The Investment Column: Growth falters at Glenmorangie

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The Independent Online
Although fewer drinkers are partaking of a wee dram in Britain, Scotch whisky sales around the world are still growing strongly. More and more people in the Far East are splashing out on a bottle of fine malt. Glenmorangie, which supplies some of the best and most expensive whisky around, should be cashing in. So at first glance its results look disappointing. After a great year last year profits rose just 6 per cent to pounds 4.57m in the six months to September.

There are several factors holding back the group's growth. The strong pound hit US profits. Glenmorangie's international ambitions have also hit a few snags. India has proved a tough nut to crack and its investment in China will not provide a meaningful boost to profits for some time yet. Japan sales also slumped, with customers holding back on purchases pending a fall in duty.

And in the face of intense competition maintaining its market leadership does not come cheap. Marketing spend jumped 23 per cent in the six months and it will continue to grow by at least 15 per cent a year.

However despite this dull performance, going forward Glenmorangie should be able to continue to achieve double-digit profit growth. It has scope to increase margins by conserving stocks, in order to sell them at a higher price in years to come. It can also cut costs as it reaps the benefits of the new distillery at Broxburn.

The worldwide whisky market is forecast to grow at 7 per cent a year and Glenmorangie has consistently grown faster than the market. New products from the recently acquired Ardbeg Distillery also look encouraging. Glenmorangie's shares were unchanged at 950p on yesterday's results. BZW forecasts full year profits of pounds 8.9m, putting the shares on a prospective p/e ratio of 20. Not cheap but worth holding on to for the long term.

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