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Andrew Peller Ltd T.ADW.A

Alternate Symbol(s):  ADWPF | T.ADW.B

Andrew Peller Limited is a producer and marketer of wines and craft beverage alcohol products in Canada. With wineries in British Columbia, Ontario and Nova Scotia, the Company markets wines produced from grapes grown in Ontario’s Niagara Peninsula, British Columbia's Okanagan and Similkameen Valleys, and from vineyards around the world. Its premium and ultra-premium Vintners' Quality Alliance brands include Peller Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek Vineyards, Gray Monk Estate Winery, Raven Conspiracy and Conviction. It imports wines from various wine regions around the world to blend with domestic wine to craft these products. It also produces craft beverage alcohol products, including No Boats on Sunday ciders and seltzers, and various spirits and cream whisky products under the Wayne Gretzky No. 99 brand. It produces and markets premium personal winemaking products through its subsidiary, Global Vintners Inc.


TSX:ADW.A - Post by User

Bullboard Posts
Post by scissors14on Jan 04, 2007 2:23am
307 Views
Post# 11953556

Stock of the week: Andrew Peller

Stock of the week: Andrew PellerStock of the week: Andrew Peller -------------------------------------- Andrew Peller Ltd. (TSX-ADW.A, $11.65) (formerly Andres Wines, a case where a name change is no sign of trouble) is now profiting from the integration of last year's acquisitions. The shares remain on buy for gains and some income. In the six months to Sept. 30, Peller earned $5.1 million, or 34 cents a share, excluding one-time items. This is up by more than a fifth from $4.2 million, or 28 cents a share, a year earlier. Based on its results in the first half of fiscal 2007, we're raising our full-year estimate to 75 cents a share (adjusted for the recent three-for-one stock split). But this includes the favorable impact of a falling tax rate. In the first half, Peller's sales rose by 10.3 per cent, to $115 million. This reflected last year's acquisitions and organic growth. Since the company made these acquisitions over a year ago, the rate of sales growth will slow in the second half. Organic growth, however, remains attractive. In fact, it hit 5.8 per cent in the second quarter for several reasons. First, Peller took steps to lift sales of its "premium and ultra- premium" wines. Such wines generate higher profit margins - especially with the company benefiting from past cost-cutting and economies of scale. Second, Peller is selling many new products through its more than 100 stores and provincial liquor stores. Since these products were introduced only in late August, they should contribute more to sales next quarter. Third, Peller sold more through all of its distribution networks. This includes supplying restaurants and bars plus selling consumer-made wine kits, as well as through its own stores and provincial liquor stores. The cost of goods sold rose by only 9.6 per cent - less than sales. That's because "fiscal 2006 margins were impacted by the Company earning less margin on inventory acquired from Cascadia and Thirty Bench due to the requirement to record the purchased inventory at fair market value". Peller's gross profit margins are now free from this accounting rule. Peller's selling and administration costs rose by 9.5 per cent - less than sales. While interest and amortization costs increased more than sales, these are minor costs. The net result is that the company's pre-tax profit jumped by 12.9 per cent and the pre-tax profit margin rose by 15 basis points, to 6.7 per cent (a basis point is one per cent divided by 100). Its tax rate fell by 3.9 percentage points, to 34 per cent. This further raised profit growth. In the first half, Peller's cash flow rose by 19 per cent, to $8.8 million. This exceeded capital spending of $2.9 million and dividend payments of $1.6 million. In fact, the extra cash flow makes the 18 per cent hike in the dividend even more affordable. We would like to see Peller use excess cash flow to reduce its debt of $97.4 million. While a debt-to-equity ratio of 1.05 to one is reasonable given the company's dependable cash flow, lower interest costs would leave more money for shareholders. Peller's outlook is positive. President and chief executive officer John Peller says, "we are beginning to see the cost savings and operating synergies being generated by the acquisitions completed last year. As we proceed with our integration initiatives, we expect these benefits will increase". Also, sales of high-quality wines are growing as the aging population's palates become more mature and the health benefits of moderate drinking of red wine become known. Andrew Peller remains a buy for gains and some income. (Click below for a profile of this week's stock.) https://www.adviceforinvestors.com/query_results.phtml?search_type=by_symbol&search_input=adw.a
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