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Distil has had another strong year of sales and volume progression, which has culminated in the company delivering a maiden profit from its owned brands. This has been driven once again primarily through the RedLeg Spiced Rum and Blackwoods Gin and Vodka brands, which have benefited from achieving further listing gains in both the supermarket and pub channels. These brands have capitalised on the continuing growth of premium spirits and the rise of the cocktail phenomenon across an ever broader spectrum of ontrade formats. Distil is well-positioned to benefit from these trends in the UK and export markets from its existing brand portfolio and potential new product development. On the basis of FY17’s forecast beat, we have raised our FY18 and FY19 PBT forecasts, and we also initiate on FY20.
Distil delivered a full-year PBT of £10K, compared with last year’s loss of £98K and our forecast of a £40K loss. This was driven by a very strong H2, and in particular the key Q3 peak trading period, which resulted in an H2 PBT of £89K, compared with last year’s H2 loss of £9K. Full year revenues rose by 40%, with cash gross profit rising by a similar quantum on an unchanged gross margin percentage. Advertising and promotional costs marginally reduced as a percentage of sales, delivering a 20bps improvement in the contribution margin to 34.5%. While headcount increase drove an 11% increase in other administrative costs, the aggregate total cost increase was lower than we had anticipated, hence the forecast beat.
Across the year as a whole, volumes increased by 31%, compounding on FY16’s volume growth of 35%. This was delivered from the continuing benefits of FY16 listing gains, and further gains made in FY17. FY18 is set to benefit from the gain of a major pub chain listing towards the end of FY17 and a further listing win with another major UK superstore operator. RedLeg delivered a volume gain of 62% across the year, with Blackwoods gin volumes up by 46%, both well ahead of the overall market in their respective segments.
FY18 should see further consolidation of volume and revenue increases from Distil’s listing gains in the UK. In addition, the launch of RedLeg in the USA should also support sentiment. Our forecast increases broadly roll forward the FY17 beat.
