made by land & hand
ANNUAL REPORT | 2024
FOLE Y WINES LIMITE D | A N N U A L R E P O R T 2 0 24
Contents
Performance Overview | 3 |
Chief Executive Officer (CEO) and Directors' Report | 5 - 24 |
Directors' Responsibility Statement | 25 |
Financial Statements | |
Income Statement | 27 |
Statement of Comprehensive Income | 28 |
Statement of Changes in Equity | 29 |
Statement of Financial Position | 30 - 31 |
Statement of Cash Flows | 32 |
Notes to the Financial Statements | 33 - 71 |
Independent Auditor's Report | 72 - 75 |
Corporate Governance Statement | 76 - 84 |
Statutory Information | 85 - 91 |
Company Directory | 92 |
FOLE Y WINES LIMITE D | A N N U A L R E P O R T 2 0 24
made by | Foley Wines is a collection of iconic |
wineries and brands from New Zealand's | |
land & | most acclaimed wine regions |
hand | Each with a unique story of New Zealand to |
tell, our wineries and distillery are linked by a | |
common unrelenting purpose; to make great | |
wine that people love to drink around the world | |
- made by land & hand. |
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FOLE Y WINES LIMITE D | A N N U A L R E P O R T 2 0 24 | FOLE Y WINES LIMITE D | A N N U A L R E P O R T 2 0 24 |
Our Wineries | Performance |
& Distillery | Overview |
BOTTLED SALES REVENUE | $62,491,000 (up 0.3%) |
CASE SALES | 561,000 (down 4%) |
USA CASE SHIPMENTS | 133,000 (up 60%) |
OPERATING EARNINGS | $4,129,000 (down 60%) |
(LOSS) AFTER TAX | $(4,081,000) (down 164%) |
PROFIT AFTER TAX | $467,000 (down 93%) |
EXCLUDING ONE-OFF TAX | |
ADJUSTMENT | |
OPERATING EBITDA1 | $16,176,000 (down 20%) |
Martinborough Vineyard | Te Kairanga | Lighthouse Gin |
Martinborough | Martinborough | Martinborough |
The 2024 year was a tough year for the Company and wider industry. Notwithstanding the headwinds faced, the Directors were pleased that case sales were down only 4% on last year, which was a solid turnaround from the first six months. Export case sales were down 5.8% which, when compared to the market being down 21% for packaged wine, demonstrated the Company's hard work on developing strong routes to market for our brands.
Grove Mill | Vavasour | Mt Difficulty |
Wairau Valley, Marlborough | Awatere Valley, Marlborough | Central Otago |
1. To be read in conjunction with the Disclosure of Non-GAAP Financial Information on page 24.
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FO L E Y W I N E S LI M I T E D | A N N U A L R E P O R T 2 0 24 | FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T |
Mark Turnbull, CEO and Director
CEO & DIRECTORS' REPORT
Staying the course.
"The Company remained focused on selling its brands through established channels and keeping its wines front of mind."
On behalf of the Directors of Foley Wines Limited (FWL) we present the 2024 operating results and annual report for the 12 months ended 30 June 2024.
OPERATING PERFORMANCE
The Company reports an operating profit before revaluations and income tax ("operating earnings") of $4,129,000 compared with $10,216,000 for the previous financial year.
The year was very challenging as it became very evident that there was a significant over supply of Marlborough Sauvignon Blanc resulting in deep discounting. At the time of writing, one broker alone has 5m litres of 2023 Marlborough Sauvignon Blanc listed for as low as $2.15 per litre. The strategy we adopted was to remain focused on selling packaged wine through the channels established and assisting the retailers with additional promotional funding to keep the brands in the forefront of consumers' minds. Further, the Company invested heavily in the USA with various initiatives which lead to a 60% increase in shipments to the USA. This investment was a major factor in the increase in selling, marketing and promotion expenses of approximately $3m. However, this has meant the Company is already shipping the 2024 vintage to many markets and inventory is generally in balance.
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FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T
Bottled
Case Sales
BOTTLED CASE SALES (000'S) 12 MONTHS TO JUNE
JUNE '24 | JUNE '23 | % CHANGE | |
New Zealand | 176 | 174 | +1% |
Australia | 81 | 120 | (33)% |
USA | 133 | 83 | 60% |
UK/Europe | 133 | 170 | (22)% |
Rest of World | 38 | 36 | 6% |
TOTAL | 561 | 583 | (4)% |
FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T
The Company was prudent in managing administration costs even though we faced major increases in insurance.
Vineyard replacement costs this year of $1.279m reflected the decisions made previously to redevelop our own vineyards to ensure we have varietals that consumers demand, and also to be less reliant on third party supply in the future. The Company intends to complete one further area next year and then there will be a pause in this redevelopment.
