ADW.B Andrew Peller Ltd

Andrew Peller Limited (TSX:ADW.A / ADW.B) (“APL” or the “Company”) announced today results for the three and twelve months ended March 31, 2024. All amounts are expressed in Canadian dollars unless otherwise stated.

FOURTH QUARTER 2024 HIGHLIGHTS

• Revenue was $85.0 million, up 9.4% compared with $77.7 million in the prior year;
• Gross margin increased to $35.6 million (41.8%) from $22.1 million (28.4%) in Q4 2023;
• EBITA increased to $9.3 million, from ($1.2 million) in Q4 2023; and
• Net loss of $6.9 million ($0.17 per Class A Share), compared with $10.0 million ($0.24 per Class A Share) in Q4 2023.

FISCAL 2024 HIGHLIGHTS:

• Revenue of $385.9 million compared to $382.1 million in the prior year.
• Gross margin was 39.0%, up from 37.1% in the prior year;
• EBITA of $50.3 million, up 32.4% from $38.0 million in the prior year;
• Net loss of $2.9 million ($0.07 per Class A Share), versus $3.4 million ($0.08 per Class A Share) last year; and
• Dividends of $0.0615 per Class A Share and $0.0535 per Class B Share to be paid on July 12, 2024.

“Our 2024 financial results were highlighted by meaningful margin expansion as well as significant growth in EBITA, which reached more than $50 million for the full year,” commented John Peller, President and Chief Executive Officer. “The diversification and breadth of our operations and brands also allowed us to generate solid top-line performance, with healthy growth in our largest channel offsetting a near-term reduction in traffic at our estates and the impact of the previously announced excise exemption repeal. As we look ahead, we believe the business is well positioned to deliver above-category sales performance, combined with further margin expansion and EBITA growth.”

Financial Highlights(Financial Statements and the Company’s Management Discussion and Analysis for the period can be obtained on the Company’s web site at ir.andrewpeller.com)

For the three months and year ended March 31,	Three Months											Year
(in $000 except per share amounts)		2024					2023					2024	2023
Revenue	$ 85,008				$77,712					$ 385,856					$382,140
Gross margin (1)		35,565				22,059					150,602					141,892
Gross margin (% of sales)		41.8%				28.4%					39.0%					37.1%
Selling and administrative expenses(2)		35,794				23,306					109,773					103,880
EBITA (1)		9,251				(1,247)					50,309					38,012
Interest		3,992				2,663					16,964					16,565
Net unrealized loss (gain) on derivative financial instruments		(1,003)				-					641					(380)
Loss on debt extinguishment and financing fees		-				-					2,172					-
Other expense (income), net		(16)				3,030					1,130					3,547
Net loss		(6,943)				(10,009)					(2,852)					(3,352)
Loss per share – Class A	$(0.17)				$(0.24)					$(0.07)					$(0.08)
Loss per share – Class B	$(0.14)				$(0.21)					$(0.06)					$(0.07)
Dividend per share – Class A (annual)										$0.246					$0.246
Dividend per share – Class B (annual)										$0.214					$0.214
Cash provided by operations (after changes in non-cash working capital items)												38,115				13,754
Shareholders’ equity per share												$5.56			$5.87

(1) Please refer to the Company’s MD&A concerning “Non-IFRS Measures” (2) Selling and administrative expenses include $9.5 million relating to the CEO retirement and transition costs. These amounts are added back to calculate the Company’s EBITA.

Financial ReviewRevenue for the three months ended March 31, 2024 increased 9.4% compared to the prior year’s fourth quarter due primarily to the $5.8 million recognized as other revenue relating to the revised Ontario VQA Support Program.

Revenue for the year ended March 31, 2024 increased 1.0% over the prior year. The majority of the Company’s well-established trade channels performed well during the year, particularly provincial liquor stores, restaurants and hospitality locations, as well as sales in the export channel due to the improvement in international travel. This strong performance was offset by softness in sales from the estate wineries due to lower guest traffic and forest fires in the west. In fiscal 2024 there was a $6.3 million reduction in sales resulting from the repeal of the federal excise duty. The Company has implemented price increases to partially offset the excise exemption repeal.

