Edrington Financial results

The Edrington Group’s results for the 12 months ended 31st March, 2011

FINANCIAL HIGHLIGHTS

Group turnover UP 18.2% at £553.4m (2010: £468.3m)
Profit before tax (excluding exceptional items) UP 19.3% to £141.5m (2010: £118.6m)
Shareholders’ earnings (excluding exceptional items) UP 20.1% to £65.0m (2010: £54.1m)
Dividend UP 16.1% to 27p (2010: 23.25p)

BRAND HIGHLIGHTS

The Famous Grouse grows by 4% with premium expressions contributing 8% growth
The Macallan grows by 14% to over 700,000 cases
Brugal consolidates position as number one rum in Spain and grows into other markets
Cutty Sark adds one million cases of sales to the Group in first full year of ownership
Highland Park grows by 9%

ROUTE TO MARKET

China and Hong Kong distribution companies become part of the Group. Edrington directly controls eight distribution companies.

CORPORATE

William A. Robertson formed a partnership with John W. Baxter in 1861 to create the business that would evolve into the present day Edrington Group. 150 years later the Group has 2,300 employees mostly based overseas.


Commenting on the results, Ian Curle, chief executive, said today:
The Group continues to make good progress and we have further improved Edrington’s strategic position and business performance during 2010/11.

The strategic position of the Group was enhanced with the acquisition of the Cutty Sark brand and by taking ownership of the Maxxium distribution companies in China and Hong Kong.

Our strong financial performance was supported by brand growth, increased earnings and improved cash flow.

Profit before tax (pre-exceptionals) of £141.5m has grown by 19% in the current year and by 95% over the last three years (from £72.6m).
Shareholders’ earnings (pre-exceptionals) have grown similarly, by 20% in the current year and by 76% over the last three years. This is prior to exceptional earnings, which further enhance these figures.

Brand growth has been driven by increased investment and improved economic conditions in many of our markets. We have continued to invest behind our premium brands despite the difficult trading conditions in mature markets in recent years. This investment is now paying off as we see stability returning to many western markets. In the current year we have experienced growth in the USA and UK, however, this has been offset by declines in Greece and Spain.

In Asia our business has continued to grow steadily and we are experiencing positive developments in Russia and a number of emerging territories.

During the year we made significant investments in our operational assets in both Scotland and the Dominican Republic. We also continued to lay down substantial whisky stocks to enable the long term growth of our brands.

Strategy
Our strategy is focussed on the long term development of Edrington and it can be summarised as follows:

§ Invest in our premium spirits portfolio:
- Our premium spirits portfolio comprises The Macallan, The Famous Grouse, Brugal, Cutty Sark and Highland Park. Investment is targeted on brand equity growth and is focussed in the markets where we anticipate the greatest opportunity for long term growth. Brand initiatives are focussed strongly on the consumer and sustained with programmes that innovate within our categories.
§ Invest and develop our Route to Market:
- We operate a number of Route to Market models, depending on the best fit for our brands in each marketplace. In recent years, we have increased the number of markets where we have full ownership, however, joint ventures and third party arrangements still play an important part of our Route to Market model.
§ Invest in our people and align our resources to support our brand growth.
- With the addition of Hong Kong and China we now employ over 2,300 people worldwide. This has increased the talent available to Edrington and provides us with an opportunity to future growth. A consequence of the international development of The Group is that our operating model has become more decentralised leading to more of our key decisions makers being located in our key markets.

Brands
The Famous Grouse brand grew by 4% during the year with the premium expressions contributing 8% growth. The Black Grouse continued to spearhead the brand’s premium development with sales growth of 21%.
The overall strong performance was driven by brand share growth in the UK and resilient performances in the USA and major European markets. Although at an early stage of development, the brand continues to make progress in emerging markets, with Russia a notable highlight.

The Macallan continues its impressive performance on all fronts. Our leading luxury malt whisky brand grew by 14%, selling over 700,000 cases. This growth has been achieved at premium prices as we continue to invest behind the brand. Asian markets represent over 50% of brand sales and our rate of growth in the USA market has increased as the economy improves. The brand has been supported with the launch of premium expressions, including the third Lalique crystal decanter and the Masters of Photography Edition featuring the world renowned photographer Albert Watson.

The Brugal brand consolidated its position as the number one rum in Spain during the year and increased its availability in other international markets. Sales also grew in the Dominican Republic with an increase in popularity of the Brugal Blanco expression.

The premium position of the brand was enhanced by the repackaging of the entire range for domestic and international markets. A new communication platform is being launched as we increase the investment behind the brand and drive for growth in the USA and other international markets.

The acquisition of Cutty Sark added a further one million case brand to our premium spirits portfolio and strengthened our distribution presence in southern Europe and the USA.

The acquisition was earnings positive in the first year allowing further investment behind the brand this year as we reveal new packaging and introduce the brand to new markets.

The Highland Park brand grew its contribution by 9% as we continue to invest behind the brand. The renowned quality of this whisky is matched by the range of awards it receives. We remain committed to growing the premium range of the brand which was enhanced by the launch of the 50 year old this year.

Route to Market
The strategic position of the Group has improved with further investment in Route to Market. On 1st April, 2011 we took ownership of the Maxxium distribution companies in China and Hong Kong. Asia has been an area of significant growth for Edrington over the last number of years and we now own distribution companies in Taiwan, China, Hong Kong and South Korea. The business operates from a regional office in Shanghai and we now employ over 280 people in Asia.

This decentralised approach has been extended to the Nordics where we now manage Sweden, Norway, Finland, Denmark, Germany, Switzerland and Austria from our Stockholm office. The Nordic markets are of particular importance to The Famous Grouse and Highland Park where they represent 14% and 13% of contribution respectively.

The Group is currently in the process of opening a regional office in New York to support brand growth in America. The primary focus is the North American premium spirits market where our brands have significant potential and the market continues to grow. The team will also oversee South America and identify opportunities for the development of our brands as this region continues to enjoy economic growth.

Edrington’s regional offices now include Shanghai, New York, Madrid, Stockholm and Santo Domingo.

People
The ongoing success and growth of the Group is due to the talent and endeavour of our employees. As Edrington has grown in recent years we have benefited from the skills and cultural diversity of our newer employees. We will seek to develop these skills and harness the potential of all employees as we continue to grow the business. I would like to take this opportunity to thank all our employees for their ongoing commitment and dedication.