Australian Vintage Ltd · ASX:AVG
Australian Vintage — Investor Presentation (September 2013)
60 slides from Australian Vintage's investor presentation, Sep 11, 2013
Slide 1: Capital Raising Investor Presentation
For personal use only Capital Raising September 2013 Investor Presentation
Slide 2: Disclaimer
Disclaimer For personal use only This investor presentation (Presentation) has been prepared by Australian Vintage Limited (ABN 78 052 179 932) (“AVL” or the “Company”). This Presentation has been prepared in relation to a placement of new AVL ordinary shares (New Shares) to institutional, professio
Slide 3: Disclaimer
Disclaimer For personal use only Not an offer (cont’d): Neither the New Shares nor the entitlements have been, or will be, registered under the U.S. Securities Act of 1933 (the “U.S. Securities Act”) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the ent
Slide 4: Disclaimer
Disclaimer For personal use only Future performance: This Presentation contains certain “forward looking statements”. Forward looking statements can generally be identified by the use of forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “
Slide 5: Index
Index For personal use only 1. Summary 2. Australian Vintage Limited (‘AVL’) Business Summary 3. AVL 2013 Result 4. Outlook 5. Capital Raising 6. Key Risks 7. International Selling Restrictions Appendix A. Global Wine Industry B. Australian Wine Industry 5
Slide 6: 1. Summary
For personal use only 1. SUMMARY
Slide 7: Summary
Summary • Australian Vintage Limited (‘AVL’ or the ‘Company’) has endured a protracted downturn in the Australian wine industry, with the industry impacted by: For personal use only – the high Australian dollar; – over-supply in the Australian market; – drought; and – higher taxes in key export mark
Slide 8: Summary
Summary • As part of the next stage of re-positioning the business, AVL is undertaking a $41.8 million capital For personal use only raising at an offer price of $0.42 to repay bank debt and significantly reduce gearing, consisting of: – an institutional placement of $8.4m – an accelerated, non-reno
Slide 9: 2. AVL Business Summary
For personal use only 1. AVL BUSINESS SUMMARY
Slide 10: AVL Business Summary
AVL Business Summary • AVL is one of Australia’s largest wine producers and most admired wine businesses For personal use only • Scale – crushes approximately 150,000 tonnes of grapes per annum – approximately 8% of the total Australian wine crush – sells almost 85m litres of wine into domestic and
Slide 11: AVL Segments
AVL Segments Segment Description Key Customers FY13 Revenue For personal use only Australasia / North Packaged wine within Australia, New Woolworths / Coles / Independent $79.9m America Packaged Zealand, Asia and North America liquor outlets through retail and wholesale channels UK / Europe Packaged
Slide 12: AVL Brands
AVL Brands • AVL’s strategy has been to focus on its strong Proportion of branded sales (in $) For personal use only brand portfolio 100% – brands provide protection from ‘commodity’ pricing of wine 80% – the McGuigan brand is ranked the World’s 14th most admired wine brand (UK publication ‘Drinks I
Slide 13: AVL Brands - McGuigan
AVL Brands - McGuigan FY13 Sales Volume by Region For personal use only 6% 3% 10% UK Australia Ireland 18% NZ 63% Other BLACK LABEL BIN SERIES EXPRESSIONS Sales 100.0 95.0 90.0 $m 85.0 80.0 SHORTLIST HANDMADE FARMS 75.0 FOUNDERS SERIES 70.0 FY10 FY11 FY12 FY13 13
Slide 14: AVL Brands – Tempus Two
AVL Brands – Tempus Two FY13 Sales Volume by Region For personal use only 2% 2% 13% Australia Asia N.America Other 83% VARIETAL PEWTER RANGE RANGE Sales 7.0 6.0 $m 5.0 4.0 COPPER UNO 3.0 RANGE FY10 FY11 FY12 FY13 14
Slide 15: AVL Brands – Nepenthe
AVL Brands– Nepenthe FY13 Sales Volume by Region 3%1% For personal use only 5% Australia Asia UK & EU N. America 91% Sales TRYST BY NEPENTHE PINNACLE 5.0 4.0 3.0 $m 2.0 1.0 ALTITUDE - FY10 FY11 FY12 FY13 15
Slide 16: AVL Brands - Global Success
AVL Brands - Global Success With further success across all markets… • McGuigan Black Label Red is the #1 selling branded red wine For personal use only by volume in the Australian market. • McGuigan Wines is ranked as the #2 Australian brand and #14 most admired wine brand in the world by leading U
