27 March 2024
The Artisanal Spirits
Company plc
("The
Artisanal Spirits Company", "ASC" or "the Group")
Preliminary results for the
year to 31 December 2023
Strong H2-23 Revenue and
EBITDA1 delivery signals positive momentum for
FY24
The Artisanal Spirits
Company (AIM: ART), the creator of outstanding,
limited-edition whiskies and experiences around the world, and
owner of The Scotch Malt Whisky Society, Single Cask Nation
& J.G. Thomson is pleased to announce its preliminary results
for the year ended 31 December 2023 ("FY23").
The Group has delivered another
year of revenue growth and diversification. FY23 results marginally
exceed the update given in early December 2023, with 8% revenue
growth at £23.5 million and adjusted EBITDA2 of £0.1
million.
The delivery of revenue growth and
adjusted EBITDA2 profit, despite the headwinds prominent
in 2023 and the macro-economic conditions in China, serves to
support the Board's confidence in the ability of the business to
deliver more substantial EBITDA1 in 2024 and thereafter,
in line with consensus forecasts*.
Headlines
· Continued improvement across key metrics, most notably
Revenue, Gross Profit and Membership, though not at the level we
had targeted for the year
· The
successful Scotch Malt Whisky 40th anniversary
celebrations - including the surpassing of 40,000 members in year
(over 41,000 at year-end)
· Acquisition post year-end (4th January 2024) of
Single Cask Nation ("SCN") in the USA
· Investment in and completion of key strategic initiatives
detailed in the Operational Highlights section, including the
launch of our new Cask Sales member offering
· Substantial growth in market value of cask inventory - this
inherent value of our spirit stock evidenced through cask sales
delivered in FY23 at 4.5x NBV and new debt facility valuation in
year of 4.8x NBV
Financial Headlines
· Revenue increased 8% to £23.5 million (2022: £21.8 million),
slightly ahead of expectation. Increasingly diversified revenue
streams came to the fore with significant growth in cask sales,
contributing £2.7 million of revenue in FY23, offsetting a
challenging period of trading in China
· Gross margin improved to 63.8% (2022: 63.6%) and gross profit
delivery increased by 9% to £15.0 million (2022: £13.8
million)
· EBITDA1 loss of £0.5 million (2022; £0.2 million),
which excluding non-recurring costs, resulted in an adjusted
EBITDA2 profit of £0.1 million (2022; £0.4 million) with
strong H2 contribution of £1.9 million (2022; £0.7 million)
· Loss
before tax of £3.6 million (2022; £2.1 million), predominantly due
to an increase of £1.1 million of interest cost and depreciation of
the now fully operational new supply chain facility, Masterton
Bond.
· Further investment in spirit and wood stock, resulting in
100% demand cover through to FY28 and 75% through to
FY35
· Cask
stock holding of £25.3 million (2022; £23.3 million) with a
notional retail value of approx £500 million
· A
new debt facility of £15 million with specialist lender Ferovinum
and total debt facility headroom, including RBS RCF, at 31 Dec
2023, of £14.0 million
· FY23
strategic and operational progress supports a path from low to high
single digit EBITDA1 margin by 2026
Operational Headlines
· SMWS
membership growth of 10% in FY23 to over 41,000 members (2022:
37,400), supported by growth in USA and mainland Europe, +17% and
+29% respectively as well as the new Asian markets
· The
launch of our new member cask sale programme with the launch
initiative being the '50th Anniversary Cask Club'. This
complementary and incremental member initiative further broadens
the offer to members
· Further expansion of the Group's Asia presence with the
launch of a new subsidiary in Taiwan and new franchise operations
in South Korea, Malaysia and Singapore
· Membership loyalty and engagement remains strong, with
retention remaining close to the all-time high level at 74%
combining with annual contribution per member of around £300 (2022;
£326) to deliver a lifetime value per member of £1,173 (2022;
£1,387) - up 25% since IPO
· Launch of the new SMWS app in the UK during December 2023
facilitating ease of ordering
· Further product innovation: "Membership and a Bottle" and
"Drop and Dram" subscription option in Q4-23 to drive additional
member recruitment
· Refurbishment of the members rooms at our spiritual home, The
Vaults, in Leith in September 2023
Global Membership
|
|
|
|
|
December 2023
|
December 2022
|
%
Change
|
Europe
|
25,900
|
24,500
|
6%
|
Americas
|
8,300
|
7,100
|
16%
|
Asia
|
4,900
|
3,800
|
29%
|
Other
|
1,900
|
2,000
|
(1%)
|
Total
|
41,000
|
37,400
|
10%
|
Current trading/post period highlights
· Trading in the early part of 2024 has been positive, with
revenue performing in line with expectation representing 10% growth
on prior year with delivery from Taiwan and Single Cask Nation
supported by growth in franchises and cask sales
· As a
result, expected FY profit delivery remains in line with consensus
market expectations, which would represent a significant
improvement in profitability and a positive step on the path to
high single digit EBITDA1 margin by FY26
· Acquisition of Single Cask Nation (SCN) on 4 January 2024,
complementing SMWS' existing US business. SCN enhances ASC's
ambition to further grow its presence in the USA and further
leverage the sizable and growing American whiskey market. Entirely
self-funded from existing bank facilities, it is anticipated SCN
will be PBT positive in FY24
· Celebration of SCN being awarded Independent Bottler of the
Year Award at the prestigious 'Icons of Whisky Awards'
in Louisville, Kentucky in February 2024 - further
emphasising the quality and appeal of SCN's exquisitely curated
whiskies
* The Board of The
Artisanal Spirits Company considers that current consensus
market expectations for the year ending 31 December
2024 are revenue of £25.0m and EBITDA1
of £1.0m.
1EBITDA, a non-IFRS metric, is
Earnings before interest, tax, depreciation and amortisation (see
note 7)
2Adjusted EBITDA, a non-IFRS
metric, is calculated as EBITDA1 excluding exceptional
and non-recurring costs (see note 7)
Andrew Dane, CEO of The Artisanal Spirits Company,
commented:
Despite the globally challenging economic environment in
2023, the Group emerged stronger, more resilient and increasingly
well positioned for continued growth.
I was particularly pleased to see the strong revenue and
EBITDA1 delivery in H2-23 which provides momentum for
growing profitability in 2024. This has continued with a positive
start to 2024, with revenue performing in line with expectation in
the first two months.
The core of the Group remains the SMWS, which celebrated its
40th anniversary in 2023, with a
unique and exciting range of celebrations and product developments.
In January 2024, we were also thrilled to welcome Single
Cask Nation (SCN) to the Group, alongside SMWS and JGT. This
acquisition is a strong strategic development and is both
complementary and incremental to SMWS in the significant and
growing US whisky market. We remain confident in this US market
opportunity, with the very strong finish to 2023 for in-market
depletions for SMWSA, continuing with double digit growth in early
2024.
This sits alongside the range of other strategic initiatives
which were delivered in 2023. These, together with the revenue
growth and impressive membership expansion give us confidence to
support further profitable growth in 2024 and
beyond.
I would like to extend my thanks and recognition to all the
fantastic employees within ASC for the hard work and commitment
displayed during the year - their resilience, innovation and
delivery of outstanding experiences for our members continuing to
reach new heights.
1EBITDA, a non-IFRS metric, is
Earnings before interest, tax, depreciation and amortisation (see
note 7)
2Adjusted EBITDA, a non-IFRS
metric, is calculated as EBITDA1 excluding exceptional
and non-recurring costs (see note 7)
Sellside analyst presentation
Andrew Dane, Chief Executive
Officer, and Billy McCarter, Chief Financial Officer, will
host an in-person presentation for sellside equity analysts
today/Wednesday, 27 March at 09.00 hours GMT. Analysts
wishing to join should register their interest by
contacting: artisanalspirits@instinctif.com
A recording of the presentation
will also be made available via the Group's website later
today.
