SMWS owner grows earnings by £1m

The Artisanal Spirits Company (ASC), which owns the Scotch Malt Whisky Society (SMWS), saw profitability increase in the six months ending 30 June 2024.

The firm said earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by around £1 million (US$1.3m) compared with the first half (H1) of the 2023 fiscal year.

Group revenue was broadly flat for the six months, with SMWS membership stable and year-on-year costs reduced.

The board predicts revenue for the full year to be £25m (US$32.5m), around a 6% increase on 2023.

In its 2023 full-year results, the firm saw 8% revenue growth to £23.5m (US$29.7m).

ASC established a subsidiary in Taiwan in August 2023 and acquired Single Cask Nation (SCN) in January 2024. The firm stated these moves have helped to ‘mitigate the group’s exposure to any given market, such as China, where trading continues to be challenging’.

Andrew Dane, CEO, commented: “While trading conditions remain challenging in a few markets, we are pleased with the ongoing improvement in year-on-year profitability in H1 and remain focused on delivering the full-year consensus EBITDA expectations of £1m and ensuring sustainable profitability over time.

“ASC’s proven strategy of investing in whisky stock has built an impressive inventory that will satisfy our requirements well into the next decade, as well as delivering a significant uplift in value creation.

“While we have an independent expert valuation estimate of just over £100m today for the casks, the business is focused on generating maximum value creation through maturing and bottling these premium whiskies, which ultimately delivers a multiple on the cask value, with estimated future retail value in bottles of almost £500m (US$650m).

“Furthermore, with our cask levels now reaching an optimal level, we have reached a turning point in the cash investment requirement in the business. Historic levels of investment in whisky stocks are no longer required as we transition to purchasing on a replacement basis to satisfy future growth demands, representing a very positive inflection point for the cash profile of the group.”

The group has a collection of around 18,000 whisky casks from 150 distilleries. Independent whisky experts Des McCagherty and Dr Alan Rutherford have estimated the firm’s collection of Scotch whisky to be worth £98.4m (US$128m), with other whiskies valued at £3.5m (US$4.6m).

The firm’s net debt was £22.8m (US$29.6m) in December 2023. It stated that management believes ‘the group’s current level of debt funding is entirely appropriate within ASC’s wider capital structure, further supported by the significant cask spirit valuation’.

The group added that its priorities include growing SMWS membership through international development, a product range review to ‘simplify and optimise’ its offering, its cask sales programme, growth from SCN and cost efficiency management.