Australian Vintage Ltd · ASX:AVG
Australian Vintage — H1 2008 Earnings Presentation
32 slides from Australian Vintage's earnings presentation, Feb 27, 2008
Slide 1: Momentum Building: 2008 Interim Results
For personal use only Momentum Building Strong Cash Flow Improved Underlying Performance 2008 Interim Results, 27 February 2008 1
Slide 2: Disclaimer
For personal use only Disclaimer The information in this presentation is general advice, given in good faith and derived from sources believed to be accurate at this date but no warranty of accuracy or reliability is given and no responsibility arising in any other way including by reason of neglige
Slide 3: Today's Agenda
For personal use only Today’s Agenda Overview David Clarke Business Review Dane Hudson Outlook David Clarke 3
Slide 4: Top Line Results
Top Line Results • Momentum building For personal use only – Sales up 0.5% versus last year to $133.1 million – Branded product sales up 24% – Margins ahead of last year • Strong cash flow – Operating cashflow, before significant items and tax, $18.6 million higher than prior year – Net debt to equi
Slide 5: Key Financials: Building brands and improving margins
Key Financials: Building brands and improving margins $M 2006 2007 Change (%) For personal use only Sales - Branded* 63.6 78.6 +24 - Non Branded 61.7 47.1 -24 - Vineyard Income 7.1 7.4 +4 Total 132.4 133.1 +0.5 EBIT (before Significant Items) 7.1 10.4 +47 EBIT (after Significant Items) 4.9 6.7 +36 N
Slide 6: Business Review
For personal use only Business Review Dane Hudson 6
Slide 7: Strategic initiatives unchanged for over months
For personal use only Strategic initiatives unchanged for over 18 months… • Grow Export • Build (and Buy) Defendable Brand • Maintain Low Cost Position … and gaining traction 7
Slide 8: Solid progress achieved; flowing into results
For personal use only Solid progress achieved; flowing into results Strategic Priorities Recent Results • Grow Export 9 • New distributor relationships working - Bottled dollar sales +12% - Margins +4 points • Reducing reliance on speculative bulk wine sales • Build (and Buy) 9 • Export Branded/Excl
Slide 9: Grow Export
Grow Export • New relationships expanding the business For personal use only – WaverleyTBS and Groupe LFE – Asian distribution increasing: more branded bottled, less low priced bulk sales – Established new partnership with Metro Cash & Carry Group (585 stores worldwide) for exclusive range of region
Slide 10: Grow (Export continued)
Grow (Export continued) • North America challenging but innovation and dedicated resourcing For personal use only will deliver improved results – Purchased Billyrock Station brand. – Identifying new distribution opportunities – Building direct retail relationships for branded and private label • Hig
Slide 11: Export – First Half Sales Performance
For personal use only Export – First Half Sales Performance UK/Europe ($'000) North America ($'000) 60,000 16,000 50,000 +7% 12,000 -38% 40,000 30,000 8,000 20,000 4,000 10,000 0 0 2006 2007 2006 2007 Asia ($'000) New Zealand ($'000) 8,000 4,000 6,000 +46% -5% 4,000 2,000 2,000 0 0 2006 2007 2006 20
Slide 12: Build & Buy Defendable Brands
Build & Buy Defendable Brands: For personal use only Approach unchanged using proven FMCG strategies • Cautiously invest in sales driving promotions • Target to break through clutter with difference not absolute spend • Introduce, or buy brands that complement our portfolio • Provide highest quality
Slide 13: Focus on value adding promotions…
For personal use only Focus on value adding promotions… 13
Slide 14: …and innovative communication like the City Vineyard
For personal use only … and innovative communication like the City Vineyard New McGuigan Discover Range …launching City Vineyard in London in July 14
Slide 15: Launching new innovative products with points of difference
For personal use only Launching new innovative products with points of difference Y Generation Lifestylers My Timers & Y Generation … fun, funky brand … embrace the art of fine … sustainable resource Australian wine initiative, ‘Tree Free’ unoaked 15
Slide 16: Building great brands requires quality products
Finally, building great brands requires quality products For personal use only obtaining third party endorsement McGuigan: Winner, “…while a lot of rosés are too big and sweet, 2008 Sydney Royal Wine this one is thoroughly up to date in style and Show… Exhibitor has some real finesse about it… clean
