Final Results

RNS Number : 1056J

Distil PLC

09 June 2014

 

Distil plc

("Distil" or the "Group")

Final Results for the Year Ended 31 March 2014

"A year of development and investment to achieve future growth"

Distil (AIM: DIS), owner of premium drinks brands including Blavod Black Vodka, Blackwoods Gin and Vodka and RedLeg Spiced Rum, today announces its final results for the year ended 31 March 2014.

Key Points:

Financial

	31 March 2014	31 March 2013
	(£,000)	(£,000)
Sales	2,405	3,785
Operating loss	(367)	(619) *
Administrative Expenses	714	1,011
Advertising and Promotional costs	235	177

   *299k of this is non-recurring   

Owned brands

·     36% increase in sales of Blackwoods Gin and 37% increase in RedLeg Spiced Rum

·     Successful launch of Blackwoods Vintage Dry Gin, Blackwoods Limited Edition 60%ABV Gin and Blackwoods Vodka

·     Diva Vodka and Jago re-designed and nearing re-launch in UK

·     International network increasing with Spanish distributor appointed

Agency brands

·     Cessation of distribution agreement with Babco and Bruichladdich Distillery brands

Corporate

·     Share placing in October 2013

·     Name change to Distil plc

Don Goulding, Executive Chairman of Blavod, said:

"We have continued to transform the business by focussing on selling our own brands through distributors and have successfully developed and launched new products which have been well received in the market. Inevitably these financial results reflect the costs of these changes.  However the majority of these costs are non-recurring in nature and having successfully raised additional working capital (from our very supportive shareholders) earlier in the year, we are now well placed to concentrate on growing sales further and launching new products later this year."

Distil plc
Don Goulding Executive Chairman	Tel: [phone]
SPARK Advisory Partners Limited (NOMAD)
Neil Baldwin  Mark Brady	Tel [phone] /2268
SI Capital (Broker)
Andy Thacker Nick Emerson	Tel [phone]
Cadogan PR
Alex Walters	Tel: [phone]

Chairman's statement

In the year to 31 March 2014 the Group has steadily transformed its business model from one where we distributed both owned and third party agency spirits brands within the UK, direct to customers via our own direct sales force, to one where we now focus solely on the development of our owned brands. Sales are now made to distributors within each market leaving the Group to focus exclusively on brand development, distributor selection and support.

With this fundamental shift in business model has come an amount of key investment and expense. During the year investment in the development of our owned brands was incurred in the form of direct expense of £90k and tooling costs and product reconfiguration amounting to £22k. Expense has also been incurred in the form of redundancy and associated costs in relation to the former sales force amounting to £58k.

The ownership of our owned brand portfolio was consolidated in May 2013 with the completion of the acquisition of Blackwoods Gin and Vodka, Diva Vodka and Jago's cream liqueur. This, combined with the funding generated by the private placing in October 2013, has enabled the re-launch of Blackwoods Vintage Dry Gin and Blackwoods Limited Edition 60% ABV in September 2013, followed by Blackwoods Vodka in March 2014. All three have been well received and are now stocked in a growing list of UK bars and retail outlets.

The development of both Diva and Jago's is now nearing completion and we expect to announce the launches of these products later in the year.

Marketing and Distribution
During the year we ran a number of highly successful promotional events including the RedLeg Spiced Rum pop-up "Rum Shacks" which appeared across major cities in the UK including Edinburgh, Glasgow, Manchester, Leeds, Newcastle, London, Bristol and Brighton during November and December. 

In January we signed an exclusive distribution agreement with Madrid based distributor The Water Company for an initial three year term to cover all Spanish territories, these represent the single largest gin market in Europe and the single largest rum market in the world.

Our agreement with Waldemar Behn GmbH & Co for production and distribution of Blavod Black Vodka in Germany continues to progress well and we have continued to see increased sales in new and existing European markets.

Discontinued Brands
Early in the year we announced that we would cease to be distributors of the Bruichladdich Distillery Brands as we unwound our activities with third party agency brands and concentrated on the development of our owned brands and we also announced in February this year that we would no longer distribute the Babco brand, Mickey Finn.

Name change
In line with the changing focus and nature of the business which is now predominantly a distilled spirits business, entirely focused on designing and marketing a growing portfolio of its own brand, it was agreed to change the name of the Group to Distil plc after the period end in April.

