The Balmain, Australia-based Australian Vintage Ltd (ASX: AVG) is engaged in production, packaging, commercialisation and distribution of wine under the brand names such as Nepenth, McGuigan Wines, Passion Pop, Tempus Two and Miranda. Its expertise lies in the domains of Bespoke Branded Solutions, Reduced & 0.5% Alcohol Solutions, Bulk Wine Supply, Own Branded Solutions, Contract Processing, Vineyard Management, Contract Packaging and Wine Concentrates.
Interestingly, the Own Branded Solutions offer a provision wherein the customer has the discretion to create and supply the brand while the company takes the responsibility for all aspects of state-of-the-art bottling and logistics including coordination of labels and cartons to customer specifications. The wine price is mutually decided and so is the specification for production.
The products are sold through retail, wholesale, distributor channels and regional outlets across Australia, UK & Ireland, Europe, Asia, New Zealand and the Americas. The Group’s business segments are categorised as UK / Europe, Australasia / North America Packaged as well as bulk wine processing, Cellar Door and Vineyards.
On February 11th, 2019, the company announced that the 2018 half-yearly results for the period ending December 31st, 2018 (H1 FY2019), will be released on Wednesday, February 27th, 2019.
As per the Annual Report for the year ended 30 June 2018, AVG recorded a net profit after tax of $ 7.7 million relative to $ 4.3 million in the previous year, indicating 79% improvement and affirming its robust long-term strategies. The cash flow statement depicted that there were cash outflows from operating activities at $ 26.7 million, up on $ 12.7 million last year, reflecting the highest figure the company has achieved in the past 12 years and five times the average annual operating cash flow since Brian McGuigan Wines and Simeon came together in 2002.
Besides, the three core brands, Nepenthe, McGuigan and Tempus Two were the major contributors towards continued growth during the year. Specifically, the company adopted a sales mix and pricing approach for Europe. McGuigan, third largest global brand (volume) recorded sales growth at 18% in the United Kingdom. Besides, the total UK/Europe sales went up 25% with a simultaneous rise in revenue by $ 5.4 million. Similarly, sales in Asia and North America grew by 9% and 31% respectively. Asian markets are a primary target for AVG, against the backdrop of their wine industry dominated by one major company and the vast potential for increased exports of bulk wine into constituent countries.
However, over the past three years, the demand in the Australian market has slowed down, probably caused by a significant increase in export sales which has increased by 127.5 million litres to 851.6 million litres. Meanwhile, there has been scanty investments in new vineyards due to competing crops such as almonds, table grapes and citrus. Sales to New Zealand recovered from the previous year’s decline and recorded an increase of 7%.
The revenue from Australasia / North America Packaged, concerning supplies to Australia, New Zealand, Asia and North America, stood at $ 107.3 million while the same from UK/ Europe segment stood at $ 111.003 million, both contributing maximally to the total revenue of $ 264.6 million from all segments.
Another noteworthy figure is that of the cash flow from operating activities at $ 26.7 million, up $ 12.7 million on the prior period, resulting from expenditure on capital projects like a new bottling line at the Merbein Packaging facility and also increased expenses incurred at the Buronga Hill Winery.
AVG is listed on the ASX with a market capitalisation of AUD 136.14 million with approximately 280.71 million outstanding shares. The stock is trading at a market price of AUD 0.490, up 1.03% (as at 1:29PM AEST, 13 February 2019). The stock has generated a YTD return of 3.19%.
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