UK trouble takes fizz out of profits

By DITA DE BONI

Over-optimistic prospectus forecasts and British distribution woes continue to cast a shadow over results from Frucor Beverages' robust Australasian businesses.

Revealing a net profit of $11.7 million for the year to June 30 - up from $9.6 million last year - the cold beverages company yesterday gave assurances that its troubles in the valuable British market were on the brink of resolution, and that substantial growth would continue in Australia.

But Frucor management admitted it had overestimated its original forecasts which, had they been fulfilled, would have given the company a net profit of around $20 million this year.

Revenue, which increased by 27 per cent to $228.4 million overall, also fell slightly short of the original figure pitched at $264 million.

For the first time this year, Frucor has broken out its results into geographical regions, clearly attributing a lowered 2001 profit to problems in the UK. That operation lost $10.2 million in the year, which managing director Mark Cowsill blamed on a huge marketing investment there that aimed to familiarise the British consumer with the energy drink "V", Frucor's flagship product.

It had also recently made breakthroughs with its troubled UK distribution system, managing to sign on major distributors such as the service station chain Esso, he said.

"V" is at present carried by around 47 per cent of all cold beverage retailers in Britain, compared with 90 per cent penetration of market leader, Red Bull.

The UK operation is expected to make a further loss in the coming year.

The company's UK marketing blitz - including a number of ex-patriate Kiwis hired to scout out distributors in the market - had contributed to positive early summer results. Average weekly sales were up 60 per cent from last month and a slight increase in market share against Red Bull had been noted.

While the company continues to spend several million dollars in establishing a foothold in Britain, it has achieved a stronger position in the promising Australian market with its purchase of the Spring Valley distribution and sales system in January. Operating revenue across the ditch grew 57 per cent in the year, to $46.7 million, and pre-tax earnings rose 93 per cent to $10.8 million.

Mr Cowsill said Australia would be the fount of future growth. The New Zealand business, while robust with revenue of $166.2 million and earnings before tax of $30.6 million - would continue to be strong but was largely satiated with "V".

In line with the company's previously stated policy, the full year's dividend was held at 8c a share, with a final dividend of 4c payable on September 7.

Frucor shares closed yesterday up 1c at $1.71. The shares are on an upward curve after hitting a year low of $1.50 in early July, but are still trading under the stock's year average of $1.83.