For further enquiries:
The Artisanal Spirits Company plc
Andrew Dane, Chief Executive
Officer
Billy McCarter, Chief Financial
Officer
|
via Instinctif PR
|
Liberum Capital Limited (Nominated Adviser and
Broker)
Edward Thomas
Dru Danford
John More
|
Tel: +44 (0) 20 3100
2222
|
Instinctif Partners (Financial PR)
Justine Warren
Matthew Smallwood
Joe Quinlan
|
Tel: +44 (0)20 7457
2020
|
Notes to Editors:
About The Artisanal Spirits Company
ASC's purpose is to captivate a
global community of whisky adventurers, creating and selling
outstanding, limited-edition whiskies and experiences around the
world with an ambition to create a high quality, highly profitable
and cash generative, premium global business.
Based in Edinburgh, ASC owns The
Scotch Malt Whisky Society (SMWS), Single Cask Nation (SCN) and
J.G. Thomson (JGT). Owning over 17,000 casks primarily comprising
Single Malt Scotch Whisky, ASC's stock includes outstanding whisky
(and other spirits) from 150 different distilleries across 20
countries which is sold to members both as individual bottles and
whole casks.
Established in 1983, SMWS
currently has a growing worldwide membership of over 41,000 paying
members. With an established global presence in some 30 countries,
SMWS operates a direct-to-consumer model (90% of revenue) primarily
through e-commerce, in addition to four member rooms in the UK.
SMWS provides members with inspiring experiences, content and
exclusive access to a vast and unique range of outstanding,
expertly curated Scotch malt and other whiskies.
In January 2024, ASC acquired SCN
which sources, curates and bottles single-cask whiskies and other
spirits selling both online and via traditional retail channels to
its following of over 10,000 whisky enthusiasts in the USA.
SCN also retails to international markets including the UK,
Germany, Sweden, Japan, Israel and Canada.
Launched in the UK in late 2021,
JGT has a focus on outstanding small batch blended malt whiskies
and other spirits, available both through direct-to-consumer online
sales and through traditional retail channels. The award-winning
brand has subsequently expanded into international
markets.
With proven e-commerce reach and a
growing family of brands, ASC is building a portfolio of
limited-edition and small-batch whisky and other spirits brands for
a global movement of discerning consumers - delivering revenue of
£23.5 million in FY23, predominantly from outside the UK, with an
expanding presence in the other key global whisky markets including
USA, China, Europe, Japan, Australia and Taiwan.
ASC has a pioneering business
model, a substantial and growing addressable market presenting a
long-term global opportunity and a strong and resilient business
primed to deliver growth.
Chair's Statement
Despite the globally challenging
environment in 2023, the Group has weathered the storm and emerged
stronger, more resilient and increasingly well positioned for
continued growth.
The global whisky market continued
to deliver compound growth in 2023, despite the global
macro-economic and geo-political situation. Against this
background, while the Group grew revenue by 8%, we were
disappointed not to have delivered the growth in profitability we
wanted and generated a loss before tax of £3.6 million (£2.1
million), reflecting increased interest costs, depreciation of our
new supply chain facility and below expectation results in some
markets such as China. This resulted in the Group resetting its
growth and revenue targets for 2024 and beyond, with the delivery
of the long-term plan set out at IPO being delayed by a year.
Despite this temporary rephasing of growth, the Group is becoming
increasingly diversified - both in terms of its geographic
footprint and expanding offering, leaving it less exposed to any
one market - and has the clear foundations in place to deliver
ongoing and growing profitability.
In 2023 the SMWS celebrated its
40th anniversary, and the Group implemented a number of strategic
actions which pave the way for the Society's continued future
growth. Membership of SMWS has grown, with year-end membership at
over 41,000, representing a 10% increase year-on-year. The four
member venues in the UK have continued to deliver excellent
results, bringing unique and memorable experiences to our members,
with The Vaults in Leith, the spiritual home of the SMWS,
benefitting from a fabulous renovation as part of the Society's
40th anniversary milestone celebrations.
Alongside membership, the
heartbeat of our proposition is our focus on unique, high-quality
whiskies that we purchase, curate and release in limited editions.
In 2023 we further added to our world-beating stock of whisky,
deploying the Group's funds well to ensure that we have forward
stock cover well into the next decade, with 100% to
FY28.
To support this membership growth
in 2023, we launched the newly re-packaged Membership & Bottle
and the Drop & Dram subscription service across the UK, both
designed to increase our membership offers and drive recruitment.
To further improve our membership experience we successfully
launched the SMWS app in late 2023 enabling members to order from
their mobile devices with good feedback received from members
supported by encouraging download levels and average engagement
time.
The end of 2023 also saw SMWS
embark upon offering cask sales to members. Under the 50th
Anniversary Cask Club, SMWS members can purchase the contents of a
cask of new-make spirit and experience its maturation journey over
the next decade to the Society's 50th Anniversary - an innovative
option for the Society's whisky afficionados.
In January 2024 we acquired an
additional brand, Single Cask Nation (SCN), the award-winning
independent bottler based in the USA. SCN will further strengthen
our position in the US market with an orientation towards American
whiskies to complement the existing SMWS business in the
USA.
In addition, the Group continued
to expand its global footprint into new growth markets through
SMWS. It further consolidated its go to market approach in Taiwan,
the world's third largest ultra-premium whisky market*, targeting a
discerning customer base in that market by migrating from a
franchise to a majority
owned joint venture, while
retaining the franchise partners as part of this growing
business.
ASC is conservatively financed and
has ample funds to continue to invest in and grow the Group for the
foreseeable future.
Investors
As we build on strategic delivery
and deliver future growth, profit and cash conversion, I would like
to thank investors for their continued support since we completed
the IPO in June 2021. The business has come a long way in that
time, a credit to your belief in what we are doing.
There is frustration with the
current share price, impacted by the AIM small cap performance
since 2021; however we continue to have a clear strategy we will
deliver against as we do everything we can to drive a more
representative valuation of our great business.
Governance
Over the last year the Board
continued to pursue exemplary standards of corporate governance and
drove the ASC values across the business, particularly the
uncompromising approach to keeping the interests of our loyal SMWS
members firmly at the forefront of everything we do.
People
In early 2023, the former Managing
Director David Ridley and the Board agreed that he would step down
following six years with the Group, during which time the business
delivered sustained revenue growth in 2021 and 2022, including the
successful IPO on the AIM market of the London Stock Exchange under
his stewardship.
Andrew Dane (previously the
Finance Director) was appointed as our new CEO in January 2023 and
Billy McCarter, formerly Group Financial Controller, was appointed
as Chief Financial Officer in May 2023 after a successful
assessment and selection process, and I would like to take this
opportunity on behalf of the Board to congratulate both of them on
their appointments and their excellent leadership throughout
2023.
I would like to thank the Board
and the ASC team for their hard work, commitment and resilience
during 2023.
Looking to the future
We have a clear strategy focussed
on delivering sustainable, profitable growth. This remains
primarily driven by continuing to develop, engage with and grow our
membership base, enhancing the breadth and depth of our whisky
stocks, further domestic and international expansion, continued
enhancement of our
e-commerce platform, increasing
margins and delivering shareholder value.
Our increasingly globally
diversified footprint means that the Group is not over exposed to
any one geography or market, further derisking the overall
business. Expanding our product offering with the acquisition of
SCN allows the Group to further expand sales in the valuable US
market, complementing the existing SMWS America
proposition.
2024 will not be without its own
set of challenges, but we are navigating these well and planning
accordingly. We welcomed the Chancellor's duty freeze in the recent
Spring statement and remain optimistic that economic conditions
will improve in the medium term, underpinning our confidence that
our business will benefit from its unique and global credentials,
serving our dedicated customer base in all major markets. We will
continue to focus on delivering compelling whisky experiences for
all of our members throughout 2024 and beyond.
We anticipate further revenue
growth in 2024, albeit slightly reduced from the c20% growth rates
experienced in 2021 and 2022, as we focus on driving margin and
delivering sustainable profitability. As we do this, we are
committed to doing so responsibly, working within The Scotch Whisky
Association's Sustainability Strategy, which strives to achieve
best practice. At ASC, 2024 will continue to focus on making our
supply chain and packaging efficient and sustainable, as well as
various efforts to reduce our carbon footprint while also reducing
costs.
The Group has come through 2023
bigger and better than ever, with an expanding portfolio of quality
brands and the core SMWS business in as strong a position as it has
ever been. I thank you all for your continued support of the ASC
business and look forward to delivering for you and our members in
2024 and beyond.
