Stock Spirits Group PLC

AGM Trading Statement

FY2021 on track despite continued On-Trade restrictions

Exclusive distribution partnership with Diageo in the Czech Republic extended

4 February 2021

Stock Spirits Group PLC ("Stock Spirits" or the "Company"), a leading owner and producer of branded spirits and liqueurs that are principally sold in Central and Eastern Europe and Italy, issues a trading update for the period from 1 October 2020 to 4 February 2021, ahead of its AGM today.

For significant parts of this period, the On-Trade channel, which in FY2020 represented around 11% of the Company's revenue, has been closed or heavily restricted in each of our key markets. These restrictions are still ongoing, albeit the Company is hopeful that they will start to lift as vaccinations are rolled-out across its markets. Whilst our performance in the On-Trade has been lower than expected due to these restrictions, this has been largely offset by our continuing strong performance in the Off-Trade. As a result, our performance is in line with expectations for FY2021 as a whole.  

Poland

In Q1¹ the total vodka market recorded an increase in value (+4.3%) whilst volume decreased (-3.3%) versus Q1 last year² as the market continues to premiumise.  

Stock Spirits' value market share at the end of December 2020 (30.1% MAT) was ahead of the previous year (29.7% MAT)² delivering the Company's highest December MAT value share for five years.²  Stock Spirits also achieved the highest value growth rate of the leading companies in the flavoured vodka category during Q1.⁵

This performance has been achieved in a pricing environment which, though improved, remains very competitive.

As previously announced, legislation was passed with effect from 1 January 2021 to implement additional taxes on small format bottle sizes (300ml or smaller) of alcoholic drinks. This means, for example, that a 100ml bottle of 40% abv vodka attracts an additional PLN 1 tax.   We have in hand a range of commercial and operational actions to mitigate the possible impact. Whilst it is too early to give a definitive view on its impact, we do not currently believe that it will be material to the Company's results.

Czech Republic

The total spirits market grew in value (+11.9%) and volume (+4.8%) during Q1³, as this market also continues to premiumise.

Stock Spirits' market share remained stable, with value market share at the end of December 2020 (33.5% MAT) broadly flat on the previous year (33.7% MAT). ³

Following a decision by Diageo to consolidate its distribution structure in the Czech Republic, Stock Spirits will commence distribution of its full portfolio of premium and "Reserve" brands from March 2021. This portfolio includes brands such as Zacapa Rum, Tanqueray Gin and Bulleit Bourbon.  Stock Spirits has been Diageo's exclusive distribution partner in this market since 2014 for its core brands of Captain Morgan, Johnnie Walker and Baileys.

Italy

Total spirits in Italy grew equally in value (+7.1%) and volume (+7.1%) in Q1⁴ versus Q1 last year.

Stock Spirits grew volume and value share in all of its core categories which, combined with the addition of the Beam Suntory distribution brands from April 2020, resulted in value share growing from 6.7% MAT at the end of December 2019 to 7.0% MAT at the end of December 2020.⁴

Taxation

There have been no developments regarding our Polish subsidiary's appeal to the Supreme Administrative Court against the assessment in respect of its 2013 corporate income tax return.  The case is not expected to be heard during this financial year. Based on advice from our taxation and legal advisors, we continue to consider it likely that our appeal will be successful. In addition, in December 2020 our Polish subsidiary paid PLN 19m (€4.3m) in taxes following the Polish Tax Authority's decision after its audit of withholding taxes relating to 2015.  Based on professional advice, our Polish subsidiary has initiated an appeal against this decision and expects to eventually recover this payment. 

Mirek Stachowicz, Chief Executive Officer of Stock Spirits, said: "We are pleased with the start that we have made to the year, and our performance is in line with expectations for FY2021 as a whole. Our longstanding Off-Trade focus has continued to help mitigate the impact of the closure of the On-Trade across our markets, and our local sourcing and manufacturing strategy means that there has been no disruption to our operations since the start of the pandemic.

We are very proud of our partnership with Diageo in the Czech Republic, and the extension of our exclusive distribution agreement with them is a great opportunity for us to expand our portfolio of premium brands in that market."

Notice of results

The Company will announce its interim results on Wednesday 12 May 2021. 

Sources:

1 First quarter of financial year from 1 October 2020 to 31 December 2020

2 Nielsen, Polish off trade, total vodka, December 2020

3 Nielsen, Czech off trade, total spirits, December 2020

4 IRI, Italian modern off trade, total spirits, December 2020 N.B. Beam Suntory distribution brands included from April 2020

5 Nielsen, Polish off trade, total flavoured vodka including vodka based liqueurs, December 2020

For further information:

A copy of this trading statement has been posted on www.stockspirits.com.

Investors can also address any query to investorqueries@stockspirits.com.

About Stock Spirits Group

Stock Spirits is one of the leading branded spirits and liqueurs businesses in Central and Eastern Europe and Italy, and offers a portfolio of products that are rooted in local and regional heritage. With businesses in Poland, the Czech Republic, Slovakia, Italy, Croatia and Bosnia & Herzegovina, Stock Spirits also exports to more than 50 other countries worldwide. Global sales volumes currently total over 125 million litres per year. 

Stock Spirits has production facilities in Poland, the Czech Republic, Germany and Italy. Its portfolio includes well-established "millionaire" (selling in excess of one million 9 litre equivalent cases per annum) brands including Żołᶏdkowa, Lubelska, Božkov and Stock Prestige, local leaders such as Stock 84 brandy, Fernet Stock bitters, Keglevich and Limoncè, as well as more recent innovations including Amundsen Expedition vodka and Božkov Republica rum.

Stock Spirits is listed on the main market of the London Stock Exchange. For the year ended 30 September 2020 it delivered total revenue of €341.0m and operating profit before exceptional items of €57.8m.

For further information, please visit www.stockspirits.com