Australian Vintage : AVG Half Year 31/12/21 4D & Financials

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Company Announcements

Australian Securities Exchange

23 February 2022

Australian Vintage Limited Appendix 4D & 2022 Interim Result

Australian Vintage Limited has today released its financial statements for the half year ended 31 December 2021. Attached to this announcement are the Appendix 4D and half year financial statements.

For the purpose of ASX Listing Rule 15.5, Australian Vintage Limited confirms that this document has been authorised for release by the Board.

Australian Vintage Ltd

ABN 78 052 179 932

275 Sir Donald Bradman Drive, Cowandilla SA 5033 Australia

www.australianvintage.com.au

For personal use only

ACN 052 179 932

Appendix 4D

For the half-year ended 31 December 2021 (listing rule 4.2)

RESULTS FOR ANNOUNCEMENT TO THE MARKET
Statutory financial metrics		Movement %	Amount
(All comparisons to half-year ended 31 December 2020)			$'000
Total operating revenue	Down	7.0%	138,015
Net profit	Down	24.7%	10,005
Other financial metrics
Net profit before SGARA	Down	17.1%	10,968
SGARA (net of tax)			(963)
Net profit			10,005
Dividend information	Date dividend paid /	Amount per	Amount franked at
	payable	security	30% tax rate
		¢
Interim dividend - half-year ended 31 December 2021	n/a	nil	n/a
Final dividend - year ended 30 June 2021	17 December 2021	2.7	60%
Interim dividend - half-year ended 31 December 2020	n/a	nil	n/a
		2021	2020
		$	$
Net tangible assets per security ^		0.88	0.85

• note: net tangible assets used in the net tangible assets per security calculation for includes right-of-use assets and lease liabilities.

Additional Appendix 4D disclosure requirements can be found in the Financial Report that follows which contains the Director's Report and the 31 December 2021 half-year Financial Statements and accompanying notes.

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Australian Vintage Ltd

Directors' Report

The directors of Australian Vintage Ltd submit herewith the financial report of Australian Vintage Ltd and its subsidiaries for the half-year ended 31 December 2021.

The names of the directors of the company during or since the end of the half-year are:

Richard H. Davis

Craig Garvin

John D. Davies

Naseema Sparks

Peter Perrin

Jiang Yuan

PRINCIPAL ACTIVITIES

The Group's principal activities in the course of the period were the production, marketing and sales of wine.

REVIEW OF OPERATIONS AND FUTURE DEVELOPMENTS

Key financial highlights:

• Net Profit after tax (NPAT) down 25% to $10.0 million.
• EBITS (earnings before tax, interest and SGARA) down $3.6 million to $16.8 million.
• EBIT (Earnings before tax and interest) down $5.0 million to $15.4 million.
• Total Revenue down 7% to $138.0 million.
• Cash flow from operating activities negative $0.8 million due to build-up of working capital and higher logistic and associated costs.
• Sales of our 4 key brands, McGuigan, Tempus Two, Nepenthe and Barossa Valley Wine Company (BVWC) down 1% but overall gross margin up on prior period.
• In line with previous years, no interim dividend declared.

A solid performance in Australian Vintage Limited's (ASX: AVG) Australian and UK businesses considering the higher logistic and associated costs, closure of our Hunter cellar doors for part of the period and the expected decline in SGARA (Self Generating and Regenerating Assets).

Net Profit after tax ('NPAT') for the period ended 31 December 2021 is down 25% to $10.0 million. While underlying business performance has remained strong, additional logistic and associated cost, cellar door closures and reduced SGARA, has negatively impacted NPAT by $4.2 million.

Our 4 pillar brands continue to perform well but we have seen a sales decline in the lower margin McGuigan range of products sold in the United Kingdom. For the last 3 months of the period (to December 2021), the UK wine market has declined by 8% but pleasingly the McGuigan brand has grown 0.5%. We are growing our market share. Overall, our pillar brand sales have declined by 1% but gross margin has improved. During the 6 month period, total sales of the McGuigan brand decreased by 4%, but sales of higher margin Tempus Two increased 20%, and Nepenthe was up 30%. BVWC decreased by 10% but mix improved, resulting in a gross margin that was in line with prior period.

During the half year we increased the investment in our brands with marketing spend up 37% on prior period. For the second half of this financial year, we expect marketing spend to be down by $1.0 million compared to prior period as we utilise the marketing investment from prior periods.

COVID continues to impact our business in terms of logistical issues and closure of our cellar doors. To minimise the potential of being out of stock in the UK and to minimise the impact of delayed shipments to the UK we have built up our finished product stock in the UK. As a result, we have been able to maintain our products on the UK shelves for most of the time although some out of stock has contributed to lost sales. The higher stock levels together with other movements in working capital has meant that our operating cash flow is negative $0.8 million compared to positive $30.9 million in the prior period. For the full year we are expecting cash flow to be around positive $20 million.

The McGuigan Zero range continues its outstanding success and is now the biggest selling non-alcoholic wine sold in the UK. Innovation is an important contributor to the ongoing growth of AVG and over the last 6 months we have been developing a drinks business which will utilise the alcohol that is extracted from the McGuigan Zero product. We are well progressed in developing a range of products from this drinks business which will be on the shelves this calendar year.

SGARA was down $1.5 million on prior period due to frost in one of our vineyards resulting in an estimated loss of 2,400 tonnes, and the expected reduction in red grape prices for the 2022 vintage in Australia. The impact of reduced red grape prices is a timing issue only as there will be margin benefits in future years from lower red wine costs. The reduction in red grape prices is due to reduced demand because of the loss of sales to China.

A more detailed review of AVG's operations including analysis by segment is contained in the press release and presentation released to the ASX on 23 February 2021. We note that these documents contain non-IFRS measures used by management in assessing AVG's performance and have not been audited.

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Australian Vintage Ltd

Directors' Report

INDEPENDENCE DECLARATION BY AUDITOR

The auditor's independence declaration is included on page 4.

ROUNDING OFF OF AMOUNTS

The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors' Report) Instrument 2016/191, dated 24 March 2016, in accordance with that Corporations Instrument amounts in the directors' report and the half-year financial report have been rounded off to the nearest thousand dollars, unless otherwise indicated.

Signed in accordance with a resolution of directors pursuant to section 306(3) of the Corporations Act 2001.

On behalf of the Directors

Richard Davis	Craig Garvin
Chairman	Chief Executive Officer
23 February 2022

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Ernst & Young	Tel: [phone]
121 King William Street	Fax: [phone]
Adelaide SA 5000 Australia	ey.com/au
GPO Box 1271 Adelaide SA 5001

Auditor's Independence Declaration to the Directors of Australian Vintage Limited

As lead auditor for the review of the half-year financial report of Australian Vintage Limited for the half- year ended 31 December 2021, I declare to the best of my knowledge and belief, there have been:

1. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
2. no contraventions of any applicable code of professional conduct in relation to the review.

This declaration is in respect of Australian Vintage Limited and the entities it controlled during the financial period.

Ernst & Young

Mark Phelps

Partner

Adelaide

23 February 2022

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