* IWSR Database - 2022 data
Chief Executive's Review
Through 2023, we continued to grow
both revenue and membership, as well as making good progress on our
strategic initiatives. These positive steps reinforce the Group's
confidence in its model and its ability to continue to grow
profitably.
We did suffer headwinds during the
year, most notably the macro-economic conditions in China, with
consumer spending behaviour significantly knocked; however, we have
delivered further diversification in our revenue delivery to
achieve year on year improvement that has helped us reduce the
impact at an EBITDA1 level, further boosted by our 50th
Anniversary Cask Sale launched in Q4.
Particular strategic highlights
from the year included the launch of the new subsidiary in Taiwan,
the world's third largest market for Ultra-Premium Scotch whisky;*
the refurbishment of The Vaults member room in Leith (heart of the
SMWS brand, with investment of £0.5 million); the creation of
innovative new revenue streams (including cask sales, the
Membership & Bottle product, and a monthly subscription
service); digital developments including a new US website and
launch of a new UK mobile app, as well as further developments in
Asia with the successful launch of a new franchise in South Korea
and appointment of new franchise partners in Malaysia and
Singapore.
I would like to extend my thanks
and recognition to all the fantastic employees within ASC for the
hard work and commitment displayed during the year - their
resilience, innovation and delivery of outstanding experiences for
our members continuing to reach new heights.
In year, we have made changes to
the Executive and Senior Management Team to support the appointment
of myself as CEO and Billy McCarter as CFO, welcoming Anne Phillips
as the new Marketing Director as well as key external hires to the
wider Management team.
I believe the current team within
ASC will significantly aid us in achieving our future
ambition.
Continued growth momentum
During 2023 we delivered £23.5
million of revenue and adjusted EBITDA2 of £0.1 million
and a strong H2 delivery of £1.9 million of adjusted
EBITDA2.
We had previously set out an
ambitious target of doubling ASC's revenue between 2020 and 2024,
and while we have already grown by 56% since 2020, challenging
trading conditions in some markets during 2023 resulted in a
temporary reset of our ambitions, delaying our growth targets by 12
months, i.e. now doubling revenue by 2025. Despite this we have
continued to work hard to deliver an expanded platform to drive
through growth in revenue, sales and ultimately profit in 2024 and
beyond. The Group is well financed for the future and remains set
on a transitional path to high single digit EBITDA1
margin by FY26.
Building a high quality, highly profitable and cash
generative, premium global business
ASC is the creator of outstanding,
one-of-a-kind whisky and experiences around the world and our
ambition remains to create a high quality, highly profitable and
cash generative, premium global business.
The core of the Group remains the
Scotch Malt Whisky Society. SMWS operates a pioneering model with a
loyal and growing membership who can exclusively purchase unique,
award winning, limited-edition whiskies. Developing additional
markets for SMWS and for our growing stable of other retail facing
brands diversifies our proposition,and allows us to still deliver
growth over the year despite economic uncertainty and fluctuating
markets in various parts of the world.
Underlying structural dynamics growing the addressable
market
Regardless of the geo-political
turmoil around the world, Scotch whisky remains a highly desirable
category on the international stage. We operate primarily in the
global Ultra-Premium segment which has seen substantial growth over
the last decade and continues to do so. Trends such as
premiumisation and experiential demand further add to the appeal of
the category - with consumers seeking authenticity, status and
exclusivity. The drive for increasing convenience and continued
global digitalisation combine to play to ASC's strengths as a
limited-edition producer with our primarily D2C model.
The overall addressable market
opportunity remains significant, with the global Scotch whisky
market for Ultra-Premium price points, valued by IWSR data for
2022, at $8.1 billion, having grown by 52% since 2020. Of this,
$6.3 billion is in markets where we already have a well-established
presence and, within these markets, ASC has a market share of only
0.3% representing a significant and growing opportunity.
Globally diversified SMWS celebrates 40th year with continued
growth
This year saw us grow global
membership of SMWS once again, up 10% to 41,000 at the year end.
2023 experienced particularly strong membership growth in Europe
(+29%) the USA (+17%) and new Asia markets, while the slower sales
performance in China was also reflected in flat membership during
the year. The Society has maintained its high levels of loyalty
from our existing members, delivering recurring revenues with
retention rates close to last year's historically high level at
74%.
2023 was a very special 40th
anniversary year for the Society, with a number of events marking
this milestone held around the world, including the global Guinness
world record for the largest online tasting, which saw members from
almost 20 different countries take part in a simultaneous whisky
tasting hosted online from the spiritual home of the Society, The
Vaults in Edinburgh. SMWS revenue continued to grow underpinned by
the growth in global membership, while spend per member reduced
slightly from the record levels seen in 2022. 2023 also saw the
launch of the new Membership & Bottle and Drop & Dram
subscription offerings, designed to engage and entice new members,
as well as the SMWS app supporting the existing members' experience
and making purchase of our award-winning whisky more
accessible.
November 2023 also saw the Society
offer its members the chance to buy the full contents of a cask for
the first time, with the launch of the 50th Anniversary Cask Club.
This initiative enables members to secure the contents of a cask of
new-make spirit and experience its maturation towards a 50th
anniversary bottling in 2033. While the initial pace of sales was
slower than forecast, dozens of members joined the programme in the
first few weeks following launch. Sales are continuing in early
2024 and we are focussed on delivering the full value of this
programme during the year.
We further enhanced our globally
diversified range of markets by completing the transfer of the
Taiwanese chapter of SMWS into a majority-owned joint venture
launching in 2023 and selling out 500 memberships within a day. The
new franchise in South Korea achieved 300 new members on initial
launch in April with a further 150 added in October.
Acquisition of Single Cask Nation (SCN)
In the second half of 2023 we laid
the groundwork to acquire SCN, the award-winning independent
bottler based in the USA. The acquisition of the SCN business,
including its two founders Jason Johnstone-Yellin and Joshua Hatton
joining the wider group, completed in early 2024.
SCN is an independent bottling
brand which sources, curates and bottles rare single-cask and
limited-edition whiskies, with an orientation to American Whiskies,
and other spirits for sale both online and through specialty on-and
off-premise accounts in the USA and other key international
markets.
We have acquired a USA business
that is both complementary and incremental to our existing USA
business. SMWS will continue to focus on delivering outstanding
Scotch Malt Whisky, while SCN will develop a greater focus on
American whiskey. This will not only give consumers something which
they seek, namely interesting, unique, curated, exquisitely
selected and matured whisky, but also allows us to incubate and
trial new product propositions in a very low cost/low risk way with
the scope to expand in due course, whilst accelerating our US
operations.
The acquisition of SCN builds on
ASC's already globally diversified footprint and secures a greater
presence in the world's largest premium whisky market.
JGT groundwork continues
We continued to grow our suite of
superior quality spirit and complementary brands with further
development of JGT with first shipments into the USA and first
sales into Asia.
Masterton Bond now fully operational
Our production and supply chain
facility at Masterton Bond, near Glasgow, is now fully operational,
taking care of every stage of the supply chain process from cask
storage, bottling, labelling and pick, pack and dispatch. Over
200,000 bottles have now been produced at the site since it opened
in 2022. The first bottling of SCN has now completed and we will
continue to service SMWS, SCN and JGT and potentially other brands
from this state-of-the- art facility.
As the facility continues to meet
the growing volume demand of the Group, in future years we look to
drive improvement in margin.
Demonstrating inherent value
ASC generates value through two
key components of its unique business model; firstly, acquiring a
unique collection of Scotch malt whisky and other spirits, and
capturing the value as these casks mature; secondly, using this
liquid to create outstanding, limited-edition whisky and
experiences around the world.
The long-term substantial value
comes from this second element, with stock in cask at the year-end
having an estimated retail value in bottle of approximately £481
million (31 December 2022: £493 million), a slight reduction as the
average selling price has declined slightly due to lower Vaults
Collection and Chinese market sales in 2023, however still a
significant value that represents the opportunity for around £300
million of future gross profit based on the current margin
structure of the business.
