February 23, 2018, Niagara-on-the-Lake, Ontario ̶ 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, 2017 (“Q3 2018” and “YTD 2018” respectively).
Q2 2018 Highlights:
- Revenue was $10.4 million, an increase of 17.4% from $8.8 million for the three months ended December 31, 2016 (“Q3 2017”);
- Gross margin was $4.8 million, up 40.6% from $3.4 million in Q3 2017, due primarily to revenue growth. Gross margin as a percentage of revenue increased to 46.7% from 39.0% in Q3 2017;
- EBITDA was $1.0 million compared to $0.6 million in Q3 2017
 See Non IFRS Financial Measure;
- Net income increased to $0.5 million, up from a slightly positive amount in Q3 2017;
- Cash flow from operating activities, before changes in non-cash working capital items, increased 7.8% to $2.6 million in YTD 2018, compared to $2.4 million in the nine months ended December 31, 2016 (“YTD 2017”);
- Working capital was $17.0 million as at December 31, 2017, an increase of $8.6 million from $8.4 million as at March 31, 2017; and
- On November 7, 2017, the Company announced that Christopher Terrio, a seasoned beverage industry executive, was named President of Kirkwood Diamond Canada, the Company’s agency division.
“I’m pleased to say that we delivered improved financial performance during the third quarter, while overcoming some of the short-term challenges that impacted us in the second quarter,” said Murray Souter, President and CEO. “In the winery division, export revenue increased more than 90% year-over-year as overseas demand for our products remains extremely robust. Following a record harvest in 2017, we have begun to re-introduce several products into the LCBO that were temporarily de-listed due to the short-crop issues we encountered earlier in the year. We have also increased promotional activity in the LCBO to accompany those re-introductions. As a result of these measures, our sales velocity improved significantly in the LCBO during the third quarter, and we expect a return to growth in this channel in fiscal 2019.”
“In the agency division, we have continued to implement restructuring initiatives and targeted investments in order to generate sustained improvements in operating performance. As part of that process, we restructured our workforce, eliminating a number of redundant sales and marketing positions. This resulted in a restructuring charge of $0.8M during the third quarter. Our efforts to turn this business around are beginning to bear fruit, and with this behind us, I am confident that Chris Terrio, the new president of the agency business, is the right person to oversee this process and implement a more focused strategy.”
“A one-time severance benefit of $0.6M recorded by our agency division during the third quarter came from a foreign producer that chose to consolidate its North American business under another agency. We expect that cost savings and organic growth, including a new supplier relationship we just recently established, will more than offset this lost business.”
Conference CallMurray Souter, CEO, and Alan Stratton, CFO, will host a conference call for the investment community today, Friday, February 23 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: http://event.on24.com/wcc/r/1610282-1/55F108DBDAB81162F1DF938E7F58D14C.
A replay of the call will be available until Friday, March 2, 2018. To access the replay, dial (416) 764-8677 or (888) 390-0541 (Passcode: 224798). 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 two wineries in the Niagara region of Ontario producing VQA and blended wines under such well-known brand names as 20 Bees, EastDell Estates, Lakeview Cellars, Dois Amigos, Dan Aykroyd, Benchmark and Seasons. Through its subsidiary, 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 Deutsch Family Wines (Josh Cellars) from the USA, Fat Bastard wines from France, Kaiken wines from Argentina, Marston’s beers from England, Hpnotiq Liqueur from France, Anciano wines from Spain, Francois Lurton wines from France and Argentina, Blue Nun wines from Germany, coolers and spirits from Independent Distillers in New Zealand, Brick Brewing from Canada, Evan Williams Bourbon from USA, Iceberg Vodka from Canada and many others. For further information on the company, please visit the company’s SEDAR profile at www.sedar.com.
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.
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.
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
Alan Stratton, 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.