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Australian Vintage delivers AU$93 million loss

27 August 2024 By Ron Emler

The extent of the problems facing Australian Vintage over the past 12 months have been laid bare by its financial results.

The company, which recently announced a new board and a revised business plan, delivered a AU$93 million loss in its 2024 financial year, compared with making a AU$4 million profit in 2022/23.

The loss was a result of significant write-downs, including a AU$37.7 million goodwill impairment and a $36.6 million inventory write-down.

During the year to June 30 the owner of the McGuigan and Tempus Two brands, managed a 1% increase in sales to AU$260.6 million with underlying earnings up 25% to AU$13.2 million.

Setting aside the one-off extraordinary charges, its net post-tax profit would have grown by 26% to $5.3 million.

Wine glut

AV, the country’s third largest producer, was not only decimated by the Australian red wine glut and consumers moving upmarket from its commodity brands, but its travails were deepened by the sacking of chief executive Craig Garvin for a ”serious error of misjudgement”.

Now long-time director Peter Perrin, who became CEO on a temporary basis, has been forced to step down because of ill health following the agreement of AV’s revised business plan, after hopes of a merger with Australian Wine Holdings (the new parent of Accolade) were dashed at virtually the last minute.

Perrin is being replaced by hedge fund manager James Williamson, who says he hope to be out of the job within three months when he finds a permanent replacement to steer the group down its newly-defined path to recovery.

That strategy has two key features: increasing stock levels in markets and categories where it is currently uncompetitive due to high discounting rates from competitors; and cutting fixed grape supply contracts and increasing its flexibility of grape sourcing.

That will further intensify the crisis being faced by many of Australia’s grape growers, many of whom are making extensive losses and quitting the sector.

Target

AV has set a target +AU$20 million free cash flow and a return on capital employed of +8% by the end of its 2027 financial year.

“In an environment where the cost of doing business continues to increase, generating cash strengthens AVG’s balance sheet and competitive edge,” it said when launch the strategy to shareholders.

“The market that Australian Vintage operates in is challenged by deep competitor discounting, with AVG identifying a number of revenue growth opportunities within those markets that it is currently not accessing.” the company said.

Australian Vintage has already sold off its Barossa Valley Lyndoch vineyard and prematurely cancelled its lease on the Balranald vineyard in the Riverina.

These actions will “result in a reduction of tax losses and the associated deferred tax asset of AU$10 million.”

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