Vranken-Pommery Monopole Reports Sharp Improvement in 2007 Financial Results

Source: Vranken-Pommery Monopole
03/04/2008

Reims, France, April 3 - The Board of Directors of Vranken-Pommery Monopole met on March 31, 2008 to approve the Group's financial statements for the year ended December 31, 2007. The meeting was chaired by Paul-François Vranken and attended by the company's auditors.

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Consolidated accounts (in millions of euros)	2007	2006	% change
Consolidated revenue	286.8	268.3	+6.9%
Recurring operating profit	50.4	45.3	+11.2%
Operating profit	49.8	44.1	+13.1%
Profit for the period	18.5	16.4	+12.8%
Profit attributable to equity holders of the parent	18.2	16.3	+11.5%
Earnings per share	3.49	3.13	+11.5%

“2007 confirmed Vranken-Pommery Monopole’s ability to improve margins as well as sales of its leading international brands, which enjoyed double-digit growth,” said Paul-François Vranken, Chairman and Chief Executive Officer. “Given current worldwide champagne consumption and the likelihood that it will continue to increase over the medium term, we are committed to pursuing our growth strategy in 2008.”

BUSINESS PERFORMANCE

Revenue for 2007 totaled €286.6 million, a 6.9% increase over 2006.

Analysis by product

-- Champagne revenue, which accounted for 92.6% of the total, rose 7.3% to €265.5 million.

The strategy to improve the product mix produced results during the year. The international brands—Vranken, Pommery Charles Lafitte and Heidsieck & Co. Monopole—reported an 11.1% increase in revenue.

-- In Port wines, Maison Rozès, which is positioned in the premium segment, pursued its value-based strategy, led by the marketing of Douro Superior premium vintages.

-- In 2007, Vranken-Pommery Monopole extended global distribution of Vins des Sables (Listel). The Listel brand is now sold in 48 countries. In Provence, Château La Gordonne (300 hectares) will be distributed by the Vranken Prestige network, whose objective is to have La Chapelle Gordonne listed in all major establishments in France and Northern Europe. The distribution business enables Vranken-Pommery Monopole to optimize its marketing budget.

Analysis by region

-- Given the large concentration of Champagne sales in Europe, Vranken-Pommery Monopole has little exposure to currency risk, since less than 7% of revenue is denominated in currencies other than the euro (of which 2.3% in US dollars).

-- For the year, Champagne sales in export markets increased at a faster rate, rising 8.4% over 2006. Growth was led by sales in Europe and Asia.

FINANCIAL INFORMATION

Income statement

-- Recurring operating profit rose 11.2% to €50.4 million from €45.3 million in 2006. As a percentage of revenue, it stood at 17.6%, compared with 16.9% in the previous year. This higher margin reflects an improvement in the price mix as well as careful management of costs.

-- Financial expense, net totaled €22.4 million and represented 7.8% of revenue, versus €19.5 million and 7.2% of revenue in 2006. The increase was due to the combined effect of higher interest rates and the year-on-year increase in debt (see below).

-- Pretax profit rose 11.4% to €27.4 million, from €24.6 million in 2006.

-- Profit attributable to equity holders of the parent amounted to €18.2 million, compared with €16.3 million in 2006. This increase of 11.5% in 2007 outpaced the previous year’s 10.4% rise.

-- Earnings per share increased by 11.5% to €3.49, from €3.13 in 2006.

Net debt and financial position

-- Net debt totaled €476 million at December 31, 2007, versus €429.9 million one year earlier. The increase was due to the Group’s sustained growth strategy, leading to targeted purchases of vineyards and a strategic build-up in inventories to offset current shortages, which resulted in an increase in working capital requirement.

-- Moreover, the Group’s debt is entirely secured by its inventory, which represented 107% of the outstanding balance at December 31, 2007. As is the case for all champagne houses, this level of debt reflects the need to keep production in cellars for around three years before it can be sold, in order to ensure consistently superior quality.

-- Equity attributable to equity holders of the parent stood at €217.6 million at December 31, 2007, compared with €204.1 million a year earlier.

Dividend

In light of the increase in earnings the Board of Directors of Vranken-Pommery Monopole will recommend that shareholders at the Annual General Meeting on June 11, 2008 approve a dividend of €1.35 per share, compared with €1.25 for the previous year, an 8% increase. The dividend will be payable on July 15, 2008.

OUTLOOK

Our strong positions in Europe led us, on January 1, 2008, to review our sales organization and to create two distinct Prestige networks—one for Vranken and the other for Pommery—in France, the Benelux countries, Germany and Switzerland. The coexistence of these two networks will enable us to distribute our brands more widely and expand the customer base.

