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Good morning, my name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the Andrew Peller Limited Fourth Quarter and Year-End Results Conference Call. [Operator Instructions].
I will now turn the call over to David Mills. Please go ahead, Mr. Mills.
Thank you and good morning everyone. Before we begin, this is a reminder that during this conference call, management may make statements containing forward-looking information. This forward-looking information is based on a number of assumptions and is subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those disclosed or implied. Please refer to our earnings release, MD&A and other securities filings for additional information about these assumptions, risks and uncertainties.
And I'll turn things over to Mr. John Peller, Chief Executive Officer.
Thank you, David. And good morning, everyone. Great to be with you. And obviously we've released our results last evening and I'm looking-forward to discussing with you all the things that are going on in our company.
I think I'd like to start by just reviewing with you where I've always presented to you as three kind of phases of COVID that we've gone through in the first year fiscal '21. We were actually incredibly surprised that despite all the business closures, we actually accelerated revenue and earnings in that first year.
And then the second year, as the second wave came through and with the impact of significant Estate Winery in retail or restaurant closures, we had a significant 5%, 6% revenue drop that - and the beginning of cost increases that had our revenue come down as I said, but - and our EBITDA fell to $39 million in that year, but largely as a result of revenue reduction.
And this last year that we've just completed, our revenue has returned back up to its normal level. We had a good revenue performance of 2.5% increase and our EBITDA has stayed flat. And while that may be modest in terms of its appearance from a managerial perspective, it was a very significant achievement and that's what I'm going to explain to you now.
Without a doubt the most difficult part of those three years has been this last year where we had total disruption in our supply chain. The whole issue of inflation and supply chain disruption was very different depending what industry that you were in. But for us, we are a global supply chain of import wine glass and packaging components. We definitely took the teeth of that disruption. And I'd like to explain on just a wine liquid perspective, the costs that we were purchasing the wine around the world was up in double-digits. But it was the least impactful. Our freight costs in one year went up over 200%. Some $10 million last year.
Our glass in packaging components went up $20 million, which is a 50% increase. And that's compared to no year in the last 20 years do we ever recall any of those costs going up 5%. So you can see that they were extraordinary increases.
Due to the incredible hard work and effort of our management team, we were able to offset over 50% of that impact with pricing, sales of more premium priced products and cost saving projects so that we were successful. And I know we were successful because I have a very close network with the people we compete within our industry here in Canada and in California, and all those other companies that I've spoken with have said they shared much worse than us.
And what all this means is, as we look-ahead is already all those costs are coming down. And they are coming down at a very good pace. Although there is some stickiness in a few areas. What I have to do today in terms of managing your expectations, this help you understand that all those high costs that we had impacted us last year are now in our inventory. And they will come out of our inventory at their high costs over the next six to nine months. And already we are purchasing at lower-cost levels so that we have a high-level of confidence that those margins are coming down and that we would expect to get to our what we would call more normal margins within two years. As I said, I am proud of the achievement of our team.
In addition to those efforts and they are most significant managerial focus is cost reduction. We've had other profit improvement initiatives. Our overhead and SG&A has come down over $5 million, which you would have seen in the one-time write-off of $2.8 million in the fourth quarter. And we have cost-saving projects going at every aspect of our business from IT, hospitality, marketing and sales, so the team remains focused and committed to further cost reductions.
Looking at our sales numbers. Last year's effort of plus 2.5% was a solid performance. We would have been up as much as 4% last year, but we were supply constrained in the first two quarters. And already in our first quarter of this year with only two weeks left, we anticipate our revenue will be up 3%, which if you compare it to the base of last year would be plus 5%, because this year we are now paying excise tax, whereas in the year prior, we weren't.
