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Little World Beverages Limited FUTURE GEELONG BREWERY SITE ANNUAL REPORT 10/11 ANNUAL REPORT 10/11 ABN 25 081 128 225 Little World Beverages Limited ABN 25 081 128 225 40 Mews Road, Fremantle WA 6160 T: + 61 8 9338 8500 F: +61 8 9338 8585 W: www.littleworldbeverages.com For personal use only Little World Beverages Limited Corporate This page has been intentionally left blank. ABN 25 081 128 225 Directory Directors Contents Ian Cochrane (Chairman) Howard Cearns Adrian Fini Chairman’s Letter 1 David Martin Jamie Tomlinson Review of Operations 2 Nic Trimboli Directors’ Report 6 Kylie Webster (appointed 19 August 2011) Company Secretary Auditor’s Independence Declaration 18 Jason Markwart (appointed 19 August 2011) Corporate Governance Statement 19 Chief Executive Officer Ross Sudano Financial Statements 24 Notice of annual general meeting Notes to Financial Report 28 The annual general meeting of Little World Beverages Limited Directors’ Declaration 66 will be held at 42 Mews Road, Fremantle WA 6160 Time 5pm Auditor’s Report 67 Date Thursday 3 November 2011 A formal notice of meeting is enclosed. ASX Additional Information 69 Principal registered office 1/7 Jones Street, O’Connor WA 6163 (08) 9338 8500 Share register Security Transfer Registrars Pty Ltd 770 Canning Highway, Applecross WA 6153 (08) 9315 2333 Auditor KPMG 235 St Georges Terrace, Perth WA 6000 (08) 9263 7171 Solicitors Freehills 250 St George’s Terrace, Perth WA 6000 (08) 9211 7777 Bankers National Australia Bank 50 St George’s Terrace, Perth WA 6000 1300 889 398 Stock exchange listing Little World Beverages Limited ordinary shares are listed on the Australian Stock Exchange. Website address For personal use only www.littleworldbeverages.com This Annual Report is a summary of the activities and financial position of Little World Beverages Limited (the Company or LWB) and its subsidiaries (together, the Group) for the financial year ended 30 June 2011. LWB is the parent Company of the Group and, unless specified otherwise, the text does not distinguish between the activities of the parent Company and those of its controlled entities. Reference in this report to a “year” is to the financial year ended 30 June 2011, unless otherwise stated. Chairman’s Letter It is my pleasure to present to you the 2011 Annual Report of Little World Beverages Limited (LWB). This was an excellent year …one nourished by the momentum of our quality beers, a well established brand position, and by the continued shift in consumer preference and retailer support to well differentiated products. The resulting consumer trial is setting an exciting platform of further opportunity. LWB highlights for the year included; – the White Rabbit Brewery reached economic volumes that contributed to increased profitability – an increase in distribution from an energetic and expanded sales effort – the breweries continuing to sharpen product quality and consistency across the range – the purchase of a strategic site in Geelong Victoria to establish an eastern seaboard brewing facility in support of White Rabbit and Little Creatures growth – the recruitment and development of talent, building organisational depth and capability With sales of Little Creatures in the major east coast markets growing at pace and the pleasing performance of the newer White Rabbit beers, the decision to establish a brewery at the Valley Mills site in Geelong for future production is economically sensible and environmentally responsible. Input supply is largely nearer to the point of production, and our national transport partner is within an hour. The necessary approvals for the plans and the associated funding strategy are well advanced and we are hopeful of commissioning the facility late in 2012, ahead of our previous forecast of mid 2013. It is fortunate that within an uncertain world economy our business is very localised. Whilst we have introduced our products to a number of international markets, the contribution to our numbers is immaterial. Our focus is very much on the opportunities within Australia. The financial results for the year were – a 24.1% increase in revenue to $70.0M (2010: $56.4M); – a 28.8% increase in EBITDA to $16.6M (2010: $12.8M); – a 35.6% increase in net profit after tax to $9.2M (2010: $6.8M); – a 41.0% increase in operating cash flows to $11.2M (2010: $7.9M); and – an increase in the annual dividend from 9.5 cents per share to 10.0 cents per share. I would like to congratulate Ross Sudano on his appointment to Chief Executive Officer after an impressive two years as Chief Operating Officer and on the wonderful results achieved by him and his team. Thank you to my fellow Board members for their expert contributions, and warm welcome to Kylie Webster who has