Blavod Extreme Spirits

Alcoholic beverage group Blavod Extreme Spirits (BES) is eyeing breakeven in the next couple of years and as it adds further brands to its portfolio and becomes an increasingly attractive target to the drinks majors.

The company’s shares have not been the most consistent performers, as sharegolders have grown impatient despite chief executive Jeff Hopmayer continuing to steer a course towards profitability. Sales for the year to March rose 72% to £5.4m (2005: £3.1m) and losses were around £300,000 less than expectations at £2.9m (£3.9m). £1.1m cash sat in the coffers at year-end and a new $3m banking facility has been arranged.

BES owns three brands (Blavod black vodka, Players Extreme vodkas and Players Extreme rums), has a 50/50 joint venture with leading Japanese group Suntory for three tequila brands and distributes a further selection of wines and spirits in the US and UK. The latter includes Cockspur rum – about to be rolled out in the UK – and wine from Baron Rothschild’s chateaux.

The Suntory joint venture is ‘ahead of plan’ after the high-margin tequilas were launched in selected US cities after an initial cash injection from the Japanese company. Distribution is now being expanded across the country and a UK launch will come after the European trademark is granted. A second big JV is ‘coming soon’, as Hopmayer and his team are currently mulling over potential partners.

House broker Brewin Dolphin points out that as BES’s volumes and sales rise it becomes more important to its larger competitors, attaching a 'sum of the parts' take-out value of 54.5p per share. The broker forecasts £2.2m losses for this year from £8.3m turnover and admits upgrades are feasible. Sales since the year-end have been 63% ahead of the same period in 2005.

The chairman and another non-executive recently picked up 50,000 shares at 18p, a good discount to the 24.5p float price in 2001 and a 99p peak later that year. I suggest joining them. Speculative buy.