ADW.B Andrew Peller Ltd

Andrew Peller Limited (TSX: ADW.A / ADW.B) (“APL” or the “Company”) announced today results for the three and six months ended September 30, 2024. All amounts are expressed in Canadian dollars unless otherwise stated.

SECOND QUARTER 2025 HIGHLIGHTS

• Revenue was $109.2 million, up from $100.2 million in the prior year;
• Gross margin of 42.4%, compared with 41.2% in the prior year;
• EBITA increased to $18.0 million, from $15.1 million in Q2 2024; and
• Net earnings of $4.6 million ($0.11 per Class A Share), compared to $5.4 million ($0.13 per Class A Share) in Q2 2024.

YTD 2025 HIGHLIGHTS

• Revenue was $208.7 million, compared with $200.7 million in the prior year;
• Gross margin of 40.5%, consistent with the prior year;
• EBITA increased to $30.8 million, from $27.8 million in the prior year; and
• Net earnings of $4.2 million ($0.10 per Class A Share), compared to $4.5 million ($0.11 per Class A Share) in prior year; and
• Dividend of $0.123 per Class A Share and $0.107 per Class B Share.

“Our Q2 results were highlighted by solid year-over-year growth in revenue and EBITA, led by robust retail store sales and contributions from other key trade channels in the period, which speaks to the breadth of our distribution and the benefits of our diversified operations,” said Paul Dubkowski, Chief Executive Officer. “This allowed us to navigate softness in other channels due largely to reduced consumer discretionary spending in this economic environment. We continue to focus on above-category sales performance by growing our key brands while introducing new products both in our core wine segment and other growth categories. As an example, our healthier-for-you offerings are among the fastest-growing in our lineup. In addition to further innovation, margin expansion and disciplined cash management remain key areas of focus for the team going forward.”

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 and six months ended September 30,	Three months				Six months
(in $000, except per share amounts)		2024		2023		2024		2023
Revenue		109,238		100,175	$ 208,703		$200,656
Gross margin (1)		46,327		41,267		84,506		80,295
Gross margin (% of revenue)		42.4%		41.2%		40.5%		40.0%
Selling and administrative expenses		28,348		26,157		53,668		52,485
EBITA (1)		17,979		15,110		30,838		27,810
Interest		4,319		3,886		8,899		8,170
Net unrealized loss (gain) on derivative financial instruments		1,513		(1,827)		1,731		(1,196)
Loss on debt extinguishment and financing fees		-		-		-		2,172
Other expenses (income)		912		(102)		1,208		1,115
Net earnings		4,560		5,391		4,185		4,460
Earnings per share – Class A basic	$0.11		$0.13		$0.10		$0.11
Earnings per share – Class B basic	$0.10		$0.11		$0.09		$0.09
Dividend per share – Class A					$0.123		$0.123
Dividend per share – Class B					$0.107		$0.107

(1) Please refer to the Company’s MD&A concerning “Non-IFRS Measures”

Financial Review

Revenue for the three months ended September 30, 2024, increased 9.0% over the prior year period due primarily to an increase in the Company’s retail store sales due to the July strike at the LCBO. Several of the Company’s other well-established trade channels also performed well, particularly restaurants and hospitality locations. This was offset by softness in sales from the estates and wine clubs due to lower guest traffic and reduced consumer discretionary spending due to economic conditions. In the second quarter of fiscal 2025, the Company recognized $2.9 million relating to the revised Ontario VQA Support Program announced in December 2023.

For the six months ended September 30, 2024, revenue was $208.7 million, up 4.0% from the prior year. The majority of the Company’s well-established trade channels have performed well on a year-to-date basis, particularly provincial liquor stores, restaurants and hospitality and the Company’s retail stores. This strong performance is offset by softness in sales from the estate wineries and wine clubs. In the six months ending September 30, 2024, the Company recognized $6.1 million relating to the revised Ontario VQA Support Program.

