Andrew Peller Limited Reports Another Year of Strong Results in Fiscal 2019, Common Share Dividends Increased 4.8%
GRIMSBY, Ontario, June 12, 2019 (GLOBE NEWSWIRE) -- Andrew Peller Limited ADW.A/ADW.B (“APL” or the “Company”) announced solid growth for the year ended March 31, 2019.
FISCAL 2019 HIGHLIGHTS:
- Sales up 4.9% year-to-date due to the acquisitions made in October 2017, new products and solid performance across majority of the Company’s trade channels;
- Gross margin strengthens to 41.6% for year ended March 31, 2019;
- Adjusted EBITA of $58.3 million and adjusted net earnings of $29.4 million;
- Fourth quarter sales were comparable to the fourth quarter of fiscal 2018 while gross margin decreased from 41.1% to 39.2% and Adjusted EBITA increased from $5.7 million to $6.5 million;
- Significant investments in launch of new products, such as Wayne Gretzky No. 99 Rye Lager, and a comprehensive marketing campaign for Peller Family Vineyards to drive future sales growth; and
- Common share dividends increased 4.8%, which will be the seventh consecutive year of dividend increases.
“We are pleased with our results in fiscal 2019 as solid growth across the majority of our trade channels drove another year of strong operating performance,” commented John Peller, Chief Executive Officer. “We are also very pleased to announce a 4.8% increase in common share dividends, a reflection of our confidence in the future and our commitment to enhancing shareholder value over the long term.”
“Fiscal 2019 was a year of significant investment in developing new brands and products, as well as the research and creation of new and comprehensive marketing and media campaigns to support their launch in fiscal 2020,” added Randy Powell, President. “We are confident these investments will generate strong sales growth this year and going forward.”
Continuing Strong Operating and Financial Performance
Sales for the year ended March 31, 2019 increased 4.9% to $381.8 million due primarily to the acquisition of three estate wineries in October 2017 as well as the introduction of new products and solid performance across the majority of the Company’s well established trade channels. Sales during the second half of fiscal 2019 were impacted by increased competition from new low-priced imported wines and market softness primarily in Western Canada. Despite these factors, the Company’s share of the English Canada wine market remained strong and stable at approximately 10.2%, which is comparable to fiscal 2018.
Gross margin as a percentage of sales strengthened in fiscal 2019 to 41.6% from 41.3% in the prior year. Gross margin in fiscal 2019 benefited from the rationalization of lower performing products, an increased focus on higher margin products, and the positive impact of the Company’s cost control initiatives, partially offset by the softer markets in Western Canada and increased competition from new low-priced imported wines, which decreased gross margin in the second half of the year compared to the prior year. On the acquisition of the three wineries in October 2017, the Company recorded an increase of $10.4 million to inventory to represent the fair value of goods acquired from the new wineries. This increase is being expensed over time to the consolidated statement of earnings as finished goods are sold, thus reducing gross margin. For the year ended March 31, 2019 the Company recorded a charge of $5.5 million to cost of goods sold as a result of this adjustment compared to $3.0 million in fiscal 2018. Management is continually focused on enhancing production efficiency and productivity and believes gross margin will strengthen over the long term.
Selling and administrative expenses increased in fiscal 2019 compared to the prior year due to additional expenditures related to compensation to build out the Company’s marketing team, extensive consumer research, large innovation projects and the creation of marketing campaigns for the launch of Peller Family Vineyards and No. 99 Rye Lager in the first quarter of fiscal 2020. Selling and administrative expenses also increased by approximately $1.2 million in fiscal 2019 due to the increase in minimum wage in Ontario. In the fourth quarter of fiscal 2019, selling and administrative expenses decreased significantly compared to the prior year’s fourth quarter due primarily to the Company’s ongoing focus on reducing costs and the realization of synergies on acquisitions. Investments made during fiscal 2019 in sales and marketing are expected to result in increased sales, thus reducing selling and administrative expenses as a percentage of revenues compared to fiscal 2019.
Other income in the third quarter of last year includes a one-time gain of approximately $4.2 million related to one of the acquisitions completed in October 2017.
Earnings before interest, amortization, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes (“EBITA”) were $52.9 million for the year ended March 31, 2019, consistent with the prior year. EBITA in fiscal 2019 was impacted by the increase in selling and administrative expenses and the larger reduction in margin due to the inventory fair value adjustment charged to cost of sales, partially offset by the increase in sales and the improved gross margin. Adjusted EBITA, which excludes from EBITA one-time acquisition related charges, was $58.3 million for the year ended March 31, 2019 compared to $57.2 million in the prior year. For the three months ended March 31, 2019 EBITA increased to $6.6 million from $4.3 million in the same quarter last year due primarily to the decrease in selling and administrative expenses. Adjusted EBITA was $6.5 million in the fourth quarter of fiscal 2019 compared to $5.7 million in the prior year.
