Treasury Wine Estates Annual Report 2018

FY2018 Annual Report · Treasury Wine Estates
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ANNUAL REPORT 2018

ABOUT TWE

 A GLOBAL LEADER IN WINE

Treasury Wine Estates (TWE) is one of the world’s 
largest wine companies, listed on the Australian 
Securities Exchange. With a rich heritage and diverse 
portfolio of outstanding wine brands and viticultural 
assets, the Company’s commitment to delivering 
shareholder value is underpinned by its passion 
for crafting, marketing and selling quality wine for 
consumers, as well as building sustainable partnerships 
with customers, globally. TWE employs approximately 
3,500 winemakers and viticulturists, along with 
marketing, sales, distribution and support staff across 
four key regions, with wine sold in more than 
100 countries around the world. 

CONTENTS

Our Locations / 1
At a Glance / 2
Chairman and Chief Executive Ofﬁ cer’s Report / 3
Brand Highlights / 6
Operating and Financial Review / 10
Corporate Responsibility / 30
Diversity and Inclusion / 32
Board of Directors / 34
Corporate Governance / 36
Directors’ Report / 40
Auditor’s Independence Declaration / 43
F18 Remuneration Report (Audited) / 44
Consolidated Statement of Proﬁ t or Loss and Other Comprehensive Income / 64
Consolidated Statement of Financial Position / 65
Consolidated Statement of Changes in Equity / 66
Consolidated Statement of Cash Flows / 67
Notes to the Consolidated Financial Statements / 68
Directors’ Declaration / 112
Independent Auditor’s Report / 113
Details of Shareholders, Shareholdings and Top 20 Shareholders / 119
Shareholder Information / 120

FORWARD LOOKING STATEMENT DISCLAIMER

This report contains certain forward looking statements. Words such as ‘expects’, ‘targets’, ‘likely’, ‘should’, ‘could’, ‘intend’ 
and other similar expressions are intended to identify forward looking statements. Indicators of and guidance on future 
earnings and ﬁ nancial position are also forward looking statements. Such forward looking statements are not guarantees 
of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond 
the control of TWE, which may cause actual results to differ materially from those expressed or implied in such statements. 
Further information on important factors that could cause actual results to differ materially from those projected in such 
statements is included in the ‘Material Business Risks’ section of the Operating and Financial Review.

References to ‘TWE’, ‘Company’, ‘Group’, ‘we’, ‘us’ and ‘our’ are to Treasury Wine Estates Limited and/or, except where the context 
otherwise requires, its subsidiaries. References to ‘F18’ and ‘F19’ are to the periods 1 July 2017 to 30 June 2018, and 1 July 2018 to 
30 June 2019 respectively. All currency referred to in this Annual Report is in Australian dollars, unless otherwise stated.

OUR LOCATIONS1

TWE AMERICAS
NAPA VALLEY, CALIFORNIA

TWE AMERICAS
OAKLAND, CALIFORNIA

TWE EUROPE
TWICKENHAM, UK

TWE EUROPE
TUSCANY,  ITALY

TWE ASIA
SHANGHAI, CHINA

TWE ASIA
SINGAPORE

TWE MAGILL, 
SOUTH AUSTRALIA

TWE ANZ
MARLBOROUGH

TWE ANZ
MELBOURNE, VICTORIA

AUSTRALIA & NEW ZEALAND2

AMERICAS2

AUSTRALIA |  Corporate head ofﬁ ce: Melbourne, Victoria

US |  Regional head ofﬁ ce: Napa Valley, California
US |  Regional head ofﬁ ce: Oakland, California

72

8,607

7

46

3,894

7

vineyards

planted hectares

wineries

vineyards

planted hectares

wineries

NEW ZEALAND |  Country head ofﬁ ce: Marlborough

EUROPE2

9

492

1

vineyards

planted hectares

wineries

ASIA

SOUTH EAST ASIA  |  Regional head ofﬁ ce: Singapore
NORTH ASIA  |  Regional head ofﬁ ce: Shanghai, China

UK |  Regional head ofﬁ ce: Twickenham, Middlesex
ITALY |  Country head ofﬁ ce: Gabbiano, Tuscany

2

148

1

vineyards

planted hectares

wineries

1. Locations marked on the global map represent corporate and regional head ofﬁ ces. TWE also maintains other major operations across 

all regions of its business.

2. Information is current as at 30 June 2018.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  1  

AT A GLANCE

•  F18 EBITS1 up 17%2 to $530.2 million; EBITS margin accretion  

of 2.8 percentage points to 21.8%

•  EPS (before material items and SGARA) up 30% to 51.8 cents per share 

•  Return on Capital Employed accretion to 12.6%

•  F18 EBITS growth contributes to 4 year EBITS CAGR3 of 25%;  

EBITS growth of 25% in F19 reiterated

•  Final dividend of 17 cents per share (fully franked); bringing F18  
annual dividend to 32 cents per share; up 23% on the prior period

•  TWE delivered Total Shareholder Return of 35% in F18

EBITS
(A$ million)

.

2
0
3
5

.

1
5
5
4

17%

increase*

2

.

4
3
3

.

1
5
2
2

.

6
4
8
1

EPS (BEFORE MATERIAL ITEMS AND SGARA)
(Earnings Per Share) (cents)

.

8
1
5

.

8
9
3

.

5
0
3

.

9
1
2

.

4
7
1

30%

increase

F14

F15

F164 F17 F18

* up 18% on constant
  currency basis

F14

F15

F164 F17 F18

ROCE
(Return on Capital Employed) (%)

MARKET CAPITALISATION
(A$ million)

17.39

13.16

9.23

4.92 4.90

.

6
2
1

.

6
1
1

3
.
9

8
.
6

9
.
5

1.0ppts

increase

9
.
3
1
7
,
9

2
.
5
9
1
,
3

2
.
1
9
1
,
3

0
.
3
1
8
,
6

.

0
0
0
5
2
1

,

29%

increase in market 
capitalisation

Share price ($ at 30 June)

F14

F15

F164 F17 F18

F14

F15

F16 F17

F18

1. Earnings before interest, tax, SGARA and material items. 
2. Percentage movements stated on a reported currency basis.
3. Compound Annual Growth Rate.
4. F16 ROCE, EPS and EBITS were restated in F17 in accordance with revised accounting standards.

2  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT

We continued positive momentum 
in the Company, demonstrating 
another stellar year of strong 
ﬁ nancial performance.

INTRODUCTION

STRATEGY

PAUL RAYNER
Chairman

MICHAEL CLARKE
Chief Executive Ofﬁ cer 

Our vision of becoming the world’s most celebrated 
wine company has remained unchanged. Throughout 
F18 we continued to focus on the following elements 
of our strategy, which has also remained consistent 
for the past four years:

• Transforming and investing in our global priority 

brands, and expanding our country-of-origin 
offerings, one portfolio at a time.

• Growing share and maximising the potential and 

proﬁ tability of our priority markets through 
transformational route-to-market changes.

• Building a high-performing organisation, 

upweighting talent and investing in capability – 
now and for the future.

• Building long-term relationships to deliver shared 

value to our customers, consumers and stakeholders. 

• Driving efﬁ ciencies across our operating model, 
ensuring our systems and processes are ﬁ xed, 
optimised and simpliﬁ ed.

Welcome to the 2018 Annual Report for Treasury 
Wine Estates Limited.

It is our pleasure to report that in ﬁ scal 2018, 
we continued positive momentum in the Company, 
demonstrating another stellar year of strong ﬁ nancial 
performance. We have called F18 a ‘foundation 
year’ for TWE, a year in which we have established 
the optimal operating business models as well as 
the appropriate structure for distributor, wholesaler 
and retailer partnerships across all regions.

The Company remained focused, disciplined 
and committed to delivering against our strategy, 
while navigating signiﬁ cant events across 
a number of our markets in the period.

We continued to invest in our people, growing 
organisational talent across the business and 
strengthening our Executive Leadership Team 
even further. An outstanding group of executives 
who bring varied skills and experience are 
leading the business to deliver the next phase 
of growth for TWE.

In addition to this report, regular engagement 
with our shareholders is undertaken throughout 
the year as part of our investor relations program. 
This includes meetings relating to our interim and 
annual results in February and August/September, 
as well as meetings prior to TWE’s Annual General 
Meeting, which addresses governance and relevant 
items of business.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  3  

CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT (CONTINUED)

• Australia and New Zealand (ANZ) reported 25.9% 
EBITS growth to $136.1 million and an EBITS 
margin of 22.7% (up 4.4 percentage points). 
This excellent result saw TWE volume growth 
outperform category growth in Australia. 
Outstanding success of our Masstige portfolio was 
led by Wolf Blass, Squealing Pig and 19 Crimes, 
and we saw our on-premise channel return to 
growth in F18 with continued investment in key 
initiatives such as Wine On Tap. Throughout the 
year, we continued to strengthen and embed our 
relationships with retail partners, while delivering 
further savings across our supply chain, and 
remaining disciplined on managing costs. 

• The Europe region delivered EBITS of $49.5 

million, up 9.3% and a 2.2 percentage point EBITS 
margin accretion to 15.4%, a strong result from the 

The F18 results 
reflect the consistently 
strong performance 
of the business, 
and the commitment 
of our team across 
every region to 
delivering against 
our strategy.

team in challenging market 
conditions. The business 
continued to exit lower margin 
Blossom Hill commercial wine 
volume, while focusing on 
premiumisation, in line with 
growth of premiumisation in 
the UK wine category. Targeted 
brand building initiatives across 
priority brands included a 
three-year partnership between 
Wolf Blass and the International 
Cricket Council and the 
relaunch of Lindeman’s 
packaging. The culture and 
capability of the Europe team 
that delivered this result 
continues to set the benchmark, 

with the business being named on the UK Great 
Place to Work Best Workplaces list in April 2018. 

In F18, the Company also commenced the ‘Simplify 
for Growth’ program, an initiative that builds 
on TWE’s existing capability of identifying and 
removing embedded cost and complexity, to improve 
operational efﬁ ciency and allow the business to focus 
on growth opportunities. 

OVERVIEW OF RESULTS AND F181

The F18 results reﬂ ect the consistently strong 
performance of the business, and the commitment 
of our team across every region to delivering 
against our strategy. In F18, TWE delivered 
EBITS2 of $530.2 million, up 18% on the prior year, 
representing our fourth consecutive year of double 
digit EBITS growth. Our EBITS margin for 
F18 increased by 3 percentage points to 21.8%. 
Following is a summary of results and achievement 
highlights across our regions: 

• The Americas delivered EBITS ahead of the 
prior year, up 1.7% to $193 million driving a 
2.2 percentage point uplift in EBITS margin, 
to 20.1%. In the last quarter of the ﬁ scal year, 
our team delivered transformational changes 
to our Company’s route-to-market in the US, 
with TWE now self-distributing 
25% of its business across 
large, direct states and 15% 
of its business transitioned 
to new, growth-oriented 
distributor partners. Initial 
signs of these route-to-market 
changes and feedback from 
strategic customers is very 
positive. In October 2017, our 
team based in Napa showed 
tremendous resilience in 
the face of the devastating 
Napa ﬁ res. While TWE was 
fortunate in that the Company 
sustained only minor cosmetic 
damage to a small number of 
our properties, the sense of community and care 
the team demonstrated in contributing to recovery 
efforts in the regions was simply outstanding. 

• The Asia region delivered an extremely strong 
result, with EBITS up 37.5% to $205.2 million, 
and an EBITS margin of 37.5% as we saw a growing 
imported wine category taking share from the 
domestic wine category. Demand for our expanded 
portfolio continued across the region, with volume 
growth driven by our Australian and French 
portfolios – a particular highlight of F18 was the 
successful in-market launch of our French brand 
Maison de Grand Esprit. Our Shanghai warehouse 
facility became operational in the ﬁ rst half of F18, 
and this model is already proving to provide increased 
access to regional retailers in China. Toward the 
end of the ﬁ scal year, we navigated the challenge 
of industry-wide delays on Australian wine imports 
into China. These delays appear to have since 
abated. The fundamentals of the Asia wine market 
continue to be exciting, and we remain focused 
on driving growth of our total portfolio across Asia. 

1. All percentage movements are on a constant currency basis, unless otherwise stated.
2. Earnings before interest, tax, SGARA and material items.

4  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

BALANCE SHEET STRENGTH 
AND DIVIDEND 

In F18, TWE’s Balance Sheet continues to be strong, 
with metrics consistent with an investment-grade 
credit proﬁ le, providing us with ﬂ exibility to pursue 
value accretive opportunities in the future. 

TWE’s Balance Sheet and Cash Flow not only 
reﬂ ect a strong trading performance, but also 
investment in our business which will set us up 
for long-term, sustainable success. We successfully 
completed our $300 million on-market share 
buy-back in F18. This was executed at an 
average price of $15.41, and was Earnings 
Per Share (EPS) accretive. 

Total capital expenditure for the year was 
$215.4 million, of which Maintenance 
and Replacement spend was $128.3 million. 
Our Reported EPS growth 
of 36% was driven by our strong 
trading performance, as well 
as proactive initiatives to deliver 
shareholder value. 

Given the Company’s strong 
result in F18, TWE is pleased 
to declare a ﬁ nal dividend of 
17 cents per share, fully franked, 
which brings the total dividend 
for F18 to 32 cents per share, 
up 23% on the prior year. 

CORPORATE RESPONSIBILITY 

F18 saw a substantive review of TWE’s Corporate 
Responsibility (CR) program, which included a 
comprehensive materiality assessment resulting 
in realignment of the program’s focus under four 
key pillars: Performance, Planet, People and Product. 
Particular CR highlights in F18 include the launch 
of the Sustainable Future framework which is 
designed to drive environmental best practice 
across our supply business; an enhanced commitment 
to human rights through updated policies and an 
environment, social and governance (ESG) review 
system embedded into TWE’s supplier on-boarding 
process; and numerous initiatives with external 
partners to promote the responsible consumption 
of alcohol in our communities. 

As a milestone in our CR journey, this year we 
published our inaugural Sustainability Report, 
released alongside our 2018 Annual Report, which 
provides more detail on how TWE works to create 
long-term value through our CR program, as well 
as through effective management of ESG topics. 
As a business, we are focused on driving sustainability 
in everything we do. We are proud to be delivering 
the refreshed CR program from F19 onward. 

THANKS AND CONCLUSION 

F18 marked the fourth consecutive year of double 
digit EBITS growth for TWE – but our journey is 
far from over. The business enters F19 in a strong 
position, with increased availability of Luxury wine, 
a strong pipeline of innovation, stronger customer 
partnerships across all regions and several 
revenue-driving brand portfolio initiatives that 

F18 marked the 
fourth consecutive 
year of double digit 
EBITS growth – 
but our journey 
is far from over.

will continue to deliver against 
our strategic imperatives. 

We are conﬁ dent we have 
the world-class quality 
wines, the brands, the 
capability and the discipline 
to deliver approximately 25% 
EBITS growth in F19 and 
continue on our journey 
to achieving 25% EBITS 
margin over time. 

We’d like to acknowledge our team, who have 
demonstrated outstanding commitment, resilience 
and focus across the entire year in delivering 
these results. 

Finally, one of our non-executive directors, Michael 
Cheek, will be retiring from the Board at the end 
of the Company’s 2018 Annual General Meeting. 
Mr Cheek has been a member of the Board since 
September 2012, bringing a depth of US alcohol 
beverage industry experience to the Board, and has 
also been a valuable member of the Human Resources 
Committee since April 2013. We would like to 
thank Mr Cheek for his signiﬁ cant contribution 
to the Board and TWE over the last six years.

As always, our thanks go to you, our shareholders, 
for your ongoing belief, investment and support 
of our Company. 

Kind regards, 

Paul Rayner 
Chairman 

Michael Clarke
Chief Executive Ofﬁ cer  

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  5  

BRAND HIGHLIGHTS

LIVING WINE LABELS 

TECHNOLOGY 
BRINGS 
WINE LABELS 
TO LIFE
At the beginning of F18, TWE launched one of 
its most successful marketing activations ever. 
The Living Wine Labels (LWL) Augmented Reality 
(AR) app was introduced in the United States on 
19 Crimes labels, giving a voice to the 18th century 
rogues on the bottles. Since then, the technology 
has been extended to Beringer Bros., The Walking 
Dead, Gentleman’s Collection and Chateau St. Jean 
in the US. In other regions, consumers can access 
the LWL AR app on 19 Crimes and Gentleman’s 
Collection. Since launch, the LWL App has been 
downloaded more than two million times.

WOLF BLASS 

WOLF BLASS SIGNS 
HAT TRICK DEAL 
WITH INTERNATIONAL 
CRICKET COUNCIL 
Wolf Blass was proud to announce its three-year 
global partnership with the International Cricket 
Council (ICC), further cementing the brand’s 
rich history of supporting marquee sporting 
events. Wolf Blass is the Ofﬁ cial Wine Partner 
of the ICC Cricket World Cup 2019 in England 
and Wales, as well as the ICC World T20 
in Australia in 2020.

6  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

PENFOLDS

PENFOLDS 
UNVEILS 
A NEW WINE 
BORN FROM 
GRANGE DNA

To coincide with the annual 
Penfolds Collection launch in 
October 2017, Penfolds released 
a special wine blended from 
three Grange vintages spanning 
seven years, aptly named 
Penfolds g3. A true ﬁ rst, 
the vintages of 2008, 2012 
and 2014 entwine to create 
a completely unique Grange 
expression. Penfolds g3 
was celebrated at a launch 
event at the Liang Yi 
Museum, Hong Kong and 
only 1,200 bottles were 
made available worldwide. 

Put simply it’s 
Penfolds ‘House Style’ 
distilled…Penfolds g3 is 
a natural end result of the 
venerated art of blending. 
It is a blend where each 
individual vintage selected 
delivers a depth of character 
and flavour honouring our 
flagship Grange.

PETER GAGO
Penfolds Chief Winemaker 

STERLING

STERLING 
DRIVES 
OUTSTANDING
GROWTH

96
POINTS

Sterling Vintner’s Collection 
drove outstanding growth 
in F18 through a strong focus 
on innovation, partnerships 
and branding. New offerings, 
Sparkling and Iridium, were 
introduced and a strategic 
partnership with the Emmy 
Awards in the US was formed, 
bringing to life the new brand 
positioning, Always Polished, 
Never Dull. This has placed 
Sterling at the forefront of 
luxury wine with a highlight 
of Iridium receiving 96 points 
from Robert Parker’s Wine 
Advocate in October 2017.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  7  

BRAND HIGHLIGHTS (CONTINUED)

WOLF BLASS 

WOLF BLASS ACHIEVES 
MILESTONE 10,000 
WINE SHOW AWARDS
Wolf Blass was awarded Best of Nation at the 
2017 San Francisco International Wine Competition 
for the third year in a row. This award takes the 
Wolf Blass award tally to a remarkable milestone 
of 10,000 won across the portfolio since the winery’s 
inception in 1966.

10,000
AWARDS

19 CRIMES

WYNNS

WYNNS CELEBRATES 
60 VINTAGES OF 
ICONIC BLACK LABEL 
CABERNET SAUVIGNON
The ﬁ rst Wednesday of August 
each year is known as Wynnsday, 
marking the release of the annual 
new vintage collection from 
the winery. In F18, Wynnsday 
signiﬁ ed an auspicious milestone, 
the 60th vintage release of one 
of Australia’s most iconic, and 
collected, cabernet sauvignons – 
Wynns Black Label.

There are so many 
stories and anecdotes 
to tell about the 
history of Wynns 
Black Label Cabernet, 
however with all these 
layers it is important 
to remember that the 
ultimate story is the 
wine in the glass.

SUE HODDER
Wynns Senior Winemaker

19 CRIMES 
CONTINUES TO 
BUILD MOMENTUM
19 Crimes continued to build outstanding 
momentum, collecting a number of industry 
awards including ‘Hot Brand’ status in the 
US from Impact Magazine for consecutive 
years of double-digit volume growth as 
well as one of the industry’s most prestigious 
marketing awards, the Super REGGIE, 
for innovative use of Augmented Reality.

8  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

SEPPELT

SEPPELT 
RELEASES 
INAUGURAL 
LUXURY 
COLLECTION

May 2018 marked the release of The 2018 Seppelt 
Luxury Collection and with it, the unveiling of its 
premium new branding and packaging. Released in 
unison for the ﬁ rst time, the Collection features nine 
of Seppelt’s leading wines, including the ﬂ agship 
2016 St Peters Grampians Shiraz, NV Original 
Sparkling Shiraz and the 2018 Drumborg Vineyard 
Henty Riesling. The Collection continues as an 
annual release going forward.

MAISON DE GRAND ESPRIT

MAISON DE GRAND 
ESPRIT GAINS 
MOMENTUM IN ASIA
After a successful launch in China, Maison 
de Grand Esprit has expanded to Hong Kong 
and Thailand where it’s now available at major 
ﬁ ne wine retailers and premium supermarkets. 
Since being introduced in June 2017, Maison 
de Grand Esprit has received numerous awards, 
including a double-gold medal and three gold 
medals, as well as ratings of more than 90 points 
by international wine critic James Suckling.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  9  

OPERATING AND FINANCIAL REVIEW

TWE is one of the world’s largest publicly listed wine companies, 
listed on the Australian Securities Exchange (ASX). The Company 
is focused on delivering shareholder value through the production 
of wine, and marketing and selling quality wine brands 
to consumers around the world.

The following Operating and Financial Review 
contains details of the signiﬁ cant changes in TWE’s 
state of affairs that occurred during the year ended 
30 June 2018.

TWE’s organisational structure and 
signiﬁ cant changes in the state of affairs 
TWE continues to be focused on four 
regional segments:

TWE’s business activities
TWE’s business activities in F18 remained unchanged. 

TWE is a vertically integrated wine business focused 
on portfolio premiumisation supported by innovation, 
brand building investment and global sales and 
marketing execution.

TWE’s brand portfolio is represented across the 
Luxury, Masstige and Commercial1 price segments 
and sold in more than 100 countries around the 
world. Furthermore, TWE operates a balanced 
and sustainable sourcing model by diversifying its 
sourcing regions across Australia, the United States, 
New Zealand, Italy and France.

TWE employs approximately 3,500 winemakers, 
viticulturists, sales, distribution and support staff 
across the globe.

• Australia and New Zealand (ANZ)

• Europe 

• Asia

• Americas

Effective 1 May 2018, Matt Young (previously,
Deputy Chief Financial Ofﬁ cer) became TWE’s
Chief Financial Ofﬁ cer replacing Gunther Burghardt 
who was appointed Executive Vice President, 
Operations – Americas.

During the year, TWE made a series of other 
management changes, including:

• Michelle Terry (previously Chief Marketing Ofﬁ cer, 
Americas) was appointed Chief Marketing Ofﬁ cer, 
based in the US (effective 1 March 2018);

• Tim Ford (previously Managing Director Europe, 

SEAMEA and Global Supply Chain) was appointed 
Deputy Chief Operating Ofﬁ cer, based in Melbourne 
(effective 1 July 2018);

1. TWE participates in three price segments: Luxury (A$20+); Masstige (A$10-A$20); and Commercial (A$5-A$10). Segment price points 

are retail shelf price.

10  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

• Angus McPherson (previously Managing Director, 

Australia and New Zealand) was appointed 
Managing Director, Australia and New Zealand and 
Europe, based in Melbourne (effective 1 July 2018); 

• Peter Dixon (previously Managing Director, North 

Asia) was appointed Managing Director Asia, based 
in Shanghai (effective 1 July 2018); and

• Victoria Snyder (previously Executive Vice President, 
Americas) was appointed President, Americas, based 
in the US and reporting to Robert Foye, TWE’s 
Chief Operating Ofﬁ cer (effective 2 July 2018).

These appointments continue to reﬂ ect the ﬂ exibility 
and depth of TWE’s global talent pool at the executive 
leadership level. 

Other than the above matters and those matters 
referred to in both the ‘TWE Vision and Strategy’ 
section of the Operating and Financial Review 
and the Financial Statements in this Annual Report, 
there have been no other signiﬁ cant changes in the 
state of affairs of the Group during the ﬁ nancial year.

TWE’s business model
TWE is a vertically integrated wine business with 
three principal activities:

• Grape growing and sourcing

• Wine production

• Wine marketing, sales and distribution

Grape growing and sourcing 
TWE secures access to grapes and bulk wine from 
a range of sources including Company-owned and 
leased vineyards, grower vineyards and the bulk 
wine market. The Company’s sourcing mix varies 
by region as shown in Figure 1.

Figure 1: TWE’s regional sourcing model

Australia

24%

48%

US

13%

18%

28%

69%

New Zealand

29%

68%

3%

Italy

10% 10%

France

TWE owned/leased vineyards
Grower contracts
Third party produced wine

80%

100%

Proactively taking steps to de-risk TWE’s global 
sourcing model by embedding ﬂ exibility and 
diversiﬁ cation across geographic regions, varietals 
and price segments continues to be a driver of the 
Company’s sourcing strategy.

By embedding a diversiﬁ ed sourcing model as well 
as focusing on multi-region and multi-country sourcing, 
TWE is better able to manage vintage variation as 
well as grape and bulk wine pricing through periods 
of grape shortages and surpluses.

Embedding diversiﬁ cation and ﬂ exibility also 
enables TWE to react to changes in consumer 
and customer preferences.

TWE owns and leases 9,099 planted hectares of 
vineyards in Australia and New Zealand and is the 
custodian of some of the most sought after viticultural 
assets in renowned winemaking regions, including 
the Barossa Valley and the Coonawarra in Australia, 
and Marlborough in New Zealand.

The Company owns and/or operates 3,894 planted 
hectares in key viticultural regions in California, 
including Napa Valley, Sonoma County, Lake County 
and Central Coast. 

TWE also owns and/or operates 148 hectares 
in Europe.

TWE continues to optimise its inventory holdings 
to support portfolio premiumisation and at the same 
time pursue initiatives to reduce production costs 
across the Luxury, Masstige and Commercial 
segments, globally. In F18, TWE successfully delivered 
in excess of $100 million cumulative run-rate cost 
of goods sold savings from its supply chain network, 
as part of its Supply Chain Optimisation initiative.

The organisation continues to focus on optimising 
production costs across TWE’s global business 
and future incremental savings are expected to 
be delivered in the ordinary course of business.

At the same time, TWE continues to focus on securing 
increased access to Luxury and Masstige fruit across 
all its sourcing regions via vineyard acquisitions, 
vineyard leasing, entering into supply contracts with 
third party growers as well as increasing its sourcing 
of Commercial grade wine from the bulk wine market.

Wine Production
TWE owns world-class wine production and 
packaging facilities:

• In Australia, TWE owns and operates seven 
wineries and two packaging facilities. TWE’s 
wines are primarily produced in South Australia 
and Victoria.

• In New Zealand, TWE owns one winery located 

in the Marlborough.

• In the US, TWE has seven wineries and one 
packaging facility located in the North and 
Central Coast regions of California.

• In Europe, TWE has one winery.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  11  

Marketing, selling and distribution of TWE wine
TWE markets, sells and distributes its branded wine to a range of customers in more than 100 countries  
around the world, tailoring and optimising its route-to-market model by country to capitalise on regional 
insights and opportunities.

TWE generates its revenues and profits from the production, marketing and sale of its portfolios of branded wine.

The Company has taken deliberate action to embed greater balance across its regional earnings mix, sourcing 
models and earnings delivery. 

Consequently, TWE’s improving profitability is increasingly being driven by high-growth segments, being 
Luxury and Masstige, as well as improved profitability across all segments (including the Commercial segment). 

Figure 2 shows net sales revenue (NSR) and earnings before interest, tax, SGARA and material items (EBITS) 
contribution by region in F18.

Figure 2: TWE’s business performance by region in F18

Net sales revenue ($M)

EBITS contribution2 ($M)

ANZ 25%
Americas 40%
Europe 13%
Asia 22%

ANZ 23%
Americas 33%
Europe 9%
Asia 35%

Global industry overview
Global wine production and consumption
Global supply and demand fundamentals continue to be attractive, with consumption outstripping production  
by a significant margin in 2017. 

Global production reduced by 8% in 2017, driven by weather-affected vintages principally in France and Italy 
where production was below 2016 by circa 20%.

Consumption remained broadly in line with the prior year and reflects growing wine consumption in emerging 
and large alcohol consuming regions, notably China and the US, largely offset by falling per capita consumption 
rates in Europe.

Figure 3: Global wine production and consumption3

a
h
m

11.0

10.0

9.0

8.0

7.0

6.0

Global vineyard area
Global wine production (RHS)
Global wine consumption* (RHS)

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
2017 F

4,500

4,000

3,500

3,000

2,500

2,000

s
e
s
a
c

e
L
9
m

* Consumption figures include ~330m 9Le cases of wine used in the production of fortifieds and industrial applications.

2. Excludes corporate costs of $53.6 million.
3. International Organisation of Vine and Wine (OIV).

12  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

OPERATING AND FINANCIAL REVIEW (CONTINUED) 
 
 
Figure 4: Forecast five-year compound annual growth rate (CAGR) in wine consumption  
in key growth areas and markets4 

COUNTRY

China
Canada
Australia
US
New Zealand
Japan
United Kingdom

CAGR (2017 – 2021F)

8.2%
1.4%
0.9%
0.9%
0.8%
(0.3)%
(2.4)%

Growth in consumer demand remains strongest at the Masstige and Luxury price points; with value growth 
highest across these segments in all of TWE’s key markets.

Figure 5: Value growth by price point

United States of America5

United Kingdom6

>$20

$10–$20

5%

6%

10%

11%

$4–$10

-3.5%

-2%

<£6

£8+

£6–£8

-7%

-5%

13%

12%

17%

14%

Mkt MAT to June 18

Mkt MAT to June 17

Mkt MAT to June 18

Mkt MAT to June 17

Australia7

Value growth of Australian bottled wine 
exports (freight on board) to China8

>$20

$10–$20

<$10

0%

0%

8%

7%

6%

6%

>$20

47%

$10–$20

43%

32%

-00%
<$10

41%

46%

146%

Mkt MAT to June 18

Mkt MAT to June 17

Mkt MAT to June 18

Mkt MAT to June 17

4. IWSR 2017, Still wine only.
5. IRI Market Advantage: Total Multi Outlet + Liquor, Table wine $4+, 52 weeks ending 1 July 2018.
6. Nielsen (750mL bottled still wine only) MAT to 14 July 2018. 
7. Aztec Sales Data | Off-premise Channel Only | Bottled wine only | Weighted MAT to 15 July 2018. 
8. Wine Australia MAT to June 2018. 

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  13  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

TWE VISION AND STRATEGY

TWE’s strategic vision and strategic imperatives have remained consistent over the last four years and are set 
out in Figure 6.

Figure 6: TWE’s Vision and Strategy

VISION

JOURNEY

To be the world’s 
most celebrated wine company

To move from an order-taking agricultural business to a brand-led organisation

PEOPLE

BRANDS

MARKETS

PARTNERS

MODEL

STRATEGIC 
IMPERATIVES

Build a high- 
performing 
organisation

Transform 
our portfolio

Win in priority 
markets

Develop 
long-term 
relationships

Optimise our 
capital base

ACTIONS

• Drive an 
inclusive, 
supportive and 
collaborative 
culture

• Grow capability 

now and for 
the future

• Operate an 
efﬁ cient and 
sustainable 
structure

• Grow Priority 
Brands, one 
portfolio at 
a time

• Expand into 

new countries-
of-origin through 
virtual brands

• Premiumise 
our portfolio

• Invest to drive 
consumer pull

• Deliver bigger, 

better campaigns

• Connect and 
engage with 
consumers

• Partner with 

key customers 
to grow wine 
category

• Drive 

performance 
for all 
stakeholders

• Operate 

sustainably, 
safely and 
responsibly

• Create supply 

chain cost 
and quality 
advantage

• Address high 

cost structures 
in mature 
markets

• Simplify 
processes 
and ways 
of working

• Grow share in 
Asia through 
route-to-market 
and portfolio 
expansion

• Grow in 

US through 
premiumisation 
and route-
to-market 
optimisation

• Expand 

no.1 position 
in Australia 
through category 
leadership

• Protect 

proﬁ tability 
in other key 
markets

BEHAVIOURS

Focus on 
top priorities 
and deliver 
against them

Instil belief 
in our wines, 
our company 
and our people

Build trust 
by acting with 
integrity and 
holding ourselves 
to account

Collaborate 
with all 
stakeholders 
to achieve 
shared goals

14  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

STRATEGIC IMPERATIVE

PROGRESS AGAINST INITIATIVE IN F18

PEOPLE

Build a high-
performing 
organisation

•  Drive an inclusive, 
supportive and 
collaborative culture
•  Grow capability now 
and for the future

•  Operate an efﬁ cient and 
sustainable structure

In F18, TWE achieved the following: 
•  Launched TWE’s organisational ethos: Thinkers. Makers. Doers. Welcome, 

representing an important step in articulating the culture and the value of joining 
and/or staying with TWE.

•  Invested in our diversity agenda with the SheLeads program as part of the 

TWEforShe initiative, which involved the development and delivery of ﬁ ve modules 
to more than 700 women globally.

•  Expanded TWE’s capability programs to include LEAD 1.0, a modular approach 

to teaching the essential competencies that underpin conﬁ dence, courage and belief 
to all TWE employees.

•  Strengthened functional capability with the launch of the Finance Academy, 

in addition to the continued roll out of TWE’s Global Sales Academy and Global 
Marketing Academy.

•  Focused on simpliﬁ cation of the ways of working and business model to support 

sustainable future growth.

BRANDS

Transform 
our portfolio

•  Grow Priority Brands, 
one portfolio at a time

•  Expand into new 

countries-of-origin 
through virtual brands
•  Premiumise our portfolio
•  Invest to drive consumer pull
•  Deliver bigger, better 

campaigns

In F18, TWE achieved the following:
•  Successfully launched TWE’s ﬁ rst Luxury French brand, Maison de Grand 

Esprit in China. 

•  Strengthened TWE’s French portfolio proposition in China by securing exclusive 

distribution partnership with Baron Philippe de Rothschild. TWE is now 
distributing Mouton Cadet from France in addition to Escudo Rojo from Chile. 
•  19 Crimes became one of TWE’s fastest growing brands with growing distribution; 
supported by successful new product developments (Hard Chard and Uprising).
•  Insight led innovation bringing Millennials into the wine category via Beringer 

Bros and The Walking Dead with both brands now on allocation in the US.
•  Refreshed Lindeman’s packaging; returning excitement to the Commercial 

category (via partnership with Australian artist David Bromley).

•  Delivered continued premiumisation by proactively exiting lower margin 

Commercial volume to facilitate greater organisational focus on proﬁ table 
Commercial segments and Luxury and Masstige, globally.

•  Refreshed and relaunched Seppelt with the release of the Luxury Collection 
in May 2018 in Australia; unveiling new branding and premium packaging.

In F18, TWE achieved the following:
•  Established a third party operated warehouse facility in Shanghai in October 2017, 

enabling TWE to sell a portfolio of brands to more customers, more frequently.

•  Expanded brand portfolio in China via growth of existing portfolio and investment 

in additional countries-of-origin; notably French and American.

•  Commenced transformational changes to TWE’s route-to-market in the US to 

strengthen the Company’s competitive positioning, drive greater brand availability 
and distribution and deliver EBITS margin growth.

•  Invested in brand and price segments in Australia where TWE is below its 

commensurate category share, notably in lighter-wine styles (e.g. Rosé, Pinot 
Grigio) as well as alternate packaging formats including cans and wine on tap.
•  Europe delivered on its double digit EBITS margin target, supported by increased 
focus on priority Masstige brands, including 19 Crimes, Lindeman’s Gentleman’s 
Collection and Wolf Blass.

MARKETS

Win in priority 
markets

•  Grow share in Asia through 

route-to-market and 
portfolio expansion
•  Grow in US through 

premiumisation and route-
to-market optimisation

•  Expand no.1 position 
in Australia through 
category leadership
•  Protect proﬁ tability 
in other key markets

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  15  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

STRATEGIC IMPERATIVE

PROGRESS AGAINST INITIATIVE IN F18

PARTNERS

Develop 
long-term 
relationships

•  Connect and engage 

with consumers

•  Partner with key customers 

to grow wine category
•  Drive performance for 

all stakeholders

In F18, TWE achieved the following:
•  Launched the Living Wine Labels augmented reality app across 19 Crimes, 

Walking Dead, Beringer Bros, Lindeman’s Gentleman’s Collection and Chateau 
St Jean to drive in-store excitement, brand awareness and consumer communication 
and engagement. 

•  Leveraged TWE’s global sales capability and best practice to further strengthen 

strategic customer partnerships in all regions supported by joint business planning 
aimed at creating mutual value and margin growth for customers and TWE.

•  Broadened third-party grower partnerships across TWE’s principal growing regions 

in ANZ, America and Europe, to increase access to Luxury and Masstige fruit.
•  TWE’s new route-to-market in the US has facilitated closer and stronger direct 

relationships with retail and distributor partners.

MODEL

Optimise our 
capital base

•  Operate sustainably, 
safely and responsibly
•  Create supply chain cost 
and quality advantage

•  Address high cost structures 

in mature markets

•  Simplify processes and 

ways of working

In F18, TWE achieved the following:
•  Continued to embed Destination Zero Harm, a behaviour-led safety culture 

program with the objective of zero harm across the Company.

•  Delivered in excess of A$100 million cumulative run-rate cost of goods sold (COGS) 
savings from TWE’s Supply Chain Optimisation initiative by 31 December 2017.

•  Completed the integration of Diageo Wine; with US$35 million of cash

synergies delivered.

•  Continued optimisation of TWE’s viticultural asset footprint including acquisition 
of Wetherall vineyard in the Coonawarra region in the second half of F18 and select 
disposals of non-core viticultural and production assets.

•  Completed an on-market share buy-back of A$300 million in F18 to optimise TWE’s 

cash and net debt position and deliver shareholder value.

•  Launched TWE’s Simplify for Growth initiative; a global program aimed at 

reducing duplicated processes and driving operational efﬁ ciencies.

16  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

FUTURE PROSPECTS 

TWE remains focused on leveraging its 
organisational, strategic and physical assets across 
the world to drive continued value accretion for its 
shareholders. Areas of current and ongoing business 
focus that will likely impact TWE’s future operational 
and ﬁ nancial prospects include the following:

• Continuing to transition the business from 

an agricultural company to a brand-led organisation.

• Ongoing focus on premiumising TWE’s portfolio, 
supported by TWE’s non-current inventory of 
Luxury and Masstige wine.

• TWE expects to continue to launch new, virtual 

wine brands that are multi-regionally sourced from 
diverse countries-of-origin, as the Company positions 
itself as a truly global wine category manager.

• Ongoing focus on generating new revenue streams 
for TWE’s brand portfolio and selectively pursuing 
potential opportunities for category adjacencies for 
some brands (e.g. Penfolds brandy and spirited wine).

• Leveraging global expertise to invest in sales and 

marketing capability in TWE’s key growth regions; 
North Asia and the US.

• Continued investment in self distribution and 

embedding new operating model in the US; new 
operating model expected to be embedded in the 
second half of F19.

• New US operating model expected to drive greater 
brand availability, strengthened strategic retail 
and distributor partnerships and EBITS dollar 
and margin growth. 

• TWE targets ﬁ nancial metrics that are consistent 
with an investment grade credit proﬁ le. TWE’s 
balance sheet provides the Company with the 
ﬂ exibility to pursue value accretive opportunities 
for shareholders.

• TWE commenced its ‘Simplify for Growth’ program 

in late F18; an initiative that builds on TWE’s 
existing capability of identifying and removing 
embedded cost and complexity. While ‘Simplify for 
Growth’ is primarily targeting operational efﬁ ciency, 
future cost savings are expected and TWE will 
update the market at the appropriate time.

• Maintenance and replacement capital expenditure 

expected in the range of $130 million to $140 million 
in F19.

• TWE expects to deliver approximately 25% EBITS 
growth in F19 and ongoing EBITS margin and 
ROCE accretion in F19 and beyond.

• TWE remains on a journey to deliver an EBITS 

margin of 25%.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  17  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

MATERIAL BUSINESS RISKS

There are various risks that could have a material impact on the achievement of TWE’s strategies and 
future prospects.

Below are those risks that TWE considers of greatest materiality to the business, and existing mitigations 
against these risks.

RISK

DESCRIPTION

MITIGATION

Constrained 
grape supply

TWE’s ability to fulﬁ l demand, in particular 
growing demand for Luxury wine, is restricted 
by the availability of grapes. Climate change, 
agricultural and other factors, such as disease, 
pests, extreme weather conditions, water 
scarcity, biodiversity loss and competing land 
use, create increased risk that TWE will be 
unable to fulﬁ l demand.
To the extent that any of the foregoing impact 
the quality and quantity of grapes available 
to TWE for the production of wine, the 
ﬁ nancial prospects of operations could be 
adversely affected, both in the year of harvest 
and in future periods.

