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Six month results for Charlie's Group Limited

31 December 2007

Six month results for Charlie's Group Limited to 31 December 2007

Premium beverage company, Charlie's Group Limited today reported its results for the six months to 31 December 2007, announcing record gross sales, improvement to gross margin and confirming that it is on track to report a year on year improvement in full year profit.

The result, reported for the first time under NZ-IFRS (New Zealand International Financial Reporting Standards), included gross sales of $16.85 million (up 37% compared to the previous year), Earnings Before Interest, Tax and Depreciation (EBITDA) of ($377,000) and a Net Loss After Tax of ($524,000). The EBITDA result includes $211,000 of employee benefits which were expensed under the new NZ IFRS standards and $200,000 in costs related to the set up of the Australian production facility.

As indicated in November 2007 at the Annual Meeting, Charlie's is continuing its focus on the Investment for Growth strategy with an increase in marketing spend to $1.84 million for the period (of the projected $3 million marketing spend for the year) resulting in an immediate increase in sales for the Group, a record gross sales result of $16.85 million and an increase in market share across all sales channels. The company also invested in the set up of the Australian production plant and in expansion of the sales and distribution platform both in New Zealand and Australia.

These factors contributed to a net loss for the company for the six month period as forecasted at the Annual Meeting.

Consolidated financial performance (unaudited)

6 months to Dec 07$000s 6 months to Dec 06*$000s

Gross sales $16,849 $12,301

Operating Revenue $15,178 $11,762

EBITDA $(377) $636

EBIT $(628) $467

NPAT $(524) $395

*Dec 06 interim results have been restated in accordance with IFRS reporting standards.

Commenting on the half year results, chief executive of Charlie's, Stefan Lepionka, said: "We have continued to focus on our three pillars for growth - vertical integration, product innovation and brands. In line with these, we have invested in a number of positive initiatives in the first half of the year, some of which are already bearing fruit for the company.

"We are investing the cash flow from the business to further develop our infrastructure, to ensure we are able to compete successfully with the 'big boys' in our journey to be a major player in the beverage market.

"In the first half of the year, our costs increased by $2.78 million on the same period last year as we invested in our marketing, our people (a dedicated new product development team and increased sales force), increased distribution and negotiated additional and desirable fridge placements. This investment today will be of long term benefit for the Groups' businesses as we continue to grow and increase our market share.

"We are especially pleased with the improvements to Gross Margin (up 3.6%) and expect to see further gains in production efficiencies from our newly acquired Australian plant in the future. Development of new and more profitable products and a more favourable product mix have also contributed to this Gross Margin improvement.

"In 2007, Charlie's announced the acquisition of a juice production and manufacturing plant in South Australia. Commissioning of this plant is well advanced and, as previously indicated, we expect it to be fully operational with the first Charlie's products rolling off the line by 1 April 08.

"As part of this project, we have invested in developing a new, improved packaging proposition for Charlie's which will be introduced in New Zealand, launched for the first time in Australia and will be presented to all our existing Export customers in April 2008. We are very excited about the new packaging for the Charlie's brand, which will be one of the key benefits of owning our own production facilities.

"We have continued to innovate with the hugely successful launch of Charlie's Soda Co, a range of healthy grown up fruit sodas, on 1 October 2007. This new product line has been supported by a humorous advertising campaign which has been very popular with viewers.

"We are well positioned for future growth and continue to explore export market opportunities and brand expansion, whilst strengthening our existing product portfolio."

The Group's plans for the next six months and beyond include:

Launch of Charlie's brand into Australia and other export markets

Launch of new products and product packaging

Continued focus on volume and market share growth across all brand categories

Increased focus on execution through Distribution network and Business Development teams in Route Channel in both NZ and Australia

Negotiate further fridge placements

Implementation of new IT system for New Zealand and Australia with completion date by end June 2008

Continued emphasis on marketing

Charlie's chairman, Ted van Arkel, commented on the Group's future outlook: "Charlie's is starting to see the benefits of our planned growth strategy and we are pleased with the progress demonstrated in the first half of the year.

"We are strongly committed to the Investment for Growth strategy and remain focused on building long term shareholder value.

"Sales results for the first two months of the second half of the year have been at record levels, so we are confident that the Group is on track to improve on the previous full year result as we take this company to a new level."


The Group is on track to deliver year on year improvement at EBITDA and NPAT level for the full 2008 financial year.

Significant improvement to the Group's gross margin, an increase of 3.6%, compared to the same period last year due to production efficiencies at the Henderson plant. Development of new and more profitable products and a more favourable product mix have also contributed to this Gross Margin improvement.

Increase in Charlie's Group Sales to $16.85m, an increase of 37% compared to the same period last year.

Marketing Highlights

Increased sales, brand awareness and market share following marketing spend of $1.84 million (compared to $392,000 in same period last year).

Successful launch of Charlie's Soda Co with listings in all major supermarkets and oil retailers nationally. Charlie's Soda Co has contributed an additional 15% to Charlie's brand sales since launch in October 2007.

New Phoenix Organics advertising campaign and brand promotion driving record sales for the brand.

Sales Highlights

Record monthly sales result of $3.55m in December 2007.

Range of Charlie's and Phoenix beverages and fridge placement programme rolled out into the Starbucks retail chain throughout NZ.

Grocery - Total Beverage sales for Grocery Channel sales grew by 32.6% versus the same period a year ago, with a 41% increase for Phoenix and a 30.5% increase for Charlie's.

Route - Route Channel sales grew by 16.4% versus the same period a year ago with an increase of 11.5% for Phoenix and 29.5% for Charlie's. A further 200 new accounts have been opened in the Route Channel between July and December 2007.

Export sales grew by 207%, with strong demand from South Korea in particular.

Australia - Strong sales growth in Australia up 60% on the same period last year.

Maintained our stronghold on fridge space and listings in premium outlets throughout New Zealand, with an 18% increase in fridge placements during the period, taking total route fridges to 971.

High sales growth trend seen in last quarter expected to continue into second half of year.

The total NZ Grocery fruit juice category has grown at 7.1% over the last 12 months to December 2007, while Charlie's and Phoenix Organics combined have grown at 28.1% (source: AC Nielsen). This illustrates how the trend for premium beverage consumption continues to grow faster than the beverage market as a whole.

Operations Highlights

Henderson glass line volume production is up 35% on the same period the previous year.

Capital expenditure on the Australian processing plant is in line with expectations with a total expected spend of AUD $2 million. The plant is nearing completion with production trials starting early March.

Significant work has been undertaken to control the ingredient and packaging supply chain for the Australian plant. A four year supply contract for a proprietary Charlie's PET bottle has been entered into.

An extensive new product programme has been developed to allow for the efficient rollout of new products from the Australian plant.


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