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42 below shows solid sales gains

42 below shows solid sales gains and signs new distributors

42 Below Limited today announced an unaudited operating result for the six months to September 30.

Sales for the period were $1.09m, an increase of $1.0m over the previous corresponding period last year and $0.59 million more than the audited turnover for the 11 months to 31 March 2003.

The company's chairman Mr Grant Baker said that sales in the first quarter of the half year were $0.45m and those in the second quarter were $0.64m, representing quarter on quarter sales growth of 42.2%.

He said that early indications at the start of quarter three were that this level of growth would continue in the near term.
In the half year sales growth has been achieved in all markets, principally through a managed increase in the direct sales force. A number of additional sales people had been relocated overseas following their training in New Zealand and currently the company had six salespeople in Australia, seven in the USA, three in London and three in New Zealand.

He said that in addition to this, importers sales agents and distributors had their own sales forces and these in most cases also promoted the company's products.

"Sales growth is the principal indicator of our business in its present stage of development, as we continue to invest in developing our brands and building our distribution networks. Our monthly sales our now nearing the level that it took us 11 months to achieve in the period to March this year, and we are making these gains without causing any disruptions to our business model," Mr Baker said.

The company's products (42 Below Vodka and South Gin) are currently sold through about 1200 bars and liquor stores with approximately 400 of these being located in the United States.

Good reorder business was being experienced from most outlets and the company's sales force was targeting reorder business as well working to secure new outlets.

The company had also entered into an agreement with Trade Mexico Ltd to distribute its products within Mexico. Mexico is a high growth vodka market with average growth in vodka sales of 28% per year from 1996 to 2001. The Mexican market therefore provided excellent additional sales opportunities for the company.

In the past week Australia's largest liquor distributor, ALM, had also listed 42 Below Vodka and South Gin. This has created an additional opportunity in Australia with the company now being able to supply all Australian States and significantly more liquor outlets in that market.

Financial figures

The company recorded an operating surplus after abnormal items and tax of $0.711 million which, as outlined in the company's prospectus, included debt forgiveness income of $1.16m. By August 31, 2003, the company's foundation shareholders had advanced $1.98m to the company, $0.82 million of this debt was converted to share capital and the balance of $1.16m was forgiven by the shareholders. The operating deficit for the period before abnormal items and tax was $0.445m.

As the latest half-year period finished prior to listing, none of the proceeds of the public offering were used to fund the company during the latest half year period. Therefore the $15 million in capital raised (less listing costs) was now available to fund the continued expansion of the business.

Marketing update

42 Below vodka has been listed in the 2003 best of the best catalogue of Wally's wine store in Los Angeles where Wally's Wines showcase their choice of the best products in each category. Wally's Wines has been rated as the No 1 wine store in Los Angeles.

Marketing activities have been directed at event sponsorship at premium events. These include the pre Emmy party, the Sun-rock music festival, the MTV after awards party and the Playboy calendar launch. 42 Below was the only vodka at these and a number of other events. People spotted drinking 42 Below include Val Kilmer, Hugh Heffner, Darryl Hannah, Charlie Sheen, Christian Slater, Jennifer Love-Hewitt and Mike Tyson.

42 Below will release its Manuka honey flavoured vodka in December.

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