Restructure slows Stock Spirits sales decline

The decline of Stock Spirits’s sales slowed to -0.6% in 2016, but the Central and Eastern European drinks group continues to face aggressive criticism from its largest shareholder.

Stock Spirits continues to face aggressive criticism from its main shareholder

The beleaguered firm has been embroiled in a battle with its largest shareholder – Western Gate Private Investments – over the past year due to Stock’s disappointing financial performance that was spurred by a loss of market share in its key Polish market.

In 2016, the company’s net sales revenue fell 0.6% to €261 million (US$275m), however profit after tax was up 46.4% to €28.4m (US$29.9m). In 2015, revenue fell 11% and profit after tax plummeted 46%.

Last year, the firm’s volumes increased 4.2% to 12.3m nine-litre cases thanks to the “continuing stabilisation” of its business in Poland, which Stock insists “remains highly competitive”.

David Maloney, chairman of Stock Spirits, announced a ‘root to branch’ strategy review for the company following its 2015 financial results, with an aim to claw back market share in the country and target wider growth opportunities.

Mirek Stachowicz, CEO of Stock Spirits, commented: “2016 has been a year of significant change for Stock Spirits, and we have emerged from it in a much stronger position than we were in this time last year.

“Trading has remained challenging in our core Polish market, where there have been several significant changes in the competitive landscape. Against that backdrop, we are pleased to have made tangible progress across a range of strategic initiatives that are aimed at improving the long-term performance of the group.

“Furthermore, we are now starting to see signs of stabilisation in our Polish business, as reflected by the market share gains that we achieved in both value and volume terms during the second half of 2016 versus the first half.”

Executive reshuffle

Stachowicz was named CEO of Stock Spirits following the retirement of Chris Heath, who left the company off the back of a shareholder revolt led by Western Gate Private Investments.

The equity firm, headed by Eurocash boss Luis Amaral, remains critical of Stock Spirits. Following the publication of this latest set of results, Amaral highlighted a 22% drop in EBITDA.

“In addition, costs have not fallen at all,” he added. “Shareholders simply do not understand why the company insists on keeping its expensive head office in the UK.”

Stock Spirits operates primarily in Poland, the Czech Republic, Italy and Slovakia but is headquartered in the UK. The firm launched its IPO in 2013.

“As the biggest independent shareholder in Stock Spirits, we are concerned by these continuing trends,” continued Amaral.

“All the many changes the company has made in the last 12 months seem to have had no impact on what is important to investors: an improvement in the core market of Poland; and a reduction in bloated costs. Further radical change is required to address this downward spiral.”

Stachowicz said that while he is aiming to “simplify and delayer” the business by transferring some activities from its London HQ to local markets, fully relocating management to Warsaw “was not compelling”.

Last year, Stock Spirits closed its office in Switzerland and scrapped its chief operating officer role, leading to the redundancy of long-serving employee Ian Croxford.

The group also replaced its entire Polish management team and implemented “reward mechanisms” as incentives for senior management.

In October 2016, Stock Spirits made its first acquisition since floating on the London Stock Exchange, purchasing Prazska Vodka, Nordic Ice and Dynybyl Gin for CZK135m (US$5.5m).

“Since taking over as CEO I have pursued an intensive agenda of change,” continued Stachowicz. “My focus on Poland continues unabated, and will remain so until I am happy that the business is able to deliver sustainable top line and profit growth.

“The focus in 2017 will continue to be on the turnaround of the Polish business and making sure that the group delivers on its strategic objectives. To facilitate this, we will remain focused on delivering cost savings, driving profit and cash and developing our people to build a highly motivated team.”