TIDMSTCK
RNS Number : 6948M
Stock Spirits Group PLC
13 May 2020
Stock Spirits Group PLC
Results for the six months ended 31 March 2020
Excise increases were successfully managed, delivering another
period of strong financial and operational progress
Current trading resilient, with minimal impact from the COVID-19
pandemic to date
13 May 2020: Stock Spirits Group PLC ("Stock Spirits", the
"Group", or the "Company"), a leading owner and producer of premium
branded spirits and liqueurs in Europe, announces its results for
the six months ended 31 March 2020.
Financial and operational highlights
All values in EUR Underlying 6 months
millions unless to March 2020 Reported 6 months to
otherwise stated Reported 6 months to excluding 2019 March 2019 restated
March 2020 acquisitions for IFRS16 % Underlying Growth
Volume (millions 9
litre cases) 8.1 8.0 7.3 8.4%
---------------------- --------------------- ---------------------- --------------------
Revenue 189.6 180.7 156.9 15.1%
---------------------- --------------------- ---------------------- --------------------
Revenue at constant
currency (1) 15.0%
---------------------- --------------------- ---------------------- --------------------
Adjusted EBITDA(2) 45.6 44.2 35.3 25.6%
---------------------- --------------------- ---------------------- --------------------
Adjusted EBITDA at
constant currency 25.6%
---------------------- --------------------- ---------------------- --------------------
Operating profit
before exceptional
items 38.8 38.7 29.3 32.3%
---------------------- --------------------- ---------------------- --------------------
Profit for the period 14.7 14.9 5.9 152.0%
---------------------- --------------------- ---------------------- --------------------
% Growth
---------------------- --------------------- ---------------------- --------------------
Earnings per share -
basic (EUR cents per
share) 7.41 2.99 147.8%
---------------------- --------------------- ---------------------- --------------------
Adjusted EPS - basic
(3) (EUR cents per
share) 14.38 10.19 41.1%
---------------------- --------------------- ---------------------- --------------------
All comparative figures for the 6 months to March 2019 have been
restated to align with the new IFRS16 requirements, which were
adopted by the Group on 1 October 2019.
-- Successfully managed January 2020 excise duty increases in
both Poland and Czech Republic (which together represent 83.9%
of Group revenue), with both businesses continuing to grow
in total spirits volume and value
-- Poland revenue up 25.4% and Czech Republic underlying revenue
up 9.1% (both at constant currency), in both cases reflecting
growth in volume, pricing and mix
-- Decisive response to COVID-19 pandemic: proactive contingency
actions focused on people and safety, continuity of production
and supply, and support of local communities (e.g. through
large-scale manufacturing and donations of hand sanitiser)
-- Strong balance sheet with unused bank facilities. Net debt(4)
of EUR55.4 million at 31 March 2020 (30 September 2019: EUR55.4
million), resulting in leverage of 0 .71x (30 September 2019
restated for IFRS16: 0.83x)
-- Interim dividend of 2.77 EUR cents per share, an increase of
5.3% (2019 interim: 2.63 EUR cents per share)
-- COVID-19 driven exceptional items: impairment of minority investment
in Quintessent ial Brands Ireland Whiskey Limited with a charge
of EUR14.2 million; net release of provisions for contingent
consideration of EUR1.6 million; and EUR1.3 million of costs
from postponed M&A work
Commenting on the results, Mirek Stachowicz, Chief Executive
Officer, said:
"These strong results are a testament to the quality of our
brand portfolio, the strength of our customer relationships, and
the resilience of our business model. It is also these attributes
that have enabled us to successfully manage the excise changes that
were implemented earlier in the year in our key markets of Poland
and the Czech Republic.
The COVID-19 pandemic reached our markets towards the end of the
period and, as a result of our long-standing focus on the
off-trade, our broad portfolio of local brands, and our strategy of
sourcing and manufacturing our products locally, it has had a
minimal impact on our operations to date. There remains robust
demand for our products, but we are monitoring developments closely
and are able to respond quickly if required. Our first priority
continues to be the health and well-being of our employees, and I
would like to thank them all for their extraordinary resilience,
loyalty and hard work during this period."
Analyst presentation
In line with government guidance on social distancing, the
Company has decided not to proceed with a physical results
presentation. Instead, an audio webcast and conference call will be
hosted by CEO Miroslaw Stachowicz and CFO Paul Bal at 9:00am (BST)
on Wednesday 13 May 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/ij23w69i
Conference call:
Location Phone Number Passcode
International +44 (0) 2071 928338 5697873
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UK 0800 279 6619
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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.
For further information:
Stock Spirits Group
Paul Bal +44 (0) 1628 648 500
Powerscourt + 44 (0) 20 7250 1446
Rob Greening stockspirits@powerscourt-group.com
Lisa Kavanagh
Bethany Johannsen
Investors can also address any query to
investorqueries@stockspirits.com
A copy of this interim results announcement ("announcement") has
been posted on www.stockspirits.com
About Stock Spirits Group
Stock Spirits is one of Europe's leading branded spirits and
liqueurs businesses, 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 also exports to more than 50 other countries
worldwide. Global sales volumes currently total over 125 million
litres per year.
Stock has production facilities in Poland, the Czech Republic,
Germany and Italy and its core brands include products made to
long-established recipes such as Stock 84 brandy, Fernet Stock
bitters and Limoncè, as well as more recent creations like Stock
Prestige and o dkowa de Luxe vodkas.
Stock is listed on the main market of the London Stock Exchange.
For the year ended 30 September 2019 it delivered total revenue of
EUR312.4 million and operating profit before exceptional items of
EUR53.9 million.
For further information, please visit www.stockspirits.com
Disclaimer
This announcement may contain statements which are not based on
current or historical fact and which are forward looking in nature.
These forward looking statements may reflect knowledge and
information available at the date of preparation of this
announcement and the Company undertakes no obligation to update
these forward looking statements. Such forward looking statements
are subject to known and unknown risks and uncertainties facing the
Group including, without limitation, those risks described in this
announcement, and other unknown future events and circumstances
which can cause results and developments to differ materially from
those anticipated. Nothing in this announcement should be construed
as a profit forecast.
Basis of Preparation
The financial information contained in these interim results
does not constitute statutory accounts of Stock Spirits Group PLC
within the meaning of Section 434 of the Companies Act 2006.
Statutory accounts for Stock Spirits Group PLC for the 12 months
ended 30 September 2019 were delivered to the Registrar of
Companies. The auditors have reported on the accounts, their report
was:(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 constitute a
statement under Section 498(2) or (3) of the Companies Act
2006.
COVID-19 IMPACT AND RESPONSE
To-date, the COVID-19 pandemic has had minimal impact both on
our performance in our core markets and on the Group's overall
financial position. However, we are monitoring the situation
extremely closely given the uncertainty as to how long the crisis
will last. However, we do note that most of our core markets have
started to relax their lock-downs in recent days.
Our first priority is the health and well-being of our
employees, and we quickly implemented an extensive range of
measures to provide them with a working environment that is as safe
as possible. These include organising revised shift patterns at our
facilities to minimise risks, and taking measures to minimise
person-to-person contact. Office-based employees are working from
home. We have redeployed staff who usually work in the on-trade to
new roles, including supporting off-trade sales activities, online
training, assisting on-trade customers navigate government support
packages, and digital marketing. We have not laid off or furloughed
any employees, and have not sought government assistance of any
kind in any market.
We continue to see robust levels of consumer demand for our
products in our two core markets of Poland and the Czech Republic
(which together represent 83.9% of the Group's revenue). We are
fortunate to have had a long-standing focus on the off-trade in
both countries, and any impact from the widespread closure of the
on-trade (bars, clubs, restaurants and hotels) has been mitigated
by the shift to off-trade channels as our products are enjoyed at
home rather than in bars or restaurants. Overall, some 85% of the
Group's revenues come through the off-trade channel. We are also
under-represented in duty-free channels, and so have avoided any
material impact there.
Furthermore, our broad portfolio of local brands covering all
price segments stands us in good stead, as consumers have tended to
prioritise more familiar brands and products that they trust.
In terms of production, nearly all of our products that we sell
within Poland and Czech Republic are sourced and manufactured
locally. There has been no disruption to our supply chain, nor to
production at any of our facilities, and no impact on our ability
to service demand - even in Italy.
We are in the fortunate position of being able to offer real
help to governments and businesses in their efforts to limit the
spread of the virus. Our facilities in Poland, the Czech Republic
and Germany have been manufacturing large quantities of hand
sanitiser which has been donated for use by medical personnel, the
emergency services, and employees in the food and drink sectors. We
are committed to continuing to do everything that we can to help
during this hugely challenging period for all our stakeholders.
Our balance sheet remains strong, with financing secure to
November 2022. We are prudently leveraged, being well inside our
financing covenants, and have significant unused bank facilities.
We have used our consistently strong cash generation to raise
inventory levels, further ensuring availability of our products
during these uncertain times.
INTERIM MANAGEMENT REPORT
Overview
Until the COVID-19 pandemic, the main challenge in the period
was managing excise tax increases in our two largest markets of
Poland and the Czech Republic. Overall performance in the run-up to
the excise increases, effective 1 January, was ahead of our
expectations. In the following months it further exceeded our
expectations, reflecting continued strong consumer demand for our
products.
The fact that we have managed the excise increases successfully,
and also traded through the COVID-19 crisis without material
interruption in our core markets so far, is clear illustration of
the resilience and adaptability of our strategy and business
model.
This is reflected in our financial results. Overall, the Group
grew volumes by +10.1%, revenue by +20.8% and adjusted EBITDA by
+29.4%. Both our Polish and Czech businesses grew revenue and
profits, notwithstanding the excise increases. Cash has taken on
even greater importance in these testing times, and the Group
continued to deliver on this front too. As a result, our financial
position remains very strong, enabling the announcement of an
increased interim dividend.
In Poland, total spirits volume and value growth continued
despite the 10% increase in excise duty. Our Polish business
delivered a strong performance. It is the fastest growing major
player in vodka by both volume and value, and also achieved the
greatest absolute growth in both volume and value. Revenue was up
by 25.4% (at constant currency) reflecting the growth in volume,
pricing and mix. After the excise increase, pricing developed as we
expected. Adjusted EBITDA was up 43.8% (constant currency) with
improved margins, notwithstanding higher marketing investment. The
anticipated small-formats-tax has not materialised due to
opposition in parliament. We are committed to fighting this
initiative should it be re-introduced, including challenge at the
EU level.
There was also continued growth in total spirits volume and
value in the Czech Republic following the 13% increase in excise
duty. This remains a highly competitive market due to a combination
of the excise increase and competitor price-discounting,
particularly in the herbal bitters and whisky sub-categories.
Against this backdrop, Stock Spirits consolidated its overall
leadership in spirits, partly by leveraging the Bartida business
acquired last year, partly by continuing to invest in brand equity.
