Cockatoo Ridge Shareholder Report For personal use only use personal For

2008 For personal use only The History of Cockatoo Ridge Wines Cockatoo Ridge Wines Limited was formed in February 2002, when it listed on Stock Exchange.

From the outset, it performed strongly in both its domestic and That has resulted in Cockatoo Ridge obtaining good penetration international environments, with the strength of the Cockatoo in both the United Kingdom and European markets, while also Ridge brand contributing above its weight in very competitive expanding sales in North America and selected Asian markets. markets. In , it has established its head office in Adelaide, while

For personal use only use personal For It has produced wines from its own vineyards and from private running a 25,000 tonne winery in the South Australian Riverland growers in the major wine producing regions of Australia, with and a highly functional cellar door and barrel storage facility the predominance of fruit sourced from within South Australia. outside Tanunda in the famed Barossa Valley.

Capitalising on its strong Australian brand, Cockatoo Ridge Shown above are the company’s bulk wine storage tanks at has developed and expanded its export markets, while also Monash in the Riverland. seeking additional opportunities to develop and market new brands using established domestic and international distribution networks. 1 Chairman’s Report to Shareholders The 2007–08 financial year was a very strong one for Cockatoo Ridge Wines in a year when the Australian wine industry saw its share of disappointments.

2007–08 was a year Financial Results for Year to 30 June 2008 ($’000) of strong growth in all sectors of the business, Actual 2007/2008 Historic Proforma 2007

coupled with the Sales Revenue 46,911 51,455 continuation of solid cash EBITDA 12,611 12,830 flow generation. EBIT 11,791 12,137

For personal use only use personal For With a record net after tax EBIT Margin 25.1% 23.6% profit of $7.0 million before Profit before tax and impairment 10,040 9,859 impairment of intangibles, the company focused on Tax Expense 3,033 2,957 achieving higher margin Net profit after tax and before impairment 7,007 6,902 wines sales. Impairment of intangibles 8,568 Profit before tax and after impairment 1,472 9,859 Loss after tax (1,561) 6,902

2 Chairman’s Report to Shareholders

At the end of 2007–08, the company had significantly Even emerging markets in Asia recorded mixed results with China strengthened its balance sheet and faces a strong period of down a massive 40% in volume but up 95.3% in value and Japan positive cash flow generation in the future. declining 8.6% in volume but increasing 3.7% in value.

The group had a significant inventory position valued at a cost The message from this is clear, at Cockatoo Ridge Wines the that will see it completely sold prior to the 2009 vintage at solid accent must firmly be on producing quality wines at reasonable margins. prices and then maximising our returns.

This will assist Cockatoo Ridge Wines to further reduce gearing With considerable pressure put on Australian wine producers, we levels and potentially see dividends restored during 2009. can expect increased competition, and prices remaining static.

As part of the restructure of the Cockatoo Ridge Wines business, The Directors underperforming brands valued at $8.6 million were written Throughout 2007–08, the Board of Cockatoo Ridge Wines off, with management focused on growing profitable worked diligently to further develop the company and to brands. provide a positive return to its shareholders. This decision was taken in light of the evolving basis During the year, the Board was changed with my of the company’s business grounded on bulk wine inclusion and the retirement of founding director shipments, it’s core “Cockatoo Ridge” label in the Mr N.J. Limb. domestic market and a limited number of new and reoriented brands sold at higher price points than some The Board comprises:

traditional lines no longer considered viable locally or in S.A. Richardson (Chairman) foreign markets. I.T. Limb Overview of Industry P.J. Perrin The Australian wine industry faced considerable upheaval in 2007–08 as it had the previous year, M.J.S. Drummond (also Company Secretary) largely due to a dramatic loss of production from the I take this opportunity to thank all past and present 2007 and 2008 vintages through drought and water directors for their endeavours throughout the year. restrictions in key irrigation areas and diminishing markets both within Australia and overseas. Looking Forward The 2008–09 outlook is promising with a very Within Australia, domestic wines sales increased solid first quarter performance from the branded by 3% over the previous year, according to business. Australian Bureau of Statistics figures, with white wine sales up 2.3% and red wine sales As previously mentioned, the Australian wine up 4.8%. industry will remain challenged on exports to traditional markets. These are only small gains, and are further compounded by the negative export Consequently, Cockatoo Ridge Wines picture. will continue to focus on new, emerging markets in Asia and continuing to grow its Latest statistics show a reduction in wine share of the branded domestic market. exports of 12.9% by volume and 13.3% by value over the previous year. The company will pay close attention to debt reduction, positive cash flow What is of greatest concern is that generation and further growth in Group much of the drop in exports came from profitability in the 2008–09 year. traditional markets — with the United Kingdom reduced by 4.2% in value, the While the challenges will be great and

