REG - Distil PLC - Trading Update

DistilAnnouncement

12/01/2023 07:00

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RNS Number : 4581M  Distil PLC  12 January 2023

12 January 2023

 

 

Distil Plc

 

Trading Update

 

Distil plc (AIM: DIS), owner of premium drinks brands RedLeg Spiced Rum,
Blackwoods Gin and Vodka, TRØVE Botanical Vodka and Blavod Black Vodka,
provides an update on trading for the third quarter of its current financial
year ending 31 March 2023.

 

·    Year-on-year third quarter (October to December 2022) unaudited
revenues decreased 48% to £411k (October to December 2021: £789k)

·    Decrease in revenue primarily due to:

o One-off reduction in UK market stock cover associated with removal of UK
distributor as previously forecast

o Significant one-off reduction in stock availability during key Christmas
trading period within a major retailer

·    RedLeg Spiced Rum delivered a strong performance across other major
retailers during the quarter

·    Blackwoods performance adversely impacted by delist in medium-sized
retailer

·    Marussia (UK distributor) has taken control of on-trade and is making
positive progress increasing distribution

·    New export markets opened in Scandinavia, and Latin America

·    Option to invest additional £2m in Ardgowan not taken up at this
time in order to focus cash resources on core business

·    Ardgowan Distillery Project

o External renovation of gin building complete with internal renovations
ongoing

o Site construction underway following revised plans for a more ambitious
whisky distillery

·    Full-year revenue will be significantly below market expectations,
with the Company expected to make a full year EBITDA loss of c£0.6m in line
with previous market guidance

·    Cash reserves at period end of £277k, net of receivables and
payables £840k

 

Don Goulding, Executive Chairman of Distil, said:

 

"The business faced several challenges in Q3 leading to disappointing
year-on-year performance versus the previous year. These are one-off issues
affecting this financial year and will not continue into FY23.

 

As announced in our interim results in October, at the end of H1 we progressed
our move away from our previous UK distributor and commenced the
implementation of a new business model, taking direct control of major
customers. This move was completed in October, and in Q3 we were still seeing
the associated impact of the significant reduction in UK market stock cover,
which in turn has reduced revenue in this fiscal year as forecast when the
move was announced.

 

The third quarter, and December in particular, is the key trading period for
our business, however, the wider UK spirits market was softer than anticipated
during the quarter, with overall UK spirits sales down in response to a
challenging economic environment.

 

It is important to be able to maximise sales throughout this key trading
period but, regretfully, a system issue within one of our major customers
resulted in reduced stock cover. RedLeg was performing well with a strong rate
of sale, however the system issue meant that stock was not being replenished
quickly enough, resulting in erratic promotional activity and out of stock
issues at store level. Our team has been working hard with the customer over
the quarter to resolve the issue and have together found a solution, with
normality expected to return from Q4.

 

Our other major retail customers performed well across the quarter, with sales
at a consumer level showing on average +38% YOY growth in December.

 

I am disappointed to report that despite positive brand growth, a mid-sized
retailer took the decision in Q3 to reduce its gin range in response to the
overall decline in the gin market, which included delisting Blackwoods 40% Gin
from its stores. This news will have a significant impact on the brand;
however, this gives us the opportunity to re-examine the brand positioning in
the current market and focus efforts on rebuilding the brand in its home
territory of Scotland with on-trade and regional off-trade listings.

 

The effect of these issues is that the Company's turnover for the current year
will be materially beneath market expectations; the Board's expectation is
that adjusted EBITDA loss for the current year will be around £0.6m, in line
with previous market guidance.

 

To mitigate the effects of the issues faced on the full year results, our
focus for Q4 is firmly on driving growth, with promotional activity and
additional marketing support in place to help recover volumes where possible.

 

In the UK on-trade, new partner Marussia has been making encouraging progress
in driving distribution and we will begin to see the fruits of these efforts
in Q4 and beyond into the next financial year.

 

Expansion of our brand footprint in export markets has made positive progress,
with new markets opened in Scandinavia and Latin America in Q3. Export growth
remains a key objective for Q4, including increased marketing support in key
territories to support accelerated brand growth.

 

We took the decision in Q3 not to exercise the option (which expired at the
end of December 2022) to invest a further £2m into the Ardgowan Distillery
project at this time to focus cash resources on our core business. The
Ardgowan plans remain intact, however revised plans for a larger, more
ambitious carbon negative whisky distillery naturally led to a resubmission of
plans which have now been approved. External renovation of the gin building is
complete with internal works ongoing. Bespoke distillation equipment is due to
be installed and commissioned over the coming months. The project still
represents a significant long-term investment for our business, and we
continue to support the team's vision.

 

We remain cautious as the market faces challenges around inflation, and
consumer confidence is impacted. Our brands are in strong positions to
withstand market turbulence, and we are confident in our plans moving forward
to the end of this financial year and beyond. However, given the challenges
experienced in Q3 and the prevailing headwinds in our chosen markets, we
expect full year revenue to be below, and operating losses in line with,
current market forecasts. We will provide longer-term market guidance
reflecting our new operational model at the time of publishing our full year
financial results.

For further information please contact:

 Distil plc
 Don Goulding Executive Chairman                 Tel: +44 203 283 4007

 Shaun Claydon, Finance Director
 SPARK Advisory Partners Limited (NOMAD)
 Neil Baldwin                                    Tel +44 203 368 3550

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

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
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About Distil

 

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

 

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