Membership numbers closed the half up 9% to stand at nearly 39,000 at the end of June and have continued to increase since.
Shares in ASC fell sharply yesterday morning but rallied later in the day after the company said that it “felt the impact of the changing macroeconomic conditions and cost of living pressures during 2023, and we expect them to remain over the course of the next 12-18 months”.
However, chief executive Andrew Dane said it was well placed to take the challenges in its stride and produce results for the year in line with market consensus.
Talking to The Herald, Mr Dane highlighted the company’s globally diversified footprint, including a new subsidiary in the burgeoning Scotch whisky market of Taiwan which opened in August, a new franchise in South Korea and new franchise agreements in Malaysia and Singapore. He also highlighted the Society’s growing membership and the increasing popularity of premium spirits as factors in its favour, as well as the growth of private cask sales to its members.
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Asked to comment on the impact of the challenging conditions highlighted by ASC in the results, Mr Dane said: “The point is to acknowledge that these broader macroeconomic conditions exist. However, the point of the note was actually to say that, certainly those conditions are there, but that combination of our globally diversified footprint means we are not overly exposed to any individual market. The global trends around premiumisation are continuing to push people into our space.”
Alongside the size of the company’s “addressable market”, the Society’s growing membership and the benefits of private cask whisky sales, Mr Dane said ASC it is on track to meet the consensus forecast this year and continue to grow in the long term.
The current market consensus points to ASC reporting revenue of £25.2m for the year ending December 31, up from £21.8m, with EBITDA of £1.07m.
Mr Dane added: “It is really about acknowledging they (macroeconomic challenges) exist. But our business model, our consumer demographics, mean that we are more insulated to them.”
ACS said revenue increased by 3% in the first half to £10.2 million, amid a strong performance in Europe and signs of recovery in China, further to the easing of Covid restrictions. Revenue grew by 7% in the second quarter and is expected to “accelerate” further throughout the remainder of the year, “giving us confidence of delivering full-year growth, including that inaugural positive EBITDA”.
Mr Dane noted that ASC, which floated in 2021, tends to use the franchise system as a low-cost way to “seed” its offer into new markets. When a franchise becomes established, they are converted into subsidiaries, he explained.
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In the case of Taiwan, the subsidiary is a joint venture with a local manager; ASC holds 70% of the equity with the balance held by the local managing director as an “incentivisation tool” for the business to perform well. ASC retains overall control of the business and the right to buy out the minority shareholder. It has successfully utilised the model in China and Japan.
In China, Mr Dane said sales have rebounded strongly following the easing of Covid restrictions and return of whisky festivals, including the giant Whisky L event in August which helped drive the company’s joint highest-ever month for recruitment.
Overall, global membership numbers of the Society are now on course to hit 40,000 in 2023 – the year it celebrates its 40th anniversary.
Meanwhile, the company is now carrying out all bottling and despatch activities from its new Masterton Bond facility near Uddingston, after switching its e-fulfilment operation to the site. And it is working on the refurbishment of the “spiritual home of the Society” at its members’ rooms in Leith, which will relaunch in around a week’s time.
Mr Dane said the new-look rooms will provide “much more of an opportunity for members to come to the bar and engage with the team there”. It will also feature an improved display of whisky, including the oldest bottle in the Society’s history.
A new “membership and a bottle” offer, offering membership and a bottle of whisky for £129, will be launched before the year ends.
Shares closed down 1.45% at 68p.
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