Andrew Peller Limited (ADW.A / ADW.B) (“APL” or the “Company”)
announced today results for the three months ended June 30, 2023.
FIRST QUARTER FISCAL 2024
HIGHLIGHTS:
- Sales increased 2.8% on solid
growth at provincial liquor stores, restaurants and hospitality
locations, and export;
- Gross margin of 38.8% consistent
with the prior year;
- EBITA of $12.7 million compared to
$12.0 million in the prior year; and
- Net loss of $0.9 million ($0.02 per
Class A Share) due to higher interest costs and one-time expenses
related to closing the Company’s new asset-backed lending
facility.
“We were very encouraged by our first quarter
sales growth following a strong fourth quarter of fiscal 2023 as
the majority of our well-established trade channels performed
well,” commented John Peller, President and Chief Executive
Officer. “Looking ahead, we anticipate improved profitability as we
continue to make progress with our initiatives to reduce costs and
enhance operational efficiency. Additionally, we are
also pleased that the City Council of Port Moody, B.C. gave 4th
reading and approval for the Company’s five-acre development site.
We will now look to market the property and intend to monetize our
investment in due course.”
Sales for the three months ended June 30, 2023
increased 2.8% with solid growth at provincial liquor stores, sales
to restaurants and hospitality locations, and through the Company’s
export business, while sales at estate wineries have moderated
slightly in comparison to increased post-pandemic traffic in the
prior year. The Company’s personal winemaking business has also now
stabilized following softer post-pandemic demand in the prior year.
Additionally, the Company has implemented price increases to
partially offset inflationary pressures, further contributing to an
increase in sales compared to the prior year. In the first quarter
of fiscal 2024 there was a $2.2 million reduction in sales
resulting from the repeal of the federal excise duty exemption.
Gross margin as a percentage of sales was 38.8%
for the three months ended June 30, 2023, consistent with the prior
year. The Company continues to experience inflationary cost
pressures, with the cost of imported wine, glass bottles, packaging
materials, and international freight and shipping charges remaining
above historical levels. However, management believes these
inflationary cost pressures are now stabilizing and should improve
going forward. In response to these margin pressures, the Company
has implemented price increases and is executing numerous
production efficiency and cost savings programs aimed at enhancing
operating margins including renegotiating freight rates for
imported wine and evaluating alternate sourcing for glass bottles
and other components. The Company’s cost of goods sold in the first
quarter of fiscal 2024 included a reduction of $4.7 million related
to a Wine Sector Support Program (“WSSP”) grant provided by
Agriculture Canada as it relates to historical inventory sold
during the period.
As a percentage of sales, selling and
administrative expenses were 26.2% in the first quarter of fiscal
2024, improved from 26.7% in the prior year due primarily to
restructuring initiatives implemented in the fourth quarter of
fiscal 2023.
Earnings before interest, amortization, loss on
debt extinguishment and financing fees net unrealized gains and
losses on derivative financial instruments, other (income)
expenses, and income taxes (“EBITA”) were $12.7 million for the
three months ended June 30, 2023 compared to $12.0 million in the
prior year.
Interest expense for the three months ended June
30, 2023 has increased compared to prior year due to higher average
debt levels and increases in interest rates. Management believes
the new credit facility and corresponding interest rate swap
entered into during the quarter will reduce the cost of borrowing
going forward.
On June 13, 2023, the Company amended and
restated its credit facility. These amendments were determined to
constitute an extinguishment of long-term debt, which resulted in
the de-recognition of the carrying amount of the original credit
facility and the recognition of the restated facility and fair
market value. As a result, the company recorded a loss on
extinguishment of $1.0 million and financing fees of $1.2 million
were expensed immediately.
The Company incurred a net loss of $0.9 million
($0.02 per Class A Share) for the three months ended June 30, 2023
compared to net income of $2.9 million ($0.07 per Class A Share) in
the prior year.
