REG - Artisanal Spirits Co - Preliminary Results
29/03/2022 07:00
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RNS Number : 3139G Artisanal Spirits Company PLC (The) 29 March 2022
29 March 2022
The Artisanal Spirits Company plc
("The Artisanal Spirits Company", "ASC", "the Company" or "the Group")
Preliminary Results
Growth comfortably ahead of market expectations and decisive early delivery
against strategic objectives
The Artisanal Spirits Company (AIM: ART), the owner of The Scotch Malt Whisky
Society ("SMWS"), the leading curator and provider of premium single cask
Scotch malt whisky and other spirits for sale primarily online to a discerning
global membership, is pleased to announce its preliminary results for the 12
months ended 31 December 2021 ("FY 2021").
Financial highlights
· Revenue increased 21% to £18.2m (2020: £15.0m), comfortably
ahead of market expectations
· Gross profit increased 27% to £11.2m (2020: £8.8m), resulting
from the revenue growth, as well as gross margin improvement to 61.5% (2020:
58.6%) which is largely attributable to the long-term suspension of US tariffs
· EBITDAE loss of £0.6m (2020: profit of £0.6m) with planned
ongoing investment for growth offsetting the increase in gross profit (EBITDAE
defined as earnings before interest tax, depreciation, amortisation and
exceptional costs, details set out in Note 7)
· Loss after tax of £3.4m (2020: £1.6m), including the impact of
£0.9m of exceptional IPO costs
· The Group's net debt position improved to £5.2m (2020:
£13.7m), as a portion of the proceeds of the IPO fundraise were used to
temporarily reduce Group borrowings (to minimise interest costs)
£'m FY 2021 FY 2020 change
Revenue 18.2 15.0 21%
Gross profit 11.2 8.8 27%
Gross margin 61% 59% 2ppt
EBITDAE (0.6) 0.6 (1.2)
Net Debt 5.2 13.7 (8.5)
Operational highlights
· 18% overall membership growth (a leading indicator of future
revenue growth)
o 15% global membership growth in the second half of the year (over 33,000
members at year end up from 28,700 at 30 June 2021)
o UK membership grew by 20%, with growth in other markets averaging 15% over
the year as a whole. Exceptionally strong growth in China offset by lower
levels of growth in Europe (reflecting Brexit related challenges in H1)
· Lifetime member value ("LTV") of £1,445 (2020: £932). A
consistently high LTV, coupled with growing global membership, demonstrates
the Group's ability to deliver sustainable and profitable growth
· Continued recovery in UK venue & events sales following
phased reopening in Q2 2021
o Robust performance through to year end despite the emergence of the
Omicron variant during Q4, demonstrating the advantages of ASC's multi-channel
business model
o UK venue sales in the second half surpassed those in the entirety of FY
2020
· Successful admission to AIM in June 2021, raising gross proceeds
of £26m. Decisive early progress made against strategic growth objectives
outlined at IPO:
o Significant investment in matured and new make spirit stock and cask wood
o 10-year lease signed on a new supply chain facility
o Launch of new brand J.G. Thomson
o Increased equity interests in joint venture entities in China and Japan
· Strengthened the Group's leadership team through key strategic
hires
· Established a warehouse in mainland Europe, enabling the Group to
mitigate Brexit-related logistical challenges and reduce shipping and delivery
times to EU members
· Record number of top awards (for both SMWS and J.G. Thomson) from
several of the most prestigious competitions in the global whisky calendar
Global membership
'000s FY 2021 FY 2020 % change
UK 16.4 13.7 20%
US 5.2 4.4 18%
China 1.7 1.1 57%
Europe* 3.3 3.3 3%
Australia 1.3 1.1 18%
Japan 1.5 1.4 14%
Rest of World 3.8 3.3 15%
Total members 33.3 28.3 18%
*Europe represents direct sales markets within continental Europe, but
excludes franchise markets in Denmark and Switzerland which are shown within
Rest of World
Post-period highlights
· Strong start to the new financial year with revenues ahead by
over 30% year-on-year, in line with management expectations, cycling over low
Q1-21 sales in UK Venues & Europe
· Global membership of 34,200 at the end of February (up 3% from
the position at year end). This was in line with management expectations
· Landmark 150(th) distillery bottling, sourced from southwest
Ireland
· 13 prestigious gold and silver awards across both SMWS (8 awards)
and J.G. Thomson (5 awards) ranges at IWSC 2022
· Site manager recruited and first materials delivered for new
supply chain facility, known as Masterton Bond
· With positive momentum in business, the Group remains well placed
to deliver another year of significant growth
David Ridley, Executive Managing Director of the Company, said:
"Following what was an exceptional year for the Artisanal Spirits Company
against a challenging backdrop, I am pleased to be able to present such a
positive first set of results as a listed business, with strong growth in both
sales and member numbers.
In the months since IPO to year end, we made excellent early progress in
delivering against our strategic objectives; investing in, enhancing and
optimising our operations to create a platform capable of delivering high,
sustainable and ultimately profitable growth, always keeping the interests of
our loyal SMWS members firmly at the centre of everything we do. This work
behind the scenes will benefit the Group and SMWS members for many years to
come, and on behalf of the Board I would like to thank all our colleagues for
their efforts during the year to make it happen.
Moving into 2022, we have made an encouraging start to the new financial year,
again from both a sales and member growth perspective. The outlook is
positive, notwithstanding the inherent unpredictability of the pandemic and
its effects, giving us confidence in our ability to continue our track record
of delivering significant year-on-year growth, while remaining on course to
deliver our ambition of doubling sales between 2020 and 2024.
Global macrotrends such as premiumisation continue unabated, and as we move
away from the worst of Covid-19, we are ideally equipped to operate in a more
hybrid world, straddling both on-line and in-person. While we have made an
encouraging start to life as a listed company, we recognise there is no room
for complacency. We will continue to meet challenges head on while vigorously
pursuing our goal of growing and developing the Group. This is being delivered
by taking our proposition to a growing global community of whisky enthusiasts,
offering the very highest quality crafted spirits & experiences and
creating significant value for members and shareholders alike."
