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Blavod Wines & Spirits is a rare thing, an AIM microcap with brands AIM microcaps normally don’t hang around for long. If they fail, they disappear and if they succeed, they are bought out. Blavod looks to be the exception. Listed since 2001, Blavod Wines & Spirits is an alcoholic beverages company with a £5.4m market capitalisation. The company is headed by Executive Chairman Don Goulding. Mr Goulding was previously managing director of Diageo’s UK operations. He is a past chair of industry body The Portman Group.

trading statement revealed a significant upturn in business Diageo is, of course, a business that is famed among investors for its unswerving dedication to building brand strength. And so anyone looking at Blavod shares has to consider the likelihood that the company can successfully establish its own brands, and deliver a reliable stream of earnings and profits. Blavod’s brands are primarily spirits with one liqueur. The spirits are Blavod Original Black Vodka, Blackwood’s Vintage Gin and Vodka, RedLeg Spiced Rum and Diva Vodka. The Blackwood’s brands are the company’s number one profit contributor. Blavod owns, markets and sells its brands in the UK, continental Europe and the US. In May 2013, Blavod announced that for the next three years, its products would be 4

distributed in the UK and Ireland by Hi-Spirits Ltd. Blavod is yet to demonstrate that its business model can deliver sustained shareholder returns. The company’s best year of recent times came in 2010 when it reported sales for the year of £8.3m and an operating profit of £70k. Since then, sales and profits have been far lower. According to Stockopedia, Blavod has reported a positive EPS figure in just one of the last five years.

margins improved and group overheads were reduced by 44% However, a recent trading statement revealed a significant upturn in business. Net revenues from Blavod brands were reported as 43% higher than in the final quarter of 2013. Margins improved and group overheads were reduced by 44%. The key Blackwood’s brands delivered month-on-month volume growth following a redesign of packaging. A successful placing in October helped the company to significantly reduce its borrowing costs. Management now reports that it expects to return to break-even imminently. Since the trading update, Blavod announced cessation of its agreement to distribute the Mickey Finn brand on behalf of Babco Europe. Although Mickey Finn made a large contribution to Blavod sales (over one third), the net contribution to the bottom line equated to a margin of around 5%. By comparison, margins on Blavod’s own brands recently hit 47%.

At the beginning of 2014, Blavod announced that it had secured a new Spanish distribution agreement for its RedLeg Spiced Rum and Blackwood’s spirit brands. Spain is Europe’s largest gin market and the biggest rum market in the world. The success or otherwise of this deal will be crucial in Blavod’s future success.

strong sales momentum among its brands Blavod is not a successful smallcap — yet. However, there is strong sales momentum among its brands and a clear management strategy. If management can force just one of the company’s brands into a strong position in the quirky spirits market, profitability could increase dramatically. Meanwhile, shareholders can continue to enjoy the strong growth that Blavod’s brands are already enjoying, led by an expert management team.

Blavod Wines and Spirits (LON:BES) FOR Good progress being made Experienced management AGAINST Yet to demonstrate success Shares illiquid Market cap Bid:offer

£5.4m 1.40p:1.55p


no forecast available


no forecast available

52week low:high


May 2014 AIM Prospector  
May 2014 AIM Prospector  

Featuring Blavod Wines & Spirits, Bond International, K3, Majestic Wines and WYG.