Australian Vintage, home to wine brands including McGuigan and Tempus Two, has set out a bid to improve its cash-flow and return on capital with changes to its sales strategy.
In recent months, the company has been looking to raise capital and lower its debts, efforts that have included a share offer and asset sales.
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The group has also gone through some significant changes at senior level, with the departure of its CEO and new appointments to its board.
In a statement to the Australian Securities Exchange today (19 August), the Nepenthe wine maker said its new-look board had approved moves to try to boost the company’s free cash flow and return on capital employed over the next three years.
Australian Vintage said it generates around two-thirds of its revenue from “export-related markets” but said where it does business is “challenged by deep competitor discounting”.
Nevertheless, the company said it has identified “a number of revenue growth opportunities within those markets that it is currently not accessing”.
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By GlobalDataAustralian Vintage plans to share more details when the group publishes its full-year results on Friday but said it plans to “invest inventory into markets and categories, without discounting pillar brands, where it currently does not compete due to high competitive discounting”.
The company said the move would “drive revenue and cash-flow growth” but lead to a non-cash impairment of inventory of around A$36m ($24.1m), or around 15% of the value of its inventory.
Meanwhile, Australian Vintage is planning to be more flexible in how it sources grapes, cutting its “fixed grape supply”. The decision will lead to another non-cash impairment of A$5m and “an expected inventory churn of less than one-and-a-half years”.
By the end of its 2027 financial year, the group wants to generate free cash flow of at least A$20m a year and a return on capital employed of at least 8%.
Ahead of the planned publication of the company’s full-year numbers this week, it posted brief details on some of its results.
Revenue rose 1% to A$261m, Australian Vintage said. Underlying EBITS was up 24% at A$13m and underlying NPATS grew 29% to A$5m.
The group said a A$6m increase in its “normalised” free cash flow “provides a strong foundation for the company to achieve its strategic objectives”.
