ACN o52 179 932 ANNUAL REPORT 2004 Table of Contents 3 Chairman’s Report 5 Managing Director’s Report - 2004 The expanded company takes shape. 8 Company Profile 10 Corporate Governance Statement 16 Shareholders’ Information 17 Directors’ Report 22 Independent Audit Report 24 Financial Statements Highlights Directors David S Clarke The successful merger and seamless integration of the Ian D Ferrier Miranda businesses to create: Nicholas F Greiner Perry R Gunner Australia’s fifth largest wine company. Christopher L Harris Brian J McGuigan Australia’s second largest listed pure wine company with a market capitalisation in excess of $500m at Company Secretary 30th June 2004 Julie Thomas Net profit increase of 25% Chief Financial Officer Michael H Noack Basic earnings per Share increase of 15% Auditors Dividend per Share increase of 18% Deloitte Touche Tohmatsu 190 Flinders Street ADELAIDE SA 5000 Bankers National Australia Bank 33/500 Burke Street MELBOURNE VIC 3000 Share Register Computershare Registry Services Pty Ltd 115 Grenfell Street ADELAIDE SA 5000 Ph: +61 8 8236 2300 Fax: +61 8 8236 2305 Head Office 170 Greenhill Road PARKSIDE SA 5063 Notice of Annual General Meeting Ph: +61 8 8172 8333 Fax: +61 8 8357 8544 The Annual General Meeting of Shareholders of Registered Office McGuigan Simeon Wines Limited will be held at 170 Greenhill Road Masonic Centre, Sydney PARKSIDE SA 5063 on 18 November 2004 at 3:00pm. Ph: +61 8 8172 8333 A formal notice of the meeting and Proxy Form is Fax: +61 8 8357 8544 enclosed with this Annual Report. Web: www.mswl.com.au 2 McGuigan Simeon Wines Limited - Annual Report 2004 McGuigan Simeon Wines Limited - Annual Report 2004 3 Chairman’s Report costs, winery costs, packaging, In the year ended 30 June 2004, the Company’s distribution and overheads; net profit after tax rose to $40.2 million, a 25% • a strategy of having a percentage of increase over the 2003 result. This is our twelveth our business based on long term wine consecutive record annual profit result, an supply/processing agreements which achievement of which we are very proud. provides security and a steady income stream; 2004 Company performance • overriding focus on value creation for our shareholders. In the past year we have continued to witness a great deal of change in the Australian wine The evidence of this strategy is again reflected in industry: the 2004 result: • The consolidation process at the • Revenue up 10% to $323.8 million; domestic retail level has continued, • EBITA up 14% to $66.9 million reinforcing the decision made by (excluding loss of $2.4m on sale of this company to merge with Simeon vineyards); Wines Limited in 2002 and to acquire • Net Profit after tax and amortisation up Miranda Wines Pty Ltd in 2003; 25% to $40.2 million; • The oversupply of grapes continues with • Earnings per share up 15% to 38.2 cents a record crush of 1.8 million tonnes in per share; 2004; • Total 2004 dividend per share up 18% • The value of the Australian dollar to 23.5 cents per share. compared to our major export markets This 12th year record trading result was based remains relatively high ; on the continued growth from our operating • A decline in the average price per litre of divisions. In 2004 the most significant wine exported to the United Kingdom. contribution improvements were made from: The Australian wine industry is in a period of • Domestic Bottled sales, which rose by adjustment resulting from abundant red wine, 108%; reduced profitability, unfavourable exchange • Export bottled branded sales , which rates and a shift in the value mix for Australian rose by 24%; wine exports. Nevertheless, the Australian wine • Vineyards (leased/owned) which industry’s competitive advantages are still there. increased by 23%. Now, more than ever, it is essential for a wine The increase in domestic bottled sales is due company to be positioned so that it can not partly to the acquisition of Miranda Wines in only deal with the current climate within the October 2003. Australian wine industry but to grow. There is no doubt that during adversity, the strong get Even though not all our divisions performed to stronger and the weak get weaker. At McGuigan expectation, the overall profit result was in line Simeon we believe that we have a strategy that with this company’s expectation. This illustrates will make this company even stronger : that the company’s strategy of diverse revenue streams is appropriate for long term sustainable • the strategy of creating a strong and profit. diverse income stream has continued and will continue into the future; I am very pleased with the result particularly • an ongoing focus on being the lowest when you take into account : cost producer, with priority on grape • Global oversupply of wine; 2 McGuigan Simeon Wines Limited - Annual Report 2004 McGuigan Simeon Wines Limited - Annual Report 