Placing
In October we raised £571k through a placing of 57.13 million New Ordinary Shares, these funds are being used for working capital, brand marketing and the activation and development of our new brands.

The loss for the year of £392k (2013: £738k of which £299k was non-recurring) is in line with our expectations. The Group has sufficient cash reserves to meet its needs as it steadily moves to the planned break even position.

D. Goulding
6 June 2014

Strategic report

Result for the year
The operating loss attributable to shareholders for the year amounted to £367k (2013: loss of £619k). The current year loss relates solely to ongoing activities. The prior year operating loss comprised £299k of non recurring expenses related to an aborted acquisition and a trading loss of £320k which related to ongoing activities.

Within the current year's expenses there has been significant expense incurred in changing the business model and investing in our owned brands as detailed in the Chairman's statement.

The directors' primary focus is to return the Group to a sustainable break even position and ultimately to turn to profit.

Principal activities and business review
Distil plc acts as a holding company for the entities in the Distil group (the "Group"). As detailed in the Chairman's statement the principal activity of the Group throughout the period under review was the marketing and selling of Blavod Black Vodka, Blackwoods Gin and Vodka and RedLeg Spiced Rum domestically and internationally and, prior to their steady transition out of the business, a number of third party agency brands of spirits in the UK.

The results for the 2014 financial year reflect the steady work in refocusing the business on its key owned brands, both the active brands detailed above and Diva and Jago's which are being rebranded ready for re-launch.

Key performance indicators
The Group monitors progress with particular reference to the following key performance indicators:

·         Contribution - defined as gross margin less advertising and promotional costs
      Contribution from owned brands fell £93k from £228k in 2013 to £136k in 2014. This result is after active
      spend on re-launching Blackwoods Gin and Vodka and preparing for the re-launch of Diva, Jago and the
      launch of another new brand under development in the amount of £111k. The benefits of this investment
      will be derived in 2015 and thereafter as the brands build distribution and consumer sales develop.

·          Sales volume versus prior year
       Total volume of owned brands sold was flat year on year despite the lack of a US distributor for Blavod
       Black Vodka in 2014. Arrangements with the previous US distributor came to an end in 2013 as the
       Group chose to terminate the relationship and seek a new distributor. Volume increases following the
       successful re-launch of Blackwoods Gin and Vodka and the further increase in volumes of RedLeg
       Spiced Rum compensated for this shortfall.

·          Sales turnover versus previous year
       For owned brands this increased by 7% year on year. Notable within this were the 36% increase in
       sales of Blackwoods Gin and 37% increase in RedLeg Spiced Rum which outweighed the temporary
       fall in sales of Blavod Black Vodka due to the lack of a US distributor.
       Agency brand sales fell by 46% year on year and, with the transfer out of agency brands nearly
       complete, these should be minimal in the year to 31 March 2015.

·          Gross margin versus previous year
       Owned brand gross profit as a percentage of sales fell slightly from 48% to 46%. This is due to the
       move from direct sales in the UK to operating via a distributor with the associated benefit moving from
       gross margin to a reduction in overheads. Overall the margin movement was positive given tooling cost
       increases as we prepared for brand re-launches. These costs shaved 3% from the margin thereby
       demonstrating the continuing improvement in export margins as we carefully consolidate and in some
       cases establish new relationships with overseas distributors.

       We also closely monitor both the level of and the value derived from our advertising and promotional
       costs and other administrative expenses. Advertising and promotional costs on owned brands
       increased by £106k from £97k to £203k. Of this amount £90k related to investment in brand redesign
       and liquid development in preparation for re-launches.

       Other administrative expenses reduced by £283k from £1,011k to £728k. Within this figure the Group
       incurred £58k of redundancy and associated costs related to the redundancies announced in May 2013.

Future developments
The Group has historically carried a large proportion of its overheads as fixed costs. The effect of reducing overheads during the year to 31 March 2014 will enable the Group to sustain this annual cost reduction in the amount of approximately £325k over the overhead level of the previous year.

Principal risks and uncertainties
The management of the business and the nature of the Group's strategy are subject to a number of risks. The directors have set out below the principal risks facing the business.

The directors are of the opinion that a thorough risk management process has been adopted which involves the formal review of all the risks identified below. Where possible, processes are in place to monitor and mitigate such risks.