Loss of key 
leadership/talent

Brand reputation/ 
damage

TWE’s ability to deliver on strategic targets is 
reliant on attracting and retaining experienced, 
skilled and motivated talent in core functions 
such as winemaking, sales and marketing. 
It also requires strong, resilient and effective 
leaders as the business grows at pace.
Inability to retain key leaders and talent can 
impact relationships with TWE’s key partners, 
result in lost business knowledge, increase 
risk of employee burnout and hamper the 
business’ ability to deliver on key initiatives.

The strength of TWE’s portfolios of brands 
is key to the success of the business. As a 
brand-led organisation, managing the 
reputation of brands, and mitigating the 
potential for events that could damage 
brands (e.g. social and environmental risks, 
counterfeited product, black market trade, 
inaccurate media coverage, unsatisfactory 
supplier performance, supplier environmental 
or social incidents, product quality issues, etc.) 
is critical to TWE’s ongoing success.
Failure to protect and effectively manage 
TWE’s portfolio of brands could have signiﬁ cant 
reputational and ﬁ nancial repercussions

Partner 
performance 
and market 
concentration

TWE relies on a number of key partners 
(suppliers, distributors, retailers) to support 
delivery of key strategic initiatives. The 
suboptimal performance of these partners, 
and/or their market concentration and power, 
could have a signiﬁ cant impact on TWE’s 
ability to deliver these initiatives.

18  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

•  Long-term vintage planning and ongoing integrated 

business planning processes.

•  Strategic climate change remediation investment 

plan and vineyard capital investment plan.
•  Deﬁ ned program to progressively reduce cost 

of goods sold over the next ﬁ ve years.

•  Balanced grape intake between owned/leased 

vineyards and third party suppliers.
•  Multi-regional growing and sourcing.
•  Innovative agronomic practices.
•  Strong grower relationships and deﬁ ned service 

level agreements.

•  Innovation investment, including collaboration 

with research institutes on climate change adaption 
and water efﬁ ciency research, development and 
extension projects.

•  Environment Policy and Standard, monitoring 

and reporting systems.

•  Strategically aligned and targeted learning and 

development programs. 

•  Talent review and succession planning processes.
•  Employee safety (including health and 

wellbeing) program.

•  Incentive and reward programs aligned to TWE’s 

Vision and growth behaviours.
•  Employee retention agreements.

•  Brand portfolio and product strategy, including 

portfolio rationalisation, prioritisation and 
targeted investment in consumer marketing.

•  Consumer insights and innovation team supporting 
the monitoring and awareness of brand health 
and consumer trends.

•  Product pricing strategy and global 

pricing alignment.

•  Code of Conduct, Responsible Marketing Guidelines, 
Responsible Consumption program, Responsible 
Procurement Code, Environment Policy and 
Standard, Media Policy and Social Media Policy 
and incident management procedures.

•  Corporate Responsibility program. 
•   Global media monitoring (including social/digital 

media).

•  Brand and intellectual property protection strategies.

•  Multi-regional and diversiﬁ ed supplier, distributor 

and retailer base. 

•  Deﬁ ned and pre-approved terms of engagement.
•  Investment in strong and multifaceted key 

partner relationships.

•  Joint business planning processes to support 
and align internal and partner incentives.

•  Quarterly performance reviews.

RISK

DESCRIPTION

MITIGATION

Changing laws 
and government 
regulations

TWE operates in a highly regulated industry 
in many of the markets in which it makes and 
sells wine. Each of these markets have differing 
regulations that govern many aspects of TWE’s 
operations, including taxation, production, 
manufacturing, pricing, marketing, 
advertising, distribution and sales of wine.
Remaining compliant with and abreast of 
changes to such regulations requires diligent 
and ongoing monitoring by the business. 
Additionally, changes and additional 
regulations can signiﬁ cantly impact the 
nature of operations in these markets.

•  Company-wide policies, standards and procedures.
•  TWE compliance framework. 
•  Crisis and Business Continuity Plans.
•  Specialised and experienced resources and teams.
•  Executive Leadership Team oversight via the 
Risk, Compliance and Governance Committee.
•  TWE assurance framework, including targeted 
reviews from external and internal audit and 
other specialist providers.

•  Relationships and engagement (where relevant) 
with key government, industry advocacy and 
regulatory bodies.

Signiﬁ cant 
business 
disruption and/or 
catastrophic 
damage or loss

Foreign exchange 
rate impacts

Information 
security/cyber/
fraud threat

TWE’s scope of operations exposes it to 
a number of business disruption risks, such 
as environmental catastrophes, natural 
and man-made hazards and incidents, 
or politically motivated violence.
Signiﬁ cant business disruption could 
result in TWE sites or employees being 
harmed or threatened, loss of key 
infrastructure, inventory shortages 
or loss, customer dissatisfaction, 
or ﬁ nancial and reputation loss.

TWE is exposed to foreign exchange risk from 
a number of sources, namely from the export 
of Australian produced wine to key offshore 
markets in North America and Europe. 
Foreign exchange rate movements impact 
TWE’s earnings on a transactional and 
translational basis.

Data/information security is essential to 
protect business critical intellectual property 
and privacy of data. Continuing advances 
in technology, systems and communication 
channels mean increasing amounts of 
private and conﬁ dential data are now stored 
electronically. This, together with increasing 
cyber-crime, heightens the need for robust 
data security measures.

Infrastructure 
supporting 
growth

The business relies on IT infrastructure, 
systems and processes to support ongoing 
business growth. Where such infrastructure 
cannot efﬁ ciently support the changing 
needs of the business, there is risk of 
process inefﬁ ciency and/or error increasing 
costs, processing time and damaging 
business reputation.

•  Crisis and Business Continuity Plans, training 

and resources.

•  Dedicated health and safety team oversight, 

audit programs and training.

•  Preventative repair and maintenance program.
•  Multi-regional and global sourcing and

production capability.

•  Comprehensive insurance program.

•  Active foreign exchange hedging strategy.
•  Partial natural hedges (purchases and sales 
within the same currency) where possible.
•  Matched debt funding of assets by currency, 

where possible.

•  Information Security Policy, supporting framework 

and specialised resources.

•  Restricted and segregated management of sensitive 

business/supplier/customer data.

•  Periodic employee training and alerts to ensure 

secure handling of sensitive data.
•  Crisis management and IT Disaster

Recovery Plans.

•  Periodic user access and general system 

penetration testing.

•  Deﬁ ned IT roadmap and strategy approved 
by the Board/Executive Leadership Team.
•  Implementation of global Enterprise Resource 

Planning system and reporting capability.

•  IT policies and supporting procedures (security, 
change management, project management, etc.).

•  System/process gap analysis and project 

prioritisation by Executive Leadership Team.
•  Documentation and mapping of key processes 

and controls across the business.

•  Semi-annual key control self-assessment process.

Changing 
consumer 
preferences/ 
market trends

The business’ ability to effectively manage 
current and non-current inventory is 
intrinsically linked to actual and forecast 
consumer demand – particularly given the 
long product lead-time and agricultural 
nature of the business.
Unanticipated changes in consumer demand 
or preferences can have adverse effects on 
the business’ ability to either capture growth 
opportunities or manage supply.

•  Dedicated consumer insights and innovation 

teams tracking consumer trends and researching 
new opportunities.

•  Brand portfolio and product strategy, including 

portfolio rationalisation, prioritisation and targeted 
investment in consumer marketing.

•  Integrated business planning processes, including 
portfolio reviews and global volume alignment 
processes.

•  Strategic focus on premium (high demand) categories.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  19  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

PROFIT REPORT

Financial Performance

A$M (UNLESS OTHERWISE STATED)

F18

F17

CHANGE

F17

CHANGE

REPORTED CURRENCY

CONSTANT CURRENCY

Volume (m 9Le cases)
Net sales revenue (NSR)
NSR per case ($)
Other Revenue
Cost of goods sold
Cost of goods sold per case ($)
Gross proﬁ t
Gross proﬁ t margin (% of NSR)
Cost of doing business
Cost of doing business margin (% of NSR)
EBITS

EBITS margin (%)
SGARA
EBIT
Net ﬁ nance costs
Tax expense
Net proﬁ t after tax (before material items)
Material items (after tax)
Non-controlling interests
Net proﬁ t after tax
Reported EPS (A¢)
Net proﬁ t after tax (before material items 
and SGARA)
EPS (before material items and SGARA) (A¢)
Average no. of shares (m)
Dividend (A¢)

34.6
2,429.0
70.25
67.4
(1,435.6)
41.52
1,060.8
43.7%
(530.6)
21.8%
530.2

21.8%
(15.1)
515.1
(33.4)
(116.7)
365.0
(4.6)
(0.1)
360.3
49.7

376.0
51.8
725.7
32.0

36.4
2,401.7
65.96
132.5
(1,568.3)
43.07
965.9
40.2%
(510.8)
21.3%
455.1

19.0%
(5.7)
449.4
(27.1)
(130.4)
291.9
(22.0)
(0.8)
269.1
36.5

293.4
39.8
736.8
26.0

(5.1)%*
1.1%*
6.5%
(49.1)%
8.5%
3.6%
9.8%*
8.7%
(3.9)%
(0.5)ppts
16.5%

2.8ppts
NM#
14.6%
(23.2)%
10.5%
25.0%
79.1%
87.5%
33.9%
36.2%

28.2%
30.2%

23%

36.4
2,387.9
65.58
131.3
(1,560.7)
42.86
958.5
40.1%
(509.3)
21.3%
449.2

18.8%
(5.2)
444.0
(26.7)
(131.4)
285.9
(21.0)
(0.8)
264.1

(5.1)%*
1.7%*
7.1%
(48.7)%
8.0%
3.1%
10.7%*
9.0%
(4.2)%
(0.5)ppts
18.0%

3.0ppts
NM#
16.0%
(25.1)%
11.2%
27.7%
78.1%
87.5%
36.4%

286.9

31.1%

*  As part of TWE’s route-to-market transition in the US, TWE proactively destocked a former distributor partner primarily in states where 

TWE is now directly distributing. These actions resulted in a negative impact to volume, NSR and gross proﬁ t in TWE’s F18 results.

# Not meaningful. 

Financial headlines1,2 
• Underlying volume up 2.7%; lower headline volume 
principally reﬂ ects exit from more than 2 million 
9Le cases of lower margin Commercial volume 
and route-to-market transition in the US

• Net Sales Revenue (NSR) up 1.7%. Strong NSR 
per case growth, up 7.1% driven by portfolio 
premiumisation and price realisation, despite 
supply constrained Luxury brands 

• EBITS of $530.2 million, up 18%. One-off $25 million 
adverse EBITS impact from route-to-market transition 
in the US included within EBITS 

• EBITS margin accretion of 3.0ppts to 21.8%

• Strong uplift in NPAT, Reported EPS and EPS 

(before material items and SGARA) 

• Underlying cash conversion was 82.5% adjusting 
for the impact of one-off items. Headline cash 
conversion was 68.0%

• Underlying cash conversion of 82.5% excludes 

the beneﬁ t from utilisation of receivables ﬁ nancing 
arrangements, relating to the receivables of high 
credit-quality retail customers in Australia and 
the UK throughout F18

• ROCE accretion delivered; up by 1.0ppts to 12.6% 

• Net debt3/EBITDAS, adjusted for operating leases 

of 1.9x and interest cover of 16.1x4 

Business headlines
• Delivered 18% EBITS growth in a ‘foundation year’ 
where TWE established optimal operating business 
models as well as appropriate structures for 
distributor, wholesaler and retailer partnerships 
across all regions

1. Financial information in this report is based on audited ﬁ nancial statements. Non-IFRS measures have not been subject to audit 

or review. The non-IFRS measures are used internally by Management to assess the operational performance of the business and make 
decisions on the allocation of resources.

2. Unless otherwise stated, all percentage or dollar movements from prior periods contained in the Proﬁ t Report are pre material items 

and on a constant currency basis.

3. Borrowings have been reduced by $12.7 million (F17: $4.1 million increase) to reﬂ ect a fair value hedge of a portion of US Private 

Placement notes.

4. Interest cover is calculated as the ratio of earnings to net interest expense, where earnings is the consolidated pre-tax proﬁ t (pre material 

items and SGARA) plus the sum of the amount of net interest expense adjusted for amortised interest costs, per ﬁ nancial covenants.

20  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

• Route-to-market changes in the US executed in the 
second half of F18. Embedding new operating model 
and ways-of-working expected to be completed in F19

• Completion of global initiative to proactively 

exit lower margin Commercial volume; more than 
2 million 9Le cases exited in F18 with no adverse 
impact to Group COGS per case

Volume
• Underlying volume growth of 2.7% delivered by Asia 
and ANZ through strategic customer partnerships, 
focused brand investment and optimised 
routes-to-market

• Headline reduction in volume driven by: 

 – Ongoing focus on driving premiumisation by 

• EBITS margin accretion largely driven by underlying 

proactively driving portfolio mix change

portfolio premiumisation, above category growth 
in Australia and Asia, supply chain savings and 
Diageo Wine synergies 

• Diageo Wine supply chain integration and 

cumulative run-rate COGS savings target of 
$100 million from Supply Chain Optimisation 
initiative delivered in F18

Dividend and share buy-back
• Final dividend of 17 cents per share, fully franked; 

bringing F18 full year dividend to 32 cents per 
share; up 23% on prior corresponding period (pcp) 
and representing a pay-out ratio of 65%5 

• $300 million on-market share buy-back completed 
in F18 at average price of $15.41 and delivering 
EPS accretion

Outlook
• Continued investment in brand portfolio initiatives 
aimed at delivering incremental sales, EBITS and 
EBITS margin

• Focus on embedding new operating model in US and 
investing in new ways of working with customers. 
Operating model expected to be embedded in the 
second half of F19

• Long-term investment in winemaking expected 

to deliver step-up in Luxury conversion 
capabilities, globally 

• ‘Simplify for Growth’ initiative commenced in F18; 

expected to deliver process efﬁ ciency, brand returns 
and future cost savings 

Revenue by region6

REPORTED 
CURRENCY

CONSTANT 
CURRENCY

A$M

F18

F17

%

F17

%

Net Sales Revenue
598.7
ANZ
547.6
Asia
961.8
Americas
320.9
Europe
Total sales 
revenue
Other 
revenue
Total 
Revenue

2,496.4

2,429.0

67.4

591.3
394.3
1,083.8
332.3

1.3%
38.9%
(11.3)%*
(3.4)%

589.9
393.7
1,061.1
343.2

1.5%
39.1%
(9.4)%*
(6.5)%

2,401.7

1.1%

2,387.9

1.7%

132.5

(49.1)%

131.3

(48.7)%

2,534.2

(1.5)%

2,519.2

(0.9)%

*  As part of TWE’s route-to-market transition in the US, TWE 
proactively destocked a former distributor partner primarily in 
states where TWE is now directly distributing. These actions 
resulted in a negative impact to volume, NSR and gross proﬁ t 
in TWE’s F18 results.

 – Proactive exit from more than 2 million 9Le cases 
of lower margin Commercial tiers and customer 
arrangements (notably in US, UK and South East 
Asia, Middle East and Africa (SEAMEA))

 – Planned shipment reduction associated with the 

US route-to-market change 

 – Prior model deep discounting in the US in 

the last quarter of F17 not repeated in the last 
quarter of F18

Revenue
• Net Sales Revenue up 1.7%, with NSR per case up 
7.1%, driven by portfolio premiumisation, top line 
momentum in Asia and ANZ, and price realisation 
across key, supply constrained Luxury brands

• Other revenue down 49%, reﬂ ecting the exit of third 
party distribution arrangements in New Zealand 
as part of the route-to-market change in F18 and 
revenue in F17 recognised on sale of bulk wine 
associated with the divestment of the NPC brand 
portfolio in July 2016

Cost of Goods Sold (COGS)
• COGS per case lower than pcp driven by Supply 
Chain Optimisation savings and realisation of 
Diageo Wine synergies, partially offset by portfolio 
premiumisation and higher underlying COGS in US

• Cumulative run-rate COGS savings target 
of $100 million from TWE’s Supply Chain 
Optimisation initiative delivered in F18

Cost of Doing Business (CODB)
• CODB up $21.3 million (up 4%) to $530.6 million 

largely due to increased investment in Advertising 
and Promotion (A&P) and organisational capability 
in Asia and a step-up in Overheads in the US 
to align organisational structure with the new 
direct route-to-market 

5. TWE targets a dividend payout ratio of between 55%–70% of Net 
Proﬁ t After Tax (pre material items and SGARA) over a ﬁ scal 
year. F18 payout ratio excludes the $20.9 million one-off tax 
beneﬁ t from US tax reform.

6. Prior year comparatives have been restated to reﬂ ect the 

transition of the LATAM business from Europe to Americas.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  21  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

EBITS by region6

REPORTED 
CURRENCY

CONSTANT 
CURRENCY

A$M

F18

F17

%

F17

%

ANZ
Asia
Americas 
Europe
Corporate
TWE 
EBITS

136.1
205.2
193.0
49.5
(53.6)

111.1
150.1
196.0
41.0
(43.1)

22.5%
36.7%
(1.5)%
20.7%
(24.4)%

108.1
149.2
189.7
45.3
(43.1)

25.9%
37.5%
1.7%
9.3%
(24.4)%

530.2

455.1

16.5%

449.2

18.0%

Corporate costs
• Corporate costs up $10.5 million to $53.6 million 
reﬂ ecting investment in organisational capability 
and higher amortisation as a result of investment 
in TWE’s global IT system in F17

EBITS 
• EBITS of $530.2 million, up 18% on a constant 

currency basis, principally driven by premiumisation, 
strong momentum in Asia, ANZ and Europe, supply 
chain savings and Diageo Wine synergies, partially 
offset by increased CODB 

• EBITS includes a one-off $25 million adverse 

EBITS impact associated with the route-to-market 
transition in the US 

• EBITS margin up 3.0ppts to 21.8% 

SGARA 
• SGARA loss of $15.1 million ($9.9 million higher 
than pcp) driven by the 2017 Californian vintage; 
partially offset by the 2018 ANZ vintage and the 
unwind of prior vintage losses, notably the 2016 
Californian and 2015 Australian vintages

Net ﬁ nance costs
• Net ﬁ nance costs higher than pcp, principally 

driven by increased average borrowings

Tax expense
• Lower tax expense reﬂ ects a one-off beneﬁ t 

of $20.9 million arising due to the restatement 
of TWE’s net deferred tax liability in respect 
to its US operations, following the enactment 
of the US Tax Cuts and Jobs Act

• Effective tax rate in F18 of 24.2% (F17: 30.8%). 
Excluding the one-off beneﬁ t, TWE’s effective 
tax rate was 28.6% in F18 

Material items
• Post-tax material items expense of $4.6 million 
reﬂ ects ﬁ nal integration costs associated with 
the integration of Diageo Wine

Net proﬁ t after tax (NPAT)
• NPAT before material items up to $365 million 
(+28%) driven by higher EBITS and lower tax 
expense, partially offset by higher SGARA loss 
and net ﬁ nance costs

Earnings Per Share (EPS)
• EPS (before SGARA and material items) increased 

30% to 51.8cps and Reported EPS up 36% to 49.7cps; 
both on a reported currency basis. EPS (before 
SGARA, material items and one-off tax beneﬁ t) 
up 22.9% to 48.9cps

Balance Sheet (condensed)7

A$M

F18

F17

Cash and cash equivalents
Receivables
Current inventories
Non-current inventories
Property, plant and equipment
Agricultural assets
Intangibles
Tax assets
Assets held for sale
Other assets
Total assets

Payables
Borrowings
Tax liabilities
Provisions
Other liabilities
Total liabilities
Net assets

89.4
593.3
1,012.3
952.1
1,416.5
41.3
1,128.9
154.5
45.2
12.2
5,445.7

759.3
879.6
245.3
49.4
15.8
1,949.4
3,496.3

240.8
607.9
947.9
763.9
1,328.5
37.7
1,095.8
208.0
36.0
12.8
5,279.3

719.9
600.5
285.0
64.8
0.6
1,670.8
3,608.5

Balance sheet movements as at 30 June 2018
Net assets down $112.2 million to $3,496.3 million, 
principally driven by an increase in net debt, 
partially offset by increased inventory. Adjusting 
for movements in foreign exchange rate movements, 
net assets decreased by $168.9 million

Cash and cash equivalents
Lower cash balance principally driven by $300 million 
share buy-back, increased dividends and tax paid and 
higher working capital (driven by higher inventory); 
partially offset by continued earnings growth 

Working Capital
Higher working capital relative to 30 June 2017, 
reﬂ ecting:

• Increased inventory, up $252.6 million to 
$1,964.4 million versus F17 driven by:

 – Intake from the high quality, lower yielding vintages 

in California in 2017 and in Australia in 2018

6. Refer to footnote 6 on page 21.
7. Unless otherwise stated, balance sheet percentage or dollar movements from the previous period are on a reported currency basis and in 

respect of the prior corresponding period.

22  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

 – A signiﬁ cant increase in Luxury grape grade 
conversion drove a strong uplift in production 
of Luxury Australian wine in 2018

 – Planned repurchase of distributor inventory 
associated with the route-to-market change 
in the US

 – Inclusion of French brand portfolio inventory 
(Maison de Grand Esprit and Mouton Cadet) 

 – Continued focus on premiumising TWE’s 

overall inventory mix; increasing Luxury and 
Masstige availability and exiting lower margin 
Commercial volume

• Higher payables driven by business growth as 
well as increased brand building investment in 
North Asia to support Australian, US and French 
brand portfolios 

• Lower receivables driven by exit from lower margin 
Commercial volume and working capital ﬁ nancing 
initiatives, partially offset by phasing of sales due 
to the US route-to-market change and industry 
delays on Australian wine imports into China 
in the last quarter of F18

Property, plant and equipment
Property, plant and equipment increased 
$88.0 million to $1,416.5 million reﬂ ecting 
investments in Australia, the US and New Zealand, 
notably the acquisition of the Wetherall vineyard; 
a premium vineyard in Coonawarra, South Australia

Agricultural assets
Agricultural assets at 30 June 2018 represent 
the market value of unharvested grapes prior 
to the 2018 US vintage with the increase reﬂ ecting 
recent investments in vineyard redevelopment

Intangibles
Adjusting for foreign currency movements, intangible 
assets increased by $17.0 million, principally 
reﬂ ecting TWE’s investment in IT systems, notably 
to support its new route-to-market in the US

Provisions
Lower provisions relative to pcp, driven by utilisation 
of restructuring-related provisions in respect of the 
integration of Diageo Wine (now complete)

Tax and other assets 
Increase in net deferred tax liabilities principally 
relates to the unwind of deferred tax assets recognised 
on the Diageo Wine acquisition, partially offset by the 
revaluation of net US deferred tax liabilities following 
the enactment of the US Tax Cuts and Jobs Act

Assets held for sale
Increase in assets held for sale reﬂ ects barrels 
to be sold under sale and lease back arrangements 
and surplus supply assets in the US and Australia

Borrowings8
Borrowings increased $279.1 million to $879.6 million, 
predominantly reﬂ ecting funding associated with 
TWE’s share buy-back program 

Balance sheet leverage
Net debt/EBITDAS of 1.9x (adjusted for operating 
leases) and interest cover of 16.1x

Funding structure
At 30 June 2018, TWE had committed debt facilities 
totalling approximately $1.3 billion, comprising;

• Drawn bank facilities of $274.1 million and 

$544.3 million of US Private Placement notes 

• Undrawn committed, syndicated debt facilities 

totalling $483.1 million

Weighted average term to maturity of committed 
facilities of 4.5 years

Cash ﬂ ow – reconciliation of net debt

A$M (UNLESS OTHERWISE STATED)

F18

F17

627.7
(177.1)
(23.8)

261.5
(29.3)
(93.7)

EBITDAS
Change in working capital
Other items
Net operating cash ﬂ ows before 
ﬁ nancing costs, tax and material items 426.8
68.0%
Cash conversion
(215.4)
Capital expenditure
Net investment proceeds/(expenditure)
50.1
Cash ﬂ ows after net capital 
expenditure, before ﬁ nancing costs, 
tax and material items
Net interest paid
Tax paid
Cash ﬂ ows before dividends 
and material items
Dividends/distributions paid
Cash ﬂ ows after dividends 
before material items
Material item cash ﬂ ows
On-market share buy-back
On-market share purchases
Total cash ﬂ ows from activities
Opening net debt
Total cash ﬂ ows from activities (above)
Proceeds from settlement of derivatives
Debt revaluation and foreign exchange 
movements
Increase in net debt

(65.2)
(8.1)
(300.0)
(42.9)
(416.2)
(354.8)
(416.2)
–

(31.3)
(447.5)

138.5
(203.7)

563.4
(67.4)
(23.5)

472.5
83.9%
(210.4)
50.9

313.0
(24.5)
(32.0)

256.5
(184.6)

71.9
(3.9)
–
(65.9)
2.1
(365.0)
2.1
0.6

7.5
10.2

Closing net debt

(802.3)

(354.8)

8. Borrowings have been reduced by $12.7 million (F17: $4.1 million increase) to reﬂ ect a fair value hedge of a portion of US Private 

Placement notes.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  23  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

Movement in net debt
Net debt increased $447.5 million to $802.3 million. 
Drivers of the movement in net debt included:

EBITDAS
EBITDAS increased $64.3 million on a reported 
currency basis driven by premiumisation, strong 
momentum in Asia, ANZ and Europe, Supply Chain 
savings and Diageo Wine synergies, partially offset 
by increased CODB

Movement in working capital9 
Net working capital outﬂ ow driven by:

• Increased inventory reﬂ ecting intake from the high 

quality, lower yielding vintages in California in 2017 
and Australia in 2018, the inclusion of French brand 
portfolio inventory as well as inventory repurchased 
as part of TWE’s route-to-market change in the US

• Higher payables, driven by business growth as 
well as increased brand building investment in 
North Asia to support Australian, US and French 
brand portfolios

• Lower receivables driven by exit from lower margin 
Commercial volume and working capital ﬁ nance 
initiatives, partially offset by phasing of sales due 
to the US route-to-market change, and industry 
delays on Australian wine imports into China 
in the last quarter of F18

Other items
Other items reﬂ ects movements in provisions and 
proﬁ t on sale of assets

Capital expenditure 
Capital expenditure (capex) of $215.4 million 
comprising:

• Maintenance and Replacement capex of 

$128.3 million; slightly higher than guidance 
due to incremental expenditure in F18 associated 
with vineyard investment

• Capex of $36.9 million for Diageo Wine integration 

(now complete)

• Vineyard acquisitions of $36.8 million to increase 
access to Luxury and Masstige supply, notably the 
acquisition of the Wetherall vineyard; a premium 
vineyard in Coonawarra

• Other investment in growth initiatives of 

$13.3 million

In F19, Maintenance and Replacement capex 
expected in the range of $130 million to $140 million 
(including oak barrels), reﬂ ecting increased growth 
and scale of Luxury operations

Net investment proceeds/(expenditure)
Net investment expenditure reﬂ ects proceeds received 
from the sale and leaseback of oak barrels and the 
sale of surplus supply assets

Net interest paid 
Increased net interest paid driven by higher average 
drawn debt

Dividends paid
Increase in dividends paid reﬂ ects F18 interim 
dividend of 15 cents per share and F17 ﬁ nal dividend 
of 13 cents per share, representing an increase of 12% 
relative to pcp

Tax paid
Increase in tax paid predominantly reﬂ ects Australia 
being in a full tax paying position in F18

Material items
Material items outﬂ ow driven by restructuring and 
redundancy costs associated with the integration 
of Diageo Wine (now complete)

On-market share purchases
Increase in issued share transactions reﬂ ects:

• Purchase and cancellation of $300 million of issued 

capital under TWE’s share buy-back program; 
executed at an average price of $15.41 per share; and

• Upfront acquisition of shares in connection with 

vesting of TWE’s Long-Term Incentive Plans, and 
underlying appreciation in TWE’s share price

Exchange rate impact
Lower period-end exchange rates used to revalue 
foreign currency borrowings and cash as at 
30 June 2018 increased net debt by $31.3 million 

Cash conversion
• Underlying cash conversion was 82.5% after 
adjusting for inventory repurchased as part 
of TWE’s route-to-market transition in the US, 
delayed sales due to clearance delays of Australian 
wine imports into China in the last quarter 
of F18 and the inclusion of French brand portfolio 
inventory (Maison de Grand Esprit and Mouton 
Cadet). Headline cash conversion was 68.0%

• Underlying cash conversion of 82.5% excludes 

the beneﬁ t from utilisation of receivables ﬁ nancing 
arrangements, relating to the receivables of high 
credit-quality retail customers in Australia and 
the UK throughout F18

9.  Change in working capital reﬂ ects operating cash ﬂ ow movements.

24  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

REGIONAL SUMMARIES

AMERICAS

Financial performance10

REPORTED 
CURRENCY

CONSTANT 
CURRENCY

A$M

F18

F17

%

F17

%

Volume (m 9Le)
NSR (A$m)
NSR per case (A$)
EBITS (A$m)
EBITS margin (%)

13.7

15.8 (13.3)%*
15.8 (13.3)%*
(9.4)%*
961.8 1,083.8 (11.3)%* 1,061.1
4.5%
2.4%
68.81
67.37
70.43
189.7
193.0
1.7%
(1.5)%
196.0
17.9% 2.2ppts
20.1% 18.1% 2.0ppts

*  As part of TWE’s route-to-market transition in the US, TWE 
proactively destocked a former distributor partner primarily 
in states where TWE is now directly distributing. These actions 
resulted in a negative impact to volume, NSR and gross proﬁ t 
in TWE’s F18 results.

Historical EBITS and EBITS margin*
A$M

200.0

175.0

150.0

125.0

100.0

75.0

50.0

25.0

0

F15

F16

F17

F18

20.0%

18.0%

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

1H EBITS

2H EBITS

FY EBITS 
Margin

* Chart presented
  on a reported 
  currency basis.

Business performance
• Underlying volume growth ﬂ at versus pcp, before 
taking into account the following adverse impacts:

• LATAM EBITS up 37% versus pcp driven 

by premiumisation and expansion in markets 
including Mexico and the Caribbean region

 – Exit from lower margin Commercial volume

• Americas EBITS up 1.7% to $193.0 million, 

 – Shipment reduction associated with the 

US route-to-market changes 

 – Prior model deep discounting in F17 not 

repeated in F18

 – Total shipments below depletions by >400k cases

• Luxury and Masstige depletions growth continued 

to be strong, up 6%, combined 

• NSR down 9.4%, driven by lower volume. NSR per 

case growth driven by favourable portfolio mix, price 
realisation on some supply constrained Luxury 
brand tiers, partially offset by continued reallocation 
of brand building investment to Discounts and 
Rebates (D&R) to drive on-shelf availability 

• Ongoing impact of lower yielding, high quality 
vintages driving higher COGS, notably across 
leased vineyards. Increased underlying COGS per 
case offset by supply chain savings in F18. TWE 
working to offset higher COGS in F19

• Favourable CODB driven by ongoing reallocation 
of A&P to D&R to drive distribution availability, 
partially offset by investment in Overheads ahead 
of US direct route-to-market changes in F18 and 
one-off items netting to $8 million included in EBITS 
in pcp, principally relating to proﬁ t on asset sales

• Strong EBITS growth and margin accretion in 
Canada; partnership with Mark Anthony Wine 
& Spirits delivering signiﬁ cant improvement 
in in-market execution

reﬂ ecting underlying premiumisation, partially 
offset by the $25 million one-off adverse EBITS 
impact from the route-to-market transition in 
the last quarter of F18

Americas regional perspectives
• US wine industry volume (excluding bag in box) 
continues to be ﬂ at; Commercial in decline and 
Masstige and Luxury segments in growth11 

• Integration of Diageo Wine completed in the ﬁ rst 

half of F18, following the consolidation of packaging 
to Sonoma Bottling Centre

• Route-to-market transition executed in the US in 
F18; TWE continuing to invest in self-distributing 
25% of its business in large, direct states 
and transitioned 15% of its business to new, 
growth-oriented distributor partners 

• Positive initial signs of new operating model; gross 
proﬁ t per case delivered by direct states in the US 
in the last quarter of F18 higher than pcp reﬂ ecting 
early beneﬁ ts of route-to-market change 

• Positive feedback from strategic, national retail 
customers in the last quarter of F18 as TWE 
leverages global sales and marketing capability 
to further strengthen direct customer partnerships 
and drive category growth 

• TWE continuing to embed new operating model in 
the US and investing in new ways of working with 
customers; new operating model expected to be 
embedded in the second half of F19

10.  Prior year comparatives have been restated to reﬂ ect the transition of the LATAM business from Europe to Americas; F17 EBITS 

restated from $189.0 million to $196.0 million.

11.  IRI Market Advantage, Table $4+ excluding bag in box, 52 weeks ending 1 July 2018, Total US Multi Outlet + Liquor.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  25  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

REGIONAL SUMMARIES

ASIA

Financial performance

REPORTED 
CURRENCY

CONSTANT 
CURRENCY

A$M

F18

F17

%

F17

%

Volume (m 9Le)
NSR (A$m)
NSR per case (A$)
EBITS (A$m)
EBITS margin (%)

4.3
547.6

23.2%
3.5
23.2%
3.5
39.1%
38.9%
393.7
394.3
12.9%
12.7% 111.53
125.93 111.70
149.2
205.2
37.5%
36.7%
150.1
37.9% (0.4)ppts
37.5% 38.1% (0.6)ppts

Historical EBITS and EBITS margin*
A$M
200.0

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0

F15

F16

F17

F18

40.0%
38.0%
36.0%
34.0%
32.0%
30.0%
28.0%
26.0%
24.0%
22.0%
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%

1H EBITS

2H EBITS

FY EBITS 
Margin

* Chart presented
  on a reported 
  currency basis.

Business performance
• Volume growth of 23% to 4,348k 9Le cases; North 

Asian regional perspectives
• Fundamentals of Asian wine market continue to 

Asia up 41% versus pcp, and South East Asia, 
Middle East and Africa (SEAMEA) down 6%

be attractive; imported wine category taking share 
from declining local wine category12 

• Industry delays on Australian wine imports into 
China in the last quarter of F18 appear to have 
abated. Strong engagement with regional and 
national government authorities 

• Shanghai warehouse facility operational in F18. 
Warehouse model already providing increased 
access to regional retailers in China, with customer 
transition ongoing

• Successful in-market launch of Maison De Grand 
Esprit in F18; with 1,000+ distribution points 
achieved in North Asia in F18

• China distribution agreement with Baron Philippe 

de Rothschild commenced in January; positive 
momentum seen in F18

• Focus on premiumisation and leveraging 

organisational capability to deepen strategic 
retail and e-commerce customer partnerships 
in SEAMEA 

• TWE continues to focus on driving portfolio growth 
in Asia; including Penfolds, other Australian, US, 
French and Italian wines

• Asia expected to deliver EBITS margin of 35%+ 

in F19 and beyond

• F18 volume growth led by Australian and French 
brand portfolios, up 27% and 296%, respectively 
partially offset by deliberate exit of lower margin 
Commercial volumes in SEAMEA, largely relating 
to Blossom Hill 

• Excluding Blossom Hill, US brand portfolio volume 
up 44% led by Luxury tiers of Beringer, Beaulieu 
Vineyard and Sterling Vineyards 

• Forward days of inventory cover broadly in line 

with previous corresponding period 

• Higher NSR per case driven by increased Luxury 

volume, proactive reduction in Blossom Hill 
Commercial volume in SEAMEA and price 
realisation on select supply-constrained 
Luxury brands 

• Higher A&P investment in F18; in the second half 
of F18 A&P investment more than double pcp to 
support Australian, US and French brand portfolios 
in North Asia

• Ongoing investment in sales, marketing and 

organisational capabilities and presence in Asia 
underpinned increased Overheads 

• Despite higher CODB, positive operating leverage 
from stronger NSR growth drove lower CODB 
margin in F18

• EBITS up 38% to $205.2 million and EBITS margin 
of 37.5%; slightly higher than the stated guidance 
range of 32–37% 

12.  As per IWSR Global Database 2017.

26  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

REGIONAL SUMMARIES

AUSTRALIA & NEW ZEALAND (ANZ)

Financial performance

REPORTED 
CURRENCY

CONSTANT 
CURRENCY

A$M

F18

F17

%

F17

%

Volume (m 9Le)
NSR (A$m)
NSR per case (A$)
EBITS (A$m)
EBITS margin (%)

1.7%
7.8
7.9
1.3%
591.3
598.7
(0.5)%
75.84
75.47
136.1
22.5%
111.1
22.7% 18.8% 3.9ppts

1.7%
7.8
1.5%
589.9
(0.3)%
75.66
108.1
25.9%
18.3% 4.4ppts

Historical EBITS and EBITS margin*
A$M

140.0

120.0

100.0

80.0

60.0

40.0

20.0

0

F15

F16

F17

F18

22.0%
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%

1H EBITS

2H EBITS

FY EBITS 
Margin

* Chart presented
  on a reported 
  currency basis.

Business performance
• ANZ volume growth of 1.7% to 7,933k 9Le cases; 

Australia volume growth outperformed Australian 
wine category13 

ANZ regional perspectives
• Australian wine market volume is growing at 
c.0–1%13, with premiumisation driving higher 
value growth

• NSR per case in line with pcp; strong Masstige 
portfolio growth, offset by the impact of the 
transition to distributor model in New Zealand. 
Adjusting for the route-to-market transition, 
underlying NSR per case increased 4%

• Lower COGS per case supported by continued 

realisation of supply chain savings 

• Successfully relaunched Seppelt Luxury Collection 
in the second half of F18 with nationwide in-store 
execution and outstanding online and print media 
marketing campaign

• A’Tivo cans launched in the second half of F18 
in Australia; strengthening TWE’s share of 
refreshment category growth 

• Lower-cost distributor model in New Zealand and 

reduced COGS per case offset increased investment 
in organisational capability (Overheads); largely 
incurred in the ﬁ rst half of F18

• TWE continues to target aspirational 25% volume 
and value market share in Australia, driven by 
investment in portfolio growth and innovation 
within the Masstige segment

• CODB margin broadly unchanged, with a one-off 

• Relationships with strategic customers remain 

beneﬁ t of $4 million relating to proﬁ t on asset sales 
in F18 offsetting the impact of increased Overheads 

strong and collaborative; joint business planning 
processes are maturing 

• EBITS up 26% to $136.1 million with margin 

accretion of 4.4ppts to 22.7%

• TWE’s on-premise channel returned to growth 
in F18; continued investment in Wine On Tap 
and Choice of Pour

• Successful transition to distributor route-to-market 
model in New Zealand in F18; distributor model and 
realigned portfolio mix positions New Zealand for 
growth in F19

• NSR per case growth expected in F19 in ANZ 
underpinned by Luxury and Masstige volume 
and value growth and lapping of the impact of the 
route-to-market transition in New Zealand in F18

13.  Due to incompleteness of available market data, this is a Management estimate.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  27  

OPERATING AND FINANCIAL REVIEW (CONTINUED)

REGIONAL SUMMARIES

EUROPE

Financial performance14

REPORTED 
CURRENCY

CONSTANT 
CURRENCY

A$M

F18

F17

%

F17

%

Volume (m 9Le)
NSR (A$m)
NSR per case (A$)
EBITS (A$m)
EBITS margin (%)

8.6
320.9
37.16
49.5

(7.5)%
9.3
(3.4)%
332.3
4.4%
35.59
20.7%
41.0
15.4% 12.3% 3.1ppts

9.3
343.2
36.76
45.3

(7.5)%
(6.5)%
1.1%
9.3%
13.2% 2.2ppts

Business performance
• Volume decline of 8% to 8,637k 9Le cases, reﬂ ecting 
exit from lower margin Blossom Hill Commercial 
volume as well as the exit from under-bond 
wholesale market in the UK 

• Higher NSR per case driven by continued focus 

on driving priority Masstige brands, notably Wolf 
Blass, Lindeman’s Gentleman’s Collection and 
19 Crimes and favourable mix within the 
Commercial segment 

• Favourable COGS per case reﬂ ects integration of 
Diageo Wine and continued supply chain savings 

• Overheads largely in line with pcp, reﬂ ecting 

implementation of organisational structure changes 
made in F17 and continued focus on managing costs

• EBITS up 9% to $49.5 million, and EBITS margin 

accretion delivered, up 2.2ppts to 15.4%

Historical EBITS and EBITS margin*
A$M

50.0

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0

F15

F16

F17

F18

16.0%

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

1H EBITS

2H EBITS

FY EBITS 
Margin

* Chart presented
  on a reported 
  currency basis.

