Stock Spirits announces ‘solid’ start to 2019
Central and eastern European group Stock Spirits has reported a “solid” performance for the start of 2019 and will “continue to assess a range of other opportunities” following its recent acquisition of Distillerie Franciacorta.
In the company’s latest trading update for the period from 1 October 2018 to 14 February 2019, Stock Spirits said it is “on track with its plans for the year as a whole”.
Last month, the group signed a deal to acquire Italian grappa producer Distillerie Franciacorta for €23.5 million (US$27m).
Stock Spirits said the acquisition shows the company’s “willingness to undertake value-creating M&A (mergers and acquisitions) as part of its four pillar growth strategy”.
The firm has previously said that “in the absence of further M&A it would as a matter of course consider returning cash to investors via additional shareholder distributions”.
The deal has been criticised by Western Gate – Stock Spirits’ largest shareholder – following calls for the removal of Stock Spirits’ chairman and senior independent director over concerns regarding “significant shareholder value destruction”.
Western Gate said the acquisition was “another example of Stock Spirits only acting under pressure from shareholders”.
For the three-month period from 1 October to 31 December 2018, the total vodka market grew in value by 2.4% and increased in volume by 0.9% year on year, according to Nielsen figures. The growth was attributed to the flavoured and clear vodka categories.
Stock Spirits said it has “now delivered 20 consecutive months of profitable year-on-year market share growth in a pricing environment which remains very competitive”.
In the Czech Republic, the company’s market share “returned to growth”, with value market share at the end of 2018 (34.2% moving annual total) ahead of 2017 (33.5% MAT).
Meanwhile, in Italy, “the categories in which Stock operates continues to decline”.
Stock Spirits will become the number one branded grappa business by value in the Italian off-trade as a result of the Distillerie Franciacorta deal. This is in addition to the group’s “established brand leadership positions in limoncello, clear and flavoured vodka, and its number two position in brandy”.
At the end of 2018, Stock Spirits received an assessment from the Polish tax authority related to its 2013 pre-IPO intellectual property restructuring and certain other historic intra-group transfer pricing matters.
The company has resolved this valuation with payments, including interest and penalties, of €5.5m (US$6.2m) in total, €1m of which has already been provided for in its accounts.
Stock Spirits is seeking recovery of €4.5m (US$5m) of these payments through the normal appeals process. The company added that “there is no material impact on the financial position or performance of the group arising from this assessment and related payments”.