„The Board of Directors of the Zwack Unicum Plc. has approved the Management’s report about the results of the Company in the first half of the 2021–2022 business year.

The data have not been audited.

1. Analysis of the Report

Total gross sales of the Company were HUF 14 152 million – a year-on-year increase of 32% (that is, HUF 3 428 million). Net sales (sales revenues excluding excise tax and public health product tax [NETA]) were HUF 7 965 million, a year-on-year increase of 39.2% (HUF 2 241 million).

There was a year-on-year increase of HUF 1 941 million (38.7%) in the net domestic sales. The net sales of own produced goods increased in the domestic market by HUF 1 466 million (by 37.8%) (it was HUF 5 341 million instead of HUF 3 875 million). Broken down, sales of premium products increased by 48.3% and those of quality products grew by 13.1%. The fact that the introduction into the off-trade market of Unicum Barista – the youngest member of the Unicum line of products – went even better than we expected was a key factor in the outstanding performance of the premium category.

The net sales revenue of traded products had a year-on-year increase of nearly 42%. Broken down, the revenue of the Diageo portfolio increased by 40.5%, while the revenue of the other traded products grew by 51.6%.

Due to the Hungarian government’s pandemic-related measures, the Company’s net domestic sales decreased by nearly 11.5% during the first half of the previous business year. The major part of the decrease was due to on-trade – which accounts for about half of the Company’s gross sales. Soon after the restrictive measures were lifted, as from spring 2021, on-trade bounced back to its usual level. Moreover, off-trade has been increasing steeper than planned. Following an outstanding first-quarter off-trade result, the Company had a year-on-year increase of 27% also in the second quarter. 

Market research data about the retail turnover for the April–September period indicate that the Hungarian taxed retail trade of spirits grew by 11.7% in volume and by 17.8% in value. In the same period the sales of the Zwack Unicum Plc. increased by 39% thanks to the combined effects of introducing Unicum Barista into the off-trade and the bounceback of on-trade.

Export earnings were HUF 1 016 million – a year-on-year increase of 42% (HUF 300 million). In the second quarter, exports to Italy had a more than 100% year-on-year increase, and the second-quarter exports to Italy accounted for nearly half of the total exports sales increase of the first half of the business year. Unicum liqueur has remained strong in Romania, and duty-free sales grew further in the second quarter. 

The material-type expenses increased by HUF 616 million (28.4%). As that figure is lower than the increase in net sales – the latter being 39.2% – the gross margin ratio has a year-on-year increase of 2.9 percentage points (65.1% instead of 62.2%). The decrease in the per-unit material cost was due to the following factors: a favourable change in the product mix (the sale of own produced high-margin goods grew steeper than that of the traded products) and the strengthening of the Hungarian Forint.

Employee benefits expense increased by HUF 150 million (11.2%). At the beginning of the business year, the Company granted an average pay hike of 4%. The Annual General Meeting of 30 June 2021 resolved that a dividend of HUF 700 should be paid per share as compared to HUF 300 a year before. As under the IFRS, dividend payable after liquidation preference shares qualifies as a personnel type of cost, the higher dividend payment raised the personnel type of cost by HUF 14 million. In a related development, as our plants upped production to satisfy increased consumer demand, wage supplements had to be paid, which in turned increased costs. Furthermore, other expenses (as for instance, the cost of training courses, attendance at conferences, and jubilee payments) increased the employee benefits expense by HUF 43 million. 

The depreciation charge showed a year-on-year increase of HUF 43 million (18.5%). Broken down, the depreciation figure for real estate, machinery and equipment went up by HUF 27 million (by 11.6%). Much of that was accounted for by the depreciation charge of the packaging and palletizing machine installed in our plant at Dunaharaszti at the beginning of the business year. Another factor that increased costs was that the Company now categorizes pallets in its books as “tangible assets of minor value” and posts for them immediate depreciation as opposed to three-year deprecation method applied until a year ago.

The other operating expenses showed a year-on-year increase of HUF 641 million (48.2%). A marked rise in marketing expenditure accounted for a considerable part of the rise. Unlike in the previous business year, many of the domestic marketing events did take place at the end of the third wave of the pandemic in summer. The export marketing expenses went up steeply (by HUF 213 million) as our media campaign scheduled for autumn 2020 in Italy was transferred to the UEFA Euro 2020 football championship (held between 11 June and 11 July 2021). Other areas where there was higher year-on-year spending were maintenance and transport (the latter caused by increase in volumes to be transported).

The other operating income increased by HUF 118 million (by 67%). Our revenues from marketing expenditure reimbursement spiked (owners of brands that we trade upped their payments), however the exchange rate gain that the Company posted showed a year-on-year decrease.

The operating income was HUF 1 739 million, which exceeded that a year before by an impressive HUF 909 million.

During the period under review the Company gained a net direct income of HUF 45 million. In April 2021 it sold Morello Kft. (Morello LLC) – which had been its associate entity. The revenue from that deal (HUF 45 million) was higher than the book value of Morello. In March 2021, at the end of the previous business year, the Company repaid half of the loan of HUF 2.5 billion it had raised earlier in that business year to cushion its operation. The Company repaid the other half of the loan in April 2021, at the opening of the present business year. Then shareholders of the Company decided to raise another loan of HUF 1.5 billion to ensure a stable financial standing for the Company in a still volatile market environment. The balance of the interest payable on that loan and the interests due to the Company on its fixed bank deposits is close to zero.

The Company’s total tax burden increased by HUF 133 million. In the first half of this business year the Company had to pay corporate tax that was by HUF 87 million higher than that payable in the previous comparable period.  The balance of the two sums is accounted for by increase in both the local business tax payable on the gross margin, and the innovation contribution.

All in all, the Company’s profit after taxation was HUF 1 483 million. That is more than double the comparable figure of the previous business year and it considerably surpasses the target. Both the first and second quarters were successful. In the rest of the business year the year-on-year growth rate will inevitably decrease because the previous comparable period produced good results. Consequently, in the second half of the business year the rate of the growth of sales is expected to be modest.       

Trade and other receivables went up by HUF 775 million (by 27.1%) due solely to the increase in sales.

Apart from the changes described above, there were no other major new developments in the balance sheet.”

The complete H1 Earnings is available by clicking the link below:

Zwack – 2021-2022 business year H1 Earnings Result