Transitional year positions the Company for growth
NIAGARA-ON-THE-LAKE, ON, June 27, 2018 /CNW/ - Diamond Estates Wines & Spirits Inc. ("Diamond Estates" or "the Company") (DWS-TSX Venture) today announced its financial results for the three and twelve-month periods ended March 31, 2018 ("Q4 2018" and "FY 2018" respectively). The Company's audited consolidated financial statements and the related Management's Discussion & Analysis ("MD&A") for FY 2018 are available on the Company's website at https://www.lakeviewwineco.com/site/investors-diamond-estates-financial-filings and on SEDAR at www.sedar.com.
FY 2018 Highlights:
- Revenue of $34.3 million was consistent with FY 2017, with a strong increase in export sales offsetting fewer sales of bulk wine and an early year decline in domestic sales driven by the implementation of a short-crop strategy to ensure sufficient supply for the new grocery channel and the export sales;
- Gross margin of $15.2 million represented a 9.0% increase from $13.9 million in FY 2017; gross margin percentage in FY 2018 was 44.3% compared with 40.6% in the prior year, the result of improved product mix and reduced programming in the LCBO, and an increase in commission-based sales in the agency division;
- EBITDA1 of $2.5 million was below the FY 2017 level of $2.8 million, due to restructuring charges, severance expenses and financing charges totaling $1.3 million;
- Adjusted EBITDA1 of $3.7 million, represented an increase of 13.0% over FY 2017, reflecting a margin equal to 10.9% of revenue compared with 9.6% in FY 2017;
- The Company acquired full ownership of its agency business, Kirkwood Diamond Canada ("KDC"), previously a joint venture with Kirkwood Brands Ltd;
- Diamond Estates opened its retail store, Lakeview Wine Co., at its production facility in Niagara-on-the-Lake, Ontario;
- Completed an expansion at its main winery production facility, adding the first of several stepped increases in wine storage, bringing total capacity to 5.3 million litres, up from 4.7 million;
- Welcomed Bank of Montreal as the Company's new senior lender and commercial banker with $30 million in expandable credit facilities;
- The 2017 autumn harvest was a record, with the winery processing approximately 2,880 tonnes of grapes for its own brands, representing an increase of 16.3% versus 2016; and
- The winery continues to win accolades, earning 55 awards across four prestigious competitions, including best dessert wine at the InterVin Wine Awards and best ice wine at the Finger Lakes International Wine Championships.
Q4 2018 Highlights:
Q4 2018 revenue was $5.4 million, an 11.2% decline from Q4 2017, reflecting the impact of a temporary sales contract in FY 2017 and the reduced sales of low margin bulk wine. Gross margin of $2.3 million was consistent with Q4 2017, while gross margin percentage increased to 42.2% of revenue, compared to 38.0% in Q4 2017, reflecting an improved sales mix in the winery division and an inventory provision of $0.3 million in the agency division in the prior year period. EBITDA was ($0.8) million, compared to ($0.5) million in Q4 2017, and the net loss was $1.4 million compared with $1.0 million in Q4 2017. The fourth quarter is a seasonally slow period for the Company, and financial results are therefore typically weaker than other quarters.
"Fiscal 2018 was a transitional year for Diamond Estates, as our financial results were impacted by unusual events and important initiatives," said Murray Souter, President and CEO. "In the winery division, we were negatively impacted by the implementation of a short-crop strategy to deal with the significantly reduced 2014 and 2015 harvests. In the agency division, we implemented significant restructuring initiatives and targeted investments to improve operating performance, including a new president of the division, a restructured workforce and the elimination of a number of redundant sales and marketing positions. We were pleased to generate a solid increase in Adjusted EBITDA as we dealt with these issues. As we close the year, grape supply is no longer an issue and the changes in the agency division are providing solid traction."
"Accordingly, as we look ahead to fiscal 2019 and beyond, management is very optimistic," added Mr. Souter. "In the winery division, growth in our exports to China is expected to be less robust this year, but our domestic wine business is expected to rebound with the return of sufficient grape supply and the success of our products in the exciting Ontario grocery channel. We also expect the realignment of our agency business to drive stronger financial performance in that division."
