Independent Liquor writes off remaining goodwill as FY loss widens, puts Mill on the block

Independent Liquor (NZ), the liquor company owned by Japan’s Asahi Group, wrote off its remaining goodwill, partly offsetting gains from a multi-million dollar settlement with the former private equity owners over the price paid for the booze empire.

The Papakura-based company founded by the late Michael Erceg reported a loss of $52.6 million in calendar 2014 compared with a loss of $41.6 million a year earlier, according to financial statements lodged with the Companies Office. Independent recognised $208.6 million as income from the deal cut with former owners Pacific Equity Partners and Unitas Capital to end a claim in the Federal Court in Melbourne that the Japanese buyers had been misled over the company’s earnings and overpaid as a result.

The loss resulted from impairment charges totalling $255.1 million in the year, of which $173.7 million was written off goodwill and $81.1 million written off the value of brands. The impairment charges wiped out the remaining goodwill Independent attributed to the business, representing the excess cost of the acquisition above the fair value of net identifiable assets, valued at $327.5 million when Asahi’s New Zealand vehicle amalgamated with the holding company of the former owners.

Independent also wrote off $6.2 million of goodwill allocated to The Mill Retail Holdings, the 35-store retail chain purchased in 2013 for $18.2 million. The liquor company has since decided to sell the Mill, embarking on a sale process which it expects to complete by September of this year.

The expansion into retail came after Independent Liquor launched boutique beer brand Boundary Road in 2011, building on its dominance in the local ready-to-drink market with brands including Woodstock Bourbon and Vodka Cruisers. It accounts for 11 percent of pack beer sales, according to the company’s website.

Independent’s accumulated losses of $241.8 million ate into equity, which was valued at just $1.5 million as at Dec. 31.

The company boosted revenue 5.8 percent to $378.3 million, a slower pace of growth than its cost of sales, meaning gross margins shrank to 24.2 percent from 24.7 percent in 2013.

Independent cut its sales and marketing spend by 16 percent to $33.9 million, while ramping up spending on administration by 34 percent to 30.1 million. Finance costs, which are largely to related parties, edged up 1.6 percent to $19.6 million.

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