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Brown Forman18 August 2022
ASX ANNOUNCEMENT
TWE 2022 Annual Report
Treasury Wine Estates Ltd (ASX:TWE) is pleased to present its Annual Report for the year
ended 30 June 2022, which includes the Company’s full year financial statements and
Appendix 4E.
For the purposes of ASX Listing Rule 15.5, TWE confirms that this document has been
authorised for release to the market by the Board.
Contacts:
Media
Melissa O’Neill
Tel: +61 3 8533 3923
Mob: +61 467 555 175
Investors
Bijan Taghian
Tel: +61 3 8533 3568
Mob: +61 433 173 664
T R E A S U R Y W I N E E S T A T E S L I M I T E D
A B N 2 4 0 0 4 3 7 3 8 6 2
L E V E L 8 , 1 6 1 C O L L I N S S T R E E T
M E L B O U R N E V I C 3 0 0 0 A U S T R A L I A
W W W . T W E G L O B A L . C O M
1. RESULTS FOR ANNOUNCEMENT TO THE MARKET
Key information
Year ended
30 June 2022
$m
Year ended
30 June 2021
$m
% Change
increase/
(decrease)
Amount
increase/
(decrease)
$m
Revenue from ordinary activities
2,531.8
2,683.9
(5.7%)
(152.1)
Profit attributable to members of Treasury Wine
Estates Limited
Net profit after tax before material items and SGARA
Earnings before interest, tax, SGARA and
material items
263.2
322.6
523.7
250.0
309.6
510.3
5.3%
4.2%
2.6%
13.2
13.0
13.4
Earnings per share
Basic earnings per share
Basic earnings per share, adjusted to exclude SGARA, material items
Year ended
30 June 2022
Cents per share
Year ended
30 June 2021
Cents per share
36.5
44.7
34.7
42.9
Dividends (distributions)
Cents per share
Franking %
Final dividend – year ended 30 June 2022 (determined subsequent to balance date)1
Interim dividend – half year ended 31 December 2021
Final dividend – year ended 30 June 2021
16.0 cents
15.0 cents
13.0 cents
100%
100%
100%
1. The record date for determining an entitlement to receipt of the final dividend is 1 September 2022 and the Company expects to pay the dividend
on 30 September 2022. The Company’s Dividend Reinvestment Plan will be in operation for the final dividend. The last date for receipt of election
notices for participation in the Dividend Reinvestment Plan is 2 September 2022 at 5pm (AEST).
2. PRELIMINARY FINAL FINANCIAL STATEMENTS
Please refer to pages 74 through 124 of this report wherein the following are provided:
• Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2022;
• Consolidated statement of financial position as at 30 June 2022;
• Consolidated statement of changes in equity for the year ended 30 June 2022;
• Consolidated statement of cash flows for the year ended 30 June 2022; and
• Notes to the consolidated financial statements.
ii – TREASURY WINE ESTATES LIMITED ANNUAL FINANCIAL STATEMENTS 2022
Appendix 4EPreliminary Final Report in respect to Treasury Wine Estates Limited For the year ended 30 June 2022ABN 24 004 373 862 3. NET TANGIBLE ASSET BACKING
Net tangible asset backing per ordinary share
Year ended
30 June 2022
$
Year ended
30 June 2021
$
Net tangible asset backing per ordinary share
3.31
3.37
4. ASSOCIATES AND JOINT VENTURES
investments in Associates and Joint Ventures
Year ended
30 June 2022
$m
Year ended
30 June 2021
$m
Investments accounted for using the equity method
0.0
2.6
Investments in associates and joint venture partnerships are accounted for in the consolidated financial
statements using the equity method of accounting. During the year, the Group disposed of a 50 percent
investment in Fiddlesticks LLC, a company incorporated in the United States of America.
5. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held on 18 October 2022.
6. FURTHER INFORMATION
Additional Appendix 4E disclosure requirements can be found in the notes to the year-end financial report and the
ASX announcement lodged with this Annual Report.
iii – TREASURY WINE ESTATES LIMITED ANNUAL FINANCIAL STATEMENTS 2022
Appendix 4EPreliminary Final Report in respect to Treasury Wine Estates Limited For the year ended 30 June 2022ABN 24 004 373 862 Annual
Report
2022
We’re striving to be the
world’s most admired
premium wine company,
and we’re boldly leading
change in the world of wine
CONTENTS
About Treasury Wine Estates
At a glance
Chairman and Chief Executive Officer’s report
Operating and financial review
Sustainability
Inclusion, equity and diversity
Board of Directors
Corporate governance
Directors’ report
Auditor’s independence declaration
F22 remuneration report
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
IMPORTANT INFORMATION
1
2
3
6
38
41
44
46
50
53
54
74
75
76
77
78
124
125
130
131
This report is in summary form and is not necessarily complete. It should be read together with the Company’s
other announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au.
This report contains information that is based on projected and/or estimated expectations, assumptions or
outcomes. Forward-looking statements are subject to a range of risk factors. The Company cautions against reliance
on any forward-looking statements, particularly in light of the current economic climate and potential impacts on
consumer demand, the impact of continued high inflation on business outcomes, global difficulties in logistics and
supply chains, the potential ongoing impacts relating to the COVID-19 pandemic, exchange rate impacts given the
global nature of our business, vintage variations and the evolving nature of global geopolitical dynamics.
While the Company has prepared this information based on its current knowledge and understanding and in good
faith, there are risks and uncertainties involved which could cause results to differ from projections. The Company
will not be liable for the correctness and/or accuracy of the information, nor any differences between the information
provided and actual outcomes, and reserves the right to change its projections from time to time. The Company
undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date
of this report, subject to disclosure obligations under the applicable law and ASX listing rules.
Certain market and industry data used in this report has been obtained from research, surveys or studies conducted
by third parties, including industry or general publications. Neither TWE nor its representatives or advisers have
independently verified any market or industry data provided by third parties or industry or general publications.
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. All currency referred to in the report is in Australian dollars, unless
otherwise stated.
2,500
Team members
We pride ourselves on employing
world-class talent across Australia,
New Zealand, Asia, the Americas,
the United Kingdom, Europe, the
Middle East, and Africa.
3Brand portfolio divisions
A brand portfolio-led operating
model with three key divisions –
Penfolds, Treasury Premium Brands
and Treasury Americas – supported
by centralised business services,
supply, and corporate functions.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 1
70+Countries
Our iconic wines are loved by
consumers around the world and
are available in major retailers,
premium wine stores, restaurants,
bars, and online.
11,300
Hectares
Our global multi-regional sourcing
model is at the heart of our business,
and includes vineyards and
production assets in some of the
world’s best wine regions.
At a glance 1
· F22 EBITS2 increased 3% to $523.7 million; EBITS margin up 1.3 percentage
points to 21.1%
· EPS (before material items and SGARA) up 4.1% to 44.7 cents per share
· Return on Capital Employed decreased 0.1 ppts to 10.7%
· Final dividend of 16 cents per share (fully franked); bringing F22 annual
dividend to 31 cents per share; up 10.7% on the prior period
· Full-year cash conversion of 104.3%
EBITS
EPS (BEFORE MATERIAL ITEMS AND SGARA)
(Earnings before interest, tax, material items and SGARA)
(Earnings per share) (cents)
(A$ million)
.
7
4
6
6
.
8
3
4
5
.
6
2
1
5
.
3
0
1
5
.
7
3
2
5
F22
3%
increase
.
2
7
5
1
.
9
4
7
.
1
4
.
9
2
4
.
7
4
4
F22
4.1%increase
F18
F19
F20
F21
F22
F16
F17
F18
F21
F22
ROCE
(Return on capital employed) (%)
.
6
3
1
7
.
1
1
.
8
0
1
.
7
0
1
.
2
0
1
F22
0.1ppts
decrease
MARKET CAPITALISATION
(A$ million)
17.39 14.92
10.48 11.68 11.35
0
0
5
2
1
,
9
2
7
0
1
,
F22
3
7
3
8
,
3
9
1
,
8
4
5
5
7
,
2%decrease in market
capitalisation
F18
F19
F20
F21
F22
F18
F19
F20
F21
F22
Share price
($ at 30 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.
2 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Chairman and Chief Executive
Officer’s report
Throughout fiscal 2022
we’ve seamlessly
transitioned to our new
operating model, which
has built momentum
around our strategy.
The positive changes
made throughout
the year have laid the
foundations for this
next phase of growth
and innovation.
Paul Rayner Chairman and Tim Ford Chief Executive Officer
INTRODUCTION
Dear shareholders,
We are pleased to present the 2022 Annual Report
for Treasury Wine Estates Limited.
Last year we acknowledged that change would
continue to be ever present in our business, and that
indeed has been the case throughout F22 as we
managed the effective closure of the Mainland China
market to Australian wine products as well as
navigated a number of macroeconomic challenges
including the global pandemic, significant supply
chain disruptions, and inflationary cost pressures.
Through these challenges, we have continued to adapt
and evolve, and have emerged a stronger and more
sustainable business as we continue to expand our
multi-country of origin portfolio and invest more
strongly across a range of markets. We have found
new opportunities to innovate - across our business,
our product portfolio and how we connect with our
customers and consumers.
We started the fiscal year with a seamless transition
to our new brand-portfolio-led operating model, which
has brought even greater focus and accountability
to how we execute our strategy.
Our new divisions – Penfolds, Treasury Americas
and Treasury Premium Brands – have accelerated
our focus on premiumisation and responding to trends
in a way that meets the unique propositions of our
existing consumers, and introducing new consumers
to premium and luxury wines.
Now emerging as a true luxury icon, Penfolds continued
to focus on introducing its wine to more consumers
around the world through a range of unique luxury
experiences, events, and the launch of new wines
including the Penfolds g5 which is blended from five
exceptional Grange vintages. The g5 marks the final
release in ‘g’ series trio and was awarded a perfect
100-point score four times by leading wine critics.
Penfolds also continued to grow its presence in some
of the finest winemaking regions in the world, with the
purchase of additional winery and vineyard assets
neighboring our current site in Bordeaux, to support
growth of the French portfolio, and announced that in
calendar 2022 it would launch the first Penfolds wine
made in China for the China market.
In addition to Penfolds, our Treasury Premium Brands
division has continued to drive growth across Asia.
In response to the tariffs on Australian wine into China,
our team is now sourcing South African and Chilean
country of origin wine for Rawson’s Retreat ensuring
the popular brand continues to be a foundation for
growth in China with plans to expand the portfolio
and distribution next financial year.
In the Americas, we have now materially reshaped
our business, laying the foundations for growth in
the world’s largest wine market through a focused
portfolio of brands that are leading the way in luxury,
culture-led experiences.
There is no better example of this than 19 Crimes, which
now joins Penfolds as our second global growth brand.
Over the past 10 years there has been a continuous
focus on consumer-led innovation, including the
extension into new varietals, category-leading digital
engagement and popular celebrity collaborations,
which has seen the brand deliver leading innovation
in the US wine market for two years running.
Treasury Americas continued to build its luxury
credentials with the acquisition of Frank Family
Vineyards. Rich and Leslie Frank have crafted a
portfolio of exceptionally high-quality wines and
nurtured an industry-leading guest experience
at the winery that we intend to emulate across
our American cellar doors.
Across our portfolio we have also continued to
innovate our approach to no-alcohol wine and grow
our low-alcohol portfolio, recognising the growing
conscious consumption trend across all markets.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 3
CHAIRMAN AND CHIEF EXECUTIVE OFFICER’S REPORT (CONTINUED)
In F22, we launched two meaningful innovations in this
category – Matua Lighter in the United States and the
Wolf Blass Zero range in Australia. These innovations
were well received by consumers and we believe
there is a significant opportunity for TWE to be the
global leader in these emerging segments of the wine
category. With that in mind, we will continue to invest
in research and development to deliver the leading
brand and wine quality combination to give our
consumers real choice for every occasion.
The strength of our team, our global diversified
business model, our iconic brand portfolio, and our
unrelenting focus on the consumer has given us an
unrivalled competitive advantage and enabled us
to quickly respond to environmental challenges and
recalibrate our strategy when, and as, required.
OVERVIEW OF RESULTS
In F22, Group EBITS increased 3% to $523.7 million,
while our EBITS margin improved 1.3 percentage points
to 21.1%. TWE’s long-term financial objective remains
to deliver sustainable top-line growth, high single digit
average earnings growth and Group EBITS margin
target of 25%+.
Throughout the year, NSR declined 3.6% to
$2,476.7 million reflecting divestment of the US
commercial portfolio and the decline in shipments
to Mainland China and reduced commercial volumes
in the UK and Australia, partly offset by strong growth
in the premium and luxury portfolios.
TWE continued portfolio premiumisation and growth of
distribution and availability for priority brands, with NSR
per case up 16.1% and the contribution of the premium
and luxury portfolios to 83% of Group NSR, up from
77% in F21.
Excluding Penfolds Australian country-of-origin sales
to Mainland China, NSR and EBITS grew 9% and
22% respectively.
This result reflects disciplined execution of F22 priorities
including continued portfolio premiumisation and
growth in distribution and availability for priority brands.
In particular, Penfolds has driven stand-out growth in
Asia, with NSR in regional markets, excluding Mainland
China, increasing 106%, alongside strong growth across
the EMEA region, particularly UK and Germany, where
NSR grew 32.9%.
Penfolds growth is evidence of its credentials as a
global luxury brand and investment will continue in
its multi-country of origin portfolio strategy, particularly
in France with the pending acquisition of Chateau
Lanessan, which will double the existing vineyard
footprint in Bordeaux, to be completed in the first half
of F23.1,2
Significant changes to the Treasury Americas brand
portfolio and asset base continued in F22, repositioning
the business as a premium wine business with a
focused portfolio of priority brands.
Treasury Americas continues to be recognised for
its outstanding innovation capability, with 19 Crimes
Cali Red recognised by IRI as the number one
selling wine in history in its first-year sales. In addition
to Cali Red, we launched Cali Rosé through our
partnership with entertainment icon Snoop Dogg, and
achieved success with the release of Martha’s Chard,
in partnership with Martha Stewart, which took out the
number one US wine market innovation in 2022.
Outside of the US, our diverse portfolio of brands
continued to make their mark with the launch of the
Wolf Blass Zero and Squealing Pig lighter ranges,
as well the sourcing of South African and Chilean wine
for Rawson’s Retreat for the Mainland China market,
and the Wolf Blass House of the Dragon partnership
with HBO, an innovative new platform to introduce new
consumers to the portfolio.
We were delighted to see the team at Penfolds Magill
Estate win the International Best of Wine Tourism Award
in the Wine Tourism Restaurant category and being
named Adelaide’s International Winner at the 2022
Great Wine Capitals Best of Wine Tourism Awards,
recognising the important role that wine regions and
our wineries play in driving regional tourism.
All divisions contributed to our F22 result, with key
elements as follows.
• Penfolds reported an 8% decline in EBITS to
$319.3 million while EBITS margin increased 0.6 ppts
to 44.5%. The significant decline in shipments to
Mainland China was partly offset by continued
strength in a number of global markets and
channels, with NSR and EBITS outside of Mainland
China increasing by 45% and 25% respectively on
a constant currency basis. Penfolds continues to
attract new consumers and grow distribution and
availability globally. In Asian markets, outside of
Mainland China, NSR grew 106% supported by strong
depletion trends in multiple markets led by
consumer demand and channel penetration.
• Treasury Americas reported a 21% increase in EBITS
to $185.6 million with EBITS margin up 2.9 ppts to
19.3%. The priority brand portfolio continued to
perform strongly with NSR increasing 15% in the year,
led by standout growth from Beringer, Stags’ Leap,
Matua and 19 Crimes. Following the completion of
significant changes in the brand portfolio and asset
base, including the acquisition of Frank Family
Vineyards, Treasury Americas has been repositioned
as a premium wine business with a focused portfolio
of growing brands.
• Treasury Premium Brands reported a 27% increase
in EBITS to $79.6 million with EBITS margin increasing
2.5 ppts to 10.0%. Portfolio premiumisation continued,
with strong performance by priority brands
including 19 Crimes, Pepperjack, Squealing Pig and
Wynns. Significant distribution gains and NSR growth
for priority brands in key EMEA and Asia markets was
an execution highlight, as was continued innovation
success across the portfolio.
1. Organic, pre-material items and on a constant currency basis.
2. TWE to acquire 78.6% stake from the Bouteiller Family, who will remain a shareholder. The cash outflow associated with the acquisition is expected
to be approximately A$60 million, including a capital injection to fund winery and vineyard development. Completion expected Oct-22, subject to
satisfaction of conditions precedent.
4 – TREASURY WINE ESTATES ANNUAL REPORT 2022
SUSTAINABILITY
One year into our evolved sustainability strategy, we
made good progress against our ambition to cultivate
a brighter future for everyone who touches our business.
Throughout the year we made progress against all
of our targets and commitments.
The key sustainability highlights for the year included:
• Completion of a comprehensive review of water
management across the global viticulture and
winery operations, with clear recommendations
to drive our water security and efficient
usage strategies.
• Committed to invest $20 million on solar panel
and meter technology across our global production
network in support of the ambition to achieve
100% renewable electricity by F24.
•
Improving levels of gender representation across
the global business, with overall female
representation up 1.3 ppts to 41.5% while females
in leadership roles were down 0.2 ppts to 44.9%.
In F22, TWE refinanced AU$1.4 billion of existing debt
into a Sustainability Linked Loan (SLL) that rewards
performance against agreed milestones with
discounts on the loan rate. The establishment of
the SLL is a key step in integrating our sustainability
agenda across the business and is an important step
for both our sustainability and market capital journeys,
incentivising us to move even more quickly towards
achieving our sustainability ambition and targets.
Whilst we recognise there is more work to do, we are
embracing the leadership role we must play in sharing
a positive future for everyone who touches our business
from grape to glass.
More information about our enhanced strategy,
goals, and the progress we are making against
our commitments will be available in our 2022
Sustainability Report which will be released later
this year and will be made available online at
tweglobal.com/sustainability.
BALANCE SHEET STRENGTH AND DIVIDEND
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. Net debt/EBITDAS was 1.8x in F22
up from 1.6x in F21, and below TWE’s up to 2.0x through
the cycle target.
Total capex for the year was $112.2 million comprising
maintenance and replacement capex of $70.6 million,
and growth capex including the completion of our
investment in South Australian luxury winemaking
infrastructure, of $41.6 million.
Cash conversion of 104.3% reflects continued strong
operating cash flow performance, in addition to
improved working capital. Excluding the net change
in non-current luxury and premium inventory,
cash conversion was 103.1%.
Earnings per share increased 4.1% to 44.7 cents per
share and return on capital employed was up 0.1 ppt
to 10.9%, excluding divested and acquired brands,
demonstrating our continued disciplined approach
to capital allocation.
For F22, TWE is pleased to declare a final dividend
of 16.0 cents per share, fully franked, which brings
the total dividend for F22 to 31 cents per share and
a payout ratio of 69% at the upper end of the target
dividend policy range.
THANKS AND CONCLUSION
Looking ahead, we will remain focused on delivering
sustainable top line growth and high single digit
average earnings growth over the long term.
We will continue to build momentum behind the
premium portfolio which has seen strong
performance globally in F22. We will also continue to
grow distribution, demand, and availability for TWE’s
priority brands as well as drive category-leading
consumer-led innovation.
Whilst uncertain economic and geopolitical trends
will continue in global markets throughout F23, we
believe that our global footprint, the flexibility of our
operating model and the outstanding execution
capability of our teams means we are well positioned
to navigate these headwinds.
After two years of significant changes within our
business, we enter F23 with momentum, focusing on
our objectives of delivering quality earnings growth,
efficient capital utilisation and sustainable
shareholder returns.
We are confident that the positive changes we have
made throughout the year have laid the foundations
for our next phase of growth and innovation,
positioning us well to deliver on our long-term growth
ambitions we set out in the TWE 2025 strategy.
Our people, alongside our suppliers, customers, and
partners, remain critical to delivering on this agenda.
With that in mind, we want to thank everyone across
our global team for their outstanding efforts during
the year, for the care they continue to show each other,
and the way they have embodied our TWE DNA as they
pursue our strategic agenda and navigated another
challenging year.
We would also like to thank the Board for their
contribution throughout the year. We would like to
take this opportunity to acknowledge the enduring
contribution made by Warwick Every-Burns who will
retire from the Board at our 2022 Annual General
Meeting. Warwick has been a Non-Executive Director
since the Company was floated in 2011 and has been
an excellent director, having spent more than 10 years
as Chair of the Human Resources Committee, and as
Chief Executive Officer on an interim basis from
September 2013 to March 2014.
In closing, we would also like to extend our thanks
to you, our shareholders, for your ongoing belief
and investment in, and support of, TWE.
Kind regards,
Paul Rayner
Chairman
Tim Ford
Chief Executive Officer
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 5
Operating and financial review
Treasury Wine Estates (TWE) is a premium-focused, global leader in wine,
listed on the Australian Securities Exchange (ASX). The Company is focused
on delivering shareholder value through the production of wine, and marketing
and selling quality wine brands to consumers around the world
The following operating and financial review
contains details of the significant changes in TWE’s
state of affairs that occurred during the year ended
30 June 2022.
TWE’S BUSINESS ACTIVITIES
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,
premium and commercial1 price segments and sold
in more than 70 countries. At the heart of the business
is TWE’s global, multi-regional sourcing model which
includes world-class vineyard and production assets
in internationally acclaimed winemaking regions
including Barossa Valley and Coonawarra in Australia,
Napa Valley in the United States, Marlborough in
New Zealand, Bordeaux in France and Tuscany in Italy.
TWE employs a global team of more than 2,500 people.
TWE’S ORGANISATIONAL STRUCTURE AND
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
New operating model
TWE has operated under a new global business model
since 1 July 2021, with three standalone divisions
enabling strong underlying performance.
• Penfolds – representing global sales of the Penfolds
brand portfolio.
• Treasury Premium Brands (TPB) – representing
the sale of TWE’s diverse range of predominately
Australia and New Zealand sourced brands globally.
• Treasury Americas – representing sales of primarily
US-sourced brands in the Americas.
Divestment of non-priority US brands and assets
In F21, TWE’s US business was reshaped into a premium-
focused wine business after the exit of a significant
portion of its commercial brand portfolio. The
divestment of non-priority US brands and assets
continued in F22 with the divestment of the Provenance
and Chateau St Jean brands and surplus supply
chain assets. TWE has now substantially completed
its US divestment program with confirmed net cash
proceeds of approximately $300 million, in line
with expectations.
Frank Family Vineyards acquisition
In December 2021, TWE completed the acquisition of
Frank Family Vineyards (FFV), an acclaimed luxury wine
business based in California’s Napa Valley, for
US$315 million. The business comprises an award-
winning luxury portfolio across three collections with
retail price points ranging from US$38 to US$225 per
bottle. Supporting the portfolio is an efficient, capital-
light Napa Valley asset base, comprising two vineyards,
a single winery and a highly renowned tasting room
and direct to consumer wine club model.
The FFV portfolio complements the Treasury Americas
luxury brand portfolio, filling a key gap for luxury
Chardonnay. Treasury Americas is well placed to
enhance FFV’s growth given its leading luxury sales
credentials, national distribution network, and
Californian asset base and sourcing model.
COVID-19 impact on business performance
During F22, pandemic-related restrictions continued
to impact TWE’s global operations, with key sales
channels remaining in varied states of impact and
recovery. Retail and e-commerce sales channels
continued to operate above pre-pandemic levels with
some moderation compared to F21, where demand
was particularly elevated. On-premise, cellar doors
and travel retail sales channels continued to
experience varying levels of disruption.
1. TWE participates in three price segments: luxury (A$30+), premium (A$10-A$30), and commercial (A$5-A$10). Segment price points are retail
shelf price.
