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9
ANNUAL REPORT 2019
ABOUT TWE
Treasury Wine Estates (TWE) is one of the world’s leading wine
companies, listed on the Australian Securities Exchange. With
a portfolio of outstanding wine brands, prized viticultural assets
and world-class production facilities, the Company’s commitment
to delivering shareholder value is underpinned by its passion
for crafting, marketing and selling quality wine for consumers.
It achieves this through building sustainable partnerships with
customers and other industry partners, globally. TWE employs
approximately 3,500 talented people across four key regions,
with wine sold in more than 100 countries around the world.
3,500
employees
100+
countries
4
regions
13,000
hectares
We employ approximately
3,500 talented people
across the globe
Our iconic wines are sold
in more than 100 countries
across the world
We are focused on four
principal regions across
the world: Australia
and New Zealand;
the Americas; Europe;
and Asia
We access approximately
13,000 planted hectares
of vineyards in
some of the world’s
most sought-after
winemaking regions
CONTENTS
Our Locations
At a Glance
Chairman and Chief Executive Officer’s Report
Brand Highlights
Operating and Financial Review
Corporate Responsibility
Diversity and Inclusion
Board of Directors
Corporate Governance
Directors’ Report
Auditor’s Independence Declaration
F19 Remuneration Report (Audited)
1
2
3
6
10
30
32
34
36
40
43
44
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Details of Shareholders, Shareholdings
and Top 20 Shareholders
Shareholder Information
64
65
66
67
68
112
113
119
120
IMPORTANT INFORMATION
This report contains certain forward looking statements, which may be identified by the use of terminology including ‘expects’, ‘believes’, ‘targets’,
‘likely’, ‘should’, ‘could’, ‘intends’, ‘aims’ or similar expressions. Indicators of and guidance on future earnings and financial position are also forward
looking statements. These forward looking statements are not guarantees or predictions of future performance and involve known and unknown
risks, uncertainties and other factors, many of which are beyond the control of TWE, and 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. Readers are cautioned
not to place undue reliance on forward looking statements.
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 ‘F19’ and ‘F20’ are to the periods 1 July 2018 to 30 June 2019 and 1 July 2019 to 30 June 2020 respectively.
All currency referred to in the report is in Australian dollars, unless otherwise stated.
In this report Hong Kong Special Administrative Region of the People’s Republic of China has been referred to as ‘Hong Kong’.
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 ANZ MAGILL,
SOUTH AUSTRALIA
TWE ANZ
MARLBOROUGH
TWE ANZ
MELBOURNE, VICTORIA
AUSTRALIA & NEW ZEALAND2
AMERICAS2
EUROPE2
AU
AU
AU
72
vineyards
8,651
planted hectares
8
wineries
NZ
NZ
NZ
9
vineyards
498
planted hectares
1
winery
US
US
US
44
vineyards
3,728
planted hectares
7
wineries
EU
EU
EU
2
vineyards
148
planted hectares
1
winery
AUSTRALIA
Corporate head office:
Melbourne, Victoria
NEW ZEALAND
Country head office:
Marlborough
ASIA
SOUTH EAST ASIA
Regional head office:
Singapore
NORTH ASIA
Regional head office:
Shanghai, China
US
Regional head office:
Napa Valley, California
Regional head office:
Oakland, California
UK
Regional head office:
Twickenham, Middlesex
ITALY
Country head office:
Gabbiano, Tuscany
1. Locations marked on the global map represent corporate and regional head offices. TWE also maintains other major operations across
all regions of its business.
2. Information current as at 30 June 2019.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 1
AT A GLANCE1
• F19 EBITS2 up 25% to $662.7 million; EBITS margin accretion
of 1.6 percentage points to 23.4%
• EPS (before material items and SGARA) up 17% to 60.4 cents per share
• Return on Capital Employed accretion to 14.9%
• F19 EBITS growth contributed to a 5 year EBITS CAGR3 of 30%;
EBITS growth of 15% to 20% in F20 reiterated4
• Final dividend of 20 cents per share (fully franked); F19 annual
dividend of 38 cents per share, up 19% on the prior period
EBITS
(A$ million)
EPS (BEFORE MATERIAL ITEMS AND SGARA)
(Earnings Per Share) (cents)
.
7
2
6
6
2
.
0
3
5
1
.
5
5
4
25%
increase
2
.
4
3
3
1
.
5
2
2
.
4
0
6
8
.
1
5
17%
increase
8
.
9
3
5
.
0
3
9
.
1
2
F15
F165
F17 F18 F19
F15
F165
F17 F18 F19
ROCE
(Return on Capital Employed) (%)
MARKET CAPITALISATION
(A$ million)
.
9
4
1
6
.
2
1
6
.
1
1
2.3 ppts
increase
3
9
.
8
6
.
13.16
9.23
4.90
.
9
3
1
7
9
,
.
0
3
1
8
6
,
.
2
1
9
1
3
,
17.39 14.92
0
.
0
0
5
2
1
,
.
0
9
2
7
0
1
,
14%
decline in market
capitalisation
F15
F165
F17 F18 F19
F15
F16
F17 F18
F19
Share price
($ at 28 June)
1. Unless otherwise stated, all figures and percentage movements are stated on a reported currency basis and are subject to rounding.
2. Earnings before interest, tax, SGARA and material items.
3. Compound Annual Growth Rate.
4. Assuming no material changes due to vintage or foreign exchange movements. Does not include impacts from the application of AASB 16
Leases or one-off charges of approximately $35 million associated with the expansion of Luxury winemaking infrastructure in South Australia.
5. F16 ROCE, EPS and EBITS were restated in F17 in accordance with revised accounting standards.
2 | TREASURY WINE ESTATES ANNUAL REPORT 2019
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT
PAUL RAYNER
Chairman
MICHAEL CLARKE
Chief Executive Officer
INTRODUCTION
Dear shareholders,
We are pleased to present the 2019 Annual Report
for Treasury Wine Estates Limited.
Fiscal 2019 represented another year of high-quality
financial results for our shareholders, and affirmed
our enduring commitment to delivering against our
Company strategy, as the world’s only truly global
wine company.
We maintained strong momentum in our performance,
which was evident through our focus on premiumisation,
the disciplined investments we have made in our
business and the exceptional execution by our
global team.
Our competitively advantaged business models
and collaborative customer partnerships have
enabled the team to continue to deliver strong
growth, even in the face of some industry challenges
during the year in the current competitive and
macro-economic landscape.
Fiscal 2019 represented another
year of high-quality financial
results for our shareholders, and
affirmed our enduring commitment
to delivering against our Company
strategy, as the world’s only truly
global wine company.
OVERVIEW OF RESULTS
In F19, Group EBITS increased 25% to $662.7 million,
delivering a five year EBITS CAGR of 30%, while
our EBITS margin increased 1.6 percentage points
to 23.4%, demonstrating continued progress on our
journey to a Group EBITS margin of 25% and beyond.
We were particularly pleased with the growth of
our Luxury and Masstige brands, which grew 27%
and now represent 69% of total net sales revenue
in F19 – up from 43% when we started our journey
of premiumisation five years ago.
Critical progress was made throughout the year
on a number of important initiatives as part of
our strategy. In the Americas, we completed our
first full financial year operating under the new
route-to-market model, delivering growth despite
the period of significant operational change,
and within a challenging US wine market. Our
performance in the Americas has been delivered
through collaboration with both our distribution
and retail partners, and importantly, we still
see significant opportunity to drive improvement
and fully capture the new opportunity for our
business in the US.
In Asia we have continued to optimise our routes-
to-market, and in China specifically we have again
delivered outstanding growth by leveraging our
competitively advantaged business model, and
focusing on expanding availability of Luxury wine
across the country. As highlighted previously,
our business model focuses on distribution through
our own local team who directly own and manage
relationships with our wholesale and retail partners.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 3
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT (CONTINUED)
This competitively advantaged model positions us apart
from other players, and we believe that companies
like TWE, who have actively invested in their model
to drive direct engagement, are best placed to succeed
in China over the long term. As we continue to consider
increasing our presence and being part of the fabric
of China, we will continue to invest in our business
model to realise the long-term potential of our business
in Asia.
Our diverse portfolio of brands continued to drive
growth and gain recognition on the world stage, with
Penfolds again recognised as the World’s Most Admired
Brand in 2019 by Drinks International and 19 Crimes
earning ‘Hot Brand’ status from Impact Magazine
in the US for its sustained market success. As a true
demonstration of category leadership, TWE’s Living
Wine Labels augmented reality app went from
strength to strength in F19, surpassing four million
downloads globally. Available in multiple languages
and markets around the world, Living Wine Labels
brings interactive brand experiences across 19 Crimes,
Wolf Blass, Matua, Beringer Bros., Maison de Grand
Esprit, Penfolds and Squealing Pig to life on the
wine bottle.
All regions contributed to our F19 result, with key
highlights as follows:
• Americas reported 13.3% EBITS growth to
$218.7 million and an EBITS margin of 19.3%
whilst successfully embedding route-to-market
changes and investment in the US. Premiumisation
continues to be a key driver of performance,
with increased Luxury and Masstige volumes
complemented by growth in Canada and
Latin America.
• Asia reported 43% EBITS growth to $293.5 million
and an EBITS margin of 39.2%, driven by increased
availability of Luxury wine, growing demand for
TWE’s portfolio of brands and outstanding execution.
TWE continues to invest in driving distribution,
brand building and organisational capability
throughout the region to support future growth.
• Australia and New Zealand (ANZ) reported 15%
EBITS growth to $156.5 million and an EBITS
margin of 26%, driven by growth across the
Masstige and lower Luxury portfolios, improving
performance in the on-premise channels and an
ongoing focus on managing costs.
• Europe reported 3.8% EBITS growth to $51.4 million
and an EBITS margin of 14.9%, driven by targeted
investment behind priority brands in focus markets
throughout the region.
CORPORATE RESPONSIBILITY
At the heart of the Company is a commitment to being
sustainable in everything we do. In F19 we continued
to integrate an even greater environmental, social
and governance (ESG) focus across the business,
and delivered against our Corporate Responsibility
framework, which is structured against four key
pillars of Performance, Planet, People and Product.
In F19 we are proud to present the Company’s second
annual Sustainability Report, which outlines our
achievements in this important area. Our work is
informed by relevant best practice initiatives and
frameworks including the Global Reporting Initiative
(GRI), the United Nations (UN) Global Compact,
and the UN Sustainable Development Goals
(SDGs). TWE has identified seven priority SDGs
with which to align the Company, and remains
committed to delivering programs that contribute
to their achievement.
With the health, safety and wellbeing of our people
being paramount, we refined our Global Workplace
Health, Safety and Wellbeing strategy, acting with
the knowledge that a strong safety culture underpins
our business performance. We continued the delivery
of our Destination Zero Harm program, which ensures
everyone keeps safety top of mind, and we introduced
an ‘I Care’ initiative, which encourages everyone
at TWE to demonstrate care for each other’s health
and safety, for their quality of work, and for the
environment. We also led an increase in the number
of safety conversations held by team members,
as a measure of leadership’s engagement on health
and safety with people across our business.
4 | TREASURY WINE ESTATES ANNUAL REPORT 2019
BALANCE SHEET STRENGTH AND DIVIDEND
THANKS AND CONCLUSION
TWE maintains financial metrics that are consistent
with an investment grade credit profile. The Company’s
balance sheet continues to be strong, efficient and
flexible. Lease adjusted net debt/EBITDAS was 1.7x
in F19, representing a reduction of 0.2x in the year.
Total capex for the year was $160 million of which
maintenance and replacement spend was $132 million,
in line with our guidance. Growth capex of $28 million
represented investment in vineyard acquisitions, IT
systems and Simplify for Growth initiatives, which
continuously focus on identifying opportunities to
remove complexity and improve operational efficiency.
Cash conversion of 75.8% was above the guided 60-70%
range, a result of cycling through route-to-market
changes, an improved sales order profile in the US,
and efficient inventory management for the 2019
Australian vintage. Excluding TWE’s F19 investment
in non-current Luxury and Masstige inventory, which
will be released in future years to support earnings
growth, cash conversion was 92.4%.
Earnings Per Share increased 18% to 58.4 cents per
share, and Return on Capital Employed increased
2.3 percentage points to 14.9% – another year of
significant incremental returns for our shareholders
– and a reflection of our disciplined and sustainable
approach to managing our capital base.
Given the Company’s strong result in F19, TWE
is pleased to declare a final dividend of 20 cents
per share, fully franked, which brings the total
dividend for F19 to 38 cents per share, up 19%
on the prior year.
Looking ahead, TWE is well placed to continue
the successful execution of its premiumisation
strategy in F20 and beyond. The 2019 Australian
vintage represents yet another outstanding
Luxury intake for TWE, and current investments
in French production assets and Australian Luxury
winemaking capacity will support the next phase
of the premiumisation journey.
Further strengthening of the Company’s route-to-
market remains a priority, particularly in the US
and Asia, both of which remain attractive regions
for premium wine consumption and where TWE
sees significant opportunity to continue growing
a focused portfolio of brands.
The Simplify for Growth program, targeting
operational efficiency and enhanced returns from
brand building investment will continue to support
cost optimisation, and TWE will increasingly
leverage the newly established Global Business
Services function over time.
We would like to acknowledge the outstanding
efforts of our people, who have consistently embodied
our growth behaviours of focus, belief, trust and
collaboration to deliver such a strong set of results.
At the same time, they have demonstrated care not
only for each other but for the results of the Company,
and displayed tremendous resilience in the face of
industry challenges across the year. We are proud
to have such a diverse, high calibre team that is
committed to realising the potential for our business.
In closing, we would like to extend our thanks to you,
our shareholders, for your ongoing belief, investment
and support of TWE.
Kind regards,
Paul Rayner
Chairman
Michael Clarke
Chief Executive Officer
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 5
BRAND HIGHLIGHTS
PENFOLDS
INTRODUCING
PENFOLDS SPECIAL
BOTTLINGS
In F19 Penfolds launched Special Bottlings, a unique
new tier inspired by Penfolds founders Mary and
Christopher Penfold, pioneers who dreamed big,
and had ambition and determination. This range,
which includes a Pot Distilled Single Batch Brandy
and a Spirited Fortified Wine with Baijiu, pushes
the boundaries with an eclectic mix of experimental
products outside of table wine. Penfolds Special
Bottlings is a true reflection of the Penfolds spirit and
a symbol of how the team works – yesterday and today.
SEPPELT
SEPPELT ANNOUNCES
MAJOR PARTNERSHIP
WITH AUSTRALIA’S
PREMIER RACING CLUB
In August 2018, Seppelt was announced as a Major
Partner of the Melbourne Cup Carnival and Victoria
Racing Club (VRC). The announcement includes
naming rights of Seppelt Wines Stakes Day and builds
on a 40-year partnership between TWE and the VRC.
Seppelt had a strong presence throughout the 2018
Carnival with the Seppelt Marquee in the Birdcage
enclosure and Seppelt Bar in The Park precinct.
A selection of wines were available from additional
venues at Flemington and in celebration of the new
partnership, the winery’s 2008 Show Sparkling was
previewed exclusively at the Seppelt Marquee.
6 | TREASURY WINE ESTATES ANNUAL REPORT 2019
WOLF BLASS
WOLF BLASS
SPONSORS ICC
AND RE-SIGNS AFL
Wolf Blass continues its affiliation with world sport,
showcasing athletic journeys to triumph and owning
the ‘celebrate together’ moments. In F19, Wolf Blass
re-signed as ‘Official Wine of the AFL’, continuing
a proud partnership extending from 2015. The brand
also proudly sponsored the ICC Cricket World Cup
in England and Wales, which is part of a three-year
global partnership with the International Cricket
Council and includes Official Wine Partner status
of the ICC World T20 in Australia in 2020.
19 CRIMES
19 CRIMES
EARNS INDUSTRY
APPLAUSE
19 Crimes, one of the fastest growing brands
in TWE’s portfolio, gained further recognition
in F19 through numerous prestigious industry
awards. For the third consecutive year, it earned
‘Hot Brand’ status in the US from Impact Magazine,
acknowledging its market success. As the first wine
brand to bring augmented reality to wine labels,
19 Crimes was also awarded a GOLD at the 2019
REGGIE awards competition, which recognises the
best marketing campaigns activated by brands and
agencies. This year, 19 Crimes also earned the most
nominations of any company at the REGGIE awards
for the Shopper Marketing Campaign category.
HOT
BRAND
Download the Living Wine Labels app and
watch the convicts come to life to tell their stories
PENFOLDS
AM 6414- 0119 Crimes_QuarterPage_90x135_FA.indd 1
24/1/19 10:14 am
DOWNLOAD
the Living Wine
Labels app
EXPERIENCE
the story behind
the wine
SCAN
the bottle with
your phone camera
PENFOLDS AND
CHAMPAGNE HOUSE
THIÉNOT ANNOUNCE
CHAMPAGNE
COLLABORATION
Penfolds unveiled a new collaboration with
family-owned Champagne House Thiénot. Three
Champagnes, from the 2012 vintage, were created.
This symbolically celebrates Penfolds 175th
anniversary and marks the start of a wonderful
French and Australian wine alliance. The inaugural
global launch was held at The Ritz in Paris with
an international guest list which included friends
and a cross section of media from around the world.
ST HUBERTS THE STAG
ST HUBERTS THE STAG
ON SERVE AT THE
AUSTRALIAN OPEN
TWE was announced as an official wine supplier
of The Australian Open 2019. On-site activations
were led by St Huberts The Stag, with The Vault
– a branded tasting room that provided a complete
cellar door experience in the heart of the Grand
Slam Oval. In addition, wine from the TWE
portfolio including Penfolds, Wynns and Seppelt
were showcased across the two-week event,
which saw more than 796,000 fans attend.
OFFICIAL
WINE
SUPPLIER
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 7
BRAND HIGHLIGHTS (CONTINUED)
SQUEALING PIG
SQUEALING PIG
BREAKS NEW
TERRITORY FOR WINE
In August 2018, Squealing Pig introduced 250ml
wine in cans in Australia. The new spritzed rosé
and pinot grigio varietals are now the top two wine
in cans sold in Australia1. The format opens up wine
to more occasions and consumers who are attracted
to the refreshing taste, convenience, portability
and portion size. In June 2019 the quirky
brand also launched a rosé gin in Australia,
and a global collection of emerging varietals
from five countries-of-origin in Europe.
NEW
PRODUCT
LIVING WINE LABELS
LIVING WINE LABELS
GROWS GLOBALLY
As a company leading the way with bringing augmented
reality to wine labels, TWE’s Living Wine Labels app
has gone from strength to strength in F19, surpassing
four million downloads globally and rating in the top
0.63% of Android apps2. The app is available in multiple
languages and markets around the world including the
US, Australia, China, South Korea, the UK and Canada.
Interactive brand experiences across 19 Crimes, Wolf
Blass, Matua, Beringer Bros., Maison de Grand Esprit
and Squealing Pig have earned the unique platform a
raft of accolades including ‘Top Innovation of the Year’
by Chinese industry media at the Chengdu Wine Fair,
a GOLD at the 2018 REGGIE marketing awards in
the US and a Silver Effies US award for Marketing
Innovation under the Existing Channel category.
MAISON DE GRAND ESPRIT
MAISON DE GRAND
ESPRIT SPONSORS
BEIJING DESIGN WEEK
As Official Wine Partner of 2018 Design China Beijing,
Maison de Grand Esprit hosted a wine bar located at
the central hub of the exhibition and created a series
of four workshops by top Chinese modern designers –
Qian Qingtong, Guangci Qu, Naihan Li, Zhoujie Zhang,
which included wine tastings as well as exploring
design and inspiration shared through the designers’
own unique stories.
1. IRI Aus Liquor Unwtd Volume Canned Wine MAT to 12/05/19
2. Statista 2019
8 | TREASURY WINE ESTATES ANNUAL REPORT 2019
WOLF BLASS
WOLF BLASS
GREY LABEL
CELEBRATES 50 YEARS
In 1967, Wolfgang Blass created the first Grey Label
wine (1967 vintage), a blend of 70% Cabernet and
30% Shiraz. This was the first wine to bear the Wolf
Blass name. In 2019 we celebrate 50 years of this
much-loved label with the release of the 2017 Grey
Label Cabernet Shiraz and 2017 Grey Label Shiraz.
Wolf Blass Grey Label red wines are unique and
distinctive, rich in regional character and varietal
expression. Highly acclaimed and proudly iconic, the
Grey Label range offers benchmark South Australian
reds from exceptional vineyards, crafted with the
character to age impeccably yet with plush, rich,
mid-palate fruit that allows for immediate enjoyment.
GLOBAL
RELEASE
PENFOLDS
RELEASES
COLLECTION 2018
IN NEW YORK
Penfolds officially launched The Penfolds
Collection 2018 in the cultural epicenter of New York,
the first ever global release in the United States
of America. This once-in-a-lifetime event marked
the next step for Penfolds to establish a strong
footprint in the US market and engage a new base
of loyal customers. The gala evening brought to
life Penfolds illustrious history and distinguished
heritage, first established in 1844, for globally
recognised tastemakers and industry insiders
alike at Cedar Lake in West Chelsea, Manhattan.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 9
PENFOLDS
PENFOLDS RECOGNISED
AS THE WORLD’S MOST
ADMIRED WINE BRAND
2019 – BY DRINKS
INTERNATIONAL
The prestigious award is voted
by an international panel of more
than 200 wine buyers, masters of
wine and wine writers. Penfolds
has been acknowledged in the top
five brands on the list since the
awards commenced in 2011 and first
received the top accolade in 2016.
BEAULIEU VINEYARD
BEAULIEU VINEYARD
GEORGES DE LATOUR
AUCTION LOT ATTRACTS
$260,000 BID
At the 39th Auction Napa Valley Fundraiser, the most
celebrated charity wine auction in the US held by the
Napa Valley Vintners, Beaulieu Vineyard was honored
to sell the 80th anniversary Georges de Latour
Private Reserve Cabernet Sauvignon Celebration Lot
for $260,000, contributing a significant amount to
the nearly $12 million raised for the Napa Valley
community, helping return the spotlight to Beaulieu
Vineyard on Napa’s biggest stage.
OPERATING AND FINANCIAL REVIEW
Treasury Wine Estates (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 for consumers around
the world.
The following Operating and Financial Review
contains details of the significant changes in TWE’s
state of affairs that occurred during the year ended
30 June 2019.
TWE’S BUSINESS ACTIVITIES
TWE’s business activities in fiscal 2019 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, France and other regions.
TWE employs approximately 3,500 winemakers,
viticulturists, sales, distribution and support staff
across the globe.
TWE’S ORGANISATIONAL STRUCTURE
AND SIGNIFICANT CHANGES IN THE
STATE OF AFFAIRS
TWE continues to be focused on four regional segments:
• Australia and New Zealand (ANZ)
• Americas
• Europe
• Asia
During the year, TWE made a series of management
changes:
• Linnsey Caya (previously, Chief Legal Officer and
Global General Counsel) was appointed Chief People
and Legal Officer, based in Oakland (effective
1 September 2018);
• Katie Hodgson (previously, Senior Human Resources
Director ANZ and Global Talent and Capability) was
appointed General Manager People and Capability,
based in Melbourne (effective 1 September 2018);
• Tim Ford (previously, Deputy Chief Operating
Officer) was appointed Chief Operating Officer,
based in Melbourne (effective 19 January 2019);
• Angus McPherson (previously, Managing Director ANZ
and Europe) was appointed Managing Director ANZ,
Europe, South East Asia, Middle East and Africa,
based in Melbourne (effective 15 February 2019);
• Tom King (previously, Managing Director Europe)
was appointed Chief Operating Officer – Asia
(effective 1 November 2018) and was subsequently
appointed Managing Director North Asia, based
in Shanghai (effective 18 February 2019);
• Michael Brooks was appointed Director Global
Supply Chain, based in Melbourne (effective
25 February 2019); and
• Carolyn Coon (previously Global Director Corporate
Communications) was appointed Global Director
Corporate Affairs, based in Melbourne (effective
14 March 2019).
These appointments continue to reflect the flexibility
and depth of TWE’s global talent pool at the executive
leadership level.
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 2019
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 significant changes in the
state of affairs of the Group during the financial year.
TWE owns and leases 9,149 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 also owns and/or operates 3,728
planted hectares in key viticultural regions in
California, including Napa Valley, Sonoma County,
Lake County and the Central Coast.
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.
Organisational focus on optimising production costs
across TWE’s global business continues 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 eight 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; and
• In Europe, TWE owns one winery in Italy and on
27 July 2019 TWE acquired a winery in France.
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
23%
47%
US
17%
18%
New Zealand
28%
67%
Italy
21%
7%
France
TWE owned/leased vineyards
Grower contracts
Third party produced wine
30%
65%
5%
72%
100%
Proactively taking steps to de-risk TWE’s global
sourcing model by embedding flexibility and
diversification across geographic regions, varietals
and price segments continues to be a driver of the
Company’s sourcing strategy.
By embedding a diversified 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.
This diversification and flexibility also enables
TWE to react to changes in consumer and
customer preferences.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 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 portfolio 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 the net sales revenue (NSR) and earnings before interest, tax, SGARA and material items
(EBITS) contribution by region in F19.
Figure 2: TWE’s business performance by region in F19
Net sales revenue ($M)
EBITS contribution2 ($M)
ANZ 21%
Americas 40%
Europe 12%
Asia 27%
ANZ 22%
Americas 30%
Europe 7%
Asia 41%
GLOBAL INDUSTRY OVERVIEW
Global wine production and consumption
Global wine production increased by 17% in 2018, driven by increased production in Italy, France and Spain,
where 2017 vintages were affected by weather.
Consumption remained broadly in line with the prior year with increased consumption in the United States,
the world’s largest wine consumer, largely offset by lower total consumption in the United Kingdom and China.
