A 32nd consecutive month of volume share growth in Poland and a new distribution deal looks unlikely to ease tensions at branded spirits-to-liqueurs maker Stock Spirits (STCK).
The £420 million company produces premium branded spirits and liqueurs that are mainly sold in Central and Eastern Europe as well as Italy, though it exports to more than 50 countries globally.
Flagship brand Zo??dkowa Gorzka was created back in 1950.
It has been the subject of long-standing claims that it has wasted funding on needless acquisitions and should return cash to shareholders.
This is the ongoing view of its second largest shareholder, Western Gate Private Investments. It's owns a 10% stake in the business and represents the family office of pugnacious Portuguese businessman Luis Amaral.
Amaral owns Eurocash, Poland’s largest cash and carry business and one of Stock Spirit’s largest customers.
Western Gate has repeatedly agitated for strategic and management change at the vodka and brandy seller. The investment firm recently called on Stock Spirits to pay a special dividend of €24m and review of its capital allocation, M&A and dividend policy amid dissatisfaction with the share price performance and its concerns over corporate governance.
A cash return may appear an odd demand given that Stock Spirit had €42.3m of net debt at the end of last year (30 September 2019), while even Western Gate has conceded that senior operational management have done a very decent job in recent years.
UPBEAT ON FULL YEAR
In a trading update covering the period from 1 October 2019 up to 6 February 2020, Stock Spirits assured it is on track for the year as a whole. Encouragingly, first quarter trading in Poland and the Czech Republic was ‘significantly ahead’ year-on-year.
Its businesses in both markets experienced ‘exceptionally strong demand’ as customers built up stocks ahead of New Year spirits excise tax hikes in Poland and the Czech Republic alike.
City analysts refrained from upgrading estimates because Stock Spirits also cautioned that ‘based on previous experience of such changes, we expect the current quarter will see some consequential impact from the strong first quarter.’
PUSHING AHEAD IN POLAND
Despite intense competition on price, December 2019 marked Stock Spirits’ 32nd consecutive month of volume share growth in Poland, where the flavoured and clear vodka segments are in growth.
During the first quarter, Stock Spirits managed to grow share in the Italian markets for brandy, clear vodka and flavoured vodka, and it has recently won the tender for Beam Suntory distribution rights in Italy too.
‘The acquisition of Distillerie Franciacorta has provided us with enhanced access to key distribution channels and consumption occasions,’ said Stock Spirits, ‘and this has been instrumental to winning the tender for Beam Suntory’s world-class premium spirits portfolio.’
AGM COULD BE FIERY ?
Whether today’s upbeat news will be enough to satisfy Western Gate is very doubtful. The investment firm has said it intends to vote against the re-election of chairman David Maloney, senior independent director John Nicolson, and against the directors’ remuneration report and policy at the annual general meeting later today.
Western Gate will, however, continue to back chief executive Mirek Stachowicz and finance director Paul Bal, having conceded that the pair have ‘overseen a significant improvement in the operational performance of the business’.
Stock Spirit shares were largely flat on Thursday, nudging just 1p, or 0.5%, higher to 211p.
