Distil has delivered a strong set of results against last year’s pipeline fill from winning new listing contracts with major retailers. This effect was most marked in Q2, with Q1 also benefiting this year from the later timing of Easter. Top line revenues increased by 23% to £818K, with gross margin held broadly flat. The operating loss was cut by 68% to £21K (vs £66K last year), with the corresponding operating loss margin improving to 2.6% from 9.9% last year. The key RedLeg and Blackwoods Gin brands continue to deliver value and volume growth, outperforming their respective categories, underlining their brand strengths and underpinned by continuing brand investment.
Revenues rose by 22.8% in the period, with volumes increasing by 41%. The gap between these reflects product sales mix changes and a welcome improvement in the licensed sales of Blavod in Eastern Europe and Duty Free. The latter generates a licence fee recorded within turnover. Brand marketing investment outpaced top line growth, rising by 36% to support future growth. The tight management of other overheads saw these held flat and contributing significantly, along with strong brand performance, to the much reduced operating loss. Period end cash came in at £690K, compared with £910K at the year end. We would expect the cash balance to re-build across H2.
As well as ongoing support for key brands through traditional channels, this period has seen increased rates of investment in two areas. Spending was doubled in the festivals/consumer events channel, as this is an important way to introduce consumers to the brands and encourage product trial. Distil has also invested in new packaging, including a proprietary bottle, to coincide with the development of a new Blackwoods gin vintage. This will be available to consumers from Q4 of the current fiscal year.
As ever, the full year outturn will depend on the all-important fiscal Q3 trading period. Distil is planning a greater level of promotional activities compared with last year, which should support further progress. Despite some consumer uncertainty arising from Brexit and the re-emergence of real wage deflation, Distil “expect to remain on plan for the full year”. Our forecasts therefore remain unchanged at this stage and will be reviewed in light of the post-Christmas trading update.