Investor presentation
The Company's Executive Managing Director, David Ridley, and Executive Finance
Director, Andrew Dane, will host a live online investor presentation and
Q&A on Wednesday 30 March 2022 at 11:00 am BST.
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-fyresults-presentation-30march
(https://www.equitydevelopment.co.uk/news-and-events/artisanal-fyresults-presentation-30march)
A recording of the presentation will also be made available via the Group's
website www.artisanal-spirits.com/ (http://www.artisanal-spirits.com/)
following the webinar.
A video overview of the results from the Executive Managing Director, David
Ridley, and Executive Finance Director, Andrew Dane, is available to watch
here:
https://www.fmp-tv.co.uk/2022/03/29/the-artisanal-spirits-company-preliminary-results/
(https://www.fmp-tv.co.uk/2022/03/29/the-artisanal-spirits-company-preliminary-results/)
For further enquiries:
The Artisanal Spirits Company plc via Alma PR
David Ridley, Managing Director
Andrew Dane, Finance Director
Singer Capital Markets (Nominated Adviser and Sole Broker) Tel: +44 (0) 20 7496 3000
Sandy Fraser
Rachel Hayes
George Tzimas
Asha Chotai
Alma PR (Financial PR) Tel: +44 (0)20 3405 0205
Josh Royston artisanalspirits@almapr.co.uk
David Ison
Lily Soares Smith
Ella Doran
About The Artisanal Spirits Company
Artisanal Spirits Company (ASC) is based in Edinburgh. It owns The Scotch Malt
Whisky Society (SMWS) which was established in 1983 and currently has a
growing worldwide membership of over 34,000 paying subscribers.
Harnessing the experience of some of the most knowledgeable stewards in the
industry, 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, sourced from over 100 distilleries in
20 countries and expertly curated with diligence and care. In 2021 around 83%
of Group revenue was generated online, whilst 13% was generated through SMWS's
four UK venues.
Having initially proven its premium experience model in the UK, SMWS is now
able to offer its unrivalled breadth of distinguished flavours to an expanding
international market, with 69% of 2021 sales from outside the UK. SMWS has a
growing presence in the key global whisky markets including UK, China, USA and
Europe.
ASC is building a portfolio of premium brands that bring together some of the
world's best spirits producers with a growing movement of discerning consumers
by curating unrivalled collections of craft spirits. In November 2021 it
launched J.G. Thomson & Co. Inspired by its namesake, which was originally
a wine and spirits merchant in Leith, Scotland, in the 1700s, J.G. Thomson is
a new, adventurous blender, creating small batch blended malt whiskies,
blended grain whiskies, rum and gin. J.G. Thomson products are available
from www.jgthomson.com (http://www.jgthomson.com/) as well as a range of
leading whisky shops, bars and restaurants.
CHIARMAN'S STATEMENT
AN EXCITING START TO THE JOURNEY AHEAD
In this, our first full set of results following our IPO in June 2021, I am
delighted to report the momentum seen in the first half continued to build
through the second half across all geographies, resulting in full year revenue
comfortably ahead of market expectations.
Our priority in the year, alongside protecting the wellbeing of our
colleagues, partners and everyone connected with the business, was to deliver
growth across the most important global whisky markets while using the IPO
proceeds to lay the foundations for future success. Given the challenges
presented by the Covid-19 pandemic, the fact that we have achieved this is
testament to the quality and hard work of our teams, the strength of our
membership offering and the resilience of our model.
Decisive early progress
The Company's successful admission to AIM in June 2021, raising gross proceeds
of £26m, was a significant milestone in our history. Since then, we have been
driving forward plans and initiatives to take the business to the next level.
Using the proceeds raised at IPO, in a few short months we have made
significant investment in matured and new make spirit stock and cask wood,
secured a new supply chain facility, launched a new brand in the shape of J.G.
Thomson, increased our stakes in our China and Japan joint ventures and
accelerated growth in our global membership. While we are still at the
beginning of our journey as a listed company, we have made an encouraging
start in testing circumstances that stands us in good stead.
A winning team
This year saw the completion of our company culture project, helping to codify
and communicate our purpose, ambition, strategy and values. We believe having
the right culture to be a prerequisite for business success, and thus it
remains a core focus.
Recognising the role every one of our colleagues plays in helping us reach our
strategic goals, we strive to offer an outstanding working environment for
everyone at the business, working hard to give colleagues the flexibility and
respect they need to thrive.
In my time at the Artisanal Spirits Company, I have been impressed by the way
everyone is aligned and engaged by the unique ethos of the business. Through
innovation, grit and determination and by fostering a progressive culture,
together we have navigated what was at times a difficult year. Our team
members have shown exceptional resolve and adaptability throughout the year,
ensuring the business continued to progress while minimising disruption caused
by the pandemic, and on behalf of the Board I would like to express heartfelt
thanks.
Prior to IPO, several changes were made to the Board in preparation for our
journey as a listed business, with a view to embedding high standards of
corporate governance from the outset of the Company's life as a listed entity.
Alongside my appointment as Non-Executive Chair, Lesley Jackson and Helen Page
joined the Board as Non-Executive Directors, joining Gavin Hewitt, Mark
Bedingham and Paul Skipworth. Paul, who was previously Chair, stepped into the
role of Non-Executive Deputy Chair. I would like to take this opportunity to
thank former directors Stella Morse, Mehdi Shalfrooshan and Benjamin Thompson,
who left the Board prior to IPO, for their exceptional stewardship in helping
shape the Group into its current form.
A compelling offering
While becoming a listed company inevitably brings with it a certain amount of
change to how things are done, one thing that will always remain absolutely
consistent is our uncompromising approach to keeping the interests of our
loyal SMWS members firmly at the centre of everything we do.
