Stock Spirits cheers positive first half

(Sharecast News) - Spirit and liqueur producer Stock Spirits Group reported underlying volume growth of 8.4% year-on-year in its first half on Wednesday, to eight million litres.

The London-listed firm said its revenue was ahead 15.1% on an underlying basis, to €180.7m, while its adjusted EBITDA was ahead 25.6% for the six months ended 31 March, at €44.2m.

Operating profit before exceptional items came in at €38.7m, which was up an underlying 32.3%, while profit for the period surged 152% year-on-year to €14.9m.

Stock Spirits said its basic earnings per share were 7.41 euro cents, up 147.8% over the first half of the 2019 financial year, while adjusted basic earnings per share were 41.1% higher at 14.38 cents.

On the operational front, Stock Spirits said it "successfully managed" the January excise duty increases in both Poland and the Czech Republic, which together represent 83.9% of its revenue, with both businesses continuing to grow in total spirits volume and value.

Poland revenue was up 25.4% and Czech Republic underlying revenue was ahead 9.1%, both at constant currency, in both cases reflecting growth in volume, pricing and mix.

The board said it had implemented a "decisive response" to the Covid-19 coronavirus pandemic, describing "proactive contingency actions" focussed on people and safety, continuity of production and supply, and the support of local communities, including through the large-scale manufacturing and donations of hand sanitiser.

It said it had a "strong" balance sheet, with unused bank facilities, and net debt standing at €55.4m on 31 March - unchanged from the end of September - resulting in leverage of 0 .71x, compared to a restated 0.83x at the start of the period.

The board declared an interim dividend of 2.77 cents per share, making for an increase of 5.3% over the half-year distribution in 2019.

Stock Spirits did report some Covid-19-driven exceptional items, including the impairment of its minority investment in Quintessential Brands Ireland Whiskey, with a charge of €14.2m, as well as net release of provisions for contingent consideration of €1.6m, and €1.3m of costs from postponed merger and acquisition work.

"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," said chief executive officer Mirek Stachowicz.

"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."

Stachowicz said there was still "robust demand" for the company's products, but it was monitoring developments closely and was 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."

At 1255 BST, shares in Stock Spirits were up 12.11% at 217.5p.