The excise increase allowed some progress in pricing, with the
exception of the whisky sub-category. Our rum growth was supported
by the premium agency distribution brand, Legendario, coming with
Bartida, which itself performed ahead of expectations prior to the
closure of the on-trade following the COVID-19 outbreak in March
2020. Underlying revenue was up 9.1% (at constant currency)
reflecting growth in volume, pricing and mix. Underlying adjusted
EBITDA was up 25.6% (constant currency), with margin
improvement.
Market conditions in Italy (which represents 7.8% of the Group's
revenue) had been improving prior to the COVID-19 outbreak, which
has had a profound impact in recent months. Under the earlier
trends, the total market grew in volume (+3.3%) and value (+4.2%).
Stock Spirits still has a relatively small overall share of the
total spirits market, with 6.6% value share in the modern off-trade
channel on which we focus. Nevertheless we hold leading positions
in several sub-categories: clear vodka, vodka-based liqueurs,
limoncello, and (following last year's acquisition of Distillerie
Franciacorta) grappa. Decline in several of these sub-categories,
coupled with private label competition, impacted the performance.
While revenue, assisted by last year's acquisition, was up 21.0%,
underlying EBITDA was down significantly, with margins under
pressure. Integration of Distillerie Franciacorta, with its
outstanding heritage and brands, progresses as planned. Synergies
came from distribution expansion of both portfolios prior to the
crisis, and this allowed us to gain Beam-Suntory as a distribution
partner. Distribution of Beam products commenced in April 2020,
despite the lockdown. Plans remain on track for the construction of
a new production facility over the coming years.
Our other markets include Slovakia, Croatia, Bosnia and export
activities. Overall revenue and profits in this area were lower,
driven mainly by a more challenging environment in Slovakia with
aggressive price competition and tougher market regulations.
One of the Group's strategic aims is to grow through
acquisition. Our M&A efforts were interrupted by market
disruption resulting from COVID-19, and so this work has been
postponed. This resulted in the write-off of EUR1.3 million
invested - disclosed as an exceptional item.
Our Quintessential Brands Irish Whiskey Ltd (QBIWL) joint
venture doubled volumes over its prior financial year albeit from a
small base. However, COVID-19 significantly impacted demand for its
relatively less established and higher-priced products. In March,
it closed its Visitor Centre in Dublin as lock-down measures hit
tourism. The distillery continues to operate, and new-make malt
liquid is being laid down. Uncertainty over the speed of recovery
in sales triggered an impairment of the investment. This had an
impact of EUR14.2 million disclosed as an exceptional item. Also
included in exceptional items is a net release of provisions for
contingent consideration of EUR1.6 million (a release of EUR1.8
million for QBIWL, net of an increase of EUR0.2 million for
Bartida).
We are today announcing an interim dividend of 2.77 EUR cents
per share, representing an increase of 5.3% versus last year's
interim dividend of 2.63 EUR cents. Given our robust balance sheet,
strong cash generation and resilient performance despite
exceptionally challenging circumstances, we are pleased to continue
with our progressive dividend policy for shareholders.
Market performance:
Poland
Poland delivered a strong performance across all of the key
spirits categories and price segments, which is a clear
illustration of the underlying momentum in this part of our
business.
Revenue has increased on a reported basis by +25.2% to EUR104.9
million, and on a constant currency basis revenue is up EUR21.2
million versus EUR83.7 million H1 2019, growth of +25.4%. Reported
adjusted EBITDA in H1 was EUR28.5 million (H1 2019: EUR19.8
million). On a constant currency basis adjusted EBITDA has
increased by EUR8.7 million, with an increase in margin from 23.7%
to 27.2% as excise increases were passed through to customers and
subsequently onto consumers.
In the market, total spirits volume and value growth continued
despite January 2020's increase in excise duty. We also delivered
growth in the three biggest spirits categories - i.e. vodka, whisky
and brandy. Vodka, the largest spirits category in Poland,
continued to perform positively, delivering volume growth (+3.8%)
and value growth (+7.3%). This is due to two main drivers: firstly,
high growth from the total flavoured segment's value (+10.2%),
which commands higher average selling prices per litre than total
clear vodka and is a segment that appeals strongly to young adults
and female drinkers; secondly, double-digit growth from total
premium vodka (+18.7%) as consumers traded up to higher quality at
higher average price points.
Stock Spirits is the fastest growing major player by volume
(+8.3%) and value (+11.8%) in the Polish vodka market, achieving
the greatest absolute growth in both volume and value and the
fastest growth rates. This has increased Stock Spirits' value share
from 28.5% to 29.7%. Our volume and value growth rates are ahead of
the category in both the clear and flavoured segments. Our
category-leading growth has been achieved through increased focus
on our flavoured range ( o dkowa, Lubelska and Saska) coupled with
the success of our premiumisation initiatives in clear vodka, where
Stock Prestige, Amundsen Expedition and Orkisz are all in double
digit growth ahead of the premium category.
Whisky, the second largest and fastest growing spirits category
in Poland, achieved volume growth (+15.9%) and value growth
(+18.4%). At this stage of the whisky category's evolution, the
majority of growth is being delivered via the discounter channel,
where the major multinational whisky players and private label are
driving trial and consumption using aggressive pricing to grow
penetration rapidly, particularly after the duty increase in
January. Jim Beam, Stock Spirits' leading agency distribution brand
in Poland, has been put under pressure by this development combined
with the significant tariff increases on U.S. spirits and the
excise increase. These have increased Jim Beam average price per
litre +6.1% over the last year versus a total whisky category
average price per litre increase in the same period of +2.2%.
Despite this extremely challenging environment, Stock Spirits
continued to grow Jim Beam value by (+7.1%).
In brandy, the third largest spirits category in Poland, Stock
Spirits grew value on its relaunched Stock 84 packaging and liquid
range (+10.3%) well ahead of the category at (+8.8%).
On-trade is estimated to be some 10% of the market. Our business
is under-represented in this channel, with some 3% of revenue for
the market coming from on-trade.
Work on a new distillery at our Lublin facility has commenced
and is proceeding in line with planned timing and costs.
Czech Republic
The environment in the Czech Republic remains highly competitive
due to a combination of the impact from the excise increase, as
well as competitor price discounting. However, Stock continues to
lead the spirits market whilst investing in brand equity growth and
margin enhancement for the long term.
Revenue has grown on a reported basis by +20.8% to EUR54.2
million, and on an underlying constant currency basis revenue is up
EUR4.1 million (H1 2019: EUR45.2 million), or growth of +9.1%. The
Bartida acquisition delivered EUR4.9 million of additional revenue
during the period. Reported EBITDA in H1 was EUR19.8 million versus
EUR15.4 million H1 2019. On an underlying constant currency basis
EBITDA has increased by EUR3.5 million, at a margin of 38.6%.
There was continued growth in total spirits volume and value in
the Czech Republic despite the +13% increase in excise duty in
January of this year.
At a total market level, spirits remain in volume (+4.0%) and
value (+6.4%) growth, as consumers traded up to higher quality and
higher price-point products during the period.
Three of the four biggest spirits categories - rum, vodka and
whisky - are in MAT volume and value growth, which more than
compensated for a contraction in total demand for herbal
bitters.
Over the last year, several multinational competitors have
continued to deploy very aggressive pricing activity in the herbal
bitters and whisky categories in order to accelerate volume growth.
As category leader, Stock Spirits chose to invest and has achieved
continued growth in total spirits value (+2.6%), and slight volume
growth (+0.8%) driving a decline in overall value share for our
Czech market from 34.6% to 33.3%.
In the largest of the Czech spirits categories, rum, Stock grew
volume and value well ahead of the category.
Our restructured Bo kov portfolio, which now covers a wider
range of price segments, drove growth in rum from both our core
established products and our premium Bo kov Republica Reserva and
Bo kov Czerny (Black) new product development ("NPD"). Our rum
growth was also supported by the addition of premium agency
distribution brand, Legendario, from the Bartida acquisition.
In the second largest category vodka, our revised category
management and promotional activity drove volume growth ahead of
the category, comprehensively addressing the headwinds of last
year.
In the third and fourth largest categories, whisky and herbal
bitters, Stock came under intense pressure from multi-nationals
which reduced their prices in their quest for rapid volume growth.
In both categories, Stock continued to invest in brand equity
building, passing on the excise increase in higher pricing post the
excise increase and enhancing margin.
The Fernet Stock range relaunch continued its phased roll out,
with new improved premium packaging and flavour innovation,
supported by a comprehensive consumer communications campaign. The
full benefits of the relaunch will take time to materialise as they
did on our earlier successful restructuring of the Bo kov
portfolio, but early indications are positive.
On-trade is estimated to be some 32% of the market. Our
participation in this channel has developed especially with the
acquisition of Bartida, with some 30% of revenue for the market now
coming from the on-trade.
Italy
Italy accounts for 7.8% of the Group's revenue. Underlying
revenue was down by -6.2%, with the Distillerie Franciacorta (DF)
delivering an additional EUR3.3 million in revenue to get to a
reported EUR14.8 million (H1 2019: EUR12.2 million). Underlying
adjusted EBITDA in H1 was EUR0.5 million (H1 2019: EUR1.3 million)
and DF was EUR0.3 million.
Whilst Stock Spirits has a relatively small overall share of
total spirits, with 6.6% value share in the modern off-trade
channel on which we focus, we hold leading positions in several key
categories. These include number one brands in the clear vodka,
vodka-based liqueurs and limoncello categories, and the number two
brand in brandy. In addition, following the acquisition of
Distillerie Franciacorta, Stock is number one in off-trade
grappa.
Trading conditions had improved slightly until the COVID-19
pandemic impacted the country, with lower levels of unemployment
and slowing inflation positively impacting consumer consumption
over the last year. As a result of these trends, the total market
grew in volume (+3.3%) and value grew (+4.2%).
Against this backdrop, Stock Spirits' total volume share in the
modern trade channel, whilst larger than before the Franciacorta
acquisition, was slightly down to (6.8%), with value share slightly
down to (6.6%).
Following the increased investment in Keglevich last year, Stock
Spirits grew overall share in clear and flavoured vodka. In
addition, it gained share in limoncello and in brandy post the
award winning Stock 84 range relaunch. However, as a result of the
softening market and tactical execution issues at Christmas, there
were losses in the grappa category.
The integration of the Distillerie Franciacorta acquisition,
with its outstanding heritage and brands, is progressing as
planned. Sales force synergies in both the on and off-trade have
supported distribution expansion of both portfolios prior to the
crisis. Plans still remain on track for the construction of a new
production facility to expand the existing site over the coming
years.
Italy has a significant on-trade channel, estimated to be some
53% of the market. Our business is under-represented in this
channel, with some 40% of revenue coming from on-trade.
Other markets
Other markets includes Slovakia; and Bosnia, Croatia and other
export activities together known as International. Revenue was
EUR15.8 million (H1 2019: EUR16.1 million) and adjusted EBITDA was
EUR2.0 million (H1 2019: EUR3.0 million).
Slovakia
In Slovakia, total spirits market volume declined (-2.0%) whilst
value was flat (-0.1%). Stock Spirits continues to premiumise its
range to grow value in the highly competitive Slovakian market and
has maintained value share of total spirits (12.1%) this year
versus last year (12.1%).
