ALG tightens grip

PORTERS and Barmans liquor store owners are smiling following a deal done with the Australian Liquor Group.

Outfront Liquor Service, which owns the Porters and Barmans brands, was acquired by listed player ALG for $1.5 million

As part of the deal, each Porters and Barmans liquor store owner receives 5,000 ALG shares.

The acquisition of Outfront puts ALG closer to reaching its forecast full year after-tax profit of $6.1 million.

ALG claims the $1.5 million acquisition will add $1 million to profitability, based on improved purchasing power and marketing arrangements.

The company also replaced its managing director Philip Murphy with Outfront CEO Mal Higgs.

Mr Murphy will remain with ALG as non-executive deputy chairman.

Mr Higgs blamed the Coles and Woolworths efforts to stop the company’s growth in Sydney for its reduced after-tax profit forecast of $5 million

“They did a pretty good job of cutting us out of the Sydney market,” Mr Higgs said.

ALG finished the best liquor selling period – Christmas – with a profit of just $3.9 million, which left it well short of its target in a traditionally slow time for the industry.

Mr Higgs said better buying would help the company reach its reduced profit target.

ALG, which operates under the Philip Murphy and Knox brands, floated last year as part of a plan to become a third force in liquor.

It used the capital raised from its listing to purchase independent liquor operators.

Meanwhile, its big two comp-etitors are making plays to build their holdings.

Coles is understood to be in negotiations to buy Queensland’s largest private hotel and bottle shop chain Leda Group. Wool-worths is believed to be close to finalising a deal to purchase Liberty Liquors.

Mr Higgs said ALG lost a lot of ground trying to corporatise the independent outlets it had bought.

“We didn’t have anyone focusing on national buying for a while,” he said.

“The rebates from our increased purchasing power will soon be flowing through.”

Mr Higgs also expects ALG’s newly corporatised stores to perform better in this half and make a greater profit contribution.

With its acquisition of Outfront, ALG is banking on an extra 0.5 per cent improvement in its purchasing power – equating to a $500,000 contribution to its net profit.

It also expects another $500,000 boost to its bottom line from using Porter’s internal advertising prod-uction and marketing department. ALG outsourced its marketing.

Mr Higgs said the Outfront set-up had not been designed to be profitable.

“It was there to help its members, not make huge profits. It was designed to build the brand,” he said.