Europe regional perspectives
• UK wine market conditions remain challenging, 
with a declining wine category and continued 
uncertainty from Brexit

• Premiumisation continues in the UK with Luxury 
and Masstige wine volume growing at c.16%, and 
Commercial declining c.7%15 

• Continued prioritisation of key markets 

(UK, Sweden and Netherlands) and priority 
brands (Wolf Blass, Lindeman’s, Blossom Hill 
and 19 Crimes) 

• Targeted brand building investment supporting 
priority brands including launch of three-year 
partnership between Wolf Blass and the 
International Cricket Council and relaunch 
of Lindeman’s packaging

• Fit for purpose organisational structure now 

implemented and driving cost efﬁ ciencies

• Strengthened partnerships with key European 

retailers driving improved distribution of priority 
brands; focus continues to be on joint business 
planning and increasing share of shelf space

• Europe positioned to deliver positive volume growth 
and continued double digit EBITS margin in F19, 
supported by strengthening customer partnerships, 
focused investment on priority brands and 
maintaining an efﬁ cient organisational structure 

14.  Prior year comparatives have been restated to reﬂ ect the transition of the LATAM business from Europe to Americas; F17 EBITS 

restated from $48.0 million to $41.0 million.

15.  Nielsen, Total Coverage, Total Still Light Wine, 52 weeks ending 14 July 2018 (750ml bottle still wine only).

28  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

VINTAGE UPDATE

California
A dry and warm winter concluded with late rainfalls 
and cooler conditions in March. The late winter rains 
and moderate growing season thereafter are expected 
to result in the 2018 harvest being later than 2017, 
with timing more aligned to long-term averages. 
The remainder of the growing season is expected to 
be warm, with overall yields anticipated to be higher 
than 2017. Key varietals, including Cabernet in Napa; 
and Chardonnay and Pinot Noir in Sonoma and the 
Central Coast are currently beneﬁ tting most from 
the favourable growing conditions and continued 
investments in estate vineyards. The quality of the 
2018 vintage will not be impacted by the California 
wildﬁ res from late 2017. 

Australia
The 2018 Australian harvest reﬂ ects a high quality 
vintage, with yields returning to long-term averages. 
Despite seasonal challenges of early frost and then 
some new year heat spikes, an extended and moderate 
ripening period leading into harvest has produced 
a high quality vintage across most of TWE’s growing 
regions and varietals – Barossa Valley Shiraz; 
McLaren Vale Shiraz and Cabernet Sauvignon; 
Coonawarra and Robe Cabernet Sauvignon; 
Tasmanian Pinot Noir and Chardonnay; and Western 
Australian Chardonnay and Cabernet Sauvignon.

New Zealand
The 2018 vintage experienced warm to hot conditions 
during the early growing season, followed by 
late season rains. Regional variations of these 
conditions were evident, with the extreme growing 
conditions resulting in wines showing high levels of 
concentration and character. Overall industry yields 
were higher than 2017, with TWE experiencing 
a notable uplift in Central Otago Pinot Noir.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  29  

CORPORATE RESPONSIBILITY

In 2018, TWE is proud to present the Company’s inaugural 
Sustainability Report, which outlines how TWE works to create 
long-term value through its Corporate Responsibility program, 
as well as through effective management of environmental, 
social and governance topics. 

Corporate Responsibility (CR) information found 
in TWE’s previous Annual Reports, has moved 
to the Sustainability Report, including ﬁ scal year 
updates on:

The four pillars encompass and build on the previous 
CR program priorities which applied in F18; being 
Sustainable Sourcing, Volunteering and Community, 
and Responsible Consumption.

• the CR program and its strategic priorities; 

• health, safety and environment; and 

• product quality and safety.

The Sustainability Report is available online 
via TWE’s corporate website, at www.tweglobal.com/
responsibility. 

The release of TWE’s inaugural Sustainability 
Report coincides with the commencement of TWE’s 
refreshed CR program. 

In F18, the Global CR Council oversaw a review 
of TWE’s CR program, including its pillars, 
guiding principles, strategic priorities and 
governance framework.

The review considered the Company’s vision, 
strategy and business priorities, and was supported 
by a comprehensive CR materiality assessment1. 
The review informed the identiﬁ cation of the 
Company’s priority environmental, social and 
governance (ESG) topics. These topics were grouped, 
resulting in the establishment of four key pillars – 
Performance, Planet, People and Product.

In F18, following the CR program review and the CR 
materiality assessment, the Company identiﬁ ed seven 
priority United Nations Sustainable Development 
Goals (SDGs). These SDGs were identiﬁ ed as having 
the most impact on TWE, whilst also being closely 
aligned to the Company’s vision and strategy, and are:

• Goal 3: Good health and well-being

• Goal 5: Gender equality

• Goal 6: Clean water and sanitation

• Goal 7: Affordable and clean energy

• Goal 12: Responsible consumption and production

• Goal 13: Climate action

• Goal 17: Partnerships for the goals

A visual representation of TWE’s CR framework 
and its alignment to TWE’s strategy and the SDGs 
is shown in Figure 7.

1. The CR materiality assessment was a process undertaken to inform TWE of its stakeholders’ views on ESG topics. Priority ESG topics 

identiﬁ ed through the CR process are therefore not necessarily TWE’s material risks. TWE’s material business risks are outlined in the 
Operating and Financial Review in this Annual Report. 

30  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

Figure 7: TWE’s Corporate Responsibility framework

VISION

MISSION

TWE
STRATEGIC
IMPERATIVES

CR PILLAR

GUIDING
PRINCIPLE

AMBITION

To be the world’s most celebrated wine company

Create long term value for TWE and everyone who touches our Company
by being sustainable in everything we do

PARTNERS

MARKETS

MODEL

PEOPLE

BRANDS

P e r f ormance

P lanet

P eople

P roduct

Be transparent 
and hold ourselves 
to account

Be sustainable and 
(cid:72)(cid:73)(cid:192)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:75)(cid:72)(cid:81)(cid:3)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:90)(cid:76)(cid:81)(cid:72)

Respect and enhance 
the lives of our people 
and our communities 

(cid:50)(cid:88)(cid:85)(cid:3)(cid:86)(cid:87)(cid:68)(cid:78)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)
believe in and 
trust our Company
to operate sustainably

Our environmental 
impact is sustainable 
(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)

Our peoples’ human 
(cid:85)(cid:76)(cid:74)(cid:75)(cid:87)(cid:86)(cid:15)(cid:3)(cid:86)(cid:68)(cid:73)(cid:72)(cid:87)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:90)(cid:72)(cid:79)(cid:79)(cid:69)(cid:72)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:87)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)

Create quality wines
that are consumed and 
promoted responsibly 
and safely

Our wines are 
(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:72)(cid:71)(cid:15)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:72)(cid:71)(cid:3)
and consumed 
responsibly

PRIORITY UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS

For more information on the CR program, the CR program review, and the Company’s F18 performance in relation 
to identiﬁ ed ESG topics, please see TWE’s 2018 Sustainability Report. 

PERFORMANCE
•  Reviewed CR program
•  Completed CR 

materiality assessment

•  Identiﬁ ed seven
priority SDGs

F18 KEY HIGHLIGHTS

PLANET
•  Launched the 

Sustainable Future 
framework

•  Achieved 100% 
sustainability 
certiﬁ cation of
vineyards and wineries

•  Improved water

and energy efﬁ ciency
in wineries and 
packaging centres

PEOPLE

•  Added Human Rights 
or ESG topics to codes 
and policies

•  Contributed over

A$1 million in value
to the community
•  Decreased Serious 

Incident Frequency Rate 
(SIFR) by 30%

PRODUCT
•  Integrated social media 
into the Responsible 
Marketing Guidelines

•  Trained 97.1% of 

employees on TWE’s 
Alcohol Policy

•  Maintained third party 
quality and food safety 
certiﬁ cations

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  31  

DIVERSITY AND INCLUSION

TWE is committed to creating a high-performance culture, 
attracting and retaining the best possible talent, as well 
as creating an inclusive environment where people from 
diverse backgrounds can fulﬁ l their potential.

TWE’s commitment also serves to broaden the 
Company’s collective knowledge and give TWE 
a competitive edge. It helps the Company to 
understand and connect more effectively with 
its customers, communities and consumers 
and drive stronger engagement with employees.

The Board has committed to reviewing and assessing 
progress against TWE’s diversity and inclusion 
objectives annually. To that end, the Company is 
pleased to report progress made in F18, together 
with its F19 measurable objectives.

The Company’s Diversity and Inclusion Policy can be 
found on the Company’s website: www.tweglobal.com/
investors/corporate-governance

F18 objectives 
Recommendation 1.5 of the ASX Corporate 
Governance Principles and Recommendations 
states that a company’s board or board committee 
is to set the measurable objectives for achieving 
gender diversity. 

The diversity objectives and measures set by the 
Board for F18 were:

1.  Increase gender diversity in leadership

Continue the journey towards achieving 
an increase in females in leadership roles 
to 38% by 2020.

2.  Develop inclusive leaders

A total of 75% of senior leaders meet or exceed 
expectations on Inclusive Leadership.

Executive Leadership Team diversity objectives
The Chief Executive Ofﬁ cer (CEO) and all Executive 
Leadership Team (ELT) members had a diversity 
Key Performance Objective (KPO) to deliver the above 
objectives in F18.

F18 progress
To achieve the objectives, various initiatives were 
undertaken throughout F18, including:

• Our global Employee Value Proposition, ‘Thinkers. 

Makers. Doers. Welcome’, was launched with a focus 
on promoting inclusion and gender diversity. 

• Launch of the second phase of the ‘TWEforShe’ 
global program, focused on ‘on-the-job learning’, 
to support women across our business in unlocking 
their potential, and creating a truly balanced and 
high performing culture at TWE.

• The fourth global Mary Penfold Leadership Award 
for Outstanding Female Leadership was awarded.

32  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

• Reinforcement of Inclusive Leadership by training 
and upskilling the Global Talent Acquisition team 
on unconscious bias and coaching hiring managers.

• Reinforcement of Inclusive Leadership through 

bias interrupters and during key people activities. 

Organisational gender proﬁ le
The Company makes the following diversity 
disclosures in relation to Recommendation 1.5 
of the ASX Corporate Governance Principles 
and Recommendations:

• Implementation of a toolkit to support employees 

RECOMMENDATION 1.5 REQUIREMENT

Proportion of 
women in the 
whole organisation

Proportion of 
women in senior 
executive1 positions 
within the Group

Proportion of 
women on the Board 
of the Company

As at 30 June 2018, 39.8% of the 
Group’s employees were women.

As at 30 June 2018, 40% of the 
senior executive positions within 
the Group were held by women.

As at 30 June 2018, 25% of the 
Company’s Board of Directors 
(including executive directors) 
were women.
The Board is committed to
ensuring that it is comprised 
of individuals with appropriate 
skills, experience, and diversity 
to develop and support the 
Company’s strategic aims. 
In 2017, the Board set an 
aspirational target to achieve 
30% female representation 
by 2018 as vacancies and 
circumstances allow. Further 
details are set out in the 
Corporate Governance
section of the Annual Report.

As an Australian based business, the Company complies 
with the Workplace Gender Equality Act which requires 
annual ﬁ lings to the Australian Workplace Gender Equality 
Agency (WGEA) disclosing ‘Gender Equality Indicators’. 
The WGEA report covering the 12-month period ended 
31 March 2018, is published on the WGEA website and the 
TWE website at tweglobal.com/careers/diversity-inclusion

1. For the purposes of this disclosure, the Company has deﬁ ned 
‘senior executive’ as the Chief Executive Ofﬁ cer and his/her 
direct reports. To note, using the TWE deﬁ nition of leader, 
37.1% of roles were held by women as at 30 June 2018.

who take parental leave. 

• Gender pay equity review recommendations 

were implemented.

The ELT continued to operate as the Diversity 
Council in F18 to focus their efforts on setting 
appropriate goals and targets, monitoring progress, 
and driving action.

The following outcomes were recorded against the 
objectives for the reporting period:

• Female representation in leadership roles as 

at 30 June 2018 was 37.1% from 37.3% in F17.

• 98% of employees agreed that senior leaders met 
or exceeded expectations on Inclusive Leadership.

F19 objectives and initiatives
As is the case in nurturing TWE’s premium wines, 
investment and time yield great results. F18 has 
continued momentum and in F19 the Company will 
continue to invest in core areas of diversity and 
Inclusive Leadership through the following objectives 
to deliver sustainable improvement:

1.  Increase gender diversity in leadership

Continue the journey towards achieving 
an increase in females in leadership roles 
to 38% by 2020.

2.  Develop inclusive leaders

A total of 75% of senior leaders meet or exceed 
expectations on Inclusive Leadership.

The following initiatives have been identiﬁ ed 
to maintain momentum in F19 and achieve the 
Company’s objectives:

• Continue executive mentoring and sponsorship 

of female talent;

• Leverage momentum through continued investment 

in the ‘TWEforShe’ global program, aimed at 
building female capability and realising their 
potential through ‘on-the-job’ learning;

• Continuation of the Mary Penfold Leadership Award 
in celebration of outstanding female leadership; and

• Implementation a 360-degree survey to measure 

senior leaders’ Inclusive Leadership.

Executive Leadership Team diversity objectives
The CEO and all ELT members have a diversity KPO 
to deliver the above objectives in F19.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  33  

Left to right:
Paul Rayner
Michael Clarke
Ed Chan
Michael Cheek

Michael Cheek B.BA (Hons) 
Non-executive Director 

Member of the Board since September 
2012 and a member of the Human 
Resources Committee.

Mr Cheek is an independent Director 
and a United States resident.

He has more than 25 years’ experience 
in the alcohol beverages industry in senior 
executive positions, including 14 years 
of leadership in the US wine industry.

He has held prior roles as Chairman 
of Finlandia Vodka Worldwide for 
the Brown-Forman Corporation and 
also as a non-executive director for 
Glenmorangie. His career spans over 
10 years with Brown-Forman in executive 
roles, including President, Global Spirits 
Group and President, North American 
Spirits. Mr Cheek also spent over nine 
years with The Coca-Cola Company 
in senior positions in both The Wine 
Spectrum and in Coca-Cola USA. 

Mr Cheek is the Chairman of Nelson’s 
Green Brier Distillery, a non-executive 
director of Jose Cuervo and a member 
of the Board of Advisers of privately 
owned Conecuh Investors, LLC.

BOARD OF DIRECTORS

Michael Clarke CA, B.Com
Managing Director and 
Chief Executive Ofﬁ cer 

Member of the Board since March 2014.

Mr Clarke has dual Irish/South African 
citizenship and is an Australian resident. 

He has held senior executive roles at 
Kraft Foods, where he was President 
of the Company’s European business 
and sat on the global operating board, 
The Coca-Cola Company and Reebok 
International. He was Chief Executive 
Ofﬁ cer of the UK publicly listed company 
Premier Foods Plc, where he led a 
signiﬁ cant turnaround of the business. 

Mr Clarke was a director of Quiksilver 
Inc. from April 2013 to February 2016 
and a director of Wolseley plc from 
March 2011 until March 2014.

In alphabetical order:

Ed Chan B.A/Ec, MS
Non-executive Director 

Member of the Board since September 
2012 and a member of the Audit and 
Risk Committee.

Mr Chan is an independent Director 
and a Hong Kong resident.

He is currently a director of Hong 
Kong-listed LINK REIT (since February 
2016) and Yum China Holdings, Inc 
(since October 2016). Mr Chan is also 
the former Vice Chairman of Charoen 
Pokphand Group (from January 2012 
to February 2018) and a former director 
of Hong Kong-listed CP Lotus (from 
April 2012 to February 2018). From 
2006 to 2011 Mr Chan was the President 
and CEO of Wal-Mart China. He has 
also held senior positions with Dairy 
Farm including his last position as 
North Asia Regional Director, as well 
as leading the Bertelsmann Music Group 
business in Greater China. Mr Chan 
began his career as a consultant with 
McKinsey & Co working in both Hong 
Kong and the United States.

Paul Rayner B.Ec, MAdmin, FAICD
Chairman

Member of the Board since May 2011 
and Chairman of the Board and the 
Nominations Committee since 
1 September 2012. 

Mr Rayner is an independent Director 
and is an Australian resident.

He brings to the Board extensive 
international experience in markets 
relevant to Treasury Wine Estates 
including Europe, North America, 
Asia, as well as Australia. He has 
worked in the ﬁ elds of ﬁ nance, corporate 
transactions and general management 
in the consumer goods, manufacturing 
and resource industries. His last role 
as an executive was as Finance Director 
of British American Tobacco plc, based 
in London, from January 2002 to 2008. 

Mr Rayner is also a director of Qantas 
Airways Limited (since July 2008 and 
where he also serves as Chairman 
of the Remuneration Committee), 
Boral Limited (since September 2008 
and where he also serves as Chairman 
of the Audit and Risk Committee) and 
Murdoch Children’s Research Institute 
(since December 2014 and where he also 
serves as Chairman of the Audit, Finance 
and Risk Committee).

Mr Rayner was a director of Centrica Plc, 
a UK listed company, from September 
2004 until December 2014.

34  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

Left to right:
Warwick Every-Burns
Garry Hounsell
Colleen Jay
Lauri Shanahan

Lauri Shanahan JD Business Law, 
BS Finance 
Non-executive Director

Member of the Board since November 
2016 and a member of the Human 
Resources Committee.

Ms Shanahan is an independent 
Director and a United States resident.

Ms Shanahan has extensive retail, 
consumer brand, e-commerce and 
governance experience. Ms Shanahan 
has held senior executive positions, 
including as Chief Administrative 
Ofﬁ cer, Chief Legal Ofﬁ cer and 
Corporate Secretary with The Gap Inc, 
where she was involved in leading the 
company’s domestic and international 
expansion. Ms Shanahan also founded 
the consulting practice Maroon Peak 
Advisors of which she is a Principal.

Ms Shanahan is currently Chair 
of fashion retailer Charlotte Russe 
Holding Inc and a director of Cedar 
Fair Entertainment Company and 
Deckers Outdoor Corporation.

Mr Hounsell is a former Chairman 
of PanAust Limited (from July 2008 
to August 2015) and former director 
of Qantas Airways Limited (from 
January 2005 to February 2015), 
Integral Diagnostics Limited (from 
October 2015 to March 2017), and 
Dulux Group Limited (from July 
2010 to December 2017) and has 
held senior positions at Ernst & 
Young and Arthur Andersen.

Colleen Jay B.BA (Hons)
Non-executive Director

Member of the Board since April 
2018 and a member of the Audit 
and Risk Committee.

Ms Jay is an independent Director 
and a United States resident.

Ms Jay has extensive experience in the 
fast-moving consumer goods industry, 
acquired over a long and successful 
career at Procter & Gamble (P&G, 
NYSE: PG), an American multinational 
consumer goods company, between 
1985 and 2017. She has held a number 
of senior leadership roles at P&G, 
including President of Global Retail 
Hair Care & Colour and her most recent 
position as President of the US$5 billion 
Global Beauty Specialty business, 
where she also led a complex transition 
and divestiture of several businesses. 

Ms Jay has signiﬁ cant global experience 
having lived and worked in the United 
States, Europe, China and Canada. 
Her leadership experience includes 
signiﬁ cant global line operational 
leadership, strategy creation and 
execution, global brand building, new 
business development, transformational 
innovation and M&A. 

Ms Jay is currently an independent 
non-executive director of The Cooper 
Companies (NYSE: COO).

Warwick Every-Burns AMP, 
Harvard University (Advanced 
Management Program)
Non-executive Director 

Member of the Board since May 2011, 
Chairman of the Human Resources 
Committee and a member of the 
Nominations Committee.

Mr Every-Burns is an independent 
Director and is an Australian resident.

He was Chief Executive Ofﬁ cer of 
Treasury Wine Estates on an interim 
basis from 23 September 2013 until 
30 March 2014. 

Mr Every-Burns previously worked 
for more than 30 years in the consumer 
packaged goods sector. Most recently, 
he was President of International 
Business and a member of the Worldwide 
Executive Committee of The Clorox 
Company, a NYSE-listed, S&P 500 
business with a market capitalisation 
of circa US$17 billion. He was based 
at The Clorox Company’s headquarters 
in the United States for more than ﬁ ve 
years. Mr Every-Burns began his career 
at Unilever, is a former Managing 
Director of Glad Products of Australia 
and New Zealand, and was formerly 
on the Advisory Council of the Frontier 
Strategy Group.

Mr Every-Burns is a director 
of The a2 Milk Company Limited 
(since August 2016).

Garry Hounsell B.Bus (Acc), 
FCA, FAICD 
Non-executive Director 

Member of the Board since September 
2012, Chairman of the Audit and 
Risk Committee and a member 
of the Nominations Committee.

Mr Hounsell is an independent Director 
and is an Australian resident.

He is currently Chairman of Myer 
Holdings Limited (a director since 
September 2017 and Chairman since 
November 2017) and Helloworld Limited 
(since October 2016). Mr Hounsell is 
also a director of the Commonwealth 
Superannuation Corporation Limited 
(since July 2016).

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  35  

 
CORPORATE GOVERNANCE

The Board believes good corporate governance 
and transparency in corporate reporting is 
a fundamental part of the Group’s culture and 
business practices.

During the year, the Board continued to govern 
the Company through the execution of its strategy 
of transitioning from an agricultural to a brand-led, 
high-performance organisation. Key governance 
focuses of the Board for the year included:

• Continued commitment to the governance of workplace 
health and safety performance and developing a culture 
of leadership on safety across the business, with the 
ongoing development and implementation of the safety 
framework, Destination Zero Harm, and related 
programs designed to empower the Company’s leaders 
to engage their teams and lead safety performance.

• Input into, and approval of, management’s development 
of corporate strategy, including setting performance 
objectives and approving the annual ﬁ nancial budget; 
and monitoring corporate performance and the 
implementation of strategy and policy. 

• Approving and overseeing transformational changes 
to TWE’s route-to-market in the United States (US), 
which are expected to strengthen the Company’s 
competitive positioning, increase efﬁ ciency and 
effectiveness and drive portfolio growth. 

• Board succession planning, including the appointment 

and induction of new independent non-executive 
director, Colleen Jay, who joined the Board 
on 1 April 2018.

• Supporting and monitoring changes to the Executive 
Leadership Team, which are designed to ensure the 
successful implementation of the route-to-market 
changes in the US and accelerate the Company’s 
growth plans in order to deliver further value creation 
for shareholders.

• Oversight of management’s continued commitment 

to a culture of high-performance and ethical conduct 
to lead the global business and setting remuneration 
policy to attract and retain the best possible talent 
and reward high performance.

• A comprehensive review of the Group’s Risk Proﬁ le 

and Risk Management Framework to further enhance 
the assessment and management of current and 
emerging material business risks facing the Group.

• Approving, and overseeing the execution of, 
the $300 million on-market share buy-back. 

• Maintaining effective governance to facilitate high-

quality processes and internal controls as the business 
continues to grow.

• Overseeing the process for the rotation of the external 
audit partner, as well as the process for the tender 
of internal audit co-source services.

36  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

INTRODUCTION

The Board is committed to conducting the Company’s 
business ethically and in accordance with high 
standards of corporate governance. This is essential 
for the long-term performance and sustainability of the 
Company and to protect the interests of its stakeholders.

To this end, the Board regularly reviews the charters 
and key policies that underpin the Company’s corporate 
governance practices to ensure they remain appropriate, 
reﬂ ect high standards of governance and meet regulatory 
requirements. The Company’s governance practices 
complied with the third edition of the ASX Corporate 
Governance Principles and Recommendations for the 
ﬁ nancial year.

This Corporate Governance section provides an overview 
of the Board’s operations, details on the governance 
framework and the key governance focuses of the Board 
for the ﬁ nancial year.

The full Corporate Governance Statement, which 
outlines the key aspects of the Company’s corporate 
governance framework and practices for the year 
ended 30 June 2018, together with the Appendix 4G 
Key to Disclosures – Corporate Governance Council 
Principles and Recommendations and key governance 
documents, including the constitution, charters 
and policies, are available on our website at 
www.tweglobal.com/investors/corporate-governance.

BOARD OF DIRECTORS

Members of the Board
The Board continues to comprise a majority of 
independent directors with all directors, other than 
the Chief Executive Ofﬁ cer (CEO), being independent 
non-executive directors. 

There were several changes to the Board during the 
year, including the appointment of Colleen Jay as a 
non-executive director with effect from 1 April 2018. 
Ms Jay is a US resident with extensive experience 
in the fast-moving consumer goods industry, including 
signiﬁ cant global line operational leadership, strategy, 
global brand building, transformational innovation 
and mergers and acquisitions. Ms Jay’s appointment 
was the culmination of an extensive global search 
conducted by an external search ﬁ rm, which included 
appropriate background checks (including criminal, 
bankruptcy, education, qualiﬁ cations and reference 
checks). In addition, Peter Hearl and Lyndsey Cattermole 
retired as non-executive directors on 31 August 2017 
and 18 October 2017 respectively. 

Since the end of the year, the Company has announced 
the retirement of Michael Cheek with effect from the end 
of the 2018 Annual General Meeting on 18 October 2018.

The Board is committed to ensuring it is comprised 
of individuals with appropriate skills, experience 
and diversity to develop and support the Company’s 
strategic aims, having regard to its ﬁ ve strategic 
imperatives. The Board utilises a skills matrix to assist 
in assessing the mix of skills, experience and diversity 
on the Board, and to identify areas of focus to supplement 
the mix of skills and experience as part of Board 
succession planning.

The Board considers that its members collectively possess the appropriate competencies and attributes that enable 
the Board to discharge its responsibilities effectively, contribute to the Company’s strategic direction and oversee the 
delivery of its corporate objectives. 

Areas of competence and skills of the Board of directors are summarised in Table 1 below.

Table 1 – Areas of Competence and Skills – Board of Directors

Strategic Imperatives

PEOPLE

Build a high-
performing 
organisation

Directors’ Skills

BRANDS

MARKETS

Transform 
our portfolio

Win in priority 
markets

PARTNERS

Develop 
long-term 
relationships

MODEL

Optimise our
capital base

AREA

Industry

Leadership 
and Strategy

Finance and 
Business

COMPETENCE/EXPERIENCE

Wine, alcohol beverages, consumer and brand marketing, supply chain, distribution, route-to-market.

Listed company experience, business strategy development, business and executive leadership, 
CEO experience, mergers and acquisitions.

Financial acumen, ﬁ nancial accounting, audit, corporate ﬁ nance, capital management, e-commerce 
and technology.

Governance and 
Regulatory

Corporate governance, legal, regulatory, health, safety and environment, government relations, 
risk management, human resources and remuneration.

International

International business experience, international industry experience.

The Board recognises the importance of cultural, 
geographic and gender diversity amongst its members 
which is reﬂ ected in the current representation on the 
Board, with four non-executive directors based offshore 
in regions in which the Company operates. In 2017, the 
Board set an aspirational target to achieve 30% female 
representation on the Board by the 2018 Annual General 
Meeting as vacancies and circumstances allow. As at the 
date of this Annual Report, women represent 25% of the 
Board, and will represent 29% of the Board following the 
retirement of Mr Cheek at the end of the 2018 Annual 
General Meeting. The Board is committed to achieving 
the 30% target and therefore continues to be actively 
engaged in succession planning in order to achieve this 
target, with a focus on appointing candidates to the Board 
with the desired mix of skills, experience and diversity.

The Board is committed to ensuring its performance 
is enhanced through its director induction and ongoing 
education program. The Board’s ongoing education 
calendar incorporated site visits throughout the ﬁ nancial 
year to a number of the Company’s operational facilities. 
Further, presentations were given by management and 
external parties concerning developments impacting, or 
likely to impact, the business.

Independence
The Board, having reviewed the position and associations 
of all non-executive directors currently in ofﬁ ce, considers 
that all non-executive directors are independent.

During the year, non-executive directors met periodically 
without the presence of management to have the 
opportunity to discuss key matters amongst the 
non-executive directors.

Role of the Board 
The responsibilities of the Board as set out in the Board 
Charter include:

Strategic guidance and effective oversight of management
• Providing input and approval of the Group’s corporate 
strategy, performance objectives and business plans 
as developed by management.

• Appointing the CEO and managing succession 

planning, as well as overseeing changes to the Executive 
Leadership Team, with a view to ensuring senior 
management has the appropriate resources to enable 
implementation of the Company’s strategic initiatives. 

• Directing, monitoring and assessing the Group’s 

performance against strategic and business plans.

• Approving and monitoring capital management, 
including major capital expenditure, acquisitions 
and divestments.

Risk assessment and management 
• Reviewing and evaluating the integrity of the 

Group’s systems of risk management, legal compliance, 
and internal compliance and control.

Obligations to stakeholders
• Monitoring and reviewing processes aimed at ensuring 

integrity of ﬁ nancial and other reporting.

• Monitoring compliance with adopted strategies, 
procedures and standards, including corporate 
governance standards.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  37  

CORPORATE GOVERNANCE (CONTINUED)

Board Committees
Three standing Board Committees have been established to assist the Board in fulﬁ lling its responsibilities.

Board of Directors

Audit and Risk Committee

Nominations Committee

Human Resources Committee

Oversees: Board composition, 
performance of the Board, 
Board Committees and 
individual directors, as well 
as succession planning.

Key focuses for F18 included:
•  Assessing the competencies 
of the directors to ensure 
the appropriate range of 
skills and expertise amongst 
Board members.

•  Board succession planning, 
including recommending 
to the Board the appointment 
of Colleen Jay as a new 
non-executive director with 
effect from 1 April 2018.
•  Reviewing the composition 

of Board Committees.

•  Overseeing, and receiving 

reports from the Chairman 
of the Board concerning 
the reviews of performance 
of individual directors, 
the Board as a whole 
and the operation of the 
Board Committees.

•  Assessing the independence 
of directors and suitability 
of director candidates for 
re-election and election.

Oversees: Training, development 
and succession planning for senior 
management, Company’s diversity 
policy, evaluation of senior executive 
performance and remuneration 
and non-executive directors’ fees.

Key focuses for F18 included:
•  Reviewing the level of 

annual ﬁ xed remuneration 
and incentive compensation 
arrangements for the 
CEO and senior executives, 
including reviewing 
remuneration arrangements in 
connection with senior executive 
changes during the year.
•  Reviewing the attainment 

of STI and LTI performance 
conditions by the CEO and 
senior executives.

•  Reviewing and recommending 

to the Board the approval 
of the Company’s F18 
Remuneration Report.

•  Overseeing the implementation 

of initiatives to facilitate 
the Group’s diversity and 
inclusion objectives.
•  Reviewing the base fee 

and committee fees payable 
to non-executive directors.
•  Monitoring global trends 

in executive remuneration.
•  Overseeing the appointment 

of a new remuneration 
consultant, including approving 
the terms of engagement.

Oversees: Financial reporting, 
risk management and internal 
controls, external and internal 
audit, capital management 
and compliance.

Key focuses for F18 included:
•  Updating the Group’s Risk 

Proﬁ le and Risk Management 
Framework, including revisions 
to risk assessments and the 
inclusion of new emerging risks.

•  Reviewing the scope of the 

annual internal and external 
audit programs and overseeing 
the conduct and coordination 
of those programs, as well 
as the performance and 
independence of the internal 
and external auditors.

•  Overseeing the process for the 
rotation of the external audit 
partner and the process for 
the tender of internal audit 
co-source services.
•  Reviewing signiﬁ cant 

accounting and ﬁ nancial 
reporting related matters
raised by management and 
the auditors.

•  Reviewing workplace health, 
safety and environmental 
matters across the Group. 
•  Reviewing whistleblower 
matters reported across 
the Group.

•  Reviewing the register of 

potential conﬂ icts of interests 
disclosed by employees. 
•  Monitoring the Group’s 

insurance renewal program.
•  Reviewing and recommending 
to the Board the approval of 
the F18 full year and interim 
ﬁ nancial reports.

•  Recommending to the Board 
the approval of the on-market 
share buy-back and overseeing 
its execution.

38  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

GOVERNANCE POLICIES

The Company has a number of governance policies which 
guide how it does business, including:

• Code of Conduct, which recognises that the Company’s 
reputation is one of its most valuable assets, founded 
on the ethical behaviour of the people who represent 
the Company;

• Disclosure Policy, which recognises the importance 

of timely disclosure of the Company’s activities 
to shareholders and market participants so that 
trading in the Company’s shares takes place in 
an informed market;

• Fraud and Corruption Policy, which conﬁ rms the 

Company’s commitment to a zero tolerance approach 
to bribery and corruption;

• Whistleblower Policy, which promotes and supports the 
Company’s culture of honest and ethical behaviour by 
encouraging the reporting of instances of unethical, 
illegal or fraudulent behaviour or any other matter 
that may contravene the Company’s Code of Conduct, 
policies or the law;

• Potential Conﬂ icts of Interest Policy, which guides 

the disclosure and management of potential conﬂ icts 
of interest;

• Share Trading Policy, which prohibits trading in the 
Company’s shares by directors and employees if they 
are in possession of ‘inside information’ and also 
during ‘blackout’ periods, and provides additional 
restrictions that speciﬁ cally apply to directors, 
Executive Leadership Team members and certain 
employees who have been notiﬁ ed by the Chief Legal 
Ofﬁ cer or Company Secretary; and

• Risk Management Policy, as well as a Risk Management 
Framework, which provide guidance and direction on 
the management of risk in the Company and state the 
Company’s commitment to the effective management 
of risk to reduce uncertainty in the Company’s 
business outcome.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  39  

DIRECTORS’ REPORT

The directors of Treasury Wine Estates Limited 
(the Company) present their report together with the 
ﬁ nancial report for the Company and its controlled 
entities (the Group) for the ﬁ nancial year ended
30 June 2018 and the auditor’s report.

The sections referred to below form part of, and are 
to be read in conjunction with, this Directors’ Report:

• Operating and Financial Review (OFR)

• Board of Directors

• Remuneration Report

PRINCIPAL ACTIVITIES

The principal activities of the Group during the ﬁ nancial 
year were viticulture and winemaking, and the marketing, 
sale and distribution of wine.

STATUTORY INFORMATION

The Group’s consolidated ﬁ nancial statements have been 
presented for the ﬁ nancial year ended 30 June 2018 and 
appear on pages 64 to 111.

DIRECTORS

The directors of the Company during the ﬁ nancial year 
and up to the date of this report are:

DATE OF APPOINTMENT

Lyndsey Cattermole AM
(retired 18 October 2017)
Warwick Every-Burns
Paul Rayner
Peter Hearl
(retired 31 August 2017)
Garry Hounsell
Ed Chan
Michael Cheek
Michael Clarke
(Chief Executive Ofﬁ cer)
Lauri Shanahan
Colleen Jay

10 February 2011
9 May 2011
9 May 2011

17 February 2012
1 September 2012
1 September 2012
1 September 2012 

31 March 2014
1 November 2016
1 April 2018

Particulars of the current directors’ qualiﬁ cations, 
experience and Board Committee responsibilities 
are detailed in the Board of Directors section of this 
Annual Report.

DIRECTORS’ MEETINGS

The number of Board and Board Committee meetings and the number of meetings attended by each of the directors 
of the Company during the ﬁ nancial year are listed below:

Meetings held during 2018 ﬁ nancial year

BOARD
 MEETINGS1

AUDIT AND RISK
COMMITTEE1

HUMAN 
RESOURCES
 COMMITTEE1  

NOMINATIONS
COMMITTEE1

ADDITIONAL
MEETINGS2

HELD ATTENDED HELD ATTENDED HELD ATTENDED HELD ATTENDED

ATTENDED

Paul Rayner3
Michael Clarke
Lyndsey Cattermole4
Ed Chan5
Michael Cheek
Warwick Every-Burns
Peter Hearl7
Garry Hounsell
Colleen Jay9
Lauri Shanahan

11
11
4
11
11
11
3
11
4
11

11
11
4
11
11
 96
28
11
310
11

2
–
2
4
–
–
1
5
1
–

2
–
2
4
–
–
1
5
1
–

–
–
–
–
7
7
–
–
–
7

–
–
–
–
7
7
–
–
–
611

4
–
–
–
–
4
–
4
–
–

4
–
–
–
–
4
–
4
–
–

6
5
–
–
–
1
–
4
–
–

1.  Shows the number of meetings held and attended by each director during the period that the director was a member of the Board or 
Committee. Directors who are not members of Board Committees do attend Committee meetings from time to time. The above table 
reﬂ ects the meeting attendance of directors who are members of the relevant Committee(s).

2.  Reﬂ ects the number of additional formal meetings attended during the ﬁ nancial year by each director, including Committee meetings 

(other than Audit and Risk Committee, Human Resources Committee or Nominations Committee) where any two directors are required 
to form a quorum.

3.  Mr Rayner was a member of the Audit and Risk Committee from 19 October 2017 to 10 April 2018.
4.  Mrs Cattermole retired as a director and member of the Audit and Risk Committee with effect from 18 October 2017.
5.  Mr Chan joined the Audit and Risk Committee with effect from 1 September 2017. 
6.  Mr Every-Burns attended all scheduled Board meetings. This number reﬂ ects his absence from two unscheduled Board meetings due 

to prior commitments.

7.  Mr Hearl retired as a director and member of the Audit and Risk Committee with effect from 31 August 2017. 
8.  Mr Hearl attended all scheduled Board meetings while he was a director. This number reﬂ ects his absence from one unscheduled Board 

meeting due to a prior commitment.

9.  Ms Jay was appointed as a director and a member of the Audit and Risk Committee with effect from 1 April 2018.
10.  Ms Jay attended all scheduled Board meetings since her appointment on 1 April 2018. This number reﬂ ects her absence from one 

unscheduled Board meeting due to a prior commitment.

11.  Ms Shanahan attended all scheduled Human Resources Committee meetings. This number reﬂ ects her absence from one unscheduled 

Human Resources Committee meeting, which was due to a prior commitment.

40  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

Directors’ interests in share capital
The relevant interest of each director in the share 
capital of the Company as at the date of this report 
is disclosed in the Remuneration Report.

DIVIDENDS

Interim dividend: The Company paid an interim 
dividend of 15 cents per ordinary share on 6 April 2018. 
The dividend was 75% franked.

Final dividend: Since the end of the ﬁ nancial year, 
the directors have declared a ﬁ nal dividend of 
17 cents per share, fully franked and payable on 
5 October 2018.

The record date for entitlement to this dividend is 
6 September 2018.

DIVIDEND PER SHARE

$M

Interim dividend paid 
on 6 April 2018
Final dividend payable 
on 5 October 2018
Total

15 cents per share

$107.7

17 cents per share
32 cents per share

$122.2
$ 229.9

The Company paid shareholders a ﬁ nal dividend
in respect of the 2017 ﬁ nancial year of $96.0 million.

EVENTS SUBSEQUENT TO BALANCE DATE

On 29 August 2018, the Company announced that 
non-executive director, Michael Cheek, will retire from 
the Board with effect from the end of the 2018 Annual 
General Meeting, which will be held on 18 October 2018.

Other than as disclosed in the ﬁ nancial statements, 
the directors are not aware of any other matters 
or circumstances that have arisen since the end of 
the ﬁ nancial year which have signiﬁ cantly affected 
or may signiﬁ cantly affect the operations of the Group, 
the results of those operations or the state of affairs 
of the Group in subsequent ﬁ nancial years.

CORPORATE RESPONSIBILITY

Matters of environmental and social signiﬁ cance to 
the Group are primarily addressed within the Corporate 
Responsibility (CR) program. This program is governed 
by the Global CR Council, comprising the Chief Executive 
Ofﬁ cer and senior representatives from regional and 
functional areas of the business.

Further detail on the Group’s CR program, strategy, 
initiatives and achievements are detailed in the Corporate 
Responsibility section of this Annual Report and the 
Company’s inaugural 2018 Sustainability Report.

ENVIRONMENTAL REGULATION

Management of environmental issues is a core element 
of the work program of sustainability and technical 
teams across the globe, and is detailed in the Corporate 
Responsibility section of this Annual Report and the 
2018 Sustainability Report, with the Group subject 
to a range of licences, permits and internal policies 
and procedures governing its operations.

Additionally, the Group’s operations are subject to a 
number of regulatory frameworks governing energy and 
water consumption, waste generation and greenhouse 
gas reporting.

The Group recognises the direct link between effective 
management of its environmental impacts and its business 
success. To this end, the Group’s environment policies, 
procedures and practices are designed to ensure that 
the Group maintains focus on resource efﬁ ciency and 
continuous improvement, and that environmental laws 
and permit conditions are complied with. Compliance 
with these regulatory and operational programs has 
been incorporated into relevant business practices 
and processes. The Company monitors its operations 
through a Health, Safety and Environment (HSE) 
Management System, overlaid with a risk management 
and compliance system overseen by the Audit and 
Risk Committee. The Global CR Council provides 
executive oversight of the Company’s strategic approach 
to managing the environmental challenges it faces. 
Although the Company’s various operations involve 
relatively low inherent environmental compliance 
risk, matters of non-compliance are identiﬁ ed from 
time to time and are corrected. Where required, 
the appropriate regulatory authority is notiﬁ ed.

