Stock Spirits (STCK) has doubled down on its struggling Italian business as sales tick along from Poland and the Czech Republic, with both locales delivering double-digit increases in revenue at constant currencies, though the Polish business was subject to margin dilution due to an unfavourable product mix. The group announced that it is acquiring Czech Republic spirits business Bartida for €7.3m (£6.3m), with an additional deferred consideration of up to €3.7m over five years. The spirits manufacturer and seller has changed its accounts to a September year-end, but the pro-forma figures point to solid top-line growth, a 6.8 per cent increase in volumes, while cash profits were ahead 4.2 per cent to €33.5m. Selling expenses increased by 2.9 per cent in the period to €28.9m due to increased promotional expenditure – the full benefits of which may take some time to flow through.
Alongside growing sales in its main two markets (80 per cent of sales), Stock is trying to make its Italian division a bigger contributor to earnings by adding premium-grade grappa to its vodka and brandy lines. Chief executive Mirek Stachowicz said the decision to commit further to Italy came from increased customer interest in pricier drink styles (the same trend has been evident in the UK), hence the deal to acquire Distillerie Franciacorta (an Italian producer of grappa, limoncello and sparkling wine) for €26.5m. But, on a macro basis, Italy – unlike many of its central European markets – remains problematic, with sales growth constrained by a sluggish economy and high unemployment.
Consensus estimates point to cash profits of €62.9m for the September 2019 year-end, leading to EPS of 18.0¢, and rising to €66.5m and 19.8¢ for FY2020.
| STOCK SPIRITS (STCK) | ||||
| ORD PRICE: | 233.5p | MARKET VALUE: | £467m | |
| TOUCH: | 230-238p | 12-MONTH HIGH: | 264p | LOW: 184p |
| DIVIDEND YIELD*: | 3.2% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 173p* | NET DEBT: | 7% | |
| Half-year to 31 March | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (¢) | Dividend per share (¢) |
| 2018 | 145 | 9.7 | -0.72 | 2.50 |
| 2019 | 157 | 12.6 | 2.94 | 2.63 |
| % change | +8 | +30 | - | +5 |
| Ex-div: | 30 May | |||
| Payment: | 21 Jun | |||
| £1 = €1.15. *Includes intangible assets of €341m, or 170¢ a share. | ||||
