September 30, 2008

Macleod Reaps the Rewards of Overseas Sales Whisky Distiller Sees Profit Close on GBP1m for Year Despite UK Dip


IAN Macleod, one of Scotland's leading family-owned distillers, closed in on the million-pound annual profits landmark in the latest financial year, as surging demand for whisky in overseas hotspots offset a slowdown in sales in the UK.

Accounts for Broxburnheadquartered Macleod Distillers, whose brands range from Glengoyne malt whisky to Wincarnis tonic wine, show the firm increased pre-tax profits by 27per cent to GBP992,475 in the year to September as the firm reaped the rewards of rising affluence in Asia and Russia.

The latest success provides further evidence of the sea change which has affected the whisky industry following the breakneck economic growth of such countries.

Macleod has found demand increasing across the board. In the year to September 2006, rising sales of the King Robert II blended Scotch to expat Indian workers in the Persian Gulf helped the company grow earnings fivefold.

In the latest period, Macleod was helped by the fact that growing numbers of drinkers overseas switched on to premium brands.

Sales of the Glengoyne unpeated single malt, produced in the distillery of that name at the foot of the Campsie Fells, increased by 10per cent.

"Market conditions have changed markedly during the year and demand has exceeded supply for certain ages of spirit. The company is therefore focusing closely on achieving selling prices that reflect the changing conditions, " wrote directors in their reports.

Macleod increased its gross profit percentage from 34.3per cent of sales to 36.6per cent.

While growth in earnings slowed, compared with the previous year, the continuing upward trend in exports prompted Macleod to increase bank borrowings by around GBP3m, to GBP11.3m, with a view to invest in mature stocks. The value of stocks increased to GBP20.1m at the year end from GBP17.3m at the end of the preceding year.

This may have been a welltimed move.

The Scotch Whisky Association recently said the value of exports surged by 14per cent to a record GBP2.8bn in 2007, powered by growth in countries like China.

This has reportedly resulted in demand outstripping supply in some areas, prompting distributors to hurry to secure stocks.

Leonard Russell, a member of the controlling family and managing director of Ian Macleod Distillers, said: "As an independent family- owned company, we are able to focus on the longer term in markets that have the best growth potential, such as developing Asian markets and Russia.

"The market for single malt whisky worldwide is also gaining momentum and there is the potential for further growth, with improved margins in the year ahead."

A "super-premium range of Glengoyne 1972" and other high-value items being developed by Macleod are being "very well received". In contrast, UK sales fell in the latest financial year, by GBP850,000, to an undisclosed amount. This may reflect the continuing challenges facing firms in the UK.

Recent research showed whisky has been overtaken in popularity by vodka.

The company was affected by the end of a contract to supply own label whisky to a highstreet multiple. Macleod said price increases on volume-driven three-year-old blends, to cover cost increases and address competitive pressures on spirit supply applied in the early part of 2007, were "initially resisted" by the market.

The reduction in UK sales came in a year when Macleod transferred responsibility for the UK sales and marketing effort to an external agency. This resulted in a fall in the amount of excise duty included in turnover.

The outsourcing deal resulted in significant savings on overheads.

Average employee numbers fell to 64, from 68 in the previous year.

While group turnover fell by 6per cent to GBP20.6m, operating profits increased by 12per cent to GBP1.8m.

Directors shared total emoluments of GBP927,608, up from GBP739,316. They did not recommend a dividend.

Originally published by Newsquest Media Group.

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