6 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Our operating model
Increased focus and accountability to unlock our long-term growth potential
Penfolds
Treasury
Premium
Brands
Treasury
Americas
Supply
US Supply
Treasury Business Solutions
Corporate Functions
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 7
TWE optimises its inventory holdings to support
portfolio premiumisation and continues to focus
on increasing access to luxury and premium fruit
from multiple countries of origin through vineyard
acquisitions, vineyard leasing, and supply contracts
with third-party growers. For commercial grade wine,
TWE prioritises sourcing from the bulk-wine market.
Wine production
TWE owns world-class wine production and
packaging facilities.
•
•
•
•
In Australia, TWE owns and operates seven wineries
and two packaging facilities, with wines primarily
produced in South Australia and Victoria.
In New Zealand, TWE owns one winery in
the Marlborough.
In the US, TWE has six wineries and one packaging
facility in California’s North and Central Coast regions.
In Europe, TWE owns one winery in Italy
and two wineries in France.
Marketing, selling and distribution of TWE wine
TWE generates revenues and profits from the
production, marketing and sale of its portfolios of
branded wine in more than 70 countries, with its
route-to-market model reflecting regional insights
and opportunities.
The Company has taken deliberate action to embed
greater balance across its regional earnings mix and
sourcing models.
TWE’s profitability continues to be increasingly driven
by the high-growth luxury and premium segments,
as well as improved profitability across all segments.
Figure 2 shows the net sales revenue (NSR) and
earnings before interest, tax, SGARA and material
items (EBITS) contribution by division in F22.
OPERATING AND FINANCIAL REVIEW (CONTINUED)
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 accesses grapes and bulk wine from a range
of sources including Company-owned and leased
vineyards, grower vineyards, and the bulk-wine market,
varying by region as shown in Figure 1.
Figure 1: TWE’s regional sourcing model2
Australia
31%
53%
California
33%
30%
New Zealand
23%
52%
Italy
29%
3%
France
15% 31%
TWE owned/leased
Grower contracts
Third-party produced wine
16%
37%
25%
68%
54%
A global sourcing model, diversified across geographic
regions, varietals and price segments, supports growth
and limits exposure to vintage variation risk, as well as
grape and bulk wine pricing during grape shortages
and surpluses.
This diversification and flexibility also enables TWE
to react to changes in consumer and customer
preferences to support growth.
TWE owns and leases 8,362 planted hectares
of vineyards in Australia and New Zealand and is
the custodian of sought-after viticultural assets in
renowned winemaking regions including Australia’s
Barossa Valley and Coonawarra, and Marlborough
in New Zealand.
The Company also owns and leases 2,702 planted
hectares in key viticultural regions in California,
including Napa Valley, Sonoma County, Lake County,
and the Central Coast. In Europe, TWE owns and leases
90 planted hectares in France’s Bordeaux region and
154 planted hectares in Tuscany, Italy.
2. Regional sourcing is historical data for the northern hemisphere 2021 vintage and the southern hemisphere 2022 vintage.
8 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Figure 2: TWE’s business performance
by division in F22
NSR
(Net sales revenue) ($M)
Penfolds 29%
TAM 39%
TPB 32%
Global wine consumption
Global wine category growth is driven by the premium
and luxury price segments, with strong consumer
demand expected to continue. TWE’s portfolio structure
and premiumisation strategy are well aligned to
benefit from these attractive category fundamentals
with 83% of F22 NSR contributed by the premium and
luxury portfolios.
Figure 3: Global wine category growth trends4
EBITS contribution3
(Earnings before interest, tax, material items and SGARA) ($M)
Penfolds 55%
TAM 32%
TPB 13%
Luxury
Premium
Commercial
2.9%
4.7%
3.8%
2.8%
0.7%
0.1%
2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Historical growth (CAGR 2012-2021)
Forecast growth (2021-2026)
The top 10 markets for premium and luxury wine represent approximately 80% of global consumption.
The US is the clear leader, with approximately 30% share of global consumption and strong forecast growth.
Figure 4: Key premium and luxury wine markets and forecast five-year compound annual growth rate
(CAGR) in wine consumption5
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2.6%
0.5%
2.9%
3.4%
3. Excludes corporate costs of $60.8 million.
4. IWSR 2022, still and sparkling wine only, A$ equivalent, portfolio price points per IWSR segmentation, value growth shown.
5. IWSR 2022, still and sparkling wine only, A$ equivalent, portfolio price points per IWSR segmentation, value growth shown.
Emerging markets include key markets in Asia, MEA and Latin America.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 9
OPERATING AND FINANCIAL REVIEW (CONTINUED)
TWE Ambition and Game Plan
TWE’s strategic vision and strategic imperatives are set out below.
TWE
Ambition
To be the world’s
most admired
premium wine
company
TWE
Way
We boldly lead
change in the
world of wine
TWE GAME
Plan
How we
will win
- Consumer focused
premium brand
portfolio
- Multi-regional & multi-
channel sales models
- World class talent
- Sustainable & multi-
regional sourcing
& winemaking
- Deep, long-term
partnerships &
networks
WHAT ARE THE ELEMENTS
& HOW DOES IT ALL
COME TOGETHER?
- We bring our
whole self
- We are
courageous
- We deliver
together
TWE
Our cultural
code
TWE
TWE
GAME
GAME
P lan
P lan
CONSUMER FOCUSED
CONSUMER FOCUSED
PREMIUM BRAND
PREMIUM BRAND
PORTFOLIO
PORTFOLIO
MULTI-REGIONAL &
MULTI-REGIONAL &
MULTI-CHANNEL
MULTI-CHANNEL
SALES MODELS
SALES MODELS
WORLD CLASS
WORLD CLASS
TALENT
TALENT
• TWE DNA at the heart
• TWE DNA at the heart
• Consumer-led &
• Consumer-led &
• Strengthened
• Strengthened
of all we do
of all we do
experience focused
experience focused
marketing as
marketing as
our advantage
our advantage
• Focused portfolio of
• Focused portfolio of
brands with clear &
brands with clear &
leadership position in
leadership position in
China & Australia
China & Australia
• US established as
• US established as
a premium wine
a premium wine
growth business
growth business
• Targeted growth
• Targeted growth
• Core objective to drive
• Core objective to drive
more consumption
more consumption
occasions
occasions
through our markets
through our markets
in rest of Asia &
in rest of Asia &
Europe
Europe
• Bold, consumer-need
• Bold, consumer need
driven innovation to
driven innovation to
build the future
build the future
• Category leadership
• Category leadership
with key retailers
with key retailers
• Acceleration in
• Acceleration in
direct to consumer &
direct to consumer &
ecommerce channels
ecommerce channels
– ours & our
– ours & our
retail partners’
retail partners’
• Employee experience
• Employee experience
focused culture –
focused culture –
a great place to work
a great place to work
• Broad diversity &
• Broad diversity &
inclusion agenda
inclusion agenda
• Continuous &
• Continuous &
company wide
company wide
learning through
learning through
TWEforME Academy
TWEforME Academy
•
•
use of technology to
use of technology to
enable collaboration,
enable collaboration,
connection &
connection &
development
development
DEEP, LONGTERM
DEEP, LONGTERM
PARTNERSHIPS
PARTNERSHIPS
& NETWORKS
& NETWORKS
• Mutually beneficial
• Mutually beneficial
partnerships across:
partnerships across:
– Customers
– Customers
– Growers
– Growers
– Suppliers
– Suppliers
– Communities
– Communities
– Government &
– Government &
industry bodies
industry bodies
• Strong third-party
• Strong third-party
expertise leveraged
expertise leveraged
for non-core
for non-core
business activities
business activities
SUSTAINABLE &
SUSTAINABLE &
MULTI-REGIONAL
MULTI-REGIONAL
SOURCING
SOURCING
& WINEMAKING
& WINEMAKING
• Continued building
• Continued building
& diversification of
& diversification of
premium sourcing
premium sourcing
across Australia, the
across Australia, the
US, & Europe
US & Europe
• Consumer led
• Consumer led
wine making at
wine making at
the best cost
the best cost
• Sustainable supply
• Sustainable supply
chain, with a focus
chain, with a focus
on water surety,
on water surety,
emissions, climate
emissions, climate
adaptation, &
adaptation &
packaging
packaging
• Fit for purpose asset
• Fit for purpose asset
base structured to
base structured to
deliver sustainable
deliver sustainable
performance now &
performance now &
in the future
in the future
10 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Strategic imperative
F22 progress
Consumer
focused premium
brand portfolio
• Introduced Penfolds wines to more consumers around the world, purchasing production
assets in Bordeaux to support growth of the Penfolds French portfolio and announcing
the first Penfolds wine made in China, launching in calendar 2022.
Multi-regional
and multi-channel
selling models
• Launched 19 Crimes Martha’s Chard, in partnership with Martha Stewart in the US, following
the successful launch of Cali Red and Cali Rosé through our partnership with entertainment
icon Snoop Dogg.
• Enhanced the luxury credentials of Treasury Americas with the addition of the award-
winning Frank Family Vineyards portfolio.
• Expanded the reach of priority brands in the Treasury Premium Brands portfolio, with
increased distribution and listings across Asia and Europe for 19 Crimes, Squealing Pig,
Wynns, and Pepperjack.
• Continued to invest in sales and marketing to grow distribution and availability of Penfolds
in markets outside of Mainland China.
• Penfolds successfully launched two NFT transactions, enabling engagement with a new set
of consumers through a new sales channel.
• Strong execution by the dedicated Treasury Americas luxury sales model ‘Vault Collective’
elevated performance across all sales channels.
• Treasury Americas partnership with Republic National Distribution Company (RNDC)
delivered significant distribution gains in California and Texas.
• Treasury Premium Brands increased investment in e-commerce in the UK and Global Travel
Retail in Europe and Asia to further diversify its sales by channel.
World class
talent
• Created our TWE leadership attributes to define traits that underpin our TWE DNA,
shaping the environment and experience of our team members.
• Continued to invest in learning through our TWEforME Academy, focused on building
capabilities such as innovation and digital, as well as our diverse, inclusive and
collaborative culture.
• Introduced new blended working principles and guidance to support a transition to hybrid
working, with a focus on holistic employee wellbeing.
• Conducted our second engagement and inclusion survey, with an increase in participation
from 50% to 76%. Progress against all focus areas from the prior year increased the overall
engagement and inclusion score to 70%, up from 68%.
• Achieved recognition as a leading employer, including from the Australian Financial Review
as one of the Best Places to Work in 2021, with the Inclusive and Diverse Workplace Award
by Australia’s The Drinks Association, Great Place to Work certification in the UK, and
recognition as one of the Healthiest Employers of the Bay Area, San Francisco.
• Completed construction and commissioning of the TWE Barossa Winery expansion and
associated consolidation of the Penfolds Nuriootpa Winery.
• Acquired and integrated additional production assets in Bordeaux, expanding and
diversifying our Penfolds production base in France.
• Accelerated our China country of origin project, completing our first luxury winemaking
trials to produce a Shangri-La and Ningxia-sourced Penfolds wine.
• Executed a global cost optimisation program into all supply chain functions and processes
to deliver benefits of $65 million in F23 and expected total savings of $90 million by F25.
Sustainable and
multi-regional
sourcing and
winemaking
models
Deep, long-term
partnerships and
networks
• Refinanced existing debt facilities, including the establishment of Sustainability Linked
Loans, increasing accountability for delivering TWE’s sustainability targets, and creating
a direct link between sustainability performance and TWE’s cost of capital.
• Entered a long-term, strategic co-operation agreement with the China Alcoholic Drinks
Association, demonstrating TWE’s long-term commitment to the Chinese wine industry
and consumers.
• Treasury Americas renewed agreements with key suppliers, further solidifying our
distribution network and strength of our relationships with key US distributors.
• Treasury Premium Brands continued to raise awareness of its brands by investing in high
profile partnerships including Wolf Blass and HBO in the launch of Game of Thrones: House
of the Dragon, Pepperjack and the AFL and Squealing Pig and the Australian Open.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 11
Inflation and cost outlook
Supply chain and input cost inflationary pressures
are expected to continue, with an incremental
$25 million currently estimated in F23. In addition,
TWE’s luxury inventory which will be sold in F23 will be
primarily from the 2020 Australian and Californian
vintages, both lower yielding and higher cost vintages.
Offsetting these costs, TWE’s global supply chain
optimisation program (which commenced in F21) is
now complete, with the program confirmed to deliver
savings of $90 million (up from $75 million previously).
The phasing of P&L delivery is now expected to be
$65 million in F23 (down from $75 million previously)
with the full run-rate of program benefits to flow
through by F25, based on the age of release of the
luxury wine portfolios. COGS per case are expected to
remain in line with F22, with improvement expected
from F24 onwards. Also mitigating higher costs are the
further price increases TWE has implemented within all
divisions in F23, specifically on growing premium and
supply-constrained luxury brands.
OPERATING AND FINANCIAL REVIEW (CONTINUED)
FUTURE PROSPECTS
TWE remains focused on leveraging its organisational,
strategic and physical assets across the world to
deliver quality growth. Our long-term financial growth
objectives are centred around driving profitability,
efficient capital usage, and the delivery of sustainable
shareholder returns, as listed below.
• Deliver sustainable top-line growth and high
single-digit average earnings growth6.
• Continue the premiumisation of the sales mix.
• Expand EBITS margin to 25% and beyond.
• Restore ROCE to pre-pandemic levels and then grow.
• Maintain cashflow and capital metrics in line with
an investment-grade credit profile, including cash
conversion of 90%+ (excluding the investment
in non-current luxury and premium inventory) and
net debt to EBITDAS to remain below 2.0x through
the cycle.
Each division will contribute differently towards our
growth objectives, with their own financial targets.
• Penfolds will focus on growth in revenue to drive
earnings growth, with an EBITS margin target of
40-45%.
• Treasury Americas will focus on premiumisation
to drive revenue growth along with cost optimisation
to support higher earnings and improved return on
capital, with an EBITS margin ambition of 25%.
• Treasury Premium Brands’ growth objectives are
focused on premiumisation and cost and capital
efficiency opportunities with a high-teens EBITS
margin ambition.
Areas of near-term focus that may impact TWE’s
future operational and financial prospects, excluding
material business risks which are outlined in the next
section, are outlined below.
Impact of high inflationary economic environment
on consumer demand
The impact of the current economic outlook on
consumer demand is uncertain. However, wine
consumption in TWE’s key global markets is currently,
and expected to remain, strong for premium and luxury
price points, reflecting the continuation of long-term
premiumisation trends and the historical resilience
of category performance through past economic
downturns. TWE expects its portfolio of trusted, well-
known and growing brands will continue to perform
well in this environment.
6. Organic, pre-material items and on a constant currency basis. Continuation of COVID-19 related disruptions to key sales channels for luxury wine
may impact short-term performance.
12 – TREASURY WINE ESTATES ANNUAL REPORT 2022
MATERIAL BUSINESS RISKS
Various risks 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.
While our material risks have not fundamentally changed in F22, we have made some changes to the risks
included below to reflect how the Board and Executive see TWE’s risk profile considering both financial and
non-financial impacts. Furthermore, the following risks have elevated in focus:
• Turnover of key talent as we operate in an environment of talent shortage and heightened levels
of employee movement.
• Pricing and investment execution and cost management impacting margin outcomes, due to increased
global inflationary pressures.
Risk
Description
Mitigation
Changing
consumer
preferences
and market
trends
Unanticipated changes in consumer
demand or preferences can have
adverse effects on the business’ ability
to either capture growth opportunities
or manage supply. These changes
could be caused or accelerated by
changes in economic outlook.
Changing
geopolitical
environment
Instability in the markets in which
we operate could impact consumer
demand, ability to trade, access to
new markets, disruption to global
supply chains, and other barriers to
the movement of people and goods
across international borders.
• We maintain a global diversified portfolio of brands and
products balanced between commercial, premium,
and luxury segments and at different stages of the
brand lifecycle.
• Strategic focus on premium and luxury categories,
which have a longer ageing process before being
released, providing greater flexibility to respond to
changes in demand.
• Brand portfolio and product strategy, including portfolio
rationalisation, brand prioritisation and targeted
investment in consumer marketing.
• A dedicated consumer insights and innovation
team tracking consumer trends and researching
new opportunities.
• Global business planning processes, including portfolio
reviews and global volume alignment processes.
• Continue to grow our diversified portfolio of products
and markets including Australia, US, Europe, Middle East,
and Asia.
• We respect local laws wherever we operate and have
implemented a robust compliance framework.
• Relationships and engagement (where relevant)
with key government, industry advocacy and
regulatory bodies.
• Flexible supply chain practices.
• Crisis management and business continuity plans.
• Seek opportunities for strategic investment from, and
into, key markets to capture new growth opportunities
and enhance connection to key markets.
Changing
regulatory
environment
TWE operates in a regulated industry
in many of the markets it makes and
sells wine. Each of these markets has
differing regulations that govern many
aspects of TWE’s operations. Changes
to regulatory requirements are broad
ranging and include taxes, health and
labelling guidelines as well as climate
and environmental requirements.
Remaining compliant with and abreast
of additional regulations and changes
to existing regulations requires diligent
and ongoing monitoring by the
business.
• Company-wide policies, standards and procedures.
• TWE Compliance Framework.
• 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
to understand emerging issues and opportunities, and
collaborate on advocacy strategies.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 13
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Risk
Description
Mitigation
Cyber and
information
security
Cyber and 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.
Health, safety
and wellbeing
The health, safety and wellbeing
of the TWE team and everyone who
touches our business remains our
highest priority. TWE recognises the
importance of ensuring our people
stay safe through closely managing
existing risks and being proactive
with emerging risks.
Growing grapes, processing fruit
and packing wine involves the use of
complex equipment and processes
that pose a risk and could result in
death, serious injury, or illness leading
to a financial, operational, and
reputational impact.
• Defined Cyber-Security Strategy and Governance.
• Information Security Policy, supporting framework
and specialised resources.
• IT Asset Management to manage our asset security
throughout the lifecycle.
• 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.
• Restricted and segregated management of sensitive
business/supplier/customer data.
• Periodic employee training and alerts to ensure secure
handling of sensitive data.
• Periodic user access and general system
penetration testing.
• Crisis, business continuity and disaster recovery plans.
• Formally defined Health, Safety and Wellbeing (HS&W)
policy, standards, procedures and tools.
• Induction/onboarding and on-going training programs
including: safe work procedures, permit to work system,
safety leadership programs, and Destination Zero Harm
Global Commitments.
• Preventative repair and maintenance programs
and facility and equipment inspection programs.
• Employee surveys, safety conversations,
HR complaints and whistleblower service capture
feedback from employees and external stakeholders
on the effectiveness of our HS&W initiatives.
• Monitoring of safety performance and incidents
through regular reporting, investigations, and
corrective action plans.
• Comprehensive COVID-19 management tools
and processes.
• TWE Mental Health and Wellbeing Framework, including
employee mental health surveys and membership of
the Corporate Mental Health Alliance Australia (CMHAA),
to improve understanding and support for mental health
in the workplace.
• Internal and external support mechanisms in place to
create a healthy and safe workplace, including Employee
Assistance Programs (EAP) and dedicated mental and
emotional health care provider for our American-based
team members.
14 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Risk
Description
Mitigation
Impacts
of climate-
related change
on TWE’s ability
to source
grapes
and make
premium wines
The impacts of climate change may
affect our ability to grow, make, and
market quality wines. A changing
climate presents physical risks such
as more frequent extreme weather
events and changing temperatures
that affect the yield and quality of
vineyards. Further, it could lead to
decreases in water availability or
quality and/or an increase in the
cost of water.
In addition, transition risks such
as government actions to reduce
the impacts of climate change,
through emission reduction targets
or cross border carbon adjustment
mechanisms, may also impact TWE’s
cost base.
• Climate-adaptive business strategy including a multi-
region sourcing model to mitigate over-reliance on a
single region.
• Investment in key production assets to manage for
compressed vintages, which are becoming more
frequent with climate change.
• Climate and water risk assessments allow us to
understand what opportunities and risks may emerge
as a result of climate change and to inform our
adaptation responses.
• Continued improvement of our data and weather
forecasting abilities as well as investment in areas
such as optimised irrigation and innovative
agronomic practices.
• Collaborating with a range of partners, such as
universities, industry, and suppliers to improve our
understanding of climate change and improve
our practices.
• We continue to monitor and understand emerging
trends, policy developments, and our emissions profile.
Incident
leading to
negative
coverage in
traditional or
social media
The strength of TWE’s portfolio
of brands is key to the success
of the business. If we experience
misrepresentation, negative or critical
coverage in either traditional and/
or social channels, this could result
in damage to TWE’s reputation and
to its brands. This can be driven
by a number of performance and
operational factors, as well as
commentary and opinions about
issues and trends that have the
potential to impact the business,
its brands, and people.
• Code of Conduct, Responsible Marketing Guidelines,
Responsible Consumption Program, Responsible
Procurement Code, Environment Policy and Standard,
Media Policy, Social Media Policy, and incident
management procedures.
• Active media monitoring and social listening including
community engagement, product reviews, and public
posting relating to TWE brands with ability to escalate
core issues.
• Global reputation research to understand
current stakeholder perceptions and influence
future engagement.
• Brand and intellectual property protection strategies.
Technology
and business
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 and/or damage
to business reputation.
• Defined technology roadmap and strategy.
• A global Enterprise Resource Planning System
and reporting capability.
• Global Shared Services Model including Continuous
Improvement Framework.
• 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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 15
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Risk
Description
Mitigation
Misaligned
supply and
demand for
region, variety,
and grade of
grapes
TWE’s ability to fulfil demand, in
particular growing demand for luxury
wine or specific varietals, can be
restricted by the availability of grapes.
Over time, changing consumer
preferences affects demand for
certain regional, varietal and/or grade
of grapes, providing both potential
opportunities for growth and potential
price pressure on existing inventory/
committed supply. As a result, financial
results could be affected, both in the
year of harvest and in future periods.
Partner
performance
and market
concentration
TWE’s ability to achieve our objectives
is directly tied to the performance of
our partners (suppliers, distributors,
and retailers). The sub-optimal
performance of these partners, and/or
their market concentration and power,
could have a significant impact on
TWE’s market share and/or margins.
Pricing and
investment
execution and
cost
management
impacting
margin
outcomes
Where pricing and investment
execution are not appropriately
aligned to both the brand and
product vision and strategy as well
as external competitor activity, there
is an increased risk to TWE of loss of
market share, decreasing margins
and/or brand damage.
Developments in the global economy,
including inflationary pressures and
foreign exchange rate movements
could add costs, impact TWE’s
earnings, and impact margins.
• Multi-regional growing and sourcing.
• Balanced grape intake between owned/leased
vineyards and third-party suppliers.
• Long-term vintage planning and ongoing demand
planning processes, to align our supply with our insights
from monitoring changing consumer preferences.
• Strong grower relationships and defined service
level agreements.
• Ongoing customer/distributor relationship management
to understand changes in demand and achieve
alignment with our current and future portfolio
of products.
• Innovative agronomic practices to improve
vineyard yield.
• Global wine allocation process for constrained products
to maximise value from products where supply is unable
to meet demand.
• Multi-regional and diversified supplier, distributor
and retailer base.
• Responsible Procurement Code (RPC) to define our
broader requirements of our suppliers, including
expectations related to human rights, safety,
and the environment.
• Defined and pre-approved terms of engagement.
• Investment in strong and multi-faceted key
partner relationships.
• Joint business planning processes with customers
and distributors to support and align their interests
with our objectives.
• Regular performance reviews.
• Ongoing management of our key cost drivers, closely
monitoring their potential for volatility and assessing
their impact on TWE earnings.
• Ongoing global pricing oversight and monitoring
across markets, including key competitor pricing
and promotional activity.
• Brand portfolio and product strategy
(incl. pricing guidelines).
• Controls over product price changes.
• Monthly brand/product sales performance reporting
versus budget.
• Active foreign exchange hedging strategy.
• Continued focus on working capital, including cash
conversion as a core financial metric.
16 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Risk
Description
Mitigation
Product
quality defects,
contamination,
and counterfeit
If we sell wine with a significant
product quality defect, or deliberate
contamination, it could have
significant impacts on TWE’s
corporate and brand reputation.
