Australian Vintage chairman Richard Davis will retire once as $20 million equity raise is completed, as the company announced its sales would be in line with last year’s but “lower than internal expectations”.

The wine business last month went into a trading halt and revealed that a proposed merger with the Accolade – the second largest wine company in Australia – had withered on the vine.

To provide the company with liquidity and financial flexibility amid “challenging industry conditions”, Cowandilla-based Australian Vintage will raise up to $20 million.

The raise will be conducted at a fixed price of 20 cents per new share, which is a major discount compared to the last trading price of Australian Vintage shares of 35 cents.

Australian Vintage said the raise was not underwritten, and there was “no guarantee that it will be fully subscribed”.

Acting CEO Peter Perrin said the funds would allow the company to navigate “volatile conditions” in the global wine market and potentially make an acquisition.

“The capital structures initiatives announced today are designed to provide more adequate levels of liquidity and financial flexibility to navigate the volatile conditions and enable the business to capitalise on future opportunities, including potential consolidation,” Perrin said.

“I would like to thank Richard [Davis] for his dedication and service to the company over more than 15 years.

“He has made an invaluable contribution and will be missed.”

Other movements on the Australian Vintage board include the appointment of John Davies as interim chair post-raise, while Peter Perrin will remain acting CEO pending the appointment of a permanent CEO.

As previously announced, Australian Vintage said its net debt would blow out at 30 June from $45-50 million to now $70-75 million.

Overall sales to 30 June 2024 are expected to be in the range of $257-261 million – in line with FY23 “but lower than internal expectations”.

“Sales in key markets, ANZ and the UK, in line with the previous year, with the UK experiencing strong sales growth in May,” Australian Vintage said.

Underlying earnings are expected to be in the range of $29-31 million – an 11 per cent improvement on FY23 – but pressure on the company’s margins is expected, driven by “a combination of persistent cost inflation, competitor pricing and sales mix”.

The company will also record a $38 million impairment charge against its goodwill (the purchase price of the company minus the fair market value of its assets, liabilities and intangible assets) in FY24.

The company claims it is now the leader in “targeted product innovation”, with 37 per cent of total margin contributed by products that did not exist five years ago.

“The current cycle is proving to be one of the most challenging on record for the Australian wine industry and this is reflected in our expected financial performance for FY24,” Perrin said.

“In the face of these sectoral headwinds, we are growing market share in our key markets, introducing considered innovations and improving our underlying earnings performance.

“While there are encouraging signs that the oversupply of red grape varietals is easing, consistent with prior cycles, we expect the market will take time to rebalance, and trading conditions remain challenging in the interim.”