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Blavod Wines & Spirits plc (DIS)

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Wednesday 05 September, 2012

Blavod Wines & Spirits plc

CORRECTION: Final Results

CORRECTION: Final Results

This announcement replaces that of 16:30 on 5 September 2012 (HUG1638964). The announcement has been amended to include a Financial summary, Key Points and Chairman's quote. All other items, including the extracts from the financial statements, remain unchanged.

Blavod Wines and Spirits PLC
("Blavod" or the "Company")

Final Results for the Year Ended 31 March 2012

The Board of Blavod Wines & Spirits plc (AIM:BES), owner of premium drinks brands including Blavod Black Vodka, Blackwoods Gin and RedLeg Rum, is pleased to announce results for the year ended 31 March 2012.

Financial summary 31 March 2012
(£'000)
30 March 2011
(£'000)
  • Sales net of Duty 

4,5805,725
  • Operating loss 

43356

Key points

Own Brands

  • Owned Brand revenues increased by 5% 

  • UK revenues up by 23% 

  • Export markets total 29 with new markets opened in Europe, Asia and Latin America added 

  • European distribution agreement with Waldemar Behn Gmbh working well 

  • Successful launch of RedLeg Spiced Rum   

Agency Brands

  • Narrowing of agency portfolio to concentrate on core brands 

  • Revenues impacted by discontinuation of two brands in previous year 

Corporate

  • Reduction in personnel costs of 7% 

  • Inventory levels reduced  

  • Improvements in administration and reporting systems 

Commenting on the results, Don Goulding, Executive Chairman, said:

"We continue to concentrate our efforts on developing our premium brands, expanding into new markets and controlling costs and are now very well placed to accelerate this activity once we have successfully strengthened the balance sheet."

Extracts of the final results appear below and the full version of the Company's annual report and accounts has been posted to shareholders and is available on the Company's website.

The Company also announces that its 2012 Annual General Meeting will be held at 10:30am on 28 September 2012 at the offices of Maclay Murray & Spens LLP, 12th floor, One London Wall, London EC2Y 5AB. The AGM notice has been posted to shareholders and is also available on the Company's website.

For further information please contact:

Blavod Wines and Spirits plc
Don Goulding Executive Chairman+44 20 7352 2096
N+1 Brewin (NOMAD & Broker)
Robert Beenstock
Richard Lindley
+44 20 3201 3710
+44 113 241 0181
Cadogan PR
Alex Walters+44 20 7839 9260
+44 7771 713608

Chairman's Statement

Introduction
The year to 31 March 2012 was one of significant change as the Group accelerated its efforts to achieve growth following a disappointing performance in the first half of the financial year. Our team has responded positively to the strategy we pursued to achieve this growth which included restructuring the senior management team and consolidating the brand portfolio. As a result, I'm pleased to report that the performance of the Group improved significantly against all key performance measures in the second half of the financial year. We ended the year with results in line with market expectations.

Sales net of duty were £4,580k (2011: £5,725k) and the operating loss for the year was £433k (2011: loss £56k).

These results reflect the full year impact of the loss of two key agency brands (Cockspur and DBR wines) and the loss of a brand listing in a major UK retailer which was subsequently regained in the second half of the year.

For those continuing brands not mentioned above we have achieved solid sales growth with our owned brands increasing 5% (23% increase in UK) and combined agency brands increasing 25% in a UK spirits market which is relatively flat.

Also included in the results is a stock write off of £19k and an impairment in the carrying value of our intangible fixed assets of £22k; both relate to one of our own brands, Jago's, which requires a more flexible manufacturing solution. Once we have achieved this we intend to re-launch and reinstate the brand value of this premium product.

Financing
As indicated in the Interim Results the board has sought additional capital to meet medium term cash requirements, brand marketing and to strengthen the balance sheet. Whilst this has taken time to put in place, discussions are ongoing and nearing finalisation. We expect to make additional announcements in due course.

Blavod Owned brands
The Group's owned brands sales revenue increased by 5% and brand contribution increased 7% as we widened distribution and improved brand activation in the UK and internationally. In the UK our sales revenue grew by 23% as we improved our organisational focus in a highly competitive market. Contribution was maintained at 19%.

The increase in contribution relative to revenues was due primarily to a reduction in marketing spend following last year's one-off costs relating to the repackaging design of Blavod Black Vodka. On a like for like basis marketing spend and support was maintained year on year however it was better invested and resulted in greater impact to sales.

With volumes increasing in other parts of the world we have taken the opportunity to rebalance the inventories held by our distributors in our major export markets of USA and Spain. In both instances year end stock levels were reduced compared to prior year to normalise inventory relative to depletions. Both markets continue to grow despite challenging market conditions.

