Australian Vintage : AVG AGM Addresses & Presentation

Company Announcements

Australian Securities Exchange

24 November 2021

AVG AGM Addresses and Presentation

Australian Vintage Limited (ASX: AVG) will today address shareholders at its Annual General Meeting to be held virtually, commencing at 2.00 pm Australian Eastern Daylight Saving Time.

Attached is a copy of the addresses to be delivered by Mr. Richard Davis, Chairman, Mr. Craig Garvin, Chief Executive Officer and Mr. Michael Noack, Chief Financial Officer and presentation material.

This information will provide shareholders an update on the company's financial performance and key strategies.

This announcement was authorised for release by the AVG Board.

Further information
Craig Garvin	Michael Noack
Chief Executive Officer	Chief Financial Officer
02 4998 4199	08 8172 8333

Australian Vintage Ltd

ABN 78 052 179 932

275 Sir Donald Bradman Drive, Cowandilla SA 5033 Australia

www.australianvintage.com.au

2021 Annual General Meeting

Chairman's Address - Richard Davis

Australian Vintage is well established in the strategic journey of putting the consumer at the heart of everything we do. The Company has made real progress in core capability and is well placed to deliver growth over the coming years. We have a culture that embraces continuous improvement, and we are a values based organisation. Our people are our greatest assets.

Financial year ended June 2021 has again been a challenging year globally. The COVID-19 pandemic continues to disrupt the lives of so many with challenging working conditions and the way we all live our lives. In the Australian wine industry, we have also seen the significant disruption to sales to mainland China as a result of the tariffs imposed by China. Sales of Australian made wine to China have basically stopped since the higher tariffs were imposed.

Despite these challenges and as a result of our limited reliance on the China market, the Company was able to report a 79% improvement in profit. The significant improvement in AVL's core business in Australia and UK together with improved production efficiencies enabled AVL to record a profit of $19.6 million. This profit is the highest the Company has achieved over the last 10 years.

The record result was very pleasing with continued growth in our portfolio of key brands. During the 12 month period, sales of our pillar brands of McGuigan, Tempus Two, Nepenthe and BVWC grew by 12% to $195.1 million. Our CEO, Craig Garvin will provide more information on the growth of these brands in his presentation.

We are committed to our strategic plan, and it is showing positive signs for our future.

Earnings per share improved by 79% to 7.0 cents per share and the Return on Capital Employed (ROCE) improved by 70% to 7.5%.

During the year we increased our investment in our brands with marketing spend up 46% with most of the increased marketing spend occurring in the second half of the financial year ended June 2021. What is also pleasing is that because of increased investment in our staff and our continued focus on our customers, the Company was awarded the number 1 wine supplier to the Australian retail industry by the Advantage Survey. This Survey is a comprehensive balance scorecard rating of all suppliers across the marketplace as rated by the customer. On top of that award, we also received the Supply Chain Manager of The Year Award at the Drinks Association Australian Drink Awards. These awards are a significant achievement for AVL's market reputation and credibility.

Through the outstanding efforts of all our staff we continued to operate and improve our business.

The pandemic is well into its second year and will continue to impact our consumers, customers and our suppliers. In many markets the disruptions caused by COVID-19 will continue into next year despite vaccination programs gaining momentum around the world.

Across all our operations we have supported and encouraged the vaccination rollout recognising that it is the pathway out of the pandemic. To ensure that we continue to have a safe workplace we have introduced a policy that all our employees be fully vaccinated by the 1st of December 2021. Overall, this has been well received by our staff at Australian Vintage Limited.

Our staff are to be commended on how they continue to demonstrate care for each other, as well as our consumers, customers, and partners.

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Increasing awareness of the threats to our environment and the importance of sustainability are growing the expectations of our consumers, customers, and partners around the world.

Sustainability is fundamental to AVL as we strive to be world class in water management, renewables, and our Carbon Footprint. As a key step forward our major wine processing facility in Australia is powered by 100% wind and solar energy sources including an onsite solar farm.

In this coming year we will be focusing on a detailed sustainability study with the aim of setting realistic objectives to be carbon neutral in everything we do. Integral to this study is the development of a climate change policy which will establish targets which can be monitored against actual performance.

The Company will continue to mitigate climate change risks through:

• ongoing investment towards innovative water and power solutions to reduce AVL's environmental footprint and save on costs;
• working closely with the Bureau of Meteorology to better understand short and long term weather patterns and their impacts on AVL; and
• working with key suppliers to ensure that they are managing climate change in a way that is commensurate with AVL's policy and approach.

The Company recognises that good management of our social, environmental and governance responsibility is integral to our future growth and prosperity. It is not only important to underpin the reputation and competitive appeal of our brands, but also to evolve our culture with appropriate values. The success of this Company is underpinned by being sustainable in everything we do.

As a result of our ongoing focus on managing our financial position, the Company announced in May 2021 a capital restructure involving a return of capital and share consolidation. This was successfully completed in early July 2021 and resulted in all shareholders receiving 8.5 cents per share and a 10% reduction in shares held. The combined impact of the two corporate actions had the same effect as a share buyback of 1 share for every 10 for 85 cents. This return was in addition to this year's declared dividend of 2.7 cents per share.

Our business has made a major step change over the last few years, and we are now recognised as a major branded wine business with sustainable strategies that will continue to grow this business. As we grow our branded business the agricultural risks become a smaller part of our total business. In recognition of this the board has today approved a dividend policy which will apply to all future dividends. The policy states that the Company will endeavour to maintain a dividend payout ratio of between 50% and 70% of net profit after tax each year, subject to the recognition of profit and availability of cash for distribution, funding requirements and the operating and investment needs of the Company.

