Diamond Estates Wines & Spirits Inc. (“Diamond Estates” or “the Company”) (DWS-TSX Venture) today announced its fiscal results for the three months ending June 30, 2015 (“Q1 2016”).
Sales for Q1 2016 were $7,559,287 versus $5,166,577 for the three months ended June 30, 2014 (“Q1 2015”), a 46.3% increase. Gross Profit was up 43.1% to $3,708,459 in Q1 2016 from $2,591,956 in Q1 2015. Gross margin declined to 49.2% in Q1 2016 from 50.1% in Q1 2015. Standardized EBITDA improved significantly to $769,814 in Q1 2016 from $370,446 in Q1 2015 aided by operating expenses that as a percent of revenue declined by 4.1%. The Company generated a net profit in Q1 2016 of $60,315 versus a net loss of $197,681 in Q1 2015. The net profit attributable to Diamond Estates’ shareholders was $30,346, a year over year improvement of $228,027.
The sales increase primarily related to distribution rights acquired from the business combination with The Kirkwood Group (“TKG”) to form Kirkwood Diamond Canada Partnership (“KDC”) on October 1, 2014. KDC has a stronger presence in Western Canada where the Company operates as both sales agent and distributor for its suppliers’ brands, which resulted in an increase in the distributorship (“buy/sell”) sales mix to 35.2% of revenues in Q1 2016 from 16.7% in Q1 2015. This affected overall gross profit margins as revenues in Eastern Canada are predominantly commission based (100% margin). As a result of the merger, buy/sell sales tripled in Q1 2016 to $2,658,635 from $865,061 in Q1 2015 and commission revenue doubled to $1,088,368 from $528,976, respectively. Sales in the Company’s winery division increased by 1.1% to $3,812,284 in Q1 2016 from $3,772,540 in Q1 2015. Strong growth in export and licensee sales were partially offset by restrained volume in the LCBO channel as brand rationalization, lower promotional activity and price increases dampened performance.
Operating expenses increased $717,135 or 32.3% in Q1 2016 over Q1 2015, primarily as a result of the combination of the agency businesses. The increased cost base relative to the prior year reflects larger sales, marketing and administration teams that enable KDC to compete more effectively as a leading national agent for suppliers with internationally recognized brands. Interest expense increased nominally to $336,697 in Q1 2016 from $332,009 in Q1 2015 as the addition of the KDC credit facility was offset by a reduction in the Company’s borrowing base as a result of applying the proceeds of the private placement completed on April 29, 2015 against the line of credit. Depreciation and amortization expense increased by $82,478, primarily related to the distribution rights vended into KDC by TKG. Financing charges of $19,312 in Q1 2016 reflect legal costs and fees to Meridian Credit Union to complete the amendments to the credit agreements that were effective in Q4 2015.
Non-operating related expenses of $45,263 in Q1 2016 were comprised of stock compensation expense recorded for options granted in prior periods.
The Company generated positive cash flow from operations before changes in non-cash working capital items for Q1 2016 of $413,805 compared to $34,755 in Q1 2015, an improvement of $379,050. Coincident with the private placement in April, 2015, the Company accelerated retirement of term debt in the amount of $456,069 that had an interest rate of 12%.
“We are pleased with the progress that we have made over the past several months towards achieving profitability and we anticipate further improvements in the forthcoming quarters” said J. Murray Souter, President and CEO of Diamond Estates. “Q1 2016 was our first profitable quarter since the merger that formed KDC on October 1, 2014 and it is indicative of the strength of the business. For example, KDC signed a cross Canada agency agreement to represent Charles Wells, the largest private brewing company in the UK, effective June 30, 2015. The breadth of the sales force was a key factor in winning the account and validates the rationale for the business combination. We continue to develop opportunities to become more efficient on the cost side of our overall business, while making targeted investments for growth such as the planned building of a new retail store at our winery in Niagara-on-the-Lake. We are enthusiastic about the prospects that lay ahead given the platform that we have built in both the agency and winery divisions.”
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, Diamond Estates Cellars, Dois Amigos, Dan Aykroyd, Riders Valley, 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 Bastard wines from France, Fireball Whiskey Shooter from Canada, Hpnotiq Liqueur from France, Anciano wines from Spain, Francois Lurton wines from France and Argentina, Brick Brewing from Canada, Buffalo Trace 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.
Diamond Estates Wines & Spirits Inc. common shares trade on the TSX Venture Exchange (symbol: DWS). For more information, please contact:
J. Murray Souter
President & CEO
Diamond Estates Wines & Spirits Inc.
905 641 1042 Ext 234
CPA, CA Chief Financial Officer
Diamond Estates Wines and Spirits Inc.
905-641-1042 Ext 225
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.
Forward Looking Statement
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.