Economic downturn
The success of the business is reliant on consumer spending. An economic downturn, resulting in reduction of consumer spending power, will have a direct impact on the income achieved by the Group. In response to this risk, senior management aim to keep abreast of economic conditions. In cases of severe economic downturn, marketing and pricing strategies will be modified to reflect the new market conditions.

High proportion of fixed overheads and variable revenues
A large proportion of the Group's overheads are fixed. There is the risk that any significant changes in revenue may lead to the inability to cover such costs. Senior management closely monitor fixed overheads against budget on a monthly basis and cost saving exercises are implemented wherever possible when there is an anticipated decline in revenues.

Competition
The market in which the Group operates is highly competitive. As a result there is constant downward pressure on margins and the additional risk of being unable to meet customer expectations. Policies of constant price monitoring and ongoing market research are in place to mitigate such risks.

Failure to ensure brands evolve in relation to changes in consumer taste
The Group's products are subject to shifts in fashions and trends, and the Group is therefore exposed to the risk that it will be unable to evolve its brands to meet such changes in taste. The Group carries out regular consumer research on an ongoing basis in an attempt to carefully monitor developments in consumer taste.

Portfolio management
A key driver of the Group's success lies in the mix and performance of the brands which form part of the Group's portfolio. The Group constantly and carefully monitors the performance of each brand within the portfolio to ensure that's its individual performance is optimised together with the overall balance of performance of all brands marketed and sold by the Group.

By order of the Board
Sarah Bertolotti
 6 June 2014

Directors' report

Review of business and financial performance
Information on the financial position and development of the Group is set out in the Chairman's statement and the strategic report.

Results
The Group reports an operating loss attributable to shareholders for the year of £367k (2013: loss of £619k). The current year loss relates solely to ongoing activities. The prior year loss comprised £299k of non recurring expenses related to an aborted acquisition and a trading loss of £320k which related to ongoing activities.

Subsequent events
In October 2013, the Group served notice on its invoice discounting facility. This notice period came to an end on 28 April 2014 at which point the facility ceased.

Financial risk management
Details of the Group's financial risk management objectives and policies and its exposure to risks associated with the use of financial instruments are disclosed in note 18 to the financial statements.

Directors
The directors of the company who served during the year and/or up to the date of this report are as follows:

S. Bertolotti
D. Goulding     (Executive Chairman)
M. Quinn          (Non-executive)

Qualifying third party indemnity provision
The Group maintains qualifying third party indemnity provision for the benefit of the directors.

Statement of disclosure to auditor
The directors confirm that:
·      so far as each director is aware, there is no relevant audit information of which the company's auditor is unaware; and
·      the directors have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Auditor
Chantrey Vellacott DFK LLP has expressed its willingness to continue in office. In accordance with section 489(4) of the Companies Act 2006, a resolution to re-appoint Chantrey Vellacott DFK LLP as auditor will be proposed at the Annual General Meeting to be held on 3 July 2014.

Going concern
The Group incurred a consolidated loss of £392k during the year under review. The Group also held cash reserves in the amount of £344k at the year-end following the private placing in October 2013.

The Group has prepared detailed three year forward forecasts for the business in its new format. These forecasts have been prepared on a prudent basis without reliance on major new customers and markets, although these are anticipated. These forecasts demonstrate the Group's steady move forwards towards its planned break even position following its change in business model. The forecasts demonstrate that the current cash reserves are sufficient to meet the Group's needs for the foreseeable future.

For these reasons, the Group continues to adopt the going concern basis in preparing the report and accounts.

Statement of directors' responsibilities
The directors are responsible for preparing the directors' report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the consolidated financial statements under International Financial Reporting Standards as adopted by the European Union (IFRS) and the parent company financial statements under United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable laws). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the company and Group for that period. In preparing these financial statements, the directors are required to:
·      select suitable accounting policies and then apply them consistently;
·      make judgments and accounting estimates that are reasonable and prudent;
·      state whether applicable IFRS have been followed for the consolidated financial statements and UK Accounting Standards have been followed for the parent company financial statements, subject to any material departures disclosed and explained in the financial statements;
·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

