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Preliminary results 2013

Stock Spirits Group PLC, a leading Central and Eastern European branded spirits producer, announces its results for the year ended 31 December 2013. These are the first year-end results since listing on the main market of the London Stock Exchange in October 2013.


  • Total revenue increased 16.4% to €340.5 million (2012: €292.4 million)
  • Gross profit increased 21.1% to €173.6million (2012: €143.4million)
  • Operating profit before exceptional costs increased 7.5% to €62.8million (2012: €58.4million)
  • Profit for the year €8.9million (2012: €26.2million)
  • Closing net debt of €46.3m
  • Adjusted EBITDA* increased 22.3% to €83.7 million (2012: €68.4 million)
  • Adjusted free cash flow* of €83.3 million, 99.6% of Adjusted EBITDA*


  • Total volume up 11.4% to 17.4 million 9 litre cases (2012: 15.6 million)
  • Several significant new product launches including new flavours of Lubelska, Stock Prestige and Bozkov
  • Stock Prestige became the Group’s 6th “millionaire” brand selling over 1 million 9 litre cases in 2013
  • Poland
    • Completion of ‘Project Polar’ initiative to install fridges in traditional off-trade stores. One off €11.9 million investment to roll out 20,000 fridges
    • Exclusive agreement signed in August with Beam Inc. to distribute its products in Poland
    • We estimate the impact of the 15% Excise Duty increase had the effect of pulling forward €5 million of operating profit into 2013
  • Czech Republic
    • Good recovery following the temporary prohibition in late 2012
    • Exclusive distribution of Diageo brands in Czech Republic effective from January 2014
  • Italy & Other markets
    • Full year benefit of Italian manufacturing site closure in 2012
    • Other markets in line with expectations

Chris Heath, CEO of Stock Spirits Group, commented:
“We are pleased with the performance of the Group during what has been a very busy period. We have completed a successful IPO whilst delivering strong performances in all our key markets, and despite challenging economic conditions.

During the year we undertook two significant strategic initiatives to position the business for further growth, with both already producing encouraging early results. Our ‘Project Polar’ project in Poland has seen the successful installation of 20,000 branded refrigerators in traditional retailer stores across the country; and we have taken a significant step forward towards our goal of broadening our premium product offering through the exclusive distribution agreements with Beam in Poland and Diageo in the Czech Republic.

The 2014 year has started well, despite the challenges posed by the Polish Excise Duty increase, and the Group is well placed to capitalise on the opportunities available in the Central and Eastern European Region. We view the future with confidence.”

* Stock Spirits Group uses alternative performance measures as key financial indicators to assess the underlying performance of the Group. Details of the basis of calculation for Adjusted EBITDA, Adjusted EBITDA margin and adjusted free cash flow can be found in Note 6 of the preliminary announcement.

Management will be hosting a presentation for analysts at 9am on Thursday 27th March at:

1 Angel Lane

There will be a simultaneous web cast of the presentation via with a recording made available shortly thereafter.

For further information:

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

Christopher Heath, Chief Executive Officer

Lesley Jackson, Chief Financial Officer

Andrew Mills, Investor Relations Director

Bell Pottinger:
Clinton Manning                                                                                      +44 (0) 20 7861 3232

A copy of this press release has been posted on The 2013 Annual Report and Accounts will be available on on 10 April 2014.

This press release contains statements which are not based on current or historical fact and which are forward looking in nature. These forward looking statements reflect knowledge and information available at the date of preparation of this press release 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 press release, and other unknown future events and circumstances which can cause results and developments to differ materially from those anticipated. Nothing in this press release should be construed as a profit forecast.

Notes to editors:

About Stock Spirits 
Stock Spirits, one of Central and Eastern Europe’s leading branded spirits and liqueurs businesses, offers a modern premium branded spirits portfolio, 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 40 other countries worldwide. Global sales volumes currently total over 150 million litres per year.
Stock Spirits holds the market leadership positions in spirits in both Poland and the Czech Republic, where it has invested in what is believed to be state of the art production facilities, and is one of the world’s leading vodka producers. This includes having the number one leading vodka brands in Poland, Italy and the Czech Republic. Core Stock brands include products made to long-established recipes such as Stock brandy, Fernet Stock bitters and Limonce, as well as more recent creations like Stock Prestige and Czysta de Luxe vodkas.

