Charlie's interim profit up 56 per cent

23 February, 2011

Market Announcement
CHARLIE’S HALF YEAR PROFIT UP 56 PER CENT

CHARLIE’S GROUP LIMITED
Half year results for the six months ended 31 December 2010

All comparisons on same period last year
All $ figures in NZ$ millions

The Directors of Australasian premium beverage company Charlie’s Group Ltd are delighted to report a net profit after tax of $1.1 million for the first 6 months of the 2011 financial year. This represents an increase of 56 per cent on the same period a year ago (excluding the one-off profit from the building sale last year).

Summary of key points

Total gross sales: $21.9m up 29% from $16.8m
Net revenue: $17.1m up 24% from $13.8m
Net profit after tax: $1.1m up 56% from $0.7m[1]
EBITDA: $2.1m up 18% from $1.8m
Net debt: $0.8m down 50% from $1.6m
Debt/equity ratio: 5% down from 17%
Australian net revenue: $63m up 95%
New Zealand net revenue: $10.5m up 3.2%[2]
Top seller: Charlie’s Old Fashioned Lemonade 1.5lt now top selling product Group-wide

DIRECTORS’ REPORT

The past six months have seen a transformation take place in the business following the very successful launch in to Coles. Charlie’s Australian operation now represents 37 per cent of total group net revenue compared with 23 per cent last year and the Directors see this as an ongoing trend in the business as our brands become entrenched in the Trans Tasman beverage markets.

Australia

Hotels, Restaurants and Cafes channel (HORECA)
Highlight: HORECA channel grows 29%

Charlie’s Group Limited’s Australian business continues to go from strength to strength with both the Charlie’s and Phoenix Organic brands growing strongly in both the HORECA and Grocery channels.

The Phoenix Organic and Charlie’s brands within the HORECA channel grew at 29 per cent for the period as more account activations and branded fridge placements were made during the period.

The brands can be found at some of the best and leading middle- to high-end food outlets. The Directors see plenty of further opportunity and we will continue to invest in the HORECA channel going forward.

Supermarket channel
Highlights: Brand market share in Coles at 8.1% in January
Charlie’s Old Fashioned Lemonade enters top 10 products in its category
Brand recognition in Australia up to 45%
Processing plant staff doubled to cope with growth
Lemons purchased increase to 6.3 million

Last year we were delighted to announce to the market our ranging in to Coles supermarkets. We are pleased to report today that the ongoing sales to Australian consumers are significantly greater than expected with purchases stronger through excellent consumer brand recognition and innovative product offering.

We undertook significant pre- and post-launch awareness research in Melbourne at the time of the Coles launch in November and December. The research showed brand awareness jumped from 3 per cent to 45 per cent among those surveyed in this short space of time.

Latest Nielsen market data for the trading month of January 2011 shows the Charlie’s brand gained a value market share of 8.1 per cent of the chilled juice category in Coles. This has exceeded all of the Group’s earlier expectations.

Charlie’s Old Fashioned Lemonade made it in to the top 10 products sold in its category for January within Coles. This is a category of 160 plus products which is usually dominated by established brands owned by the very large multi-national players such as Heinz, Coca Cola and Lion Nathan National Foods.

Following the successful launch of the first 11 Charlie’s products in Coles, the Group was invited to supply an additional six across the Orange Juice, Smoothie and Old Fashioned Quencher ranges.

The additional distribution into Cole’s 750 stores nationwide will not only grow our revenue and potentially our market share but also enables us to more fully utilise our Renmark production facility.

Renmark is now working regular double shifts to keep up with the demand and we have been able to create an extra nine jobs representing 50 per cent of the production floor workforce. The number of cartons through the plant has increased three-fold.

When the Coles deal was announced we anticipated requiring four million extra lemons to meet the orders. In fact, due to the success of the Quencher Lemonade and the Quencher range, we are going to need 6.3 million lemons.

Our immediate goals for Charlie’s Group are to continue to invest in people, marketing and infrastructure as we continue to grow significantly in the Australian market.

As a result of both past and anticipated market growth we have appointed an experienced Grocery Key Account Manager for Australia. Richard Witton has 28 years’ experience in the $1 billion Australian grocery juice market spanning some of the largest juice and beverage producers and leading brands in Australia.

New Zealand
Highlights: New Zealand market share growing
New Zealand net revenue increases 3.2%

It is pleasing to note that following a year of adjusting to the new economic climate, rationalising our product portfolio, introducing new innovation and the gross margin strategies we put in place that we have returned to growth in the New Zealand market and increased the profitability of this segment.

Our New Zealand market is back in growth reporting a 3.2 per cent increase in net revenue on the same period a year ago. Of particular note is the growth we achieved in the quarter leading up to Christmas with net revenue growing eight per cent on the same quarter last year. Market share increases have helped this sales growth.

The strategy is to continue with the plans we have put in place and keep growing the market with a close eye on costs to ensure its profitability

Exports
Highlights: First shipments to new supermarket group Park n Shop Hong Kong (January)
Further advances in South Korea & Singapore

Our brands continue to attract enquiries and orders from export markets and although Australia and New Zealand are our key areas of focus in the short and medium term we are pleased with the new business that we are achieving as part of our long term strategy of building global brands.

Hong Kong’s largest supermarket chain Park N Shop took its first order of Phoenix and Charlie’s products in January and hitting the shelves in mid-February.

Phoenix has a strong presence in South Korea and we gained a further listing in more than 300 Cafe Benne outlets to strengthen our presence. In Singapore we gained extra listings of Phoenix Organics in the Cold Storage supermarket chain.

Outlook
The Group has been experiencing a significant step change in the business over the last 6 months with its very successful launch in to Coles. This trend is continuing into the second half of the year with strong sales in January and February.

On behalf of the Board
Charlie’s Group Limited

ENDS

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