Australian Vintage announces $19.9m capital raise with heavily discounted shares

Australian Vintage Limited has announced a planned equity raising of up to $19.9 million “to further improve liquidity, reduce leverage and increase balance sheet strength.” 

The equity raising will be conducted at a fixed price of 20c per new share, 42% cheaper than the value of 34.5c per share at AVG's last close on 22 May. 

Australian Vintage entered into a trading halt at the end of May after reporting that its net debt as of 30 June was expected to be around $70-$75 million, significantly higher than the forecasted $43-$50 million.

“The current cycle is proving to be one of the most challenging on record for the Australian wine industry and this is reflected in our expected financial performance for FY24,” said Peter Perrin, Acting CEO. 

“The capital structures initiatives announced today are designed to provide more adequate levels of liquidity and financial flexibility to navigate the volatile conditions and enable the business to capitalise on future opportunities, including potential consolidation.”

The $19.9 million equity raising will comprise of a $5.5 million institutional placement, a $9.5 million 2 for 7 accelerated non-renounceable entitlement officer, and a $4.9 million 2 for 7 non-renounceable entitlement offer. Australian Vintage’s ASX announcement says “the Equity Raising is not underwritten and there is no guarantee that it will be fully subscribed.”

Peter Perrin said, “in the face of these sectoral headwinds, we are growing market share in our key markets, introducing considered innovations and improving our underlying earnings performance.

“While there are encouraging signs that the oversupply of red grape varietals is easing, consistent with prior cycles, we expect the market will take time to rebalance, and trading conditions are likely to remain challenging in the interim.”

Australian Vintage’s ASX announcement also indicated that it had reached an agreement with existing financier NAB to double its debt capacity with the addition of a $15 million short-term debt capacity. It has also agreed upon a four month extension of its existing $15 million debt capacity. 

“We are grateful for the support of shareholders and our financier NAB and are committed to the disciplined execution of our Strategic Plan,” said Perrin.

Australian Vintage’s ASX Announcement also revealed that Richard Davis will retire from the Board at the completion of the Equity Raising, at which point in times John Davies will be appointed as Interim Chair.

“On behalf of the entire Board and Executive Committee, I would like to thank Richard for his dedication and service to the company over more than 15 years,” said Perrin.

“He has made an invaluable contribution and will be missed.”

Australian Vintage suspended share trading shortly after receiving correspondence from Accolade Wines stating it was no longer in a position to continue merger discussions. The trading halt also followed on from the cancellation of its long-term lease on the Balranald Riverina vineyard seven years ahead of its scheduled expiry date.

Despite its current difficult positioning, Australian Vintage remains the category leader in targeted product innovation, with 37% of its total margin earned through products that didn't exist five years ago. This includes its mid-strength McGuigan Mid range of 7% abv wines.

Australian Vintage also revealed to the ASX that it experienced strong sales growth in the UK market in May, providing some hope for growth in the near future.