Brand building investment on the Amundsen vodka range drove
value growth (+19.0%), off-setting declines for Stock in the fruit
spirits category
Stock Spirits maintained volume leadership in herbal bitters,
despite aggressive price promotional activity by major competitors.
The relaunch of the Fernet Stock range, launched in Slovakia in
tandem with the Czech Republic, aimed to rejuvenate the brand
equity, enhance brand perceptions and profitability.
NPD also drove premiumisation. Bo kov Republica was rolled out,
helping to grow Stock's share of rum from (7.6%) to (12.0%), whilst
our new player in the Borovička (Juniper) category, the premium
Golden Ladova (Ice) brand, helped drive a (+146.2%) value growth
for Stock in a declining category.
The success of these NPDs off-set declines in our agency brand
whisky business with Beam Suntory where, as in the Czech Republic,
Stock Spirits came under intense pressure from the combination of
aggressive competitor price discounting and U.S. tariff imposition.
However, we took the decision to work with Beam Suntory to build
investment in brand equity and margin enhancement for the long
term, rather than joining a "race to the bottom".
These initiatives contributed to stable overall volume and value
share for Stock Slovenska, maintaining our position as the second
biggest spirits company in the off-trade. In April, we announced
that the management team of our Slovakian business would be
combined with our Czech operations to better leverage the combined
scale of the broadly similar brand portfolios in both
countries.
International
In Croatia we have had pleasing results from Stock 84 brandy,
post its relaunch, reinforcing our market leading position of
imported brandy and growing value share from 11.3% to 13.1%.
All distribution brands have been performing well, including the
Beam brands, Beluga, The Dubliner Irish whiskey and the more recent
addition of the Fentimans tonics range.
Our new distributor in Germany has delivered tangible results by
gaining increased listings in the retail segment for our Polish
brands. A new brand ambassador for our Italian portfolio has been
appointed in Germany to help drive similar growth on that element
of our portfolio. The new distributor for the UK market appointed
in January 2019 has driven significant increases for our Polish
brands in the UK, notably on Lubelska and Stock Prestige.
Sources for all market data as referenced above: All data quoted
is MAT to end March 2020, from Nielsen for Poland, Czech Republic,
Croatia and from IRI and IWSR for Italy. Data for Slovakia is MAT
to the end of February 2020.
Financial performance
Following implementation of IFRS 16 'Leases' from 1 October
2019, all comparatives have been restated to comply with the new
accounting standard to report on a like-for-like basis. Full
details of the changes are outlined in note 25 of the unaudited
interim condensed consolidated financial statements. One
consequence of this is improvement in EBITDA and EBITDA margin, as
certain operating costs associated with leases are now considered
financing costs.
Also, in the second half of the last financial year, two
acquisitions were completed - Distillerie Franciacorta in Italy,
and Bartida in the Czech Republic. For key metrics, when comparing
our half year results to the prior period, we also report
underlying growth rates that exclude the impact of these
acquisitions in the current period, again to provide a
like-for-like comparison.
Volumes for the period were up 8.3% on an underlying basis,
primarily as a result of continued strong performance in Poland and
Czech. On a reported basis volumes rose 10.1%.
Reported revenue was up +20.8% to EUR189.6 million (H1 2019:
EUR156.9 million). Underlying revenue at constant currency
increased +15.0% driven by the increase in volume (+8.3%) and
pricing (+5.9%), where both Poland and Czech successfully managed
the January 2020 excise increases. The excise increase was fully
passed on in Poland, with a small margin. In Czech, the excise
increase was passed on where competition considerations allowed.
Impact to revenue from foreign currency was minimal (+0.1%), as
slight weakening in the Polish Zloty was off-set by the
strengthening in the Czech Koruna during the period.
Revenue per litre rose 9.8% to EUR2.59 (H1 2019: EUR2.36) mainly
reflecting the mix impact of last year's acquisitions, as well as
increased pricing in Poland and Czech.
Cost of goods sold per litre increased +10.7% to EUR1.39 (H1
2019: EUR1.25), mainly due to last year's acquisitions and an
increase in third party brand costs. This mix reduced gross profit
margin by 40bps.
Selling expenses increased +12.6% from a combination of the
acquisitions, and increased investment behind our brands. Overheads
increased by 11.8% mainly due to higher people costs, plus the
increase from the acquisitions.
Exceptional items include an impairment of investment in our
Irish whiskey venture, QBIWL. The impact of COVID-19 on the
forecasts for this venture results in a EUR14.2 million impairment.
Another consequence of these lower forecasts is the release in the
provision for contingent consideration as most of the metrics for
payment are unlikely to be met. The resulting impact is a release
of EUR1.8 million. Partly off-setting this, the potential for
payment of contingent consideration for Bartida has increased,
which has resulted in a EUR0.2 million increase in the
provision.
A further exceptional item is the write-off of EUR1.3 million of
M&A costs incurred, where work has been postponed as a result
of the impact of the COVID-19 pandemic.
Operating profit for the period was EUR25.0 million, an increase
of +66.8% versus H1 2019 (EUR15.0 million). Adjusted EBITDA also
increased by +29.4% to EUR45.6 million (H1 2019: EUR35.3 million)
with underlying adjusted EBITDA increase at +25.6% to EUR44.2
million and an underlying EBITDA margin of 24.5%.
Net debt (now including IFRS 16 adjustments) remains at EUR55.4
million (September 2019: EUR55.4 million). Working capital
increased at the period-end due to strong sales in late-March, and
the building of "safety buffer" inventory to ensure continued
supply to our customers. This increase in working capital
temporarily reduced our free cashflow conversion level from 93.5%
in H1 2019 to 58.9% in the current period. Conversion rates are
expected to recover to traditionally higher levels as conditions
stabilise over coming months. Leverage has, however, reduced from
0.83x (as at September 2019) to 0.71x reflecting the significantly
increased adjusted EBITDA.
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 retain
significant unused bank facilities.
Net finance costs declined slightly to EUR2.2 million (H1 2019
EUR2.3 million) as the impact of increased facility-drawings to
fund last year's acquisitions was off-set by a reduction in
interest rates.
As set out in the principal risks and uncertainties and in note
9 of the interim condensed consolidated financial statements, we
continued with the appeal process against the EUR4.5 million
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 are currently preparing to lodge a final appeal,
to the Supreme Administrative Court. In respect of intellectual
property restructuring, representing EUR3.7 million 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. The remaining
EUR0.8 million remains fully provided for.
Adjusted basic earnings per share were reported as 14.38 EUR
cents for the period, growth of +41.1% versus an adjusted value in
H1 2019 of 10.19 EUR cents per share.
The Board of Directors has approved an interim dividend payment
of 2.77 EUR cents per share, an increase of 5.3% on the prior year
interim dividend. The dividend will be paid on 19 June 2020, with a
record date of 29 May 2020 (shareholders on the register at the
close of business on 29 May 2020). The Euro:Sterling exchange rate
will be fixed on the record date.
Outlook
Given the global nature of the COVID-19 pandemic and the
uncertainty around the severity and duration of its impact across
our markets, we are not in a position to offer guidance on Group
revenue and profitability for the year ending 30 September
2020.
We believe that spirits are - and will remain - a staple product
in our key markets, so we expect consumer demand to remain robust.
Under the impact of the pandemic, consumer demand has remained
resilient in the off-trade channel where we may have also benefited
from consumer stock piling.
All aspects of our business continue to be fully operational
with the exception of selling into the on-trade channel. Our
performance in the second half of the year will, therefore, depend
significantly on the speed of recovery of the on-trade channel in
our markets. The scope of impact of any possible scenarios here
could be limited to the historical 15% share of the on-trade
channel in the overall Group revenue.
We have put significant contingency plans in place in order to
ensure that we continue to deliver as strong a performance as
possible if circumstances change. Our financial position is strong,
with relatively low levels of leverage and significant unutilised
bank facilities.
Overall, we continue to believe that the resilience demonstrated
by our businesses, both during the recent excise increases and
through the COVID-19 pandemic to date, means that we are
well-positioned for further success once trading conditions
normalise.
Going concern
After making enquiries, the Directors have a reasonable
expectation that the Company and its subsidiaries have adequate
resources to continue in operational existence for at least the
next twelve months. For this reason, they continue to adopt the
going concern basis in preparing the consolidated financial
information of the Group.
Principal risks and uncertainties
Clearly the impact of COVID-19 is a major uncertainty facing
almost every business. As outlined above, the impact on our trading
operations 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, 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 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. Based on that,
the Board considers the principal risks and uncertainties for the
Group are:
-- Economic & political change - Results are affected by
overall economic conditions and consumer confidence in key
geographic markets in Central and Eastern Europe markets where
economic and regulatory uncertainty is considered to be higher than
other European countries. Brexit is not considered to be a
principal risk or uncertainty for the Group, for the reasons set
out on page 19 of the Stock Spirits Group Annual Report 2019.
-- Taxes - Increases in taxes, particularly excise duty rates
and VAT, could adversely affect the demand for the Group's
products. Tax increases are likely to be considered by many
governments to help pay the costs incurred in handling the COVID-19
outbreak. Demand for the Group's products is particularly sensitive
to fluctuations in excise taxes, since excise taxes generally
constitute the largest component of the sales price of spirits. The
Group may also be exposed to tax liabilities resulting from tax
audits. Changes in tax laws and related interpretations and
increased enforcement actions and penalties may increase the cost
of doing business. In addition, certain tax positions taken by the
Group are based on industry practice and external tax advice and/or
involve a significant degree of judgement.
-- Laws & regulations - The Group is subject to extensive
laws and regulations limiting advertising, promotions and access to
its products, as well as laws and regulations relating to its
operations, such as anti-trust, anti-bribery, data protection,
health and safety and environmental laws. These regulations and any
changes to them could limit the Group's business activities or
increase costs.
-- Marketplace & Competition - The Group operates in highly
competitive markets that may result in pressure on prices and loss
of market share. This has been particularly evident in Poland
historically.
-- Strategic transactions - Key objectives of the Group are: (i)
the development of new products and variants; (ii) expansion
through the acquisition of additional businesses; and (iii)
distribution agreements with world-class brand partners.
Unsuccessful launches, or failure by the Group to fulfil its
expansion plans or integrate completed acquisitions, or to maintain
and develop its third party brand relationships could have a
material adverse effect on the Group's growth potential and
performance.
Further detail on the principal risks and uncertainties
affecting the business activities of the Group are set out on pages
14 to 19 in the Stock Spirits Group Annual Report 2019, a copy of
which is available on the Company's website at
www.stockspirits.com. Subject as stated above regarding COVID-19
uncertainty, in the view of the Board there is no material change
in these risks in respect of the remaining six months of the
year.