While we continue on our path to
realising this full value over time, the first part of the
accretion capture has already delivered significant value. The
Group now holds over 17,000 casks (up from 16,500 at the end of
2022) covering a vast range of styles, distilleries, makes, ages,
and cask wood types. Though these casks are still carried in our
accounts at the net book value of £25.3 million (31 December 2022:
£23.3 million), the real current market value has increased
substantially since acquisition.
This has been evidenced by both
the value of casks sold during the period, which sold for an
average of 4.5x the book value, but also the third-party valuation
undertaken by Ferovinum; they valued the relevant inventory at 4.8x
the net book value as part of the new £15 million facility
announced in November 2023.
The path to profitability
During the course of 2023, we have
continued to build on the significant investments across our
business made in 2021 and 2022, have a clear strategy to drive
profitable growth and anticipate growing EBITDA1 and
profit before interest and tax (PBIT) through 2024. Furthermore,
the Group remains set on a transitional path to high single digit
EBITDA1 margin by FY26.
2024 will be a year of continued
profitable expansion and development, focussing on maximising the
benefits of the investments and developments already made in 2023,
with concentration on the "brilliant basics" of the business that
we expect to see deliver revenue and PBIT growth in line with
forecasts.
Current trading and outlook
Whilst still early in the year, we
are on track to meet our revised expectations for the full year. We
remain positive about our ability to meet our strategic goals in
the short, medium and long term, achieving revenue,
EBITDA1 and PBIT growth as we benefit from our
investments and the momentum from a profitable FY23 H2 together
with increased revenue diversification through cask sales and our
new SCN acquisition.
Confidence is supported by
stronger performance in the USA, with encouraging levels of
in-market depletions revenue growth for Q4-23 (+29%) and continued
double digit growth in early 2024 supporting our FY24 shipment
revenue forecasts. In China, double digit growth in the early
months of 2024 again supports our full year forecast on broadly
flat revenue in the market for 2024.
We will continue to adhere to a
disciplined investment programme, ensuring we balance conversion of
profit delivery to cash with investment in spirit and wood to
achieve the optimal levels required to meet our future growth
ambitions. We have invested ahead in our supply chain facility and
technology roadmap and now have the foundation in place for
profitable cash conversion. We will continue to seek partnerships
in major markets for ultra-premium whisky where we are not already
presented.
Early in FY24-Q2, we plan to
relocate to a new Edinburgh HQ Head Office. These premises in
central Edinburgh facilitate our future growth ambitions and show a
commitment to our People, one of our five strategic pillars -
investing in facilities more reflective of modern working practices
and further building our Employee Value Proposition (EVP), as
morale, collaboration and an increased sense of pride drive further
productivity within the business.
We remain focussed on developing
and progressing our business through the continued growth of
membership globally, building a sustainable platform for the future
and driving ASC towards profitability which should be achieved in
the near term. We will continue to benefit from the structural
tailwinds of digitalisation, premiumisation and convenience which
underpin our unique business model and the continued global growth
of the Ultra- Premium whisky segment.
* IWSR Database - 2022 data
1EBITDA, a non-IFRS metric, is
Earnings before interest, tax, depreciation and amortisation (see
note 7)
2Adjusted EBITDA, a non-IFRS
metric, is calculated as EBITDA1 excluding exceptional
and non-recurring costs (see note 7)
Chief Financial Officer's Review
FY23 has been a year of challenge
within the wider spirits Industry, most notably the economic
climate in China, cost of living pressures and the US post-Covid
market rebalancing.
We are disappointed to have not
delivered the growth in profitability we wanted, generating a loss
of £3.6 million (2022; £2.1 million), impacted by increased
interest costs, depreciation of our new Supply Chain facility and
below expectation results in some markets such as China.
This FY24 objective is supported
by FY23-H2 momentum where we delivered strong results, recognising
12% revenue growth against H2-22, resulting in H2-23 adjusted
EBITDA2 profit delivery of £1.9 million. Full year
growth in gross margin of 0.2ppt and completion of the key
investments we set out to achieve by the end of FY23, setting us up
well to achieve our EBITDA1 and PBIT ambition, more
importantly, sustained and growing profit and cash delivery in the
near to medium term.
In FY23, we delivered revenue
growth of +8%, achieving £23.5 million, and an EBITDA1
loss of £0.5 million which, after accounting for non-recurring
areas of spend (Executive and Senior Management Team restructure
costs, pre-acquisition costs of Taiwan, Single Cask Nation (SCN)
and final Masterton move costs), resulted in an adjusted
EBITDA2 of £0.1 million. The loss before tax was £3.6
million, impacted by lower profitability than expected,
predominantly driven by market conditions in China.
At a Group level, I am enthused by
our continued ability to strengthen the diversification of our
business with regards to revenue and profit delivery - more than
offsetting challenges in any one market.
Diversified Global Revenue
Europe
As the home of SMWS, the European
region remains our largest global market, with around 60% of total
Group membership comprising UK Online, UK Venues, Europe and our
two franchise markets, Denmark & Switzerland. The region
delivered 29% revenue growth year-on-year, within markets like
Germany and France as well as another year of continued growth
within our UK venues, achieving 9% revenue improvement on
FY22.
This omni-channel approach in the
UK, with four outstanding member rooms complementing the online
presence at www.smws.com, remains a key recruitment tool for the Group, with over 1,200
new members joining via venues in 2023.
The biggest driver of Europe
growth was the delivery of £2.7 million in cask sales to members
and where appropriate to the trade, up from £0.5 million in 2022.
This is further testament to our ability to deliver new revenue
streams and increase diversification.
Asia
Our key Asian markets of China,
Japan and Hong Kong were joined in year by the launch of a new
subsidiary in Taiwan and a new franchise operation in South Korea.
The launch of Taiwan and South Korea in H2-23, resulting in 1,000
new members, ensured the region closed the year with over 4,850
members, signifying an almost 30% growth year-on-year.
As stated, the Chinese economy
faced significant challenges in 2023, resulting in a 30% revenue
decline to £3.5 million in year (2022; £5.0 million), a return to
pre-2021 levels.
We expect the recovery in China
will be at a steady pace over the next 2 to 3 years. Our outlook
for FY24 as a Group starts from the current base and a prudent
growth trajectory over the next few years, seeking to take
opportunity in China as it recovers, over the medium
term.
Japan closed a successful 2023
with 20% revenue growth, achieving £1 million of sales in 2023, and
a closing membership of almost 2,000 members, +5%
year-on-year.
Our other Asian markets operate on
a franchise basis, with new partners taking on Malaysia and
Singapore during the year.
Americas
The North American market is led
by the United States, supported by franchises in Canada and Mexico
- with the US business representing over 90% of the region based on
revenue delivery. From a shipment viewpoint, the market achieved
flat performance year-on-year, heavily impacted in the first half
by volume declines in the USA as a result of de-stocking as
consumer behaviour and on-trade consumption fell back to pre-Covid
levels.
Q4 in the market from a depletions
perspective was strong, achieving three consecutive months of
growth and a December out-turn that achieved the second highest
month of depletion sales on record. With full year depletions up
5%, and membership growth of +17%, the encouraging end to 2023
gives us strong momentum heading into FY24.
Other (Australia, New
Zealand and South Africa)
The other markets within SMWS,
representing 4% and 5% of the Group business based on revenue and
membership respectively, consist of our wholly-owned subsidiary in
Australia and franchise operations in New Zealand and South
Africa.
Performance was 20% down on prior
year from a revenue perspective, driven by economic conditions and
high inflation in Australia where consumer spending has been
cautious. Membership growth achieved was 5% year on year, again
driven by the Australian market, providing a good base for
2024.
Cost base investment setting us up for greater Gross Profit
delivery to the bottom line
Further investment in systems was
made in 2023, in line with our technology roadmap. As we enter
2024, the major investments of 2023 and earlier years have
materially concluded, meaning future revenue growth will ensure
gross profit flow-through to PBIT level.
