Evans & Tate cut losses on lower sales

Winemaker Evans & Tate Ltd has clawed back some ground in the six months to December 31, posting a first-half loss of $6.7 million compared to a $44.4 million loss in the previous corresponding period following a string of big write-downs.

But E&T blamed continuing pressure in the UK market for slicing 11.2 per cent from its revenue, which fell from $44.3 million in the 2005 half to $39.4 million in the six months to December 31 2006.

E&T, which is currently engaged in due diligence work after conditionally approving a takeover proposal from US-listed Yarraman Estate, said it would turn its attention to improving top-line revenue performance in the second half.

"The results of the first half point to continuing price and promotion pressures on top-line revenue," the board said in a statement to the Australian Stock Exchange.

"However, tight cost control and better margins have enabled the company to deliver its bottom line improvement."

E&T said it expected revenue growth for the full year to be in the "low single digit range" but focussing on margins and costs would help the company deliver a breakeven profit for the year, which it forecast at its annual meeting in November.

E&T also revealed that it has received more financial support during the half from its bankers, ANZ Banking Group. The bank lent the winery $4 million in July, which was repaid the following month after the sale of its Mildura and Griffith wineries. E&T went to the bank again in October for an additional working capital facility of $5 million, which is due to be repaid with interest on March 31.

ANZ was owed $97 million at December 31.

E&T managing director Martin Johnson said the winery continued to enjoy the support of its bankers, which also waived breaches of its loan arrangements after its total liabilities exceeded 80 per cent of total assets.

Mr Johnson said that given the context of where the business had been recently the result was re-assuring and was the product of the turnaround program it embarked on more than 12 months ago.

"Whilst we continue to see major challenges in driving top-line revenue growth in difficult markets in both the UK and Australia, investors should note the positive impact of changes that this management team has made to our business disciplines to secure the improved bottom line performance and particularly to avoid any further damaging one-off charges," Mr Johnson said.

E&T said revenue plunged 50 per cent in its European markets to $3.3 million.

"This reflects slower than expected listings for the company's brands and the deliberate decision to focus on the higher margin premium wine business," the company said.

"The European business continues to be challenging and the company is disappointed with the sales performance in this market albeit at significantly improved profitability compared to the previous corresponding period."

E&T added that sales revenue was flat in Australasia, however, it managed to improve margins and reduce operating costs.

It said its North American segment recorded a revenue fall of 36 per cent to $1.3 million. It said this was the result of transitioning its US-based subsidiary, Scott Street Portfolio, to try and get better market share and profitability in future years.