REG - Artisanal Spirits Co - Interim Results
18/09/2023 07:00
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RNS Number : 6861M Artisanal Spirits Company PLC (The) 18 September 2023
18 September 2023
The Artisanal Spirits Company plc
('Artisanal Spirits', 'ASC' or 'the Group')
Interim Results for the Six Months to 30 June 2023
Continued positive progress towards our 2024 ambition
The Artisanal Spirits Company (AIM: ART), curators of the world's favourite,
single-cask and limited-edition whisky, and owner of The Scotch Malt Whisky
Society ("SMWS") which marks 40 years since its inception this year, is
pleased to announce its half year results for the six months ended 30 June
2023. The Group has continued to deliver on its strategic plan and
objectives - progressing a disciplined investment programme and range of
operational initiatives to facilitate the Group's long term, sustainable
growth.
Performance highlights
• Ongoing strategic progress maintaining consistency of delivery against
expectations.
• Revenue of £10.2m representing +3% increase in H1-23, with growth momentum
gained in Q2-23, delivering +7% growth following a relatively flat Q1.
• SMWS membership growth of 9% vs H1-22, with double digit growth in Europe, US,
Japan and Franchises. China also returned to membership growth through Q2,
with membership up +8% vs H1-22.
• Europe online and UK Venues continued to achieve strong outperformance with
21% and 23% growth respectively.
• Adjusted EBITDA in H1-23 represents a loss of £1.8m against a prior year
EBITDA loss of £0.3m. Revenue growth and profit delivery are weighted to the
second half, and we remain on track to deliver positive EBITDA in the full
year.
• SMWS was again recognised in 2023 for the quality of its spirits at awards
from the top international competitions including The International Spirits
Challenge, Scotch Whisky Masters, San Francisco World Spirits Competition and
The Tokyo Whisky and Spirits Competition.
Continued progress against strategic objectives
• Continued successful international expansion;
· Post period-end launched a new Joint Venture subsidiary in Taiwan
(replacing a Franchise agreement) in the world's 3rd biggest total addressable
whisky market.
· Successfully established the new franchise in South Korea
· Signed new franchise agreements in Malaysia and Singapore
• Completed the final development phase of Masterton Bond: e-fulfilment. The
site is now completing all bottling and despatch activities for the Group.
• Re-opening of Vaults Members' room, the heart of the SMWS brand home, due this
month following refurbishment investment of £0.5m.
• In line with our strategy, realised value of our existing spirit stock through
private cask sales to members and selected industry partners.
• Continued to balance our cask spirit holding by also seeking opportunities to
acquire old and rare spirit.
• Ongoing exploration of development opportunities in the American Whiskey
Market. Growth in American Whiskey sales via SMWS USA ($120k in H1-23, up 50%
on full year FY22) and first shipment of JGT to the market in H1, with £130k
potential sales value.
• Continued commitment to investment in digital transformation and on track to
launch a new Members' app by the end of 2023.
• Further development of management, talent and expertise within the business,
with the promotion of Billy McCarter to CFO, promotion of Rebecca Hamilton to
Chief Marketing & Experience Officer and the appointment of Chris Leggat
(former Chief Executive of Douglas Laing & Co) as new Business Development
Director.
Remain confident in delivering full year growth expectations
• Like many other companies, we have felt the impact of the changing
macroeconomic conditions and cost of living pressures during 2023, and we
expect them to remain over the course of the next 12-18 months. Our globally
diversified footprint, growing membership and pioneering model, combined with
the demographics of our loyal and engaged customers make us better placed to
continue to grow despite these wider market conditions. We therefore remain
confident that we are on track to deliver growth in line with full year
expectations, including inaugural positive EBITDA.
• We expect to see an acceleration in revenue growth during H2-23 (full year
consensus revenue expectation represents c25% revenue growth vs H2-22), with
positive impact of the Taiwan & Korea launches, weaker comparatives in
China from H2-22, and further progress on cask sales.
• The SMWS membership product offer is being broadened in H2 with the
introduction of private cask sales which allow members to more actively
participate in the whisky curation process and which opens up a complementary
revenue stream.
• We also anticipate continued strong performance in UK venues and the launch of
the refurbished venue at the Vaults in Leith at the end of September coupled
with a Guinness World Record attempt for the largest whisky tasting worldwide.
• Alongside this, further progress on strategic objectives will be made with the
launch of a new SMWS App in the UK, new membership & bottle product and
first "prestige" 40-year-old product designed to complement the existing
Vaults Collection range and further develop our prestige pricing.
£'m 6 months to 30 June 2023 6 months to 30 June 2022 % change
Note
Revenue 6 10.2 9.9 3%
Gross profit 6.2 6.2 -
Gross margin 61% 63% (2ppt)
Adjusted EBITDA* 9 (1.8) (0.3) (500%)
EBITDA 9 (2.0) (0.3) (567%)
Loss before tax 9 (3.5) (1.1) (218%)
Loss after tax (3.6) (1.4) (157%)
Net Debt (18.8) (8.2) (128%)
Cask inventory 14 23.9 22.8 5%
Notional retail value of cask inventory(+) 492 455 8%
*Adjusted EBITDA is a non IFRS measure and is defined as earnings before
interest tax, depreciation, amortisation and exceptional and restructure
costs, details set out in Note 9
+Notional retail value is a non IFRS measure and is calculated as total litres
of spirit in casks, converted to bottle equivalent (based on 70cl) multiplied
by average net revenue per bottle in the period.