The main elements of our cost base
(advertising & promotion (A&P), payroll and wider business
overhead costs), have seen increases year-on-year as a result of
our strategic investment plans. Importantly however, our H2
EBITDA1 delivery was supported by a cost base 16% lower
than H1, a result of investment predominantly made in H1. This
gives substance and focus for a well-controlled cost base in 2024
and beyond.
|
Selling & Distribution
Expenses
|
Administrative
Expenses
|
|
2023
|
2022
|
2023
|
2022
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Commission
|
1,524
|
1,461
|
|
|
Advertising & Promotion
(A&P)
|
3,081
|
2,743
|
|
|
Depreciation
|
1,455
|
1,259
|
|
|
FX Loss
|
178
|
40
|
|
|
Overheads
|
|
|
4,191
|
3,849
|
Payroll
|
|
|
6,712
|
6,026
|
Total
|
6,238
|
5,503
|
10,903
|
9,875
|
Within A&P, we have spent £3.1
million (2022; £2.7 million), the increase of £0.4 million driven
by marketing for our new product offerings. Investment in 2024 will
remain around the same level as 2023 as we seek continued
improvement on the return on our investment and less cost-intensive
marketing of product innovations.
From a payroll perspective, the
£0.7 million increased spend in 2023 at £6.7 million (2022; £6.0
million) is driven by two key elements - the high-inflationary
impact of pay increases in 2023, at an incremental cost of £0.3
million in year, as we remain committed to being a Real Living Wage
employer and utilising CPI as the main independent determinant of
pay review increases, and the organisational restructure costs of
£0.4 million following changes to our Executive and Management team
in the year.
Within wider business overhead
costs, investment of £0.3 million in our technology roadmap and
initial set-up costs of £0.1 million for new ventures in the year
relating to the Taiwan subsidiary and Single Cask Nation (SCN) have
resulted in a spend in 2023 of £4.3 million (2022; £3.9
million).
At a depreciation level, the
increased depreciation of £0.2 million relates to our new Supply
Chain Facility.
During the year we chose not to
hedge against our USD exposure, choosing to self-hedge alongside
our planned Single Cask Nation investment, resulting in £0.2
million FX loss in year. This will be further reviewed in
2024.
Share Incentive Schemes and EPS
We have followed up the award of
share options in 2022 with further options within the scheme. In
2023, 670,000 new share options were issued, consisting of time
vesting options for central office and venue staff. Senior
Management options are all performance related, based on revenue,
EBITDA1 and share price.
Our Earnings per Share at the end
of 2023 is (5.5p) as a result of the loss-making position, with
positive bottom-line return expected by 2026.
Balance sheet strength, supported by cash liquidity through
asset backed funding, allows for continued cask
investment
Our balance sheet strength remains
strong, with net assets of £18.3 million supported by further gross
investment in spirit and wood of around £4.7 million (2022: £3.0
million).
At a cash level, net cash from
financing activities increased by £6.6 million, more than planned
due to the greater loss after tax position; £3.7 million (2022;
£1.7 million), interest costs of £1.5 million (2022; £0.5 million),
as UK interest rates have climbed to their highest rate in over 15
years, and inventory holding - predominantly further net
spirit investment of £2.3 million (2022; 4.5 million), allowing us
to fully meet forecast demand for the next 5 years and 75% long
into the next decade.
We have also made strong
investment in key strategic areas in the business over FY23, with
£2.1 million (2022; £3.3 million) consisting of final elements of
Masterton Bond, fully operational midway through FY23, supported by
refurbishment of The Vaults in Edinburgh, our technology roadmap
including the launch of our new member app and continued investment
in cask wood.
During the year, we entered into a
new £15 million facility arrangement with Ferovinum to allow draw
down of more debt, which recognises the strength of the cask spirit
on our balance sheet and allows us to recognise relevant stock at a
truer market valuation to that of the more cautious valuation
approach used by banks in a classic asset based
facility.
These investments facilitate a
strong foundation for the future, delivering a number of strategic
priorities in 2023 that will deliver returns in 2024 onwards. The
major system investment planned for 2024 is our ePos improvement
programme, estimated at around £0.3 million.
The above investments, together
with a greater than expected loss before tax and additional
interest costs of around £1.0 million has resulted in a net
draw-down of debt of £7.9 million.
Improved optionality and flexibility for Group investment
through our complementary cask spirit, asset backed, Ferovinum
financing facility
Complementing our £21.5 million
existing revolving credit facility with The Royal Bank of Scotland
(RBS),
of which £1.5 million headroom
remains at the end of FY23, the Group agreed a new financing
facility of
£15 million with Ferovinum, giving
the Group further financial flexibility to develop its business via
recognition of the significant appreciating cask spirit asset
base.
The Ferovinum platform allows the
Group to convert our maturing stock into a financial asset at a
truer market valuation compared to the net book value held in the
balance sheet, and the only other externally guided amount provided
by the Bank (RBS). As part of the initial agreement, Ferovinum
extended to ASC £2.6 million in cash, through a cask spirit parcel
valuation of £3.8 million at 70% loan to value ratio, for a maximum
period of two years with the same headline interest margin as ASC's
existing RBS banking facility.
To highlight the significant value
increment achieved via Ferovinum, the Net Book Value of the casks
within the initial £3.8 million transaction held on the Balance
Sheet was £0.8 million, the RBS valuation was £1.3 million and
Ferovinum's valuation, using market generated intelligence was £3.8
million, representing a 380% and 191% incremental valuation on the
net book value and bank value respectively.
1EBITDA, a non-IFRS metric, is
Earnings before interest, tax, depreciation and amortisation (see
note 7)
2Adjusted EBITDA, a non-IFRS
metric, is calculated as EBITDA1 excluding exceptional
and non-recurring costs (see note 7)
Consolidated Statement of
Comprehensive Income for the year ended 31 December 2023
|
|
|
Notes
|
2023
£'000
|
2022
£'000
|
|
Revenue
|
6
|
23,500
|
21,781
|
|
Cost of sales
|
|
(8,499)
|
(7,936)
|
|
Gross profit
|
|
15,001
|
13,845
|
|
Selling and distribution
expenses
|
|
(6,238)
|
(5,503)
|
|
Administrative expenses
|
|
(10,901)
|
(9,875)
|
|
Finance costs
|
6
|
(1,516)
|
(576)
|
|
Other income
|
9
|
79
|
37
|
|
Loss on ordinary activities before taxation
|
7
|
(3,575)
|
(2,072)
|
|
Taxation
|
11
|
(158)
|
359
|
|
Loss for the year
|
|
(3,733)
|
(1,713)
|
|
Other comprehensive
income:
Items that may be reclassified to profit or loss:
Movements in cash flow hedge
reserve
|
|
(8)
|
31
|
|
Movements in translation
reserve
Tax relating to other
comprehensive loss
|
|
(64) -
|
(59) -
|
|
|
|
(72)
|
(28)
|
|
Total comprehensive loss for the year
|
|
(3,805)
|
(1,741)
|
|
Loss for the year attributable to:
- Owners of parent company
|
|
(3,848)
|
(2,010)
|
|
- Non-controlling interest
|
|
115
|
297
|
|
|
|
(3,733)
|
(1,713)
|
|
Total comprehensive loss for the year attributable
to:
- Owners of parent company
|
|
(3,920)
|
(2,038)
|
|
- Non-controlling interest
|
|
115
|
297
|
|
|
|
(3,805)
|
(1,741)
|
|
Basic EPS (pence)
|
12
|
(5.5p)
|
(2.9p)
|
|
Diluted EPS (pence)
|
12
|
(5.5p)
|
(2.9p)
|
|
Consolidated Statement of
Financial Position as at 31 December 2023
|
|
|
Notes
|
2023
£'000
|
2022
£'000
|
Non-current assets