Long-term debt was consistent at $208.3 million
at June 30, 2023 compared to $208.1 million at March 31, 2023. For
the three months ended June 30, 2023, the Company generated cash
from operating activities, after changes in non-cash working
capital items, of $13.7 million compared to $7.3 million in the
prior year. As at June 30, 2023, the Company had unutilized debt
capacity in the amount of $66.7 million on its credit facility.
The Company’s new asset-backed lending facility
is an interest-only facility with principal repayment due upon
maturity and is to be used to fund day-to-day operations,
distributions, capital expenditures and acquisitions. In connection
with the closing June 13, 2023, the Company also entered into an
interest rate swap agreement on $65 million. From June 30, 2023 to
June 13, 2027, the interest rate on this portion of the facility is
fixed at 4.46%, plus the applicable margin, which at June 30, 2023
was 2.50%.
Financial Highlights(Financial
Statements and the Company’s Management Discussion and Analysis for
the period can be obtained on the Company’s web site at
www.ir.andrewpeller.com)
For the three months ended June 30, (in
$000, except per share amounts) |
|
2023 |
|
|
|
2022 |
|
Sales |
$ |
100,481 |
|
|
$ |
97,699 |
|
Gross
margin (1) |
|
39,028 |
|
|
|
38,063 |
|
Gross
margin (% of sales) |
|
38.8 |
% |
|
|
39.0 |
% |
Selling
and administrative expenses |
|
26,328 |
|
|
|
26,092 |
|
EBITA
(1) |
|
12,700 |
|
|
|
11,971 |
|
Interest |
|
4,284 |
|
|
|
2,613 |
|
Net
unrealized loss (gain) on derivative financial instruments |
|
631 |
|
|
|
(492 |
) |
Loss on
debt extinguishment and financing fees |
|
2,172 |
|
|
|
- |
|
Other
expenses |
|
1,217 |
|
|
|
397 |
|
Net
(loss) earnings |
|
(931 |
) |
|
|
2,863 |
|
(Loss)
earnings per share – basic and diluted - Class A |
$ |
(0.02 |
) |
|
$ |
0.07 |
|
(Loss)
earnings per share – basic and diluted - Class B |
$ |
(0.02 |
) |
|
$ |
0.06 |
|
Dividend
per share – Class A (annual) |
$ |
0.246 |
|
|
$ |
0.246 |
|
Dividend
per share – Class B (annual) |
$ |
0.214 |
|
|
$ |
0.214 |
|
Cash
provided by operations (after changes in non-cash working capital
items) |
|
13,747 |
|
|
|
7,331 |
|
Shareholders’ equity per share |
$ |
5.80 |
|
|
$ |
5.87 |
|
(1) Please refer to the Company’s MD&A concerning “Non-IFRS
Measures”
Investor Conference CallAn
investor conference call hosted by John Peller, President and CEO
and Paul Dubkowski, CFO will be held Wednesday August 9, 2023 at
10:00 a.m. ET. To join the conference call please register within
one hour of the start time by accessing
https://emportal.ink/3rdXjRE to receive an instant automated call
back. You will need to enter your name, company, and your
phone number to receive the call back. You can also dial one of the
following numbers to connect through an operator. If connecting
with an operator we advise calling ten to fifteen minutes prior to
the start time: Local/International: (416) 764-8659, North American
Toll Free: (888) 664-6392. The confirmation number for the call is
60742741. The call will be archived on the Company’s website at
www.ir.andrewpeller.com.
About Andrew Peller
Limited Andrew
Peller Limited is one of Canada’s leading producers and marketers
of quality wines and craft beverage alcohol products. The Company’s
award-winning premium and ultra-premium Vintners’ Quality Alliance
brands include Peller Estates, Trius, Thirty Bench, Wayne Gretzky,
Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek
Vineyards, Gray Monk Estate Winery, Raven Conspiracy, and
Conviction. Complementing these premium brands are a number of
popularly priced varietal offerings, wine-based liqueurs, craft
ciders, and craft spirits. The Company owns and operates 101
well-positioned independent retail locations in Ontario under The
Wine Shop, Wine Country Vintners, and Wine Country Merchants store
names. The Company also operates Andrew Peller Import Agency and
The Small Winemaker’s Collection Inc., importers and marketing
agents of premium wines from around the world. With a focus on
serving the needs of all wine consumers, the Company produces and
markets premium personal winemaking products through its wholly
owned subsidiary, Global Vintners Inc., the recognized leader in
personal winemaking products. More information about the Company
can be found at www.ir.andrewpeller.com.
