Annual Report 2025 - Financial Review

After a period of industry-leading growth, during which the size of the business has grown significantly, this has been a year in which we have experienced the full year impact of reduced consumer demand.

Our core revenue declined by -10% due to a reduction in consumer confidence and a more cautious approach to spending across almost all markets where we operate. The decline in core contribution of -28% is much higher than our decline in core revenue as both the cost of producing goods and our other operating costs continued to grow during the year. Pre-exceptional profit before tax was -26% less than last year whilst retained profit for the financial year, before exceptional items, declined by -24%.

During the year we announced the agreement to sell The Famous Grouse and Naked Malt brands to William Grant and Sons. The sale of these brands supports our strategy to focus on ultra-premium spirits. The transaction is subject to, among other things, obtaining the requisite regulatory approvals in the UK which was received on 6 March 2025. The sale is considered to be highly probable as at 31 March 2025 and it is expected to complete in the year ending 31 March 2026. Consequently, we are recording the net profit from these brands as discontinued operations in our income statement and the impacted assets were classified as held for sale on 31 March 2025.

Despite the decline in sales performance, we have delivered improved free cash flow due to a focus on reducing our stocks of finished goods and a reduction in capital investment. Our Balance Sheet will be strengthened further in the coming months as the proceeds from the sale of The Famous Grouse are used to reduce our level of debt.

Group Financial Performance (reported on a constant currency basis)
 

Core Revenue

Core revenue declined by -10% to £912m due to a lower volume of sales and an adverse product mix due to a greater decline in our higher priced products.

Brand Investment

Brand investment is an essential element in building the long-term success of Edrington, and our brand equity scores continue to grow. Our total brand investment of £217m was down -9% on the previous year as we have scaled back the absolute level of spend to reflect market conditions and the reduction in core revenue, however our reinvestment ratio of 24% remains ahead of our industry peers.

Core Contribution

The core contribution margin percentage was lower than the prior year due to the adverse product mix and continued inflationary pressures in both our cost of production and our employment costs. The decline in core revenue of 10% combined with the reduced margin percentage resulted in a 28% decline in core contribution. During the year we have taken steps to align our cost base to the current size of the business including a reduction in headcount. The costs of this restructuring are included in these results, and the lower operating costs will benefit the following financial year.

The Macallan celebrated its 200th anniversary with a number of spectacular events and we saw excellent brand and commercial success for TIME:SPACE products released for this landmark occasion.

The Estate Brands business unit has been more acutely impacted by the market challenges, due to the smaller scale of these brands. We have recognised an impairment of brand values for both Wyoming Whiskey and The Glenrothes during the year. This reflects the impact of the current downturn in demand and a level of uncertainty with future performance.

The Brugal business unit has shown resilience in its core market of The Dominican Republic. The brand has built strong brand equity and benefitted from its excellent innovation pipeline with new expressions Doble and Triple Reserva.

At a regional level we experienced similar rates of decline across Americas, Asia Pacific, EMEIA (Europe, Middle East, India and Africa) and Global Travel Retail. The Dominican Republic was our only region of growth reflecting the Brugal brand success in its home market.

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