Figure 3: Global wine production and consumption3
11.0
10.0
9.0
8.0
7.0
a
h
m
6.0
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Global vineyard area
Global wine production (RHS)
Global wine consumption* (RHS)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018 F
2017
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 $57.4 million.
3. International Organisation of Vine and Wine (OIV).
12 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED)
While total wine consumption volume is forecast to decline in some markets due to a flat to declining
Commercial segment, consumer demand remains strong at the Masstige and Luxury price points
and this is expected to continue, driving total wine category value growth.
Figure 4: Forecast five-year compound annual growth rate (CAGR)
in wine consumption in key growth areas and markets4
COUNTRY
China
Canada
New Zealand
US
Japan
Australia
United Kingdom
Figure 5: Value growth by price point
United States of America5
United Kingdom6
>$20
$8–$20
<$8
-3%
-3%
7%
11%
4%
5%
£8+
£6–£8
-4%
-7%
<£6
CAGR (2018 – 2022F)
9.8%
1.2%
0.7%
(0.5%)
(1.2%)
(1.9%)
(2.9%)
7%
13%
9%
17%
Mkt MAT to June 19
Mkt MAT to June 18
Mkt MAT to June 19
Mkt MAT to June 18
Australia7
Value growth of Australian bottled wine
exports (freight on board) to China8
>$20
6%
11%
17%
>$20
146%
$10–$20
3%
3%
<$10
-3%
-1%
$10–$20
45%
43%
<$10
-7%
41%
41%
Mkt MAT to June 19
Mkt MAT to June 18
Mkt MAT to June 19
Mkt MAT to June 18
4. IWSR 2018, Still wine only, volume growth.
5. IRI Market Advantage, Table $4+, Still bottled wine only, MAT to 30 June 2019.
6. Nielsen (750mL bottled still wine only) MAT to 16 June 2019.
7. Aztec Sales Data | Off-premise Channel Only | Bottled wine only | Weighted MAT to 7 July 2019.
8. Wine Australia MAT to June 2019.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 13
TWE VISION AND STRATEGY
TWE’s strategic vision and strategic imperatives have remained consistent over the last five years
and are set out in Figure 6:
Figure 6: TWE’s vision and strategy
VISION
JOURNEY
STRATEGIC
IMPERATIVES
ACTIONS
To be the world’s
most celebrated wine company
Together we boldly lead change in the world of wine
PEOPLE
BRANDS
MARKETS
PARTNERS
MODEL
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
Transform
our portfolio
Win in priority
markets
Develop
long-term
relationships
Optimise our
capital base
• 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
• Grow share in
Asia through
route-to-
market (RTM)
and portfolio
expansion
• Grow in
US through
premiumisation
and RTM
optimisation
• Expand
no.1 position
in Australia
through category
leadership
• Protect
profi tability
in other key
markets
• 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
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 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) STRATEGIC IMPERATIVE
PROGRESS AGAINST INITIATIVE IN F19
PEOPLE
Build a high-
performing
organisation
• Drive an inclusive,
supportive and
collaborative culture
• Grow capability now
and for the future
• Operate an efficient and
sustainable structure
In F19, TWE achieved the following:
• Grew our capability, now and for the future, through:
– Delivering capability campaigns to build business acumen and understanding of our
wine value chain through ‘Inspiring Growth: Vintage 19’, which was attended by more
than 500 employees in Australia and over 400 employees in the Americas region;
– Launching LinkedIn Learning globally, a world-class on-demand online learning
platform – providing access for all TWE employees to new and emerging skills,
as well as TWE curated content; and
– Strengthening functional capability with the launch of the TWE Way of Marketing,
and Global Hospitality Academy, in addition to the continued roll out of TWE’s Global
Sales Academy.
• Fostered a diverse, inclusive and collaborative culture through various initiatives,
including expanding our TWEforSHE program to include Executive Leadership Team
sponsorship for high potential/high performing women, with the objective of building our
pipeline of senior female leaders; along with the continued implementation of TWE Tasker,
our on-the-job, cross functional development program.
• Operated an efficient and sustainable structure in support of our business goals, including
the introduction of a Global Business Services team 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 F19, TWE achieved the following:
• Accelerated Penfolds global luxury status through:
– Driving strong increase in global demand leveraging new campaign and luxury
credential building initiatives in key luxury markets – Asia and North America,
launching our annual Penfolds collection in New York City;
– Building trust marks through Penfolds Special Bottlings and Limited Release wines;
– Global launch of Thiénot x Penfolds Champagne; and
– Commemoration of its 175-year milestone.
• 19 Crimes maintained strong growth through global expansion, disruptive marketing,
in-store display and innovation into adjacent categories.
• Squealing Pig became Australia’s #1 Rosé and named best Rosé in the World
(Best Wine of the World competition), expands into gin and launches in the UK.
• Launched category led innovation to deliver Refreshment opportunities – Main
& Vine Spritzer cans and Sterling aluminium bottles in US, as well as T’Gallant
and Squealing Pig cans in Australia.
• Launched French sourced Beaulieu Vineyard for China to extend portfolio and distribution
and leverage the brand’s French heritage.
In F19, TWE achieved the following:
• Expanded distribution penetration in China into more cities and across more partners
through increased allocation of Luxury wine.
• Fully embedded 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 and Wolf Blass and a continued
focus on priority markets.
MARKETS
Win in priority
markets
• Grow share in Asia through
RTM and portfolio expansion
• Grow in US through
premiumisation and
RTM optimisation
• Expand no.1 position
in Australia through
category leadership
• Protect profitability
in other key markets
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 15
STRATEGIC IMPERATIVE
PROGRESS AGAINST INITIATIVE IN F19
PARTNERS
Develop
long-term
relationships
• Connect and engage
with consumers
• Partner with key customers
to grow wine category
• Drive performance for
all stakeholders
In F19, TWE achieved the following:
• Living Wine Labels achieved over 4 million global downloads and the app was launched
into China. The platform has been the recipient of multiple Marketing Effectiveness
awards, including the Effies US – Silver (Media innovation – Existing Channel), Chengdu
Wine Fair (Top 10 Marketing Innovation of the Year, 2018-2019), Reggie – Silver
(Creativity & Innovation).
• TWE and Wolf Blass continued their affiliation with world sport, re-signing as ‘Official
Wine of the AFL’ and also sponsoring the ICC Cricket World Cup in England and Wales
in 2019.
• TWE and Seppelt partnered with the Victoria Racing Club and the Melbourne Cup Carnival,
acquiring the naming rights for the final day of racing, Seppelt Wines Stakes Day.
• TWE’s new route-to-market in the US has facilitated 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 F19, 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; achieving a 50% reduction in our
Serious Incident Frequency Rate from 3.4 to 1.7 in F19.
• Invested in the development of mental health awareness and mental health management
programs to be implemented in F20.
• Continued optimisation of TWE’s viticultural asset footprint including optimising balance
between demand and supply for all varietals.
• Increased access to Luxury and Masstige fruit to drive future premiumisation via select
vineyard and winery acquisitions, investment in winemaking capability and access to
third party grower contracts.
• Progressed TWE’s ‘Simplify for Growth’ initiative aimed at reducing duplicated processes
and driving operational efficiencies. The establishment of the Global Business Services
division was a key milestone in F19.
• Establishment of a new US$350 million syndicated debt facility to be used for
working capital and capital investment purposes to support the continued growth
of the global business.
16 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) 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 financial
prospects include the following:
• Ongoing focus on premiumising TWE’s portfolio,
supported by TWE’s non-current inventory of
Luxury and Masstige wine.
• Investments in French production and vineyard
assets and Australian Luxury winemaking
capacity to support the next phase of the
premiumisation journey.
• TWE expects to continue to launch new, virtual
wine brands that are multi-regionally sourced from
new 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 spirited wine,
Squealing Pig Gin).
• Leveraging global expertise to invest in sales
and marketing capability in TWE’s key growth
regions – North Asia and the US.
• Leveraging the new route-to-market in the US
to drive greater brand availability, strengthened
strategic retail and distributor partnerships and
EBITS dollar and margin growth.
• TWE targets financial metrics that are consistent
with an investment grade credit profile. TWE’s
balance sheet provides the Company with the
flexibility to pursue value accretive opportunities
for shareholders.
• Continuation of TWE’s ‘Simplify for Growth’
program – an initiative launched in F18 targeting
operational efficiency and enhanced returns from
brand building investment.
• TWE expects to deliver approximately 15% to 20%
EBITS growth on a reported basis in F201 and
ongoing EBITS margin and Return on Capital
Employed accretion in F20 and beyond.
1. Assuming no material changes due to vintage or foreign exchange movements. Does not include impacts from the application of AASB 16
Leases or one-off charges of approximately $35 million associated with the expansion of Luxury winemaking infrastructure in South Australia.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 17
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
Climate
TWE’s ability to effectively respond to and manage the
impacts of climate-related change may lead to adverse
effects on business operations and performance.
Restrictions on access to and/or an increase in the cost
of water and energy, the introduction of a carbon price
and emission reduction targets and the inability of
third-party suppliers to adapt to and mitigate against
climate change, could impact on TWE’s ability to
effectively source grapes and wine for production
and may also impact TWE’s cost base.
Constrained
grape supply
TWE’s ability to fulfil 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 fulfil 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 financial 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 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 portfolio 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 significant
reputational and financial repercussions.
• Innovation investment, including collaboration with
research institutes on climate change adaptation and water
efficiency research, development and extension projects.
• Environment Policy and Standard, monitoring and
reporting systems.
• Strategic climate change remediation investment plan
and vineyard capital investment plan.
• Innovative agronomic practices including investment
in innovative technologies that use less water in vineyard,
winery and packaging, such as drought resistant root
stocks, and use of technology at key vineyards to monitor
soil moisture and visualise water stress.
• Sustainable Future program to drive best practice across
all regions and gain consistent measurement of, and
reduction targets for, water and energy.
• Long-term vintage planning and ongoing demand planning
processes.
• Strategic climate change remediation investment plan
and vineyard capital investment plan.
• Defined programs to progressively reduce cost of goods sold
over the next five years.
• Balanced grape intake between owned/leased vineyards
and third-party suppliers.
• Multi-regional growing and sourcing.
• Innovative agronomic practices.
• Strong grower relationships and defined service
level agreements.
• Innovation investment, including collaboration with
research institutes on climate change adaptation and water
efficiency research, development and extension projects.
• 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 framework.
• Global media monitoring (including social/digital media).
• Brand and intellectual property protection strategies.
18 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) Changing
laws,
regulations
and
geopolitical
landscape
Significant
business
disruption
and/or
catastrophic
damage
or loss
Foreign
exchange
rate impacts
Information
security/
cyber/fraud
threat
RISK
DESCRIPTION
MITIGATION
Partner
performance
and market
concentration
TWE relies on a number of key partners (suppliers,
distributors and retailers) to support delivery of key
strategic initiatives. The suboptimal performance
of these partners, and/or their market concentration
and power, could have a significant impact on TWE’s
ability to deliver these initiatives.
• Multi-regional and diversified supplier, distributor
and retailer base.
• Defined and pre-approved terms of engagement.
• Investment in strong and multifaceted key
partner relationships.
• Joint business planning processes to support and align
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 and
geopolitical landscapes that govern many aspects
of TWE’s operations, including taxation, production,
manufacturing, pricing, marketing, advertising,
distribution and sale 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 as well as government
actions which influence or restrict international trade
could significantly impact the nature of operations
in these markets.
internal and partner incentives.
• Quarterly performance reviews.
• Company-wide policies, standards and procedures.
• TWE Compliance framework.
• Crisis, Business Continuity and Disaster Recovery Plans.
• Specialised and experienced resources and teams.
• Executive Leadership Team oversight via the Risk,
Compliance and Governance Committee.
• TWE risk and assurance framework, including targeted reviews
by external and internal audit and other specialist providers.
• Relationships and engagement (where relevant) with key
government, industry advocacy and regulatory bodies.
• Flexible supply chain practices.
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.
Significant business disruption could result in TWE
sites or employees being harmed or threatened, loss
of key infrastructure, inventory shortages or loss,
customer dissatisfaction, or financial and reputational loss.
• Crisis, Business Continuity and Disaster Recovery
Plans, training and resources.
• Dedicated health and safety team oversight, audit
programs and training.
• Preventative repair and maintenance program.
• Multi-regional sourcing and production capability.
• Comprehensive insurance program.
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 confidential 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 efficiently support
the changing needs of the business, there is risk
of process inefficiency and/or error, which includes
increased costs and processing times or damage
to business reputation.
• 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, Business Continuity and Disaster Recovery Plans.
• Periodic user access and general system penetration testing.
• Program to monitor and detect cyber threats across the
enterprise network.
• Vulnerability management program to identify and
remediate susceptible high-risk areas within the enterprise
environment.
• Defined and Executive Leadership Team approved
IT roadmap and strategy.
• A global Enterprise Resource Planning system and
reporting capability.
• IT policies and supporting procedures (security, change
management, project management, etc.).
• 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
team tracking consumer trends and researching
new opportunities.
• Brand portfolio and product strategy, including portfolio
rationalisation, prioritisation and targeted investment
in consumer marketing.
• Global business planning processes, including portfolio
reviews and global volume alignment processes.
• Strategic focus on premium (high demand) categories.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 19
PROFIT REPORT
Financial Performance
A$M (UNLESS OTHERWISE STATED)
F19
F18
CHANGE
F18
CHANGE
REPORTED CURRENCY
CONSTANT CURRENCY
Net sales revenue
NSR per case ($)
Other Revenue
Cost of goods sold
Cost of goods sold per case ($)
Gross profit
Gross profit margin (% of NSR)
Cost of doing business
Cost of doing business margin (% of NSR)
EBITS
EBITS margin (%)
SGARA
EBIT
Net finance costs
Tax expense
Net profit after tax (before material items)
Material items (after tax)
Non-controlling interests
Net profit after tax
Reported EPS (A¢)
Net profit after tax (before material items
and SGARA)
EPS (before material items and SGARA) (A¢)
Average no. of shares (m)
Dividend (A¢)
2,831.6
79.77
51.4
(1,660.8)
46.79
1,222.2
43.2%
(559.5)
19.8%
662.7
23.4%
(19.7)
643.0
(52.0)
(171.5)
419.5
-
-
419.5
58.4
433.8
60.4
718.4
38.0
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
16.6%
13.6%
(23.7)%
(15.7)%
(12.7)%
15.2%
(1.1)%
(5.4)%
2.0ppts
25.0%
1.6ppts
(30.5)%
24.8%
(55.7)%
(47.0)%
14.9%
100.0%
100.0%
16.4%
17.5%
15.4%
16.6%
18.8%
2,519.8
72.88
69.0
(1,496.4)
43.28
1,092.4
43.4%
(547.1)
21.7%
545.3
21.6%
(16.5)
528.8
(34.8)
(117.9)
376.1
(4.9)
(0.1)
371.1
51.1
388.5
53.5
725.7
32.0
12.4%
9.5%
(25.5)%
(11.0)%
(8.1)%
11.9%
(0.5)%
(2.3)%
1.9ppts
21.5%
1.8ppts
(19.4)%
21.6%
(49.4)%
(45.5)%
11.5%
100.0%
100.0%
13.0%
14.3%
11.7%
12.9%
18.8%
Financial headlines1,2
• Net Sales Revenue (NSR) increased 16.6% on
a reported currency basis and 12.4% on a constant
currency basis. Key drivers were a 2.7% increase
in volume and 9.5% growth in NSR per case,
reflecting portfolio premiumisation and price
realisation within the Luxury and Masstige portfolio
• EBITS of $662.7 million, up 25.0% on a reported
currency basis and 21.5% on a constant currency
basis, with EBITS margin up 1.8ppts to 23.4%
• Strong uplift in NPAT, Reported EPS and EPS
(before material items and SGARA)
• Net borrowings reduced by $51.8 million to
$750.5 million and Net debt3/EBITDAS, adjusted
for capitalised operating leases, improved to
1.7x (from 1.9x in F18)
• Cash conversion of 75.8% was above the guided
60-70% range, reflecting the cycling through of
route-to-market changes and an improved sales
order profile in the US, and efficient inventory
management on the 2019 Australian vintage.
Excluding investment in non-current Luxury and
Masstige inventory, cash conversion was 92.4%
Business headlines
• Top-line growth was delivered through increased
volume, portfolio premiumisation and price
realisation. In F19, all regions delivered volume,
NSR and NSR per case growth
• Execution of the premiumisation strategy continues
to gain momentum with Luxury and Masstige
NSR growing 27.4% in F19, and now representing
68.8% of Group NSR
• Strong EBITS growth delivered in Asia, driven
by TWE’s premiumisation strategy, the increased
availability of Luxury and Masstige wine and
outstanding execution
• US route-to-market changes embedded; margin
accretion delivered in the second half of F19 with
further benefits expected from F20 onwards as
the new model is refined and builds momentum
• Investment in strategic partnerships with
distributor and retail partners in priority markets,
supported by joint business planning and insight-led
category growth initiatives
1. Financial information in this report is based on audited financial 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 Profit Report are pre-material items
on a constant currency basis and are subject to rounding.
3. Net debt has been reduced by $12.1 million (F18: $12.7 million increase) to reflect fair value hedges on a portion of US Private Placement notes.
20 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) • Simplify for Growth initiatives to deliver operational
efficiencies. Establishment of the Global Business
Services function in F19 represents an important
milestone
• Acquisition of French production and vineyard
assets in the Bordeaux region of France and
significant future expansion of Luxury winemaking
in South Australia represent key investments
in premiumisation
Cost of Doing Business (CODB)
• CODB up 2.3% to $559.5 million, largely due to
investment in brands and organisational capability
in Asia, moving to a direct sales model in the
US and one-off costs associated with Simplify
for Growth initiatives
• CODB margin improved by 1.9ppts, reflecting
strong revenue growth, business simplification
and continued cost discipline
Dividend
• Final dividend of 20 cents per share, fully franked;
full year dividend of 38 cents per share delivering
18.8% growth versus F18, and a pay-out ratio
of 62.9%4
• Dividend reinvestment plan re-activated during F19
Corporate costs
• Corporate costs up $3.8 million to $57.4 million,
driven by establishment costs in relation to the
Global Business Services function
EBITS by region
Revenue by region
REPORTED
CURRENCY
CONSTANT
CURRENCY
REPORTED
CURRENCY
CONSTANT
CURRENCY
A$M
F19
F18
%
F18
%
A$M
F19
F18
%
F18
%
Net Sales Revenue
602.3
ANZ
748.9
Asia
1,134.4
Americas
Europe
346.0
Total sales
revenue
Other
revenue
Total
Revenue
51.4
598.7
547.6
961.8
320.9
0.6%
36.8%
17.9%
7.8%
598.8
552.2
1,037.4
331.4
0.6%
35.6%
9.4%
4.4%
2,831.6 2,429.0
16.6%
2,519.8
12.4%
67.4
(23.7)%
69.0
(25.5)%
2,883.0 2,496.4
15.5% 2,588.8
11.4%
Revenue
• Net Sales Revenue increased 12.4%. Volume grew
2.7% and NSR per case was up 9.5%, driven by
strong sales execution across all regions, portfolio
premiumisation and price realisation across Luxury
and Masstige brands
• Other revenue reflects the exit of third party
distribution and packaging arrangements
in New Zealand
Cost of Goods Sold (COGS)
• COGS per case up 8.1%, primarily driven
by portfolio premiumisation. Higher prices
of Australian Commercial wine also
increasing COGS, partly offset by supply
chain optimisation savings in Australia
156.5
293.5
218.7
51.4
(57.4)
136.1
205.2
193.0
49.5
(53.6)
15.0%
43.0%
13.3%
3.8%
(7.1)%
133.8
197.4
214.9
52.8
(53.6)
17.0%
48.7%
1.8%
(2.7)%
(7.1)%
662.7
530.2
25.0%
545.3
21.5%
ANZ
Asia
Americas
Europe
Corporate
TWE
EBITS
EBITS
• EBITS of $662.7 million, up 25.0% on a reported
basis and up 21.5% on a constant currency basis,
principally driven by premiumisation and strong
global earnings momentum
• EBITS margin up 1.8ppts to 23.4%, a step closer
on TWE’s journey to 25% and beyond
SGARA
• SGARA loss of $19.7 million ($4.6 million higher
than pcp) driven by the Californian vintage loss
and unwinding of 2017 Australian gain; partially
offset by the unwinding of prior vintage losses
Net finance costs
• Increased net finance costs are principally driven
by higher average borrowings following the
on-market share buy-back in F18 and undrawn
commitment fees on bilateral debt facilities
4. TWE targets a dividend payout ratio of between 55%-70% of Net Profit After Tax (pre-material items and SGARA) over a fiscal year.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 21
Tax expense
Working Capital
• The higher tax expense in F19 predominantly
reflects an increase in earnings in Australia
and Asia
• Effective tax rate in F19 of 29.0% is higher than
the prior year as a result of the prior year including
a one-off tax benefit in the US following the
enactment of the US Tax Cuts and Jobs Act.
The effective tax rate also reflects the increase
in the growth of earnings in Australia and Asia
Net profit after tax (NPAT)
• NPAT before material items $419.5 million, up
11.5%, driven by higher EBITS, partially offset
by higher SGARA loss, increased net finance costs
and higher tax expense
Earnings Per Share (EPS)
• EPS (before SGARA and material items) increased
12.9% to 60.4cps. Reported basic EPS increased
14.3% to 58.4cps
Balance Sheet (condensed)5
A$M
F19
F18
Cash & cash equivalents
Receivables
Current inventories
Non-current inventories
Property, plant & 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
401.8
662.0
1,024.0
1,068.9
1,398.7
29.4
1,163.8
152.3
78.3
21.0
6,000.2
780.7
1,165.1
289.5
50.2
8.6
2,294.1
3,706.1
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
Balance sheet movements as at 30 June 2019
Net assets up $209.8 million to $3,706.1 million,
principally driven by an increase in cash and
non-current inventory, partially offset by increased
borrowings. Adjusting for movements in foreign
exchange rate movements, net assets increased
by $136.4 million
Higher working capital relative to 30 June 2018,
reflecting:
• Total inventory which increased by $128.5 million
in F19 to $2,092.9 million, reflecting the intake
of high quality, high volume vintages in Australia
and California and the impact of foreign exchange
translation on US inventory
Luxury inventory increased 11.1% to $1,230.4 million:
– Premiumisation of inventory mix, through
increasing Luxury availability, remains a priority
– The very strong and high quality 2019
Australian Luxury vintage saw intake up 10% on
the prior year, supported by TWE’s multi-regional
sourcing strategy
– 2017 Australian vintage will commence release
in F20
• Payables slightly above the prior year, reflecting
TWE’s disciplined approach to managing its cost base
• Receivables grew 11.6% in F19, driven by strong
top-line growth, with NSR up 16.6% in the year
Property, Plant & Equipment
Property, Plant & Equipment decreased $17.8 million
to $1,398.7 million reflecting depreciation, disposal
of assets and increase in assets held for sale, partly
offset by vineyard and winemaking investments
in Australia and the US
Agricultural assets
Agricultural assets at 30 June 2019 represent
the market value of unharvested grapes prior
to the 2019 US vintage. Decline in the year reflects
the sale of surplus assets in the US and fair market
value adjustments
Intangibles
Adjusting for foreign currency movements, intangible
assets increased by $12.5 million, principally reflecting
investment in IT systems supporting Simplify for
Growth initiatives, offset by amortisation expense
Provisions
Provisions balance broadly in line with pcp
Tax and other assets
Increase in net tax liabilities principally relates to
increased profitability across all regions, particularly
ANZ and Asia
Assets held for sale
Increase in assets held for sale relates to surplus
supply assets in the US
5. Unless otherwise stated, balance sheet percentage or dollar movements from the previous period are on a reported currency basis.
22 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) Net Borrowings6
Net Borrowings decreased $51.8 million to
$750.5 million, driven by positive Group cash
flow, offset by increased term borrowings
following establishment of the US$350 million
syndicated facility and unfavourable currency
translation on US$ denominated borrowings
Balance sheet leverage
Net debt/EBITDAS of 1.7x (adjusted for operating
leases) and interest cover of 12.8x
Funding structure
At 30 June 2019, TWE had committed debt facilities
totalling approximately $1.9 billion, comprising;
• Drawn bank facilities of $499.6 million and
$571.0 million of US Private Placement notes
• Undrawn committed, bilateral debt facilities
totalling $821.1 million
Weighted average term to maturity of committed
facilities 4.6 years
Cash flow – reconciliation of net debt7
A$M (UNLESS OTHERWISE STATED)
F19
F18
Movement in net debt
Net debt decreased $51.8 million to $750.5 million.
Drivers of the movement in net debt included:
EBITDAS
EBITDAS increased $138.0 million on a reported
currency basis driven by premiumisation and strong
global earnings momentum, partially offset by
increased COGS and CODB
Movement in working capital8
Net working capital outflow driven by:
• Increased inventory reflecting the intake of high
quality, high volume vintages in Australia and
California and the impact of foreign exchange
translation on US inventory
• Higher receivables of 11.6%, driven by strong
top-line growth with NSR up 16.6% in the year
• Payables slightly above the prior year, reflecting
TWE’s disciplined approach to managing its
cost base
765.7
(170.2)
(14.8)
EBITDAS
Change in working capital
Other items
Net operating cash flows before
financing costs, tax and material items 580.7
75.8%
Cash conversion
(159.8)
Capital expenditure
Net investment proceeds
101.6
Cash flows after net capital
expenditure, before financing costs,
tax and material items
Net interest paid
Tax paid
Cash flows before dividends
and material items
Dividends/distributions paid
Cash flows after dividends before
material items
Material item cash flows
On-market share buyback
On-market share purchases
Total cash flows from activities
114.2
(1.5)
–
(16.6)
96.1
522.5
(51.1)
(112.5)
358.9
(244.7)
627.7
(177.1)
(23.8)
426.8
68.0%
(215.4)
50.1
261.5
(29.3)
(93.7)
138.5
(203.7)
(65.2)
(8.1)
(300.0)
(42.9)
(416.2)
Opening net debt
Total cash flows from activities (above)
Debt revaluation and foreign exchange
movements
Decrease/(Increase) in net debt
Closing net debt
(802.3)
96.1
(354.8)
(416.2)
(44.3)
51.8
(31.3)
(447.5)
(750.5)
(802.3)
6. Borrowings have been reduced by $12.1 million (F18: $12.7 million increase) to reflect fair value hedges on a portion of US Private
Placement notes.