Stock was created through the integration of Eckes & Stock and Polmos Lublin in 2008 and recently floated on the main market of the London Stock Exchange.

Stock supports and is active in the promotion of responsible and moderate drinking. For further information please visit:

Chairman’s Statement
Jack Keenan

I am pleased to write as Chairman of Stock Spirits Group PLC following the successful Initial Public Offering on the London Stock Exchange in October 2013 which attracted significant demand from investors. We are starting out on our journey as a fully listed company and I am personally very confident about the prospects of the Group.

The Group’s performance has been very strong in 2013 and we continue to improve our results in marketing, new product development, sound financial management, operations and procurement. We expect that continued organic growth, combined with sensible acquisitions or mergers, will enable us to deliver results in line with our strategic plan.

The Group’s two new distribution agreements, with Beam Inc. in Poland and Diageo plc in the Czech Republic, provide us with premium brands that complement our portfolio. These agreements demonstrate well the excellent quality of our trading platforms in both of these markets where we are the clear market leader in spirits.

Stock Spirits Group is a lean organisation at the top with most resources in the markets where we operate. The central management team has world class credentials with successful backgrounds in global spirits / consumer companies. We have implemented a revised remuneration policy in line with a public company, to ensure that the interests of the Executive Directors and senior managers are aligned to those of shareholders. Details of the new remuneration policy are contained in the corporate governance section of the report. All senior managers have a significant portion of annual remuneration tied to performance targets. A system of formal and informal performance evaluations leads to a culture that is built on results.

I would like to recognise the commitment of all our employees and thank them for their contribution to the Group’s performance.

Stock Spirits Group complies with high standards of corporate governance as a London listed company. Following the IPO, we have a very strong Board of Directors. Combining with our CEO, Chris Heath, and CFO, Lesley Jackson, who have been building the business in recent years are three newly appointed independent Non-Executive Directors. The Board is benefitting greatly from the experience of Andrew Cripps, David Maloney and John Nicolson who chair respectively the Audit, Nomination and Remuneration Committees.

I would also like to express my gratitude to Karim Khairallah who serves as a shareholder Non-Executive Director representing Oaktree Capital Management. Karim has guided the development of Stock Spirits Group from the very beginning.

Looking Ahead
I believe that the outlook for Stock Spirits Group is very promising. We have a clear mission statement and strategic plan and a proven executive team.

I look forward to reporting on our progress as we deliver benefits to shareholders, consumers, customers and employees.

Chief Executive Officer’s Statement
Chris Heath

2013 was an important and transformational year for Stock Spirits Group.

We listed our shares on the London Stock Exchange; we made significant progress towards our strategic goals; and we delivered strong performance in our key growth markets.

I am pleased with the strong performance we delivered during the year in a challenging environment. I would like to pass on my thanks to all our people who have made such a worthwhile contribution. Their support has been invaluable.

It is an exciting time to be leading Stock Spirits Group. We enjoy strong positions in our core markets, and selected market segments, within the Central and Eastern European Region. I believe that we are well placed to take advantage of the continued strong demand for spirits in the area we operate in. There is a long cultural tradition of spirits consumption in Central and Eastern Europe and I believe this will continue to underpin the success of the Group as we move forwards.

I am also particularly encouraged with the results we are seeing from a number of our key brands. In Poland, Czysta de Luxe has regained the leading position in the clear vodka market. Also in Poland, the new pineapple and apple additions to the Lubelska vodka-based liqueurs range have been very well received by consumers. In the Czech Republic, Božkov has had a very strong year, benefiting from the recovery in the spirits market following the temporary prohibition in late 2012. In Italy, both the clear and flavoured variants of Keglevich have performed well.

Listing on the London Stock Exchange
One of the major events for the Company during the year was the premium listing on the main market of the London Stock Exchange. The impact on the organisation of such an exercise is considerable and I commend the whole management team who retained a strong focus on our customers and the business during this busy period, avoiding distraction. We are well prepared to respond to the new requirements of a listed company and also take advantage of the opportunities presented.

Strategic initiatives
I would like to highlight two significant strategic initiatives that we undertook this year, both of which I am confident will lead to strong results in the future.

The first is Project Polar – the highly innovative installation of branded refrigerators at the point of sale in small local retailers in Poland, covering over half of the weighted volume distribution through this very important sales channel. The speed of this roll out demonstrates our proven ability to act swiftly using our operational management strength and, in this case, has provided us with first mover advantage. These branded refrigerators address consumer demand for chilled vodka, often for immediate consumption, while also displaying the Group’s brands to best effect in our most important sales channel.