Slide 17: AVL Brands – Global Success
AVL Brands – Global Success Brand Award McGuigan Trophy - International Winemaker of the Year International Wine & Spirits Competition For personal use only Trophy - Australian Producer of the Year International Wine & Spirits Competition Trophy - White Winemaker of the Year International Wine Chall
Slide 18: AVL Asset Portfolio
AVL Asset Portfolio Wineries Buronga Hill (145,000 tonne capacity), Yaldara winery (12,000 tonne capacity), Hunter winery (1,000 tonne small boutique winery) For personal use only Owned Vineyards Coldridge (474Ha), Grande Junction (404ha, 240Ha planted), Nepenthe (84Ha across 3 vineyards), Yaldara (
Slide 19: AVL Asset Portfolio
AVL Asset Portfolio • AVL has “right-sized” its operations in recent years and now believes it has an optimally sized For personal use only network of wineries, production facilities, owned and leased vineyards • AVL has undertaken surplus asset sales – Griffith winery (20,000 tonne winery) – Loxton
Slide 20: AVL Cost Control
AVL Cost Control • AVL has significantly reduced its cost base in recent years For personal use only • During 2013, AVL renegotiated the terms of its leased vineyards with Belvino (formerly Challenger Wine Trust) – annual lease costs to reduce $4.5m (32% savings) – Belvino to contribute $1.25m towar
Slide 21: 3. AVL 2013 Result
For personal use only 3. AVL 2013 RESULT
Slide 22: AVL FY Result Summary
AVL FY 13 Result Summary For personal use only • FY13 Result reflected low volume 2012 vintage of 120,000 tonnes – increased average cost per litre – acquired $6m of bulk wine to meet requirements • Exchange rates remained at historically high levels during the year • Despite these difficult trading
Slide 23: Impact of Foreign Exchange Movements
Impact of Foreign Exchange Movements • AVL’s exposure to exchange rates is significant: For personal use only – 68% of total export sales in GBP – 9% in Euro – 2% in CAD • Level of GBP hedging has reduced from 36.5m (GBP) in June 2012 to 10.0m (GBP) as at 30th June 2013. EURO hedging has declined by
Slide 24: Sales Summary
Sales Summary For personal use only Dollar Sales ($’000) • Overall sales performance reflected: FY12 FY13 % Change – reduced cask wine & bulk sales Australasia/North 79,371 79,903 1 – A$ impact America packaged – offset by improved branded sales UK/Europe 97,302 88,847 (9) • UK/Europe sales down 8.7
Slide 25: Results Summary
Results Summary For personal use only $’000 Change • Core business improving but result FY12 FY13 $’000 % impacted negatively due to poor 2012 Australasia/North America packaged 6,353 5,214 (1,139) (18) vintage UK/Europe 7,098 3,350 (3,748) (53) • Australasia/North America segment Cellar Door 885 70
Slide 26: Cashflow from Operating Activities
Cashflow from Operating Activities For personal use only $m FY12 FY13 • FY13 Cashflow impacted by: Operating Activities – $6m bulk wine purchase Receipts from customers 241.4 223.5 – yet to gain full benefit from leased vineyard cost savings Payments to suppliers and employees (217.7) (217.2) – incr
Slide 27: Cashflow from Operating Activities
Cashflow from Operating Activities • FY13 cashflow was materially impacted by: For personal use only – the purchase of $6m of bulk wine during the year – the large 2013 vintage resulting in increased inventory – unfavourable exchange rates. • The impact of these items was estimated as follows: Impro
Slide 28: Financial Position
Financial Position For personal use only ($m) 30 June 2013 • Net borrowings increased by $13.0 million Assets Trade & Receivables 35.6 – increase in inventory (up $19.7 Inventories 172.2 million) due to larger 2013 Plant and equipment 93.2 vintage Other 142.8 • Gearing (net debt to equity) 443.8 cur
Slide 29: 4. Outlook
For personal use only 4. OUTLOOK
Slide 30: Outlook
Outlook • Industry – will remain challenging but there are signs that industry conditions are improving For personal use only – grape production is moving towards balance – global demand has grown faster than supply for the past six years – competition remains fierce across Australian and overseas m
Slide 31: Outlook