7. Unless otherwise stated, cash flow percentage or dollar movements from the previous period are on a reported currency basis.
8. Change in working capital reflects operating cash flow movements.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 23
Other items
On-market share purchases
Reduction in on-market share purchases reflects
vesting of shares under TWE’s Long Term Incentive
Plans being delivered in F19 via a combination of
new shares issued and shares purchased on-market
Exchange rate impact
Lower period-end exchange rates used to revalue
foreign currency borrowings and cash as at
30 June 2019 increased net debt by $44.3 million
Cash conversion
Cash conversion of 75.8% was above the guided
60-70% range, a result of cycling through route-to-
market changes and an improved sales order profile
in the US, and efficient inventory management
for the 2019 Australian vintage. Excluding TWE’s
investment in non-current Luxury and Masstige
inventory, which will be released in future years to
support continued earnings growth, cash conversion
was 92.4%
Other items reflects movements in provisions
and profit on sale of assets
Capital expenditure
Capital expenditure (capex) of $159.8 million comprising:
• Maintenance and Replacement capex
of $132.1 million
• Growth capex including vineyard acquisitions
and IT investments of $27.7 million
In F20, Maintenance and Replacement capex
is expected to be in the range of $100 million
to $110 million, with growth capex of up to
$135 million including investment in assets
supporting premiumisation
Net investment proceeds
Net investment proceeds reflects receipts from
the sale of surplus supply assets, notably in
the US, and oak barrels for sale and leaseback
Net interest paid
Increased net interest paid driven by higher average
borrowings following the on-market share buy-back
in F18, and increased committed debt facilities
Dividends paid
Increase in dividends paid reflects F19 interim
dividend of 18 cents per share and F18 final
dividend of 17 cents per share, representing
an increase of 20.1% relative to pcp
Tax paid
Increase in tax paid predominantly reflects increased
profits in respect of the Australian operations
24 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) REGIONAL SUMMARIES AMERICAS
REGIONAL SUMMARIES AMERICAS
Financial performance
Historical EBITS and EBITS margin*
REPORTED
CURRENCY
CONSTANT
CURRENCY
A$M
F19
F18
%
F18
%
9.4%
17.9% 1,037.4
NSR (A$m)
1,134.4
6.5%
75.96
14.8%
NSR per case (A$) 80.87
214.9
EBITS (A$m)
1.8%
13.3%
218.7
20.7% (1.4)ppts
EBITS margin (%) 19.3% 20.1% (0.8)ppts
961.8
70.43
193.0
A$M
250.0
225.0
200.0
175.0
150.0
125.0
100.0
75.0
50.0
25.0
0.0
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.
F15
F16
F17 F18 F19
Business performance
• Shipments were lower than depletions in F19;
Luxury and Masstige depletions were up 9%
in the year
• NSR growth of 9.4% was driven by:
– Higher volume of 2.7%, reflecting positive
momentum in the first full financial year
operating under the new route-to-market model
– NSR per case grew 6.5% led by strong portfolio
premiumisation and the overall benefits from
the route-to-market changes in the US, offset
by increased discounting in the US market,
particularly in the Commercial portfolio
• COGS per case increased due to improved portfolio
mix, higher logistics costs in the direct distribution
states under the new route-to-market model and
the ongoing impact of lower yielding, high quality
vintages, notably across leased vineyards
• Higher overheads were incurred above the line in
F19 to support transition to the new route-to-market
model, with the removal of transitional overheads
having commenced in the second half of F19
• EBITS growth delivered in Canada and
Latin America
• Regional EBITS grew 1.8% to $218.7 million with
improved operating leverage under the new route-
to-market model partly offset by price impacts in
response to competitor discounting and transitional
route-to-market overheads
• EBITS margin declined 1.4ppts to 19.3%,
an improvement of 0.8% on the first half of F19
Americas regional perspectives
• Luxury and Masstige segments of the US wine
market continue to exhibit strong growth, with
Commercial segment declines (excluding bag in box)
driven by increasing retailer focus on private label
and aggressive competitor discounting
• TWE continues to focus on growing its Luxury
and Masstige portfolios, having proactively exited
lower margin Commercial volumes in previous
years, ahead of other players
• Growth momentum across the Luxury and Masstige
portfolio led by Stags’ Leap, Beringer Luxury,
BV, Penfolds, 19 Crimes, Matua, The Stag and
Beringer Brothers
• TWE is pleased with its performance to date in
the US following transformational route-to-market
changes:
– Building collaborative, long-term relationships
with distributor and retail partners focused
on expanding availability and distribution,
complemented by the activation of consumer led
pull through programs
– Improving broad market availability and growing
points of distribution remain an ongoing priority
– Cost base and organisational efficiency to improve
over time
• Future growth to come from improved execution,
improved availability in the broad market and
increased focus on premiumisation; EBITS
margin accretion expected from F20 onwards
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 25
REGIONAL SUMMARIES ASIA
Financial performance
Historical EBITS and EBITS margin*
REPORTED
CURRENCY
CONSTANT
CURRENCY
A$M
F19
F18
%
F18
%
35.6%
36.8%
552.2
NSR (A$m)
748.9
26.9%
28.0% 126.99
NSR per case (A$) 161.19
197.4
EBITS (A$m)
48.7%
43.0%
293.5
35.7% 3.5ppts
EBITS margin (%) 39.2% 37.5% 1.7ppts
547.6
125.93
205.2
Business performance
• Strong growth delivered through outstanding
execution across all major markets
• Continued top-line momentum with NSR up 35.6%,
supported by:
– Increased availability of Luxury
and Masstige wine
– Price realisation across the region
on several brands
– Strengthening of key strategic partnerships
that are driving breadth and depth of distribution
throughout the region
– Growth rates weighted to the second half of F19,
reflecting the allocation of Luxury wine and a
more balanced sales profile for Rawson’s Retreat
through the year
• Record depletions achieved in F19, and forward
days of inventory cover remain broadly in line with
the prior year9
• Execution of the multiple country-of-origin (COO)
portfolio strategy continues to strengthen, with
Australian and French brand NSR up 44% and
38% respectively in F1910
• NSR per case up 26.9%, driven by mix improvement,
price realisation in the Luxury and Masstige
segments and the exit of lower margin Commercial
volumes in SEAMEA in the first quarter of F19
• Higher CODB reflects proactive, ongoing investment
in the region:
– Higher investment to support future brand growth
and portfolio expansion, with the launch of Lot 518
a highlight in F19
A$M
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
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.
F15
F16
F17 F18 F19
– Investment in sales, marketing and support
functions continuing to deliver step change
in organisational capability
– Despite the higher CODB, strong NSR growth
drove lower CODB margin in F19
• EBITS up 48.7% to $293.5 million, with margin
accretion of 3.5ppts to 39.2% delivered
Asian regional perspectives
• Fundamentals of the Asian wine market remain
attractive; consumption continues to grow,
particularly at premium price points
• TWE’s route-to-market, focused on self-distribution,
provides a key competitive advantage to
maintaining growth momentum across the region
through changing macro-economic cycles
• Growing a portfolio of strong brands from multiple
COO’s remains a priority for TWE throughout the
region; TWE is currently delivering growth across
its Australian and French COO portfolios and
momentum for US brands is expected to return
once the US/China trade relationship improves
• TWE sees tremendous opportunity to continue
growing market share from the current sub 5%
level by working closely with its wholesale and
retail partners
• 35%+ EBITS margin guidance maintained for
F20 and beyond
9. Excludes first year impact of new product launches.
10. French brand portfolio growth includes third party distributed brands.
26 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) REGIONAL SUMMARIES AUSTRALIA & NEW ZEALAND (ANZ)
Financial performance
Historical EBITS and EBITS margin*
A$M
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
26.0%
24.0%
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.
F15
F16
F17 F18 F19
ANZ regional perspectives
• Australian wine market volume remains flat,
with value growth being driven by premiumisation
• TWE maintains its aspirational 25% market
share target, to be achieved through prioritising
growth across the Luxury and Masstige portfolios;
22% value share in F1911
• TWE has strong and collaborative relationships
with strategic customers, supported by well-
established joint business planning processes
• Maintaining greater focus in the on-premise
category remains a priority, and TWE continues
to improve performance through category growth
initiatives such as Wine on Tap
• Continue to focus on maintaining 25%+ EBITS
margin in F20, with higher Commercial COGS
from the Australian 2019 vintage to be managed
REPORTED
CURRENCY
CONSTANT
CURRENCY
A$M
F19
F18
%
F18
%
0.6%
NSR (A$m)
602.3
0.6%
NSR per case (A$) 75.89
EBITS (A$m)
15.0%
156.5
EBITS margin (%) 26.0% 22.7% 3.3ppts
598.7
75.47
136.1
0.6%
598.8
0.5%
75.49
133.8
17.0%
22.3% 3.7ppts
Business performance
• NSR grew 0.6% in F19, driven by:
– Positive top-line performance in Australia where
NSR increased 3.1%, led by Masstige and lower
Luxury portfolio growth, positive collaboration
with key retail partners and gains in the on-
premise channel
– Volume and NSR declines in New Zealand were
due to the transitional impacts of the change
to a distributor model in F18. New Zealand
depletions grew approximately 10% in F19
with further growth anticipated in F20
• NSR per case increased 1.2% in Australia through
improved portfolio mix, including strong growth
from 19 Crimes, Squealing Pig, Seppelt, The Stag
and T’Gallant
• Higher gross margin reflects portfolio mix
improvement, with COGS per case benefitting
from continued realisation of Supply Chain savings
across the Luxury portfolio, partly offset by short
term cost pressure on Australian sourced
Commercial wine. Vintage 19 Commercial
COGS pressures to impact F20
• Improved CODB margin reflects ongoing focus
and discipline around cost management
• EBITS increased 17.0% to $156.5 million,
with EBITS margin improving 3.7ppt to 26.0%
11. Aztec Sales Value Data, bottled and canned wine only, Australia Liquor Weighted, Scan 52 weeks to 23 June 2019.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 27
REGIONAL SUMMARIES EUROPE
Financial performance
Historical EBITS and EBITS margin*
REPORTED
CURRENCY
CONSTANT
CURRENCY
A$M
A$M
F19
F18
%
F18
7.8%
NSR (A$m)
346.0
4.8%
NSR per case (A$) 38.93
EBITS (A$m)
3.8%
51.4
EBITS margin (%) 14.9% 15.4% (0.5)ppts
320.9
37.16
49.5
331.4
38.37
52.8
4.4%
1.5%
(2.7)%
15.9% (1.0)ppts
50.0
%
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Business performance
• Volume and NSR growth achieved in F19, up 2.9%
and 4.4% respectively, with strong momentum across
the Masstige portfolio in key regional markets
including Continental Europe and the Nordics
• NSR per case 1.5% higher, driven by continued
Masstige led portfolio premiumisation
• Unfavourable COGS per case reflects pricing pressure
on Australian and US sourced Commercial wine
• Flat CODB reflects a disciplined approach to brand
building investment and cost management
• Mid-teens EBITS margin maintained at 14.9%
60.0
55.0
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 F19
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
• Overall UK wine market conditions remain
challenging, however the strong trend to
premiumisation has continued over the
past year with Masstige volume growth
approximately 9% compared to Commercial
declines of approximately 7%12
• Strong partnerships with key European retailers
are key to delivering growth ahead of the market;
focus continues to be on joint business planning
and winning in store
• Continued prioritisation of key markets
(UK, Sweden and the Netherlands) and a
focused portfolio of brands is delivering success
• Priority to maintain mid-teen EBITS margin in
F20, with benefits of premiumisation and additional
cost efficiency to be offset by impacts on Australian
Commercial sourced COGS
12 . Nielsen, Total Coverage, Total Still Light Wine, 52 weeks ending 15 June 2019 (750ml bottled still wine only).
28 | TREASURY WINE ESTATES ANNUAL REPORT 2019
OPERATING AND FINANCIAL REVIEW (CONTINUED) New Zealand
2019 delivered a vintage of strong quality albeit
with slightly lower yields than 2018. With two
wet vintages in 2017 and 2018, the 2019 vintage
pleasingly delivered a high-quality harvest with
great concentration and flavour. Sauvignon Blanc
and Pinot Noir have great varietal concentration,
testament to the warm dry growing season. In
Marlborough, Sauvignon Blanc yield was slightly
down and lower than average crops of Pinot Noir
and Pinot Gris were picked. Pinot Noir from Central
Otago produced a crop of exceptional quality.
VINTAGE UPDATE
California
After a wet winter across much of California, the
grape growing season has been relatively mild thus
far. Canopy growth is strong in response to the wet
winter, yet flowering conditions in V19 were cool
and wet for early varieties, such as Chardonnay
and Pinot Noir in Coastal regions and some berry
set impact is expected for these specific varieties.
Other late varieties, including Cabernet and red
blenders in Napa, Sonoma and the Central Coast
are healthy in crop load and canopy growth,
in response to favourable flowering and growing
conditions. Overall, forecast grape tonnage may
be slightly below V18, given it was a large vintage,
however if moderate conditions continue through
to harvest then quality is expected to be high.
Australia
The 2019 harvest compares favourably with 2018,
with TWE delivering around 10% incremental
growth in volume across its Luxury wine portfolio.
This is despite some central regions experiencing
early season frosts, hail and intense heat in late
January which resulted in significant yield
reductions in the Barossa Valley in particular.
The impact of the lower yields in central regions
were partially offset by the exceptional quality of
the fruit received which will fulfil demand for super
Luxury wines. The Limestone Coast experienced
a slightly cooler growing season and has as a result
delivered high volumes of high quality fruit that
more than offset the lower intake from the Barossa
and McLaren Vale. Irrigated region commercial
wine and fruit intake was in line with expectations
for both quality and quantity.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 29
CORPORATE RESPONSIBILITY
TWE is committed to operating
sustainably, safely and responsibly.
We are delighted to present our
second annual Sustainability Report,
demonstrating TWE’s strong focus
on creating long-term shared value
through the Company’s Corporate
Responsibility framework.
CORPORATE RESPONSIBILITY FRAMEWORK
TWE’s reporting on environmental, social and
governance (ESG) topics is captured in the Company’s
Sustainability Report, which provides annual updates
on our performance. The 2019 Sustainability Report
is available online via the Company’s website,
at www.tweglobal.com/sustainability.
In F19, TWE continued to embed its Corporate
Responsibility (CR) framework and drive action
across the four CR pillars – Performance, Planet,
People and Product.
The Global CR Council (Council) remained the
program’s governing body and continued to comprise
a mix of members from the Executive Leadership
Team (ELT), including the Chief Executive Officer
(CEO), and senior representatives from regional
and functional areas of the business.
In F19, Carolyn Coon, Global Director Corporate
Affairs replaced Tim Ford, Chief Operating Officer
as Council Chair.
During F19, the Council oversaw the development
of four detailed roadmaps that sit under the CR pillars.
The roadmaps focus on addressing priority ESG topics
and seven priority Sustainable Development Goals
(SDGs) (see Figure 7) as well as implementing changes
to continue to drive high levels of ESG performance.
TASKFORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD)
In F19, TWE considered in detail the recommendations
of the Taskforce on Climate-related Financial
Disclosures (TCFD). In particular, the Company
conducted a detailed gap analysis and benchmarking
of TWE’s existing frameworks, practices and
disclosures against the TCFD recommendations
and current market practice.
The analysis identified areas where TWE is performing
well, acknowledging that TWE has been investing in
minimising and adapting to climate change impacts
for more than a decade. The analysis also highlighted
areas for improvement, including the need to continue
to build a whole-of-business approach to assessing
climate-related risk and opportunity.
TWE has since developed an internal roadmap to
enable the business to draw on these findings and
drive future action as appropriate, with a view to
enhancing the Company’s practices and disclosures
relating to climate change.
A summary of actions undertaken in line with
the four core elements of climate-related financial
disclosure is detailed in the Performance section
of the 2019 Sustainability Report.
30 | TREASURY WINE ESTATES ANNUAL REPORT 2019
Figure 7: TWE’s Corporate Responsibility Framework and F19 highlights
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 31
PEOPLEBRANDSMARKETSPARTNERSMODELTWE STRATEGIC IMPERATIVESMISSIONCR PILLARGUIDING PRINCIPLERespect and enhance the lives of our people and our communities Create quality wines that are consumed and promoted responsibly and safelyCreate long term value for TWE and everyone who touches our Company by being sustainable in everything we doVISIONTo be the world’s most celebrated wine companyBe transparent and hold ourselves to accountF19 HIGHLIGHTS•Established four key roadmaps for the CR pillars•Assessed and prepared our internal roadmap in response to the recommendations of the TCFD•Strengthened corporate governance through updates to existing, and the introduction of new, policies, standards and procedures •Continued to deliver the Sustainable Future program, which resulted in ANZ and Americas supply sites achieving TWE’s internal environmental standards•Continued to drive greater energy and water efficiencies across our supply network•Maintained an average waste diversion rate of more than 96% •Achieved a reduced Serious Injury Frequency Rate•Improved gender balance within TWE leadership and Board member roles•Increased employee participation and contributed over 9,000 volunteer hours during Global Volunteering Week•Launched Smart Drinking, TWE’s internal responsible consumption program•Innovated to provide greater choice in lower alcohol options for consumers •Continued to drive responsible packaging choices through lightweighting for selected glass and plastic packaging formatsBe sustainable and efficient when sourcing and producing our wineProductPeoplePlanetPerformanceAMBITIONOur peoples’ human rights, safety and wellbeing is protectedOur wines are produced, marketed and consumed responsiblyOur stakeholders believe in and trust our Company to operate sustainablyOur environmental impact is sustainable and reducing over timePRIORITY UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS DIVERSITY AND INCLUSION
TWE is made up of individuals as
diverse as its wines and the people
who enjoy them. We are committed
to creating an inclusive, supportive
and collaborative culture to attract
and retain the best possible talent,
and create an environment where
people from diverse backgrounds
can fulfil their potential.
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 F19, together
with the F20 measurable objectives.
• Inclusive Leadership training sessions for senior
leaders; and delivery of talent review and performance
management workshops to 638 employees and
managers globally, addressing unconscious bias.
• Global gender pay equity review recommendations
The Company’s Diversity and Inclusion Policy can be
found on the Company’s website: www.tweglobal.com
F19 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 F19 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 Officer (CEO) and all Executive
Leadership Team (ELT) members had a diversity Key
Performance Objective (KPO) to deliver the above
objectives in F19.
F19 PROGRESS
To achieve the objectives, various initiatives were
undertaken throughout F19, including:
• The fifth global Mary Penfold Leadership Award
for Outstanding Female Leadership was awarded.
• Reinforcement of Inclusive Leadership through
bias interrupters and during key people activities.
32 | TREASURY WINE ESTATES ANNUAL REPORT 2019
were implemented.
• Continuation of the TWEforSHE program aligned
with three key initiatives:
i.
‘She Leads’ capability program for ongoing support,
learning and development of TWE women.
ii. ‘TWE Tasker’, the on-the-job learning program
designed to support women improving business
acumen and broadening their experience across
the organisation, launched in the Americas
for the first time and continued in Australia
and New Zealand for the second year running,
with 86 female participants overall. The program
will roll out across Asia and Europe in F20.
iii. ELT Sponsorship program formally launched as
part of TWEforSHE, matching 19 high-potential
women with executives to support career
progression and leadership development with the
intention of increasing female representation in
senior leadership roles.
• Global survey to female employees identifying
workplace experiences, opportunities for
improvement and areas for further development
and support as part of the TWEforSHE program.
The ELT continued to operate as the Diversity Council
in F19 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 2019 was 39%, up from 37.1% in F18.
• 98% of employees agreed that senior leaders met
or exceeded expectations on Inclusive Leadership.
F20 OBJECTIVES AND INITIATIVES
Our diversity and inclusion strategy for F20 is focused
on three pillars, which positively contribute to our
employee experience and business performance.
1. Diverse workforce:
Strong workforce representation so we can
leverage talent as a competitive advantage,
creating value for our customers and community.
2. Inclusive workplace:
Create a differentiated inclusive culture of care
where diverse and resilient talent can thrive
during ‘moments that matter’ to deliver business
outcomes that matter.
3. Employer of Choice in marketplace:
Strong Employer Brand, Employee Value Proposition,
and improved business outcomes that demonstrate
return on investment in human capital.
The ELT forms TWE’s Diversity Council with
accountability for defining and managing TWE’s
diversity and inclusion goals and objectives, aligned
to our global strategy.
Given the Company’s target to increase females
in leadership roles to 38% by 2020 has been reached
during 2019, the Company has set a new measurable
objective to increase female representation in
leadership roles to 40% by 2025 whilst continuing
to foster an inclusive culture.
Initiatives to attract, retain and progress
females in leadership
• Attracting female talent: implementation of an
AI based selection tool designed to guide attraction
and remove bias from selection decisions.
• Retaining female talent: flexible working and
lifestyle/carer’s leave; Mary Penfold Award;
Gender Pay Equity.
• Progressing female talent: female targeted
succession planning for key roles and investing
in the TWEforSHE program.
Initiatives to foster an inclusive and resilient
workplace
• Introduction of a Global TWE Pride network.
• People Manager Inclusion and Ways of Working
(inclusive meetings) toolkits.
• Continued focus on bias cognizance (bias awareness)
in key people processes and people manager training.
• TWEforME – investment in wellbeing and resilience.
Executive Leadership Team diversity objectives
The CEO and all ELT members have a diversity
KPO to deliver the above objectives in F20.
Board diversity objective
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 imperatives. The Board recognises the
importance of cultural, geographic and gender
diversity amongst its members which is reflected
in the current representation on the Board,
with four non-executive directors based offshore
in regions in which the Company operates.
During F19, the Board achieved its gender target
of at least 30% female representation on the Board,
with women representing 37.5% of the Board as
at the date of this report. In F20, the Board set
itself a measurable objective that at least 30%
of its directors will be of each gender going forward,
to maintain gender diversity in its composition.
Organisational gender profile
The Company makes the following diversity disclosures
in relation to Recommendation 1.5 of the ASX Corporate
Governance Principles and Recommendations:
RECOMMENDATION 1.5 REQUIREMENT
Proportion of women in the whole organisation
As at 30 June 2019, 39.6% of the Group’s employees were women
Proportion of women in senior executive1 positions
within the Group
As at 30 June 2019, 42.9% of the senior executive positions
within the Group were held by women.
Proportion of women on the Board of the Company
As at 30 June 2019, 37.5% 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.
The Board had set itself a target for achieving gender diversity
in its composition of at least 30% female representation, and this
was achieved during F19.
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
filings to the Australian Workplace Gender Equality Agency
(WGEA) disclosing ‘Gender Equality Indicators’. This report,
covering the 12-month period ending 31 March 2019, is published
on the WGEA and the TWE websites. It can be found here:
TWEglobal.com/careers/diversity-inclusion
1. For the purposes of this disclosure, the Company has defined
‘senior executive’ as the Chief Executive Officer and his/her
direct reports. To note, using the TWE definition of leader,
39.0% of roles were held by women as at 30 June 2019.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 33
BOARD OF DIRECTORS
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.
Michael Clarke
CA, B.Com
Managing Director and
Chief Executive Officer
Member of the Board since
March 2014.
Mr Rayner is an independent Director and 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
fields of finance, 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 Childrens 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.
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 Officer of the UK publicly
listed company Premier Foods Plc, where he led a significant
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
to March 2014.
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.
Louisa Cheang
B.Soc.Sc
Non-executive Director
Member of the Board since
December 2018.
Mr Chan is an independent Director and a Hong Kong resident.
Ms Cheang 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) and an Operating Partner of SoftBank
Investment Advisers (since June 2019).
Mr Chan is 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.
Ms Cheang is currently the Vice Chairman and Chief Executive
of Hang Seng Bank, listed on the Stock Exchange of Hong Kong
Limited, and has had a successful career spanning a number
of critical leadership roles with the HSBC Group throughout the
Asia Pacific region. She is also currently Group General Manager
of HSBC Holdings plc and a director of The Hongkong and
Shanghai Banking Corporation.
Ms Cheang is also a member of key government advisory
committees, notably The Twelfth Jiangsu Provincial Committee
of the Chinese People’s Political Consultative Conference and
the Consulting Committee for the Qianhai & Shekou Area
of Shenzhen, China (Guangdong) Pilot Free Trade Zone,
and Qianhai Shenzhen-Hong Kong.
34 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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.
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 and Human
Resources Committee.
Mr Every-Burns is an independent Director and an
Australian resident.
Mr Hounsell is an independent Director and an
Australian resident.
He was Chief Executive Officer 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. In his last executive
role, 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$20 billion. He was based at The Clorox Company’s
headquarters in the United States for more than five 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 non-executive director of the a2 Milk
Company Limited (since August 2016).
He is currently Chairman of Helloworld Travel Limited (since
October 2016) and Myer Holdings Limited (since November 2017,
and a director since September 2017). Mr Hounsell is also
a director of the Commonwealth Superannuation Corporation
Limited (since July 2016).
Mr Hounsell is a former Chairman of PanAust Limited
(from July 2008 to August 2015), Spotless Group Holdings
Limited (from February 2017 to August 2017, and a director
from March 2014 to August 2017) and a 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 both 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.
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 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 significant global experience having lived and worked
in the United States, Europe, China and Canada. Her leadership
experience includes significant 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).
Ms Shanahan is an independent Director and
a United States resident.
