfer pricing is performed on an arm's
length basis, in management's view there is a risk that tax
positions regarding intercompany transactions in certain
jurisdictions, including Poland, Italy and Germany, may ultimately
not be accepted.
At 30 September 2020, the Group has recognised tax provisions
totalling EUR3.5m (2019: EUR4.3m) in relation to matters where it
is probable that tax positions adopted by the Group may not
ultimately be sustained by the relevant authorities. These tax
provisions are included in income taxes payable on the balance
sheet. The reduction is mainly due to the release of provisions no
longer required and foreign exchange differences.
On 17 August 2020, the German tax authorities opened enquiries
into the 2016-2018 Corporate Income Tax returns of Baltic
Distillery GmbH. These enquiries are currently ongoing and at 30
September 2020 there have been no significant developments.
There have been no significant developments in Italy in respect
of the tax dispute relating to 2009-2010 and, as at 30 September
2020, provisions held in respect of issues under dispute remain
unchanged.
Similarly, there have been no developments in respect of the
ongoing tax appeal in the Czech Republic related to
the 2011 Corporate Income Tax return of Stock Plze -Bo kov s.r.o.
Status of Poland tax enquiries
During the year, Stock Polska Sp. z.o.o., continued its appeal
against the EUR4.5m assessment issued by the tax authorities in
respect of its 2013 Corporate Income Tax return relating to pre-IPO
intra-group intellectual property restructuring and management
recharges. In February 2020, the administrative court of first
instance upheld the assessment and in May 2020, the Group lodged a
final appeal to the Supreme Administrative Court. With regards to
the amortisation of the intellectual property, the Group obtained
advanced tax rulings from the tax authorities prior to
implementation, adopted a tax position fully compliant with the tax
laws prevailing at the time and made full disclosures. As the
Group's tax position had been accepted by the tax authorities for
the periods prior to 2013, the Group does not consider there to be
any valid basis for the challenge. On the basis of all the
available evidence and professional opinions, the Group considers
that the position adopted by it in respect of intellectual property
restructuring will ultimately prevail. Therefore, the Group
continues to recognise a receivable against the assessed taxes
which, in accordance with the local requirements, have been paid in
full to the tax authorities to facilitate the appeal. No receivable
has been recognised in respect of the remaining EUR0.8m relating to
the deductibility of the intra-group management recharges.
In January 2020, the Polish tax authorities commenced an audit
of the Stock Polska Sp. z.o.o. 2014 Corporate Income Tax return.
This is currently ongoing and we have not yet received an
assessment. If the tax authority adopts an approach similar to the
audit of the 2013 CIT return, any tax assessed will need to be
paid, and then recovery sought through the appeal process. The
amount of tax at stake for the period relating to both the
intellectual property restructuring and management recharges and
including interest, is approximately EUR9m. Amounts in respect of
management recharges have been provided for within the transfer
pricing risks provision identified above.
Whilst not subject to enquiries, the tax impact of deductions
claimed in respect of the amortisation of the intellectual property
in each of the subsequent years from 2015 to 2017 are in the range
between EUR5.8m and EUR6.3m. This, together with late interest at
the prescribed rate of 8%, represents the Group's maximum possible
exposure associated with the issue. Management considers that
ultimately it is probable that the adopted tax position will be
sustained and therefore no provision has been recognised.
In November 2019, the Polish tax authority opened a specialist
tax audit of Stock Polska Sp. z.o.o., focusing on 2015 Intra-group
funding and withholding tax. We have yet to receive an
assessment.
Impact of Brexit
On 31 January 2020 the UK left the EU and, consequently, is no
longer an EU member state. Under the terms of the departure, a
post-Brexit transition period started on 31 January 2020 and will
end on 31 December 2020. During the transition period, the UK
continues to be treated for most purposes as if it were still an EU
member state, however significant change is expected at the end of
the transition period, even if certain agreements are concluded
within the transition period.