Outlook For personal use only • AVL expects full year net profit after tax to improve by somewhat in excess of a third on the 2013 result of $7.1m based on: – benefits of the much improved 2013 vintage – the weakening of the A$ – reduced vineyard lease costs • Guidance is based on – normal vintage c
Slide 32: 5. Capital Raising
For personal use only 5. CAPITAL RAISING
Slide 33: Offer Details
Offer Details For personal use only Offer Size • Capital raising of approximately $41.8 million (the “Offer”) to existing and new shareholders consisting of: - $8.4 million placement to institutional, professional and sophisticated investors (“Institutional Placement”) - $18.5 million 3 for 5 Accele
Slide 34: Use Of Proceeds
Use Of Proceeds • The net proceeds of approximately $39.5m will be used to reduce net debt resulting in: For personal use only - reduction in Gearing (Net Debt to Shareholders Funds) from 59% to 36.5% on a pro- forma basis as at 30 June 2013; - reduction in Net Debt from $142.1 million to $102.5 mil
Slide 35: Bank Facility, Interest Savings & Guidance
Bank Facility, Interest Savings & Guidance • Extended banking facility For personal use only - assuming a successful offer, AVL’s banker has agreed to enter into a revised banking facility with a term to September 2015 - new facility negotiated with terms including a significantly lower margin • Int
Slide 36: Strengthened Balance Sheet
Strengthened Balance Sheet • Pro Forma FY13 Balance Sheet For personal use only As at 30 June 2013 Impact Of Offer Pro Forma as at ($m) ($m) 30 June 2013 ($m) Cash and cash equivalents 1.0 1.0 Trade and other receivables 35.6 35.6 Inventories 172.2 172.2 Property, plant and equipment 93.2 93.2 Biolo
Slide 37: Raising - Timetable
Raising - Timetable For personal use only Event Date Trading halt Wednesday, 11 September 2013 Institutional Placement and Institutional Shortfall bookbuild Thursday, 12 September 2013 AVL shares are expected to recommence trading on ASX Friday, 13 September 2013 Record Date for eligibility in the R
Slide 38: 6. Key Risks
For personal use only 6. KEY RISKS
Slide 39: Key Risks
Key Risks Summary For personal use only Investors should be aware that there are risks associated with an investment in the Company. Activities of the Company and its controlled entities, as in any business, are subject to risks which may impact on the Company’s future performance. There are a numbe
Slide 40: Key Risks – Specific Risks (continued)
Key Risks Specific Risks (continued) For personal use only Global over production and the emergence of quality alternatives AVL competes in a global market. Global wine oversupply or over supply in other countries may adversely effect AVL’s sales or impact its sale prices. Consumer demand AVL’s oper
Slide 41: Key Risks – Specific Risks (continued)
Key Risks Specific Risks (continued) For personal use only Litigation and disputes Legal and other disputes may arise from time to time in the ordinary course of operations. Any such dispute may impact on earnings or affect the value of AVL’s assets. Counterparty risk The Company deals with many cou
Slide 42: Key Risks – General Risks
Key Risks General Risks For personal use only Stock market fluctuations The value of the New Shares will be determined by the share market and will be subject to a range of factors beyond the control of the Company and the Directors. Share market fluctuations in Australia and other stock markets aro
Slide 43: Key Risks – General Risks (continued)
Key Risks General Risks (continued) For personal use only General economic conditions Both Australian and world economic conditions may negatively affect AVL’s performance. Any slow down in economic conditions or factors such as the level of production in the relevant economy, inflation, currency fl
Slide 44: 7. International Selling Restrictions
For personal use only 7. INTERNATIONAL SELLING RESTRICTIONS
Slide 45: International Selling Restrictions
International Selling Restrictions This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be unlawful. New Shares may not be offered or sold in any country outside Australia except to the extent permitted below. For perso
Slide 46: International Selling Restrictions
