August 27, 2008 - Re-Investment for Growth strategy starts to bear fruit for Charlie's Group
Premium beverage company, Charlie’s Group Limited, today announced its results for the financial year ended 30 June 2008 reporting record Gross sales, a positive EBITDA and a small net loss after tax after allowing for one off costs.
The audited results for the year showed Gross sales of $33.3 million, a year on year increase of 24%, and Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $0.3 million.
One off costs of approximately $0.6 million were incurred in relation to the rapid set up of the Australian production facility within a short time frame. However, the benefits of this investment were immediately realised with a positive swing in profitability in the last quarter of the financial year when commercial production commenced. EBITDA improved from a loss of ($0.4 million) for the six months ended 31 December 2007 to a profit of $0.3 million for year ended 30 June 2008, a positive swing of $0.7 million, or 175%.
As previously disclosed, one off costs of $0.2 million were also incurred in relation to employee benefits which were expensed under the new NZ IFRS reporting standards.
Industrial action at Charlie’s third party contract packers and product issues resulting from the transition from third party contract packers to the new Charlie’s Australian production facility in April 2008, resulted in a loss of potential revenue of approximately $0.9 million and potential profit of $0.3 million.
After allowing for these one off costs and loss in revenue, Charlie’s Group reported a small net loss after tax of ($0.4 million).
Chairman of Charlie’s Group, Ted van Arkel said: “Charlie’s Group continued its unbroken record of year on year sales growth, achieving record Gross sales of over $33 million and improving Gross Margins to 47%, up from 44% the previous year.
“The establishment of the Charlie’s Australian facility is a highlight for the 2008 year. We purchased the assets of the Gallard and Mirage Group in October 07 and turned these into a fully operational, state of the art plant within six months. The capital expenditure on this project included the initial asset purchase of $0.8 million and subsequent purchases of $1.7 million, funded through bank debt. The Group’s total capital expenditure for the year was $3.4 million and total assets have risen from $17 million to $24 million over the year.”
The working capital requirements of Charlie’s Group also increased during the 2008 year due to a substantial investment in raw material inventory for the Charlie’s brand. As part of the transition to the new Australian facility, the Group purchased ingredients for production of the entire Charlie’s product range, while still purchasing finished products from our third party contract packers. This impacted in the second half of the FY08 financial year and resulted in negative cash flow from operating activities for the year ended 30 June 2008. The Group’s total inventory holding increased from $2.6 million at 30 June 07 to $5.3 million at 30 June 08.
Ted noted: “We now have an appropriate raw material base for all Charlie’s products and as we run down the stock holding of products produced by our contract packer, we expect our operating cash flow to normalise.”
“Although we are disappointed not to have achieved a positive NPAT result, we are pleased with what we have accomplished this year including strong sales and revenue growth.”
Chief Executive of Charlie’s Group, Stefan Lepionka, said: “The focus of the year has been on Re-Investment for Growth with pleasing results in the second half as the benefits of this strategy started to bear fruit. Earnings have been reinvested into growing the brand equity of the Group’s premium brands, widening our distribution platforms and setting up the new Australian facility to deliver our premium product to consumers through our efficient, fully integrated, orchard to consumer supply chain.
“Moving production to Charlie’s own Australian facility has seen cost efficiencies and margin improvements emerge and the full benefits, of what has been a significant investment for Charlie’s Group, will be realised in the 2009 financial year and beyond.
“Increased marketing spend resulted in Group Gross sales for the year breaking through the $33 million mark and Charlie’s growth outstripping the performance of all other competitors in the New Zealand Chilled Juice market .
“Parallel to the set up of the Australian facility, significant investment in new packaging was undertaken and implemented for all Charlie’s branded products and 16 new product SKUs were developed and are now being rolled out.
“Also during the year, Charlie’s invested in a new company wide, integrated IT system for both New Zealand and Australia, providing operational efficiencies for all departments. This system went live on 01 July 08.”
Stefan continued: “The non-alcoholic premium beverage market is growing strongly in line with consumer trends towards healthier foods and beverages. Charlie’s Group is well positioned to take advantage of this demand through our premium brand propositions.
“Export markets, particularly Australia with 47% growth on last year, and Asia, continue to be a significant opportunity for Charlie’s Group. Moving forward, we will continue to build market share and presence in New Zealand, as well as growing sales and distribution in Australia and other export markets. The launch of the Charlie’s brand into Australia in October 2008 through our established Phoenix Organics distribution channels is the next step in this plan.
“This is an exciting time for Charlie’s Group and we now have built a solid platform from which to continue our growth, here in New Zealand, in Australia and in selected export markets.”
Summary of highlights for the 2008 year
• Year on year, gross sales up 24% or $6 million to $33 million
• Improved gross profit margin from 44% to 47%
• Successful commissioning of the Australian production and packaging plant in April 2008
• Go-live on new company-wide, integrated IT platform
• In New Zealand, reported 23% year on year growth in Total Juice category and 30% year on year growth in Chilled Juice category in the Grocery channel
• Export growth of 47% in Australian market and 100% in other export markets
• Initial export orders for India and Singapore and ongoing growth in sales to South Korea
• Successful launch of two new product lines - Charlie’s Soda Co. and Charlie’s Old Fashioned Quenchers
• Launch of innovative square bottle packaging for the Charlie’s range of products
• Introduced two new limited edition flavours to the Phoenix range
• Increased fridge space and listings in premium outlets throughout New Zealand and Australia
• Won 10 out of 13 categories at the NZ Beverage Awards
• The Group’s total assets have risen from $17 million to $24 million over the year