Australian Vintage

Australian Vintage profits up 35%

August 26, 2020
By Alana House

Australian Vintage Ltd (AVL) has announced its net profit rose 35% in FY20 to $11million.

Among the highlights were sales of the McGuigan brand growing by 3% and Tempus Two growing by 42%.

The winemaker also described its UK performance as “exceptional”, with sales volumes up against an industry trend that is showing total Australian wine sales to the UK declining by 2%.

In the UK, sales of the McGuigan brand increased by 13% “through an improved mix of sales, volume increases and targeted marketing”.

Sales of our higher priced McGuigan Black Label and Reserve ranges increased by 23%. The Tempus Two brand has also performed well in the UK, with sales up 34% from a low base.

The company said it will continue to invest in the UK market with increased marketing spend planned for FY21 and a strong Tempus Two campaign seeing the introduction of new ranging in major retail.

Tempus Two Distinctively Bold campaign

Despite the on-premise and cellar door segments declining due to COVID-19, the Australian business delivered a profit result 18% up on one year ago.

AVL noted: “The combination of consumer focus with retail partners, innovation and strong cost control all contributed to the positive result in very challenging circumstances.”

It was a less positive result in Asia and the US. Asia sales were significantly down 40%, resulting in a decline in EBIT of $1.9 million.

AVL said: “The company does not expect significant sales to mainland China over the coming six to twelve months as the new management at our major distributor continue to focus on reducing working capital. In the long term we believe that our strategies will result in sales growth.”

Australian Vintage has also been listed as an exporter in the application initiating China’s recent anti-dumping investigation into Australian wine exports, and said it would co-operate fully while remaining committed to the China market as part of its long term strategy and did not see the probe as a risk to its earnings.

The company has addressed its marketplace strategy in North America and expects improvements in sales following a “disappointing decline” of 18%.

“Canada and United States remain challenging markets for Australian wines with total Australian volume sales to Canada down 18%,” AVL added. “North America EBIT contribution was down $1million.”

Chief Executive Craig Garvin, said: “This strong performance underlines the strengths of our brands, and the ongoing transformation of our business. Especially in a year which was not without its challenges. We are well advanced in our plans to grow our brands and our business over the coming 12 months.

“Our Asian and North American markets have been underperforming and have not been consumer focussed. We have taken the necessary corrective action which makes the 2020 result all the more positive. The team has worked hard on setting up our business for strong growth in our portfolio which is a key focus moving forward.

“We are very aware of offsetting the risks this business faced and now move to a branded portfolio strategy. The performance of our operations has been particularly pleasing. Despite the industry suffering declines in grape production across the total Australian wine sector, AVL has been able to improve its yield. This combined with our excellent assets sets up well when combined with our portfolio approach.

“A complete review of the leadership group and strategy has been completed and the necessary changes made. I am confident of a stronger return on investment in line with market expectations moving forward.”

AVL’s future strategy

Going forward, AVL said its focus will be on investing in its key brands, McGuigan, Tempus Two and Nepenthe.

“We will also be investing in our next pillar brand, Barossa Valley Wine Company,” the company said.

Barossa Valley Wine Company was established in 2001. Its home is The Farms, which sits in the cooler southern region of the Barossa Valley, not far from the small hamlet of Lyndoch.

The company is also planning a major redevelopment of its Nepenthe Cellar Door in the Adelaide Hills.

Australian Vintage CEO Neil McGuigan announces his resignation

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