Well positioned for strong sales growth in FY2022

ASC announced around 20% sales growth in a FY2021 trading update released today. Sales growth was similar both in the UK and internationally, which tends to confirm the efficacy of the company’s global approach to business development as well as the strength of its online offering.

Strong membership growth is important - not just as a driver for current growth, but also for future sales. While UK and International member numbers increased by 20% and 15% respectively in FY2021 as a whole, it should be noted that the bulk of this growth occurred in the second half of the fiscal year to end-December. As a result, the company may be expected to continue to record robust sales revenue growth into the first half of the current fiscal year. Implied revenue per member growth was 3% in the year as a whole, with the underlying number stronger due to a late surge in the year. Between end-June and end-December 2021 members increased from 28,700 to above 33,000.

Furthermore, ASC is laying down significant foundations which not only supports future growth, but also augur well for margin expansion The company continues to invest in both maturing whisky and wooden casks to meet expectations of future demand growth. Importantly, as the company increasingly purchases younger whisky stock, future profit margins should improve.

Elsewhere, the company highlights some important areas of progress in FY2021. It has signed a 10-year lease on a new supply chain facility, launched J G Thomson to diversify its distilled spirits offering with the launch of complementary new brands, and restructured its joint-venture agreements in both China and Japan so as to capture more of the value creation in these markets. Senior leadership has also been bolstered by new strategic hires.

The core ASC investment case is its ability to grow membership numbers both domestically and internationally while benefiting from the observable trend within alcoholic drinks of customers “drinking less but better.” Today’s trading statement tends to confirm that the company is on track to achieve these objectives. However, the current stock market valuation remains, in our view, materially shy of what we consider fair value based on comparable distilled spirits and luxury valuations. We reiterate our fair value of 150p per share, which would imply a 5.5x EV/sales ratio.