It may also add costs through
product write offs or recall.
As the reputation and value of TWE’s
brands increase, so does the risk
of counterfeit and copycat products,
which may impact profitability
and brand reputation.
• Product quality policies, procedures and controls,
coordinated and overseen by central TWE Technical
Services team.
• Product quality analytical control testing including
chemical and microbiological testing.
• Third-party audits and accreditation of processes
and controls, including Hazard Analysis and Critical
Control Points.
• Supplier Service Level Agreements and specifications
for Quality and Supplier Quality Assurance for packaging
dry goods.
• Crisis management and product withdrawal and/or
recall plans.
• Intellectual Property (IP) protection including trademark,
copyright, design and other IP registrations. Strict IP
agreements and guidelines, including for licensing
arrangements, such as branded retail stores.
• Collaborative alliances and working relationships with
online marketplaces and other key industry bodies.
• Regular internal counterfeit/copycat awareness training
and clear customer communication policies regarding
complaints/enquiries.
• Brand Protection Program - focusing on online
and offline enforcement (including maximising
criminal enforcements).
• Copycat enforcement strategy - focusing on
high-priority targets.
• IP due diligence - detailed checks on partners/retailers
and ongoing supply chain audits.
Business
disruption and/
or catastrophic
damage or loss
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 people being
harmed or threatened, loss of key
infrastructure, inability to trade,
inventory shortages, excess 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.
• Multi-regional sales diversification.
• Comprehensive insurance program.
• Global business planning processes.
• Financial risk management (refer to Page 109).
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 17
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Risk
Description
Mitigation
Turnover
of key talent
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’s ability to deliver
on key initiatives.
We aim to make TWE a great place to work with an inclusive
culture and a compelling Employee Value Proposition (EVP).
To differentiate TWE from competitors in the market,
we provide a place where our people come together to
spark innovation, fuel human connection, create belonging,
and promote wellbeing through a range of employee
programs such as:
• strategically aligned and targeted learning
and development
• strategic workforce planning
• talent review and succession planning processes
• employee health, safety and wellbeing, including mental
and physical health and resilience
• market competitive remuneration and benefits and
incentive and reward aligned to the achievement of
TWE’s financial and business goals and demonstration
of the right behaviours
• a culture, enabled by our DNA, which celebrates diversity,
courage and collaboration.
18 – TREASURY WINE ESTATES ANNUAL REPORT 2022
PROFIT REPORT
Announcement highlights
• Reported EBITS grew 3% to $523.7 million and EBITS margin improved 1.3 ppts to 21.1%, reflecting execution of F22
priorities including continued portfolio premiumisation and growth of distribution and availability for priority brands.
• Strong performance delivered across TWE, with each brand portfolio division delivering underlying EBITS growth
and EBITS margin expansion.
• Excluding Penfolds Australian COO sales to Mainland China, NSR and EBITS grew 9% and 22% respectively.
• Portfolio premiumisation continues, with the contribution of global NSR from the premium and luxury portfolios
increasing 6 ppts to 83%.
• The strength of a number of TWE’s luxury and premium brands enabled targeted price increases in F22,
with additional price increases implemented in early F23 on selected brands.
•
•
104.3% cash conversion and investment grade capital structure enabling a 23% increase for F22 final dividend.
In F23, TWE expects to deliver strong growth and continued EBITS margin expansion.
Group financial summary
A$m (unless otherwise stated)
Net Sales Revenue (NSR)
NSR per case (A$)
Earnings Before Interest, Tax, SGARA
and Material items (EBITS)
EBITS Margin
Net Profit After Tax
Earnings Per Share (A$ cents)
Net Profit After Tax before Material Items
and SGARA
Earnings Per Share before Material Items
and SGARA (A$ cents)
F22 % Chg. Reported
% Chg. Constant
Currency
% Chg. Organic7
(1.1)%
7.7%
4.1%
1.0ppt
2,476.7
97.3
523.7
21.1%
263.2
36.5
322.6
44.7
(3.6)%
16.1%
2.6%
1.3ppts
5.3%
5.2%
4.2%
4.1%
(4.7)%
14.8%
4.0%
1.8ppts
10.0%
10.0%
7.4%
7.3%
• NSR declined 3.6% to $2,476.7 million, reflecting reduced global commercial portfolio volumes and the decline
in shipments to Mainland China8, partly offset by strong growth in the premium and luxury portfolios.
• NSR per case improved 16.1%, with TWE’s continued focus on portfolio premiumisation increasing the contribution
of the premium and luxury portfolios to 83% of Group NSR, up from 77% in F21.
• EBITS increased 2.6% to $523.7 million; adjusting for the contribution from Penfolds Australian COO sales in
Mainland China, EBITS increased 22%.
• EBITS margin increased 1.3 ppts to 21.1%, with improvement delivered across all divisions.
• NPAT improved 4.2% to $322.6 million and EPS improved 4.1% to 44.7 cents per share.
• ROCE 10.7%, down 0.1 ppt versus the pcp; excluding divested and acquired brands, ROCE was 10.9%.
• Cash conversion 104.3%; excluding the change in premium and luxury inventory, cash conversion was 103.1%.
• Net Debt to EBITDAS of 1.8x9 reflects the maintenance of TWE’s investment grade profile, up from 1.6x in the pcp
following the acquisition of Frank Family Vineyards.
• Final dividend of 16.0 cents per share declared, fully franked, an increase of 23% on F21 final dividend; full year
payout of 31.0 cents per share, or 69% of NPAT, at the upper end of TWE’s long-term dividend policy.
7. On a constant currency basis, excluding the contribution of divested and acquired portfolio brands in Treasury Americas.
8. In November and December 2020, the Chinese Ministry of Commerce (‘MOFCOM’) announced provisional anti-dumping and countervailing
measures, with a combined duty of 175.6% to be applied to the value of TWE Australian COO wine in containers of two litres or less imported into
Mainland China. In March 2021, MOFCOM announced its final determination, announcing that the combined duty rate would remain in place for
a minimum of five years.
9. Includes last-twelve months EBITDAS of Frank Family Vineyards.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 19
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Performance overview
A$m
NSR
Penfolds
Treasury Americas
Treasury Premium Brands
Group
Luxury & Premium (%NSR)
EBITS
Penfolds
Treasury Americas
Treasury Premium Brands
Corporate
Group
EBITS Margin (%)
F22
% Chg.
Reported
% Chg. Constant
Currency
% Chg.
Organic
717.3
963.4
796.0
2,476.7
83.3%
319.3
185.6
79.6
(60.8)
523.7
21.1%
(9.1)%
2.5%
(5.3)%
(3.6)%
6.7ppts
(7.8)%
20.5%
27.0%
(15.6)%
2.6%
1.3ppts
(9.3)%
(0.1)%
(5.6)%
(4.7)%
6.6ppts
(5.4)%
16.9%
33.6%
(15.6)%
4.0%
1.8ppts
-
11.6%
-
(1.1)%
3.0ppts
-
19.0%
-
-
4.1%
1.0ppt
Execution of key F22 strategic priorities delivered strong operating momentum across each brand portfolio division:
• Penfolds reported an 8% decline in EBITS to $319.3 million and an EBITS margin of 44.5% (up 0.6 ppts).
The significant decline in shipments to Mainland China was partly offset by continued strength in a number
of global markets and channels. Penfolds continues to attract new consumers and grow distribution and
availability, globally, with NSR and EBITS outside of Mainland China increasing by 45% and 25% respectively
on a constant currency basis. In Asian markets outside of Mainland China NSR grew 106%, supported by
strong depletion trends in multiple markets led by consumer demand and channel penetration.
• Treasury Americas reported a 21% increase in EBITS to $185.6 million and an EBITS margin of 19.3% (up 2.9 ppts).
The priority brand portfolio continued to perform strongly with NSR increasing 15% in the year on a constant
currency basis, led by standout growth from Beringer, Stags’ Leap, Matua and 19 Crimes. Following the
completion of significant changes in brand portfolio and asset base, including the acquisition of Frank Family
Vineyards, Treasury Americas has been repositioned as a premium wine business with a focused portfolio
of growing brands.
• Treasury Premium Brands reported a 27% increase in EBITS to $79.6 million and an EBITS margin of 10.0% (up
2.5 ppts). Portfolio premiumisation continued, with strong performance by priority brands including 19 Crimes,
Pepperjack, Squealing Pig and Wynns. Significant distribution gains and NSR growth for priority brands in key
EMEA and Asia markets was an execution highlight, as was continued innovation success across the portfolio.
• Corporate costs increased 16% reflecting increased investment in technology and higher insurance costs.
20 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Profit and Loss10
$Am (unless otherwise stated)
F22
F21
Change
F21
Change
Reported Currency
Constant Currency
Net sales revenue
NSR per case ($)
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 (before material items)
EBITS margin (%)
SGARA
EBIT (before material items)
Net finance costs
Tax expense
Net profit after tax (before material items)
Material items (after tax)
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¢)
2,476.7
2,569.6
(3.6)%
2,598.1
97.3
55.1
83.8
28.2
(1,488.5)
(1,573.1)
51.3
1,024.7
39.9%
16.1%
95.3%
5.4%
(14.0)%
1.8%
2.2ppts
84.8
28.3
(1,597.8)
52.1
1,028.6
39.6%
58.5
1,043.2
42.1%
(519.5)
21.0%
523.7
21.1%
(33.9)
489.8
(71.4)
(120.2)
298.2
(35.0)
263.2
36.5
322.6
44.7
721.8
31.0
(514.4)
(1.0)%
(525.2)
20.0%
510.3
19.9%
9.4
519.7
(73.5)
(130.1)
316.1
(66.1)
250.0
34.7
309.6
42.9
721.4
28.0
(1.0)ppts
2.6%
1.3ppts
NM
(5.8)%
2.8%
7.6%
(5.7)%
47.1%
5.3%
5.2%
4.2%
4.1%
0.1%
10.7%
20.2%
503.4
19.4%
9.6
513.0
(74.8)
(131.1)
307.2
(67.9)
239.2
33.2
300.5
41.7
721.4
28.0
(4.7)%
14.8%
94.8%
6.8%
(12.2)%
1.4%
2.5ppts
1.1%
(0.8)ppts
4.0%
1.8ppts
NM
(4.5)%
4.5%
8.3%
(2.9)%
48.5%
10.0%
10.0%
7.4%
7.3%
0.1%
10.7%
NSR declined 4.7% reflecting the divestment of the
US commercial portfolio in March 2021, the decline
in shipments to Mainland China and reduced
commercial volumes in the UK and Australia.
The decline was partly offset by strong premium
and luxury performance in Treasury Americas and
Treasury Premium Brands.
NSR per case improved 14.8% with TWE’s continuing
focus on portfolio premiumisation increasing the
contribution of the luxury and premium portfolios
to 83% of Group NSR, up from 77% in the pcp.
COGS per case increased 12.2% reflecting the portfolio
mix shift, higher COGS from the fire and drought
impacted 2020 Californian vintage and elevated global
supply chain, logistics and packaging costs which
totalled approximately $25 million vs pcp.
CODB improved 1.1% to $519.5 million, driven by lower
overheads and brand building investment in Mainland
China in addition to reduced global commercial
portfolio volumes.
EBITS margin improved 1.8 ppts to 21.1%, continuing
progress towards TWE’s Group EBITS margin target
of 25% and beyond.
SGARA loss reflects reduced intake from the 2021
Californian vintage and 2022 Australian vintage,
partially offset by the unwinding of losses from
previous vintages.
Net finance costs improved 4.5%, driven by lower
interest expense on right of use leases and a reduction
in debt establishment costs.
Tax expense declined 8.3% in F22, reflecting lower
statutory earnings. The effective tax rate (before
material items) of 28.7% was in line with the pcp.
Material Items A post-tax net material items loss
of $35.0 million has been recognised, and relates to
costs associated with the divestment of US brands
and assets, the acquisition of Frank Family Vineyards
and supply chain changes.
EPS (before SGARA and material items) increased
7.3% to 44.7 cents per share. Reported EPS increased
10.0% to 36.5 cents per share.
10. Unless otherwise stated, all figures and percentage movements are stated on a constant currency basis versus the prior corresponding period
and are subject to rounding.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 21
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Balance sheet (condensed)11
A$m
Cash & cash equivalents
Receivables
Current inventories
F22
430.5
564.4
947.9
F21
448.1
621.3
839.7
Property, plant & equipment increased $199.0 million
to $1,521.5 million driven by the Frank Family Vineyard
acquisition, investment in South Australian luxury
winemaking infrastructure and foreign currency
movements.
Intangible assets increased by $244.3 million to
$1,399.8 million, reflecting the acquisition of Frank Family
Vineyards and foreign currency movements.
Assets held for sale declined $104.6 million following
the divestment of Provenance, Chateau St Jean and
surplus supply chain assets in the US.
Provisions includes employee provisions and
allowance for future repairs on leased assets damaged
by the Californian wildfires, which are recoverable
under insurance.
Net borrowing12 (including Lease Liabilities) increased
by $163.5 million to $1,243.2 million, with interest bearing
debt increasing by $149.5 million following the
acquisition of Frank Family Vineyards, partly offset by
cash proceeds from asset divestments.
Net debt to EBITDAS13 1.8x, up from 1.6x in F21 and below
TWE’s up to 2.0x ‘through the cycle’ target.
Funding structure includes committed debt facilities
totalling $1.9 billion, of which $827.3 million were
undrawn at 30 June 2022. New US Private Placement
Notes totalling US$250 million were issued in 2H22, with
funding to take place in September 2022. The weighted
average term to maturity of committed debt facilities
was 4.6 years.
Non-current inventories
1,063.6
1,056.8
Property, plant & equipment
Right of use lease assets
Agricultural assets
Intangibles
Tax assets
Assets held for sale
Other assets
Total assets
Payables
Interest bearing debt
Lease liabilities
Tax liabilities
Provisions
Other liabilities
Total liabilities
Net assets
1,521.5
435.3
32.9
1,322.5
448.4
33.8
1,399.8
1,155.5
163.5
35.6
68.7
183.7
140.2
34.2
6,663.7
6,284.2
747.2
1,064.7
609.0
347.2
81.0
25.6
703.6
915.2
612.6
330.7
104.8
26.1
2,874.7
2,693.0
3,789.0
3,591.2
Net assets increased $197.8 million to $3,789.0 million
in F22. Adjusting for foreign exchange rate movements,
net assets increased by $108.2 million.
Working capital increased $14.5 million, driven by
higher luxury inventory and partly offset by favourable
movements in receivables (primarily associated
with divestment of the US commercial portfolio)
and payables.
Inventory increased $115.0 million to $2,011.5 million
in F22.
• Current inventory increased $108.2 million to
$947.9 million reflecting improved demand
expectations for the Penfolds, Treasury Premium
Brands and Treasury Americas portfolios, in addition
to the acquisition of Frank Family Vineyards.
• Non-current inventory increased $6.8 million to
$1,063.6 million, driven by the acquisition of Frank
Family Vineyards and partly offset by the smaller
2021 Californian vintage intake.
• Luxury inventory increased 7.4% to $1,152.3 million.
11. Unless otherwise stated, balance sheet percentage or dollar movements from the previous period are on a reported currency basis.
12. Interest bearing debt includes fair value adjustments related to derivatives that are in a fair value hedge relationship on a portion of US Private
Placement notes: F22 $(11.3) million, F21 +$21.6 million.
13. Adjusted to include last twelve months EBITDAS for Frank Family Vineyards.
22 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22
672.3
34.0
(5.0)
701.2
104.3%
(112.2)
(439.6)
11.1
160.6
(66.9)
(95.5)
(1.8)
(202.1)
(203.9)
155.2
(17.3)
(66.0)
30.6
(35.4)
F21
661.0
(60.3)
65.6
666.3
100.8%
(121.2)
(0.0)
4.8
549.9
(72.3)
(118.4)
359.2
(158.7)
200.5
53.1
0.9
254.5
(245.8)
8.7
(1,057.7)
(1,434.2)
(66.0)
(8.7)
(122.0)
(196.6)
(1,254.3)
254.5
(18.7)
140.7
376.5
(1,057.7)
Cash flow – reconciliation of net deb14
A$m
EBITDAS
Change in working capital
Other items
Net operating cash flows before financing costs, tax & material items
Cash conversion
Payments for capital expenditure
Payments for subsidiaries
Proceeds from sale of assets
Cash flows after net capital expenditure, before financing costs, tax & material items
Finance costs paid
Tax paid
Cash flows before dividends & material items
Dividends/distribution paid
Cash flows after dividends before material items
Material item cash flows – proceeds from asset sales
(On-market share purchases)/issue of shares
Total cash flows from activities (before debt)
Net (repayment)/proceeds from borrowings
Total cash flows from activities
Opening net debt
Total cash flows from activities (above)
Net lease liability additions
Debt revaluation and foreign exchange movements
(Increase)/Decrease in net debt
Closing net debt15
Cash conversion of 104.3% reflects continued strong
operating cash flow performance in addition to
improved working capital. Excluding the net change
in non-current luxury and premium inventory, cash
conversion was 103.1%.
Capital expenditure (capex) of $112.2 million comprised
maintenance and replacement capex of $70.6 million
and growth capex of $41.6 million, including the
completion of investment in South Australian luxury
winemaking infrastructure. Ongoing expectation for
maintenance and replacement capex of approximately
$100 million.
Investment in subsidiaries of $439.6 million is driven by
the acquisition of Frank Family Vineyards in December
2021, in addition to the purchase of supply assets in the
Bordeaux region of France.
Material item cash flows includes the divestiture
of vineyard assets in Australia and the US, partly offset
by integration costs for Frank Family Vineyards and
restructuring costs relating to the new divisional model.
With respect to the confirmed total net cash proceeds
of approximately $300 million from divestments in
Treasury Americas, approximately $235 million had
been received as cash by 30 June 2022, with the
remainder expected to be received by the end of
calendar year 2022.
14. Unless otherwise stated, cash flow percentage or dollar movements from the previous period are on a reported currency basis.
15. Net debt excludes fair value adjustments related to derivatives in a fair value hedge relationship on a portion of US Private Placement notes:
F22 +$(11.3) million, F21 +$21.6 million.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 23
Penfolds
World’s most
admired wine
brand:
Drinks
International
annual poll (2016, 2019)
Penfolds Grange
Sold in
24xperfect
score recipient
60+markets
5wineries
(including shared wineries)
24 – TREASURY WINE ESTATES ANNUAL REPORT 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Penfolds collection of benchmark
wines was established in the spirit
of innovation and the endless
pursuit of excellence. From the
secret bottling of Grange in 1951
through to the unbroken line of
vintages, Grange is arguably
Australia’s most iconic red wine.
Penfolds commitment to quality has always been
underpinned by a consistent and recognisable ‘House
Style’; Penfolds time-honoured tradition of sourcing the
best fruit from the best regions. Today, this philosophy
extends beyond Australia, as Penfolds explores the
bountiful soils of the Napa Valley, Bordeaux, Champagne,
and most recently China’s winemaking regions, for its
winemaking endeavours.
Penfolds Ventures Beyond
Penfolds has ventured into an unexpected, exciting and
visually powerful world of space exploration – with the
launch of the brand’s fi rst global brand thematic –
‘Venture Beyond’. This new territory unlocks a universe
of playful experiences and out-of-this-world activations,
designed to capture the imagination of global luxury
consumers. The introduction of ’Venture Beyond’ as a
global thematic is a strategic fi rst and a shift for Penfolds
from fi ne wine brand to global luxury icon. A logical
next step following the introduction of Penfolds Meet
Extraordinary communications platform in 2020, ‘Venture
Beyond’ personifi es Penfolds innovative spirit and desire
to push the boundaries through self-belief.
Penfolds g5
Penfolds new wine,
blended from fi ve vintages
of Grange, Penfolds g5,
entwines Grange DNA from
the exceptional 2010, 2012,
2014, 2016, and 2018 vintages.
The fi nal release in the ‘g’
series trio, it was awarded a
perfect 100-point score four
times by leading wine critics
James Suckling, Matthew
Jukes, Andrew Caillard, and
Ken Gargett.
Penfolds NFT
Penfolds partnered with BlockBar, a non-fungible token
(NFT) marketplace for luxury wine and spirits products,
to create connections with consumers who buy and
trade luxury wine in a new way. The debut limited edition
NFT, tied to a rare Penfolds Magill Cellar 3 barrel of wine
from the 2021 vintage valued at US$130,000, sold out in
12 seconds. Penfolds second NFT, linked to 300 bottles
of 2018 Magill Cellar 3, launched in January 2022 and
sold out within 12 hours.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 25
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Business summary
DIVISIONAL PERFORMANCE OVERVIEW
Penfolds16
A$m (unless
otherwise stated)
Volume (m 9Le)
NSR (A$m)
ANZ
Asia
Americas
EMEA
NSR per case (A$)
EBITS (A$m)
EBITS margin (%)
Reported currency
Constant currency
F22
2.2
717.3
199.2
407.2
54.3
56.6
332.2
319.3
44.5%
F21
2.2
788.9
199.2
498.6
48.6
42.4
352.6
346.2
43.9%
%
(3.5)%
(9.1)%
0.0%
(18.3)%
11.7%
33.3%
(5.8)%
(7.8)%
0.6ppts
F21
2.2
790.5
199.2
498.7
50.0
42.6
353.2
337.5
42.7%
%
(3.5)%
(9.3)%
0.0%
(18.4)%
8.6%
32.9%
(6.0)%
(5.4)%
1.8ppts
F22 Luxury and
Premium
contribution to
division NSR
100%
Unchanged
FINANCIAL PERFORMANCE
DIVISION INSIGHTS
Volume and NSR declined 3.5% and 9.3% respectively,
driven by:
– the decline in shipments to Mainland China and
deferral of the Californian Collection release from
2H22 to F23; and
– partly offset by continued positive momentum
across the portfolio globally, with NSR outside
of Mainland China increasing by 45.1% in F22.
NSR per case declined 6.0%, reflecting the impact of
reduced Bin and Icon portfolio shipments to Mainland
China and growth in the premium tier Max’s range
across all markets.
COGS per case improved 9.1%, reflecting the change
in portfolio mix and the cycling of one-off impacts
related to demurrage and incremental product costs
in F21 following the implementation of import duties
by The Ministry of Commerce of the People’s Republic
of China (MOFCOM).
CODB improved 11.9%, driven by reduced costs in
Mainland China net of reinvestment to other priority
global growth markets.
EBITS declined 5.4% to $319.3 million, and EBITS margin
increased 1.8 ppts to 44.5%; excluding Mainland China,
EBITS increased 25.1% in F22.
• Key F22 execution highlights include:
– growth in volume and NSR across a number of
priority growth markets and channels, reflecting
the momentum behind Penfolds global execution
strategy of building distribution and increasing
brand awareness; and
– standout growth delivered in Asia, with NSR in
regional markets ex-Mainland China increasing
106%, and in EMEA, particularly the UK and Germany,
where NSR grew 32.9%. In Asia, NSR growth was
supported by strong depletion trends, and
inventory days remain in line with the prior year.
• Penfolds will continue to invest in its multi-country
of origin portfolio strategy. The acquisition of
Chateau Lanessan is expected to be completed
in 1H2317, more than doubling the existing vineyard
footprint in Bordeaux and providing significant
incremental winery production capacity that will
support future growth.
• Penfolds has returned to a position of supply
constraint across key luxury Cabernet Bins, and
has implemented price increases in F23.
• Trends for distribution and volume growth are
expected to remain strong across Penfolds priority
growth markets. EBITS margin is expected to shift
towards the mid-point of Penfolds 40-45% target
range in F23, reflecting higher COGS from the 2020
Australian vintage and increased investment to
accelerate the momentum in distribution and
demand growth achieved in F22.
16. Unless otherwise stated, all figures and percentage movements from prior periods are pre-material items on a constant currency basis versus
the prior corresponding period and are subject to rounding.
