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Preliminary Results for the 9 Month Period Ended 30 September 2018

Download the full Preliminary Results statement (PDF 1.76MB)

Stock Spirits Group PLC

Preliminary Results for the 9 month period ended 30 September 2018

A period of good growth and significant brand investment

5 December 2018: Stock Spirits Group PLC (“Stock Spirits” or the “Company”), a leading owner and producer of premium branded spirits and liqueurs that are principally sold in Central and Eastern Europe, announces its results for the nine month period ended 30 September 2018 and its proforma unaudited 12 months results.

Financial Highlights

  Proforma unaudited results*:   Reported results*:
  12 mth to
Sept 2018
12 mth to
Sept 2017
  9 mth to
Sept 2018
12 mth to
Dec 2017
Volume (millions 9 litre cases) 13.3 12.9 +2.8%   9.1 13.1
Revenue (€ millions) 282.4 259.8 +8.7%   193.8 269.8
Revenue growth at constant currency     +6.9%      
Adjusted EBITDA1 (€ millions) 59.4 53.2 +11.5%   35.8 56.3
Adjusted EBITDA growth at constant currency     +8.1%      
Operating profit** (€ millions) 48.7 41.7 +16.8%   28.2 44.8
Profit for the period (€ millions) 33.2 29.2 +13.8%   19.3 11.3
Basic EPS (€ cents per share) 16.72 14.74 +13.4%   9.71 5.72

* All figures have been restated for IFRS 15
** Operating profit for the 12 months to December 2017 is Operating profit before exceptional expenses

  • Net debt of €31.6 million at 30 September 2018 (December 2017: €53.1 million), resulting in leverage of 0.53x2 (31 December 2017: 0.94x)
  • Proposed enhanced final dividend of 6.01 €cents per share3 (2017: 5.72 €cents per share), giving a total dividend in respect of the 9 month period 2018 of 8.51 €cents per share (2017: 8.10 €cents per share), an increase of 5.1%

1 Stock Spirits Group uses alternative performance measures as key financial indicators to assess underlying performance of the Group. Details of the basis of calculation for Adjusted EBITDA can be found in note 5 to the statutory reported figures

2 Leverage at 30 September 2018 is net debt as at 30 September 2018 divided by proforma adjusted EBITDA 2018

3 Subject to shareholder approval at the AGM on 14 February 2019, the final dividend will be paid on 1 March 2019 based on the record date of 8 February 2019

Operational Highlights

  • Solid share and value growth in Poland led by premium brands
  • Investment in premium products providing resilience in Czech Republic
  • Extended third party distribution agreements, including with Beam Suntory in Czech Republic and Slovakia
  • Commenced distribution of The Dubliner and The Dublin Liberties Irish whiskey brands across all markets, building on the 25% investment in Quintessential Brands Ireland Whiskey Ltd
  • Appointment of new Independent Non-Executive Director, Kate Allum, on 1 November 2018

Commenting on the results, Mirek Stachowicz, Chief Executive Officer, said:

“This has been a year of good growth for Stock Spirits, and today’s results show that our strategy of focusing on premiumising our range and increasing the use of digital channels in order to engage with millennial consumers is working. We are pleased with the increasing strength and resilience of our core Polish business, and also with the way in which we have combatted the headwinds experienced earlier in the year in the Czech Republic. Given the positive momentum in our underlying business and our portfolio of strong brands that are responding well to our ongoing programme of investment, we remain confident of being able to achieve further growth in the future.”

Analyst presentation

Management will be hosting a presentation for analysts at 9.00am today at Numis Securities, London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT. If you would like to attend, please contact Powerscourt on the details below.

A webcast of the presentation will also be available via and a recording made available shortly afterwards.

For further information:

Stock Spirits Group:                             +44 (0) 1628 648 500

Paul Bal

Powerscourt:                                         +44 (0) 207 250 1446

Rob Greening                                
Lisa Kavanagh
Sofie Brewis

A copy of this preliminary results announcement ("announcement") has been posted on

Investors can also address any query to

About Stock Spirits Group

Stock Spirits is one of Central and Eastern Europe’s leading branded spirits and liqueurs businesses, and offers a portfolio of products that are rooted in local and regional heritage. With core operations 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 100 million litres per year.

