Report on the results of the Zwack Unicum Plc. in the 2015–2016 business year
The data are audited (both those prepared according to the IFRS standards and those prepared according to the Hungarian accounting rules).
Total gross sales of the Company amounted to HUF 21,136 million, which is 1.2% lower than in the previous year. Net sales (sales revenues excluding excise and public health product tax) were HUF 12,458 million, a year-on-year decrease of 2.6% (-HUF 337 million).
Net domestic sales were down from the previous year by 2.2% (-HUF 250 million). (That is a year-on-year decrease from HUF 11,283 million to HUF 11,033 million.)
Net domestic sales in the fourth quarter was considerably higher than the January–March 2015 figure: it surpassed the earlier figure by 57.4%, by HUF 534 million. That was mostly because the sales figure of the fourth quarter of the current business year was ordinary, whereas that of the previous business year had been extremely low. As the public health product tax was introduced in January 2015, the majority of our trading partners had brought forward their purchases to December 2014. Let us add that in 2016 Easter fell on March so the Easter spike in turnover contributed to the results of the fourth quarter.
Within domestic sales the aggregate net sales figure of own-produced goods for the whole business year showed a year-on-year decrease of 2.6%. Domestic sales of premium products increased by 1.2% while the net sales of quality products went down by 11.9%. The latter development was due to decrease in trade inventories.
In the net earnings from traded products there was a year-on-year decrease of 0.8%. Broken down, sales of the Diageo portfolio came down by 4.3%, while those of other products traded went up by 6.0%.
Market research figures for the whole business year indicate that, expressed in volume, the Hungarian market of spirits decreased by 4.2%. Overall, the weak performance (-15.3%) of the non-branded segment caused the decrease. The two market segments that really matter for the Zwack Unicum Plc.: the premium and the quality segments, markedly increased (by 5.7% and 6.5%, respectively). In those two segments Zwack’s overall market share has slightly increased.
Export earnings were HUF 1,425 million, which is a year-on-year decrease of 5.8% (‑HUF 88 million). The brunt of the decrease had its cause in the ups and downs of our trade relations with China: the previous business year had seen a major one‑off sales deal with China, which has not been repeated this year. Among the focus markets Italy did very well, Germany repeated its results of the previous business year, but there was a year‑on‑year decrease in our sales to Slovakia and Romania.
The decrease of 6.6% (‑HUF 372 million) in material costs and costs of material type was due mainly to changes in volume.
The gross margin of sales improved by 1.8 percentage points (from 55.6% to 57.4%) owing mainly to higher sales prices.
Employee benefits expense decreased by HUF 69 million (‑2.6%). The Annual General Meeting of the Company, held on 25 June 2015, decided to pay dividend at HUF 1200 per share. According to IFRS, dividends paid after liquidation preference shares is a personnel type of cost; consequently, the lower dividend brought down payment to personnel by HUF 45 million. That was the main cause of the year‑on‑year decrease in payment to personnel.
The other operating expenses increased by HUF 371 million (15.7%) due to increase in marketing expenditure. As compared to the corresponding period of the previous year, marketing expenditure went up on Unicum (in Hungary and in Italy) and on St. Hubertus and the brands of Diageo.
The other operating income increased by HUF 172 million (27.9%). Of the increase, HUF 150 million was due to the higher cost reimbursements because the brand owners of the distributed products increased their marketing expenditures compared to the last year.
The net financial income/loss decreased by HUF 10 million (42.4%). Presently the deposit interest rate is considerably lower than a year ago. Note that in July 2014 the Company paid HUF 5 billion in dividend. Thus in the first quarter of the previous business year cash in hand and in banks was considerably bigger than in the first quarter of this business year.
The Company’s profit after taxation according to the International Financial Reporting Standards (IFRS) stood at HUF 1,694 million, a year‑on‑year decrease of 1.2% (previous: HUF 1,714 million).
There are considerable year‑on‑year changes in the following lines: Inventories, Trade and other receivables, and Trade and other liabilities. Each of those changes is due to the higher sales figure of the January–March 2016 period (see above). Parallel with increase in sales, the accounts receivable went up. Due to the resultant increase in the taxes payable, there has also been increase in the line of Trade and other liabilities. While the level of our inventories was very low in the previous business year, we have closed the present business year with an “ordinary” level of inventories.
The HUF 706 million (14.9%) drop in the profit reserves mainly is the result of the higher dividend payment than the last year’s profit.
During the 2015–2016 business year the Zwack Unicum Plc. spent HUF 692 million on fixed assets. Spending in this category was higher than in previous years because the Company started two major technological projects. We have embarked on modernizing bottling and have therefore purchased new machines for bottle filling, packaging and palletizing at a total cost of HUF 331 million. HUF 37 million was spent for the installation a new extracting technology. Both investment projects support the technological upgrade and the effectiveness of production.
The Company has 218 employees (at the end of the 2014/2015 business year it had 218).
The Management of the Company predicts growing risks in the market for the coming business year. There is no exact telling of the impact on the market of forthcoming legislative changes (for example, in the law on excise duty and the public health product tax). Moreover the international spirit brands intensively focus on the Hungarian alcoholic drinks market, so we expect our competitors to step up their marketing activities.
This Management Report for the business year has been made according to the relevant accounting regulations and the financial statements made on the basis of our best knowledge, and they are in accordance with both the Hungarian and the international standards. It gives a truthful and reliable account of the assets, liabilities, financial standing and profits of Zwack Unicum Plc. This business report gives a reliable picture about the Company’s situation, development and performance and it includes the major risks and factors of uncertainties. To make this report comparable with earlier ones, it carries figures in compliance with the International Financial Reporting Standards.
Additional information:
– There was no change in the ownership structure of the Company.
– During the 2015–2016 business year there was no change in the organization of the Company.
– The Company does not possess shares of its own, just as before.
24 May 2016
On behalf of the Board of Directors of Zwack Unicum Részvénytársaság: Sándor Zwack, Chairman and Frank Odzuck, General Manager
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