Operational highlights:
Global membership
'000s June 2023 June 2022 % change
UK 18.2 17.7 3%
US 6.3 5.5 15%
China 1.7 1.6 8%
Europe* 4.8 3.9 22%
Australia 1.5 1.5 -
Japan 1.9 1.6 20%
Rest of World 4.3 3.8 13%
Total members 38.7 35.6 9%
*Europe represents direct sales markets within continental Europe, but
excludes franchise markets in Denmark and Switzerland which are shown within
Rest of World
Notes
1. The Board of The Artisanal Spirits Company considers that current
consensus market expectations for the year ending 31 December 2023 are revenue
of £25.2m (2022: £21.8m) and EBITDA of £1.07m (2022: Adjusted EBITDA
£0.4m)
Post-period highlights:
• Continued growth in membership, now above 39,000.
• Successful launch of newly established SMWS Taiwan subsidiary. 500 members
enrolled on the first day of trading. We now plan to drive sales and
engagement through the SMWS website, in-person events and digital marketing,
as well as social media activity, building on launch activity for media,
whisky clubs, brand ambassadors and retailers.
• Reopening of refurbished Vaults venue to reinforce members' proposition and
positive growth of venue revenue.
Andrew Dane, CEO of Artisanal Spirits Company, commented:
"We are pleased to have achieved year on year revenue growth, particularly
within the context of challenging macroeconomic headwinds in some of our key
markets and cost of living pressures, with an increase of +7% in Q2 (following
a relatively flat Q1) and are proud to have also continued to deliver strong
member growth, +9% up on prior year, which is a leading indicator of future
revenue growth.
"We have also made continued progress against our strategic objectives with
Masterton Bond now fully operational, the successful launches of the South
Korea franchise and Taiwan subsidiary and further strengthening of the Exec
Team and talent within the business.
"As we look ahead to trading in the balance of the year, despite the ongoing
macroeconomic backdrop, we remain focused on delivering EBITDA at the
consensus level, with the continued premiumisation trend, our expanding, loyal
and engaged membership base and diversified global business model supporting
our growth ambitions.
"We also look forward to further delivery of our strategic objectives for the
year including continuance of the private cask programme and launch of the new
App all on track for this year."
Sellside analyst presentation
Andrew Dane, CEO, and Billy McCarter, CFO, will host a physical, in person
presentation for sellside equity analysts, followed by Q&A, at 09.00
hours BST today. Analysts wishing to join should register their interest by
contacting: artisanalspirits@instinctif.com
(mailto:artisanalspirits@instinctif.com)
Investor presentation
In addition, management will host a live online investor presentation and
Q&A at 11.30 hours BST on Wednesday 20th September. The Group is
committed to ensuring that there are appropriate communication channels for
all elements of its shareholder base so that its strategy, business model and
performance are clearly understood.
The presentation is open to all existing and potential shareholders. To
register to attend, please use the link below:
https://www.equitydevelopment.co.uk/news-and-events/artisanal-results-presentation-20sept2023
(https://protect-eu.mimecast.com/s/QNbeCYERQTkzNY3sMseEg?domain=equitydevelopment.co.uk)
A recording of the presentation will also be made available via the Group's
website following the webinar.
For further enquiries:
The Artisanal Spirits Company plc via Instinctif PR
Andrew Dane, Chief Executive Officer
Billy McCarter, Chief Financial Officer
Liberum Capital Limited (Nominated Adviser and Broker) Tel: +44 (0) 20 3100 2222
Dru Danford
Edward Thomas
Miquela Bezuidenhoudt
Instinctif Partners (Financial PR) Tel: +44 (0)20 7457 2020
Justine Warren
Matthew Smallwood
Joe Quinlan
About The Artisanal Spirits Company
The Artisanal Spirits Company (ASC) are curators of the world's favourite,
single-cask and limited-edition whisky.
Based in Edinburgh, ASC owns The Scotch Malt Whisky Society (SMWS) which was
established in 1983 - marking its 40(th) anniversary this year - and currently
has a growing worldwide membership of over 39,000 paying members.
SMWS provides members with inspiring experiences, content and exclusive access
to a vast and unique range of outstanding single cask Scotch malt whiskies and
other craft spirits, with current stocks sourced from over 100 distilleries in
20 countries and expertly curated with diligence and care.
Since producing the Society's very first cask, we have created around 10,000
different whisky releases, producing a constant flow of unique and exciting
one-of-a-kind whiskies.
With proven e-commerce reach and new brands like J.G. Thomson, ASC is building
a portfolio of limited-edition and small-batch spirits brands for a global
movement of discerning consumers - delivering c.£22 million in annual
revenues with over 80% of revenue generated online and over 65% from outside
the UK, with a growing presence in the key global whisky markets including UK,
China, USA and Europe.
ASC has a pioneering business model, a substantial and growing addressable
market presenting a long-term global growth opportunity and a strong and
resilient business primed to deliver growth.
