Independent Liquor writes off remaining goodwill as loss increases

Independent Liquor (NZ), the liquor company owned by Japan's Asahi Group, has written 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 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% 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 December 31.

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

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

(BusinessDesk)