Operating EBITDA for the period was $16.2m, down 20% on last year, which gives some insight into how the business performed taking out the one off accounting costs and high interest rates.
As outlined every year, we are of the firm belief that operating earnings is the key metric to demonstrate the progress the Company is making due to the complexity around the accounting standards and fair value adjustments, particularly with harvested grapes. The reasons are twofold. Firstly, this is how the Company budgets, determines pricing and manages performance. Secondly, the fair value of grapes is a timing issue. A gain in the year of harvest is reversed in the year of sale and, on the flip side, a loss in the year of harvest is reversed in the year of sale.
This year our unrealised loss on harvested grapes is much higher than previous years for two reasons. Firstly, the lower yield results in a higher cost per tonne. Secondly, due to the current market conditions, the price of grapes per tonne decreased. This resulted in a much higher price variation leading to a much higher loss at the time of harvest, which is then reversed out when sold.
Changes to tax legislation which has removed the ability to claim tax depreciation on commercial buildings has resulted in a one-off deferred tax expense of $4,548,000.
The (Loss)/Profit for the period net of tax attributable for the Shareholders was $(4,081,000), down 164% compared with $6,342,000 the previous year.
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FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T
The above case sales performance, when compared with the export data from Statistics New Zealand, is solid. As mentioned earlier, total packaged wine from New Zealand was down 21%, whereas the Company was down 5.8%.
The investment in the USA market made a material difference with the Company's case sales up 60% while the total market was down 22%. The Company's case sales to Australia were down 33% versus the total market being down 36%. The good news was that the Company's case sales to Australia were actually up 60% for the last six months compared with the prior year, which was reflective of our customers' inventory coming into balance.
Once again our brands held up well in New Zealand against a background of a weak retail sector and consumers being conscious about any discretionary expenditure.
FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T
CASHFLOW
Operating cash flow was $4,340,000 for the year, down from $10,348,000 the previous year. This year's cashflow was significantly influenced by a number of factors:
- Significantly higher marketing costs to fund promotions to move through inventory and to fund market growth.
- Higher insurance costs due to an increase in premium rates by reinsurers for New Zealand based businesses and increased sums insured due to the capital investment made by the Company.
- Higher interest costs due to higher interest rates and increased borrowing to fund asset purchases.
- Sales for the last quarter were the highest for the year. This timing has a major influence on cash receipts.
Capital expenditure was $5,770,000 for the year compared with $14,017,000 the previous year. The major expenditure during the year was an upgrade of the refrigeration system at the Vavasour winery and continued investment in vineyard productivity with further replants in underperforming vineyards. The major item of expenditure during the prior year was the development at Te Kairanga in Martinborough (The Runholder), comprising of a tasting room, restaurant and distillery, amounting to $6.6m, and the expansion of the Grove Mill winery by 1,000 tonnes of processing capacity with a new tank farm, amounting to $3.2m. The balance of the capital expenditure was operating capital expenditure of $4.2m.
Capital expenditure for the year ahead is budgeted at approximately $3.5m which is materially lower than the past two years, with the majority of this expenditure on redeveloping the vineyards that were removed and written off this year.
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FO L E Y W I N E S LI M I T E D | AC ENON UAANLDRDEIPROERCTT O2 0R 24S ' R E P O R T | FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T |
BRAND HOMES
The Company is pleased to have completed its first year of operations at its new hospitality venue in Martinborough, The Runholder. In its first year this 100 person restaurant, tasting room, cellar door, viewing terrace, private dining room and distillery has welcomed thousands of guests to share the stories of our Martinborough brands, Te Kairanga, Martinborough Vineyard and Lighthouse Gin. In addition to very high customer ratings across Google and TripAdvisor, The Runholder has recently been recognised in the Cuisine Good Food Awards 2024 "Who we are watching" list. It has also been awarded a Gold Qualmark accreditation, identifying the business as a best-in-class sustainable tourism business in New Zealand, delivering exceptional customer experiences and leading the way in making the New Zealand tourism industry a world-class sustainable visitor destination.
In addition to the hospitality offering, The Runholder provides key operational facilities including gin bottling, warehousing and a subterranean barrel hall which has capacity for 1,300 barrels and has been operational for the past three vintages. The distillery serves a dual purpose with the still itself providing much greater gin production capacity, while large floor to ceiling windows position the craftmanship of the custom built CARL still as a striking display for visitors to discover the distilling process.
Both The Runholder and Mt Difficulty hospitality venues offer truly unique and memorable destinations for visitors to experience the Company's brands.
