Scotch Malt Whisky Society owner braces for potential tariff fallout as earnings rise

Scotch Malt Whisky Society owner Artisanal Spirits Company has cheered record annual earnings but warned of “uncertain economic conditions in some markets” as it looks to further grow its presence in the US and other key territories.

Chief executive Andrew Dane said the Edinburgh-based group, which listed on the London Stock Exchange in 2021, was able to “flex as required” as the possibility of trade tariffs looms.

“Everybody is talking about tariffs,” he said. “We are as prepared as we can be and we are confident that we can ride out anything that does happen. It’s worth noting that at present there are no specific tariffs being discussed that relate to our products that I am aware of.

Artisanal Spirits Company is the owner of the Scotch Malt Whisky Society (SMWS). Picture by Peter Sandground

“However, we are making plans and taking mitigating actions. The US remains a long-term growth opportunity for us.”

The UK is expecting to be hit by Donald Trump’s tariffs this week, Downing Street has said, as discussions with the US over a potential trade agreement continue. The US president has announced a 25 per cent import tax will be introduced on all cars imported to the US from later this week - a measure expected to hit British luxury car makers such as Rolls-Royce and Aston Martin.

The levy is on top of a series of tariffs set to come into effect on April 2, which could include a general 20 per cent tax on UK products in response to the rate of VAT.

Artisanal Spirits Company’s preliminary results for 2024 revealed full-year earnings before interest, taxes, depreciation and amortisation (Ebitda) of £1.1 million, slightly ahead of market expectations for £1m. At the bottom line, the loss before tax was cut to £3.1m, from £3.6m a year earlier. Overall revenues nudged up to £23.6m, from £23.5m in 2023, with “continued revenue diversification” during last year.

Andrew Dane, chief executive at the Artisanal Spirits Company. Picture by Colin Hattersley Photography

Based on an independent valuation, Artisanal Spirits Company (ASC) now has a cask inventory worth some £102m. ASC’s stock includes whisky, and other spirits, from some 150 distilleries across 20 countries which is sold to members both as individual bottles and whole casks.

Over the course of 2024, membership grew by 4 per cent to 42,700, with Europe supported by “notable” UK growth of 10 per cent and the Asian region led by China (up 24 per cent) and a recently added Korean franchise (+59 per cent).

The firm flagged a strong start to the current year, with double-digit revenue growth in the first quarter of 2025. That performance was led by bottle sales in Europe, supported by further success for the company’s new “Creators Collection” range, as well as early success on delivering against full-year cask sales targets.

In January, ASC completed its investment in the Scotch Malt Whisky Society (SMWS) America business, resulting in an ability to take a greater proportion of the value chain from full control of membership and marketing services. Year on year profitability improvement in the first quarter of 2025 more than offset the previously announced one-off £500,000 investment in SMWS America, it noted.

Scotch Malt Whisky Society owner Artisanal Spirits Company has cheered record annual earnings before interest, taxes, depreciation and amortisation (Ebitda). Picture by Peter Sandground

In January last year, ASC acquired Single Cask Nation (SCN), which sources, curates and bottles single-cask whiskies and other spirits selling both online and via traditional retail channels to its following of more than 10,000 whisky enthusiasts in the US. SCN also retails to key international whisky markets around the world.

The firm told investors: “As we head into 2025, while there is no specific new tariff currently being proposed on our products, the threat of tariffs remains a possibility and the group is taking steps to minimise any potential impact through management of our US stockholding, the optimal route to market, and our ability to utilise a greater percentage of US whiskey, should this be required at any stage.”

Analysts at brokerage Panmure Liberum said the group had delivered “strong progress” during the year.

They noted: “The outlook is for a return to strong sales growth, further profitability improvements and a pivot to self-funded growth due to the transition from investments in stock to a replenishment approach. The group has stripped circa £1.5m of costs out of the business, which should lead to stronger drop through margins as growth is delivered.

“As the group promised, net debt began to decline in [the second half] and we expect further reductions from here as the group transitions towards free cash flow generation, which should drive a transfer of value to equity. For all these reasons alongside significant asset-backing, these shares look way too cheap.”

Dane also stressed the attraction of whisky as a form of alternative investment, particularly over a longer timeframe and with an exit strategy in mind.

He said: “We along with others in the industry have been warning of the risks in cask investment schemes. Our society members are looking for the authenticity of the product and ultimately getting bottles at the end. It’s not about some speculative investment.”

Dane added: “We continue to have an outstanding asset backing. We have now made the important transition of only acquiring stock on a replenishment basis, and this continues to increase the positive future cash profile of the business which is encouraging.

“Overall, we exit 2024 with a good set of results behind us, with a positive start to [the first quarter] meaning that we are on track to deliver further profitable growth and cash generation in 2025 and beyond.”

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