There is currently significant uncertainty over the outcome of
the negotiations, the future arrangements between the UK and the
EU, and the laws that will apply to the UK after the transition
period. In particular, uncertainty remains over the application of
EU directives such as the Parent-Subsidiary or Interest and
Royalties Directives concerning the tax treatment of interest,
royalties and dividend payments between EU Member States and the
UK. At this stage, the level of uncertainty is such that it is
impossible to determine if, how and when the laws will change. As
it stands, the Group has not identified any critical dependencies
or reliances which could not be managed.
(iii) Unrecognised tax losses
The Group has unrecognised tax losses which arose in the UK of
EUR64.7m as at 30 September 2020 (2019: EUR49.5m) that are
available indefinitely for off-set against future taxable profits
of the companies in which the losses arose. A deferred tax asset
has not been recognised in respect of these losses due to
uncertainty in respect of timing and amount of future taxable
profits against which the tax losses could be utilised.
(iv) Deferred tax balances
Deferred tax assets and liabilities arise as follows:
1 October Credited Translation 30 September
2019 to income difference 2020
2020 EUR000 EUR000 EUR000 EUR000
Temporary differences:
Brands (57,706) 2,399 2,203 (53,104)
Accrued liabilities 5,512 2,656 (194) 7,974
Other assets and liabilities (632) 533 (97) (196)
(52,826) 5,588 1,912 (45,326)
========== =========== ============ =============
Deferred tax asset 674 1,557 (328) 1,903
Deferred tax liability (53,500) 4,031 2,240 (47,229)
(52,826) 5,588 1,912 (45,326)
========== =========== ============ =============
1 October (Charged)/ credited Credited Translation 30 September
2018 to income Acquisitions to equity difference 2019
2019 - restated EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Temporary differences:
Brands (55,015) 989 (3,824) - 144 (57,706)
Accrued liabilities 5,940 (292) - - (136) 5,512
Other assets and
liabilities 1,968 (351) (2,254) 47 (42) (632)
(47,107) 346 (6,078) 47 (34) (52,826)
========== ==================== =============== =========== ============ =============
Deferred tax asset 589 77 - - 8 674
Deferred tax liability (47,696) 269 (6,078) 47 (42) (53,500)
(47,107) 346 (6,078) 47 (34) (52,826)
========== ==================== =============== =========== ============ =============
The deferred tax liability related to brands is based on the
difference between the accounting and tax book values of brands.
Included in the amounts credited to income is an exceptional
deferred tax credit of EUR1,142,000 (2019: EUR948,000) related to
the impairment of Italian brands (note 6). Also included in the
amounts credited to income is a EUR1,259,000 credit arising as a
result of a re-measurement of the deferred tax liability in respect
of brands held by F.lli Galli, Camis & Stock A.G. due to a
change in the applicable Corporate Income Tax rate from 14.5% to
11.91%.
The deferred tax asset arises in respect of accrued liabilities
where trade related costs are deductible on a paid basis, while
other deferred tax assets and liabilities represent all other
timing differences between accounting and tax recognition.
(v) Changes in income tax rates
Deferred tax assets and liabilities recognised as at 30
September 2020 have been calculated using tax rates enacted or
substantively enacted at the balance sheet date and applicable to
the periods in which differences between the accounting and tax
book values are expected to unwind.
In the UK, a reduction in corporate income tax rate from 19% to
17% effective from 1 April 2020 has been enacted. However, as part
of the 2020 UK Budget, it was announced that the UK tax rate will
remain at 19% for the 2020 and 2021 tax years. The change has no
effect on the Group's result as the Group does not recognise
deferred tax in the UK, mainly due to structural losses.
Due to a change in the CIT rate applicable in Switzerland from
14.5% to 11.91%, deferred tax arising in respect of brands held by
F.lli Galli, Camis & Stock A.G. has been re-measured at 11.91%.
The resulting deferred tax credit has been included within deferred
tax movements for the year.
10. Earnings per share
Basic earnings per share amounts are calculated by dividing the
profit attributable to ordinary equity holders of the Parent for
the year by the weighted average number of ordinary shares
outstanding during the year. Diluted earnings per share amounts are
calculated by dividing the profit attributable to ordinary equity
holders of the Parent by the weighted average number of ordinary
shares outstanding during the year plus the weighted average number
of ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares. Adjusted
earnings per share amounts exclude the impact of the significant
exceptional items that would otherwise distort comparability and
understanding of the underlying performance of the Group.
