“Another year of strong growth supported by continued brand investment”
Distil (AIM: DIS), owner of premium drinks brands including Blackwoods Gin and Vodka, RedLeg Spiced Rum, Blavod Black Vodka, Diva Vodka and Jago’s Vanilla Cream Liqueur, announces its final results for the year ended 31 March 2018.
Operational review
· Sales volumes and revenues continue to grow strongly across all trade channels
· New listings and listing extensions secured in both major UK retail multiples and pub chains
· Succcessful launch of Blackwoods new 2017 Vintage Dry Gin and proprietary packaging
· Further progress in opening up new European markets for our brands
Financial review
· Turnover, supported by increased marketing investment, increases 23% to £2,014k from £1,642k
· Gross profit increased 23% from £950k to £1,172k
· Margins maintained at 58% for the same period, year-on-year
· Other administrative expenses increased by <1%
· Operating profit of £157k compared to prior year profit of £10k
· Net operating cash inflow of £166k (2017: £(2)k) resulting in year end cash reserves of £1.03m (2017: £910k)
· Net assets of £3.01m (2017: £2.81m) at 31 March 2018
Don Goulding, Executive Chairman of Distil, said:
“We are pleased to have delivered a strong set of results with significant growth in volumes, revenue and profits, supported by investment in our brands. Importantly we were able to grow sales, drive contribution margins, invest in marketing and improve operating cash flow during the year.
Distil is growing into a stronger business with a healthier balance sheet and increasingly attractive owned brands. We look forward to building on this success though further investment in our key brands in the coming year.”
Chairman’s Statement
We delivered another year of strong growth through focused investment and targeted activity in support of our key brands. Our team continued to successfully nurture brand appeal, grow sales, ensure excellent product quality and generate cash.
Performance
The Company was able to achieve its key growth objectives, particularly that of advancing the business from a breakeven position in 2017. It was an important year because we were able to demonstrate that our business can successfully grow the top line, the bottom line, invest in brands and improve cash flow.
I am delighted to report an operating profit of £157k (2017: £10k) for the full year.
Sales revenue increased 23% to £2.01m, gross profits increased by 23% to £1.17m and contribution margins improved to 35%. Adjusted EBITDA (EBITDA adjusted for share-based expense) improved from £46k to £185k.
We also achieved a positive net operating cash flow of £166k (2017: £(2)k) resulting in a strong year end cash position with no debt.
Key Brands
Blackwoods 2017 Vintage Dry Gin began its roll-out to distributors in January 2018 with proprietary glass design, premium packaging and our unique gin recipe using Shetland botanicals harvested in 2017. Importantly, we were able to achieve the highest quality improvements whilst maintaining an ‘affordable premium’ positioning. Initial stock releases commenced in the UK domestic market post-Christmas followed by export markets being phased-in as inventories of the 2012 vintage depleted. Trade and consumer reaction has been very positive and the gin has already received its first medal for quality. Blackwoods Gin 40%, posted a 32% increase in volume sales year on year.
Distribution of RedLeg Spiced Rum continued to expand in both the on-trade and off-trade as the brand gathered a consumer following. We know RedLeg is a great tasting product, therefore product trial is an advantage and consequently we are focusing on awareness and trial with consumers at the point of decision.
During the course of the year we prioritised those export markets with an established and growing spiced rum category. RedLeg volume sales grew by 37% in the full year.
Licensed sales of Blavod Black Vodka helped drive a 34% improvement in volume sales. The majority of this growth was from European Duty Free and Eastern European markets which returned to growth following a lull in political and economic uncertainty.
UK market
As our home market, the UK is naturally an important source of business. It also provides an accessible opportunity to test marketing initiatives. Gin and spiced rum categories continue to grow faster than total spirits, taking sales from other sectors including vodka which has been in decline. Total spirits are growing value faster than both beer and wine. We are encouraged by leading rum and gin brands investing in above-the-line advertising campaigns. This stimulus will help further build these categories and provide smaller brands with additional growth opportunities.
Premium brands have performed well as consumers appear to be choosing to drink ‘affordable quality spirits in moderation’. I expect this trend to continue for the foreseeable future. Our brands have benefitted from this trend.
International markets
We are in talks and negotiations with potential US distributors for our brands, except for Blavod where we already have a US distributor. We are seeking a long term, strategic partner for this market. As the US market represents an important long-term brand building opportunity, we have broadened our search to find the best distribution partner for our brands in terms of being able to provide market coverage and activation support. We will keep shareholders informed of further progress and developments.
We opened new markets in Europe with initial shipments moving through to consumer as outlet distribution builds and promotional activation begins to raise consumer awareness of our brands. I am particularly encouraged by new opportunities for identified spiced rum.
Asia remains a region with significant potential for our product portfolio and we will resource development in this area.
Productivity and cost management
Gross profit grew by 23% in line with revenue growth reflecting our efforts to contain product costs while making product quality and packaging improvements. We never compromise on product quality, packaging or liquid, but we do seek to drive down or at least hold costs through continual improvements in planning, sourcing of dry goods, stock management and procurement. We successfully secured new suppliers and bottling contracts in 2017.
Outlook
Work continues to best minimise any likely impact as the UK exits the European Union. For example, we now source glass in the UK for all of our production in England and Scotland. Similarly we source glass in Europe for our Blavod Black Vodka production in Germany. We only invoice in GBP thereby minimising our exposure to currency fluctuation. Other measures will be taken once we have a clearer understanding of potential challenges and opportunities.
Over the coming year we will build on current success by maintaining or growing investment in proven brand building activities and, in addition, invest in the four growth levers outlined under Future Developments contained within our Strategic Report.
Surplus cash will be invested in growth opportunities. Initially we will prioritise product development, including new packs and new liquids.
Our Brand priorities remain: RedLeg Spiced Rum, Blackwoods Gin and Blavod Black Vodka.
We will also invest in talent to resource market expansion opportunities and to manage the growing number of export markets.