Every year we deliver more and better experiences to SMWS members, and 2021
was no different despite the uncertain backdrop. During the year, we produced
over 200,000 bottles of limited-edition whiskies, we launched the new SMWS EU
site, we doubled down on the amount of engaging online content we create and
we took several steps to make the online member and e-commerce experience even
more engaging.
Looking ahead, we plan to deliver new and exciting additions to the membership
proposition, alongside an increase in in-person events as Covid-19
restrictions continue to ease, and we look forward to seeing how members
react.
We are grateful to all our members, new and old, for their continued support
and at times patience when contending with Covid-19 and Brexit-related
logistical issues. Our teams are working hard to ensure they receive the very
highest level of service and are committed to repaying the faith they have
shown in us.
We continue to achieve universal recognition for our outstanding whiskies with
2021 being a standout year. The Artisanal Spirits Company won a record number
of awards for both its SMWS and J.G. Thomson products across three of the most
prestigious competitions in the global spirits calendar - the International
Wine & Spirits Competition, Ultimate Spirits Challenge, and The Luxury
Masters hosted by The Spirits Business.
Looking to the future
With a clear strategy, a significantly enhanced organisational infrastructure
and favourable long-term growth drivers, we are confident of continued
progress in 2022 and beyond. We remain cognisant of the inherent
unpredictability of the pandemic, the Ukraine crisis and cost of living
increases in most of our markets. We will continue to execute against our
growth strategy in a disciplined and measured way, building out our already
established presence in all the key international spirit markets and
continuing to deliver exceptional spirit experiences wherever there are touch
points with our customers.
Whilst our intent to accelerate growth is evident, we are committed to doing
so responsibly, taking our environmental impact into consideration. We
currently operate within the Scotch Whisky Association's Sustainability
Strategy, adhering to best practice, and remain focused on exploring further
areas for improvement which we will update on periodically.
The opportunity before us is vast, and we are increasingly well positioned to
capitalise on it. I am grateful to all shareholders, including those
historical investors without whom we wouldn't be here today. I warmly welcome
those who have joined us on our journey in the year and look forward to
keeping them all updated with further progress as we move through the new
financial year.
Mark Hunter
Chair
Executive Managing Director's Review
OPTIMISING OPERATIONS FOR SUSTAINABLE AND PROFITABLE GROWTH
In the months since IPO, we have successfully achieved the first steps in our
growth plan - delivering an impressive sales performance, comfortably ahead of
market expectations, while investing in the enhancement and optimisation of
our operations to create a platform for high, sustainable and ultimately
profitable growth.
A clear plan for growth
We have made decisive early progress against our ambition to double revenue
between 2020 and 2024, delivering revenue growth ahead of market expectations,
and beginning to execute on our strategy with focus on the five key growth
pillars set out below.
#1 Grow Membership
Global membership growth in the year, a leading indicator of future revenue
growth, was extremely strong, particularly in the second half, with
significant growth in both UK and International membership. This was driven by
a material acceleration of sign-ups in several key markets including the UK,
China and the US, supported by strong returns on campaigns targeted at
recently lapsed members, as well as gains from extending our marketing to new
potential members.
This was also supported by improving retention rates, particularly in the same
key markets of the UK, China and the US, where the increasing focus on
onboarding, combined with practical steps such as the introduction of
auto-renewal in some markets has generated fantastic initial results, which we
will continue to embed in these locations and roll out to other markets as
appropriate.
To have accomplished all this and more in the face of unforeseen challenges
presented by the pandemic is a remarkable achievement and I am incredibly
grateful to our teams for making it happen.
#2 Enhance E-commerce & Digital Content
We continued to build our e-commerce experiences for our SMWS Members
worldwide, expanding our digital ecosystem and significantly expanding the
volume and quality of our digital content production, as well as introducing
new websites for our European SMWS members and launching the J.G. Thomson
e-shop.
Work continues in this space, with a new website for our Japanese members
expected during the first half of 2022, and other markets to follow
thereafter.
#3 Value Creation - Improve Margins
We continue to build on our vast and unique range of outstanding single cask
Scotch malt whiskies, with a view to ensuring that stock investment supports
the Group's long-term membership and revenue growth expectations. In
particular, we've also made great progress on expanding our investment in
younger and new make spirit, which helps drive down the spirit cost over time,
and will drive sustainable long-term gross margin improvement.
We have continued to enter into new rolling agreements for new make spirits
since the first agreement in November 2019. We have been delighted with both
the range of suppliers we have engaged with (with 15 different distillery
makes now covered) and the level of commitments made (with the equivalent of
275,000 bottles per annum now covered).
Alongside this, we also signed a ten-year lease on a new multi-purpose
facility in Scotland. Once this becomes operational, it will provide us with
much greater control of our supply chain later this year. We expect bringing
certain processes in-house will have a beneficial impact on margin
contribution over time, which is a key objective for the Group. The 37,000 sq.
ft. facility comprises a high-quality warehouse, production building and
offices. It is located on a secure yard with excellent transport links. Design
work and the process of sourcing equipment is underway. The materials for cask
racking were delivered in February 2022 and initial bottling line equipment in
early March 2022. We expect the facility to become fully operational in the
second half of 2022.
#4 New Complementary Brands
In November 2021 we launched J.G. Thomson, a creator of small batch blended
malt whiskies, grain whiskies, rum and gin, in line with our strategy of
launching complementary but independent brands, without compromising our core
SMWS proposition.
The soft launch period has been a success and we look forward to the active
launch in 2022 with the addition of new distribution channels and geographies.
Work is ongoing to develop further opportunities. In particular we are
considering the exciting potential within the sizeable and fast growing
American domestic whiskey market. According to IWSR, there is now a $1.4bn
domestic market for American whiskey at Ultra-Premium price points and above,
having grown by 1,000% in the last decade. We continue to develop a
proposition to target this opportunity and look forward to providing further
updates on this during this year.
