Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Australian Vintage Ltd (ASX:AVG, Financial) achieved a $261 million revenue, marking a 1% growth over the previous year.
- The company grew its underlying EBITDA by 12% and EBITS by 25%, despite a challenging macroeconomic environment.
- The Americas market saw a significant growth of 28% over the prior year, contributing to the company's expansion in emerging markets.
- Australian Vintage Ltd (ASX:AVG) continues to lead in the no-and-low wine category, with a 20% revenue growth in this segment over the prior year.
- The company has secured liquidity through increased bank facilities and a finalized capital raise, providing a buffer against inflation pressures and enabling future investments.
Negative Points
- The share price of Australian Vintage Ltd (ASX:AVG) has collapsed, reaching an all-time low, causing significant concern among shareholders.
- The company experienced a negative free cash flow of $7 million in FY24, excluding capital raise and asset sale.
- There were substantial costs incurred in FY24, including redundancies and strategic review costs, which are not expected to be repeated.
- The company is undergoing a significant transition with a refreshed Board and the departure of the previous CEO, creating potential instability.
- Despite the positive revenue growth, the overall headline growth over the last five years has been just 1%, indicating a slow pace of expansion.
Q & A Highlights
Q: Can you provide an update on the CEO search process?
A: James Williamson, Interim Chairman and Interim CEO, emphasized that appointing a well-credentialed and appropriate CEO is the Board's top priority. The search process is well underway.
Q: How do you plan to achieve the turnaround in free cash flow from negative in FY24 to breakeven in FY25?
A: Adam Rigano, CFO, explained that the turnaround will come from several areas, including non-repeated costs from FY24, a cost-out program that leveraged $9 million, reduced grape supply, and sweating existing inventory. Additionally, they are looking at manufacturing efficiencies and new market opportunities.
Q: Is the improvement in inventory and working capital just a one-off benefit?
A: Adam Rigano clarified that the inventory improvement is not a one-off benefit but an investment to set up for success over the next few years. They plan to use this to drive growth in new markets and reduce grape supply to maintain a positive cash flow.
Q: Can you provide specific revenue and earnings guidance for FY25 and a trading update for the first six weeks?
A: Adam Rigano stated that while they are not providing specific revenue and earnings guidance, they are focused on driving free cash flow and return on capital employed (ROCE). He also mentioned that trading for the first six weeks is in line with their expectations.
Q: What is included in the innovation revenue and margin growth from FY19 to FY24?
A: Jeff Howlett, General Manager - Asia Pacific, explained that the innovation revenue includes premium ranges like Tempus, Nepenthe, and Barossa Valley, as well as new branded growth. These innovations have significantly contributed to their revenue and margin growth.
Q: How has the ABV tax change in the UK impacted your business?
A: Tom Dusseldorp, Chief Marketing Officer, noted that the ABV tax change allowed them to gain deeper alignment with retail partners and grow their margin position. They were able to transition smoothly and even introduced new products like McGuigan Mid, which gained dedicated shelf space in key stores.
Q: Are there any more cost reductions expected on an overhead basis?
A: Adam Rigano confirmed that they are continually looking for cost reduction opportunities within their business and supply chain. They have already implemented significant cost-outs and expect more efficiencies to come.
Q: How do you plan to leverage your assets and know-how for future growth?
A: Tom Dusseldorp highlighted that they are focusing on both core business and new opportunities. They plan to expand their portfolio beyond wine into beverages and new consumer occasions, leveraging their assets and know-how to drive growth.
Q: What are your plans for international expansion?
A: Tom Dusseldorp mentioned that they are focusing on expanding their footprint in markets like Canada and the UK, where they see significant growth potential. They are also exploring opportunities in Asian markets and other new frontiers.
Q: How do you plan to achieve the targeted free cash flow of $20 million by FY27?
A: Adam Rigano explained that they are focusing on multiple strategies, including top-line growth, operational efficiencies, reduced grape supply, and sweating existing inventory. They aim to drive a free cash flow positive position in the near term and achieve their long-term targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