During the ﬁ nancial year, the Group was not found 
to be in breach of any environmental regulations.

Under the compliance system, the Audit and Risk 
Committee and the Board receive six-monthly reports 
detailing matters involving non-compliance and 
potential non-compliance. These reports also detail 
the corrective action that has been taken.

PROCEEDINGS ON BEHALF OF THE COMPANY

There are no proceedings brought or intervened in, 
or applications to bring or intervene in proceedings,
on behalf of the Company by a member or other person 
entitled to do so under section 237 of the Corporations 
Act 2001 (Cth).

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  41  

DIRECTORS’ REPORT (CONTINUED)

NON-AUDIT SERVICES AND 
AUDITOR INDEPENDENCE

KPMG is the Company’s auditor, appointed with effect 
from 23 October 2013.

The Group may decide to engage the auditor, KPMG, 
on assignments additional to their statutory audit 
duties where such services are not in conﬂ ict with 
their role as auditor and their expertise and/or detailed 
experience with the Company may allow cost efﬁ ciencies 
for the work.

The Board has considered the position and, in accordance 
with advice received from the Audit and Risk Committee, 
is satisﬁ ed that the provision of non-audit services 
by KPMG is compatible with the general standard of 
independence for auditors imposed by the Corporations 
Act 2001 (Cth). The Board also notes that:

• All non-audit services have been reviewed by the 

Audit and Risk Committee to ensure they do not impact 
the actual or perceived impartiality and objectivity of 
KPMG and are consistent with the Committee’s rules 
of engagement contained in its Charter; and

• None of the services provided by KPMG undermine 

the general principles relating to auditor independence 
as set out in APES 110 Code of Ethics for 
Professional Accountants.

During the ﬁ nancial year, the fees paid or payable 
for non-audit services provided by KPMG as the auditor 
of the Company and its related practices totalled $160,797. 
Amounts paid or payable for audit and non-audit services 
are disclosed in note 31 of the Financial Statements.

A copy of the auditor’s independence declaration is set 
out on page 43 and forms part of this report.

INDEMNITIES AND INSURANCE

Rule 40 of the Company’s Constitution provides that the 
Company will, to the extent permitted by law, indemnify 
directors and ofﬁ cers of Group companies in respect 
of any liability, loss, damage, cost or expense incurred 
or suffered in or arising out of the conduct of the 
business of the Group or in or arising out of the proper 
performance of any duty of that director or ofﬁ cer.

Each director of Treasury Wine Estates Limited has 
entered into a Deed of Indemnity, Insurance and Access 
(Deed) with the Company. Several members of the senior 
executive team have also entered into a Deed. No director 
or ofﬁ cer of the Company has received a beneﬁ t under 
an indemnity from the Company during the period ended 
30 June 2018 or to the date of this report.

In accordance with the Company’s Constitution and 
the Deed, the Company has paid a premium in respect 
of an insurance contract that covers directors and 
ofﬁ cers of the Group companies against any liability 
arising in or out of the conduct of the business of the 
Group and the proper performance of any duty of that 
director or ofﬁ cer. Due to conﬁ dentiality undertakings 
of the policy, no further details in respect of the 
premium or the policy can be disclosed.

ROUNDING

Treasury Wine Estates Limited is a company of the 
kind referred to in ASIC Corporations (Rounding in 
Financial/Directors’ Reports) Instrument 2016/19 and, 
except where otherwise stated, amounts in the statutory 
ﬁ nancial statements forming part of this report have 
been rounded off to the nearest one hundred thousand 
dollars or to zero where the amount is $50,000 or less.

Dated at Melbourne 29 August 2018.

Paul Rayner 
Chairman 

Michael Clarke
Chief Executive Ofﬁ cer 

42  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

AUDITOR’S INDEPENDENCE DECLARATION

Lead Auditor’s Independence Declaration under 
Section 307C of the Corporations Act 2001 

To the Directors of Treasury Wine Estates Limited 

I declare that, to the best of my knowledge and belief, in relation to the audit of Treasury Wine Estates 
Limited for the financial year ended 30 June 2018 there have been: 

i.(cid:3)

ii.(cid:3)

no contraventions of the auditor independence requirements as set out in the 
Corporations Act 2001 in relation to the audit; and 

no contraventions of any applicable code of professional conduct in relation to the audit(cid:17)(cid:3)

(cid:3)
(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:51)(cid:68)(cid:88)(cid:79)(cid:3)(cid:45)(cid:3)(cid:48)(cid:70)(cid:39)(cid:82)(cid:81)(cid:68)(cid:79)(cid:71)(cid:3)
(cid:3)
(cid:51)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:3)
(cid:48)(cid:72)(cid:79)(cid:69)(cid:82)(cid:88)(cid:85)(cid:81)(cid:72)(cid:3)
(cid:21)(cid:28)(cid:3)(cid:36)(cid:88)(cid:74)(cid:88)(cid:86)(cid:87)(cid:3)(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)
(cid:87)(cid:4)(cid:90)(cid:890)(cid:94)(cid:47)(cid:39)(cid:890)(cid:1004)(cid:1005)(cid:3)

(cid:87)(cid:4)(cid:90)(cid:890)(cid:69)(cid:4)(cid:68)(cid:890)(cid:1004)(cid:1005)(cid:3)

(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)

(cid:3)

(cid:87)(cid:4)(cid:90)(cid:890)(cid:87)(cid:75)(cid:94)(cid:890)(cid:1004)(cid:1005)(cid:3)

(cid:87)(cid:4)(cid:90)(cid:890)(cid:24)(cid:4)(cid:100)(cid:890)(cid:1004)(cid:1005)(cid:3)

(cid:87)(cid:4)(cid:90)(cid:890)(cid:18)(cid:47)(cid:100)(cid:890)(cid:1004)(cid:1005)(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:46)(cid:51)(cid:48)(cid:42)(cid:15)(cid:3)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:11)(cid:179)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:3)(cid:54)(cid:90)(cid:76)(cid:86)(cid:86)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)

(cid:3)

(cid:3)(cid:3)

(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:3)(cid:86)(cid:70)(cid:75)(cid:72)(cid:80)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)
(cid:51)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:47)(cid:72)(cid:74)(cid:76)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  43  

 
 
 
 
 
 
F18 REMUNERATION REPORT (AUDITED)

CONTENTS

Executive 
remuneration

45   Key messages

47  Framework

51 

 Performance and 
remuneration outcomes

Non-executive director 
remuneration

Other remuneration 
information

58  Framework and outcomes

60  Governance

61   Further information 

EXECUTIVE REMUNERATION

Introduction from the Chairman of the Human Resources Committee 

Dear Shareholders,

On behalf of the Board, I am pleased to share with you our F18 remuneration report which reﬂ ects the Company’s 
performance, executive reward framework and outcomes and their strong alignment with shareholder returns. 

In F18, we have remained disciplined and committed to delivering our strategy and by doing so, we have delivered 
another year of signiﬁ cant returns to our shareholders. 

F18 has been coined a ‘foundation year’ for our Company, a year in which we have established the optimal operating 
business models as well as the appropriate structure for distributor, wholesaler and retailer partnerships across all 
regions. We have reported an outstanding 18% EBITS growth on a constant currency basis to $530.2 million and 
a 1 percentage point ROCE improvement to 12.6%. Our EBITS margin for F18 increased by 3 percentage points 
on a constant currency basis to 21.8% and the Company’s Total Shareholder Return performance from July 2015 
to June 2018 was at the 99th percentile relative to its peer group.

The momentum in the business, together with the strength of the organisational talent, brand portfolios, operating 
models and customer partnerships, enabled TWE to deliver strong earnings growth in F18 whilst successfully executing 
transformational changes to our route-to-market in the US as well as navigating the distraction caused by industry 
delays on Australian wine imports into China; both in the ﬁ nal quarter of the ﬁ scal year.

This year’s results demonstrate ongoing and consistently outstanding leadership and global execution, with the team 
having delivered an EBITS Compound Annual Growth Rate of 25% over the past four years. Importantly, the strong 
performance is reﬂ ected in the remuneration outcomes for executives. 

TWE’s journey to become the world’s most celebrated wine company is far from over. The business enters F19 in 
a strong position with a talented, innovative and highly motivated leadership team, increased availability of Luxury 
wine and strong customer partnerships across all regions. 

This report shares with you our reward framework and how remuneration outcomes align with our strategic 
imperatives, stellar results, market practice and shareholder value creation. The Group’s remuneration practices are 
designed to attract, motivate and retain the high-calibre talent needed to continue delivering sustainable results that 
out-perform the market. In this report you will see rewards to executives reﬂ ect their outstanding contribution to the 
out-performance of the Company and reﬂ ect the Board’s commitment to retaining this talented team. 

We welcome shareholder feedback and regularly engage with investors. As part of our investor relations program 
we meet throughout the year to discuss our interim and annual results as well as Executive remuneration and 
governance matters. 

Common terms used throughout the report are deﬁ ned in the table on page 63. 

I trust you will ﬁ nd this report informative and useful in understanding the remuneration policies and practices 
of the Group and in better informing your investment decisions.

Yours sincerely,

Warwick Every-Burns
Human Resources Committee Chairman

44  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

1. KEY MESSAGES

This report details the F18 remuneration framework and outcomes for the Key Management Personnel (KMP) of 
the Group which includes non-executive directors. In this report, ‘executives’ refers to executives identiﬁ ed as KMP 
excluding the non-executive directors. It is prepared in accordance with the requirements of the Corporations Act 2001 
and all references are to Australian dollars (A$) unless otherwise speciﬁ ed.

(a) Financial highlights for F18
In F18, Treasury Wine Estates Limited (TWE) delivered EBITS of $530.2 million, up 18% on a constant currency 
basis and adjusted Earnings per Share (EPS) of 51.8 cents (before material items and SGARA). The Company also 
delivered outstanding EBITS margin accretion, up 3 percentage points on a constant currency basis to 21.8% and 
improved Return On Capital Employed (ROCE), up 1 percentage point to 12.6%.

F18 was a year where the Company invested in its organisational talent, brand portfolios, customer partnerships and its 
operating models across priority regions. Whilst investing in long-term, sustainable growth in F18, TWE still delivered 
strong ﬁ nancial results that reﬂ ect continued momentum across priority regions, portfolio premiumisation, enhanced 
global marketing and sales execution, a strong focus on embedding more efﬁ cient routes-to-market and an ongoing 
emphasis on optimising TWE’s cost base.

(b) KMP
KMP at TWE (in addition to non-executive directors) is as follows:

EXECUTIVES (AS AT 30 JUNE 2018)

Current KMP
MA Clarke
RB Foye
MJ Young

Former KMP
GG Burghardt

Chief Executive Ofﬁ cer
Chief Operating Ofﬁ cer
Chief Financial Ofﬁ cer

Full Year
Full Year
From 1 May 2018

Chief Financial Ofﬁ cer

1 July 2017 to 30 April 2018

Gunther Burghardt moved to a new role, Executive Vice President Operations Americas, on 1 May 2018 and ceased 
to be KMP on that date.

(c) Fixed remuneration
Over the last three years TWE has become a truly global company with signiﬁ cant growth increasing the responsibility 
and complexity of executive roles. The executive team has been crucial to the successful turnaround of the Company. 
The reward, retention and development of this team has been a key consideration of the Board and was reﬂ ected in 
ﬁ xed remuneration outcomes for executives.

The Board is committed to rewarding and retaining the CEO who has led the ﬁ nancial transformation and sustained 
out-performance of the Company. As reported in the Company’s 2017 Report, Mr Clarke’s ﬁ xed remuneration increased 
from $2,200,000 to $2,500,000 effective 1 September 2017, an increase of 13.6%. For F19, the Board approved a 4% 
increase in Mr Clarke’s ﬁ xed remuneration to $2,600,000 effective 1 September 2018. Mr Foye’s ﬁ xed remuneration 
increased from US$625,000 to US$825,000 effective 1 September 2017 however this was offset with a reduction in his 
expatriate beneﬁ ts from US$350,000 to US$150,000. Mr Young was appointed as CFO on 1 May 2018 which coincided 
with him becoming KMP. He received a ﬁ xed remuneration increase of 32% to $700,000 effective 30 June 2018 to 
reﬂ ect the responsibilities of his new role and the next review of his salary will occur in September 2019.

(d) Short-term incentives in the year
Again, the Group’s successful focus on sustainable earnings growth, cost management and operational effectiveness, 
including the transformational route-to-market change in the US, signiﬁ cantly enhanced shareholder value in F18. 
The continued focus on our global priority brands, expansion of country-of-origin offerings and investment in long-term 
relationships with key stakeholders has driven over-achievement on the executive KMP’s balanced scorecards. As a 
result, the Board has determined that the F18 short-term incentive plan (STIP) outcomes are above target (68% 
of ﬁ xed remuneration) for Mr Foye and at maximum (120% of ﬁ xed remuneration) for Mr Young. The CEO received 
a STIP outcome of 150% of ﬁ xed remuneration due to achievement of maximum performance.

(e) Long-term incentives in the year
The Group’s Total Shareholder Return (TSR) performance was at the 99th percentile relative to its peer group. This 
achievement, along with strong ROCE results, has driven vesting of 100% of the F16 long-term incentive plan (LTIP) 
for eligible executives. This vesting outcome for executives mirrors the strong returns delivered to investors over the 
plan period. The share price appreciated from $4.90 on 1 July 2015 to $17.39 on 29 June 2018. Over the three year plan 
period investors have enjoyed a 255% increase in the Company’s share price and Return on Capital Employed has almost 
doubled, moving from 6.8% to 12.6%.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  45  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

(f) General employee share plan
Three purchases for executives under the Company’s 2017 Share Cellar plan were completed in F18. The 2018 Share 
Cellar plan was successfully launched in February 2018 and the Company now has 39% of all eligible employees 
participating in equity plans. All executive KMP as at 30 June 2018 are enrolled as participants.

(g) Changes for F19

F19 LTIP
In the F18 LTIP, the two metrics of ROCE and Relative TSR were equally weighted. This has been reviewed by the 
Board for F19.

Sustainable results are the bedrock of the Company’s incentive framework and the Board and Management are intent 
on motivating performance that positions TWE for the long term. Releasing Luxury wine in a gradual manner honours 
its scarcity and achieves sustainable pricing and margin. It drives longer term thinking, protects future year’s availability 
of luxury wine and reduces potential risk to TWE. ROCE growth driven by improved asset returns and margin accretion 
drives shareholder value. In F19 the Board wants Management resolutely focused on ROCE with TSR improvement 
as a natural consequence.

With this context, the Board has given signiﬁ cant thought to incentive design and measures. The Board continues 
to view the existing LTIP measures, ROCE and Relative TSR, as appropriate but has adjusted the weighting of these 
measures for F19 with ROCE weighted at 75% of the plan. Relative TSR is weighted at 25%. ROCE growth is a metric 
on which executives can actively focus and drive improvement whereas Relative TSR is an outcome metric beyond 
the direct inﬂ uence of executive action. The Board is conﬁ dent these metrics and their revised weightings strongly 
align Management and shareholder outcomes and believe the measures strike the right balance between motivating 
sustainable results and rewarding outperformance.

The following targets have been set for the F19 LTIP. 

ROCE growth will be measured against the F18 ROCE base of 12.6% and vest according to the following schedule.

ROCE baseline 
12.6% (F18)

% ROCE growth

ROCE result

Less than 1.9%
1.9% to 2.6%
At or above 2.6%

Less than 14.5%
14.5% to 15.2%
At or above 15.2%

% of Performance Rights 
subject to ROCE measure 
which vest
0%
35–100%
100%

The vesting schedule for the F19 LTIP is unchanged from F18.

Relative TSR 
Vesting Schedule

Relative TSR Ranking

Below 50th percentile
50th to 60th percentile
60th to 75th percentile
At or above 75th percentile

% of Performance Rights 
subject to Relative TSR 
measure which vest
0%
35–70%
70–100%
100%

The peer group for relative TSR comprises companies within the S&P/ASX 200 Index, excluding companies from the 
energy, metal and mining, real estate and ﬁ nance sectors.

Offers of performance rights under the F19 LTIP are subject to the satisfaction of performance conditions, as outlined 
above, over the performance period from 1 July 2018 to 30 June 2021. LTIP awards to KMP are at the absolute 
discretion of the Board. For F19 LTIP the following awards will apply:

• Mr Clarke: opportunity of 200% of ﬁ xed remuneration at maximum, 70% at threshold, 0% below threshold

• Mr Foye: opportunity of 162% of ﬁ xed remuneration at maximum, 56.7% at threshold, 0% below threshold

• Mr Young: opportunity of 199% of ﬁ xed remuneration at maximum, 69.7% at threshold, 0% below threshold. 
The LTIP opportunity of 199% comprises a grant equivalent to 150% of ﬁ xed remuneration plus a one-off 
additional grant of 15,000 performance rights equivalent to 49% of ﬁ xed remuneration

The Company will seek shareholder approval at the 2018 Annual General Meeting for the F19 LTIP offer to the CEO.

46  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

(h) New Accounting Standard on Leases
A new Lease Accounting Standard, AASB 16 Leases, is mandatorily effective in Australia for annual reporting 
periods commencing on or after 1 January 2019. The Group will adopt AASB 16 in the annual reporting period ending 
30 June 2020 (F20). AASB 16 removes the lease classiﬁ cation test for lessees and requires the Group to bring all 
material leases with lease terms greater than one year onto the balance sheet.

The new standard is expected to have an impact on the Group’s balance sheet and P&L, both of which are key inputs 
to the EBITS and ROCE metrics used in the Company’s incentive plans. The Board has determined to manage the 
impact of this change on incentive plan outcomes. Results will be assessed absent of the impact of this new accounting 
standard. It is intended that plan participants will not materially beneﬁ t or be disadvantaged by the change of 
accounting treatment.

2. FRAMEWORK

(a) Total remuneration
Executive total remuneration (TR) comprises ﬁ xed remuneration (FR) and variable (‘at-risk’) remuneration in the 
form of STIP and LTIP. The remuneration structure in F18 for current executives as at 30 June 2018 is as follows.

Total Remuneration with STIP at Target and LTIP at Threshold:

CEO

Executives

Percentage of TR

FR 33%
STIP (at target) 33%
LTIP (at threshold) 34%

Percentage of TR

FR 46%
STIP (at target) 30%
LTIP (at threshold) 24%

Total Remuneration with both STIP and LTIP at Maximum:

CEO

Executives

Percentage of TR

FR 18%
STIP (at maximum) 27%
LTIP (at maximum) 55%

Percentage of TR

FR 27%
STIP (at maximum) 32%
LTIP (at maximum) 41%

The CEO’s remuneration mix in F18 changed slightly from F17 due to his LTIP award increasing from 200% of ﬁ xed 
remuneration in F17 to 300% of ﬁ xed remuneration in F18. In F19 the CEO’s remuneration mix will move again as his 
LTIP award will be 200% of ﬁ xed remuneration.

(b) Fixed remuneration
For Australian-based executives this is total ﬁ xed remuneration inclusive of superannuation and other beneﬁ ts. 
For executives based outside Australia, references to ﬁ xed remuneration refer to base salary.

Fixed remuneration is reviewed annually and set at a market-competitive level reﬂ ective of the executive’s skills, 
experience and responsibilities, and taking into account complexity of role, location and performance. The Group 
looks at industry and general market peer groups, with key criteria applied such as market capitalisation and revenue. 
Both Australian and global peers are considered, reﬂ ecting the complexity of roles in a global business and the 
Group’s international lens on talent. Peer groups are reviewed regularly for accuracy and alignment with the nature 
of the business.

(c) Short-term incentive plan (STIP)
The STIP drives an annual at-risk component of remuneration and links business results for the ﬁ scal year, executive 
performance and reward using a balanced scorecard approach.

The STIP performance measures are consistent across the Company. They are designed to support the ﬁ nancial health 
of the organisation and shareholder return in terms of dividends and share price – this year and over time. The metrics 
are aimed at reinforcing Company culture as their achievement requires focus, belief, trust and collaboration. 
Hurdles and stretch targets are set for each metric and the sustainability of growth and returns is non-negotiable.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  47  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

F18 STIP MEASURES 

REMUNERATION AND PERFORMANCE LINK

Global/Regional 
EBITS
(30% to 60%)

The EBITS metric focuses and rewards executives for the overall health and proﬁ t-producing ability 
of the Group/Region. It is designed to reward executives for levels of earnings that will beneﬁ t 
shareholders and provide capital that can be further invested by the Group for future growth.

Cost optimisation 
(up to 10%)

The cost optimisation metric aims to reward executives for the efﬁ cient deployment of overheads. 
It encourages executives to innovate, and where warranted to invest, to remove waste, achieve 
economies of scale and simplify.

Forecast accuracy 
(up to 10%)

The forecast accuracy metric aims to reward executives for optimising efﬁ ciency across the 
Company, from supply in our vineyards to demand from our customers. Delivery of this metric 
drives executives to collaborate to achieve balance in the supply chain over time, managing 
investment, product quality and inventory levels.

Working capital 
(10%)

Working capital focuses and rewards executives on cash conversion i.e. their efﬁ ciency in turning 
the Group’s products into cash.

ROCE 
(10% to 15%)

The Return on Capital Employed metric (ROCE) rewards executives for the efﬁ cient deployment 
of capital across the business. Focusing investment only where return hurdles will be met and the 
prioritising of investment to initiatives with higher yields ensures ﬁ nancial returns for investors 
are maximised.

Strategic Initiatives 
(10% to 15%)

This part of the STIP scorecard is used to focus executives on speciﬁ c strategic initiatives that are 
critical to the delivery of Regional, Functional or Group business plans.

The table below provides further detail including the weighting of metrics and size of opportunity.

F18 STIP PERFORMANCE MEASURES 

STIP OPPORTUNITY 

STIP DETAIL

The annual STIP opportunity 
is at the absolute discretion of 
the Board. In F18, the following 
STIP opportunities applied:
Target:

Executives 66.5% of FR
CEO 100% of FR

Maximum:

Executives 120% of FR
CEO 150% of FR
The Individual Performance 
Multiplier is derived from 
the level of each Executive’s 
achievement of individual 
KPOs and demonstration of the 
Company’s growth behaviours.
The Individual Performance 
Multiplier can drive a result 
of 0 to 1.5 as per the diagram 
overleaf (except for the CEO for 
whom the individual multiplier 
on STIP is capped at 1.25).

An annual award of cash and/or equity 
may be received based on:
•  Group, team and individual ﬁ nancial, 
strategic and operational performance, 
measured by way of the Balanced 
Scorecard; and

•  Agreed individual key performance 

objectives (including company 
behaviours) measured by way of the 
Individual Performance Multiplier

One-third of the STIP award for executives 
is deferred into Restricted Equity in the 
Company. Of this Restricted Equity, 
one-half (i.e. one-sixth of the overall 
STIP award) will vest after one year, 
and one-half (i.e. one-sixth of the overall 
STIP award) will vest after two years.
The remaining two-thirds of the STIP 
award is delivered in cash at the end 
of the F18 ﬁ nancial year.

The STIP Balanced Scorecard 
is weighted by role as follows.
CEO & CFO:

50% global EBITS
10% cost optimisation
up to 10% forecast accuracy
10% working capital
10–15% ROCE
10–15% Strategic Initiatives

COO:

30% global EBITS
30% regional EBITS
10% forecast accuracy
10% working capital
10% ROCE
10% Strategic Initiatives

Each measure is assessed after 
the ﬁ nancial year-end against 
the full-year audited ﬁ nancial 
report on a constant currency 
basis to determine the overall 
level of performance achieved.
The Balanced Scorecard can 
drive a multiplier outcome 
between 0 and 1.2 as per the 
diagram overleaf.

48  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

The overall structure of the F18 STIP is provided below.

STIP Award $

Fixed
remuneration $

STIP 
opportunity %

Balanced
Scorecard
multiplier 
(0 to 1.2)

Individual
multiplier
(0 to 1.5)*

Fixed – based on 
level of skill and 
responsibility.

Fixed – based on 
role and level of role 
within the Company.

Variable – based on 
Balanced Scorecard 
performance.

Variable – based 
on individual 
performance.

* 0 to 1.25 for the CEO

Restricted Equity 
Cash 

1/3
2/3

(d) Long-term incentive plan (LTIP)
The LTIP is designed to reward executives for long-term performance and value creation for shareholders. Offers are 
approved by the Board and made to select executives and senior leaders as nominated by the CEO. For F18 the Board 
awarded the CEO an LTIP opportunity of 300% of ﬁ xed remuneration. This decision was taken to recognise and retain 
the CEO who has led the outstanding ﬁ nancial transformation and performance of the Company over recent years.

The performance period for the F18 LTIP is 1 July 2017 to 30 June 2020 and the plan has the following features.

LTIP PERFORMANCE MEASURES

LTIP OPPORTUNITY

LTIP DETAIL

Relative Total Shareholder Return (TSR)
(50% weighting)

Relative to S&P/ASX 200 Index, excluding 
companies from the energy, metal and mining, 
real estate and ﬁ nance sectors.

Return on Capital Employed (ROCE) 
Growth (50% weighting)

Calculated as EBITS divided by average 
capital employed (at constant currency). 
Capital employed is the sum of average 
net assets (excluding SGARA) and average 
net debt.

LTIP awards are at the 
absolute discretion of the 
Board. In F18, the following 
awards applied:

Executives 150% to 162% 
of FR
CEO 300% of FR

LTIP awards are delivered in 
the form of performance rights. 
The number of rights allocated 
is based on face value using the 
90-day VWAP preceding 1 July 
at the start of the performance 
period. If the performance 
conditions are met at the end 
of the three-year performance 
period, rights vest and executives 
receive a share for each vested 
performance right.
No amount is payable on the 
vesting of the performance rights 
or on their conversion into shares. 
Any rights that do not vest lapse.

F18 LTIP Vesting schedules

Relative TSR 
Vesting Schedule

Relative TSR Ranking

Below 50th percentile
50th to 60th percentile
60th to 75th percentile
At or above 75th percentile

% of Performance Rights 
subject to Relative TSR 
measure which vest
0%
35–70%
70–100%
100%

ROCE baseline 
11.6% (F17)

% ROCE growth

ROCE result

Less than 2.1%
2.1% to 2.8%
At or above 2.8%

Less than 13.7%
13.7% to 14.4%
At or above 14.4%

% of Performance Rights 
subject to ROCE measure 
which vest
0%
35–100%
100%

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  49  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

(e) General employee share plan (Share Cellar)
The Group has a broad-based employee share plan, Share Cellar, which operates by way of after-tax employee payroll 
contributions (minimum $500 to maximum $5,000) to acquire shares in the Company. For every two purchased 
shares that a participant holds at the vesting date (approximately two years) the Company delivers one matched share. 
An equivalent cash plan operates in countries where, due to local laws, it is not practicable to offer shares to employees.

Shares were acquired in F18 under the 2017 Share Cellar offer, and a subsequent offer to participate in the 2018 
Share Cellar plan was made during the year. The ﬁ rst share purchases in the 2018 Share Cellar plan will occur 
in September 2018 (F19).

(f) Restricted equity plan (REP)
In addition to the LTIP, the Group operates the REP which allows the Board to make offers of Restricted Shares 
or Deferred Share Rights for the purpose of attracting, retaining and motivating key employees within the Group. 
There were no awards granted to, or vested for, executives under the REP in F18.

(g) Other key information

Board discretion and clawback
The Board will exercise discretion to ensure any cash or equity outcomes are appropriately aligned to the Company’s 
underlying performance and the interests of shareholders. The Board maintains the discretion to clawback any 
unvested equity should a clawback event arise, such as (but not limited to) material misstatement, which was not 
apparent at the time the equity was awarded.

Leavers
The Board has absolute discretion as to whether participants retain their unvested equity upon ceasing employment, 
taking into account the circumstances of their departure. In general if an executive ceases employment with the 
Group they forfeit their entitlement to cash or equity under the Company’s incentive plans.

In exceptional circumstances (such as redundancy, death or disability), the Board, in its discretion, may determine 
that a portion of the award is retained having regard to performance and time lapsed to date of cessation (or that 
an equivalent cash payment be made). Retained awards will generally be subject to post-employment vesting, 
where the participant must continue to hold the relevant Performance Rights until the end of the performance 
period, and be subject to the performance conditions under the plan.

Dividends and voting rights
Plan participants granted restricted shares are entitled to dividends and voting rights. Participants holding 
time-restricted rights or performance rights are entitled to neither dividends nor voting rights.

Change of control
In the event of a change of control, unless the Board determines otherwise, the transfer restrictions imposed on 
the shares will be lifted, but only in so far as to permit the executive to participate in the change of control event. 
Any shares that do not participate in the change of control event will continue to be subject to restrictions until 
the end of the applicable restriction period.

Hedging
To ensure the variable components of the Group’s remuneration structure remain ‘at-risk’, employees may not hedge 
against the risk inherent in arrangements such as the LTIP or any other equity-based incentive plans. Awards will 
be forfeited if the policy is breached.

50  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

3. PERFORMANCE AND REMUNERATION OUTCOMES

(a) Overview of company performance
EBITS growth and EBITS margin accretion, together with improved asset returns are underpinned by the Company’s 
investment in its organisational talent, portfolio premiumisation, brand building investment, strategic customer  
and distributor partnerships, more efficient routes-to-market and a cost conscious culture. F18 results demonstrate 
the benefits of this strategy delivering EBITS of $530.2 million, up 18% year on year on a constant currency basis  
and improved profitability with strong EBITS margin accretion and significantly enhanced ROCE.

The table below summarises the Company’s financial performance over the last five financial years.

Table 3.1: Overview of Company performance (reported)

FINANCIAL YEAR ENDED 30 JUNE 

EBITS performance (A$ million)
Earnings per share (cents)1
Dividends paid per share (cents) 
Franked (%)
Closing share price ($ at 30 June)
Return on capital employed (%)

2014

184.6
17.4
13
0
4.92
5.9

2015

225.1
21.9
13
0
4.90
6.8

2016

334.2
30.5
16
0
9.23
9.3

2017

455.1
39.8
25
0
13.16
11.6

2018

530.2
51.8
282
63
17.39
12.6

1. Before material items, SGARA and tax consolidation benefit.
2. The 2018 dividend of 28 cents is comprised of the final dividend in F17 of 13 cents (50% franked) paid on 6 October 2017 and the interim 

F18 dividend of 15 cents (75% franked) paid on 6 April 2018. For the final F18 dividend see Note 6 of the Financial Statements.

The following graph shows movement in the Company share price against movement in the ASX200 over the last  
five years.

500%

450%

400%

350%

300%

250%

200%

150%

100%

50%

0%

Jul–2013

TWE
ASX200

Ja n –2014

Jul–2014

Ja n –2015

Jul–2015

Ja n –2016

Jul–2016

Ja n –2017

Jul–2017

Ja n –2018

Jul–2018

(b) Fixed remuneration outcomes
Market benchmarking and salary reviews are conducted annually with any changes effective from 1 September.

In F18:

• The CEO, Mr Clarke, received an increase from $2,200,000 to $2,500,000 per annum, an increase of 13.6%.

• The former CFO, Mr Burghardt, received an increase from US$475,000 to US$530,000, an increase of 11.6%.

• Mr Foye’s fixed remuneration increased from US$625,000 to US$825,000 however this was offset with a reduction 

in his expatriate benefits from US$350,000 to US$150,000.

• Mr Young was appointed CFO on 1 May 2018. His fixed remuneration was increased by 32% to $700,000 effective 

30 June 2018 to reflect the responsibilities of his new role.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  51  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

(c) Short-term incentive outcomes
Short-term incentives are assessed by achievement against each executive’s Balanced Scorecard and speciﬁ c personal 
objectives. Actual results for the Balanced Scorecard are provided below.

The F18 STIP scorecard is heavily weighted to ﬁ nancial metrics and the primary driver is EBITS. STIP outcomes 
for executives reﬂ ects the ﬁ nancial out-performance of the Company with particularly strong results in Europe, Asia, 
Australia and New Zealand. EBITS results were more variable in the Americas region where the route-to-market 
changes were implemented part way through the year. However, this was countered by over-achievement in all other 
regions. The Company’s strong focus on cost, operational efﬁ ciency and ROCE resulted in stretch achievement on the 
related metrics in the STIP scorecards. This high level of performance is reﬂ ected in the STIP results and the level 
of payout for most executives.

F18 STIP
SCORECARD

Financial goals
Global EBITS2
Regional EBITS
Cost optimisation
Working capital

Strategic goals
Strategic Initiatives
Forecast Accuracy
ROCE
Total

CEO

CFO

COO1

WEIGHT

PAYMENT

WEIGHT

PAYMENT

WEIGHT

PAYMENT

50%

10%
10%

60%

12%
12%

15%

18%

15%
100%

18%
120%

50%

10%
10%

10%
10%
10%
100%

60%

12%
12%

12%
12%
12%
120%

30%
30%

10%

10%
10%
10%
100%

30%
23%

10%

6%
6%
10%
85%

1. In F18 the COO was measured on scorecards relating to North Asia, Americas and his role as Chief Operating Ofﬁ cer.
2. TWE has a three-phase approach to driving value accretion for shareholders; Fixing, Growing and Accelerating. The Board exercised 
discretion on the Global EBITS result for the Americas region in light of it remaining in “Fixing” phase versus TWE’s ANZ, Asia and 
Europe regions being in “Growth” phase.

The table below sets out short-term incentive outcomes for each executive inclusive of the impact of individual 
performance multiplier outcomes. The cash component of F18 STIP awards will be paid in September 2018. 
The Restricted Equity will also be allocated in September 2018.

Table 3.2: F18 STIP outcomes

FR2 FOR STIP 
OPPORTUNITY
($)

STIP 
OPPORTUNITY 
AT TARGET 
(% OF FR)
(%)

STIP 
OPPORTUNITY 
AT TARGET
($)

STIP
AWARDED4
($)

TOTAL STIP 
AWARDED 
(% OF FR)4
(%)

CASH
($)

RESTRICTED 
EQUITY
($)

TOTAL STIP 
OPPORTUNITY 
FORFEITED
(% OF FR)4
(%)

2,500,000
1,063,967
89,041

100%
66.5%
66.5%

2,500,000 3,750,000
724,131
106,582

707,538
59,212

150%  2,500,000 
68%  482,754 
 71,055 

120%

 1,250,000 
 241,377 
 35,527 

0%
0%
0%

EXECUTIVE1

MA Clarke
RB Foye
MJ Young3

1. Reports only executives who were KMP at 30 June 2018.
2.  FR is salary as of 1 September 2017. Where changes have occurred after 1 September, FR is pro-rated based on calendar days in the 

ﬁ nancial year.

3. Mr Young’s FR for STIP opportunity and actual payment is pro-rated reﬂ ecting the period he was KMP from 1 May 2018.
4. Inclusive of balanced scorecard and individual performance multiplier outcomes.

52  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

(d) Long-term incentive awards and outcomes

LTIP awarded during the year
Performance rights were allocated to executives under the F18 LTIP after the 2017 Annual General Meeting and are 
subject to a three-year performance period. Any vesting is subject to two hurdles (detailed on page 49). The performance 
rights have no exercise price and the minimum total value of the grant is zero. The maximum value is the number 
of awards granted multiplied by the share price at vesting.

Table 3.3: F18 LTIP Performance Rights

EXECUTIVE

GRANT DATE

VESTING DATE

NUMBER OF 
AWARDS 
GRANTED

FACE VALUE 
AT GRANT
DATE ($)1

FAIR VALUE 
AT GRANT
DATE ($)2

Current 
(as at 30 June 2018)
MA Clarke
RB Foye
MJ Young3

Former
GG Burghardt

13 November 2017
13 November 2017
13 November 2017

30 June 2020
30 June 2020
30 June 2020

514,283
138,186
17,727

6,599,999
1,773,396
227,498

6,690,822
1,797,800
230,628

13 November 2017

30 June 2020

73,613

944,705

957,705

1. The value of LTIP awards granted to executives was the face value of the volume weighted average price (VWAP) of Company shares sold 

on the Australian Securities Exchange over the 90-day period up to and including 30 June 2017 ($12.8334 per share).

2  The fair value ($) in the table above is calculated using the valuation method detailed in note 21 of the Financial Statements.
3  The number of awards shown for Mr Young represent the full F18 LTIP grant which were granted prior to him becoming KMP.

LTIP vesting
The F16 LTIP vested at the end of the year. The vesting schedule for the F16 LTIP is provided below.

Relative TSR 
vesting schedule

Relative TSR ranking

ROCE growth 
vesting schedule
Baseline 6.8% 
(F16)

Below 50th percentile
50th to 75th percentile
At or above 75th percentile

% ROCE growth

ROCE result

Less than 0.6%
0.6% to 1.2%
Greater than 1.2%

Less than 7.4%
7.4% to 8.0%
Greater than 8.0%

% of Performance Rights 
subject to Relative TSR 
measure which vest
0%
35–100%
100%

% of Performance Rights 
subject to ROCE measure 
which vest
0%
35–100%
100%

Performance over the three year period ended 30 June 2018. The Group’s Relative TSR performance was at the 
99th percentile of the peer group and so 100% vesting for this metric was achieved. Return on Capital Employed 
(ROCE) growth for the performance period was 12.6% resulting in 100% vesting. The combined vesting outcome 
for the F16 LTIP plan was 100%. 

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  53  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

The F16 LTIP vesting outcome by executive is provided below.

Table 3.4: Vesting/lapse of F16 LTIP1

EXECUTIVE

Current 
(as at 30 June 2018)
MA Clarke
RB Foye
MJ Young

NUMBER OF 
PERFORMANCE 
RIGHTS
GRANTED1

REVISED 
NUMBER OF
AWARDS2

VALUE AT
GRANT3
($)

NUMBER 
OF RIGHTS 
VESTED

VALUE
VESTED4
($)

NUMBER 
OF RIGHTS 
WHICH
LAPSED5

VALUE
LAPSED4
($)

639,506
179,617
14,671

659,759
185,305
15,135

3,507,675
985,193
80,467

659,759
185,305
15,135

11,473,209
3,222,454
263,198

0
0
0

0
0
0

1. Represents the original number of Performance Rights granted under the F16 LTIP. Mr Young’s F16 LTIPs were awarded before he 

became KMP.

2. The revised number of awards reﬂ ects the updated number of Performance Rights allocated to employed executives to keep them whole 

after the renouncable rights issue announced by the Company on 14 October 2015. The additional number of units granted was determined 
in accordance with the methodology provided to the Company by an independent third-party advisory ﬁ rm.

3. ‘Value at grant’ is calculated based on $5.3166 which was the volume weighted average price of Company shares sold on the ASX 

over the 90 day period up to and including 30 June 2015. This was the price used to calculate the number of performance rights granted 
under the F16 LTIP as previously disclosed by the Company.

4. The ‘value vested’ and ‘value lapsed’ are calculated based on the closing share price on the performance period end date of 30 June 2018, 
being $17.3900. The value for each executive largely reﬂ ects the $12.0734 share price differential between the unit value at grant, being 
$5.3166, and the share price at the end of the performance period of $17.3900.

5. The number of rights which lapsed as they did not vest. 

(e) General employee share plan (Share Cellar)
All executives are participants of the 2017 Share Cellar plan, except for Mr Foye. Mr Foye at that time was based in China, 
and therefore participated in the Cash Plan. Mr Young was not KMP at the time the 2017 Share Cellar plan was offered.

Share purchases occurred in September 2017, November 2017 and March 2018 with the relevant matching rights 
allocated to executives in F18. Subject to the executive continuing to meet the plan rules, these matching rights 
will convert to matching shares when the plan vests.

Table 3.5: Acquisitions in F18 for the 2017 Share Cellar Plan

EXECUTIVE1

MECHANISM

Current 
(as at 30 June 2018)
MA Clarke

Shares

RB Foye

Phantom Shares

Former
GG Burghardt

Shares

ACQUISITION 
DATE

ACQUISITION 
PRICE
($)

NUMBER 
OF SHARES 
ACQUIRED

NUMBER 
OF RIGHTS 
ALLOCATED

VALUE 
OF RIGHTS 
ALLOCATED
($)2

1 September 2017
1 November 2017
26 February 2018
1 September 2017
1 November 2017
26 February 2018

1 September 2017
1 November 2017
26 February 2018

14.51
15.63
17.72
14.51
15.63
17.72

14.51
15.63
17.72

156
58
103
156
58
103

140
54
105

78
29
51
78
29
51

70
27
52

2,264
907
1,825
2,264
907
1,825

1,016
422
921

1. MJ Young was not a participant in the 2017 Share Cellar plan.
2. The value of rights allocated at grant date is calculated based on the acquisition price.

During F18, the 2018 Share Cellar plan was launched with deductions commencing in April 2018. Actual share 
acquisitions under the plan will be completed in F19, commencing September 2018.

Enrolment rates for the fourth year of Share Cellar were at an all-time high and the Company now has more 
than a third of all eligible employees participating in the Share Cellar Plan and investing their post-tax pay 
to become shareholders. All executives as at 30 June 2018 are enrolled in the 2018 Share Cellar plan.

