Trading Update and Notice of Results
14/10/2020
Trading for the year ahead of expectations, with continued volume and value growth in both Poland and the Czech Republic.
Stock Spirits Group PLC ("the Company"), a leading owner and producer of premium branded spirits and liqueurs that are principally sold in Central and Eastern Europe and Italy, today provides a trading update for the year ended 30 September 2020.
Overall trading for the year was ahead of our expectations. The impact of COVID-19 in the second half has been less than initially anticipated, with a strong Off-Trade performance being driven in part by On-Trade restrictions, lock-downs relaxing earlier than our prudent planning assumptions, and our brands benefitting from the trend towards staycations.
The Polish and Czech spirits markets, which together deliver some three-quarters of our revenue, continued to show growth in both volume and value terms despite excise increases during the year and the subsequent COVID-19 impact (source: Nielsen MAT August 2020).
We are pleased with the strong performance of our Polish and Czech businesses, both of which achieved volume and value growth.
Our Polish business outperformed the total vodka market, with a strong performance from our flavoured vodka portfolio, where innovation helped us gain both volume and value share.
Our Czech business grew absolute retail value sales more than any other spirits competitor in the market. This was driven by the success of our strategic initiatives including further core brand premiumisation and new product development, which also helped the continuing recovery of our market share in herbal bitters.
Notwithstanding the impact of COVID-19 on the Czech On-Trade in the second half of the year, the contribution from Bartida (a high-end On-Trade spirits business that we acquired in May 2019) exceeded our expectations. In line with our plans, the business is earnings-enhancing in the first year after acquisition. Last year's other acquisition, Distillerie Franciacorta (a leading grappa business that we acquired in June 2019), delivered a small positive contribution in the year. It is performing in line with our expectation to be earnings-enhancing in the current year, despite the challenging environment in Italy.
Group cash flow from operations for the year was strong, resulting in net debt (post adopting IFRS 16: Leases) at 30 September 2020 of circa €23m (30 September 2019: €55m).
As previously reported, our Polish subsidiary, Stock Polska, was issued with an assessment by the Polish tax authorities in respect of its 2013 Corporate Income Tax Return. A final appeal against this assessment was lodged with the Supreme Administrative Court in May 2020. Based on advice from our taxation advisors, we consider it likely that it will be successful. However, the hearing is not expected for a number of years.
The Polish government has decided to apply additional tax on small format pack sizes (300ml or smaller) of alcohol from 1 January 2021. This decision had been debated since December 2019, and we have in hand a range of potential commercial and operational actions to mitigate the possible impact and indeed take advantage of opportunities that this change could present. As with previous tax increases, at this stage it is too early to identify accurately or with sufficient certainty the likely impact that this legislation could have on our Polish business.
As ever, our first priority is the health and well-being of our colleagues, and on providing them with safe working environments.
We will announce our results for the year ended 30 September 2020 on Wednesday 2 December 2020.
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