#5 Talent and Organisational Development
This is a key area of focus for us, with an emphasis on talent development and
with clear alignment across the business on values and behaviours. We have
made good progress on helping capture and codify the culture, values and
behaviours. The focus now is to work to help embed these across the business
as well as developing and implementing the more formal talent and
organisational development plan that has been delivered.
In the period, we strengthened our Leadership Team through a number of key
strategic hires, including Rebecca Hamilton as Marketing & E-Commerce
Director, and Douglas Aitken as Company Secretary and Legal Counsel.
A growing global presence
Outside its UK home market, the Artisanal Spirits Company has operations in
all the key whisky markets around the world, including the US, China, Japan
and Australia as well as a number of major European markets such as France,
Germany and Sweden.
United Kingdom
Alongside encouraging e-commerce performance, the strong year-on-year
performance in UK venue and events sales resulted from a continued recovery
through to the end of the year, despite the emergence of Omicron during the
fourth quarter. Special thanks are due to our venue staff, who have dealt with
the well-publicised pandemic-related issues, such as staff availability,
admirably.
This demonstrates the strength of our unique multi-channel business model,
where revenue mixes can ebb and flow between in-person and online depending on
the trading environment. While we expect the revenue mix in the UK will
continue to shift and change as conditions normalise, we continue to see
strong growth momentum across both online and in venue, giving us confidence
in our ability to make further progress in our home market.
Asia
We saw extraordinary growth in the number of members in China. Optimising our
route to market and consumer accessibility in China has been a key strategic
focus, and we are now seeing the benefits of the partnerships established with
purchasing platforms in prior periods filter through strongly, both from a
sales and member recruitment perspective. We have also invested in our team on
the ground in the territory while making enhancements to our local CRM
capability, all of which have contributed to making our SMWS China joint
venture a more robust and efficient operation capable of scaling at pace. In
December 2021, in recognition of its importance to the growth story of the
Artisanal Spirits Company and in line with our strategy of extracting greater
value from our assets, we announced that we had increased our equity interests
in our China operation and Japan join venture. Although Japan was severely
impacted by tight Covid-19 restrictions during the year (particularly in H1),
making marketing challenging and impacting consumer confidence, we continue to
see a substantial opportunity in the territory and are working hard to
strengthen our platform to capture it.
North America
In the US, the world's largest whisky market, member numbers and underlying
in-market sales both grew strongly. Retention was also a major area of focus
in the year, with particular success from the auto-renewal programme
implemented in Q2. We also bolstered our membership offering, hosting a
greater number of virtual tastings and making greater use of our social media
channels, which helped drive interest. Although we are making excellent
headway in the US, despite the impact of Covid, we are still only scratching
the surface in terms of market penetration. In June, we were buoyed by the US
Government's decision to extend the suspension of tariffs on imports of Scotch
whisky for a period of five years. This allows us to plan with much greater
certainty, as well as having a positive impact on profitability with the Group
having budgeted to absorb those costs.
Europe
We continued to work our way through a variety of Brexit-related logistical
challenges in the year, culminating in the establishment of a warehouse in
mainland Europe which enabled us to reduce shipping times to members on the
continent. From the moment Britain left the EU single market and customs union
in January 2021, we, like so many other exporters, were thrust into uncharted
territory. It was a steep learning curve for all parties and in some cases led
to delivery delays. We are extremely grateful to SMWS members outside the UK
who were affected by these challenges for their understanding. We are pleased
to report that the vast majority of the issues have now been resolved.
Australia
In Australia, a market where we bought back the business from the franchise
holder at the end of February 2020, we have seen strong performance in both
revenue and membership growth. Our Australian face-to-face events business is
a larger component of revenue than it is elsewhere, meaning the strict local
Covid related lockdowns had a proportionately higher impact, but sales growth
was boosted by improved availability of stock versus the previous year. In Q4
2021, we were excited to release the first of two unique whiskies created and
curated in the territory, with the second release made available to Australian
SMWS members in Q1 2022. This is the first time that we have bottled
Australian single malt whisky in Australia and is an initiative we are giving
consideration to recreating in other geographies.
Our sustainability journey
Our impact on the environment remains a key focus area for the Group, working
within the Scotch Whisky Association's industry-wide sustainability framework
and taking appropriate steps such as increasing the level of recycled glass
content in bottles and reducing the level of non-recyclable packaging we use.
At the same time, we acknowledge we are near the start of our journey and that
there is more work to be done in terms of measurement, actions and
communication of our strategy. We are working behind the scenes across these
fronts.
Current trading and outlook
We have made a strong start to the new financial year. Revenues are ahead by
over 30% year-on-year and in line with management expectations, cycling over
low Q1-21 sales in UK Venues & Europe. Global membership at the end of
February stood at 34,200, an increase of 3% from the position at the year end
and also in line with management expectations.
Progress since IPO has been encouraging, and against a backdrop of favourable
long-term growth drivers, we will continue to execute against our growth
strategy in a disciplined and measured way. As we move through the new
financial year, we remain focused on delivering the very best SMWS member
experiences, driving membership growth and increasing revenues across our
brands while investing a significant proportion of the funds raised to ensure
we realise the immense potential in the business. Meanwhile our product goes
from strength to strength - earlier this month we presented our landmark
150(th) SMWS distillery bottling, from the south-west of Ireland, and
celebrated another impressive awards haul at IWSC 2022, taking home several
prestigious gold and silver awards across both SMWS and J.G. Thomson.
Recognising that the first quarter is seasonally less active, that the
Covid-19 pandemic continues to generate operational uncertainties and that
comparative performance figures will get tougher as the year progresses given
the beneficial impact of the gradual unwinding of Covid-related trading
restrictions in the second half of last year, our expectations for the year as
a whole remain unchanged at this stage. However, with the momentum in the
business and key performance indicators positive for the early months of the
year, we are confident in our prospects, and remain well placed to deliver
another year of significant growth.
