The winery is experiencing a resurgence in on-premise and export sales
The EWG acquisition is positively contributing to sales and gross margins
Supply chain disruption experienced by the agency appear to be waning
NIAGARA-ON-THE-LAKE, Ontario, July 29, 2022--(BUSINESS WIRE)--Diamond Estates Wines & Spirits Inc. ("Diamond Estates" or "the Company") (DWS-TSX Venture) today announced its financial results of position for the three and twelve months ended March 31, 2021 ("Q4 2022 and "FY 2022" respectively).
FY 2022 Summary
"With the waning of the restrictions associated with the pandemic, we are starting to see a significant resurgence in our domestic business," said Murray Souter, President and CEO. "Our winery business is returning to more normal volumes particularly our on-premise and our winery retail stores as covid restrictions ease. Additionally, we are seeing our export business return to prior levels as global covid restrictions are being eased. We are also seeing solid sales and margin contribution from our recent acquisitions, consistent with our expectations as we further integrate their operations into the company. The company remains focused on improving our cost structure to realize further synergies in the future."
Revenue for FY 2022 of $30.0 million represents an increase of $4.4 million from FY 2021 revenue of $25.6 million. The winery division experienced an increase of $4.2M due to the acquisition of the Equity Wine Group and stronger growth and distribution within the on-premise and export channels. The agency business increased by $0.2 million with growth being hampered by a combination of flooding in Western Canada and the ongoing global supply chain issues.
Gross margin for FY 2022 was $11.0 million, an increase of $0.5 million from $10.5 million in FY 2022, while gross margin as a percentage of revenue was 36.8% for FY 2022 compared to 41.2% in FY 2021. However, factoring the adjustments to cost of goods sold for the fair value of EWG inventories sold, gross margin for FY 2022 was $11.7 million and 39.0% of revenue decreasing 2.2% year over year. The winery experienced slightly higher gross margins compared to prior year resulting from the inclusion of the results from EWG acquisition. The agency division experienced margin compression from higher product costs, ongoing supply chain issues resulting in out-of-stocks and continued trade pressure on sales discounts in buy/sell markets.
EBITDA was $(1.7) million in FY 2022, a decrease of $(2.5) million from $0.8 million in FY 2021, largely a result of a decrease in gross margin less an increase in selling, general and administration expenses of $3.1 million. The decrease in gross margin is mostly from the inventory fair value adjustment from the EWG acquisition. The SG&A increased due to an increase in employee compensation associated with the reopening as covid restrictions eased, advertising and promotion costs and the operating costs from the EWG acquisition.
Adjusted EBITDA was $(1.1) million for FY 2022 when accounting for the incremental fair value of EWG inventories of $0.6 million, $0.1 in transactions costs and $(0.1) in government funding; and
Net loss was $2.5 million, compared to a net loss of $2.6 million in FY 2021.
Q4 2022 Summary:
Q4 2022 revenue was $7.1 million, an increase of $1.7 million, compared to the results experienced for the three-month period ended March 31, 2021 ("Q4 2021"). The increase in revenue is attributable to the winery division and the acquisition of EWG. Gross margin increased by $0.3 million to $2.0 million, or 29.4% of revenue, compared to $1.7 million, or 32.3% of revenue in Q4 2021. Adjusted EBITDA was $(1.1) million, compared to ($0.8) million in Q4 2021, and the net loss was $3.1 million compared with $1.4 million in Q4 2021. The January-to-March quarter is a seasonally slow period for the Company, and financial results in the fiscal fourth quarter are therefore typically weaker than in other quarters.
"The continued impact of the global supply chain disruptions, the inflationary pressures on our costs and their impact on our business remain a focus of the organization both now and into the near future," stated Murray Souter. "We have implemented a series of price increases across our product lines to recoup the increased costs and we will continue to monitor input costs and adjust pricing as appropriate."
About Diamond Estates Wines and Spirits Inc.
Diamond Estates Wines and Spirits Inc. is a producer of high-quality wines and ciders and is the sales agent for over 120 beverage alcohol brands across Canada. The Company operates four wineries, three in Ontario and one in British Columbia, that produce predominantly VQA wines under such well-known brand names as 20 Bees, Creekside, EastDell, Lakeview Cellars, Queenston Mile, Mindful, Dan Aykroyd, Shiny Apple Cider, Fresh Wines, Proud Pour, Red Tractor, Seasons, Serenity, and Backyard Vineyards.
Through its commercial division, Trajectory Beverage Partners, 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 and Andre Lurton wines from France, Kaiken wines from Argentina, Blue Nun wines from Germany, Francois Lurton wines from France and Argentina, Felix Solis wines from Spain, Waterloo Brewing from Canada, Landshark Lager from the USA, Edinburgh Gin from Scotland, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies, C.K. Mondavi & Family wines including Charles Krug from Napa, Bols Vodka from Amsterdam, Koyle Family Wines from Chile, Pearse Lyons whiskies and gins from Ireland, and Fontana di Papa wines from Italy.
Forward Looking Statements
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.
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J. Murray Souter
President & CEO
Diamond Estates Wines & Spirits Inc.
905.641.1042 Ext 234
Ryan Conte, CPA, CA, CBV
Diamond Estates Wines & Spirits Inc.