So it's a very good performance. By comments on sales in the market today is that certainly we're seeing the impact of inflation on consumers as they struggled to meet their grocery bills. Certainly all those sales of hard goods in the consumer markets are down considerably. Our sales remained solid. And having said that, there is a clear preference for value priced markets or products - value priced products in the retail store system, so that's the LCBOs, our wine shop stores, independent retail stores across the country and that restaurants as well. So value priced products are performing more strongly. Premium are little soft, although our premium products are selling well in our state wineries in the destination tourism areas.
As part of our company's strengthen those value products, $9 to $12 price, 750 bottles, our Peller Family Series brand is market-leader. But this year, we've also launched imported products in that segment. From Chile and Argentina, we have a brand called [indiscernible] that's been in the market two years. It's performing extremely well. We've launched the an Australian product called Natural Selection.
In California, product called Neon post also doing extremely well. We have a new product that we've launched called Honest Lot, which is zero grams sugar and we are very, very pleased with that set launch and it's growing very nicely.
Additionally, we launched the line extension ice storm vodka to our Gretzky spirit line, it's had a very, very successful first year in the market and our No Boats Cider, which is a premium position Cider, is performing very well. On the whole, we're very happy with our marketing and sales performance. And we're looking-forward to the rest of the year.
Another key initiative though I want to draw your attention, which we announced was our asset-backed loan facility. This was part of an initiative that when I went to talk to my friends and competitors in California, it was made clear to me that everybody in the California wine industry has an asset-backed loan facility as opposed to a term-loan that has a EBITDA covenant. Because it recognizes all the asset values that are critical component to the wine business model.
So when you look at our current share price now, we're trading below our netbook value. And if you now adjust for the valuations the banks have put on our assets, that share prices less than double the value of those fixed assets or more than double the price of the current share price. And that does not include to our brands, which are by far our most valuable assets.
Now I'm anxious to highlight our asset-backed loan facility. First of all, we get an immediate cash savings of $5 million to $6 million annually, because of our lower interest rates. And secondly demonstrates the strength and sustainability of our balance sheet, which also is critical to our being able to grow through mergers and acquisitions going-forward.
As part of our cash management, we've also managed our CapEx down and to conserve cash-in the short-term, as we watch ourselves emerge from this sustain economy. Last item I want to highlight is just our Port Moody property in British Columbia. Many of you know, we are in the process of monetizing the value of a non-core asset.
Indeed, we are in the final stages of crystallizing our entitlements. We have a date of either June the 27 or July the 11. We've filed for our development permit, all the filings and they are considerable for a development permit, all those filings are now complete. The city has indicated that they're pleased with what we've put forward.
So this will allow us to receive our fourth file approval on either of those two date. And it will crystallize the entitlements and the significant increase in value of that property from its prezoned value.
As I've said in past calls, we realize that we are not a developer. And our goal is to maximize the value, monetize the value of the property and pay-down debt. The Vancouver market for condos and rental apartments is the strongest in the country. It is grossly under-served in terms of a demand perspective. You may have read in the globe, a week or two ago, that the premier is so concerned about the lack of supply for condos and apartments and rental apartments that they shamed several communities and at the top of the list was Port Moody for under-delivering to their commitments. I think that will bode very positively for us going-forward and the potential for increase entitlements.
The interest rates are very high, as you know for people buying houses and condos. So in the short-term, the market is a little soft, but the long term i.e. more than one year demand looks very, very strong, there's also inflation in construction costs in that market. They have more than doubled and while they anticipated them to have come down by now. In fact, they've picked-up a little, which is to say that there is some short-term noise in this market, but the medium-to-long term market for our property and its amenities is very, very strong.
So with that, operator, I'm a prepared to pass over to you Paul for some comments on the financial statements.
Thanks, John. I'm happy to be here with everyone today.
Turning to our results. Sales in the fourth quarter of fiscal 2023 decreased $1.1 million or 1.4% to $77.7 million. This decrease was driven by a $1.4 million revenue impact related to the repeal of the federal excise exemption. Excluding this impact, sales for the fourth quarter would have been up slightly to the prior year.
