AVL's pillar brands support profit growth of 29 per cent

Australian Vintage reported growth in market share for its Tempus Two, Nepenthe and Barossa Valley Wine Company brands, helping to lift EBITSDA by 17 per cent to $28.3m and with NPAT reaching 29 per cent higher to $12.9 million when compared to the same time last year.

Total revenue for AVL remained consistent at $137.1m with 77 per cent of that thanks to its pillar brands while margins of 29 per cent continue to be impacted by 'high inflationary pressures, notably sea freight'. AVL says inflation has cost the business an extra $15.2m but expects these costs to ease through the second half of FY23.

At last week's results presentation, Chief Executive, Craig Garvin said, “Our result is in line with our expectations. We have continued to grow market share. We have taken price in all key geographies despite the challenging global environment and the increased competition in Zero in ANZ. Our premiumisation strategy is working with Tempus Two, Nepenthe and the Barossa Valley Wine Company increasing by 2, 22 and 4 per cent respectively, whilst McGuigan has declined by 11 per cent, in line with post Covid declines and our expectations."

Garvin said that the business's marketing spend of $2.2m over the past year has led to 'a strong and exciting innovation pipeline' and that AVL's innovations have contributed positively to the bottom line. The business intends to continue to follow this strategy to build market share across all key markets as well as being open to acquisitions that are complementary to its existing portfolio.

In Australia and NZ, sales via its DTC channels lifted by 25 per cent and the upgraded Nepenthe Cellar Door due for completion at the end of next month is expected to support continuing strong sales performance via this channel.

The leading no- and low-alc producer is set to launch a new range, Not Guilty zero-alc drinks, as a new line of its pillar brands and is also set to launch a mid-range McGuigan in the second half.

In the UK, AVL grew its share in the no and low-alc by 44 per cent and McGuigan Zero continues to be the number one alcohol free still wine brand in the UK. In Ireland, market share for McGuigan grew by 19 per cent.

The sale and leaseback of the Coldridge and Grande Junction vineyards delivered $56.4 million in revenue, $14.7 million in after tax profit lifting the financial result in Australia, and reducing net debt for the company to $53.1 million.

The business is also in the process of clearing its inventory to improve cash flow, particularly in the UK where retailers not stocked up as expected.

Looking ahead, AVL says it expects softer trading conditions driven by inflation, interest rate rises, increasing competitiveness in the no and low-alc categories and 'aggressive Australian export behaviour arising from red wine surplus'.