Interim Statement
Introduction
The first half of 2023 was another period of progress against our stated
strategy with improved sales and membership growth. We continue to believe
that our pioneering model, long-term global growth opportunity and robust
business is well positioned to deliver. Underpinning the Group's success
remains our ability to consistently deliver the very highest quality
experiences to our members with a range of exclusive and unique single malt
Scotch Whisky. The Artisanal Spirits Company ("ASC") has proven strategies for
growth around the world, further augmented by the combination of the Group's
online digital platform and exclusive membership club venues/in person
experiences which enable the maximisation of our opportunity in both online
and offline markets.
Our business fundamentals remain strong, and we achieved year on year
membership growth of +9% and member retention of 74%, demonstrating the
continued appeal of our membership proposition and demand for our curated
range of premium single malt whiskies. Despite a relatively flat Q1,
momentum was gained in Q2 achieving +7% against Q2-2022, culminating in
overall revenue increasing +3% to £10.2 million in the six months to 30 June
2023, building on a significantly strong H1-22 which delivered +25%
year-on-year (2022: £9.9 million). Our industry-leading gross margins
were broadly maintained vs H1-22, at 61%, (2022: 63%).
The Group has continued to invest in additional future whisky stocks,
infrastructure, systems and people to support ASC's future growth, laying the
foundations for delivery of significantly enhanced shareholder value over
time. In addition, and in line with our strategy, we continue to enhance the
value of our cask stock, capitalising on the opportunity to further balance
our cask spirit holding, acquiring additional old and rare spirits to add to
our existing portfolio and recognise value from certain other appreciating
assets within our existing stock.
The Group incurred an adjusted EBITDA loss of £1.8 million (2022: £0.3
million loss (adjusted and unadjusted EBITDA)) and a loss before tax of £3.5
million (2022: £1.1 million loss). However, the Board remains confident we
remain on track to deliver inaugural positive EBITDA, our strategic objectives
delivery and revenue diversification allowing us to manage the impact of the
evident macroeconomic headwinds suffered. We remain confident that the
investment we are making now will see margins continue to grow over the longer
term and deliver sustainable profits.
The Group is well positioned for the remainder of the year. Whilst the wider
challenging economic backdrop and general cost of living concerns stubbornly
remain, the global trend of growth in spirits - particularly Scotch malt
whisky, premiumisation, digitalisation and consumer desire for experiences,
underpins our continued confidence in the future growth prospects for ASC.
It is anticipated that the full year performance will be in line with market
expectations and the Group remains on track to meet its aim of doubling
revenue between 2020 and 2024.
Operational progress and continued delivery of strategic objectives
Group revenue in the period increased 3% overall, further building on an
exceptionally strong period of growth of 25% in the prior year. Trading
improved following a broadly flat Q1 and although May and June were tougher
months in the UK and China, momentum increased with the result that the Group
delivered +7% growth in Q2-2023 versus Q2-2022. This performance evidenced
strong growth in Europe in the six-month period, with membership up 22% and
revenue up 21% versus 2022, as we continue to consolidate our position in this
key strategic growth area. There were encouraging signs of recovery in China
which delivered Q2-2023 revenue growth of 50% on Q1-2023 and membership
increased 6% year on year. The US, Japan and Franchises also delivered
double-digit membership growth of 15%, 20% and 15% respectively.
UK Venues continued to achieve strong outperformance with 23% revenue growth
during H1-2023 against the same period in the prior year - marking this
division's strongest six-month performance on record - as we see increase in
member usage and spend per head. Investment of £0.5 million in refurbishment
of the Group's member rooms at the Vaults in Edinburgh is due to complete at
the end of Q3 and we look forward to welcoming back our members for our busy
Christmas period.
A pioneering model relevant for today's consumer
ASC is a creator and curator of outstanding single cask and limited-edition
whisky, and, through its pioneering business model, it combines a vertically
integrated business; through its prowess and expertise in acquiring and
maturing limited edition whiskies, with a horizontally integrated model;
through its digital e-commerce platform and four member venues in London,
Glasgow, Edinburgh and Leith. The Group has a robust and well-financed
business model which is arguably unique in combining the attractions of
direct-to-consumer attributes through membership of The Scotch Malt Whisky
Society ("SMWS"), with the benefits that e-commerce brings, together with its
physical member venues which provide a rich source for recruitment and an
additional level of exclusivity for members.
SMWS benefits from a unique market position with its global membership model
which comprises an invested, loyal, growing and high spending community, which
is both scalable and geographically diverse, with characteristically affluent
members. An established global brand with over 60% of revenues generated in
international markets across c.30 countries, SMWS continues to grow its
presence and standing in the world's key whisky markets such as the UK,
continental Europe, China and the US.
Loyal, valuable and growing global membership
Membership trends are a leading indicator of future revenue growth, courtesy
of SMWS' high member retention rates which, in turn, deliver a stream of
recurring annual revenue in the key markets in which the Group operates.
In addition, the breadth of SMWS' international membership base diversifies
the Group's risk, and its affordable entry level membership fee delivers
immediate payback on average member acquisition cost.
Overall, membership grew by 9% in H1-2023 to 38,700 (30 June 2022: 35,600, 31
December 2022: 37,400). The Group experienced strong growth in membership
numbers in Europe, the US and Japan. Following a slow start in China in Q1,
due to significant levels of Covid following the easing of lockdown and the
macro-economic challenges, encouragingly, Q2-23 saw improving momentum and
both revenue and membership have now returned to growth.
Lifetime member value reduced slightly to £1,261 - albeit this remains up 35%
since IPO, further demonstrating the intrinsic value inherent within ASC's
business model.
