Final Results

Blavod Wines and Spirits plc 14 June 2010 Preliminary Results for the year ended 31 March 2010 Financial Highlights Blavod Wines and Spirits plc (the "Company"), the owner of the Blavod Black Vodka brand, and wines and spirits distributor, announces its unaudited preliminary results for the year ended 31 March 2010. Financial highlights ·         Revenue up 40% to £ 8.316m (2009: £5.955m) ·         Gross profit up 10% hurt by unfavourable mix of brands and sterling weakness. ·         Costs of Brand Support and overheads significantly increased to support growth. ·         Loss of £15k (2009 profit £130k as restated) Commenting on the results, Richard Ambler, Managing Director, said: "Despite an encouraging 40% increase in sales value the change in mix towards lower priced brands reduced margins during a difficult trading year and led to a disappointing result. This year, price increases already partially implemented, regained distribution and the selective reduction in overheads will restore the company to profit. The launch of Blackwood's Gin in Spain and in the US, and the repackaging of Blavod and good progress in the US, are particularly encouraging developments." For further information, please contact: Blavod Wines and Spirits plc                               Tel: 0207 352 2096 Richard Ambler Brewin Dolphin Corporate Advisory & Broking             Tel: 0845 213 4726 Neil Baldwin Chairman's Statement Trading After a strong start, the Group had a disappointing year, making a small loss of £15k (2009: profit £130k as restated) as expected in our trading statement of 1 February 2010. Spirit sales continued to grow strongly, from £4.9m to £6.8m net of excise taxes. However, profits were hurt by a number of factors of which the most important were the following: * gross margins were penalised by the poor performance of Blavod Black Vodka, our highest margin brand, which was delisted in two major UK grocery chains for most of the year, in favour of a competitive product which is no longer labelled as vodka; income from wine dropped sharply as a result of the weaker pound sterling, generally difficult market conditions and a less attractive vintage; * there were continued difficulties in Russia and Duty Free at the beginning of the year; * overheads and brand spending increased substantially behind volume growth; * interest charges rose sharply as we borrowed more to finance greatly increased volumes, at lower margins. Among the positive features of the year, the most important was the addition of Bruichladdich Scotch Malt Whiskies to the portfolio in September, making a strong contribution. Blavod had a good year in the US gaining volume and listings in a number of new states. Blackwood's was launched into Spain in the middle of the year, one of the world's largest premium gin markets. Vitally, the Company's very prudent credit policy, although it caused us to forfeit some sales, saved us from the First Quench collapse and other failures. The Company has taken steps to correct the causes of the poor result last year: * Blavod Black Vodka will be back in UK grocery distribution by the middle of the year in an attractive new presentation; * Blackwood's export distribution continues to grow and the brand will be launched in the US in July; * some price increases have been successfully implemented and others are being negotiated, improving our margins; * overheads have been cut back almost to the levels of 2008/9, largely by the restructuring of the sales force. As a result of these corrective measures we are confident of a significantly improved performance in the year ahead and in the long term prospects of our brands. In order to improve investors' understanding of our business we have made a number of changes to our financial statements this year, and adjusted our previous year accordingly. Specifically: * we have added more information in our income statement, showing separately advertising and promotional costs, administrative expenses, depreciation and amortisation and finance charges as well as adding EBITDA and operating profit lines; * we have reallocated to cost of sales funds received from suppliers as price support, whereas in the past these have been included as a credit within administrative expenses; * also in the course of the year we identified a misstatement in our 2008/9 financial statements whereby our profit for that year was overstated and one of our creditor balances understated in the amount of £55,000. This has been corrected in the restated figures. Neither the original error nor its correction had any effect on cash. Amortisation of trademarks As envisaged in last year's report we have reviewed the policy of amortisation of the Group's owned brands. We have concluded that straight line amortisation bears no relevance to brand value and have decided to adopt the more useful method of annual review of value for impairment purposes. On the basis that brands are considered to have an indefinite useful life, this year's review showed a value well in excess of the value on the balance sheet and therefore there is no cause for impairment. Board developments Mr Willie Phillips will retire at the AGM, after acting as part time finance director since 2003. We thank him for his services, particularly during the very difficult times when the Company was being managed from the US. Mr Phillips will be succeeded as part time finance director by Mrs Sarah Bertolotti, who has been working with Mr Phillips for much of the last year. We propose Mrs Bertolotti for election to the board of Directors at the AGM. Mrs Bertolotti is a chartered accountant and worked for Arthur Andersen for six years before moving to finance management positions with Hilton Hotels and with Regus. She has already made a significant contribution to Blavod. We intend to further strengthen the board, and to prepare for the future, by proposing two new non executive directors for election at the AGM: Mr Don Goulding was for many years a senior executive at Diageo, holding a number of commercial positions internationally, lastly as Managing Director of Diageo in the UK. He has deep knowledge of the UK market and Blavod's customers; Mr Mark Quinn is an experienced businessman who until recently was Managing Director of Soho Estates, which owns the largest estate of licensed premises in Central London. He will bring deep understanding of the economics and operations of the restaurants, bars and clubs in the Capital, important customers for our brands. C. Campbell Chairman Unaudited consolidated income statement for the year