S. Bertolotti
6 June 2014

Consolidated statement of comprehensive income
for the year ended 31 March 2014

		2014 £'000	2013 £'000
Revenue		2,405	3,785
Cost of sales		(1,830)	(2,908)
Gross profit		575	877
Administrative expenses:
Advertising and promotional costs		(235)	(177)
Other administrative expenses		(714)	(1,011)
Depreciation and amortisation	0	(7)	(9)
Non recurring expenses		-	(299)
Other operating income		14	-
Total administrative expenses		(942)	(1,496)
Operating loss		(367)	(619)
Finance expense		(25)	(119)
Loss before tax from continuing operations		(392)	(738)
Taxation		-	-
Loss for the year and total comprehensive expense		(392)	(738)
Loss per share
Basic and diluted (pence per share)		(0.12)	(0.40)

Consolidated balance sheet

as at 31 March 2014

		2014 £'000	2013 £'000
Assets
Non-current assets
Property, plant and equipment		9	17
Intangible assets		1,493	1,418
Total non-current assets		1,502	1,435
Current assets
Inventories		64	361
Trade and other receivables		361	628
Cash and cash equivalents		344	60
Total current assets		769	1,049
Total assets		2,271	2,484
Liabilities
Current liabilities
Trade and other payables		(314)	(428)
Finance facility liability		-	(259)
Total current liabilities		(314)	(687)
Total liabilities		(314)	(687)
Net assets		1,957	1,797
Equity
Equity attributable to equity holders of the parent company
Share capital		1,153	1,096
Share premium		1,853	1,358
Retained deficit		(1,049)	(657)
Total equity		1,957	1,797

Consolidated statement of changes in equity

for the year ended 31 March 2014

	Share capital £'000	Share premium £'000	Retained earnings £'000	Total equity £'000
Balance at 1 April 2012	878	-	81	959
Issue of ordinary shares at a premium	218	1,358	-	1,576
Transactions with owners	218	1,358	-	1,576
Loss for the year and total comprehensive expense	-	-	(738)	(738)
Balance at 31 March 2013 and 1 April 2013	1,096	1,358	(657)	1,797
Issue of ordinary shares at a premium	57	495	-	552
Transactions with owners	57	495	-	552
Loss for the year and total comprehensive expense	-	-	(392)	(392)
Balance at 31 March 2014	1,153	1,853	(1,049)	1,957

Consolidated cash flow statement

for the year ended 31 March 2014

		2014 £'000	2013 £'000
Cash flows from operating activities Loss before taxation Adjustments for:		(392)	(738)
Finance expense		25	119
Depreciation		7	9
Loss on disposal of property, plant and equipment		2	-
		(358)	(610)
Movements in working capital
Decrease/(increase) in inventories		297	(27)
Decrease in trade and other receivables		267	350
Decrease in trade payables		(114)	(446)
Cash generated by/(used in) operations		450	(123)
Net finance expense		(25)	(58)
Net cash generated by/(used in) operating activities		67	(791)
Cash flows from investing activities
Purchase of property, plant and equipment		(1)	(2)
Expenditure relating to the acquisition of licences and trade marks		(75)	(15)
Net cash used in investing activities		(76)	(17)
Cash flows from financing activities
Proceeds from issue of shares net of issue costs		552	1,139
Net cash repaid to finance facility		(259)	(348)
Net cash generated by financing activities		293	791
Net increase/(decrease) in cash and cash equivalents		284	(17)
Cash and cash equivalents at beginning of year		60	77
Cash and cash equivalents at end of year	4	344	60

1 Basis of preparation and summary of significant accounting policies

The consolidated financial statements are for the year ended 31 March 2014. They have been prepared in accordance with the requirements of International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention.

These consolidated financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company. Unless otherwise stated, all amounts are given in round £'000s.

Distil plc is the Group's ultimate parent company. The company is a public limited company incorporated and domiciled in the United Kingdom. The address of Distil plc's registered office and its principal place of business is 3rd Floor, Cardinal House, 39/40 Albemarle Street, London W1S 4TE.

These results are audited, however, the financial information does not constitute statutory accounts as defined under section 434 of the Companies Act 2006. The consolidated balance sheet at 31 March 2014 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended have been extracted from the Group's 2014 statutory consolidated financial statements upon which the auditor's opinion is unqualified.

The financial information for the year ended 31 March 2013 has been derived from the Group's statutory consolidated financial statements for that year, as filed with the Registrar of Companies. Those consolidated financial statements contained an unqualified audit report, with an emphasis of matter paragraph on going concern. 

Copies of the Annual report will be sent to shareholders shortly and will available on the company's website www.distil.uk.com and from the company's registered office 3^rd Floor, Albemarle Street, London W1S 4TE.
 

 

END

 

 

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