Continued profitability despite
short-term challenges in export and LCBO
channels
NIAGARA-ON-THE-LAKE, ON, Aug. 29, 2018 /CNW/ - Diamond
Estates Wines & Spirits Inc. ("Diamond Estates" or "the
Company") (DWS-TSX Venture) today announced its financial results
for the three-month period ended June 30,
2018 ("Q1 2019").
Q1 2019 Highlights:
- On June 20, 2018, the
Company acquired Backyard Vineyards Inc., a winery in British Columbia, for $2.8 million. The transaction transforms Diamond
Estates into a national producer of VQA wines and positions the
Company to build a new winery in British
Columbia's acclaimed Okanagan Valley;
- Revenue was $8.0 million, a
decline of 16.9% from $9.6 million in
the three months ended June 30, 2017
("Q1 2018"), driven by lower wine sales to the export market and
LCBO channel, in addition to the loss of a supplier in the agency
division;
- Gross margin was $3.7
million, a decline of 16.1% from $4.4
million in Q1 2018, primarily driven by the revenue
reduction in the quarter;
- EBITDA1 was $0.8 million, compared to $1.4 million in Q1 2018;
- Net income was $0.1
million, compared to $0.9
million in Q1 2018;
- Cash flow from operating activities, before changes in
non-cash working capital items, was $0.5
million, compared to $1.2
million in Q1 2018;
- Working capital was $14.6
million as at June 30, 2018,
an increase of approximately $0.9
million from $13.6 million as
at March 31, 2018;
- The Company's new retail store has exceeded management's
high expectations by generating a 65.7% revenue increase compared
with the previous year and has significantly enhanced the winery's
profile in the Niagara region;
- Diamond Estates set an industry first in Canada with the launch of a single-serve,
200 ml polyethylene terephthalate (PET) bottle for four of
its products. The lightweight, shatterproof,
environmentally-friendly bottle reduces the Company's carbon
footprint and allows wine lovers to enjoy the Company's products at
venues where glass bottles are prohibited; and
- The winery has continued to enjoy success, receiving 16 awards
across four prestigious competitions during Q1 2019, including
Gold, Double Gold and Best Dessert Wine of the Year at the All
Canadian Wine Championships.
"Despite short-term challenges, Diamond Estates remained
profitable in the fiscal first quarter," said Murray Souter, President and CEO. "In the winery
division, export sales through our Chinese distributor were
impacted by delayed store openings in China. The new stores will open in the current
and next fiscal years, which is expected to drive a return to
strong volume growth. The winery division was also impacted by a
decrease in sales in the LCBO channel, which related to the
short-crop strategy we implemented in 2017 in response to poor
grape harvests in 2014 and 2015. While we have worked hard to
re-introduce VQA products to LCBO stores that were temporarily
de-listed, this process has been slower than anticipated due to
continued competitive pressures on distribution and a lack of
available programming in the fiscal first quarter. Following recent
adjustments to our distribution strategy, we have experienced
strong distribution gains at the store level and we expect a return
to full distribution in the LCBO during the current quarter."
"The agency division was impacted by the loss of a
supplier during fiscal 2018 who we previously represented as their
national distributor. It will take some time to replace all of the
lost business but we are confident that our new strategy for the
agency division will produce meaningful growth."
"Despite these challenges, we have much to be pleased
about. We continue to maintain a very strong competitive position
in the Ontario grocery channel,
which will become increasingly important as the provincial
government issues licenses to more stores. Sales performance has
been stellar at our flagship retail store at the Lakeview winery.
Additionally, we are very excited about our recent Backyard
Vineyards acquisition, which makes us a national VQA producer and
positions us for significant growth in the Okanagan
Valley."
Conference Call
Murray Souter, CEO, and
Alan Stratton, CFO, will host a
conference call for the investment community today, Wednesday, August 29 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/1822332/06C7FF1A5598D28C80B3A6E7A4D02AFE.
A replay of the call will be available until Wednesday, September 5, 2018. To access the
replay, dial (416) 764-8677 or (888) 390-0541 (Passcode: 220668 #).
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 three wineries, two in Ontario and one in British Columbia, that produce predominantly
VQA wines under such well‑known brand names as 20 Bees, EastDell,
Lakeview Cellars, Dan Aykroyd,
Fresh, McMichael Collection, Benchmark, Seasons and Backyard
Vineyards. Through its wholly‑owned subsidiary, Kirkwood Diamond
Canada Partnership ("KDC"), 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 Brewery, both from Canada, Landshark Lager from the USA, Blue Nun wines from Germany, Malfy Gin from Italy, Edinburgh Gin from Scotland, Barcelo Rum from the Dominican Republic 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 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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1 See Non
IFRS Financial Measure
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SOURCE Diamond Estates Wines & Spirits Inc.