Responsibility statement of the Directors in respect of the
half-yearly financial report
We confirm to the best of our knowledge:
The condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU
The interim management report includes a fair review of the
information required by:
a) DTR 4.2 7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2 8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Board of Directors
The Board of Directors as at 13 May 2020 is as follows:
David Maloney, Non-Executive Chairman
Mirek Stachowicz, Chief Executive Officer
Paul Bal, Chief Financial Officer
John Nicolson, Senior Independent Non-Executive Director
Kate Allum, Independent Non-Executive Director
Diego Bevilacqua, Independent Non-Executive Director
Tomasz Blawat, Independent Non-Executive Director
Mike Butterworth, Independent Non-Executive Director
For and on behalf of the Board of Directors
Mirek Stachowicz David Maloney
Chief Executive Officer Chairman
13 May 2020
Stock Spirits Group PLC
Unaudited Interim Condensed
Consolidated Financial Statements
Six-month period ended 31 March 2020
Independent Review Report to Stock Spirits Group PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 March 2020 which comprises the Interim
Condensed Consolidated Income Statement, Interim Condensed
Consolidated Statement of Comprehensive Income, Interim Condensed
Consolidated Statement of Financial Position, Interim Condensed
Consolidated Statement of Changes in Equity, Interim Condensed
Consolidated Statement of Cash Flows, and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
March 2020 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in Note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Paul Nichols
For and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
13 May 2020
Interim condensed consolidated income statement
For the six months ended 31 March 2020
Six months Six months
ended 31 ended 31
March 2020 March 2019
Unaudited Unaudited
Restated*
Notes EUR000 EUR000
Revenue 5 189,612 156,908
Cost of goods sold (101,307) (83,142)
Gross profit 88,305 73,766
Selling expenses (31,346) (27,837)
Other operating expenses (17,694) (15,824)
Impairment loss on trade and other receivables (315) (420)
Share of loss of equity-accounted investees,
net of tax 16 (165) (422)
Operating profit before exceptional items 38,785 29,263
Exceptional income 7 1,641 -
Exceptional expense 7 (15,459) (14,295)
Operating profit 24,967 14,968
Finance income 8 161 103
Finance costs 8 (2,331) (2,383)
Profit before tax 22,797 12,688
Income tax expense 9 (8,108) (6,763)
Profit for the period 14,689 5,925
------------ ------------
Attributable to:
Equity holders of the Parent 14,689 5,925
------------ ------------
Earnings per share, (EURcents), attributable
to equity holders of the Parent
Basic 10 7.41 2.99
Diluted 10 7.33 2.96
------------ ------------
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25.
Interim condensed consolidated statement of comprehensive income
For the six months ended 31 March 2020
Six months Six months
ended 31 ended 31
March 2020 March 2019
Unaudited Unaudited
Restated*
EUR000 EUR000
Profit for the period 14,689 5,925
Other comprehensive expense
Other comprehensive expense to be reclassified
to profit or loss in subsequent periods:
Exchange differences arising on translation
of foreign operations (10,846) (99)
Total comprehensive income for the period,
net of tax 3,843 5,826
============ ============
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25.
Interim condensed consolidated statement of financial position
As at 31 March 2020
31 March 30 September
2020 2019
Unaudited Unaudited
Restated*
Notes EUR000 EUR000
Non-current assets
Intangible assets - goodwill 11 49,800 49,800
Intangible assets - other 12 315,311 326,718
Property, plant and equipment 14 50,865 53,532
Right-of-use assets 15 11,421 11,817
Investment in equity accounted investee 16 2,100 16,458
Deferred tax assets 1,452 674
Other assets 4,463 4,720
435,412 463,719
---------- -------------
Current assets
Inventories 42,901 43,059
Trade and other receivables 119,906 111,039
Current tax assets 3,735 3,588
Cash and cash equivalents 17 59,901 63,437
226,443 221,123
---------- -------------
Total assets 661,855 684,842
========== =============
Non -current liabilities
Borrowings 18 102,481 105,425
Other financial liabilities 13,210 16,034
Deferred tax liabilities 50,111 53,500
Provisions 1,175 1,234
Trade and other payables 321 331
167,298 176,524
---------- -------------
Current liabilities
Trade and other payables 69,539 77,362
Borrowings 18 1 2
Other financial liabilities 5,185 4,408
Income tax payable 8,077 5,883
Indirect tax payable 61,509 59,714
Provisions 439 173
144,750 147,542
---------- -------------
Total liabilities 312,048 324,066
---------- -------------
Net assets 349,807 360,776
========== =============
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25.
Interim condensed consolidated statement of financial position
As at 31 March 2020
31 March 30 September
2020 2019
Unaudited Unaudited
Restated*
Notes EUR000 EUR000
Capital and reserves
Issued capital 20 23,625 23,625
Merger reserve 99,033 99,033
Consolidation reserve 5,130 5,130
Own share reserve 20 (4,728) (2,718)
Other reserve 20 12,374 12,566
Foreign currency translation reserve 20 (1,072) 9,774
Retained earnings 215,445 213,366
Total equity 349,807 360,776
Total equity and liabilities 661,855 684,842
=========== ===============
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25.
Interim condensed consolidated statement of changes in equity
For the six months ended 31 March 2020
Foreign
currency
Issued Merger Consolidation Own share Other translation Retained Total
capital reserve reserve reserve reserve reserve earnings equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance at 1
October 2018
(as previously
reported)
(audited) 23,625 99,033 5,130 (3,370) 11,406 13,915 202,142 351,881
Adjustment for
initial
application
of IFRS 16 (net
of tax) - - - - - - (580) (580)
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Balance at 1
October 2018
(restated*) 23,625 99,033 5,130 (3,370) 11,406 13,915 201,562 351,301
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Profit for the
period - - - - - - 5,925 5,925
Other
comprehensive
expense - - - - - (99) - (99)
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Total
comprehensive
(expense)/income - - - - - (99) 5,925 5,826
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Share-based
payment
compensation
charge - - - - 663 - - 663
Exercise of share
options - - - - (456) - 456 -
Dividends - - - - - - (11,953) (11,953)
Own shares
utilised for
incentive
schemes - - - 334 - - (334) -
Balance at 31
March 2019
(unaudited) 23,625 99,033 5,130 (3,036) 11,613 13,816 195,656 345,837
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Profit for the
period - - - - - - 22,522 22,522
Other
comprehensive
expense - - - - - (276) (7) (283)
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Total
comprehensive
(expense)/income - - - - - (276) 22,515 22,239
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Share-based
payment
compensation
charge - - - - 1,829 - - 1,829
Exercise of share
options - - - - (227) - 227 -
Reduction in
share-based
compensation
reserve following
liquidation of
subsidiary - - - - (649) - 649 -
Realisation of
exchange
differences
following
liquidation of
subsidiary - - - - - (3,766) - (3,766)
Dividends - - - - - - (5,168) (5,168)
Own shares
utilised for
incentive
schemes - - - 318 - - (318) -
Adjustment for
application
of IFRS 16 (net
of tax) - - - - - - (195) (195)
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Balance at 30
September 2019
(restated*) 23,625 99,033 5,130 (2,718) 12,566 9,774 213,366 360,776
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25.
Interim condensed consolidated statement of changes in equity
(continued)
For the six months ended 31 March 2020
Foreign
currency
Issued Merger Consolidation Own share Other translation Retained Total
capital reserve reserve reserve reserve reserve earnings equity
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
Balance at 30
September 2019
(restated*) 23,625 99,033 5,130 (2,718) 12,566 9,774 213,366 360,776
Profit for the
period - - - - - - 14,689 14,689
Other
comprehensive
expense - - - - - (10,846) - (10,846)
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Total
comprehensive
(expense)/income - - - - - (10,846) 14,689 3,843
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
Share-based
payment
compensation
charge - - - - 1,528 - - 1,528
Exercise of share
options - - - - (1,720) - 1,720 -
Dividends - - - - - - (12,499) (12,499)
Own shares
acquired for
incentive
schemes - - - (3,841) - - - (3,841)
Own shares
utilised for
incentive
schemes - - - 1,831 - - (1,831) -
Balance at 31
March 2020
(unaudited) 23,625 99,033 5,130 (4,728) 12,374 (1,072) 215,445 349,807
--------- --------- -------------- ---------- --------- ------------- ---------- ---------
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25
Interim condensed consolidated statement of cash flows
For the six months ended 31 March 2020
Six months Six months
ended 31 ended 31
March 2020 March 2019
Unaudited Unaudited
Restated*
Notes EUR000 EUR000
Operating activities
Profit for the period 14,689 5,925
Adjustments to reconcile profit for the
period to net cash flows:
Income tax expense recognised in income
statement 9 8,108 6,763
Interest expense and bank commissions 8 2,331 2,383
Loss on disposal of tangible and intangible
assets 206 28
Other financial income 8 (139) (83)
Depreciation of property, plant and equipment 14 3,804 3,367
Depreciation of right-of-use assets 15 1,698 1,424
Amortisation of intangible assets 12 1,163 775
11,
Impairment of goodwill and brands 12 - 14,295
Impairment of investment 16 14,193 -
Net release of contingent consideration 16 (1,641) -
Net foreign exchange gain 8 (22) (20)
Share-based compensation charge 1,528 663
Share of loss of equity-accounted investees,
net of tax 16 165 422
Increase/(decrease) in provisions 197 (570)
------------ ------------
46,280 35,372
Working capital adjustments
(Increase)/decrease in trade receivables
and other assets (8,474) 3,954
Decrease/(increase) in inventories 158 (2,456)
(Decrease)/increase in trade payables
and other liabilities (4,960) 804
(13,276) 2,302
Cash generated by operations 33,004 37,674
Income tax paid (8,267) (8,423)
Net cash flow from operating activities 24,737 29,251
------------ ------------
Investing activities
Interest received 8 139 83
Payments to acquire intangible assets 12 (1,889) (511)
Proceeds from sale of property, plant
and equipment 113 7
Purchase of property, plant and equipment 14 (4,373) (4,194)
Advance payment for investment - (3,000)
Net cash flow from investing activities (6,010) (7,615)
------------ ------------
Financing activities
Increase in borrowings 18 424 19,505
Interest paid (2,128) (2,494)
Purchase of own shares 20 (3,841) -
Payment of lease liabilities (1,860) (1,508)
Dividends paid to equity holders of the
Parent (12,499) (11,953)
Net cash flow from financing activities (19,904) 3,550
------------ ------------
Net (decrease)/increase in cash and cash
equivalents (1,177) 25,186
Cash and cash equivalents at the start
of the period 17 63,437 50,143
Effect of exchange rates on cash and
cash equivalents (2,359) 366
Cash and cash equivalents at the end
of the financial period 17 59,901 75,695
============ ============
*Restated for the adoption of IFRS 16, as explained in notes 3
and 25.
Notes to the interim condensed consolidated financial
statements
for the six months ended 31 March 2020
1. Corporate information
The interim condensed consolidated financial statements of Stock
Spirits Group PLC (the "Company") and its subsidiaries (the
"Group") for the six months ended 31 March 2020 were authorised for
issue in accordance with a resolution of the directors on 13 May
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, is involved in the
production and distribution of branded spirits in Central and
Eastern Europe.