Australian Wine Industry

For the year ended September 2021, Australian export sales decreased by 24% to $2.4 billion, and volume decreased 17% to 638 million litres. This is 214 million litres less than the volume of Australian wine exported in 2018.

The decline in export sales is due to the decreased sales to mainland China, following the imposition of significant import tariffs on Australian wine. Worldwide shipping delays linked to COVID-19 restrictions and BREXIT have also impacted export sales.

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Exports, excluding mainland China, increased by 9% in value and 5% in volume. The UK is now the biggest export market by value and volume.

The total grape crush for 2021 was 2.0 million tonnes, a record for this industry. The grape crush was 31% above the 2020 harvest and 17% above the 10 year average. All regions experienced a substantial increase in tonnes.

With the record crush and a significant decline in export sales we are expecting that there will be around 300,000 tonnes of excess wine in the Australian wine industry. Furthermore, with China being predominantly a red wine market, almost all these excess tonnes will be red wine.

As a result of the excess red wine there will be downward pressure on all red grape prices. We have already seen this with red grape prices declining by 3 to 23% during the 2021 vintage. We expect red grape prices to decline even further in next year's vintage. White grape prices are expected to increase slightly as a result of some shortages of key white variety grapes.

In terms of what this company's upcoming vintage is looking like, I can report that the recent storms that passed through the Barossa and the Riverland have not materially impacted our vineyards. However, a frost event early in the growing season has impacted one of our Riverland vineyards. Our CEO will provide further details on this frost event during his presentation.

Water availability is very good in the inland regions and as a result the cost of water has reduced. At this stage, we are expecting an average yield from our vineyards.

On behalf of the Board, I would like to thank the people at Australian Vintage, led by Craig, for delivering a result that was 79% up on last year, while demonstrating resilience in a highly competitive and challenging market.

We are proud of our staff who are committed to delivering against our long term strategy.

I will now hand over to Craig Garvin to provide a more detailed breakdown of business performance over the last financial year and our priorities and focus for FY22 and beyond.

Chief Executive Officer's Address - Craig Garvin

Thankyou Richard and welcome to all our shareholders joining us today.

Before I provide some detailed insight on the FY21 result and the outlook for FY22 I would like to share with you, our vision and values and then our internal balanced score card that we use to measure our business.

Vision and Values

Firstly, looking at our vision and values. These values are critical as they guide our business approach with a strong focus on putting the consumer at the heart of everything we do.

Our vision is to make us the first-choice wine for every occasion by having a portfolio of quality brands that cater for every occasion. To achieve this vision, we must put the consumer at the heart of everything we do, and we must work in a collaborative manner, we must be innovative, nimble and responsive and we must be empowered. Underlying all these values is our behaviours which include integrity, respect and trust. It is the culture of the company and its staff which will underpin the ongoing growth and success of this business. These values form an integral part of each person's annual performance plan which is assessed every 6 months and I am glad to report that all our staff have embraced these values.

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Strategic Plans positions us well for growth

Now moving onto our balanced scorecard. This scorecard, which monitors how we are going against our strategic plans, is an all-encompassing view of our business and covers:

• Consumer and Brands in terms of our investment in brands, innovation, and consumer insight.
• Markets and Customers with targets to outperform the wine category and improving our over business in our key markets.
• People. This involves assessing our staff in terms of regular engagement surveys, investing in our staff and safety.
• Sustainability in terms of our carbon footprint, linking with local communities and renewables priority.
• Return on Assets. This involves leveraging our world class assets and delivering on all financial metrics.

FY21 key balance scorecard

This slide shows how we have performed against the balanced scorecard for FY21. The key issues that I would like to highlight are:

• Our pillar brands are now 71% of our total sales and growing;
• Our marketing spend has doubled since 2019;
• We have outgrown the markets in the UK and Australia;
• Staff engagement has improved from 54% to 65% and our lost time injury has decreased significantly from 17 in FY19 to 5 in FY21;
• Our major wine facility at Buronga is powered by 100% solar and wind energy; and
• Our operating cash flow has doubled and our return on assets has grown to 7.5%.

As you can see the Company has performed well against the balanced scorecard.

Strong Financial Performance

The FY21 record result was very pleasing with continued growth in our portfolio of key brands. During the 12 month period, sales of our pillar brands of McGuigan, Tempus Two, Nepenthe and BVWC grew by 12% to $195.1 million. These pillar brands now represent 71% of our total sales compared to 56% in FY17. Our total revenue grew by 3% to $274.0 million.

Our Earnings before interest and tax grew by 59% to $30.4 million and our Net Profit after Tax improved by 79% to $19.6 million.

Pleasingly our Operating Cash flow was a record $45.0 million, and in line with our improved result, earnings per share increased to 7.0 cents per share and our return on capital employed was 7.5%.

As you can see from the graphs, we have seen a step change to the business in FY21. This step change has been achieved through a 46% increase investment in our key brands, efficiencies gained from our capital investment in our production assets, a real focus on our vision and values and increased investment in our staff.

Whilst it is difficult to calculate the impact of COVID-19 on the business, our key strategies should continue growth post COVID-19. Increased distribution, innovation and consumer engagement is key to this growth, and we have seen this in our Australian and UK business where we are working hard with our customer partners to drive our portfolio. The McGuigan Zero range has

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