Distil Regulatory News (DIS)

6 Jun 2008 14:38



Blavod Extreme Spirits PLC

6 June 2008

 

Blavod Extreme Spirits PLC 

Blavod Extreme Spirits plc (the "Company"), the owner of the Blavod Black Vodka brand, and wine and spirits distributor, announces its preliminary results for the year ended 31 March 2008.

Financial highlights

Revenue up 26% to £4.09 million (2007: £3.05 million)

Profitable at operating company level with £92k operating profit (2007 : loss (£172k)) 

Reported pre-tax loss from continuing operations reduced to £155k (2007: £649k);

Reported pre-tax profit for the year of £1.08 million (2007: loss £3.50 million) after profit on disposal of discontinued operations

Company has net cash resources at £0.5 million at the year end (2007: £0.4 million)

Business highlights

All brands in the business showing increased turnover year on year.

Successful acquisition of the licence for Blackwood's Gin and Vodka in May 

Disposal of loss-making US business complete

Proposal to change the Company's name 

Commenting on the results, Richard Ambler, Chief Executive, said: 

"A year of solid progress both for the Blavod vodka brand and all of our agency brands has resulted in our first operating profit, and the very recent acquisition of two new brands and the encouraging start to the new financial year give us confidence in more progress in the year ahead. "

For further information, please contact:

Blavod Extreme Spirits plc  Tel: 0207 352 2096

Richard Ambler

Brewin Dolphin Investment Banking Tel: 0113 241 0126

Neil Baldwin

Preliminary Results

For the twelve months ended 31 March 2008

Chairman's Statement

Having sold the loss-making Blavod Extreme Spirits USA Inc's brands, assets and liabilities in September 2007, the Group has made solid progress.

Each brand in our portfolio contributed to the 26% growth in turnover: Blavod responded to a modest investment in promotional spending, and gained strongly in export sales; Mickey Finns benefited from strong demand and increased range and distribution; and Cockspur prospered over the first full year of representation by the Group. Consequently, the UK operating company made a profit, for the first time, of £91,000, compared to a loss of £172,000 in the previous year. Head Office costs remained at previous high levels resulting in an operating loss in the UK of £166,000.

In the circular proposing to shareholders the disposal of the US business, the directors wrote that this disposal would enable the Company to widen the portfolio of brands. This May we have been able to take advantage of such an opportunity, and to acquire the licences for Blackwood's Gin and Blackwood's Vodka, under terms recently announced, and which should lead to full ownership of the brands in due course. We are enthusiastic about this development: these brands should contribute in a meaningful way to Group turnover in the current year and significantly more thereafter, generating good margins.

The Group has been able to finance its growth and the acquisition of the new brands through the consideration received for the sale of the US business and the issue of new shares in December 2007. We will be in a position to finance further growth by using an invoice discounting facility recently put in place.

In 2008/9, sales have increased satisfactorily in the first two months, in spite of the rise in excise duty in the UK. Export volume of Blavod remains buoyant, and there is nascent demand for Blackwood's Gin. An experienced and stable management team is in place, spending behind the brands will be increased and overhead costs contained, and we expect a positive result for the full year.

Some changes are needed to reflect the structure and future prospects of the Company.

Following a year of major change the Group can look forward to growth of its brands and a profitable year. 

Colin Campbell

Director

Consolidated income statement

	2008		2007
Note	£'000		£'000

Revenue		4,092		3,251
Cost of sales		(3,091)		(2,415)

Gross profit

1,001

836

Administrative costs

(1,166)

(1,504)

Operating loss

(165)

(668)

Finance income			10		19
Net finance income			10		19

Loss before tax and loss for the period from continuing operations		(155)		(649)
Income tax expense		-		-

Loss for the period from continuing operations

(155)

(649)

Discontinued operations
Profit/(loss) for the period from discontinued operations		1,238		(2,856)

Profit/(loss) for the year

1,083

(3,505)

Earnings per share: 

From continuing operations:

Basic (pence per share)	2	(0.20)		(0.90)
Diluted (pence per share)	2	(0.20)		(0.90)

From total profit/(loss):