Gross margin as a percentage of sales increased to 41.8% and 39.0% for the three months and year ended March 31, 2024, respectively, from 28.4% and 37.1% in the prior year. Gross margin in the fourth quarter and the fiscal year benefited from the inclusion of the Ontario VQA Support program as described above while continuing to be impacted by inflationary cost pressures in imported wine, glass bottles, packaging materials, and international freight and shipping charges. Management believes these inflationary cost pressures have stabilized. In response to these margin pressures, the Company has implemented price increases and is executing numerous production efficiency and cost savings programs aimed at enhancing operating margins, such as renegotiating freight rates for raw materials and evaluating alternate sourcing for glass bottles and other components. During the 2024 fiscal year, these programs have resulted in $9.3 million of cost savings.

As a percentage of sales, selling and administrative expenses rose to 42.1% and 28.4% for the three months and year ended March 31, 2024, respectively, compared to 30.0% and 27.2% in the prior year. Selling and administrative expenses in the fourth quarter included $6.5 million relating to the previously disclosed retirement allowance and consulting agreements entered into as part of John Peller’s retirement and transition and $3.0 million in legal and advisory fees incurred by certain shareholders in connection with these agreements. Excluding these one-time expenses, selling and administrative expenses would have been 31.0% and 26.0% for the three months and year ended March 31, 2024, respectively

Earnings before interest, amortization, loss on debt extinguishment and financing fees, CEO retirement and transition costs, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes (“EBITA”) (see “Non-IFRS Measures” section of this MD&A) was $9.3 million in the fourth quarter of fiscal 2024, up from a loss of $1.2 million in the fourth quarter of fiscal 2023. EBITA increased to $50.3 million for the year ended March 31, 2024 compared to $38.0 million in the prior year.

Interest expense for the three months and year ended March 31, 2024 increased compared to prior year due to higher average debt levels in fiscal 2024 when compared to prior year. Management believes the new credit facility entered on June 13, 2023 and corresponding interest rate swap will continue to contribute to reductions in the cost of borrowing going forward.

Other expenses (income), net decreased in fiscal 2024 compared to the prior year due primarily to a one-time $2.8 million overhead restructuring initiative completed in the fourth quarter of the prior year.

The Company incurred a net loss of $6.9 million (loss of $0.17 per Class A share) for the fourth quarter of fiscal 2024 compared to a net loss of $10.0 million (loss of $0.24 per Class A share) in the prior year and a net loss of $2.9 million ($0.07 per Class A share) for the year ended March 31, 2024 compared to a net loss of $3.4 million ($0.08 per Class A Share) in the prior year.

Investor Conference CallThe Company will hold a conference call to discuss the results on Wednesday, June 19, 2024 at 10:00 a.m. ET. John Peller, President and CEO and Paul Dubkowski, CFO will host the call, with a question and answer period following management’s presentation.

Conference Call Dial In Details:
Date:	Wednesday, June 19, 2024
Time:	10:00 a.m. (ET)
Dial-in numbers:	Local Toronto / International: (416) 764-8659North American Toll Free: (888) 664-6392Conference ID: 69675274
Webcast:	A live webcast will be available at ir.andrewpeller.com
Replay:	Following the live call, a recording will be available on the Company’s investor relations website at ir.andrewpeller.com