2004 3 Chairman’s Report (Cont.) • aggressive pricing strategies from Finally, on behalf of the board and all competitors in both the domestic and shareholders, I congratulate and thank our international markets; Managing Director, Brian McGuigan and all the • adverse exchange rates. company’s management and employees for the excellent result achieved in 2004. I am also pleased to report that the integration of the Miranda Wines business proceeded seamlessly with no loss of business momentum. In fact we have been able to extract maximum synergies from this acquisition and at the same time enhance the financial performance of the David Stuart Clarke AO Miranda business. Chairman Miranda is now a critical part of the McGuigan Simeon business. It provided the company with immediate access to the domestic cask business and the ability to increase our domestic branded business. The Future Whilst the wine industry is in a new phase of development in terms of aggressive pricing strategies, oversupply of wine and on going consolidation, it is important to note that the Australian Wine industry continues to grow, both domestically and internationally. Domestic sales volume has been increasing by 4% per annum and export sales volumes 14%. Whilst volume increases have been evident, the average selling price per litre of wine in both the domestic and export markets has been declining. To maintain profitability, wine companies must meet the challenges of reducing costs and at the same time improving quality. McGuigan Simeon Wines is structured to meet these challenges with increased product quality, sustainable cost control and security of distribution channels as our main focus. There is no doubt that the next few years will be extremely challenging. Also, as the company continues to meet these challenges, we will remain alert to potential acquisitions and ventures which will add value for shareholders. The acquisition of Miranda Wines during the year is an example. 4 McGuigan Simeon Wines Limited - Annual Report 2004 McGuigan Simeon Wines Limited - Annual Report 2004 5 Managing Director’s Report 2004 – The expanded company takes shape Background The 2004 year has been one of the most exciting, increase over the prior year sales of $37.1 million. successful and rewarding years of the company’s 12 Whilst the acquisition of Miranda contributed year history. The company is now one of the most significantly to this growth, Icon Brands also technically competent and acknowledged wine performed extremely well. companies in Australia. This achievement was recognised by Winestate Magazine, awarding Australian Branded Sales McGuigan Simeon Wines Limited the trophy for 80 Australia’s Wine Company 70 of the Year in December 60 2003. 50 40 30 20 The Busby Trophy for the 10 Australian Wine Company of 0 the Year Award. $m 1996 1997 1998 1999 2000 2001 2002 2003 2004 The merger between Brian McGuigan Wines Limited The success of MSWL in the domestic market is based and Simeon Wines Limited was the marriage of two on many contributing factors. complimentary businesses, and that took place in July 2002. The combination of an efficient producer, Firstly, continual focus has been given to maintaining Simeon Wines, and an effective marketer, McGuigan and expanding our existing brands. Wines, provided an excellent launching pad for the The acquisition of Miranda Wines company’s next development phase. allowed McGuigan Simeon Wines Limited to enter the cask and This phase emerged during the financial year 2004, sparkling wine market for the first when the company purchased the national wine time, with a range of products that producer, Miranda Wines Pty Ltd. McGuigan Simeon had already proved successful in the Wines Limited did not previously participate in cask domestic market. Simultaneously, and sparkling wine markets until this time because new innovative products have been of the company’s commitment to table wine in the developed for both the Icon and bottle and in bulk. The acquisition of Miranda Wines Miranda sales teams. For example, Sandra’s 2LP (2 Limited was a strategic move to compliment and litre pack) was released into the market in May 2004 expand the range of branded products marketed and has shown great success to date. The launch of a throughout Australia and in the international markets. Pinot Grigio by Icon Brands under the McGuigan label, and Summertime under the Miranda label, have all I am very pleased to be able to report that domestic seen successful launches. sales revenue, as a result of the combination of the three companies, has been very successful. We now The development of our existing ranges has also have a complimentary range of products available occurred by the re-packaging of the Bin range through our two marketing arms to satisfy the needs as well as the Earths Portrait range. We have of our domestic customers.