The Group now exports to 29 markets having opened four new markets in Asia and Latin America in the year. In addition, in December the Group signed a production, marketing and distribution agreement with Waldemar Behn GmbH to cover Duty Free and nominated domestic markets in continental and eastern Europe for Blavod Black Vodka. I am pleased to report to you that this is working well with volume sales in continental Europe growing 25% year on year during the first six months of this agreement.

RedLeg spiced Caribbean Rum was successfully developed and launched in March 2012. This is the first new product entirely developed by the Group in several years and is a premium quality drink with premium packaging. Despite its launch having a relatively small budget, RedLeg is already building a following amongst consumers and trade customers. Promotional activity has included tastings and music nights in bars in Brighton, Sussex where we are focusing our initial efforts as well as cross marketing with the launch of a new Caribbean style soft drink, made by a third party, at music festivals and this has worked well in attracting consumers to both brands.

Agency brands
Sales revenues in this division declined by 24% mainly due to the discontinuation of two key agency brands agreements during part of the year as well as the loss of a major UK retail listing in the previous year.

Overall, sales on continuing brands increased by 25% after adjusting for the brand impacted by the prior year delisting.

Agency brands are an important part of our UK business and to our growth strategy, however it had become clear to the Directors that the Group was overstretched with too many brands - often with very different distribution strategies. It was therefore decided between December 2011 and April 2012 to narrow these down to provide greater focus and concentration on what the Directors believe to be the core brands.

Organisation

During the year we have undertaken several important steps to contain costs and improve the operational efficiency of the Group.

People costs were reduced by 7% following organisational changes in senior management and during the course of the year debtor days were reduced from 89 in 2011 to 75 in 2012. This has greatly improved our working capital management and is largely as a result of the improvements in processes and systems. After the year end we successfully migrated to a new transaction system which will improve administration efficiency and future reporting quality. These overhead cost reductions were offset by a number of non-recurring costs. The registered office moved in December 2011 resulting in one off costs of £20k. Our inventory levels have been reduced from £583k to £334k as we reduced the number of agency brands.

At the same time, we have invested in the management of our major customers, improving geographical coverage, gaining new listings for many of our brands and have enlarged our customer base in the UK.

Outlook
The board and management are confident that our focus on brand building activities and quality distribution expansion on a narrower product portfolio will continue to grow both the owned and agency brands ahead of the market.

Although market conditions remain difficult we are building from a relatively small base and have an experienced team which is able to seize the many opportunities which exist and offset the obvious challenges. As we have demonstrated this year we are capable of launching new products with limited resources and opening up into new markets to gain customers and believe this sets us up well for the future.

The UK market remains intensely competitive and highly price sensitive as consumers buy a greater share of their purchases on promotion and because we have such a wide distribution base across our brand portfolio we are very well positioned to work with our customers to grow our mutual businesses.

D. Goulding

Chairman

4 September 2012

Consolidated income statement

for the year ended 31 March 2012

2012

£'000
2011 restated

£'000
Revenue4,5805,725
Cost of sales(3,539)(4,319)
Gross profit1,0411,406
Advertising and promotional costs(317)(336)
Other administrative expenses(1,126)(1,120)
Depreciation and amortization(9)(6)
Impairment of intangible fixed assets(22)-
Total administrative expenses(1,474)(1,462)
Operating loss(433)(56)
Finance income4713
Finance expense(115)(130)
(Loss) before tax from continuing operations(501)(173)
Income tax--
(Loss) for the year(501)(173)
(Loss) per share
Basic (pence per share)(0.57)(0.20)
Diluted (pence per share)(0.57)(0.20)

Consolidated statement of comprehensive income

for the year ended 31 March 2012

2012
£'000
2011
£'000
(Loss) for the year(501)(173)
Other comprehensive income--
Total comprehensive income for the year(501)(173)

Consolidated balance sheet

as at 31 March 2012

2012

£'000
2011

£'000
Assets
Non-current assets
Property, plant and equipment2429
Intangible assets1,4031,380
1,4271,409
Current assets
Inventories334583
Trade and other receivables9781,488
Cash and cash equivalents7736
Total current assets1,3892,107
Total assets2,8163,516
Liabilities
Non current liabilities
Borrowings(375)(350)
Derivative(1)(48)
(376)(398)
Current liabilities
Trade and other payables(874)(923)
Finance facility liability(607)(740)
Total current liabilities(1,481)(1,663)
Total liabilities(1,857)(2,061)
Net assets9591,455
Equity
Equity attributable to equity holders of the parent
Share capital878878
Shares to be issued1251
Retained earnings69526
Total equity9591,455