2. Basis of preparation
The interim condensed consolidated financial statements for the
six months ended 31 March 2020 have been prepared on a going
concern basis in accordance with IAS 34 Interim Financial Reporting
as adopted by the European Union.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards
("IFRSs") as adopted by the EU. As required by the Disclosure and
Transparency Rules of the Financial Conduct Authority, the
condensed set of financial statements has been prepared applying
the accounting policies and presentation that were applied in the
preparation of the Company's published consolidated financial
statements for the period ended 30 September 2019.
The financial information contained in this interim statement,
which is unaudited, does not constitute statutory accounts as
defined by the Companies Act 2006. The interim condensed
consolidated financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Group's
annual financial statements as at 30 September 2019. The annual
financial statements of the Group were prepared in accordance with
IFRS as adopted by the European Union and can be found on the
Group's website at www.stockspirits.com.
The Group's annual financial statements for the year ended 30
September 2019 have been reported on by the Company's auditor and
delivered to the registrar of companies. The report was (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.
The financial information for the six months ended 31 March 2020
and the comparative financial information for the six months ended
31 March 2019 has not been audited, but has been reviewed. The
comparative figures included in the Interim condensed consolidated
statement of financial position for the financial period ended 30
September 2019 have been restated for the adoption of IFRS 16 (see
notes 3 and 25) and have not been audited.
Having made appropriate enquiries, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in existence for the foreseeable future. Accordingly, it
is appropriate to adopt the going concern basis in preparing the
interim condensed consolidated financial statements.
The consolidated financial information is presented in Euros
('EUR'). The closing foreign exchange rates used to prepare these
financial statements are as follows:
31 March 31 March 30 September
2020 2019 2019
PLN 4.55 4.30 4.38
CZK 27.33 25.82 25.82
GBP 0.89 0.86 0.89
CHF 1.06 1.12 1.09
3. Significant accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statement are consistent
with those followed in the preparation of the Group's annual
consolidated financial statements for the period ended 30 September
2019, except for the adoption of new standards and interpretations
and revision of the existing standards as of 1 October 2019 noted
below.
New/revised standards and interpretations adopted in 2020
The following amendments to existing standards and
interpretations were effective in the period to 31 March 2020, but
were either not applicable or did not have a material impact on the
Group:
-- Amendments to IFRS 9: Financial Instruments
-- Amendments to IAS 19: Employee Benefits
-- Amendment to IAS 28: Investments in Associates and Joint Ventures
-- Annual Improvements to IFRS Standards 2015-2017 Cycle - minor
amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23
The Group has adopted IFRS 16 'Leases' effective for the period
ending 31 March 2020. IFRS 16 has been applied using the full
retrospective transition approach with comparatives for the prior
periods being restated. Further details of the impact of adoption
of IFRS 16 is described in note 25.
The Group has adopted the following accounting policy in respect
of IFRS 16:
Leases
The Group assesses whether a contract is, or contains a lease at
inception of the contract. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration. To assess
whether a contract conveys the right to control the use of an
identified asset, the Group assesses whether, throughout the period
of use, the customer has both of the following:
a) The right to obtain substantially all of the economic
benefits from the use of the identified asset; and
b) The right to direct the use of the identified asset.
A right-of-use asset and corresponding lease liability are
recognised at commencement of the lease.
The right--of--use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to
dismantle and remove the underlying asset or to restore the
underlying asset or the site on which it is located, less any lease
incentives received.
The right--of--use asset is subsequently depreciated using the
straight--line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset, or the end of
the lease term, unless the lease transfers ownership of the
underlying asset to the Group by the end of the lease term or the
cost of the right--of--use asset reflects that the Group will
exercise a purchase option. In that case the right--of--use asset
will be depreciated over the useful life of the underlying asset,
which is determined on the same basis as those of property and
equipment. In addition, the right--of--use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability. The right-of-use asset is
tested for impairment if there are any indicators of
impairment.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the lessee's incremental
borrowing rate. The incremental borrowing rate is specific to the
term, country, currency and start date of the lease.
Lease payments included in the measurement of the lease
liability comprise the following:
-- Fixed payments, including in--substance fixed payments
-- Variable lease payments that depend on an index or a rate,
initially measured using the index or rate as at the commencement
date
-- Amounts expected to be payable under a residual value guarantee; and
-- The exercise price under a purchase option that the Group is
reasonably certain to exercise, lease payments in an optional
renewal period if the Group is reasonably certain to exercise an
extension option, and penalties for early termination of a lease
unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
if there is a change in the Group's estimate of the amount expected
to be payable under a residual value guarantee, if the Group
changes its assessment of whether it will exercise a purchase,
extension or termination option or if there is a revised
in--substance fixed lease payment.
When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the
right--of--use asset, or is recorded in profit or loss if the
carrying amount of the right--of--use asset has been reduced to
zero.
Leases of low value assets and short term leases of 12 months or
less are expensed to the income statement on a straight-line basis
over the lease term, as are variable payments dependent on
performance or usage, 'out of contract' payments and non-lease
service components.
Cash flows relating to interest on lease liabilities is included
in interest paid, within cash flows from financing activities.
4. Use of estimates and judgements
The preparation of the interim financial information requires
management to make judgments, estimates and assumptions that effect
the application of policies and reported amounts of certain assets,
liabilities, revenues and expenses. These are discussed on page 139
of the Group's 2019 annual financial statements. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised, if the revision affects only that period, or
in the period of revision and future periods if the revision
affects both the current and future periods.
Following the adoption of IFRS 16, the key assumptions
concerning the future and other key sources of estimation
uncertainty at the reporting date that have a significant risk of
causing a material adjustment to the carrying amount of assets and
liabilities within the current and next financial year, have been
updated to include:
Leases
The discount rate used to calculate the lease liability is the
rate implicit in the lease, if it can be readily determined, or the
lessee's incremental borrowing rate if not. Determination of the
lessee's incremental borrowing rate involves estimation of a series
of inputs including the risk free rate based on government bond
rates and an entity specific adjustment.
5. 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 of these operating segments is managed separately as each
of these geographic areas require 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 EBITDA reported to the chief operating decision-maker to
assess performance is based on operating profit and excludes
intra-Group profits, depreciation and amortisation.
The Group has presented a reconciliation from profit before tax
per the consolidated income statement to EBITDA below:
For the six months ended 31 March For the six months ended 31 March
2020 2019
Restated
EUR000 EUR000
Profit before tax 22,797 12,688
Share of loss of equity-accounted
investees, net of tax 165 422
Net finance charges 2,170 2,280
-------------------------------------- --------------------------------------
25,132 15,390
Depreciation and amortisation (note
12,14,15) 6,665 5,566
-------------------------------------- --------------------------------------
EBITDA 31,797 20,956
Exceptional income (note 7) (1,641) -
Exceptional expense (note 7) 15,459 14,295
-------------------------------------- --------------------------------------
Adjusted EBITDA 45,615 35,251
-------------------------------------- --------------------------------------
Adjusted EBITDA margin 24.1% 22.5%
-------------------------------------- --------------------------------------
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.
Poland Czech Italy Other Corporate Total
Republic Operational
31 March 2020 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
External revenue 104,885 54,202 14,752 15,773 - 189,612
-------- ---------- ------- ------------- ---------- --------
Adjusted EBITDA 28,512 19,830 760 1,995 (5,482) 45,615
-------- ---------- ------- ------------- ---------- --------
Poland Czech Italy Other Operational Corporate Total
Republic
31 March 2019 - restated EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
External revenue 83,794 44,862 12,190 16,062 - 156,908
------- ---------- ------- ------------------ ---------- --------
Adjusted EBITDA 19,820 15,377 1,267 2,974 (4,187) 35,251
------- ---------- ------- ------------------ ---------- --------
As well as the impact of IFRS 16, Adjusted EBITDA for the 6
month period to 31 March 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. These are now included in the relevant segment
based on the amount recharged.
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.
Seasonality
Sales of spirits beverages are somewhat seasonal, with the
fourth calendar quarters accounting for the highest sales volumes.
The volume of sales may be affected by both weather conditions and
public holidays.
6. Free cash flow
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.
The use of this alternative performance measure is consistent
with how institutional investors consider the performance of the
Group. This measure is not defined in IFRS and thus may not be
comparable to similarly titled measures by other companies.
Free cash flow is a supplemental measure of the Group's
performance and liquidity that is not required to be presented in
accordance with IFRS.
For the six months ended For the six months ended
31 March 2020 31 March 2019
Restated
EUR000 EUR000
Cash generated by operations 33,004 37,674
Payments to acquire property, plant and equipment (4,373) (4,194)
Payments to acquire intangible assets (1,889) (511)
Proceeds from sale of property, plant and equipment 113 7
Free cash flow 26,855 32,976
Adjusted free cash flow conversion 58.9% 93.5%
------------------------- -------------------------
7. Exceptional expenses and income
In the six months ended 31 March 2020, the Group has three
exceptional items totalling EUR13,818,000 (six months ended 31
March 2019: exceptional expenses of EUR14,295,000).
The occurrence of the Coronavirus pandemic is a global issue
affecting every single business sector and every country to some
degree. It is already having a significant impact on the global
economy, and it is expected that significant changes with an
adverse effect will take place in the markets and economic
environment in which the Group operates. Consequently, the impact
of the pandemic is considered to be an indication that goodwill and
indefinite life intangible assets in each of the Group's
cash-generating units (CGUs) may be impaired. Following an
impairment review, no impairment loss has been recognised in
respect of the CGUs (refer to note 13).
The impact of the pandemic also provides objective evidence that
the Group's equity investment in Quintessential Brands Ireland
Whiskey Limited (QBIWL) may be impaired. Consequently, the Group
has considered a range of economic conditions that may exist over
the next five years. These economic conditions, together with
reasonable and supportable assumptions, have been used to prepare a
revised five-year plan for that business. The revised five-year
plan for that business indicates that the financial projections are
no longer sufficient to support the carrying value of the
investment and an impairment loss of EUR14,193,000 has been
recognised in the period to 31 March 2020. This impairment reduces
the carrying value of the investment in Quintessential Brands
Ireland Whiskey Limited to EUR2,100,000. Due to the nature and size
of the impairment, and consistent with prior periods, this has been
disclosed as an exceptional expense. Also refer to note 16.
The second exceptional item is a credit of EUR1,641,000 relating
to the net overall release in provisions for contingent
consideration relating to past acquisitions. This predominantly is
in respect of the investment in QBIWL at EUR1,827,000. Due to the
size of the change in the provision, this has been disclosed as an
exceptional item.
The third exceptional item represents an expense of EUR1,266,000
relating to advisory and legal costs incurred in pursuit of the
Group's strategy in respect of mergers and acquisitions. Due to the
nature of these, and consistent with prior periods, these have been
disclosed as an exceptional expense.
In March 2019, the impairment review for goodwill and other
intangible assets identified the need to impair the carrying value
of goodwill and brands in the Italy Region cash-generating unit by
EUR7,732,000 and EUR6,563,000, respectively.
