Cockatoo Ridge Shareholder Report For personal use only 2008 For personal use only The History of Cockatoo Ridge Wines Cockatoo Ridge Wines Limited was formed in February 2002, when it listed on the Australian 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 Australia, it has established its head office in Adelaide, while For personal use only 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 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 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, Melbourne 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 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.