Improved financial performance and key strategic initiatives position the Company for continued success
NIAGARA-ON-THE-LAKE, ON, June 23, 2017 /CNW/ - Diamond Estates Wines & Spirits Inc. ("Diamond Estates" or "the Company") (DWS-TSX Venture) today announced significant improvements in financial performance for the three and twelve-month periods ended March 31, 2017 ("Q4 2017" and "FY2017" respectively).
- Revenue was $34.3 million, an increase of 17.5% from $29.2 million in FY2016, driven by strong growth in export sales in the winery division;
- Gross margin increased to 41.5% of revenue, compared to 40.6% in FY2016, due to increased export revenues and a reduction in promotional activity in the LCBO channel in the winery division, partially offset by a decline in gross margin in the agency division, reflecting a decision to clear out excess inventory;
- EBITDA1 rose 84.9% to $2.8 million, compared to $1.5 million in FY2016, as the winery benefited from increased operating leverage attributable to increased sales volume;
- Cash flow from operating activities, before changes in non-cash working capital items, increased significantly to $1.8 million, up from $0.3 million in FY2016, reflecting the increased operating leverage;
- Net income of approximately $0.5 million versus a loss of $1.7 million in FY2016;
- On April 6, 2017, subsequent to the end of Q4 2017, the Company announced an agreement to acquire the 49.99% minority interest in its agency business, Kirkwood Diamond Canada ("KDC") owned by its joint venture partner, Kirkwood Brands Ltd. The Company agreed to pay $4.4 million to complete the acquisition. On May 5, 2017, the Company completed the transaction, increasing its interest in the agency business to 100%;
- Since March 31, 2016, the Company's working capital has increased to $8.4 million from $3.2 million (excluding debt then-classified temporarily as current) and its debt to equity ratio improved substantially to 0.68:1 from 1.76:1;
- Following the Province of Ontario's issuance of the first tranche of licenses to permit wine sales in the grocery channel, 69 of the 70 stores initially awarded new grocery licenses are now operational and Diamond has 100% penetration of those locations; and
- At the recent All Canadian Wine Championships, Diamond Estates' products captured nine awards including Double Gold for both the 2016 McMichael Chardonnay and the 2015 Lakeview Cellars Cabernet Franc Icewine.
1 See Non IFRS Financial Measure
Q4 2017 Highlights:
Revenue was $6.1 million, essentially unchanged from Q4 2016. Gross margin increased significantly to 39.0% of revenue, compared to 31.0% in Q4 2016, due to increased export sales and sales to VIA Rail during the quarter. EBITDA was negative $0.5 million, compared to negative $0.8 million in Q4 2016, reflecting the improved gross margins. Net loss totaled approximately $1 million, smaller than the net loss of $2.1 million in Q4 2016. The fourth quarter is a seasonally slow period for the Company, and financial results are therefore typically weaker than other quarters.
"Fiscal 2017 was a landmark period for Diamond Estates," said Murray Souter, President and CEO. "The introduction of wine into Ontario grocery stores is a transformational event for our industry, and we are positioned as one of the three largest suppliers to the grocery channel with approximately 12% market share. Our financial performance also improved significantly during the fiscal year as we experienced very strong demand for our products at home and abroad, and benefited from enhanced operating leverage. In December 2016, we completed a very important equity financing that improved our balance sheet and positioned us to execute on our growth plans. Among those is the important capacity expansion project at the Lakeview winery, which we initiated in the spring."
"Diamond Estates achieved further milestones subsequent to the fiscal year-end. In early May, we acquired 100% ownership of our agency business. This business has low capital intensity and is capable of delivering strong free cash flow. We will be reviewing a realignment of the agency division to unlock synergies and will be making targeted investments to improve distribution, sales and brand management. Additionally, we opened our new retail store at the Lakeview winery in mid-May and it is expected to drive significantly higher sales of our wines at our Niagara-on-the-Lake facility."
"Looking ahead, we are very optimistic about Fiscal 2018. We are confident that the realignment of our agency business will drive stronger financial performance in that division. We have a healthy balance sheet, which positions us to make strategic acquisitions if the right opportunities arise. Additionally, the outlook for our industry is robust, with demographic trends continuing to support year-over-year growth in demand for our wines."
Murray Souter, CEO, and Alan Stratton, CFO, will host a conference call for the investment community today, Friday, June 23 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: http://event.on24.com/wcc/r/1452438-1/8074EEF2FCE5AAEF49D7440642A65A3A.
A replay of the call will be available until Friday, June 30, 2017. To access the replay, dial (416) 764-8677 or (888) 390-0541 (Passcode: 013820). 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 producing VQA and blended wines under such well-known brand names as 20 Bees, EastDell Estates, Lakeview Cellars, Dois Amigos, Dan Aykroyd, Benchmark and Seasons. Through its subsidiary, Kirkwood Diamond Canada, the Company is the sales agent for top selling international brands in all regions of the country as well as being a distributor in the western provinces. These recognizable brands include Fat Bastard wines from France, Kaiken wines from Argentina, Charles Wells beers from England, Hpnotiq Liqueur from France, Anciano wines from Spain, Francois Lurton wines from France and Argentina, Blue Nun wines from Germany, coolers and spirits from Independent Distillers in New Zealand, Brick Brewing from Canada, Evan Williams Bourbon from USA, Flor de Cana rum from Nicaragua, Iceberg Vodka from Canada and many others. For further information on the company, please visit the company's SEDAR profile at www.sedar.com.
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 Measure
Management uses net income (loss) and comprehensive income (loss) as presented in the unaudited interim condensed consolidated statements of net income (loss) and comprehensive income (loss) as well as "EBITDA" as a measure to assess performance of the Company. EBITDA is another financial measure and is reconciled to net income (loss) and comprehensive income (loss) under "Results of Operations" in the Company's MD&A.
EBITDA is a supplemental financial measure 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. 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.
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