"Our brands continue to perform well as the market begins to recover from the effects of lockdown.  Results for the half year are below those of 2020 due to sales lapping an extraordinary increase last year when the combination of lockdown, a hot summer and unusual trading conditions led to a significant surge in sales, particularly in Q2 (July to September) when revenues advanced by 265% versus the prior year.

Comparing sales for the half year to the same period in 2019 (pre Covid pandemic) we increased revenues by 75%.

Our team has managed well the widespread disruption and cost pressures associated with extensive labour shortages throughout the supply chain, production and distribution networks. This is likely to remain an area of focus for the foreseeable future particularly during the key Christmas trading period. To date we have successfully maintained supply to all customers across all brands.

Following a successful equity fund raise for investment in Ardgowan Distillery in Scotland, exciting development work has begun with the Ardgowan whisky maker and other renowned whisky connoisseurs to create our own distinctive Malt Scotch for launch planned 2022."

Executive Chairman's Statement

After an uncertain start, the UK On Trade has had a successful reopening over the summer as consumers returned to venues. As confidence returns, we have secured new listings across the RedLeg Spiced Rum range, and expect to continue building on these provided the UK remains lockdown free. The first half of our financial year has also seen the business secure a new listing for TRØVE within a prestigious premium retailer.

Global lockdowns continue to ease and have largely ended in our key export markets, with the exception of Australia which is still experiencing restrictions. Throughout the period, we have continued to expand our international reach and have opened a new export market in Ukraine. In addition, as confidence in international travel returns, the Duty Free market is showing encouraging signs of growth. The TRØVE trademark application in the USA has now been approved.

Operations

Throughout the period, the main challenge to our business has been ongoing disruption to the supply chain due to widespread staff shortages across production and distribution, which in turn has driven production cost increases. Vigorous work with suppliers behind the scenes has successfully mitigated disruption and kept our product in the hands of consumers. We are pleased to have broadly maintained margins versus the same period last year despite these challenges.

These issues are likely to continue throughout the current financial year and will remain  a priority.

In addition, we are anticipating further cost of goods and energy price increases across the business, and endeavouring to maintain margins in light of this.

Investment in Ardgowan

In August, we announced a £3 million strategic investment (in the form of a convertible loan and with an option to increase to £5 million) in Ardgowan Distillery Company Limited which will see the development of a new Malt Whisky distillery, planned for opening in 2023. This move will provide the Company with a long-term interest in a growing premium category as we develop our own Malt Scotch, as well as providing a new home for Blackwoods Gin with its own distillery, Gin school and visitors' centre. This investment forms part of a total initial investment package of £11.4 million, which will be used by Ardgowan to build the Ardgowan Distillery and visitors' centre. 

To enable the Ardgowan investment, we completed an equity fundraising in August that raised £3.2 million (before expenses) from existing and new shareholders. Net proceeds from the fund raise are held in cash reserves at the period end pending drawdown of the £3 million loan by Ardgowan, expected in the next three months.

Results versus same period last year

Results for the half year are below together with those for the prior comparative period which benefited from an unprecedented surge in sales, particularly in the second quarter, due to the combination of lockdown, a hot summer and unusual trading conditions.

Total revenues fell 23% to £1.44 million against challenging comparatives. Compared to pre-pandemic sales in the same period in 2019 total revenues increased 75%.    

The Company achieved an operating profit (after adjusting for one-off costs of investment in Ardgowan and share based payment expense) of £58k (2020: £154k; 2019; £1k). Despite an increase in production costs caused by supply chain disruptions we successfully maintained our year on year margins at 55% during the period. In the short term we do not expect margins to return to pre-Covid levels due to cost increases throughout the supply chain.

Cash reserves stood at £4.22 million at the end of the period. This includes the proceeds of fundraising completed in August amounting to £3.20 million before expenses.

Outlook

Christmas is our key trading period and all of our efforts will focus on keeping our customers in stock at all times. We are working closely with manufacturers and suppliers to maintain continuity against ongoing uncertainties regarding hauliers' ability to attract a sufficient number of drivers.

Given ongoing supply chain challenges and uncertain timelines for the resumption of normal activity levels it is difficult to forecast with accuracy and certainty for the second half of the year. Market guidance will be released following our key Christmas trading period.

If the UK remains lockdown-free throughout this period, social gatherings at home and enjoyment of the On Trade will help facilitate a return to normal trading/activity levels. Our brands across the portfolio are well positioned and supported to enjoy growth in line with this.