Breakout Quarter, with Stronger Growth Ahead
Diamond Estates Wines earns $716,202 in fiscal Q1 2017
2016-08-19 09:16 ET - News Release
Mr. Murray Souter reports
DIAMOND ESTATES WINES AND SPIRITS INC. ANNOUNCES Q1 2017 FINANCIAL RESULTS WITH STRONG GROWTH IN REVENUE AND EARNINGS
Diamond Estates Wines & Spirits Inc. has released its fiscal Q1 2017 financial results. The company had strong growth in revenue and net earnings for the three months ending June 30, 2016.
Q1 2017 highlights:
- Revenue increases 26.6% to $9,149,120 on growth in both agency and winery divisions;
- EBITDA improves 78.7% to $1,330,514 as growth in revenues outpaced expenses;
- Net earnings jump twelve fold to $716,202 or $0.01 per share;
- Secured insurance from Export Development Bank of Canada on sales to a key customer;
- and Closed a new credit facility with CIBC for the agency division.
"We are very pleased that our strategy of revenue growth and cost control is translating into significantly improved financial performance that is consistent with our expectations. We anticipate that these efforts will continue to generate improved results into the future," stated Murray Souter, President and CEO of Diamond Estates. "The organic sales growth is the result of our efforts to capitalize on the growing market for Ontario wines and a focus in our agency division in the western region. The increase in profitability is reflective of our scalable platform and judicious management of costs. We are enthusiastic about the prospects for continued growth that lie ahead."
Revenue in Q1 2017 was $9,149,120 versus $7,227,016 for Q1 2016, a 26.6% increase. The Company defines gross margin as gross profit excluding depreciation of property, plant and equipment used in production. Gross margin was up 22.1% to $4,006,465 in Q1 2017 from $3,281,750 in Q1 2016. Standardized EBITDA also increased to $1,330,514 in Q1 2017 from $744,700 in Q1 2016 as operating expenses declined to 29.2% of revenue from 35.1% respectively. The Company recorded net income in Q1 2017 of $716,202 (7.8% of revenue) versus $59,239 (0.0% of revenue) in Q1 2016. The net income attributable to Diamond's shareholders was $606,864 in Q1 2017 versus $29,270 in Q1 2016, a year over year increase of $577,594
Revenue in the agency division increased 17.9% to $4,227,489 in Q1 2017 from $3,585,565 in Q1 2016 as there was growth in the western region, partially due to the addition of a new supplier, Charles Wells that the Company did not represent in Q1 2016. Revenue in Q1 2017 included $228,000 accrued for severance in lieu of notice related to a supplier that separated from the Company on June 1, 2016.
Revenue in the winery division increased 35.2% to $4,921,631 in Q1 2017 compared to $3,641,451 in Q1 2016. Export revenue increased 94.6% to $2,140,677 in Q1 2017 from $1,100,307 in Q1 2016, consistent with expectations that were previously announced by the Company. Revenue grew in other winery sales channels by $239,810 to $2,780,954 in Q1 2017 from $2,541,144 in Q1 2016 as the Company added new direct delivery (licensee) customers and the LCBO channel benefitted as new packaging for the core brands, 20 Bees, EastDell and Fresh began to appear in stores during the quarter.
Gross margin in the agency division increased 7.2% to $1,860,039 in Q1 2017 from $1,734,690 in Q1 2016. Gross margin (as a % of revenue) decreased to 44.0% in Q1 2017 from 48.4% in Q1 2016 as costs in the western region increased on products sourced in foreign currencies due to the depreciation of the Canadian dollar in the second half of fiscal 2016. The gross margin in the winery division increased 56.2% to $1,788,564 in Q1 2017 from $1,145,244 in Q1 2016. The gross margin as a percent of revenue was up 5% to 36.3% in Q1 2017 from 31.5% in Q1 2016 as the export sales growth favoured higher margin products, such as reserve wines and the Company increased prices on its Dan Aykroyd wines.
Operating expenses in Q1 2017 were $2,675,951 compared to Q1 2016 expenses of $2,537,050, an increase of $138,901 or 5.5%. Advertising and promotion expenses increased by $100,306 to $240,353 in Q1 2017 from $140,047 in Q1 2016. This is due to higher promotional activity in the growing western region. Delivery and warehousing expenses increased by $56,004 to $271,813 in Q1 2017 from $215,809 in Q1 2016. This reflects higher finished goods inventory levels and the growing licensee business where the Company delivers directly to commercial customers. These increases were partially offset by a foreign exchange gain of $28,491 in Q1 2017, an increase of $34,293 from the loss of $5,802 in Q1 2016 as the Canadian dollar strengthened against the US dollar during the quarter. All other operating expenses did not change significantly from the prior year.
As reflected in the consolidated statements of cash flows, the Company generated cash flow from operations, before changes in non‑cash working capital items, of $1,001,928 in Q1 2017 compared to cash flow of $413,805 in Q1 2016, an improvement of $588,123.
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 partnership, 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 Bustard 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.
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