Stock has production facilities in Poland, the Czech Republic and Germany, and its core brands include products made to long-established recipes such as Stock 84 brandy, Fernet Stock bitters and Limonce, as well as more recent creations like Stock Prestige and Żołᶏdkowa de Luxe vodkas.

Stock is listed on the main market of the London Stock Exchange. For the proforma year ended 30 September 2018 it delivered total revenue of €282.4 million and operating profit of €48.7m.

For further information, please visit

Chairman’s Statement

As Chairman of Stock Spirits Group PLC, I am pleased to present our Annual Report and Accounts for the 9 month period ended 30 September 2018. This reflects our adoption of 30 September as the Group’s new accounting reference date.

Following on from the results of 2017, I am pleased to announce another period of growth, reflecting the continued turnaround of the business, particularly in Poland. The results reflect the early positive impact of the reformulated strategy of focusing on premiumising our range and increasing the use of digital channels in order to engage with consumers, especially the millennial cohort.

While it was very encouraging to see real progress in our two largest markets of Poland and the Czech Republic, Italy, however, remained difficult.

With regards to mergers and acquisitions (M&A), we continue to assess a range of acquisition opportunities that would deliver enhanced growth and shareholder value for the future.


I am pleased to announce an ‘enhanced’ final dividend for the 9 month period. We are proposing a final dividend that is in excess of what would have been declared based on the 9 months of profit generated in the period. Effectively, it is a full final dividend as though we were reporting for a full 12 month period. Hence, the final dividend proposed of 6.01 €cents per share (12 month to Dec 2017: 5.72 €cents) represents growth of 5.1% from the prior year final dividend. Shareholders are therefore not only receiving the full ‘enhanced’ final dividend, but are also receiving this three months earlier than in previous years.

This dividend represents the continued approach, as outlined previously, of a progressive dividend policy which can be supported by the ongoing strength of the Group’s free cashflow conversion. It also does not preclude pursuit of M&A opportunities, and allows us to retain a solid balance sheet which is important in the current economic climate.

Board and people

As announced in September 2018, Kate Allum joined the Group as an Independent Non-Executive Director, being appointed with effect from 1 November 2018. Kate brings a wide variety of experience in both human resources and supply chain management, and from within Central and Eastern Europe, which will be hugely beneficial as the Group continues to develop. Kate has been appointed to the Audit and Remuneration Committees and we are delighted to welcome her to the Board.

The success of any company is down to the quality of its leadership and is reliant on the skills and talent of the team working throughout the organisation. On behalf of the Board, I would like to thank all of the employees of Stock Spirits for their continued hard work, commitment and dedication.

Corporate governance

The Company complies with all applicable laws and regulations, and the Board adopts the UK Corporate Governance Code as part of its culture. A statement relating to compliance with the Code is included within the Governance section within our Annual Report, which also sets out the processes which have been put in place to deliver long-term success.

The Board and its various Committees have met regularly throughout the year, and an internal Board evaluation exercise took place during the period which showed continued progress in overseeing and guiding the business.

Looking ahead

The possible implications of Brexit on the Group will continue to be closely monitored but, as previously reported, the likely effect is not considered to be material as we do not produce in or export from the UK. 

We now have an enhanced Board, a stable management team that is working to a clear strategy, and a portfolio of brands that are growing in strength. Notwithstanding the continued competitive environment in our main market of Poland, we remain confident of being able to achieve further growth in the future. 

Chief Executive Statement

Group financial performance

Given the change in our accounting year to 30 September, we have presented summarised proforma results for the 12 months to 30 September 2018 along with proforma 12 month comparatives. On this basis, we have delivered growth in volume, revenues and profitability, and the balance sheet has strengthened further as net debt was reduced.

Continued growth in Poland

For the 9 month period to 30 September 2018, revenue for Poland was €105.6m, (12 months to 31 December 2017: €147.5m), with adjusted EBITDA of €27.5m (12 months to 31 December 2017: €37.7m). 

For the proforma years of 2018 and its 2017 comparative, revenue was €152.6m, an increase of 8% from €141.2m in 2017. Adjusted EBITDA also increased 16% from €34.9m in 2017 to €40.4m. In 2018, this division represented 54% of Group revenue (2017: 54%).

Our Polish business continued to grow from the foundations that have been re-laid in recent years. Given it contributes some half of Group revenues, success in Poland is critical.

