16 January 2018

www.progressive-research.com

Strong peak Christmas trading….

….sees Distil on track to meet market expectations

Distil's full-year outturn is forecast to be in line with market expectations, following strong trading across its peak Q3 (Oct - Dec) period in what remains a highly competitive market. Despite playing up against the toughest quarterly comparative of last year, when revenue rose 71%, this Q3 delivered revenue (and volume) growth of 19%. Growth was strong across all trade channels, most notably online, albeit from a much smaller base than the On Trade and Off Trade channels. The resultant two-year quarterly growth rate is therefore the best achieved thus far this year, with Q3 revenue in the current year more than double that achieved in Oct - Dec 2015. Our full-year forecasts therefore remain unchanged.

  • Revenue and volume growth: The 19% revenue and volume growth delivered in the quarter brings the cumulative growth rates for the first nine months to 21% and 29% respectively, with marketing investment up 23%. In Q3, brand marketing increased by 11%, reflecting timing and phasing, following the 36% increase seen in H1. Growth continues to be driven by RedLeg and Blackwoods, supported by a resurgent Blavod Black Vodka, especially in Eastern Europe. These Blavod sales are licensed sales, therefore driving volume growth directly but without a commensurate benefit to the revenue line.

  • Extended UK listings: Distil has also announced increased listings of some 520 stores across four major UK retailers. These will come through in Spring, with the full-year benefit weighing in from the next FY19 fiscal year. These incremental listings have primarily reflected the broader market's positive response to the new packaging, labelling and recipe of the Blackwoods 2017 Vintage Dry Gin. Domestic and export shipments of this new product formulation and brand presentation, including a proprietary new bottle, commence from this month.

  • Outlook and forecasts: With the development of Blackwoods complete, management attention will now turn to export markets, with a focus on combining the distribution of gin and spiced rum. Discussions are currently underway for this approach in the US with a shortlist of suitable distributors. Given a positive outlook for Q4 and the future benefits of incremental listings, our forecasts remain unchanged.

FYE MAR

2016

2017

2018E

2019E

2020E

Revenue

Adjusted EBITDA

Adjusted PBT

Adjusted EPS (p)

EV/sales (x)

EV/EBITDA (x)

PE (x)

1.2

1.6

2.1

2.5 3.0

-0.1

0.0

0.2

0.4 0.5

-0.1

0.0

0.2

0.4 0.5

0.0

0.0

0.0

0.1 0.1

9.3x n.a.

6.6x

5.3x

4.4x 3.6x

797.5x

69.3x

30.5x 23.4x

n.a.

1221.1x

78.5x

33.7x 25.6x

Source: Company Information and Progressive Equity Research estimates

This marketing communication has not been prepared in accordance with requirements designed to promote the independence of investment research. Please refer to important disclosures at the end of the document.

DISTIL - SUMMARY FINANCIALS

Year ended March

FY-15A

FY-16A

FY-17A

FY-18E

FY-19E

FY-20E

£m unless stated

Profit & Loss

Revenue

0.67

1.17

1.64

2.06

2.48

3.00

Adj EBITDA

-0.28

-0.09

0.01

0.16

0.36

0.47

Adj EBIT

-0.29

-0.10

0.01

0.15

0.35

0.46

Reported PBT

-0.29

-0.10

0.01

0.15

0.35

0.46

PBT before exceptionals and AAG

-0.29

-0.10

0.01

0.15

0.35

0.46

Fully adj PBT

-0.29

-0.10

0.01

0.15

0.35

0.46

NOPAT

-0.29

-0.10

0.01

0.15

0.35

0.46

Reported EPS (p)

-0.08

-0.02

0.00

0.03

0.07

0.09

EPS before exceptionals and AAG (p)

-0.08

-0.02

0.00

0.03

0.07

0.09

Fully adj EPS (p)

-0.08

-0.02

0.00

0.03

0.07

0.09

Dividend per share (p)

0.00

0.00

0.00

0.00

0.00

0.00

Cash flow & Balance sheet

Operating cash flow

-0.37

-0.11

0.00

0.05

0.27

0.36

Free Cash flow £m

-0.38

-0.12

-0.07

0.05

0.28

0.36

FCF per share p

-0.10

-0.03

-0.01

0.01

0.06

0.07

Acquisitions

-0.02

-0.02

-0.01

0.00

0.00

0.00

Disposals

0.00

0.00

0.00

0.00

0.00

0.00

Shares issued

0.56

0.60

0.01

0.00

0.00

0.00

Net cash flow

0.17

0.47

-0.07

0.05

0.28

0.36

Overdrafts / borrowings

0.00

0.00

0.00

0.00

0.00

0.00

Cash & equivalents

0.51

0.98

0.91

0.96

1.23

1.60

Net (Debt)/Cash

0.51

0.98

0.91

0.96

1.23

1.60

NAV and returns

Net asset value

2.23

2.76

2.81

2.96

3.31

3.77

NAV/share (p)

0.51

0.55

0.56

0.59

0.66

0.76

Net Tangible Asset Value

0.72

1.24

1.27

1.44

1.79

2.25

NTAV/share (p)

0.16

0.25

0.26

0.29

0.36

0.45

Average equity

2.09

2.50

2.79

2.88

3.14

3.54

Post-tax ROE (%)

-13.8%

-3.9%

0.3%

5.2%

11.2%

13.0%

Metrics

FY-15A

FY-16A

FY-17A

FY-18E

FY-19E

FY-20E

Revenue growth

-72.3%

75.6%

40.4%

25.6%

20.0%

21.3%

Adj EBITDA growth

21.7%

66.8%

114.6%

1050.7%

127.1%

30.7%

Adj EBIT growth

22.1%

66.2%

110.0%

1431.3%

135.0%

31.5%

Adj PBT growth

26.3%

66.2%

109.9%

1455.5%

133.2%

31.5%

Adj EPS growth

26.3%

66.2%

109.9%

1455.5%

133.2%

31.5%

Adj EBIT margins

-43.0%

-8.3%

0.6%

7.2%

14.0%

15.2%

Valuation

FY-15A

FY-16A

FY-17A

FY-18E

FY-19E

FY-20E

EV/Sales

16.4

9.3

6.6

5.3

4.4

3.6

EV/EBITDA

(38.6)

n.a.

797.5

69.3

30.5

23.4

EV/NOPAT

(38.1)

n.a.

1,128.1

73.7

31.3

23.8

PER

n.a.

n.a.

1,221.1

78.5

33.7

25.6

FCF yield

-4.3%

-1.1%

-0.6%

0.4%

2.3%

3.1%

Source: Company information; Progressive Equity Research estimates

2

Disclaimers and Disclosures

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Distil plc published this content on 16 January 2018 and is solely responsible for the information contained herein.
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