Ms Shanahan has extensive retail, consumer branding, strategy,
omni-channel and governance experience. She has held senior
executive positions, including as Chief Administrative Officer,
Chief Legal Officer and Corporate Secretary with The Gap Inc,
where she was involved in leading the company’s domestic and
international expansion. She also led the company’s global
corporate responsibility functions, including environmental,
social and governance, as well as government affairs and public
policy. Ms Shanahan also founded the consulting practice
Maroon Peak Advisors of which she is a Principal.
Ms Shanahan is currently a director of Cedar Fair Entertainment
Company (NYSE: FUN) and Deckers Outdoor Corporation
(NYSE: DECK).
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 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, safety and wellbeing performance and developing
a culture of leadership on safety across the business,
with the ongoing development 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.
• Providing input into, and approval of, management’s
development of corporate strategy, including setting
performance objectives and approving the annual
financial budget; and monitoring corporate performance
and the implementation of strategy and policy.
• Continued to oversee the execution of the
transformational changes to TWE’s route-to-market
in the United States (US), which are strengthening
the Company’s competitive positioning and driving
portfolio growth.
• Board succession planning, including the appointment
and induction of new independent non-executive
director, Louisa Cheang, who joined the Board on
1 December 2018.
• Supporting and monitoring changes to the Executive
Leadership Team.
• Oversight of management’s continued commitment
to a culture of high performance and ethical and
responsible conduct to lead the global business and
setting remuneration policy to attract and retain the
best possible talent and reward high performance and
conduct that exemplifies the Company’s growth
behaviours of focus, belief, trust and collaboration.
• A comprehensive review of the Group’s Risk Profile
(including both financial and non-financial risk) and
Risk Management Framework to further enhance the
assessment and management of contemporary and
emerging material business risks facing the Group.
• Approving the new US$350 million syndicated debt
facility, which maintains balance sheet flexibility,
lengthens the Company’s debt maturity profile and
diversifies its source of funds.
• Approving and overseeing the implementation
of the Global Business Services operating model,
which is designed to deliver operational efficiencies.
• Approving the reinstatement of the Company’s
Dividend Reinvestment Plan.
• Maintaining effective governance to facilitate
high-quality processes and internal controls
as the business continues to grow.
36 | TREASURY WINE ESTATES ANNUAL REPORT 2019
INTRODUCTION
The Board is committed to conducting the Company’s
business ethically and responsibly 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,
reflect high standards of governance and meet regulatory
requirements. During the financial year, the Company’s
governance practices complied with the third edition
of the ASX Corporate Governance Principles and
Recommendations (ASX Principles and Recommendations).
The importance of effective leadership, good governance
and appropriate culture has been at the forefront of a
number of key developments across corporate Australia,
culminating in the release of the fourth edition of the ASX
Principles and Recommendations on 27 February 2019.
The Company is in the process of revising its governance
practices with a view to ensuring alignment with the
fourth edition of the ASX Principles and Recommendations
before the end of the financial year ending 30 June 2020.
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 financial 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 2019,
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
Officer (CEO), being independent non-executive directors.
There were several changes to the Board during the
year, including the appointment of Louisa Cheang as a
non-executive director with effect from 1 December 2018.
Ms Cheang is based in Hong Kong and has extensive
senior executive and director experience in the Asia
Pacific region, including as Vice Chairman and Chief
Executive of Hang Seng Bank. Ms Cheang’s appointment
included appropriate background checks (including
criminal, bankruptcy, education, qualifications and
reference checks). In addition, Michael Cheek retired
as a non-executive director 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 five 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. In respect of each
competence and skill (including health, safety and environment), either all directors or a majority of them are
considered to be either highly competent or practised.
Table 1 – Areas of Competence and Skills – Board of Directors
Strategic Imperatives
PEOPLE
Build a high-
performing
organisation
Directors’ Skills
BRANDS
MARKETS
PARTNERS
MODEL
Transform
our portfolio
Win in priority
markets
Develop
long-term
relationships
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, financial accounting, audit, corporate finance, 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 and international industry experience.
The Board recognises the importance of cultural,
geographic and gender diversity amongst its members
which is reflected in the current representation on the
Board, with four non-executive directors based offshore
in regions in which the Company operates. The Board
considers that it also has an appropriate mix of director
tenure, with its members ranging from newly appointed
to longer standing directors. As at June 2019, the
average tenure for the Company’s non-executive
directors was 4.9 years.
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. Since the appointment of Louisa
Cheang with effect from 1 December 2018, women
represent 37.5% of the Board. In order to maintain
gender diversity in the composition of the Board, in 2019
the Board set itself a measurable objective that at least
30% of its directors will be of each gender going forward.
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 financial
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 office, 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.
Annual director elections
Under the Constitution of the Company, at least every
three years non-executive directors are required to retire
by rotation and may seek re-election. However, in 2019
the Board, having regard to the global nature of the
Company and emerging governance requirements in key
markets, adopted a policy pursuant to which all non-
executive directors will seek re-election annually,
commencing at the 2019 Annual General Meeting.
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 into, 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.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 37
CORPORATE GOVERNANCE (CONTINUED)
• Directing, monitoring and assessing the Group’s
performance against strategic and business plans.
Obligations to stakeholders
• Monitoring and reviewing processes aimed at ensuring
• 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 (for both financial and
non-financial risks), legal compliance, and internal
compliance and control.
integrity of financial and other reporting.
• Monitoring compliance with adopted strategies,
procedures and standards, including corporate
governance standards.
Board Committees
Three standing Board Committees have been established to assist the Board in fulfilling its responsibilities.
Board of Directors
Audit and Risk Committee
Oversees: Financial reporting, risk management and internal controls, external and internal audit, capital
management and compliance.
Key focuses for F19 included:
• Updating the Group’s Risk Profile and Risk Management
Framework, including revisions to risk assessments and
the inclusion of new and emerging risks (financial and
non-financial).
• 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.
• Reviewing significant accounting and financial reporting
related matters raised by management and the auditors,
including reviewing the transition to reporting under the
new lease accounting standard.
• Overseeing the work being undertaken to assess the
Company’s level of readiness to meet the Taskforce for
Climate-related Disclosure (TCFD) recommendations
and address any gaps.
• Reviewing workplace health, safety and environmental
matters across the Group.
• Reviewing whistleblower matters reported across the Group.
• Reviewing the register of potential conflicts of interests
disclosed by employees.
• Monitoring the Group’s insurance renewal program.
• Reviewing and recommending to the Board for approval
the F19 full year and interim financial reports.
• Recommending to the Board for approval the
reinstatement of the Dividend Reinvestment Plan.
• Recommending to the Board for approval the
implementation of the Global Business Services
operating model.
• Recommending to the Board for approval amendments
to the Anti-bribery and Corruption Policy to reflect changes
to legislation.
Nominations Committee
Oversees: Board composition, performance of the Board, Board Committees and individual directors,
as well as succession planning.
Key focuses for F19 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 Louisa Cheang as a new
non-executive director with effect from 1 December 2018.
• Overseeing the externally facilitated review of the
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.
Human Resources Committee
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 F19 included:
• Reviewing and recommending to the Board for approval
the CEO’s fixed remuneration and incentive compensation
arrangements, including reviewing the attainment of STI
and LTI performance conditions.
• Reviewing and recommending to the Board for
approval the base fee and committee fees payable
to non-executive directors.
• Reviewing and recommending to the Board for approval
the Company’s Remuneration Report.
• Reviewing and approving the fixed remuneration and
incentive compensation arrangements
for senior executives, including reviewing the attainment
of STI and LTI performance conditions.
• Reviewing and recommending to the Board for approval
the diversity and inclusion measurable objectives and
overseeing the implementation of initiatives designed
to meet those objectives.
• Reviewing the remuneration arrangements for changes
in key management personnel and senior executives.
• Approving the terms of engagement of the
remuneration consultant.
• Reviewing the potential impact of the new lease
accounting standard on incentive plan metrics.
38 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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 and responsible 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;
• Anti-bribery and Corruption Policy, which supports
the Company’s commitment to countering bribery and
corruption in all forms and confirms that the Company
does not tolerate any form of bribery and corruption;
• Whistleblower Policy, which promotes and supports
the Company’s culture of honest and ethical behaviour
by encouraging the reporting of suspected or actual
unethical, illegal, corrupt or fraudulent behaviour or
any other matter that may contravene the Company’s
Code of Conduct or other policies or the law;
• Potential Conflicts of Interest Policy, which guides
the disclosure and management of potential conflicts
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 provides
for trading windows during which directors and
employees may trade (being the six-week period
immediately following the release of the Company’s
full-year results, the four-week period immediately
following the release of the Company’s half-year
results, and the two-week period immediately following
the Annual General Meeting), subject to any required
approvals being obtained; 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 (financial and non-financial) to reduce uncertainty
in the Company’s business outcomes.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 39
DIRECTORS’ REPORT
The directors of Treasury Wine Estates Limited
(the Company) present their report together with the
financial report for the Company and its controlled
entities (the Group) for the financial year ended
30 June 2019 and the auditor’s report.
The following sections of the Annual Report 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
financial year were viticulture and winemaking,
and the marketing, sale and distribution of wine.
STATUTORY INFORMATION
The Group’s consolidated financial statements have
been presented for the financial year ended 30 June 2019
and appear on pages 64 to 111.
DIRECTORS
The directors of the Company during the financial year
and up to the date of this report are:
DATE OF APPOINTMENT
Warwick Every-Burns
Paul Rayner
Ed Chan
Michael Cheek
(retired 18 October 2018)
Garry Hounsell
Michael Clarke
(Chief Executive Officer)
Lauri Shanahan
Colleen Jay
Louisa Cheang
9 May 2011
9 May 2011
1 September 2012
1 September 2012
1 September 2012
31 March 2014
1 November 2016
1 April 2018
1 December 2018
Particulars of the current directors’ qualifications,
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 financial year are listed below:
Meetings held during 2019 financial year
BOARD
MEETINGS1
AUDIT AND RISK
COMMITTEE
MEETINGS1
HUMAN
RESOURCES
COMMITTEE
MEETINGS1
NOMINATIONS
COMMITTEE
MEETINGS1
ADDITIONAL
MEETINGS2
HELD ATTENDED HELD ATTENDED HELD ATTENDED HELD ATTENDED
ATTENDED
Paul Rayner
Michael Clarke
Ed Chan
Louisa Cheang3
Michael Cheek4
Warwick Every-Burns
Garry Hounsell6
Colleen Jay
Lauri Shanahan
8
8
8
4
4
8
8
8
8
8
8
8
4
35
8
8
77
8
–
–
4
–
–
–
4
4
–
–
–
4
–
–
–
4
4
–
–
–
–
–
2
4
2
–
4
–
–
–
–
2
4
2
–
4
4
–
–
–
–
4
4
–
–
4
–
–
–
–
4
4
–
–
7
6
–
–
–
1
7
–
–
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 reflects the meeting attendance of directors who are members of the relevant Committee(s).
2. Reflects the number of additional formal meetings attended during the financial 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. Ms Cheang was appointed as a director with effect from 1 December 2018.
4. Mr Cheek retired as a director and member of the Human Resources Committee with effect from 18 October 2018.
5. Mr Cheek attended all scheduled Board meetings while he was a director. This number reflects his absence from one unscheduled
Board meeting due to a prior commitment.
6. Mr Hounsell joined the Human Resources Committee with effect from 19 October 2018.
7. Ms Jay attended all scheduled Board meetings. This number reflects her absence from one unscheduled Board meeting due
to a prior commitment.
40 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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.
Company Secretary
The Company Secretary is Fiona Last LLB (Hons),
B.Com, FGIA. She has been the Company Secretary
since September 2016. Ms Last is an experienced corporate
lawyer and governance adviser with over 20 years
relevant professional experience. She has practised
as a corporate lawyer for legal firms in Australia, Asia
and the United Kingdom and has significant experience
providing in-house legal and governance advice to top
ASX listed companies.
DIVIDENDS
Interim dividend: The Company paid an interim
dividend of 18 cents per ordinary share on 5 April 2019.
The dividend was fully franked.
Final dividend: Since the end of the financial year,
the directors have declared a final dividend of
20 cents per share, fully franked and payable
on 4 October 2019.
The record date for entitlement to this dividend
is 5 September 2019.
In summary:
Interim dividend paid
on 5 April 2019
Final dividend payable
on 4 October 2019
Total
DIVIDEND PER SHARE
$M
18 cents
$129.4
20 cents
38 cents
$143.8
$273.2
The Company paid shareholders a final dividend
in respect of the 2018 financial year of $122.2 million.
EVENTS SUBSEQUENT TO BALANCE DATE
On 27 July 2019 the Group acquired production and
vineyard assets in the Bordeaux region of France which
will allow the Group to expand its French country-of-
origin portfolio, centred on the Penfolds, Beaulieu
Vineyard and Maison de Grande Esprit brands.
On 15 August 2019 the Group announced an expansion
of Luxury winemaking assets in Australia with a
significant investment in the Bilyara winery site in
South Australia. This project will support the continued
growth of the Australian Luxury portfolio and will
increase wine making capacity, drive production
efficiency and increase wine storage facilities. The
investment includes an additional production line,
processing infrastructure and the construction of
additional barrel storage facilities, increasing production
and storage capacity. Total capital investment is
expected to be between $150 million and $180 million
and will be incurred over the course of F20 and F21.
In addition, one-off costs of approximately $35 million
are expected to be incurred in F20.
Other than as disclosed in the financial statements,
the directors are not aware of any other matters or
circumstances that have arisen since the end of the
financial year which have significantly affected or
may significantly affect the operations of the Group,
the results of those operations or the state of affairs
of the Group in subsequent financial years.
CORPORATE RESPONSIBILITY
Matters of environmental and social significance to
the Group are primarily addressed within the Corporate
Responsibility (CR) framework. This framework is
governed by the Global CR Council, comprising the
Chief Executive Officer and senior representatives
from regional and functional areas of the business.
Further detail on the Group’s CR framework, strategy,
initiatives and achievements are detailed in the
Corporate Responsibility section of this Annual Report
and the Company’s 2019 Sustainability Report.
ENVIRONMENTAL REGULATION
The Group is subject to various environmental laws and
regulatory frameworks governing energy, water, waste
and greenhouse gas reporting for its operations globally.
Management of environmental issues is a core element
of the work program delivered by sustainability and
technical teams and is detailed in the relevant material
business risks outlined in the OFR and the 2019
Sustainability Report.
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 efficiency
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 Group 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 Group’s
strategic approach to managing the environmental
challenges it faces. Although the Group’s various
operations involve relatively low inherent environmental
compliance risk, matters of non-compliance are identified
from time to time and are corrected. Where required, the
appropriate regulatory authority is notified.
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.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 41
INDEMNITIES AND INSURANCE
Rule 40 of the Company’s Constitution provides that the
Company will, to the extent permitted by law, indemnify
directors and officers 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 the proper performance of any duty
of that director or officer.
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 officer of the Company has received a
benefit under an indemnity from the Company during the
period ended 30 June 2019 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 officers
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 officer. Due to confidentiality 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
financial 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 28 August 2019.
Paul Rayner
Chairman
Michael Clarke
Chief Executive Officer
DIRECTORS’ REPORT (CONTINUED)
Under the National Greenhouse and Energy Reporting
Act 2007 (Cth) (NGER Act), the Company is required
to report on its Australian operations that exceed specific
greenhouse gas emissions or energy-use thresholds.
The Company submitted its annual NGER Act report
by the prescribed reporting date of 31 October 2018.
During the financial year, the Group was not found to be
in breach of any environmental regulations.
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).
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 conflict with their role as
auditor and their expertise and/or detailed experience
with the Company may allow cost efficiencies for the work.
The Board has considered the position and, in accordance
with advice received from the Audit and Risk Committee,
is satisfied 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:
• the engagements for all non-audit services have been
reviewed by the Chief Financial Officer and, where
relevant, the Chair of the Audit and Risk Committee
in accordance with the Committee’s rules of engagement
regarding the provision of non-audit services by the
External Auditor contained in the Committee Charter
to ensure they do not impact the actual or perceived
impartiality and objectivity of KPMG; 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 financial year, the fees paid or payable for
non-audit services provided by KPMG and its related
practices totalled $346,348. Amounts paid or payable
for audit and non-audit services are disclosed in
note 30 of the Financial Statements.
A copy of the auditor’s independence declaration is set
out on page 43 and forms part of this report.
42 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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 2019 there have been:
i.
ii.
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.
KPM_INI_01
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG
Gordon Sangster
Partner
Melbourne
28 August 2019
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 43
F19 REMUNERATION REPORT (AUDITED)
CONTENTS
Executive
remuneration
45 Key messages
47 Remuneration strategy
and 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 present our
F19 remuneration report for which we will seek your
approval at our Annual General Meeting in October
2019. The remuneration report is designed to
demonstrate the Company’s performance, executive
reward framework and outcomes and their strong
alignment with shareholder returns.
During the year, the Committee has continued its
work to achieve remuneration outcomes that fairly
reflect the performance of TWE and individuals.
TWE’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. F19 has seen continued improvement in
performance and the remuneration outcomes for F19
reflect this.
In F19, we have delivered another high-quality set
of financial results for our shareholders. The positive
momentum in our business was delivered through
our premiumisation strategy, the disciplined investments
we have made in our business over recent years and
importantly, exceptional execution by our global team.
These results were achieved in an environment of ‘doing
the right thing’ consistent with TWE’s growth behaviours,
which are a key component of our remuneration practices.
We have reported an outstanding 25% EBITS growth
to $662.7 million and a 2.3 percentage point ROCE
improvement to 14.9%. Our EBITS margin for F19
increased by 1.6 percentage points to 23.4% and the
Company’s Total Shareholder Return performance
of 69% from July 2016 to June 2019 was at the 80th
percentile relative to its peer group.
This year’s results demonstrate the exceptional returns
we are delivering for our shareholders, and they are
a direct result of the investments and structural change
our team has made in our global business over the past
five years. Sustainability is at the heart of everything
we do at TWE, and we will continue to pursue
opportunities to enhance the fundamentals of our
business with a mindset of prioritising long-term
success over short-term outcomes.
We look to the future with confidence, knowing that
we have the people, the brands, the wine, the business
models and the customer partnerships to continue
delivering sustainable, margin accretive growth.
The remuneration outcomes for F19 reflect an
appropriate alignment between pay and TWE’s
performance during the year. We remain confident
our philosophy, framework and remuneration policy
can continue to support long-term value creation.
The Committee is responsible for other Human
Resources matters across the Group, including
diversity and inclusion, talent, capability, culture
and engagement. It remains our intention to encourage
open dialogue with shareholders and other stakeholders,
particularly around our remuneration practices,
disclosures, and governance matters, and accordingly
I welcome any feedback and comments you may have.
Yours sincerely,
Warwick Every-Burns
Human Resources Committee Chairman
44 | TREASURY WINE ESTATES ANNUAL REPORT 2019
1. KEY MESSAGES
This report details the F19 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 identified 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 specified.
a) Financial highlights for F19
In F19, Treasury Wine Estates Limited (TWE) delivered EBITS of $662.7 million, up 25%, and adjusted Earnings
per Share (EPS) of 60.4 cents (before material items and SGARA). The Company also delivered outstanding
EBITS margin accretion, up 1.6 percentage points to 23.4% and improved Return on Capital Employed (ROCE),
up 2.3 percentage points to 14.9%.
F19 was a year where the positive momentum in our business was delivered through our premiumisation strategy,
the disciplined investments we have made in our business over recent years and importantly, exceptional execution
by our global team. We delivered another high-quality set of financial results for our shareholders.
b) KMP
Executive KMP at TWE during F19 are as follows:
EXECUTIVES (AS AT 30 JUNE 2019)
Current KMP
MA Clarke
TM Ford
MJ Young
Former KMP
RB Foye
Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Full Year
From 19 January 2019
Full Year
Former Chief Operating Officer
1 July 2018 to 18 January 2019
As announced on 21 January 2019, Mr Foye’s employment
was terminated on 18 January 2019 due to a breach
of internal policies at which time he ceased to be KMP.
Mr Ford was appointed as Chief Operating Officer
(COO) from 19 January 2019.
On cessation of employment, Mr Foye forfeited all
unvested awards, comprising 23,768 restricted shares
from the F17 and F18 deferred short-term incentive plans
and 340,316 performance rights from the F17, F18 and
F19 long-term incentive plans. Further information
is outlined in section 3.
c) Fixed remuneration
TWE is now a truly global company with significant
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 reflected in fixed
remuneration outcomes for executives.
The Board is committed to rewarding and retaining
the CEO who has led the financial transformation and
sustained out-performance of the Company. As reported
in the Company’s 2018 Report, Mr Clarke’s fixed
remuneration increased from $2,500,000 to $2,600,000
effective 1 September 2018. For F20, the Board approved
a 2% increase to Mr Clarke’s fixed remuneration to
$2,652,000 and a 2% increase to Mr Young’s fixed
remuneration to $714,000, effective 1 September 2019.
Mr Ford was appointed as COO on 19 January 2019
which coincided with him becoming KMP. His fixed
remuneration was set at $800,000 effective 1 March
2019, reflecting the responsibilities of his new role.
As noted in the 2018 Remuneration Report, the fixed
remuneration of the former COO, Mr Foye, was
increased on 1 September 2018 by 3.2% to US$851,000.
d) Short-term incentives in the year
Again, the Group’s successful focus on sustainable
earnings growth, cost management and operational
effectiveness, has delivered exceptional returns for our
shareholders. The continued focus on our premiumisation
strategy, the disciplined investments we have made
in our business over recent years, and investment
in long-term relationships with key stakeholders has
driven over-achievement on the executive KMP’s
balanced scorecards. We will continue to pursue
opportunities to enhance the fundamentals of our
business with a mindset of prioritising long-term
success over short-term outcomes.
As a result, the Board has determined that the F19
short-term incentive plan (STIP) outcomes are at
maximum (120% of fixed remuneration for the period
since becoming KMP) for Mr Ford and above target
(86% of fixed remuneration) for Mr Young. The CEO
received a STIP outcome of 150% of fixed 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 80th percentile relative to its
peer group. This achievement, along with strong ROCE
results, has driven vesting of 100% of the F17 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 $9.28 on 1 July 2016 to $14.92
on 28 June 2019. Over the three year plan period
investors have enjoyed a 61% increase in the Company’s
share price and growth in Return on Capital Employed
has increased from 9.3% to 14.9%.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 45
F19 REMUNERATION REPORT (AUDITED) (CONTINUED)
f) Changes for F20
F20 LTIP
In the F20 LTIP, the weighting of the two metrics remain unchanged from the F19 LTIP with ROCE weighted at 75%
of the plan and Relative Total Shareholder Return (TSR) weighted at 25%.
The following targets have been set for the F20 LTIP.
ROCE growth will be measured against the adjusted F19 ROCE base of 13.8%. This adjusted base takes into account
the new Lease Accounting Standard, AASB 16 Leases, which is mandatorily effective in Australia for annual
reporting periods commencing on or after 1 January 2019 (refer to section 1 g) for further information) and will vest
according to the following schedule.
ROCE baseline
13.8% (F19)
% ROCE growth
ROCE result
Less than 1.0%
1.0% to 1.9%
At or above 1.9%
Less than 14.8%
14.8% to 15.7%
At or above 15.7%
% of Performance Rights subject
to ROCE measure which vest
0%
35–100%
100%
The Relative TSR vesting schedule for the F20 LTIP is unchanged from F19.
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 finance sectors.
Offers of performance rights under the F20 LTIP are subject to the satisfaction of performance conditions, as outlined
above, over the performance period from 1 July 2019 to 30 June 2022. LTIP awards to KMP are at the absolute
discretion of the Board. For the F20 LTIP the following awards will apply:
• Mr Clarke: opportunity of 200% of fixed remuneration at maximum, 70% at threshold, 0% below threshold
• Mr Ford: opportunity of 150% of fixed remuneration at maximum, 52.5% at threshold, 0% below threshold
• Mr Young: opportunity of 150% of fixed remuneration at maximum, 52.5% at threshold, 0% below threshold.
The Company will seek shareholder approval at the 2019 Annual General Meeting for the F20 LTIP offer to the CEO.
General Employee Share Plan (2019 Share Cellar Plan)
The Company’s general employee share plan (Share Cellar Plan) was enhanced during 2019. For employees enrolling
in the 2019 plan, the Company will deliver one matched share for every purchased share (previously every two
purchased shares) held at the plan vesting date (i.e. one to one matching), subject to continued employment. Further
information on the Share Cellar Plan is outlined in sections 2 f) and 3 e).
CEO Minimum Shareholding
Non-executive directors and executives are encouraged to have control over ordinary shares in the Company, and are
required to hold at least the equivalent of one year’s base fees or fixed remuneration respectively. From F20, the CEO has
volunteered to have control over ordinary shares equivalent to two year’s fixed remuneration. This is the new guideline for
the CEO, which has already been met and exceeded at the date of this report. The guidelines are expected to be met over a
reasonable period of time (approximately five years). Refer to section 5 c) for further information.
g) 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 classification 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. It is intended that plan participants will not materially benefit
or be materially disadvantaged by the change of accounting treatment in any period. Further details of the impact
of AASB 16 are included in note 31 to the financial statements.
46 | TREASURY WINE ESTATES ANNUAL REPORT 2019
2. REMUNERATION STRATEGY AND FRAMEWORK
a) Remuneration strategy
TWE’s remuneration strategy sets the direction for the remuneration framework, and drives the design and
application of remuneration programs across the Group, including for executives. The strategy aims to attract,
retain and reward the best talent while building a performance oriented culture. It sets out principles and processes
to ensure remuneration practices attract and motivate the highest calibre employees to achieve TWE’s business
and financial objectives.
The remuneration strategy is designed to drive strong alignment between financial results for the business,
wealth outcomes for shareholders and remuneration outcomes for employees. The Board believes that remuneration
of executives should include a fixed component and at-risk or performance-related components, including both
short-term and long-term incentives. Executive and stakeholder interests are aligned through share ownership.