8. Finance costs and income
For the For the six
six months months ended
ended 31 March
31 March 2019
2020 Restated
EUR000 EUR000
Finance income:
Foreign currency exchange gain 22 20
Interest income 139 83
Total finance income 161 103
============ ==============
Finance costs:
Interest payable on bank overdrafts and loans 1,073 1,107
Bank commissions, guarantees and other payables 354 332
Interest payable on lease liabilities 262 212
Other interest expense 642 732
Total finance costs 2,331 2,383
============ ==============
Net finance costs 2,170 2,280
============ ==============
9. Income taxes
The Group calculates the period income tax expense using the tax
rate that would be applicable to the expected total earnings for
the full 12 month reporting period to 30 September 2020 and 30
September 2019. The major components of income tax expense in the
interim condensed consolidated income statement are:
For the For the six
six months months
ended ended
31 March 31 March
2020 2019
EUR000 EUR000
Current income tax
Current period income tax charge 10,524 5,498
Tax (credit)/charge relating to prior periods (223) 192
Other taxes 17 16
Deferred income tax
Origination and reversal of temporary differences (2,210) 1,057
Total tax expense 8,108 6,763
============ ============
The Group is a sizeable international drinks business operating
across multiple jurisdictions 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 potential cash outflows and
estimated future settlements.
As at 31 March 2020, the Group has recognised tax, interest and
penalties provisions totalling EUR3.8m (30 September 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 the provisions no longer required and foreign
exchange differences.
Baltic Distillery GmbH continues to defend tax positions taken
in respect of its 2016 and 2017 Corporate Income Tax returns. There
have been no significant updates to the ongoing German tax
inquiries in the six months to 31 March 2020.
Stock S.r.l. in Italy continues to challenge the rulings of the
Second Court and to defend tax positions taken in respect of its
2009 and 2010 Corporate Income Tax returns. There have been no
significant updates to the ongoing Italian tax inquiries in the six
months to 31 March 2020.
There have been no developments in respect of the ongoing tax
appeal in Czech Republic related to the 2011
Corporate Income Tax return of Stock Plze -Bo kov s.r.o.
During the period, 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. On 7 May 2020, the company lodged a
final appeal to the Supreme Administrative Court. In respect of
intellectual property restructuring, representing EUR3.7m of the
total assessment, the Group's view remains unchanged and, on the
basis of all the available evidence and professional opinions, it
considers that the position adopted by the company 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. The remaining EUR0.8m remains fully provided
for. In January 2020, the tax authorities commenced an audit of the
2014 Corporate Income Tax return, and this is currently
ongoing.
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.
Change in tax rates
As part of the 2020 UK Budget, it has been announced that the UK
tax rate will remain at 19% and will not reduce to 17% from 1 April
2020 as previously planned. There is no effect of the proposed
change on the Group's result as the Group does not recognise
deferred tax in the UK mainly due to structural losses.
10. Earnings per share
Basic earnings per share amounts are calculated by dividing the
profit for the period attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the period.
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 period plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential
ordinary shares into ordinary shares.
Details of the earnings per share are set out below:
For the six months
For the six months ended
ended 31 March 2019
31 March 2020 Restated
Basic earnings per share
Profit attributable to the equity shareholders of the Company (EUR'000) 14,689 5,925
Weighted average number of ordinary shares in issue for basic earnings
per share ('000) 198,178 198,340
-------------------- --------------------
Basic earnings per share (EURcents) 7.41 2.99
-------------------- --------------------
Diluted earnings per share
Profit attributable to the equity shareholders of the Company (EUR'000) 14,689 5,925
Weighted average number of diluted ordinary shares adjusted for the
effect of dilution ('000) 200,278 199,994
-------------------- --------------------
Diluted earnings per share (EURcents) 7.33 2.96
-------------------- --------------------
Adjusted basic earnings per share
Profit attributable to the equity shareholders of the Company (EUR'000) 14,689 5,925
Exceptional expense (EUR'000) 13,818 14,295
Profit attributable to the equity shareholders of the Company before
exceptional expenses
(EUR'000) 28,507 20,220
Weighted average number of ordinary shares in issue for basic earnings
per share ('000) 198,178 198,340
-------------------- --------------------
Adjusted basic earnings per share (EURcents) 14.38 10.19
-------------------- --------------------
Adjusted diluted earnings per share
Profit attributable to the equity shareholders of the Company (EUR'000) 14,689 5,925
Exceptional expense (EUR'000) 13,818 14,295
Profit attributable to the equity shareholders of the Company before
exceptional expenses
(EUR'000) 28,507 20,220
Weighted average number of diluted ordinary shares adjusted for the
effect of dilution ('000) 200,278 199,994
-------------------- --------------------
Adjusted diluted earnings per share (EURcents) 14.23 10.11
-------------------- --------------------
Reconciliation of basic to diluted ordinary shares
Weighted average number of ordinary shares ('000) 200,000 200,000
Effect of own shares held ('000) (1,822) (1,660)
-------------------- --------------------
Basic weighted average number of ordinary shares ('000) 198,178 198,340
Effect of options ('000) 2,100 1,654
Diluted weighted average number of ordinary shares ('000) 200,278 199,994
-------------------- --------------------
There have been no other transactions involving ordinary shares
between the reporting date and the date of authorisation of these
financial statements
11. Intangible assets - goodwill
31 March
2020
EUR000
Cost:
As at 1 October 2019 88,932
-
---------
As at 31 March 2020 88,932
---------
Accumulated impairment:
As at 1 October 2019 39,132
Impairment charge -
---------
As at 31 March 2020 39,132
---------
Carrying amount at 31 March 2020 49,800
=========
12. Intangible assets - other
The movement in intangible assets for the six-month period ended
31 March 2020 was as follows:
Customer
Distributor Relationships
Brands contracts and Trademarks Software Total
EUR000 EUR000 EUR000 EUR000 EUR000
At 1 October 2019, cost,
net of accumulated amortisation 314,648 2,458 5,702 3,910 326,718
Additions - - - 1,688 1,688
Amortisation expense (2) (299) (204) (658) (1,163)
Foreign currency adjustment (11,725) (132) (4) (71) (11,932)
At 31 March 2020, cost,
net of accumulated amortisation 302,921 2,027 5,494 4,869 315,311
========= ============ ================ =========== =========
Customer
Distributor Relationships
Brands contracts and Trademarks Software Total
EUR000 EUR000 EUR000 EUR000 EUR000
At 1 October 2018, cost,
net of accumulated amortisation 306,601 - 998 3,530 311,129
Additions - - - 1,793 1,793
Acquisitions through
business combinations 14,827 2,657 5,084 25 22,593
Amortisation expense (2) (199) (350) (1,415) (1,966)
Impairment charge (note
7) (6,563) - - - (6,563)
Foreign currency adjustment (215) - (30) (23) (268)
At 30 September 2019,
cost, net of accumulated
amortisation 314,648 2,458 5,702 3,910 326,718
========== ============ ================ =========== ========
13. Impairment of goodwill and intangibles with indefinite
lives
The occurrence of the Coronavirus pandemic is a global issue
affecting every single business sector and every country to some
degree. It is already having a significant impact on the global
economy, and it is expected that significant changes with an
adverse effect will take place in the markets and economic
environment in which the Group operates. Consequently, the impact
of the pandemic is considered to be an indication that goodwill and
indefinite life intangible assets in each of the Group's
cash-generating units (CGUs) may be impaired.
In light of the pandemic, the Group has considered a range of
economic conditions which may exist over the next three years.
These economic conditions, together with reasonable and supportable
assumptions, have been used to estimate the future cash inflows and
outflows of each of the CGUs over the next three years.
Key assumptions used in the value-in-use calculations
The key assumptions used in the estimation of the recoverable
amount are set out below:
-- Spirits price inflation - small annual percentage increases
assumed in all markets based on historical data.
-- Growth in spirits market - assumed to be static or marginally
increasing in all markets based on recent historical trends.
-- Market share - through company specific actions outlined in
detailed internal plans, market share to be grown overall.
-- Excise duty - no future duty changes have been used in projections.
-- Raw material cost - assumed to be at average industry cost.
-- Impact of Coronavirus pandemic:
o No on-trade sales in the remaining six months of this
financial year
o 20% drop in off-trade volumes for the remaining six months of
this financial year
o Gross profit percentage unchanged for the remaining six months
of this financial year
o Selling expenses assumed to be 50% fixed and 50% variable
o Overheads unchanged for the remaining six months of this
financial year
o Capital expenditure - all major projects continue as
normal
o Suppliers continue to be paid at the usual time
o Adjusted free cash flow conversion drops 15ppts from 30
September 2019 for the remaining six months of this financial year
due to slower customer receipts
o Cash flows for the financial year ending 30 September 2021 are
mid-way between the projections for the financial year ending 30
September 2020 and the financial year ending 30 September 2022
o Cash flows for the financial year ending 30 September 2022 are
as per the three-year plan approved by the Board of Directors in
December 2019
-- Discount rates - rates reflect the current market assessment
of the risks specific to each operation. The discount rate was
estimated based on an average of guideline companies adjusted for
the operational size of the Group and specific regional
factors.
-- Growth rate used to extrapolate cash flows beyond the
forecast period. The assumed growth rate reflects the long-term
inflation rate of the primary market of each CGU.
The values assigned to the key assumptions represent
management's assessment of future trends in the industry and have
been based on historical data from both external and internal
sources.
Cash-generating units
Goodwill acquired through business combinations and brands have
been allocated for impairment testing purposes to CGUs based on the
geographical location of production plants and the ownership of
intellectual property. This represents the lowest level within the
Group at which goodwill and brands are monitored for internal
management purposes.
For the purposes of impairment testing, goodwill and brands have
been allocated to the Group's CGUs as follows:
Czech Distillerie
Republic Italy Poland Franciacorta Bartida Other Total
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
31 March 2020
Carrying amount of
brands 193,319 51,044 41,481 11,244 3,382 2,451 302,921
Carrying amount of
goodwill 34,516 - 2,212 8,244 3,348 1,480 49,800
30 September 2019
Carrying amount of
brands 204,625 49,639 43,108 11,246 3,579 2,451 314,648
Carrying amount of
goodwill 34,516 - 2,212 8,244 3,348 1,480 49,800
The headroom generated as a result of the recoverable amount
being in excess of the CGU carrying amounts is as follows:
Czech Distillerie
Republic Italy Poland Franciacorta Bartida Other Total
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
31 March 2020
Value-in-use headroom 59,425 2,839 533,026 2,659 10,826 16,818 627,585
30 September 2019
Value-in-use headroom 159,733 781 465,181 6,236 9,760 15,967 657,658
Impairment review outcome
The calculation of value-in-use for all regions is most
sensitive to the discount rate, future cash flows, and the growth
rate used for extrapolation purposes. The headroom for each
cash-generating unit where these sensitivities would be applicable
has been detailed below.
Czech CGU
The post-tax discount rate applied to cash flow projections is
7.5% (30 September 2019: 7.5%) and cash flows beyond the three-year
period are extrapolated using a 2.0% (30 September 2019: 2.0%)
growth rate.