been appointed to the Board of LWB. Kylie has worked with the company since the beginning in roles as Chief Financial Officer and more recently Company Secretary and has an intimate knowledge of the business currently and historically. We are all looking forward to exciting times ahead. Yours faithfully For personal use only Ian Cochrane Chairman 1 Review of Operations 2010-2011 Little World Beverages (LWB) is a brewing company focused on producing well differentiated beers with a consistent flavour and structure that ensures drinkers will want to come back for more. This founding philosophy across both the Little Creatures and White Rabbit brands remains the key driver behind the value created, and a reminder of the importance of the product itself that ultimately makes a difference. The past year’s operations again strengthened the company’s market position at the front end of a growing consumer trend for differentiated ales and lagers. Net Profit increased 35.6% to $9.2m off a 24.1% increase in Revenue to $70m, and the annual dividend increased from 9.5c per share to 10c per share. The White Rabbit sales volumes attained economic levels that enabled that brewery operation to contribute solidly to the company profit. The two products, dark ale and white ale, have both been through successful launch phases and are now showing sustained growth that is encouraging as the company considers the scale of further capacity expansion. Distribution gains achieved by an energetic and expanding sales team deliver financial upside, but importantly establish opportunity for greater awareness and trial…the building blocks of long term brand equity and shareholder value. For personal use only 2 The continued uplift in the sales of Little Creatures products in the east coast markets and the previously stated performance of White Rabbit has led the company to the logical step of seeking a major ROUND BREWERY STAMP manufacturing base on the eastern seaboard. EATURES In January of this year, the company acquired CR BR E E W L a 40,000sqm site in Geelong complete with T I N T I G magnificent character buildings and established L services capable of housing a strategic brewing P A R I and packaging facility. O L D A U C T R The team is working hard to gain approvals and T O F A U S project funding with a view to being operational by the end of 2012. The Geelong decision is supported by the desire to OVAL BREWERY STAMP reduce our carbon footprint by decreasing transport FOR NECK LABEL COMPENSATION milesFor personal use only for both input supply and product delivery. Given the national transport partner is based less than an hour from the site and maltings are in the immediate area, savings are also anticipated. 3 This year saw the appointment of Ross Sudano to the position of Chief Executive Officer after two years of delivering positive results as Chief Operating Officer. With a great team already behind him, Ross has led the recruitment and development of talent to build even greater organizational depth and capability that will be required for the company’s exciting next phase. The new Single Batch pint releases have worked to gain a place on the shelves and taps of trade customers to regularly offer the consumer unique styles to enjoy in amongst their Little Creature’s staples. Rogers’ Beer was added to the repertoire available in the proprietary pint bottle during the year. The company’s sales of Pipsqueak Cider and agency line Aspall Cyder from the UK continue to increase at exciting rates in what has become a very dynamic category. Internationally, export continues to the United Kingdom, Singapore, New Zealand, Canada, and will shortly commence to Hong Kong. The contribution from this activity is minimal and while global economic uncertainty and the less than favourable exchange rate exists the focus will remain on the domestic opportunity. For personal use only At the beginning of this review “the product” was mentioned as the key to success. The highlight of the year, though subtle, has been the sharpening of quality and consistency within the breweries which will be further demanded as the business grows. 4 Financial Results Total revenue for the year grew 24% to $70.0 million (2010: $56.4 million), while earnings before interest, tax depreciation and amortization (“EBITDA”) for the year of $16.6 million (2010: $12.8 million) was 29% above the previous period. The Company achieved a net profit after tax of $9.2 million (2010: $6.8 million) representing an increase of 35% on the previous year. Operating cash flow increased by 41% during the period from $7.9 million to $11.2 million. Earnings per share for the year ended 30 June 2011 was 14.4 cents (2010: 11.5 cents), and diluted earnings per share was 13.8 cents (2010: 10.0 cents). TOTAL SALES (CAGR