Due to inflation and rising costs, consumers tightened their belts, leaving their liquor glasses half-full and wallets fuller. It so appears, the domestic glasses will remain half empty for a while, with luxury whisky and liquor company Lark Distilling (ASX: LRK) still reeling under the economic hangover.

In H1 FY24, Lark’s net sales revenue was $7.4 million, down $2.2 million on H1 FY23 driven by lower limited release sales in domestic channels and reduced export (-$1.0m) due to a slowdown in the Chinese Indirect Export channel. 

Despite ongoing challenging trading conditions, the Core Lark Signature range saw a Net Sales growth of 13%. The Company also expanded its base, signing distribution Agreements for Indonesia and Singapore, with shipments commenced from Q3 FY24, and MOUs in place for the Philippines and Malaysia. 

Lark CEO Sash Sharma said, “We’re excited by the export opportunity for Lark as we set ourselves up to drive international sales momentum, by creating repeatable and diversified revenue streams, which will be increasingly important with the softer consumer confidence currently in the domestic market. 

“We are executing our strategy, and have made good progress with Southeast Asian distributors, with MOUs in place with Malaysian and Philippines distributors, and Indonesia now progressed to the execution of a Distribution Agreement with Pelita Makmur Perkasa (PMP).” 

The first orders from the core range have been shipped to PMP. Additionally, it has executed its Distribution Agreement with Velocity Wines & Spirits, a premier distributor in Singapore, with the first order received and being prepared for shipment in late February.

At Australian airports, Lark’s Global Travel Retail presence continues to grow, with Net Sales up $500k, with strong brand presence and consumer offtake over the key seasonal travel period. 

Sharma added, “The underlying performance of the core ranges in our domestic channels is very pleasing given this resilient performance is set against a backdrop of soft consumer confidence and challenging domestic trading conditions, which makes the performance more noteworthy. Pleasingly, our nascent GTR business continues to grow its presence and performance in key Australian airports, with this channel remaining a key strategic priority for Lark.” 

Lark’s net operating activity cash outflows continued to improve against last year by $2.2 million. This improvement is a direct result of its renewed focus on cost control and the decision to consolidate production in its Cambridge Distillery from Q4 FY23. These disciplined actions have offset the impact of lower limited release and indirect export sales.

Lark Distilling maintained gross profit margins at 66%, slightly lower than the previous period. This was influenced by a decrease in Whisky Net Sales Value per Litre to $257 due to shifts in domestic channel and product mix. Marketing investment as a percentage of Net Sales decreased to 13.7% from 18.4% in the prior period, aligning with plans for new market launches and brand development in H2 FY24. Despite inflationary pressures and new hires, operating costs held steady at $5.1 million. At the same time, Operating EBITDA recorded a $400k loss.

As of the end of H1, it had a cash balance of $5.5 million, with a $15 million undrawn committed bank facility available and now extended to January 2028.