Interim Results

Blavod Extreme Spirits PLC 29 December 2006 29 December 2006 BLAVOD EXTREME SPIRITS PLC INTERIM REPORT For the six months ended 30 September 2006 Financial â€¢ Turnover increased by 61% to Â£3.54m (2005: Â£2.20m) â€¢ Case equivalent shipments increased by 35% â€¢ Gross profit of Â£986k (2005: Â£737k) increase by 34% â€¢ Gross profit margin of 28% (down from 34% in 2005) â€¢ Improved operating loss (excluding associate) of Â£1.49m (2005: Â£1.57m) Brands â€¢ Brand Portfolio offerings delivering solid performances â€¢ Brands continue to increase distribution in both the UK and US â€¢ Added new wine and spirit partnerships Joint Venture â€¢ Joint venture with Suntory International progressing well â€¢ El Diamante del Cielo Tequila is now distributed in 44 US States â€¢ Strengthened the Group's position within the drinks sector Commenting on the results, Chief Executive Officer, Jeff Hopmayer, said: 'We have continued to benefit from a strong marketplace, the continued roll-out of our Tequila El Diamante del Cielo and the introduction of Cockspur Rum which have accelerated our growth. Turnover in the UK and the US have increased substantially. However, some of this growth has been at the cost of lower margins, specifically on Blavod Black Vodka, as we continue to support the brand. Measures have been put in place to correct this in the second half of the year which is traditionally the main season for wine and spirit sales.' Enquires: Blavod Extreme Spirits plc 020 7930 0777 Jeff Hopmayer, Chief Executive 001 615 771 9111 Tony Murphy, Finance Director Brewin Dolphin Securities Ltd 0113 241 0130 Mark Brady Keith Williams CHIEF EXECUTIVE'S STATEMENT Blavod Extreme Spirits plc ('the Group') has continued to make good progress in its strategic and marketing objectives for the six months ended 30 September, 2006. Turnover increased by 61% to Â£3.54m, led by El Diamante del Cielo, our wine portfolio and the introduction of new agency brands. The global market for wines and spirits continues to expand in the areas where we operate, while industry consolidation continues. Results Total revenue of Â£3.54m (2005: Â£2.20m) represented an increase in per case revenue of 19%. Equivalent case shipments increased in the US by 23%, while increasing 52% in the UK and other markets. Recorded gross profit margin in the US fell to 26% (2005: 30%) as a direct result of heavy promotions for Blavod Black Vodka. Gross profit margins for Players Extreme and our wine portfolio increased over last year. Gross profit margin in the UK finished at 18% (2005: 24%), driven by margin decreases on Blavod Black Vodka. These decreases were the result of the competitive environment and the promotional demands to grow consumer brand awareness. We believe that there continues to be potential for further margin gains on many of our brands and we are taking steps to restore decreasing margins in our brand portfolio for the second half of the year. Total marketing costs decreased by 10%, while other administrative expenses increased by 24%. Over the full year, marketing and other administrative expenses are expected to be in-line with the previous year. The Group recorded an increase in gross profits to Â£986k (2005: Â£737k). United Kingdom In the UK markets, new listings further expanded distribution. All agency brands are contributing ahead of last year's figures, despite higher advertising and promotion costs. This trend indicates that all brands have attained profitability. Initial indications for the Christmas holiday period show forward orders significantly ahead of last year. United States In the US, distribution expanded and equivalent case shipments increased by 23%. Gross margins on Players Extreme and our wine portfolio have increased and all brands are contributing after advertising and promotion costs. Initial indications for the second half of the year appear very promising and strongly ahead of last year. Diamante Spirits (Associate) The first brand launched by our Joint Venture with Suntory is a new luxury tequila, El Diamante del Cielo Tequila. The brand has been positively received