Foley Wines : Annual Report 30 June 2021

made by land & hand

ANNUAL REPORT | 2021

F O LEEYYWWI NIENSELSI MLIITME DI T|EADN |N UAANL NR EUPAOLR TR E2 P0 O21R T 2 019

Contents

Performance Highlights	3
Operating Performance	5
Chief Executive Officer (CEO) and Directors' Report	6 - 16
Directors' Responsibility Statement	17
Financial Statements
Income Statement	20
Statement of Comprehensive Income	21
Statement of Changes in Equity	22
Statement of Financial Position	23 - 24
Statement of Cash Flows	25
Notes to the Financial Statements	26 - 66
Independent Auditor's Report	67 - 71
Corporate Governance Statement	72 - 80
Statutory Information	81 - 87
Company Directory	88

F O L E Y W I N E S L I M I T E D | A N N U A L R E P O R T 2 0 21

made by	Foley Wines is a collection of iconic
wineries and brands from New Zealand's
land &	most acclaimed wine regions
hand	Each with a unique story of New Zealand to
	tell, our wineries and distillery are linked by a
	common unrelenting purpose; to make great
	wine that people love to drink around the world
	- made by land & hand.

1

F O L E Y W I N E S L I M I T E D | A N N U A L R E P O R T 2 0 21

Our Wineries & Distillery

F O L E Y W I N E S L I M I T E D | A N N U A L R E P O R T 2 0 21

Performance

Highlights

CONTINUED PREMIUMISATION

CASE SALES

DOMESTIC CASES

BOTTLED SALES REVENUE

OPERATING EARNINGS

DECLARED DIVIDEND

565,000 (up 6%)

170,299 (up 8.6%) $53,255,000 (up 6.6%) $8,036,000 (up 3.7%)

4 cents per share

fully imputed (up 33%)

Martinborough Vineyard	Te Kairanga	Lighthouse Gin
Martinborough	Martinborough	Martinborough

Grove Mill	Vavasour	Mt Difficulty
Wairau Valley, Marlborough	Awatere Valley, Marlborough	Central Otago

2021 has been a year of significant progress, against a background of uncertainty due to Covid-19 in terms of disruptions to key hospitality markets globally, unfavourable exchange rates and major logistical issues with global shipping and supply chains.

2

3

F O L E Y W I N E S L I M I T E D | A N N U A L R E P O R T 2 0 21

F O L E Y W I N E S L I M I T E D | A N N U A L R E P O R T 2 0 21

Bottled

Case Sales

BOTTLED CASE SALES (000'S) 12 MONTHS TO JUNE

	JUNE '21	JUNE '20	% CHANGE	JUNE '19	% CHANGE
New Zealand	170	157	+8.3%	118	+44.1%

Australia

135

132

+2.3%

138

-2.2%

USA/Canada

127

121

+5%

145

-12.4%

UK/Europe

99

92

+7.6%

97

+2.1%

Rest of World

34

31

+9.7%

24

+41.7%

TOTAL

565

533

+6%

522

+8.2%

Operating

Performance

ANOTHER RECORD YEAR

The Company reports a record operating profit before revaluations and income tax ("operating earnings") of $8,036,000 compared with $7,750,000 for the previous financial year.

As outlined every year, we are of the firm belief that operating performance (underlying profit) is the key metric to demonstrate the progress the Company is making due to the complexity around the accounting standards and fair value adjustments particularly with harvested grapes. The reasons are twofold. Firstly, this is how the Company budgets, determines pricing and manages performance. Secondly, the fair value of grapes is a timing issue. A gain in the year of harvest is reversed in the year of sale and, on the flip side, a loss in the year of harvest is reversed in the year of sale.

Profit for the period net of tax attributable for the shareholders was $3,866,000, down 44% compared with $6,921,000 the previous year. A significant influence is the fair value loss on harvested grapes of $1,709,000 compared with last year's gain $1,243,000 (as noted above this will be reversed when sold). Finally, last year the Company had a one-off deferred tax adjustment of $1,519,000 required due to the re-introduction of the depreciation on commercial buildings from the 2020/2021 tax year.

4

5

F O L E Y W I N E S L I M I T E D | C E O A N D D I R E C TO R S ' R E P O R T

F O L E Y W I N E S L I M I T E D | C E O A N D D I R E C TO R S ' R E P O R T

	Mark Turnbull, CEO and Director
CEO & DIRECTORS' REPORT	"Our premiumisation strategy
A Pivotal Year	continues to create opportunities
	for the business."

On behalf of Directors of Foley Wines Limited (FWL) we are pleased to present the 2021 operating results and annual report for the 12 months ended 30 June 2021.

COVID-19

The company experienced considerable disruption as a result of Covid-19. Disruption in markets such as United Kingdom and the United States, where we have considerable exposure to hospitality, airlines and cruise line businesses, meant a considerable downturn in sales through these channels. Furthermore, the Company incurred cost in relabelling wine which was intended for these markets, which is an expensive and time consuming process (different countries have different back label requirements).

The media has reported extensively on the issues with global shipping. While pre-Covid a booking could often be secured within two weeks, it has not been unusual for bookings on vessels to take 3 to 4 months. In addition, these bookings can change several times adding further complexity and cost.

The Company would have been much closer to 600,000 cases if these logistics issues had not prevented some orders being shipped this financial year.

CASHFLOW

Operating cash flow was $7,184,000 for the year, down from $10,792,000 the previous year. This year's cashflow was significantly influenced by a number of factors:

• A much stronger second half of the year, reflected in trade debtors being up $2.42m at year end.
• An increase in tax payments of $1.121m as a result of the uplift in profits in the year ended 30 June 2020.
• Grower payments of $953,000 brought forward into this financial year to assist growers that were impacted by the low vintage.

Capital expenditure was $5,626,000 for the year, compared with $4,417,000 the previous year. The major item of expenditure is the development at Te Kairanga in Martinborough. During this period the new underground barrel storage facility was completed in time for vintage at a cost of $3.5m. The balance of the capital expenditure was operating capital expenditure of $2.1m.

The Company is forecasting to increase this year's capital expenditure to approximately $4m (not including the next stage of development in Martinborough). A major focus of this expenditure is on vineyard investment, both in terms of replant programmes and machinery to increase productivity.

During the year the balance of the consideration for Mt Difficultly was paid of $5.2m which was financed from banking facilities and throughout the year $2m was repaid in terms of term borrowings.

The total dividend paid for the year was $1,972,000.

6

7