Following the substantial reduction in H1 operating loss, Distil had a very strong H2, which resulted in FY18 growing to £157K from £10K in FY17. H2 PBT came in at £178K, some 135% higher than the prior year figure of £76K. Turnover growth of 23% resulted from strong - and broadly similar - volume growth across the core RedLeg spiced rum and Blackwoods gin brands, supported by a return to good growth at Blavod. Total volume growth was 31% and was strong across all trade channels, benefitting from new listings and listing extensions over the past two years. Operating cash flow of £166K saw the year end cash position improve to £1031K (vs £910K last year).
One of the most pleasing aspects of this year’s progress is that Distil has delivered a positive operating cash flow performance on top of an improving bottom line performance. Gross margin improved by around 30bps, and with advertising & promotion (A&P) spend down slightly in relation to turnover, this resulted in a 60bps improvement in the contribution margin. Management’s cost discipline saw other administrative expenses held flat, with the overall EBIT margin expanding by 720bps to 7.8%.Year-end net cash of £1031K was up by £121K (+13%) over last year.
The core RedLeg spiced rum and Blackwoods gin brands saw volume growth of 37% and 32% respectively. Having only begun its roll-out from January 2018, we would expect continued strong growth in FY19E from the new Blackwoods 2017 Vintage dry Gin, with its new proprietary bottle and packaging design. Economic recovery in Eastern Europe helped Blavod to a 34% volume increase, albeit largely through licensed sales, where Distil books only commission into turnover. Progress has also been made in opening up new export markets including France and additional Eastern European countries.
Maintaining momentum is key for developing brands, and Distil is to step up its brand investment in FY19E, putting its cash resources to good use by underpinning future growth. Combined with a more considered approach to US distribution, with the company seeking a long-term strategic partner, the lagged impact of the increased marketing effort will hold back profit growth in FY19, before resuming a stronger growth curve from FY20E.