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EDRINGTON FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2018

22 Jun 2018

EDRINGTON FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2018

Edrington, the international premium spirits company, is pleased to report that its new Macallan distillery and visitor centre has enjoyed a successful opening month and that the brand has been a key contributor to another year of growth for the company.

Opened in June, the new distillery will enhance The Macallan’s status as the leading international single malt by value, following an ongoing investment of £500 million in the brand which includes the distillery, whisky, warehousing, and particularly in The Macallan’s signature sherry-seasoned oak casks.

Investment across Edrington’s premium brand portfolio has contributed to a strong set of results for 2017-18 in which all business units grew contribution.

 

CORPORATE SUMMARY

  • Core revenue (Revenue from branded products at constant currency) of £706.7m, +7% versus 2017
  • Brand investment of £125.7m, +5% versus prior year
  • Core contribution of £210.5m, +7% versus 2017
  • Profit before tax £194.7, +3%
  • Profit for the financial year of £86.6m, -5% versus 2017 as a consequence of a one off tax credit in the prior year

Edrington’s 2020 Strategy, Perfect The Macallan, Accelerate Highland Park, Transform Super-Premium, Energise Regional Power Brands, and Recruit More Consumers is embedded in the organisation through business units and continues to positively impact results.

  • The strategy has been supported with higher levels of investment in brand advertising, increased innovation, and greater focus on consumers, which has contributed to an encouraging performance.
  • All business units and all regions grew contribution in 2018.
  • 76% of core contribution for the year was generated by premium brands.

Perfect The Macallan

  • The Macallan delivered another strong year of sales volume and revenue growth, enabling higher levels of brand building investment whilst delivering 7% contribution growth.
  • The brand strengthened its leading position in some of the world’s most significant Scotch Whisky markets including The USA, Taiwan, and Japan.
  • The Macallan will embark on its first global advertising campaign in the autumn with an £11m budget.

 

Accelerate Highland Park

  • Highland Park benefitted from a 23% increase in marketing investment versus 2017, which flowed through to contribution growth of 15% as the brand’s new range, packaging, and marketing programmes were well received by consumers.

 

Transform Super Premium

  • Following its acquisition in April 2017, this was a year of transition for The Glenrothes Single Malt as it expanded its distribution to 30 new markets. A new range and packaging are on track for launch later in the summer.
  • Edrington continues to be well-positioned for growth in Tequila, the largest spirits category by value in the USA. The super-premium segment is in double digit growth and Edrington’s partnership with Tequila Partida has benefitted from the strength of The Macallan in this key market.

 

Energise Regional Power Brands

  • Regional Power Brands enjoyed another year of growth with contribution up 4% versus last year.
  • Brugal Rum’s focus on premium resulted in a double digit contribution increase, led by its two core markets, The Dominican Republic and Spain.
  • The blended Scotch market continues to be challenging. Although The Famous Grouse sustained a low single figure contribution decline versus the prior year, it strengthened its leading position in the UK, delivering an all-time high market share (source: Nielsen).

 

Focus on the core

Edrington has also announced plans to put its Cutty Sark and Glenturret brands up for sale.

Edrington chief executive Ian Curle said that the proposals will enable greater focus and investment to support the long-term growth of the company’s premium portfolio including The Macallan, The Famous Grouse, Highland Park, The Glenrothes, and Brugal Rum.

“Premium spirits is the fastest growing area of the spirits market. Focussing our resources and investment on the brands best equipped to compete powerfully will help Edrington to capitalise on the long term prospects from premium spirits.”

The sale process will commence this summer and is not expected to involve any redundancies with an anticipation that all 31 employees at The Glenturret in Crieff, Perthshire will transfer to a new owner. Edrington will consult with these 31 employees about this transfer.

The Glenturret is Scotland’s oldest Single Malt Scotch Whisky distillery and the site includes the visitor centre for The Famous Grouse. A high level of interest is expected from prospective purchasers.

Cutty Sark Blended Scotch Whisky has been owned by Edrington since 2010 and enjoys leading positions in Spain, Greece and Portugal.

Cutty Sark is blended and bottled at Edrington’s Great Western Road facility, accounting for around 10% of volume output at the site. Graham Hutcheon, group operations managing director, said the impact can be managed over time, adding: “Our intention is to offer blending and bottling facilities to a new owner. If that should not prove appropriate we do not anticipate any compulsory redundancies and would endeavour to redirect our people to the dynamic premium developments at Great Western Road.”

 

Commenting on the 2018 results, Ian Curle, chief executive, said: “2017-18 was a strong year of growth and increased investment for Edrington.

“Economic and market developments remain encouraging in the near term. All regions are experiencing an upturn in economic growth and Scotch Whisky exports are also in growth.

“The premium segment of Scotch Whisky and other spirit categories is the fastest growing, reinforcing Edrington’s emphasis on premium brand building.

“While consumer trends are encouraging, the geopolitical context, including Brexit, remains uncertain. Scotch whisky is a robust and successful industry but it does face increasing competition from other authentic spirit categories leading to the 400+ trade barriers faced currently. Against this backdrop we want our governments to create a climate where economic development and growth is actively encouraged and rewarded.

“Despite ongoing geopolitical uncertainty we are confident about the medium and long term prospects for the business and will continue to invest in our people, brands, and processes.

“With its premium brand portfolio, proven strategy, and management capability, Edrington remains well-positioned to deliver further growth.”