The economic environment remained favourable, and the total vodka category was stable, with welcome growth in premium segments. Total vodka category growth is still driven by the flavoured sub-category, with clear vodka seeing a small decline. Trade channel dynamics were also stable, notwithstanding some regulatory changes in retailing. Against this backdrop, we were able to capitalise on rising consumer affluence by continuing to strengthen our portfolio with attractive premium brands.

Stock out-performed the total vodka market, continuing to grow volume and value share. Our total vodka volume share grew from 25.2% last year to 27.0% this year, and value share grew from 26.2% to 27.4%4. In recent months, both our volume and value growth rates outpaced our key competitors.

A significant contributor was the continued strong growth of our leading premium brand, Stock Prestige, which is the number one brand in premium vodka in Poland. In the top premium segment, our Amundsen Expedition grew volume well ahead of that segment’s volume growth. Our leading mainstream brand, Żołądkowa de Luxe, was relaunched and also achieved volume growth, outperforming its segment. In the economy segment, our Żubr and 1906 brands grew their combined volume strongly, benefitting from pack size innovation. We also grew total flavoured vodka volume and value versus last year, led by Stock Prestige flavours and Saska flavours.

We are building on our progress in flavoured vodka to achieve our longer term aim of growth ahead of that sub-category. Our revised flavoured strategy will entail an increasing focus on our top flavoured brands: Żołądkowa Gorzka, Lubelska and Saska.

We continued to grow whisky category share via the Beam Suntory portfolio. Our co-operation with Synergy Brands, which has been in place since July 2016, also generated positive results as Beluga grew value in the fast growing ultra-premium vodka segment.

The strengthening of our sales capabilities continued with a significant programme of store re-layouts in traditional trade channel, which improved results at point-of-purchase.

Overcame headwinds in the Czech Republic

For the 9 month period to 30 September 2018, revenue for Czech Republic was €49.2m, (12 months to 31 December 2017: €67.7m), with adjusted EBITDA of €13.6m (12 months to 31 December 2017: €21.8m). 

For the proforma years of 2018 and its 2017 comparative, revenue was €73.2m, an increase of 13% from €64.6m in 2017. Adjusted EBITDA also increased 5% from €20.6m in 2017 to €21.6m. In 2018, this division represented 26% of Group revenue (2017: 25%).

The Czech Republic is the Group’s second largest market. We have held spirits market leadership for over 20 years5, leading in the three key spirits categories of rum6, vodka and herbal bitter liqueurs7. The Czech economy is also performing well, and with higher consumer incomes we see an increasing desire for premium products, which in turn drives value growth8. The total spirits market grew value and volume despite reduced levels of retailer promotional activity7.

Given our scale in these categories, Stock was heavily impacted by the shift in retailers’ promotional strategy, resulting in only marginal total volume growth. Despite this, the combination of our premium innovations, benefits from previously-acquired brands and the addition of new distribution brands delivered value growth, maintaining our market leadership and achieving value share of 33.1%7.

Stock grew value share in the biggest spirits category, rum, through the outstanding success from the Q1 launch of Božkov Republica. This has achieved 24.5%7 value share of imported rum. Captain Morgan, which we distribute on behalf of Diageo, remains the number one international rum and also achieved solid value growth.

In the highly competitive vodka category, the Bohemia Sekt spirits brands that we acquired in 2016 helped maintain our category leadership despite massive growth of retailer private labels.

Our established partnership with Diageo, coupled with the new distribution agreement with Beam Suntory, have created the strongest whisky portfolio in the market. We grew whisky value share to over 10% despite significant price reductions by some leading competitors.

Success in rum, vodka and whisky outweighed a decline in herbal bitters value share, driven primarily by the changed retailer promotional strategy, coupled with aggressive price-discounting by Jagermeister. Our new premium herbal bitter, Black Fox, which was launched late last year, increased its value share of the premium segment counteracting, in part, the decline of Fernet Stock in the mainstream segment.

EU Commission deliberations on the use of rum ether concluded that the aroma will not be banned in domestic rum (Tuzemak) for five years. Our team managed this challenge without significant business implications. A new debate that has opened between the EU Commission and the Czech Ministry of Agriculture and Food Inspection regarding inclusion of milk in egg liqueurs carries no material risk to Stock.