For personal use only use personal For United States down 9.9%, Denmark off the demands ever-present, your Board 17% and the Netherlands declining by is extremely confident in the future of 4.5%. Cockatoo Ridge Wines and the returns the company can provide to its shareholders in Other key markets were down in volume the years ahead. but up in value including Canada (+ 1.6%), Germany (+ 30.4%) and New Zealand Stuart Richardson (+ 42.7). Chairman

3 Executives Cockatoo Ridge Wines Limited

Stuart Richardson Chairman In 2001, he joined Cheviot Bridge as Export Manager, remaining in that role until joining Cockatoo Ridge in the Mr Stuart Richardson is a well second half of 2006. known Australian businessman who joined the Cockatoo Ridge Board in Mr Perrin is a Board Member of the International Trade November 2007, and was appointed Advisory Council of the Australian Wine and Brandy Producers Chairman of the company in July Association. 2008. Damien Lister Chief Financial Officer Mr Richardson brought to Cockatoo Damien Lister graduated from the Ridge Wines extensive experience in University of South Australia as a capital markets in both Australia and overseas, particularly in Bachelor of Arts in Accountancy the fields of stockbroking and investment banking. and is accredited as a Professional He was a founding director of Blackwood Capital Limited, National Accountant by the National an Australian-based investment bank operating in capital Institute of Accountants. markets, advisory services and funds management in equities He joined the Australian wine and private equity funds. He remains a director of Blackwood industry in 1995 as an accountant Capital today. with Australian Vintners Limited before becoming part of the Mr Richardson holds a Bachelor of Business (Accounting) from accounting and financial control team with Simeon Wines when the Swinburne University of Technology, and is a that company took control of Austvin in 1999. CPA. Mr Lister joined Cockatoo Ridge Wines as financial controller Apart from his role as Chairman of Cockatoo Ridge Wines, he in 2002 before taking a short period in private practice rejoining is also Chairman of UnderCoverWear Limited. the company in 2005, again as Chief Financial Officer.

Peter Perrin Managing Director Alan Thompson National Sales Manager Regarded as one of Australia’s Alan Thompson is a career wine highest profile wine industry industry executive having joined corporate leaders, Peter Perrin was Cockatoo Ridge Wines in mid-2007. appointed Sales and Marketing As the head of its National sales Director at Cockatoo Ridge in August force, Mr Thompson is based 2006, before becoming Managing in Melbourne and has provided Director and joining the Cockatoo Cockatoo Ridge with considerable Ridge Wines Board in early 2007. expertise in wine marketing, having Mr Peter Perrin brought to the company a wealth of knowledge specialised in major account management for the past seven of the Australian wine industry. He started his wine industry years. career with Lindemans Wines in Adelaide in 1980. Having entered retailing in 1985, he initially worked for the Myer Appointed Victorian State Sales Manager for Lindemans in Group in a variety of roles for nearly a decade before entering 1984, he moved to the United States in 1986 as US Sales the wine industry through the Southcorp Wines group in 1999. Manager — an Australian pioneer in the tough US market and Initially a key account executive, Mr Thompson became introduced the renowned Lindemans’ Bin 65 Chardonnay to a Sales Manager in 2001, before taking national account that market. responsibilities first for Southcorp, then Wine Source In 1989, Mr Perrin returned to Australia, joining Wolf Blass (Evans & Tate) and later Casama before his Cockatoo Ridge Wines in Adelaide as Export Director, one year later moving appointment. to Victoria as Export Director for Mildara Blass following the

For personal use only use personal For Mr Thompson is widely regarded as one of the leading ‘Young merger of those two companies. Turks’ of sales in the Australian wine industry, providing the Six years later, he again moved to the USA, this time as North company with a wealth of corporate wine knowledge and American Sales Director for Mildara Blass before returning to national brand management. Adelaide in 2000, as International Trading Director for what had become Berringer Blass.

