Canada NewsWire
NIAGARA-ON-THE-LAKE, ON, June 27, 2018
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 millionin 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 millioncompared 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."