David Ridley
Managing Director
Executive Finance Director's Review
BUILDING A PLATFORM FOR LONG-TERM PROFITABLE GROWTH
This year, we have made good early progress in deploying IPO funds, investing
in a strong platform to support ongoing development, while delivering better
than expected revenue growth.
Investing strategically
We have made good early progress towards investing the IPO funds to deliver
our strategic priorities. Most notably, significant investment has been made
in spirit stock and cask wood, with around £4m invested during 2021,
delivering progress against a range of objectives, including:
- The acquisition of mature stock to fill known gaps in the stock
planning model, meaning that we now hold 100% of the stock we plan to sell
through to the end of 2026.
- Ramping up the investment in younger and new make spirit that
drive up margins over time; during 2021 we added over 1,000 extra casks of new
make spirit.
- Continuing to enter further rolling agreements for new make
spirit, we now have coverage for the equivalent of around 275,000 bottles per
year with an average cost of less than a third of the cost of the mature stock
currently being sold.
- Making good progress with our ex-sherry cask maturation
programme, investing around £0.5m in ex-sherry cask wood during the year to
deliver growth in our range of ex-sherry cask influenced whiskies which our
members love and which generate additional value for the Artisanal Spirits
Company.
Significant progress has also been made against the other strategic
objectives, including:
- The supply chain facility Masterton Bond, where the lease was
signed and initial costs of c£0.6m (inc £0.2m lease deposit) incurred in
Q4-21, but the majority of costs (c£2m) are expected to be incurred during
2022.
- Launch of J.G. Thomson, with around £0.2m deployed initially on
brand and product development.
- Increased equity interests in joint venture entities in China
and Japan. The total cost of acquiring the additional 10% interest in the
China JV is c£0.5m, comprising £0.4m in relation to the profit multiple for
FY21 results, and £0.1m relating to the December 2021 cash balance. There was
no material cost associated with Japan increase.
Strong Group financial performance
Overall, the Artisanal Spirits Company delivered strong revenue and membership
growth, with momentum continuing to build, despite the global impact of
Covid-19. We were also delighted to deliver a 55% year on year increase in
member Lifetime Value (LTV) to £1,445, driven by a combination of factors.
The most significant was the improving retention rates in the UK, China and
the US. While China and the US were driven by improved onboarding and the
introduction of auto-renewal respectively, the largest impact was from the UK.
This reflects both an underlying improvement in retention rates, but also a
slightly lower proportion of first year renewals in 2021, as a result of the
lower 2020 recruitment experienced. The second largest factor impacting Group
LTV, was the positive impact on contribution as a result of the long-term
suspension of US tariffs. In addition to these two key factors, the relative
expansion in high LTV markets such as China and positive performance in
Australia also supported this improvement. Overall, this demonstrates the
Group's progress on executing its strategy to deliver sustainable profitable
growth.
At present, as stated at IPO, we remain in a growth and reinvestment phase
while retaining a focus on gross margin improvement, with the goal of
returning to positive EBITDAE in the near term and delivering profitability in
the medium term. Increased investment has also been directed into building the
platform to support further growth, in particular the teams and systems needed
to fulfil our ambition of doubling revenue between 2020 and 2024. While this
conscious decision to front load the investment has resulted in losses during
2021, the growth in absolute gross profit, and notably the improvement in
gross margin, both provide a degree of comfort over the path to delivering
profitability in the medium term.
Growing global revenue
United Kingdom
In the UK, we saw growth in online sales of 8% to £3.5m (2020: £3.2m). There
was also a very strong rebound in venue revenue, with H2-21 growing by 120%
versus H2-20 (and surpassing the total for FY20). Despite the emergence of the
Omicron variant towards the end of the year, December 2021 sales reached
around 90% of pre-pandemic levels in December 2019. Overall this meant that
the UK as a whole remained the largest individual market for the Group and
contributed 31% of total Group sales.
Member numbers were up 20% in the year, from 13,700 to 16,400, thanks in large
part to a particularly strong second half.
Asia
In China, we saw extraordinary growth in members, up 57% in the year, with
sales up 28% to £3.9m (2020: £3.0m). Particularly pleasing was the growth in
retention rates, which increased significantly during the year, but still have
scope for further significant value, which will continue to drive up member
LTV in China which already has the Group's highest level of gross margin and
LTV.
While member numbers in Japan grew 14% in the year, sales were flat at £0.7m,
with the growth in direct to consumer sales offset by the fall in sales to
partner bars. As noted, while Japan was particularly impacted by Covid-19
restrictions in H1 making it challenging to deliver growth, we have worked
hard to build on our platform to support future growth.
North America
For the US, revenue is recognised on a shipment basis, and on this basis,
sales were up by 50% to £4.1m. This growth in part reflects the comparatively
low level of shipments in 2020. In-market depletions grew by 21% to $5.5m
(c£4.1m). 2021 profitability was significantly boosted versus the prior year
following the long-term suspension of US import tariffs on single malt Scotch
whisky during the period.
Europe
In Europe, member numbers were relatively flat in the year, with sales down
20% from £2.1m to £1.7m reflecting Brexit related logistical challenges.
Although member retention dipped towards the middle of the year, we saw
improved momentum in member growth and trading towards the end of the year as
confidence in our ability to fulfil orders returned, meaning that H2 sales
were flat year-on-year at £1.2m.
Australia
In Australia, the decision to convert from a franchise to a wholly owned
subsidiary in February 2020, has continued to deliver results, with member
numbers up 18% in the year, and sales up 46% from £0.6m to £0.9m.
Cost base expanding as we invest to support continued growth across the
business
Gross profit growth, driven by the improving revenue (and removal of US
tariffs) noted above, is being re-invested for further growth in the business.