In addition to the capital expenditure incurred on the refrigerator programme, during the year we increased the size of the sales team in Poland. This has enabled us to further increase the level of service we offer to our customers and also supported the roll out of the refrigerators.

The second initiative relates to the two distribution agreements we signed with global spirits companies, Beam Inc and Diageo plc, which both serve to validate the success of our strategy and demonstrate the confidence of these leading global spirits companies in the quality of our distribution platforms. The Beam contract was signed in August 2013 and appointed us as the exclusive distributor of Beam’s portfolio of whiskey and bourbon brands in Poland with effect from September 2013. Since January 2014, we have been the exclusive distributor of Diageo’s premium brands in the Czech Republic. These agreements both support the strategic drive to strengthen the premium elements of our brand portfolio further.

Strong performance in our markets
We made some excellent progress in our key markets, despite challenging economic pressures and external factors such as the Polish excise duty increase effected from 1st January 2014.

The Group has delivered another outstanding performance against a challenging economic backdrop, recording growth in Net sales revenue, adjusted EBITDA* and adjusted EBITDA* margin.

Adjusted EBITDA* for the year was €83.7m a growth of 22.3% over 2012, and an adjusted EBITDA* margin of 24.6%.

The Group remains highly cash generative and has delivered adjusted free cash flow* of €83.3m, and a closing net debt to adjusted EBITDA* leverage of 0.55, providing the Group with sufficient funding headroom to support our growth ambitions.

New Product Development (NPD)
I am very proud of the Group’s strong track record of developing successful new products and new variants of existing products. Following the Group’s success with Czysta de Luxe, we formalised the NPD Programme. As a result we now have a structured framework for new product development which expedites our ability to launch new products.

One of our strongest assets is the quality of our people and the excellent team work found in the Group. Our business thrives on their energy and enthusiasm and their attitude and professionalism reinforces my confidence in our ability to continually improve our performance and achieve our strategic goals. We have a strong and distinctive culture which we continue to nurture.

The Group continued to benefit from what we believe to be best in class production facilities in Poland and the Czech Republic. We also have a small distillery and production unit in the Czech Republic and an ethanol distillery in Germany. These facilities provide a total combined annual bottling production capacity of approximately circa 329 million litres based on current product mix, following the significant investment we made in recent years.

The year has started well, despite the challenges posed by the Polish excise duty increase, and we view the future with confidence.

Building momentum behind our growth strategy is my personal priority for the coming year. Growing our market shares in our core regions and further developing our brand portfolio will strengthen our ability to maximise growth and shareholder value.

We are making excellent progress in our NPD Programme and in embedding our new distribution arrangements in Poland and the Czech Republic.

Our actions over the coming year will result in even stronger brands and a broader platform for driving growth across the business.

Chief Financial Officer’s Review
Lesley Jackson

Top line growth driven by volume, price increases and an improving mix has produced a net revenue of €340.5m.

Revenue growth has been further assisted by successful new product launches in Poland and the Czech Republic, with the launch of new flavours of Lubelska, Stock Prestige and new pack formats for Božkov.

The full year benefit of the closure of the Italian manufacturing facility in Trieste coupled with the synergies generated from the first year of operating the Baltic distillery in Germany, acquired at the end of 2012, have improved the production cost base and delivered an underlying cost per case reduction.

During the year the Group invested in a larger sales force in Poland to further develop customer relationships and distribution, and to support the implementation of the branded fridges in the traditional trade stores. In addition, the integration of the Imperator business in Slovakia, acquired at the end of 2012, has also resulted in an increased investment in selling expenses.

Our underlying results have been impacted by the Polish duty increase. On the 1st January 2014 the Polish Government increased excise duty on strong alcohol by 15%. This resulted in a number of customers buying ahead of the duty increase and thereby increasing net sales revenue and operating profit in 2013 at the expense of net sale revenue and operating profit in 2014. We estimate that the impact of the duty buy-in was a 6% increase in sales volumes for Poland and a circa €5m increase in operating profit in 2013. We fully expect this impact to reverse during 2014.

