Final Results

Blavod Extreme Spirits PLC 05 August 2004 Blavod Extreme Spirits 2003/04 Preliminary Results Blavod Extreme Spirits plc reports its preliminary results for its financial year ended 31 March 2004. Financial and Strategic Highlights • Turnover up by 20.9% to £1.82m • Equivalent gross profit up 14.5% to £647,000 (excluding the exceptional write-off of old stock) • Case volume increased by 30.9% • Strong cash position • Significantly enhanced marketing already under way • Rationalisation of businesses following the merger now complete and a firm base for future growth established Commenting on the results, CEO Jeff Hopmayer said: 'I am extremely encouraged by these results and look forward to seeing the benefits of our merger in the latter part of the year. New partnerships with both wineries and retailers, to which our recent announcement referred, and our enhanced marketing approach, clearly demonstrate the exciting potential of our niche brands on both sides of the Atlantic.' Enquiries: Blavod Jeff Hopmayer CEO 0207 404 5959 Brunswick Laura Cummings 0207 404 5959 Unaudited preliminary results for the year ended 31 March 2004 Chairman's statement With turnover up by 21% and gross profit by 14.5% at the trading level, excluding the exceptional write-off of old stock, there is evidence of a year of satisfactory advance. It should be noted that the period under review includes only 72 days of combined figures following upon the acquisition of the business of Extreme Beverage Company LLC by Blavod Black Vodka plc and which was duly completed on January 20, 2004 and yielded some £10m gross for working capital. The transaction has brought new institutional shareholders to the Company and new directors to the Board, giving us greater financial, commercial and marketing experience. The company continued to see satisfactory progress in key markets for Blavod, particularly in the UK, Russia and European Duty Free. Our other UK brands also grew, notably Domaine Baron Rothschild Wines and the Babco range of products. Earlier in the year we announced agreement in principle to manage the distribution of Marie Brizard alcoholic liqueurs in the UK and expect this to add value to our growing portfolio of quality products in the domestic market. The merged businesses have already seen benefits in a number of ways. The purchase of the business of Extreme Beverage gives our newly-named company both ownership of the Players Extreme vodka range in the USA - primarily in the promising infused or flavoured vodka market - as well as real distribution access for Blavod Black Vodka to key US wholesalers. A sustained TV and cinema marketing campaign for Blavod Black Vodka, based on a cutting-edge commercial directed by a world-renowned film maker, is also planned for later this year, beginning in the North of England and the UK sales team has been expanded to cope with the greater opportunities which the advertising will facilitate. Much management effort has been expended in setting up a US sales organization for the company's brands. This has already seen the opening of markets in 40 of the US states and extensive marketing in trade and consumer publications to support sales of the nine flavours of vodka, rum and gin which were owned by Extreme. The management continues to concentrate on improving margins at the production end of the business and the Players Extreme range will now be bottled exclusively in the UK for overseas exportation. Rationalization of the two businesses and an effective merging of the operations, IT, human resources, production and marketing have been successfully accomplished. As a part of this rationalization process, the following changes have been made to the Board since this time last year: Our Chief Executive is Jeff Hopmayer, the founder of the Extreme Beverage company. Our Finance Director is Fred Read. David Falk and Robert Levin have joined the Board as non-executive directors. William Phillips becomes Director of Finance (International) and Richard Ambler is Chief Executive (International) with a wide ranging responsibility for sales and marketing. David Wheatley left the Board during the year and we thank him for his years of service. Andrew Napier also stepped down but remains with the company as Sales Director of Blavod Drinks (UK), the domestic operating arm of the business where he leads a successful young team. With Lawrence Banks and myself as non-executive directors, the Board now consists of four UK-based directors and four US-based directors. It is still early days in the new fiscal year and much is yet to be achieved. The full benefits of the merger are not expected to show until the latter half of this calendar year and in the meantime write-downs of old stock, as the brands develop stronger and more marketable identities, as well as other exceptional costs associated with the merger are reflected in the figures and are the principal reason for the overall loss. In taking a fresh look at our brands and as a result of consumer research, an early decision was taken to provide a new look for the Players Extreme range which is intended to widen our consumer base, improve margin, position the product for more international acceptability and, in smaller part, respond to packaging changes by competing brands. This will create a firm base for future sales growth. We are expecting a significant increase in Blavod sales to the US over the next 12 months. A good beginning has been made, evidenced by the recent announcement that Costco Wholesale Club of Northern California, the largest retailer of wine and spirits in the US, is to stock Blavod Black Vodka. Blavod is also targeting special marketing opportunities in the US during the later part of this year, as is Players Extreme with its range of high-profile activities to support the newly designed packaging for the flavoured vodka range. This range is being both augmented and rationalized by the addition of new flavours in response to consumer demand and extensive market research and the gin and rum based products are being dropped in anticipation of other brands being brought into the portfolio. Further developments include the recent signing of US distribution agreements for two distinguished Italian wine brands, Bruno Rocca and Baroncini. More announcements in connection with the strong margin and large-volume wine sales in the US will be made shortly. The strategy in this regard