Details of the earnings per share are set out below: Year to Year to
30 September 30 September
2020 2019
Basic earnings per share Restated*
Profit attributable to the equity shareholders of the Company (EUR000) 19,558 28,447
Weighted average number of ordinary shares in issue for basic earnings per share
(000) 198,883 198,468
-------------- --------------
Basic earnings per share (EURcents) 9.83 14.33
-------------- --------------
Diluted earnings per share
Profit attributable to the equity shareholders of the Company (EUR000) 19,558 28,447
Weighted average number of diluted ordinary shares adjusted for the effect of
dilution (000) 201,102 199,743
-------------- --------------
Diluted earnings per share (EURcents) 9.73 14.24
-------------- --------------
Adjusted basic earnings per share
Profit attributable to the equity shareholders of the Company (EUR000) 19,558 28,447
Net exceptional expenses (EUR000) 24,190 11,693
Exceptional tax credit (EUR000) (1,142) (948)
Profit attributable to the equity shareholders of the Company before exceptional
income, exceptional
expenses and exceptional tax credit (EUR000) 42,606 39,192
Weighted average number of ordinary shares in issue for adjusted basic earnings per
share
(000) 198,883 198,468
-------------- --------------
Adjusted basic earnings per share (EURcents) 21.42 19.75
-------------- --------------
Adjusted diluted earnings per share
Profit attributable to the equity shareholders of the Company (EUR000) 19,558 28,447
Net exceptional expenses (EUR000) 24,190 11,693
Exceptional tax credit (EUR000) (1,142) (948)
-------------- --------------
Profit attributable to the equity shareholders of the Company before exceptional
expenses
and exceptional tax credit (EUR000) 42,606 39,192
Weighted average number of diluted ordinary shares adjusted for the effect of
dilution (000) 201,102 199,743
-------------- --------------
Adjusted diluted earnings per share (EURcents) 21.19 19.62
-------------- --------------
Reconciliation of basic to diluted ordinary shares Year to Year to
30 September 30 September
2020 2019
000 000
Issued Ordinary shares 200,000 200,000
Effect of own shares held (2,381) (1,692)
Effect of vesting of share options 1,264 160
-------------- --------------
Basic weighted average number of Ordinary shares 198,883 198,468
Effect of options 2,219 1,275
Diluted weighted average number of Ordinary shares 201,102 199,743
-------------- --------------
All of the share awards are dilutive.
There have been no material transactions involving the Group's
ordinary shares between the reporting date and the date of
authorisation of these financial statements.
11. Investment in equity-accounted investee
On 17 July 2017, Stock Spirits entered into an agreement with
Quintessential Brands Group for the acquisition of a 25% equity
interest in Quintessential Brands Ireland Whiskey Limited (QBIWL),
representing 25,001 B ordinary shares, for a cash consideration of
up to EUR18,333,000. Consideration comprised an initial cash
payment of EUR15,000,000 for 25% of the equity interest, and a
contingent consideration of up to EUR3,333,000 which is payable
over the period November 2020 to May 2022, subject to performance
conditions.
QBIWL owns The Dublin Liberties Irish Whiskey(c) and the
Dubliner Irish Whiskey(c) brands, a range of ultra-premium through
to standard Irish whiskies. The principal place of business of
QBIWL is Dublin, Ireland.
This investment was made to enable the Group to capitalise on
the growing whisky category and to enhance our whisky
expertise.
The registered address of QBIWL is Tullyroe, Mountrath Road,
Abbeyleix, Co. Laois, R32 K230, Republic of Ireland. The latest
audited accounts for QBIWL were prepared for the year ended 31
March 2020.
The Group's share of the loss of QBIWL for the year to 30
September 2020 is EUR165,000 (2019: loss of EUR536,000). There has
been a corresponding reduction in the carrying value of the
investment to reflect the Group's share of the loss.
No dividend has been received from QBIWL by the Group.