The new Wine sector support program which was introduced in fiscal 2023, as the excise exemption ended, is accounted for as a reduction of cost-of-goods-sold, and does not flow-through sales. For the full-year fiscal 2023, sales increased $8.2 million or 2.2% to $382.1 million. As noted previously, sales was reduced by $1.4 million due to the repeal of the excise exemption program.
The increases in sales for the year were driven by growth across the majority of our trade channels including restaurant hospitality, retail, export and our estate wineries. A number of positive factors supported this growth including price increases implemented throughout the fiscal period to help offset ongoing inflation and supply chain pressures and increased sales of our premium higher margin VQA products to our Ontario retail network at our state wineries and through our direct-to-consumer wine clubs.
Growth in our key trade channels was partially offset by the underperformance of our personal winemaking business which is experiencing softer post pandemic demand and distribution. As John mentioned, sales growth in fiscal 2023 was impacted by ongoing supply chain issues throughout the majority of the year. While our supply chain has largely normal normalized now, we continue to closely manage the timely delivery of wines from international producers and the sourcing of glass bottles and other input components from our suppliers. To help us meet demand in fiscal 2023, we had to source liquid and other components from domestic and international suppliers at higher cost.
Moving to margins. Margin in the fourth quarter of fiscal 2023 landed at $22.1 million, down $1.0 million or 4.2% to the prior year. For the full year margin landed at $141.9 million, up $2.9 million or 2.1% to the prior year. Margin as a percentage of sales for the full year fiscal 2023 was 37.1%, relatively consistent with the prior year of 37.2%. Margin in the quarter and year-to-date was supported by the company's recognition and accounting of the Wine Sector Support Program benefit as described in our financial statements and MD&A.
Margin in the fourth quarter and for the full year fiscal 2023 period was affected by higher-than-normal cost of raw materials, particularly glass bottles and packaging with international freight shipping charges in fuel surcharges remaining well above historical levels for the majority of the year. Additionally, sourcing certain inputs from alternative suppliers has increased our production cost.
In response to these margin pressures, as John mentioned, the company has implemented price increases throughout fiscal 2023, and is focusing on increasing sales of higher-margin products. In addition, the company is executing numerous production efficiency and savings programs aimed at enhancing operating margins, including rationalizing stock keeping units, evaluating alternative sourcing of imported wine in glass bottles and optimizing our logistics and freight.
As John mentioned in his remarks, we are confident that our cost-savings initiatives will drive further recovery of our margin in fiscal 2024 with full recovery back to normal levels in the next few years, as it will take time for cost reductions to work their way through our system. Sales and admin expenses landed at $23.3 million for the quarter, up $0.4 million or 1.6% to the prior year and at $103.9 million, up $4.1 million or 3.9% to the prior year for the 12 months ended March 31.
As a percentage of sales, expenses were 27.2% in fiscal 2023, up marginally from 26.7% in the prior year. Sales and admin expenses have increased this year as the Ontario minimum wage increase took effect, as we returned to full operations at our Estates post-pandemic.
EBITDA landed at negative $1.2 million and positive $38 million for the three and 12 months ended March 31 compared to negative $0.6 million and positive $39.2 million respectively last year. Interest expense was higher for the year due to increased debt levels and higher interest rates. I'll have more to say about this in the balance sheet section when I discuss our new credit facility.
We also incurred $2.8 million in one-time costs related to overhead cost restructuring initiatives completed in the fourth quarter. We will realize the savings from this restructuring in fiscal 2024 and going forward.
As a result of the inflationary impact on margins, increased interest expense and the one-time restructuring costs in the fourth quarter, we incurred a net loss of $3.4 million or $0.08 per Class A share for the year. This compares to earnings of $12.5 million or $0.29 per Class A share in fiscal 2022. It should be noted that in fiscal 2022 second quarter, we did recognize a realized gain of $7.5 million or $0.21 per share on the sale of Port Coquitlam BC property and assets.
