Feb, 27 - Premium beverage company Charlie's Group Limited today reported its unaudited results for the six months to 31 December 2008, announcing improvements in gross sales, and earnings before interest, tax, depreciation and amortisation (EBITDA) relative to the six month result for the same period in 2007.
Half Year Highlights
• Sales Growth
• Improved EBITDA
• Increased Market Share
• Gross Margin maintained
• Solid expansion in Australia including reaching 1,000 outlet milestone for Charlie’s
• Bank confirms ongoing support
Overview
The result shows Gross Sales of $17.3m for the six months (an increase of 3%) including a record in December 2008 of over $4m (an increase of 13% on December 2007), Gross Margin of 47% and EBITDA of $(83,360). The EBITDA result represents an improvement of $278,640 over the half year to 31 December 2007.
Chairman of Charlie’s, Ted van Arkel said: “It was pleasing to increase sales and improve EBITDA, at a time when economic conditions are so uncertain. The strong Gross Sales in December 2008, and continued growth through January and February 2009, relative to the same months in 2008, are particularly encouraging. Most of this growth is arising from Charlie’s rapidly expanding presence in the Australian market, where Charlie’s has recorded a year on year increase of 21% for the 6 months ended 31 December 2008. Also pleasing is the fact that Charlie’s have grown market share in both the Grocery and Oil channels (as measured by AC Nielsen) and increased the number of branded fridges placed in the premium Route channels in Australia and New Zealand to 1,664.”
Charlie’s notes that its six month results may be below expectations for the six month period ended 31 December 2008 from the trading update given at the November 2008 Annual Meeting. Subsequent to that update, problems with the Company's newly implemented IT system were identified, which had inflated the October 2008 year to date results.
Ted said “These errors, while disappointing, have now been rectified with the assistance of PriceWaterhouseCoopers and the Company’s IT provider.”
“We wish to reiterate to shareholders that during these tougher times, we will remain focused on monitoring costs and production efficiency to ensure that the Company’s resources will be deployed in the most cost effective manner, while still driving sales and brands to increase market penetration.”
As indicated at the 2008 Annual Meeting, the Group is continuing to invest in its brands in New Zealand and Australia by opening accounts, placing branded fridges and marketing activity. This was supported during the period through increased investment in sales and distribution of $335,000, increased promotional spend of $150,000 and $800,000 marketing spend.
This investment will position Charlie’s for further growth in the future, and is also necessary to continue the Company’s positive momentum in the current economic downturn. Continuing to invest in widening Charlie’s distribution network, increasing fridge placements, entering new markets and maintaining the loyalty of customers is critical to delivering year on year sales growth on an ongoing basis.
Raw material costs increased due to the NZD falling value against both the USD and AUD in the 6 months ended 31 December 08 compared with the same period last year. The average NZD/AUD cross rate has dropped from 0.87 to 0.82 from December 2007 to December 2008, while the USD/NZD exchange rate has dropped from 0.76 to 0.57. Charlie’s hedges AUD exposures, but does not hedge the USD. However, despite these factors the Group has maintained its gross margin percentage from the previous period.
Management of working capital remains a key priority for the Group with particular focus on debtor management and inventory control.
Notwithstanding the additional sales and distribution expenditure and brand support, Charlie’s expects that its EBITDA loss in the six months to 30 June 2009 to be consistent with the result achieved in the first half of this financial year.
Funding Facilities
The Group continues to enjoy strong support from its bankers, ANZ, who have confirmed ongoing facilities of both current and long term funding.
Review of Operations
The Company’s operations in key markets continue to perform strongly.
Highlights for the Group in the six months to 31 December 2008:
o Charlie’s remains number one chilled juice brand by value in the following key accounts:
• Mobil
• New World South Island
• Woolworths
• Foodtown
• Countdown
• Shell
and a close second in:
• New World Auckland
• New World Wellington
• Caltex
(AC Nielsen Data, 4 weeks ending 25/1/09)
o Stand out performance of Charlie’s Old Fashioned Quencher range over summer
o Strong second quarter sales in line with seasonal expectation
o Roll out of the new square packaging
o Successful launch of Charlie’s Honest Water in December
o Successful launch of Charlie’s Vitamin Water in December
o 1,664 branded fridges now activated in our main markets of NZ and Australia
NZ Route Trade
Charlie’s has maintained its volumes in this market at the same level as the previous period through acquisition of new customers and placement of new fridges. Despite evidence that in general the Route market is slowing, Fridge placements rose by 119 to 1264 (from 1145 at 30 June 2008) and 418 new accounts opened.
In addition, the volume of Charlie’s brand sold through the petrol retail channel increased with sales through Caltex (+ 35%), Mobil (+ 76%) and Shell (+ 19%) growing strongly.
NZ Grocery
Charlie’s continues to outperform in this important sector, with further growth in the half year to December 2009, and Charlie’s market share has grown to 10.4% of the total NZ juice market.
The termination of the Grocery sales servicing agreement with Redbull brand in February 2009 will represent a decrease in sales revenue of 1.4% annualised, but also gives the Company options to launch its own Energy drink offering or offer sales services for a brand alternative. Any reduction in the Group’s overall gross margin should be mitigated through new initiatives.
Australia
The growth in Australia reported at the Annual Meeting has continued. In the half year to December 2008, the Charlie’s brand achieved a milestone 1,000 outlets. This has resulted in further investment in the placement of fridges to maintain growth.
The immediate success of the Charlie’s brand in Australia has proven that this market holds great growth potential for the Group. Further focus will be placed on increasing the growth and presence of both brands in this large market, with an aim to have Australian sales exceed New Zealand sales in 3 to 5 years time.
Export
Overall export sales (excluding Australia) declined by 4% from $291,000 to $281,000. However, Charlie’s has recently received a third order from Dairy Farm International in Singapore and early signals indicate the products are selling well.
Outlook
Charlie’s CEO, Stefan Lepionka said “Charlie’s brands and market position are firmly cemented in the beverage landscape of NZ and Australia and the continuation of our growth strategy will ensure that we will be in the best possible position going forward.”
“Our vision is to see Charlie’s fridges and products in all key outlets throughout New Zealand and Australia. We are well on our way but there is still significant potential to expand Charlie’s footprint and presence.”
“Our focus for the remainder of the year is to drive sales and make our brands more available to consumers.”