54  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

(f) Summary of awards held by executives
The table below sets out the number and movement of awards held by executives. Restricted Shares are generally issued 
under STIP Deferral (Restricted Equity). Performance Rights are issued under the LTIP. Deferred Share Rights are 
issued under the REP or represent the right to matching shares under the 2016 and 2017 Share Cellar Plans.

Table 3.6 Summary of awards held by executives

HELD AT 
THE START 
OF THE 
REPORTING 
PERIOD

GRANTED/ 
ACQUIRED 
DURING 
REPORTING 
PERIOD

RECEIVED 
UPON 
EXERCIS-
ING

OTHER
CHANGE1

HELD AT 
THE END 
OF THE 
REPORTING 
PERIOD

NUMBER 
UNVESTED 
AT THE END 
OF THE 
REPORTING 
PERIOD

EXERCIS-
ABLE 
AT THE 
END OF 
THE 
REPORTING 
PERIOD4

NAME

Current 
(as at 30 June 2018)
MA Clarke

RB Foye

MJ Young2

Restricted 
Shares
Performance 
Rights
Deferred 
Share Rights
Restricted 
Shares
Performance 
Rights
Deferred 
Share Rights
Restricted 
Shares
Performance 
Rights
Deferred 
Share Rights

Former
GG Burghardt3 Restricted 

Shares
Performance 
Rights
Deferred 
Share Rights

Grand Total

 201,956 

 76,238 

(163,431) 

 1,111,964 

 514,283 

–

–

–

 114,763 

 114,763 

–

 1,626,247 

 966,488 

 659,759 

 317 

–

(182) 

 158 

 293 

 293 

 41,069 

 21,085 

(34,090) 

 288,783 

 138,186 

(185,305) 

–

–

 46,837 

 92 

–

–

–

–

–

 5,447 

 98,640 

 73,613 

–

–

–

–

–

–

–

–

–

–

–

–

 28,064 

 28,064 

 241,664 

 241,664 

–

–

–

–

 46,837 

 31,702 

 15,135 

 92 

 92 

(5,447) 

(172,253) 

–

–

–

–

–

–

–

–

–

–

–

–

 35,134 
 1,824,792 

–
 828,852 

(131) 
(35,003) 
(418,011)  (177,673) 

–
 2,057,960 

–
 1,383,066 

–
 674,894 

1. Represents balance adjustments for executives ceasing to be a member of KMP, grants made in relation to Share Cellar and any units 

forfeited in F18.

2. Mr Young’s holding at the start of the period reﬂ ects his holding on 1 May 2018 when he became KMP. 
3. Ceased as KMP on 1 May 2018.
4. MA Clarke and MJ Young’s Performance Rights are eligible for an exercise period. The F16 LTIP plan provides Australian based participants 

an option to defer exercising vesting rights for a period of up to four years. 

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  55  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

(g) Remuneration of executives
The table below (Table 3.7) provides details of remuneration for the CEO and executives for F18, calculated in 
accordance with statutory accounting requirements. All amounts are in Australian dollars and relate only to the 
portion of the year in which the person occupied the KMP role.

Table 3.7: Remuneration of executives

SHORT-TERM BENEFITS

EXECUTIVE

YEAR

SALARY/
FEES1
($)

LEAVE
ACCRUAL2
($)

NON-MONETARY 
BENEFITS3
($)

TOTAL CASH
INCENTIVE4
($)

OTHER
PAYMENTS5
($)

Current 
(as at 30 June 2018)
MA Clarke9
KMP full year
RB Foye10,11,12
KMP full year
MJ Young13
From 1 May 2018

Former
GG Burghardt10,14
Until 30 April 2018
Total

F18
F17
F18
F17
F18
F17

F18
F17
F18
F17

 2,429,951 
 2,180,384 
 1,014,365 
 746,858 
 84,992 
 – 

 562,531 
 209,013 
 4,091,839 
 3,136,255 

 182,638 
 154,944 
 34,630 
(12,000) 
 8,215 
 – 

 24,917 
 16,003 
 250,400 
 158,947 

 606,779 
 116,595 
 728,684 
 808,403 
 690 
 – 

 2,500,000 
 2,200,000 
 482,754 
 608,465 
 71,055 
 – 

 527,184 
 16,066 
 1,863,337 
 941,064 

 – 
 157,201 
 3,053,809 
 2,965,666 

 161,188 
 69,533 
 4,259 
 – 
 – 
 – 

 78,471 
 31,771 
 243,918 
 101,304 

1.  Represents cash salary including any salary sacriﬁ ced items such as superannuation and novated motor vehicles.
2.  Includes any net changes in the balance of annual leave and long service leave (i.e. leave entitlements that accrued during the year but 

were not used).

3.  Includes the provision of car parking, insurances, product allocations, executive medical checks, the value of entertainment, taxation 

expenses, international relocation and expatriate costs and Fringe Beneﬁ ts Tax on all beneﬁ ts, where applicable.

4.  Represents cash payments made under the F18 STIP, excluding the Restricted Equity portion which will be allocated in September 2018. 
5.  Includes allowances such as, but not limited to, relocation, car and repatriation.
6.  Includes a proportion of the fair value of all outstanding LTIP offers at the start of the year, or which were offered during the year. 

7. 

Under Australian Accounting Standards, the fair value is determined as at the offer date and is apportioned on a straight-line basis across 
the expected vesting period after adjusting at each reporting date for an estimation of the number of shares that will ultimately vest.
Includes a proportion of the fair value of all Restricted Shares and Deferred Share Rights held under outstanding Restricted Equity 
Plans at the start of the year. F16 and F17 STIP Restricted Equity were outstanding at the end of F18. Restricted Equity granted under 
the F18 STIP is expected to be allocated in September 2018. Under Australian Accounting Standards, the fair value is determined as at 
the offer date and is apportioned on a straight-line basis across the expected vesting period after adjusting at each reporting date for an 
estimation of the number of shares that will ultimately vest. 

8.  Represents the sum of incentive and Performance Rights/Restricted Equity as a percentage of total remuneration, excluding 

termination payments.

9.  Mr Clarke’s salary was adjusted on 1 September 2017 from AU$2,200,000 to AU$2,500,000.

56  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

SUPERANNUATION/
PENSION
($)

TOTAL AMORTISATION
VALUE OF LTIP6
($)

OTHER 
EQUITY7
($)

TOTAL
($)

PERFORMANCE
RELATED8
(%)

TERMINATION 
BENEFITS
($)

SHARE-BASED PAYMENTS

 20,049 
 19,616 
 13,065 
 14,377 
 3,341 
 – 

 16,671 
 7,438 
 53,126 
 41,431 

 4,267,867 
 3,358,940 
 1,138,828 
 900,546 
 19,178 
 – 

 341,563 
 111,059 
 5,767,436 
 4,370,545 

 958,119 
 753,439 
 255,702 
173,747 
 111 
 – 

 11,126,591 
 8,853,451 
 3,672,287 
 3,240,396 
 187,582 
 – 

 40,761 
 15,433 
 1,254,693 
 942,619 

 1,592,098 
 563,984 
 16,578,558 
 12,657,831 

69%
71%
51%
52%
48%

24%
50%

 – 
 – 
–
 – 
–
 – 

–
 – 
 – 
 – 

10.  Mr Burghardt and Mr Foye are remunerated in US dollars. Amounts reported are converted to Australian dollars at average A$:US$ 

exchange rate for F18 of 0.7754.

11.  Mr Foye’s remuneration mix was adjusted on 1 September 2017 from Fixed Remuneration of US$625,000 and long-term assignment 

beneﬁ ts of US$350,000 to Fixed Remuneration of US$825,000 and long-term assignment beneﬁ ts of US$150,000.

12.  Mr Foye’s tax equalisation beneﬁ ts represents the difference between the hypothetical taxes deducted from Mr Foye’s US salary and the 

tax actually paid in China and California which is borne by TWE. 

13.  Amounts reported for Mr Young for KMP period, from 1 May 2018 to 30 June 2018.
14.  Amounts reported for Mr Burghardt for KMP period, from 1 July 2017 to 30 April 2018.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  57  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

NON-EXECUTIVE DIRECTOR REMUNERATION

4. FRAMEWORK AND OUTCOMES

This section of the report refers to the following non-executive directors.

NAME

POSITION

DATES

Non-executive directors
Current (as at 30 June 2018)
PA Rayner
EYC Chan
MV Cheek
WL Every-Burns
GA Hounsell
LM Shanahan
CE Jay

Former
PR Hearl
ML Cattermole

Chairman
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director

Full year
Full year
Full year
Full year
Full year
Full year
From 1 April 2018

Non-executive director
Non-executive director

Retired effective 31 August 2017
Retired effective 18 October 2017

(a) Fee pool
The current maximum aggregate fee pool of $2,500,000 per annum (inclusive of superannuation) was approved 
by shareholders at the 2016 Annual General Meeting.

(b) Non-executive director fees
The level of non-executive directors’ fees takes into account the risks and responsibilities of the role, the global reach 
and complexity of the business; director skills and experience, and market benchmark data (provided by independent 
external consultants).

Chairman and non-executive director base fees increased during F18, effective 1 April 2018, for the third time since 
May 2011. Committee fees remain unchanged. The increases were informed by input from the Committee’s independent 
remuneration advisor and awarded to remain competitive in the market, noting the increasing global operations, scale 
and complexity of the Group.

Table 4.1: F18 Non-executive director fees

BOARD/COMMITTEE

Board base fee
Audit and Risk Committee
Human Resources Committee
Nominations Committee

CHAIRMAN 
FEE ($)

MEMBER 
FEE ($)

515,0001
40,000
40,000
10,0004

187,2502
20,0003
20,000
5,000 

The above fees were effective from 1 April 2018 and are inclusive of superannuation.

1. The Chairman fee was increased by 4% from $495,000 per annum to $515,000 per annum, effective 1 April 2018.
2. The non-executive director base fee was increased by 4% from $180,000 to $187,250 per annum, effective 1 April 2018.
3. The Chairman of the Board, Mr Rayner, was a member of the Audit and Risk Committee from 19 October 2017 to 10 April 2018 and did 

not receive any additional fees for this role.

4. Currently the Chairman of the Board, Mr Rayner, is also the Chairman of the Nominations Committee, thereby not receiving any additional 

fees for this role.

In addition to the above fees, non-executive directors receive a wine allowance. In order to maintain independence, 
non-executive directors do not participate in the Company’s incentive plans and they do not receive retirement beneﬁ ts 
other than the superannuation contributions disclosed in this report.

58  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

During F18, overseas-based directors were entitled to a travel allowance to compensate for travel undertaken in 
their duties. This was in addition to any business-related expenses that may be incurred in carrying out their duties. 
Travel costs are not included in base fees but are paid to non-executive directors as appropriate so that it is a targeted 
spend for the business to compensate for actual travel taken during the year.

Table 4.2: F18 Non-executive director travel allowances

TRAVEL TIME

TRAVEL ALLOWANCE

Between 4–12 hours

More than 12 hours

$1,250 each trip
(i.e. generally $2,500 per meeting)
$2,500 each trip
(i.e. generally $5,000 per meeting)

The above allowances are inclusive of superannuation, if applicable.

As previously reported, the Board decided in F15 to gradually phase out this travel allowance by 30 June 2018. Travel 
allowances ceased at the end of F18 and are no longer available to directors.

(c) Non-executive director outcomes
Details of non-executive director remuneration for F18 and F17 are provided below.

Table 4.3: F18 Non-executive director remuneration

NON-EXECUTIVE 
DIRECTOR

YEAR

FEES
($)

NON-MONETARY
BENEFITS1
($)

TRAVEL 
ALLOWANCE
($)

SUPER-
ANNUATION
($)

PA Rayner

EYC Chan

MV Cheek

WL Every-Burns

GA Hounsell

CE Jay2

LM Shanahan

Former
ML Cattermole3

PR Hearl4

Total

F18
F17
F18
F17
F18
F17
F18
F17
F18
F17
F18
F17
F18
F17

F18
F17
F18
F17
F18
F17

 479,951 
 434,134 
 193,251 
 159,419 
 201,851 
 185,000 
 207,160 
 191,781 
 207,160 
 191,781 
 51,813 
–
 201,813 
 122,077 

 54,795 
 178,082 
 30,441 
 168,950 
 1,628,235 
 1,631,224 

 8,900 
 12,856 
 4,000 
 4,000 
 4,000 
 4,000 
 7,800 
 6,188 
 4,000 
 9,463 
 1,000 
–
 4,000 
 2,000 

 2,000 
 6,888 
 1,000 
 6,888 
 36,700 
 52,283 

–
–
 10,000 
 10,000 
 20,000 
 20,000 
–
–
–
–
–
–
 20,000 
 15,000 

–
–
–
–
 50,000 
 45,000 

 20,049 
 19,615 
 5,228 
 5,581 
–
–
 19,653 
 18,219 
 19,653 
 18,219 
–
–
–
–

 5,205 
 16,918 
 2,892 
 16,050 
 72,680 
 94,602 

TOTAL
($)

 508,900 
 466,605 
 212,479 
 179,000 
 225,851 
 209,000 
 234,613 
 216,188 
 230,813 
 219,463 
 52,813 
–
 225,813 
 139,077 

 62,000 
 201,888 
 34,333 
 191,888 
 1,787,615 
 1,823,109 

1. Includes car parking, product allocations, entertainment and Fringe Beneﬁ ts Tax, where applicable. The amounts for Mr Rayner includes 

car parking. 

2. Ms Jay commenced as non-executive director from 1 April 2018.
3. Ms Cattermole ceased as non-executive director on 18 October 2017.
4. Mr Hearl ceased as non-executive director from 31 August 2017.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  59  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

OTHER REMUNERATION INFORMATION

5. GOVERNANCE

(a) Role of the Human Resources Committee (HRC)
The HRC provides assistance to the Board in relation to such matters as monitoring remuneration principles and 
frameworks, providing advice on remuneration matters, making remuneration recommendations for executives, 
approving incentive plans, and reviewing and governing remuneration policies. In addition to its remuneration 
responsibilities and together with the Board, the HRC’s duties include overseeing talent management, diversity 
and leadership development.

The Committee ensures that the Company’s policies and frameworks aid the achievement of the Group’s strategic 
objectives, are aligned with market best practice, and fulﬁ l the Board’s responsibility to shareholders.

As outlined in Section 4 of the Corporate Governance Statement disclosed on the Company’s website www.tweglobal.com, 
the Group has procedures in place for the reporting of any matter that may give rise to a conﬂ ict between the interests 
of a director and those of the Group. In addition, the Group has adopted a general policy for employees in relation to 
the disclosure and management of potential conﬂ icts of interest (see Section 4 of the Corporate Governance Statement 
on www.tweglobal.com).

(b) Engagement of remuneration advisors
In F18, the Board and HRC engaged PwC as an independent advisor to the HRC. In the ﬁ nancial year, PwC did not 
provide any remuneration recommendations as deﬁ ned in the Corporations Act.

(c) Executive and non-executive director share ownership
Each executive and non-executive director is encouraged to have control over ordinary shares in the Company that 
are worth at least the equivalent of one year’s ﬁ xed remuneration or base fees. This guideline is expected to be met over 
a reasonable period of time (approximately ﬁ ve years). The Group’s variable incentive programs contribute towards 
executives meeting this guideline. The Director Share Acquisition Plan (DSAP) allows directors to apply after-tax fees 
to the acquisition of the Company’s shares on a periodic basis at the prevailing market rate. The table below sets out 
KMP shareholdings.

Table 5.1: KMP shareholdings

F18

Executive
Current 
(as at 30 June 2018)
MA Clarke
RB Foye
MJ Young3

Former
GG Burghardt
Executive total

BALANCE 
AT START OF 
THE YEAR

RECEIVED 
UPON 
EXERCISE1

OTHER 
CHANGES 
DURING 
THE YEAR2

BALANCE 
AT END 
OF YEAR

 805,708 
 254,747 
 1,340 

823,372
 219,395 
15,135

(469,769) 
(234,837) 

–

1,159,311
 239,305 
16,475

 66,786 
 1,128,581 

 35,003 
1,092,905

(101,789) 
(806,395) 

–
1,415,091

1. Includes shares acquired upon exercise of F16 LTIP awards. MA Clarke’s balance includes 163,613 shares received upon exercise and 
659,759 exercisable rights at the end of the reporting period. MJ Young’s balance includes 15,135 exercisable rights at the end of the 
reporting period.

2. Includes the purchase/sale of ordinary shares during F18 and balance adjustments for executives ceasing to be KMP.
3. Mr Young’s holding at the start of the period reﬂ ects his holding on 1 May 2018 when he became KMP. 

60  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

F18

Non-executive directors
Current 
(as at 30 June 2018)
PA Rayner
EYC Chan
MV Cheek
WL Every-Burns
GA Hounsell
CE Jay
LM Shanahan

Former
ML Cattermole6
PR Hearl7
Non-executive director total
Grand total

BALANCE 
AT START OF 
THE YEAR

ACQUIRED 
DURING THE 
YEAR AS
PART OF 
DSAP4

OTHER 
CHANGES 
DURING 
THE YEAR5

BALANCE 
AT END 
OF YEAR

 228,068 
 43,300 
 55,124 
 90,000 
 54,500 
–
 4,779 

–
 2,569 
 1,937 
–
–
–
–

 21,966 
–
 3,000 
 10,000 
 14,000 
–
 3,764 

 250,034 
 45,869 
 60,061 
 100,000 
 68,500 
–
 8,543 

 174,214 
 45,000 
 694,985 
 1,823,566 

 1,094 
–
 5,600 
1,098,505

(175,308) 
(45,000) 
(167,578) 
(973,973) 

–
–
 533,007 
 1,948,098 

4. Shares acquired by Directors using post-tax fees in TWE’s Director Share Acquisition Plan (DSAP).
5. Includes the purchase/sale of ordinary shares during F18 and balance adjustments for non-executive directors on cessation as KMP.
6. Ceased as non-executive director on 18 October 2017. Zero balance at end of year represents cessation as KMP, not the sale of shares.
7. Ceased as non-executive director on 31 August 2017. Zero balance at end of year represents cessation as KMP, not the sale of shares.

6. FURTHER INFORMATION

(a) Executive contracts
There is no ﬁ xed term for executive contracts. The Company may terminate service agreements immediately for cause, 
in which case the executive is not entitled to any payment other than the value of ﬁ xed remuneration and accrued leave 
entitlements up to the termination date. On resignation all executives are required to give six months’ notice. If the 
termination is Company initiated, all executives have termination provisions of six months’ notice by the Company plus 
six months’ severance pay.

(b) Other transactions with KMP and their personally related entities
The Group entered into transactions which are insigniﬁ cant in amount with KMP and their related parties within 
normal employee, customer or supplier relationships on terms and conditions no more favourable than those available 
in similar arm’s length dealings which include payments of salaries and beneﬁ ts and purchase of Group products.

Some directors of the Company are also directors of public companies which have transactions with the Group. 
The relevant directors do not believe they have the individual capacity to control or signiﬁ cantly inﬂ uence the ﬁ nancial 
policies of those companies. The companies are therefore not considered to be related parties for the purpose of the 
disclosure requirements of the Corporations Act 2001.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  61  

F18 REMUNERATION REPORT (AUDITED) (CONTINUED)

(c) Prior years’ equity arrangements
This section summarises all outstanding equity arrangements for executives, as reported in previous  
Remuneration Reports.

The below equity plans have no exercise price and the minimum total value of the grant is zero. The maximum value 
is the number of awards granted multiplied by the share price at vesting.

Table 6.1: Prior years’ restricted equity1

EXECUTIVE PLAN

INSTRUMENT 
TYPE

ALLOCATION 
DATE

NUMBER

FACE  
VALUE AT 
ALLOCATION 
DATE2,3,4
($)

FAIR  
VALUE AT 
ALLOCATION
DATE5
($)

VESTING  

DATE

MA Clarke

RB Foye

MJ Young

F16 STIP 
(tranche 2)
F17 STIP 
(tranche 1)
F17 STIP 
(tranche 2)
F17 LTIP

2016 Share 
Cellar
2016 Share 
Cellar
F16 STIP 
(tranche 2)
F17 STIP 
(tranche 1)
F17 STIP 
(tranche 2)
F17 LTIP

2016 Share 
Cellar
2016 Share 
Cellar
F17 LTIP

2016 Share 
Cellar
2016 Share 
Cellar
2016 Share 
Cellar
2016 Share 
Cellar

Restricted 
Shares
Restricted 
Shares
Restricted 
Shares
Performance 
Rights
Matched 
Rights
Matched 
Rights
Restricted 
Shares
Restricted 
Shares
Restricted 
Shares
Performance 
Rights
Phantom 
Shares
Phantom 
Shares
Performance 
Rights
Matched 
Rights
Matched 
Rights
Matched 
Rights
Matched 
Rights

15 September 2016

38,525

419,996

419,996 14 September 2018

12 September 2017

38,119

550,000

550,000 11 September 2018

12 September 2017

38,119

550,000

550,000 11 September 2019

5 December 2016

452,205

4,400,000

3,676,427

30 June 2019

15 November 2016

9 March 2017

83

52

871

628

871

20 August 2018

628

20 August 2018

15 September 2016

6,979

76,084

76,084 14 September 2018

12 September 2017

10,543

152,120

152,120 11 September 2018

12 September 2017

10,542

152,105

152,105 11 September 2019

5 December 2016

103,478

1,006,851

841,276

30 June 2019

15 November 2016

9 March 2017

81

49

850

592

850

20 August 2018

592

20 August 2018

5 December 2016

13,975

135,978

113,617

30 June 2019

15 July 2016

17 October 2016

16 January 2017

29 March 2017

25

22

24

21

241

250

253

256

241

20 August 2018

250

20 August 2018

253

20 August 2018

256

20 August 2018

1. Reports only executives who were KMP at 30 June 2018.
2.	The	value	of	STIP	Deferral	at	allocation	date	is	calculated	based	on	the	five-day	VWAP	up	to	and	including	the	allocation	date.	The	F16	

and F17 STIP allocation price was $10.9019 and $14.4285 respectively.

3.	The	value	of	F17	LTIP	awards	at	allocation	date	is	calculated	based	on	the	ninety-day	VWAP	up	to	and	including	30	June	2016	($9.7301	

per share). The vesting schedule is provided in Table 6.2.

4. The value of matched rights is calculated based on the purchase price of the 2016 Share Cellar shares at each purchase date. 
5. This LTIP value is calculated using the valuation method detailed in Note 21 of the Financial Statements. All other plans are based  

on face value.

62  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

Table 6.2: F17 LTIP vesting schedules

Relative TSR 
vesting schedule

ROCE growth 
vesting schedule

Baseline 9.6% 
(F16)

Relative TSR ranking

Below 50th percentile
50th to 75th percentile
At or above 75th percentile

% ROCE growth

ROCE result

Less than 1.8%
1.8% to 2.4%
Greater than 2.4%

Less than 11.4%
11.4% to 12.0%
Greater than 12.0%

(d) Deﬁ nitions

TERM

DEFINITION

% of Performance Rights 
subject to Relative TSR 
measure which vest
0%
35–100%
100%

% of Performance Rights 
subject to ROCE measure 
which vest
0%
35–100%
100%

Constant currency An exchange rate that eliminates the effects of exchange rate ﬂ uctuations year-on-year.

Earnings per 
Share (EPS)

NPAT excluding SGARA and material items, divided by the weighted average number of shares. 
Adjusted EPS is used to calculate performance outcomes, meaning that the Board retains the 
discretion to adjust EPS to ensure that participants are not penalised or provided with a windfall 
gain arising from matters outside of management’s control.

EBITS

Earnings before interest, tax, SGARA and material items.

Key management 
personnel (KMP)

Those persons having authority and responsibility for planning, directing and controlling the 
major activities of the Company and the Group, directly or indirectly, including any director 
(whether executive or otherwise), as listed in the introduction to the Remuneration Report.

Phantom Shares

Units which provide the participant with a right to a receive a cash payment at the vesting date, 
whereby the payment is tied to the market value of an equivalent number of TWE shares.
The amount of the payout will increase as the share price rises, and decrease if the share price falls, 
but without the participant actually receiving any TWE shares.

Relative Total 
Shareholder 
Return (TSR)

Restricted Equity

The return on investment of a company relative to a peer group of companies.

Rights or shares granted by TWE that vest upon the satisfaction of certain conditions, such as 
continued employment for a period of time or the achievement of particular performance milestones. 
The plan participant cannot deal in the equity until it vests and the restriction is lifted. 

Return on Capital 
Employed (ROCE)

EBITS divided by Capital Employed (at constant currency). Capital Employed is the sum of average 
net assets (adjusted for SGARA impact) and average net debt.

SGARA

Self-generating and regenerating assets.
The adjustment to self-generating and regenerating assets (SGARA) is excluded to reﬂ ect the fair 
value adjustment each ﬁ nancial year which is largely due to environmental conditions not within 
the Group’s control.

Total Shareholder 
Return (TSR)

Total return on investment of a security, taking into account both capital appreciation and 
distributed income that was reinvested.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  63  

CONSOLIDATED STATEMENT OF PROFIT OR LOSS 
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018

Revenue
Cost of sales
Gross proﬁ t

Selling expenses
Marketing expenses
Administration expenses
Other expenses
Proﬁ t before tax and ﬁ nance costs

Finance income
Finance costs
Net ﬁ nance costs
Proﬁ t before tax

NOTE

3

2018
$M

2,496.4
(1,435.6)
1,060.8

2017
$M

2,534.2
(1,568.3)
965.9

(286.6)
(110.8)
(113.0)
(41.5)
508.9

28.2
(61.6)
(33.4)
475.5

(115.1)
360.4
(0.1)
360.3

–
–
59.4
59.4

419.7
0.1
419.8

(273.6)
(113.9)
(128.8)
(35.3)
414.3

19.9
(47.0)
(27.1)
387.2

(117.3)
269.9
(0.8)
269.1

7.6
(3.1)
(50.8)
(46.3)

222.8
0.8
223.6

CENTS
PER SHARE

CENTS
PER SHARE

7
7

49.7
49.3

36.5
36.1

Income tax expense
Net proﬁ t
Net proﬁ t attributable to non-controlling interests
Net proﬁ t attributable to members of Treasury Wine Estates Limited

22

Other comprehensive income
Items that may subsequently be reclassiﬁ ed to proﬁ t or loss
Cash ﬂ ow hedges
Tax on cash ﬂ ow hedges
Exchange gain/(loss) on translation of foreign operations
Other comprehensive income for the year, net of tax

Total comprehensive income for the year attributable 
to members of Treasury Wine Estates Limited
Non-controlling interests
Total comprehensive income for the year

Earnings per share for proﬁ t attributable to 
the ordinary equity holders of the Company
Basic
Diluted

The consolidated statement of proﬁ t or loss and other comprehensive income should be read in conjunction with the 
accompanying notes.

64  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018

Current assets
Cash and cash equivalents
Receivables
Inventories
Assets held for sale
Other current assets
Total current assets

Non-current assets
Inventories
Property, plant and equipment
Agricultural assets
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets

Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Other current liabilities
Total current liabilities

Non-current liabilities
Trade and other payables
Borrowings
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets

Equity
Contributed equity
Reserves
Retained earnings
Total parent entity interest
Non-controlling interests
Total equity

NOTE

2018
$M

2017
$M

9
9
9
13

9
10
11
12
22

9

15

9
17
22

18
20

89.4
593.0
1,012.3 
45.2
1.9
1,741.8 

952.1 
1,416.5
41.3
1,128.9
154.5
10.6
3,703.9
5,445.7

702.9
54.5
45.4
6.6
809.4

56.4
875.3
190.8
17.5
1,140.0
1,949.4
3,496.3

3,235.4
0.4
256.2
3,492.0
4.3
3,496.3

240.8
606.5
947.9
36.0
4.0
1,835.2

763.9
1,328.5
37.7
1,095.8
208.0
10.2
3,444.1
5,279.3

662.5
51.1
61.3
4.4
779.3

57.4
596.4
233.9
3.8
891.5
1,670.8
3,608.5

3,528.6
(23.9)
99.6
3,604.3
4.2
3,608.5

The consolidated statement of ﬁ nancial position should be read in conjunction with the accompanying notes.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  65  

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018

CONTRIBUTED
EQUITY
$M

RETAINED
EARNINGS
$M

FOREIGN
CURRENCY
TRANSLATION
RESERVE
$M

OTHER
RESERVES
$M

TOTAL
$M

NON-
CONTROLLING
INTERESTS
$M

TOTAL
EQUITY
$M

Balance at 30 June 2016

3,533.6

15.1

(1.0)

18.1

3,565.8

3.4

3,569.2

Proﬁ t for the year
Total other comprehensive income
Total comprehensive income 
for the year

–
–

–

269.1
–

269.1

–
(50.8)

–
4.5

269.1
(46.3)

0.8
–

269.9
(46.3)

(50.8)

4.5

222.8

0.8

223.6

Transactions with owners 
in their capacity as owners 
directly in equity
Share based payment expense
Purchase of own shares
Vested deferred shares 
and share rights
Dividends to owners 
of the Company
Balance at 30 June 2017

Proﬁ t for the year
Total other comprehensive income
Total comprehensive income 
for the year

Transactions with owners 
in their capacity as owners 
directly in equity
Share based payment expense
Shares bought back and cancelled
Vested deferred shares 
and share rights
Dividends to owners 
of the Company
Balance at 30 June 2018

–
(18.3)

13.3

–
3,528.6

–
–

–

–
(300.0)

6.8

–
–

–

(184.6)
99.6

360.3
–

360.3

–
–

–

–
3,235.4

(203.7)
256.2

–
–

–

–
(51.8)

–
59.4

59.4

–
–

–

–
7.6

18.6
–

18.6
(18.3)

(13.3)

–

–
27.9

(184.6)
3,604.3

–
–

–

360.3
59.4

419.7

18.0
–

18.0
(300.0)

(53.1)

(46.3)

–

(203.7)
(7.2) 3,492.0

–
–

–

–
4.2

0.1
–

18.6
(18.3)

–

(184.6)
3,608.5

360.4
59.4

0.1

419.8

–
–

–

18.0
(300.0)

(46.3)

–
4.3

(203.7)
3,496.3

The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

66  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018

Cash ﬂ ows from operating activities
Receipts from customers
Payments to suppliers, governments and employees
Borrowing costs paid
Income taxes paid
Interest paid
Net cash ﬂ ows from operating activities

Cash ﬂ ows from investing activities
Payments for property, plant, and equipment
Payments for intangible assets
Payments for subsidiaries, investments and other assets
Proceeds from sale of property, plant and equipment
Net cash ﬂ ows used in investing activities

Cash ﬂ ows from ﬁ nancing activities
Shares bought back and cancelled
Dividend payments
Proceeds from borrowings
Repayment of borrowings
Net proceeds from settlement of derivatives
Purchase of shares – employee equity plans
Net cash ﬂ ows used in ﬁ nancing activities
Total cash ﬂ ows from activities

Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on foreign currency cash ﬂ ows and cash balances
Cash and cash equivalents at end of the year

2018
$M
INFLOWS/
(OUTFLOWS)

2017
$M
INFLOWS/
(OUTFLOWS)

NOTE

3,263.3 
(2,845.3)
(2.6)
(93.7)
(26.7)
295.0

3,237.3
(2,798.3)
(2.8)
(32.0)
(21.7)
382.5

(193.6)
(21.8)
–
50.6
(164.8)

(300.0)
(203.7)
482.0
(215.3)
–
(42.9)
(279.9)
(149.7)

240.8
(1.7)
89.4

(187.8)
(22.6)
(26.4)
106.9
(129.9)

–
(184.6)
384.5
(387.3)
0.6
(65.9)
(252.7)
(0.1)

252.1
(11.2)
240.8

8

9

The consolidated statement of cash ﬂ ows should be read in conjunction with the accompanying notes.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  67  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
ABOUT THIS REPORT
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 1 – ABOUT THIS REPORT

The notes are organised into the following sections:

Treasury Wine Estates Limited (‘the Company’) is a for 
proﬁ t company incorporated in Australia and limited 
by shares which are publicly traded on the Australian 
Securities Exchange (ASX). The consolidated ﬁ nancial 
statements comprise the Company and its controlled 
entities (collectively, ‘the Group’). The ﬁ nancial report 
was authorised for issue by the Board of Directors 
on 29 August 2018.

The accounting policies that are critical to understanding 
the ﬁ nancial statements as a whole are set out in this 
section. Where an accounting policy is speciﬁ c to one note, 
the policy is described in the note to which it relates. 
Further policies, including the impact of upcoming 
changes to accounting standards, are set out in note 32.

Basis of preparation
The ﬁ nancial report is a general purpose ﬁ nancial 
report which:

• Has been prepared in accordance with the 

requirements of the Corporations Act 2001 (Cth), 
Australian Accounting Standards and other 
authoritative pronouncements of the Australian 
Accounting Standards Board (AASB);

• Has been prepared on a historical cost basis, except 
for derivative ﬁ nancial instruments, agricultural 
produce and assets and liabilities acquired in a 
business combination which have been measured 
at fair value; and

• Is presented in Australian dollars with all values 
rounded to the nearest tenth of one million dollars 
unless otherwise stated, in accordance with ASIC 
Corporations (Rounding in Financial/Directors’ 
Reports) Instrument 2016/191.

Statement of compliance
This ﬁ nancial report complies with Australian 
Accounting Standards and International Financial 
Reporting Standards (IFRS) as issued by the 
International Accounting Standards Board.

Notes to the ﬁ nancial statements
The notes include additional information required to 
understand the ﬁ nancial statements that is material 
and relevant to the operations, ﬁ nancial position and 
performance of the Group.

Information is considered material and relevant if the 
amount in question is signiﬁ cant because of its size, 
nature or incidence or it helps to explain the impact 
of signiﬁ cant changes in the business, for example, 
acquisitions and asset write-downs.

Earnings: focuses on the ﬁ nancial results and performance 
of the Group. It provides disclosures relating to income, 
expenses, segment information, material items and 
earnings per share.

Working capital: shows the assets and liabilities 
generated through trading activity. It provides information 
regarding working capital management and analysis 
of the elements of working capital.

Operating assets and liabilities: provides information 
regarding the physical assets and non-physical assets used 
by the Group to generate revenues and proﬁ ts (including 
associated liabilities). This section also explains the 
accounting policies applied and speciﬁ c judgements and 
estimates made by management in arriving at the value 
of these assets and operating liabilities.

Capital structure: provides information about the capital 
management practices adopted by the Group – particularly 
how much capital is raised from shareholders (equity) 
and how much is borrowed from ﬁ nancial institutions 
(debt) in order to ﬁ nance the activities of the Group both 
now and in the future.

Taxation: sets out the Group’s tax accounting policies, 
the current and deferred tax charges, a reconciliation 
of proﬁ t or loss before tax to the tax charge or credit 
and the movements in deferred tax assets and liabilities.

Risk: discusses the Group’s exposure to various ﬁ nancial 
risks, explains how these affect the ﬁ nancial position 
of the Group and what is done to manage these risks.

Group composition: explains aspects of the Group’s 
structure and business acquisitions.

Other: other required disclosures under Australian 
Accounting Standards and IFRS.

Key estimates and judgements

In preparing this ﬁ nancial report, the Group is required 
to make estimates, judgements and assumptions that 
affect the reported amounts in the ﬁ nancial statements. 

These estimates, judgements and assumptions are 
continually evaluated, and are often based on historical 
experience and assessed to be reasonable under the 
circumstances at the relevant time. Actual results may 
differ from these estimates under different assumptions 
and conditions. The areas involving a higher degree of 
judgement or complexity, or areas where assumptions 
and estimates are signiﬁ cant to the ﬁ nancial statements:

Line items labelled ‘other’ on the face of the consolidated 
statements comprise miscellaneous income, expenses, 
assets, liabilities or cash ﬂ ows which individually or 
in aggregate are not considered material to warrant 
additional disclosures.

Note 3:  Revenue
Note 9:  Working capital
Note 11:  Agricultural assets
Note 12:  Intangible assets
Note 14:  Impairment of non-ﬁ nancial assets
Note 22:  Income tax

68  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 1 – ABOUT THIS REPORT (CONTINUED)

Principles of consolidation
The consolidated ﬁ nancial statements include the assets 
and liabilities of Treasury Wine Estates Limited and 
its controlled entities as a whole at year-end and the 
consolidated results and cash ﬂ ows for the year. A list 
of controlled entities (subsidiaries) is provided in note 27.

An entity is regarded as a controlled entity when the 
Company is exposed to, or has rights to, variable returns 
from its involvement with the entity and has the ability 
to affect those returns through power over the entity.

The rights of other investors to the results and equity 
of the subsidiaries (called non-controlling interests) 
are shown separately in the consolidated statement 
of proﬁ t or loss and other comprehensive income, 
consolidated statement of changes in equity and 
consolidated statement of ﬁ nancial position respectively.

The ﬁ nancial information of the subsidiaries is prepared 
for the same reporting period as the parent, using 
consistent accounting policies. Intra-group balances 
and transactions arising from intra-group transactions 
are eliminated.

A change in the ownership interest of a subsidiary, without 
a loss of control, is accounted for as an equity transaction.

Functional and presentation currency
The consolidated ﬁ nancial statements are presented in 
Australian dollars. Each entity in the Group determines its 
own functional currency and items included in the ﬁ nancial 
statements of each entity are measured using that 
functional currency. The major functional currencies used 
throughout the Group include Australian Dollar (AUD), 
United States Dollar (USD) and Great British Pound 
(GBP). Other currencies used include the Canadian Dollar, 
Euro, New Zealand Dollar, Singapore Dollar, Swedish 
Krona, Norwegian Krone and South African Rand.

Foreign group companies
As at the reporting date, the assets and liabilities 
of overseas subsidiaries are translated into Australian 
dollars at the rate of exchange ruling at the balance 
sheet date and the income statement are translated at 
the average exchange rates for the period. The exchange 
differences arising on the translation are recognised in 
the foreign currency translation reserve within equity.

When a foreign operation is sold, the cumulative exchange 
difference in equity for this operation is recognised in 
the consolidated statement of proﬁ t or loss and other 
comprehensive income as part of the gain and loss on sale.

Transactions and balances
Transactions in foreign currencies are initially recorded 
in the functional currency of the relevant entity at the 
exchange rates ruling at the date of the transaction. 
Monetary assets and liabilities denominated in foreign 
currencies are subsequently translated at the rate 
of exchange ruling at the balance sheet date.

Exchange differences arising are recognised in the 
consolidated statement of proﬁ t and loss and other 
comprehensive income, except for gains or losses arising 
on assets or liabilities that qualify for hedge accounting, 
discussed further in note 23. Tax charges and credits 

attributable to these exchange differences are also 
recognised in equity.

Average exchange rates used in translating proﬁ t and 
loss items in F18 are:

A$1 = US$ 0.775 (F17: US$ 0.754)
A$1 = GB£ 0.576 (F17: GB£ 0.595)

Year-end exchange rates used in translating ﬁ nancial 
position items in F18 are:

A$1 = US$ 0.735 (F17: US$ 0.768)
A$1 = GB£ 0.562 (F17: GB£ 0.590)

Fair value measurement
The Group measures certain ﬁ nancial instruments, 
including derivatives, and certain non-ﬁ nancial assets 
such as agricultural assets, at fair value at each balance 
sheet date.

Fair value is the price that would be received to sell 
an asset or paid to transfer a liability in an orderly 
transaction between market participants in its principal 
or most advantageous market at the measurement date. 
It is measured using the assumptions that market 
participants would use when pricing the asset or liability, 
assuming that market participants act in their economic 
best interest. A fair value measurement of a non-ﬁ nancial 
item assumes it is put to its highest and best use.

The Group uses valuation techniques that are appropriate 
in the circumstances and for which sufﬁ cient data 
is available to measure fair value, maximising the 
use of relevant observable inputs and minimising 
the use of unobservable inputs.

Accounting standards prescribe a fair value hierarchy, 
described as follows, based on the lowest level input that 
is signiﬁ cant to the fair value measurement as a whole:

Level 1 – Quoted (unadjusted) market prices in active 
markets for identical assets or liabilities.

Level 2 – Valuation techniques for which the lowest level 
input that is signiﬁ cant to the fair value measurement 
is directly (i.e. as prices) or indirectly (i.e. derived 
by prices) observable.

Level 3 – Valuation techniques for which the lowest level 
input that is signiﬁ cant to the fair value measurement 
is unobservable.

Subsequent events
Since the end of the ﬁ nancial year, the Directors declared 
a ﬁ nal 100% franked dividend of 17.0 cents per share. 
This dividend has not been recognised as a liability in 
the consolidated ﬁ nancial statements at 30 June 2018.

On 29 August 2018, the Company announced that 
non-executive director, Michael Cheek, will retire from 
the Board with effect from the end of the 2018 Annual 
General Meeting on 18 October 2018.