The Company utilizes EBITA (defined as earnings
before interest, amortization, loss on debt extinguishment and
financing fees, net unrealized gains and losses on derivative
financial instruments, other (income) expenses, and income taxes)
to measure its financial performance. EBITA is not a recognized
measure under IFRS. Management believes that EBITA is a useful
supplemental measure to net earnings, as it provides readers with
an indication of earnings available for investment prior to debt
service, capital expenditures, and income taxes, as well as
provides an indication of recurring earnings compared to prior
periods. Readers are cautioned that EBITA should not be construed
as an alternative to net earnings determined in accordance with
IFRS as indicators of the Company’s performance or to cash flows
from operating, investing, and financing activities as a measure of
liquidity and cash flows. The Company also utilizes gross margin
(defined as sales less cost of goods sold, excluding amortization).
The Company’s method of calculating EBITA and gross margin may
differ from the methods used by other companies and, accordingly,
may not be comparable to measures used by other companies.
Andrew Peller Limited common shares trade on the
Toronto Stock Exchange (symbols ADW.A and ADW.B).
FORWARD-LOOKING
INFORMATIONCertain statements in this news release may
contain “forward-looking statements” within the meaning of
applicable securities laws including the “safe harbour provisions”
of the Securities Act (Ontario) with respect to APL and its
subsidiaries. Such statements include, but are not limited to,
statements about the growth of the business; its launch of new
premium wines and craft beverage alcohol products; sales trends in
foreign markets; its supply of domestically grown grapes; and
current economic conditions. These statements are subject to
certain risks, assumptions, and uncertainties that could cause
actual results to differ materially from those included in the
forward-looking statements. The words “believe”, “plan”, “intend”,
“estimate”, “expect”, or “anticipate”, and similar expressions, as
well as future or conditional verbs such as “will”, “should”,
“would”, “could”, and similar verbs often identify forward-looking
statements. We have based these forward-looking statements on our
current views with respect to future events and financial
performance. With respect to forward-looking statements contained
in this news release, the Company has made assumptions and applied
certain factors regarding, among other things: future grape, glass
bottle, and wine and spirit prices; its ability to obtain grapes,
imported wine, glass, and other raw materials; fluctuations in
foreign currency exchange rates; its ability to market products
successfully to its anticipated customers; the trade balance within
the domestic Canadian and international wine markets; market
trends; reliance on key personnel; protection of its intellectual
property rights; the economic environment; the regulatory
requirements regarding producing, marketing, advertising, and
labelling of its products; the regulation of liquor distribution
and retailing in Ontario; the application of federal and provincial
environmental laws; and the impact of increasing competition.
These forward-looking statements are also
subject to the risks and uncertainties discussed in this news
release, in the “Risks and Uncertainties” section and elsewhere in
the Company’s MD&A and other risks detailed from time to time
in the publicly filed disclosure documents of Andrew Peller Limited
which are available at www.sedar.com. Forward-looking statements
are not guarantees of future performance and involve risks,
uncertainties, and assumptions which could cause actual results to
differ materially from those conclusions, forecasts, or projections
anticipated in these forward-looking statements. Because of these
risks, uncertainties and assumptions, you should not place undue
reliance on these forward-looking statements. The Company’s
forward-looking statements are made only as of the date of this
news release, and except as required by applicable law, the Company
undertakes no obligation to update or revise these forward-looking
statements to reflect new information, future events or
circumstances or otherwise.
For more information, please contact:Mr. Paul
Dubkowski, CFO and Executive Vice-President, IT(905) 643-4131
Source: Andrew Peller Limited
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