The recoverable amount of is most sensitive to the assumptions
regarding expected future cash inflows. A reasonably possible
change in EBITDA and discount rate assumptions could cause the
carrying amount to exceed the recoverable amount. The following
sensitivity analysis shows the impact on the headroom of different
post-tax discount rates and EBITDA delivery in the cash flow
projections used in the impairment review models.
Post-tax discount
rate 6.5% 7.0% 7.5% 8.0% 8.5%
EBITDA delivery EURm EURm EURm EURm EURm
-10% 59.3 31.7 9.0 (9.8) (25.7)
-5% 90.2 59.4 34.2 13.3 (4.5)
0% 121.0 87.1 59.4 36.3 16.8
5% 152.9 114.9 84.6 59.4 38.1
10% 182.7 142.6 109.8 82.5 59.3
The impact of a 1 percentage point decrease in the long-term
growth rate applied in the terminal value calculation would be a
decline in headroom of EUR40.5m.
Italy CGU
The Italy CGU represents the sales of Italian trading brands by
Stock S.r.l. and through Stock International s.r.o. There is no
manufacturing in Italy.
The post-tax discount rate applied to cash flow projections is
9.5% (30 September 2019: 9.5%) and cash flows beyond the three-year
period are extrapolated using a 1.2% (30 September 2019: 1.2%)
growth rate.
The recoverable amount of is most sensitive to the assumptions
regarding expected future cash inflows. A reasonably possible
change in EBITDA and/or discount rate assumptions could cause the
carrying amount to exceed the recoverable amount. The following
sensitivity analysis shows the impact on headroom of different
post-tax discount rates and EBITDA delivery in the cash flow
projections used in the impairment review models.
Post-tax discount
rate 8.5% 9.0% 9.5% 10.0% 10.5%
EBITDA delivery EURm EURm EURm EURm EURm
-10% 2.9 (0.7) (3.8) (6.5) (9.0)
-5% 6.7 2.9 (0.5) (3.4) (6.1)
0% 10.4 6.4 2.8 (0.3) (3.1)
5% 14.2 9.9 6.1 2.8 (0.2)
10% 18.0 13.5 9.5 5.9 2.8
The impact of a 1 percentage point decrease in the long-term
growth rate applied in the terminal value calculation would be an
impairment of EUR2.7m.
Distillerie Franciacorta CGU
The Distillerie Franciacorta CGU represents the sales of
Distillerie Franciacorta trading brands by Stock S.r.l. and through
Stock International s.r.o.
The post-tax discount rate applied to cash flow projections is
9.5% (30 September 2019: 9.5%) and cash flows beyond the three-year
period are extrapolated using a 1.2% (30 September 2019: 1.5%)
growth rate.
The recoverable amount of is most sensitive to the assumptions
regarding expected future cash inflows. A reasonably possible
change in EBITDA and/or discount rate assumptions could cause the
carrying amount to exceed the recoverable amount. The following
sensitivity analysis shows the impact on headroom of different
post-tax discount rates and EBITDA delivery in the cash flow
projections used in the impairment review models.
Post-tax discount
rate 8.5% 9.0% 9.5% 10.0% 10.5%
EBITDA delivery EURm EURm EURm EURm EURm
-10% 2.4 0.4 (1.4) (2.9) (4.3)
-5% 4.7 2.5 0.7 (1.0) (2.5)
0% 7.0 4.7 2.7 0.9 (0.7)
5% 9.3 6.8 4.7 2.8 1.1
10% 11.6 9.0 6.7 4.6 2.8
The impact of a 1 percentage point decrease in the long-term
growth rate applied in the terminal value calculation would be an
impairment of EUR 0.5 m.
Bartida CGU
The post-tax discount rate applied to cash flow projections is
7.5% (30 September 2019: 7.5%) and cash flows beyond the three-year
period are extrapolated using a 2.0% (30 September 2019: 2.0%)
growth rate.
The following sensitivity analysis shows the impact on headroom
of different post-tax discount rates and EBITDA delivery in the
cash flow projections used in the impairment review models.
Post-tax discount
rate 6.5% 7.0% 7.5% 8.0% 8.5%
EBITDA delivery EURm EURm EURm EURm EURm
-10% 12.5 10.2 8.2 6.6 5.3
-5% 14.1 11.6 9.5 7.8 6.3
0% 15.7 13.0 10.8 9.0 7.4
5% 17.3 14.5 12.1 10.2 8.5
10% 18.9 15.9 13.4 11.4 9.6
The impact of a 1 percentage point decrease in the long-term
growth rate applied in the terminal value calculation would be a
decline in headroom of EUR3.2m.
Poland CGU
The post-tax discount rate applied to cash flow projections 8.5%
(30 September 2019: 8.5%) and cash flows beyond the three-year
period are extrapolated using a 2.5% (30 September 2019: 2.3%)
growth rate.
The recoverable amount calculated indicates very significant
headroom over the carrying value. As such, there are no assumptions
for which a reasonably possible change will result in an
impairment.
14. Property, plant and equipment
The movement in property, plant and equipment for the six-month
period ended 31 March 2020 was as follows:
Land Technical Other Assets under
and buildings equipment equipment construction Total
EUR000 EUR000 EUR000 EUR000 EUR000
At 1 October 2019, cost, net
of accumulated depreciation 27,109 20,399 1,417 4,607 53,532
Additions 243 887 1,196 919 3,245
Transfers 116 246 1,743 (2,105) -
Disposals (4) (144) (13) (89) (250)
Depreciation expense (479) (2,599) (726) - (3,804)
Foreign currency adjustment (1,097) (531) (4) (226) (1,858)
At 31 March 2020, cost, net
of accumulated depreciation 25,888 18,258 3,613 3,106 50,865
================ =========== =========== =============== ========
Restated Land and Technical Other Assets under Total
buildings equipment equipment construction
EUR000 EUR000 EUR000 EUR000 EUR000
At 1 October 2018, cost, net
of accumulated depreciation 23,655 20,178 1,223 1,955 47,011
Additions 1,212 3,836 673 3,244 8,965
Acquisitions through business
combinations 3,300 1,259 355 - 4,914
Transfers 99 456 - (555) -
Disposals (2) (73) 4 - (71)
Depreciation expense (925) (4,978) (840) - (6,743)
Foreign currency adjustment (230) (279) 2 (37) (544)
------------ ----------- ----------- --------------- --------
At 30 September 2019, cost,
net of accumulated depreciation 27,109 20,399 1,417 4,607 53,532
============ =========== =========== =============== ========
15. Right-of-use assets
The movement in right-of-use assets for the six-month period
ended 31 March 2020 was as follows:
Right-of-use Right-of-use
land and other equipment
buildings Total
EUR000 EUR000 EUR000
At 1 October 2019, cost, net
of accumulated depreciation 10,194 1,623 11,817
Additions 1,221 338 1,559
Disposals (27) (41) (68)
Depreciation expense (1,341) (357) (1,698)
Foreign currency adjustment (198) 9 (189)
At 31 March 2020, cost, net
of accumulated depreciation 9,849 1,572 11,421
============= ================= ========
Restated Right-of-use Right-of-use Total
land and other equipment
buildings
EUR000 EUR000 EUR000
At 1 October 2018, cost, net
of accumulated depreciation 8,597 1,335 9,932
Additions 1,595 921 2,516
Acquisitions through business
combinations 2,419 71 2,490
Depreciation expense (2,448) (710) (3,158)
Foreign currency adjustment 31 6 37
------------- ----------------- ---------
At 30 September 2019, cost,
net of accumulated depreciation 10,194 1,623 11,817
============= ================= =========
16. Investment in equity-accounted investees
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")
for a cash consideration of up to EUR18,333,000. Consideration
comprised of an initial cash payment of EUR15,000,000 for 25% of
the equity investment, 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.
The Group's share of the loss of Quintessential Brands Ireland
Whiskey Limited for the period is EUR165,000 (31 March 2019: loss
of EUR422,000). There has been a corresponding reduction in the
carrying value of the investment to reflect the Group's share of
the loss.
As discussed in note 7, the impact of the Coronavirus pandemic
provides objective evidence that the Group's equity investment in
Quintessential Brands Ireland Whiskey Limited may be impaired.
Consequently, the Group has considered a range of economic
conditions that may exist over the next five years. These economic
conditions, together with reasonable and supportable assumptions,
have been used to prepare a revised five-year plan. The revised
five-year plan indicates that the financial projections are no
longer sufficient to support the carrying value of the investment
and an impairment loss of EUR14,193,000 has been recognised in the
period to 31 March 2020. After the loss for the period, this
impairment reduces the carrying value of the investment in
Quintessential Brands Ireland Whiskey Limited to EUR2,100,000.
Due to the nature and size of the impairment, and consistent
with prior periods, 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.
At 31 March 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
remote.
In light of the impact of the Coronavirus pandemic, the Group
has reviewed its estimate of the provision required for the
contingent consideration. As a result, the provision for the
contingent consideration has been reduced from EUR2,491,000 at 30
September 2019 to EUR664,000 at 31 March 2020. This is included in
non-current financial liabilities.
The resulting EUR1,827,000 reduction in the provision has been
recognised within "exceptional expense" in the consolidated income
statement.
17. Cash and cash equivalents
For the purposes of the 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 period as shown in the cash flow statement can be
reconciled to the related items in statement of financial position
as follows:
31 March 30 September 2019
2020
EUR000 EUR000
Cash and bank balances 59,901 63,437
--------- ------------------
Cash and cash equivalents are denominated in the following
currencies:
31 March 30 September 2019
2020
EUR000 EUR000
Sterling 14,586 21,121
Euro 10,718 11,226
Czech Koruna 10,331 16,165
Polish Zloty 23,200 13,223
Other currencies 1,066 1,702
Total 59,901 63,437
========= ==================
18. Borrowings
Current Non-current
31 March 31 March Current Non-current
2020 2020 30 September 2019 30 September 2019
EUR000 EUR000 EUR000 EUR000
Unsecured - at amortised cost
HSBC loan - 102,522 - 105,500
Cost of arranging bank loan - (41) - (75)
Interest payable 1 - 2 -
1 102,481 2 105,425
----------- ----------- ------------------ ------------------
The Group has a facilities agreement for a EUR200,000,000
revolving credit facility ("RCF") with a banking club consisting of
five banks including HSBC who also act as the Agent. The original
term of the RCF facility was five years, to November 2020. On 21
July 2017, Stock Spirits Group extended its revolving credit
facilities with its banking club by a further 2 years to November
2022. The other key facility terms remain unchanged.
The facility is fully flexible and allows the Group to benefit
from being able to increase or reduce borrowings as required, and
utilise balance sheet cash more effectively. Each of the drawings
under the RCF are drawn down in the local currencies. The loans
bear variable rates of interest which are linked to the inter-bank
offer rates of the country of drawing: WIBOR, PRIBOR or EURIBOR as
appropriate. Each of the loans have a variable margin element to
the interest charge. The margin is linked to a ratchet mechanism,
subject to a minimum margin, as the Group's leverage covenant
changes.