We continued to develop our sales and trade marketing capabilities, achieving step change in category management. We also stay focused on price management and promotional efficiency, as price competition remains strong, especially with the growth of private label. Our Czech business has a demonstrable ability to deliver value growth through focus on premiumisation, both of our own core brands and by working with our distribution partner brands.

Tough trading conditions in Italy

For the 9 month period to 30 September 2018, revenue for Italy was €17.6m, (12 months to 31 December 2017: €26.2m), with adjusted EBITDA of €1.7m (12 months to 31 December 2017: €6.3m). 

For the proforma years of 2018 and its 2017 comparative, revenue was €25.8m, a decrease of 1% from €26.0m in 2017. Adjusted EBITDA also decreased 27% from €6.0m in 2017 to €4.4m. In 2018, this division represented 9% of Group revenue (2017: 10%).

Italy is our third largest market in terms of revenue and EBITDA. The market is highly fragmented, with several mature spirits categories including bitters, vodka, brandy, whiskey and liqueurs. Whilst Stock has a relatively small overall share of total spirits, with 6.0% volume share in our main focus area of the modern off-trade channel, we hold leading positions in several key categories - including number one brands in the clear vodka, vodka-based liqueurs and limoncello categories, and the number two brand in brandy.

Trading conditions remain very tough as a result of high levels of unemployment and consumer consumption being impacted by rising inflation. As a result of these trends, the total market declined slightly in value in the period.

Against this backdrop, Stock’s total volume share was slightly down to 6.0%, with value share slightly down to 5.7% in the modern trade channel9. Stock held overall volume and value share in its four key categories, with slight gains in brandy, but as a result of the softening market and strong growth of private label, there were slight losses in flavoured vodka-based liqueurs, limoncello and clear vodka.

Looking ahead, continuing economic challenges and political uncertainty are expected to constrain consumer confidence and disposable income, with a continuing negative impact on overall spirits sales. There is also a possible VAT increase from 22% to 24.2% on 1 January 2019, with further smaller increases possible in 2020 and 2021.

Despite this, in the early summer we relaunched the Keglevich fruit flavoured range, supported by new packaging and a programme of investment in a new ‘Pure Vodka, Pure Fruit’ campaign using both digital and traditional media. Early indications point to a positive consumer response.

Our iconic brandy, Stock 84, which was refreshed last year, achieved value and volume share growth, to which our premium XO variant contributed significantly.

We continue to carry out focused brand-building in selected premium on-trade outlets for Syramusa, the premium sub-brand of Limoncè limoncello, which was launched in late 2017. The brand is also now listed in travel retail.

Finally, our distribution brand range expanded further with new distribution agreements with Nuove Distillerie Vicenzi, Dictador rum and The Dubliner Irish whiskey.

Other markets

Other markets includes Slovakia, Bosnia, Croatia and other export activities. For the 9 month period to 30 September 2018 revenue was €21.3m, (12 months to 31 December 2017: €28.4m), with adjusted EBITDA of €2.8m (12 months to 31 December 2017: €4.9m). 

For the proforma years of 2018 and its 2017 comparative, revenue was €30.9m, an increase of 10% from €28.1m in 2017. Adjusted EBITDA also increased 24% from €4.6m in 2017 to €5.7m. In 2018, this division represented 11% of Group revenue (2017: 11%).

Continued strong results in Slovakia

Our Slovakian team delivered another strong performance, growing both volume (+4.9%) and value (+3.9%) ahead of the market10. Stock maintained its leadership in herbal bitters, with growth supported by the Fernet Stock grapefruit flavour extension, coupled with revised price-positioning of Fernet Stock Grand11. The continued roll-out of Black Fox added a premium dimension to our bitters portfolio, whilst in vodka, Amundsen achieved double digit volume and value growth12.

As in other markets, NPD also drove premiumisation. Božkov Republica was rolled out, and we entered the borovička (Juniper) category using the premium Golden Ice brand.

Stock’s second highest value growth in Slovakia came from whisky. Having begun distribution of Beam Suntory’s range in May 2017, Jim Beam’s value share was increased to 7.5% from 3.6%, with strong growth in sales13. The distribution brands portfolio was expanded to other growth categories through adding the Quintessential Brands gin range, The Dubliner and The Dublin Liberties whiskeys, and Barcelo premium rum.