The financial statements were approved by the Board of Directors on 4 September 2012 and were signed on their behalf by:

D. Goulding   S. Bertolotti

Director   Director

Consolidated statement of changes in equity

for the year ended 31 March 2012

Share
capital
£'000
Shares to be
issued
£'000
Retained
earnings
£'000
Total equity
£'000
Balance at 31 March 2010 and 1 April 2010878717211,616
Share based payment charge

Lapsed/forfeited share options - reclassification to retained earnings
-

-
12

(678)
-

678
12

-
Transactions with owners-(666)67812
(Loss) for the year--(173)(173)
Balance at 31 March 2011 and 1 April 2011878515261,455
Share-based payment charge

Lapsed/forfeited share options - reclassification to retained earnings
-

-
5

(44)
-

44
5

-
Transactions with owners-(39)445
(Loss) for the year--(501)(501)
Balance at 31 March 20128781269959

Consolidated cash flow statement

for the year ended 31 March 2012

2012

£'000
2011

£'000
Cash flows from operating activities Operating (loss)

Adjustments for:
(433)(56)
Depreciation96
Impairment of intangible fixed assets22-
Profit on sale of intangible fixed assets(1)-
Loss on disposal of property, plant and equipment1-
Share-based payment512
(397)(38)
Movements in working capital
Decrease in inventories24930
Decrease in trade receivables510339
(Decrease) in trade payables(49)(51)
Cash generated by operations710318
Net finance expense(90)(117)
Net cash generated by operating activities223163
Cash flows from investing activities
Purchase of property, plant and equipment(5)(11)
Expenditure relating to the acquisition of licences and trade marks(47)(69)
Proceeds from the disposal of licences and trade marks3-
Net cash (used by) investing activities(49)(80)
Cash flows from financing activities
Net cash (repaid to) finance facility(133)(165)
Net cash (used in) financing activities(133)(165)
Net increase/(decrease) in cash and cash equivalents41(82)
Cash and cash equivalents at beginning of year36118
Cash and cash equivalents at end of year7736

Notes to the consolidated financial statements

for the year ended 31 March 2012

1. Basis of preparation

The consolidated financial statements are for the twelve months ended 31 March 2012. They have been prepared in accordance with the requirements of International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared under the historical cost convention. The measurement bases and principal accounting policies of the Group are set out below.

These consolidated financial statements are presented in Pounds Sterling (£), which is also the functional currency of the parent company. Unless otherwise stated, all amounts are given in round £'000s.

Blavod Wines and Spirits plc is the Group's ultimate parent company. The company is a public limited company incorporated and domiciled in the United Kingdom. The address of Blavod Wines and Spirits plc's registered office and its principal place of business is 3rd Floor, Cardinal House, 39/40 Albemarle Street, London W1S 4TE.

Going concern
These financial statements have been prepared on a going concern basis. The Group incurred a consolidated loss of £501k during the year under review, principally as a result of the loss of certain agency brands and also reduced volumes in one continuing agency brand. As a result year on year gross profit decreased although management continued to control overhead costs effectively. A number of positive steps have been taken during the year to improve future profitability and performance. These include: ceasing to manage certain third party brands, this took up a significant amount of management time without contributing substantially to profitability; the launch of the owned brand, RedLeg Rum, in March 2012; and the regaining of the volumes on the key agency brand listing lost in 2011. In addition, management is pleased with the performance of the Group during the first quarter of 2013. Nonetheless, management is currently investigating several potential sources of finance to support the Group's working capital needs and plans going forward. Should these not come to fruition, or insufficient finance be raised, which is contrary to management's current expectations, there is a material uncertainty that the Group will be able to continue as a going concern.

New Standards, amendments and interpretations
At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Group.

Management anticipates that all of the pronouncements will be adopted by the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

IFRS 9 "Financial Instruments" (effective 1 January 2015)
IFRS 9 addresses the classification and measurement of financial assets and will replace IAS 39. The standard is mandatory for accounting periods commencing on or after 1 January 2015, subject to adoption by the European Union.

Amendments to IAS 1 "Presentation of Items of Other Comprehensive Income" (effective 1 July 2012)
The Amendments to IAS 1 do not address which items are presented in other comprehensive income (OCI) but do change the structure of their presentation. The main change is a requirement for entities to group items presented in OCI into those that, in accordance with other IFRS:

  1. will not be reclassified subsequently to profit or loss; 

  2. will be reclassified to profit or loss when specific conditions are met. 




This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients.

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(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.

Source: Blavod Wines & Spirits plc via Thomson Reuters ONE

HUG#1639038

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