Payroll costs increased by 33% to £4.5m (2020: £3.4m) reflecting additional
Board and Executive Team members as well as investment in other operational
and support functions across the world.
Marketing costs increased by 32% to £2.4m (2020: £1.8m) with the initial
deployment of IPO funds supporting the substantial membership growth in the
latter part of the year (as well as the development and launch of J.G.
Thomson). The majority of these funds remain to be deployed during 2022.
Commission costs largely relate to the US, and have grown by 47% to £1.4m
(2020: £1.0m). This was driven by the 50% growth in US revenue, partially
offset by improved terms agreed in December 2020.
Other significant overhead cost increases included increased IT & Systems
costs, new Investor Relations & AIM costs and share option costs. Other
operating income (primarily relating to furlough payments and other Covid-19
related support) decreased to £0.2m (2020: £0.4m).
There were also substantial exceptional costs of £0.9m (2020: £0.4m)
relating to the legal and other professional fees associated with the IPO.
Overall this resulted in an increase in the loss per share to 4.9p (2020: loss
of 3.0p per share), though as noted, since the Company is in a phase of
investing for growth, management does not consider that this metric is a
relevant measure of success at this point.
Share incentive schemes
During the year a new long-term incentive plan was introduced with a total of
1.4m new share options awarded at the time of the IPO. These all carry
performance conditions, based on Revenue, EBITDA and Share Price. Full details
are included in the Annual Report & Accounts. No new schemes are expected
in 2022, though some additional awards will be made under this existing scheme
during the year and in future periods.
Tax
A change to the future UK corporation tax rate was announced in the March 2021
budget. The rate will increase to 25% with effect from 1 April 2023. This
change has been reflected in these financial statements, with full details
included in the Annual Report & Accounts.
Strong, well capitalised, asset backed balance sheet
We have continued to invest in high quality spirits - principally single malt
Scotch whisky - in the year. At the period end we had £20.4m of cask stock,
providing a strong asset backing to the business and providing the security of
stock to cover 100% of sales through to the end of 2026 and also the vast
majority of 2027 and 2028.
Reduction in net debt pending full deployment of IPO proceeds
Net debt reduced significantly in the year to £5.2m (2020: £13.7m), as a
portion of the proceeds of the IPO fundraise were used to reduce outstanding
Group borrowings, pending the deployment of the remaining balance expected
largely to occur during 2022.
Net operating cash outflow driven by EBITDAE loss, and growth in stock and
debtors
During the year we saw an increase in working capital, principally driven by
an increase in debtors, reflecting the growth in sales to the US which
represents the majority of the debtor balance (with hedging in place for this
FX exposure). Contract terms with the US importer agreed in late 2020 provide
for a reduction in debtor days, which took effect from 1 January 2022, which
would therefore partially offset some of the future impact of ongoing growth.
Finished goods stock increased in the year. This in part reflected the
correction of the short stock position at 31 December 2020, which was driven
by production issues in 2020 during the Covid-19-related lockdowns.
Looking ahead to 2022
In the current financial year we expect to see further deployment of funds
raised at IPO in spirit and wood, underpinning our ambitious long-term growth
plans. We also intend to ramp up marketing spend on member recruitment and
retention to continue to grow our global membership, alongside paying the
majority of costs relating to the new supply chain facility "Masterton Bond".
As noted at the time of the IPO, we identified venue investment as part of the
long-term plan for the business. We are taking the opportunity presented by
the pandemic-related closures to reassess the Group-wide approach to venues,
partner bars and physical engagement and expect to complete that assessment
during 2022.
The Group is currently conducting a tender of its external audit this year,
with any potential change to be effective for the year ending 31 December
2022.
Looking forward, we expect to see improving profitability and operational cash
flows, continued investment to support strategic growth pillars and ongoing
balance sheet strength.
Andrew Dane
Finance Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Notes £'000 £'000
Continuing operations
Revenue 18,237 15,026
6
Cost of sales (7,026) (6,222)
Gross profit 11,211 8,804
Selling and distribution expenses (4,046) (2,979)
Administrative expenses (9,694) (6,938)
Finance costs (348) (499)
Other income 9 160 410
Loss on ordinary activities before taxation 7 (2,717) (1,202)
Taxation 11 (631) (418)
Loss for the year (3,348) (1,620)
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Movements in cash flow hedge reserve (113) 51
Movements in translation reserve - -
Tax relating to other comprehensive profit/(loss) 23 (11)
(90) 40
Total comprehensive loss for the year (3,438) (1,580)
Loss for the year attributable to:
- Owners of parent company (3,653) (1,688)
- Non-controlling interest 305 68
(3,348) (1,620)
Total comprehensive loss for the year attributable to:
- Owners of parent company (3,743) (1,648)
- Non-controlling interest 305 68
(3,438) (1,580)
Basic EPS (pence) 12 (5.9p) (3.0p)
Diluted EPS (pence) 12 (5.9p) (3.0p)
Consolidated Statement of Financial Position
As at 31 December 2021
2021 2020
Notes £'000 £'000
Non-current assets
Investment property 391 391
13
Property, plant and equipment 14 8,377 5,785
Intangible assets 2,420 2,599
11,188 8,775
Current assets
Inventories 23,719 21,651
15
Trade and other receivables 2,968 1,956
Forward currency contracts - 83
Cash and cash equivalents 2,012 2,176
28,699 25,866
Total assets 39,887 34,641
Current liabilities
Trade and other payables 3,949 3,157
Current tax liabilities 277 332
Financial liabilities 16 392 14,963
Lease liability 259 139
Forward currency contracts 31 -
4,908 18,591
Net current assets 23,791 7,275