These initiatives contributed to overall volume and value growth for Stock in Slovakia, and reinforced our position as the second biggest spirits company in the off-trade11.

Other export

In Croatia we grew volume and value14, primarily through an increased focus on the on-trade, supported by the relaunch of Stock 84, and an increased range of distribution brands from Beam Suntory plus Beluga, Botran Rum and Lucas Bols.

In our export markets, reorganisation of our route to market in Germany was completed successfully, and contributed to a strong volume uplift. New distribution in Taiwan for Hammerhead Single Malt Czech Whisky also generated high margin incremental sales.


We continued to build our core brands via a focused programme of NPD. In addition, a new online NPD process flow was implemented to streamline and speed up this critical process.

In Poland in clear vodka, we relaunched our leading brand by volume, Żołądkowa de Luxe, with a new, smoother taste and impactful new packaging. The relaunch was supported by awareness and trial building activity, including an innovative digital campaign and a Guinness Book of World Records entry winning the largest ever linked-arms toast.

We also introduced an evolutionary update of Stock Prestige’s packaging to retain consumer appeal in the fast evolving premium vodka segment.

In the flavoured category, a strong package of consumer activation on Lubelska and Saska, coupled with the launch of two new Lubelska flavours and three new Saska flavours contributed to volume growth. We continue to have a strong NPD pipeline in flavoured vodka.

Building on our history of successful flavour innovation on Božkov, and with the ambition of premiumising the brand, we launched new Božkov Republica imported rum in February 2018 in the Czech Republic. It has achieved outstanding growth, growing the overall rum category. Božkov Republica is fast becoming one of the most successful NPD launches in Czech spirits history.

A full review of the Keglevich flavoured range in Italy resulted in the launch of a new improved liquid. The new recipe uses six times distilled grain vodka coupled with 100% fruit juice. The range was also relaunched with new packaging. Keglevich clear vodka has also been relaunched, again with an improved quality six times distilled liquid and more impactful packaging. It has outperformed the category in both volume and value growth.

In Slovakia, Fernet Stock Grapefruit won the Consumer Choice Award 2018, which is awarded to the most successful innovation in the spirits category by Slovak consumers.

Božkov Republica was also rolled out in Slovakia, and we entered the borovička (Juniper) category using the premium Golden Ice brand.

Operations and supply chain

Smarter purchasing strategies coupled with new systems tools delivered encouraging results, and helped to mitigate adverse market conditions in certain categories of inputs.

Digital and technology

We are enhancing our marketing and sales capabilities with the latest technology to deliver enhanced brand experiences. Digital communications played a leading role in our Keglevich relaunch in Italy, where we pilot tested a new smart e-commerce tool which links our social media activation directly to opportunities to purchase.

In Poland, Stock established the first ever virtual bartender league, along with tools to encourage brand advocacy and increased consumer engagement.

In the Czech Republic we began working with our customers to develop our reach beyond the established ‘bricks and mortar’ channels into the emerging e-retail arena.

In respect of our IT infrastructure, we have consolidated and strengthened our network architecture which will facilitate us running more Group-wide software solutions in future.

Our people

We made senior Marketing and Sales appointments in Poland and the Czech Republic. We also invested in our Italian marketing team in order to support the Keglevich relaunch.

A number of updated health and safety initiatives were put in place across the Group, the improvements from which have been recognised by third party auditors.

The results from our very first employee engagement survey have been acted upon, providing a base-line from which to create an engaged, agile culture.

Our partners

The integration of the distribution brands with Stock’s leading local brands has brought significant benefits to the combined portfolio, further strengthening our overall offering to customers and consumers.

We will soon complete our fourth year as exclusive distributor of Diageo’s core brands in the Czech Republic, where we are delighted with the continued value growth that has been achieved on Captain Morgan, Johnnie Walker and Baileys. The addition of the Beam Suntory range to our Czech portfolio made a material increase to our total whisky share, and we also began distribution of The Dubliner and The Dublin Liberties whiskeys from Quintessential Brands.

In Italy, the Vicenzi range of liqueurs from Nuove Distillerie Vicenzi was introduced from 1 January 2018. The distribution brand range expanded further with the addition of two new distribution agreements with Dictador rum and The Dubliner Irish whiskey.