As discussed in note 11, the impact of the Coronavirus pandemic
provided objective evidence that the Group's equity investment in
QBIWL may be impaired. The latest three-year plan for QBIWL
considers a range of economic conditions, together with reasonable
and supportable assumptions that may exist over the next three
years. The three-year plan indicates that the cash flow projections
under the value-in-use approach are no longer sufficient to support
the carrying value of the investment, indicating a possible
impairment. Consequently, the Group estimated the recoverable
amount of the investment in QBIWL using the fair value less costs
of disposal approach. Under this approach, the fair value of the
investment less costs of disposal was estimated to be higher than
the value-in-use, but still lower than the carrying value of the
investment, thereby indicating an impairment.
A non-cash impairment loss of EUR14,193,000 has therefore been
recognised in the year. The impairment loss reduced the carrying
value of the investment in QBIWL to EUR2,100,000.
Due to the nature and size of the impairment this has been
disclosed as an exceptional expense.
As part of a facility agreement between Wells Fargo and
Quintessential Brands UK Holdings Limited and other borrowers (the
QB Group), QBIWL has guaranteed the borrowings made by other QB
Group companies up to a maximum of GBP20m. This GBP20m guarantee
cap is in addition to any borrowings made directly by QBIWL . In
the event of the guarantee being called upon, this would reduce the
carrying value further. The guarantee does not extend outside the
QB Group.
At 30 September 2020, the QB Group had sufficient assets that
could be called upon to satisfy the debt under the facility
agreement, and therefore managements' assessment of the likelihood
of the guarantee being called on to satisfy the QB Group's debt is
that it is remote.
The following table summarises the financial information of
QBIWL as included in its own financial statements, adjusted for
fair value adjustments at acquisition and differences in accounting
policies, as at 30 September 2020. The table also reconciles the
summarised financial information to the carrying value of the
Group's interest in QBIWL, and the results for the year to 30
September 2020.
30 September 30 September
2020 2019
EUR000 EUR000
Net assets
Non-current assets 63,224 64,807
Current assets and liabilities 15,813 9,214
Non-current liabilities (15,566) (9,889)
Net assets 63,471 64,132
------------- -------------
Group's share of net assets (25%) 15,868 16,033
Goodwill 425 425
Impairment of investment (note 6) (14,193) -
------------- -------------
Carrying value of investment in associate at end of period 2,100 16,458
============= =============
Year to Year to
30 September 30 September
2020 2019
EUR000 EUR000
Revenue (100%) 7,533 8,103
-------------- --------------
Loss from continuing operations (100%) (660) (2,144)
Total comprehensive expense (100%) (660) (2,144)
-------------- --------------
Group's share of loss from continuing operations (25%) (165) (536)
Group's share of total comprehensive expense (25%) (165) (536)
-------------- --------------
Carrying value of investment in associate brought forward 16,458 16,994
Share of loss from continuing operations (25%) during the period (165) (536)
Impairment of investment (note 6) (14,193) -
-------------- --------------
Carrying value of investment in associate carried forward 2,100 16,458
============== ==============
12. Risk management
Capital risk management
The primary objective of the Group's capital management is to
ensure that it has the capital required to operate and grow the
business at a reasonable cost of capital without incurring undue
financial risks. The Board of Directors periodically reviews the
capital structure to ensure that it meets changing business
needs.
In addition, the Directors consider the management of debt to be
an important element in controlling the capital structure of the
Group. The Group may carry significant levels of long-term
structural and subordinated debt to fund investments and
acquisitions and has arranged debt facilities to allow for
fluctuations in working capital requirements. There have been no
changes to the capital requirements in the current period.
Management manage capital on an ongoing basis to ensure that
covenant requirements on third party debt are met.
