WOOD Flash – Stock Spirits Group: 2H17 results - two booked one-offs, Polish vodka market remains very competitive

This morning (7 March), Stock Spirits Group reported its 2H17 results, before the market opened. On the top line, the company reported EUR 155m, up 6.8% yoy and beating consensus by 5%. The adjusted EBITDA came in at EUR 34.3m, up 1.9% yoy, with 1ppt respective margin erosion. Stock Spirits booked EUR 19.6m of exceptional items in the period: a EUR 14.9m impairment related to its Italian operations; and a EUR 4.7m deferred tax asset on its Polish brands. Stripping out the one-offs, adjusted net profit came in at EUR 19.2m, down 4.1% yoy and 1.9% ahead of our forecasts. Management proposed a dividend of EUR 0.0572/share, which brings the total DPS for FY17 to EUR 0.081/share, slightly ahead of our expectations, and implying a dividend yield of 2.6%.
We view the company’s results announcement as neutral to our investment case, and reaffirming our HOLD rating. On one hand, the Polish vodka market remains highly competitive on pricing, with no clear strategy given recent management reshuffles at both of Stock Spirits’ main competitors: Roust and Marie Brizard. On the other, we see the company’s operations in Poland as nimbler for facing further price deterioration from Roust compared to what we have seen historically. Going forward, we expect the company to take advantage of its strong premium vodka brand portfolio as, according to Nielsen, the Polish consumer tends to trade up in times of a solid macroeconomic environment; while continuing to tap into the solid growth potential of Czech spirits market as the clear market leader.