The Directors are not aware of any other matters or 
circumstances that have arisen since the end of the 
ﬁ nancial year which have signiﬁ cantly affected or 
may signiﬁ cantly affect the operations of the Group, 
the results of those operations or the state of affairs 
of the Group in subsequent ﬁ nancial years.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  69  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  69  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 2 – SEGMENT INFORMATION

Segment accounting policies

Segment assets and liabilities
Segment assets and liabilities represent those working 
capital and non-current assets and liabilities which are 
located in the respective segments. Cash is not considered 
to be a segment asset as it is managed by the Group’s 
centralised treasury function. Consistent with the use 
of EBITS for measuring proﬁ t, tax assets and liabilities, 
which do not contribute towards EBITS, are not allocated 
to operating segments.

Intersegment transactions
The price of an intersegment transaction is set at 
an arm’s length basis. Whilst these transactions are 
eliminated on consolidation, they are shown within 
the segment revenue and EBITS to properly reﬂ ect the 
segment of origin performance, including production.

Corporate charges
Unallocated corporate charges are reported in the 
Corporate/unallocated segment. Net ﬁ nance costs are 
not allocated to segments as the Group’s ﬁ nancing 
function is centralised through its treasury function.

Segment loans payable and loans receivable
Segment loans are initially recognised at the amount 
transferred. Intersegment loans receivable and payable 
that earn or incur non-market interest are adjusted 
to fair value based on market interest rates.

Other
If items of revenue and expense are not allocated to 
operating segments, then any associated assets and 
liabilities are not allocated to segments either.

The Group’s segments
The Group reports segment information on the same 
basis as its internal management reporting structure and 
consistent with the information used to organise and 
manage the Group.

The reportable segments are based on the aggregation 
of operating segments determined by the similarity 
of the nature of products, the production process, the 
types of customers and the methods used to distribute 
the products.

During F18 the business structure was re-organised 
to better reﬂ ect the way the Group was being managed. 
Effective from 1 July 2017, the results of Latin America 
are reported with Americas (previously combined with 
Europe). To facilitate comparability over reporting 
periods, comparatives have been re-stated to incorporate 
these changes.

The identiﬁ ed reportable segments in the Group 
are below:

(i)  Australia and New Zealand (ANZ)

This segment is responsible for the manufacture, 
sale and marketing of wine within Australia and 
New Zealand. The segment also distributed beer 
and cider under licence in New Zealand until 
August 2017.

(ii)  Americas

This segment is responsible for the manufacture, 
sale and marketing of wine within North America 
and Latin America.

(iii) Asia

This segment is responsible for the sale and 
marketing of wine within Asia (including the 
Middle East and Africa).

(iv)  Europe

This segment is responsible for the manufacture, 
sale and marketing of wine within Europe.

Presentation of segment results

Management EBITS
The principal proﬁ t metric for internal management 
reporting is Management earnings before interest, 
tax, SGARA and material items (EBITS). Corporate 
charges are allocated to each segment on a proportionate 
basis linked to segment revenue, head count or other 
appropriate driver depending on the nature of the charge.

70  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 2 – SEGMENT INFORMATION (CONTINUED)

ANZ
$M

AMERICAS
$M

ASIA
$M

EUROPE
$M

INTERSEGMENT
ELIMINATION
$M

TOTAL
SEGMENT
$M

UNALLOCATED/
CORPORATE
$M

CONSOLIDATED
$M

2018

Total revenue 
comprises:

Net sales revenue
Other revenue
Intersegment 
revenue

Total segment 
revenue (excl other 
income/interest)

598.7
57.0

961.8 547.6
–

7.2

320.9
0.9

–
–

2,429.0
65.1

299.3 

50.2

0.3

51.2

(401.0)

–

955.0 

1,019.2 547.9

373.0

(401.0)

2,494.1

Management EBITS 136.1
7.5
SGARA gain/(loss)
–
Material items

193.0 205.2
–
(21.6)
–
(3.1)

49.5
(1.0)
(3.1)

Management EBIT 143.6
Net ﬁ nance costs
Consolidated proﬁ t 
before tax

168.3 205.2

45.4

38.6

Depreciation of 
property, plant 
and equipment
Amortisation of 
1.0
intangible assets
Assets held for sale
29.1
Capital expenditure 107.6
Segment assets 
(excl intersegment 
assets)
Segment liabilities 
(excl intersegment 
liabilities)

269.3

2,212.6 

41.1

0.5

0.8
16.1
97.2

–
–
1.7

2.0

0.1
–
1.9

2,362.9 192.6

329.6

401.1

57.9

87.5

–
–
–

–

–

–
–
–

–

–

583.8
(15.1)
(6.2)

562.5

82.2

1.9
45.2
208.4

–
2.3

–

2.3

(53.6)
–
–

(53.6)

3.5

9.9
–
12.4

2,429.0
67.4

–

2,496.4

530.2
(15.1)
(6.2)

508.9
(33.4)

475.5

85.7

11.8
45.2
220.8

5,097.7 

348.0 

5,445.7

815.8

1,133.6

1,949.4

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  71  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  71  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 2 – SEGMENT INFORMATION (CONTINUED)

ANZ
$M

AMERICAS
$M

ASIA
$M

EUROPE
$M

INTERSEGMENT
ELIMINATION
$M

TOTAL
SEGMENT
$M

UNALLOCATED/
CORPORATE
$M

CONSOLIDATED
$M

2017

Total revenue 
comprises:

Net sales revenue
Other revenue
Intersegment 
revenue

591.3
87.9

271.3

1,083.8 394.3
–

38.4

332.3
1.4

–
–

2,401.7
127.7

51.6

0.1

37.4

(360.4)

–

Total segment 
revenue (excl other 
income/interest)

950.5

1,173.8 394.4

371.1

(360.4)

2,529.4

–
4.8

–

4.8

(43.1)
–
–

(43.1)

2.4

7.0
–
19.4

2,401.7
132.5

–

2,534.2

455.1
(5.7)
(35.1)

414.3
(27.1)

387.2

99.4

8.9
36.0
210.4

498.2
(5.7)
(35.1)

457.4

97.0

1.9
36.0
191.0

4,729.5

549.8

5,279.3

798.5

872.3

1,670.8

Management EBITS 111.1
16.8
SGARA gain/(loss)
4.3
Material items

196.0 150.1
–
(22.5)
–
(36.6)

41.0
–
(2.8)

Management EBIT
Net ﬁ nance costs
Consolidated proﬁ t 
before tax

Depreciation of 
property, plant 
and equipment
Amortisation of 
intangible assets
Assets held for sale
Capital expenditure
Segment assets 
(excl intersegment 
assets)
Segment liabilities 
(excl intersegment 
liabilities)

132.2

136.9 150.1

38.2

43.6

1.4
23.0
85.1

51.4

0.4

0.4
13.0
104.2

–
–
0.3

1.6

0.1
–
1.4

2,173.1

2,133.0

77.9

345.5

271.1

418.0

28.4

81.0

–
–
–

–

–

–
–
–

–

–

72  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
72  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 2 – SEGMENT INFORMATION (CONTINUED)

Geographical segments
The presentation of geographical revenue is based on the location of the selling entity. 

Australia
United States of America
United Kingdom
Other geographical locations1
Total

NET SALES REVENUE

2018
$M

1,053.4
990.1
279.5
106.0
2,429.0

2017
$M

 887.7
1,104.0
293.5
116.5
2,401.7

1. Other than Australia, United States of America and the United Kingdom, sales in other countries are individually less than 10% of the 

Group’s net sales revenue.

The presentation of non-current assets is based on the geographical location of the assets.

Australia
United States of America
United Kingdom
Other geographical locations
Total geographical non-current assets
Other non-current assets2
Consolidated non-current assets

2. Other non-current assets include ﬁ nancial derivative assets and deferred tax assets.

NOTE 3 – REVENUE

Revenue
Net sales revenue1
Other revenue
Total revenue

NON-CURRENT ASSETS

2018
$M

1,567.0
1,716.6
137.9
121.7
3,543.2
160.7
3,703.9

2017
$M

1,428.5
1,506.4
144.0
152.5
3,231.4
212.7
3,444.1

2018
$M

2017
$M

2,429.0
67.4
2,496.4

2,401.7
132.5
2,534.2

1. Net sales revenue is net of trade discounts and volume rebates.

Types of products and services
The Group generates revenue through the sale of branded wines, principally as a ﬁ nished, bottled product. The Group’s 
wine portfolio includes some of the world’s leading Luxury, Masstige and Commercial wine brands such as Penfolds, 
Beringer, Lindeman’s, Wolf Blass, 19 Crimes, Chateau St Jean, Beaulieu Vineyard and Sterling Vineyards.

The Group also provides contract bottling services to third parties. Until August 2017, the Group also distributed beer 
and cider under licence in New Zealand.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  73  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  73  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 3 – REVENUE (CONTINUED)

Sales approach
The Group distributes wine to a range of customers across the world, with routes to market tailored by country. 
Depending on the geography, wine is sold to distributors (who tend to be exclusive and stock a whole portfolio), 
wholesalers (who choose which brands they would like to order from the portfolio), direct to national retails chains, 
independent retailers and on premise outlets. The Group also has some sales direct to the consumer.

For F18, the Group has two major customers in the Americas whose revenues represent 10.4% (F17: 22.8%) and 
8.4% (F17: 3.1%) of reported net sales revenue, and one major customer in Australia whose revenue represents 8.7% 
(F17: 9.0%) of reported net sales revenue. 

Accounting policies
Revenue is measured at the fair value of the consideration received or receivable. Revenue is recorded net of sales 
discounts and rebates, duties and taxes. Revenue is recorded only if it is probable that the economic beneﬁ ts will ﬂ ow to 
the Group, such as when product is sold to a credit approved purchaser. The following speciﬁ c criteria are also applied:

Wine
Revenue is recognised when the risk and rewards of ownership have passed to the buyer. Sales to national retail 
chains, domestic distributors, independent retailers and on premise outlets are usually recognised when goods are 
delivered. Sales to international customers are recognised based on the international commercial terms the goods 
are shipped under, but typically when goods are despatched. This is also the case for some national retail chains 
that manage their own distribution networks.

Bottling services
Revenue is recognised when the relevant service has been completed.

Key estimate and judgement:

Trade discounts and volume rebates
Products are often sold with volume discounts and other rebates. Sales are recorded based on the price speciﬁ ed in the 
sales contracts, net of the estimated discount or rebate at the time of sale. Accumulated experience is used to estimate 
and provide for the discounts based on anticipated annual purchases.

NOTE 4 – OTHER EARNINGS DISCLOSURES

Rental expense relating to operating leases
Net foreign exchange gains/(losses)
Salaries and wages expense
Share based payments expense

Restructuring and redundancy expense1

Net gain relating to property, plant and equipment and intangible assets

Reversal of write-down/(write-down) of assets1
Insurance and other income
Net proﬁ t on disposal of assets

1. Includes items classiﬁ ed as material items (refer note 5).

2018
$M

(87.0)
2.6
(385.1)
(18.0)

2017
$M

(84.7)
5.6
(372.4)
(18.6)

(6.4)

(25.6)

1.8
5.3
1.8
8.9

(30.1)
12.5
19.0
1.4

During the year, the Group implemented a series of improvements to its route-to-market in the US to enhance its 
competitive positioning and drive portfolio growth. Changes included implementing direct and hybrid sales and 
distribution models. The impact to the Group’s Management EBITS and proﬁ t before tax and ﬁ nance costs during 
the year was $25.0 million.

74  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
74  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 4 – OTHER EARNINGS DISCLOSURES (CONTINUED)

Accounting policies

Agricultural valuation movement
The change in fair value of picked grapes and olives is recognised in the statement of proﬁ t or loss and other 
comprehensive income in the year of harvest.

Finance income
Finance income is recognised as the interest accrues (using the effective interest method, which applies a rate that 
discounts estimated future cash receipts through the expected life of the ﬁ nancial instrument) to the net carrying 
amount of the ﬁ nancial asset.

Finance costs
Finance costs are recognised as an expense when they are incurred, except for interest charges attributable to major 
projects with substantial development and construction phases, which are capitalised as part of the cost of the asset.

Operating leases
Operating lease payments are recognised as an expense in the statement of proﬁ t or loss and other comprehensive 
income on a straight-line basis over the lease term. The Group’s policy on how to determine the nature of a lease 
is set out in note 19.

Employee beneﬁ ts
Employee beneﬁ ts include wages, salaries, annual leave, bonuses, non-monetary beneﬁ ts and share based payment 
expenses. Further details of Group policy on measuring employee beneﬁ ts are set out in note 15.

Superannuation
Employees are members of deﬁ ned contribution superannuation schemes. Superannuation contributions are 
recognised as an expense when they are due and payable.

Property, plant and equipment income
Revenue from the sale of property, plant and equipment is recognised when an executed contract becomes unconditional.

Other income
Revenue is recognised on an accruals basis in accordance with the substance of the relevant agreements.

Insurance income
Revenue is recognised when recovery is virtually certain.

NOTE 5 – MATERIAL ITEMS

The following individually material items are included within the consolidated statement of proﬁ t or loss and other 
comprehensive income.

Individually material items included in proﬁ t before income tax:
Restructuring and redundancy costs1
(Write-down)/reversal of write-down of assets2
Total material items (before tax)
Tax effect of material items
Total material items (after tax)

2018
$M

(5.2)
(1.0)
(6.2)
1.6
(4.6)

2017
$M

(16.3)
(18.8)
(35.1)
13.1
(22.0)

1. In the current year, comprises costs associated with integrating businesses acquired. In the prior year, comprises costs in relation to 

executing supply chain optimisation programs, implementing overhead reductions arising from changes to the Group’s supply chain network 
and costs associated with integrating businesses acquired.

2. Includes write-down/disposal of various assets associated with business integration activities.

Material items
Material items are deﬁ ned as those items of income or expense which have been determined as being sufﬁ ciently 
signiﬁ cant by their size, nature or incidence and are disclosed separately to assist in understanding the Group’s 
ﬁ nancial performance.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  75  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  75  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 6 – DIVIDENDS

Dividends declared and paid on ordinary shares
Final dividend for F17 of 13.0 cents per share 50% franked (F16: 12.0 cents per share)
Interim dividend for F18 of 15.0 cents per share 75% franked (F17: 13.0 cents per share)

Dividends declared after balance date
Since the end of the ﬁ nancial year, the Directors declared a ﬁ nal dividend 
of 17.0 cents per share (F17: 13.0 cents) 100% franked (F17: 50% franked). 
This dividend has not been recognised as a liability in the consolidated 
ﬁ nancial statements at year end.

Details in relation to franking credits are included in note 22.

NOTE 7 – EARNINGS PER SHARE

Basic EPS
Basic EPS (cents) based on net proﬁ t attributable to members of Treasury Wine Estates Limited
Diluted EPS
Diluted EPS (cents) based on net proﬁ t attributable to members of Treasury Wine Estates Limited

Weighted average number of shares
Weighted average number of ordinary shares on issue used in the calculation 
of basic EPS (in thousands)
Effect of potentially dilutive securities
Deferred shares (in thousands)
Weighted average number of ordinary shares on issue used in the calculation 
of diluted EPS (in thousands)

Earnings reconciliation
Basic and diluted EPS
Net proﬁ t
Net proﬁ t attributable to non-controlling interests
Net proﬁ t attributable to members of Treasury Wine Estates Limited 
used in calculating basic and diluted EPS

2018
$M

96.0
107.7
203.7

2017
$M

88.6
96.0
184.6

122.2

96.0

2018
CENTS PER
SHARE

2017
CENTS PER
SHARE

49.7

49.3

36.5

36.1

NUMBER

NUMBER

725,652

736,766

4,864

7,732

730,516

744,498

$M

$M

360.4
(0.1)

269.9
(0.8)

360.3

269.1

Impact of US tax reform
On 22 December 2017, the US Government passed the Tax Cuts and Jobs Act (‘the Act’). The Act reduced the 
US Federal corporate tax rate from 35% to 21% effective from 1 January 2018. During the year, the Group recognised 
a one-off beneﬁ t of $20.9 million arising due to the restatement of its net deferred tax liability in respect of its 
US operations. Excluding the one off tax beneﬁ t, basic earnings per share would have been 46.8 cents per share, 
and diluted earnings per share would have been 46.5 cents per share. Basic earnings per share (adjusted to exclude 
SGARA and material items) would have been 48.9 cents per share.

Calculation of earnings per share
Earnings per share (EPS) is the amount of post-tax proﬁ t attributable to each share.

Basic EPS is calculated by dividing the net proﬁ t after income tax attributable to ordinary shareholders by the 
weighted average number of ordinary shares outstanding during the year.

Diluted EPS is determined by dividing the proﬁ t attributable to ordinary shareholders after tax by the weighted 
average number of ordinary shares outstanding during the period (adjusted for the effects of dilutive potential 
ordinary shares in the employee Long-term Incentive Plan and Restricted Equity Plan (see note 21).

76  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
76  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 8 – NET CASH FLOWS FROM OPERATING ACTIVITIES

Reconciliation of net cash ﬂ ows from operating activities to proﬁ t after income tax

Proﬁ t for the year
Depreciation and amortisation
SGARA (gain)/loss
(Reversal of asset write-downs)/asset write-downs 
Net proﬁ t on disposal of non-current assets
Share based payments expense
Other

Net cash provided by operating activities before change in assets and liabilities

Change in working capital and tax balances, net of effects 
from acquisition/disposal of controlled entities

Receivables
Inventories
Derivative ﬁ nancial assets/liabilities
Payables
Net tax balances
Provisions

Net cash ﬂ ows from operating activities

2018
$M

360.4
97.5
15.1
(1.8)
(1.8)
18.0
0.9
488.3

17.0
(221.7)
(2.2)
7.6
21.4
(15.4)
295.0

2017
$M

269.9
108.3
5.7
30.1
(19.0)
18.6
0.7
414.3

42.9
(169.6)
0.5
25.8
85.3
(16.7)
382.5

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  77  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  77  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
WORKING CAPITAL
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 9 – WORKING CAPITAL

Current
Cash and cash equivalents
Receivables (a)
Inventories (b)
Trade and other payables
Total current

Non-current
Inventories (b)
Trade and other payables
Total non-current

(a) Receivables

Current
Trade receivables
Allowance for doubtful debts
Other receivables
Prepayments
Total current receivables

(b) Inventories

Current
Raw materials and stores
Work in progress
Finished goods
Total current inventories

Non-current
Work in progress
Finished goods
Total non-current inventories

Total inventories

2018
$M

2017
$M

89.4
593.0
1,012.3 
(702.9)
991.8 

952.1 
(56.4)
895.7 

240.8
606.5
947.9
(662.5)
1,132.7

763.9
(57.4)
706.5

2018
$M

2017
$M

469.2
(1.7)
94.1 
31.4 
593.0

2018
$M

42.4
402.0 
567.9
1,012.3 

793.6 
158.5
952.1 

476.0
(1.5)
103.8
28.2
606.5

2017
$M

35.3
442.6
470.0
947.9

637.1
126.8
763.9

1,964.4

1,711.8

Inventories of wine stocks are classiﬁ ed between current and non-current based on sales projections for the ensuing 
year. Inventories recognised as an expense during the year and included in cost of sales amounted to $1,392.0 million 
(F17: $1,506.4 million). In F18, the write-down of inventories to net realisable value amounted to $10.7 million 
(F17: $22.4 million). The reversal of write-downs amounted to $11.9 million (F17: $1.5 million). These amounts are 
included in cost of sales.

78  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 9 – WORKING CAPITAL (CONTINUED)

Accounting policies

Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits held at call with banks, cash in transit, short-term 
deposits and investments with maturities of three months or less.

Cash assets and cash liabilities are offset and presented as a net amount in the consolidated statement of ﬁ nancial 
position when the Group has a legally enforceable right to offset or intent to settle on a net basis.

For the purposes of the consolidated statement of cash ﬂ ows, cash and cash equivalents are disclosed net 
of outstanding bank overdrafts.

Receivables
Trade receivables are initially recognised at invoice value (fair value) and subsequently measured at amortised cost, 
less allowance for doubtful debts.

Credit terms are generally between 30–120 days depending on the nature of the transaction. An allowance for 
doubtful debts is raised to reduce the carrying amount of trade receivables based on a review of outstanding amounts 
at reporting date where there is potential credit risk.

Inventories
Inventories are valued at the lower of their cost (using average or FIFO basis) or estimated net realisable value.

The cost of raw materials is their purchase price or, in the case of grapes sourced from Group owned vineyards, 
fair value (see note 11 for further details). The cost of manufactured goods is determined on a consistent basis and is 
made up of the raw materials and direct labour used in manufacture. It also includes other direct costs and related 
production overheads based on normal operating capacity.

Net realisable value represents the estimated selling price in the ordinary course of business less estimated costs 
of completion and estimated costs to be incurred in marketing, selling and distribution.

Trade and other payables
Trade and other payables including accruals are recorded when the Group is required to make future payments 
as a result of purchases of goods or services. Trade and other payables are carried at amortised cost.

Key estimates and judgements:

Trade discounts and volume rebates
Key estimates relate to the amount accrued for discounts and rebates. Products are often sold with trade discounts 
and volume rebates. Sales are recorded based on the price speciﬁ ed in the sales contracts, net of the estimated 
discount or rebate at the time of sale. Accumulated experience is used to estimate and provide for the discounts 
and rebates based on anticipated annual purchases and depletions.

Net realisable value of inventory
The period over which some wine inventories are converted from raw materials to ﬁ nished goods can be a signiﬁ cant 
length of time. Failure to forecast demand effectively may result in excess inventories or missed revenue opportunities.

Forecast demand and market prices can vary signiﬁ cantly over the holding period up to the likely date of sale. 
Estimating the most likely conditions at the expected point of sale is therefore more challenging over the longer term. 
Non-current inventory is $952.1 million (F17: $763.9 million) and its estimated selling price is therefore a key estimate.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  79  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  79  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT

LAND

2017
$M

372.2
–

2018
$M

392.8
–

FREEHOLD 
BUILDINGS

LEASEHOLD 
BUILDINGS

PLANT AND 
EQUIPMENT

TOTAL

2018
$M

470.7
–

2017
$M

432.3
–

2018
$M

72.0
–

2017
$M

81.1
–

2018
$M

2017
$M

2018
$M

2017
$M

1,712.0 1,710.5
137.7

141.2

2,647.5 2,596.1
137.7

141.2

(37.5)

(42.4)

(228.3)

(218.0)

(24.6)

(35.7)

(1,081.8) (1,109.2)

(1,372.2) (1,405.3)

355.3

329.8

242.4

214.3

47.4

45.4

771.4

739.0

1,416.5 1,328.5

329.8
21.2

336.7
16.2

214.3
28.1

213.8
22.9

45.4
5.0

48.4
2.8

739.0
144.7

748.9
145.9

1,328.5 1,347.8
187.8

199.0

(3.2)
–

(5.5)
(10.0)

–
–
–

(0.3)
–
(1.1)

2.6
–

–
(8.0)
–

(3.3)
(1.7)

(4.1)
(7.9)
–

0.5
(0.2)

(0.1)
(5.0)
–

–
–

(0.2)
(4.4)
–

(40.2)
(17.9)

1.9
(72.7)
–

(25.4)
(9.1)

(23.3)
(87.1)
–

(40.3)
(18.1)

(34.2)
(20.8)

1.8
(85.7)
–

(27.9)
(99.4)
(1.1)

7.5

(6.2)

5.4

(5.4)

1.8

(1.2)

16.6

(10.9)

31.3

(23.7)

355.3

329.8

242.4

214.3

47.4

45.4

771.4

739.0

1,416.5 1,328.5

Cost
Projects in Progress
Accumulated 
depreciation 
and impairment
Carrying amount 
at end of year

Reconciliations
Carrying amount 
at start of year
Additions
(Transfer to)/from 
Assets held for sale
Disposals
(Write-downs)/
write-downs reversal
Depreciation expense
Transfer
Foreign currency 
translation
Carrying amount 
at end of year

Included within plant and equipment are ‘Projects in progress’ of $141.2 million (F17: $137.7 million), which are 
assets under construction and therefore not yet depreciated. The cost of construction includes the cost of materials 
used in construction, direct labour on the project, and an allocation of overheads.

The Group recognised $0.7 million (F17: $27.9 million) of write-downs for property, plant and equipment primarily 
in relation to non-core assets that were disposed of during the year.

80  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Accounting policies
Property, plant and equipment is initially recorded at cost and then reduced by accumulated depreciation and any 
impairment losses.

Plant and equipment is depreciated so that the assets are written down to their residual value over their useful lives, 
using a reducing balance or straight-line method depending on the nature of the asset. Assets that relate to leases 
are written-off over the period of the lease or useful life, whichever is the shorter. Residual values, useful lives and 
amortisation methods are reviewed annually and adjusted when required.

Depreciation expense is included in ‘costs of sales’, ‘selling expenses’ and ‘administration expenses’ in the consolidated 
statement of proﬁ t or loss and other comprehensive income.

The depreciation rates used for each class of asset are as follows:

Freehold buildings 
Leasehold buildings 
Plant and equipment 

1.5% – 10.0%
10.0% – 20.0%
3.3% – 40.0%

Costs incurred in maintaining agricultural assets are recognised as an expense as incurred.

Derecognition and disposal
When an asset is sold, scrapped or is no longer of use to the business it is derecognised. Any gain or loss arising on 
derecognition of the asset (calculated as the difference between the net proceeds and the carrying amount of the asset) 
is recorded in the period the asset is derecognised in the statement of proﬁ t or loss and other comprehensive income.

Vineyard resources

Australia
New Zealand
United States
Italy

2018
HECTARES

2017
HECTARES

8,607
492
3,894
148
13,141

8,828
528
3,758
152
13,266

The area under vine shown above:

• Includes 3,146 hectares (F17: 3,630 hectares) under lease arrangements and seven hectares (F17: seven hectares) 

of olive groves in Tuscany, a region of Italy.

• Yielded 91,128 tonnes of grapes (F17: 112,982 tonnes).

Harvests generally occur in September–October in the Northern Hemisphere and February–May in the 
Southern Hemisphere.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  81  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  81  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 11 – AGRICULTURAL ASSETS

Agricultural assets
Total agricultural assets

Reconciliations
Carrying amount at start of year
Fair value increase
Transfers to inventory
Foreign currency translation
Carrying amount at end of year

2018
$M

41.3
41.3

37.7
41.3
(38.9)
1.2
41.3

2017
$M

37.7
37.7

35.8
37.7
(35.7)
(0.1)
37.7

Grape growing and sourcing
The Group has a variety of sources of fruit including owned and leased vineyards, contracted growers and the bulk 
wine market.

This approach provides ﬂ exibility through the economic cycle and assists with managing the risks arising from 
agricultural factors beyond the Group’s control such as pests, disease and extreme weather conditions.

The Group’s owned vineyards ensure access to super premium fruit from key viticultural regions including the Barossa 
Valley and Coonawarra in Australia, Marlborough in New Zealand and the Napa and Sonoma Valleys in California. 
These vineyards contribute to some of the Group’s most prestigious wines.

Accounting policies
The agricultural assets of the Group (i.e. grapes) are measured at their fair value, less estimated point of sale costs.

The fair value adjustment during the year is recognised within ‘Other expenses’ in the consolidated statement 
of proﬁ t or loss and other comprehensive income.

Harvested grapes are transferred to inventory initially at fair value and are then subsequently accounted for in the 
cost of inventory (see note 9).

Fair value determination
The valuations of agricultural assets are Level 2 fair value measurements under the Group’s accounting policy 
(see note 1), with the principal inputs being:

Grapes prior to harvest
Estimated based on the expected yields per hectare, estimated harvest costs and the anticipated market price of grapes.

Harvested grapes
Determined by reference to the weighted district average of grape prices for each region for the current vintage. 
Prices vary with the grade quality of grapes produced in each particular region.

Key estimate and judgement:

Fair value of grapes
Key to estimating the value of grapes is the following:

• Yield estimates were higher/(lower);

• The estimated harvest costs were lower/(higher);

• Market prices for grapes were higher/(lower); or

• The quality of grapes was higher/(lower).

82  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
82  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 12 – INTANGIBLE ASSETS

Cost
Projects in progress at cost
Accumulated amortisation 
and impairment
Carrying amount at end of year

Reconciliations
Carrying amount at start of year
Additions
Impairment
Amortisation expense
Foreign currency translation
Carrying amount at end of year

BRAND NAMES
AND LICENCES

2018
$M

2017
$M

1,418.0 1,383.2
–

–

IT 
DEVELOPMENT
COSTS

GOODWILL

TOTAL

2018
$M

85.1
20.6

2017
$M

70.3
13.0

2018
$M

749.7
–

2017
$M

747.0
–

2018
$M

2017
$M

2,252.8 2,200.5
13.0

20.6

(480.2)
937.8

(465.0)
918.2

(43.7)
62.0

(32.1)
51.2

(620.6)
129.1

(620.6)
126.4

(1,144.5) (1,117.7)
1,128.9 1,095.8

918.2
0.4
–
–
19.2
937.8

934.0
–
(2.2)
–
(13.6)
918.2

51.2
21.4
–
(11.8)
1.2
62.0

37.6
22.6
–
(8.9)
(0.1)
51.2

126.4
–
–
–
2.7
129.1

129.9
–
–
–
(3.5)
126.4

1,095.8 1,101.5
22.6
(2.2)
(8.9)
(17.2)
1,128.9 1,095.8

21.8
–
(11.8)
23.1

Goodwill is allocated to the Cash Generating Units (CGUs) or group of CGUs (see note 14 for further details) 
that are expected to beneﬁ t from the synergies of the combination. The allocation of intangible assets (other than 
IT development costs) is as follows:

Goodwill
Carrying amount at start of year
Foreign currency translation
Carrying amount at end of year

Brand names and licences
Carrying amount at start of year
Additions
Impairment
Foreign currency translation
Carrying amount at end of year

ANZ

2017
$M

37.2
(0.2)
37.0

2018
$M

37.0
(1.2)
35.8

481.2
0.4
–
(0.2)
481.4

481.2
–
–
–
481.2

AMERICAS

EUROPE

TOTAL

2018
$M

2017
$M

2018
$M

2017
$M

2018
$M

2017
$M

70.7
3.0
73.7

434.0
–
–
19.2
453.2

72.7
(2.0)
70.7

449.8
–
(2.2)
(13.6)
434.0

18.7
0.9
19.6

3.0
–
–
0.2
3.2

20.0
(1.3)
18.7

126.4
2.7
129.1

129.9
(3.5)
126.4

3.0
–
–
–
3.0

918.2
0.4
–
19.2
937.8

934.0
–
(2.2)
(13.6)
918.2

Indeﬁ nite life brands
Brand names with a carrying value of $937.8 million (F17: $918.2 million) are assessed as having an indeﬁ nite useful life. 
The indeﬁ nite useful life reﬂ ects the Group’s intention to continue to manufacture or distribute these brands to generate 
net cash inﬂ ows into the foreseeable future.

Key estimate and judgement:

Useful life of brand names
In assessing whether a brand has a ﬁ nite or indeﬁ nite useful life, the Group makes use of information on the long-term 
strategy for the brand, the level of growth or decline of the markets that the brand operates in, the history of the market 
and the brand’s position within that market. 

If a brand is assessed to have a ﬁ nite life, the Group will use judgement in determining the useful life of the brand 
and will consider the period over which expected cash ﬂ ows will continue to be derived in making that decision.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  83  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  83  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 12 – INTANGIBLE ASSETS (CONTINUED)

Accounting policies

Brand names and licences
Brand names are recognised as assets when purchased individually and (primarily) as part of the allocation of the 
purchase price when the Group acquires other businesses. Internally generated brand names are not capitalised 
and expenditure incurred in developing, maintaining or enhancing brand names is charged to proﬁ t or loss in the 
year incurred.

Brand names are initially recognised at cost when purchased individually and at fair value when acquired with 
a business. This fair value is determined by reference to independent valuations.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any 
accumulated impairment losses.

The useful lives of brand names have been assessed to be indeﬁ nite and therefore are not amortised.

Goodwill
Goodwill arises on the acquisition of businesses and represents the difference between the purchase price and share 
of the net assets of the acquired business, recorded at fair value.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not 
amortised but is tested for impairment at least annually (see note 14).

IT development and software
Costs incurred in developing information technology (IT) products or systems and costs incurred in acquiring software 
and multi-year licenses are capitalised as intangible IT assets. They include the cost of purchased software and internal 
labour and contractors used in the development of software.

IT assets are carried at cost less any accumulated amortisation and are amortised over their expected useful life 
(2–10 years) on a straight line basis. Amortisation is included in ‘Other expenses’ in the consolidated statement 
of proﬁ t or loss and other comprehensive income.

NOTE 13 – ASSETS HELD FOR SALE

Assets held for sale
Total assets classiﬁ ed as held for sale

2018
$M

45.2
45.2

2017
$M

36.0
36.0

Assets held for sale comprise property, plant and equipment identiﬁ ed by the Group to be recovered through sale within 
Australia and America that are surplus to requirements and Australian Oak Barrels (2018 Vintage) and other assets.

Accounting policies
Non-current assets are classiﬁ ed as held for sale if their value will be recovered principally through their sale, rather 
than through ongoing use within the business.

Assets are not depreciated or amortised while they are classiﬁ ed as held for sale. They are valued at the lower of 
their carrying amount and fair value less costs to sell with an impairment loss recognised for any difference. A gain 
is recognised for any subsequent increase in value, but not in excess of any cumulative impairment loss previously 
recognised. Any gain or loss not previously recognised by the date of the sale of the non-current asset is recognised 
at that point. The fair values of the assets based on independent market appraisals exceed the assets’ carrying values.

84  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
84  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 14 – IMPAIRMENT OF NON-FINANCIAL ASSETS

In F18 the recoverable amounts of cash generating units (CGUs) exceed their carrying values and as a result no 
impairment has been recognised (F17: Nil). Other than the amount disclosed in note 4, there were no indications 
that previously recognised impairment losses should be reversed (F17: Nil). The recoverable amount was determined 
through a value in use calculation.

The Group’s CGUs are consistent with the prior period and are:

• Americas;

• Europe; and

• Australia and New Zealand (ANZ).

Accounting policies

Timing of Impairment Testing
The Group tests property, plant and equipment and intangible assets for impairment:

• At least annually for goodwill and indeﬁ nite life brands; and

• Where there are indications that an asset may be impaired; or

• Where there is an indication that previously recognised impairments may have changed.

Impairment losses are recognised in the consolidated statement of proﬁ t or loss and other comprehensive income.

Approach to Impairment Testing
If the asset does not generate independent cash inﬂ ows and its value in use cannot be estimated to be close to its fair 
value, the asset is tested for impairment as part of the CGU to which it belongs.

When an asset’s (or CGU’s) carrying value exceeds its recoverable amount, it is impaired. Recoverable amount is the 
higher of the asset’s (or CGU’s) fair value less costs of disposal or value in use.

Fair value is determined in accordance with the accounting policy set out in note 1.

In assessing value in use, the estimated future cash ﬂ ows are discounted to their present value using a discount rate 
that reﬂ ects current market assessments of the time value of money and the risks speciﬁ c to the asset or CGU.

Reversals of Impairment
If there is an indicator that a previously recognised impairment loss no longer exists or has decreased, recoverable 
amount is estimated. If there has been a change in the estimates used to determine an asset’s recoverable amount 
since an impairment loss was recognised, the carrying value of the asset is increased to its recoverable amount 
(limited to the amount that would have been determined, net of depreciation, had no impairment loss been recognised 
for the asset in prior years).

Any reversal is recognised in the consolidated statement of proﬁ t or loss and other comprehensive income with an 
adjustment to depreciation in future periods to allocate the asset’s revised carrying value, less any residual value, 
on a systematic basis over its remaining useful life. The Group does not reverse impairments recognised for goodwill.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  85  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  85  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 14 – IMPAIRMENT OF NON-FINANCIAL ASSETS (CONTINUED)

Key estimate and judgement:

Impairment testing key assumptions
The Group has estimated recoverable amount based on value in use at 30 June 2018. Key estimates and 
judgements include:

Cash ﬂ ow forecasts
Cash ﬂ ow forecasts are based on the Group’s most recent ﬁ ve-year ﬁ nancial plans approved by the Board. 
Key assumptions in the cash ﬂ ow forecasts include sales volume growth, cost of sales and cost of doing business.

The Group’s assumptions regarding sales volume growth and costs of doing business are based on expectations of the 
market demand and past experience. The assumption on cost of sales is based on expectation about future vintage costs.

Long-term growth rates
Cash ﬂ ow forecasts beyond a ﬁ ve-year period are extrapolated using a growth rate range of 2.0% to 3.0% (F17: 2.0% 
to 3.0%). Growth rates are speciﬁ c to individual CGUs and reﬂ ect expected future market and economic conditions.

Discount rate
The Group applies a post-tax discount rate to post-tax cash ﬂ ows as the valuation calculated using this method 
closely approximates applying pre-tax discount rates to pre-tax cash ﬂ ows. The post-tax discount rates incorporate 
a risk-adjustment relative to the risks associated with the net post-tax cash ﬂ ows being achieved. The following 
pre-tax discount rates were applied:

Americas
Europe
ANZ

2018

9.5%
9.6%
11.0%

2017

10.9%
10.0%
11.3%

Exchange rates
Cash ﬂ ow forecasts in foreign currency are forecast in that currency and discounted using the applicable regional 
discount rates (predominantly USD and GBP).

Sensitivity analysis
Increases in discount rates or changes in other key assumptions, such as operating conditions or ﬁ nancial performance, 
may cause the recoverable amount to fall below carrying values.

Based on current economic conditions and CGU performances, there are no reasonably possible changes to key 
assumptions used in the determination of CGU recoverable amounts that would result in a material impairment 
to the Group.

86  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
86  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 15 – PROVISIONS

Current
Employee entitlements
Other
Total current provisions

Other provisions

2018
Carrying amount at start of year
Charged/(credited) to proﬁ t or loss
Payments
Foreign currency translation
Carrying amount at end of year

2017
Carrying amount at start of year
Charged/(credited) to proﬁ t or loss
Payments
Foreign currency translation
Carrying amount at end of year

2018
$M

34.4
11.0
45.4

2017
$M

34.9
26.4
61.3

ONEROUS
CONTRACTS
$M

RESTRUCTURING
$M

OTHER
$M

TOTAL
$M

3.8
(0.5)
(1.4)
0.1
2.0

12.6
(4.2)
(4.5)
(0.1)
3.8

18.4
1.2
(13.1)
–
6.5

27.4
11.8
(20.4)
(0.4)
18.4

4.2
2.1
(3.9)
0.1
2.5

1.3
3.0
(0.2)
0.1
4.2

26.4
2.8
(18.4)
0.2
11.0

41.3
10.6
(25.1)
(0.4)
26.4

Onerous contract provisions are held for non-cancellable leases, IT infrastructure service contracts and wine grape 
supply contracts that have been identiﬁ ed as being surplus to the Group’s needs. The restructuring provision 
comprises costs in relation to the Group’s supply chain optimisation program and group rationalisation and 
restructure program.

Accounting policies
Provisions are recognised for present obligations (legal, equitable or constructive) to make future payments (or other 
transfer of value) to other entities due to past transactions or events. They are recognised only when it is probable the 
liability will arise and when a reliable estimate can be made of the amount.

If the effect of time value of money is material, provisions are determined by discounting the expected future cash 
ﬂ ows at a pre-tax risk free rate plus, where appropriate, the risks speciﬁ c to the liability. Where discounting is used, 
the increase in the provision due to the passage of time is recognised as a ﬁ nance cost.

Employee entitlements
Liabilities for employees’ entitlements to wages and salaries, annual leave and other current employee entitlements 
(that are expected to be paid within 12 months) are measured at amounts expected to be paid as at the reporting date.

Liabilities for other employee entitlements, which are not expected to be paid or settled within 12 months of reporting 
date, are accrued in respect of all employees at the present value of future amounts expected to be paid.

Restructuring
Restructuring provisions are recognised at the point when a detailed plan for the restructure has been developed and 
implementation has commenced. The cost of restructuring provided is the estimated future cash ﬂ ows, discounted 
at the appropriate rate which reﬂ ects the risks of the cash ﬂ ow.

Termination beneﬁ ts are payable when employment is terminated before the normal retirement date or whenever an 
employee accepts voluntary redundancy in exchange for these beneﬁ ts. The Group recognises termination beneﬁ ts 
when it is demonstrably committed to either terminating the employment of a current employee according to a detailed 
formal plan without possibility of withdrawal or upon the provision of an offer to encourage voluntary redundancy.

Onerous contracts
Onerous contracts are measured at the lower of the expected cost of terminating the contract and the expected net cost 
of continuing with the contract (discounted to present value if material).