Basic (pence per share)	2	1.40		(4.88)
Diluted (pence per share)	2	1.40		(4.88)

Consolidated balance sheet

	2008		2007
	£'000		£'000

ASSETS

Non-current assets
Property, plant and equipment		1		33
Intangible assets		615		682
Investments in associates		-		255
		616		970

Current assets
Inventories			220		1,032
Trade and other receivables			1,057		1,313
Cash and cash equivalents			502		401
Total current assets			1,779		2,746
Total assets			2,395		3,716

LIABILITIES

Current liabilities
Trade and other payables		(929)		(1,496)
Total current liabilities		(929)		(1,496)

Non-current liabilities
Long-term borrowings		-		(1,664)
Total non-current liabilities		-		(1,664)
Total liabilities		(929)		(3,160)
Net assets		1,466		556

EQUITY

Equity attributable to equity holders of the parent
Share capital		878		732
Share premium account		18,489		18,240
Shares to be issued		682		1,093
Other reserve		-		255
Profit and loss account		(18,583)		(20,359)
Translation reserve		-		595
Total equity		1,466		556

  Consolidated statement of recognised income and expense

	2008		2007
	£'000		£'000

Exchange differences on translation of foreign operations	-		595
Exchange differences on translation of associate	-		(42)
Share of additional capital contribution to associate	-		156
Net income recognised directly in equity	-		709
Profit/(loss) for the year	1,083		(3,505)
Total recognised income and expense for the period	1,083		(2,796)

Consolidated cash flow statement

	2008		2007
	£'000		£'000

Cash flows from operating activities

Profit/ (loss) after taxation		1,083		(3,505)
Adjustments for:
Depreciation		32		37
Amortisation		54		44
Share-based payment		27		41
Net foreign exchange loss		(66)		611
Disposal of US operations		(2,274)		-
Finance (income)/expense		(10)		72
		(1,154)		(2,377)
Movements in working capital
Decrease in inventories		1,523		57
Decrease in trade receivables		524		92
Decrease in trade payables		(1,335)		(234)
Cash used by operations		712		(2,462)
Finance expense		(79)		(91)
Net cash used in operating activities		(521)		(2,553)

Cash flows from investing activities

Interest received		10		19
Proceeds from the sale of subsidiary and associate		220		-
Purchase of property, plant and equipment		(3)		(23)
Proceeds from sale of property, plant and equipment		-		8
Expenditure relating to the registration of trade marks		-		(20)
Net cash used in investing activities		227		(16)

Cash flows from financing activities

Proceeds from issue of share capital		395		257
Proceeds from long-term borrowings		-		1,664
Repayment of finance lease		-		(5)
Net cash from financing activities		395		1,916

Net increase/(decrease) in cash and cash equivalents		101		(653)
Cash and cash equivalents at beginning of period		401		1,070
Effects of exchange rate changes on the balance of cash held in foreign currencies		-		(16)
Cash and cash equivalents at end of period		502		401

 1 Basis of preparation

The financial information in this statement is for the twelve months ended 31 March 2008 and is prepared in accordance with applicable accounting standards. It does not constitute statutory accounts as defined in the Section 240 of the Companies Act 1985. 

2 Earnings per share

The calculation of the basic 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 earnings/(loss) per share is identical to the basic earnings/(loss) per share as the exercise of warrants and options would be anti-dilutive as the market value of shares is less than the exercise price of the warrants and options granted. 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

2008

2007

Continuing operations

Loss attributable to ordinary shareholders (£'000)	(155)	(649)
Weighted average number of shares (used for basic earnings per share)	77,405,809	71,891,182
Basic and diluted loss per share (pence)	(0.20)	(0.90)

Discontinued operations

Profit/(loss) attributable to ordinary shareholders (£'000) (Note 22)	1,238	(2,856)
Weighted average number of shares (used for basic earnings per share)	77,405,809	71,891,182
Basic and diluted earnings/(loss)  per share (pence)	1.60	(3.97)

Total operations

Profit/(loss) attributable to ordinary shareholders (£'000)	1,083	(3,505)
Weighted average number of shares (used for basic earnings per share)	77,405,809	71,891,182
Basic and diluted earnings/(loss)  per share (pence)	1.40	(4.88)

3 Explanation of transition to IFRS

These are the Group's first financial statements prepared under IFRS.