is to augment the brand portfolio and improve revenues while continuing to keep focus on our principal wholly-owned brands. With sales of imported wine in the USA continuing to grow (by 4.9% this past year) the opportunity was taken to provide our sales teams with products which create additional sales and marketing opportunities across the range of our brands and especially for Blavod Black Vodka and Players Extreme. The wine distribution agreements are long term and have no capital cost aside from stock purchase. They will, thus, contribute to general revenue growth while helping to move Blavod Extreme Spirits towards its goal of creating a substantial position in the global beverage business. Our employees have been especially diligent and hard working during the year under review and, on behalf of shareholders, I wish to thank them for all their efforts, their loyalty and skill. PROFIT AND LOSS ACCOUNT for the year ended 31 MARCH 2004 2004 2004 2003 £000 £000 £000 Turnover Continuing operations 1,366 1,509 -acquisitions 459 - -------- -------- 1,825 1,509 Cost of sales (1,178) (944) Exceptional cost of sales - stock re-packaging provision (869) - -------- -------- Total cost of sales (2,047) (944) -------- -------- Gross (loss)/profit (222) 565 Marketing and administrative expenses (2,164) (1,032) Exceptional item - stock claim provision - (149) -------- -------- Total marketing and administrative expenses (2,164) (1,181) -------- Operating loss Continuing operations (819) (616) - acquisitions (1,567) - -------- -------- (2,386) (616) -------- -------- Bank interest receivable 54 35 -------- -------- Loss on ordinary activities before taxation (2,332) (581) Taxation - - -------- -------- Retained loss for the financial year (2,332) (581) ======== ======== Loss per share (8.50p) (5.16p) Diluted loss per share (8.50p) (5.16p) All of the company's activities are classed as continuing. There were no gains or losses in either year other than those included in the above profit and loss account. BALANCE SHEET as at 31 MARCH 2004 2004 2003 £000 £000 Fixed assets Intangible assets 4,161 1,196 Tangible assets 41 20 -------- -------- 4,202 1,216 Current assets Stock 249 73 Debtors 921 249 Cash at bank and in hand 7,293 1,022 -------- -------- 8,463 1,344 Creditors: Amounts falling due within one year (1,277) (329) -------- -------- Net current assets 7,186 1,015 -------- -------- Total assets less current liabilities 11,388 2,231 -------- -------- Net assets 11,388 2,231 ======== ======== Capital and reserves Called up share capital 654 148 Share premium account 16,950 5,967 Profit and loss account (6,216) (3,884) -------- -------- Shareholders' funds 11,388 2,231 ======== ======== CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 MARCH 2004 2004 2003 £000 £000 Cash outflow from operating activities (2,287) (241) -------- -------- Returns on investments and servicing of finance Interest received 54 35 -------- -------- Net cash inflow from returns on investments and servicing of finance 54 35 -------- -------- Capital expenditure Purchase of tangible fixed assets (10) - Expenditure relating to the registration of trademarks (16) (8) -------- -------- Net cash outflow for capital expenditure (26) (8) -------- -------- Acquisition Expenses related to acquisition (546) - Cash acquired with subsidiary 2 - -------- -------- Net cash outflow relating to acquisitions (544) - -------- -------- Cash outflow before financing (2,803) (214) -------- -------- Financing Issue of ordinary share capital 10,000 - Cost of share issue (926) - -------- -------- Net cash inflow from financing 9,074 - -------- -------- Increase/(decrease) in cash in the year 6,271 (214) ======== ======== NOTES for the year ended 31 MARCH 2004 1. Turnover Turnover relates to the company's principal activity. 2004 2003 £000 £ 000 United Kingdom 965 901 Europe - EU 18 12 USA 512 58 Duty Free 184 176 Rest of World 146 362 ---------- -------- 1,825 1,509 ========== ======== 2. Loss per share The loss per share is based upon a loss of £2,332,000 (2003: loss of £581,000) and the weighted average number of shares ranking for dividend during the year of 27,443,139 (2003: 14,776,306). The fully-diluted loss per share is based upon the loss as disclosed above and the weighted average number of shares ranking for dividend during the year of 27,443,139 (2003: 14,776,306) adjusted for the effects of all dilutive potential shares. 3. Acquisition On 20 January 2004 the company acquired the business of Extreme Beverage Company LLC, a company based in Nashville, Tennessee and involved in the sale and marketing of spirits in the US. Details of the assets and liabilities, acquired in the non- cash transaction, are as shown below. Assets/ UK Restated Liabilities GAAP assets/ acquired adjustments liabilities £'000 £'000 £'000 Intangible fixed assets 23 (8) 15 Tangible fixed assets 63 (9) 54 -------- -------- ------- 86 (17) 69 Stock 817 - 817 Debtors 418 (80) 338 Cash at bank 2 - 2 -------- -------- ------- 1,237 (80) 1,157 Creditors (1,776) 130 (1,646) -------- -------- ------- Net current liabilities (539) 50 (489) Total assets less current liabilities (453) 33 (420) Expenses incurred in acquisition (546) Goodwill 3,381 ------- Satisfied by issue of shares 2,415 ======= The purchase was initially satisfied by the issue of 9,851,000 shares to the value of £2,415,000 as stated above. Further share issues will be required as follows:- * should the share price reach 50p before 20 January 2007 4,104,000; * should the share price reach 70p before 20 January 2008 4,104,000; * should the share price reach 90p before 20 January 2009 4,104,000. * No provision has been made in respect to the above contingent consideration. 4. Basis of preparation The financial information set above does not constitute the Group's statutory accounts for the year ended 31 March 2004 but is derived from these accounts. Statutory accounts for the year ended 31 March 2004 will be delivered to the Registrar of Companies in England and Wales following Group's annual general meeting. 5. Published accounts Copies of the published accounts of the Company will be sent in due course to all shareholders and will be available from the offices of Evolution Beeson Gregory at 100 Wood Street, London, EC2V 7AN. This information is provided by RNS The company news service from the London Stock Exchange

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