Strong momentum in grocery and LCBO sales
despite temporary challenges in export business and agency
division
NIAGARA-ON-THE-LAKE, ON,
Feb. 26, 2019 /CNW/ - Diamond
Estates Wines & Spirits Inc. ("Diamond Estates" or "the
Company") (DWS-TSX Venture) today announced its financial results
for the three and nine-month periods ended December 31, 2018 ("Q3 2019" and "YTD 2019"
respectively).
Q3 2019 Summary:
- Revenue declined to $7.4 million,
compared to $10.4 million in the
three-month period ended December 31,
2017 ("Q3 2018") due to lower export sales and the loss of
two large agency suppliers, partially offset by positive momentum
in the LCBO and grocery channels, the positive contribution from
the acquisition of Backyard Vineyards, and the addition of new
high-growth suppliers in the agency division;
- Gross Margin was $3.0 million, or
40.8% of revenue, compared to $4.7
million, or 45.8% of revenue, in Q3 2018, with lower revenue
driving the decline in dollars and non-recurring severance revenue
in Q3 2018 driving the decline in margin percentage;
- EBITDA declined to negative $0.2
million, compared to $1.0
million in Q3 2018, due to lower gross margin contribution
and increased investment in distribution and promotional
programming to expand brand presence in the LCBO channel;
- Sales in the Ontario grocery
channel remained strong, with Diamond Estates' brands having
maintained the number one market share position in grocery during
the quarter, keeping the Company well positioned for the
anticipated expansion of wine in grocery and convenience
stores;
- LCBO-specific sales were strong with revenue increasing 17% and
case volumes increasing 20% compared to Q3 2018, as distribution
improved due to increased promotional activity and a re-vectored
marketing strategy;
- The annual harvest was completed during Q3 2019, yielding 2,100
tonnes of high-quality grapes, which is sufficient inventory to
meet the Company's production needs; and
- The Company continued to accumulate accolades for its
high-quality wines, with Backyard Vineyards wines winning six
medals at the San Francisco International Wine Competition,
including a gold medal for its 2017 Riesling.
"While we are disappointed with our financial results for the
third quarter of fiscal 2019, we are excited about our improved
competitive position in Ontario,"
said Murray Souter, President and
CEO. "Over the last three years, one of our biggest points of
emphasis has been to establish and maintain a leading position in
the Ontario grocery channel. We
have done just that, putting us in an outstanding position to
capitalize as the Ontario
government authorizes further roll-out of wine in grocery and
convenience stores. We are also pleased with the continuing rebound
in our LCBO sales, as we have overcome the distribution challenges
that affected us earlier in the fiscal year."
"We are confident that the declines in export and agency
division sales are temporary. As previously disclosed, export sales
have been impacted because our key distributor in China did not open new stores as quickly as
anticipated. Accordingly, the distributor is working through excess
ice-wine inventory and has reduced purchases. Our partnership with
this distributor remains strong and with the distributor recently
opening its full complement of stores, China will continue to be a very important
market for Diamond Estates. We have also qualified several new
export distributors globally and are beginning to export our wines
to new markets including the USA,
United Kingdom and Russia.
"In the agency division, revenue is down because of the loss of
two major suppliers that accounted for a significant proportion of
overall sales. While we cannot replace these sales overnight, we
have recently established new agency partnerships and are
generating solid sales growth from both these newer partner brands
and from key brands belonging to long-time partners. We have the
right team and the right strategy in place in the agency division
to generate strong long-term growth."
"Looking ahead, we believe that we can drive substantial value
for shareholders as we overcome the short-term export and agency
sales shortfalls, benefit from the continued Ontario grocery rollout, complete the
expansion of the Lakeview winery in Niagara-on-the-Lake, and develop an attractive
new Lakeview winery in the Okanagan Valley in British Columbia."
Conference Call
Murray Souter, CEO, and
Paul Dowdall, CFO, will host a
conference call for the investment community today 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/1939150/242EFC432FE1B01268B8144FFC1B048A.
A replay of the call will be available until Tuesday, March 5, 2019. To access the replay,
dial (416) 764-8677 or (888) 390-0541 (Passcode: 953853 #). 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, 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, Anciano wines from Spain, Blue Nun wines from Germany, Francois
Lurton wines from France
and Argentina, Waterloo Brewing
and Amsterdam Brewery, both from Canada, Landshark Lager from the USA, Marston's beers from England, Social Lite vodka sodas from
Canada, Malfy Gin from
Italy, Edinburgh Gin from
Scotland, Ian MacLeod and Glengoyne scotches from
Scotland, Barcelo Rum from the
Dominican Republic and Tequila
Rose Liqueur from McCormick Distilling in the USA.
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.
SOURCE Diamond Estates Wines & Spirits Inc.