Gross margin as a percentage of revenue increased to 42.4% and 40.5% for the three and six months ended September 30, 2024 respectively from 41.2% and 40.0% in the prior year. Gross margin continues to be impacted by channel mix and inflationary cost pressures in imported wine, glass bottles, packaging materials, and international freight and shipping charges. In response to these margin pressures, the Company has executed numerous production efficiency and cost savings programs including the renegotiation of inbound and outbound freight rates and alternate sourcing for glass bottles.

As a percentage of revenue, selling and administrative expenses improved to 26.0% and 25.7% for the three and six months ended September 30, 2024, respectively, compared to 26.1% and 26.2% in the prior year. Selling and administrative expenses increased due to higher labour and other store related charges incurred by the Company’s retail stores to support increased sales in the second quarter of fiscal 2025.

Earnings before interest, amortization, loss on debt extinguishment and financing fees, 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 $18.0 million in the second quarter of fiscal 2025 compared to $15.1 million in the same prior year period. EBITA increased to $30.8 million for the six months ended September 30, 2024 from $27.8 million in the prior year.

Interest expense for the three and six months ended September 30, 2024 increased from the prior year due to a higher average debt balance and higher interest expense on the Company’s leases.

The Company recorded a net unrealized non-cash loss in the first six months of fiscal 2025 of $1.7 million related to mark-to-market adjustments on interest rate swaps and foreign exchange contracts compared to a gain of $1.2 million in the prior year. The Company has elected not to apply hedge accounting and accordingly the change in fair value of these financial instruments is reflected in the Company’s consolidated statement of earnings each reporting period. These instruments are considered to be effective economic hedges and are expected to mitigate the short-term volatility of changing foreign exchange and interest rates.

In the first six months of fiscal 2025, the Company undertook certain tax planning initiatives as it relates to capital gains with respect to the Port Moody lands. This included transferring the beneficial interest in the land to a newly registered limited partnership. All parties associated with the limited partner are within the consolidated APL group and there has been no legal ownership change. This transaction resulted in an additional current tax expense of $4,000, with an offsetting deferred tax recovery, recorded for the six months ended September 30, 2024.

The Company generated net income of $4.6 million ($0.11 per Class A share) for the second quarter of fiscal 2025 compared to net income of $5.4 million ($0.13 per Class A share) in the prior year and net income of $4.2 million ($0.10 per Class A share) for the six months ended September 30, 2024 compared to net income of $4.5 million ($0.11 per Class A Share) in the prior year.

On July 15, 2024, the Company announced its normal course issuer bid (“NCIB”) had been approved by the Toronto Stock Exchange. Under the issuer bid the Company can purchase for cancellation up to 1,000,000 of its outstanding Class A non-voting shares, representing 2.8% of the Class A shares outstanding at the time, over the ensuing 12 months. The total number of common shares repurchased for cancellation under the NCIB for the six-month period ended September 30, 2024 amounted to 56,800 common shares, at a weighted average price of $3.99 per common share, for a total cash consideration of $0.2 million. 

Investor Conference CallThe Company will hold conference call to discuss the results on Thursday, November 7, 2024 at 10:00 a.m. ET. Paul Dubkowski, CEO, Patrick O’Brien, President and CCO, and Renee Cauchi, VP, Finance and Interim CFO, will host the call, with a question and answer period following management’s presentation.

Conference Call Dial In Details:
Date:	Thursday, November 7, 2024
Time:	10:00 a.m. (ET)
Dial-in numbers:	Local Toronto / International: (437) 900-0527North American Toll Free: (888) 510-2154
Webcast:	A live webcast will be available at ir.andrewpeller.com / https://app.webinar.net/2Bz9QWm5Xxo
Replay:	Following the live call, a recording will be available on the Company’s investor relations website at ir.andrewpeller.com

About Andrew Peller LimitedAndrew 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. 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. 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. More information about the Company can be found at www.ir.andrewpeller.com.

The Company utilizes EBITA (defined as earnings before interest, amortization, loss on debt extinguishment and financing fees, 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.sedar.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:Craig Armitage and Jennifer Smithir@andrewpeller.com

Source: Andrew Peller Limited