17. TWE to acquire 78.6% stake from the Bouteiller Family, who will remain a shareholder. The cash outflow associated with the acquisition is expected
to be approximately A$60 million, including a capital injection to fund winery and vineyard development. Completion expected Oct-22, subject to
satisfaction of conditions precedent.
26 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Penfolds is providing
consumers and collectors
around the world with
amazing Penfolds
experiences, whether that’s
in their local wine store or
favourite restaurant.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 27
Treasury Premium Brands
Sold in
60+countries
Top market share
positions
in still wine18
#1 Australia #1 Singapore
#1 Hong Kong #3 Nordics #3 UK
9
focus brands
7wineries
(including shared wineries)
18. IWSR 2022, still wine, value share, Asia imported wine only.
28 – TREASURY WINE ESTATES ANNUAL REPORT 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Our vision is to be world’s most
inventive branded wine business,
bringing the pleasure of premium
wine to more people on more
occasions.
Treasury Premium Brands (TPB) is an enviable premium
wine business with significant opportunity. Premium-
focused portfolio expansion and consumer-led
innovation will be the drivers of success. With a portfolio
of outstanding wine brands, prized viticultural assets,
and world-class production facilities, TPB caters to
a diverse range of consumer needs and occasions,
sourced from the world’s most renowned
sourced from the world’s most renowned
wine regions.
Rawson’s Retreat
expands country
of origin
Leveraging the solid brand
awareness of Rawson’s
Retreat in the China market,
South African and Chilean
country of origin wine was
introduced in record time
and is now available for
consumers. Positioned to
be a foundation and engine
of growth for TPB China
and the broader TPB
business, initial sales are
strong with plans in place
to expand the portfolio
and distribution in F23.
Squealing Pig fl ies with Pride
Inclusivity was put centre stage through a proud
three-year partnership with the Sydney Gay and Lesbian
Mardi Gras, incorporating the global Sydney WorldPride
event in 2023. To further support 2022 Mardi Gras
celebrations, Squealing Pig ambassadors - including
comedian Joel Creasey - sky-dived over Melbourne
to spotlight the many diverse communities that
LGBTQIA+ represents.
Wolf Blass Zero
launches
Our long awaited No Alcohol
offering launched in October
2021, expertly crafted by our
winemakers at Wolf Blass.
With the conscious
consumption trend on the
rise, Wolf Blass Zero is the
latest deliverable against
our strategy to innovate to
address market trends and
deliver on taste for the 48%
of Australian consumers
now actively moderating
their alcohol intake.
Wynns Reframed
Wynns Coonawarra Estate released a new tier of wines
that represent a creative renaissance of Wynns’ early
pioneering years. Named Reframed, the tier comprises
four new wines, which are an artistic, contemporary take
on classic Wynns’ varietals, styles, winemaking, and wine
occasions; crafted by the same trusted Wynns team.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 29
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Business summary
DIVISIONAL PERFORMANCE OVERVIEW
Treasury Premium Brands19
A$m (unless
otherwise stated)
Volume (m 9Le)
NSR
ANZ
Asia
Americas
EMEA
NSR per case (A$)
EBITS
EBITS margin (%)
Reported currency
Constant currency
F21
17.2
840.7
402.9
66.7
—
371.1
48.9
62.7
7.5%
%
(11.0)%
(5.3)%
(5.2)%
8.9%
—
(8.0)%
6.4%
27.0%
2.5ppts
F21
17.2
843.4
403.1
66.8
—
373.5
49.0
59.6
7.1%
%
(11.0)%
(5.6)%
(5.2)%
8.8%
—
(8.6)%
6.0%
33.6%
2.9ppts
F22
15.3
796.0
382.1
72.7
—
341.2
52.0
79.6
10.0%
F22 Luxury and
Premium
contribution to
division NSR
59%
6ppts vs. pcp
FINANCIAL PERFORMANCE
DIVISION INSIGHTS
Volume and NSR declined 11.0% and 5.6% respectively,
driven by:
– reduced commercial portfolio volumes in EMEA
and ANZ, notably through the UK retail channel
following heightened pandemic related demand
in F21; and
– partly offset by premium and luxury portfolio NSR
growth of 5.5%, led by priority brands including
19 Crimes, Pepperjack, Squealing Pig, Wynns and
Rawson’s Retreat.
NSR per case increased 6.0%, reflecting improved
portfolio mix, with the premium and luxury portfolios
contributing 59% of divisional NSR (up from 53% in F21).
COGS per case increased 2.3%, driven by the improved
portfolio mix and elevated global supply chain costs,
including packaging and freight.
CODB improved 6.9% reflecting more focused,
prioritised brand investment and lower commercial
portfolio volumes.
EBITS increased 33.6% to $79.6 million, and EBITS
margin improved 2.9ppts to 10.0%.
• Key F22 execution highlights include:
– progression towards key divisional financial
priorities, including portfolio premiumisation,
EBITS growth and EBITS margin expansion;
– distribution and NSR growth of priority brands in
key global markets, with the premium portfolio
performance in EMEA a highlight led by 19 Crimes
and Squealing Pig;
– strong growth in Asia driven by Chilean sourced
Rawson’s Retreat in China and premium portfolio
distribution gains in South East Asia;
– price increases across the premium portfolio in
EMEA, partly offsetting impacts from higher global
supply chain costs; and
– strong innovation focus including the launch
of the Wolf Blass Zero and Squealing Pig Lighter
ranges, and the Wolf Blass House of the Dragon
partnership with HBO, an innovative platform to
introduce new consumers to the portfolio.
•
19 Crimes continues to grow strongly outside of the
US with shipments across Treasury Premium Brands
geographies increasing over 20% in F22 to surpass
the two million case mark. Continued growth is
expected in F23, supported by an innovation pipeline
that includes extension of the 19 Crimes collaboration
with Snoop Dogg beyond the Americas region.
• Treasury Premium Brands is investing in organisational
capability in Asia, including Mainland China, to
support growth plans throughout the region in F23
and beyond.
• Focused on continued premiumisation and top-line
margin accretive growth in F23, supported by ongoing
price realisation and cost mitigation strategies.
19. Unless otherwise stated, all figures and percentage movements from prior periods are pre-material items on a constant currency basis versus
the prior corresponding period and are subject to rounding.
30 – TREASURY WINE ESTATES ANNUAL REPORT 2022
19 Crimes enlists the
help of renowned tattoo
historian Dr Matt Lodder
to delve into the history
of convict tattoos, creating
an 8th century-inspired
pop-up tattoo parlour
in London.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 31
Treasury Americas
2#
in the luxury
wine market
10focus
brands
7wineries
32 – TREASURY WINE ESTATES ANNUAL REPORT 2022
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Treasury Americas boldly leads
change in the Americas wine
market with luxury, culture-led
experiences.
Treasury Americas is a consumer-led wine business
with disruptive marketing, and strong e-commerce,
using innovation and the power of its portfolio to drive
growth. Treasury Americas leads with world-class
sustainability efforts, supply, and winemaking, and a
flexible sourcing model to meet consumer demand.
Treasury Americas’ investment in sales and marketing
capability drive the division forward.
Treasury Americas
welcomes Frank
Family Vineyards
to the portfolio
Frank Family Vineyards joined the
luxury portfolio in November 2021,
filling a key portfolio gap and bringing
Treasury Americas’ position to #2 in
the total luxury market. Rich and Leslie
Frank have nurtured an industry-
leading guest experience at the
winery, cultivating a loyal consumer
following. Todd Graff, General
Manager and acclaimed winemaker,
along with the entire team, pride
themselves on producing a portfolio
of exceptionally high-quality wines.
This year, Frank Family Vineyards
was also recognised as ‘Best Winery
Tasting Room’ and Todd Graff as
‘Best Local Winemaker’ in Napa Valley
Life Magazine’s 2022 Best of Napa
Valley Awards.
2019 Beaulieu Vineyard
Georges de Latour
receives 100-point score
The 2019 Beaulieu Vineyard Georges
de Latour Private Reserve Cabernet
Sauvignon has received its first ever
100-point score. Wine critic James Suckling
published the 100-point score and his
thoughts on the wine in an early May
tasting report on JamesSuckling.com,
writing, “Durling said he has been working
toward a more ‘refined’ and ‘drinkable’
BV Private Reserve in recent years to honor
the great bottlings of the 1960s and 1970s.
He certainly achieved this with the
incredible, and perfect, 2019. I’m calling
it ‘the new 1974 Georges de Latour,’ which
was a legend.”
19 Crimes launches
Martha’s Chard
From an appearance on The Late Show with Stephen
Colbert and Access Hollywood, to features in People
Magazine, 19 Crimes’ Martha’s Chard has dominated
the airwaves since its debut in February. To date,
this buzzworthy wine has accumulated over 1.4 billion
impressions. Work hard, play hard, drink Martha’s Chard!
Stags’ Leap reaches new heights
with geo-targeted digital ads
Stags’ Leap Winery continued elevating its brand
presence among target consumers in F22 with
strategically placed video billboards and geo-targeted
digital ads in New York City’s Times Square, Miami, and
Los Angeles. Featuring artwork from our ‘Take the Leap’
campaign, these striking pieces generated over 14 million
impressions over out-of-home digital, YouTube, and
social channels in March and April 2022.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 33
OPERATING AND FINANCIAL REVIEW (CONTINUED)
Business summary
DIVISIONAL PERFORMANCE OVERVIEW
Treasury Americas20
Reported currency
Constant currency
A$m (unless
otherwise stated)
Volume (m 9Le)
F22
8.0
F21
11.2
%
(28.9)%
F21
11.2
%
Organic21
%
(28.9)%
(3.3)%
NSR
ANZ
Asia
Americas
EMEA
NSR per case (A$)
EBITS
EBITS margin (%)
963.4
940.0
2.5%
964.2
(0.1)%
11.6%
—
—
963.4
—
120.9
185.6
19.3%
—
—
940.0
—
83.8
154.0
—
—
2.5%
—
44.1%
20.5%
—
—
964.2
—
86.0
158.8
—
—
(0.1)%
—
40.5%
16.9%
16.4%
2.9ppts
16.5%
2.8ppts
—
—
11.6%
—
15.5%
19.0%
1.0ppt
F22 Luxury and
Premium
contribution to
division NSR
92%
13ppts vs. pcp
FINANCIAL PERFORMANCE
DIVISION INSIGHTS
Volume and NSR declined 28.9% and 0.1% respectively,
driven by:
– structural changes to the Treasury Americas
division, including divestment of the US commercial
brand portfolio, Chateau St Jean and Provenance,
partly offset by the contribution from the
acquired Frank Family Vineyards portfolio in 2H22;
– on an organic basis, NSR grew 11.6% led by
strong growth across the premium and luxury
portfolios, partly offset by declines in US$8-11 price
point brands; and
– excluding new product development and the
one-off, distributor stocking as part of the 1H22
distributor model change to RNDC in California,
shipments were in line with depletions.
NSR per case increased 40.5% reflecting a significantly
improved portfolio mix, with the premium and luxury
portfolios now contributing 92% of divisional NSR
(up from 79% in F21).
COGS per case increased 35.4%, driven by the
improved portfolio mix, higher COGS from recent
vintages and elevated supply chain costs related
to freight and logistics.
CODB improved 2.0% and includes insurance proceeds
relating to lost profits from the ongoing closure of cellar
doors following the 2020 Californian wildfires.
EBITS increased 16.9% to $185.6 million, with EBITS
margin improving 2.8 ppts to 19.3%; on an organic basis
EBITS increased 19.0%.
The contribution of Frank Family Vineyards was in line
with expectations, with 2H22 NSR and EBITS of
$40.2 million and $16.2 million respectively, delivering
an EBITS margin of 40.2%.
• Key F22 execution highlights include:
– strong performance across the priority brand
portfolio, where NSR increased 15.2%, led by
standout growth from Beringer, Stags’ Leap,
Matua and 19 Crimes;
– luxury portfolio growth across all channels, led by
outstanding execution from Treasury Americas
dedicated luxury sales model which achieved US
distribution growth of 12%;
– price increases on a number of fast growing and
supply constrained portfolio brands, including
Matua and Frank Family Vineyards; and
– significant changes in the brand portfolio and
asset base to reposition Treasury Americas as a
premium wine business with a focused portfolio
of growing brands, including the acquisition of
Frank Family Vineyards.
• Treasury Americas continues to be recognised for
its outstanding innovation capability, with 19 Crimes
Cali Red recognised by IRI as the number one selling
wine in history for first year sales22. Innovation success
has continued in 2022 with Martha’s Chard, the
number one US wine market innovation this calendar
year23. The launch of 19 Crimes Cali Gold sparkling
wine is expected to be a significant innovation
highlight in F23.
• Well positioned to deliver top-line growth and
margin expansion in F23, led by continued strength
in the premium portfolio and supported by
additional price realisation across key brands,
while luxury portfolio growth will be moderated by
reduced availability of wine from the 2020
Californian vintage.
20. Unless otherwise stated, all figures and percentage movements from prior periods are pre-material items on a constant currency basis versus
the prior corresponding period and are subject to rounding.
21. On a constant currency basis, excluding the contribution of divested and acquired portfolio brands in Treasury Americas.
22. IRI New Product Pacesetter announcement, 8 June 2022.
23. IRI, Total US MULO+Convenience, calendar year to date ending 10 July 2022.
34 – TREASURY WINE ESTATES ANNUAL REPORT 2022
St Huberts the Stag takes
to the slopes for the second
year in a row as the official
wine of Winter X Games
Aspen 2022.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 35
OPERATING AND FINANCIAL REVIEW (CONTINUED)
VINTAGE UPDATE
Australia
Vintage 2022 industry yield was in line with long-term
averages, but significantly below last year’s record
crush. It has been a high-quality Shiraz and Cabernet
vintage across all regions. TWE proactively took in a
smaller 2022 vintage intake as part of its plans to
manage its inventory position following the reduction
in shipments to Mainland China. Red wine intake was
a highlight, reflecting high-quality fruit and the benefits
of the $165 million investment in South Australian luxury
winemaking infrastructure, completed in time for
vintage 2022. Fruit processed through this new facility
achieving exceptional grade conversion outcomes that
will support future luxury portfolio growth.
Bulk wine and grape pricing has reduced over the last
18 months driven by a number of factors, including the
large vintage 2021 harvest and the significant reduction
in demand from Mainland China.
California
Early growing conditions for the 2022 California season
are positive. Temperatures for the first half of the
season were moderate, ensuring optimal growing
conditions in much of California. Above average
temperatures are predicted for the second half of the
year across most of the state. The expectation across
California is that vintage 2022 will be higher yielding
than vintage 2021.
Following two short vintages, increased demand has
led to higher prices throughout the grape and bulk
wine market.
New Zealand
Vintage 2022 was an excellent vintage in New Zealand,
with strong yields across all varietals and regions.
The harvest crush for Marlborough Sauvignon Blanc
was 51% higher than 2021. Central Otago Pinot Noir
had an outstanding vintage with high quality wine
and strong yields.
Grape pricing is likely to remain high in the short term,
with bulk wine prices easing, but remaining high
compared to long-term average.
France
France has experienced a challenging growing
season to date with a mild to dry winter, early frost
in the Bordeaux region and heat waves in all regions.
The current heat and sunshine are helping the late
varietals such as Cabernet Sauvignon to fully mature.
Expectations are for below average industry intake
in vintage 2022. For TWE, intake will be higher due to
the acquisition of new vineyards which are providing
access to incremental sourcing of luxury fruit.
Luxury grape and bulk wine pricing is largely stable.
Italy
Growing conditions in Italy have been challenging due
to hot weather and a lack of rain. This will impact
vintage 2022 industry intake, which is expected to be
below the long-term average. TWE company-owned
vineyards are performing well, with heat impacting only
a small percentage of vines on the properties.
Bulk wine contracts are in place, albeit at slightly higher
prices than vintage 2021, reflecting increased demand
for Italian country of origin wine.
36 – TREASURY WINE ESTATES ANNUAL REPORT 2022
RECONCILIATION OF KEY PERFORMANCE MEASURES
A$m (unless otherwise stated)
Metric
Management calculation
EBITS
Statutory net profit
Income tax expense
Net finance costs
Material items
SGARA (gain)/loss
EBITS
EBITDAS EBITS
Depreciation & Amortisation
EBITDAS
EPS
Statutory net profit
Material items
Tax on material items
SGARA
Tax on SGARA
NPAT (before material items & SGARA)
Weighted average number of shares (millions)
EPS (cents)
ROCE
EBITS (LTM)
Net assets
SGARA in inventory
Net debt
Capital employed – Current year
Net assets (CFX)
SGARA in inventory (CFX)
Net debt (CFX)
Capital employed – Prior year (CFX)
Average capital employed
ROCE24
F21
263.2
109.7
71.4
45.5
33.9
523.7
523.7
148.6
672.3
263.2
45.5
(10.5)
33.9
(9.5)
322.6
721.8
44.7
523.7
3,789.0
(45.0)
1,254.3
4,998.3
3,690.0
(30.3)
1,130.0
4,789.7
4,894.0
10.7%
F20
250.0
107.7
73.5
88.5
(9.4)
510.3
510.3
150.7
661.0
250.0
88.5
(22.4)
(9.4)
3.0
309.7
721.4
42.9
510.3
3,591.2
(32.2)
1,057.7
4,616.7
3,477.7
(22.9)
1,343.0
4,797.8
4,707.3
10.8%
24. Includes impacts from divested and acquired portfolio brands in Treasury Americas.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 37
Sustainability
One year into our evolved sustainability strategy, we’ve made good progress
against our plans to cultivate a brighter future, building momentum across all
aspects of our agenda.
The progress made throughout the year reflects the collective effort of our
team and partners who recognise that sustainability is integral to building
a more resilient business, producing sustainable wine, and prioritising the
wellbeing of our people, communities, and consumers.
Whilst we have more work to do, we recognise the leadership role we must
play in shaping a positive future for everyone who touches our business,
from grape to glass.
OUR APPROACH
PROGRESS AGAINST OUR AGENDA
Our approach to sustainability is embedded in our
Ambition and Game Plan and driven by our TWE DNA.
It reflects a clear commitment to innovation,
partnership, and taking a sustainability leadership
role not just across the global wine sector but in the
beverages sector more broadly.
This bold ambition requires an integrated approach to
sustainability with a focus on long-term value creation
and leading collective action to effectively manage
risks and make the most of new and emerging
opportunities.
This is coupled with investments in our data, processes
and systems to support this transition, ensuring that
sustainability is embedded into our business.
Our sustainability strategy and programs are informed
by best practice initiatives and guidance including the
Global Reporting Initiative, the United Nations Global
Compact and the UN Sustainable Development Goals.
We continue to monitor the Environmental, Social,
and Governance (ESG) reporting landscape and will
respond to significant changes (currently under
consultation) in future reporting.
Since launching our sustainability strategy in
September 2021, we have made significant progress
against our agenda, including against our targets
and commitments across our material focus areas.
Throughout the year, we saw increased interest in
our roadmap, accelerated by a range of social and
environmental events, such as floods in Australia
and the ongoing drought in California, that has
ensured sustainability remains on the agenda across
stakeholder groups including consumers.
Some of the key performance highlights include:
• refinancing of $1.4 billion of existing debt into a
Sustainability Linked Loan that rewards performance
against agreed milestones with discounts on the
loan rate;
• a comprehensive review of water management
across the global viticulture and winery operations,
with clear recommendations to drive our water
security and efficient usage strategies;
• commitment to invest $20 million on solar panel
and meter technology across our global production
network in support of our ambition to achieve
100% renewable electricity by 2024;
•
improving levels of gender representation
across the global business, with overall female
representation up 1.3 ppts to 41.5% while females
in leadership roles were down 0.2 ppts to 44.9%.
Whilst we are pleased with our performance in F22 we
acknowledge that we have more work to do. We remain
focused on improving the quality of our data and
supporting systems and increasing the integration
of sustainability considerations across our business.
A fulsome overview of progress against our strategy,
including the targets and commitments, will be
available in our 2022 Sustainability Report, released
later this year.
38 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Cultivating a brighter future
F O S T E R I N G H E A LTHY AND
I N C L U S I V E C O M MUNITIES
C O N S U M E R
H E A L T H A N D
R E S P O N S I B L E
D R I N K I N G
INCLUSION,
EQUITY AND
DIVERSITY
D
G
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H ,
A L T
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W E L L B
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CLIMATE RISK
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EMISSIO
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Our sustainability agenda has three focus areas:
BUILDING A RESILIENT BUSINESS
We want to ensure our business
is resilient in the face of increasing
uncertainty, complexity, and change.
FOSTERING HEALTHY
AND INCLUSIVE COMMUNITIES
We want to foster safe, sociable, and
connected communities where our
brands are promoted, and our wine
is consumed, safely and responsibly.
PRODUCING SUSTAINABLE WINE
We want every consumer to
experience wine that is sustainably
grown, made, and packaged.
GOVERNANCE AND REPORTING
In F22 we refreshed our management oversight
of sustainability to respond more effectively to
our ambition and the increasing pace of change.
Progress against strategic roadmaps for each of
our material topics, together with enabling areas
such as communications and data, is reported
monthly to executive sponsors, with quarterly
reporting to the Executive Leadership Team (ELT).
The Board oversees TWE’s approach to, and
management of ESG matters and receives updates
on sustainability and the status of key priorities and
initiatives. TWE established a Board Wine Operations
and Sustainability Committee in F22 for greater focus
on strategic, long-term planning and operational
issues in winemaking, sustainability, and supply chain
in its own operations and relationships with the sector
in different winemaking regions.
TWE’s reporting on ESG topics is captured in the
Company’s annual Sustainability Report, which
provides updates on progress and performance.
The Board has oversight of our key ESG disclosures,
including the Sustainability Report.
TASKFORCE ON CLIMATE RELATED FINANCIAL
DISCLOSURES (TCFD)
As a global viticultural business, TWE is exposed to both
physical and transitional climate risks. The physical
impacts of climate change include more frequent
extreme weather events, but importantly for our
business, the long-term risks arising from changes
in climate patterns such as increased temperature
and water security.
Transitional risks and opportunities arise from political,
legal, technological, and market responses to the
challenges posed by climate change and the
transition to a lower carbon economy. We continue
to monitor these emerging trends, together with
changing consumer preferences and expectations.
We are seeking to increasingly align our climate
disclosures with the recommendations of the TCFD.
Following the conclusion of our global Climate
Scenario Analysis in F21, we sharpened our focus
this year with a global climate risk model (for our
viticultural sites) that uses localised data to enable
more specific projections. The model will inform the
range of risk mitigation and adaptation responses
that we might consider at our viticultural sites.
We are also investing in a range of research and
development initiatives including trials in dam
coverings and vineyard shading, as well as refreshing
portions of our prestige growing locations in the
Barossa and Coonawarra to help them prepare for
future climate change.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 39
World-class talent
AT A GLANCE
A diverse
global team
% global workforce
by geography
56%
28%
8%
8%
Australia &
New Zealand
Americas
Asia
Europe
40 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Inclusion, equity and diversity
TWE’s inclusion, equity and diversity (IE&D) strategy is underpinned by a
commitment to upholding the International Bill of Human Rights, as well as the
United Nations Guiding Principles on Business and Human Rights, and Modern
Slavery Acts. TWE benefits from the diversity of our people, with their variety
of backgrounds, ideas, cultures, ethnicities, talents, genders, and voices.
Our inclusive, supportive and collaborative culture
attracts and retains the best talent, with an
environment where people from diverse backgrounds
can bring their unique perspectives and contribute
to the organisation’s success.
The Board has committed to reviewing and assessing
progress against TWE’s IE&D objectives annually.
The Company is pleased to report progress in F22,
together with the F23 measurable objectives.
The Company’s IE&D policy can be found at:
tweglobal.com.
F22 PROGRESS ON DIVERSITY TARGETS
44.9%
females in leadership roles
(0.2%)
41.5%
females in all roles
+1.3%
F22 DIVERSITY TARGET AND OBJECTIVES
F22 PROGRESS AGAINST THE IE&D STRATEGY
Recommendation 1.5 of the ASX Corporate Governance
Principles and Recommendations states that a
company’s Board or Board committee is to set
measurable objectives for achieving gender diversity.
