Written by Admin | Aug 16, 2017 4:00:00 AM
Summary
- Pinkster continues to benefit from what is fast becoming a global phenomenon, with a resurgence of the cocktail culture and Millennials becoming a driving force behind the sector’s continued growth.
- Sales are expected to double again in 2017/18 and we are confident that costs are now being managed better, evidenced in the first two trading months of the year.
Status Update
- Since the last trading update in December 2016, year-on-year sales for the financial year ended March 2017 more than doubled to £1,107k in line with the forecast £1,114k.
- The strong sales were supported by a number of significant account wins, notably Matthew Clark, and the momentum has carried through into the start of the current year, which aims to double revenues again.
- Gross margins held above 50% which was in line with budget, although the EBITDA loss of £426k for the FY was larger than the expected £86k.
- The original budget was set on the basis the Company would raise £600k in 2016. However, the final total was £1m and the additional funds raised have been invested in a number of areas, including the sales team, marketing (specifically, the number of events attended and POS support) and stock.
- The additional investment in overhead expenses, along with higher fulfilment costs arising from a different sales mix, resulted in a higher loss than originally forecast.
- Pinkster Gin can only be produced during the raspberry growing season and stock levels have been boosted to enable the Company to meet increased demand for its products.
- To reflect the trading performance for the full year ended March 2107, the Company has reforecast its budgets for 2018 and 2019, and now expects to reach monthly profit in mid-2018. Comparative forecasts are shown below.
- Management have taken a conscious decision to focus on better cost control and the new financial year has started solidly. YTD sales are just shy of budget, but EBITDA is 14% ahead, reflecting that tighter management of costs. Gross margin has exceeded budget at 47% (budget 44%), with the reduction from the original forecasts reflecting the new split of sales and increased direct costs.
- Although the UK market remains the main focus in 2017/18, good progress is being made in Australia and New Zealand. Sales also start in the US in the autumn.
- In other news, Gin Jam and Boozy Berries sales are strong, commanding margins nearer 65%, and a branding refresh is underway.
Trading Performance
| March Year End (£’000s) |
Actual 2016 |
Actual 2017 |
Original Budget 2018 |
Revised Budget 2018 |
Original Budget 2019 |
Revised Budget 2019 |
| Sales |
£500k |
£1,107k |
£2,344k |
£2,229k |
£3,609k |
£3,519k |
| Cost of Sales |
(£224k) |
(£549k) |
(£1,142k) |
(£1,200k) |
(£1,752k) |
(£1,925k) |
| Gross Profit |
£276k |
£558k |
£1,202k |
£1,029k |
£1,857k |
£1,594k |
| Overheads |
(£452k) |
(£984k) |
(£872k) |
(£1,142k) |
(£1,473k) |
(£1,315k) |
| EBITDA |
(£176k) |
(£426k) |
£330k |
(£113k) |
£384k |
£279k |
| GP Margin |
55% |
50% |
51% |
46% |
51% |
45% |
Cash Update
- The higher costs associated with the decision to invest in events and accelerate production last year led to a squeeze on cash in May 2017, which was identified early, and the Company has secured a loan of £210k from the Board of Directors. The coupon of base +6% is rolled up and the loan is to be repaid on 31st Dec 2018.
- Monthly profit is now expected in mid-2018 and we will continue to review the cash position.
Exit Planning
- Since our last update in December, UK sales of Gin have broken through the £1bn mark for the first time, and there has been a flurry of M&A activity – Sipsmith was bought by Suntory and Bulldog by Gruppo Campari, for sums in excess of $50m each.
- It is still anticipated that a trade sale to one of the drinks majors in 2019/20 is the most likely liquidity event.