4 Executives

Mark Starick Operations Manager Roger Harbord Chief Winemaker Mark Starick is a highly qualified Roger Harbord is a renowned wine industry professional. He was Australian winemaker with extensive appointed as Operations Manager international experience to head the to oversee the overall wine making Cockatoo Ridge wine production operations and supply chain operations. management of the company as He joined Cockatoo Ridge Wines in it expands its operations within early 2008, bringing 30 years of wine Australia and through exports making experience to the company globally. and, as has been commissioned to further enhance the quality Highly qualified in wine production and with a wine-making and reputation of the wines in the Cockatoo Ridge portfolio. background, Mr Starick has more than 27 years of wine Backed by a Science Degree from Adelaide University and an industry experience having spent the majority of his working Oenology Degree from the Roseworthy Agricultural College, life with major wine companies including Fosters Group Limited Mr Harbord worked in Europe and the United States before and Southcorp Wines Pty. Ltd. joining Quelltaler (now Annie’s Lane) Winery in the Clare Valley Having begun his career with Southcorp as a cellar hand in as a winemaker in 1980 at a time when it was owned by giant 1979, he worked through the ranks to become a winemaker in French company, Remy Martin. 1999, before joining Cellarmaster Wines as Site Winemaker at In 1987, he moved to the Barossa Valley as winemaker its Dorrien Estate winery in the Barossa Valley in late 2000. for Basedow Wines before becoming Chief Winemaker at In addition to wine making responsibilities, he was responsible Cellarmaster Wines in 1992, overseeing the production of one for winery and site management during his employment with million cases of wine each year. In 1996 Mr Harbord became Cellarmasters. Chief Winemaker at Normans Wines, which is today under the Cockatoo Ridge umbrella, before establishing his own small In late 2006, Mr Starick joined the Fosters Group at Wolf Blass winery (Harbord Wines) in 2000, while also consulting to wine Wines, playing a heading role in that company’s Database companies in Coonawarra and the Barossa Valley. Management System managing the process of winemaking from the vineyard to the bottle. His input during the 2008 vintage was significant and best illustrated the specialist expertise and additional skills he has Mr Starick provides considerable skills in operational brought to Cockatoo Ridge Wines. management — key imperatives in an organisation that has merged two wine businesses and is quickly expanding its role John Harris Export Manager in national and international markets. John Harris joined Cockatoo Ridge Bob Hunt Chief Operating Officer Wines in 2006, following a career in wine sales and marketing. Bob Hunt is an established Australian business manager and financial Initially appointed South Australian controller who joined Cockatoo Sales Manager, Mr Harris was Ridge Wines as Chief Operating appointed Export Manager in 2007. Officer in mid-2008.

Mr Hunt brought to the position years of experience in a wide range of Ryan Villas Winery Manager industries including the aircraft, wine, Ryan Villas is a career winemaker, production and petroleum industries. born in the South Australian Mr Hunt spent 11 years with Mobil Oil while completing a Riverland having started his career Bachelor of Commerce Degree at Deacon University majoring with McGuigan Wines at Loxton in in accountancy. 1999, as a laboratory assistant.

For personal use only use personal For In recent years, he has worked for several international During his time at McGuigan Wines companies including setting up the Australian operations for he spent three years as an assistant Danish company, Hardi Sprays, and working as Financial winemaker and then two as senior Controller for Global Intertrade and Woodstock Wines. white winemaker, while completing a degree as a Bachelor of Oenology from the Charles Sturt University in Wagga Prior to joining Cockatoo Ridge, Mr Hunt was Chief Financial Wagga (NSW). Mr Villas joined Australian Commercial Wines Officer for Pilatus Aircraft, the Swiss-based company that has as a winemaker in 2006 around the time it was acquired by provided many aircraft for the Royal Flying Doctor Service from Cockatoo Ridge Wines and has since become Winery Manager its base at Adelaide Airport. at Monash in addition to his duties as a winemaker. 5 Managing Director’s Report 2007–08 was a highly successful year for Cockatoo Ridge Wines.

Over the year, Cockatoo Ridge Wines succeeded in significantly Valley) complex along with storage facilities, with excess office growing case sales and with the introduction of new products space in the premises sub-let. like the new sparkling wines and the upgrade in products under Over the coming year, the company emphasis will strongly be the “Cockatoo Ridge” label, it is expected the company will focused on developing a diverse wine business with market

achieve further increases in the year ahead. For personal use only use personal For leading positions in processing, bulk wine trading and a Behind the scenes, significant efforts were made to revamp the benchmark branded wine portfolio. company’s operational team with the introduction of new key staff including a Chief Winemaker. Production

At the same time, all management functions were relocated to The Company achieved a 23,000-tonne crush from the 2008 a new Adelaide office (see photo above), with Cellar Door and vintage as Cockatoo Ridge Wines moved to produce its own direct sales facility retained at the company’s Tanunda (Barossa wines at its Monash production facility acquired mid-2007.