The F22 diversity targets set by the Board are:
• to increase female representation in leadership
roles to 50% by 2025, while continuing to foster an
inclusive culture;
• to increase female representation across the total
TWE workforce to 42% by 2025.
Our refreshed IE&D strategy has three pillars.
1. Leaders who model our DNA: developing leaders
who steadfastly role model and lead inclusion, and
have a true understanding of employee experience
and culture, enabled by world-class leadership and
development programs.
2. Engaged team members, consumers and
communities: achieving meaningful outcomes
from our people, who bring their whole selves
to work, and consumers who recognise our
commitment to inclusion and diversity through
our brands and partnerships, with purpose-aligned
communities, suppliers, and initiatives.
3. Employer of choice: creating industry-leading
policies and work processes that maximise inclusion
and minimise bias, with innovation through team
contribution and data-informed plans and
allocation of resources.
The CEO and all Executive Leadership team (ELT)
members had a diversity and inclusion key
performance objective (KPO) to deliver the
objectives in F22.
Highlights of progress against the F22 plan supporting
the IE&D strategy include:
1. Leaders who model our DNA
•
Inclusion was hardwired into TWE’s leadership
competency model, defining what ‘good
leadership’ looks like at TWE and setting
behavioural expectations (what it is and what
it isn’t) through the attribute of ‘helping
people belong’.
• To build leadership capability and awareness,
more than 190 leaders undertook inclusive
leadership training which included managing
biases, working inclusively, maximising collective
intelligence, better understanding thinking styles,
and using diversity of thinking to solve challenges.
• To show how our IE&D strategy is underpinned
by beliefs which inform and underpin actions,
and to define a standard to which we can be
held accountable, an IE&D manifesto was
co-created through an inclusive and consultative
process and introduced to the organisation
through inclusive and courageous conversations.
We will build on this foundation in F23.
• To lift leadership capability and build awareness
of inclusion through the eyes of another, the ELT
participated in an inclusive (reverse) mentoring
program. Each member of the ELT was mentored
by an employee from a different background
and through courageous conversations,
developed a stronger and personalised
understanding of the importance of inclusion,
our IE&D strategy, and plans.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 41
INCLUSION, EQUITY AND DIVERSITY (CONTINUED)
• To increase the number of females in senior
leadership, we evolved the design of ‘Empower
Me’, our female and non-binary top talent
leadership development program. More than
25 females participated in the program this year,
during which two were promoted.
2. Engaged employees, consumers and communities
• To better understand the employee experience
at TWE, we incorporated inclusion feedback
and measurement in our annual all employee
engagement survey. Our people told us:
they feel a strong sense of inclusion, their unique
difference is valued, they feel safe to be their
authentic selves, and they value our focus on
mental health and wellbeing. We also heard
there is an opportunity for us to help people
feel comfortable being innovative and taking
calculated risks, as well as making sure internal
career opportunities are visible and we support
them by investing time in their learning
and development.
• To ensure greater diversity of voices in the
governance of our IE&D strategy and plans,
we extended the membership of the global IE&D
council beyond the ELT to include representatives
from each global Employee Resource Group (ERG)
and all Regional IE&D Councils. This has helped
build connection and relationships between ERGs
and regions and promote greater collaboration
and innovation, which has been evident through
many of the ERG initiatives in F22.
• To drive more meaningful connection between
our consumers and brands, we have integrated
purpose into our marketing strategies. For
example, Squealing Pig launched a new long-
term partnership with Sydney Gay and Lesbian
Mardi Gras and Sydney WorldPride 2023,
significantly improving brand affinity and
conversion. Wolf Blass introduced a
comprehensive inclusivity, equality and diversity
pillar into its new global platform ‘Why Settle
When You Can Soar’, with partnerships in the
LGBTQIA+, disability, and female empowerment
spaces established.
• To leverage external expertise and escalate
progress, TWE Enable established a partnership
with the Australian Network on Disability and TWE
Pride with Pride in Diversity. Through the efforts
of TWE Pride, in its first submission, TWE has been
acknowledged with the 2021 Bronze Award for
inclusivity of LGBTQIA+ employees by the
Australian Workplace Equality Index.
• To make TWE more accessible, we have installed
mobile wayfinding technology (BindiMaps)
at 161 Collins Street Melbourne and Magill Estate
Adelaide, with further sites to follow.
• To raise awareness, we held or participated in
local and global events including 16 days of
Activism against Gender Based Violence;
International Women’s Day; Taste of Harmony
and Pride Month; an Aboriginal walk of Melbourne;
Culture Day in Asia; and International Day of
People with Disabilities. We were also invited
to speak at, host and participate in numerous
industry events, including Black Food and Wine
Event (US), Black Business Week, and Diversity
in Grocery LIVE! (EMEA).
3. Employer of choice
• To better support people impacted by domestic
and family violence, we upgraded and extended
benefits available through a global policy
including up to 10 days of paid leave for both the
impacted employee and anyone supporting
someone impacted by domestic and family
violence, and emergency financial support of
up to $5,000.
• To sustain our culture, balance individual
autonomy and flexibility with connection and
belonging, and the needs of individuals with
those of teams and the business, we established
the TWE approach to blended work. This is based
on coming together and connecting in person
more often than not, prioritising TWE common
days onsite and leveraging our ‘Find Your Flex’
policy. This approach was developed after
extensive employee consultation and is based
on a test-and-learn methodology that means
specific details will vary by country and over time
as we continue to learn and adapt.
• To ensure remuneration equity globally, we
reviewed our gender pay gap to determine the
difference between male and female earnings,
irrespective of role or seniority. Five adjustments
to remuneration were made as a result of
this analysis.
• To understand the impact of hiring, promotion,
and termination decisions on female
representation, we developed an Internal Labour
Map. The map shows we have strong female
representation in all divisions other than
throughout our Supply and IT functions and, even
within these areas of low female representation,
there are functions and locations with strong
levels of female representation. This information
will help direct our focus during F23 in seeking
to increase overall female representation.
• We were recognised externally by: the Australian
Financial Review as one of the Best Places to Work;
the Drinks Association as the Most Inclusive and
Diverse Workplace; and certified as a Great Place
to Work in the UK. TWE Americas was recognised
as one of the Healthiest Employers of the Bay Area
(fourth in the mid-sized firm category).
42 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F23 OBJECTIVES AND INITIATIVES
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 importance of cultural,
geographic, and gender diversity is reflected in the
Board’s membership, with three non-executive
directors based offshore in regions in which the
Company operates. Females represent 37.5% of the
Board and two of our committees are currently
chaired by females.
ORGANISATIONAL GENDER PROFILE
The Company makes the following diversity disclosures
in relation to Recommendation 1.5 of the ASX Corporate
Governance Principles and Recommendations.
TWE reaffirms its commitment to and will continue
to strive towards the following targets.
•
•
Increase female representation in leadership roles
to 50% by 2025.
Increase female representation across the total
TWE workforce to 42% by 2025.
• Continue to foster an inclusive and equitable culture.
The following high priority initiatives are planned
to build on the Company’s achievements in F22.
• Leader-led, layered engagement so that all
employees feel they belong, irrespective of location,
language, or level. The IE&D Manifesto will be one
tool used to engage employees and encourage
powerful and inclusive conversations.
• Evolve data collection and analysis to measure
diversity of factors other than gender.
•
Invest in and support our Employee Resource
Groups to enable their ongoing contribution to
progressing our IE&D agenda.
The CEO and all ELT members have a leadership,
inclusion, equity and diversity KPO to deliver the
above objectives in F23.
Recommendation 1.5 requirement
Proportion of females in the
whole organisation
Proportion of females in senior
executive1 positions within
the Company
As at 30 June 2022, 41.5% of the Company’s employees were female.
As at 30 June 2022, 30.0% of the senior executive positions within the Company
were held by females.
Proportion of females on
the Board of the Company
As at 30 June 2022, 37.5% of the Company’s Board of Directors (including executive
directors) were female.
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’s objective is that at least 30% of its directors will be of either gender,
to maintain gender diversity in its composition.
Further details are set out in the ‘Corporate governance’ section of this 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, was published on the WGEA and TWE websites in
August 2022: tweglobal.com/careers/inclusion-equity-diversity
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, 44.9% of roles were held by females as at 30 June 2022.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 43
Board of Directors
Member of the Board since May 2011 and
Chairman of the Board and the Nominations
Committee since September 2012.
Mr Rayner is an independent Director and is an
Australian resident.
He brings to the Board extensive international
experience in markets relevant to Treasury Wine
Estates including Europe, North America, Asia, as well
as Australia. He has worked in the 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 Boral Limited
(since September 2008, where he also serves as
Chairman of the Audit and Risk Committee) and
Murdoch Children’s Research Institute (since
December 2014, where he also serves as Chairman
of the Audit, Finance and Risk Committee). Mr Rayner
is a former Director of Qantas Airways Limited (July
2008 to November 2021).
Member of the Board since July 2020.
Mr Ford is an Australian resident and TWE’s Chief
Executive Officer.
Since joining TWE in February 2011, Tim has held
key roles across the business’s global operations,
including: Director, Global Supply and Managing
Director Europe, South East Asia, Middle East and
Africa; and Deputy Chief Operating Officer with
responsibilities for Asia, Europe and the ANZ regions.
In January 2019, Tim was appointed Chief Operating
Officer with responsibility for TWE’s global operations,
and took the helm as Chief Executive Officer on
1 July 2020.
Member of the Board since September 2012
and member of the Audit and Risk Committee.
Mr Chan is an independent Director and a Hong
Kong resident.
He is currently a Director of Hong Kong-listed LINK REIT
(since February 2016).
Mr Chan is a former Partner at Gaorong Capital
(from July 2020 to June 2022), a former Director of
Yum China Holdings, Inc (from October 2016 to May
2021), a former Operating Partner of SoftBank
Investment Advisers (from June 2019 to June 2020),
the former Vice Chairman of Charoen Pokphand
Member of the Board since May 2011, member
of the Human Resources Committee and
member of the Nominations Committee.
Mr Every-Burns is an independent Director and
is 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.
Most recently, he was President of International
Business and a member of the Worldwide Executive
Committee of The Clorox Company, a NYSE-listed,
S&P 500 business. He was based at The Clorox
Tim has more than 20 years’ experience in the wine,
food, and beverages sectors, with a strong track
record for disciplined execution of strategy,
driving growth, and building high-performing and
connected teams. Prior to joining TWE, he held senior
management roles with National Foods and CUB.
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.
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 Director of The a2 Milk Company
Limited (since August 2016).
Paul Rayner
B.Ec, MAdmin, FAICD
Chairman
Tim Ford
BBus, MBA
Managing Director and
Chief Executive Offi cer
Ed Chan
B.A/Ec, MS
Non-executive Director
Warwick Every-Burns
AMP, Harvard University
(Advanced Management
Program)
Non-executive Director
44 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Mr Hounsell is a former Chairman of PanAust Limited
(from July 2008 to August 2015), Myer Holdings
Limited (from November 2017 to October 2020, and
a Director from September 2017 to October 2020),
and Spotless Group Holdings Limited (from February
2017 to August 2017, and a Director from March 2014
to August 2017). He is 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.
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)
and Beyond Meat (NASDAQ: BYND).
Member of the Board since September
2012, Chairman of the Wine Operations and
Sustainability Committee and a member
of the Audit and Risk Committee and the
Nominations Committee.
Mr Hounsell is an independent Director and is an
Australian resident.
He is currently Chairman of Helloworld Travel Limited
(since October 2016), Wellness and Beauty Solutions
Limited (since December 2021) and the
Commonwealth Superannuation Corporation Limited
(since July 2021, and a Director since July 2016).
Mr Hounsell is also a Director of Findex Group Limited
(since January 2020).
Member of the Board since April 2018,
member of the Human Resources Committee
and member of the Wine Operations and
Sustainability Committee.
Ms Jay is an independent Director and an
American 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.
Member of the Board since April 2020,
Chair of the Audit and Risk Committee and
member of the Nominations Committee.
Ms Korsanos is an independent Director and an
Australian resident.
Ms Korsanos has extensive senior executive,
strategy, M&A, financial, global supply chain, and
governance experience, acquired over a successful
career as Chief Financial Officer of ASX-listed
Aristocrat Leisure Limited between 2009 and 2018
(where she also served as Company Secretary
from 2011). During her career with Aristocrat,
Ms Korsanos gained a significant understanding
of the US market and regulatory environment and
led a number of transformational cross-border
technology acquisitions.
Prior to joining Aristocrat, Ms Korsanos held senior
leadership roles in the fast-moving consumer
goods industry for a period of 10 years, including
at Goodman Fielder and Kelloggs. Ms Korsanos
commenced her career with accounting firm
Coopers & Lybrand (now PwC) and has been
a Chartered Accountant since 1994.
Ms Korsanos was appointed to the Board of Light
& Wonder, Inc. (formerly known as Scientific Games
Corporation) (NASDAQ: LNW) in September 2020.
Ms Korsanos is a former Director of Crown Resorts
Limited (from May 2018 to October 2021), Ardent
Leisure Group Limited (from July 2018 to June 2020)
and Webjet Limited (from June 2018 to March 2021).
In the private sector, in 2019 she co-founded a
Growth Equity Fund (Ellerston JAADE Fund) which
invests in growing private Australian technology
companies.
Member of the Board since November 2016,
Chair of the Human Resources Committee
and member of the Nominations Committee.
Ms Shanahan is an independent Director and an
American resident.
Ms Shanahan has extensive retail, consumer brand,
e-commerce, sustainability, 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 global expansion and had direct
oversight responsibility for key strategic initiatives
as well as for operating, administrative, and
sustainability functions worldwide. 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), Deckers
Outdoor Corporation (NYSE: DECK) and G Squared
Ascend (NYSE: GSQD.U). Ms Shanahan is a former
member of the California State Personnel Board
(December 2012 to March 2022).
Garry Hounsell
B.Bus (Acc), FCA, FAICD
Non-executive Director
Colleen Jay
B.BA (Hons)
Non-executive Director
Antonia Korsanos
BEC, CA, GAICD
Non-executive Director
Lauri Shanahan
JD Business Law, BS Finance
Non-executive Director
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 45
Corporate governance
The Board believes good corporate governance and
transparency in corporate reporting is a fundamental
part of the Company’s culture and business practices.
During the year, the Board continued to govern
the Company through the execution of its strategy.
Key governance issues for the Board during the
year included the following.
• Overseeing the Company’s sustainability
agenda and progress, including approval of
TWE’s full suite of sustainability targets and the
establishment of Sustainability Linked Loans.
• Providing input into, and approval of, the
acquisition of Frank Family Vineyards in
the US and the purchase of supply assets
in the Bordeaux region of France.
• Continued development of Board composition
and succession plans including the
establishment of a new Board committee (the
Wine Operations and Sustainability Committee),
approving changes to committee composition,
overseeing the retirement of Ms Louisa Cheang,
and announcing Mr Every-Burns’s intention to
retire from the Board at the Company’s
upcoming Annual General Meeting.
• Overseeing Company culture including the
establishment of Company-wide initiatives to
perpetuate the TWE DNA, being the Company’s
core values.
• Overseeing the implementation of the
Company’s new divisional operating model
under which Penfolds, Treasury Americas and
Treasury Premium Brands operate as three
separate business units.
• Guiding the Company through the continued
uncertainty created by COVID-19.
• Continued commitment to the governance
of workplace health, safety and wellbeing
performance, and developing a culture of
leadership on safety across the business.
• Providing input into, and approval of, the TWE
fi ve-year strategic plan, approving the annual
fi nancial budget, and monitoring corporate
performance and the implementation of
strategy and policy.
• Oversight of management’s continued
commitment to a culture of high performance
and ethical and responsible conduct and
setting remuneration policy to attract and retain
talent and reward high performance and
conduct that exemplifi es the Company’s DNA.
• Maintaining effective governance to facilitate
high-quality processes and internal controls.
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, refl ect high standards of governance and
meet regulatory requirements. During the fi nancial
year, the Company’s governance practices complied
with the fourth edition of the ASX Corporate
Governance Principles and Recommendations
(ASX Principles and Recommendations).
This ‘Corporate governance’ section provides an
overview of the Board’s operations, details on the
governance framework, and the key governance
focuses of the Board for the fi nancial year.
The full Corporate Governance Statement, which
outlines the key aspects of the Company’s corporate
governance framework and practices for the year
ended 30 June 2022, 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
tweglobal.com/investors/corporate-governance
BOARD OF DIRECTORS
Members of the Board
The Board continues to comprise a majority of
independent directors with all directors, other than
the Chief Executive Offi cer (CEO), being independent
non-executive directors.
The Board is committed to ensuring it is comprised
of individuals with appropriate skills, experience and
diversity to develop and support the Company’s
ambition to be the world’s most admired premium
wine company, having regard to the fi ve pillars of its
Game Plan. 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. Each director annually
rates their skills, expertise and experience from 1 to 3 for
each competency identifi ed in the Board skills matrix
(1 = working knowledge, 2 = good understanding,
and 3 = expert). The self-assessment ratings are
subsequently calibrated and included in the Board
skills matrix.
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.
46 – TREASURY WINE ESTATES ANNUAL REPORT 2022
TWE Ambition To be the world’s most admired premium wine company
The Company’s Game Plan is set out in Table 1. A summary of the Company’s Board skills matrix is included in Table 2.
TWE Way We boldly lead change in the world of wine
Table 1: TWE Game Plan
TWE GameGameG
TWE Game PLAN
PLAN
OUR PLAN ON A PAGE
Consumer focused
Consumer focused
premium brand
premium brand
portfolio
portfolio
Multi-regional
Multi-regional
& multi-channel
& multi-channel
sales models
sales models
World-class talent
World-class talent
Sustainable &
Sustainable &
multi-regional
multi-regional
sourcing &
sourcing &
winemaking
winemaking
Deep, long-term
Deep, long-term
partnerships
partnerships
& networks
& networks
Table 2: TWE Board skills matrix
TWE
Board skills and experience
We bring our whole self
We are courageous
Expert
No. of directors (total of 8)
Good
We deliver together
understanding
Working
knowledge
Industry
Expertise and experience in the wine or alcohol industry,
consumer marketing or supply and distribution
Business strategy development and M&A
Demonstrated ability to build, develop, implement, and deliver
strategic business objectives, including sustainability objectives
and/or experience in corporate transactions and joint ventures
Finance and business
Profi ciency in fi nancial accounting and reporting, corporate fi nance
and internal controls, corporate funding, capital management and
associated risks
Governance, regulatory, and human capital
Expertise identifying and managing legal, regulatory, governance,
public policy, and corporate affairs issues; and experience in complex
human capital and remuneration issues and understanding of the
link between strategy, performance, and remuneration outcomes
Risk management
Experience anticipating and identifying risks and monitoring
the effectiveness of both fi nancial and non-fi nancial risk
management frameworks and controls; and extensive experience
with complex workplace health, safety, environmental, and
community risks and frameworks
Technology
Expertise and experience in the adoption and implementation of new
technology, including IT infrastructure, understanding of key factors
relevant to digital disruption, including opportunities to leverage digital
technologies and cyber security, and understanding the use of data
and analytics
Innovation
Expertise in and understanding of key factors relevant to digital
disruption and innovation; and experience in the creation
and delivery of new ways of working and commercial initiatives
International
Relevant experience in regions and countries related to the Company’s
strategy and activities, including US, Asia, and EMEA
Board or senior management experience
Chairman – listed company
CEO/senior management
4
5
3
2
3
0
2
5
Yes
2
8
4
3
5
6
5
6
5
3
0
0
0
0
0
2
1
0
No
6
0
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 47
ROLE OF THE BOARD
The responsibilities of the Board as set out in the
Board Charter include the following.
Strategic guidance and effective oversight
of management
• Providing input into, and approval of, the Company’s
corporate strategy, performance objectives, and
business plans as developed by management.
• Appointing the CEO and managing succession
planning, as well as overseeing changes to the
Executive Leadership Team, with a view to ensuring
senior management has the appropriate resources
to enable implementation of the Company’s
strategic initiatives.
• Directing, monitoring and assessing the Company’s
performance against strategic and business plans.
• Approving and monitoring capital management,
including major capital expenditure, acquisitions,
and divestments.
Risk assessment and management
• Reviewing and evaluating the integrity of the
Company’s systems of risk management (for both
financial and non-financial risks), legal compliance,
and internal compliance and control.
• Reviewing and approving the Company’s risk
appetite statement.
Obligations to stakeholders
• Monitoring and reviewing processes aimed at
ensuring integrity of financial and other reporting.
• Monitoring compliance with adopted strategies,
procedures and standards, including corporate
governance standards.
CORPORATE GOVERNANCE (CONTINUED)
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 three 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 2022, the average tenure
for the Company’s non-executive directors was
7.7 years. Mr Every-Burns has advised of his intention
to retire from the Company’s Board at the upcoming
Annual General Meeting and the Board has clear
succession plans in place to ensure continued
Board renewal.
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. Since the
retirement of Louisa Cheang on 1 September 2021,
women represent 37.5% of the Board. In order to
maintain gender diversity into the future, in 2022 the
Board has set itself a measurable objective to maintain
at least 30% 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
incorporates site visits and presentations given
by management and external parties concerning
developments impacting, or likely to impact,
the business.
Independence
The Board, having reviewed the position, interests,
and relationships 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, non-executive
directors are required to retire and may seek
re-election, at least every three years. However, having
regard to the global nature of the Company, emerging
governance requirements in key markets, the inherent
benefits for Board renewal, and to ensure
accountability of directors, in 2019 the Board adopted
a policy pursuant to which all non-executive directors
will seek re-election annually.
48 – TREASURY WINE ESTATES ANNUAL REPORT 2022
BOARD COMMITTEES
Four standing Board Committees have been established to assist the Board in fulfilling its responsibilities.
Board of Directors
Audit and Risk
Committee
Nominations
Committee
Human Resources
Committee
Wine Operations and
Sustainability Committee
Oversees: financial reporting,
risk management and internal
controls, external and internal
audit, capital management,
and compliance.
Key focuses for F22
• 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.
• Reviewing compliance
matters across
the Company.
• Reviewing whistleblower
matters reported across the
Company and endorsing
a new Whistleblower Policy.
• Monitoring the Company’s
insurance renewal program.
• Reviewing and
recommending to the Board
for approval the full year and
interim financial reports.
• Reviewing the Company’s
risk management
framework to ensure that it
continues to be sound.
Oversees: Board composition,
performance of the Board,
Board committees and
individual directors, as well
as succession planning.
Key focuses for F22
• Overseeing Board
composition and succession
plans including changes to
Committee composition,
overseeing the retirement
of Ms Louisa Cheang, and
the intended retirement of
Mr Every-Burns from the
Board at the Company’s
upcoming Annual General
Meeting.
• Assessing the competencies
of the directors to ensure
the appropriate range of
skills and expertise amongst
Board members.
• Review of the Board
skills matrix.
• 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.
Oversees: training,
development and succession
planning for senior
management, Company’s
Inclusion, Equity, and Diversity
Policy, evaluation of senior
executive performance,
remuneration, and non-
executive directors’ fees.
Key focuses for F22
• Reviewing remuneration
practices for F23 to
ensure alignment with the
Company’s DNA and to
provide for the reward and
retention of key talent.
• Reviewing and approving
the fixed remuneration and
incentive compensation
arrangements for senior
executives, including
reviewing the attainment
of short-term incentive
and long-term incentive
performance conditions.
• Reviewing and
recommending to the Board
for approval the Company’s
F22 Remuneration Report.
• Approving the terms
of engagement of the
remuneration consultant.
• Overseeing the Company’s
inclusion, equity, and
diversity initiatives and
progress against targets.
Oversees: winemaking
operations in the various
regions in which the
Company operates,
expansion opportunities
in winemaking areas,
supply chain sustainability,
and the Company’s
sustainability reporting.
