This morning, Australian Vintage Limited announced a new strategy that it hopes will alleviate current economic pressures over the next three years. The strategy, approved by its newly updated board of directors this morning, is targeting a free cash flow of +$20 million and a Return on Capital Employed of +8% by the end of Financial Year 2027.
“In an environment where the cost of doing business continues to increase, generating cash strengthens AVG’s balance sheet and competitive edge,” said Australian Vintage in an announcement to the ASX.
According to this announcement, the new strategy will feature two key approaches: to increase its stock in markets and categories where it is currently uncompetitive due to high discounting rates from competitors; and to reduce fixed grape supply and increase its flexibility of grape sourcing.
“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,” said Australian Vintage in relation to its first new strategic approach.
Australian Vintage has already started to enact its second strategic approach, having already sold off its Barossa Valley Lyndoch vineyard and prematurely cancelled its lease on the Balranald vineyard in the Riverina.
Australian Vintage believes that the above two actions will “result in a reduction of tax losses and the associated deferred tax asset of $10 million.”
This morning, Australian Vintage also provided an update on its expected performance for the recently completed FY24. This reveals a strong overall performance including 1% total revenue growth and a double digit percentage increase to both its global no/low revenue and to its overall profits across, as recorded by various metrics.
Australian Vintage has also “maintained market share and grown North America by 28%.
“Australian Vintage derives approximately two thirds of its revenue from export related markets. It has maintained and grown market share over the past few years, whilst delivering a strong premiumisation and innovation program, currently representing one third of its margin.”
The new three year growth strategy has been approved by the company’s newly appointed non-executive directors Margaret Zabel and Michael Byrne. James Williamson and Elaine Teh were also appointed to the Board as non-executive directors starting from this Friday 23 August.
“The appointment of Mr Williamson, Ms Teh and Mr Byrne continues the Board renewal process,” said a spokesperson for the Board.
“Mr Williamson will be Interim Chair, Ms Teh represents a key strategic partner to further drive growth across key Asia markets and Mr Byrne brings leadership and technical expertise within the logistics, supply chain and retail sectors.”
Australian Vintage’s new three year strategy and Board renewal mark a continuation of Australian Vintage’s ongoing efforts to restructure the company after it was forced to conduct a $19.9 million equity raising in June. Following this, the value of Australian Vintage shares dropped to their lowest level since 2010. Today, the share price sits at $0.160, well under half of a recent height of $0.435 on 11 April.
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