in the 44 US States to which it has been currently introduced. The company recorded a share of loss in Associate of Â£198k; however, working capital for the joint venture is contributed by our partner. The brands in the joint venture continue to contribute significantly to Blavod Extreme Spirits. Partnerships The Group continues to form partnerships with other drinks companies to distribute their brands in the UK and US. In the UK, the Group distributes Mickey Finn, Fernet Branca, Molinari Sambuca, the wines of the Domaines de Baron Rothschild and recently added Cockspur Rum and Matariki Wines. The representation and distribution relationships have all made positive contributions and they now represent 65% of our UK business. In the US, we distribute an Italian wine portfolio, including wines from Bruno Rocca, Baroncini, L'Illuminata, Petra and Contadi Castaldi among others, which now represent 31% of our US business. These partnerships have made positive contributions and continue to increase the Group's presence amongst key distributors and accounts. Possible offer for the issued share capital in the Company Further to our announcement on 28 November 2006, the Company confirms that discussions regarding this possible offer are still ongoing. A further announcement will be made in due course. Outlook The Group is continuing to establish its brands in its major target markets. In the second half of the year the Group expects to continue the momentum of the first half. The second half of the year is the main season for wine and spirit sales and there are early positive indications that our brands are continuing to demonstrate their potential. Jeffrey S. Hopmayer Chief Executive UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT for the six months ended 30 SEPTEMBER 2006 Year to Six months to 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Restated Notes Â£ 000 Â£ 000 Â£ 000 Turnover 3,540 2,203 5,353 Cost of sales (2,554) (1,466) (3,682) -------- -------- -------- Gross profit 986 737 1,671 Marketing and administrative expenses (2,484) (2,315) (4,188) -------- -------- -------- Operating loss (1,498) (1,578) (2,517) Share of operating loss in associate (198) (78) (470) -------- -------- -------- (1,696) (1,656) (2,987) Bank interest receivable Group 13 39 48 Associate 0 1 3 -------- -------- -------- 13 40 51 Loss on ordinary activities before taxation (1,683) (1,616) (2,936) Taxation 0 0 0 -------- -------- -------- Loss for the financial period (1,683) (1,616) (2,936) ======== ======== ======== Loss per share 2 (2.36p) (2.47p) (4.11p) Diluted loss per share 2 (2.36p) (2.47p) (4.11p) UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the six months ended 30 SEPTEMBER 2006 Year to Six months to 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Restated Notes Â£ 000 Â£ 000 Â£ 000 Loss for the financial period (1,683) (1,616) (2,936) Investment in associated undertaking recognised in other reserves 1 0 635 931 Foreign exchange differences on conversion of net investments (59) 246 (384) -------- -------- -------- Total recognised losses for the period (1,742) (735) (2,389) Prior year adjustments 1 (1,052) 0 0 -------- -------- -------- Total recognised losses since the last audited financial statements (2,794) (735) (2,389) ======== ======== ======== UNAUDITED CONSOLIDATED BALANCE SHEET as at 30 SEPTEMBER 2006 31 March 2006 2006 Unaudited 2005 Unaudited Audited Restated Notes Â£ 000 Â£ 000 Â£ 000 Fixed assets Intangible assets 3,779 3,847 3,728 Tangible assets 35 66 55 Investment in associate 266 558 464 -------- -------- -------- 4,080 4,471 4,247 -------- -------- -------- Current assets Stock 1,309 1,052 1,089 Debtors 1,972 1,375 1,405 Cash at bank 372 880 1,070 -------- -------- -------- 3,653 3,307 3,564 Creditors: amounts falling due within one year (3,361) (1,177) (1,716) -------- -------- -------- Net current assets 292 2,130 1,848 -------- -------- -------- Total assets less current liabilities 4,372 6,601 6,095 Creditors: amounts falling due after one year 0 (10) (5) -------- -------- -------- Net assets 4,372 6,591 6,090 ======== ======== ======== Capital