As well as the revolving credit facility drawings of
EUR102,522,000 as at 31 March 2020 (30 September 2019:
EUR105,500,000), an additional EUR12,537,000 (30 September 2019:
EUR11,361,000) of the RCF was utilised for customs guarantees in
Italy and Germany. These custom guarantees reduce the available RCF
facility but do not constitute a balance sheet liability.
19. Financial assets and liabilities
Set out below is a comparison by category of carrying amounts
which approximate fair values of all of the Group's financial
instruments that are carried in the financial statements.
As at 31 March 2020
Financial assets Total book
and liabilities value
at amortised
cost
EUR000 EUR000
Financial assets:
Cash and cash equivalents 59,901 59,901
Trade and other receivables 110,427 110,427
Customs deposits 4,463 4,463
Financial liabilities:
Interest-bearing loans and borrowings:
(i) Finance lease obligations (12,809) (12,809)
(ii) Floating rate borrowings -
banks (102,481) (102,481)
Trade and other payables (67,240) (67,240)
Contingent consideration (3,782) (3,782)
Deferred consideration (1,804) (1,804)
As at 30 September 2019
Financial
assets and
liabilities
at amortised Total book
cost value
Restated Restated
EUR000 EUR000
Financial assets:
Cash and cash equivalents 63,437 63,437
Trade and other receivables 106,832 106,832
Customs deposits 4,720 4,720
Financial liabilities:
Interest-bearing loans and borrowings:
(i) Finance lease obligations (13,179) (13,179)
(ii) Floating rate borrowings - banks (105,425) (105,425)
Trade and other payables (76,116) (76,116)
Contingent consideration (5,280) (5,280)
Deferred consideration (1,782) (1,782)
20. Authorised and issued share capital and reserves
Share capital of Stock Spirits Group PLC
31 March 30 September
2020 2019
Number of ordinary shares
Ordinary shares of GBP0.10 each, issued
and fully paid 200,000,000 200,000,000
------------ -------------
Ordinary shares (EUR000) 23,625 23,625
------------ -------------
Own share reserve
The own share reserve comprises the cost of the Company's shares
held by the Group. The Employment Benefit Trust (EBT) holds these
shares on behalf of the employees until the options are exercised.
During the six months ended 31 March 2020 1,500,000 shares were
purchased by the EBT on behalf of the Group. At 31 March 2020 the
Group held 2,038,686 of the Company's shares (30 September 2019:
1,364,519).
On the exercise of options in the period, EUR1,831,000 was
credited to the own share reserve, with the corresponding charge to
retained earnings (30 September 2019: EUR652,000).
The EBT holds the shares at cost.
Other reserve
Other reserves include the credit to equity for equity-settled
share-based payments. The charge for the period ended 31 March 2020
was EUR1,528,000 (30 September 2019: EUR2,492,000). On the exercise
of Performance Share Plan and Restricted Stock options in the
period, EUR1,720,000 was debited from other reserves and credited
to retained earnings (30 September 2019: EUR683,000).
Foreign currency translation reserve
31 March 30 September
2020 2019
EUR000 EUR000
Foreign currency translation reserve (1,072) 9,774
--------- -------------
Exchange differences relating to the translation from the
functional currencies of the Group's foreign subsidiaries into
Euros are accounted for by entries made directly to the foreign
currency translation reserve.
21. Dividend
An interim dividend of 2.77 Euro cents per ordinary share has
been declared by the Board in respect of the six months ended 31
March 2020 and will be paid on 19 June 2020. The dividend payable
has not been recognised as a liability at 31 March 2020.
22. Related party transactions
In considering each possible related party relationship,
attention is directed to the substance of the relationship, not
merely the legal form.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation. There were
no other related party transactions during the six month period
ended 31 March 2020 (31 March 2019: EURnil), as defined by
International Accounting Standard No 24 'Related Party
Disclosures', other than for key management compensation and
transactions with Quintessential Brands Ireland Whiskey Limited and
its related entities.
The following tables provides the total amount of transactions
that have been entered into with Quintessential Brands Ireland
Whiskey Limited and its related entities for the periods to 31
March 2020 and 31 March 2019.
Sales of goods/services Purchases Amounts owed Amounts owed
March 2020 EUR'000 of goods/services by related to related
EUR'000 parties parties
EUR'000 EUR'000
Subsidiaries:
Stock S.r.l. - - 1 -
Stock d.o.o. - 69 - 25
Stock Slovensko
s.r.o. - 15 - 12
Stock Plzen-Bozkov - 14 - -
s.r.o.
Stock Polska
Sp. z.o.o. 25 132 24 40
25 230 25 77
------------------------ ------------------- ------------- -------------
Sales of goods/services Purchases Amounts owed Amounts owed
March 2019 EUR'000 of goods/services by related to related
EUR'000 parties parties
EUR'000 EUR'000
Subsidiaries:
Stock S.r.l. 3 - 3 -
Stock d.o.o. 6 39 - 26
Stock Slovensko - 4 - -
s.r.o.
Stock Plzen-Bozkov
s.r.o. 6 56 6 -
Stock Polska - 23 - -
Sp. z.o.o.
15 122 9 26
------------------------ ------------------- ------------- -------------
The related party transactions for the period ended 30 September
2019 as defined by International Accounting Standard No 24 'Related
Party Disclosures' are disclosed in note 31 of the Stock Spirits
Group PLC Annual Report for the period ended 30 September 2019.
23. Commitments for capital expenditure
Commitments for the acquisition of property, plant and equipment
as of 31 March 2020 are EUR613,000 (31 March 2019: EUR480,000).
24. Events after the balance sheet date
There were no events after the balance sheet date which require
adjustment to or disclosure in these interim condensed consolidated
financial statements.
25. 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 balance sheet 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 transition. 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.
Refer to note 3 for further details.
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 is expected to
largely offset the increase in depreciation and finance costs.
Lease liabilities are presented within other financial
liabilities, both current and non-current, in the interim condensed
consolidated statement of financial position. In the interim
condensed 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 Interim condensed consolidated income
statement:
The table below shows the impact of IFRS 16 on the comparative
period consolidated income statement for the six months ended 31
March 2019, and related alternative profit measures (APMs).
Six months IFRS 16 Six months
ended 31 March impact ended 31 March
2019 reported 2019 restated
EUR000 EUR000 EUR000
Revenue 156,908 - 156,908
Cost of goods sold (83,142) - (83,142)
Gross profit 73,766 - 73,766
Selling expenses (28,894) 1,057 (27,837)
Other operating expenses (15,063) (761) (15,824)
Impairment loss on trade and
other receivables (420) - (420)
Share of loss of equity-accounted
investees, net of tax (422) - (422)
Operating profit before exceptional
expense 28,967 296 29,263
Exceptional expense (14,295) - (14,295)
Operating profit 14,672 296 14,968
Finance income 103 - 103
Finance costs (2,171) (212) (2,383)
Profit before tax 12,604 84 12,688
Income tax expense (6,763) - (6,763)
Profit for the period 5,841 84 5,925
---------------- -------- ----------------
Earnings per share, (EURcents),
attributable to equity holders
of the Parent
Basic 2.94 0.05 2.99
Diluted 2.92 0.04 2.96
KPIs and APMs
Adjusted EBITDA 33,531 1,720 35,251
Adjusted EBITDA margin 21.4% 1.1% 22.5%
Adjusted basic earnings per
share (EURcents) 10.15 0.04 10.19
---------------- -------- ----------------
Restatement of interim condensed consolidated statement of
financial position:
The tables below sets 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. Trade and other payables reduce as
accruals for rent-free periods 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 (12 month proforma) 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 0.67 0.83
================= ======== =================
Restatement of interim condensed consolidated statement of cash
flows:
The table below shows the impact of IFRS 16 on the comparative
period consolidated cash flow statement for the six months ended 31
March 2019 and APMs. IFRS 16 has no impact on total cash flow for
the period or cash and cash equivalents at the end of the period.
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.
Six months IFRS 16 Six months
ended 31 impact ended 31
March 2019 March 2019
reported restated
EUR000 EUR000 EUR000
Operating activities
Profit for the period 5,841 84 5,925
Adjustments to reconcile profit for
the period to net cash flows:
Income tax expense recognised in income
statement 6,763 - 6,763
Interest expense and bank commissions 2,171 212 2,383
Loss on disposal of tangible and intangible
assets 28 - 28
Other financial income (83) - (83)
Depreciation of property, plant and
equipment 3,367 - 3,367
Depreciation of right-of-use assets - 1,424 1,424
Amortisation of intangible assets 775 - 775
Impairment of goodwill and brands 14,295 - 14,295
Net foreign exchange gain (20) - (20)
Share-based compensation charge 663 - 663
Share of loss of equity-accounted
investees, net of tax 422 - 422
Decrease in provisions (570) - (570)
------------ -------- ------------
33,652 1,720 35,372
Working capital adjustments
Decrease in trade receivables and
other assets 3,954 - 3,954
Increase in inventories (2,456) - (2,456)
Increase in trade payables and other
liabilities 804 - 804
------------ -------- ------------
2,302 - 2,302
------------ -------- ------------
Cash generated by operations 35,954 1,720 37,674
Income tax paid (8,423) - (8,423)
Net cash flow from operating activities 27,531 1,720 29,251
------------ -------- ------------
Investing activities
Interest received 83 - 83
Payments to acquire intangible assets (511) - (511)
Proceeds from sale of property, plant
and equipment 7 - 7
Purchase of property, plant and equipment (4,194) - (4,194)
Advance payment for investment (3,000) - (3,000)
Net cash flow from investing activities (7,615) - (7,615)
------------ -------- ------------
Financing activities
New borrowings raised 19,505 - 19,505
Interest paid (2,282) (212) (2,494)
Payment of lease liabilities - (1,508) (1,508)
Dividends paid to equity holders of
the Parent (11,953) - (11,953)
Net cash flow from financing activities 5,270 (1,720) 3,550
------------ -------- ------------
Net increase in cash and cash equivalents 25,186 - 25,186
Cash and cash equivalents at the start
of the period 50,143 - 50,143
Effect of exchange rates on cash and
cash equivalents 366 - 366
Cash and cash equivalents at the end
of the financial period 75,695 - 75,695
============ ======== ============
Free cash flow 31,256 1,720 32,976
Adjusted free cash flow conversion 93.2% 93.5%
1 Constant currency is calculated by converting the prior period
results at current period FX rates
2 The Company and its subsidiaries, Stock Spirits Group (the
"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 Unaudited Interim Condensed Consolidated Financial
Statements
3 Adjusted basic EPS excludes the impact from exceptional
items
4 Leverage at 30 September 2019 is net debt including IFRS16
liabilities as at 30 September 2019 divided by the Adjusted EBITDA
for full year 2019. Leverage at 31 March 2020 is the net debt
including IFRS16 liabilities as at 31 March 2020 divided by the
unaudited 12 months Adjusted EBITDA to 31 March 2020
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DLLFFBELXBBF
(END) Dow Jones Newswires
May 13, 2020 02:00 ET (06:00 GMT)
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