6 Managing Director’s Report

This record vintage was achieved despite drought conditions success with growth in all market segments for bottled wine and tight water restrictions throughout the Riverland of SA. and the launch of new products.

Forward planning for the 2009 vintage that will ensure Cockatoo It achieved significant growth in “own label” packaged products Ridge Wines will have a similar crush, backed by processing into Australian wholesalers. agreements with a number of key customers. Cockatoo Ridge Wines also achieved good growth in sales of At the same time, the company has adopted a policy of the Norman’s branded products including the premium, super- withholding significant bulk wine stocks to mitigate the effects premium and ultra-premium “Chais Clarendon” labels. of the on-going drought and vineyard water supply problems It successfully launched the “NXG” range of premium varietal that threaten reduced yields. wines through a new national wholesale network while also Already work has been done in securing key contracts with relaunching the “Kelly’s Promise” range and the “Lone Gum” premium grape producers in the Riverland and other areas in range nationally as “banquet and event” wines. southern Australia. Towards the end of the financial year, the company With the accent firmly on further upgrading quality launched a new premium sparkling wine — “Cockatoo products in the Cockatoo Ridge range, the Monash Ridge Eleanora Sparkling Pinot Chardonnay.” winery is continuing to be improved to further This was followed by the highly successful launch of increase production capacity of quality wines. “Cockatoo Ridge Low Calorie NV Sparkling Brut”, Bulk Wine Sales with strong initial support achieved from major chains on the back of an innovative and highly targeted The company achieved continuation of robust bulk national marketing campaign. wine sales into export markets, backed by renewed supply contracts with major overseas wine buying Strong growth was also achieved for the JV brand groups. produced for Lion Nathan NZ with sales doubling initial forecasts. Bulk sales included new contracts to supply bulk wines in both Austria and Germany. Promoting Our Brands At the same time, the company successfully Over 2007–08, Cockatoo Ridge Wines adopted a developed bulk wine sales within Australia pro-active approach to promoting the company’s securing a number of new and significant brands — a direction that was met with strong contracts. support by the retail market.

Bottled Wine Sales The use of former Miss Australia and “” star, Ms Erin McNaught, as the Throughout 2007–08, Cockatoo Ridge “face” of Cockatoo Ridge Wines was highly Wines achieved a 25% increase in rewarding. overseas bottled wine sales. The initial campaign incorporated major Growth in this area was further poster and giant billboard advertising enhanced by the company’s ability using catch-lines like “McNaughty but to replace low margin product with Nice”, and “Who’s a Cheeky Girl”. channel specific, higher margin wines in a number of its existing Late in the year, the “Cockatoo export contracts. Ridge Low Calorie NV Sparkling Brut” campaign was launched, again Cockatoo Ridge Wines continued to having Ms McNaught as the “face” of develop its market in branded red Cockatoo Ridge Wines and using the wine sales to China, with double theme of “Light as a Feather” (which digit growth recorded. featured on each bottle) and the tag Late in 2007–08, the company

For personal use only use personal For lines of “Save a Cal or Two” and secured a new major United States “McNaughty But Light”. importer with an initial contract to This campaign was highly targeted and supply 50,000 cases of product included billboards, large signage in under the Terra Australis label. key locations, tram sides and even the Within Australia, Cockatoo Ridge sponsorship of the nation’s top racing Wines recorded considerable yacht (The Goat) on Sydney Harbour.

7 All campaigns have been backed by targeted Public Relations Before the end of the financial year, Mr Bob programs which also embrace the company’s corporate profile. Hunt joined Cockatoo Ridge Wines as Chief Operating Officer responsible for day-to-day All campaigns are designed to allow Cockatoo Ridge Wines to business operations for the company. cut through the market clutter of the wine industry in a fresh and innovative way as the company continues to be innovative and Well recognised, Mr Hunt has experience in a range of different with its promotion and its product lines. industries including the aircraft, wine, production and petroleum industries. Staffing Together with the existing Executive Team members they form The staffing of the new head office in Adelaide has now been a strong and cohesive unit that is well geared to drive Cockatoo completed, with an attractive staff share scheme implemented, Ridge Wines forward in a dynamic and profitable way. resulting in all key employees becoming fully paid shareholders.