Our online cellar door, The Foley Wine Club, has recently received a refresh to even better showcase our brands, in particular those rare and library wines which are hard to find elsewhere. The Foley Wine Club and Foley Rewards programme create a powerful platform generating significant trial and loyalty across the brands. In synergy with the hospitality venues, the Foley Wine Club continues to build a strong halo effect on the Company's brands in the wider market.
The Shareholder Store continues to be a popular online destination and also received a refresh during the year, being renamed Foley VIP Cellar. Available to Shareholders, this online store makes available our portfolio of brands at special VIP prices, as well as access to VIP-only offers.
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T H E RU N H O L D E R , M A RT I N BO RO U G H | |
FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T | FO L E Y WFOLEI N E SY LIWINESM I T E DLIMITE| C E ODA|NADNDNI RUEACLTROERPSO' RRTE P2O0 24R T |
MARIE ZELIE
The Company was proud to this year launch the sixth release of Martinborough Vineyard's iconic Marie Zelie Reserve Pinot Noir. This 2019 vintage marked the first release of this wine since 2013 and was warmly welcomed by wine media and connoisseurs alike at media events and wine dinners at Somm Cellar Door and Hotel Britomart in Auckland, and at The Runholder in Martinborough. Awarded 98 Points from US wine critic James Suckling, this historied wine continues to reinforce the tradition of handcrafted excellence at Martinborough Vineyard, and set the standard for luxury New Zealand Pinot Noir.
CUSTOMERS SEEKING OUT THE VALUE OF FOLEY WINES' UNIQUE PROPOSITION
For a number of years the Company has described its unique ability to deliver value through its portfolio of high quality brands from three acclaimed regions. The past year has continued to prove the value of this 'one stop' solution for customers, with an increasing number of customers seeking out the business to supply multiple products across price points and regions, resulting in long term mutually beneficial relationships in key markets.
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FO L E Y W I N E S LI M I T E D | AC ENON UAANLDRDEIPROERCTT O2 0R 24S ' R E P O R T | FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T |
QUALITY
The Company was delighted to receive outside recognition of quality from some of the world's most respected and influential industry competitions and commentators. Highlights from the year included:
- Trophy for Champion Sauvignon Blanc for Vavasour Sauvignon Blanc and Golds for an additional 14 wines at The New Zealand International Wine Show 2023
- Six Golds at The National Wine Awards of Aotearoa 2023
- Four Golds at The Marlborough Wine Show 2023
- 48 wines awarded 90+ Point scores by James Suckling
- Recognition of our wines by The Real Review's Wine Classification of New Zealand with Two Merits for Martinborough Vineyard Home Block Chardonnay, Martinborough Vineyard Home Block Pinot Noir, Martinborough Vineyard Manu Riesling, and Te Kairanga John Martin Pinot Noir, and One Merit each for Te Tera Pinot Noir, Te Kairanga Runholder Pinot Noir, Vavasour Sauvignon Blanc, Dashwood Sauvignon Blanc, Mt Difficulty Bannockburn Pinot Noir and Mt Difficulty Target Gully Riesling.
In addition, our wines were selected to be served to guests aboard the world's most discerning airlines in the past 12 months:
- Vavasour Sauvignon Blanc served aboard British Airways First Class, Malaysia Airlines Business Class and Singapore Airlines First Class
- Vavasour Pinot Noir served aboard Air New Zealand Business Class
- Te Kairanga Runholder Pinot Noir served aboard Air New Zealand Business Class
- Martinborough Vineyard Home Block Sauvignon Blanc served aboard Singapore Airlines First Class and Malaysia Airlines Business Class
- Martinborough Vineyard Home Block Pinot Noir served aboard Singapore Airlines First Class
- Te Tera Pinot Noir served aboard British Airways First Class
- Mt Difficulty Bannockburn Pinot Noir served aboard Air New Zealand Business Class
- Mt Difficulty Target Gully Riesling served aboard Air New Zealand Business Class
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FOLE Y WINES LIMITE D | C E O A N D D I R E C T O R S ' R E P O R T | FO L E Y W I N E S LI M I T E D | C E O A N D D I R E C T O R S ' R E P O R T |
TOAST MARTINBOROUGH
Further bolstering the premium experiences the Company is able to offer in the region, the Company acquired the long-running wine and food festival Toast Martinborough during the year. The refreshed festival will be 'a toast to Martinborough', reflecting the boutique wine region's premium, small scale wine production and elevated wine experiences.
With a new summer date of January 19, coinciding with Wellington Anniversary, festival goers will be able to make a long weekend of it and fully immerse themselves in the wine, food and VIP experiences running across the weekend. The festival will retain its boutique personality that comes from visiting individual wineries of the Martinborough wine village with different wine, food and live music at each site, but will now be walkable with all sites located along a picturesque stretch of road flanked by vineyards.
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