Australian Vintage’s results are back in the black.
The company has released its half-year result to December 31, 2016, which showed a net profit after tax of $1.6million compared to an after tax loss of $6.1 million in prior period.
The owner of the McGuigan, Tempus Two and Nepenthe brands recorded a net loss of $2million last period, owing to costs associated with the termination of its Del Rios vineyard lease. The surprise Brexit vote also resulting in a $1.1million after tax hit to the bottom line.
However, net profit after tax and before one-off items was down compared to the $3.5million recorded in the prior period. The results were negatively impacted by $2.7million (after tax) as a result of unfavourable exchange rates when compared to prior period. Total revenue was down $10.4million to $119.3million with unfavourable exchange rates accounting for $10.5million of this decline.
Australian Vintage Chairman, Richard Davis, said: “Our branded sales continue to perform well, but the unfavourable exchange rates make it a challenge to translate branded growth into EBIT growth. The company continues to focus on its three key brands, McGuigan, Tempus Two and Nepenthe and
whilst the first six months have been tough we remain confident that our strategy is the correct one.”
Australian Vintage Chief Executive Neil McGuigan added: “Our branded sales continue to perform well with volumes up 3% against market conditions that had seen wine volumes decline. However, due to the unfavourable exchange rates actual branded sales declined. In the UK market, sales volumes of our McGuigan brand grew by 4.3% despite a total wine market decline of 4.1%. Our McGuigan Black Label red remains the biggest selling red wine in Australia.
“Like every other Australian wine business that exports to the UK, the unfavourable movement in the pound has negatively impacted profit. To improve margin from this market we have implemented various strategies which became effective in January 2017.”
The rise of Tempus Two
The star brand in the Australian Vintage portfolio for volume growth was Tempus Two, which was up 21%.
Tempus Two wines took home a slew of awards last year, including Tempus Two 2015 Pewter Series Poppy’s Block Chardonnay winning Cairns Wine Show’s champion wine and best white and Riverina Wine Show’s best wine and best chardonnay; Tempus Two 2016 Copper Rosé Shiraz being the first winner of the Hunter Wine Show’s rosé trophy; and Tempus Two 2014 Pewter Series Hunter Chardonnay being judged the best Australian wine at the China Wine and Spirits Awards in Hong Kong.
The company plans to continue its focus on premium brand growth rather than bulk wine sales.
“Over the last five years sales of AVL’s three key brands, McGuigan, Tempus Two and Nepenthe have almost doubled, as we continue to transition the business from a bulk wine producer to a quality branded bottled wine business,” McGuigan noted last year.
Looking to the US
McGuigan is seeking to grow the US market, following a sales decrease of $0.9million to $56.4million due to reduced sales of low-margin cask wine. Branded sales were in line with the prior period.
“We recently signed a distribution agreement with one of the top US distributors, Palm Bay International. This is a great step forward for this company in continuing to create a truly global footprint for our brands. The US is a hard market to crack and it will take time, but I have great confidence in the quality and depth of the team at Palm Bay. As Palm Bay’s exclusive Australian supplier, we believe we have an exciting future together.”
Improvement on the horizon for Asia
The company said sales to Asia were down against prior period due to timing of orders received from its major distributor.
“Our sales to Asia have declined in the last six months against prior period due to timing,” Davis admitted. “However, our January 2017 sales to Asia were 40% above last year.”