About Andrew Peller Limited        Andrew Peller Limited is one of Canada’s leading producers and marketers of quality wines and craft beverage alcohol products. The Company’s award-winning premium and ultra-premium Vintners’ Quality Alliance brands include Peller Estates, Trius, Thirty Bench, Wayne Gretzky, Sandhill, Red Rooster, Black Hills Estate Winery, Tinhorn Creek Vineyards, Gray Monk Estate Winery, Raven Conspiracy, and Conviction. Complementing these premium brands are a number of popularly priced varietal offerings, wine-based liqueurs, craft ciders, and craft spirits. The Company owns and operates 101 well-positioned independent retail locations in Ontario under The Wine Shop, Wine Country Vintners, and Wine Country Merchants store names. With a focus on serving the needs of all wine consumers, the Company produces and markets premium personal winemaking products through its wholly owned subsidiary, Global Vintners Inc., the recognized leader in personal winemaking products. The Company also operates Andrew Peller Import Agency and The Small Winemaker’s Collection Inc., importers and marketing agents of premium wines from around the world. More information about the Company can be found at ir.andrewpeller.com.

The Company utilizes EBITA (defined as earnings before interest, amortization, loss on debt extinguishment and financing fees, CEO retirement and transition costs, net unrealized gains and losses on derivative financial instruments, other (income) expenses, and income taxes) to measure its financial performance. EBITA is not a recognized measure under IFRS. Management believes that EBITA is a useful supplemental measure to net earnings, as it provides readers with an indication of earnings available for investment prior to debt service, capital expenditures, and income taxes, as well as provides an indication of recurring earnings compared to prior periods. Readers are cautioned that EBITA should not be construed as an alternative to net earnings determined in accordance with IFRS as indicators of the Company’s performance or to cash flows from operating, investing, and financing activities as a measure of liquidity and cash flows. The Company also utilizes gross margin (defined as sales less cost of goods sold, excluding amortization). The Company’s method of calculating EBITA and gross margin may differ from the methods used by other companies and, accordingly, may not be comparable to measures used by other companies.

Andrew Peller Limited common shares trade on the Toronto Stock Exchange (symbols ADW.A and ADW.B).

FORWARD-LOOKING INFORMATIONCertain statements in this news release may contain “forward-looking statements” within the meaning of applicable securities laws including the “safe harbour provisions” of the Securities Act (Ontario) with respect to APL and its subsidiaries. Such statements include, but are not limited to, statements about the growth of the business; its launch of new premium wines and craft beverage alcohol products; sales trends in foreign markets; its supply of domestically grown grapes; and current economic conditions. These statements are subject to certain risks, assumptions, and uncertainties that could cause actual results to differ materially from those included in the forward-looking statements. The words “believe”, “plan”, “intend”, “estimate”, “expect”, or “anticipate”, and similar expressions, as well as future or conditional verbs such as “will”, “should”, “would”, “could”, and similar verbs often identify forward-looking statements. We have based these forward-looking statements on our current views with respect to future events and financial performance. With respect to forward-looking statements contained in this news release, the Company has made assumptions and applied certain factors regarding, among other things: future grape, glass bottle, and wine and spirit prices; its ability to obtain grapes, imported wine, glass, and other raw materials; fluctuations in foreign currency exchange rates; its ability to market products successfully to its anticipated customers; the trade balance within the domestic Canadian and international wine markets; market trends; reliance on key personnel; protection of its intellectual property rights; the economic environment; the regulatory requirements regarding producing, marketing, advertising, and labelling of its products; the regulation of liquor distribution and retailing in Ontario; the application of federal and provincial environmental laws; and the impact of increasing competition.

These forward-looking statements are also subject to the risks and uncertainties discussed in this news release, in the “Risks and Uncertainties” section and elsewhere in the Company’s MD&A and other risks detailed from time to time in the publicly filed disclosure documents of Andrew Peller Limited which are available at www.sedarplus.com. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties, and assumptions which could cause actual results to differ materially from those conclusions, forecasts, or projections anticipated in these forward-looking statements. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. The Company’s forward-looking statements are made only as of the date of this news release, and except as required by applicable law, the Company undertakes no obligation to update or revise these forward-looking statements to reflect new information, future events or circumstances or otherwise.

For more information, please contact:        Paul Dubkowski, CFO and Executive Vice-President, IT(905) 643-4131

Source: Andrew Peller Limited