Investment property
|
|
420
|
405
|
Property, plant and equipment
|
13
|
10,426
|
10,362
|
Intangible assets
|
|
2,389
|
2,249
|
|
|
13,235
|
13,016
|
Current assets
Inventories
|
14
|
30,564
|
28,303
|
Trade and other receivables
|
|
4,787
|
3,714
|
Cash and cash equivalents
|
|
1,235
|
2,331
|
|
|
36,586
|
34,348
|
Total assets
|
|
49,821
|
47,364
|
Current liabilities
Trade and other payables
|
|
3,216
|
3,703
|
Current tax liabilities
|
|
702
|
405
|
Financial liabilities
|
15
|
272
|
357
|
Lease liability
|
|
384
|
360
|
|
|
4,574
|
4,825
|
Net current assets
|
|
32,012
|
29,523
|
Non-current liabilities
Financial liabilities
|
15
|
23,809
|
16,984
|
Lease liability
|
|
2,575
|
2,959
|
Deferred tax liabilities
|
|
-
|
-
|
Provisions
|
|
589
|
580
|
Total non-current
liabilities
|
|
26,973
|
20,523
|
Total liabilities
|
|
31,547
|
25,348
|
Net assets
|
|
18,274
|
22,016
|
Equity
Called up share capital
|
|
176
|
174
|
Share premium account
|
|
15,255
|
14,997
|
Translation reserve
|
|
(140)
|
(76)
|
Retained earnings
|
|
2,789
|
6,685
|
Cash flow hedge reserve
|
|
-
|
8
|
Equity attributable to owners of the parent
|
|
18,080
|
21,788
|
Non-controlling interest
|
|
195
|
228
|
Net assets
|
|
18,275
|
22,016
|
Consolidated Statement of Changes
In Equity For the year ended 31 December 2023
£'000
|
Called up share capital
|
Share premium account
|
Retained earnings
|
Cash flow hedge reserve
|
Translation reserve
|
Other reserves
|
Total controlling
interest
|
Non- controlling interest
|
Total
equity
|
Balance at 31 December
2021
|
174
|
14,938
|
8,505
|
(23)
|
(17)
|
-
|
23,577
|
304
|
23,881
|
Issue of share capital
|
-
|
59
|
-
|
-
|
-
|
-
|
59
|
-
|
59
|
(Loss)/profit for the period
|
-
|
-
|
(2,010)
|
-
|
-
|
-
|
(2,010)
|
297
|
(1,713)
|
Share-based compensation
|
-
|
-
|
190
|
-
|
-
|
-
|
190
|
-
|
190
|
Dividend paid
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(373)
|
(373)
|
Other comprehensive gain/(loss)
|
-
|
-
|
-
|
31
|
(59)
|
-
|
(28)
|
-
|
(28)
|
Balance at 31 December
2022
|
174
|
14,997
|
6,685
|
8
|
(76)
|
-
|
21,788
|
228
|
22,016
|
Issue of share capital
|
2
|
258
|
-
|
-
|
-
|
-
|
260
|
-
|
260
|
(Loss)/profit for the period
|
-
|
-
|
(3,848)
|
-
|
-
|
-
|
(3,848)
|
115
|
(3,733)
|
Share-based compensation
|
-
|
-
|
(48)
|
-
|
-
|
-
|
(48)
|
-
|
(48)
|
Transactions with non-controlling
interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
65
|
65
|
Dividend payable
|
-
|
-
|
-
|
-
|
-
|
-
-
|
(213)
|
(213)
|
Other comprehensive gain/(loss)
|
-
|
-
|
-
|
(8)
|
(64)
|
-
(72)
|
-
|
(72)
|
Balance at 31 December 2023
|
176
|
15,255
|
2,789
|
-
|
(140)
|
- 18,080
|
195
|
18,275
|
Consolidated Statement of Cash
Flows For the year ended 31 December 2023
|
|
|
Notes
|
2023
£'000
|
2022
£'000
|
Loss for the year after
tax
Adjustments for: Taxation
charged
|
|
(3,733)
158
|
(1,713)
(359)
|
Finance costs
|
|
1,415
|
494
|
Interest receivable
|
|
(4)
|
(4)
|
Movements in provisions
|
|
9
|
10
|
Share-based payments
|
|
(48)
|
190
|
Investment property fair value
movement
|
|
(15)
|
(14)
|
Lease interest
|
|
101
|
82
|
Depreciation of tangible
assets
|
13
|
1,568
|
1,000
|
Amortisation of intangible
assets
Movements in working capital:
Increase in inventory
|
|
282
(2,261)
|
259
(4,496)
|
Increase in trade and other
receivables
|
|
(1,073)
|
(746)
|
(Decrease)/increase in trade and
other creditors
|
|
(700)
|
240
|
Cash absorbed by operations
|
|
(4,301)
|
(5,057)
|
Income taxes received/(paid)
|
|
139
|
(75)
|
Interest paid
|
|
(1,379)
|
(494)
|
Net cash outflow used in operating activities
|
|
(5,541)
|
(5,626)
|
Cash flow from investing activities
Purchase of intangible
assets
|
|
(422)
|
(88)
|
Purchase of property, plant and
equipment
|
13
|
(1,657)
|
(2,911)
|
Sale of property, plant and
equipment
|
13
|
23
|
-
|
Acquisition of subsidiary
|
|
-
|
(359)
|
Interest receivable
|
4
|
4
|
4
|
Net cash used in investing activities
|
|
(2,052)
|
(3,354)
|
Cash flows from financing activities
Share issue
|
|
260
|
59
|
Transactions with non-controlling
interest
|
|
65
|
-
|
Asset backed lending received
|
|
2,592
|
-
|
Inventory secured RCF facility
|
|
5,000
|
10,300
|
Dividends paid
|
|
-
|
(373)
|
Loan received
|
|
1,450
|
-
|
Repayment of loan
|
|
(2,336)
|
(148)
|
Repayment of leases
|
|
(461)
|
(354)
|
Net cash from financing activities
|
|
6,570
|
9,484
|
Net (decrease)/increase in cash and
cash equivalents
|
|
(1,023)
|
504
|
Cash and cash equivalents at
beginning of year
|
|
2,331
|
2,012
|
Foreign currency translation
|
|
(73)
|
-
|
Non-controlling interest
movement
|
|
-
|
(185)
|
Cash and cash equivalents at end of year
|
|
1,235
|
2,331
|
Relating to:
Bank balances and short term
deposits
|
|
1,235
|
2,331
|
Notes to the Financial
Statements
1) Basis
of preparation:
The condensed interim financial
information presents the consolidated financial results of
The Artisanal Spirits Company plc and its subsidiaries
(together the "Group") for the twelve months ended 31 December 2023
and the comparative figures for the twelve months ended 31 December
2022.
The Group's consolidated financial
statements have been prepared on a going concern basis under the
historical cost convention; in accordance with UK adopted
International Accounting Standards.
This statement does not include
all the information required for the annual financial statements
and should be read in conjunction with the Annual Report &
Accounts.
The financial information set out
above does not constitute the company's statutory accounts for 2023
or 2022. The statutory accounts for 2022 have been delivered to the
Register of Companies, and those for 2023 will be delivered in due
course. The independent auditor has reported on these accounts,
their reports were (i) unqualified, (ii) did not draw attention to
any matter by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
This announcement was approved on
behalf of the Board on 27 March 2024.
2) Accounting
Policies:
The accounting policies applied in
preparing the condensed consolidated financial information are the
same as those applied in the preparation of the Annual Report and
Accounts for the year ended 31 December 2023, and those applied in
the preparation of the Group's Historical Financial Information
included within the Company's Admission Document.
3) Going
concern:
The Directors are, at the time of
approving the financial statements, satisfied that the Group and
Company have adequate resources to continue in operational
existence for a period of at least 12 months. Thus, they continue
to adopt the going concern basis of accounting in preparing the
financial statements.
The Group meets its day-to-day
working capital requirements from a revolving credit facility of
£21.5m together with cash balances. The Group has further access to
a £15.0m inventory financing facility which can be drawn upon if
required. The revolving credit facility was renewed in December
2022 and is not due for renewal until December 2025 whilst the
inventory financing facility has an evergreen term.
The revolving credit facility has
quarterly leverage and covenants relating to minimum stock holding
level as a percent of the facility drawn down, the 'springing
test', which requires 135% of eligible inventory holding against
the RCF balance, reviewed monthly. Secondary covenants of
EBITDA1 (Earnings before Interest, Tax, Depreciation and
Amortisation) and Net Assets (excluding Intangibles) exist if the
springing test is not met.
The Group remained compliant with
its banking covenants throughout the year to 31 December
2023.
In the context of the above, the
directors have prepared cash flow forecasts for the period to 31
April 2025 which indicate that, taking account of reasonably
plausible downside scenarios, the Group will have sufficient funds
to meet its liabilities as they fall due for that
period.
