Discussion of Financial Results
Review of Operations
Vintage is fundamental to the business as it determines the quality and quantity of wine available for future sales in all markets.
Grape Intake – The Company sources 98% of the grapes from the independent growers with the balance being harvested from the Company’s own vineyards. The resultant wine from the “own use” is used for sale under the Peter Lehmann brand, for sale in bulk to other wineries and under buyers’ own brand labels.
Contract Crushing – Work is actively sought from other wineries as a means of securing overhead recoveries. The harvesting times for grape growing districts and grape varieties differ and this allows PLW to spread the crushing activities over the vintage period.
Vintage - Tonnes
|
Year |
Crushed - Own Use |
Crushed Contract |
Total Crushed |
|
1994 |
6,493 |
5,410 |
11,903 |
|
1995 |
4,991 |
5,031 |
10,022 |
|
1996 |
8,326 |
5,876 |
14,202 |
|
1997 |
7,309 |
5,211 |
12,520 |
|
1998 |
7,608 |
6,261 |
13,869 |
|
1999 |
7,760 |
6,422 |
14,182 |
|
2000 |
5,991 |
4,923 |
10,914 |
|
2001 |
10,157 |
5,214 |
15,371 |
|
2002 |
11,561 |
5,509 |
17,070 |
|
2003 |
9,506 |
4,796 |
14,302 |
|
2004 |
14,588 |
4,360 |
18,948 |
|
2005 |
17,308 |
3,771 |
21,079 |
|
2006 |
13,643 |
3,752 |
17,395 |
|
2007 |
8,021 |
3,634 |
11,655 |
|
2008 |
14,150 |
3,991 |
18,141 |
|
2009 |
10,992 |
3,837 |
14,829 |
PLW Vineyards
The Company has three vineyards located in the Barossa Valley and a fourth located in the Clare Valley. Having vineyards under its own control provides PLW winemakers with flexibility in securing fruit grown under specific viticulture management regimes. The area planted is given in the table below.
Vineyard Hectares
|
Year |
Hectares Planted |
Year |
Hectares Planted |
|
1994 |
- |
2002 |
71 |
|
1995 |
18 |
2003 |
71 |
|
1996 |
18 |
2004 |
41 |
|
1997 |
36 |
2005 |
41 |
|
1998 |
36 |
2006 |
41 |
|
1999 |
57 |
2007 |
41 |
|
2000 |
57 |
2008 |
41 |
|
2001 |
57 |
2009 |
41 |
Sales Revenue
PLW continually monitors stock holdings and aligns these with bottled wine sales and forecasts. Wine identified as being surplus to requirements is made available for sale on the spot market which has been affected by the general slowdown in Australian wine sales. Export sales accounted for 73% (2008: 52%) of sales volume.
Sales Revenue by Volume
|
Year |
Bottled - Domestic |
Bottled - UK |
Bottled - Export excl UK |
Bulk - Current Vintage |
Bulk - Prior Vintages |
Total Revenue by Vol |
|
1994 |
16% |
15% |
4% |
44% |
21% |
100% |
|
1995 |
15% |
17% |
4% |
37% |
27% |
100% |
|
1996 |
15% |
18% |
5% |
44% |
18% |
100% |
|
1997 |
16% |
21% |
4% |
36% |
23% |
100% |
|
1998 |
21% |
33% |
5% |
27% |
14% |
100% |
|
1999 |
27% |
34% |
6% |
21% |
12% |
100% |
|
2000 |
36% |
33% |
11% |
8% |
12% |
100% |
|
2001 |
33% |
32% |
17% |
8% |
10% |
100% |
|
2002 |
37% |
28% |
17% |
10% |
8% |
100% |
|
2003 |
43% |
24% |
22% |
8% |
3% |
100% |
|
2004 |
37% |
25% |
26% |
7% |
5% |
100% |
|
2005 |
37% |
26% |
25% |
4% |
8% |
100% |
|
2006 |
32% |
27% |
29% |
5% |
7% |
100% |
|
2007 |
28% |
20% |
28% |
2% |
22% |
100% |
|
2008 |
29% |
19% |
33% |
6% |
13% |
100% |
|
2009 |
33% |
16% |
38% |
7% |
6% |
100% |
Sales Revenue by Dollars
|
Year |
Bottled - Domestic |
Bottled - UK |
Bottled - Export excl UK |
