Blavod Wines & Spirits

AVOID

07/12/2011 Ben Jaglom

Spirits to liqueurs distributor Blavod Wines & Spirits (BES) fell further into the red following the loss of some key contracts.

The AIM-quoted minnow announced a loss of £393,000 (2010: loss of £12,000) on gross sales net of duty that fell to £2.66m (2010: £3.99m). This followed the loss of two contracts with customers Cockspur rum and DBR wines in addition to what it described as a 'key grocery account for a major agency brand'.

Despite the 'disappointing' results the company noted that 'positives' included the improvement in owned brand revenues of its Blavod Black Vodka and Blackwood's Gin drinks, up by 7%. In addition to its interim results Blavod also reported that it won an agreement to distribute its vodka to Europe from a bottling plant in Germany. The deal was clinched with German spirit producer Waldemar Behn.

Looking ahead Blavod describes the UK market as 'challenging' however it argued despite the tough market what it calls 'differentiated premium brands' appear to be 'bucking overall market trends and showing strong growth'. Blavod adds it does not expect to 'see a profit improvement for the full year'.

Analysts at Brewin Dolphin are forecasting a loss before tax of £500,000 (EPS: loss per share of 0.6p) on revenues of £6.8m for the year to March 2012. In 2013 losses of £200,000 (EPS: loss per share of 0.3p) on turnover of £7.5m are pencilled in.

Last recommended by Growth Company Investor this July at 1.625p the shares have since risen to 1.75p. Having slipped from a 2007 value of 14p long-term investors in the group have watched as the company has lost 87.5% of its previous value, reporting a loss in four out of the last five years.

For the brave there is no doubt the possibility of future profits but there is better value elsewhere in the sector with lumpy revenues and recurring losses. Avoid.