Turning to our balance sheet, total debt increased to $208 million from $192.1 million at the end of fiscal 2022. At March 31, 2023 with capacity on our revolving credit facility of approximately $141.9 million with shareholders' equity standing at $5.87 per Class A share.
Subsequent to year-end, on June 13, we announced the company had entered into a $275 million asset backed lending credit facility effective June 13, 2023, maturing on June 13, 2027. The credit facility replaces the company's existing credit facility entered into on December 08, 2020 and will result in significant interest savings for the company at comparative debt levels using interest rates today on an annualized basis, we anticipate $5 million to $6 million in interest savings under the new facility. These savings estimates are subject to change based on debt levels and interest rate movement and are reflective of the annual savings as of today not what would be accounted for in the financial statements.
Thank you for time this morning, and I'll now pass it back to John.
So thank you very much, Paul.
You know, kind of in summary, we're aware that there's kind of considerable instability in the economy these days, that's going to continue for a year or so. But notwithstanding that the overall sales of our company's products remains strong.
As many years I've highlighted to you all that if you go back in the last 25 years to the fourth recessions we've gone through, we've always emerged from every recession, a stronger, more capable company, and that will be the case again this time around.
Our costs as we've explained, though they were high in our inventory valuations currently come out over the next six to nine months. And we're confident we'll return to normal margins within the next two years. As we see the recession kind of pass going forward, we're going to be in a very strong position from a mergers and acquisition point to participate in many opportunities that are out there.
I wanted just to - on a final note kind of draw your attention that the Niagara region will be issuing an economic development report in the next two weeks that was produced by Deloitte. It required the participation of all the economic stakeholders of the Niagara region certainly including growers and wineries, but also all the hotel hospitality and tourism providers, all the cultural industries of the region. It included all the housing developers, all 16 mayors, of the Niagara region participated with their economic development people along with the universities and colleges and the transportation infrastructure providers to the region.
In other words, it was every stakeholder in the economy of the Niagara region. The report will highlight the fact that there is an incredible opportunity for economic growth in the Niagara region. And the opportunity is in all those aspects of the economy that I just reviewed, but it identifies the role that wine industry plays as a catalyst for this economic growth.
We hosted an event at the Gretzky State facility. It was attended broadly by 90 stakeholders of the region. It included senior people from government and everybody is excited with the opportunities to grow. When we look at British Columbia with a population of 4.5 million it supports two international travel destinations, Whistler to Kelowna, In fact, Kelowna is the fastest growing city in Canada these days. It's hospitality and tourism business is strong. There's been multiple billion dollars of investment into that industry over the last five years.
That was standing the fact that the Okanagan Valley is about a four-hour drive from Vancouver and a six to eight hour drive from Edmonton and Calgary. Looking at Ontario in the Niagara region, we have a 16 million population that's about to grow to 20 over the next decade or so within an hour or two hour drive of our wine region. And when you extend that into the U. S. the population goes up to 30 million to 40 million within a short drive.
The government has recognized now that as a province we've grossly underdeveloped our hospitality and tourism industries, and they're working to see how they can help support capital investment and growth in our region. Along with the housing developers, the Beamsville, Vineland, Pellam, St. David's Niagara on the Lake, these are all very compelling communities that people want to live in largely because of their proximity to the wine region. So we're excited about that. You'll see this economic report be published shortly and I think it authors very, very well for our industry in the region.
With that operator, we're ready to poll for questions.
[Operator Instructions] Your first question comes from Nick Corcoran from Acumen Capital. Please go ahead.
Good morning, guys. I have few questions for me. The first is how are your brands performing relative to the industry?
I'm sorry Nick. Could you repeat that?
Yes. How are your brands performing relative to the industry?
Yes, we've had a strong year for brand performance. We've gained share in the wine industry in every region. I think we were a little short in BC on the VQA side because of a short crop from the year earlier. But nationally, our market share and brand performance has been very, very strong and positive.
Great. And then you mentioned restructuring cost of $2.8 million in the fourth quarter. What do you expect the annual savings from that today?
