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AV pushes brands over bulk

Australian Vintage has reported a 16% rise in total revenue in its half year results, boosted by a double digit increase in sales of its branded wines.

Sales of its McGuigan, Tempus Two and Nepenthe brands rose by 19% in the six months to 31 December with total net profits rising to AUS$4.4m from $4m the previous period. Total revenue was up 16% to $121.7m versus $104.8m the previous period, driven by strong sales of the company’s branded wine in the UK and Europe, Australasia and North America. The final sale of the company’s Yaldarra Winery for $15.5m meanwhile generated a tax profit of $6.2m.

UK and Europe sales were up 20% due to increased sales of the McGuigan brand which were up 28%. Within Australasia and North America every division recorded an increase in sales with New Zealand seeing the biggest rise of 42%.

Australian Vintage chief executive Neil McGuigan said: “The continued growth of our three key brands is very encouraging. However, due to the higher cost of our 2014 vintage and some large bulk wine sales, the improved sales did not directly translate into improved margin dollars. Our branded business continues to grow and what is really pleasing is the continued growth of all out three key brands. Mcguigan, Tempus Two and Nepenth increased sales by 19% and these brands now make up 60% of our total wine sales. in comparison for the six month period to December 2010, the sales of these brands made up 39% of total wine sales.”

Australian Vintage chairman, Ian Ferrier, said the continued growth of the company’s three key brands was “very pleasing” adding that the company’s strategy of growing its export business, increasing branded sales and controlling costs was the “correct strategy”.

He added that the expiration of a number of “above market priced grower contracts” between 2016 and 2018 would help bring in extra cash flow of $6.5m a year.

“The expectation is that these growers will be replaced with fair market priced contracts”, he said. “Whilst the accounting benefits will take some time to flow through, the cash benefits will be immediate. Based on contracts that expire from 2016 to 2018 and using the average weighted 2014 grape prices, the expected cash flow benefit is $6.5 million per annum.”

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