International Selling Restrictions Mauritius In accordance with The Securities Act 2005 of Mauritius, no offer of the New Shares may be made to the public in Mauritius without the prior approval of For personal use only the Mauritius Financial Services Commission. Accordingly this offer is being mad
Slide 47: International Selling Restrictions
International Selling Restrictions United Kingdom Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in For personal use only the United Kingdom and no prospectus (within the meaning of section 85 o
Slide 48: Appendix A: Global Wine Industry
For personal use only APPENDIX A GLOBAL WINE INDUSTRY
Slide 49: World Industry Conditions
World Industry Conditions For personal use only 1. We believe the industry globally is moving towards balance and entering a new phase of its supply/demand cycle. • Oversupply is decreasing - Global output fell from 26,400 million litres in 2011 to 24,800 million litres in 2012. The 2012 vintage was
Slide 50: World Industry Conditions (continued)
World Industry Conditions (continued) Global Wine Supply and Demand For personal use only Note: Provisional 2011 data, 2012 estimates; Area under vine covers all grapes * Consumption figures include c.333m 9L cases of wine used in the production of fortifieds and industrial applications Source: Inte
Slide 51: World Industry Conditions - Summary
World Industry Conditions - Summary For personal use only 1. The global wine industry is cyclical, partially due to the slow supply response. 2. The industry cycle is currently moving towards supply/demand balance. 3. Global area under vine continues to decline. 4. Global consumption growth is begin
Slide 52: Appendix B: Australian Wine Industry
For personal use only APPENDIX B AUSTRALIAN WINE INDUSTRY
Slide 53: 2013 Vintage
2013 Vintage For personal use only 1. The quality of the 2013 vintage was very good with some parcels of wine arguably higher in quality than the exceptional 2012 vintage. 2. The Australian industry crush increased by more than 10% to 1.83 million tonnes. The 2012 crush was 1.66 million tonnes. 3. T
Slide 54: 2013 Vintage (continued)
2013 Vintage (continued) For personal use only 6. Although the 2013 vintage is above expectations the long term outlook is that the supply and demand will continue to move towards balance. 7. The high AUD, which has negatively impacted profitability of wine companies, has recently reduced by around
Slide 55: Australian Wine Industry - Snapshot
Australian Wine Industry - Snapshot Vineyard Area and Wine Production Wine Grape Crush & Average Price Bearing Ha Non bearing Ha Wine production (RHS) Wine grape crush (LHS) Average winegrape price (RHS) For personal use only '000 Ha million M tonnes $A / tonne 9LE 200 160 2.5 $1,000 140 2.0 $800 15
Slide 56: Australian wine – Supply and Demand
Australian wine – Supply and Demand • Australian wine production and sales have been balanced for past 4 years For personal use only Export sales - tonnes (one year delay) Domestic Sales - tonnes (one year delay) Wine grape crush (tonnes) '000 Tonnes 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 2
Slide 57: Key Markets for Australian Wine
Key Markets for Australian Wine Asia Pacific is the fastest growing region • Asia Pacific (China, Malaysia, Japan, Hong Kong, Korea, etc.) growing at the fastest rate For personal use only • Western Europe in decline • Eastern Europe has recovered since GFC • Australasia (Australia, New Zealand) is
Slide 58: Key Retail for Australian Wine (continued)
Key Retail for Australian Wine (continued) Bottled exports – higher average A$/L to Asia • Of the destinations where Australia ships more than 1 million litres of bottled wine, the top 8 highest average values per litre For personal use only were achieved in Asian markets • Bottled exports to our tw
Slide 59: Bottled exports vs. Bulk exports
Bottled exports vs. Bulk exports Volume of Australian bottled and bulk shipments over time For personal use only • Bulk exports now exceed bottled exports • Australian wineries sending bulk overseas for packaging, mainly the UK. Source: Wine Australia 59
Slide 60: Exports by top destinations
Exports by top 15 destinations Volume (million litres) for MAT September 2012 For personal use only Source: Wine Australia 60 60
Australian Vintage — Investor Presentation (September 2013) on 6ix