and reserves Called up share capital 714 654 714 Share premium account 18,001 16,916 18,001 Other reserves 3 266 558 464 Shares to be issued 3 1,077 1,044 1,052 Profit and loss account 3 (15,686) (12,581) (14,141) -------- -------- -------- Shareholders' funds 4,372 6,591 6,090 ======== ======== ======== UNAUDITED CONSOLIDATED CASH FLOW STATEMENT for the period ended 30 SEPTEMBER 2006 Year to Six months to 30 September 31 March 2006 2005 2006 Unaudited Unaudited Audited Â£ 000 Â£ 000 Â£ 000 Cash outflow from operating activities (1,738) (1,289) (2,251) Returns on investments Interest received 13 40 48 -------- -------- -------- Net cash inflow from returns on investments 13 40 48 Capital expenditure Purchase of tangible fixed assets (3) (9) (2) Expenditure relating to the registration of trademarks 0 (3) (10) -------- -------- -------- Net cash outflow for capital expenditure (3) (12) (12) -------- -------- -------- Cash outflow before financing (1,728) (1,261) (2,215) Financing Draw-down on credit facility 1,030 0 0 Issue of ordinary share capital 0 0 1,240 Share issue costs 0 0 (95) Repayment of capital element of finance lease rental 0 (1) (2) -------- -------- -------- Net cash inflow/(outflow) from financing 1,030 (1) 1,143 -------- -------- -------- Decrease in cash in the period (698) (1,262) (1,072) ======== ======== ======== NOTES TO THE FINANCIAL STATEMENTS for the six months ended 30 SEPTEMBER 2006 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 2006, restated to adopt Financial Reporting Standard 20: Share-based payments. The statutory accounts for the year to 31 March 2006, upon which the auditors issued an unqualified opinion, have been delivered to the Registrar of Companies. As a result of adoption of Financial Reporting Standard 20, profit for the year to 31 March 2006 is reduced by Â£20,000 from that stated in the statutory accounts for the year to 31 March 2006 and unaudited profit for the period to 30 September 2005 is reduced by Â£12,000 from that stated in the interim report for the six months ended 30 September 2005. Whilst net assets are unaffected, the profit and loss reserve 31 March 2006 is reduced by Â£1,052,000 (September 2005 unaudited: Â£1,044,000) and the shares to be issued reserve is increased by an equivalent amount. Other than adoption of FRS 20, 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 2006. In the prior period, Blavod Extreme Spirits PLC acquired a 50% holding in an associated undertaking, Diamante Spirits LLC,at zero cost. The associate is included in the consolidated accounts on an equity accounting basis, in that the Group's share of the net assets of the associate are included within investment in associate and the Group share of the profits or losses are included within the profit and loss account.Suntory International Corporation, which owns the other 50% of the associate, has invested Â£1,754,483 in Diamante Spirits, LLC since its formation, and the Group's share of this amount is included within other reserves. A transfer equivalent to the Group's share of the loss for the period has been made between other reserves and the profit and loss account within shareholders' funds. 2. Loss per share The calculations of earnings per share for the six months, both basic and diluted, are based on a loss of Â£1,683,000 (2005: Â£1,616,000) and 71,379,700 (2005: 65,443,633) shares in issue. The calculations of earnings per share for the full year to 31 March 2006 are based on a loss of Â£2,936,000, and 71,379,700 shares in issue. 3. Movement in reserves Other Shares to be Profit and Reserves Issued Loss At 31 March 2006 as previously stated 464 0 (13,089) Prior period adjustment 0 1,052 (1,052) -------- -------- -------- At 31 March 2006 adjusted 464 1,052 (14,141) Loss for the period 0 0 (1,683) Share of loss in associate (198) 0 198 Foreign 0 0 (59) Share options 0 25 0 -------- -------- -------- At 30 September 2006 266 1,077 (15,685) ======== ======== ======== This information is provided by RNS The company news service from the London Stock Exchange

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