The company now has a strong executive team in place, with Looking Forward new appointments during the first half of 2008 rounding out the Cockatoo Ridge Wines is well positioned for the future. staff.

For personal use only use personal For The company has a firm focus and direction, with the key to Mr Roger Harbord joined the company during vintage 2008 to success being the continued development of traditional markets head the Cockatoo Ridge Wines wine making operations. and the further development of those in South-East Asia plus new markets in emerging countries. Mr Harbord brought to the company 30 years of wine making experience and has embarked on further enhancing quality This strategy is strongly underlined by market trends, with only and the reputation of the wines in the Cockatoo Ridge Wines South-East Asia (up 2.6% by volume) and new markets (up 7%) portfolio. currently providing growth for exports.

8 Domestically, strong growth is expected in the sparkling area — a traditionally strong base for Cockatoo Ridge Wines — and low-alcohol, low-calorie wines.

Over the next 12–18 months, Cockatoo Ridge Wines plans to roll out a range of low alcohol, low calorie wines to meet growing consumer demand.

The future outlook looks very promising and, while competition will be fierce, Cockatoo Ridge Wines now has the team and the products in place to meet challenges head on

and produce good returns for its shareholders. For personal use only use personal For Peter Perrin Managing Director

9 For personal use only use personal For

10 The Cockatoo Ridge Wine Making Facilities The major Cockatoo Ridge winery facility is located outside Monash in the South Australian Riverland.

Established in 1999 as a quality, high volume-low-cost The winery today has capacity for around 21 million litres of production facility, it was bought by an emerging small wine wine, held in a variety of large, refrigerated storage tanks. company (Rivers Wines) in 2002, with the production facility In 2008, the company processed in excess of 23,000 tonnes of slowly expanded to produce 9,000 tonnes of fruit by 2005. fruit in the largest crush yet undertaken.

For personal use only use personal For In February 2006, it was bought by Australian Commercial With around another nine million litres of wine storage at Wines (‘ACW’), with production facilities significantly expanded Cockatoo Ridge in the Barossa Valley, the company today has to allow the crushing of 18,000 tonnes of fruit from the 2006 storage for around 30 million litres of wine in stainless steel vintage. tanks. In addition, storage capacity was significantly increased to allow The long-term aim is to have one third of production supplied the facility to store a further 22,000 tonne of fruit bought from through contracted growers, one third through existing other wine companies. contracts and one third on a yearly speculative basis. In 2007, ACW was acquired by Cockatoo Ridge Wines, with the winery re-badged as Cockatoo Ridge Winery in 2008. 11 For personal use only use personal For

12 Corporate Directory Cockatoo Ridge Wines Limited ACN 008 095 207 and Controlled Entities

Company Secretary Melvyn J.S. Drummond

Registered Office Solicitors Level 7 Exchange Tower Cowell Clarke 530 Little Collins Street Level 5 Melbourne Vic 3000 63 Pirie Street Tel (03) 9909 7625 Adelaide SA 5000 Fax (03) 9909 7585 Tel (08) 8228 1111

Share Registry Bankers Computershare Investor Services Pty Limited GE Commercial Corporation (Australia) Pty Ltd Level 5 Level 13 115 Grenfell Street 255 George Street Adelaide SA 5000 Sydney NSW 2000 Tel (08) 8236 2300 Home Exchange Auditor Australian Securities Exchange Limited Deloitte Touche Tohmatsu Level 19 Level 17 91 King William Street 11 Waymouth Street Adelaide SA 5000 Adelaide SA 5000 Tel (08) 8407 7000 Cellar Door Barossa Valley Way Tax Agents And Advisors Tanunda SA 5352 Deloitte Touche Tohmatsu Tel (08) 8563 6400 Level 17 11 Waymouth Street Website Adelaide SA 5000 www.cockatooridge.com.au Tel (08) 8407 7000 For personal use only use personal For Trading Code Principal Administration Office CKR Level 1 71–73 Fullarton Road Kent Town SA 5071 Tel (08) 8304 8700 For personal use only use personal For

Cockatoo Ridge Wines Limited

ABN 72 008 095 207

Level 7, Exchange Tower 530 Little Collins Street Melbourne Vic 3000 Australia

T +61 3 9909 7625 F +61 3 9909 7585 [email protected] www.cockatooridge.com.au 14