In second-half 2007, our US subsidiary began distributing the high value-added Pommery brand. Pommery Champagnes’ premium positioning should help to offset the weaker dollar.

Eastern Europe and Russia are now managed by the German subsidiary, whose expertise represents a powerful growth driver. This was confirmed by the recent sales increase in the region, particularly in Russia.

In the Pacific region, 2008 is shaping up as a very satisfactory year in light of the agreement signed with distributors, projects undertaken by our Japanese subsidiary and the solid start-up of operations in other countries.

Based on early-year trends, which are in line with the corresponding period in 2007, the Group remains confident and intends to pursue its strategic focus on growth and higher margins in 2008.

ABOUT VRANKEN-POMMERY MONOPOLE

Vranken-Pommery Monopole is one of the world's leading Champagne groups. Its balanced portfolio of brands spans the entire market, with Cuvée Louise, Pop and Pommery, Vranken Demoiselle and Diamant, Charles Lafitte and Heidsieck & Co Monopole champagnes. It is also present in premium port wines, with Rozès and São Pedro, and is positioned as a prime distributor of rosé wines, with Vins des Sables (Domaines Listel) and Vins de Provence (Château La Gordonne), which it markets worldwide. Vranken-Pommery Monopole had 2007 revenue of €286.8 million. Taking into account the distribution of Listel products, business volume, net of marketing agreements, amounted to over €350 million of value-added products. The Vranken-Pommery Monopole share is traded on Eurolist by Euronext, Compartment B (VRAP; ISIN: FR0000062796).

Appendices

Vranken - Pommery Monopole

Consolidated Income Statement - IFRS


(in € thousands)	2007	2006
Revenue	286,830	268,347
Purchases used in production	(189,370)	(175,801)
Personnel costs	(34,891)	(34,454)	*
Other operating income	854	1,367
Other operating expenses	(2,042)	(1,422)
Taxes other than on income	(2,748)	(3,935)
Reversals of depreciation, amortization and provisions; expense transfers	1,476	1,204
Depreciation, amortization and provision expense	(9,706)	(9,985)
Recurring operating profit	50,403	45,321
Other income	845	982	**
Other expenses	(1,409)	(2,234)	**
Operating profit	49,839	44,069
Financial income	4,631	2,617	***
Financial expense	(27,042)	(22,071)	***
Profit before tax	27,428	24,615
Income tax expense	(8,914)	(8,199)
Profit for the period	18,514	16,416
Minority interests	317	95
Profit attributable to equity holders of the parent	18,197	16,321
Basic earnings per share (in euros)	3.49	3.13
Diluted earnings per share (in euros)	3.49	3.13
*Including statutory and discretionary profit-sharing
**Net amount published in 2006: -€1,252 thousand
***Net amount published in 2006: -€19,454 thousand

Vranken - Pommery Monopole

Consolidated balance sheet - IFRS

	Assets

	(in € thousands)	2007	2006
	Goodwill		-
	Intangible assets	91,746	92,155
	Property, plant and equipment	125,468	121,562
	Other non-current assets	14,757	14,960
	Deferred tax assets	2,108	2,150
	Total non-current assets	234,079	230,827
	Inventories	509,522	469,284
	Trade receivables	155,675	126,715
	Other current assets	54,595	27,503
	Current financial assets	3,800	2,836
	Cash and cash equivalents	13,064	4,941
	Total current assets	736,656	631,279
	Total assets	970,735	862,106

	Equity and Liabilities

	(in € thousands)	2007	2006
	Share capital	78,997	78,997
	Reserves and share premium account	112,320	101,005
	Profit for the period	18,197	16,321
	Equity attributable to equity holders of the parent	209,514	196,323
	Minority interests	8,124	7,790
	Total equity	217,638	204,113
	Long-term borrowings	406,572	344,080
	Employee benefit obligations	3,227	3,180
	Deferred tax liabilities	49,888	48,772
	Total non-current liabilities	459,687	396,032
	Trade payables	167,844	142,732
	Short-term provisions	432	353
	Income taxes payable	24,974	12,152
	Other current liabilities	13,823	13,109
	Short-term borrowings	86,231	93,601
	Current financial liabilities	106	13
	Total current liabilities	293,410	261,961
	Total equity and liabilities	970,735	862,106

Vranken - Pommery Monopole

Statement of Changes in Net Debt
IFRS

in € millions
Net debt at December 31, 2006	(429.9)
Net cash from operations before changes in working capital	28.0
Net cash from investing activities	(10.7)
Changes in working capital requirements	(57.7)
2006 dividends	(6.5)
Application of IAS 32/39	0.8
Net debt at December 31, 2007	(476.0)