Key focuses for F22
• Reviewing and monitoring
progress against the
Company’s sustainability
targets and the
implementation of initiatives
to reach these targets.
• Overseeing Company
initiatives to ensure
industry and community
engagement.
• Reviewing workplace health,
safety, and wellbeing
performance and initiatives.
• Overseeing wine asset
management and strategy.
• Monitoring global vintage
variations and outcomes.
GOVERNANCE POLICIES
The Company has a number of governance policies
which guide how it does business, including
the following.
• 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
or corruption.
• Whistleblower Policy, which promotes and supports
the Company’s culture of honest and ethical
behaviour, by encouraging the reporting of potential
misconduct 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 further restrictions on trading by ‘Restricted
Persons’ including prohibiting trading during
blackout periods, and requiring prior approval
before trading at any other time.
• 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 ongoing development of a strategic and
consistent company-wide approach to risk
management, underpinned by a risk-aware culture.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 49
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 2022 and the auditor’s report.
The following sections of the Annual Report are
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 2022 and appear on pages 74 to 124.
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
DIRECTORS
The directors of the Company during the financial year
and up to the date of this report are:
Warwick Every-Burns
Paul Rayner
Ed Chan
Garry Hounsell
Lauri Shanahan
Colleen Jay
Louisa Cheang
(retired 1 September 2021)
Antonia Korsanos
Timothy Ford
(Chief Executive Officer)
Date of appointment
9 May 2011
9 May 2011
1 September 2012
1 September 2012
1 November 2016
1 April 2018
1 December 2018
1 April 2020
1 July 2020
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 2022 financial year
Board
meetings1
Audit and Risk
Committee
meetings1
Human
Resources
Committee
meetings1
Nominations
Committee
meetings1
Wine Operations
and Sustainability
Committee
meetings1
Additional
meetings2
Held Attended
Held Attended
Held Attended
Held Attended
Held Attended
Attended
Paul Rayner
Tim Ford
Ed Chan
Louisa Cheang3
Warwick Every-Burns
Garry Hounsell
Colleen Jay
Antonia Korsanos6
Lauri Shanahan
17
17
17
2
17
17
17
17
17
17
17
17
04
165
17
155
17
17
–
–
4
–
–
4
–
4
–
–
–
4
–
–
4
–
4
–
–
–
–
–
4
–
4
–
4
–
–
–
–
4
–
4
–
4
4
–
–
–
4
4
–
1
–
4
–
–
–
4
4
–
1
–
–
–
–
–
–
2
2
–
–
–
–
–
–
–
2
2
–
–
11
11
1
–
1
8
2
5
3
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, Nominations Committee or Wine Operations and Sustainability
Committee) where any two directors are required to form a quorum.
3. Ms Cheang retired from the Board on 1 September 2021.
4. This number reflects Ms Cheang’s absence from two Board meetings due to a Board-approved leave of absence.
5. Mr Every-Burns and Ms Jay attended all scheduled Board meetings. This number reflects absence from unscheduled Board meetings due
to a prior commitment.
6. Ms Korsanos joined the Nominations Committee with effect from 1 November 2021.
50 – TREASURY WINE ESTATES ANNUAL REPORT 2022
DIRECTORS’ INTERESTS IN SHARE CAPITAL
EVENTS SUBSEQUENT TO BALANCE DATE
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 Sustainability and External Affairs Officer, Kirsten
Gray BA/LLB (Hons), PDM, is also the Company’s
Company Secretary. She has been the Company
Secretary since 23 March 2020. Ms Gray is an
experienced executive with deep commercial, legal,
and governance expertise. Ms Gray began her career
as a corporate lawyer with Allens Australia, following
which she held senior global positions in various
top ASX-listed companies including the BHP Group
and Orica.
DIVIDENDS
Interim dividend: the Company paid an interim
dividend of 15 cents per ordinary share on 1 April 2022.
The dividend was fully franked.
Final dividend: since the end of the financial year,
the directors have approved a final dividend of
16 cents per share, fully franked and payable on
30 September 2022. The record date for entitlement
to this dividend is 1 September 2022.
In summary:
Interim dividend paid
on 1 April 2022
Final dividend payable
on 30 September 2022
Total
Dividend per share
$M
15 cents
$108.3
16 cents
31 cents
$115.5
$223.8
The Company paid shareholders a final dividend in
respect of the 2021 financial year of $93.8 million.
REVIEW AND RESULTS OF OPERATIONS
Information on the operations and financial position
for TWE is set out in the OFR accompanying this
Directors’ report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
During the financial year, the Company’s state
of affairs was significantly impacted by the
implementation of the Company’s new divisional
operating model, the divestment of non-priority
US brands and assets, the Frank Family Vineyards
acquisition, and COVID-19. The nature of these
impacts have been discussed in various ASX
announcements made by TWE. Further information
regarding these impacts on TWE can be found
in the OFR, accompanying this Directors’ report.
BUSINESS STRATEGIES, PROSPECTS AND
LIKELY DEVELOPMENTS
The OFR sets out information on TWE’s business
strategies and prospects for future financial years
and refers to likely developments in the Company’s
operations, along with the expected results of those
operations in future financial years.
Since the end of the financial year, the directors
approved a final 100% franked dividend of 16 cents
per share. This dividend has not been recognised
as a liability in the consolidated financial statements
at 30 June 2022.
On 1 July 2022 the Group purchased a number of
vineyard assets in America for US$73 million that were
previously subject to long term lease arrangements.
These assets have been acquired with a view to resale
in F23 as part of the ongoing restructure of supply
assets in America.
In July 2022 the Group agreed to acquire a 78.6% stake
in Chateau Lanessan, including its production and
vineyard assets in the Bordeaux region of France.
The cash outflow associated with the acquisition is
expected to be approximately A$60 million, including
a capital injection to fund winery and vineyard
development. Completion is expected in October 2022,
subject to satisfaction of conditions precedent.
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.
SUSTAINABILITY
Matters of environmental and social significance to
the Group are primarily addressed within the Group’s
sustainability strategy. This strategy addresses the
material topics for the Group, and the Executive
Leadership Team actively monitors progress against
our strategic roadmaps and public targets.
Further detail on the Group’s sustainability strategy,
initiatives and achievements are detailed in the
Sustainability section of this Annual Report and the
Company’s most recent 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 and risks 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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 51
DIRECTORS’ REPORT (CONTINUED)
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.
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 any matters involving non-compliance and
potential non-compliance. These reports also detail
the corrective action that has been taken.
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 2021.
During the financial year, the Group has not been
convicted of any significant breaches of
environmental regulation.
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 the following.
• 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
52 – TREASURY WINE ESTATES ANNUAL REPORT 2022
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.
• 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 $170,371. Amounts paid or payable
for audit and non-audit services are disclosed in
note 31 of the financial statements.
A copy of the auditor’s independence declaration
is set out on page 53 and forms part of this report.
INDEMNITIES AND INSURANCE
Rule 40 of the Company’s Constitution provides that
the Company must, to the extent permitted by and
subject to the Corporations Act 2001 (Cth), indemnify
each officer, director and Company Secretary
of a Group company in respect of any liability, loss,
damage, cost, or expense incurred or suffered, or
to be incurred or suffered, by the officer, director or
Company Secretary in or arising out of the conduct
of any activity of the relevant Group company or the
proper performance of any duty of that officer,
director or Company Secretary.
Each director of Treasury Wine Estates Limited has
entered into a Deed of Indemnity, Insurance and
Access (Deed) with the Company. No director or officer
of the Company has received a benefit under an
indemnity from the Company during the period ended
30 June 2022 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.
ROUNDING
Treasury Wine Estates Limited is a company of the kind
referred to in ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191 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.
This report is made on 18 August 2022, in accordance
with a resolution of the directors.
Paul Rayner
Chairman
Timothy Ford
Chief Executive Officer
Auditor’s independence declaration
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 53
F22 remuneration report
CONTENTS
Executive remuneration
Key messages
Remuneration strategy and framework
Performance and remuneration outcomes
EXECUTIVE REMUNERATION
Page 55
Page 57
Page 62
Non-executive director remuneration
Framework and outcomes
Other remuneration information
Governance
Further information
Page 68
Page 70
Page 72
Introduction from the Chairman of the Human Resources Committee
Dear shareholders,
On behalf of the Board, I am pleased to present our F22
remuneration report for which we will seek your approval
at our Annual General Meeting (AGM) in October 2022.
This remuneration report is designed to demonstrate
the Company’s performance, executive reward framework
and outcomes, and their strong alignment with our
strategic objectives and shareholder interests.
This is my final letter to shareholders as the Chair of the
Human Resources Committee (HRC) as I hand over the
reins to Lauri Shanahan from 1 July 2022 and retire from
the TWE Board following the upcoming AGM in October.
Lauri has been on the TWE Board and a member of the
HRC for almost six years, and will be an exceptional Chair.
She has an extensive career background in retail,
consumer brand, e-commerce, and environment, social
and governance (ESG), and holds several Board positions
in the US - Deckers Outdoor Corporation (NYSE: DECK),
Cedar Fair Entertainment Company (NYSE: FUN), and G
Squared Ascend (NYSE: GSQD.U). Lauri has previously held
the position of Chair of the Compensation Committee at
Deckers and Cedar Fair and is currently the Compensation
Committee Chair at G Squared. Lauri is an American
citizen, living in California and Colorado.
F22 saw TWE move from a period of recovery and
significant restructuring and into an exciting new phase
of growth and execution under our brand-led divisional
portfolio model. Each of our new divisions – Penfolds,
Treasury Premium Brands and Treasury Americas – are
now on a clear and positive trajectory towards their
respective long-term growth objectives. The benefits
of separate focus and accountability are already very
evident throughout TWE. Our short-term incentives
support our Game Plan by rewarding our executives
and global teams for accelerating divisional focus and
delivery across the portfolio to unlock growth, whilst at
the same time ensuring alignment to our company-wide
strategic ambitions. Focused execution of the plan and
priorities from our global teams has resulted in strong
underlying earnings growth during F22 across each
of the three brand portfolio divisions. This remarkable
performance was delivered against a backdrop of varied
and ongoing impacts from the global pandemic, supply
chain disruptions, and the introduction of unprecedented
import duties on Australian wine by MOFCOM.
We are confident that our executives have set the
Company up exceptionally well for long term success
and are positive on our outlook across key markets outside
of Mainland China. We remain focused on continuing the
strong momentum of growth in our luxury and premium
portfolios as evidenced through our acquisition of
Frank Family Vineyards and the divestment of our
US commercial portfolio.
We have reported EBITS1 growth of 3% to $523.7 million
and EBITS margin improved 1.3 percentage points to 21.1%,
reflecting excellent operating momentum and
outstanding execution of strategic priorities across all
divisions. Excluding Penfolds Australian country-of-origin
sales to Mainland China, NSR and EBITS grew 9% and 22%
respectively. ROCE declined slightly from F21 to 10.7%
(10.9% when impacts from divested and acquired portfolio
brands in Treasury Americas are excluded) but remains
ahead of our weighted cost of capital. Portfolio
premiumisation continues, with the contribution of NSR
from the premium and luxury portfolios increasing
6 percentage points to 83%. The Company’s capital
structure remains flexible and efficient, and we have
retained a strong balance sheet and investment grade
capital structure, with net debt2/EBITDAS3 of 1.8x.
The Company’s Total Shareholder Return performance,
whilst still impacted by the unanticipated and ongoing
external forces on our business, improved slightly from F21.
TWE’s remuneration practices are designed to attract,
motivate, and retain the high-calibre talent needed to
deliver sustainable results that out-perform the market
over the long term. As the Chair of the Committee, I have
consulted considerably in recent months with investors
and proxy advisors to discuss the challenges with ensuring
remuneration outcomes for F22 reflect an alignment
between pay, TWE’s strategic objectives, financial
performance and shareholder returns given the
cumulative and continuing impacts of the pandemic,
supply chain disruptions and the tariffs imposed by China.
Following the challenging year in F21, in F22 executives were
tasked with aggressive, stretch goals to pivot the business
and mitigate these impacts by driving growth in other
markets and focusing on delivering growth in earnings.
Executives have delivered impressive results. Once again,
however, remuneration outcomes have been directly
impacted. Whilst short-term incentive outcomes in F22
appropriately reward our executives for pivoting the
business and setting the Company up for long term
growth, the collective impacts to remuneration outcomes
for executives have been significant with no short-term
incentive payments for F20, and nil vesting of the LTIP for
the third year in a row. The Board recognises and greatly
appreciates management’s ongoing efforts and success
in executing mitigation strategies.
1. Earnings before interest, tax, SGARA and material items.
2. Net debt excludes fair value adjustments related to derivatives that are in a fair value hedge relationship on a portion of US Private Placement
Notes: F22 ($11.3) million, F21 +$21.6 million.
3. Earnings before interest, tax, depreciation, amortisation, SGARA and material items.
54 – TREASURY WINE ESTATES ANNUAL REPORT 2022
As always, the Board will continue to evaluate
remuneration strategies to ensure that the Company
both retains and appropriately incentivises executives
in the face of these significant obstacles.
The Committee is responsible for oversight of other
human resources matters across the Company, including
diversity, equity and inclusion, talent development and
succession, culture and engagement. It remains our
intention to encourage open dialogue with shareholders
and other stakeholders, and accordingly we welcome
any feedback and comments you may have.
1. KEY MESSAGES
This report details the F22 remuneration framework
and outcomes for the key management personnel (KMP)
of the Company which includes non-executive directors.
In this report, ‘executives’ refers to executives identified as
KMP excluding the non-executive directors. It is prepared
in accordance with the requirements of the Corporations
Act 2001 (Cth) and all references are to Australian dollars
($) unless otherwise specified.
a) Financial results for F22
Following a challenging year in F21, F22 saw TWE return
to earnings growth under our new brand-led divisional
portfolio model. Our continued focus on portfolio
premiumisation is delivering an impact with the
contribution of NSR from the premium and luxury portfolios
increasing to 83%. Management has executed strongly
and shown organisational resilience despite several years
of significant disruption and we delivered EBITS of
$523.7 million, a 3% increase on prior year. EBITS margin
improved 1.3 percentage points to 21.1% and TWE delivered
EPS of 44.7 cents per share (before material items and
SGARA) whilst ROCE declined slightly from F21
to 10.7% (10.9% when impacts from divested and acquired
portfolio brands in Treasury Americas are excluded).
b) KMP
Executive KMP at TWE during F22 are as follows:
Executives (as at 30 June 2022)
Current KMP
TM Ford
Chief Executive Officer (CEO)
Full year
MJ Young
Chief Financial Officer (CFO)
Full year
SR Boxer
Chief Strategy and Corporate
Development Officer (CSCDO)
Full year
c) Fixed remuneration
TWE is a truly global company with significant growth,
increasing the responsibility and complexity of executive
roles. The executive team has been crucial to the
successful navigation of COVID-19, wildfires and the tariffs
imposed on Australian wine by MOFCOM. The reward,
retention, and development of this team is a key
consideration of the Board.
As reported in the Company’s F21 Remuneration Report,
Mr Ford’s remuneration was increased by 5% to $1,575,000,
Mr Young’s remuneration was increased by 5% to $749,700,
and Mr Boxer’s remuneration increased by 2.5% to $691,875,
all effective from 1 September 2021. For F23, the Board has
approved a 3% increase to Mr Ford’s remuneration to
$1,622,250, a 3% increase to Mr Young’s remuneration to
$772,200 and a 3% increase to Mr Boxer’s remuneration
to $712,700, effective 1 September 2022.
Yours sincerely,
Warwick Every-Burns
Human Resources Committee Chairman
d) Short-term incentives in the year
As we advised in our F21 Remuneration Report F21 , short-
term incentive plan (STIP) targets were set in the context
of our roadmap out of COVID-19, easing of government
mandated restrictions and travel and economic recovery
in our key markets. The MOFCOM announcement in August
2020 was another material uncontrollable event and also
had a significant impact on our performance. F21 STIP
targets were therefore reviewed and adjusted after the
first half of F21 to achieve a balance between appropriately
motivating and rewarding our executives for results
delivered in extenuating circumstances and setting up
TWE for long-term growth and returns for our shareholders.
Management exceeded the revised targets, however the
Board determined that the F21 STIP Balanced Scorecard
multiplier for executives be paid at 1.0x (on target).
Targets set for F22 STIP once again included aggressive,
stretch goals such as driving growth in other markets
to mitigate the impact of severely reduced shipments
to Mainland China, and to focus on delivering growth in
earnings. These opportunities also assisted in offsetting
ongoing adverse COVID-19 impacts. The F22 Balanced
Scorecard multiplier for executives will be paid at 1.01x.
Despite significant supply chain and cost headwinds,
the Company has achieved strong performance
against the F22 STIP targets. The continued focus on
our premiumisation strategy, has enabled EBITS growth
and increased contribution of the premium and luxury
portfolios to our NSR. 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, and taking into account each executive’s
individual performance multiplier (IPM) based on their
achievement of individual KPOs and demonstration
of the Company’s DNA, the Board has determined that
the F22 STIP outcomes are 73.9% of fixed remuneration
for Mr Young and 87.3% of fixed remuneration for Mr Boxer.
The CEO received an F22 STIP outcome of 109.4% of
fixed remuneration.
e) Long-term incentives in the year
Whilst the Company has focused on sustainable earnings,
cost management and operational effectiveness during
the pandemic and following the introduction of the
MOFCOM tariffs, the subsequent financial impacts
continue to have a direct impact on LTIP. The Company’s
TSR performance was at the 25th percentile relative to its
peer group while ROCE results, impacted significantly by
these events, were also below threshold as a direct result.
Targets were not met which resulted in nil vesting for
eligible executives. This is the third year in a row that LTIP
has lapsed for executives due to unprecedented events
outside of their control.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 55
f) Changes for F23
F23 STIP
Following consultation with investors and to align Mr Ford’s target STIP opportunity to the market, the Board has approved
an increase to his target STIP opportunity from F23 onwards, from 83.3% to 100% of fixed remuneration.
F23 LTIP
The current performance measures of the LTIP have remained largely unchanged for seven years. Whilst adjustments to
weighting and performance curves have been made, the current measures of relative TSR and ROCE have been in place
since the F16 LTIP grant in 2015.
For the F23 LTIP, an additional measure of EPS, before material items and SGARA, will be introduced. An EPS measure is
aligned to our growth strategy whilst ensuring remuneration outcomes are aligned to shareholder returns. Both the TSR
and ROCE measures were retained and EPS was added as a third metric rather than removing one of the existing
measures, which has been supported following consultation with investors.
The weighting of the three metrics for the F23 LTIP will be relative TSR weighted at 20%, ROCE weighted at 40%, and EPS
weighted at 40% of the plan.
The following targets have been set for the F23 LTIP. The Board considers that the Company’s F23 targets are realistic
but challenging and an appropriate level of performance is required to justify full vesting of the portion of the LTIP award.
ROCE growth will be measured against the F22 ROCE base of 10.7% and will vest according to the following schedule.
ROCE baseline
10.7% (F22)
% points ROCE growth
ROCE result
% of Performance Rights subject
to ROCE measure which vest
Less than 2.8
2.8 to 3.2
3.2 to 4.0
Less than 13.5%
13.5% to 13.9%
13.9% to 14.7%
At or above 4.0
At or above 14.7%
0%
35-75%
75-100%
100%
EPS Compound Annual Growth Rate (CAGR) will vest according to the following schedule
EPS Vesting
Schedule
EPS1 CAGR %
Less than 7.5%
7.5% to 15%
At or above 15%
% of Performance Rights subject
to EPS measure which vest
0%
35-100%
100%
The relative TSR vesting schedule for the F23 LTIP is unchanged from F22
Relative TSR
vesting schedule
Relative TSR ranking
% of Performance Rights subject
to relative TSR measure which vest
Below 50th percentile
50th to 60th percentile
60th to 75th percentile
0%
50-70%
70-100%
At or above 75th percentile
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.
The Board has the discretion to adjust hurdles or vesting outcomes to ensure that executives are neither penalised,
nor provided with a windfall benefit arising from material, non-recurring items.
Offers of Performance Rights under the F23 LTIP are subject to the satisfaction of performance conditions, as outlined
above, over the performance period from 1 July 2022 to 30 June 2025. LTIP awards to KMP are at the absolute discretion
of the Board. For the F23 LTIP the following awards will apply:
• Mr Ford: opportunity of 175% of fixed remuneration at maximum, 66.5% at threshold, 0% below threshold
• Mr Young: opportunity of 150% of fixed remuneration at maximum, 57% at threshold, 0% below threshold
• Mr Boxer: opportunity of 150% of fixed remuneration at maximum, 57% at threshold, 0% below threshold.
The Company will seek shareholder approval at the 2022 AGM for the F23 LTIP offer to the CEO.
F23 Non-executive director fees
Following over three years of no increases to non-executive director fees, the Board has approved a 3% increase
to Board Chair and Member base fees and a moderate increase to Committee fees ranging between 2.3% to 4.5%,
effective 1 July 2022. The previous increase to non-executive director fees was in April 2019.
1. Earnings per Share before material items and SGARA.
56 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) 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 Company, 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 TR comprises fixed remuneration (FR) and variable (‘at-risk’) remuneration in the form of STIP and LTIP.
The remuneration structure in F22 for current executives as at 30 June 2022 is as follows.
Total remuneration with STIP at target and LTIP at threshold:
CEO
Executives
Percentage of TR
FR 40%
STIP (at target) 33%
LTIP (at threshold) 27%
Percentage of TR
FR 44%
STIP (at target) 30%
LTIP (at threshold) 26%
Total remuneration with both STIP and LTIP at maximum:
CEO
Executives
Percentage of TR
FR 24%
STIP (at maximum) 35%
LTIP (at maximum) 41%
Percentage of TR
FR 27%
STIP (at maximum) 32%
LTIP (at maximum) 41%
c) Fixed remuneration
For Australian-based executives, total fixed remuneration is inclusive of superannuation and other benefits.
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 Company
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
Company’s international lens on talent. Peer groups are reviewed regularly for accuracy and alignment with the nature
of the business.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 57
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.
The STIP performance measures 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 DNA: We Bring our Whole Self, We are Courageous and
We Deliver Together. Hurdles and stretch targets are set for each metric and the sustainability of growth and returns is
non-negotiable.
F22 STIP measures
Remuneration and performance link
Global EBITS
(50%)
Growth in sales
volumes
(15%)
Brand contribution
margin
(15%)
Cash conversion
(10%)
The EBITS metric focuses and rewards executives for the overall health and profit-producing ability
of the Company. 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 Company for future growth.
This growth metric aims to reward executives for delivering sales volumes in our priority brands to drive
a steep trajectory in top line growth globally. Delivery of this metric drives executives to explore wider
opportunities for the Company to grow beyond existing products, markets, consumers, and customers.
Executives delivering margin accretion are rewarded for delivering growth from quality brand
contribution through premiumisation of the Company’s portfolio, optimising investment and making
risk-managed, smart decisions.
This metric rewards executives for the delivery of quality growth and strong planning operations
as measured by improvements in the balance sheet, operating cash flow, and forecast accuracy,
all critical to delivering ROCE metric and financial returns for investors.
ROCE
(10%)
This metric aims to incentivise executives to grow profits by increasing revenue or efficiency
and optimise the Group’s asset base.
58 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) The table below provides further detail including the weighting of metrics and size of opportunity.
F22 STIP performance measures
STIP opportunity
STIP detail
The STIP Balanced Scorecard is
consistent across all executives and
measures are weighted as follows:
The annual STIP opportunity is at the
absolute discretion of the Board. In F22,
the following STIP opportunities applied:
50% global EBITS
Target
15% quality growth in sales volume
Executives 66.5% of FR
15% brand contribution margin
CEO 83.3% of FR
10% cash conversion
10% ROCE
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.
Maximum
Executives 120% of FR
CEO 150% of FR
The PM is derived from the level
of each Executive’s achievement of
individual KPOs and demonstration
of the Company’s DNA.
