Australian Vintage shares fall to lowest level since 2010 following $15m equity raising

Australian Vintage Limited's equity raising has brought in $15 million through the issuing and sale of approximately 75 million new shares. As of 2pm on June 13, shares had fallen by more than 45% to a low of $0.188, the lowest level since July 2010.

The initial $15 million of equity raising took place through its Placement and Institutional Entitlement Offer. The third component of Australian Vintage’s equity raising, a Retail Entitlement Offer, is set to open on 18 June with the potential to raise up to $4.9 million. 

According to an announcement to the ASX posted by Australian Vintage this morning, the “Placement received strong demand from a range of existing and new investors,” raising approximately $5.5 million via the sale of 27.5 million new shares each priced at 20c. This Placement is “within its existing placement capacity and does not require shareholder approval.” The Institutional Entitlement offer raised a further $9.5 million via the sale of 47.5 million new shares. 

Australian Vintage said the Placement and Institutional Entitlement shares “are expected to settle on 20 June 2024, with allotment on 21 June 2024 and normal trading on 24 June 2024.”

Today’s update continues on from Australian Vintage’s equity raising announcement, which was descrbied as necessary “to further improve liquidity, reduce leverage and increase balance sheet strength.” The fixed price of 20c per share was 42% cheaper than the value of 34.5c per share at AVG’s last close on 22 May. 

The $19.9 million equity raising was initially announced after Australian Vintage entered into a trading halt at the end of last month shortly after receiving correspondence from Accolade Wines that it was no longer in a position to continue merger discussions. Shortly prior to this, Australian Vintage was also forced to cancel a long-term lease on the Balranald Riverina vineyard seven years ahead of its scheduled expiry date.

Australian Vintage announced it would be pausing share trading 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.

According to Acting CEO Peter Perrin, “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. 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.”

Australian Vintage has also revealed that it has reached an agreement with existing financier NAB to double its debt capacity with the addition of a $15 million short-term debt capacity along with agreeing 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.

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.

“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,” said Perrin. 

“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.”