The Group regards its total capital as follows:
2020 2019
EUR000 EUR000
Restated
Net debt 22,678 55,445
Equity attributable to the owners of the Company 347,112 360,776
-------- ----------
369,790 416,221
-------- ----------
Net debt is calculated as follows: 2020 2019
EUR000 EUR000
Restated
Cash and cash equivalents (note 13) 42,747 63,437
Short-term deposits 18,132 -
Floating rate loans and borrowings (70,555) (105,502)
Lease obligations (13,002) (13,380)
Net debt (22,678) (55,445)
========= ==========
2020 2019
EUR000 EUR000
Restated
Adjusted EBITDA (note 5) 71,025 66,951
Net debt/Adjusted EBITDA ratio (Leverage) 0.32 times 0.83 times
Return on capital employed
Return on capital employed (ROCE) is calculated as follows:
2020 2019
EUR000 EUR000
Non-current assets 424,986 463,719
Current assets 202,118 221,123
Current liabilities (148,988) (147,542)
Capital employed 478,116 537,300
========== ==========
2020 2019
Alternative performance measures EUR000 EUR000
Statutory operating profit before exceptional items 57,833 54,547
Statutory operating profit before exceptional items/capital employed (ROCE) 12.1% 10.2%
13. Cash and cash equivalents
For the purposes of the Consolidated Cash Flow Statement, cash
and cash equivalents include cash on hand and in banks, net of
outstanding bank overdrafts. Cash and cash equivalents at the end
of the financial year as shown in the Consolidated Cash Flow
Statement can be reconciled to the related items in the
Consolidated Statement of Financial Position as follows:
30 September 30 September
2020 2019
EUR000 EUR000
Cash and bank balances 42,747 63,437
------------- -------------
Cash and cash equivalents are denominated in the following
currencies:
30 September 30 September
2020 2019
EUR000 EUR000
Sterling 4,688 21,121
Euro 12,072 11,226
Czech Koruna 12,380 16,165
Polish Z oty 12,492 13,223
Other currencies 1,115 1,702
Total 42,747 63,437
============= =============
14. Events after the balance sheet date
There were no events after the balance sheet date which require
adjustment to or disclosure in these financial statements.
15. Changes in accounting policies - IFRS 16: Leases
This note explains the impact of the adoption of IFRS 16: Leases
on the Group's financial position and financial performance.
IFRS 16 is effective for the accounting period commencing 1
October 2019. The Group adopted the standard retrospectively, with
comparatives restated from a transition date of 30 September
2018.
IFRS 16 requires lessees to recognise right-of-use assets and
lease liabilities on the Statement of Financial Position for all
leases, except short-term and low-value asset leases. At
commencement of the lease, the lease liability equals the present
value of future lease payments, and the right-of-use asset equals
the lease liability, adjusted for payments already made, lease
incentives, initial direct costs and any provision for dilapidation
costs.
The operating lease rental charge, as previously accounted for
under IAS 17: Leases, is replaced by depreciation of the
right-of-use assets and interest on the lease liabilities.
Under IFRS 16, the lease liability is remeasured on the
occurrence of certain events, such as a change in lease term or a
change in future lease payments resulting from a change in an index
or rate. A corresponding adjustment is made to the right-of-use
asset. There are a limited number of property leases which are
subject to index-linked rental uplifts.
The Group applied the practical expedient not to reassess
whether a contract is, or contains, a lease on initial application
of IFRS 16. The Group has elected to recognise payments for
short-term leases and leases of low-value assets on a straight-line
basis as an expense in the income statement.
The most significant IFRS 16 estimates relate to the selection
of appropriate discount rates to calculate the lease liability.
The Group's lease portfolio consists of office and warehouse
properties and other assets such as motor vehicles.
IFRS 16 has a significant impact on reported assets and
liabilities, as well as the classification of cash flows relating
to lease contracts. However, the reduction in cost of goods sold,
selling expenses and other operating expenses largely offsets the
increase in depreciation and finance costs.
Lease liabilities are presented within other financial
liabilities, both current and non-current, in the Consolidated
Statement of Financial Position. In the Consolidated Income
Statement, depreciation of the right-of-use assets is recorded in
selling expenses or other operating expenses, depending on the
nature of the leased asset. Interest expense arising on lease
liabilities is recorded in finance costs.
Restatement of Consolidated Income Statement:
The table below shows the impact of IFRS 16 on the comparative
period consolidated income statement for the year ended 30
September 2019, and related alternative profit measures (APMs).