Slide 17: Sales confirm strategy working
For personal use only Sales confirm strategy working First Half Branded Sales Case Sales (‘000) Dollar Sales ($’000) % % 2006/07 2007/08 2006/07 2007/08 Change Change Total Export Branded 754 1,002 +33 28,965 43,605 +50 Australian Branded 1,158 1,068 -8 34,593 34,966 +1 Total 1,912 2,070 +8 63,558 7
Slide 18: Growing branded sales as percentage of total business
Achieving objective of growing branded sales as For personal use only percentage of total business Revenue Segment Profit (6 months to December) (6 months to December) 100% 100% 5% 6% Vineyards 18% 16% Vineyards Bulk Wine & 80% 28% Bulk Wine & 80% 0% 7% Processing 32% Processing 2% Private Label 21%
Slide 19: Remain Low Cost Producer by consolidating operations around Mildura
Remain Low Cost Producer by consolidating operations around For personal use only Mildura (Buronga Hill Winery and Merbein Packaging)… • Exited under-utilised assets (Griffith Winery, Tower Estate Investment, Hunter Ridge Winery, Vineyard and Warehouse) yielding approximately $20 million in cash • I
Slide 20: Improving and simplifying business systems and practices
And improving and simplifying business systems For personal use only and practices • JDE financial system fully implemented • Improving national stock allocation and management system • Restructured/reduced contract grower base by 60% 20
Slide 21: Australian Vintage's integrated strategy is working
For personal use only Australian Vintage’s integrated strategy is working • Branded sales momentum • Gross margin up across all parts of the business through product mix shifting and price increases • EBIT up 47% to $10.4m before significant items • Structural and system changes will cement Australi
Slide 22: Operating cash flow well up on last year
For personal use only And, to repeat, operating cash flow well up on last year $ ‘000 2006 2007 Receipts from customers 148,144 158,733 Payments to suppliers and employees (150,614) (141,366) Financing costs (net) (4,626) (5,871) Cash flow from operating activities (7,096) 11,496 before significant
Slide 23: Positive outcomes over last six months, but risk remains
Many positive outcomes achieved over last six months, For personal use only but risk remains • Total vintage for 2008 still uncertain, although we will crush more tonnes than vintage 2007 • Higher costs for vintage 07 coming through, but targetting to offset through further price rises • High Austra
Slide 24: Driving strategic priorities will generate further improvement
For personal use only Driving strategic priorities will generate further improvement • Grow Export • Build (and Buy) Defendable Brand • Maintain Low Cost Position 24
Slide 25: Outlook for Second Half 2007/2008
For personal use only Outlook for Second Half 2007/2008 25
Slide 26: Competitive Environment
For personal use only Competitive Environment • Smaller Vintage 2007 and uncertain 2008 are pushing up prices: – Domestic cask and branded prices increasing – Export prices increasing, particularly bulk • Branded wine margins improving – Competitive environment but more sustainable prices and margin
Slide 27: Vintage '08 – Industry returning to balance
Vintage ’08 – Industry returning to balance • Vintage 2008 likely to be broadly in line with 2007 For personal use only – Drought and water restrictions – Many companies and individuals bought water to ensure adequate crop levels • Industry estimates are around to 1.4 million tonnes • Australian Vin
Slide 28: Outlook
For personal use only Outlook • Vintage ‘08 expected to be broadly in line with ’07 • Own vineyards to crop better than 2007 • Remain confident in achieving a small profit 28
Slide 29: Questions
For personal use only 29 Questions
Slide 30: Back up
For personal use only 30 Back up
Slide 31: Additional Information – EBIT to December 2007
For personal use only Additional Information – EBIT to 31 December 2007 2006 2007 $’000 $’000 Profit for the Period 594 643 Adjust for: Tax (benefit) / Cost (571) 190 Finance Cost 5,486 6,207 Interest Revenue (644) (385) EBIT 4,865 6,655 31
Slide 32: Additional Information – Significant Items to December
For personal use only Additional Information – Significant Items to 31 December 2006 2007 $’000 $’000 Profit on disposal of winery and vineyard assets - 2,981 Costs associated with the re-organisation of - (4,407) overseas distribution agreements Costs associated with exiting Grande Junction (2,220)