Our results have also been significantly impacted by:

  • The net gain arising on the disposal of the US business in 2012
  • The expenses incurred on the IPO process in 2013
  • Other non-recurring costs in 2013

As a consequence, operating profit of £47.7m shows a 44.2% decrease versus FY2012. The profit for the year of £8.9m shows a reduction from reported profit for FY2012 of £26.2m and has also been impacted by the large tax credit in 2013 (see note 9 of the preliminary announcement).

Given the significant impact of the IPO expenses, the financial performance measures have also been presented on an adjusted basis to provide greater transparency of the underlying commercial results.

The adjustments relate to costs classified as exceptional items (see note 7 to the preliminary announcement) and other non-recurring costs, discussed in note 6 to the preliminary announcement.

Taking into consideration these adjustments, the reported adjusted EBITDA is £83.7m (see note 6 to the preliminary announcement).

Removing the impact of the Polish duty increase in 2013, the underlying adjusted EBITDA for the Group for 2013 is £78.7m, revealing an underlying growth of 14.9%.

On a constant currency basis revenue shows an increase of 17.7% and reported adjusted EBITDA an increase of 22.8%.

In quarter 4 the Czech National Bank imposed measures to devalue the Czech currency to manage deflationary impacts. The measures taken by the central bank are expected to continue throughout 2014.

Non-recurring & exceptional costs 
Within other operational overheads are a number of costs which are non-recurring. (Details of these costs can be found in note 6 to the preliminary announcement).

Following the IPO, the contract relating to management charges reimbursed to Oaktree Capital Management, the previous majority shareholder, terminated, and as a consequence these costs will not recur.

At flotation a new remuneration policy was implemented to bring the remuneration of Directors and senior management in line with a publicly listed company and replace the prior policy which supported a private equity business model. Under the prior policy a number of remuneration arrangements crystallised at IPO, and by their nature will not recur under the new remuneration policy.

Significant costs (classified as exceptional costs within the consolidated income statement) have been incurred during 2013 in respect of the IPO, the capital restructuring and the partial refinancing activity and are explained in more detail within note 7 to the preliminary announcement.

Adjusted EBITDA has been stated to remove the impact of these costs and a reconciliation is shown in note 6 to the preliminary announcement.

Finance income & expense and taxation 
Finance costs shown within the consolidated income statement of €58.2m, primarily reflects the cost of debt within the capital structure prior to IPO, which consisted predominantly of senior unsecured debt instruments. These debt instruments attracted interest annually which was capitalised and not paid out in cash.

The Group undertook an extensive capital restructuring exercise prior to IPO which resulted in the senior unsecured debt instruments being partially repaid and the remaining balance converted to a single class of equity shares.

The devaluation of the Czech Koruna, discussed above, has also crystallised a significant financing foreign exchange loss of approximately €8m on the Czech business’s intercompany loans denominated in Polish złoty and Euros. A further financing foreign exchange loss of €2.6m crystallised as a result of the post-IPO capital restructuring as a result of the movement in the pound / Euro exchange rate

Following the repayment and conversion of the senior unsecured debt instruments, going forwards interest cost will reflect expense predominantly relating to third party bank debt only.

The total tax charge for the year ended 31 December 2013 was a credit of €17.6m. The Group tax credit in the profit and loss account has been impacted by several non-recurring items:

  • Significant loss before tax in the Group holding companies largely as a result of the pre-IPO finance structure (shareholder debt service costs) and IPO-related expenses and fees.
  • Increased provision relating to potential Group tax risks (see note 9 of the preliminary announcement).
  • Post-IPO corporate restructure which has crystallised a deferred tax asset and released a deferred tax liability resulting in a net deferred tax credit in the profit and loss account (see note 9 of the preliminary announcement).

Going forward benefits of the post-IPO corporate restructure will result in a large reduction to the Group cash tax expense. The benefit will flow to the Group profit and loss account, over a similar time period, but will be largely offset by the amortisation of the deferred tax asset discussed above for a period of years.

A full reconciliation of the Group tax charge can be seen in note 9 to the preliminary announcement.

Cash flow
The Group’s business continued to be strongly cash generative during the year with adjusted net free cash flow of €83.3m (see note 6 to the preliminary announcement), an increase of €22.6m from 2012, and an adjusted cash flow conversion of 99.6% (88.8% in 2012).

The cash generated has been adjusted for a one off benefit of €40.3m relating to VAT which reversed in January 2014, and arose from the corporate restructuring following the IPO. This was purely a timing impact with the corresponding receipt of VAT having been received at the end of 2013.

