INVESTORS delivered a brutal verdict to a profit warning issued by The Artisanal Spirits Company yesterday.

Shares in the owner of the prestigious Scotch Malt Whisky Society, which operates member rooms in Leith, Edinburgh, Glasgow, and London, plunged more than 20% in early trading after the company told investors it had “identified two areas that are expected to challenge the current year result”.

The share price recovered partially as the day progressed, but had still lost nearly 16% of their value by the end of the day, closing down 9p at 48.5p.

The reversal came after Artisanal said while revenue for the year ended December will increase it is now expected to be recorded at £23 million, £2m lower than previously guided.

The company, which said membership of the Society had now surpassed 40,000 in this the year it toasts its 40th anniversary, said it now also expects to break even, with expectations of profitability pushed back a year to 2024.

Expanding on the reasons for the downgrade, Artisanal pointed to a “weaker performance” in China in the fourth quarter, amid a softening of conditions in the market for luxury products, and a tough comparison with November last year.

Its travails in China last month, which came after a “record performance” September, meant that an expected uplift in revenue growth of 25% for the second half, versus the second half of last year, “may not be fully met”, Artisanal warned.

Meanwhile, the company highlighted a slower than anticipated rate of sales on its new 50th anniversary member cask sales programme, which launched at the end of November.

It noted in a statement to the market that while cask programme sales have been “generating a positive contribution this year, sales will not be at the anticipated level by the 31 December 2023 year end.”

Despite the recent setbacks, the company “remains confident that it can continue to grow profitably with FY24 anticipated to deliver revenue and adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) similar to that which was previously expected in 2023, with the phasing of growth therefore deferred by a year”.

It said it was continuing to trade well in other areas and that its “stock-backed balance sheet is strong”. This has been boosted by a new partnership with finance provider Ferovinum, which Artisanal said has allowed it to convert maturing stocks into a “just-in-time asset at a truer valuation without increasing its overall debt level, giving the group financial flexibility and optionality”.

Chief executive Andrew Dane said: "Our business continues to develop and grow strongly with successful strategic initiatives and membership growth driving profitable sales.

“Whilst it is disappointing that our Q4 sales in China and the sales rate of the brand-new cask programme have not yet met anticipated levels, the remainder of the business has performed well and grown in line with expectations, and we are on track to deliver substantial EBITDA growth in H2-23.

“Our model is robust, throughout FY23 we have ensured that we have the right cost base for the business, we are well-financed, and we remain confident of future profitable growth."

The profit warning came towards the end of a year during which Artisanal, which joined the stock market in 2021, has made notable progress on numerous fronts.

In the international arena, it opened a new subsidiary in the huge whisky market of Taiwan, established a new franchise in South Korea, and striking new finance deals in Malaysia and Singapore. Early in the year it officially opened its Masterton Bond in Uddingston from where all bottling and despatch activities are carried out, and whisky stocks are held to mature.

House broker Liberum said in a note for investors: “Through 2023, Artisanal Spirits has continued to grow revenues, membership as well as underlying EBITDA (earnings before interest, tax, depreciation, and amortisation). The business model has been improved with multiple strategic initiatives and these should bode well for future objectives.