ended 31 March 2010 2009             2010   restated           Note £'000   £'000 Revenue           8,316   5,955 Cost of sales         (6,745)   (4,531) --------- ---------- Gross profit         1,571   1,424 Advertising and promotional costs           (268)   (104) Non recurring costs           (21)   - Other administrative expenses         (1,204)   (1,084) --------- ---------- Total administrative expenses           (1,493)   (1,188) --------- ---------- EBITDA           78   236 Depreciation and amortisation           (6)   (53) Operating profit       72   183 Finance income         20   3 Finance expense         (107)   (56) (Loss) / profit before tax from continuing operations   (15)   130 Income tax          -    - +------------------+ (Loss)/ profit for the year | (15)   130| +------------------+ (Loss)/ earnings per share: Basic (pence per share)     2 (0.02)   0.15 Diluted (pence per share)     2 (0.02)   0.15 Unaudited consolidated statement of comprehensive income 2009             2010   restated             £'000   £'000 (Loss)/ profit for the year         (15)   130 Other comprehensive income         -   - --------- ----------- Total comprehensive income for the year   (15)   130 Unaudited consolidated balance sheet as at 31 March 2010         2010   2009 restated         £'000   £'000 Assets Non-current assets Property, plant and equipment   24   12 Intangible assets     1,311   1,259 --------- --------------         1,335   1,271 --------- -------------- Current assets Inventories     612   452 Trade and other receivables   1,827   1,724 Cash and cash equivalents   118   52 --------- -------------- Total current assets     2,557   2,228 --------- -------------- Total assets     3,892   3,499 Liabilities Non current liabilities Borrowings     (337)   - Derivative     (60)   - --------- --------------       (397)   - Current Liabilities Trade and other payables   (974)   (1,139) Finance facility liability   (905)   (745) --------- -------------- Total current liabilities       (1,879)   (1,884) --------- -------------- Total liabilities     (2,276)   (1,884) --------- -------------- Net assets     1,616   1,615 EQUITY Equity attributable to equity holders of the parent Share capital     878   878 Share premium account   -   - Shares to be issued     717   701 Retained earnings   21   36 --------- -------------- Total equity     1,616   1,615 Unaudited consolidated statement of changes in equity Share Share Shares Capital Premium to be Retained Total           £000 £000 issued Earnings Equity Balance at 31 March 2008 and 1 April 1,466 2008              878 18,489 682 (18,583) Transfer between reserves   (18,489) - 18,489 - Share-based payment charge   - 19   19 Profit for the financial year as stated   - - 130 130 ----------------------------------------- Balance at 31 March 2009 and 1 April 1,615 2009              878 - 701 36 ----------------------------------------- Share-based payment charge   - 16   16 (Loss) for the year   - - (15) (15) ----------------------------------------- Balance at 31 March 1,616 2010                                         878 - 717 21 Unaudited consolidated cash flow statement for the year ended 31 March 2010 2009           2010   restated           £'000   £'000 Cash flows from operating activities Operating profit     72   183 Adjustments for : Depreciation       6   3 Amortisation       -   53 Share-based payment     16   19 Net foreign exchange (gain) / loss   -   (11) ------- ---------           94   247 Movements in working capital (Increase) in inventories   (160)   (232)  (Increase) in trade receivables   (103)   (667)  (Decrease) / increase in trade payables   (65)   121 Cash (used by) operations     (328)   (778) ------- --------- Finance expense       (90)   (56) ------- --------- Net cash (used in) operating activities   (324)   (587) Cash flows from investing activities Interest received       -   3 Purchase of property,  plant and equipment       (18)   (14) Expenditure relating to the acquisition of licences and trade marks (152)   (597) ------- --------- Net cash (used by) investing activities   (170)   (608) Cash flows from financing activities Net cash received from finance facility   160   745 Proceeds from convertible loan note   400   - Net cash received from financing activities   560   745 ------- --------- Net increase/(decrease) in cash and cash equivalents 66   (450) Cash and cash equivalents at beginning of year 52   502 ------- --------- Cash and cash equivalents at end of year   118   52 1        Basis of preparation The consolidated financial statements are for the twelve months ended 31 March 2010. 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 financial information set out above does not constitute the Company's statutory accounts within the meaning of section 435 of the Companies Act 2006.  The 2010 figures are based on unaudited accounts for the year ended 31 March 2010. The 2009 comparatives are derived from the statutory accounts for 2009 which have been delivered to the Registrar of Companies and received an unqualified audit report and did not contain a statement under the Companies Act 1985, s237(2) or (3).  These have been restated by way of a prior year adjustment to correct a misstatement in the amount of £55,000.  Neither the original error nor its correction had any effect on cash. The effect of this adjustment is to reduce the prior year profit, as previously stated, with a corresponding increase in trade creditors. 2      Earnings per share The calculation of the basic (loss)/ earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The diluted (loss) / earnings per share is identical to the basic earnings/(loss) per share as the exercise of convertible loan instruments, warrants and options would be anti-dilutive as the market value of shares is less than the exercise price of the convertible loan instruments, warrants and options granted. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.         2010   2009   restated (Loss)/profit attributable to ordinary shareholders (15)   130 (£'000) Weighted average number of shares (used for basic e r i gs per share)   87,758,508   87,758,508 ------------ ----------- Basic and diluted earnings/(loss) per share (pence) (0.02)   0.15 3.  Annual report Copies of the published accounts of the Company will be sent to all shareholders on or around 15 June 2010 and will be available from that the Company's registered office and will be located on: http://www.blavodwinesandspirits.com/investors/accounts.htm ENDS [HUG#1423550]

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