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  87  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  87  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 16 – CAPITAL MANAGEMENT

The Group considers capital to be the combination of shareholders’ equity, reserves and net debt. The key objectives 
of the Group’s approach to capital management include:

• Safeguard the Company’s ability to continue as a going concern;

• Maintaining a credit proﬁ le and the requisite ﬁ nancial metrics that secures access to funding with a spread 

of maturity dates and sufﬁ cient undrawn committed facility capacity;

• Optimising over the long term, and to the extent practicable, the weighted average cost of capital to reduce the 

Group’s cost of capital while maintaining ﬁ nancial ﬂ exibility; and

• To provide returns to shareholders and beneﬁ ts to other stakeholders.

In order to optimise the Group’s capital structure and in line with the Group’s strategic objectives and operating plans, 
the Company may:

• Alter the amount of dividends paid to shareholders;

• Return capital to shareholders;

• Issue new shares;

• Vary discretionary capital expenditure;

• Draw-down additional debt; or

• Sell assets to reduce debt.

Various ﬁ nancial ratios and internal targets are assessed and reported to the Board on a regular basis 
by management to monitor and support the key objectives set out above. These ratios and targets include:

• An earnings to net interest expense ratio;

• A total net indebtedness to earnings before interest, tax, depreciation, amortisation and self-generating and 

regenerating assets ratio; and

• Group debt maturity proﬁ le.

NOTE 17 – BORROWINGS

Total borrowings consist of:
Current
Non-current
Total borrowings

Details of major arrangements

2018
$M

4.3
875.3
879.6

2017
$M

4.1
596.4
600.5

US Private Placement Notes and Debt Facilities
US Private Placement (USPP) notes totalling US$400.0 million (unsecured) are outstanding, with maturities 
ranging from December 2020 to June 2029. The carrying value of USPP notes at 30 June 2018 is $544.3 million 
(F17: $520.8 million).

The Group has in place a number of revolving bank debt facilities with maturities staggered through to 
December 2022. As at 30 June 2018 drawings under the bank debt facilities totalled $274.1 million (F17: Nil).

USPP notes bear interest at ﬁ xed and ﬂ oating interest rates. In accordance with the Group’s risk management strategy, 
the Group has entered into a combination of ﬁ xed to ﬂ oating and ﬂ oating to ﬁ xed interest rate swaps to obtain the 
desired ﬁ xed/ﬂ oating interest ratio, with interest rate caps also used to manage interest rate risk. Refer to note 23 
for further details.

The Group is party to a number of ﬁ nance lease arrangements which have a carrying value of $76.7 million 
at 30 June 2018 (F17: $77.9 million). The Group’s ﬁ nance lease arrangements have durations up to 13 years.

88  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 17 – BORROWINGS (CONTINUED)

Financial guarantees
The Group has issued ﬁ nancial guarantees to other persons of $23.7 million (F17: $23.7 million) that could be called upon 
at any time in the event of a breach of the Group’s ﬁ nancial obligations. No payments are expected to eventuate under 
these ﬁ nancial guarantees as the Group expects to meet its respective obligations to the beneﬁ ciaries of these guarantees.

Receivables purchasing agreement
The Group has entered into an uncommitted non-recourse receivable purchasing agreement to sell certain domestic 
and international receivables, from time to time, to an unrelated entity in exchange for cash. As at 30 June 2018, 
receivables totalling $41.9 million had been sold under this arrangement (F17: nil).

Accounting policies
Borrowings are initially recorded at fair value of the consideration received, net of directly attributable costs.

After initial recognition, borrowings are measured at amortised cost, using the effective interest rate method. 
Amortised cost is calculated by taking into account any issue costs, and any discount or premium on issuance. 
Gains and losses are recognised in the statement of proﬁ t or loss and other comprehensive income if borrowings 
are derecognised.

ALL BALANCES TRANSLATED TO AUD

Net debt
Cash and cash equivalents
Loan receivable
Bank loans
US Private Placement Notes (net of fair value hedge)
Lease liabilities
Other loan payable
Net debt

NOTE 18 – CONTRIBUTED EQUITY

Issued and paid-up capital
718,663,546 (F17: 738,135,033) ordinary shares, fully paid
Own shares held

Contributed equity at the beginning of the period
Shares movements:
19,471,487 Shares bought back and cancelled (F17:Nil)
Net movement in own shares held
Contributed equity at the end of the period

The shares have no par value.

TOTAL CASH 
FLOWS 
FROM 
ACTIVITIES 
$M

DEBT 
REVALUATION 
AND FX 
MOVEMENTS 
$M

2017
$M

240.8
0.9
3.0
(520.8)
(77.9)
(0.8)
(354.8)

(149.7)
(0.3)
(270.4)
–
4.0
0.2
(416.2)

(1.7)
–
(3.3)
(23.5)
(2.8)
–
(31.3)

2018 
$M

89.4
0.6
(270.7)
(544.3)
(76.7)
(0.6)
(802.3)

2018
$M

2017
$M

3,240.5
(5.1)
3,235.4

3,540.5
(11.9)
3,528.6

3,528.6

3,533.6

(300.0)
6.8
3,235.4

–
(5.0)
3,528.6

Share buy-back
On 17 August 2017, the Company announced an on-market share buy-back of up to $300.0 million, which commenced 
in September 2017. During the year ended 30 June 2018, the Company bought back and cancelled 19,471,487 shares 
at an average price per share of $15.41.

Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in 
proportion to the number of and amounts paid on the shares held. Ordinary shares entitle their holder to one vote, 
either in person or by proxy, at a meeting of the Company. Incremental costs directly attributable to the issue of new 
shares or options are shown in equity as a deduction, net of tax from the proceeds.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  89  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  89  

 
 
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 18 – CONTRIBUTED EQUITY (CONTINUED)

Purchase of shares for LTIP plans
The Group engages a third party to purchase shares in the Company to be used to satisfy share based payment 
obligations upon vesting under the Group’s Employee Equity Plans. Historically, such commitments were satisﬁ ed 
by way of treasury share purchases (i.e. the Group acquiring shares on market directly). Treasury shares that had 
previously been purchased remain available to satisfy any future vesting under the Group’s Employee Equity Plans. 

During the year, the Group purchased nil treasury shares (F17: 1.6 million shares ($18.3 million)). A total of 
0.5 million (F17: 1.1 million) treasury shares are available at 30 June 2018. During the year, the Group purchased 
2.7 million shares ($42.9 million) under the third party arrangement (F17: 3.9 million shares ($47.6 million)). A total 
of 2.7 million shares (F17: 3.8 million) purchased under the third party arrangement are available at 30 June 2018.

When the Company reacquires its equity instruments (treasury shares) their cost is deducted from equity. No gain 
or loss is recognised in proﬁ t or loss on the purchase, sale, issue or cancellation of treasury shares. Any difference 
between the cost of acquisition and the consideration when reissued is recognised in share based payments reserve.

NOTE 19 – COMMITMENTS

Leases
Non-cancellable leases
Commitments in relation to leases contracted for at the reporting date 
but not recognised as liabilities, payable:

under one year
between one year and ﬁ ve years
over ﬁ ve years

Total lease commitments

Capital expenditure and other commitments
The following expenditure has been contracted but not provided for in the ﬁ nancial statements:
Capital expenditure

2018
$M

2017
$M

88.6
282.5
478.9
850.0

84.6
269.7
555.3
909.6

38.1

58.6

The Group’s leases of property expire between one and 25 years. Leases generally provide the Group with a right 
of renewal at which time the requirement to renew the lease is considered and all terms are renegotiated.

Accounting policies

Leases
The determination of which of the Group’s arrangements are leases can be complex; for example determining 
whether long-term contracts are for the supply of grapes or a lease of the vineyard. The assessment is made based 
on the substance of the arrangement, whether it is dependent on the use of a speciﬁ c asset or assets and if it conveys 
a right of use.

When an arrangement is a lease, it is accounted for in one of two ways. Where the lessor retains substantially all 
the risks and beneﬁ ts of ownership of an asset it is classiﬁ ed as operating leases. Operating lease payments are 
recognised as an expense on a straight-line basis over the lease term in the consolidated statement of proﬁ t or loss 
and other comprehensive income.

Where the Group takes on substantially all the risks and beneﬁ ts of ownership of the leased item it is classiﬁ ed as 
a ﬁ nance lease. An asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, 
at the present value of the minimum lease payments. Lease payments are split between a ﬁ nance expense and 
a reduction of the lease liability so as to record a constant rate of interest on the remaining balance of the liability. 
The asset is depreciated over the shorter of the estimated useful life of the asset or the lease term.

Refer to note 32 outlining the expected impact on the Group from the initial adoption of AASB 16 Leases.

90  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
90  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 20 – RESERVES

Cash ﬂ ow hedge reserve
Share based payments reserve
Foreign currency translation reserve
Total reserves

2018
$M

2.2
(9.4)
7.6
0.4

2017
$M

2.2
25.7
(51.8)
(23.9)

Cash ﬂ ow hedge reserve
This reserve records the effective portion of gains or losses from open cash ﬂ ow hedges.

Share based payment reserve
This reserve records amounts offered to employees under Long-term Incentive Plan (LTIP), Restricted Equity Plan 
(REP), deferred Short-term Incentive Plan (STIP) and Share Cellar plan.

Foreign currency translation reserve
This reserve holds exchange differences arising on translation of foreign subsidiaries, as described in note 1.

NOTE 21 – EMPLOYEE EQUITY PLANS

Outstanding at the beginning 
of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end 
of the year
Exercisable at the end of the year

STIP
(RESTRICTED 
SHARES)

LTIP
(PERFORMANCE 
RIGHTS)

REP
(RESTRICTED 
SHARES/DEFERRED 
SHARE RIGHTS)

SHARE CELLAR
(BROAD-BASED 
EMPLOYEE 
SHARE PLAN)

456,874
173,211
(374,679)
–

255,406
–

4,249,992
1,620,401
(1,274,092)
(147,530)

4,448,771
1,230,602

1,411,749
162,471
(1,159,312)
(18,999)

395,909
–

121,588
62,531
(74,715)
(8,598)

100,806
–

The Group operates equity plans as outlined below:

STIP Restricted Equity
One-third of earned STIP is delivered in the form of deferred equity (Restricted Shares). The key terms of this award are:

• Subject to a mandatory restriction period and continued employment. Half of the award is restricted for one year 

and the remaining half for two years from grant date;

• Holders of Restricted Shares are entitled to dividends and to exercise their voting rights during the restriction;

• Will generally be forfeited if the executive is dismissed for cause or resigns. Clawback mechanisms apply.

LTIP
Under the LTIP certain employees receive Performance Rights which entitle participants to receive the Company’s 
shares at no cost subject to the achievement of performance conditions and continued employment. No dividends are 
payable to participants prior to vesting.

For the F16, F17 and F18 awards, Performance Rights are subject to dual performance measures with equal 
weighting over a performance period of three years.

• Relative Total Shareholder Return (TSR)

• Return on Capital Employed (ROCE) growth

• Will generally be forfeited if the executive is dismissed for cause or resigns. Clawback mechanisms apply.

Performance rights that are exercisable as at 30 June 2018 relate to the F16 LTIP plan where Australian based 
participants have the option to defer exercising vested rights for a period of up to four years.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  91  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  91  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 21 – EMPLOYEE EQUITY PLANS (CONTINUED)

Restricted Equity Plan (REP)
Under the REP certain employees receive a grant of restricted equity awards in the form of Restricted Shares. 
If Restricted Shares cannot be awarded (e.g. due to country speciﬁ c regulation) Deferred Share Rights are granted. 
The award is at no cost to the employee and is subject to a restriction period. Restricted equity awards require continued 
employment with the Group through the restriction period. Other terms are similar to the STIP terms above.

Restricted equity awards may be granted to compensate employees for foregoing equity compensation in their previous 
organisation as a sign-on award and/or as a retention incentive.

Share Cellar (broad-based Employee Share Plan)
Share Cellar is the Group’s broad-based Employee Share Plan and plan participation is offered annually. The plan was 
ﬁ rst launched early in 2015. Participation is voluntary and employees in select countries are eligible to join the Plan. 
Share Cellar operates as a matching plan whereby employees contribute funds to the Plan from their after-tax pay 
and shares are acquired by the Group on their behalf. If the individual continues to hold their shares, and remains an 
employee of the Group at the vesting date (approximately two years), the Group will grant one matched share for every 
two purchased shares they hold.

Participants are entitled to dividends and to exercise voting rights attached to the shares purchased under the plan, 
and matched shares once they have been allocated.

Accounting policies
Employee equity plans are accounted for as share based payments, whereby employees render services in exchange for 
the awards. The fair value of the shares and performance rights that are expected to vest is progressively recognised 
as an employee beneﬁ ts expense over the relevant vesting period with a corresponding increase in equity.

The fair value of shares granted is determined by reference to observed market values. The fair value of the TSR 
component of performance rights is independently determined at grant date by an external valuer using a Monte-Carlo 
simulation. For the non-market components (ROCE), the fair value is independently determined based on the share 
price less the present value of dividends.

Non-market performance conditions do not impact the value of shares and performance rights, but rather the estimate 
of the number of shares to vest.

At each reporting date the Company revises the estimate of the number of shares and the non-market component 
of performance rights that are expected to vest and the employee beneﬁ ts expense recognised each period incorporates 
this change in estimate.

An expense is recognised for the TSR component of performance rights whether or not the TSR hurdle is met. 
No expense is recognised if these rights do not vest due to cessation of employment. No expense is recognised for 
shares and non-market components of performance rights that do not ultimately vest.

92  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
92  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 21 – EMPLOYEE EQUITY PLANS (CONTINUED)

Active share based payment plans:

Long-term Incentive Plans
The below table outlines the F17 and F18 LTIP plans which have a vesting date post 30 June 2018:

GRANT DATE

Grant date share price
Expected share price volatility (%)
Expected dividend yield (%)
Risk-free interest rate (%)
Fair value estimate at grant date – TSR
Fair value estimate at grant date – ROCE

Restricted Equity Plans

GRANT DATE

F15
29-Aug-14

F16
4-Sep-15
4-Dec-15

F17
5-Dec-16

F18
13-Nov-17
1-Mar-18

F17 PLAN
05-DEC-16

F18 PLAN
13-NOV-17

$10.42
35.0
2.3
1.9
$6.44
$9.82

$15.82
29.0
2.2
1.9
$11.09
$14.93

GRANT DATE 
SHARE PRICE

$5.11

$5.98
$7.97

$10.42

$15.82
$17.32

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  93  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  93  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
TAXATION
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 22 – INCOME TAX

The major components of income tax expense are:

Statement of proﬁ t or loss
Current income tax expense
Deferred income tax expense
Total tax expense

Deferred income tax expense included in the income tax expense comprises:

Decrease in deferred tax assets
(Decrease) in deferred tax liabilities

Deferred income tax

Tax reconciliation
The amount of income tax expense as shown in the consolidated statement of proﬁ t or loss 
and other comprehensive income differs from the prima facie income tax expense attributable 
to earnings. The differences are reconciled as follows:
Proﬁ t before tax excluding material items
Material items before tax
Proﬁ t before tax

Prima facie income tax expense attributable to proﬁ t from operations 
calculated at the rate of 30% (F17: 30%)
Tax effect of:

Non-taxable income and proﬁ ts, net of non-deductible expenditure
Other deductible items
Tax losses recognised
Change in tax rate
Foreign tax rate differential
Other
(Over)/under provisions in previous years

Total tax expense

Income tax expense on operations
Income tax beneﬁ t attributable to material items
Income tax expense

Deferred income tax relates to the following:
Deferred tax assets
The balance comprises temporary differences attributable to:

Inventory
Property, plant and equipment (including vines)
Accruals
Provisions
Foreign exchange
Tax losses
Other

Total deferred tax assets

Deferred tax liabilities
The balance comprises temporary differences attributable to:

Inventory
Property, plant and equipment (including vines)
Intangibles
Foreign exchange
Other

Total deferred tax liabilities

94  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

2018
$M

2017
$M

106.6
8.5
115.1

63.4
(54.9)
8.5

75.7
41.6
117.3

42.9
(1.3)
41.6

481.7
(6.2)
475.5

422.3
(35.1)
387.2

142.7

116.2

(11.8)
(6.8)
(1.4)
(16.3)
(0.8)
10.8
(1.3)
115.1

116.7
(1.6)
115.1

10.8
6.6
6.2
21.5
2.9
84.3
22.2
154.5

18.3
67.9
99.8
–
4.8
190.8

2.7
(1.7)
(6.0)
0.4
4.4
(0.2)
1.5
117.3

130.4
(13.1)
117.3

25.2
0.5
34.5
27.9
–
89.4
30.5
208.0

11.4
71.6
143.6
2.6
4.7
233.9

NOTE 22 – INCOME TAX (CONTINUED)

Movements in deferred income tax relate to the following:
Movement in deferred tax assets:

Opening balance
(Charged) to the proﬁ t or loss
Foreign currency translation
Balance sheet reclassiﬁ cation
Other

Closing balance

Movement in deferred tax liabilities:

Opening balance
(Charged) to the proﬁ t or loss
Foreign currency translation
Balance sheet reclassiﬁ cation
Other

Closing balance

Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period 
and not recognised in net proﬁ t or loss but directly debited to equity

2018
$M

2017
$M

208.0
(63.4)
9.3
–
0.6
154.5

233.9
(54.9)
11.3
–
0.5
190.8

270.0
(42.9)
(6.3)
(12.4)
(0.4)
208.0

245.1
(1.3)
(6.9)
(3.6)
0.6
233.9

–

3.1

Unrecognised tax assets
There are potential future income tax beneﬁ ts relating to accumulated losses in non-Australian group companies, 
which have not been brought to account. These possible beneﬁ ts amount to $43.5 million (F17: $43.8 million).

The Group has carry forward capital tax losses in Australia and the UK respectively. These losses may be used to offset 
any future capital gains derived by activities in these countries. The Group will assess the conditions for deductibility 
imposed by the tax laws of Australia and the UK prior to any utilisation of the capital losses.

Ongoing tax audits
The Group is subject to ongoing tax audits by taxation authorities in several jurisdictions covering a variety of taxes. 
The Group fully cooperates with these enquiries as and when they arise.

Franking credits
The Australian Tax Consolidation Group has $69.8 million (F17: $36.7million) franking credits available for subsequent 
reporting periods.

US tax reform
On 22 December 2017, the US Government passed the Tax Cuts and Jobs Act (‘the Act’). The Act reduced the US 
Federal corporate tax rate from 35% to 21% effective from 1 January 2018. During the year, the Group recognised 
a one-off beneﬁ t of $20.9 million arising due to the restatement of its net deferred tax liability in respect of its 
US operations. 

Key estimate and judgement:

Taxation
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Signiﬁ cant 
judgement is required in determining the worldwide provision for income taxes. There are many transactions and 
calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. 
Where the ﬁ nal tax outcome of these matters is different from the amounts that were initially recorded, such differences 
will impact the current and deferred tax provisions in the period in which such determination is made.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  95  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  95  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
TAXATION
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 22 – INCOME TAX (CONTINUED)

Accounting policies

Current taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from, or paid to, taxation 
authorities at the tax rates and tax laws enacted or substantively enacted by the reporting date.

Deferred taxes
Deferred income tax liabilities are recognised for all taxable temporary differences. Deferred income tax assets 
are recognised for all deductible temporary differences, carried forward unused tax assets and unused tax losses, 
to the extent it is probable that they will be utilised.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that 
it will become possible that future taxable proﬁ t will allow the deferred tax asset to be recovered.

The carrying amount of deferred income tax assets is reviewed at balance sheet date and reduced to the extent that 
it is no longer probable that sufﬁ cient taxable proﬁ t will be available to utilise them.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when 
the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively 
enacted at the balance sheet date.

Deferred income tax is provided on temporary differences at balance sheet date between accounting carrying amounts 
and the tax bases of assets and liabilities, other than for:

• The initial recognition of an asset or liability in a transaction that is not a business combination and at the time 
of the transaction, affects neither the accounting proﬁ t nor taxable proﬁ t or loss or on the recognition of goodwill.

• Foreign taxes which may arise in the event of retained proﬁ ts of foreign controlled entities being remitted to 

Australia as there is no present intention to make any such remittances.

Deferred tax assets and deferred tax liabilities associated with indeﬁ nite life intangibles such as brand names are 
measured based on the tax consequences that would follow from the use and sale of that asset. Income taxes relating 
to items recognised directly in equity are recognised in equity and not in proﬁ t or loss.

Offsetting deferred tax balances
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax 
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and 
the same taxation authority.

96  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
96  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 23 – FINANCIAL RISK MANAGEMENT

Financial risk management framework
The Group’s ﬁ nancial risk management policies (‘Group Treasury Policies’) cover risk tolerance, internal controls 
(including segregation of duties), delegated authority levels, management of foreign currency, interest rate and 
counterparty credit exposures, and the reporting of exposures. These policies are reviewed at least annually and 
approved by the Board of Directors.

The centralised Group Treasury function has been delegated operational responsibility for the identiﬁ cation and 
management of ﬁ nancial risks.

The Group holds ﬁ nancial instruments from ﬁ nancing (principally borrowings), transactions (trade receivables and 
payables) and risk management (derivatives) which result in exposure to the following ﬁ nancial risks, covered by the 
Group Treasury Policies:

• Liquidity risk;

• Interest rate risk;

• Foreign exchange risk; and

• Counterparty credit risk.

The following table outlines how these risks impact Group ﬁ nancial assets and liabilities:

Net borrowings
Receivables
Other ﬁ nancial assets
Payables
Derivative ﬁ nancial assets and liabilities

(a) Liquidity risk

LIQUIDITY 
RISK
(a)

INTEREST 
RATE RISK
(b)

FOREIGN 
EXCHANGE 
RISK
(c)

CREDIT 
RISK
(d)

✕

✕

✕
✕

✕

✕
✕
✕
✕
✕

✕
✕
✕

✕

NOTE

17
9
9
9
24, 32

Nature of the risk
The Group is exposed to liquidity risk primarily from its core operating activities. The Group’s focus is to ensure it is able 
to meet ﬁ nancial obligations as and when they fall due.

Risk management
The Group ensures the maintenance, at all times, of an appropriate minimum level of liquidity, comprising committed, 
unutilised debt facilities and cash resources. To facilitate this, the Group monitors forecast and actual cash ﬂ ows, 
performs sensitivity analysis as well as monitoring the availability and cost of debt and equity funding.

The Group’s objective is to balance continuity of funding and ﬂ exibility by maintaining an appropriately structured 
debt maturity proﬁ le with a mix of bank and capital (bond) market debt, whilst also monitoring compliance with the 
Group’s key ﬁ nancial covenants and undertakings.

At reporting date, the standby arrangements and unused credit facilities are as follows:

Committed facilities
Available facilities
Amounts utilised
Amount unutilised

The Group is in compliance with all undertakings under its various ﬁ nancing arrangements.

2018
$M

2017
$M

1,301.5
(818.4)
483.1

1,178.8
(520.8)
658.0

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  97  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(a) Liquidity risk (continued)

Level of exposure at balance date
The following tables analyse the maturities of the Group’s contractual undiscounted cash ﬂ ows arising from its material 
ﬁ nancial liabilities, net and gross settled derivative ﬁ nancial instruments.

6 MONTHS
OR LESS
$M

6 MONTHS
TO 1 YEAR
$M

1 TO 2
YEARS
$M

2 TO 5
YEARS
$M

OVER
5 YEARS
$M

CONTRACTUAL
TOTAL
$M

CARRYING
AMOUNT
$M

MATURING IN:

2018
Non-derivative 
ﬁ nancial liabilities
Bank loans1
Finance leases
Other loans
US Private Placement Notes
Trade payables
Other payables 
(ﬁ nancial liabilities)

Derivative 
ﬁ nancial liabilities
Foreign exchange contracts
Interest rate swaps
Total ﬁ nancial liabilities

2017
Non-derivative 
ﬁ nancial liabilities
Bank loans1
Finance leases
Other loans
US Private Placement Notes
Trade payables
Other payables 
(ﬁ nancial liabilities)

Derivative 
ﬁ nancial liabilities
Foreign exchange contracts
Interest rate swaps
Total ﬁ nancial liabilities

1.2
4.3
–
10.4
315.7

387.2

0.3
0.6
719.7

–
4.4
–
10.4
279.5

383.0

0.1
0.9
678.3

–
4.3
–
9.7
–

–

0.6
1.4
16.0

–
4.1
–
9.3
–

–

0.2
1.3
14.9

90.0
8.5
0.6
19.4
–

–

184.1
25.6
–
157.3
–

–
57.5
–
489.6
–

275.3
100.2
0.6
686.4
315.7

270.7
76.7
0.6
544.3
315.7

–

–

387.2

387.2

0.6
2.7
121.8

–
8.2
375.2

–
1.4
548.5

1.5
14.3
1,781.2

1.5
12.7
1,609.4

–
8.2
0.8
18.7
–

–

0.2
2.6
30.5

–
24.5
–
152.0
–

–
63.5
–
486.4
–

–
104.7
0.8
676.8
279.5

(3.0)
77.9
0.8
520.8
279.5

–

–

383.0

383.0

–
7.8
184.3

–
3.9
553.8

0.5
16.5
1,461.8

0.5
4.2
1,263.7

1. Loans are stated net of capitalised facility ﬁ nance costs. At reporting date, the balance of bank loans is $274.1 million (F17: nil) against 

capitalised facility ﬁ nance costs of $3.4 million (F17: $3.0 million) to be amortised over the facility period.

98  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
98  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(b) Interest rate risk

Nature of the risk
The Group is exposed to interest rate risk principally from ﬂ oating rate borrowings, including bank borrowings and US 
Private Placement Notes. Other sources of interest rate risk include receivable purchasing agreements, interest-bearing 
investments, creditors’ accounts offering a discount and debtors’ accounts on which discounts are offered.

Risk management
We manage interest rate risk by ensuring that the sensitivity of forecast future earnings to changes in interest rates 
is within acceptable limits. This involves longer term forecasting of both expected earnings and expected borrowing 
to determine the tolerable exposure.

A combination of interest rate swaps were exchanged to obtain the desired ratio of ﬁ xed and ﬂ oating interest rates.
At 30 June 2018, interest rate swap contracts were in use to exchange ﬁ xed interest rates to ﬂ oating on $340.2 million 
(US$250.0 million) of US Private Placement notes and ﬂ oating interest rates to ﬁ xed on $136.1 million (US$100.0 
million). The swaps mature in December 2023, June 2027 and June 2029. Refer note 23(a) for the proﬁ le and timing 
of cash ﬂ ows over the next ﬁ ve years.

Level of exposure at balance date
The Group’s exposure to variable interest rate risk results from the following ﬁ nancial instruments at balance sheet date:

Financial assets
Cash and cash equivalents
Total assets

Financial liabilities
US Private Placement Notes1
Bank loans
Total liabilities

1. Net of hedged amounts.

2018
$M

89.4
89.4

272.1
274.1
546.2

2017
$M

240.8
240.8

195.3
–
195.3

Sensitivity analysis
The table below shows the impact by currency denomination if the Group’s weighted average ﬂ oating interest rates 
change from the year-end rates of 1.78% (F17: 0.67%) with all other variables held constant.

CURRENCY

USD
AUD1
GBP1

SENSITIVITY

2018

2017

+ / – 25bp
+ / – 25bp
+ / – 25bp

+ / – 25bp
+ / – 25bp
+ / – 25bp

PRE-TAX IMPACT ON PROFIT

+
$M

(0.7)
(0.3)
–

2018

–
$M

0.7
0.3
–

+
$M

(0.1)
–
0.1

2017

–
$M

0.1
–
(0.1)

1. The ‘–’ denotes a balance that is less than $100,000.

The movements in proﬁ t on a consolidated level are primarily a result of interest costs from borrowings. 
There would have been no signiﬁ cant impact on equity.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  99  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  99  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(c) Foreign exchange risk

Nature of the risk
The Group is exposed to foreign exchange risk through:

• Transaction exposures including sales of wine into export markets and the purchase of production inputs, 

denominated in foreign currencies other than the respective functional currency of the speciﬁ c Group entity;

• Exposures arising from borrowings denominated in foreign currencies; and

• Translation exposures including earnings of foreign subsidiaries and revaluation of monetary assets and liabilities, 

including borrowings.

The currencies in which these transactions are primarily denominated are the Australian Dollar (AUD), United 
States Dollar (USD) and Great British Pound (GBP). Other currencies used include the Canadian Dollar, Euro, 
New Zealand Dollar, Singapore Dollar, Swedish Krona, Norwegian Krone and South African Rand.

Risk management
The focus of the Group’s foreign exchange risk management activities is on the transactional exposures arising from 
the sourcing and sale of wine.

A proportion of expenses are hedged over time up to a period of three years. The timing, nominal amount and average 
price of the instruments in place at 30 June 2018 are disclosed in the table on the following page.

In determining the amount of hedging required, the Group also considers the ‘natural hedges’ arising from the 
underlying net cash ﬂ ows in the relevant currency, comprising operating, investing and ﬁ nancing cash ﬂ ows.

Details of the Group’s open hedges at balance sheet date are shown below.

Open foreign currency hedges at 30 June 2018

CURRENCY

HEDGE TYPE

HEDGE VALUE
(NOTIONAL AUD)

AVERAGE
HEDGE 
RATE

AUD/USD

AUD/GBP

USD/GBP

ZAR/GBP

NZD/USD

Forwards
Options
Total
Forwards
Options
Total
Forwards
Options
Total
Options
Total
Forwards
Total

1.4
186.3
187.7
27.0
154.5
181.5
13.5
13.5
27.0
87.0
87.0
58.0
58.0

0.7492
0.7898

0.5561
0.5922

1.3301
1.3400

17.7494

0.6829

100  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
100  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(c) Foreign exchange risk (continued)

Level of exposure at balance date
At the reporting date, the Group’s ﬁ nancial assets and liabilities were denominated across the following currencies:

ALL BALANCES TRANSLATED TO AUD

2018
Net debt
Cash and cash equivalents
Loan receivable
Bank loans1
US Private Placement Notes (net of fair value hedge)
Lease liabilities
Other loan payable
Net debt

Other ﬁ nancial assets/(liabilities)
Trade receivables (net of the allowance for doubtful debts)
Other receivables
Trade and other payables
Net other assets/(liabilities)

2017
Net debt
Cash and cash equivalents
Loan receivable
Bank loans1
US Private Placement Notes (net of fair value hedge)
Lease liabilities
Other loan payable
Net debt

Other ﬁ nancial assets/(liabilities)
Trade receivables (net of the allowance for doubtful debts)
Other receivables
Trade and other payables
Net other assets/(liabilities)

AUD
$M

USD
$M

GBP
$M

OTHER
$M

TOTAL
$M

26.2
0.6
(151.8)
–
(0.1)
(0.6)
(125.7)

238.0
59.3
(323.4)
(26.1)

18.3
0.9
1.5
–
(0.3)
(0.8)
19.6

211.0
55.6
(282.3)
(15.7)

26.2
–
(118.9)
(544.3)
(76.4)
–
(713.4)

115.0
17.1
(322.8)
(190.7)

108.3
–
1.5
(520.8)
(77.6)
–
(488.6)

122.9
31.6
(330.8)
(176.3)

0.6
–
–
–
–
–
0.6

48.4
1.0
(58.5)
(9.1)

56.8
–
–
–
–
–
56.8

83.2
1.0
(63.0)
21.2

36.4
–
–
–
(0.2)
–
36.2

66.1
16.7
(54.6)
28.2

57.4
–
–
–
–
–
57.4

57.4
15.6
(43.8)
29.2

89.4
0.6
(270.7)
(544.3)
(76.7)
(0.6)
(802.3)

467.5
94.1
(759.3)
(197.7)

240.8
0.9
3.0
(520.8)
(77.9)
(0.8)
(354.8)

474.5
103.8
(719.9)
(141.6)

1. Includes capitalised borrowing costs of $3.4 million (F17: $3.0 million).

Sensitivity analysis
The following table illustrates the impact of potential foreign exchange movements on proﬁ t before tax and the 
statement of ﬁ nancial position at 30 June:

CURRENCY

United States Dollar
Great British Pound
Euro
Canadian Dollar
New Zealand Dollar2

SENSITIVITY
ASSUMPTION1

2018

2017

9.2% 9.3%
9.0% 9.8%
8.0% 9.3%
7.2% 7.9%
7.0%
6.3%

PRE-TAX IMPACT ON PROFIT
($M)

IMPACT ON EQUITY
($M)

2018

–

3.2
1.9
0.8
1.8
0.7

+

(2.7)
(1.6)
(0.7)
(1.5)
(0.6)

2017

–

1.0
0.4
0.4
1.8
–

2018

–

71.5
13.5
3.2
(1.6)
6.8

+

(130.4)
(24.1)
(3.3)
0.8
(9.1)

2017

–

162.2
30.0
4.1
(0.9)
10.4

+

(56.8)
(9.0)
(2.7)
1.4
(6.0)

+

(0.9)
(0.3)
(0.3)
(1.6)
–

1. Australian dollar versus individual currencies. Implied one year currency volatility at reporting date (Source: Bloomberg).
2. The ‘ – ’ denotes a balance that is less than $100,000.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  101  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  101  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)

(d) Credit risk

Nature of the risk
Counterparty credit risk arises primarily from the following assets:

• Cash and cash equivalents;

• Trade and other receivables; and

• Derivative instruments.

Risk management
The Group’s counterparty credit risk management philosophy is to limit the Group’s loss from default by any one 
counterparty by dealing only with ﬁ nancial institution counterparties of good credit standing, setting maximum 
exposure limits for each counterparty, and taking a conservative approach to the calculation of counterparty credit 
limit usage. Where available, credit opinions on counterparties from two credit rating agencies are used to determine 
credit limits.

The Group assesses the credit quality of individual customers prior to offering credit terms and continues to monitor 
on a regular basis. Each customer is assigned a risk proﬁ le based upon the measurable risk indicators for dishonoured 
payments, adverse information and average days late along with the securities and guarantees held. All prospective 
accounts are required to complete a credit application and generally a director’s guarantee is required with minimal 
exceptions. Failure to provide a director’s guarantee results in either no credit or a limited level of credit offered. 
Credit terms may be reduced or extended for individual customers on the basis of risk.

Past due accounts are subject to a number of collection activities which range from telephone contact, suspension 
of orders through to legal action. Past due accounts are reviewed monthly with speciﬁ c focus on accounts that are 
greater than 90 days overdue. Where debt cannot be recovered, it is escalated from the credit representative to the 
credit manager to initiate recovery action.

For derivatives, the Group transacts under an International Swaps and Derivatives Association (ISDA) master netting 
agreement. If a credit event such as a default occurs, all outstanding transactions under an ISDA agreement are 
terminated, the termination value is assessed and only a single net amount is payable in settlement of all transactions.

Level of exposure at balance date
The maximum counterparty credit risk exposure at 30 June 2018 in respect of derivative ﬁ nancial instruments was 
$2.5 million (F17: $4.1 million) and in respect of cash and cash equivalents was $55.9 million (F17: $67.4 million). 
The Group’s authorised counterparties are restricted to banks and ﬁ nancial institutions whose long-term credit rating 
is at or above a Standard and Poor’s rating of A- (or Moody’s equivalent rating of A3), with any exceptions requiring 
approval from the Board. Commercial paper investments are restricted to counterparties whose short-term credit 
rating is at or above a Standard and Poor’s rating of A-1 (or Moody’s equivalent rating of P-2). The magnitude of credit 
risk in relation to receivables is generally the carrying amount, net of any provisions for doubtful debts. The ageing 
of the consolidated Group trade receivables (net of provisions) is outlined below:

Not past due
Past due 1–30 days
Past due 31–60 days
Past due 61 days+
Total

2018
$M

432.1
28.3
3.2
3.9
467.5

2017
$M

455.1
13.4
2.3
3.7
474.5

Trade receivables have been aged according to their original due date. Terms may be extended on a temporary basis 
with the approval of management. The past due receivables shown above relate to customers who have a good debt 
history and are considered recoverable. There is no collateral held as security against the receivables above and there 
are no other receivables past due.

102  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
102  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 24 – DERIVATIVE FINANCIAL INSTRUMENTS

At the reporting date, there were $541.2 million (Australian dollar equivalent) net face value of outstanding foreign 
exchange contracts at contract rates (F17: $312.2 million) and interest rate swaps of $476.3 million (F17: $390.6 million). 
These instruments are regarded as being Level 2 under AASB’s Fair Value measurement hierarchy.

NOTE 25 – FAIR VALUES

The fair values of cash and cash equivalents, ﬁ nancial assets and most ﬁ nancial liabilities approximate their carrying 
value. The fair value of the US Private Placement Notes is $581.8 million (F17: $590.1 million). There have been no 
reclassiﬁ cations of ﬁ nancial assets from fair value to cost, or from cost or amortised cost to fair value during the year.

The fair values of derivative ﬁ nancial instruments are based upon market prices, or models using inputs observed 
from the market, where markets exist or have been determined by discounting the expected future cash ﬂ ows by the 
current interest rate for ﬁ nancial assets and ﬁ nancial liabilities with similar risk proﬁ les (a Level 2 valuation).

The valuation of derivative ﬁ nancial assets and liabilities reﬂ ects the estimated amounts which the Group would be 
required to pay or receive to terminate the contracts (net of transaction costs) or replace the contracts at their current 
market rates at reporting date. This is based on internal valuations using standard valuation techniques.

As the purpose of these derivative ﬁ nancial instruments is to hedge the Group’s underlying assets and liabilities 
denominated in foreign currencies and to hedge against risk of interest rate ﬂ uctuations, it is unlikely in the absence 
of abnormal circumstances that these contracts would be terminated prior to maturity.

For all other recognised ﬁ nancial assets and ﬁ nancial liabilities, based on the facts and circumstances existing 
at reporting date and the nature of the Group’s ﬁ nancial assets and ﬁ nancial liabilities including hedge positions, 
the Group has no reason to believe that the ﬁ nancial assets could not be exchanged, or the ﬁ nancial liabilities could 
not be settled, in an arm’s length transaction at an amount approximating its carrying amount.

NOTE 26 – CLASS ACTION

On 28 August 2017, the Company announced that it had reached an agreement to settle the previously announced 
shareholder class action commenced on 2 July 2014 by Brian Jones, represented by Maurice Blackburn, relating to 
historical market disclosures that occurred in 2013. The settlement of the claim was without admission of liability and 
was approved by the Court on 10 November 2017. The settlement amount, $49.0 million inclusive of interest and costs, 
was fully insured. The agreement to settle was a commercial decision made in the best interests of the Company’s 
shareholders to enable the Company to remain focused on executing against its strategy without the distraction and 
expense of the legal proceeding.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  103  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  103  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP COMPOSITION
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 27 – SUBSIDIARIES

The consolidated ﬁ nancial statements incorporate the assets, liabilities and results of the following subsidiaries:

ENTITY NAME

Equity holding of 100% (F17: 100%)
Aldershot Nominees Pty. Ltd.*
B Seppelt & Sons Limited*
Beringer Blass Distribution S.R.L.
Beringer Blass Italia S.R.L.
Beringer Blass Wine Estates Chile Limitada
Beringer Blass Wine Estates Limited
Beringer Blass Wines Pty. Ltd.*
Bilyara Vineyards Pty. Ltd.*
Cellarmaster Wines (UK) Limited
Cellarmaster Wines Holdings (UK) Limited
Coldstream Australasia Limited*
Cuppa Cup Vineyards Pty. Ltd.
Devil’s Lair Pty. Ltd.
Ewines Pty. Ltd.
FBL Holdings Limited
Il Cavaliere del Castello di Gabbiano S.r.l.
Interbev Pty. Ltd.*
James Herrick Wines Limited
Leo Buring Pty. Ltd.
Lindeman (Holdings) Limited*
Lindemans Wines Pty. Ltd.
Mag Wines Pty. Ltd
Majorca Pty. Ltd.*
Mildara Holdings Pty. Ltd.*
North America Packaging (Paciﬁ c Rim) Corporation
Penfolds Wines Pty Ltd
Piat Pere et Fils B.V.
Premium Land, Inc.
Robertsons Well Pty. Ltd.
Robertsons Well Unit Trust
Rosemount Estates Pty. Ltd.
Rothbury Wines Pty. Ltd.*
SCW905 Limited*
Seaview Wynn Pty. Ltd.*
Southcorp Australia Pty. Ltd. *
Southcorp Brands Pty. Ltd.*
Southcorp International Investments Pty. Ltd.*
Southcorp Limited*
Southcorp NZ Pty. Ltd.*
Southcorp Whitegoods Pty. Ltd.
Southcorp Wines Asia Pty. Ltd.
Southcorp Wines Europe Limited
Southcorp Wines Pty. Ltd.*
Southcorp XUK Limited
T’Gallant Winemakers Pty. Ltd.
The New Zealand Wine Club Limited
The Rothbury Estate Pty. Ltd.*
Tolley Scott & Tolley Limited*
Treasury Americas Inc

104  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

COUNTRY OF 
INCORPORATION

Australia
Australia
Italy
Italy
Chile
UK
Australia
Australia
UK
UK
Australia
Australia
Australia
Australia
UK
Italy
Australia
UK
Australia
Australia
Australia
Australia
Australia
Australia
USA
Australia
Netherlands
USA
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
UK
Australia
UK
Australia
UK
Australia
Australia
USA

NOTE 27 – SUBSIDIARIES (CONTINUED)

ENTITY NAME

Treasury Chateau & Estates LLC
Treasury Logistics Pty Ltd*
Treasury Wine Estates (China) Holding Co Pty Ltd*
Treasury Wine Estates (Matua) Limited
Treasury Wine Estates (NZ) Holding Co Pty Ltd*
Treasury Wine Estates (Shanghai) Trading Co. Ltd.
Treasury Wine Estates (UK) Holding Co Pty Ltd*
Treasury Wine Estates Americas Company
Treasury Wine Estates Asia (SEA) Pte Limited
Treasury Wine Estates Asia Pty. Ltd.
Treasury Wine Estates Australia Limited*
Treasury Wine Estates Barossa Vineyards Pty. Ltd.
Treasury Wine Estates Canada, Inc.
Treasury Wine Estates Denmark ApS
Treasury Wine Estates EMEA Limited
Treasury Wine Estates France S.A.R.L.
Treasury Wine Estates HK Limited
Treasury Wine Estates Holdings Inc.
Treasury Wine Estates Japan KK
Treasury Wine Estates Limited*
Treasury Wine Estates Netherlands B.V
Treasury Wine Estates Norway AS
Treasury Wine Estates Sweden AB
Treasury Wine Estates UK Brands Limited
Treasury Wine Estates Vintners Limited*
TWE Finance (Aust) Limited*
TWE Finance (UK) Limited
TWE Insurance Company Pte. Ltd.
TWE Lima Pty Ltd*
TWE Share Plans Pty Ltd
TWE US Finance Co.
TWE USA Partnership
Wolf Blass Wines Pty. Ltd.*
Woodley Wines Pty. Ltd.
Wynn Winegrowers Pty. Ltd.
Wynns Coonawarra Estate Pty. Ltd

COUNTRY OF 
INCORPORATION

USA
Australia
Australia
New Zealand
Australia
China
Australia
USA
Singapore
Australia
Australia
Australia
Canada
Denmark
UK
France
Hong Kong
USA
Japan
Australia
Netherlands
Norway
Sweden
UK
Australia
Australia
UK
Singapore
Australia
Australia
USA
USA
Australia
Australia
Australia
Australia

*  Entity is a member of the Closed Group under the Deed of Cross Guarantee (refer to Note 29) and relieved from the requirement 

to prepare audited ﬁ nancial statements by ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.

