All You Need To Know About Digital Wine Ventures Limited

Introduction:

Digital Wine Ventures Limited (ASX: DW8) is an early-stage technology company that operates in digital logistic services within the global beverage market. The company has built a platform where from it provides end-to-end supply chain solutions. The company focuses on the distribution across Australian and Asian wine markets. The company acquired an online company named Wine Depot during the financial year of 2019.

Recently, the company announced that Mr. James Walker will join the management committee of Digital Wine Ventures Limited from 30 September 2019. Mr. James has marketing experience of cutting edged technology products across several emerging markets. Mr. James has wide experience in the field of finance, management and analysis, strategic management, etc across several growth companies.

The Management further clarifies that Mr Sam Atkins has resigned from the post of non-executive director of the company with effect from 30 September 2019.

FY19 Financial Highlights: Digital Wine ventures Limited announced its FY19 full year financials for the period ended 30 June 2019,  wherein the company posted total sale of goods at $2,35,262 versus a $2,16,501 in FY18 and reported net loss of $1,655,517 against a loss of $2,108,315 in previous financial year. The company reported a gross loss of $74,188 as compared to a gross profit of $12,797 during FY18. Administrative, consulting and other expenses stood higher at $8,94,599 compared to $5,76,317 in previous financial year. The company reported depreciation expense at $8,407, Advertising and marketing expense at $123,822 and Office and warehouse expense at $88,860 during the year. Salary & wages and Travel expenses stood at $74,024 and $18,966, respectively. The company reported current assets at $942,513 which includes cash balance at $889,285 and Trade and other receivables at $53,228. Plant and equipment and Intangible assets stood at $6,935 and $339,003 respectively. The company reported total equity at $900,118 as on 30 June 2019.

FY19 Financial Results (Source: Company Reports)

Net cash from operating activities stood at -$1,188,822, net cash flow used in investing activities stood at -$47,008 and Net cash from financing activities came in at $1,106,00.

Industry Scenario: The wine market in Australia accounts of producing more than $6 billion worth of wine on yearly basis with more than 2500 plus wineries. Total wine exports stood at $2.76 billion (as per Wine Export Report on June 2018) while more than $750 million is sold to the consumer directly (as per Wine Australia DTC wine volume data). More than $2.2 billion worth of wine is sold to the wholesale level via 2000 plus distributors (as per Liquor Wholesaling in Australia Industry Report on April 2018). Australia imports more than $850 million worth of wine, where 45% of which is imported from New Zealand. However, the logistics service related to wine industry is inefficient, highly fragmented and unable to cater to the growing online consumer base. The primary reasons being greater distances, lack of technology, subscale operations, etc. The area of Australia is huge and due to the nature of product and expensive interstate levies, margins get reduced and it takes more than two days to deliver the product to the end consumers. The entire industry uses age old operating systems and most of the processing is conducted manually making the entire process time-consuming.

Business model: The company has a cloud-based platform with three vertically integrated components namely B2B Marketplace, Order Management System and Logistics solution. The suppliers are connected to manufacturers, distributors, Agents and retailers. The company provides a platform where from it allows B2B transactions, Order management and distributions. With the above three inputs, the company caters large number of retail consumers and traders, trade customers, DTC customers, International customers on a large scale. The company is able to connect with larger number of producers, importers and agents. Trade buyers consist of online retailers, marketplaces, on-premises, independent and traditional retailers. The platform has access to the product range necessary to distribute to the primary customers. Trade buyers are targeted as the secondary customer groups. To develop the above platform, a brief coding is required followed by experienced developer for building the product bases. The products also require extensive, well-structured documents along with high security and authentications. The above business model will facilitate green field opportunities, Business to Business focus, less inventory risks, first mover advantage etc., for the company.

Revenue recognition: The company derives its revenue by charging a commission over the total wholesale proceeds. The company further charges a listing fee from the suppliers on account of listing each product on the platform. There is monthly subscription segment for the company called SAAS fees. Digital Wine ventures derives revenue by providing data related to the industry, data of wine segment as a whole to the research firms. Another way of generating revenue is to charge a logistic fee for storing, warehousing, packaging and delivery from end consumers.

Offerings: The company has collaborated with Australia post in which it will build depots across Brisbane, Sydney, Melbourne and Perth. The company expects the above deal to likely reduce handling costs and delivery time. Overall it is likely to provide an access to more than 57,000 sqm of storage space which includes more than 100 warehouse staff. The company also associated with Wine Storage & Logistics Pty Limited to provide and a specialized central storage and distribution center for inventory management. The company will launch the platform across several potential markets like China, UK, Canada, USA, New Zealand and Singapore.

Capital raising: During the financial year of 2019, the company successfully completed $506,000 capital raising in two tranches.

Management Profile:  Mr. Piers Lewis is the Non-Executive Chairman of the company having more than 20 years of global corporate experience and have the degree of Chartered Accountant. He has worked with top companies like Deloitte, Credit Suisse, Mizuho International and NAB Capital. He joined Digital Wine on 23rd February 2017.

Mr. Dean Taylor holds the position of Executive-Director and Chief Executive Officer and has been appointed on the Board on 1st February 2019. He is an architect and worked on Wine Ark during 2000. Wine Ark is a storage business which manages over $100 million worth of wine and has presence across twelve countries. He has been successfully ventured seven start-up wine companies.

Michael Edwards serves as the non-executive director of the company. He holds the qualification of bachelor’s in business management specializing in Economics and Finance from Curtin University of Technology and bachelor’s in science specializing in Geology from University of Western Australia. He has rich experience in of more than 20 years as Senior Management across private and public sectors. As per the professional exposure, he worked three years in Barclays Australia in corporate finance and eight years in in mining sector as a Geologist.

Acquisition: The company acquired Wine Depot Holding Pty ltd. On 3rd May 2019. The target company provides integrated trading and logistics platform to the end customers. The company operates through a cloud-based technology which provides the data-solutions of warehouse facilities to the suppliers. The Management expects that the above acquisition would aid the business by providing lower freight costs, efficient time management, reducing working capital requirements, higher penetration among the customers, less paperwork, etc.

Stock update: On 20 September 2019, the stock of DW8 closed at $0.007, with no change from its previous close. The stock has a market capital of $6.26 million and total shares outstanding stand at 893.82 million. The 52-week trading range of the company is $0.003 to $0.010. The stock has delivered positive returns of 40% in last three-months and six-months, respectively.


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