Non-current liabilities
Financial liabilities 6,796 901
16
Lease liability 3,332 1,428
Deferred tax liabilities 563 324
Provisions 407 404
Total non-current liabilities 11,098 3,057
Total liabilities 16,006 21,648
Net assets 23,881 12,993
Equity 174 135
Called up share capital
Share premium account 14,938 99
Translation reserve (17) (15)
Retained earnings 8,505 12,544
Cash flow hedge reserve (23) 67
Equity attributable to parent company 23,577 12,830
Non-controlling interest 304 163
Net assets 23,881 12,993
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Notes 2021 2020
£'000
£'000
Loss for the year after tax (3,348) (1,620)
Adjustments for:
Taxation charged 631 418
Finance costs 348 499
Interest receivable (5) (19)
Movements in provisions 3 2
Share-based payments 216 51
Depreciation of tangible assets 671 683
Amortisation of intangible assets 271 283
(Profit)/loss on disposal of assets - 250
Movements in working capital:
(Increase)/decrease in stocks (2,068) (698)
(Increase)/decrease in debtors (929) 591
Increase/(decrease) in creditors 252 (655)
Cash absorbed by operations (3,958) (215)
Income taxes paid (360) (327)
Interest paid (347) (477)
Net cash outflow (used in)/from operating activities (4,665) (1,019)
Cash flow from investing activities (92) (437)
Purchase of intangible assets
Purchase of property, plant and equipment 14 (1,101) (660)
Proceeds received on sale of fixed assets - 1
Interest receivable 5 19
Net cash used in investing activities (1,188) (1,077)
Cash flows from financing activities
Share issue 14,878 991
Asset backed lending drawn down (14,823) 1,980
Inventory secured RCF facility 6,200 -
Dividends paid (385) (254)
Loan received 93 214
Repayment of loan (145) (103)
Repayment of leases (139) (125)
Net cash from financing activities 5,679 2,703
Net increase in cash and cash equivalents (174) 607
Cash and cash equivalents at beginning of year 2,176 1,536
Other reserve movements 10 33
Cash and cash equivalents at end of year 2,012 2,176
Relating to: 2,012 2,176
Bank balances and short term deposits
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share premium account Cash flow hedge reserve Total controlling interest Non- controlling interest
£'000 Called up share capital Retained earnings Translation reserve Other reserves Total equity
Balance at 31 December 2019 131 15,980 (2,687) 27 (48) - 13,403 349 13,752
Issue of share capital 4 987 - - - - 991 - 991
Loss for the period - - (1,688) - - - (1,688) 68 (1,620)
Share-based compensation - - 51 - - - 51 - 51
Dividend paid - - - - - - - (254) (254)
Share premium reduction - (16,868) 16,868 - - - - - -
Other comprehensive gain - - - 40 33 - 73 - 73
Balance at 31 December 2020 135 99 12,544 67 (15) - 12,830 163 12,993
Issue of share capital 39 15,579 - - - - 15,618 - 15,618
Share issue direct costs - (740) - - - - (740) - (740)
Loss for the period - - (3,653) - - - (3,653) 305 (3,348)
Adjustment to non-controlling interest - - (252) - - - (252) 252 -
Share-based compensation - - 216 - - - 216 - 216
Dividend paid - - - - - - - (280) (280)
Investment in subsidiary - - (350) - - - (350) (136) (486)
Other comprehensive gain/(loss) - - - (90) (2) - (92) - (92)
Balance at 31 December 2021 174 14,938 8,505 (23) (17) - 23,577 304 23,881
Notes to the Financial Statements
1) Basis of preparation:
The condensed interim financial information presents the consolidated
financial results of The Artisanal Spirits Company plc and its subsidiaries
(together the "Group") for the twelve months ended 31 December 2021 and the
comparative figures for the twelve months ended 31 December 2020.
The Group's consolidated financial statements have been prepared on a going
concern basis under the historical cost convention; in accordance with UK
adopted International Accounting Standards.
This statement does not include all the information required for the annual
financial statements and should be read in conjunction with the Annual Report
& Accounts.
The financial information set out above does not constitute the company's
statutory accounts for 2021 or 2020. The statutory accounts for 2020 have been
delivered to the Register of Companies, and those for 2021 will be delivered
in due course. The independent auditor has reported on these accounts, their
reports were (i) unqualified, (ii) did not draw attention to any matter by way
of emphasis without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
This announcement was approved on behalf of the Board on 28 March 2021.
2) Accounting Policies:
The accounting policies applied in preparing the condensed consolidated
financial information are the same as those applied in the preparation of the
Annual Report and Accounts for the year ended 31 December 2021, and those
applied in the preparation of the Group's Historical Financial Information
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 June 2023, availability of financing and the impact of subsequent
events in making their assessment.
The directors have considered in detail both the impact Covid-19 and Brexit
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 separately
disclosed in the Annual Report & Accounts.
5) Dividends
No dividend was declared or paid during the period (prior period £nil).
6) Revenue
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision maker has been identified as the Executive Team, which is responsible
for developing strategy and leading its execution. The Executive Team includes
the Managing Director, Finance Director, Spirits Director, Marketing &
E-Commerce Director and Group Commercial & Operations Director.
An analysis of the Company's revenue is as follows:
2021 2020
£'000 £'000
Revenue from sale of whisky 14,439 12,047
Membership income 1,591 1,523
Revenue from sale of other spirits 395 384
Member rooms 1,095 552
Events and tastings 467 340
Other 250 180
Total revenue 18,237 15,026
An analysis of Group revenue by geographical area is as follows
2021 2020
£'000 £'000
United Kingdom (venue) 2,291 1,503
United Kingdom (online) 3,497 3,234
US (shipments) 4,095 2,730
China 3,864 3,029
Europe* 1,706 2,079
Australia 905 619
Japan 729 727
Rest of World 1,150 1,106
18,237 15,026
*Europe represents direct sales markets within continental Europe, but
excludes franchise markets in Denmark and Switzerland which are shown within
Rest of World.