In Slovakia, we began the distribution of Beam Suntory’s range in May 2017. The distribution brands portfolio was further expanded to other growth categories, adding the Quintessential Brands gin range, as well as its whiskeys, The Dubliner and The Dublin Liberties, and Barcelo premium rum.


We are pleased with the increasing strength and resilience of our core Polish business, and also with the way in which we have combatted the headwinds experienced earlier in the year in the Czech Republic. While challenges remain in certain parts of our operations, most notably in Italy, we believe that the strength of our brands and the fact that our four pillar strategy is starting to deliver tangible results means that we are well positioned for further success.

Chief Financial Officer Statement

Change of year-end and the proforma results

As previously announced, we have now adopted 30 September as our accounting year-end. The transition to this has been achieved without any major issues or business disruption. Given there is very limited comparability between the results reported for the 9 months to 30 September 2018, and the results for the 12 months ended 31 December 2017 (‘2017’), we have presented certain additional proforma financial statements and notes in this Report and Accounts. The proforma financial statements cover the 12 months ended 30 September 2018 (‘2018 proforma’) and the 12 months ended 30 September 2017 (‘2017 proforma’). We have also set out the basis on which these proforma financial statements have been compiled, and provided reconciliations to the reported financial statements. The proforma financial statements are not audited.

In the 9 months to 30 September 2018, we sold 9.1m 9 litre cases (2017: 13.1m). In 2018 proforma, volumes were up 2.8% as we sold 13.3m 9 litre cases (2017 proforma: 12.9m 9 litre cases). 

Total Group revenue was €193.8m for the 9 month period (2017: €269.8m as restated for IFRS 15).  On a proforma basis in 2018, revenues were up +8.7% to €282.4m (2017 proforma: €259.8m) and up +6.9% on a constant currency basis15.

Revenue per litre16 in the 9 month period was €2.36 (2017: €2.33). On a proforma basis it was €2.37 (2017 proforma €2.24), reflecting the progress in improved sales mix as our focus on premiumisation gains traction.

Costs of goods per litre16 rose during the 9 months to 30 September 2018 to
€1.22 (2017: €1.16). This reflects the impact of inflation as well as the premiumisation focus, including the increased proportion of distribution brands volume in our sales mix. Reported gross margin therefore slipped from 49.1% to 48.2%, although this was distorted by the shorter reporting period and the seasonality of Group sales. On a proforma basis, gross margin improved to 48.9% (2017 proforma: 47.3%), and cost of goods per litre were held to general inflationary levels.

As previously communicated, we invested more on the development and marketing of our brands and products than in recent years. This included several New Product Developments (NPDs) during the period. Whilst this increased investment is not apparent in the reported results selling expenses (9 months 2018: €42.5m, 2017: €56.0m), it can be seen in the proforma results (2018 proforma: €57.7m, 2017 proforma: €54.9m).

Other operating expenses, whilst lower in the reported results (9 months 2018: €22.0m, 2017: €29.6m), were higher on a proforma basis (2018 proforma: €30.1m, 2017 proforma: €25.1m). This largely reflects higher people costs, particularly in Central Europe, and also includes higher variable reward costs as a result of the stronger performance across the business as a whole during the period. Underlying corporate costs reflect inflationary increases only.

Adjusted EBITDA for the 9 month period was €35.8m (2017: €56.3m). Proforma adjusted EBITDA was 2018: €59.4m (2017 proforma: €53.2m), up +11.5%; or +8.1% on a constant currency basis15.

The change in year-end has implications for our Financial Calendar, notably in respect of results announcements and dividends.

As reported previously, the Group does not expect a material impact from the UK’s proposed exit from the European Union. This position will continue to be monitored, as will all of the principal risks that the Group faces.

Finance income and expense

The decline in net finance expense in the 9 months to 30 September 2018 of €1.7m (2017: €2.6m) as reported, is lower principally due to the shorter reporting period. On a proforma basis, the increase in net finance expense (2018 proforma: €3.1m, 2017 proforma: €1.7m) was primarily due to interest payable on settling historic tax issues, and higher interest rates in the Czech Republic.


The income tax expense, as detailed in note 8 of the summary consolidated financial statements below, reflects a number of factors, primarily being the tax expense for the current period; changes in provisions for taxation relating to prior years and movements in deferred tax. The higher reported effective tax rate of the Group at 27.3% (2017: 26.7% excluding exceptionals) primarily reflects the settlement of prior year open tax issues. A small increase in the effective rate is also seen on the proforma basis (2018 proforma: 27.1%, 2017 proforma: 27.0%).

