Stock Spirits (STCK); doing well off its Eastern European trading market

Published on 05-12-2018 09:01:17
Author Paul Hickman

With its buoyant Eastern European trading markets refreshingly far from the UK, Stock Sprits has delivered year-on-year net profit growth of 13.8% to €33.2m to its new-year end of September 2018, meeting market EPS expectations of 16.7c per share, up 13.4%. This signals two years of turnaround in the company’s main markets centered on Eastern Europe.

In its principal market of Poland, where economic conditions are positive, Stock out-performed the vodka market, focusing on premium product and away from the cutthroat competition of the economy segment. Stock grew its vodka market share 1.8ppts to 27.0% and value 1.2ppts to 27.4%, with recent months’ volume and value growth outpacing competitors. It has led the way in premium vodka products with its number one Polish premium brand Stock Prestige, and has outpaced competitors in the top premium segment with Amundsen Expedition. It grew ahead of category in mainstream vodka with its relaunched Zoladkowa de Luxe, and also achieved growth in the economy and flavoured vodka segments.

In its second market in the Czech Republic, where the economy is also in steady growth, Stock is the market leader in rum, vodka and herbal bitter liqueurs. Despite headwinds from a reduction in retailers’ promotions, it also grew value and volume here, with total spirits value share of 33.1%. The company also grew year-on-year in Slovakia, Bosnia Croatia and export markets. However, it faced tough conditions in the fragmented Italian market where unemployment and falling consumer demand led to a 1% revenue decline – but Italy is only 9% of total revenue.

A 160bps strengthening in gross margin to 48.9% led to 11.5% year-on-year growth in EBITDA, though that was helped by currency translation and was a more modest 8.1% on a constant currency basis.

Stock is highly cash productive. Free cash delivery of $54.3m represents 91.5% conversion of EBITDA. Stock has increased its total dividend 5% to 8.51€c. With debt leverage of only 0.53 times, further payouts may be made if the Board decides the capital structure inefficient.

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