Proforma Consolidated Income Statement 

for the year ended 30 September 2019

The statutory reported Consolidated Income Statement and associated notes for the 12 months to 30 September 2019 can be found on the Consolidated Income Statement page.

The proforma Consolidated Income Statement for the 12 months to 30 September 2018 (comparative year) has been provided as additional information to the 9 month to September 2018 statutory reported Consolidated Income Statement, as a requirement to illustrate the performance of the business on an annualised basis given the importance of the fourth calendar quarter. This information is unaudited and does not form part of the audited annual Financial Statements. The reconciliation of the comparative year of 2018 between reported and as outlined in the table below is on the following page.

The proforma Consolidated Income Statement for the 12 months to 30 September 2017 (shown below) and associated notes has also been provided as these figures are represented also in our Annual Report.

Selected income statement information has been extracted from the Group’s management accounts for the comparative year of 2018 and 2017. Further notes to show the segmental analysis and certain assumptions used to calculate the proforma income statements are outlined in the below Notes section.

2019

2018

2017

Notes

The following notes provide detail on further assumptions applied in deriving the financial information presented in the proforma Consolidated Income Statement:

1. Accounting policies and critical areas of judgement

The accounting policies of the Group, as outlined on pages 128 to 139, are applied to the statutory period as presented within the Financial Statements and accompanying notes. The financial information provided for the proforma 12 month period has been derived from this information by extracting selected information from the Group’s quarterly consolidated management accounts for the quarters ended December 2016 and December 2017.

Revenue: proforma revenue has been extracted from source accounting records without adjustment. A certain degree of estimation is applied in determining volume rebate deductions from revenue. These estimates are revised each month such that no further adjustment to revenue is necessary for the purposes of the proforma revenue. Revenue rebate adjustments were reviewed, to the extent significant, at both the December 2016 and December 2017 year-end and no further adjustment to revenue was necessary for the purposes of proforma revenue figures.

In the context of the Group’s critical accounting judgements and key sources of estimation uncertainty, described in note 4 to the Financial Statements, the following considerations were made:

1. Taxation: a thorough review of tax risks and exposures has been carried out in June and December of each reporting period, and again as at September 2018. A review of significant judgements and estimates made in the quarterly periods ended December 2016 and December 2017 was undertaken to identify any item that would have had a significant impact on September balances. No adjustments were determined to be necessary to the methodology applied as per note 4 below.
    
2. Impairment of goodwill and indefinite-life intangible assets: annual impairment reviews were performed as at 31 December of each reporting period prior to 30 September 2018, and then as at 30 September 2018. The impairment charge recorded against goodwill in the year to 31 December 2017 has been included in the proforma financial information as an exceptional expense.
    

There are a number of other estimates and judgements made on a routine basis that are not considered significant for the Financial Statements taken as a whole. No adjustments have been made to September 2016 and September 2017 balances to reflect these.

2. Exceptional expenses

In the year to 31 December 2017, two non-cash exceptional items were expensed. The first was an impairment loss of €14.9m against the carrying value of goodwill in our Italian business. The second was a deferred tax charge of €4.7m resulting from amortisation on our Polish brands ceasing to be available.

3. Share of loss of equity-accounted investee

On 17 July 2017, as per the note on page 159, Stock invested in a 25% shareholding of Quintessential Brands Ireland Whiskey Limited (QBIWL). Information has been gathered from the management accounts of QBIWL for the years to September 2017 and September 2018 to provide information for the proforma years September 2017 and September 2018. No indicators of impairment were identified during the period since acquisition, and therefore the balances recognised in the proforma period represented only the share of loss for the relevant period. No adjustments were recorded to the fair value of contingent consideration during the period since investment.

4. Taxation

As the effective tax rates for the Group do not materially change year-on-year, for the period of October to December 2017, the effective tax rate (excluding exceptional tax expenses) has been assumed to be the same as for the reported rate for the year to December 2017, 26.7%. For the period of October to December 2016, the effective tax rate for the year to December 2016 of 27.4% has been assumed.

5. Adjusted EBITDA and Free cashflow

The Group defines Adjusted EBITDA as operating profit before depreciation and amortisation, exceptional items and the share of results of equity-accounted investees. A reconciliation from profit before tax per the proforma Consolidated Income Statement to Adjusted EBITDA is as follows:

2018

2017

The Group defines free cashflow as cash generated from operating activities (excluding income tax paid), plus the proceeds from the sale of property, plant and equipment and proceeds from the disposal of intangible assets less cash used for the acquisition of property, plant or equipment and for the acquisition of intangible assets. Adjusted free cashflow conversion is free cashflow as a percentage of Adjusted EBITDA.

2018

2017

6. Segmental analysis

2018

2017

7. Earnings per share

The proforma earnings per share has been calculated for the basic and diluted measures using the weighted average number of Ordinary shares in issue as follows:

1. Proforma year to September 2018: as per the 9 month period ending on the same date and as per note 14 of the Financial
   Statements, as there were no material share schemes vesting or purchased into the employee benefit trust in the last quarter
   of 2017, nor did options outstanding materially differ over that period;
    
2. Proforma year to September 2017: the weighted average number of shares as per December 2017 as there were no material
   share schemes vesting or purchased into the employee benefit trust in the last quarter of 2017 or 2016, nor did options
   outstanding materially differ over that period.

2018

2017

8. Net debt and leverage

Net debt is defined as the net of balances reported as cash and cash equivalents, loans and borrowings and finance leases. Refer to note 30 in the Financial Statements for a calculation of net debt as at 30 September 2018.

Leverage, being net debt divided by 12 months adjusted EBITDA, is an important measure for the efficient capital structure of the Group at a point in time, to support organic and inorganic growth. This is also an important measure for both our banks and shareholders. Leverage at 30 September 2018 has therefore been calculated using the net debt value (€31,583,000) divided by proforma Adjusted EBITDA 2018 (€59,363,000) = 0.53.

As leverage has been reported as at 31 December 2017 (0.94), there is felt to be no need for a comparative calculation as at 30 September 2017.