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The City: Good news from Blavod

Published:  18 January, 2007

When Blavod Extreme Spirits was listed on the Alternative Investment Market in early 2004, following the merger of UK-based Blavod with Extreme Beverage of the US, the shares stood at 38p. Since then, investors may have needed a strong shot of black vodka as they watched their shares slump to 16.5p in midsummer. But, as with many a young, rapidly expanding company, the market for the shares had become less buoyant once the initial launch story was played out and the nitty-gritty of running the company meant that the flow of news slowed. In the past few weeks that process has been reversed as Blavod unveiled joint-venture expansion plans, a marketing drive and US sponsorship, and results showing it is making positive inroads in its chosen markets.

In the six months to the end of September, Blavod's turnover increased by 140% to 2.2m, while its operating loss fell from 2.69m in the same period in 2004 to 1.56m.

Total case shipments of Blavod and the Players Extreme ranges of vodkas and gins rose by 149% and by 344% in the US, the world's largest market for premium vodkas, which now accounts for 70% of group sales. Sales in the UK grew by 55%. Gross profit margins almost doubled to 33.5%.

So all the significant figures are moving in the right direction, and shareholders have been given extra confidence by the fact that the company has entered into an agreement with Headstart Group, which will, when called upon by Blavod, subscribe for up to 5m worth of extra shares within the next three years. Effectively the financing greatly reduces the prospect of Blavod having to call on shareholders for further funds to back its development.

Blavod has embarked on an aggressive marketing programme, notably in the US. To back distribution in all 50 states, it has agreed to sponsor a NASCAR car and driver to emphasise the excitement of the brands. But apart from the financial improvement, what has made investors take note recently is a joint-venture deal with Suntory, one of Asia's largest drinks groups.

Called Diamante Spirits, the offshoot produces and markets a new Tequila range, El Diamante del Cielo (Diamond in the Sky'), which will retail in the US at $45-50 a bottle. It is being rolled out in the New Year. Meanwhile, Blavod is looking for other joint ventures and is planning to expand its international markets, including bringing the Players Extreme range to the UK.

A trading statement with the results says that Blavod expects the momentum achieved in the first half of its financial year to continue while the company pegs its costs. With the second half including the key Christmas sales period, there are hopes that Blavod Extreme Spirits will move further down the road to profitability.