Year ended IFRS 16 Year ended
30 September impact 30 September
2019 reported 2019 restated
EUR000 EUR000 EUR000
Revenue 312,419 - 312,419
Cost of goods sold (164,600) - (164,600)
Gross profit 147,819 - 147,819
Selling expenses (61,299) 312 (60,987)
Other operating expenses (31,644) 325 (31,319)
Impairment loss on trade and
other receivables (430) - (430)
Share of loss of equity-accounted
investees, net of tax (536) - (536)
Operating profit before exceptional
items 53,910 637 54,547
Exceptional income 3,766 - 3,766
Exceptional expense (15,459) - (15,459)
Operating profit 42,217 637 42,854
Finance income 312 - 312
Finance costs (4,299) (500) (4,799)
Profit before tax 38,230 137 38,367
Income tax expense (10,868) - (10,868)
Exceptional tax credit 948 - 948
--------------- -------- ---------------
Total income tax expense (9,920) - (9,920)
--------------- -------- ---------------
Profit for the period 28,310 137 28,447
--------------- -------- ---------------
Earnings per share, (EURcents),
attributable to equity holders
of the Parent
Basic 14.26 0.07 14.33
Diluted 14.17 0.07 14.24
KPIs and APMs
Adjusted EBITDA 63,217 3,734 66,951
Adjusted EBITDA margin 20.2% 1.2% 21.4%
Adjusted basic earnings per
share (EURcents) 19.68 0.07 19.75
--------------- -------- ---------------
Restatement of Consolidated Statement of Financial Position:
The tables below set out the impact of IFRS on the transition
balance sheet at 30 September 2018 and on the comparative balance
sheet at 30 September 2019, as well as on related debt measures.
Right-of-use assets are presented separately in the Consolidated
Statement of Financial Position. Lease liabilities are presented in
other finance liabilities (both current and non-current). Net debt
and leverage increase as a consequence of the increase in lease
liabilities. Trade and other receivables reduce as lease
prepayments are eliminated. There is also a corresponding increase
in deferred tax liabilities relating to the accrual
elimination.
30 September IFRS 16 30 September
2018 - reported impact 2018 - restated
EUR000 EUR000 EUR000
Non-current assets
Intangible assets - goodwill 45,940 - 45,940
Intangible assets - other 311,129 - 311,129
Property, plant and equipment 47,265 (254) 47,011
Right-of-use assets - 9,932 9,932
Investment in equity-accounted investee 16,994 - 16,994
Deferred tax assets 589 - 589
Other assets 4,742 - 4,742
426,659 9,678 436,337
----------------- -------- -----------------
Current assets
Inventories 30,711 - 30,711
Trade and other receivables 119,238 - 119,238
Other assets 135 - 135
Current tax assets 863 - 863
Cash and cash equivalents 50,143 - 50,143
201,090 - 201,090
----------------- -------- -----------------
Total assets 627,749 9,678 637,427
================= ======== =================
Non-current liabilities
Borrowings 81,300 - 81,300
Other financial liabilities 2,692 8,476 11,168
Deferred tax liabilities 47,421 275 47,696
Provisions 1,082 - 1,082
Trade and other payables 287 - 287
132,782 8.751 141,533
----------------- -------- -----------------
Current liabilities
Trade and other payables 72,080 (1,446) 70,634
Borrowings 16 - 16
Other financial liabilities 66 2,953 3,019
Income tax payable 8,149 - 8,149
Indirect tax payable 62,058 - 62,058
Provisions 717 - 717
143,086 1,507 144,593
----------------- -------- -----------------
Total liabilities 275,868 10,258 286,126
----------------- -------- -----------------