I mean, I'll let Paul add on to it, but my -- that was part of the $5 million cost-savings initiative. And the [technical difficulty] restructuring costs associated with that. That program is continuing going forward. That was it's first initiative and we have facilitated projects in every segment and function of our business now to increase our savings going forward. Do you want to add to that Paul?
No, I think you captured it, John. I think that that was a one-time expense in Q4 and a more significant expense to incur that restructuring and I think John highlighted the savings, but there are broader savings initiatives across the organization just to ensure that we're maintaining kind of smart spend within the business as we fight back against these inflationary pressures.
And with the first quarter almost done, how is traffic and booking being kind of with this fiscal year-to-date?
I would say what we're seeing that's somewhat of a change is a much stronger performance at retail. And as I said before, to even more strong in value products. The estate wineries are very, very busy as well. And having said that they've grown in each of the last - this plus 25%, plus 30% which is like growth far, far beyond anything we've ever contemplated. It reflected the fact that people were anxious to get out tour and travel and they didn't necessarily want travel beyond the Canadian borders.
So, I mean, this is, like, way beyond where we were - revenue levels beyond where we were in '20 and '21 where we're at right now. There's a little bit of softness in the 5% range first month that we think reflects that people are still being cautious with their spending a bit, but overall the retail performance, restaurant performance, our export business is up nicely. Our kit business is stabilized showing potential to grow this year. So we really have good performance in all our trade channels.
And have you seen a recovery in the export business particularly the duty free.
What I would say there is that we've recovered in and around, say, the 60% level of those sales – 60% to 70%. Interestingly, a lot of our recovery has become - is coming from other products other than ice wine and travel - and on airlines as well we've done well, the component that is missing is Chinese destination travelers, there are a lot of consumer discretionary and retailers hoping that that the Chinese travelers will return.
I would say that from what their normal level was two or three years ago, they're coming - they're traveling in at about 10% to 15% of what they used to travel. So the good story is there, we've done much better building new business in travel, retail and export. And we expect that Chinese travel business to come back. We've actually opened up an e-commerce trade channel in China that's doing very well as a business start-up. So that our performance has been good and should get much better as that travel patterns come back to normal.
Good. And then you mentioned that revenues expect to up grow 3% in the first quarter. Can you give any indication what you're targeting for the full year?
At this point in time, we obviously do have a budgeted plan, you know, to come in in the 2% to 3% level. And we're kind of used to having significant fluctuations throughout the last three years. It feels to me like things are coming back at a more normal kind of shopping basis as people are aware that the economy is as I said and stable at this point in time. But our segment is performing very well. So we're optimistic we'll hit those targets.
Good. And then one last question from me. With the fourth By-Law reading for Port Moody, have you had any more advanced conversations to monetize on that front?
I mean, we're speaking obviously to people in the market. Our project represents a very, very large scale project so that you know, it's only a handful of developers who are doing it, and we're having good discussions with many of them. And you know, we're focused on getting our fourth By-Law reading. Like everybody else, we're watching interest rates and costs in the marketplace. But we're in very strong position to monetize that asset going forward and we'll do it appropriately and carefully.
That's all for me. Thanks. Thanks for taking my questions.
Thanks, Nick.
Thank you. [Operator Instructions] At this time, there are no further questions. Please proceed with your closing remarks.
Thank you very much everyone for joining us today. As always, I encourage you to call us if you have any other questions or things you'd like to discuss with us. We were out in the market a fair amount in the next four to six weeks with talking with shareholders and investors. So if you're interested in booking something with us, please give us a call.
We're pleased to inform you that we will have an AGM in this - the fall that will be back in the market. It won't be a virtual AGM. We'll be inviting people to come in and join us. And we'll keep you posted on that as well. And we look forward to connecting with all of you soon.
So thanks for your support and attention, and have a pleasant day. Thank you.
This does conclude the conference for today. You may now disconnect your lines. Thank you.