The weighting of the at-risk remuneration components for each executive reflects the Board’s commitment to
performance-based reward. The diagram below illustrates the mix of remuneration components for executives,
firstly as a percentage of total remuneration (TR) at target, and then as a proportion of total maximum potential
remuneration. Section 3 of this report describes performance outcomes over the past five years, and how they
have impacted remuneration outcomes.
b) Total remuneration
Executive total remuneration (TR) comprises fixed remuneration (FR) and variable (‘at-risk’) remuneration in the
form of STIP and LTIP. The remuneration structure in F19 for current executives as at 30 June 2019 is as follows.
Total Remuneration with STIP at Target and LTIP at Threshold:
CEO
Executives
Percentage of TR
FR 37%
STIP (at target) 37%
LTIP (at threshold) 26%
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 22%
STIP (at maximum) 33%
LTIP (at maximum) 45%
Percentage of TR
FR 27%
STIP (at maximum) 32%
LTIP (at maximum) 41%
The CEO’s remuneration mix in F19 changed slightly from F18 due to his LTIP award decreasing from 300% of fixed
remuneration in the F18 LTIP grant to 200% of fixed remuneration in the F19 LTIP grant.
c) Fixed remuneration
For Australian-based executives, total fixed remuneration is inclusive of superannuation and other benefits. For executives
based outside Australia, references to fixed remuneration refer to base salary.
Fixed remuneration is reviewed annually and set at a market-competitive level reflective 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, reflecting 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.
d) Short-term incentive plan (STIP)
The STIP drives an annual at-risk component of remuneration and links business results for the fiscal year,
executive performance and reward using a balanced scorecard approach.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 47
F19 REMUNERATION REPORT (AUDITED) (CONTINUED)
The STIP performance measures are consistent across the Company. They are designed to support the financial
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 compliance with the Company’s
Growth Behaviours, focus, belief, trust and collaboration. Hurdles and stretch targets are set for each metric and
the sustainability of growth and returns is non-negotiable.
F19 STIP MEASURES
REMUNERATION AND PERFORMANCE LINK
Global EBITS
(40%)
The EBITS metric focuses and rewards executives for the overall health and profit-producing ability
of the Group/Region. It is designed to ensure TWE products are available in the right quantities and
retail locations and to reward executives for levels of earnings that will benefit shareholders and
provide capital that can be further invested by the Group for future growth.
Cost and process
optimisation
(15% to 20%)
The cost optimisation metric aims to reward executives for the efficient deployment of overheads.
It encourages executives to innovate, and where warranted to invest, to remove waste, achieve
economies of scale and simplify.
Growth in brand
contribution,
sales and new
revenue streams
(10% to 15%)
This growth metric aims to reward executives for delivering new revenue opportunities and drive
a steep trajectory in top line growth globally. Delivery of this metric drives executives to optimise
the contribution of each brand and then explore wider opportunities for the Company to grow
beyond existing products, markets, consumers and customers.
Margin accretion
(10% to 15%)
Executives delivering margin accretion are rewarded for delivering growth through premiumisation
of the Company’s portfolio, optimising investment and making risk-managed, smart decisions.
Quality of growth
(15% to 20%)
This metric rewards executives for the delivery of quality growth as measured by improvements
in the balance sheet, operating cash flow, forecast accuracy and brand premiumisation, all critical
to delivering Return on Capital Employed metric (ROCE) and financial returns for investors.
The table below provides further detail including the weighting of metrics and size of opportunity.
F19 STIP PERFORMANCE MEASURES
STIP OPPORTUNITY
STIP DETAIL
The annual STIP opportunity
is at the absolute discretion of
the Board. In F19, 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
below (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 financial,
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 F19 financial year.
The STIP Balanced Scorecard
is weighted by role.
CEO:
40% global EBITS
15% cost and process optimisation
15% growth through new revenue
streams
15% margin accretion
15% quality of growth
CFO:
40% global EBITS
20% cost and process optimisation
10% growth in brand contribution
10% margin accretion
20% quality of growth
COO:
40% global EBITS
15% cost and process optimisation
15% growth through new revenue
streams
15% margin accretion
15% quality of growth
Each measure is assessed after
the financial year-end against
the full-year audited financial
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 2019
The overall structure of the F19 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
e) 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 F19 the Board
awarded the CEO an LTIP opportunity of 200% of fixed remuneration.
The performance period for the F19 LTIP is 1 July 2018 to 30 June 2021 and the plan has the following features.
LTIP PERFORMANCE MEASURES
LTIP OPPORTUNITY
LTIP DETAIL
Relative Total Shareholder Return (TSR)
(25% weighting)
Relative to S&P/ASX 200 Index, excluding
companies from the energy, metal and
mining, real estate and finance sectors.
Return on Capital Employed (ROCE)
Growth (75% 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 F19, the following
awards applied:
CEO 200% of FR
Other executives
150% to 200% 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.
F19 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
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%
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 49
F19 REMUNERATION REPORT (AUDITED) (CONTINUED)
f) 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. An equivalent cash plan
operates in countries where, due to local laws, it is not practicable to offer shares to employees.
In the plans operating from 2015 to 2018, for every two purchased shares that a participant holds at the vesting date
(approximately two years) the Company delivers one matched share (i.e. one to two matching), subject to continued
employment. This design feature was enhanced in the 2019 Share Cellar Plan. For employees enrolling in the 2019
plan, the Company will deliver one matched share for every purchased share held at the plan vesting date (i.e. one
to one matching), subject to continued employment.
Shares were acquired in F19 under the 2018 Share Cellar offer, and a subsequent offer to participate in the 2019
Share Cellar Plan was made during the year. The first share purchases in the 2019 Share Cellar Plan will occur
in September 2019 (F20).
g) Mid-term incentive plan (MTIP) and restricted equity plan (REP)
In addition to the LTIP, the Group operates the MTIP and REP which allows the Board to make offers of Deferred
Share Rights or Restricted Shares for the purpose of attracting, retaining and motivating key employees within the
Group. Participation in the MTIP is open to senior managers (excluding executives eligible for LTIP) and is subject
to performance conditions. There were no awards granted to, or vested for, executives under the MTIP or REP in F19.
h) 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
vested or unvested equity should a clawback event arise, which was not apparent at the time the equity was awarded.
This may include (but is not limited to) material misstatement of financial results, material reputational damage
to the Group, or where there was serious misconduct by a participant. This includes discretion to reduce, forfeit or
reinstate awards, require payback of proceeds from the sale of vested awards and/or reset or alter the performance
conditions applying to any award.
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 2019
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 and a cost conscious culture. F19 results demonstrate the benefits of this strategy delivering
EBITS of $662.7 million, up 25% year on year and improved profitability with strong EBITS margin accretion and
significantly enhanced ROCE.
The table below summarises the Company’s financial performance over the last five financial years.
Table 3.1: Overview of Company performance (reported)
FINANCIAL YEAR ENDED 30 JUNE
EBITS performance (A$ million)
Earnings per share (cents) 1
Dividends paid per share (cents)
Franked (%)
Closing share price ($ at 30 June)
Return on capital employed (%)
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
28
63
17.39
12.6
2019
662.7
60.4
35 2
100
14.92
14.9
1. Before material items, SGARA and tax consolidation benefit.
2. The 2019 dividend of 35 cents is comprised of the final dividend in F18 of 17 cents (100% franked) paid on 5 October 2018 and the interim
F19 dividend of 18 cents (100% franked) paid on 5 April 2019. For the final F19 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.
400%
350%
300%
250%
200%
150%
100%
50%
0%
Jul–2014
TWE
ASX200
Ja n –2015
Jul–2015
Ja n –2016
Jul–2016
Ja n –2017
Jul–2017
Ja n –2018
Jul–2018
Ja n –2019
Jul–2019
b) Fixed remuneration outcomes
Market benchmarking and salary reviews are conducted annually with any changes effective from 1 September.
In F19:
• The CEO, Mr Clarke, received an increase from $2,500,000 to $2,600,000 per annum, effective 1 September 2018,
an increase of 4%.
• Mr Young was appointed Chief Financial Officer (CFO) on 1 May 2018 and his fixed remuneration was set at
$700,000 effective 30 June 2018 to reflect the responsibilities of his new role. Mr Young did not receive a further
increase in F19.
• Mr Foye was Chief Operating Officer (COO) until 18 January 2019. His fixed remuneration increased by 3.2%
from US$825,000 to US$851,000 effective 1 September 2018. Mr Foye ceased employment with the Company
on 18 January 2019.
• Mr Ford was appointed COO on 19 January 2019 and on 1 March 2019 his fixed remuneration was set at $800,000
to reflect the responsibilities of his new role.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 51
F19 REMUNERATION REPORT (AUDITED) (CONTINUED)
c) Short-term incentive outcomes
Short-term incentives are assessed by achievement against each executive’s Balanced Scorecard and specific personal
objectives. Actual results for the Balanced Scorecard are provided below.
The F19 STIP scorecard is heavily weighted to financial metrics and the primary driver is EBITS. STIP outcomes
for executives reflects the financial out-performance of the Company which was driven by premiumisation and strong
global earning momentum. The Company’s strong focus on cost, operational efficiency and ROCE resulted in stretch
achievement on the related metrics in the STIP scorecards. This high level of performance is reflected in the STIP
results and the level of payout for executives.
F19 STIP
SCORECARD
Financial goals
Global EBITS
Quality of Growth
Margin accretion
Strategic goals
Cost and process optimisation
Growth through new revenue
streams
Growth in Brand contribution
Total
CEO
CFO
COO1
WEIGHT
PAYMENT
WEIGHT
PAYMENT
WEIGHT
PAYMENT
40%
15%
15%
15%
15%
48%
18%
18%
18%
18%
40%
20%
10%
48%
22%
12%
20%
10%
40%
15%
15%
15%
15%
48%
18%
18%
18%
18%
100%
120%
10%
100%
11%
103%
100%
120%
1. F19 scorecard reflects time in role as COO from 19 January 2019.
The table below sets out short-term incentive outcomes for each executive inclusive of the impact of individual
performance multiplier outcomes. The cash component of F19 STIP awards will be paid in September 2019.
The Restricted Equity will also be allocated in September 2019. Mr Foye did not receive a STIP award for F19.
Table 3.2: F19 STIP outcomes
FR2 FOR STIP
OPPORTUNITY
($)
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
(%)
2,600,000
346,027
700,000
100.0%
66.5%
66.5%
2,600,000 3,900,000
414,195
605,150
230,108
465,500
150% 2,600,000
276,130
120%
86% 403,433
1,300,000
138,065
201,717
0%
0%
0%
EXECUTIVE1
MA Clarke
TM Ford3
MJ Young
1. Reports only executives who were KMP at 30 June 2019.
2. FR is salary as of 1 September 2018. Where changes have occurred after 1 September, FR is pro-rated based on calendar days in the
financial year.
3. Mr Ford’s FR for STIP opportunity and actual payment is pro-rated reflecting the period he was KMP from 19 January 2019. The total
FR for STIP Opportunity was $733,425 and the total STIP awarded was $821,877 for the full F19 year.
4. Inclusive of balanced scorecard and individual performance multiplier outcomes.
52 | TREASURY WINE ESTATES ANNUAL REPORT 2019
d) Long-term incentive awards and outcomes
LTIP awarded during the year
Performance rights were allocated to executives under the F19 LTIP after the 2018 Annual General Meeting
and are subject to a three-year performance period. Any vesting is subject to two hurdles (detailed on page 49).
The performance rights have no exercise price and the minimum total value of the grant is zero. The maximum
value is the number of awards granted multiplied by the share price at vesting.
Table 3.3: F19 LTIP performance rights
EXECUTIVE
GRANT DATE
VESTING DATE
NUMBER OF
AWARDS
GRANTED
FACE VALUE
AT GRANT
DATE ($)1
FAIR VALUE
AT GRANT
DATE ($)2
Current
(as at 30 June 2019)
MA Clarke
TM Ford3
MJ Young
Former
RB Foye4
12 November 2018
12 November 2018
12 November 2018
30 June 2021
30 June 2021
30 June 2021
285,963
61,669
60,468
5,000,006
1,078,270
1,057,271
3,691,782
796,147
780,642
12 November 2018
30 June 2021
98,652
1,724,910
1,087,145
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 2018 ($17.4848 per share).
2 The fair value ($) 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 Ford represent the full F19 LTIP grant which were granted prior to him becoming KMP.
4 The F19 LTIP awards granted to Mr Foye, and all unvested awards granted under the F17 and F18 LTIP, were subsequently forfeited
on cessation of employment.
LTIP vesting
The F17 LTIP vested at the end of the year. The vesting schedule for the F17 LTIP is provided below.
Relative TSR
vesting schedule
Relative TSR ranking
Below 50th percentile
50th to 75th percentile
At or above 75th percentile
% of Performance Rights
subject to Relative TSR
measure which vest
0%
35–100%
100%
ROCE baseline
9.3% (F16)
% ROCE growth
ROCE result
Less than 1.8%
1.8% to 2.4%
At or above 2.4%
Less than 11.1%
11.1% to 11.7%
At or above 11.7%
% of Performance Rights
subject to ROCE measure
which vest
0%
35–100%
100%
Performance is measured over the three year period ended 30 June 2019. The Group’s relative TSR performance
was at the 80th 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 14.9% resulting in 100% vesting. The combined vesting
outcome for the F17 LTIP plan was 100%.
The F17 LTIP vesting outcome by executive is provided overleaf.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 53
F19 REMUNERATION REPORT (AUDITED) (CONTINUED)
Table 3.4: Vesting/lapsing of F17 LTIP
EXECUTIVE
Current
(as at 30 June 2019)
MA Clarke
TM Ford
MJ Young
NUMBER OF
PERFORMANCE
RIGHTS
GRANTED1
VALUE AT
GRANT2
($)
NUMBER
OF RIGHTS
VESTED
VALUE
VESTED3
($)
NUMBER
OF RIGHTS
WHICH
LAPSED4
VALUE
LAPSED3
($)
452,205
59,973
13,975
4,400,000
583,543
135,978
452,205
59,973
13,975
6,746,899
894,797
208,507
0
0
0
0
0
0
1. Mr Ford and Mr Young’s F17 LTIPs were awarded before they became KMP.
2. ‘Value at grant’ is calculated based on $9.7301 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 2016. This was the price used to calculate the number of performance rights granted under
the F17 LTIP as previously disclosed by the Company.
3. The ‘value vested’ and ‘value lapsed’ are calculated based on the closing share price on the performance period end date of 30 June 2019,
being $14.9200. The value for each executive largely reflects the $5.1899 share price differential between the unit value at grant, being
$9.7301, and the share price at the end of the performance period of $14.9200.
4. The number of rights which lapsed as they did not vest.
e) General employee share plan (Share Cellar)
All executives are participants of the 2018 Share Cellar Plan. Share purchases occurred in September 2018,
November 2018 and March 2019 with the relevant matching rights allocated to executives in F19. Subject to the
executive continuing to meet the plan rules, these matching rights will convert to matching shares when the plan vests.
Table 3.5: Acquisitions in F19 for the 2018 Share Cellar Plan
EXECUTIVE
MECHANISM
ACQUISITION
DATE
ACQUISITION
PRICE
($)
NUMBER
OF SHARES
ACQUIRED
NUMBER
OF RIGHTS
ALLOCATED
VALUE
OF RIGHTS
ALLOCATED
($)1
Current
(as at 30 June 2019)
MA Clarke
TM Ford2
MJ Young
Former
RB Foye3
Shares
Shares
Shares
Shares
3 September 2018
2 November 2018
6 March 2019
6 March 2019
3 September 2018
2 November 2018
6 March 2019
3 September 2018
2 November 2018
19.85
15.66
15.35
15.35
19.85
15.66
15.35
19.85
15.66
114
58
119
119
68
35
71
113
61
57
29
59
59
34
17
36
56
31
1,131
454
906
906
675
266
553
1,112
485
1 The value of rights allocated at grant date is calculated based on the acquisition price.
2 Reflects participation since Mr Ford commenced as KMP on 19 January 2019. Mr Ford previously acquired 172 shares and was allocated
86 rights to the value of $1,585 in F19 but was not KMP at the time.
3 Ceased as KMP as at 18 January 2019. The matched rights for Mr Foye were forfeited upon cessation of employment.
During F19, the 2019 Share Cellar Plan was launched with deductions commencing in April 2019. Actual share
acquisitions under the plan will be completed in F20, commencing September 2019.
Enrolment rates for the fourth year of Share Cellar were at an all-time high and the Company continues to have
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 2019 are enrolled in the 2019 Share Cellar Plan.
54 | TREASURY WINE ESTATES ANNUAL REPORT 2019
(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 2017 and 2018 Share Cellar Plans.
Table 3.6 Summary of awards held by executives
NAME
Current
(as at 30 June 2019)
MA Clarke3
TM Ford4
MJ Young
Former
RB Foye5
Grand Total
Restricted Shares
Performance Rights
Deferred Share Rights
Restricted Shares
Performance Rights
Deferred Share Rights
Restricted Shares
Performance Rights
Deferred Share Rights
Restricted Shares
Performance Rights
Deferred Share Rights
HELD AT
THE START
OF THE
REPORTING
PERIOD
GRANTED/
ACQUIRED
DURING
REPORTING
PERIOD
RECEIVED
UPON
VESTING/
EXERCISING1
HELD AT
THE END
OF THE
REPORTING
PERIOD
OTHER
CHANGE2
114,763
1,626,247
293
18,115
174,239
244
–
46,837
92
68,494
285,963
–
–
–
–
1,946
60,468
–
(76,644)
(1,111,964)
(135)
–
(59,973)
–
–
(29,110)
(92)
–
–
145
–
–
59
–
–
87
106,613
800,246
303
18,115
114,266
303
1,946
78,195
87
28,064
241,664
–
2,250,558
13,226
98,652
–
528,749
(17,522)
–
–
(1,295,440)
(23,768)
(340,316)
–
(363,793)
–
–
–
1,120,074
1. Includes F16 LTIP exercised in F19, and F17 LTIP vested and auto-exercised in F19. Mr Clarke’s amount includes 659,759 and 452,205
rights from the F16 and F17 LTIP respectively. Mr Young’s amount includes 15,135 and 13,975 rights from the F16 and F17 LTIP
respectively. Mr Ford’s amount includes 59,973 rights from the F17 LTIP.
2. Represents balance adjustments for executives ceasing to be a member of KMP, grants made in relation to Share Cellar and any units
forfeited in F19.
3. Mr Clarke’s share sales during F19 included shares sold to cover his Australian taxation obligations.
4. Mr Ford’s holding at the start of the period reflects his holding on 19 January 2019 when he became KMP.
5. Ceased as KMP as at 18 January 2019.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 55
F19 REMUNERATION REPORT (AUDITED) (CONTINUED)
g) Remuneration of executives
The table below (Table 3.7) provides details of remuneration for the CEO and executives for F19, 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
EXECUTIVE
YEAR
SALARY/
FEES1
LEAVE
ACCRUAL2
NON-MONETARY
BENEFITS3
TOTAL CASH
INCENTIVE4
OTHER
PAYMENTS5
SUPERANNUATION/
TOTAL AMORTISATION
PENSION
VALUE OF LTIP6
OTHER
EQUITY7
TOTAL
PERFORMANCE
RELATED %8
TERMINATION
BENEFITS
SHORT-TERM BENEFITS
SHARE-BASED PAYMENTS
20,531
20,049
9,224
–
20,531
3,341
3,986
13,065
54,272
36,455
4,327,981
4,267,867
251,954
–
236,217
19,178
(664,294)
1,138,828
4,151,858
5,425,873
1,176,249
11,387,045
958,119
11,126,591
78,173
1,012,246
–
–
21,536
1,364,303
111
187,582
(121,013)
1,331,493
255,702
3,672,287
1,154,945
15,095,087
1,213,932
14,986,460
71%
69%
60%
0%
48%
48%
(59%)
51%
–
–
–
–
–
–
–
–
Current
(as at 30 June 2019)
MA Clarke9
TM Ford10, 11
MJ Young12
Former
RB Foye13, 14, 15, 16
Total
F19
F18
F19
F18
F19
F18
F19
F18
F19
F18
2,562,802
2,429,951
338,602
–
679,469
84,992
693,343
1,014,365
4,274,216
3,529,308
207,830
182,638
52,613
–
(5,003)
8,215
(32,166)
34,630
223,274
225,483
415,669
606,779
5,550
–
8,120
690
2,600,000
2,500,000
276,130
–
403,433
71,055
1,249,345
728,684
1,678,684
1,336,153
–
482,754
3,279,563
3,053,809
75,983
161,188
–
–
–
–
202,292
4,259
278,275
165,447
1. Represents cash salary including any salary sacrificed 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 Benefits Tax on all benefits, where applicable.
4. Represents cash payments made under the F19 STIP, excluding the Restricted Equity portion which will be allocated in September 2019.
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.
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.
7. 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. F17 and F18 STIP Restricted Equity were outstanding at the end of F19. Restricted Equity granted under the F19
STIP is expected to be allocated in September 2019. 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. No termination payments were made to Executives during F19.
9. Mr Clarke’s salary was adjusted on 1 September 2018 from AU$2,500,000 to AU$2,600,000.
56 | TREASURY WINE ESTATES ANNUAL REPORT 2019
g) Remuneration of executives
The table below (Table 3.7) provides details of remuneration for the CEO and executives for F19, 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
Current
(as at 30 June 2019)
MA Clarke9
TM Ford10, 11
MJ Young12
Former
RB Foye13, 14, 15, 16
Total
F19
F18
F19
F18
F19
F18
F19
F18
F19
F18
2,562,802
2,429,951
338,602
–
679,469
84,992
693,343
1,014,365
4,274,216
3,529,308
207,830
182,638
52,613
–
(5,003)
8,215
(32,166)
34,630
223,274
225,483
415,669
606,779
5,550
–
8,120
690
1,249,345
728,684
1,678,684
1,336,153
2,600,000
2,500,000
276,130
403,433
71,055
–
–
482,754
3,279,563
3,053,809
75,983
161,188
–
–
–
–
202,292
4,259
278,275
165,447
EXECUTIVE
YEAR
SALARY/
FEES1
LEAVE
ACCRUAL2
NON-MONETARY
BENEFITS3
TOTAL CASH
INCENTIVE4
OTHER
PAYMENTS5
SUPERANNUATION/
PENSION
TOTAL AMORTISATION
VALUE OF LTIP6
OTHER
EQUITY7
TOTAL
PERFORMANCE
RELATED %8
TERMINATION
BENEFITS
SHORT-TERM BENEFITS
SHARE-BASED PAYMENTS
20,531
20,049
9,224
–
20,531
3,341
3,986
13,065
54,272
36,455
4,327,981
4,267,867
251,954
–
236,217
19,178
(664,294)
1,138,828
4,151,858
5,425,873
1,176,249
958,119
78,173
–
21,536
111
11,387,045
11,126,591
1,012,246
–
1,364,303
187,582
(121,013)
255,702
1,154,945
1,213,932
1,331,493
3,672,287
15,095,087
14,986,460
71%
69%
60%
0%
48%
48%
(59%)
51%
–
–
–
–
–
–
–
–
–
–
10. Amounts reported for Mr Ford for KMP period, from 19 January 2019 to 30 June 2019.
11. Mr Ford’s salary was adjusted on 1 March 2019 from AU$700,000 to AU$800,000.
12. Amounts reported for Mr Young for F18 for KMP period, from 1 May 2018 to 30 June 2018.
13. Amounts reported for Mr Foye for KMP period, from 1 July 2018 to 18 January 2019. Mr Foye was remunerated in US dollars. Amounts
reported are converted to Australian dollars at average A$:US$ exchange rate for July to December 2018 of 0.7245.
14. Mr Foye’s remuneration mix was adjusted on 1 September 2018 from Fixed Remuneration of US$825,000 and benefits of US$150,000
to Fixed Remuneration of US$851,000 and long-term assignment benefits of US$150,000.
15. The Non-Monetary Benefits for Mr Foye for F19 includes $1,238,875 in tax equalisation benefits for F19 under the terms of his employment
contract, and relate to the F16 LTIP and Restricted Equity from the F16 and F17 STIP, which vested prior to his termination.
16. The Other Payments for Mr Foye for F19 includes long-term assignment benefits for the period to 18 January 2019 which were paid as
a taxable cash allowance. In prior years, these benefits were claimed via reimbursement and were categorised as Non-Monetary Benefits.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 57
F19 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
PA Rayner
EYC Chan
WL Every-Burns
GA Hounsell
LM Shanahan
CE Jay
L Cheang
Former
MV Cheek
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 December 2018
Non-executive director
Retired effective 18 October 2018
a) Fee pool
The current maximum aggregate fee pool of $2,500,000 per annum (inclusive of superannuation) was approved
by shareholders at the 2016 Annual General Meeting.
b) Non-executive director fees
The level of non-executive directors’ fees takes into account the risks and responsibilities of the role, the global reach
and complexity of the business, director skills and experience, and market benchmark data (provided by independent
external consultants).
Chairman and non-executive director fees increased during F19, effective 1 April 2019, for the fourth time since
May 2011. The increases were informed by input from the Committee’s independent remuneration advisor and awarded
to remain competitive in the market, noting the increasing global operations, scale and complexity of the Group.
Table 4.1: F19 Non-executive director fees
BOARD/COMMITTEE
Board base fee
Audit and Risk Committee
Human Resources Committee
Nominations Committee
The above fees are inclusive of superannuation.
F19 FEES PER ANNUM
F19 FEES PER ANNUM
1 JULY 2018 – 31 MARCH 2019
1 APRIL 2019 – 30 JUNE 2019
CHAIRMAN
FEE ($)
MEMBER
FEE ($)
CHAIRMAN
FEE ($)
MEMBER
FEE ($)
515,000
40,000
40,000
10,0001
187,250
20,000
20,000
5,000
530,000
45,000
41,200
10,0001
193,000
22,000
20,600
5,000
1. The Chairman of the Board, Mr Rayner, is also the Chairman of the Nominations Committee. He does not receive any additional fees
for this role.