Equity holding of less than 100%

ENTITY NAME

Fiddlesticks LLC
Graymoor Estate Joint Venture
Graymoor Estate Pty. Ltd.
Graymoor Estate Unit Trust
North Para Environment Control Pty. Ltd.

COUNTRY OF 
INCORPORATION

% OF HOLDING

USA
Australia
Australia
Australia
Australia

2018

50.0
48.8
48.8
48.8
69.9

2017

50.0
48.8
48.8
48.8
69.9

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  105  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  105  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP COMPOSITION
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 28 – PARENT ENTITY FINANCIAL INFORMATION

(a) Summary ﬁ nancial information
The individual ﬁ nancial statements for the parent entity show the following aggregate amounts:

Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Net assets

Shareholders’ equity
Issued capital
Share based payments reserve
Retained earnings
Total equity

Proﬁ t for the year
Total comprehensive income

2018
$M

2017
$M

5,945.6
8,296.7
4,858.2
4,858.2
3,438.5

3,240.5
(9.4)
207.4
3,438.5

91.4
91.4

6,398.9
8,749.9
4,863.9
4,863.9
3,886.0

3,540.5
25.8
319.7
3,886.0

9.1
9.1

(b) Financial guarantees
Refer note 17 for ﬁ nancial guarantees to banks, ﬁ nanciers and other persons.

(c) Class action
Refer note 26.

(d) Tax consolidation legislation
The Company formed a consolidated group for income tax purposes with each of its Australian resident subsidiaries on 
21 May 2011. The Company and the controlled entities in the tax consolidation group continue to account for current and 
deferred tax amounts separately. These tax amounts are measured on a ‘group allocation’ approach, under which the 
current and deferred tax amounts for the tax-consolidated group are allocated among each reporting entity in the Group.

(e) Capital commitments
There are no capital commitments for the Company (F17: nil).

NOTE 29 – DEED OF CROSS GUARANTEE

Under the terms of ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, certain wholly owned 
controlled entities have been granted relief from the requirement to prepare audited ﬁ nancial reports. It is a condition 
of the class order that the Company and each of the relevant subsidiaries enter into a Deed of Cross Guarantee whereby 
each company guarantees the debts of the companies party to the Deed. The member companies of the Deed of Cross 
Guarantee are regarded as the ‘Closed Group’ and identiﬁ ed in Note 27.

A summarised consolidated statement of proﬁ t or loss and other comprehensive income, retained earnings reconciliation 
and a consolidated statement of ﬁ nancial position, comprising the Company and those controlled entities which are a 
party to the Deed of Cross Guarantee, after eliminating all transactions between parties to the Deed, at 30 June 2018 
are set out below.

Extract of the statement of proﬁ t or loss and other comprehensive income
Proﬁ t before tax
Income tax expense
Net proﬁ t after tax
Retained earnings at beginning of the year
External dividends
Retained earnings at end of the year

2018
$M

412.4
(96.2)
316.2
(11.1)
(203.7)
101.4 

20171
$M

267.1
(75.2)
191.9
(18.4)
(184.6)
(11.1)

1. Current receivables, investments, current borrowings and retained earnings balances restated to reﬂ ect net presentation of related party

balances previously reported on a gross basis.

106  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
106  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 29 – DEED OF CROSS GUARANTEE (CONTINUED)

Statement of ﬁ nancial position
Current assets
Cash and cash equivalents
Receivables
Inventories
Investments
Assets held for sale
Other current assets
Total current assets

Non-current assets
Inventories
Investments
Property, plant and equipment
Intangible assets
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets

Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Other current liabilities
Total current liabilities

Non-current liabilities
Borrowings
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets

Equity
Contributed equity
Reserves
Retained earnings
Total equity

2018
$M

20171
$M

23.7
1,146.3 
441.3
1.8
29.1
3.2
1,645.4 

542.8
2,663.9 
529.4
410.5
29.4
1.5
4,177.5 
5,822.9 

318.3
1,803.7 
51.0
27.5
3.8
2,204.3 

263.0
18.3
4.8
286.1
2,490.4 
3,332.5 

3,240.5
(9.4)
101.4 
3,332.5 

14.2
1,099.7 
391.5
1.8
20.2
4.0
1,531.4 

473.0
2,663.9 
498.3
408.1
45.2
1.5
4,090.0 
5,621.4 

281.4
1,671.6 
49.8
33.7
4.1
2,040.6 

–
21.6
4.1
25.7
2,066.3 
3,555.1 

3,540.5
25.7
(11.1)
3,555.1 

1. Current receivables, investments, current borrowings and retained earnings balances restated to reﬂ ect net presentation of related party 

balances previously reported on a gross basis.

Current borrowings comprise balances with other entities within the Group. These balances will not be called within 
the next 12 months.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  107  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  107  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 30 – RELATED PARTY DISCLOSURES

Ownership interests in related parties
All material ownership interests in related parties are disclosed in note 27 to the ﬁ nancial statements.

Parent entity
The ultimate parent entity is Treasury Wine Estates Limited, which is domiciled and incorporated in Australia.

Transactions with entities in the wholly-owned Group
Transactions between companies within the Group during the current and prior year included:

• Purchases and sales of goods and services; and

• Provision of accounting and administrative assistance.

Transactions with controlled entities are made on normal commercial terms and conditions.

Transactions with other related parties
The Group entered into transactions which are insigniﬁ cant in amount with executives, non-executive Directors and 
their related parties within normal employee, customer or supplier relationships on terms and conditions no more 
favourable than those available in similar arm’s length dealings.

There were no other transactions with related parties during the current year.

Key management personnel compensation
The following table shows the compensation paid or payable to the key management personnel (‘executives’) of the Group.

Short-term employee beneﬁ ts
Post-employment beneﬁ ts
Share based payments
Termination beneﬁ ts
Total

2018
$

2017
$

 9,503,303
53,126
7,022,129
–
16,578,558

10,067,918
88,765
7,552,707
400,000
18,109,390

Additionally, compensation paid to non-executive directors was $1,787,615 (F17: $1,823,109).

NOTE 31 – REMUNERATION OF AUDITORS

The Audit and Risk Committee has completed an evaluation of the overall effectiveness and independence of the 
external auditor, KPMG. As part of this process, the external auditor has provided a written statement that no 
professional engagement with the Group has been carried out which would impair their independence as auditor. 
The Chairman of the Audit and Risk Committee has advised the Board that the Committee’s assessment is that 
the auditor is independent.

During the year, the following fees were paid or payable for services provided by the auditor of the Group, and its 
related practices:

Audit and review of ﬁ nancial statements and other 
audit work under the Corporations Act 2001
Associate ﬁ rms of Auditor
Audit and review services

Other non-audit services
Total

2018
$

2017
$

1,502,220
447,951
1,950,171

1,542,780
408,338
1,951,118

160,797
2,110,968

156,887
2,108,005

The Group engages KPMG to provide other non-audit services where their expertise and experience best qualiﬁ es them 
to provide the appropriate service and as long as stringent independence requirements are satisﬁ ed. In the year ended 
30 June 2018, KPMG earned fees in respect to the provision of advisory and taxation services.

108  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 32 – OTHER ACCOUNTING POLICIES

New accounting standards and interpretations
Since 30 June 2017, we have adopted the following new and amended accounting standards.

REFERENCE

TITLE

AASB 2016-1

AASB 2016-2

Amendments to Australian Accounting Standards – Recognition of Deferred Tax 
Assets for Unrealised Losses
Amendments to Australian Accounting Standards – Disclosure Initiative: 
Amendments to AASB 107

APPLICATION

1 January 2017

1 January 2017

The adoption of these standards did not have a signiﬁ cant impact on the consolidated ﬁ nancial statements.

Issued but not yet effective accounting standards
The following relevant accounting standards have recently been issued or amended but are not yet effective and have 
not been adopted for this year-end reporting period.

REFERENCE

TITLE

AASB 15
AASB 9
AASB 2014-5
AASB 2014-7

AASB 2015-8
AASB 2016-3
AASB 2016-5

Interpretation 22
Interpretation 23
AASB 2017-4

AASB 16

Revenue from Contracts with Customers
Financial Instruments (December 2014)
Amendments to Australian Accounting Standards arising from AASB 15
Amendments to Australian Accounting Standards arising from AASB 9 
(December 2014)
Amendments to Australian Accounting Standards – Effective Date of AASB 15
Amendments to Australian Accounting Standards – Clariﬁ cations to AASB 15
Amendments to Australian Accounting Standards – Classiﬁ cation and 
Measurement of Share-based Payment Transactions
Foreign Currency Transactions and Advance Consideration
Uncertainty over Income Tax Treatments
Amendments to Australian Accounting Standards – Uncertainty over 
Income Tax Treatments
Leases

APPLICATION

1 January 2018
1 January 2018
1 January 2018
1 January 2018

1 January 2018
1 January 2018
1 January 2018

1 January 2018
1 January 2019
1 January 2019

1 January 2019

Other than the impact of AASB 16 Leases outlined below, these standards are not expected to have a material impact 
on the Group’s ﬁ nancial position or its performance.

AASB 16 Leases
AASB 16 Leases was released in February 2016 by the Australian Accounting Standards Board. This standard 
removes the lease classiﬁ cation test for lessees and requires the Group to bring all material leases with lease terms 
greater than one year onto the balance sheet. There is also new guidance on when an arrangement would meet the 
deﬁ nition of a lease.

The new standard is mandatory for annual reporting periods beginning after 1 January 2019, but is available to 
be early adopted. The Group is in the process of performing an assessment of the potential impact on its consolidated 
ﬁ nancial statements. The Group will be required to recognise new assets and liabilities for its operating leases 
including vineyards, buildings, equipment and motor vehicles, and the nature of the expenses related to those leases 
will change as AASB 16 replaces the straight-line operating lease expense with a depreciation charge for the 
right-of-use assets and interest expense on the lease liabilities.

The Group intends to apply the full retrospective transition option.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  109  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  109  

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2018

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

Other accounting policies

Financial assets
A ﬁ nancial asset is classiﬁ ed as at fair value through 
proﬁ t or loss or fair value through other comprehensive 
income unless it meets the deﬁ nition of amortised cost. 
This is determined on initial recognition.

Financial assets classiﬁ ed as at amortised cost are 
measured initially at fair value and adjusted in respect 
of any incremental and directly attributable transaction 
costs. All other ﬁ nancial assets are measured at fair 
value on initial recognition.

Reclassiﬁ cation occurs only if there are fundamental 
changes to the Group’s business model for managing 
ﬁ nancial assets.

Amortised cost
A ﬁ nancial asset is classiﬁ ed as at amortised cost only 
if the asset is held to collect contractual cash ﬂ ows 
and the contractual terms of the ﬁ nancial asset give 
rise to cash ﬂ ows that are solely payments of principal 
and interest.

A ﬁ nancial asset is measured at amortised cost using 
the effective interest rate method. Any gains and losses 
are recognised through the amortisation process or when 
the ﬁ nancial asset is derecognised or impaired.

Impairment of ﬁ nancial assets
If there is objective evidence that an impairment loss 
on loans and receivables carried at amortised cost has 
been incurred, the amount of the loss is measured 
as the difference between the asset’s carrying amount 
and the present value of estimated future cash ﬂ ows 
(excluding future credit losses that have not been 
incurred) discounted at the ﬁ nancial asset’s original 
effective interest rate (i.e. the effective interest rate 
computed at initial recognition).

The carrying amount of the asset is reduced either 
directly or through the use of an allowance account. 
The amount of the loss is recognised in the statement 
of proﬁ t or loss and other comprehensive income.

The Group ﬁ rst assesses whether objective evidence 
of impairment exists individually for signiﬁ cant 
ﬁ nancial assets, and individually or collectively for 
other ﬁ nancial assets.

Assets that are individually assessed for impairment 
and for which an impairment loss is, or continues to be, 
recognised are not included in a collective assessment 
of impairment. Otherwise the asset is included in a group 
of ﬁ nancial assets with similar credit risk characteristics 
to be assessed for impairment.

If, in a subsequent period, the amount of the 
impairment loss decreases due to an event occurring 
after the impairment was recognised, the loss 
is revised. The reversal of an impairment loss is 
recognised in the statement of proﬁ t or loss and 
other comprehensive income.

Derecognition of ﬁ nancial assets
The derecognition of a ﬁ nancial asset takes place 
when the Group no longer controls the contractual 
rights that comprise the ﬁ nancial instrument.

This is normally the case when the instrument is sold 
or all the cash ﬂ ows attributable to the instrument are 
passed through to an independent third party.

Derivatives
The Group uses derivative ﬁ nancial instruments such 
as foreign currency contracts, interest rate swaps and 
options to hedge its risks associated with interest 
rate and foreign currency ﬂ uctuations. Such derivative 
ﬁ nancial instruments are carried at fair value and 
are ﬁ nancial assets when the fair value is positive 
and ﬁ nancial liabilities when the fair value is negative.

For derivatives that do not qualify for hedge accounting, 
any gains or losses arising from changes in fair value 
are taken directly to proﬁ t or loss for the year.

110  |  TREASURY WINE ESTATES ANNUAL REPORT 2018
110  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)

Fair value hedges
For fair value hedges (for example, interest rate swaps), 
any gain or loss from remeasuring the hedging instrument 
is recognised immediately in the statement of proﬁ t or loss 
and other comprehensive income. Where the adjustment 
is to the carrying amount of a hedged interest-bearing 
ﬁ nancial instrument, the adjustment is amortised to 
the statement of proﬁ t or loss and other comprehensive 
income such that it is fully amortised by maturity.

Cash ﬂ ow hedges
In relation to cash ﬂ ow hedges (forward foreign currency 
contracts) to hedge ﬁ rm commitments, the portion of the 
gain or loss on the hedging instrument that is determined 
to be an effective hedge is recognised directly in equity 
and the ineffective portion is recognised in the statement 
of proﬁ t or loss and other comprehensive income.

When the hedged item gives rise to the recognition 
of an asset or a liability, the associated deferred gains 
or losses are included in the initial measurement 
of the asset or liability.

For all other cash ﬂ ow hedges, the gains or losses that 
are recognised in equity are transferred to the statement 
of proﬁ t or loss and other comprehensive income in the 
same period in which the hedged ﬁ rm commitment 
affects the proﬁ t and loss, for example when the future 
sale actually occurs.

Other accounting policies (continued)

Hedge accounting
For the purposes of hedge accounting, hedges are 
classiﬁ ed as either fair value hedges when they hedge 
the exposure to changes in the fair value of a recognised 
asset or liability; cash ﬂ ow hedges where they hedge 
exposure to variability in cash ﬂ ows that is either 
attributable to a particular risk associated with a 
recognised asset or liability or a forecasted transaction; 
or hedges of a net investment in a foreign operation.

Initial recognition
At the beginning of a hedge relationship, the Group 
designates and documents the hedge relationship and 
the related risk management objective and strategy. 
The documentation identiﬁ es the hedging instrument 
and the hedged item as well as describing the economic 
relationship, the hedge ratio between them and potential 
sources of ineffectiveness. The documentation also 
includes the nature of the risk being hedged and the 
method of assessing the hedging instrument’s effectiveness. 
To achieve hedge accounting, the relationship must be 
expected to be highly effective and are assessed on an 
ongoing basis to determine that they continue to meet 
the risk management objective.

Re-balancing
If the hedge ratio for risk management purposes is no 
longer met but the risk management objective remains 
unchanged and the hedge continues to qualify for hedge 
accounting, the Group will rebalance the relationship 
by adjusting either the volume of the hedged item or the 
volume of the hedging instrument.

Discontinuation
Hedge accounting is discontinued when the hedge 
instrument expires or is sold, terminated or exercised, 
or no longer qualiﬁ es for hedge accounting. At that point 
in time, any cumulative gain or loss on the hedging 
instrument recognised in equity is kept in equity until 
the forecasted transaction occurs. If a hedged transaction 
is no longer expected to occur, the net cumulative gain 
or loss recognised in equity is transferred to proﬁ t or loss 
for the year.

Gains or losses recognised directly in equity are 
reclassiﬁ ed into proﬁ t and loss in the same period or 
periods the foreign currency risk affects consolidated 
proﬁ t and loss.

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  111  
TREASURY WINE ESTATES ANNUAL REPORT 2018  |  111  

DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2018

In the Directors’ opinion:

(a)  The ﬁ nancial statements and notes 1 to 32 are in accordance with the Corporations Act 2001, including:

(i)   complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional 

reporting requirements; and

(ii)  giving a true and fair view of the consolidated entity’s ﬁ nancial position as at 30 June 2018 and of its 

performance for the ﬁ nancial year ended on that date.

(b) there are reasonable grounds to believe that Treasury Wine Estates Limited will be able to pay its debts as and 

when they become due and payable; and

(c)  there are reasonable grounds to believe that members of the Closed Group identiﬁ ed in note 27 will be able to meet 

any obligations or liabilities to which they are or may become subject to, by virtue of the Deed of Cross Guarantee 
described in note 29.

Note 1 conﬁ rms that the ﬁ nancial statements also comply with International Financial Reporting Standards as 
issued by the International Accounting Standards Board.

The Directors have been given the declarations by the Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer as required 
by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

Paul Rayner 
Chairman 

29 August 2018

Michael Clarke
Chief Executive Ofﬁ cer

112  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

 
 
INDEPENDENT AUDITOR’S REPORT

(cid:3)

(cid:3)

Independent Auditor’s Report 

To the shareholders of Treasury Wine Estates Limited 

Report on the audit of the Financial Report 

Opinion 

We have audited the Financial Report of 
Treasury Wine Estates Limited (the 
Company). 

In our opinion, the accompanying Financial 
Report of the Company is in accordance 
with the Corporations Act 2001, including:  

(cid:120)(cid:3) giving a true and fair view of the 

Group’s financial position as at 30 
June 2018 and of its financial 
performance for the year ended on 
that date; and 

The Financial Report comprises:  

(cid:120)(cid:3) Consolidated statement of financial position as at 30 

June 2018; 

(cid:120)(cid:3) Consolidated statement of profit or loss and other 

comprehensive income, Consolidated statement of 
changes in equity, and Consolidated statement of 
cash flows for the year then ended; 

(cid:120)(cid:3) Notes including a summary of significant accounting 

policies; and 

(cid:120)(cid:3) Directors’ Declaration. 

(cid:120)(cid:3)

complying with Australian Accounting 
Standards and the Corporations 
Regulations 2001. 

The Group consists of the Company and the entities it 
controlled at the year-end or from time to time during 
the financial year. 

Basis for opinion 

We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit 
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 

Our responsibilities under those standards are further described in the Auditor’s responsibilities for 
the audit of the Financial Report section of our report.  

We are independent of the Company and Group in accordance with the Corporations Act 2001 and 
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 
Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial 
Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.  

(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)

(cid:46)(cid:51)(cid:48)(cid:42)(cid:15)(cid:3)(cid:68)(cid:81)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:73)(cid:73)(cid:76)(cid:79)(cid:76)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:11)(cid:179)(cid:46)(cid:51)(cid:48)(cid:42)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:180)(cid:12)(cid:15)(cid:3)(cid:68)(cid:3)(cid:54)(cid:90)(cid:76)(cid:86)(cid:86)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)

(cid:3)

(cid:47)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:68)(cid:3)(cid:86)(cid:70)(cid:75)(cid:72)(cid:80)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)
(cid:51)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:47)(cid:72)(cid:74)(cid:76)(cid:86)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17) 

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  113  

 
 
 
 
 
 
INDEPENDENT AUDITOR’S REPORT (CONTINUED)

(cid:3)
(cid:3)

Key Audit Matters 

The Key Audit Matters we identified are: 

(cid:120)(cid:3) Valuation of inventory; and 

(cid:120)(cid:3) Recognition of discounts and rebates. 

Key Audit Matters are those matters that, in our 
professional judgement, were of most significance in 
our audit of the Financial Report of the current period.  

These matters were addressed in the context of our 
audit of the Financial Report as a whole, and in forming 
our opinion thereon, and we do not provide a separate 
opinion on these matters. 

Valuation of inventory (total finished goods and work in progress inventory was $1,922.0 
million) 

Refer to Note 9 Working Capital of the Financial Report. 

The key audit matter 

How the matter was addressed in our audit 

The  valuation  of  inventories  of  finished  goods 
and work in progress, is a key audit matter as we 
need  to  consider  estimates  and  judgements 
made  by  the  Group.  These  include  inherently 
subjective  judgements  about  forecast  demand 
and  estimated  market  sales  prices  at  the  time 
the wine is expected to be sold. We focus our 
work  on  assessing  the  judgments  contained  in 
the valuation models for:  

(cid:120)(cid:3)

(cid:120)(cid:3)

the  period  of  time  over  which  some 
harvested  grapes  are  converted  from  work 
in  progress  to  bottled  wine  ready  for  sale 
(the holding period) which can be a number 
of years depending on the varietal and type 
of wine;  

  These  factors 

forecast  demand  and  market  sales  prices, 
which  can  fluctuate  significantly  over  the 
holding  period  and  are  influenced  by  the 
fundamentals  of  the  global  wine  industry, 
including fluctuations in demand and supply 
and  other  factors  that  impact  agricultural 
outputs. 
influence  the 
Group’s  determination  of  the  most  likely 
market  conditions  at  the  estimated  date  of 
sale.  A  key  indicator  for  at-risk  inventory 
values, including finished goods and work in 
progress 
is  the 
in  the  holding  period, 
identification  of  current  slow  moving  and 
inventories.  These  can  signal 
obsolete 
changes  in  consumer  demand  patterns  or 
potential  over-supply  issues  which  may 
impact forecast prices; and   

Our procedures included: 

(cid:120)(cid:3)

(cid:120)(cid:3)

testing key controls designed by the Group to 
identify slow  moving and obsolete inventories 
(including  wine  held  by  third  party  distributors 
and  retailers),  which  if  existing,  may  indicate 
valuation  issues  with  work  in  progress  and 
finished goods; 

testing year-end inventory valuation models, in 
particular  the  identification  and  valuation  of 
work in progress and finished goods considered 
to  be  ‘at  risk’  (i.e.  where  the  costs  may 
potentially exceed the estimated net realisable 
value  at  the  time  of  sale).    We  used  our 
knowledge  from  the  Group’s  identification  of 
slow  moving  and  obsolete  inventories  and 
underlying  documentation  such  as  forecast 
sales plans, inventory holding reports (including 
wine  held  by  third  party  distributors  and 
future  supply 
retailers),  and  committed 
contracts.    For  a  sample  of  ‘at  risk’  inventory 
we: 

(cid:120)(cid:3) evaluated  the  proposed  inventory  value 
against  the  trends  from  the  underlying 
documentation for consistency; 

(cid:120)(cid:3) assessed 

the 

reasonableness 

of 
management’s  action  plans  in  place  to 
mitigate the risk and enable sale of potential 
at risk inventory above cost; 

(cid:120)(cid:3) comparing,  by  product  grade, 

inventory 
volumes  in  significant  markets  to  both  recent 
and  forecasted  sales  data  to  identify  slow 

(cid:3)

(cid:3)

114  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

 
 
 
 
 
 
 
(cid:120)

of particular interest to us when auditing the
valuation of inventory were the implications
of  the  Group  making  changes  to  their  US
Route  to  Market,  which  included  certain
finished goods that were sold to distributors
being returned to the group.

moving and potentially ‘at risk’ inventories, and 
assessing  the  computation  of  write-downs  of 
inventory to net realisable value. The population 
utilised  for  this  procedure  included  finished 
goods  returned  to  the  group  as  part  of  the 
changes  to  their  US  Route  to  market  that 
remained unsold as at 30 June 2018; 

attending cycle counts and / or year-end stock
takes  in  significant  locations,  which  included
observing  the  process  of  identifying  slow
moving and potentially obsolete inventory;

comparing the estimated net realisable value of
slow  moving  inventories  identified  in  prior
periods to actual sales outcomes subsequently
achieved,  to  assess  the  historical  accuracy  of
the Group’s forecasting process; and

assessing the Group’s inventory valuation
methodologies and the Group’s disclosures in
respect of inventory valuation against the
requirements of relevant accounting
standards.

(cid:120)

(cid:120)

(cid:120)

Recognition of discounts and rebates (Net sales revenue, which is net of trade discounts and 
volume rebates, was $2,429.0 million) 

Refer to Note 3 Revenue of the Financial Report. 

The key audit matter 

How the matter was addressed in our audit 

The Group’s policy is to record net sales revenue 
at the time goods are shipped to customers based 
on the price specified in the sales agreement, net 
of  any  estimated  discount  or  rebate.  In  some 
cases,  the  discount  or  rebate  will  not  be  finally 
determined or paid until the inventory is depleted 
from  the  customer’s  warehouse,  which  may  be 
some  time  after  the  Group’s  sale  date  to  their 
customer.  Sales  agreement  terms  and  historical 
trends  are  used  by  the  Group  to  estimate  the 
discounts. The impact of any one-off events, such 
as the US Route to Market change during the year, 
are considered by the Group in the estimation of 
the accrual. 

At year end, the Group estimates and accrues 
amounts for discounts and rebates they consider 
have been incurred and not yet paid. The Group’s 
estimation of these amounts at the year-end is 
considered a key audit matter due to the 

Our procedures included: 

(cid:120)

(cid:120)

the  appropriateness  of 

considering 
the
Group’s accounting policy for the recognition
and  measurement  of  net  sales  revenue,
including  the  policy  for  recording  discounts
and  rebates,  by  assessing  compliance  with
applicable accounting standards;

testing  the  estimation  of  discounts  and
rebates  accruals.  We  used  underlying
documentation 
customer
such 
agreements,  shipment  and  depletion  data,
claims  for  discounts  and  rebates  along  with
cash  payments  made.  We  evaluated  the
estimate, for a sample of customers, by:

as 

(cid:120)

(cid:120)

checking amounts to the agreements;
and

analysing sales and depletion to date,
and depletion programs expected to

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  115  

INDEPENDENT AUDITOR’S REPORT (CONTINUED)

significance of Group judgements applied and the 
number of unique customer arrangements they 
relate to. For example, the Group’s judgement is 
required to estimate the accrual where discounts 
and rebates are dependent on customers 
achieving annual sales targets and the 
performance year does not align to the Group’s 
financial year. 

Additional audit effort was applied to the 
implications of the Group’s change to their US 
Route to Market during the year. As part of this, 
new customers and distributors needed to be set 
up in the Group’s discounts and rebates 
processes. 

take place in future periods against 
sales budgets, depletion plans and 
actual claims, to assess the estimate of 
discounts and rebates incurred but not 
yet paid. 

testing key controls in significant jurisdictions
for  calculating, 
reviewing  and  approving
discounts and rebates;

challenging  the  nature  and  quantum  of  the
amounts  recorded  by  reference  to  historical
sales,  rebates  paid  and  discounts  paid.    We
also tested, on a sample basis, the nature and
level  of  such  amounts  back  to  contractually
agreed terms;

assessing  the  accuracy  of  the  accrual  in
previous  years  in  order  to  challenge  the
Group’s current year estimation processes;

performing an analysis of the impact of the US
Route  to  Market  change  on  the  underlying
accrual, by using the reduction in the level of
distributor inventory on hand in key States to
analyse  the  reduction  in  the  portion  of  the
accrual relating to those States; and

considering the Group’s disclosures with
respect to revenue, discounts and rebates
accruals against accounting standard
requirements.

(cid:120)

(cid:120)

(cid:120)

(cid:120)

(cid:120)

Other Information 

Other Information is financial and non-financial information in Treasury Wine Estates Limited’s annual 
reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors 
are responsible for the Other Information.  

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not 
express an audit opinion or any form of assurance conclusion thereon, with the exception of the 
Remuneration Report and our related assurance opinion. 

In connection with our audit of the Financial Report, our responsibility is to read the Other 
Information. In doing so, we consider whether the Other Information is materially inconsistent with 
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially 
misstated. 

We are required to report if we conclude that there is a material misstatement of this Other 
Information, and based on the work we have performed on the Other Information that we obtained 
prior to the date of this Auditor’s Report we have nothing to report. 

116  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

(cid:3)
(cid:3)

Responsibilities of the Directors for the Financial Report 

The Directors are responsible for: 

(cid:120)(cid:3) preparing the Financial Report that gives a true and fair view in accordance with Australian 

Accounting Standards and the Corporations Act 2001; 

(cid:120)(cid:3)

implementing necessary internal control to enable the preparation of a Financial Report that 
gives a true and fair view and is free from material misstatement, whether due to fraud or 
error; and 

(cid:120)(cid:3) assessing the Group’s and Company’s ability to continue as a going concern and whether the 

use of the going concern basis of accounting is appropriate. This includes disclosing, as 
applicable, matters related to going concern and using the going concern basis of accounting 
unless they either intend to liquidate the Group and Company or to cease operations, or have 
no realistic alternative but to do so.  

Auditor’s responsibilities for the audit of the Financial Report 

Our objective is: 

(cid:120)(cid:3)

(cid:120)(cid:3)

to obtain reasonable assurance about whether the Financial Report as a whole is free from 
material misstatement, whether due to fraud or error; and  

to issue an Auditor’s Report that includes our opinion.  

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in 
accordance with Australian Auditing Standards will always detect a material misstatement when it 
exists. 

Misstatements can arise from fraud or error. They are considered material if, individually or in the 
aggregate, they could reasonably be expected to influence the economic decisions of users taken on 
the basis of the Financial Report. 

A further description of our responsibilities for the audit of the Financial Report is located at the 
Auditing and Assurance Standards Board website at 
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s 
Report. 

(cid:3)

(cid:3)

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  117  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
INDEPENDENT AUDITOR’S REPORT (CONTINUED)

(cid:3)
(cid:3)

Report on the Remuneration Report 

Opinion 

Directors’ responsibilities 

In our opinion, the Remuneration Report 
of Treasury Wine Estates Limited for the 
year ended 30 June 2018, complies with 
Section 300A of the Corporations Act 
2001. 

The Directors of the Company are responsible for the 
preparation and presentation of the Remuneration 
Report in accordance with Section 300A of the 
Corporations Act 2001. 

Our responsibilities 

We have audited the Remuneration Report included in 
pages 44 to 63 of the Directors’ report for the year 
ended 30 June 2018.  

Our responsibility is to express an opinion on the 
Remuneration Report, based on our audit conducted in 
accordance with Australian Auditing Standards. 

(cid:60)(cid:87)(cid:68)(cid:890)(cid:47)(cid:69)(cid:47)(cid:890)(cid:1004)(cid:1005)(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

(cid:3)

KPMG 

Paul J McDonald 
Partner 
Melbourne 
29 August 2018 

(cid:3)

(cid:3)

118  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

 
 
 
 
 
 
 
 
 
 
 
 
DETAILS OF SHAREHOLDERS, SHAREHOLDINGS 
AND TOP 20 SHAREHOLDERS

DETAILS OF SHAREHOLDERS AND SHAREHOLDINGS

Holding of securities

LISTED SECURITIES 8 AUGUST 2018

Fully paid ordinary shares 

NO. OF
HOLDERS

NO. OF 
SHARES

% HELD BY
TOP 20

61,725 718,663,546

88.40

SIZE OF HOLDING 

1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total

NUMBER

43,183
16,371
1,465
649
57
61,725

As at 8 August 2018, the number of shareholders holding less than a marketable parcel of $500 worth of shares, 
based on the closing market price on that date of $18.05 per share, is 396. 

TWENTY LARGEST SHAREHOLDERS – 8 AUGUST 2018

RANK SHAREHOLDER

NO. OF FULLY PAID
ORDINARY SHARES

% OF FULLY PAID 
ORDINARY SHARES

HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd 
BNP Paribas Nominees Pty Ltd 
Australian Foundation Investment Company Limited
Citicorp Nominees Pty Limited  
CPU Share Plans Pty Ltd 
AMP Life Limited
HSBC Custody Nominees (Australia) Limited
 
National Nominees Limited 
HSBC Custody Nominees (Australia) Limited – GSCO ECA
HSBC Custody Nominees (Australia) Limited – A/C 2
Merrill Lynch (Australia) Nominees Pty Limited
Milton Corporation Limited
BNP Paribas Nominees Pty Ltd 

HSBC Custody Nominees (Australia) Limited
National Nominees Limited 
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.

12.
13.
14.
15.
16.
17.

18.
19.
20.
Total

309,956,854
185,741,864
59,422,152
27,483,300
14,905,734
11,261,977
5,450,000
4,032,638
2,727,407
2,460,710

1,889,974
1,639,000
1,568,851
1,329,818
1,282,097
1,194,085

901,500
711,600
671,559
592,573
635,223,693

43.13
25.85
8.27
3.82
2.07
1.57
0.76
0.56
0.38
0.34

0.26
0.23
0.22
0.19
0.18
0.17

0.13
0.10
0.09
0.08
88.40

SUBSTANTIAL SHAREHOLDERS – 8 AUGUST 2018

The following shareholders have declared a relevant interest in the number of voting shares at the date of giving the 
notice under Part 6C.1 of the Corporations Act.

INSTITUTION

The Capital Group Companies
Blackrock Group
Wellington Management Group

INTEREST (% OF ISC)

8.0
5.3
5.2

TREASURY WINE ESTATES ANNUAL REPORT 2018  |  119  

SHAREHOLDER INFORMATION

ANNUAL GENERAL MEETING

ELECTRONIC COMMUNICATIONS

The Annual General Meeting of the Company will be held 
on Thursday 18 October 2018. Full details are contained in 
the Company’s Notice of Meeting provided to shareholders 
and available on the Company’s website prior to the meeting.

VOTING RIGHTS

Shareholders are encouraged to attend the Annual General 
Meeting; however, when this is not possible, they can use the 
proxy form by which they can express their views.

Shareholders may also lodge a proxy electronically either via 
www.investorvote.com.au using the details printed on their 
personalised proxy form or www.tweglobal.com (in the AGM 
section under the Investors menu) or www.intermediaryonline.
com for custodian voting (subscribers only).

Every shareholder present personally or by proxy, attorney 
or representative has, on a poll, one vote for each fully paid 
share held.

SECURITIES EXCHANGE LISTING

Treasury Wine Estates Limited shares are listed on the 
Australian Securities Exchange under the code ‘TWE’.

Treasury Wine Estates Limited ordinary shares are traded 
in the US in the form of American Depositary Receipts (ADR) 
issued by The Bank of New York Mellon as Depositary.

SHARE BUY-BACK

During the ﬁ nancial year ended 30 June 2018, Treasury Wine 
Estates acquired shares under an on-market share buy-back 
program for a total consideration of $300 million. 19,471,487 
shares were bought back and cancelled resulting in a reduction 
of fully paid shares on issue. 

SHARE REGISTER AND OTHER ENQUIRIES

If you have any questions in relation to your shareholding, 
share transfers or dividends, please contact our share registry:

Computershare Investor Services Pty Limited Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067 Australia

Telephone: 1800 158 360
International: +61 3 9415 4208
Facsimile: +61 3 9473 2500
For faxing Proxy Forms only: +61 3 9473 2555
(outside Australia) or 1800 783 447 (within Australia) 
Website: www.investorcentre.com/contact

Please include your securityholder reference number (SRN) 
or holder identiﬁ cation number (HIN) in all correspondence 
to the share registry. For enquiries relating to the operations 
of the Company, please contact the Investor Relations team on:

Telephone: +61 3 8533 3000
Facsimile: +61 3 9690 5196 
Email: investors@tweglobal.com 
Website: www.tweglobal.com 
Address: 58–82 Queensbridge Street
Southbank Victoria 3006 Australia

ADR Depositary and Transfer Agent: 
BNY Mellon Shareholder Services
462 South 4th Street, Suite 1600
Louisville KY 40202 
United States
Postal address: PO Box 505000 
Louisville KY 40233 – 5000 
United States
Telephone: +1 (201) 680 6825 (1888 269 2377 – toll free)

120  |  TREASURY WINE ESTATES ANNUAL REPORT 2018

The Company has an online share registry facility where 
shareholders can:

• check their current and previous holding balances;

• update their address details;

• update their bank details;

• review their dividend history;

• conﬁ rm whether they have lodged a TFN/ABN exemption;

• elect to receive communications and Company information 
electronically and change their Annual Report election;

• download commonly used forms; and

• elect to receive email notiﬁ cation when dividend statements 

and issuer sponsored holding statements are available 
to view online.

To access the online share registry, log on to www.tweglobal.
com, go to the Shareholder Information section located under 
the Investors menu and click the ‘online share registry’ icon. 
For security and privacy reasons, shareholders will be required 
to verify their identity before they can view their records.

TAX FILE NUMBERS, AUSTRALIAN BUSINESS 
NUMBERS OR EXEMPTIONS

Australian taxpayers who do not provide details of their tax 
ﬁ le number will have dividends subjected to the top marginal 
personal tax rate plus Medicare levy (if applicable). It may be 
in the interests of shareholders to ensure that tax ﬁ le numbers 
have been supplied to the share registry. Shareholders may 
request a form from the share registry or submit their details 
via the online share registry.

CHANGE OF ADDRESS

It is important for shareholders to notify the share registry 
of any change of address. As a security measure, the previous 
address should also be quoted as well as your securityholder 
reference number (SRN). Shareholders may access the online 
share registry to submit their details or download a personalised 
change of address form.

SHAREHOLDER WINE OFFER – 
CELLARDOOR.CO

Shareholders have the opportunity to purchase the Company’s 
wines through Cellardoor.co.

Cellardoor.co is an exclusive members-only wine community 
for shareholders, friends and family of Treasury Wine Estates. 
The virtual cellar door offers a range of wines across the 
Treasury Wine Estates portfolio. Members of Cellardoor.co 
have access to award winning wines, exclusive pricing and 
member-only events.

Shareholders can register for Cellardoor.co by calling 1300 846 
863 or by visiting https://cellardoor.co/shareholders2018.
Information about Cellardoor.co is also included in the welcome 
letter provided to new shareholders.

TREASURY WINE ESTATES LIMITED

ABN 24 004 373 862

COMPANY SECRETARY

Fiona Last LLB (Hons), B.Com, FGIA

REGISTERED OFFICE

58–82 Queensbridge Street
Southbank Victoria 3006
Australia
Telephone: +61 3 8533 3000

W W W.TWEGLOBAL.COM