Continued international expansion
The period under review saw ASC continue to expand its geographic footprint in
additional key markets. The Group entered into a new franchise operation
in South Korea, achieving 300 new members on initial launch in April 2023.
We also signed new franchise agreements in Malaysia and Singapore, where we
expanded our relationship with La Maison du Whisky.
Post the period end, a new Joint Venture subsidiary was successfully launched
in Taiwan in July 2023, a key strategic objective for 2023. Taiwan is the
third largest market for Ultra-Premium Scotch Whisky globally based on value,
with an estimated total addressable market of $593 million (source: IWSR 2022)
and our previous presence in this market had been limited to a franchise
agreement. The newly established SMWS Taiwan subsidiary provides direct
sales access to the Taiwanese market and marks the next milestone in the
Group's strategic expansion in Asia where SMWS already has similar subsidiary
operations in China and Japan as well as franchise partners in a range of
markets, including those referenced above. ASC has 70% ownership of the new
entity which is led by an experienced management team of Murphy Chang, former
Brand Heritage Manager for Moët Hennessy Taiwan, as Country Director who will
oversee operations, supported by Eric Huang, the former franchise partner and
one of the foremost whisky experts in Asia. Whilst still early days, this
operation has got off to an encouraging start with 500 members enrolling on
launch day. We look forward to building on this success over the coming
months as we continue to expand our representation within this important
market and in Asia more generally.
ASC now has an SMWS presence in the world's six largest markets and our
enlarged global footprint provides us with coverage of over 80% of the $8.1
billion Ultra-Premium Scotch Whisky Market (2022 IWSR) as we continue to grow
our global reach.
International industry recognition
The limited-edition nature and outstanding reputation for the quality of ASC's
whisky continues to attract a growing number of industry accolades, now
totalling over 300 awards since 2018. This third-party endorsement from
prestigious awards globally, which are judged by many of the most respected
professionals in our industry, further authenticate our credentials in
producing outstandingly high-quality single malt Scotch malt whiskies, thereby
driving demand and engendering a loyal, growing and high spending membership
of whisky-loving aficionados globally. ASC currently sells over 1,000
different products per annum with an average revenue per bottle of around
£97.
Once again, H1 saw SMWS recognised for the quality of its spirits at awards
from the top competitions around the world, including a record success in the
International Spirits Challenge, as well as achieving its best-ever result in
the Scotch Whisky Masters 2023. In addition, SMWS was recognised in the US
at the 2023 San Francisco World Spirits Competition, as well as the 2023 The
Tokyo Whisky & Spirits Competition (TWSC) in Japan. These awards are
testament to the outstanding quality of our single malt Scotch whiskies which
are appreciated around the world for their unique flavours.
Investing to support long-term global growth
ASC remains on track to double sales between 2020 and 2024 and with it
sustainable profit delivery. It has made significant investment for future
growth with spirit and stocks acquired to satisfy demand through to the end of
FY28 and beyond, providing a significant inflation hedge for the Group from a
supply perspective, with further potential upside from stock appreciation over
time. During the period under review, ASC invested £1.2 million in new
spirit stock and wood, taking the total number of casks to around 16,700 (31
December 2022: 16,500). During this period the holding of New Make Spirit
(NMS) casks rose to over 50% of our total cask holding, over time feeding
through to deliver increases in gross margin.
As normal course of business, we continue to enhance the value of our cask
stock by taking advantage of the opportunities to grow and realise value of
this substantial and appreciated asset base in line with our strategy. The
flexibility of our model is such that we proactively look to rebalance the
Group's cask spirit holdings from time to time (including cask swaps and
sales) either by acquiring additional old and rare spirits to add to our
existing portfolio or realising value from certain other appreciating assets
within our existing stock. An additional potential new revenue stream
currently under consideration includes the development of member cask sales as
part of the ongoing strategic development of our membership offer to deliver
additional value from our appreciating asset base.
Embracing premiumisation and ecommerce growth
ASC is positioned at the forefront of key current structural consumer trends
such as premiumisation and experiential demand, as consumers increasingly move
away from mainstream brands to seek out higher quality, crafted products which
demonstrate premium authenticity. These trends are particularly evident in the
context of artisanal whisky and other spirits. Today's consumer both values
- and demands - experience above all else, along with diversity of choice,
convenience of access, purchase and delivery, as well as value for money.
ASC's relevance for today's consumer is further illustrated by the way in
which its ethos creates a sense of community, enabling its members to
socialise and connect in a variety of physical, digital and virtual spaces
through technology, data and its membership venues. The Group is committed
to continued investment in digital transformation to further enhance member
experience and is on track to launch a new Members' app by the end of 2023.
In addition, SMWS is also a premier vehicle for investing in outstanding cask
whisky and accessing often rare and exclusive whiskies. Through the
provision of premium single cask whisky and other spirits - each a limited
edition by nature - ASC is able to capitalise on the rarity value of its
portfolio, creating the desire for consumers to purchase each release before
stocks run out.
Significant and growing addressable market opportunity
Scotch Whisky remains a highly desirable global category. The premium whisky
sector in which we operate continues to grow and prove its resilience in spite
of the ongoing challenging economic backdrop. Today, the Ultra-Premium and
above whisky sector is estimated to be worth $8.1 billion, of which ASC has a
small but growing share, achieving 12% CAGR since 2012 and grown by 52% by
2020.
