ANNUAL REPORT 11/12 ABN 25 081 128 225 For personal use only Little World Beverages Limited ACN 081 128 225 Corporate Directory Directors Contents Ian Cochrane (Chairman) Howard Cearns Adrian Fini Chairman’s Letter 1 David Martin Jamie Tomlinson Directors’ Report 2 Nic Trimboli Kylie Webster Auditor’s Independence Declaration 13 Company Secretary Jason Markwart Corporate Governance Statement 14 Chief Executive Officer Financial Statements 19 Ross Sudano Principal registered office Notes to Financial Report 23 1/7 Jones Street O’Connor WA Australia 6163 Directors’ Declaration 63 (08) 9338 8500 Auditor’s Report 64 Share register Security Transfer Registrars Pty Ltd 770 Canning Highway ASX Additional Information 66 Applecross WA 6153 (08) 9315 2333 Auditor KPMG 235 St Georges Terrace Perth WA 6000 (08) 9263 7171 Solicitors Freehills 250 St Georges Terrace Perth WA 6000 (08) 9211 7777 Bankers Commonwealth Bank of Australia 150 St Georges Terrace Perth WA 6000 1800 019 910 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 2012. 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 2012, unless otherwise stated. Chairman’s Letter It is my pleasure to present the 2012 Annual Report for Little World Beverages Limited (“the Company”). Building on the results of recent years, the business has had another excellent year with a very strong result delivered on the back of increased market representation and continued consumer interest in our beers and ciders. Our commitment to producing the highest quality beers and ciders has resulted in more consumers enjoying our products than ever before, including within our venues which continue to showcase the passion of our people in everything they do. The financial results for the year were; – a 22.5% increase in revenue to $85.8m (2011: $70.0m) – a 21.7% increase in ebitda to $20.2m (2011: $16.6m) – a 26.5% increase in net profit after tax to $11.6m (2011: $9.2m) – a 38.6% increase in operating cash flows to $15.5m (2011: $11.2m) – annual dividend payments maintained at 10 cents per share. Construction of the Geelong brewery is well under way with commissioning expected in the first half of 2013. This custom designed brewery will provide an important strategic production base for the continued growth of Little Creatures, White Rabbit and Pipsqueak products in our key east coast markets. On 18 June 2012, the Company announced that it had entered into a Scheme Implementation Agreement with Anglo-Gaelic Investments Pty Ltd (a wholly owned subsidiary of Lion Pty Ltd) (“Lion”) which, subject to shareholder approval, will see Lion acquire all the issued shares in the Company that it does not already own for a total payment of $5.30 per share, a significant premium to the pre announcement closing price and at a very compelling multiple of earnings compared to like industry transactions. If successful, our products will be given the opportunity to achieve even higher levels of recognition and success by utilising Lion’s scale, market presence and operational expertise. As a result, the non Lion directors have recommended that shareholders vote in favour of the scheme to be put to shareholders shortly. If shareholders approve this transaction and the scheme becomes effective the company will be delisted from the ASX and become a wholly owned subsidiary of Lion. However, until the scheme becomes effective, the Directors and Management team are focused on ensuring the business continues to drive toward the objectives we have set and implement the strategies we have in place. On behalf of the Board of Directors, I would like to congratulate Chief Executive Officer, Ross Sudano and his talented team of people who have done a remarkable job and have again delivered an excellent result of which we can all be very proud. Yours faithfully Ian Cochrane Chairman 8 August 2012 For personal use only 1 Directors’ Report For the year ended 30 June 2012 The directors present their report together with the financial report of Little World Beverages Limited (the Company) and of the Group, being the Company and its subsidiaries for the year ended 30 June 2012 and the auditor’s report thereon. Directors The directors of the Company at any time during or since the end of the financial year are: Ian Cochrane (Chairman) Howard Cearns Adrian Fini David Martin Jamie Tomlinson Nic Trimboli Kylie Webster (appointed 19 August 2011) Principal activities During the year, the principal continuing activities of the Group consisted of brewing and distributing beer and cider nationally and internationally from operations in Fremantle, Healesville and Melbourne. The Group also commenced the development of its new brewery facility located in Geelong, Victoria. Dividends Dividends totalling $6,522,522 (2011: $6,522,522) were paid during the year. No further dividends were declared during the year ended 30 June 2012. Dividends were fully franked at 30%. No further dividend has been declared subsequent to the end of the financial year, however under the proposed Scheme with Anglo-Gaelic Investments Pty Ltd (a wholly owned subsidiary of Lion Pty Ltd) (“Lion”), a special dividend of up to $0.20 per share is contemplated to be declared around 17 September 2012, subject to the receipt of a favourable class ruling (or a draft of it which is reasonably satisfactory to the Company) from the Australian Taxation Office. Operating and financial review The Group continued to conduct its operations from the Little Creatures Brewery in Fremantle, Western Australia and the White Rabbit Brewery in Healesville, Victoria. These operations are supported by the administration and packaging facility in O’Connor, Western Australia and the Dining Hall venue in Fitzroy, Victoria. Both breweries were in production for the full year, supplying the national market through a dedicated sales team and direct to customers through the Fremantle, Healesville and Fitzroy venues. Development of our Geelong brewery commenced during the year with pleasing progress being made towards the scheduled opening date in the first half of calendar year 2013. On 18 June 2012, the Company announced it had entered into a Scheme Implementation Agreement with Lion which would see Lion acquire all the issued shares that it does not already own, subject to shareholder approval. The Group’s operating profit after income tax for the year was $11,650,863 (2011: $9,210,063). For personal use only 2 Significant changes in the state of affairs There were no other significant changes in the nature of the activities of the Group during the year. Matters subsequent to the end of the financial year With the exception of the following matter, no matters or circumstances have arisen since 30 June 2012 that have significantly affected or may significantly affect: a) the Group’s operations in future financial years, or b) the results of those operations in future financial years, or c) the Group’s state of affairs in future financial years. Implementation of Scheme of Arrangement with Lion Pty Ltd On 18 June 2012, the Company announced it had entered into a Scheme Implementation Agreement with Lion, which would see Lion acquire all of the unissued shares in the Company that it did not already own. On 8 August 2012, the board approved a copy of the Scheme Booklet to be lodged with the Federal Court of Australia, ahead of its distribution to the shareholders in the Company. Likely developments and expected results of operations The Group will continue to operate its existing facilities, to pursue new product development and to expand its distribution of packaged and draught beer and cider both nationally and internationally. Furthermore, the Group expects to complete the construction and commissioning of the Geelong brewery which will see production of some products relocated to the Geelong brewery. Subject to the approval of the Scheme with Lion, Lion have indicated that they will seek to remove the Company from the official list of the Australian Securities Exchange (“ASX”). Lion have also indicated that they intend to continue to maintain the operations of the business if the Scheme is approved. Environmental regulation The Group’s operations are subject to environmental regulations in relation to noise, odour and waste management. The regulations are monitored by local councils in accordance with applicable legislation. The management of the Group monitors compliance with environmental regulations. The directors are not aware of any material breaches during the financial year covered by this report which have not been rectified. Rounding of amounts to the nearest thousand dollars The Group is of a kind referred to in ASIC Class Order 98/100, dated 10 July 1998 and in accordance with that Class Order amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. For personal use only 3 Directors’ Report (continued) For the year ended 30 June 2012 Information on Directors The directors of the Company at any time during or since the end of the financial year are: Name, qualifications Experience, special responsibilities and other directorships and independence status Ian Cochrane Corporate Lawyer. Extensive experience in asset and company acquisitions, capital BCom LLB raisings, and publicly listed company governance and shareholder relations.