In addition to the above fees, non-executive directors receive a wine allowance. In order to maintain independence,
non-executive directors do not participate in the Company’s incentive plans and they do not receive retirement benefits
other than the superannuation contributions disclosed in this report. As previously reported, travel allowances ceased
at the end of F18 and are no longer available to directors.
58 | TREASURY WINE ESTATES ANNUAL REPORT 2019
c) Non-executive director outcomes
Details of non-executive director remuneration for F19 and F18 are provided below.
Table 4.2: F19 Non-executive director remuneration
NON-EXECUTIVE
DIRECTOR
PA Rayner2
EYC Chan
L Cheang3
WL Every-Burns2
GA Hounsell2
CE Jay
LM Shanahan
Former
MV Cheek4
Total
YEAR
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FEES
($)
NON-MONETARY
BENEFITS1
($)
TRAVEL
ALLOWANCE
($)
SUPER-
ANNUATION
($)
498,219
479,951
204,858
193,251
106,589
–
213,742
207,160
228,591
207,160
209,188
51,813
208,838
201,813
62,763
201,851
1,732,788
1,542,999
14,088
12,234
4,000
4,000
2,000
–
6,660
13,830
6,660
6,660
4,000
1,000
4,000
4,000
2,000
4,000
43,409
45,724
–
–
–
10,000
–
–
–
–
–
–
–
–
–
20,000
–
20,000
–
50,000
20,531
20,049
4,329
5,228
3,369
–
20,245
19,653
20,436
19,653
–
–
–
–
–
–
68,910
64,583
TOTAL
($)
532,838
512,234
213,187
212,479
111,958
–
240,647
240,643
255,687
233,473
213,188
52,813
212,838
225,813
64,763
225,851
1,845,107
1,703,306
1. Includes product allocations, entertainment and Fringe Benefits Tax, where applicable. The amounts for Mr Rayner include car parking.
2. Fringe Benefits Tax was incorrectly omitted in the F18 Remuneration Report for Mr Rayner, Mr Every-Burns and Mr Hounsell.
3. Ms Cheang commenced as non-executive director from 1 December 2018.
4. Mr Cheek ceased as non-executive director on 18 October 2018.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 59
F19 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, provide appropriate governance, are aligned with market practice, and fulfil the Board’s responsibility
to shareholders. During the year the Audit and Risk Committee Chair attended all HRC meetings as a Committee
member. Also, the HRC Chair typically attends the Audit and Risk Committee meetings, providing a link between
both Committees to assist with oversight of non-financial risk.
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 conflict 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 conflicts of interest
(see Section 4 of the Corporate Governance Statement on www.tweglobal.com).
b) Engagement of remuneration advisors
In F19, the Board and HRC engaged PwC as an independent advisor to the HRC. Potential conflicts of interest are
considered by the HRC, and the Board and HRC are satisfied that the advice provided by PwC was free from undue
influence. Any advice provided by remuneration consultants is used as a guide only and is not a substitute for detailed
consideration of all relevant issues by the HRC. No remuneration recommendations, as defined by the Corporations
Act 2001 (Cth), were provided.
c) Executive and non-executive director share ownership
Executives and non-executive directors are encouraged to have control over ordinary shares in the Company, and
executives and non-executive directors are required to hold at least the equivalent of one year’s fixed remuneration
or base fees. From F20, the CEO has volunteered to have control over ordinary shares equivalent to two year’s fixed
remuneration. This is the new guideline for the CEO, which has already been met and exceeded at the date of this
report. The guidelines are expected to be met over a reasonable period of time (approximately five 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
F19
Executive
Current
(as at 30 June 2019)
MA Clarke4
TM Ford5
MJ Young
Former
RB Foye6
Executive total
BALANCE
AT START OF
THE YEAR1
RECEIVED
UPON VESTING/
EXERCISE2
OTHER
CHANGES
DURING
THE YEAR3
BALANCE
AT END
OF YEAR
1,159,311
52,686
16,475
239,305
1,467,777
528,984
59,973
14,067
(799,709)
(29,881)
(13,569)
888,586
82,778
16,973
17,522
620,546
(256,827)
(1,099,986)
–
988,337
60 | TREASURY WINE ESTATES ANNUAL REPORT 2019
Table 5.1: KMP shareholdings (continued)
F19
Non-executive directors
Current
(as at 30 June 2019)
PA Rayner
EYC Chan
L Cheang9
WL Every-Burns
GA Hounsell
CE Jay
LM Shanahan
Former
MV Cheek10
Non-executive director total
BALANCE
AT START OF
THE YEAR
ACQUIRED
DURING THE
YEAR AS
PART OF
DSAP7
OTHER
CHANGES
DURING
THE YEAR8
BALANCE
AT END
OF YEAR
250,034
45,869
–
100,000
68,500
–
8,543
60,061
533,007
–
2,411
–
–
–
2,862
–
840
6,113
30,200
–
–
–
15,000
–
3,016
280,234
48,280
–
100,000
83,500
2,862
11,559
(60,901)
(12,685)
–
526,435
1. Includes shares acquired upon exercise of F16 LTIP awards. MA Clarke’s balance includes the 659,759 exercisable Rights at the
end of the F18 reporting period. MJ Young’s balance includes the 15,135 exercisable Rights at the end of the F18 reporting period.
2. Includes shares acquired upon auto-exercise of F17 LTIP awards.
3. Includes the purchase/sale of ordinary shares during F19 and balance adjustments for executives ceasing to be a member of KMP.
4. Mr Clarke’s share sales during F19 included shares sold to cover his Australian taxation obligations.
5. Mr Ford’s holding at the start of the period reflects his holding on 19 January 2019 when he became KMP.
6. Mr Foye’s other changes includes 80,157 shares sold to cover tax liabilities, personal sale of 112,165 shares whilst KMP and 174 shares
purchased under the Share Cellar Plan and balance adjustments for when he ceased to be a KMP.
7. Shares acquired by directors using post-tax fees in TWE’s Director Share Acquisition Plan (DSAP).
8. Includes the purchase/sale of ordinary shares during F19.
9. Ms Cheang has been granted an exemption from TWE’s minimum shareholding requirement due to the extensive regulatory processes
for securities trading that apply in relation to her role as Vice Chairman and Chief Executive of Hang Seng Bank Limited and Group
General Manager of HSBC Holdings plc.
10. Ceased as non-executive director as at 18 October 2018. Zero balance at the end of year represents cessation as KMP, not the sale
of shares.
6. FURTHER INFORMATION
a) Executive contracts
There is no fixed 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 fixed 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 without cause, 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 insignificant 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 benefits 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 significantly influence the financial
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 2019 | 61
F19 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
TM Ford
MJ Young6
F17 STIP
(tranche 2)
F18 STIP
(tranche 1)
F18 STIP
(tranche 2)
F18 LTIP
2017 Share
Cellar
2017 Share
Cellar
2017 Share
Cellar
F17 STIP
(tranche 2)
F18 STIP
(tranche 1)
F18 STIP
(tranche 2)
F18 LTIP
2017 Share
Cellar
2017 Share
Cellar
2017 Share
Cellar
F18 LTIP
F18 STIP
(tranche 1)
F18 STIP
(tranche 2)
Restricted
Shares
Restricted
Shares
Restricted
Shares
Performance
Rights
Matched
Rights
Matched
Rights
Matched
Rights
Restricted
Shares
Restricted
Shares
Restricted
Shares
Performance
Rights
Matched
Rights
Matched
Rights
Matched
Rights
Performance
Rights
Restricted
Shares
Restricted
Shares
12 September 2017
38,119
550,000
550,000 11 September 2019
14 September 2018
34,247
624,997
624,997 11 September 2019
14 September 2018
34,247
624,997
624,997 11 September 2020
13 November 2017
514,283
6,599,999
6,690,822
30 June 2020
1 September 2017
1 November 2017
26 February 2018
78
29
51
1,132
1,132
16 August 2019
453
904
453
16 August 2019
904
16 August 2019
12 September 2017
6,222
89,774
89,774 11 September 2019
14 September 2018
5,946
108,513
108,513 11 September 2019
14 September 2018
5,947
108,531
108,531 11 September 2020
13 November 2017
52,597
674,998
684,287
30 June 2020
1 September 2017
1 November 2017
26 February 2018
78
29
51
1,132
1,132
16 August 2019
453
904
453
16 August 2019
904
16 August 2019
13 November 2017
17,727
227,498
230,628
30 June 2020
14 September 2018
14 September 2018
973
973
17,757
17,757 11 September 2019
17,757
17,757 11 September 2020
1. Reports only executives who were KMP at 30 June 2019.
2. The value of STIP Deferral at allocation date is calculated on the five-day VWAP up to and including the allocation date. The F17
and F18 STIP allocation price was $14.4285 and $18.2497 respectively.
3. The value of F18 LTIP awards at allocation date is calculated based on the ninety-day VWAP up to and including 30 June 2017
($12.8334 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 2017 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.
6. MJ Young was not a participant in the 2017 Share Cellar Plan.
62 | TREASURY WINE ESTATES ANNUAL REPORT 2019
Table 6.2: 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
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%
(d) Definitions
TERM
DEFINITION
% of Performance Rights
subject to Relative TSR
measure which vest
0%
35–70%
70–100%
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 fluctuations 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 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 reflect the fair
value adjustment each financial 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 2019 | 63
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
Revenue
Cost of sales
Gross profit
Selling expenses
Marketing expenses
Administration expenses
Other expenses
Profit before tax and finance costs
Finance income
Finance costs
Net finance costs
Profit before tax
Income tax expense
Net profit
Net profit attributable to non-controlling interests
Net profit attributable to members of Treasury Wine Estates Limited
22
Other comprehensive income
Items that may subsequently be reclassified to profit or loss
Cash flow hedges
Tax on cash flow 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 profit attributable to
the ordinary equity holders of the Company
Basic
Diluted
NOTE
3
2019
$M
2,883.0
(1,660.8)
1,222.2
2018
$M
2,496.4
(1,435.6)
1,060.8
(328.3)
(118.3)
(117.9)
(14.7)
643.0
47.4
(99.4)
(52.0)
591.0
(171.5)
419.5
–
419.5
(15.0)
4.4
69.2
58.6
478.1
–
478.1
(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
CENTS
PER SHARE
CENTS
PER SHARE
7
7
58.4
58.1
49.7
49.3
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
64 | TREASURY WINE ESTATES ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
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
2019
$M
2018
$M
9
9
9
13
9
10
11
12
22
9
15
9
17
22
18
20
401.8
661.3
1,024.0
78.3
3.2
2,168.6
1,068.9
1,398.7
29.4
1,163.8
152.3
18.5
3,831.6
6,000.2
724.7
95.4
45.8
19.1
885.0
56.0
1,147.7
194.1
11.3
1,409.1
2,294.1
3,706.1
3,243.8
33.8
424.4
3,702.0
4.1
3,706.1
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
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 65
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
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 2017
3,528.6
99.6
(51.8)
27.9
3,604.3
4.2
3,608.5
Profit 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
Profit 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
Vested deferred shares
and share rights
Dividends to owners
of the Company
Balance at 30 June 2019
–
–
–
360.3
–
360.3
–
(300.0)
6.8
–
–
–
–
3,235.4
(203.7)
256.2
–
–
–
–
1.6
419.5
–
419.5
–
–
6.8
3,243.8
(251.3)
424.4
–
59.4
59.4
–
–
–
–
7.6
–
69.2
69.2
–
–
–
76.8
–
–
–
360.3
59.4
419.7
0.1
–
360.4
59.4
0.1
419.8
18.0
–
18.0
(300.0)
(53.1)
(46.3)
–
(203.7)
(7.2) 3,492.0
–
(10.6)
419.5
58.6
(10.6)
478.1
18.9
18.9
(44.1)
(42.5)
–
(244.5)
(43.0) 3,702.0
–
–
–
18.0
(300.0)
(46.3)
–
4.3
(203.7)
3,496.3
–
–
–
–
–
419.5
58.6
478.1
18.9
(42.5)
(0.2)
4.1
(244.7)
3,706.1
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
66 | TREASURY WINE ESTATES ANNUAL REPORT 2019
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers, governments and employees
Borrowing costs paid
Income taxes paid
Interest paid
Net cash flows from operating activities
Cash flows 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 flows used in investing activities
Cash flows from financing activities
Shares bought back and cancelled
Dividend payments
Proceeds from borrowings
Repayment of borrowings
Purchase of shares – employee equity plans
Net cash flows used in financing activities
Total cash flows from activities
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on foreign currency cash flows and cash balances
Cash and cash equivalents at end of the year
2019
$M
INFLOWS/
(OUTFLOWS)
2018
$M
INFLOWS/
(OUTFLOWS)
NOTE
3,689.2
(3,110.0)
(7.3)
(112.5)
(43.8)
415.6
3,263.3
(2,845.3)
(2.6)
(93.7)
(26.7)
295.0
(132.0)
(27.8)
(0.9)
102.5
(58.2)
–
(244.7)
707.6
(492.2)
(16.6)
(45.9)
311.5
89.4
0.9
401.8
(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
8
9
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
ABOUT THIS REPORT
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1 – ABOUT THIS REPORT
Treasury Wine Estates Limited (‘the Company’) is a for
profit company incorporated in Australia and limited
by shares which are publicly traded on the Australian
Securities Exchange (ASX). The consolidated financial
statements comprise the Company and its controlled
entities (collectively, ‘the Group’).
The accounting policies that are critical to understanding
the financial statements as a whole are set out in this
section. Where an accounting policy is specific 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 31.
Basis of preparation
The financial report is a general purpose financial
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 financial 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 financial report complies with Australian
Accounting Standards and International Financial
Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
Notes to the financial statements
The notes include additional information required to
understand the financial statements that is material
and relevant to the operations, financial position and
performance of the Group.
Information is considered material and relevant if the
amount in question is significant because of its size,
nature or incidence or it helps to explain the impact
of significant changes in the business, for example,
acquisitions and asset write-downs.
Line items labelled ‘other’ on the face of the consolidated
statements comprise miscellaneous income, expenses,
assets, liabilities or cash flows which individually or
in aggregate are not considered material to warrant
additional disclosures.
Where applicable, comparative periods have been
adjusted to disclose comparatives on the same basis
as the current year.
The notes are organised into the following sections:
Earnings: focuses on the financial results and performance
of the Group. It provides disclosures relating to income,
expenses, segment information, material items and
earnings per share.
68 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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 profits (including
associated liabilities). This section also explains the
accounting policies applied and specific 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 financial institutions
(debt) in order to finance 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 profit 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 financial
risks, explains how these affect the financial 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 financial report, the Group is required
to make estimates, judgements and assumptions that
affect the reported amounts in the financial 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 significant to the financial statements:
Note 3: Revenue
Note 9: Working capital
Note 11: Agricultural assets
Note 12: Intangible assets
Note 14: Impairment of non-financial assets
Note 22: Income tax
Principles of consolidation
The consolidated financial 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 flows for the year. A list
of controlled entities (subsidiaries) is provided in note 26.
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.
NOTE 1 – ABOUT THIS REPORT (CONTINUED)
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 profit or loss and other comprehensive income,
consolidated statement of changes in equity and
consolidated statement of financial position respectively.
The financial 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 financial statements are presented in
Australian dollars. Each entity in the Group determines its
own functional currency and items included in the financial
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, Chinese Renminbi 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 is 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 profit 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 profit 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 profit and
loss items in F19 are:
A$1 = US$ 0.715 (F18: US$ 0.775)
A$1 = GB£ 0.553 (F18: GB£ 0.576)
Year-end exchange rates used in translating financial
position items in F19 are:
A$1 = US$ 0.701 (F18: US$ 0.735)
A$1 = GB£ 0.553 (F18: GB£ 0.562)
Fair value measurement
The Group measures certain financial instruments,
including derivatives, and certain non-financial 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-financial
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 sufficient 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 significant 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 significant 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 significant to the fair value measurement
is unobservable.
Subsequent events
Since the end of the financial year, the Directors
declared a final 100% franked dividend of 20.0 cents
per share. This dividend has not been recognised
as a liability in the consolidated financial statements
at 30 June 2019.
On 27 July 2019 the Group acquired production and
vineyard assets in the Bordeaux region of France which
will allow the Group to expand its French country-of-
origin portfolio, centred on the Penfolds, Beaulieu
Vineyard and Maison de Grande Esprit brands.
On 15 August 2019 the Group announced an expansion of
Luxury winemaking assets in Australia with a significant
investment in the Bilyara winery site in South Australia.
This project will support the continued growth of the
Australian Luxury portfolio and will increase wine
making capacity, drive production efficiency and increase
wine storage facilities. The investment includes an
additional production line, processing infrastructure
and the construction of additional barrel storage facilities,
increasing production and storage capacity. Total capital
investment is expected to be between $150 million and
$180 million and will be incurred over the course of
F20 and F21. In addition, one-off costs of approximately
$35 million are expected to be incurred in F20.
The Directors are not aware of any other matters or
circumstances that have arisen since the end of the
financial year which have significantly affected or
may significantly affect the operations of the Group,
the results of those operations or the state of affairs
of the Group in subsequent financial years.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2019
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 profit, 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 reflect the
segment of origin performance, including production.
Corporate charges
Unallocated corporate charges are reported in the
Corporate/unallocated segment. Net finance costs are
not allocated to segments as the Group’s financing
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.
The identified 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 profit 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 2019
NOTE 2 – SEGMENT INFORMATION (CONTINUED)
2019
Total revenue
comprises:
Net sales revenue
Other revenue
Intersegment
revenue
Total segment
revenue (excl other
income/interest)
ANZ
$M
AMERICAS
$M
ASIA
$M
EUROPE
$M
INTERSEGMENT
ELIMINATION
$M
TOTAL
SEGMENT
$M
UNALLOCATED/
CORPORATE
$M
CONSOLIDATED
$M
602.3
32.7
1,134.4 748.9
1.1
15.3
346.0
2.1
–
–
2,831.6
51.2
347.5
45.8
0.3
35.5
(429.1)
–
–
0.2
–
2,831.6
51.4
–
982.5
1,195.5 750.3
383.6
(429.1)
2,882.8
0.2
2,883.0
Management
EBITS
SGARA gain/(loss)
Material items
156.5
(9.8)
–
Management EBIT 146.7
Net finance costs
Consolidated
profit before tax
218.7 293.5
–
(10.2)
–
–
208.5 293.5
51.4
0.3
–
51.7
(38.4)
(44.6)
(0.9)
(1.8)
(0.6)
–
(2.4)
78.3
–
–
(0.9)
–
63.5
50.7
2.1
0.9
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)
–
–
–
–
–
–
–
–
720.1
(19.7)
–
700.4
(85.7)
(3.9)
78.3
117.2
(57.4)
–
–
(57.4)
(3.5)
(9.9)
–
35.2
662.7
(19.7)
–
643.0
(52.0)
591.0
(89.2)
(13.8)
78.3
152.4
2,286.2
2,487.6 228.3
357.5
–
5,359.6
640.6
6,000.2
(273.1)
(421.7) (51.8)
(92.8)
–
(839.4)
(1,454.7)
(2,294.1)
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 2 – SEGMENT INFORMATION (CONTINUED)
ANZ
$M
AMERICAS
$M
ASIA
$M
EUROPE
$M
INTERSEGMENT
ELIMINATION
$M
TOTAL
SEGMENT
$M
UNALLOCATED/
CORPORATE
$M
CONSOLIDATED
$M
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
37.5
(387.3)
–
–
2.3
–
2,429.0
67.4
–
955.0
1,019.2 547.9
359.3
(387.3)
2,494.1
2.3
2,496.4
136.1
7.5
–
193.0 205.2
–
(21.6)
–
(3.1)
49.5
(1.0)
(3.1)
Management EBIT 143.6
Net finance costs
Consolidated
profit before tax
168.3 205.2
45.4
(38.6)
(41.1)
(0.5)
(2.0)
(1.0)
29.1
(0.8)
16.1
–
–
(0.1)
–
107.6
97.2
1.7
1.9
–
–
–
–
–
–
–
–
583.8
(15.1)
(6.2)
562.5
(82.2)
(1.9)
45.2
(53.6)
–
–
(53.6)
(3.5)
(9.9)
–
530.2
(15.1)
(6.2)
508.9
(33.4)
475.5
(85.7)
(11.8)
45.2
208.4
12.4
220.8
2,212.6
2,362.9 192.6
329.6
–
5,097.7
348.0
5,445.7
(269.3)
(401.1) (57.9)
(87.5)
–
(815.8)
(1,133.6)
(1,949.4)
2018
Total revenue
comprises:
Net sales revenue
Other revenue
Intersegment
revenue
Total segment
revenue (excl other
income/interest)
Management
EBITS
SGARA gain/(loss)
Material items
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)
72 | TREASURY WINE ESTATES ANNUAL REPORT 2019
72 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 2 – SEGMENT INFORMATION (CONTINUED)
Geographical segments
The presentation of geographical net sales revenue is based on the location of the selling entity.
Australia
United States of America
United Kingdom
Other geographical locations1
Total
NET SALES REVENUE
2019
$M
1,295.7
1,147.3
298.1
90.5
2,831.6
2018
$M
1,053.4
990.1
279.5
106.0
2,429.0
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 financial derivative assets and deferred tax assets.
NOTE 3 – REVENUE
Revenue
Net sales revenue1
Other revenue
Total revenue
NON-CURRENT ASSETS
2019
$M
2018
$M
1,629.0
1,776.8
151.4
109.4
3,666.6
165.0
3,831.6
1,567.0
1,716.6
137.9
121.7
3,543.2
160.7
3,703.9
2019
$M
2018
$M
2,831.6
51.4
2,883.0
2,429.0
67.4
2,496.4
1. Net sales revenue is net of trade discounts and volume rebates.
On 1 July 2018 the Group adopted AASB 15 Revenue from Contracts with Customers utilising the cumulative effect
method. Under this method, the comparative information is not restated. The standard did not have a significant
impact on the consolidated financial statements.
Net sales revenue – types of products
The Group generates revenue through the sale of branded wines, principally as a finished, 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 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 retail chains,
independent retailers and on premise outlets. The Group also has some sales direct to the consumer.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 3 – REVENUE (CONTINUED)
Other revenue – types of services
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.
Sales approach
For F19, the Group has one major customer in the Americas whose revenues represent 9.6% (F18: 10.4%) of reported
net sales revenue, and one major customer in Australia whose revenue represents 7.1% (F18: 8.7%) of reported net
sales revenue.
Financing components
The Group does not have any contracts where the period between the transfer of the promised product or services
to the customer and by the customer exceeds one year. Consequently, the Group does not adjust any of the transaction
prices for the time value of money.
Accounting policies
Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts
collected on behalf of third parties. The Group’s contracts with customers generally include one performance
obligation. Revenue from the sale of products or services is recognised at the point in time when control over a
product or service is transferred to the customer, generally on delivery. The Group recognises revenue when it
transfers control over a product or service to a customer. Revenue is recorded net of sales discounts and rebates,
duties and taxes. Payment terms vary by customer. The following specific criteria are also applied:
Wine
Revenue is recognised in a manner that depicts transfer of control of goods to customers at the amount that reflects
consideration the business expects to be entitled to in exchange for those goods. 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 consideration
specified in the sales contracts or terms, net of the estimated discount or rebate at the time of sale. These discounts
or rebates are considered variable consideration and are accounted for in determining the transaction price of a
contract. The method used by the Group to estimate discounts and rebates is the most likely amount. Accumulated
experience is used to estimate and provide for the discounts and rebates based on anticipated purchases.
74 | TREASURY WINE ESTATES ANNUAL REPORT 2019
74 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 4 – OTHER EARNINGS DISCLOSURES
Rental expense relating to operating leases
Net foreign exchange (losses)
Salaries and wages expense
Share based payments expense
Insurance and other income
Other gains and losses
Restructuring and redundancy expense
(Write-down)/reversal of write-down of assets
Net profit on disposal of non-current assets
Total other gains and losses
Accounting policies
2019
$M
(100.5)
(1.7)
(412.4)
(18.9)
8.5
(24.1)
(8.8)
25.9
(7.0)
2018
$M
(87.0)
(1.3)
(385.1)
(18.0)
5.3
(6.4)
1.8
1.8
(2.8)
Operating leases
Operating lease payments are recognised as an expense in the consolidated statement of profit 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 benefits
Employee benefits include wages, salaries, annual leave, bonuses, non-monetary benefits and share based
payment expenses. Further details of Group policy on measuring employee benefits are set out in note 15.
Superannuation
Employees are members of defined 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 profit or loss and other
comprehensive income. There are no material items for F19.
Individually material items included in profit before income tax:
Restructuring and redundancy costs1
Reversal of write-down/(write-down) of assets2
Total material items (before tax)
Tax effect of material items
Total material items (after tax)
2019
$M
–
–
–
–
–
2018
$M
(5.2)
(1.0)
(6.2)
1.6
(4.6)
1. In F18, comprises costs associated with integrating businesses acquired.
2. In F18, includes write-down/disposal of various assets associated with business integration activities.
Material items
Material items are defined as those items of income or expense which have been determined as being sufficiently
significant by their size, nature or incidence and are disclosed separately to assist in understanding the Group’s
financial performance.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
EARNINGS
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 6 – DIVIDENDS
Dividends declared and paid on ordinary shares
Final dividend for F18 of 17.0 cents per share 100% franked (F17: 13.0 cents per share)
Interim dividend for F19 of 18.0 cents per share 100% franked (F18: 15.0 cents per share)1
Dividends declared after balance date
Since the end of the financial year, the Directors declared a final dividend of 20.0 cents
per share (F18: 17.0 cents) 100% franked (F18: 100% franked). This dividend has not
been recognised as a liability in the consolidated financial statements at year-end.