Robust business characteristics
Whilst the macro-economic climate continues to be challenging, and along with
many other businesses the Group continues to face certain inflationary
pressures, the whisky category has historically been highly robust, and stocks
have typically appreciated significantly through challenging periods
protecting gross margins and representing a natural inflation hedge.
Furthermore, our substantial stock holding not only provides protection
against supply side inflation but also potentially delivers incremental value
given the high degree of price elasticity open to us as an 'ultra-premium'
supplier and the appreciating nature of our curated, finite spirits
portfolio.
Further strengthening of Board and management team
The Group benefits from an experienced Board and management team, with a
proven track record of delivery. H1 saw further strengthening of the
Executive management team, talent and expertise within the business with the
promotion of Billy McCarter to CFO and to the Board.
In addition, Chris Leggat (former Chief Executive of Douglas Laing & Co)
was appointed as the new Business Development Director and Rebecca Hamilton as
Chief Marketing & Experience Officer (CXO).
Outlook and current trading
ASC continues to deliver against its stated strategy. The Group enters H2
well positioned, and management remains confident in continuing to progress
the Group's strategic ambition of doubling revenue between 2020 and 2024. We
continue to face a challenging economic landscape, noted by many within the
spirits industry, but remain on track to deliver positive EBITDA in 2023 and
utilise our loyal and growing membership base globally (now at over 39,000
members), diversified revenue portfolio and strategic delivery to manage many
of the challenges we currently face, and expected to remain over the next
12-18 months.
Trading in the early weeks of H2 has been positive, with the momentum
evidenced in Q2 continuing into Q3, with performance supported by growth in
membership and robust demand for our exclusive, curated and unique products
and membership venues. Europe and UK Venues are expected to continue to
outperform the prior year and momentum looks set to continue in China on
strong Q2 membership growth of +8%.
Finalisation of the Vaults Member's Room refurbishment in September following
an investment of £0.5 million is on schedule to plan and budget as we invest
in the heart of the SMWS brand home.
In terms of future developments, H2 will see further development of our cask
sales, building on the selective re-balancing of cask spirit holdings
initiatives undertaken in H1, as well as development of private member cask
sales as a new revenue driver as part of the ongoing strategic development of
our membership offer to deliver additional value from our appreciating asset
base. Our new proprietary member app remains on course to go live later this
year bringing increased functionality and ease of engagement to our loyal and
growing members.
The Board remains confident in the future opportunity for ASC and that market
expectations for the year ended 31 December 2023 including inaugural positive
EBITDA. Looking forward, the Group looks increasingly well positioned to
deliver significant future value for shareholders.
Financial Review
The Group has delivered year-on-year sales growth of 3%, trailing an H1-22
that was +25% vs prior year. Delivery of £10.2 million in the six months to
June 2023 represents another period of revenue growth.
Our H1-23 performance signifies strongly the diversified global portfolio of
our business. Despite a decline in China performance given the particular
economic conditions in that market, we have successfully grown year on year.
Some stand out performances include;
1) The best six-month performance on record within our UK Venues, achieving
£2.0 million in H1-23, an increase of 16% against H1-22;
2) Further growth in Europe, delivering 23% revenue growth, driven by 22%
increase in membership, against the prior year
3) Cask sales in the first half equating to £0.5 million, H1-22 delivering
£0.1m. This remains a strategic opportunity for the business as we look at
the potential of a cask sale offering to members as a premium service and the
opportunity to ensure we continually balance our cask spirit holding
portfolio, any sales replaced with spirit that creates a better re-balance.
Within China, we have seen momentum as we exit H1 and sales in Q2 were up more
than 50% on Q1, however we recognise we won't achieve the level of growth in
year as was expected at the start of the year as a result of the economic
headwinds.
At a Gross Profit level, we are maintaining a strong return on the costs of
our product, delivering 61% in H1-23. This was slightly lower than the prior
year 63% as a result of Group level margin mix from reduced sales in China,
lower average selling price, predominantly through re-pricing of some our
premium Vaults Collections and FX impacts relating to the Asia and US markets.
The expectation remains we will deliver in line with consensus margin
expectation, H2 trading margins and mix closing the current gap.
The adjusted EBITDA loss of £1.8 million, and Loss before Tax of £3.5m in
the first half, down from a loss of £0.3 million loss (adjusted and
unadjusted EBITDA) and £1.1m respectively in the same period of 2022, is a
result of the continued investment in systems and people, the second half
delivering the greater proportion of revenue and therefore EBITDA as our
busiest trading periods. EBITDA has been adjusted for two key items in 2023;
Masterton Bond costs, as we moved to our own self-sufficient supply chain
facility; £0.1m, which are exceptional by nature, and restructuring costs
that took place following the change of CEO, £0.1m, non-recurring costs which
have also been adjusted to ensure we show representative underlying EBITDA
(there were no adjustment items in H1-22 EBITDA).
The Group's balance sheet retains a strong net asset value of £18.7m,
supported by continued investment in an appreciating cask spirit asset held at
cost value but with an external bank valuation of +50% on holding value, and a
retail value of almost £0.5bn.
Within Cash, we continue to invest in cask wood and spirit stock, per our
strategy, £1.2m in the period, as well as the final elements of investment in
our Masterton Bond Supply Chain facility, initial investment in the Vaults
refurbishment and restructuring costs within the business as a result of the
change in CEO.