There has continued to be a strong focus on the efficient management of working capital. The Group cash flow shows a full year cash inflow on working capital of €62.6m compared to €2.2m in 2012.

The 2013 inflow includes the €40.3m of VAT payable in Poland, discussed above. When this is excluded the cash inflow on working capital is €22.3m.

The Group has continued to invest in its capital asset base with expenditure on its production facilities and on branded fridges (“Project Polar”) in Poland. This expenditure was partly offset by €4.2m proceeds received on the sale of the former production site in Trieste, Italy.

Net debt and financing 
Net debt at the end of December 2013 was €46.3m, an increase of €15.1m versus December 2012, giving a year end net leverage of 0.55 versus 0.46 in 2012.

During the year a substantial amount of restructuring of the capital structure was undertaken to prepare the company for the IPO. This included the repayment of €162.2m of PECs and CECs (senior unsecured debt instruments), a partial refinancing of banking facilities resulting in a net increase of long term debt of €12.9m and the proceeds of €61.4m from the primary issue of shares at IPO.

The partial refinancing undertaken during 2013 resulted in amendments to the bank facilities to align them with terms common with a public company, following IPO. This included an extension in the maturity profile, relaxation and amendment of a number of clauses and a revision of the covenants. The debt was also restructured across all the trading balance sheets of the business to provide a more effective and tax efficient capital structure.

Together with the proceeds from the primary issue at IPO, and the net cash flow generated by the business, the Group closed the year with net leverage of 0.55. The headroom within the current bank facilities in addition to underlying cash generation has established an effective financing structure to support both organic and inorganic growth opportunities.

All debt is drawn in local currency to provide flexibility in facilities and a natural hedge for cash flow and balance sheet protection.

To protect the Group from movements in local country central bank lending rate changes, the Group has put in place hedging to cover a portion of the interest payable in Italy and Czech Republic with a fixed margin and to provide a cap on the level of the central bank lending rate in Poland.

Debt maturity profile
The Group’s bank facilities consist of term loans of €175.4m and a Revolving Credit Facility (RCF) of €70m.

As at 31 December 2013 €8.6m of the RCF was utilised to back excise duty guarantees in both Italy and Germany. This utilisation reduces the available balance of the RCF but does not constitute a drawing, and as such the utilisation of the RCF is not disclosed as a liability on the Group balance sheet. There were no drawings under the RCF at 31 December 2013. Since the year end the excise duty guarantee in respect of our German business is in the process of being reduced by €2.1m.

Foreign exchange
The Group is exposed to the impact of foreign currency exchange with the major currencies being the Polish złoty and the Czech Koruna. The Group, where possible, aims to match currency cash flows, liabilities and assets through normal commercial business arrangements. An example of this is all external third party debt is drawn in local currency. There are no hedging instruments in place to manage transaction exposure, where this arises.

The Group will continue to monitor its foreign currency exposures and where necessary to appropriately manage risk, will implement hedging arrangements.


  Dec 2013
closing rate
Polish złoty 4.15 4.20
Czech Koruna 27.40 26.07

The average rate above is the weighted average of the monthly average rates calculated on Group monthly revenue.

Equity structure
In preparation for the IPO it was necessary to undertake a revision of the equity structure of the Group, effective from the date of listing. The previous structure consisting primarily of senior unsecured debt instruments were partially repaid during the year, with the balance converted to a single class of equity shares at IPO.

The previous equity, consisting of 7 classes of shares, was also converted to a single class of shares at IPO.

As a consequence at the date of listing, and at the end of December 2013, the equity structure consisted of 200 million shares with a nominal value of £0.10 each.

Earnings per share
On a fully diluted basis the earnings per share at the end of December 2013 was €0.05 per share.

Prior to the IPO this was not a measure used in the business, and the previous capital structure, did not lend itself to calculate this in a meaningful manner. For comparison purposes the EPS as at December 2012 is calculated on the assumption that the post IPO capital structure was in place and the shareholder debt was converted to new shares in the PLC.

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.

Jack Keenan, Chairman
Chris Heath, Chief Executive Officer
Lesley Jackson, Chief Financial Officer
Andrew Cripps, Independent Non-Executive Director
David Maloney, Senior independent Non-Executive Director
Karim Khairallah, Non-Executive Director
John Nicolson, Independent Non-Executive Director

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