Australian Vintage Ltd · ASX:AVG
Australian Vintage — FY2008 Earnings Presentation
35 slides from Australian Vintage's earnings presentation, Aug 27, 2008
Slide 1: 2008 Full Year Results
For personal use only Strong Branded Growth Asset Base Restructured Improved Profitability 2008 Full Year Results 27 August 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
Today’s Agenda For personal use only Overview David Clarke Business Review Dane Hudson Outlook David Clarke Questions 3
Slide 4: Strong turnaround in challenging market
For personal use only Strong turnaround in challenging market Full Year Change Result EBIT (before Significant Items) $19.1m Ï $13.9 million NPAT (before Significant Items) $5.5m Ï $8.2 million NPAT (after Significant Items) $1.3m Ï $7.3 million 4
Slide 5: Delivered on strategy: Focus on profit vs sales
For personal use only Delivered on strategy: Focus on profit vs sales 1. Build Exports and Brands 9 Branded product sales up 10% 9 Margins 7 points ahead of last year 9 Non branded/bulk sales down 2. Maintain Low Cost Position 9 Operating costs down 15% 3. Asset Base Restructured 9 Sold assets in Gr
Slide 6: Building brands and improving margins
For personal use only Building brands and improving margins $M 2007 2008 Change Sales - Branded* 132.2 146.1 ↑ 10.5% - Non Branded 39.0 25.6 ↓ 34.4% - Bulk/Processing/Vineyard Income 115.5 93.3 ↓ 19.2% Total 286.7 265.0 ↓ 7.6% EBIT (before Significant Items) 5.2 19.1 + 13.9m EBIT (after Significant
Slide 7: Business Review
For personal use only Business Review Dane Hudson 7
Slide 8: Topics for Review
For personal use only Topics for Review 1. Market Overview 2. 07/08 Scorecard 3. Progress against Strategic Priorities 8
Slide 9: Significant change around the globe impacting Australian wine producers
Significant change around the globe impacting Australian wine producers UK/Europe North America For personal use only •Weakening economy •Consumption growing, but so is local production and imports •Retailers/consumers demanding value, in face of higher excise duty •Australian brands struggling to h
Slide 10: Vintage 2008 significantly higher than expected, driven by premium grapes
Vintage 2008 significantly higher than expected, For personal use only driven by growth of premium grapes Australian Grape Harvest (Tonnes ‘000s) 2000 2000 Forecast Premium/Dry 1500 1500 Land growth 740 42% +220KT 520 1000 1000 Irrigated growth 6% +50KT 500 500 930 880 0 0 2003 2004 2005 2006 2007 2
Slide 11: Industry headwinds remain
Industry headwinds remain • Vintage 2008 significantly higher than expected For personal use only • Softening demand for Australian wine for the 12 months to July 08 – Export sales down 12% or 96 million litres • Bulk volume 32% below last year • Packaged volume down 3% for year; but 14% for second
Slide 12: AVL financial scoreboard: Strategies improving profitability
For personal use only AVL financial scoreboard: Strategies improving profitability Change vs PY Results Results Change $’000 in Constant 2007 2008 vs PY Currency** Branded wine division 4,221 7,292 3,071 +4,661 Private Label wine division 1,588 (1,071) (2,659) Bulk wine and processing (3,557) 6,830
Slide 13: Delivered solid cash flow from operating activities
For personal use only Delivered solid cash flow from operating activities $M 2007 2008 Receipts from customers 305.5 304.5 Payments to suppliers and employees (285.8) (281.7) Interest and other finance costs (9.8) (11.8) Income tax (paid) / refunded (2.2) 2.2 Change Total (before water and one-off i
Slide 14: Strategy scoreboard: Significant progress achieved across whole business
For personal use only Strategy scoreboard: Significant progress achieved across whole business Strategic Priorities Recent Results • Grow Export and 9 • Export branded sales +22% Build (and Buy) • Domestic branded sales -3.7% but margins up +10 points Defendable Brands • Introducing new innovative b
Slide 15: Branded strategy is working
For personal use only Branded strategy is working Full Year Branded Sales Case Sales (‘000) Dollar Sales ($’000) % % 2006/07 2007/08 2006/07 2007/08 Change Change Total Export Branded 1,664 1,928 +16 69,107 84,610 +22 Australian Branded 2,149 1,776 -17 63,822 61,456 -4 Total 3,814 3,705 -3 132,929 1
Slide 16: Branded exports up in key markets
Branded exports up in key markets For personal use only 44% 38% 32% 32% Overall Branded 24% +22% Sales Growth vs Prior Year -16% UK Europe Asia USA Canada NZ • Core relationships remain strong around the world • METRO partnership in early days, but orders have commenced 16
Slide 17: North America performance improving
For personal use only North America performance improving • Relationship with Gallo strong, although Black Swan sales soft • Past year have focused on restructuring distribution partners; like UK in 06 and 07 • Branded sales up 32% • Bottled private label sales growing; focusing on price points +US$