The Directors have assessed the
potential future impacts of geopolitical risk and have modelled
scenarios as follows:
1. A base cash flow
forecast. The 2024 figures in this forecast are based on the
Group's 2024 budget, which is compiled using board approved
forecasts and reflecting current performance, expected revenue
growth and membership retention. The 2025 figures in the base cash
flow forecast are taken from the Group's 3-5 year long range
planning. This base case assumes a more prudent growth trajectory
than in previous years, with organic market growth rate at single
digit, supported by full year delivery of strategic initiatives
secured. Cost inflation has been considered and additional costs
have been included to account for increased wage
inflation.
2. A severe, but
plausible downside scenario. The directors have also prepared a
sensitised forecast which considers the impact of certain severe
but plausible downside events, when compared to the base case. This
severe but plausible downside scenario assumes an escalation of
geopolitical tensions in Asia with a resultant shut down of Asian
operations impacting revenue in excess of £5m per annum, together
with an associated reduction in global sales to a level similar to
that experienced during the recent Covid-19 pandemic. Under this
scenario, one-off costs to implement the required cost-base
reductions are assumed in the impacted markets.
In this scenario, capital
expenditure has been reduced whereas investment in spirit and wood
continues on a replenishment basis. Throughout the severe but
plausible downside scenario the Group would remain within its
facility limits and in compliance with the relevant covenants, with
further cash mitigation opportunities available through capital
expenditure, spirit and wood investment.
The Directors are mindful of the
potential impacts to macro-economic conditions and further risk of
disruption to supply chains that the conflict in Ukraine presents,
but after assessing the risks do not believe there to be a material
risk to going concern. Based on the above, the directors are
confident that the Group and Company will have sufficient funds to
continue to meet their liabilities as they fall due for at least 12
months from the date of approval of the financial statements, and
therefore the directors believe it remains appropriate
to
prepare the financial statements
on a going concern basis.
1EBITDA, a non-IFRS metric, is
Earnings before interest, tax, depreciation and amortization (see
note 7)
2Adjusted EBITDA, a non-IFRS
metric, is calculated as EBITDA1 excluding exceptional
and non-recurring costs (see note 7)
4) Principal
risks and uncertainties
The principal risks and
uncertainties affecting the Group are separately disclosed in the
Annual Report & Accounts.
5) Dividends
No dividend was declared or paid
during the period (prior period £nil).
6) Operating
Segments
Operating segments are reported in
a manner consistent with the internal reporting provided to the
chief operating decision-maker; Revenue and Gross Profit by
geography and by type.
|
Europe
|
Asia
|
Americas
|
Others
|
Group
|
2023
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Revenue
|
12,570
|
5,223
|
4,722
|
985
|
23,500
|
Cost of Sales
|
(5,783)
|
(1,415)
|
(896)
|
(405)
|
(8,499)
|
Gross Profit
|
6,787
|
3,808
|
3,826
|
580
|
15,001
|
Selling & distribution
costs
|
|
|
|
|
(6,238)
|
Administrative costs
|
|
|
|
|
(10,901)
|
Finance Costs
|
|
|
|
|
(1,516)
|
Other income
|
|
|
|
|
79
|
Loss before tax
|
|
|
|
|
(3,575)
|
Taxation
|
|
|
|
|
(158)
|
Net Loss
|
|
|
|
|
(3,733)
|
|
Europe
|
Asia
|
Americas
|
Others
|
Group
|
2022
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Revenue
|
9,804
|
6,099
|
4,670
|
1,208
|
21,781
|
Cost of Sales
|
(5,076)
|
(1,664)
|
(997)
|
(617)
|
(8,354)
|
Gross Profit
|
4,728
|
4,435
|
3,673
|
591
|
13,427
|
Selling & distribution
costs
|
|
|
|
|
(5,503)
|
Administrative costs
|
|
|
|
|
(9,875)
|
Finance Costs
|
|
|
|
|
(576)
|
Other income
|
|
|
|
|
37
|
Loss before tax
|
|
|
|
|
(2,072)
|
Taxation
|
|
|
|
|
359
|
Net Loss
|
|
|
|
|
(1,713)
|
Within Europe, the UK represents
the largest market, split UK Online and UK Venues, delivering £3.5
million (2022: £3.3 million) and £4.0 million (2022: £3.7 million),
respectively.
In the America's region, the
largest market being the US, shipment sales of £4.4 million was
flat on prior year (2022: £4.4 million), with in-market depletions
+5%, and Q4 alone +29%, year on year.
China represents the largest
market in Asia, revenue in the year of £3.5 million (2022: £5.0
million) representing a 30% decline on the prior year, impacted by
the economic headwinds within the market.
Other is predominantly represented
by Australia, with revenue of £0.8 million (2022: £1.0
million).
The Board does not receive a
segmental breakdown of assets and liabilities, depreciation or
capital expenditure.
An analysis of the Group's revenue
by product category is as follows.
|
|
|
2023
|
2022
|
|
£'000
|
£'000
|
Revenue from sale of whisky
|
18,161
|
16,972
|
Membership income
|
1,724
|
1,479
|
Revenue from sale of other
spirits
|
143
|
149
|
Member rooms
|
2,244
|
2,025
|
Events and tastings
|
886
|
827
|
Other
|
342
|
329
|
Total revenue
|
23,500
|
21,781
|
Revenue from the sale of whisky in
2022 has been adjusted to include £344k of trade sales of cask
whisky, previously presented within other.
7) Loss
on ordinary activities before taxation
|
2023
£'000
|
2022
£'000
|
Operating loss is stated after charging:
Amortisation of intangible
assets
|
282
|
259
|
Depreciation on tangible
assets
|
1,173
|
1,000
|
Cost of inventories recognised as
an expense
|
5,759
|
6,111
|
Net foreign exchange loss
|
79
|
11
|
Reconciliation of
adjusted EBITDA:
|
|
|
Loss on ordinary activities before
taxation
|
(3,575)
|
(2,072)
|
Add back; Depreciation of tangible
assets
|
1,173
|
1,000
|
Add back; Depreciation of
production assets within cost of sales
|
106
|
-
|
Add back; Amortisation of
intangible assets
|
282
|
259
|
Add back; Finance Costs - interest
on loans
|
1,415
|
494
|
Add back; Finance Costs -
leases
|
101
|
82
|
EBITDA
|
(498)
|
(237)
|
Exceptional items and non-recurring costs
|
647
|
631
|
Adjusted EBITDA
|
149
|
394
|
Adjusted EBITDA and loss for the
year are stated after including £nil (2022: £0.2m) of share based
payment costs.
8)
KPIs
Certain KPIs relating to membership
are monitored by the Board and by Management, as
follows:
2023
|
Revenue
£'000
|
Year End Members
|
Average Members
|
Annual Revenue/ Member £
|
Annual Contribution/
Member £
|
Retention
%
|
Expected
Years
|
LTV
(Members)
£
|
Europe
|
10,231
|
25,921
|
24,987
|
409
|
187
|
78
|
4.6
|
866
|
Asia
|
5,223
|
4,865
|
4,249
|
1,229
|
878
|
63
|
2.7
|
2,355
|
Americas
|
4,722
|
8,281
|
7,511
|
628
|
366
|
67
|
3.0
|
1,107
|
Other
|
977
|
1,977
|
1,958
|
499
|
291
|
70
|
3.3
|
970
|
Total
|
21,153
|
41,044
|
38,706
|
547
|
303
|
74
|
3.9
|
1,173
|
Change vs prior year
|
-
|
+10%
|
+9%
|
-9%
|
-7%
|
-3%
|
-9%
|
-15%
|
|
Revenue
|
Year
End
|
Average
|
Annual Revenue/
|
Annual Contribution/
|
Retention
|
Expected
|
LTV
(Members)
|
2022
|
£'000
|
Members
|
Members
|
Member
£
|
Member
£
|
%
|
Years
|
£
|
Europe
|
9,408
|
24,494
|
23,304
|
404
|
173
|
80
|
5.1
|
885
|
Asia
|
6,056
|
3,770
|
3,668
|
1,651
|
1,180
|
64
|
2.7
|
3,234
|
Americas
|
4,618
|
7,148
|
6,632
|
696
|
392
|
68
|
3.1
|
1,235
|
Other
|
1,129
|
2,004
|
1,818
|
620
|
318
|
80
|
4.9
|
1,556
|
Total
|
21,209
|
37,416
|
35,422
|
599
|
326
|
77
|
4.3
|
1,387
|
1. Contribution is a non-IFRS measure, and is defined by
Management as Gross Profit less Commission paid on sales (primarily
in relation to the USA)
2. Expected Years is a non-IFRS measure and is defined by
Management as one divided by one minus retention 1/(1-r%).