Bulk - Current Vintage |
Bulk - Prior Vintages |
Contract Services |
Sales Revenue $000's |
|
1994 |
32% |
26% |
6% |
24% |
12% |
0% |
12,979 |
|
1995 |
31% |
33% |
7% |
18% |
11% |
0% |
13,662 |
|
1996 |
31% |
27% |
7% |
22% |
8% |
5% |
17,167 |
|
1997 |
31% |
30% |
8% |
16% |
11% |
4% |
22,113 |
|
1998 |
32% |
43% |
7% |
10% |
5% |
3% |
31,243 |
|
1999 |
39% |
39% |
9% |
7% |
3% |
3% |
35,146 |
|
2000 |
46% |
31% |
16% |
2% |
3% |
2% |
36,406 |
|
2001 |
38% |
31% |
24% |
2% |
2% |
3% |
41,696 |
|
2002 |
41% |
27% |
25% |
3% |
2% |
2% |
44,762 |
|
2003 |
43% |
23% |
29% |
2% |
1% |
2% |
46,091 |
|
2004 |
38% |
23% |
33% |
2% |
2% |
2% |
51,250 |
|
2005 |
37% |
24% |
32% |
1% |
4% |
2% |
55,543 |
|
2006 |
34% |
24% |
37% |
1% |
3% |
1% |
57,592 |
|
2007 |
31% |
21% |
39% |
1% |
7% |
1% |
63,487 |
|
2008 |
33% |
11% |
45% |
3% |
6% |
2% |
61,999 |
|
2009 |
34% |
8% |
51% |
2% |
3% |
2% |
52,598 |
Branded domestic sales were down 20% in volume and 16% in value compared with the previous year. Although the decline in sales is predominantly attributable to lower sales of the Peter Lehmann Semillon, this decline appears to have slowed.
In the UK, sales volume has fallen over that of the previous year due to a strong downturn in sales to the supermarkets, although volumes in the restaurant, hotel and club segment increased by 50% which was very heartening.
Various countries in continental Europe have collectively become the Company’s largest export market with sales volumes mirroring domestic sales volume. Although the volume to the USA market was lower, the favourable exchange rate boosted sales revenue compared with the previous corresponding period. Sales to the Canadian market remained approximately at the same level as the previous year in both volume and value terms.
Bulk wine sales slowed considerably compared with the previous year as the Australian wine industry is an oversupply position.
The Barossa district is highly regarded as a world class producer of top quality fruit and PLW has sufficient volumes of high quality wine available which will greatly assist in meeting future sales aspirations. The outlook for the national 2010 vintage is quite uncertain as the industry faces difficult decisions regarding the required structural change to bring supply back into balance with demand.
Profitability
Management is cognisant of the need to balance volume growth aspirations with profitability targets. Funds for advertising and promotional support provided to gain access to retail shelf space are monitored carefully to avoid the trap of pursuing profitless volume.
Although the Group is fully cognisant of the need to carefully monitor inventory levels the imports of NZ Sauvignon Blanc has severely destabilised the white wine market and resulted in an oversupply situation. Although the Company continues to explore avenues to sell white wine stocks it made the prudent decision to make a provision for write-down of $992,000 for this inventory.
The reporting of certain assets and liabilities at fair value at reporting date introduced more volatility into the measurement of profit. This principle applies to biological assets - grape vines and their crops, as well as financial derivatives such as interest rate swaps and forward exchange contracts.