An explanation of how the transition from UK GAAP to IFRS has affected the Group's reported financial position, financial performance and cash flows is set out below.

IFRS 1 permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS in the transition period. These financial statements have been prepared on the basis of taking the following exemptions:

Business combinations prior to 1 April 2006, the Group's date of transition to IFRS, have not been restated to comply with IFRS 3 "Business Combinations". Accordingly the classification of the combination (acquisition, reverse acquisition or merger) remains unchanged from that used under UK GAAP. Assets and liabilities are recognised at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement. Deferred tax is adjusted for the impact of any consequential adjustments after taking advantage of the transitional provisions.

Cumulative translation differences on foreign operations are deemed to be nil at 1 April 2006. Gains recognised in the consolidated income statement on the subsequent disposal of foreign operations have excluded translation differences arising prior to the transition date; and

The entity has elected not to apply IAS 21 "The Effects of Changes in Foreign Exchange Rates" retrospectively to goodwill and fair value adjustments arising on business combinations before the Group's date of transition to IFRS. Such goodwill and fair value adjustments are not treated as foreign currency assets and so are not retranslated at each reporting date.

Reconciliation of equity at 1 April 2006

	UK GAAP	a	b	c	d	e	IFRS
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	55	-	-	-	-	-	55
Goodwill	3,022	-	-	-	(3,022)	-	-
Other intangible assets	706	-	-	-	-	-	706
Investments in associates	464	-	-	-	-	-	464
Current assets
Inventories	1,089	-	-	-	-	-	1,089
Trade and other receivables	1,405	-	-	-	-	-	1,405
Cash and cash equivalents	1,070	-	-	-	-	-	1,070
Current liabilities
Trade and other payables	(1,716)	(14)	-	-	-	-	(1,730)
Non-current liabilities
Long-term borrowings	-	-	-	-	-	-	-
Other non-current liabilities	(5)	-	-	-	-	-	(5)
Net assets	6,090	(14)	-	-	(3,022)	-	3,054
Equity
Share capital	713	-	-	-	-	-	713
Share premium account	18,002	-	-	-	-	-	18,002
Shares to be issued	1,052	-	-	-	-	-	1,052
Other reserve	464	-	-	-	-	-	464
Profit and loss account	(14,141)	(14)	-	-	(3,022)	-	(17,177)
Translation reserve	-	-	-	-	-	-	-
Total equity	6,090	(14)	-	-	(3,022)	-	3,054

	UK GAAP	a	b	c	d	e	IFRS
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	33	-	-	-	-	-	33
Goodwill	-						-
Other intangible assets	682	-	-	-	-	-	682
Investments in associates	255	-	-	-	-	-	255
Current assets
Inventories	1,032	-	-	-	-	-	1,032
Trade and other receivables	1,313	-	-	-	-	-	1,313
Cash and cash equivalents	401	-	-	-	-	-	401
Current liabilities
Trade and other payables	(1,482)	(14)	-	-	-	-	(1,496)
Non-current liabilities
Long-term borrowings	(1,664)	-	-	-	-	-	(1,664)
Other non-current liabilities	-	-	-	-	-	-	-
Net assets	570	(14)	-	-	-	-	556
Equity
Share capital	732	-	-	-	-	-	732
Share premium account	18,240	-	-	-	-	-	18,240
Shares to be issued	1,093	-	-	-	-	-	1,093
Other reserve	255	-	-	-	-	-	255
Profit and loss account	(19,750)	(14)	-	-	-	(595)	(20,359)
Translation reserve	-	-	-	-	-	595	595
Total equity	570	(14)	-	-	-	-	556