2019
$M
122.2
129.1
251.3
2018
$M
96.0
107.7
203.7
143.8
122.2
1. The F19 interim dividend includes an amount of $6.8 million for shares issued under the Dividend Reinvestment Plan.
Details in relation to franking credits are included in note 22.
NOTE 7 – EARNINGS PER SHARE
Basic EPS
Basic EPS (cents) based on net profit attributable to members of Treasury Wine Estates Limited
Diluted EPS
Diluted EPS (cents) based on net profit 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 profit
Net profit attributable to non-controlling interests
Net profit attributable to members of Treasury Wine Estates Limited
used in calculating basic and diluted EPS
2019
CENTS PER
SHARE
2018
CENTS PER
SHARE
58.4
58.1
49.7
49.3
NUMBER
NUMBER
718,419
725,652
3,516
4,864
721,935
730,516
$M
419.5
–
419.5
$M
360.4
(0.1)
360.3
76 | TREASURY WINE ESTATES ANNUAL REPORT 2019
76 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 7 – EARNINGS PER SHARE (CONTINUED)
Impact of US tax reform
In F18, the US Government passed the Tax Cuts and Jobs Act (‘the Act’) which reduced the US Federal corporate tax
rate from 35% to 21% effective from 1 January 2018. In F18, the Group recognised a one-off benefit 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 benefit, basic earnings per share in F18 would have been 46.8 cents per share, and diluted earnings per share
in F18 would have been 46.5 cents per share. Basic earnings per share in F18 (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 profit attributable to each share.
Basic EPS is calculated by dividing the net profit 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 profit 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).
NOTE 8 – NET CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of net cash flows from operating activities to profit after income tax
Profit for the year
Depreciation and amortisation
SGARA loss
Write-down/(reversal of write-down) of assets
Net profit 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 financial assets/liabilities
Payables
Net tax balances
Provisions
Net cash flows from operating activities
2019
$M
2018
$M
419.5
103.0
19.7
8.8
(25.9)
18.9
(3.6)
540.4
(70.3)
(120.2)
(2.3)
7.2
59.0
1.8
415.6
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
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
WORKING CAPITAL
FOR THE YEAR ENDED 30 JUNE 2019
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 expected credit loss
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
2019
$M
2018
$M
401.8
661.3
1,024.0
(724.7)
1,362.4
1,068.9
(56.0)
1,012.9
2019
$M
545.8
(2.6)
91.4
26.7
661.3
89.4
593.0
1,012.3
(702.9)
991.8
952.1
(56.4)
895.7
2018
$M
469.2
(1.7)
94.1
31.4
593.0
2019
$M
2018
$M
60.7
438.1
525.2
1,024.0
853.3
215.6
1,068.9
42.4
402.0
567.9
1,012.3
793.6
158.5
952.1
2,092.9
1,964.4
Inventories of wine stocks are classified 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 $1,571.8 million
(F18: $1,392.0 million). In F19, the write-down of inventories to net realisable value amounted to $15.4 million
(F18: $10.7 million). The reversal of write-downs amounted to $12.2 million (F18: $11.9 million). These amounts
are included in cost of sales.
78 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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 financial
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 flows, 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 an allowance for expected credit losses.
Credit terms are generally between 30 – 120 days depending on the nature of the transaction. Expected credit losses
are calculated by utilising a provision matrix where loss rates are calculated based on days past due for groupings
of various customer segments that have similar loss patterns (for example geography, product type and rating).
The provision matrix is initially determined by the Group’s historical observed loss rates and will be calibrated
for forward looking information. Loss rates will be updated at each reporting date based on changes in observed
default rates and changes in forward looking information.
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 specified in the sales contracts or terms, 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 purchases and depletions.
Net realisable value of inventory
The period over which some wine inventories are converted from raw materials to finished goods can be a significant
length of time. Failure to forecast demand effectively may result in excess inventories or missed revenue opportunities.
Forecast demand and market prices can vary significantly 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 $1,068.9 million (F18: $952.1 million) and its estimated selling price is therefore a key estimate.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 10 – PROPERTY, PLANT AND EQUIPMENT
LAND
FREEHOLD
BUILDINGS
LEASEHOLD
BUILDINGS
PLANT AND
EQUIPMENT
TOTAL
2019
$M
2018
$M
383.5
–
392.8
–
2019
$M
496.4
–
2018
$M
470.7
–
2019
$M
81.8
–
2018
$M
72.0
–
2019
$M
2018
$M
2019
$M
2018
$M
1,828.1 1,712.0
141.2
82.1
2,789.8 2,647.5
141.2
82.1
(41.6)
(37.5)
(246.0)
(228.3)
(30.7)
(24.6)
(1,154.9) (1,081.8)
(1,473.2) (1,372.2)
341.9
355.3
250.4
242.4
51.1
47.4
755.3
771.4
1,398.7 1,416.5
355.3
14.2
329.8
21.2
242.4
16.2
214.3
28.1
47.4
8.4
45.4
5.0
771.4
81.6
739.0
144.7
1,416.5 1,328.5
199.0
120.4
(14.0)
(23.5)
(3.2)
–
–
–
–
–
(5.4)
(0.8)
–
(8.7)
2.6
–
–
(8.0)
(0.3)
–
–
(6.6)
0.5
(0.2)
(0.1)
(5.0)
(17.5)
(27.5)
0.3
(73.9)
(40.2)
(17.9)
1.9
(72.7)
(37.2)
(51.8)
0.3
(89.2)
(40.3)
(18.1)
1.8
(85.7)
9.9
7.5
6.7
5.4
2.2
1.8
20.9
16.6
39.7
31.3
341.9
355.3
250.4
242.4
51.1
47.4
755.3
771.4
1,398.7 1,416.5
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
Foreign currency
translation
Carrying amount
at end of year
Included within plant and equipment are ‘Projects in progress’ of $82.1 million (F18: $141.2 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 nil write-downs (F18: $0.7 million) for property, plant and equipment during the year.
80 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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 profit 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 consolidated statement of profit or loss and other
comprehensive income.
Vineyard resources
Australia
New Zealand
United States
Italy
2019
HECTARES
2018
HECTARES
8,651
498
3,728
148
13,025
8,607
492
3,894
148
13,141
The area under vine shown above:
• Includes 3,317 hectares (F18: 3,146 hectares) under lease arrangements and 7 hectares (F18: 7 hectares)
of olive groves in Tuscany, a region of Italy.
• Yielded 94,292 tonnes of grapes (F18: 91,128 tonnes).
Harvests generally occur in September – October in the Northern Hemisphere and February – May in the
Southern Hemisphere.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
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
2019
$M
29.4
29.4
41.3
29.4
(41.9)
0.6
29.4
2018
$M
41.3
41.3
37.7
41.3
(38.9)
1.2
41.3
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 flexibility 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 profit 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 2019
82 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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
(Transfers to)/from assets held for sale
Amortisation expense
Foreign currency translation
Carrying amount at end of year
BRAND NAMES
AND LICENCES
2019
$M
2018
$M
1,446.3 1,418.0
–
–
IT
DEVELOPMENT
COSTS
GOODWILL
TOTAL
2019
$M
94.2
44.3
2018
$M
85.1
20.6
2019
$M
754.7
–
2018
$M
749.7
–
2019
$M
2018
$M
2,295.2 2,252.8
20.6
44.3
(499.2)
947.1
(480.2)
937.8
(55.8)
82.7
(43.7)
62.0
(620.7)
134.0
(620.6)
129.1
(1,175.7) (1,144.5)
1,163.8 1,128.9
937.8
–
(11.7)
(1.8)
22.8
947.1
918.2
0.4
–
–
19.2
937.8
62.0
32.0
–
(12.0)
0.7
82.7
51.2
21.4
–
(11.8)
1.2
62.0
129.1
–
–
–
4.9
134.0
126.4
–
–
–
2.7
129.1
1,128.9 1,095.8
21.8
–
(11.8)
23.1
1,163.8 1,128.9
32.0
(11.7)
(13.8)
28.4
Goodwill is allocated to the Cash Generating Units (CGUs) or group of CGUs (see note 14 for further details)
that are expected to benefit from the synergies of the combination. The allocation of intangible assets (other than
IT development costs) is as follows:
ANZ
2018
$M
37.0
(1.2)
35.8
2019
$M
35.8
1.4
37.2
AMERICAS
EUROPE
TOTAL
2019
$M
2018
$M
2019
$M
2018
$M
2019
$M
2018
$M
73.7
3.2
76.9
70.7
3.0
73.7
19.6
0.3
19.9
18.7
0.9
19.6
129.1
4.9
134.0
126.4
2.7
129.1
481.4
–
(0.8)
–
0.2
480.8
481.2
0.4
–
–
(0.2)
481.4
453.2
–
(1.0)
(11.7)
22.4
462.9
434.0
–
–
–
19.2
453.2
3.2
–
–
–
0.2
3.4
3.0
–
–
–
0.2
3.2
937.8
–
(1.8)
(11.7)
22.8
947.1
918.2
0.4
–
–
19.2
937.8
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
Amortisation expense
(Transfers to)/from assets held for sale
Foreign currency translation
Carrying amount at end of year
Key estimate and judgement:
Useful life of brand names
In assessing whether a brand has a finite or indefinite 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 finite life, the Group will use judgement in determining the useful life of the brand
including the period over which expected cash flows will continue to be derived in making that decision.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
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 profit 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.
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 profit or loss and other comprehensive income.
NOTE 13 – ASSETS AND DISPOSAL GROUPS HELD FOR SALE
Assets and disposal groups held for sale
Total assets and disposal groups classified as held for sale
2019
$M
78.3
78.3
2018
$M
45.2
45.2
Assets held for sale comprise property, plant and equipment and related deferred tax assets and liabilities identified
by the Group to be recovered through sale.
In F19, management committed to a plan to sell a wine making facility, including its related property, plant and
equipment, inventory and intangible assets within America. Accordingly that facility has been presented as a disposal
group held for sale.
Impairment losses relating to the disposal group
Impairment losses of $6.3 million for the write down of the disposal group to the lower of its carrying amount and its
fair value less costs to sell have been included in ‘other expenses’ in the consolidated statement of profit or loss and
other comprehensive income. Refer to note 4 for other earnings disclosures.
Accounting policies
Non-current assets are classified 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 classified 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 2019
84 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 14 – IMPAIRMENT OF NON-FINANCIAL ASSETS
In F19 the recoverable amounts of cash generating units (CGUs) exceed their carrying values and as a result no
impairment has been recognised (F18: Nil). Other than the amount disclosed in note 4, there were no indications
that previously recognised impairment losses should be reversed (F18: 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 indefinite 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 profit or loss and other comprehensive income.
Approach to Impairment Testing
If the asset does not generate independent cash inflows 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 flows are discounted to their present value using a discount rate
that reflects current market assessments of the time value of money and the risks specific 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 profit 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 2019 | 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
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 2019. Key estimates and
judgements include:
Cash flow forecasts
Cash flow forecasts are based on the Group’s most recent five-year financial plans approved by the Board. Key
assumptions in the cash flow 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 flow forecasts beyond a five-year period are extrapolated using a growth rate range of 2.0% to 3.0% (F18: 2.0%
to 3.0%). Growth rates are specific to individual CGUs and reflect expected future market and economic conditions.
Discount rate
The Group applies a post-tax discount rate to post-tax cash flows as the valuation calculated using this method
closely approximates applying pre-tax discount rates to pre-tax cash flows. The post-tax discount rates incorporate
a risk-adjustment relative to the risks associated with the net post-tax cash flows being achieved. The following
pre-tax discount rates were applied:
Americas
Europe
ANZ
2019
10.0%
9.6%
11.8%
2018
9.5%
9.6%
11.0%
Exchange rates
Cash flow 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 financial 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 2019
86 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 15 – PROVISIONS
Current
Employee entitlements
Other
Total current provisions
Other provisions
2019
Carrying amount at start of year
Charged/(credited) to profit or loss
Payments
Foreign currency translation
Carrying amount at end of year
2019
$M
36.1
9.7
45.8
2018
$M
34.4
11.0
45.4
ONEROUS
CONTRACTS
$M
RESTRUCTURING
$M
OTHER
$M
TOTAL
$M
2.0
2.2
(0.6)
–
3.6
6.5
5.9
(7.2)
0.1
5.3
2.5
–
(1.8)
0.1
0.8
11.0
8.1
(9.6)
0.2
9.7
Onerous contract provisions are held for non-cancellable leases, IT infrastructure service contracts and wine grape
supply contracts that have been identified as being surplus to the Group’s needs. The restructuring provision
comprises costs in relation to the Group’s 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
flows at a pre-tax risk free rate plus, where appropriate, the risks specific to the liability. Where discounting is used,
the increase in the provision due to the passage of time is recognised as a finance 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 flows, discounted
at the appropriate rate which reflects the risks of the cash flow.
Termination benefits are payable when employment is terminated before the normal retirement date or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits
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 2019 | 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
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 profile and the requisite financial metrics that secures access to funding with a spread
of maturity dates and sufficient 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 financial flexibility; and
• To provide returns to shareholders and benefits 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 financial 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 profile.
NOTE 17 – BORROWINGS
Total borrowings consist of:
Current
Non-current
Total borrowings
Details of major arrangements
2019
$M
17.4
1,147.7
1,165.1
2018
$M
4.3
875.3
879.6
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 2019 is $571.0 million
(F18: $544.3 million).
During the year the Group established a US$350.0 million syndicated debt facility with a US$120.0 million 5-year
tranche maturing November 2023 and a US$230.0 million 7-year tranche maturing in November 2025. At 30 June
this syndicated debt facility is fully drawn to US$350.0 million. The carrying value of the syndicated debt facility
at 30 June 2019 is $499.6 million (F18: nil).
The Group has in place a number of revolving bank debt facilities with maturities staggered through to December 2024.
As at 30 June 2019 there were no drawings under the bank debt facilities (F18: $274.1 million).
USPP notes bear interest at fixed and floating interest rates. In accordance with the Group’s risk management strategy,
the Group has entered into a combination of fixed to floating and floating to fixed interest rate swaps to obtain the
desired fixed/floating 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 finance lease arrangements which have a carrying value of $75.1 million
at 30 June 2019 (F18: $76.7 million). The Group’s finance lease arrangements have durations up to 12 years.
88 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 17 – BORROWINGS (CONTINUED)
Financial guarantees
The Group has issued financial guarantees to other persons of $23.0 million (F18: $23.7 million) that could be called upon
at any time in the event of a breach of the Group’s financial obligations. No payments are expected to eventuate under these
financial guarantees as the Group expects to meet its respective obligations to the beneficiaries 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 2019,
receivables totalling $26.2 million had been derecognised under this arrangement (F18: $41.9 million).
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 profit or loss and other comprehensive income if borrowings
are derecognised.
ALL BALANCES TRANSLATED TO AUD
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
TOTAL CASH
FLOWS
FROM
ACTIVITIES
$M
DEBT
REVALUATION
AND FX
MOVEMENTS
$M
2018
$M
89.4
0.6
(270.7)
(544.3)
(76.7)
(0.6)
(802.3)
311.5
–
(206.9)
–
5.1
(13.6)
96.1
0.9
0.1
(15.1)
(26.7)
(3.5)
–
(44.3)
2019
$M
401.8
0.7
(492.7)
(571.0)
(75.1)
(14.2)
(750.5)
1. Loans are stated net of capitalised facility finance costs. At reporting date, the balance of bank loans is $499.6 million (F18:
$274.1 million) against capitalised facility finance costs of $6.9 million (F18: $3.4 million) to be amortised over the facility period.
NOTE 18 – CONTRIBUTED EQUITY
Issued and paid-up capital
719,100,485 (F18: 718,663,546) ordinary shares, fully paid
Own shares held
Contributed equity at the beginning of the period
Shares movements:
Nil shares bought back and cancelled (F18: 19,471,487)
436,939 shares issued under the Dividend reinvestment plan (F18: Nil)
Net movement in own shares held
Contributed equity at the end of the period
The shares have no par value.
2019
$M
2018
$M
3,247.3
(3.5)
3,243.8
3,240.5
(5.1)
3,235.4
3,235.4
3,528.6
–
6.8
1.6
3,243.8
(300.0)
–
6.8
3,235.4
Share buyback
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 2019, the Company bought back and cancelled nil shares.
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 2019 | 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
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 satisfied
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 (F18: Nil). A total of 0.3 million (F18: 0.5 million) treasury
shares are available at 30 June 2019. During the year, the Group purchased 0.9 million shares ($16.6 million) under
the third party arrangement (F18: 2.7 million shares ($42.9 million)). A total of 0.9 million shares (F18: 2.7 million)
purchased under the third party arrangement are available at 30 June 2019.
When the Company reacquires its equity instruments (treasury shares) their cost is deducted from equity. No gain
or loss is recognised in profit 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 five years
over five years
Total lease commitments
Capital expenditure and other commitments
The following expenditure has been contracted but not provided for in the financial statements:
Capital expenditure
2019
$M
2018
$M
111.7
354.8
494.9
961.4
88.6
282.5
478.9
850.0
49.2
38.1
The Group’s leases of property have terms of up to 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 specific 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 benefits of ownership of an asset it is classified as an operating lease. Operating lease payments are
recognised as an expense on a straight-line basis over the lease term in the consolidated statement of profit or loss
and other comprehensive income.
Where the Group takes on substantially all the risks and benefits of ownership of the leased item it is classified
as a finance 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 finance 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 31 outlining the expected impact on the Group from the initial adoption of AASB 16 Leases.
90 | TREASURY WINE ESTATES ANNUAL REPORT 2019
90 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 20 – RESERVES
Cash flow hedge reserve
Share based payments reserve
Foreign currency translation reserve
Total reserves
2019
$M
(8.4)
(34.6)
76.8
33.8
2018
$M
2.2
(9.4)
7.6
0.4
Cash flow hedge reserve
This reserve records the effective portion of gains or losses from open cash flow 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
STIP
(RESTRICTED
SHARES)
MTIP
(PERFORMANCE
RIGHTS)
LTIP
(PERFORMANCE
RIGHTS)
REP
(RESTRICTED
SHARES/
DEFERRED
SHARE RIGHTS)
SHARE CELLAR
(BROAD-BASED
EMPLOYEE
SHARE PLAN)
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
255,406
140,562
(168,803)
(29,846)
197,319
–
–
245,436
–
(33,976)
4,448,771
806,921
(2,688,879)
(628,716)
211,460
1,938,097
–
–
395,909
33,353
(162,697)
(40,270)
226,295
–
100,806
57,962
(44,539)
(12,565)
101,664
–
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. The performance conditions are:
• 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.
For the F17 and F18 awards, Performance Rights are subject to dual performance measures with equal weighting
of TSR and ROCE over a performance period of three years. The F19 awards were issued over the same performance
period but with a weighting of 25% for TSR and 75% for ROCE.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 21 – EMPLOYEE EQUITY PLANS (CONTINUED)
Mid-term Incentive Plan (MTIP)
F19 is the first year the Group have awarded an MTIP grant. Under the MTIP certain employees receive Performance
Rights which entitle the participant to receive shares at no cost subject to the achievement of performance conditions
and continuing employment. The F19 plan has two equal vesting conditions: time-based (50%) and ROCE growth
(50%). For the time-based conditions half vest in 1-year (25%) and half in 2-years (25%).
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 specific 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 first 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. In the plans operating from 2015 to 2018, for every two
purchased shares that a participant holds at the vesting date (approximately two years) the Group delivers one matched
share, subject to continued employment. For employees enrolling in the 2019 plan, the Group will deliver one matched
share for every purchased share held at the plan vesting date, subject to continued employment.
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 benefits 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 benefits 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 2019
92 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 21 – EMPLOYEE EQUITY PLANS (CONTINUED)
Active share based payment plans:
Long-term Incentive Plans
The below table outlines the F18 and F19 LTIP plans which have a vesting date post 30 June 2019:
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
Mid-term Incentive Plans
The below table outlines the F19 plan which has a vesting date post 30 June 2019:
GRANT DATE
Grant date share price
Expected dividend yield (%)
Fair value estimate at grant date – ROCE
Fair value estimate time-based – Vesting 2019
Fair value estimate time-based – Vesting 2020
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
F19
12-Nov-18
F19 PLAN
12-NOV-18
F18 PLAN
13-NOV-17
$15.56
28.0
1.9
2.1
$7.24
$14.80
$15.82
29.0
2.2
1.9
$11.09
$14.93
F19 PLAN
12-NOV-18
$15.56
1.9
$15.09
$15.32
$15.04
GRANT DATE
SHARE PRICE
$5.11
$5.98
$7.97
$10.42
$15.82
$17.32
$15.56
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
TAXATION
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 22 – INCOME TAX
The major components of income tax expense are:
Statement of profit 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
Increase/(decrease) in deferred tax liabilities
Deferred income tax
Tax reconciliation
The amount of income tax expense as shown in the consolidated statement of profit or loss
and other comprehensive income differs from the prima facie income tax expense attributable
to earnings. The differences are reconciled as follows:
Profit before tax excluding material items
Material items before tax
Profit before tax
Prima facie income tax expense attributable to profit from operations
calculated at the rate of 30% (F18: 30%)
Tax effect of:
Non-taxable income and profits, net of non-deductible expenditure
Other deductible items
Tax losses recognised
Change in tax rate
Foreign tax rate differential
Other
Under/(over) provisions in previous years
Total tax expense
Income tax expense on operations
Income tax benefit 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
Other
Total deferred tax liabilities
94 | TREASURY WINE ESTATES ANNUAL REPORT 2019
2019
$M
2018
$M
156.7
14.8
171.5
13.7
1.1
14.8
591.0
–
591.0
106.6
8.5
115.1
63.4
(54.9)
8.5
481.7
(6.2)
475.5
177.3
142.7
2.5
(3.4)
(2.3)
0.6
(6.1)
2.5
0.4
171.5
171.5
–
171.5
23.6
0.6
5.8
19.6
5.2
71.0
26.5
152.3
16.2
72.6
104.2
1.1
194.1
(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
NOTE 22 – INCOME TAX (CONTINUED)
Movements in deferred income tax relate to the following:
Movement in deferred tax assets:
Opening balance
(Charged) to profit or loss
Recognised directly in Equity
Foreign currency translation
Reclassification
Other
Closing balance
Movement in deferred tax liabilities:
Opening balance
Charged/(credited) to profit or loss
Recognised directly in Equity
Transfer (to)/from Assets Held for Sale
Foreign currency translation
Reclassification
Other
Closing balance
2019
$M
2018
$M
154.5
(13.7)
3.0
5.9
0.6
2.0
152.3
190.8
1.1
(1.4)
(5.3)
8.3
0.6
–
194.1
208.0
(63.4)
–
9.3
–
0.6
154.5
233.9
(54.9)
–
–
11.3
–
0.5
190.8
Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting period and not recognised
in net profit or loss but directly credited to equity
4.4
–
Unrecognised tax assets
There are potential future income tax benefits relating to accumulated losses in non-Australian group companies,
which have not been brought to account. These possible benefits amount to $38.5 million (F18: $43.5 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 $58.7 million (F18: $69.8 million) franking credits available for
subsequent reporting periods.
US tax reform
In F18, 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, as a result the Group recognised a one-off benefit of
$20.9 million which arose 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. Significant
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 final 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 2019 | 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
TAXATION
FOR THE YEAR ENDED 30 JUNE 2019
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 profit 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 sufficient taxable profit 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 profit nor taxable profit or loss or on the recognition of goodwill.
• Foreign taxes which may arise in the event of retained profits 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 indefinite 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 profit 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 2019
96 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 23 – FINANCIAL RISK MANAGEMENT
Financial risk management framework
The Group’s financial 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 identification and
management of financial risks.
The Group holds financial instruments from financing (principally borrowings), transactions (trade receivables and
payables) and risk management (derivatives) which result in exposure to the following financial 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 financial assets and liabilities:
LIQUIDITY
RISK
(A)
INTEREST
RATE RISK
(B)
NOTE
FOREIGN
EXCHANGE
RISK
(C)
CREDIT
RISK
(D)
Net borrowings
Receivables
Other financial assets
Payables
17
9
9
9
✕
✕
Derivative financial assets and liabilities
24, 31
(a) Liquidity risk
✕
✕
✕
✕
✕
✕
✕
✕
✕
✕
✕
✕
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 financial 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 flows,
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 flexibility by maintaining an appropriately structured
debt maturity profile with a mix of bank and capital (bond) market debt, whilst also monitoring compliance with the
Group’s key financial 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 financing arrangements.
2019
$M
2018
$M
1,887.1
(1,066.0)
821.1
1,301.5
(818.4)
483.1
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2019
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 flows arising from its material
financial liabilities, net and gross settled derivative financial 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:
2019
Non-derivative
financial liabilities
Bank loans1
Finance leases
Other loans
US Private Placement Notes
Trade payables
Other payables
(financial liabilities)
Derivative
financial liabilities
Foreign exchange contracts
Interest rate and cross
currency swaps
Total financial liabilities
2018
Non-derivative
financial liabilities
Bank loans1
Finance leases
Other loans
US Private Placement Notes
Trade payables
Other payables
(financial liabilities)
Derivative
financial liabilities
Foreign exchange contracts
Interest rate and cross
currency swaps
Total financial liabilities
10.1
4.5
13.6
10.9
351.7
373.0
0.6
0.8
765.2
1.2
4.3
–
10.4
315.7
387.2
0.3
0.6
719.7
8.9
4.5
–
10.2
–
–
0.7
2.1
26.4
–
4.3
–
9.7
–
–
0.6
1.4
16.0
15.8
9.0
0.6
126.8
–
215.3
26.9
–
231.8
–
–
–
0.7
0.2
345.2
60.4
–
319.9
–
–
–
595.3
105.3
14.2
699.6
351.7
492.7
75.1
14.2
571.0
351.7
373.0
373.0
2.2
2.2
4.8
157.7
7.4
481.6
–
725.5
15.1
2,156.4
6.8
1,886.7
90.0
8.5
0.6
19.4
–
–
0.6
2.7
121.8
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
1.5
1.5
8.2
375.2
1.4
548.5
14.3
1,781.2
12.7
1,609.4
1. Loans are stated net of capitalised facility finance costs. At reporting date, the balance of bank loans is $499.6 million
(F18: $274.1 million) against capitalised facility finance costs of $6.9 million (F18: $3.4 million) to be amortised over the facility period.