Individual KPOs for Executives
and the CEO comprise the
following objectives:
50% strategic/operational
25% leadership, inclusion, equity,
and diversity
25% wellbeing and sustainability.
The IPM can drive a result of 0 to 1.5
as per the diagram overleaf.
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
• agreed individual KPOs (including the
TWE DNA) measured by way of the IPM.
One-third of the STIP award for executives
is deferred into Restricted Equity (RE)
in the Company. Of this RE, 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 F22.
The overall structure of the F22 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.
Restricted Equity
Cash
1/3
2/3
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 59
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 F22, the Board
awarded the CEO an LTIP opportunity of 175% of fixed remuneration.
The performance period for the F22 LTIP is 1 July 2021 to 30 June 2024 and the plan has the following features.
LTIP performance measures
LTIP opportunity
LTIP detail
Relative TSR (25% weighting)
Relative to S&P/ASX 200 Index, excluding companies
from the energy, metal and mining, real estate and
finance sectors.
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 F22,
the following awards applied:
• CEO 175% of FR
• other executives 150% 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
Volume Weighted Average Price
(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.
The features of the F22 LTIP outlined above remained the same as the F20 and F21 LTIP.
F22 LTIP vesting schedules
Relative TSR
vesting schedule
Relative TSR ranking
% of Performance Rights subject
to relative TSR measure which vest
Below 50th percentile
0%
50th to 60th percentile
60th to 75th percentile
50%-70%
70%-100%
At or above 75th percentile
100%
ROCE baseline
10.8% (F21)
ROCE percentage
points growth
Less than 1.8
1.8 to 2.1
2.1 to 2.8
ROCE result
Less than 12.6%
12.6% to 12.9%
12.9% to 13.6%
At or above 2.8
At or above 13.6%
% of Performance Rights subject
to ROCE measure which vest
0%
35%-75%
75%-100%
100%
f) General employee share plan (Share Cellar)
The Company 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. The Company delivers one
matched share for every purchased share held at the plan vesting date (approximately two years), subject to continued
employment. An equivalent cash plan operates in countries where, due to local laws, it is not practicable to offer shares
to employees.
Shares were acquired in F22 under the 2021 Share Cellar offer and a subsequent offer to participate in the 2022 Share
Cellar Plan was made during the year. The first share purchases in the 2022 Share Cellar Plan will occur in August 2022 (F23).
g) Mid-term incentive plan (MTIP) and Restricted Equity plan (REP)
In addition to the LTIP, the Company 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 Company.
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 F22.
60 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) 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 not limited to) material mis-statement of financial results, material reputational damage to the Company,
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
Company 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 Company’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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 61
3. PERFORMANCE AND REMUNERATION OUTCOMES
a) Overview of Company performance
Company performance during F22 saw earnings growth under our new brand-led divisional portfolio model. Our
continued focus on portfolio premiumisation is delivering an impact with the contribution of NSR from the premium and
luxury portfolios increasing to 83% from 77% in F21. We delivered EBITS of $523.7 million, a 3% increase on prior year and
EBITS margin improved 1.3 percentage points to 21.1%. TWE delivered EPS of 44.7 cents per share (before material items and
SGARA) whilst ROCE declined slightly from F21 to 10.7% (10.9% when impacts from divested and acquired portfolio brands
in Treasury Americas are excluded). The Company’s capital structure remains flexible and efficient. We have retained
a strong balance sheet and investment-grade capital structure, with net debt/EBITDAS of 1.8x.
Due to the outstanding performance from our executives and our global teams, our global response plan to mitigate
impacts from the measures implemented by MOFCOM is progressing well. Execution of key strategic priorities delivered
strong operating momentum across each brand portfolio division in F22. Whilst Penfolds reported an 8% decline in EBITS
due to reduced shipments to Mainland China, this was partly offset by continued positive momentum across the
portfolio and performance in other Asian markets, which continues to build momentum. NSR and EBITS for Penfolds
outside of Mainland China increased by 45% and 25% respectively on a constant currency basis and EBITS margin
increased by 0.6 percentage points. Treasury Americas reported a 20.5% increase in EBITS and EBITS margin increased
by 2.9 percentage points, led by standout growth from Beringer, Stags’ Leap, Matua and 19 Crimes. The contribution of
Frank Family Vineyards (FFV) was in line with expectations, with integration materially complete across people, systems,
processes, and external partnerships. Treasury Premium Brands reported a 27% increase in EBITS and improved EBITS
margin (up 2.5 percentage points). Portfolio premiumisation continued with strong performance by priority brands
including 19 Crimes, Pepperjack, Squealing Pig, and Wynns. Significant distribution gains for focus brands in key EMEA
and Asia markets was an execution highlight.
Whilst executives have delivered impressive performance in the face of the cumulative impact the unanticipated and
unprecedented events have had on the Company, once again, remuneration outcomes have been impacted.
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 2022
EBITS performance (A$ million)
Earnings per share (cents)2
Dividends paid per share (cents)
Franked (%)
Closing share price ($ at 30 June)
Return on capital employed (%)
20181
543.8
49.1
28
63
17.39
11.7
20191
664.7
57.2
35
100
14.92
13.6
20201
512.6
41.7
40
100
10.48
10.2
2021
510.3
43.0
23
100
11.68
10.8
2022
523.7
44.7
283
100
11.35
10.7
1. Prior year results for EBITS, EPS, and ROCE have been restated for changes in accounting policies.
2. Before material items and SGARA.
3. The 2022 dividend of 28 cents is comprised of the final dividend in F21 of 13 cents (100% franked) paid on 1 October 2021 and the interim F22
dividend of 15 cents (100% franked) paid on 1 April 2022. For the final F22 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.
200%
150%
100%
50%
0%
Jul– 2 017
TWE
ASX200
J a n – 2 018
Jul– 2 018
J a n – 2 019
Jul– 2 019
J a n – 2 02 0
Jul– 2 02 0
J a n – 2 021
Jul– 2 021
J a n – 2 022
Jul– 2 022
62 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) b) Fixed remuneration outcomes
Market benchmarking and salary reviews are conducted annually with any changes effective from 1 September.
When comparing executives’ remuneration to the market, the ASX 21-75 peer group was used. During F22:
• the CEO, Mr Ford, received a 5% increase from $1,500,000 to $1,575,000 per annum, effective 1 September 2021
• the CFO, Mr Young, received a 5% increase from $714,000 to $749,700 per annum, effective 1 September 2021
• the CSCDO, Mr Boxer, received a 2.5% increase from $675,000 to $691,875 per annum, effective 1 September 2021.
c) Short-term incentive outcomes
Short-term incentives are assessed by achievement against each executive’s Balanced Scorecard and specific
personal objectives.
The F22 STIP scorecard is heavily weighted to financial metrics with the primary driver EBITS. Following a challenging year
in F21, the Company has achieved strong performance against the F22 STIP targets and F22 EBITS increased by 3% from F21
to $523.7 million. Targets set for F22 STIP once again included aggressive, stretch goals such as driving growth in other
markets to mitigate the impact of severely reduced shipments to Mainland China and to focus on delivering growth in
earnings. These opportunities also assisted in offsetting ongoing adverse COVID-19 impacts. This level of performance
is reflected in the STIP results and the level of payout for executives.
The continued focus on our premiumisation strategy, including the acquisition of Frank Family Vineyards and the
divestment of our US commercial portfolio, has resulted in EBITS and EBITS margin growth and increased contribution
of the premium and luxury portfolios to our NSR. We will continue to pursue opportunities to enhance the fundamentals
of our business with a mindset of prioritising long-term success over short-term outcomes.
Actual results for the Balanced Scorecards are provided below.
F22 STIP
Scorecard
Global EBITS
Quality growth in
sales volume
Brand contribution
margin
Cash conversion
Return on Capital
Employed
Total
CEO
CFO
CSCDO
Weight
Payment
Weight
Payment
Weight
Payment
50%
15%
15%
10%
10%
100%
52%
8%
18%
12%
11%
101%
50%
15%
15%
10%
10%
100%
52%
8%
18%
12%
11%
101%
50%
15%
15%
10%
10%
100%
52%
8%
18%
12%
11%
101%
The table below sets out short-term incentive outcomes for each executive inclusive of the impact of individual
performance multiplier outcomes.
Table 3.2: F22 STIP outcomes
FR1 for STIP
opportunity
($)
1,575,000
749,700
691,875
STIP
opportunity
at target
(% of FR)
(%)
83.3%
66.5%
66.5%
Executive1
TM Ford
MJ Young
SR Boxer
STIP
opportunity
at target
($)
STIP
awarded2
($)
Total STIP
awarded
(% of FR)2
(%)
Cash
($)
Restricted
Equity
($)
Total STIP
opportunity
forfeited
( % of FR)2
(%)
1,312,500
1,722,623
109.4%
1,148,415
574,208
498,551
553,890
460,097
604,107
73.9%
87.3%
369,260
402,738
184,630
201,369
0%
0%
0%
1. FR is salary as of 1 September 2021.
2. Inclusive of balanced scorecard and individual performance multiplier outcomes.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 63
d) Long-term incentive awards and outcomes
LTIP awarded during the year
Performance Rights were allocated to executives under the F22 LTIP after the 2021 Annual General Meeting and are subject
to a three-year performance period. Any vesting is subject to two hurdles (detailed on page 60). 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: F22 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 2022)
TM Ford
MJ Young
SR Boxer
1 December 2021
30 June 2024
1 December 2021
30 June 2024
1 December 2021
30 June 2024
240,171
97,989
92,637
2,624,997
1,070,990
1,012,495
2,425,127
989,444
935,402
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 2021 ($10.9297 per share).
2. The fair value ($) in the table above is calculated using the valuation method detailed in note 22 of the Financial Statements.
LTIP Vesting
The F20 LTIP was due to vest at the end of F22. The vesting schedule for the F20 LTIP is provided below.
Relative TSR vesting
schedule
Relative TSR ranking
% of Performance Rights subject
to relative TSR measure which vest
Below 50th percentile
0%
50th to 75th percentile
60th to 75th percentile
35%-70%
70%-100%
At or above 75th percentile
100%
ROCE baseline
13.8% (F19)
ROCE percentage
points growth
Less than 1.0
1.0 to 1.9
At or above 1.9
ROCE result
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%
Performance targets for the F20 LTIP were set prior to the COVID-19 pandemic and MOFCOM tariffs. Performance is
measured over the three-year period ended 30 June 2022. The Company’s relative TSR performance was at the 25th
percentile relative to its peer group while ROCE results, impacted significantly by these events, were also below threshold
resulting in nil vesting for eligible executives. This is the third year in a row that LTIP has lapsed for executives due to
unprecedented events outside of their control.
The F20 LTIP vesting outcome by executive is provided below. Mr Boxer did not participate in the F20 LTIP as it was granted
prior to his commencement with the Company.
Table 3.4: Vesting/lapsing of F20 LTIP
Executive
Current
(as at 30 June 2022)
TM Ford
MJ Young
Number of
Performance
Rights
granted
Value at
grant1
($)
Number
of rights
vested
Value
vested2
($)
Number
of rights
which
lapsed3
Value
lapsed2
($)
77,436
67,756
1,199,995
1,049,988
0
0
0
0
77,436
67,756
878,899
769,031
1.
‘Value at grant’ is calculated based on $15.4966 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 2019. This was the price used to calculate the number of Performance Rights granted under
the F20 LTIP as previously disclosed by the Company.
2. The value ‘lapsed’ or ‘vested’ is calculated based on the closing share price on the performance period end date of 30 June 2022, being $11.35.
3. The number of rights which lapsed as they did not vest.
64 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) e) General employee share plan (Share Cellar)
During F22, the 2022 Share Cellar Plan was launched. No executives participated in this plan. The Company has
approximately one quarter of all eligible employees participating in the Share Cellar Plan and investing their post-tax
pay to become shareholders.
f) Summary of awards held by executives
The table on the following page 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 2019 Share Cellar Plan.
Table 3.5: Summary of awards held by executives
Name
Current
(as at 30 June 2022)
Held at the
start of the
reporting
Period
Granted/
acquired
during
reporting
Period
Received
upon
vesting/
exercising
Lapsed or
forfeited1
Other
change
Held at the
end of the
reporting
Period
TM Ford
Restricted Shares
7,464
44,338
(7,464)
–
Performance Rights
333,376
240,171
–
(77,436)
MJ Young
Restricted Shares
5,495
16,842
(5,495)
Deferred Share Rights
344
–
(344)
–
–
Performance Rights
206,987
97,989
–
(67,756)
SR Boxer
Restricted Shares
Deferred Share Rights
224
–
13,472
–
(224)
Performance Rights
98,719
92,637
Deferred Share Rights
–
–
–
–
–
–
–
–
–
Grand Total
652,609
505,449
(13,527)
(145,192)
1. Represents F20 LTIP Performance Rights which lapsed on 30 June 2022.
–
–
–
–
–
–
–
–
–
–
44,338
496,111
–
16,842
237,220
–
13,472
191,356
–
999,339
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 65
g) Remuneration of executives
Table 3.6 provides details of remuneration for the CEO and executives for F22, 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 3.6: Remuneration of executives
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
Current
(as at 30 June 2022)
TM Ford
MJ Young
SR Boxer
TOTAL
F22
F21
F22
F21
F22
F21
F22
F21
1,538,932
86,759
1,478,306
268,498
720,182
692,306
665,495
653,306
2,924,609
35,487
34,610
4,375
32,865
126,621
2,823,918
335,973
28,713
26,847
10,499
10,031
10,493
10,031
49,705
46,910
1,148,415
1,083,333
369,260
411,502
402,738
329,175
1,920,413
1,824,010
(1,856)
808
–
–
–
–
(1,856)
808
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, product allocations, executive medical checks, taxation expenses, and fringe benefits tax on all benefits,
where applicable.
4. Represents cash payments made under the F22 STIP, excluding the Restricted Equity portion which will be allocated in September 2022.
5. Represents an amount payable by Mr Ford to the Company in respect of a refund of foreign tax credits claimed on Mr Ford’s 2020 US Federal
tax return.
23,568
21,694
23,568
21,694
23,568
21,694
70,704
65,083
696,229
196,394
212,369
(27,630)
410,773
113,519
1,319,371
282,283
181,115
3,701,875
104,718
3,180,599
72,061
1,443,426
70,185
1,212,699
52,249
1,569,691
–
1,160,591
305,425
6,714,992
174,904
5,553,889
55%
44%
45%
37%
55%
38%
–
–
–
–
–
–
–
–
66 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) Table 3.6 provides details of remuneration for the CEO and executives for F22, 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
g) Remuneration of executives
person occupied the KMP role.
Table 3.6: Remuneration of executives
(as at 30 June 2022)
Executive
Current
TM Ford
MJ Young
SR Boxer
TOTAL
but were not used).
where applicable.
tax return.
F22
F21
F22
F21
F22
F21
F22
F21
1,538,932
86,759
1,478,306
268,498
720,182
692,306
665,495
653,306
2,924,609
35,487
34,610
4,375
32,865
126,621
2,823,918
335,973
28,713
26,847
10,499
10,031
10,493
10,031
49,705
46,910
1,148,415
1,083,333
369,260
411,502
402,738
329,175
1,920,413
1,824,010
(1,856)
808
–
–
–
–
(1,856)
808
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
3. Includes the provision of car parking, product allocations, executive medical checks, taxation expenses, and fringe benefits tax on all benefits,
4. Represents cash payments made under the F22 STIP, excluding the Restricted Equity portion which will be allocated in September 2022.
5. Represents an amount payable by Mr Ford to the Company in respect of a refund of foreign tax credits claimed on Mr Ford’s 2020 US Federal
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
23,568
21,694
23,568
21,694
23,568
21,694
70,704
65,083
696,229
196,394
212,369
(27,630)
410,773
113,519
1,319,371
282,283
181,115
3,701,875
104,718
3,180,599
72,061
1,443,426
70,185
1,212,699
52,249
1,569,691
–
1,160,591
305,425
6,714,992
174,904
5,553,889
55%
44%
45%
37%
55%
38%
–
–
–
–
–
–
–
–
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. F21 STIP Restricted Equity was outstanding at the end of F22. Restricted Equity granted under the F22 STIP is expected to be
allocated in September 2022. 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 F22.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 67
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
CE Jay
A Korsanos
LM Shanahan
Former
LW Cheang
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
Full year
Non-executive director
Retired effective 1 September 2021
a) Fee pool
The current maximum aggregate fee pool of $2,500,000 per annum (inclusive of superannuation) was approved by
shareholders at the 2016 AGM.
b) Non-executive director fees
The level of non-executive directors’ fees takes into account the risks and responsibilities of the role, the global reach
and complexity of the business, director skills and experience, and market benchmark data (provided by independent
external consultants). At our 2021 AGM, we announced the establishment of a new Wine Operations and Sustainability
Committee which is chaired by our Director Mr Hounsell.
There were no increases to Chairman or non-executive director fees during F22. From F23, the Board has approved a
3% increase to Board Chair and Member base fees and a moderate increase to Committee fees as detailed in Table 4.1.
The previous increase to non-executive director fees was in April 2019.
Table 4.1: F22 Non-executive director fees
Board/Committee
Board base fee
Audit and Risk Committee
Human Resources Committee
Nominations Committee
Wine Operations and Sustainability
Committee
F22 fees per annum
F23 fees per annum
effective from 1 July 2022
Chair fee ($)
Member fee ($)
Chair fee ($)
Member fee ($)
530,000
45,000
41,200
10,0001
193,000
22,000
20,600
5,000
546,000
46,500
42,500
10,0001
198,500
22,500
21,500
5,000
35,000
18,000
35,000
18,000
The above fees are inclusive of superannuation for Australian-based non-executive directors.
1. The Chairman of the Board, Mr Rayner, is also the Chair 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 of $4,000. 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.
68 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) c) Non-executive director outcomes
Details of non-executive director remuneration for F22 and F21 are provided overleaf.
Table 4.2: F22 Non-executive director remuneration
Non-executive director
PA Rayner
EYC Chan
WL Every–Burns
GA Hounsell
CE Jay
LM Shanahan
A Korsanos
Former
L Cheang2
TOTAL
Year
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
Fees
$
506,432
524,576
215,000
215,000
217,455
218,447
222,878
221,918
222,600
213,600
213,600
213,600
212,425
196,347
48,250
193,000
1,858,640
1,996,488
Non–monetary
benefits1
$
Superannuation
$
16,840
15,617
4,000
4,000
7,547
6,660
7,547
6,660
4,000
4,000
4,000
4,000
7,547
6,660
4,000
4,000
55,481
51,597
23,568
5,424
–
–
21,745
20,753
22,288
21,082
–
–
–
–
21,242
18,653
–
–
88,843
65,912
Total
$
546,840
545,617
219,000
219,000
246,747
245,860
252,713
249,660
226,600
217,600
217,600
217,600
241,214
221,660
52,250
197,000
2,002,964
2,113,997
Includes product allocations, entertainment and fringe benefits tax, where applicable. The amounts for Mr Rayner include car parking.
1.
2. Ms Cheang ceased as a non-executive Director from 1 September 2021.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 69
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 HRC ensures that the Company’s policies and frameworks aid the achievement of the Company’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 tweglobal.com,
the Company 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 Company. In addition, the Company 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 tweglobal.com).
b) Engagement of remuneration advisors
In F22, 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. The guidelines are expected to be met over a reasonable period of time (approximately five years).
The Company’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, however there was no opportunity to participate in this plan during F22 due to
trading restrictions. The table below sets out KMP shareholdings.
Table 5.1: KMP shareholdings
F22
Executive
Current
(as at 30 June 2022)
TM Ford
MJ Young
SR Boxer
Executive total
Balance
at start of
the year
Received
upon vesting/
exercise1
Other
changes
during
the year2
Balance
at end
of year
63,755
25,358
–
89,113
7,808
5,719
–
13,527
–
192
–
192
71,563
31,269
–
102,832
Includes release of Restricted Shares under Tranche 2 of F19 Deferred STIP and vesting of Share Cellar matched rights.
1.
2. Includes the purchase/sale of ordinary shares during F22 and for Mr Young, shares received under TWE’s dividend reinvestment plan.
70 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) Table 5.1: KMP shareholdings (continued)
F22
Non-executive directors
Current
(as at 30 June 2022)
PA Rayner
EYC Chan
WL Every-Burns
GA Hounsell
CE Jay
LM Shanahan
T Korsanos
Former
L Cheang5,6
Non-executive director total
Grand total
Balance at start
of the year
Acquired
during the year
as part of DSAP3
Other changes
during the year
Balance at
end of year4
297,819
48,280
100,000
83,500
3,382
15,225
12,500
–
560,706
649,819
–
–
16,500
–
5,143
5,000
–
26,643
26,835
297,819
48,280
100,000
100,000
16,591
20,368
17,500
–
600,558
703,390
13,209
13,209
26,736
3. Shares acquired by directors using post-tax fees in TWE’s Director Share Acquisition Plan (DSAP).
4. No changes in shareholdings have occurred for non-executive directors from the balance date to the date of this report.
5. Ms Cheang was 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.
6. Ms Cheang ceased to be a Director from 1 September 2021.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 71
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 Company 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 Company products.
Some directors of the Company are also directors of public companies which have transactions with the Company.
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 (Cth).
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 Equity
Executive
Plan
TM Ford
F21 LTIP
MJ Young
F21 LTIP
SR Boxer
F21 LTIP
Instrument
type
Performance
Rights
Performance
Rights
Performance
Rights
Allocation date
Number
Face value
at allocation
date1
($)
Fair value
at allocation
date2
($)
Vesting date
23 November 2020
255,940
2,624,997
2,125,582
30 June 2023
23 November 2020
139,231
1,427,996
1,156,313
30 June 2023
23 November 2020
98,719
1,012,492
819,861
30 June 2023
1. The value of F21 LTIP awards at allocation date is calculated based on the 90-day VWAP up to and including 30 June 2020 ($10.2563 per share).
The vesting schedule is provided in Table 6.2.
2. 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.
Table 6.2: F21 LTIP vesting schedules
Relative TSR vesting
schedule
Relative TSR ranking
% of Performance Rights subject
to relative TSR measure which vest
Below 50th percentile
0%
50th to 60th percentile
60th to 75th percentile
35%-70%
70%-100%
At or above 75th percentile
100%
ROCE baseline
10.6% (F20)
ROCE percentage
points growth
Less than 3.0
3.0 to 3.6
3.6 to 5.1
ROCE result
Less than 13.6%
13.6% to 14.2%
14.2% to 15.7%
At or above 5.1
At or above 15.7%
% of Performance Rights subject
to ROCE measure which vest
0%
35%-75%
75%-100%
100%
72 – TREASURY WINE ESTATES ANNUAL REPORT 2022
F22 REMUNERATION REPORT (CONTINUED) d) Definitions
Term
Definition
Constant currency
An exchange rate that eliminates the effects of exchange rate fluctuations year-on-year.
Earnings per share (EPS)
EBITDAS
EBITS
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 material, non-recurring items.
Earnings before interest, tax, depreciation, amortisation, material items and SGARA.
Earnings before interest, tax, SGARA and material items.
EBITS Margin
EBITS divided by Net sales revenue.
Key management
personnel (KMP)
Phantom shares
Relative total
shareholder return (TSR)
Restricted Equity (RE)
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.
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.
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.
Self-generating and
regenerating assets
(SGARA)
SGARA represents the difference between the fair value of harvest (as determined under AASB 141
Agriculture) and the cost of harvest. The fair value gain or loss is excluded from management EBITS so
that earnings can be assessed based on the cost of harvest, rather than their fair value. This approach
results in a better reflection of the true nature of TWE’s consumer-branded and FMCG business and
improved comparability with domestic and global peers.