Net assets 351,881 (580) 351,301
================= ======== =================
Capital and reserves
Issued capital 23,625 - 23,625
Merger reserve 99,033 - 99,033
Consolidation reserve 5,130 - 5,130
Own share reserve (3,370) - (3,370)
Other reserve 11,406 - 11,406
Foreign currency translation reserve 13,915 - 13,915
Retained earnings 202,142 (580) 201,562
----------------- -------- -----------------
Total equity 351,881 (580) 351,301
----------------- -------- -----------------
Total equity and liabilities 627,749 9,678 637,427
================= ======== =================
KPIs and APMs
Net debt 31,583 11,429 43,012
Leverage ratio (12 month proforma - times) 0.53 0.68
================= ======== =================
30 September IFRS 16 30 September
2019 - reported impact 2019 - restated
EUR000 EUR000 EUR000
Non-current assets
Intangible assets - goodwill 49,800 - 49,800
Intangible assets - other 326,718 - 326,718
Property, plant and equipment 53,723 (191) 53,532
Right-of-use assets - 11,817 11,817
Investment in equity-accounted investee 16,458 - 16,458
Deferred tax assets 674 - 674
Other assets 4,720 - 4,720
452,093 11,626 463,719
----------------- -------- -----------------
Current assets
Inventories 43,059 - 43,059
Trade and other receivables 111,068 (29) 111,039
Current tax assets 3,588 - 3,588
Cash and cash equivalents 63,437 - 63,437
221,152 (29) 221,123
----------------- -------- -----------------
Total assets 673,245 11,597 684,842
================= ======== =================
Non-current liabilities
Borrowings 105,425 - 105,425
Other financial liabilities 6,115 9,919 16,034
Deferred tax liabilities 53,272 228 53,500
Provisions 1,234 - 1,234
Trade and other payables 331 - 331
166,377 10,147 176,524
----------------- -------- -----------------
Current liabilities
Trade and other payables 78,534 (1,172) 77,362
Borrowings 2 - 2
Other financial liabilities 1,148 3,260 4,408
Income tax payable 5,883 - 5,883
Indirect tax payable 59,714 - 59,714
Provisions 173 - 173
145,454 2,088 147,542
----------------- -------- -----------------
Total liabilities 311,831 12,235 324,066
----------------- -------- -----------------
Net assets 361,414 (638) 360,776
================= ======== =================
Capital and reserves
Issued capital 23,625 - 23,625
Merger reserve 99,033 - 99,033
Consolidation reserve 5,130 - 5,130
Own share reserve (2,718) - (2,718)
Other reserve 12,566 - 12,566
Foreign currency translation reserve 9,774 - 9,774
Retained earnings 214,004 (638) 213,366
----------------- -------- -----------------
Total equity 361,414 (638) 360,776
----------------- -------- -----------------
Total equity and liabilities 673,245 11,597 684,842
================= ======== =================
KPIs and APMs
Net debt 42,266 13,179 55,445
Leverage ratio (times) 0.67 0.83
================= ======== =================
Restatement of Consolidated Statement of Cash Flows:
The table below shows the impact of IFRS 16 on the comparative
period Consolidated Statement of Cash Flows for the year ended 30
September 2019 and APMs. IFRS 16 has no impact on total cash flow
for the year or cash and cash equivalents at the end of the year.
Cash generated from operations and free cash flow measures increase
as operating lease rental expenses are no longer recognised as
operating cash outflows. Cash outflows are instead split between
interest paid and repayments of obligations under leases, which
both increase.