7) Loss on ordinary activities before taxation
2021 2020
£'000 £'000
EBITDAE* (626) 572
Depreciation of tangible assets (575) (600)
Amortisation of intangible assets (271) (283)
Finance Costs (348) (499)
Exceptional items (897) (392)
Loss on ordinary activities before taxation (2,717) (1,202)
*EBITDAE defined as earnings before interest tax, depreciation, amortisation
and exceptional costs
8) KPIs
An analysis of Group KPIs by geographical area is as follows:
Annual Revenue/ Avg Member Annual Contribution1/ Avg Member
Revenue Year End Members Average Members £ £ Expected Years2 LTV3 (Avg
£'000 Retention % Members)
£
UK 5,788 16,445 13,960 415 190 85% 6.7 1,280
United States 4,095 5,207 4,804 852 445 60% 2.5 1,123
China 3,864 1,732 1,378 2,804 1,956 40% 1.7 3,244
Europe4 1,706 3,349 3,109 549 169 69% 3.2 541
Rest of World 1,150 3,761 3,555 323 203 82% 5.5 1,124
Australia 905 1,337 1,227 738 423 85% 6.6 2,790
Japan 729 1,496 1,412 516 363 82% 5.4 1,968
Total 18,237 33,327 29,445 619 332 77% 4.4 1,445
Change vs prior year +21% +18% +4.5% +16% +20% +10% +28% +55%
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 Manager 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 and Switzerland
which are shown within Rest of World.
9) Other operating income
An analysis of Group KPIs by geographical area is as follows:
2021 2020
£'000 £'000
Coronavirus Job Retention Scheme 50 169
Government grants (UK) 105 187
Government grants (Australia) - 35
Other income 5 19
160 410
Other operating income primarily relates to furlough payments and other
government support for the impact of Covid-19. These payments largely related
to the UK venues and their staff.
10) Exceptional items
2021 2020
£'000 £'000
ERP system expenditure - 240
Legal and professional fees 897 152
897 392
The 2021 exceptional legal and professional fees are in relation to the June
2021 AIM listing following an IPO. These represent the expenses which were
charged to the Consolidated Statement of Comprehensive Income in the period
and are in addition to the share issue expenses shown in Note 25. The
exceptional items are included within administrative expenses in the statement
of comprehensive income. The cash flow statement shows both "Loss for the year
after tax" and "Cash absorbed by operations" after payments of £897k
relating to the exceptional IPO costs which are not part of the underlying
cash flow of the Group.
11) Taxation
2021 2020
£'000 £'000
Current income tax
UK corporation tax (14) -
Foreign tax 382 346
Deferred tax
Relating to origination and reversal of temporary timing differences 263 72
Tax on ordinary activities 631 418
12) Earnings per Shares (EPS)
2021 2020
£'000 £'000
Earnings used in calculation (3,743) (1,648)
Number of shares 63,009,163 54,071,820
Basic EPS (p) (5.9p) (3.0p)
Number of dilutable shares 68,272,288 59,599,160
Diluted EPS (p) (5.9p) (3.0p)
13) Investments
In December 2021, the Group agreed to acquire 10 per cent. of the equity in
SMWS China beneficially held by Christina Leung (the MD of SMWS China) for
cash consideration of around £0.5 million, funded by the Company's existing
cash resources, following which, SMWS and Christina Leung now hold 75 per
cent. and 25 per cent. of the equity in SMWS China respectively. While the
transaction occurred in December, the final consideration is based on full
year 2021 results and hence was deferred until 2022, with the liability and
investment therefore recognised at the year end.
Additionally, in December 2021, the Group also agreed to acquire the entire 30
per cent. equity interest in SMWS Japan previously held by Mark Bedingham, for
cash consideration of £25k. Following this acquisition, the Group then sold
20 per cent. of its interest in SMWS Japan to Pei Hong Ong, the newly
appointed local managing director of SMWS Japan, for consideration of ¥4.35m
(approximately £20k).
Following the above changes, SMWS and Pei Hong Ong will hold 80 per cent. and
20 per cent. of the equity in SMWS Japan respectively.
14) Property, plant and equipment
Land and buildings freehold Land and buildings leasehold Leasehold improvements Fixtures, fittings and equipment
Casks Right-of -use Total
asset
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost or valuation
As at 1 January 2020 678 1,616 789 2,069 1,791 2,065 9,008
Additions - - 169 177 314 116 776
Disposals - (211) (460) (697) (6) - (1,374)
As at 31 December 2020 678 1,405 498 1,549 2,099 2,181 8,410
Additions - 36 - 419 646 2162 3,263
As at 31 December 2021 678 1,441 498 1,968 2,745 4,343 11,673
Accumulated depreciation 137 1,099 567 1,088 142 275 3,308
As at 1 January 2020
Charge for the year 16 70 93 219 86 199 683
On Disposals - (212) (460) (693) (1) - (1,366)
As at 31 December 2020 153 957 200 614 227 474 2,625
Charge for the year 15 70 51 230 118 187 671
As at 31 December 2021 168 1,027 251 844 345 661 3,296
Net book value
As at 31 December 2020 525 448 298 935 1,872 1,707 5,785
As at 31 December 2021 510 414 247 1,124 2,400 3,682 8,377
£96k (2020: £83k) of the depreciation charge for casks has been capitalised
as a cost of stock. The remaining balance has been expensed to the Statement
of Comprehensive Income.
15) Inventories
2021 2020
£'000 £'000
Cask whisky and bottled stock 23,719 21,651
The above balance is net of a provision for aged stock of £83k (2020: £33k).
This provision relates entirely to glass and dry goods relating to
potentially obsolete designs.
16) Financial liabilities
2021 2020
£'000 £'000
Inventory Secured RCF 6,200 -
Asset based lending facility - 14,823
Bank loans 913 946
Other loans 75 95
Total financial liabilities 7,188 15,864
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