Australian Vintage has announced its half-year results, with revenue in line with the prior year at $136 million due to challenging market conditions.
AVG Chief Executive Craig Garvin (above) said: “Our result is in line with our expectations. Given the trading environment, and the challenging industry conditions, I am very encouraged we have been able to maintain revenue in line with the prior year and improve earnings in contradiction to industry trends.
“We have achieved margin and underlying earnings improvement as indicated at our AGM. Relentless focus on efficient brand investment, innovation and cost out measures have seen earnings and cash flow improvement.”
Highlights for the company included being the number one alcohol-free still wine brand in markets including the United Kingdom and Australia.
“We are the global leaders in no-and-low with our McGuigan Zero product number 1 in the UK, Ireland, Australia and New Zealand,” Garvin said.
“In APAC our sales of no-low have increased by 15% over the prior year. Our position is supported by our world leading technology and our customer facing innovation. We have launched Mid Strength on shelf in the UK and early signs are encouraging of consumer pull through.”
The company also gave an update on its strategic review, saying it was in the process of executing initiatives to “reset” the business, “however larger transformational opportunities, including potential mergers, are still in very early stages”.
However, it warned that the ongoing Red Sea drone attacks and recent DP World disputes had created significant
disruption to international shipping channels creating a potential earnings risk of $2 million to its full-year result.
UK and Ireland strong for Australian Vintage
The company said changes to UK duty, which is now levied according to the strength, rather than type, of alcohol had worked in its favour.
“In the UK we have leveraged our leadership in alcohol reduction to successfully manage, and benefit from, the government’s introduction of taxation by alcohol volume (Alcohol Duty Reform),” Garvin said.
“We have protected key price points, as well as launched new innovation ahead of the competition, including Not Guilty (alcohol free) and McGuigan Mid (7% mid strength).”
In the 12 weeks leading up to Christmas, McGuigan was the number one still wine brand in UK grocery, according to Kantar, and is the number one alcohol free still wine brand.
In Ireland, McGuigan remains the number one Australian wine brand by a clear margin, with sales growth of 11% over the last year.”
Sales were also encouraging in APAC.
“There has been strong competition in Australia in all segments. Despite this competition Australian Vintage continued to deliver market share growth of 2% versus market -5%,” Garvin said.
“In particular, super premium wines above $15 have grown by 11% year-on-year versus a total market decline of -1%. Our
portfolio strategy is evident with retail scan sales for Tempus Two +7%, Nepenthe +20% and Barossa Valley Wine Company +4% versus prior year.”
The outlook for China
Australian Vintage said it was encouraged by the ongoing dialogue with China and the strong signals that re-ordering may commence in Q4 of its financial year, which it said presents a positive growth opportunity for FY25.
“AVG anticipates China opening in the next three months with the company working closely with existing strong partnerships,” Garvin said.
He said the company was focussed on growing its Asia market, with a focus on Taiwan, Hong Kong, Japan, Malaysia,
Singapore and Thailand.
Cost reductions continue
Australian Vintage said it had an ongoing focus on efficiencies and cost reductions to drive profit and reduce net debt.
“Action has been, and will continue to be, taken to offset persisting inflationary pressures through removing $9 million in annualised costs out of the business, net of inflation,” the company said.
“AVG’s focus on cash flow has generated improvements in operational cash flow and free cash flow, pre assets sales and dividends. Net debt of $68 million was in line with expectations however there is a significant focus on reducing net debt, with net debt expected to be in the range of $43 – $50 million by the end of the financial year, subject to a normal vintage, FX, and agricultural risk.”