Slide 18: UK branded momentum should continue
UK branded momentum should continue, however For personal use only anticipate lower private label sales and margins • Private label margins under pressure – Weak UK economy and currency – March 07 excise duty increase of 14p/bottle – Sharp value price points critical to retailers • However branded f
Slide 19: Australian business profit well up on last year
For personal use only Australian business profit well up on last year • Traded off sales versus margin: GM +10pts above last year • Growth of brand McGuigan – Black Label +17%; highest in at least six years – New higher priced ranges contributing to sales and shifting mix • Nepenthe EBIT contributio
Slide 20: Australian performance enhanced by double digit sales growth with chains
Australian performance enhanced by double digit sales growth with chains through better operations and appealing consumer promotions For personal use only Delivered in Full on Time with Coles Liquor Group 100% Target 80% 86% DIFOT 60% Monthly Average 40% 20% 0% Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar
Slide 21: Achieving stated objective of growing branded sales as percentage of total
Achieving stated objective of growing branded sales For personal use only as percentage of total business Revenue 100% 5% 8% 4% Vineyards 80% Bulk Wine & 33% 36% 30% Processing 60% Private 10% Label 15% 14% 40% 43% 46% 55% Branded 20% 0% 2005/06 2006/07 2007/08 21
Slide 22: Achieving third strategy of maintaining low cost position
Achieving third strategy of maintaining low cost position For personal use only and leveraging assets • Controlled winery costs in a smaller than average vintage – Loxton Winery costs $2 million below last year, on higher tonnage – Buronga Hill cost $1 million below last year • Obtained 15,000 incre
Slide 23: And exiting under-utilised assets
For personal use only … And exiting under-utilised assets Cash Loxton Winery $60m $3m non-refundable deposit received. Remainder to be received Sept 08 Hunter Assets $20m and Griffith Winery $80 million 23
Slide 24: Innovation critical to AVL's sales and profit momentum
For personal use only Innovation critical to AVL’s sales and profit momentum • Participate in high growth segments • Market research based new products and repackaging • Offer truly differentiated products • Execute unique UK/Australia promotions 24
Slide 25: Example of our new capabilities
For personal use only is an example of our new capabilities Solidly Researched Professional Presentation Retailer Acceptance 120% 100% Agreed listings in 80% over 3,000 stores 60% in two months Growth 40% 20% 0% Existing New Total Entrants Sparkling -20% 25
Slide 26: Billyrock cans off to solid start
For personal use only Billyrock cans off to solid start “Those cheerful Aussie iconoclasts did it again, breaking another taboo by packaging wine in cans. Fortunately, the resulting product is right up to standard with no signs of having sacrificed quality or flavour. The latest I have tasted are go
Slide 27: London City Vineyard
London City Vineyard For personal use only 27
Slide 28: Key takeaways
For personal use only Key takeaways 1. Strong turnaround in challenging market 2. Delivered on strategy 3. Delivered on margins 4. Strengthened financial position 5. Market difficult but winning with innovation 28
Slide 29: Outlook for 2008/09
For personal use only Outlook for 2008/09 29
Slide 30: Outlook
For personal use only Outlook • Market remains challenging – High Australian Dollar – UK economy – 35% of total AVL sales – Competitor asset actions, including sales of written down stock • Real uncertainty for Vintage 09 due to drought – 2007/08 water investment will impact 08/09 profit increasing
Slide 31: Questions & Answers
For personal use only Questions & Answers 31
Slide 32: Back up
For personal use only 32 Back up
Slide 33: Sales Segment Performance
Sales Segment Performance For personal use only Segment Revenue ($’000) 2006/07 2007/08 % Change Bottled wine division – branded / casks 132.2 146.1 ↑ 10.5 Bottled wine division – private label 39.0 25.6 ↓ 34.4 Bulk wine and processing 104.0 79.2 ↓ 23.8 Vineyards 11.5 14.1 ↑ 22.6 Total of all segmen
Slide 34: Additional Information – Significant Items to June
Additional Information – Significant Items to 30 June 2007 2008 For personal use only $’000 $’000 Profit on disposal of winery and vineyard assets - 3,054 Stock valuation adjustment - (1,759) Impairment of property, plant & equipment (2,472) - Costs associated with the re-organisation of - (5,056) o
Slide 35: Demand for Australian wine softening
Demand for Australian wine softening • Export sales down 12% or 96 million litres For personal use only – Bulk volume 32% below last year – Packaged volume down 3% for year; but 14% for second half Change in Year on Year Volume for Jan-Jun 08 vs 07 UK USA 0% -5% -6% Bottled Bulk -10% -11% Source: WF