The Artisanal Spirits Company plc
Consolidated Statement of Comprehensive Income
For the period ended 30 June 2023
6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022 (Audited)
£'000 Notes
Continuing operations
Revenue 6 10,226 9,933 21,781
Cost of sales (4,014) (3,719) (7,936)
Gross Profit 6,212 6,214 13,845
Selling & Distribution expenses (3,390) (1,819) (5,503)
Administrative expenses (5,774) (5,316) (9,875)
Finance costs (629) (195) (576)
Other income 8 77 12 37
Loss on ordinary activities before taxation 9 (3,504) (1,104) (2,072)
Taxation (8) (279) 359
Loss for the period (3,512) (1,383) (1,713)
Other comprehensive income:
Item that will not be reclassified to profit or loss
Movements in cash flow hedge reserve 0 31 31
Movements in translation reserve (127) 0 (59)
(127) 31 (28)
Total comprehensive loss for the period (3,639) (1,353) (1,741)
Loss for the period attributable to;
- Owners of parent company (3,593) (1,562) (2,010)
- Non-controlling interest 81 179 297
(3,512) (1,383) (1,713)
Total comprehensive loss for the period attributable to;
- Owners of parent company (3,720) (1,532) (2,038)
- Non-controlling interest 81 179 297
(3,639) (1,353) (1,741)
Basic EPS (pence) 12 (5.3) (2.2) (2.9)
Diluted EPS (pence) 12 (5.3) (2.2) (2.9)
The Artisanal Spirits Company plc
Consolidated Statement of Financial Position
As at 30 June 2023
As at As at
30 June 2023 (Unaudited)
31 December 2022 (Audited)
£'000 Notes
Non-current assets
Investment property 405 405
Property, plant and equipment 13 10,212 10,362
Intangible assets 2,139 2,249
12,756 13,016
Current assets
Inventories 14 29,780 28,303
Trade and other receivables 3,773 3,714
Cash and cash equivalents 1,506 2,331
35,059 34,348
Total assets 47,815 47,364
Current liabilities
Trade and other payables 4,459 3,703
Current tax liabilities 327 405
Financial liabilities 15 281 357
Lease liability 15 360 360
Forward currency contracts - -
5,427 4,825
Net current assets 29,632 29,523
Non-current liabilities
Financial liabilities 15 20,282 16,984
Lease liability 15 2,780 2,959
Deferred tax liabilities - -
Provisions 584 580
23,646 20,523
Total liabilities 29,073 25,348
Net Assets 18,742 22,016
Equity
Called up share capital 176 174
Share premium account 15,255 14,997
Translation reserve (196) (76)
Retained earnings 3,192 6,685
Cash flow hedge reserve 8 8
Equity attributable to parent company 18,435 21,788
Non-controlling interest 307 228
Net assets 18,742 22,016
The Artisanal Spirits Company plc
Consolidated Statement of Cash Flows
For the period ended 30 June 2023
6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022 (Audited)
£'000 Notes
Loss for the period after tax (3,512) (1,383) (1,713)
Adjustments for:
Taxation charged 8 279 (359)
Finance costs 579 195 494
Interest receivable (2) - (4)
Movement in provisions 4 - 10
Share based payments 100 94 190
Investment in property fair value movement - - (14)
Lease interest 50 - 82
Depreciation of tangible assets 760 505 1,000
Amortisation of intangible assets 124 133 259
Movement in working capital:
(Increase)/decrease in stocks (1,477) (3,005) (4,496)
(Increase)/decrease in debtors (64) (627) (746)
Increase/(decrease) in creditors 756 1,794 240
Cash absorbed by operations (2,674) (2,015) (5,057)
Income taxes paid (86) (131)) (75)
Interest paid (579) (195) (494)
Net cash outflow from operating activities (3,339) (2,341) (5,626)
Cash flow from investing activities
Purchase of intangible assets (14) (31) (88)
Purchase of property, plant and equipment (610) (1,010) (2,911)
Purchase of JV China share - - (359)
Interest receivable 2 - 4
Net cash used in investing activities (621) (1,041) (3,354)
Cash flows from financing activities
Asset backed lending drawn down
Dividends paid (373)
Loan received
Repayment of loan (78) (148)
Share issue 252 59 59
Repayment of lease (230) (92) (354)
Inventory secured RCF facility 3,221 5,650 10,300
Net cash from financing activities 3,243 5,539 9,484
Net (decrease)/increase in cash and cash equivalents (718) 2,157 504
Cash and cash equivalents at beginning of period 2,331 2,012 2012
Reserve movements 120 31 -
Non controlling interest movement (228) (185)
Cash and cash equivalents at end of period 1,506 4,200 2,331
The Artisanal Spirits Company plc
Consolidated Statement of Changes in Equity
For the period ended 30 June 2022
£'000 Called up share capital Share premium account Retained earnings Cash flow hedge reserve Translation reserve Total controlling interest Non-controlling interest Total equity
Balance at 31 December 2021 174 14,938 8,505 (23) (17) 23,577 304 23,881
Issue of share capital 0 59 59 59
Share issue direct costs
Loss for the period (2,010) (2,010) 297 (1,713)
Adjustment to non-controlling interest
Share-based compensation 190 190 190
Dividend paid (373) (373)
Investment in subsidiary
Other comprehensive gain 31 (59) (28) (28)
Balance at 31 December 2022 174 14,997 6,685 8 (76) 21,788 228 22,016
Issue of share capital 2 258 260 260
Loss for the period (3,593) (3,593) 79 (3,514)
Share-based compensation 100 100 100
Other comprehensive gain (120) (120) (120)
Balance at 30 June 2023 176 15,255 3,192 8 (196) 18,435 309 18,742
Notes to the unaudited interim financial information
1. Basis of preparation
The condensed interim financial information presents the consolidated
financial results of The Artisanal Spirits Company plc and its wholly owned
subsidiaries (together the "Group") for the six months ended 30 June
2023 and the comparative figures for the six months ended 30 June
2022 which are unaudited. This financial information does not constitute
statutory accounts as defined in Section 435 of the Companies Act
2006.