3. Lifetime Value (LTV) is a non-IFRS measure, and is defined as
Annual Gross Profit per member, multiplied by expected years.
4. Total
revenue excludes trade cask sales within Europe and JG Thomson
trade sales totaling £2,347k (2022: £572k) which are unrelated to
membership proposition.
9)
Other operating income
|
2023
£'000
|
2022
£'000
|
Other income
|
79
|
37
|
|
79
|
37
|
Other income in 2023 relates to a
refund of previously overpaid expenses in SMWS China, other income
in 2022 is predominantly the ageing of gift vouchers past expiry as
well as interest received on VAT refunds from HMRC.
10)
Exceptional and non-recurring costs
|
2023
£'000
|
2022
£'000
|
Organisational restructuring costs
|
418
|
1
|
Acquisition and
transaction-related costs
|
138
|
288
|
Masterton pre-operational
costs
|
91
|
342
|
|
647
|
631
|
In 2023 non-recurring costs
comprise; executive and senior management team restructuring costs,
pre-acquisition costs in relation to the Group's new operations in
Taiwan and the Group's acquisition of Single Cask Nation subsequent
to the year end, and costs relating to finalisation of the
Masterton Bond start-up which became operational in
2022.
The 2022 non-recurring costs
relate to pre-operational expenses in setting up the Masterton Bond
site to be operational by the end of 2022, and the initial costs of
the American Whiskey concept and brand assessment and development
as well as establishment of relevant legal entities. These costs
are fully expensed in the year with no revenue achievement and are
therefore separately shown to make clear the underlying profitable
performance of the business.
11)
Taxation
|
2023
£'000
|
2022 £'000
|
Current income tax
UK corporation tax
|
|
|
Adjustment in respect to prior
periods
|
(45)
|
(250)
|
Foreign tax
|
203
|
454
|
Current tax charge
|
158
|
204
|
Deferred tax
Relating to origination and
reversal of temporary timing differences
|
-
|
(386)
|
Adjustment in respect to prior
periods
|
-
|
(52)
|
Effect of changes of tax
rates
|
-
|
(125)
|
Deferred tax credit
|
-
|
563
|
Tax on ordinary activities
|
158
|
(359)
|
12)
Earnings per Shares (EPS)
|
2023
£'000
|
2022
£'000
|
Earnings used in calculation
|
(3,848)
|
(2,010)
|
Number of shares
|
70,214,725
|
69,708,374
|
Basic EPS (p)
|
(5.5p)
|
(2.9p)
|
Number of dilutable shares
|
74,989,595
|
74,746,138
|
Diluted EPS (p)
|
(5.5p)
|
(2.9p)
|
All dilutable potential shares
relate to share options. A loss per share is not diluted. The
number of shares and number of dilutable shares shown represent the
weighted average for the period.
13) Property,
plant and equipment
|
Land and buildings
|
Land and buildings
|
Leasehold
|
Fixtures, fittings and
|
|
Right-of
use
|
|
|
freehold
|
leasehold
|
improvements
|
equipment
|
Cask
wood
|
asset
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Cost or valuation
As at 1 January 2022
|
678
|
1441
|
498
|
1,968
|
2,745
|
4,343
|
11,673
|
Additions
|
-
|
-
|
5
|
2,202
|
704
|
162
|
3,073
|
As at 31 December 2022
|
678
|
1,441
|
503
|
4,170
|
3,449
|
4,505
|
14,746
|
Additions
|
-
|
-
|
-
|
817
|
840
|
-
|
1,657
|
Disposals
|
-
|
-
|
-
|
(25)
|
-
|
-
|
(25)
|
As at 31 December 2023
|
678
|
1,441
|
503
|
4,962
|
4,289
|
4,505
|
16,378
|
Accumulated depreciation
As at 1 January 2022
|
168
|
1,027
|
251
|
844
|
345
|
661
|
3,296
|
Charge for the year
|
13
|
70
|
55
|
328
|
148
|
474
|
1,088
|
As at 31 December 2022
|
181
|
1,097
|
306
|
1,172
|
493
|
1,135
|
4,384
|
Charge for the year
|
15
|
70
|
47
|
849
|
169
|
420
|
1,570
|
Released on disposal
|
-
|
-
|
-
|
(2)
|
-
|
-
|
(2)
|
As at 31 December 2023
|
196
|
1,167
|
353
|
2,019
|
662
|
1,555
|
5,952
|
Net book value
|
|
|
|
|
|
|
|
As at 31 December 2022
|
497
|
344
|
197
|
2,998
|
2,956
|
3,370
|
10,362
|
As at 31 December 2023
|
482
|
274
|
150
|
2,943
|
3,627
|
2,950
|
10,426
|
£151k (2022: £88k) of the
depreciation charge for cask wood, £65k of the depreciation charge
for fixtures, fittings and equipment.
£74k of the depreciation charge
for right-of-use assets have been capitalised as costs of stock.
The remaining balance has been expensed to the Statement of
Comprehensive Income.
Leases are in relation to the
Group's supply chain facility at Masterton Bond in addition to
venues at Queen Street in Edinburgh and Bath Street in
Glasgow.
Right of use assets included in
the Consolidated Statement of Financial Position were as
follows.
|
|
|
Venues
|
Supply
Chain
Facility
|
Total
|
At 1 January
2022(i)
|
1,520
|
2,162
|
3,682
|
Additions
|
-
|
162
|
162
|
Depreciation
|
(188)
|
(286)
|
(474)
|
At 31 December 2022(i)
|
1,332
|
2,038
|
3,370
|
Depreciation
|
(187)
|
(233)
|
(420)
|
At 31 December 2023
|
1,145
|
1,805
|
2,950
|
(i) Right of Use Assets at 1
January 2022 and at 31 December 2022 has been adjusted to
reclassify £187k of assets from Supply Chain Facility to Venues,
with no change to the reported total balance.
Lease Liabilities included in the
Consolidated Statement of Financial Position were as
follows.
|
|
|
|
Supply
Chain
|
|
|
Venues
|
Facility
|
Total
|
At 1 January 2022
|
1,428
|
2,163
|
3,591
|
Additions
|
51
|
31
|
82
|
Depreciation
|
(200)
|
(154)
|
(354)
|
At 31 December 2022
|
1,279
|
2,040
|
3,319
|
Interest payment
|
51
|
50
|
101
|
Repayment of lease liability
|
(199)
|
(262)
|
(461)
|
At 31 December 2023
|
1,131
|
1,828
|
2,959
|
14) Inventories
|
Group
|
|
|
2023
£'000
|
2022
£'000
|
Cask Goods
|
25,343
|
23,034
|
Bottled stock
|
3,092
|
3,298
|
Other inventory
|
2,129
|
1,971
|
|
30,564
|
28,303
|
The cost of inventories recognised
as an expense during the year was £5,759k (2022: £6,111k). The cost
of inventories recognised as an expense includes £151k (2022: £4k)
in respect of write-downs of bottled stock and other
inventory.
Inventories with a carrying amount
of £795k (2022: £nil) have been pledged as security for certain of
the Group's financing facilities.
15) Financial
liabilities
|
|
Group
|
|
|
|
|
2023
£'000
|
2022
£'000
|
|
Inventory Secured RCF
|
|
20,000
|
16,500
|
|
Inventory financing
|
|
2,628
|
-
|
|
Bank loans
|
|
1,418
|
784
|
|
Other loans
|
|
35
|
57
|
|
Total financial liabilities
|
|
24,081
|
17,341
|
|