  Reconciliation of loss for the year ended 31 March 2007

	UK GAAP	a	b	c	d	e	IFRS
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	6,899	-	(3,648)	-	-	-	3,251
Cost of sales	(5,105)	-	2,690	-	-	-	(2,415)
Gross profit	1,794	-	(958)	-	-	-	836
Administrative costs	(5,063)	-	3,559	-	-	-	(1,504)
Impairment of goodwill	(2,863)	-	-	-	2,863	-	-
Total administrative costs	(7,926)	-	3,559	-	2,863	-	(1,504)
Operating loss	(6,132)	-	2,601	-	2,863	-	(668)
Finance income	-	-	-	19	-	-	19
Finance costs	(72)	-	91	(19)	-	-	-
Net finance (cost)/income	(72)	-	91	-	-	-	19
Share of loss of associates	(323)	-	323	-	-	-	-
Loss before tax	(6,527)	-	3,015	-	2,863	-	(649)
Income tax expense	-	-	-	-	-	-	-
Loss for the period from continuing operations	(6,527)	-	3,015	-	2,863	-	(649)
Loss for the period from discontinued operations	-	-	(2,856)	-	-	-	(2,856)
Loss for the period	(6,527)	-	159	-	2,863	-	(3,505)

Notes to the reconciliations

a) In accordance with IAS 19, the Group is required to accrue holiday pay due to its employees.

b) The Group sold its US operations on 5 October 2007. In accordance with IFRS 5, this constitutes a major geographical area. As such, the operations must be reclassified as discontinued. 

c) Interest income has been grossed up from net interest costs.

d) Based on the directors' discounted cash flow analysis, unamortised goodwill remaining at the Group's conversion to IFRS on 1 April 2006 was impaired under IAS 36 criteria. Adjustment has been made to impair goodwill in the opening balance sheet and reverse the full impairment charge in the period ended 31 March 2007. Refer to the impairment loss disclosure below.

e) The foreign exchange reserve has been reclassified from the profit and loss account.

Impairment loss

As part of the Group's transition to International Financial Reporting Standards, and in accordance with IFRS1 'First-time adoption of International Financial Reporting Standards', the directors reviewed the carrying value of goodwill. That review was performed in accordance with IAS36 'Impairment of assets' and led to impairment of goodwill in full.

It should be noted that under UK GAAP goodwill was impaired in full in 2007, being a year after the transition date. At that time, and in accordance with FRS11 'Impairment of fixed assets and goodwill', the directors did not consider there to be any significant indicators of impairment and hence no impairment review was performed at that time. 

IAS36 requires a formal impairment review to be performed at each reporting date. The impairment review compared the carrying value of the Group's net investment in its US American operations with their recoverable amount, which was based on a value in use calculation. Based on the information available at the time and on recoverable amount being less than cost (and without the benefit of hindsight) the directors considered full impairment as at 1 April 2006 to be appropriate under IFRS. This adjustment is not a correction of an error.

The goodwill impairment of £3.02m relates entirely to the US operations and as the adjustment has been treated as a transition date adjustment does not affect the income statement or segmental disclosures of either the current or comparative periods.

The key features of the value in use calculation are shown below:

Period on which management approved forecasts are based		5 years
Growth rate applied beyond approved forecast period		nil
Discount rate		10.25%

The management approved forecasts are based on estimates that are not adjusted for risk. The growth rates used in the value in use calculation reflect the average growth rate experienced by the Group for its US operations in the three years 2004, 2005 and 2006. The pre-tax discount rate used represents management's best estimate of the time value of money as adjusted for the specific risks facing the Group as at 1 April 2006. 

Application of IFRS has resulted in reclassification of certain items in the cash flow statement as follows:

(i)  Under UK GAAP, payments to acquire property, plant and equipment were classified as part of 'Capital expenditure and financial investment'. Under IFRS, payments to acquire property, plant and equipment have been classified as part of 'Investing activities'.

(ii) Under IAS 36, goodwill was deemed fully impaired at the transition to IFRS on 1 April 2006. For the year ended 31 March 2007, the loss after taxation has been reduced by the impairment charge that has now been incurred at 1 April 2006 and goodwill amortisation is no longer shown as an adjusting item.

There are no other material differences between the cash flow statement presented under IFRS and the cash flow statement presented under UK GAAP.

Copies of the published accounts of the Company have been sent to all shareholders and will be available from the offices of Brewin Dolphin, 34 Lisbon Street, Leeds, LS1 4LX and can be located on http://www.blavodextreme.com/investors/accounts.htm

ENDS

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