98 | TREASURY WINE ESTATES ANNUAL REPORT 2019
98 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Interest rate risk
Nature of the risk
The Group is exposed to interest rate risk principally from floating 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 fixed and floating interest rates.
At 30 June 2019, interest rate swap contracts were in use to exchange fixed interest rates to floating on
$356.9 million (US$250 million) of US Private Placement notes and floating interest rates to fixed on $142.7 million
(US$100 million). The swaps mature in December 2023, June 2027 and June 2029. During the year cross currency
interest rate swaps were used to exchange floating USD interest on a portion of the USD syndicated debt facility
of US$120 million into AUD fixed rate of $166.6 million with maturities in November 2023. Please refer note 23(a)
for the profile and timing of cash flows over the next five years.
Level of exposure at balance date
The Group’s exposure to variable interest rate risk results from the following financial instruments at balance sheet date:
Financial assets
Cash and cash equivalents
Total assets
Financial liabilities
US Private Placement Notes1
Bank loans1
Total liabilities
1. Net of hedged amounts.
2019
$M
401.8
401.8
285.5
328.3
613.8
2018
$M
89.4
89.4
272.1
274.1
546.2
Sensitivity analysis
The table below shows the impact by currency denomination if the Group’s weighted average floating interest rates
change from the year-end rates of 2.14% (F18: 1.78%) with all other variables held constant.
CURRENCY
USD
AUD
SENSITIVITY
2019
2018
+ / – 25bp
+ / – 25bp
+ / – 25bp
+ / – 25bp
PRE-TAX IMPACT ON PROFIT
2019
–
$M
1.4
(0.7)
+
$M
(0.7)
(0.3)
2018
–
$M
0.7
0.3
+
$M
(1.4)
0.7
The movements in profit on a consolidated level are primarily a result of interest costs from borrowings. There would
have been no significant impact on equity.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2019
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 specific 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, Chinese Renminbi 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 nominal amount and average hedge
rate of the instruments in place at 30 June 2019 are disclosed in the following table.
In determining the amount of hedging required, the Group also considers the ‘natural hedges’ arising from the
underlying net cash flows in the relevant currency, comprising operating, investing and financing cash flows.
Details of the Group’s open hedges at balance sheet date are shown below.
Open foreign currency hedges at 30 June 2019
CURRENCY
HEDGE TYPE
AUD/USD
AUD/GBP
Forwards
Options
Total
Forwards
Options
Total
HEDGE VALUE
(NOTIONAL AUD)
$M
AVERAGE
HEDGE
RATE
8.3
419.7
428.0
111.6
182.3
293.9
0.7104
0.6954
0.5406
0.5563
100 | TREASURY WINE ESTATES ANNUAL REPORT 2019
100 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 23 – FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Foreign exchange risk (continued)
Level of exposure at balance date
At the reporting date, the Group’s financial assets and liabilities were denominated across the following currencies:
ALL BALANCES TRANSLATED TO AUD
2019
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 financial assets/(liabilities)
Trade receivables (net of allowance for expected credit loss)
Other receivables
Trade and other payables
Net other assets/(liabilities)
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 financial assets/(liabilities)
Trade receivables (net of allowance for expected credit loss)
Other receivables
Trade and other payables
Net other assets/(liabilities)
AUD
$M
USD
$M
GBP
$M
OTHER
$M
TOTAL
$M
273.8
0.7
1.8
–
(0.1)
(14.2)
262.0
305.8
36.2
(306.7)
35.3
26.2
0.6
(151.8)
–
(0.1)
(0.6)
(125.7)
238.0
59.3
(323.4)
(26.1)
75.6
–
(494.5)
(571.0)
(75.0)
–
(1,064.9)
116.1
52.5
(349.8)
(181.2)
26.2
–
(118.9)
(544.3)
(76.4)
–
(713.4)
115.0
17.1
(322.8)
(190.7)
10.9
–
–
–
–
–
10.9
73.2
0.6
(70.3)
3.5
0.6
–
–
–
–
–
0.6
48.4
1.0
(58.5)
(9.1)
41.5
–
–
–
–
–
41.5
48.1
2.1
(53.9)
(3.7)
36.4
–
–
–
(0.2)
–
36.2
66.1
16.7
(54.6)
28.2
401.8
0.7
(492.7)
(571.0)
(75.1)
(14.2)
(750.5)
543.2
91.4
(780.7)
(146.1)
89.4
0.6
(270.7)
(544.3)
(76.7)
(0.6)
(802.3)
467.5
94.1
(759.3)
(197.7)
1. Includes capitalised borrowing costs of $6.9 million (F18: $3.4 million).
Sensitivity analysis
The following table illustrates the impact of potential foreign exchange movements on profit before tax and the
statement of financial position at 30 June:
CURRENCY
United States Dollar
Great Britain Pound
Euro
Canadian Dollar
New Zealand Dollar
SENSITIVITY
ASSUMPTION1
2019
2018
8.2%
9.9%
7.1%
6.2%
5.4%
9.2%
9.0%
8.0%
7.2%
6.3%
PRE-TAX IMPACT ON PROFIT
IMPACT ON EQUITY
2019
–
1.0
0.1
0.4
1.3
0.2
+
(0.8)
(0.1)
(0.3)
(1.2)
(0.1)
+
(2.7)
(1.6)
(0.7)
(1.5)
(0.6)
$M
2018
–
3.2
1.9
0.8
1.8
0.7
2019
–
58.4
19.9
0.4
(1.1)
7.7
+
(56.8)
(9.0)
(2.7)
1.4
(6.0)
+
(45.8)
(14.3)
0.3
1.0
(6.9)
$M
2018
–
71.5
13.5
3.2
(1.6)
6.8
1. Australian dollar versus individual currencies. Implied one year currency volatility at reporting date (Source: Bloomberg).
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
RISK
FOR THE YEAR ENDED 30 JUNE 2019
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 financial 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 profile 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 specific 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 2019 in respect of derivative financial instruments was
$3.4 million (F18: $2.5 million) and in respect of cash and cash equivalents was $110.0 million (F18: $55.9 million).
The Group’s authorised counterparties are restricted to banks and financial institutions whose long term credit rating
is at or above a Standard and Poors 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 allowance for expected credit loss.
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
2019
$M
489.1
29.7
9.4
15.0
543.2
2018
$M
432.1
28.3
3.2
3.9
467.5
Trade receivables have been aged according to their 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 2019
102 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 24 – DERIVATIVE FINANCIAL INSTRUMENTS
At reporting date, there were $721.9 million (Australian dollar equivalent) net face value of outstanding
foreign exchange contracts at contract rates (F18: $541.2 million), interest rate swaps of $499.6 million
(F18: $476.3 million) and cross currency interest rate swaps of $171.3 million (F18: Nil). These instruments
are Level 2 under AASB’s Fair Value measurement hierarchy.
NOTE 25 – FAIR VALUES
The fair values of cash and cash equivalents, financial assets and most financial liabilities approximate their carrying
value. The fair value of the US Private Placement Notes is $637.1 million (F18: $581.8 million) and the fair value of
the syndicated debt facility is $544.5 million (F18: nil). There have been no reclassifications of financial assets from
fair value to cost, or from cost or amortised cost to fair value during the year.
The fair values of derivative financial 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 flows by
the current interest rate for financial assets and financial liabilities with similar risk profiles (a Level 2 valuation).
The valuation of derivative financial assets and liabilities reflects 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 financial instruments is to hedge the Group’s underlying assets and liabilities
denominated in foreign currencies and to hedge against risk of interest rate fluctuations, it is unlikely in the absence
of abnormal circumstances that these contracts would be terminated prior to maturity.
For all other recognised financial assets and financial liabilities, based on the facts and circumstances existing
at reporting date and the nature of the Group’s financial assets and financial liabilities including hedge positions,
the Group has no reason to believe that the financial assets could not be exchanged, or the financial liabilities could
not be settled, in an arm’s length transaction at an amount approximating its carrying amount.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP COMPOSITION
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 26 – SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:
ENTITY NAME
Equity holding of 100% (F18: 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 (Pacific 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 2019
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 26 – 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 Ltd
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 28) and relieved from the requirement
to prepare audited financial 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
2019
50.0
48.8
48.8
48.8
69.9
2018
50.0
48.8
48.8
48.8
69.9
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP COMPOSITION
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 27 – PARENT ENTITY FINANCIAL INFORMATION
(a) Summary financial information
The individual financial 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
Profit for the year
Total comprehensive income
2019
$M
2018
$M
827.0
8,933.1
5,343.3
5,343.3
3,589.8
3,247.3
(34.6)
377.1
3,589.8
421.0
421.0
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
Current liabilities comprise balances with other entities within the Group. These balances will not be called within
the next 12 months.
(b) Financial guarantees
Refer note 17 for financial guarantees to banks, financiers and other persons.
(c) 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.
(d) Capital commitments
There are no capital commitments for the Company (F18: nil).
NOTE 28 – 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 financial 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 identified in Note 26.
A summarised consolidated statement of profit or loss and other comprehensive income, retained earnings reconciliation
and a consolidated statement of financial 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 2019
are set out below.
Extract of the statement of profit or loss and other comprehensive income
Profit before tax
Income tax expense
Net profit after tax
Retained earnings at beginning of the year
External dividends
Retained earnings at end of the year
2019
$M
2018
$M
453.6
(137.8)
315.8
100.6
(251.3)
165.1
416.1
(100.7)
315.4
(11.1)
(203.7)
100.6
106 | TREASURY WINE ESTATES ANNUAL REPORT 2019
106 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 28 – DEED OF CROSS GUARANTEE (CONTINUED)
Statement of financial 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
2019
$M
2018
$M
273.1
296.9
482.7
1.9
–
4.4
1,059.0
569.9
2,257.5
541.4
426.4
27.8
1.1
3,824.1
4,883.1
308.6
550.6
89.2
28.9
4.7
982.0
495.3
16.2
10.3
521.8
1,503.8
3,379.3
3,247.3
(33.1)
165.1
3,379.3
23.7
1,146.3
441.3
1.8
29.1
3.2
1,645.4
542.8
2,477.3
529.4
410.5
29.4
1.6
3,991.0
5,636.4
318.3
1,618.6
51.0
27.5
3.8
2,019.2
263.0
18.3
4.9
286.2
2,305.4
3,331.0
3,240.5
(10.1)
100.6
3,331.0
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 2019 | 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 29 – RELATED PARTY DISCLOSURES
Ownership interests in related parties
All material ownership interests in related parties are disclosed in note 26 to the financial 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 insignificant 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 benefits
Post-employment benefits
Share based payments
Total
2019
$
2018
$
9,734,012
54,272
5,306,803
15,095,087
9,503,303
53,126
7,022,129
16,578,558
Additionally, compensation paid to non-executive directors was $1,845,107 (F18: $1,703,306).
NOTE 30 – 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 financial statements and other
audit work under the Corporations Act 2001
Associate firms of Auditor
Other assurance services
Audit and review services
Other non-audit services
Total
2019
$
2018
$
1,452,298
397,702
51,000
1,901,000
346,348
2,247,348
1,502,220
447,951
–
1,950,171
160,797
2,110,968
The Group engages KPMG to provide other non-audit services where their expertise and experience best qualifies them
to provide the appropriate service and as long as stringent independence requirements are satisfied. In the year ended
30 June 2019, KPMG earned fees in respect to the provision of advisory and taxation services.
108 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 31 – OTHER ACCOUNTING POLICIES
New accounting standards and interpretations
Since 30 June 2018, the Group has adopted the following new and amended accounting standards.
REFERENCE
TITLE
AASB 15
AASB 2014-5
AASB 2015-8
AASB 2016-3
AASB 9
AASB 2014-7
AASB 2016-5
Interpretation 22
Revenue from Contracts with Customers
Amendments to Australian Accounting Standards arising from AASB 15
Amendments to Australian Accounting Standards – Effective Date of AASB 15
Amendments to Australian Accounting Standards – Clarifications to AASB 15
Financial Instruments (December 2014)
Amendments to Australian Accounting Standards arising from AASB 9
(December 2014)
Amendments to Australian Accounting Standards – Classification and
Measurement of Share-based Payment Transactions
Foreign Currency Transactions and Advance Consideration
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
The adoption of these standards did not have a significant impact on the consolidated financial 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 16
Interpretation 23
AASB 2017-4
AASB 9
AASB 128
AASB 119
AASB 10 and
AASB 128
Leases
Uncertainty over Income Tax Treatments
Amendments to Australian Accounting Standards – Uncertainty over
Income Tax Treatments
Prepayment Features with Negative Compensation (Amendments to IFRS 9)
Long-term Interests in Associates and Joint Ventures (Amendments
to AASB 128)
Plan Amendment, Curtailment or Settlement (Amendments to AASB 119)
Annual Improvements to IFRS Standards 2015–2017 Cycle – various standards
Amendments to References to Conceptual Framework in IFRS Standards
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture (Amendments to IFRS 10 and IAS 28)
APPLICATION
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2022
Other than the impact of AASB 16 Leases outlined below, these standards are not expected to have a material
impact on the Group’s financial 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 classification 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
definition of a lease.
The new standard is mandatory for annual reporting periods beginning after 1 January 2019. 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 which requires the restatement
of comparative information.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 31 – OTHER ACCOUNTING POLICIES (CONTINUED)
Issued but not yet effective accounting standards (continued)
AASB 16 Leases (continued)
The Group has performed an assessment of the impact on its consolidated financial statements and expects
the impact to be as follows:
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME (EXTRACT)
Cost of sales
Other expenses
Finance costs
Profit before tax
Income tax expense
Net profit attributed to members of Treasury Wine Estates Limited
Earnings per share for profit attributed to the ordinary equity
holders of the Company
• Basic
• Diluted
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EXTRACT)
Assets
Current and non current inventory
Property, plant and equipment
Liabilities
Trade and other payables
Provisions
Net deferred tax liability
Current and non current borrowings
Equity
Other reserves
Retained earnings
CONSOLIDATED STATEMENT OF CASH FLOWS (EXTRACT)
Payment to suppliers, governments and employees
Interest paid
Repayment of borrowings
Other accounting policies
30 JUNE 2019
$M
INCREASE/
DECREASE
$M
30 JUNE 2019
$M
RESTATED
(1,660.8)
(14.7)
(99.4)
591.0
(171.5)
419.5
58.4
58.1
15.2
3.5
(33.7)
(15.0)
3.8
(11.2)
(1.6)
(1.5)
(1,645.6)
(11.2)
(133.1)
576.0
(167.7)
408.3
56.8
56.6
30 JUNE 2019
$M
INCREASE/
DECREASE
$M
30 JUNE 2019
$M
RESTATED
2,092.9
1,398.7
780.7
45.8
41.8
1,165.1
33.8
424.4
(45.2)
507.1
(62.1)
(2.1)
(28.6)
629.4
(5.7)
(69.0)
2,047.7
1,905.8
718.6
43.7
13.2
1,794.5
28.1
355.4
30 JUNE 2019
$M
INCREASE/
DECREASE
$M
30 JUNE 2019
$M
RESTATED
(3,110.0)
(43.8)
(492.2)
81.5
(33.7)
(47.8)
(3,028.5)
(77.5)
(540.0)
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 financial instrument) to the net carrying
amount of the financial 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.
Financial assets
A financial asset is classified as at fair value through profit or loss or fair value through other comprehensive
income unless it meets the definition of amortised cost. This is determined on initial recognition.
Financial assets classified as at amortised cost are measured initially at fair value and adjusted in respect
of any incremental and directly attributable transaction costs. All other financial assets are measured at fair
value on initial recognition.
Reclassification occurs only if there are fundamental changes to the Group’s business model for managing financial assets.
110 | TREASURY WINE ESTATES ANNUAL REPORT 2019
110 | TREASURY WINE ESTATES ANNUAL REPORT 2019
NOTE 31 – OTHER ACCOUNTING POLICIES (CONTINUED)
Other accounting policies (continued)
Amortised cost
A financial asset is classified as at amortised cost only
if the asset is held to collect contractual cash flows and
the contractual terms of the financial asset give rise
to cash flows that are solely payments of principal
and interest.
A financial 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 financial asset is derecognised or impaired.
Impairment of financial assets
The Group recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are determined using
historical recovery of contractual cash flows and the
amount of loss incurred, adjusted for current economic
and credit conditions.
An impairment loss is based on the difference between
the contractual cash flows due in accordance with the
contract and all the cash flows that the Group expects
to receive, discounted at an approximation of the original
effective interest rate. Impairment losses on assets
classified as amortised cost are recognised in profit or
loss when they are expected, not when they are incurred.
If a later event causes the impairment loss to decrease,
the amount is reversed in profit or loss.
Derecognition of financial assets
The derecognition of a financial asset takes place when
the Group no longer controls the contractual rights that
comprise the financial instrument.
This is normally the case when the instrument is sold
or all the cash flows attributable to the instrument
are passed through to an independent third party.
Derivatives
The Group uses derivative financial instruments such
as foreign currency contracts, interest rate swaps and
options to hedge its risks associated with interest rate
and foreign currency fluctuations. Such derivative
financial instruments are carried at fair value and
are financial assets when the fair value is positive
and financial 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 profit or loss for the year.
Hedge accounting
For the purposes of hedge accounting, hedges are
classified as either fair value hedges when they hedge
the exposure to changes in the fair value of a recognised
asset or liability; cash flow hedges where they hedge
exposure to variability in cash flows 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 identifies 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 qualifies 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 profit or loss
for the year.
Gains or losses recognised directly in equity are
reclassified into profit and loss in the same period or
periods the foreign currency risk affects consolidated
profit and loss.
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 profit or loss and other comprehensive income. Where
the adjustment is to the carrying amount of a hedged
interest-bearing financial instrument, the adjustment
is amortised to the statement of profit or loss and other
comprehensive income such that it is fully amortised
by maturity.
Cash flow hedges
In relation to cash flow hedges (forward foreign currency
contracts) to hedge firm 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 profit 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 flow hedges, the gains or losses that
are recognised in equity are transferred to the statement
of profit or loss and other comprehensive income in the
same period in which the hedged firm commitment
affects the profit and loss, for example when the future
sale actually occurs.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 111
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2019
In the Directors’ opinion:
(a) The financial statements and notes 1 to 31 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 financial position as at 30 June 2019 and of its
performance for the financial 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 identified in note 26 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 28.
Note 1 confirms that the financial 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 Officer and Chief Financial Officer 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
28 August 2019
Michael Clarke
Chief Executive Officer
112 | TREASURY WINE ESTATES ANNUAL REPORT 2019
INDEPENDENT AUDITOR’S REPORT
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
(the
Treasury Wine Estates Limited
Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• giving a true and fair view of the
Group’s financial position as at 30
June 2019 and of
financial
performance for the year ended on
that date; and
its
The Financial Report comprises:
• Consolidated statement of financial position as at 30
June 2019;
• 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;
• Notes including a summary of significant accounting
policies; and
• Directors’ Declaration.
•
complying with Australian Accounting
Standards
the Corporations
Regulations 2001.
and
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 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.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 113
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Key Audit Matters
The Key Audit Matters we identified are:
• Valuation of inventory; and
• 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 $2,032.2
million
Refer to Note 9 Working Capital to the Financial Report
The key audit matter
How the matter was addressed in our audit
Our procedures included:
•
•
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;
in progress and
testing year-end inventory valuation models, in
particular the identification and valuation of
work
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
considered forecast sales plans,
inventory
holding reports (including wine held by third
party distributors and retailers), committed
future supply contracts and the outcomes of
the Group’s process to identify slow moving
and obsolete inventories. For a sample of ‘at
risk’ inventory we:
• evaluated the proposed inventory value
against brand strategies and forecast sales
plans for consistency;
• assessed
the
reasonableness
of
management’s action plans in place to
mitigate the risk that wine will be sold
below cost and facilitate the sale of
potential at risk inventory above cost;
• assessing
the
integrity of
valuation models
used,
the
including
inventory
the
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 judgements contained in
the valuation models for:
•
•
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; and
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. These factors 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 in the holding period, is the
identification of current slow moving and
obsolete inventories. These can signal
changes in consumer demand patterns or
potential over-supply issues which may
114 | TREASURY WINE ESTATES ANNUAL REPORT 2019
impact forecast prices.
mathematical accuracy of
calculation formulas;
the underlying
• comparing, by product grade,
inventory
volumes in significant markets to both recent
and forecasted sales data to identify slow
moving and potentially ‘at risk’ inventories, and
assessing the computation of write-downs of
inventory to net realisable value;
• attending cycle counts and / or year-end
inventory counts 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.
Recognition of discounts and rebates (Net Sales revenue, which is net of trade discounts and
volume rebates, was $2,831.6 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 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 as a key audit matter due to the
Our procedures included:
• considering the appropriateness of 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
such as customer 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:
• checking amounts to the agreements;
and
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 115
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
the number of unique
significance of the Group judgements applied
and
customer
arrangements that are in place. 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.
• analysing sales and depletion to date, and
depletion programs expected to 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
reviewing and approving
for calculating,
discounts and rebates;
• assessing the integrity of the discount and
including
the
the underlying
rebate models
mathematical accuracy of
calculation formulas;
used,
• 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; and
• considering
the Group’s disclosures with
respect to revenue, discounts and rebates
accruals
standard
requirements.
accounting
against
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 2019
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
•
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
• assessing the Group 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:
•
•
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.
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 117
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
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 2019, 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 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Gordon Sangster
Partner
Melbourne
28 August 2019
118 | TREASURY WINE ESTATES ANNUAL REPORT 2019
DETAILS OF SHAREHOLDERS, SHAREHOLDINGS
AND TOP 20 SHAREHOLDERS
DETAILS OF SHAREHOLDERS AND SHAREHOLDINGS
Holding of securities
LISTED SECURITIES 7 AUGUST 2019
Fully paid ordinary shares
NO. OF
HOLDERS
NO. OF
SHARES
% HELD BY
TOP 20
65,989
719,100,485
87.34
SIZE OF HOLDING
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
NUMBER
45,328
18,261
1,645
701
54
65,989
As at 7 August 2019, 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 $16.56 per share, is 622.
TWENTY LARGEST SHAREHOLDERS – 7 AUGUST 2019
RANK SHAREHOLDER
NO. OF FULLY PAID
ORDINARY SHARES
% OF FULLY PAID
ORDINARY SHARES
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
BNP Paribas Nominees Pty Ltd
HSBC Custody Nominees (Australia) Limited – GSCO ECA
Australian Foundation Investment Company Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
AMP Life Limited
HSBC Custody Nominees (Australia) Limited
Avanteos Investments Limited
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd DRP
Milton Corporation Limited
UBS Nominees Pty Ltd
Mutual Trust Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
CPU Share Plans Pty Ltd
Netwealth Investments Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Total
260,586,317
198,356,377
67,650,509
33,021,406
20,401,687
14,054,625
9,323,483
5,450,000
3,650,437
2,774,514
1,919,962
1,685,476
1,645,815
1,457,726
1,206,363
1,128,189
987,520
963,965
923,077
787,680
627,975,128
36.24
27.58
9.41
4.59
2.84
1.95
1.30
0.76
0.51
0.39
0.27
0.23
0.23
0.20
0.17
0.16
0.14
0.13
0.13
0.11
87.34
SUBSTANTIAL SHAREHOLDERS – 7 AUGUST 2019
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
The Vanguard Group
INTEREST (% OF ISC)
9.65
6.21
5.00
TREASURY WINE ESTATES ANNUAL REPORT 2019 | 119
SHAREHOLDER INFORMATION
ANNUAL GENERAL MEETING
ELECTRONIC COMMUNICATIONS
The Annual General Meeting of the Company will be held on
Wednesday 16 October 2019 (AEDT). 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 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 (Australia)
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 identification 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 9654 7254
Email: investors@tweglobal.com
Website: www.tweglobal.com
Address: Level 8, 161 Collins Street
Melbourne Victoria 3000
Australia
ADR Depositary and Transfer Agent:
BNY Mellon Shareowner Services
462 South 4th Street, Suite 1600
Louisville KY 40202
United States of America
Postal address: PO Box 505000
Louisville KY 40233 – 5000
United States of America
Telephone: (1888 269 2377 – toll free) – (US)
International: +1 201 680 6825
Email: shrrelations@cpushareownerservices.com
Website: www-us.computershare.com/investor
120 | TREASURY WINE ESTATES ANNUAL REPORT 2019
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;
• confirm 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 notification 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
file number will have any unfranked portions of 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 file 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 AND THECELLAR.CO
Shareholders in Australia and the US have the opportunity
to purchase the Company’s wines through Cellardoor.co and
Thecellar.co respectively.
Cellardoor.co and Thecellar.co are exclusive members-only
online wine communities for shareholders and family and friends
of Treasury Wine Estates. The virtual cellar door provides 24/7
access to an exceptional range of wines from Treasury Wine
Estates’ award winning wineries at exclusive shareholder prices.
Shareholders in Australia can register for Cellardoor.co
by visiting http://pub.wine.cellardoor.co/shareholderrego.
Shareholders in the US can register for Thecellar.co
by visiting https://thecellar.co/shareholders2019.
TREASURY WINE ESTATES LIMITED
ABN 24 004 373 862
COMPANY SECRETARY
Fiona Last LLB (Hons), B.Com, FGIA
REGISTERED OFFICE
Level 8, 161 Collins Street
Melbourne Victoria 3000
Australia
Telephone: +61 3 8533 3000
WWW.TWEGLOBAL.COM
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