REG - Distil PLC - Trading Update

DistilAnnouncement

13/07/2022 07:00

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RNS Number : 2426S  Distil PLC  13 July 2022

Distil PLC

 

Trading update

 

Business remodels for accelerated growth

 

Distil plc (AIM:DIS), owner of premium drinks brands RedLeg Spiced Rum,
Blackwoods Gin and Vodka, TRØVE Botanical Vodka, Blavod Black Vodka and Diva
Vodka,  provides an update on trading for the first quarter of its current
financial year.

 

Unaudited year-on-year first quarter (April - June 2022) results:

 

·    Volumes decreased 79% and revenues decreased 81% from £624k to
£120k

o Reported figures due to one-off impact of business remodel resulting in
stock being removed from current distributor as business sets-up for
accelerated growth

·    Export sales increased 84% year-on-year

o Expansion of existing and opening of new markets

·    Marketing investment increased 67% year-on-year

o Positive initial results following launch of first TV campaign for RedLeg
Spiced Rum

 

Don Goulding, Executive Chairman, said:

 

"Reported year-on-year revenue and volume declines for the first quarter
largely reflect the recently announced remodelling of our UK business (see RNS
dated 6 July 2022), which will see us handling all sales and marketing to our
major UK retail customers directly rather than through a third-party
distributor. Whilst this major move will result in a one-off impact to full
year revenue in the current financial year, we expect the change to our
business model to yield significant revenue upside from 2023 financial year
onwards.

 

The UK is by far our largest market and stock cover held by our outgoing
distributor to service major retailers is significant. This inventory is being
managed down and removed from the distributor supply chain as we prepare for
the shift to direct sales at the end of Q2. We anticipate this one-off
reduction in inventories will result in a c.£580k adverse impact to our
reported UK sales during the first half of the current financial year ending
31 March 2023. However, these changes to distributor stock cover have no
impact on sales at the consumer level.

 

The Board expects that the short-term impact of this major change on UK sales
will be offset by greater benefits next year and into the future. The
appointment of a Commercial Director is a pivotal step in the business remodel
as it will enable us to take direct control of servicing our major customers,
which will in turn allow us to take advantage of effective promotional
activity, better manage market fluctuations, and develop business-building
plans together with our key customers to drive visibility and brand growth
while simultaneously reducing costs.

 

The overall UK spirits market in the first half of this calendar year has been
challenging as it continues to recover from the impact of Covid, showing a
small decline in the off-trade as consumer drinking habits adjust to being
back in hospitality which has grown off a low comparison during lockdown.

 

The on-trade continues to show strong signs of recovery as consumers return to
hospitality, and as confidence rebuilds, we are positioned to take advantage
of new listing opportunities. This quarter we have secured increased
distribution with a major UK on-trade chain, and we are confident that working
together with specialist on-trade distributor, Marussia Beverages and its
award-winning team, we will continue to build on this success in this
financial year.

 

Export sales continued to grow in the first quarter, up 84% year-on-year. Our
international markets have largely experienced a quicker bounce-back from
Covid restrictions, and we have been working diligently with existing markets
to ensure stock levels are managed, as well as seeking out additional growth
opportunities within new markets. This quarter has seen the team secure an
additional listing for RedLeg Tropical in Australia, and new distribution
agreements in Germany and The Baltics. Our newly appointed Commercial Director
will be instrumental in accelerating growth of export not only through opening
new markets, but also by fostering key existing markets to create joint growth
plans for our brands.

 

The start of the current financial year saw us increase the front-line retail
price of our brands in order to manage our margins in light of cost of goods
increases caused by the impacts of Covid, Brexit, Eastern Europe conflict and
the associated impact on price inflation. This is the first time we have
advanced retail prices since 2017, and our brands still offer great value
within their respective categories. Cost management and containment will
remain a key priority this year while ensuring we maintain the premium product
quality that our brands have become known for.

 

The quarter also saw marketing investment increase 67%, predominantly
attributed to the launch of the first TV advertising campaign for RedLeg
Spiced Rum in collaboration with ITV Adventures. The campaign, valued at over
£500,000, ran on linear channels in targeted regions and nationally
on-demand, was named Ad of the Week in leading trade publication, The Grocer,
and has already begun to deliver positive results for the brand at consumer
level. We are now working together with our strategic partners and customers
to continue building on this success.

 

As with business change there will be initial non-recurring impacts of
remodelling our business strategy however the Board and the wider team are
excited by the opportunities that the improved business affords us, and we
look forward to driving business growth and value for customers, shareholders,
and stakeholders."

 

For further information:

 

 Distil PLC
 Don Goulding, Executive Chairman            Tel +44 203 405 0475

 Shaun Claydon, Finance Director
 SPARK Advisory Partners Limited (NOMAD
 Neil Baldwin                                Tel +44 20 3368 3550

 Mark Brady
 Turner Pope Investments (TPI) Ltd (Broker)
 Andy Thacker / James Pope                   Tel +44 20 3657 0050

 

About Distil

Distil Plc is quoted on the AIM market of the London Stock Exchange. It owns
drinks brands in a number of sectors of the alcoholic drinks market. These
include premium spiced rum, vodka, gin, vodka vanilla cream liqueur and are
called RedLeg Spiced Rum. Blackwoods Vintage Gin, Blackwoods Vodka, TRØVE
Botanical Vodkas, Blavod Original Black Vodka and Diva Vodka.

 

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