Group tax provisions totalled €8.0m at 30 September 2018, an increase of €0.5m from 31 December 2017. As set out in the principal risks and uncertainties, the Group is exposed to a number of tax risks in the countries in which it operates. There have been a number of developments in the period with respect to the Group’s unsettled tax years in several countries which are detailed in note 8 of this statement. This includes in Poland where in recent years the Group has noted the Polish authorities increasingly adopting a more aggressive approach towards the interpretation of tax laws and regulations. Taken as a whole, and in common with other companies operating in Poland, this increases the uncertainties relating to the treatment of historical tax positions. The Group takes professional advice, and has undertaken a review of potential tax risks and current tax assessments, and whilst it is not possible to predict the outcome of any pending enquiries, adequate provisions are considered to have been included in the Group accounts to cover any likely or expected future settlements. Nevertheless, in some circumstances the Group may have to pay over sums assessed as due by the authorities and then seek their recovery as appeals processes run their course.

Further details are set out below in note 8 of the summary consolidated financial statements.

Exceptional items

There are no exceptional items arising in the 9 months to 30 September 2018 (2017: €14.9m Italian impairment charge and €4.7m deferred tax charge).

During the year-ended 31 December 2017, there were two non-cash exceptional items. First, there was an impairment charge against the carrying value of the Italian business, of €14.9m. Second, there was a one-off deferred tax charge of €4.7m in respect of Poland resulting from changes in tax legislation whereby tax deductibility of intangible asset amortisation is no longer allowed.

For the purposes of comparability, these exceptional items have been completely excluded from the proforma results.

Earnings per share

The basic earnings per share (EPS) for the 9 months to 30 September 2018 was 9.71 €cents per share (2017: 5.72 €cents per share). On a proforma basis, the basic EPS for the 12 months to 30 September 2018 was 16.72 €cents (2017: 14.74 €cents).

Cashflow and working capital

The Group continues to generate strong cashflow from operating activities. Using a measure by which we judge our underlying operational cashflow, the Group generated free cashflow of €47.9m in the 9 months to 30 September 2018 (2017: €48.6m). This represents a conversion rate from Adjusted EBITDA of 133.6% (2017: 86.3%), and reflects the reversal of the high level of trade receivables at 31 December 2017. On a proforma basis, the Group generated free cashflow of €54.3m in the year to 30 September 2018 (2017 proforma: €52.8m). This represents a strong conversion rate from Adjusted EBITDA of 91.5% (2017: 99.1%).

Dividend and reserves

The Board has proposed a final dividend to shareholders which, when combined with the interim dividend, represents a significant enhancement over the progressive underlying dividend that would have otherwise been paid for the 9 month period to 30 September 2018.

The Board proposes a final dividend of 6.01 €cents per share for the 9 months to 30 September 2018 (2017: €5.72 €cents per share). In effect, the Board has proposed what would be a 12 month dividend that was progressive versus the 5.72 €cents final dividend paid for the year ended 31 December 2017.

When combined with the interim dividend of 2.50 €cents per share paid in September 2018 (2.38 €cents interim dividend paid in September 2017), this totals 8.51 €cents per share for the 9 months to 30 September 2018 (2017: 8.10 €cents per share), and represents an increase of 5.1%. Besides the enhancement of some 3.41 €cents, there are two further benefits for our shareholders: the final dividend is to be paid some three months ahead of last year as a result of the year-end change; and the 8.51 €cents total dividend becomes the base for future dividends under our progressive dividend policy.

If, through the combination of continued strong cash generation and limited M&A activity, the Group finds itself with an inefficient capital structure, the Board will consider making additional shareholder distributions.

During the period, the Company undertook a Reduction of Capital. This involved the cancellation of £155,428,080 standing to the credit of the Company’s share premium account. This correspondingly increased the Company’s distributable reserves by the same amount. The Reduction of Capital itself did not involve any return of capital to shareholders, or any reduction in the Company’s net assets. The rationale for the Reduction of Capital was to increase the Company’s distributable reserves, providing the Company with greater headroom and flexibility in the future for the paying of dividends.