Year ended IFRS 16 Year ended
30 September impact 30 September
2019 reported 2019 restated
EUR000 EUR000 EUR000
Operating activities
Profit for the period 28,310 137 28,447
Adjustments to reconcile profit for
the period to net cash flows:
Income tax expense recognised in income
statement 9,920 - 9,920
Interest expense and bank commissions 4,218 500 4,718
Loss on disposal of tangible and intangible
assets 50 - 50
Other financial income (312) - (312)
Depreciation of property, plant and
equipment 6,805 (61) 6,744
Depreciation of right-of-use assets - 3,158 3,158
Amortisation of intangible assets 1,966 - 1,966
Impairment of goodwill and brands 14,295 - 14,295
Gain on liquidation of subsidiary (3,766) - (3,766)
Net foreign exchange loss 81 - 81
Share-based compensation charge 2,492 - 2,492
Share of loss of equity-accounted
investees, net of tax 536 - 536
Decrease in provisions (443) - (443)
--------------- -------- ---------------
64,152 3,734 67,886
Working capital adjustments
Decrease in trade receivables and
other assets 9,962 - 9,962
Increase in inventories (7,815) - (7,815)
Increase in trade payables and other
liabilities 1,384 - 1,384
--------------- -------- ---------------
3,531 - 3,531
--------------- -------- ---------------
Cash generated by operations 67,683 3,734 71,417
Income tax paid (15,196) - (15,196)
Net cash flow from operating activities 52,487 3,734 56,221
--------------- -------- ---------------
Investing activities
Interest received 195 - 195
Payments to acquire intangible assets (1,628) - (1,628)
Proceeds from sale of property, plant
and equipment 21 - 21
Purchase of property, plant and equipment (8,556) - (8,556)
Acquisition of subsidiaries, net of
cash acquired (31,801) - (31,801)
Net cash flow from investing activities (41,769) - (41,769)
--------------- -------- ---------------
Financing activities
Increase in borrowings 24,981 - 24,981
Interest paid (4,861) (500) (5,361)
Payment of lease liabilities - (3,234) (3,234)
Dividends paid to equity holders of
the Parent (17,121) - (17,121)
--------------- -------- ---------------
Net cash flow from financing activities 2,999 (3,734) (735)
Net increase in cash and cash equivalents 13,717 - 13,717
Cash and cash equivalents at the start
of the period 50,143 - 50,143
Effect of exchange rates on cash and
cash equivalents (423) - (423)
Cash and cash equivalents at the end
of the financial period 63,437 - 63,437
=============== ======== ===============
Year ended IFRS 16 Year ended
30 September impact 30 September
2019 reported 2019 restated
EUR000 EUR000 EUR000
Operating activities
Free cash flow 57,520 3,734 61,254
Adjusted free cash flow conversion 91.0% 91.5%
The financial information set out above does not constitute the
company's statutory accounts for the year ended 30 September 2020
or ended 30 September 2019 but is derived from those accounts.
Statutory accounts for 2019 have been delivered to the registrar of
companies, and those for 2020 will be delivered in due course. The
auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
[1] Constant currency is calculated by converting 2019 results
at 2020 FX rates. Underlying also excludes the impact from
acquisitions made in 2019
[2] Stock Spirits Group uses alternative performance measures as
key financial indicators to assess underlying performance of the
Group. Details of the basis of calculation for Adjusted EBITDA can
be found in note 5 to the statutory reported figures. Adjusted EPS
is the EPS excluding exceptional expenses and can be found in note
10 to the statutory reported figures.
[3] Leverage at 30 September is net debt as at 30 September
divided by the 12 month Adjusted EBITDA to 30 September including
IFRS 16 adjustments for 2020 for both measures
[4] Subject to shareholder approval at the AGM on 4(th) February
2021, the final and special dividend will be paid on 19(th)
February 2021 based on the record date of 29(th) January 2021
[5] IRI data, total Italy, modern trade MAT September 2020
[6] Nielsen, total Poland, total off trade, total spirits MAT
September 2020
[7] Nielsen, total Poland, total off trade, total vodka MAT
September 2020. For the purposes of this estimate, total vodka =
total regular vodka plus total flavoured vodka plus total flavoured
vodka based liqueurs
[8] IWSR 2019
[9] In the Czech Republic the "rum" category of the spirts
market includes traditional rum, which is a spirit drink made from
sugar cane, and what is widely referred to as "local rum", known as
"Tuzemak" or Tuzemsky", which is made from sugar beet. As used in
this Report, "rum" refers to both traditional and local rum, while
"Czech rum" refers to local rum
[10] Nielsen MAT to end September 2020, total Czech
off-trade
[11] Source: IRI total Italy, total modern trade, total spirits,
MAT September 2020. Prior year data excludes Beam Suntory
[12] Nielsen, total Slovakia, total off trade, total rum,
whisky, vodka, fruit spirits, herbal bitters and fruit distillates
MAT to end August 2020
[13] Nielsen Croatia, total off trade, total brandy MAT
September 2020
[14] Revenue and cost of goods per litre is calculated by
dividing the total Group revenue or cost of goods by the number of
litres sold
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