The condensed consolidated interim financial information, which is neither
audited nor reviewed, has been prepared in accordance with the measurement and
recognition criteria of adopted International Financial Reporting Standards
("IFRS"). This statement does not include all the information required for the
annual financial statements and should be read in conjunction with the Group's
the Company's Annual Report and Accounts for the 12 months ended 31 December
2022.
There are no new IFRS which apply to the condensed consolidated interim
financial information.
2. Accounting policies
The accounting policies applied in preparing the condensed consolidated
interim financial information are the same as those applied in the preparation
of the Group's HFI included within the Company's Admission Document.
3. Going concern
The financial information has been prepared on the basis that the Group will
continue as a going concern. The directors have considered relevant
information, including annual budget sensitivities, forecast future cash flows
up until December 2024, availability of financing and the impact of
subsequent events in making their assessment.
The directors have considered in detail both the impact COVID-19, Brexit and
the wider inflationary environment have had on the Group's business to date
and based on their forecasts and sensitivity analysis including the potential
impact of further lockdown scenarios, are satisfied there is sufficient
headroom in their cashflow forecasts to continue to operate as a going
concern.
Based on this assessment and taking into account the Group's and the Company's
current position, the directors have a reasonable expectation that the Group
and the Company will be able to continue in operation and meet its liabilities
as they fall due over the 12-month period from the date of this
announcement.
4. Principal risks and uncertainties
The principal risks and uncertainties affecting the Group are unchanged from
those set out in the Company's Annual Report and Accounts for the 12 months
ended 31 December 2022.
5. Dividends
No dividend was declared or paid during the period (prior period £nil).
6. Revenue
An analysis of the Group revenue is as follows:
£'000 6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022
(Audited)
Revenue from the sale of Whisky 7,679 7,713 16,976
Membership Income 822 740 1,479
Revenue from the sale of other spirits 56 74 149
Member rooms 1,091 910 2,025
Events & tastings 455 352 827
Other 123 144 325
10,226 9,933 21,781
An analysis of the Group revenue by geographical areas is as follows:
£'000 6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022
(Audited)
UK 3,990 3,252 7,703
US 1,833 1,867 4,353
China 1,756 2,346 5,002
Europe 1,109 915 2,014
Rest of World 682 670 907
Australia 383 439 1,001
Japan 473 444 800
10,226 9,933 21,781
'Revenue from the Sale of Whisky' includes the revenue from sale of cask
whisky spirit, £502k (H1-22; £53k, 2022 £348k).
7. KPIs
LTM Period End Average Retention Revenue/ Contribution(1)/ Expected Years(2) LTV(3)
Members
Members
%
Member
Member
(Avg Members)
Revenue
('000s)
('000s)
£'000
UK 7,156 18.2 17.8 76% 402 217 4.2 910
United States 4,370 6.3 5.9 68% 736 386 3.1 1,211
China 4,455 1.7 1.6 40% 2,739 1,931 1.7 3,210
Europe(4) 2,388 4.8 4.3 73% 553 236 3.7 873
Australia 945 1.5 1.6 75% 599 318 4.0 1,275
Japan 829 1.9 1.8 85% 464 358 6.7 2,393
Rest of World 1,135 4.4 4.0 81% 1,034 620 7.9 2,047
Total 21,278 38.8 37.1 74% 574 330 3.8 1,261
Change(5) 0% 4% 5% -4% -4% -3% -11% -13%
1) Contribution is a non-IFRS measure, and is defined by
management as Gross Profit less Commission
2) Expected Years is a non-IFRS measure, and is defined by
Management as one divided by one minus retention 1/(1-r%)
3) Lifetime Value (LTV) is a non-IFRS measure, and is defined as
Annual Contribution per member, multiplied by expected years
4) Europe represents direct sales markets within continental
Europe, but excludes franchise markets in Denmark & Switzerland which are
shown within Rest of World
5) Change is shown versus the twelve-month period ended 30
December 2022
8. Other Operating Income
£'000 6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022
(Audited)
Other Income 74 10 37
74 10 37
Other income in the period relates to a refund from the Chinese government to
SMWS China in relation to previously overpaid expenses.