Net debt and maturity profile

The Group’s Revolving Credit Facility (RCF), which was taken out in 2015, was amended and extended in 2017, and now expires in 2022. Debt can be drawn and repaid at the Group’s discretion without penalty or charge. At 30 September 2018, €10.6m of the RCF is used to back excise duty guarantees in Italy and Germany. We also retain a factoring facility capability of €50.0m.

The continued strong cashflow during the 9 month period to 30 September 2018 resulted in Net Debt of €31.6m at 30 September 2018, a decrease of €21.6m from 31 December 2017. Leverage fell to 0.53x (calculated using the proforma Adjusted EBITDA for 2018 not the 9 month reported Adjusted EBITDA) from 0.94x at 31 December 2017.

Our relatively low leverage combined with the significant headroom in our bank facilities leaves us well placed to finance our strategic aspirations.

Foreign exchange

The Group remains exposed to the impact of foreign currency exchange movements, with the major trading currencies continuing to be the Polish Złoty and the Czech Koruna. Details as to how the Group manages this risk is outlined below. At 30 September 2018, there were no formal hedging instruments in place.

A net positive foreign currency exchange gain of €0.8m was reported within the Adjusted EBITDA over the 9 month period to 30 September 2018. This has arisen on the appreciation of the Polish Złoty and the Czech Koruna versus the Euro.

Changes in accounting policies

The Group adopted IFRS 15 (Revenue from contracts with customers) from 1 January 2018.

The Group adopted IFRS 9 (Financial Instruments) from 1 January 2018. As previously communicated, there was no material impact from this adoption.

The Group will adopt IFRS 16 (Accounting for leases) from 1 October 2019.

Equity structure

There has been no change to the equity structure of the business in the 9 month period to 30 September 2018. This remains at 200 million issued shares with a nominal value of £0.10 each.

The Company purchased 1.2 million of its shares in the period, at a cost of €3.5m, to settle future obligations under its share-based reward schemes. These shares provide a natural hedge to the P&L charge arising from the various share schemes in place under IFRS 2 (Classification and Measurement of Share-based Payment Transactions).

Directors' responsibility statement

Each of the Directors, whose names and functions are listed below, confirms that:

To the best of their knowledge, the consolidated financial statements and the Company financial statements, which have been prepared in accordance with IFRS as issued by the IASB and IFRS as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Company on a consolidated and individual basis; and to the best of their knowledge, the announcement includes a fair summary of the development and performance of the business and the position of the Company on a consolidated and individual basis, together with a description of the principal risks and uncertainties that it faces.


David Maloney, Chairman
Mirek Stachowicz, Chief Executive Officer
Paul Bal, Chief Financial Officer
John Nicolson, Senior Independent Non-Executive Director
Mike Butterworth, Independent Non-Executive Director
Tomasz Blawat, Independent Non-Executive Director
Diego Bevilacqua, Independent Non-Executive Director
Kate Allum, Independent Non-Executive Director

7 March 2018


4 Nielsen, total Poland, total off-trade, total vodka MAT September 2018.  For the purposes of this estimate total vodka = total clear vodka plus total flavoured vodka plus total flavoured vodka based liqueurs


6 In the Czech Republic the “rum” category of the spirts market includes traditional rum, which is a spirit drink made from sugar cane, and what is widely referred to as “local rum”, known as “Tuzemak” or Tuzemsky”, which is made from sugar beet. As used in this Report, “rum” refers to both traditional and local rum, while “Czech rum” refers to local rum.

7 Nielsen MAT to end September 2018, total Czech Off-trade

8 OECD 2018

9 IRI total Italy, total modern trade, total spirits, MAT to end September 2018

10 Nielsen, total Slovakia, total off-trade, total spirits MAT to end September 2018

11 Nielsen, Slovakia, total off-trade, total herbal bitters MAT to end September 2018

12 Nielsen, Slovakia, total off-trade, total vodka MAT to end September 2018

13 Nielsen, Slovakia, total off-trade, total whisky MAT to end September 2018

14 Internal Stock Spirits Group audited data

15 Constant currency is calculated by converting 2017 results at 2018 FX rates

16 Revenue and cost of goods per litre is calculated by dividing total Group revenue and cost of goods sold by litres sold

Download the full Preliminary Results statement (PDF 1.76MB)

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