Interim Results

Blavod Extreme Spirits PLC 03 December 2004 3 December 2004 BLAVOD EXTREME SPIRITS PLC INTERIM REPORT For the six months ended 30 September 2004 BLAVOD EXTREME SPIRITS PLC CHAIRMAN'S STATEMENT - DECEMBER 3, 2004 The company continues to make progress in its strategic and marketing objectives. With sales of Blavod Black Vodka continuing to give promising indications of further advances in the full year, the interim result was, however, affected principally by one factor - the decision, made after extensive discussion and research, to repackage the Players Extreme brands. While the new packaging has now been well received and has increased market perception of the brand with a return to meaningful sales volumes, delays were experienced in planning and production which, together with getting new product into the distributor network through a number of legal, regulatory and logistical hurdles, resulted in a temporary decrease in volumes. This was offset by only one month of upturn in this reporting period. Also during this time, production of Players Extreme was moved to the UK. This builds on the rationale of the recent merger as the company now benefits from the efficiencies of manufacturing both the Players Extreme range and Blavod together. Furthermore, producing the Players Extreme range in the UK yields the advantage of making the brands 'imported' vodkas in the US, thus enabling an increase in the price to the trade and the consumer and an ongoing improvement in margins. Market uptake since the re-launch in mid-September has been, as stated, satisfying with customers stocking the new-look range and additional outlets expressing meaningful interest. In order to create a sustainable sales impetus for the re-packaged Players Extreme over the hiatus period, recruitment and marketing plans were maintained on schedule so as to sustain the integrity of the distribution network in the US, and this, together with the production changes and delay referred to, seriously affected profitability in the short term. The Board believes, however, that this was the correct strategy for the future and that, as a consequence, sales volumes and market share will be recovered and a firmer base for growth established. Additional marketing expenses were also incurred in an aggressive sales effort for Blavod in the US where, for the first time, the company now has direct control of its own marketing operation and sales team. The re-launch and marketing activities of Blavod in the US also took place in advance of sales revenues as it was strategically better to re-establish both products in the distribution chain at the same time. Equivalent shipments of Blavod are running 150% above last year. The second half of the year already shows evidence of promising sales and preliminary data indicates some good results, albeit on a modest base. The Halloween holiday in the US helped to re-invigorate the Blavod Black Vodka market, with demand outstripping supply in several areas. Going forward we intend to focus our positioning of the brand in this market over the whole year and not just for a particular period. Given these factors, it should be emphasised that the half-year's result is much less than indicative of a full trading period, particularly as the main season for alcohol sales lies ahead and early indications are positive with the company moving over 45,000 cases over the last three months trading. A number of countries where Blavod enjoyed strong Duty Free sales joined the EU recently and this resulted in difficulty achieving budget targets. However, these sales are already recovering strongly as the effect of lower domestic taxes in those countries begins to show benefit. Internationally, margins continued to improve on Blavod and other brands in the UK, including Rothschild wines, were over or near forecast. Case sales of BABCO products have increased almost 93% on a year-on-year basis. Our previously announced arrangements with the Marie Brizard line of alcoholic liqueurs has yet to begin fully providing benefits, but we expect that this will build value for the company in the long-term. Expenditure on a TV and cinema campaign for Blavod in England was paid for in the half year, though the commercials themselves were not screened until October, November and December. There are now clear indications that sales are expanding on all fronts. In the US Players Extreme and Blavod are making progress with key distributors supporting the relaunch. Also in the US, the new wine range from Italy, announced earlier in the year, has started to contribute to revenues. Internationally, sales of Blavod are moving forward with substantial growth already noted in the US as well as in Russia and in the UK where sales are benefiting from the advertising