Murray Souter, CEO, and Alan Stratton, CFO, will host a conference call for the investment community on Wednesday, June 27 at 10:00 a.m. (ET). The call-in numbers for participants are (416) 764-8688 or (888) 390-0546. In addition, the call will be webcast live at: https://event.on24.com/wcc/r/1782862/3DF0F7578BD8FF7855B274D4E399365F.
A replay of the call will be available until Wednesday, July 4, 2018. To access the replay, dial (416) 764-8677 or (888) 390-0541 (Passcode: 038466 #). A transcript of the call will be archived on the Company's website.
About Diamond Estates Wines and Spirits Inc.
Diamond Estates Wines and Spirits Inc. is a producer of high quality wines and a sales agent for over 120 beverage alcohol brands across Canada. The company operates two wineries in the Niagara region of Ontario and one in Toronto, producing VQA and blended wines under such well-known brand names as 20 Bees, EastDell, Lakeview Cellars, Dan Aykroyd, Fresh, McMichael Collection, Benchmark and Seasons. Through its wholly-owned subsidiary, Kirkwood Diamond Canada Partnership, the Company is the sales agent for many leading international brands in all regions of the country as well as being a distributor in the western provinces. These recognizable brands include Josh Wines from California, Fat Bastard wines from France, Kaiken wines from Argentina, Marston's beers from England, Hpnotiq Liqueur from France, Anciano wines from Spain, Francois Lurton wines from France and Argentina, Waterloo Brewing and Amsterdam Brewing, both from Ontario, Landshark Lager from the USA, Blue Nun wines from Germany, coolers and spirits from Independent Distillers in New Zealand, and Evan Williams Bourbon from the USA.
Forward Looking Statement
This press release contains forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "estimates", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Diamond Estates Wines and Spirits Inc. to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Such forward-looking statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to: the economy generally; consumer interest in the services and products of the Company; financing; competition; and anticipated and unanticipated costs. While the Company acknowledges that subsequent events and developments may cause its views to change, the Company specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing the views of the Company as of any date subsequent to the date of this press release. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
Non IFRS Financial Measures
Management uses net income (loss) and comprehensive income (loss) as presented in the consolidated statements of net income (loss) and comprehensive income (loss) as well as "EBITDA" and "Adjusted EBITDA" as measures to assess performance of the Company. EBITDA and Adjusted EBITDA are other financial measures and are reconciled to net income (loss) and comprehensive income (loss) under "Results of Operations" in the Company's MD&A.
EBITDA and Adjusted EBITDA are supplemental financial measures to further assist readers in assessing the Company's ability to generate income from operations before taking into account the Company's financing decisions, depreciation of property, plant and equipment and amortization of intangible assets. EBITDA comprises gross margin less operating costs before financial expenses, depreciation and amortization, non-cash expenses such as share based compensation, one time and other unusual items, and income tax. Adjusted EBITDA comprises EBITDA before non-recurring expense such as severance, restructuring costs, one-time financing charges and inventory write-downs. Gross margin is defined as gross profit excluding depreciation on property, plant and equipment used in production. Operating expenses excludes interest, depreciation on property, plant and equipment used in selling and administration, and amortization of intangible assets.
EBITDA does not represent the actual cash provided by the operating activities nor is it a recognized measure of financial performance under IFRS. Readers are cautioned that this measure should not be considered as a replacement for those as per the unaudited interim condensed consolidated financial statements prepared under IFRS. The Company's definitions of this non IFRS financial measure may differ from those used by other companies.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
1 See Non IFRS Financial Measures
SOURCE Diamond Estates Wines & Spirits Inc.
For further information: J. Murray Souter, President & CEO, Diamond Estates Wines & Spirits Inc., [email protected], 905.641.1042 Ext 234; Alan Stratton, CPA, CA, Chief Financial Officer, Diamond Estates Wines & Spirits Inc., [email protected], 905.641.1042 Ext 225