Interest expense increased in fiscal 2019 compared to the prior year primarily due to long-term debt incurred to complete the three acquisitions in October 2017. Amortization expense has also increased due to the addition of the three acquired wineries and operational improvements at the Company’s production facilities.
The Company recorded a net unrealized non-cash loss in the fourth quarter and year ended March 31, 2019 of $1.2 million and $1.7 million, respectively, related to mark-to-market adjustments on interest rate swaps and foreign exchange contracts compared to an unrealized net gain of $0.8 million and $1.4 million, respectively, in the comparable prior year periods.
Adjusted earnings, defined as net earnings not including net unrealized gains and losses on derivative financial instruments, other (income) expenses, non-recurring, non-operating (gains) and losses, and the related income tax effect were $29.4 million for the year ended March 31, 2019 compared to $29.3 million in the prior year. For the fourth quarter of fiscal 2019 adjusted net earnings were $1.5 million compared to a loss of $0.9 million in the fourth quarter of fiscal 2018. Net earnings in fiscal 2019 were $22.0 million or $0.51 per Class A Share compared to $30.1 million or $0.71 per Class A Share in the prior year. Net earnings in fiscal 2018 included a one-time gain of approximately $4.2 million related to one of the acquisitions completed in October 2017.
Maintaining a Strong Financial Position
Overall bank debt decreased to $154.8 million at March 31, 2019 from $171.7 million at March 31, 2018 due to cash flows from operations, the positive impact of working capital management, and regularly scheduled debt repayments. With the decrease in debt, the Company’s debt to equity ratio improved to 0.66:1 at March 31, 2019 compared to 0.78:1 at March 31, 2018. At March 31, 2019, the Company had unutilized debt capacity in the amount of $51.8 million on its operating facility and $102.8 million on its investment facility.
Shareholders’ equity as at March 31, 2019 increased to $234.8 million or $5.31 per common share, up from $220.2 million or $4.99 per common share at March 31, 2018. The increase in shareholders’ equity was due to the net earnings in the period partially offset by the payment of dividends.
For the ended March 31, 2019, the Company generated cash from operating activities, after changes in non-cash working capital items, of $49.0 million compared to $21.7 million in the prior year. Investing activities were $23.4 million and relate primarily to capital expenditures to improve operations. In fiscal 2018 the Company invested approximately $77.4 million in the acquisition of three wineries.
Common Share Dividend Increase
On June 12, 2019, the Company’s Board of Directors approved a 4.8% increase in common share dividends for shareholders of record on June 28, 2019 to be paid on July 5, 2019. The annual dividend on Class A Shares was increased to $0.215 per share from $0.205 per share and the dividend on Class B Shares was increased to $0.187 per share from $0.178 per share. The Company has consistently paid common share dividends since 1979 and has increased dividends every year for the past seven years.
Financial Highlights (Unaudited)
(Financial Statements and the Company’s Management Discussion and Analysis for the period can be obtained on the Company’s web site at www.andrewpeller.com)
|For the three months and year ended March 31,||Three Months||Year|
|Gross margin (% of sales)||39.2||%||41.1||%||41.6||%||41.3||%|
|Selling and administrative expenses||24,756||28,532||106,133||97,465|
|Net unrealized loss (gain) on derivative financial instruments||1,168||(833||)||1,679||(1,400||)|
|Other expenses (income)||669||35||1,063||(3,842||)|
|Adjusted net earnings (loss)||1,477||(904||)||29,408||29,303|
|Net earnings (loss)||84||(1,691||)||21,958||30,117|
|Earnings (loss) per share – Class A||$||0.00||$||(0.04||)||$||0.51||$||0.71|
|Earnings (loss) per share – Class B||$||0.00||$||(0.03||)||$||0.44||$||0.62|
|Adjusted earnings (loss) per share – Class A||$||0.03||$||(0.02||)||$||0.68||$||0.69|
|Adjusted earnings (loss) per share – Class B||$||0.03||$||(0.02||)||$||0.59||$||0.60|
|Dividend per share – Class A (annual)||$||0.205||$||0.180|
|Dividend per share – Class B (annual)||$||0.178||$||0.156|
|Cash provided by operations |
(after changes in non-cash working capital items)
|Shareholders’ equity per share||$||5.31||$||4.99|
Investor Conference Call
An investor conference call hosted by John Peller, Chief Executive Officer, Randy Powell, President, and Steve Attridge, CFO and Executive Vice-President, IT, will be held Thursday, June 13, 2019 at 9:30 a.m. ET. The telephone numbers for the conference call are Local/International: (416) 340-2216, North American Toll Free: (800) 273-9672. The telephone numbers to listen to the call after it is completed (Instant Replay) are local/international (905) 694-9451 or North American toll free (800) 408-3053. The Passcode for the Instant Replay is 5106240#. The Instant Replay will be available until midnight, July 13, 2019. The call will also be archived on the Company’s website at www.andrewpeller.com.