campaign. Forward orders from supermarkets significantly exceed last year. The agency brands in the UK - Babco, DBR, Fernet Branca etc. - continue to perform ahead of forecast. Despite the delay in achieving the objectives set out at the time of the merger, the Board believes that overall the group is on course to establish its brands in its major target markets, as well as building its range of other products. The second half of the year is expected to see the benefits from the actions taken over the past months, particularly in the US, as the company achieves volume growth on a broadly similar overhead base. Allan Shiach Chairman Enquiries: Jeff Hopmayer 020 7352 2096 UNAUDITED PROFIT AND LOSS ACCOUNT for the six months ended 30 SEPTEMBER 2004 Notes Six months to Year to 30 September 31 March 2004 2003 2004 Unaudited Unaudited Audited £ 000 £ 000 £ 000 Turnover 1 917 557 1,825 Cost of sales (750) (354) (1,178) Exceptional item - stock repackaging provision - - (869) -------- -------- -------- Gross profit 167 203 (222) Marketing and administrative expenses (2,858) (465) (2,164) -------- -------- -------- Operating loss (2,691) (262) (2,386) Bank interest receivable 114 15 54 -------- -------- -------- Loss on ordinary activities before taxation (2,577) (247) (2,332) Taxation - - - -------- -------- -------- Loss for the financial period (2,577) (247) (2,332) ======== ======== ======== Loss per share 2 (3.94p) (1.67p) (8.50p) Diluted loss per share (3.94p) (1.67p) (8.50p) There were no gains or losses in any period other than those included in the above profit and loss account. UNAUDITED CONSOLIDATED BALANCE SHEET as at 30 SEPTEMBER 2004 30 September 31 March 2004 2003 2004 Unaudited Unaudited Audited £ 000 £ 000 £ 000 Fixed assets Intangible assets 4,055 1,124 4,161 Tangible assets 96 14 41 -------- -------- -------- 4,151 1,138 4,202 -------- -------- -------- Current assets Stock 770 75 249 Debtors 1,598 269 921 Cash at bank 4,105 776 7,293 -------- -------- -------- 6,473 1,120 8,463 Creditors: amounts falling due within one year (1,847) (274) (1,277) -------- -------- -------- Net current assets 4,626 846 7,186 -------- -------- -------- -------- -------- -------- Net assets 8,777 1,984 11,388 ======== ======== ======== Capital and reserves Called up share capital 654 148 654 Share premium account 16,916 5,967 16,950 Profit and loss account (8,793) (4,131) (6,216) -------- -------- -------- Shareholders' funds 8,777 1,984 11,388 ======== ======== ======== UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the period ended 30 SEPTEMBER 2004 Six months to Year to 30 September 31 March 2004 2003 2004 Unaudited Unaudited Audited £ 000 £ 000 £ 000 Cash outflow from operating activities (3,187) (257) (2,287) -------- -------- -------- Returns on investments Interest received 114 15 54 -------- -------- -------- Net cash inflow from returns on investments 114 15 54 -------- -------- -------- Capital expenditure (74) (10) Purchase of tangible fixed assets Expenditure relating to the registration of trademarks (7) (4) (16) -------- -------- -------- Net cash outflow for capital expenditure (81) (4) (26) Acquisition Expenses related to acquisition (34) - (546) -------- -------- -------- Cash acquired with subsidiary (34) - 2 Net cash outflow relating to acquisitions - (544) -------- -------- -------- Cash outflow before financing (3,188) (246) (2,803) Financing - - 10,000 Issue of ordinary share capital - - (926) Cost of share issue - - 9,074 Net cash inflow from financing ======== ======== ======== Increase/(decrease) in cash in the period (3,188) (246) 6,271 ======== ======== ======== NOTES TO THE FINANCIAL STATEMENTS for the six months ended 30 SEPTEMBER 2004 1. Basis of preparation The financial information in this interim statement is prepared under the historical cost convention and in accordance with applicable accounting standards. It does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory accounts for the year to 31 March 2004. Those accounts, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. The interim financial information has been prepared on the basis of the accounting policies set out in the Group's statutory accounts for the year ended 31 March 2004. 2. Loss per share The calculations of earnings per share for the six months, both basic and diluted, are based on a loss of £2,577,000 (2003: £247,000) and 65,443,633 (2003: 14,776,306) shares in issue. The calculations of earnings per share for the full year to 31 March 2004 are based on a loss of £2,332,000, a basic weighted average of 27,443,139 shares in issue and a diluted weighted average of 27,443,139 shares. This information is provided by RNS The company news service from the London Stock Exchange

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