A measure of trading profitability EBIT expressed as a percentage of sales. The outcome is determined by the mix of revenue activities and their respective margins as well as PLW’s ability to contain costs and expenses. The 2004 EBIT % has been calculated exclusive of the takeover costs in order to compare the performance with prior years.
|
Year |
EBIT as % of Sales Revenue |
Year |
EBIT as % of Sales Revenue |
|
1994 |
17% |
2002 |
24% |
|
1995 |
16% |
2003 |
20% |
|
1996 |
19% |
2004 |
19% |
|
1997 |
20% |
2005 |
20% |
|
1998 |
18% |
2006 |
19% |
|
1999 |
21% |
2007 |
16% |
|
2000 |
23% |
2008 |
24% |
|
2001 |
23% |
2009 |
19% |
After tax profit and earnings per share are other indicators of profitability. The 2004 result was affected adversely by the takeover costs.
|
Year |
After Tax Profit $000's |
Basic Earnings per Share cents |
No of Shares at Balance Date 000's |
|
1994 |
1,352 |
7.1c |
18,930 |
|
1995 |
1,296 |
6.8c |
18,930 |
|
1996 |
1,807 |
9.4c |
19,170 |
|
1997 |
2,589 |
11.9c |
25,371 |
|
1998 |
3,464 |
12.2c |
30,946 |
|
1999 |
4,475 |
13.9c |
33,235 |
|
2000 |
5,009 |
15.1c |
33,260 |
|
2001 |
6,195 |
18.1c |
34,147 |
|
2002 |
6,915 |
19.0c |
36,359 |
|
2003 |
5,419 |
14.5c |
37,311 |
|
2004 |
3,830 |
10.1c |
37,969 |
|
2005 |
6,317 |
16.6c |
37,969 |
|
2006 |
5,748 |
15.1c |
37,969 |
|
2007 |
5,975 |
15.7c |
37,969 |
|
2008 |
9,604 |
25.3c |
37,969 |
|
2009 |
5,736 |
15.1c |
37,969 |
Another measure of profitability is the return on shareholders’ equity. This is measured as the after tax profit (ATP) expressed as a percentage of shareholders’ equity. The 2004 return on shareholders’ equity was affected by the takeover costs.
Return on Equity
|
Year |
ATP as a % of Equity |
Year |
ATP as a % of Equity |
|
1994 |
14% |
2002 |
16% |
|
1995 |
13% |
2003 |
11% |
|
1996 |
16% |
2004 |
7% |
|
1997 |
17% |
2005 |
12% |
|
1998 |
17% |
2006 |
10% |
|
1999 |
16% |
2007 |
10% |
|
2000 |
17% |
2008 |
14% |
|
2001 |
18% |
2009 |
9% |
Review of Financial Condition
Capital Investment and Structure
Contributed equity remained constant at $30.6M with the use of debt facilities increasing from $16.1M at 30 June 2008 to $20.1M at 30 June 2009.
At 30 June 2009 gearing (interest bearing debt as a percentage of capital employed) was 30% (2008: 24%). Interest cover (the number of times operating profit before interest and tax is greater than the total interest charge) moved to 6 times, from 15.2 times last year. This rate is comfortably ahead of the financial covenant level.
The nature of the industry requires the maturation of red and fortified wines beyond a 12 month period. The lower 2009 grape crop volume has offset the slowdown in sales and as a result the value of inventory holdings at 30 June 2009 of $49.8 is 1% higher than the 2008 level of $49.2M. The Group is aware of the need to balance the volumes of wines held for future sales.
Capital projects and working capital requirements have been funded by funds generated by operating activities. The relocation of the southern tankfarm to alongside the winery complex has almost been completed at an estimated total cost of $1.2M. The relocation is expected to improve productivity, reduce the use of water required to clean the wine lines and reduce electricity currently required to pump wine between the two separate locations.
Company tax for the Group of $2.5M at an effective rate of 30% has been provided on the operating profit before tax and compares with the company tax rate of 30%.
The Company has declared a final dividend of 4.8 cents and combined with the interim dividend of 3.5 cents totals 8.3 cents per share. It is in keeping with the board’s policy of dividends moving broadly in line with underlying earnings per share.