About Andrew Peller Limited
Andrew Peller Limited is one of Canada’s leading producers and marketers of quality wines and craft spirits. The Company’s award-winning premium and ultra-premium VQA brands include Peller Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate, Tinhorn Creek, Gray Monk Estates, Raven Conspiracy, and Conviction. Complementing these premium brands are a number of popularly priced varietal offerings, wine based liqueurs, craft ciders, and craft spirits. The Company owns and operates 101 well-positioned independent retail locations in Ontario under The Wine Shop, Wine Country Vintners, and Wine Country Merchants store names. The Company also operates Andrew Peller Import Agency and The Small Winemaker’s Collection Inc., importers and marketing agents of premium wines from around the world. With a focus on serving the needs of all wine consumers, the Company produces and markets premium personal winemaking products through its wholly-owned subsidiary, Global Vintners Inc. (“GVI”), the recognized leader in personal winemaking products. More information about the Company can be found at www.andrewpeller.com.
The Company utilizes EBITA (defined as earnings before interest, amortization, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes) and Adjusted EBITA (defined as EBITA before non-recurring expenses such as acquisition transaction and transition costs) to measure its financial performance. EBITA and Adjusted EBITA are not recognized measures under IFRS. Management believes that EBITA and Adjusted EBITA are useful supplemental measures to net earnings, as these measures provide readers with an indication of earnings available for investment prior to debt service, capital expenditures, and income taxes, as well as provide an indication of recurring earnings compared to prior periods. Readers are cautioned that EBITA and Adjusted EBITA should not be construed as an alternative to net earnings determined in accordance with IFRS as indicators of the Company’s performance or to cash flows from operating, investing, and financing activities as a measure of liquidity and cash flows. The Company also utilizes gross margin (defined as sales less cost of goods sold, excluding amortization) and adjusted earnings. The Company’s method of calculating EBITA, Adjusted EBITA, gross margin, and adjusted earnings may differ from the methods used by other companies and, accordingly, may not be comparable to measures used by other companies.
Andrew Peller Limited common shares trade on the Toronto Stock Exchange (symbols ADW.A and ADW.B).
Certain statements in this news release may contain “forward-looking statements” within the meaning of applicable securities laws including the “safe harbour provisions” of the Securities Act (Ontario) with respect to APL and its subsidiaries. Such statements include, but are not limited to, statements about the growth of the business in light of the Company’s acquisitions; its launch of new premium wines and craft beverage alcohol products; sales trends in foreign markets; its supply of domestically grown grapes; and current economic conditions. These statements are subject to certain risks, assumptions, and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. The words “believe”, “plan”, “intend”, “estimate”, “expect”, or “anticipate”, and similar expressions, as well as future or conditional verbs such as “will”, “should”, “would”, “could”, and similar verbs often identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. With respect to forward-looking statements contained in this news release, the Company has made assumptions and applied certain factors regarding, among other things: future grape, glass bottle, and wine and spirit prices; its ability to obtain grapes, imported wine, glass, and other raw materials; fluctuations in foreign currency exchange rates; its ability to market products successfully to its anticipated customers; the trade balance within the domestic Canadian and international wine markets; market trends; reliance on key personnel; protection of its intellectual property rights; the economic environment; the regulatory requirements regarding producing, marketing, advertising, and labelling of its products; the regulation of liquor distribution and retailing in Ontario; the application of federal and provincial environmental laws; and the impact of increasing competition.
These forward-looking statements are also subject to the risks and uncertainties discussed in this news release, in the “Risks and Uncertainties” section and elsewhere in the Company’s MD&A and other risks detailed from time to time in the publicly filed disclosure documents of Andrew Peller Limited which are available at www.sedar.com. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions which could cause actual results to differ materially from those conclusions, forecasts, or projections anticipated in these forward-looking statements. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. The Company’s forward-looking statements are made only as of the date of this news release, and except as required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new information, future events or circumstances or otherwise.
For more information, please contact:
Mr. Steve Attridge, CFO and Executive Vice-President, IT