8th Dec 2023 12:53
(Alliance News) - Liberum reaffirmed its rating 'buy' on Artisanal Spirits Co PLC shares on Friday, despite the whisky seller predicting annual revenue will fall short of consensus.
An improving business model, new strategic initiatives and a growing membership are behind Liberum's continued confidence in the Edinburgh-based firm.
Artisanal on Friday warned its 25% revenue growth goal for second half of 2023 "may not be fully met," owing to a poor performance in China in the fourth quarter of 2023. Artisanal now expects 2023 revenue of around GBP23 million, a rise of around 5.5% from GBP21.8 million in 2022, though still below the GBP25 million predicted by consensus.
A difficult November, characterised by tepid Chinese revenue and slower-than-anticipated sales of the brand-new 50th anniversary member cask sales programme, were behind the downbeat outcome reappraisal.
Artisanal also expects adjusted earnings before interest, tax, depreciation and amortisation for the second-half to be "nearer to GBP2 million", meaning it will record a roughly "breakeven" adjusted Ebitda for the full-year. It achieved an adjusted Ebitda of GBP394,000 in 2022.
While Liberum sees this outcome as disappointing, it took confidence from 2023 sales rising from 2022.
Liberum also highlighted Artisanal's new revenue-generating initiatives. The group launched a GBP45 monthly subscription service in November, which includes three cask-strength whiskies along with other member benefits.
Artisanal announced that its Scotch Malt Whisky Society had passed the 40,000 member milestone in the organisation's 40th year.
Liberum analysts urged investors to remember that the group is still on track towards the strategic goals laid out when Artisanal first floated back in June 2021. Liberum expects the group's gross margin percentage to rise to around 66% by 2025, up from 63.6% in 2022.
Artisanal shares floated at 112 pence each. Shares slumped 15% to 49.00p in London on Friday afternoon, down 56% from its IPO price.
The margin growth will be aided by the purchase of younger stock to make new spirits, cutting the production costs of a finished bottle to under GBP2.00 from GBP6.00. The group's use of ex-sherry casks, which now comprise around 25% of the total casks, will also allow for a pricing premium of 10% per bottle.
Liberum claims the group's business model and strategic initiatives "bode well for future objectives," and reaffirmed its 'buy' on the shares, noting the "special nature of the asset".
However, it lowered its price target to 95.0p, from 130.0p, to reflect the group's poor earnings guidance for 2023.
By Hugh Cameron, Alliance News reporter
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