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McGuigan Simeon Wines' financial report
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McGuigan Simeon Wines Limited today released its results for the financial year ended June 30, 2006.
Key points • Sales down 1%, with significant increase in export sales offset by a decrease in vineyard contracting revenues and domestic sales • Results affected by global oversupply and margin pressure • Following a detailed review, stock written down by $29 million after tax increased from previous estimate of $20 million provided in May • Cash flow from operating activities up $30.8 million • Net debt reduced by $22.7 million • NPAT (pre stock write down) down 54% to $17.5 million • No final dividend.
EBITA • EBITA decreased by 40% to $34.4 million due to reduced margins in all divisions resulting from oversupply, retail consolidation and severe competition.
Sales • Double digit volume growth to 187.1 million litres, up 10% on the previous year with significant increase in export volumes and contract processing. • Domestic volumes fell 6% to 74.0 million litres. The Australian retail environment is extremely competitive with wine companies fighting to clear stocks on the domestic bulk wine market. The brand market was characterised by discounting and cleanskins. Continuing retail consolidation has further pressured margins. • Contract processing increased 27% to 36.4 million litres due to the establishment of further processing agreements.
Export • Export volumes improved 21% to 76.7 million litres and underpinned McGuigan’s result. • Sales into the UK were up 69% to $145.8 million based on strong brand growth into major retail outlets. Bottled growth was up 100%. • Sales into the US were down by 50% to $25 million, partly as a result of a change from bottled to bulk supply arrangements for Black Swan. • Sales into Europe and Asia were below last year due mainly to reduced volumes of bulk wine shipments. • Sales into New Zealand were also lower due to a reduction in bulk wine sales and as a result of the competitive market. • Australian dollar strength increased export attractiveness of producers from other countries including USA, South Africa and South America. Vineyard development and management • Revenue from vineyard management fell $6.7 million reflecting a reduction in vineyard development income.
McGuigan Simeon Wines Ltd Chairman, David Clarke, said that while the company’s 2006 results were disappointing ‘McGuigan Simeon was in sound financial shape’.
McGuigan Chairman, David Clarke, said that the company didn’t see any upturn in the cycle before 2009.
“We believe that market and industry conditions will continue to be very competitive.
“In the 2007 financial year we are targeting net profit to be similar to the 2006 year, before significant items. But we are very cautious given the rapid weakening in market conditions that has occurred in the past four to six months. Thus we see downside risk which could impact our targets.
“We will update shareholders with our latest views at the Annual General Meeting in November.
“We will continue to focus on things we can control, driving costs down and building on the core strengths of the company.”