Listed winemaker Evans & Tate expects to report a loss of between $4.8 million and $7.5 million in the current financial year after writing down the value of its wine inventory and one of its subsidiaries.
Listed winemaker Evans & Tate expects to report a loss of between $4.8 million and $7.5 million in the current financial year after writing down the value of its wine inventory and one of its subsidiaries.
In a shareholder update, Evans & Tate also disclosed that ANZ Bank has agreed to defer an upcoming interest payment of $2.5 million and may provide an additional $8.5 million of short-term working capital this month, subject to a review of the company’s 2006 financial year budgets by consulting firm 333 Performance Management.
“The company is confident that this short-term working capital will be made available,” executive chairman Franklin Tate said.
The company said its board of directors has decided to accelerate the reduction of its unallocated wine inventory (i.e. wine not allocated to customers).
The inventory write-down will cost the company between $8 million and $10 million and equates to 7-9 per cent of its total inventory.
In addition, the company will write-down $4.3 million of goodwill related to Victorian subsidiary Oakridge Vineyards.
“These strategies are expected to reduce inventories with the aim of moving the company into positive cash flow during the 2006 financial year,” Mr Tate said.
Other initiatives being considered by the company include a $4 million reduction of its packaged stock over the coming year and the sale and leaseback of its Griffith (NSW) winery, which would help to further reduce debt.
The shareholder update followed a halving of the company’s share price over the past week to as little as 28.5 cents, driven by concern about its financial health.
The company belatedly disclosed last week that it had appointed 333 Performance Management, a consultancy owned by insolvency firm KordaMentha, on the 1st of June.
It said 333’s role was to review its forecasting, planning and business efficiency.
The shareholder update said Evans & Tate expected to pay dividends on both its preference shares and its ordinary shares, despite the bottom-line loss.
The dividend on its preference shares will be in accordance with their terms but the company did not specify the expected dividend on its ordinary shares.
Evans & Tate’s share price bounced 10 cents higher on Wednesday morning to 41.0 cents per ordinary share.
