Promising improvements for future results
Diamond Estates Wines & Spirits Inc. (“Diamond Estates” or
“the Company”) (DWS-TSX Venture) today announced its financial
results of position for the three and six months ended September
30, 2022 ("Q2 2023 and "YTD 2023" respectively).
Q2 2022 Summary:
- Revenue for Q2 2023 of $9.2 million, an increase of $2.1
million from Q2 2022 revenue of $7.1 million. The winery division
experienced an increase of $1.8 million; because of the acquisition
of Equity Wine Group, the continuing resurgence in On Premise
sales, the expansion in distribution within the LCBO and Grocery
channels and organic growth at Lakeview winery. Additionally,
export sales have rebounded from $0.1 million in Q1 2023 to $0.6
million in Q2 2023. The Agency experienced moderate growth
increasing $0.3 million to $3.8 million in Q2 2023.
- Gross margin for Q2 2023 was $3.6 million, an increase of $0.9
million from $2.7 million in Q2 2022, while gross margin as a
percentage of revenue was 38.7% for Q2 2023 compared to 38.1% in Q2
2022. However, when factoring the adjustments to cost of goods sold
for the fair value of EWG inventories sold, gross margin for Q2
2023 was $3.8 million and 41.1% of revenue. The increase in gross
margin was a result of increases in most channels driven by the
acquisition of Equity Wine Group and price increases on most
products;
- EBITDA was negative $0.4 million in Q2 2023, a decrease of $0.1
million from negative $0.3 million in Q2 2022, the decrease is
mostly attributable to an increase in selling, general and
administrative expenses from the EWG acquisition, brand redesigns
on many of the core brands, increased spending requirements with
the easing of covid (promotions, events and travel) and the opening
of our new Shiny retail store in July 2022. When adjusting for the
incremental fair value of EWG inventories sold, adjusted EBITDA was
negative $0.2 million in Q2 2023 compared to negative $0.1 million
in Q2 2022; and
- Net loss was $1.4 million, compared to a net loss of $1.0
million in Q2 2022.
Subsequent Events:
- On October 24, 2022, the Company entered into an amendment to
its Second Amended and Restated Credit Agreement (the "SARCA") with
Bank of Montreal ("BMO"); and
- On November 9, 2022, the Company closed a non-brokered private
placement of 10.0 % unsecured convertible debentures of the Company
for gross proceeds of $4.884 million.
“I am very pleased to see strong topline revenue growth in the
business,” said Andrew Howard, President and CEO. “Over the past
six months we’ve seen a resurgence in On Premise sales, significant
early success of our new low alcohol / low sugar wine Mindful,
strong growth in our Grocery business across the country, a near
tripling of our export sales vs the first quarter and a number of
exciting new products for our Agency.
We are pleased to see solid growth in our Gross Margin versus
last year driven by the acquisition of Equity Wine Group and also
from our Lakeview winery, but our growth is below our projections
for the quarter. We continue to experience Gross Margin head winds
in BC and Alberta in our Agency and consumer traffic has not yet
returned to our wineries, with covid waning, where we earn our
highest Gross Margin. We are confident that our team will overcome
these issues.
The domestic marketing team has also been hard at work
refreshing our core brands with graphic redesigns of Twenty Bees,
Fresh Wines and Lakeview Wine Co in addition to introducing a
premium line of Twenty Bees for the winery and e-commerce
channels.
It is typically difficult to increase price in this industry,
but we have successfully added a dollar or more to virtually every
one of our products in every channel. We’ve accomplished this with
both new product launches and increases on our current products. We
will continue to evaluate pricing opportunities given inflationary
pressure on cost of goods sold.
We have experienced and created a lot of change in our business
causing our expenses to grow faster than our revenue including:
significant brand redesigns, the opening of our new Shiny Apple
Cidery retail store and the support for new brand launches. With
the easing of covid, spending has increased to participate in
promotional events and to compete in all channels. This will need
to be closely managed going forward to ensure improved
profitability.
Given the topline growth in the business, improving Gross
Margin, successful price increases, new product launches including
Mindful, well received graphic redesigns and several new business
wins at our Agency – I feel confident that we are setting the stage
for future improved bottom line results,” says Howard.
The Company also announced that it has issued deferred share
units (“DSUs”) to its directors as of today. Under the DSU plan of
the Company, an aggregate of 71,301 DSUs have been issued by the
Company to non-executive directors in settlement of $34,937.50 of
deferred directors' compensation. The DSUs are to be settled in
common shares of the Company when the director retires from all
positions with the Company.
About Diamond Estates Wines and Spirits Inc.
Diamond Estates Wines and Spirits Inc. is a producer of
high-quality wines and ciders as well as a sales agent for over 120
beverage alcohol brands across Canada. The Company operates five
production facilities, four in Ontario and one in British Columbia,
that produce predominantly VQA wines under such well-known brand
names as 20 Bees, Creekside, EastDell, Lakeview Cellars, Mindful,
Queenston Mile, Shiny Apple Cider, Fresh, Proud Pour, Red Tractor,
Seasons, Serenity, Persona and Backyard Vineyards.
Through its commercial division, 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, Meffre, Pierre Chavin and Andre
Lurton wines from France, Brimincourt Champagne from France, Merlet
and Larsen Cognacs from France, Kaiken wines from Argentina, Blue
Nun and Erben wines from Germany, Felix Solis wines from Spain,
Calabria Family Estate Wines from Australia, Saint Clair Family
Estate Wines from New Zealand, Redemption Bourbon and Rye whiskies
from the U.S., Gray Whale Gin from California, Storywood and
Cofradia Tequilas from Mexico, Magnum Cream Liqueur from Scotland,
Talamonti and Cielo wines from Italy, Catedral and Cabeca de Toiro
wines from Portugal, Waterloo Beer & Radlers from Canada,
Landshark Lager from the USA, Edinburgh Gin, Tamdhu, Glengoyne and
Smokehead single- malt Scotch whiskies from Scotland, Islay Mist,
Grand MacNish and Waterproof whiskies from Scotland, C. Mondavi
& Family wines including C.K Mondavi & Charles Krug from
Napa, Wize Spirits and Hounds Vodka from Canada, Bols Vodka from
Amsterdam, Koyle Family Wines from Chile and Pearse Lyons whiskies
and gins from Ireland.
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221124005335/en/
Andrew Howard President & CEO, Diamond Estates Wines &
Spirits Inc. ahoward@diamondwines.com
Ryan Conte, CPA, CA, CBV CFO, Diamond Estates Wines &
Spirits Inc. rconte@diamondwines.com
Diamond Estates Wines an... (TSXV:DWS)
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Diamond Estates Wines an... (TSXV:DWS)
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