Diamond Estates Wines & Spirits Reports Fiscal 2021 Financial Results
- Strong brands drive positive outlook
- Company has successfully adapted to changing consumption patterns
- Management focus is on driving brand performance, optimizing the financial position, and strengthening the balance sheet
July 22, 2021, 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 12-month periods ended March 31, 2021 ("Q4 2021" and "FY 2021" respectively).
FY 2021 Summary:
"We are seeing new opportunities both domestically and internationally in the aftermath of the COVID-19 pandemic that has caused significant disruption to our industry," said Murray Souter, President and CEO. "Consumer buying patterns have changed, with greater demand for value-priced wines and recognized brands, such as those offered through both our winery and agency divisions. We are seeing growth in emerging channels including grocery and online largely offsetting weakness in traditional channels. The winery volume growth we achieved in the fourth quarter demonstrates that we are capitalizing on these shifting market dynamics."
Revenue was $25.6 million, a decline of 4.5% from $26.8 million in the 12-month period ended March 31, 2021 ("FY 2021"). The decrease was primarily related to the impact of the COVID-19 pandemic, which reduced operations of most private retail and on-premise accounts nationally and continued softness in winery export and contract sales.
The Company maintained its strong #2 position in the emerging Ontario grocery channel amongst VQA wines with 20 Bees representing three of the top 10 selling stock keeping units ("SKU's"). Through our Agency Division, Josh Cellars Cabernet Sauvignon continues to be the top selling imported red wine over $15, with sales volumes doubling year-over-year and our Trajectory Division is now the #4 agency in the grocery channel.
The impact of the COVID-19 pandemic continues to shift consumer purchase behaviour from on-premise/out-of-home to in-home consumption. As a direct result, Diamond has seen a shift of sales volume from traditional retail and on-premise channels to grocery, on-line, direct delivery and curbside retail, with the trend particularly prevalent in Ontario. As a group, the volume from these channels was up 77% in FY2021.
Gross margin was $10.5 million, a decline of $1.6 million from $12.1 million in FY 2020. Gross margin percentage was 41.2% for FY 2021 compared to from 45.2% last year, driven primarily by sales declines in high margin trade channels to lower priced and lower margin brands as consumers look to less costly brand alternatives.
EBITDA was $0.8 million, a notable improvement compared to ($0.8) million in FY 2020, with the increase attributable to lower SG&A expenses due to reductions in employee compensation and reductions in advertising and promotion expenditures.
Net loss was $2.6 million, compared to a net loss of $4.2 million in FY 2020.
On June 10, 2021, the Company announced that it has completed a non-brokered private placement of $1.83 million aggregate principal amount of 10.0 % unsecured convertible debentures of the Company with certain insiders of the Company, including Lassonde Industries Inc. and Oakwest Corporation Limited.
On October 26, 2020, the Company entered into an Amended and Restated Credit Agreement ("ARCA") to replace the original the BMO credit agreement dated September 29, 2017. The ARCA was amended on March 26, 2021 (the "First Amendment to the ARCA") and further amended on June 29, 2021 (the Second Amendment to the ARCA") to extend the maturity date of the ARCA by 3 months from July 1, 2022 to October 1, 2022.
Q4 2021 Summary:
Q4 2021 revenue was $5.4 million, similar to the results experienced for the three-month period ended March 31, 2020 ("Q4 2020"). Gross margin decreased by $0.3 million to $1.7 million, or 31.4% of revenue, compared to $2.0 million, or 37.0% of revenue, in Q4 2020. Adjusted EBITDA was $0.7 million, compared to ($0.7) million in Q4 2020, and the net loss was $1.4 million compared with $1.6 million in Q4 2020. The January-to-March quarter is a seasonally slow period for the Company, and financial results in the fiscal fourth quarter are therefore typically weaker than in other quarters.
"From the beginning of the pandemic, Diamond has moved quickly and decisively to improve our competitive position. We reduced overhead costs, curtailed spending on channels with weakening sales outlooks, extended the debt maturity in our credit agreement, and introduced protocols to support the health and safety of our customers, employees, and other stakeholders. While market conditions remain volatile, we anticipate a return to more normal sales levels in our traditional channels including on-premise, and on-site in addition to strengthening export and travel related sales. We are well positioned to take advantage of that shift and expect significant growth in those channels and further improvements to our financial results over the coming months."
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, one 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, Serenity, and Backyard Vineyards.
Through its commercial division, Trajectory Beverage Partners ("TBP"), 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, Blue Nun wines from Germany, Francois Lurton wines from France and Argentina, Felix Solis wines from Spain, Waterloo Brewing from Canada, Landshark Lager from the USA, Marston's beers from England, Edinburgh Gin from Scotland, Tamdhu, Glengoyne and Smokehead single-malt Scotch whiskies, Barcelo Rum from the Dominican Republic, C.K. Mondavi & Family wines including Charles Krug from Napa, Bols Vodka from Amsterdam, Koyle Family Wines from Chile, Pearse Lyons whiskies and gins from Ireland, Niagara Craft Distillers' beverages from Ontario and Fontana di Papa wines from Italy.
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.
For more information, please contact:
J. Murray Souter
President & CEO
Diamond Estates Wines & Spirits Inc.
905.641.1042 Ext 234
Ryan Conte, CPA, CA, CBV
Diamond Estates Wines & Spirits Inc.
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.