9. Loss on ordinary activities before taxation
£'000 6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022
(Audited)
Presented as;
Adjusted EBITDA* (1,811) (313) 394
Depreciation of tangible assets (760) (462) (1,000)
Amortisation of intangible assets (124) (133) (259)
Finance costs (629) (195) (576)
Exceptional and restructure costs (180) - (631)
Loss on ordinary activities before taxation (3,504) (1,104) (2,072)
Loss on ordinary activities before taxation (3,504) (1,104) (2,071)
Add back; Depreciation of tangible assets 760 462 1,000
Add back; Amortisation of intangible assets 124 133 259
Add back; Finance costs 629 195 576
EBITDA (1,991) (313) (236)
Exceptional and restructure costs 180 0 631
Adjusted EBITDA* (1,811) (313) 395
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation and exceptional and restructure costs
10. Exceptional and Restructure costs
£'000 6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022
(Audited)
Legal and professional fees - - 1
Non underlying American Whiskey pre operational costs - - 288
Non underlying Masterton pre-operational costs 91 342
Non recurring organisational restructuring costs 89 - -
180 - 631
Costs in the period relate to £91k (2022; nil) relating to final movement of
Supply operations to our new Masterton Bond Supply Chain facility and £89k
(2022; nil) and restructure costs relating to the change of CEO.
11. Taxation
The results include a tax charge against the profits of the Group's Chinese
subsidiary at the rate of 25% in both 2022 and 2023. There have been no
corporation taxes due against other Group companies due to carried forward
trading losses.
12. Earnings Per Share (EPS)
6 months to 6 months to Year Ended
30 June 2023 (Unaudited)
30 June 2022 (Unaudited)
31 December 2022
(Audited)
Earnings used in calculation (£'000) (3,720) (1,532) (2,038)
Number of shares 69,807,454 69,638,840 69,708,374
Basic EPS (p) (5.3p) (2.2p) (2.9p)
Fully diluted number of shares 74,995,461 74,673,842 74,746,138
Diluted EPS (p) (5.3p) (2.2p) (2.9p)
13. Property, Plant & Equipment
Land and buildings freehold Land and buildings leasehold Leasehold improvements £'000 Fixtures, fittings and equipment £'000 Casks Right of use asset Total £'000
£'000
£'000
£'000
'£000
Cost or valuation
As at 1 January 2022 678 1,441 498 1,968 2,745 4,343 11,673
Additions - - 5 2,202 704 162 3,073
As at 31 December 2022 678 1,441 503 4,170 3,449 4,505 14,746
Additions - - - 287 322 - 609
As at 30 June 2023 678 1,441 503 2,651 3,070 4,343 12,686
Accumulated Depreciation
As at 1 January 2022 168 1,027 251 844 345 661 3,296
Charge for the year 13 70 55 328 148 474 1,088
As at 31 December 2022 181 1,097 306 1,172 493 1,135 4,384
Charge for the 6 months 18 24 27 407 73 210 759
As at 30 June 2023 199 1,121 333 1,579 566 1,345 5,142
Net book value
As at 31 December 2022 497 344 197 2,998 2,956 3,370 10,362
As at 30 June 2023 479 320 170 2,878 3,205 3,160 10,212
Investment in the period is driven by progression in the build and fit-out of
our new Supply Chain facility, Masterton Bond, and continued investment in
Cask Wood £322k; (2021; £199k).
14. Inventories
£'000 As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
(Unaudited) (Unaudited) (Audited)
Cask whisky & other spirits 23,926 22,804 23,034
Other inventory 5,844 3,921 5,269
Total inventory 29,780 26,725 28,303
The above balance contains no provision for aged stock (Jun-22: £83k) as we
have recognised write off costs direct to the income statement in 2023, £100k
relating to aged stock encountered as a result of our move from third party
supply chain support to sole inhouse operations at our new Masterton bond
supply chain facility.
The movement in inventory is primarily driven by continued investment in our
cask stock inventory as we invest to meet future demand, with net cask
investment representing £0.9m in the six-month period (H1-22: £2.4m).
15. Financial Liabilities
£'000 6 months to Year Ended
30 June 2022 (Unaudited)
31 December 2022
(Audited)
Inventory secured revolving credit facility 19,400 16,500
Bank loans 569 784
Other loans 45 57
Financial liabilities 20,014 17,341
Lease liability 3,139 3,319
23,153 20,660
The revolving credit facility (RCF) is secured by a bond and floating charge
over eligible inventory within the Group. The availability of funds under the
facility agreement is linked to a calculation of eligible inventory, which is
predominantly the casked goods component of inventory assets.
In December 2022, the revolving credit facility was increased, as part of the
accordion element within the original contract, by £3m, the total facility
availability now £21.5m. The loan is interest bearing and interest is due at
a rate of 2.25% over the Bank of England base rate.
The bank loan is secured by standard securities over the Ground Floor Premises
of the Leith property and a legal charge over the Greville Street property.
The loan is interest bearing and interest is due at a rate of 2.25% over the
Bank of England base rate.
16. Financial Instruments - accounting classifications and
fair value
Financial assets
Trade and other receivables and cash and cash equivalents are classified as
financial assets at amortised cost.
Derivative assets are classified as financial assets measured at fair value
(level 2 - i.e. those that do not have regular market pricing) through other
comprehensive income.
Financial liabilities
Trade and other payables (excluding deferred income) are classified as
financial liabilities are measured at amortised cost.
The fair value of both financial assets and financial liabilities have been
assessed and there is deemed to be no material difference between fair value
and carrying value.
Derivative liabilities are classified as financial liabilities measured at
fair value (level 2) through other comprehensive income.
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