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 2022 – 73
Consolidated statement of profit or loss and other
comprehensive income
For the year ended 30 June 2022
Revenue
Cost of sales
Gross profit
Selling expenses
Marketing expenses
Administration expenses
Other income/(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
Other comprehensive income/(loss)
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/(loss) 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
2022
$m
2,531.8
(1,488.5)
1,043.3
23
(235.2)
(136.2)
(148.9)
(78.7)
444.3
51.5
(122.9)
(71.4)
372.9
(109.7)
263.2
–
263.2
59.3
(16.6)
94.6
137.3
400.5
–
400.5
2021
$m
2,683.9
(1,659.2)
1,024.7
(246.6)
(131.5)
(159.8)
(55.6)
431.2
33.4
(106.9)
(73.5)
357.7
(107.7)
250.0
–
250.0
10.9
(2.7)
(109.0)
(100.8)
149.2
–
149.2
Cents
per share
Cents
per share
7
7
36.5
36.3
34.7
34.6
The consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
74 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Consolidated statement of financial position
As at 30 June 2022
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
Right-of-use assets
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
Borrowings
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 parent entity interest
Non-controlling interests
Total equity
Note
2022
$m
2021
$m
9
9
9
14
9
10
11
12
13
23
9
16
18
18
23
19
21
430.5
564.4
947.9
35.6
11.3
448.1
621.3
839.7
140.2
8.0
1,989.7
2,057.3
1,063.6
1,521.5
435.3
32.9
1,399.8
163.5
57.4
4,674.0
6,663.7
747.2
8.5
76.3
161.5
9.6
1,003.1
1,512.2
338.7
20.7
1,871.6
2,874.7
3,789.0
3,280.7
48.7
455.5
3,784.9
4.1
3,789.0
1,056.8
1,322.5
448.4
33.8
1,155.5
183.7
26.2
4,226.9
6,284.2
703.6
21.1
100.0
53.1
0.7
878.5
1,474.7
309.6
30.2
1,814.5
2,693.0
3,591.2
3,280.7
(88.0)
394.4
3,587.1
4.1
3,591.2
The consolidated statement of financial position should be read in conjunction with the accompanying notes.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 75
Consolidated statement of changes in equity
For the year ended 30 June 2022
Contributed
equity
$m
Retained
earnings
$m
Foreign
currency
translation
reserve
$m
Other
reserves
$m
Non-
controlling
interests
$m
Total
$m
Total
equity
$m
Balance at 30 June 20201
3,269.8
310.2
86.6
(74.6)
3,592.0
4.1
3,596.1
Profit for the year
Total other comprehensive
income/(loss)
Total comprehensive income
for the year/(loss)
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
–
–
–
–
3.7
7.2
Balance at 30 June 2021
3,280.7
Profit for the year
Total other comprehensive
income/(loss)
Total comprehensive income
for the year/(loss)
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 2022
3,280.7
–
–
(165.9)
394.4
263.2
–
–
(202.1)
455.5
250.0
–
–
(109.0)
250.0
(109.0)
–
8.2
8.2
250.0
(100.8)
149.2
–
–
–
–
–
–
250.0
(100.8)
149.2
5.0
(0.5)
(158.7)
–
–
–
–
–
–
263.2
137.3
400.5
10.4
(11.0)
(202.1)
–
–
–
5.0
5.0
(4.2)
(0.5)
–
(158.7)
–
–
263.2
(22.4)
(65.6)
3,587.1
4.1
3,591.2
–
94.6
42.7
137.3
263.2
94.6
42.7
400.5
–
–
–
10.4
10.4
(11.0)
(11.0)
–
(202.1)
72.2
(23.5)
3,784.9
4.1
3,789.0
The consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
1. Reported results restated due to changes in accounting policies as disclosed in the 30 June 2021 Annual Report.
76 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Consolidated statement of cash flows
For the year ended 30 June 2022
2022
$m
inflows/
(outflows)
2021
$m
inflows/
(outflows)
Note
Cash flows from operating activities
Receipts from customers
Payments to suppliers, governments and employees
Borrowing costs paid
Income taxes paid
Interest paid (net)
Net cash flows from operating activities
8
Cash flows from investing activities
Payments for property, plant, and equipment
Payments for intangible assets
Payments for subsidiaries, net of cash acquired
Proceeds from sale of property, plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
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
3,378.3
(2,653.9)
(5.4)
(95.5)
(61.5)
562.0
(102.4)
(9.8)
(439.6)
143.2
(408.6)
(202.1)
335.7
(301.1)
(17.3)
(184.8)
(31.4)
3,383.7
(2,721.3)
(6.2)
(118.4)
(66.1)
471.7
(109.9)
(11.3)
–
61.8
(59.4)
(158.7)
217.4
(463.2)
0.9
(403.6)
8.7
448.1
449.1
9
13.8
430.5
(9.7)
448.1
The consolidated statement of cash flows should be read in conjunction with the accompanying notes.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 77
Notes to the consolidated financial statements:
About this report
For the year ended 30 June 2022
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 based on forecasts of
economic conditions which reflect expectations and
assumptions as at 30 June 2022 about future events that
the Directors believe are reasonable in the circumstances.
The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates
are significant to the financial statements:
Note 3:
Note 9:
Note 11:
Note 12:
Note 13:
Note 15:
Note 23:
Note 34:
Revenue
Working capital
Right-of-use assets
Agricultural assets
Intangible assets
Impairment of non-financial assets
Income tax
Business acquisitions
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 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.
Basis of preparation
The consolidated financial statements are general
purpose financial statements prepared in accordance
with Australian Accounting Standards (AASBs) adopted
by the Australian Accounting Standards Board (AASB)
and the Corporations Act 2001. The consolidated financial
statements comply with the International Financial
Reporting Standards (IFRS) adopted by the International
Accounting Standards Boards (IASB). They were authorised
for issue by the Board of Directors on 18 August 2022.
The financial statements are 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.
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.
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.
78 – TREASURY WINE ESTATES ANNUAL REPORT 2022
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 24.
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 F22 are:
A$1 = US$ 0.726 (F21: US$ 0.747)
A$1 = GB£ 0.545 (F21: GB£ 0.555)
Year-end exchange rates used in translating financial
position items in F21 are:
A$1 = US$ 0.688 (F21: US$ 0.751)
A$1 = GB£ 0.568 (F21: GB£ 0.543)
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.
NOTE 1 – ABOUT THIS REPORT (CONTINUED)
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 27.
An entity is regarded as a controlled entity when the
Company is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability
to affect those returns through power over the entity.
The rights of other investors to the results and equity
of the subsidiaries (called non-controlling interests)
are shown separately in the consolidated statement
of 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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 79
Notes to the consolidated financial statements:
About this report
For the year ended 30 June 2022
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 and
borrowings, other than lease liabilities, are not
considered to be segment assets/liabilities as they
are managed by our 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.
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.
NOTE 2 – SEGMENT INFORMATION
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.
During the current period, the business structure
was reorganised to reflect the Group’s new divisional
operating model. To facilitate comparability over
reporting periods, comparatives have been restated
to incorporate these changes.
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.
SGARA represents the difference between the fair value
of harvested grapes (as determined under AASB 141
Agriculture) and the cost of harvested grapes. The fair
value gain or loss is excluded from Management EBITS
so that earnings can be assessed based on the cost of
harvest, rather than their fair value. This approach results
in a better reflection of the true nature of TWE’s consumer
branded and FMCG business and improved comparability
with domestic and global peers. The F22 SGARA loss
of $33.9 million includes the impact of a significant
reduction in tonnage and yield from the 2021 Californian
vintage and in some specific parcels of the 2022
Australian vintage, resulting in losses of $32 million.
The Group has the following reportable segments:
(i) Penfolds
This segment is responsible for the manufacturing,
sale and marketing of Penfolds wine globally.
(ii) Treasury Premium Brands
This segment is responsible for the manufacturing,
sale and marketing of wine within Australia, Asia,
Europe, Middle-East and Africa.
(iii) Treasury Americas
This segment is responsible for the manufacture,
sale and marketing of wine within North American
and Latin Americas regions.
80 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Notes to the consolidated financial statements:
Earnings
For the year ended 30 June 2022
NOTE 2 – SEGMENT INFORMATION (CONTINUED)
Treasury
Premium
Brands
$m
Penfolds
$m
Treasury
Americas
$m
Total
segment
$m
Unallocated/
corporate
$m
Consolidated
$m
2022
Total revenue comprises:
Net sales revenue
Other revenue
Total segment revenue
(excl other income/interest)
Management EBITS
SGARA gain/(loss)
Material items
Management EBIT
Net finance costs
Consolidated profit before tax
Depreciation of property,
plant and equipment and
right-of-use assets
Amortisation of intangible assets
Assets held for sale
Capital expenditure (additions)
Segment assets
Segment liabilities
2021 Restated
Total revenue comprises:
Net sales revenue
Other revenue
Total segment revenue
(excl other income/interest)
Management EBITS
SGARA gain/(loss)
Material items
Management EBIT
Net finance costs
Consolidated profit before tax
Depreciation of property,
plant and equipment and
right-of-use assets
Amortisation of intangible assets
Assets held for sale
Capital expenditure (additions)
Segment assets
Segment liabilities
796.0
5.7
717.3
4.9
963.4
34.6
2,476.7
45.2
801.7
722.2
998.0
2,521.9
79.6
(9.8)
(0.1)
69.7
319.3
(12.7)
(2.4)
304.2
185.6
(11.4)
(39.0)
135.2
584.5
(33.9)
(41.5)
509.1
–
9.9
9.9
(60.8)
–
(4.0)
(64.8)
(3.6)
(12.9)
–
(11.3)
746.5
2,476.7
55.1
2,531.8
523.7
(33.9)
(45.5)
444.3
(71.4)
372.9
(132.0)
(16.6)
35.6
(112.2)
6,663.7
(21.9)
(1.8)
7.9
(35.6)
1,452.8
(288.5)
Treasury
Premium
Brands
$m
(35.6)
(0.0)
4.5
(45.3)
1,647.2
(236.8)
(70.9)
(1.9)
23.2
(20.0)
2,817.2
(128.4)
(3.7)
35.6
(100.9)
5,917.2
(801.5)
(1,326.8)
(1,547.9)
(2,874.7)
Penfolds
$m
Treasury
Americas
$m
Total
segment
$m
Unallocated/
corporate
$m
Consolidated
$m
840.7
4.2
788.9
3.4
940.0
105.7
2,569.6
113.3
844.9
792.3
1045.7
2,682.9
62.7
5.6
(4.4)
63.9
(24.2)
(1.8)
–
(20.1)
1,476.0
(295.7)
346.2
5.3
(14.3)
337.2
(33.1)
(0.3)
8.1
(83.2)
1,617.6
(237.6)
154.0
(1.5)
(67.6)
84.9
562.9
9.4
(86.3)
486.0
(73.0)
(2.6)
132.1
(16.4)
2,438.9
(791.3)
(130.3)
(4.7)
140.2
(119.7)
5,532.5
(1,324.6)
0.0
1.0
1.0
(52.6)
0.0
(2.2)
(54.8)
(4.1)
(11.6)
–
(9.4)
751.7
2,569.6
114.3
2,683.9
510.3
9.4
(88.5)
431.2
(73.5)
357.7
(134.4)
(16.3)
140.2
(129.1)
6,284.2
(1,368.4)
(2,693.0)
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 81
Notes to the consolidated financial statements:
Earnings
For the year ended 30 June 2022
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
2022
$m
985.4
1,035.7
345.6
110.0
2,476.7
2021
$m
1,113.2
1,000.3
345.5
110.6
2,569.6
1. Other than Australia, United States of America and the United Kingdom, sales of 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 locations2
Total geographical non-current assets
Other non-current assets3
Consolidated non-current assets
Non-current assets
2022
$m
2,041.2
2,113.5
146.0
154.3
4,455.0
219.0
4,674.0
2021
$m
2,006.5
1,713.6
146.4
154.0
4,020.5
206.4
4,226.9
2. Other than Australia, United States of America and the United Kingdom, non-current assets of other countries are individually less than 10%
of the Group’s non-current assets.
3. Other non-current assets include financial derivative assets and deferred tax assets.
82 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 3 – REVENUE
Revenue
Net sales revenue1
Other revenue
Total revenue
2022
$m
2021
$m
2,476.7
55.1
2,531.8
2,569.6
114.3
2,683.9
1. Net sales revenue is net of trade discounts and volume rebates.
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, premium and commercial wine brands such as Penfolds,
Beringer, Lindeman’s, Wolf Blass, 19 Crimes, Beaulieu Vineyard, Sterling Vineyards and Stags’ Leap.
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, wholesalers, direct to national retail chains, independent
retailers and on-premise outlets. The Group also has some sales direct to the consumer.
Other revenue
Other revenue of the Group includes contract bottling services to third parties, sub-lease income and grape and bulk
wine sales.
In F22 other revenue includes $15.4 million (F21: $14.8 million) of insurance income in relation to damage caused by
wildfires in the Americas.
Sales approach
For F22, the Group had one major customer in Treasury Americas whose revenues represented 11.4% (F21: 8.7%) of reported
net sales revenue, and one major customer in Treasury Premium Brands and Penfolds whose revenue represented 7.6%
(F21: 8.1%) 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 payment 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. 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
the 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 and depletions.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 83
Notes to the consolidated financial statements:
Earnings
For the year ended 30 June 2022
NOTE 4 – OTHER EARNINGS DISCLOSURES
Net foreign exchange gains/(losses)
Salaries and wages expense
Costs associated with cloud computing arrangements
Share based payments expense
Items recognised as material items – refer note 5
Restructuring and redundancy costs
(Write-down)/reversal of write-down of assets
Net profit/(loss) on sale of property, plant and equipment
Transaction and integration costs
Other items
Restructuring and redundancy costs
(Write-down)/reversal of write-down of assets
Insurance income
Net profit on sale of property, plant and equipment
Total other gains and (losses)
2022
$m
(0.6)
(342.8)
(7.2)
(10.4)
(9.0)
(3.2)
(20.5)
(12.8)
(0.5)
–
15.4
0.9
(29.7)
2021
$m
1.9
(337.7)
(6.6)
(5.0)
(30.9)
(95.8)
38.2
–
(1.9)
(54.1)
62.4
1.4
(80.7)
Accounting policies
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 16.
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.
84 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 5 – MATERIAL ITEMS
The following individually material items are included within the consolidated statement of profit or loss and other
comprehensive income.
Individually material items included in profit before income tax:
Divestment of US brands and assets
Restructuring and redundancy (costs)
(Write-down)/reversal of write-down of intangible assets
(Write-down)/reversal of write-down of assets held for sale
(Write-down)/reversal of inventory
(Write-down)/reversal of leased assets
Net profit/(loss) on sale of property, plant and equipment
South Australian luxury winery expansion
Restructuring and redundancy (costs)
(Write-down)/reversal of write-down of assets
Overhead and supply chain restructure
Restructuring and redundancy (costs)
Acquisition of Frank Family Vineyards
Transaction and integration (costs)
Total material items (before tax)
Tax effect of material items
Total material items (after tax)
2022
$m
2021
$m
(0.4)
(5.3)
–
–
–
(20.5)
(4.5)
2.1
(11.3)
(64.3)
(6.6)
(11.0)
(7.3)
38.2
(1.2)
(6.6)
(4.1)
(18.4)
(12.8)
(45.5)
10.5
(35.0)
–
(88.5)
22.4
(66.1)
In F22, material items reflect costs relating to the acquisition of Frank Family Vineyards in the Americas, the restructure
and review of commercial operations and assets in the Americas, the costs pertaining to the long-term investment in
Luxury winemaking infrastructure in South Australia, and costs relating to the Group’s overhead and supply chain
restructure.
In F21, material items reflect the restructure and review of commercial operations and assets in the Americas, the costs
pertaining to the long-term investment in Luxury winemaking infrastructure in South Australia, and costs relating to the
Group’s overhead and supply chain restructure.
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 2022 – 85
Notes to the consolidated financial statements:
Earnings
For the year ended 30 June 2022
NOTE 6 – DIVIDENDS
Dividends declared and paid on ordinary shares
Final dividend for 2021 of 13.0 cents per share, 100% franked
(2020: 8.0 cents per share, 100% franked)A
Interim dividend for F22 of 15.0 cents per share 100% franked
(F21: 15.0 cents per share – 100% franked)B
Dividends approved after balance date
Since the end of the financial year, the Directors approved a final dividend
of 16.0 cents per share (F21: 13.0 cents) 100% franked (F21: 100% franked).
This dividend has not been recognised as a liability in the consolidated
financial statements at year-end.
2022
$m
2021
$m
93.8
108.3
202.1
57.7
108.2
165.9
115.5
93.8
A The F21 final dividend includes an amount of $4.0 million (F20 final dividend: $2.6 million) for shares issued under the Dividend Reinvestment Plan
which were fulfilled by on market share purchase.
B The F22 interim dividend includes an amount of $5.0 million (F21 interim dividend: $4.6 million) for shares issued under the Dividend Reinvestment
Plan which were fulfilled by on market share purchase.
Details in relation to franking credits are included in note 23.
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
86 – TREASURY WINE ESTATES ANNUAL REPORT 2022
2022
cents per
share
2021
cents per
share
36.5
34.7
36.3
34.6
Number
Number
721,848
721,406
3,233
1,947
725,081
723,353
$m
263.2
–
263.2
$m
250.0
–
250.0
NOTE 7 – EARNINGS PER SHARE (CONTINUED)
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 22).
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 (gain)/loss
Write-down/(reversal of write-down) of assets
Net (profit)/loss 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
2022
$m
263.2
148.6
33.9
3.2
9.1
10.4
1.8
470.2
88.7
(21.7)
(4.6)
43.2
14.3
(28.1)
562.0
2021
$m
250.0
150.7
(9.4)
92.9
(39.6)
5.0
(2.4)
447.2
4.8
(22.7)
4.5
9.2
(10.7)
39.4
471.7
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 87
Notes to the consolidated financial statements:
Working capital
For the year ended 30 June 2022
NOTE 9 – WORKING CAPITAL
Current
Cash and cash equivalents
Receivables (a)
Inventories (b)
Trade and other payables
Total current
Non-current
Inventories (b)
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
2022
$m
2021
$m
430.5
564.4
947.9
(747.2)
1,195.6
448.1
621.3
839.7
(703.6)
1,205.5
1,063.6
1,063.6
1,056.8
1,056.8
2022
$m
427.2
(7.3)
95.2
49.3
564.4
2021
$m
487.1
(9.5)
107.4
36.3
621.3
2022
$m
2021
$m
60.8
345.0
542.1
947.9
815.5
248.1
1,063.6
48.1
348.9
442.7
839.7
747.6
309.2
1,056.8
2,011.5
1,896.5
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 $1,402.9 million
(F21: $1,397.5 million).
In F22, the write-down of inventories to net realisable value amounted to $22.8 million (F21: $63.7 million). Reversals of
write-downs amounted to nil (F21: $1.0 million). These amounts are included in cost of sales.
88 – TREASURY WINE ESTATES ANNUAL REPORT 2022
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. For trade receivables,
the Group applies the simplified approach for expected credit losses, which requires expected lifetime losses to be
recognised from initial recognition of receivables. 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 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 weighted 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 12 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 $1,063.6 million (F21: $1,056.8 million) and its estimated selling price is therefore a key estimate.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 89
Notes to the consolidated financial statements:
Operating assets and liabilities
For the year ended 30 June 2022
NOTE 10 – PROPERTY, PLANT AND EQUIPMENT
Land
2021
$m
2022
$m
Freehold
buildings
Leasehold
buildings
Plant and
equipment
2022
$m
2021
$m
2021
$m
2022
$m
2021
$m
2022
$m
Total
2021
$m
Cost
442.8
347.2
540.2
483.3
Projects in Progress
–
–
–
–
39.6
1,867.7
1,709.7
2,894.5
2,579.8
–
91.4
163.1
91.4
163.1
Accumulated
depreciation
and impairment
Carrying amount
at end of year
Reconciliations
Carrying amount
at start of year
Additions
Business acquisition
(Transfer to)/from
Assets held for sale
(Transfer to)/from
other asset classes
(Write-downs)/
write-downs reversal
Depreciation expense
Foreign currency
translation
Carrying amount
at end of year
(39.4)
(41.6)
(238.9)
(222.7)
(27.6)
(23.8)
(1,158.5)
(1,132.3)
(1,464.4)
(1,420.4)
403.4
305.6
301.3
260.6
16.2
15.8
800.6
740.5
1,521.5
1,322.5
305.6
339.9
260.6
253.3
15.8
1.2
20.7
2.0
6.5
94.3
–
–
10.2
32.9
(6.8)
(20.7)
–
–
–
–
34.1
–
(8.3)
–
–
740.5
783.5
1,322.5
1,397.4
84.5
23.9
81.7
–
102.4
151.1
117.8
–
(5.3)
(20.2)
(12.1)
(49.2)
8.0
(12.7)
–
(1.8)
8.0
–
(25.9)
(2.3)
–
–
–
–
–
–
(0.1)
–
–
(8.7)
(0.4)
(7.9)
(2.8)
(2.3)
–
(65.7)
(4.5)
(67.2)
–
(76.3)
(7.8)
(77.4)
12.8
(13.0)
10.5
(10.2)
1.1
(1.8)
27.4
(31.0)
51.8
(56.0)
403.4
305.6
301.3
260.6
16.2
15.8
800.6
740.5
1,521.5
1,322.5
Disposals
(9.0)
(0.5)
(4.2)
2022
$m
43.8
–
–
–
–
–
–
(1.9)
Included within plant and equipment are ‘Projects in Progress’ of $91.4 million (F21: $163.1 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 (F21: $7.8 million
write-downs) for property, plant and equipment during the year.
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.
90 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 10 – PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Vineyard resources
Australia
United States
New Zealand
Italy
France
2022
hectares
2021
hectares
7,857
2,702
505
154
90
11,308
8,762
3,200
498
166
60
12,686
The area under vine shown above:
• Includes 3,000 hectares (F21: 3,111 hectares) under direct leasing arrangements and 10 hectares (F21: 10 hectares)
of olive groves in Tuscany, a region of Italy.
• Yielded 90,002 tonnes of grapes (F21: 110,701 tonnes).
Harvests generally occur in September – October in the Northern Hemisphere and February – May in the
Southern Hemisphere.
NOTE 11 – RIGHT-OF-USE ASSETS
The Group has leases for vineyards, buildings, equipment and motor vehicles. The Group’s lease arrangements have
durations up to 25 years but may have extension options as described in (d) below.
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases, including IT equipment and oak barrels. The Group recognises the lease payments associated with
these leases as an expense on a straight-line basis over the lease term.
(a) Right-of-use assets
2022
$m
Land
2021
$m
Leasehold
buildings
2022
$m
2021
$m
Cost
483.9
461.3
259.2
245.7
Accumulated depreciation
and impairment
(209.0)
(183.0)
Carrying amount at end of year
274.9
278.3
(116.1)
143.1
(90.4)
155.3
Reconciliations
Carrying amount at start of year
278.3
324.3
155.3
Additions
Disposals
Depreciation and
impairment expense
Foreign currency translation
Carrying amount at end of year
5.8
(4.2)
(26.3)
21.3
274.9
5.8
–
(26.1)
(25.7)
278.3
173.2
24.6
(12.9)
2.3
-
(21.9)
(22.5)
7.4
143.1
(7.1)
155.3
Plant and
equipment
2022
$m
39.4
(22.1)
17.3
14.8
9.5
-
(7.5)
0.5
17.3
2021
$m
36.7
(21.9)
14.8
19.5
5.1
–
(8.4)
(1.4)
14.8
2022
$m
Total
2021
$m
782.5
743.7
(347.2)
(295.3)
435.3
448.4
448.4
17.6
(4.2)
(55.7)
29.2
435.3
517.0
35.5
(12.9)
(57.0)
(34.2)
448.4
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 91
Notes to the consolidated financial statements:
Operating assets and liabilities
For the year ended 30 June 2022
NOTE 11 – RIGHT-OF-USE ASSETS (CONTINUED)
(b) Amounts recognised in the statement of profit or loss and other comprehensive income
Variable lease payments not included in lease liabilities
Interest expense on lease liabilities
Expenses relating to low-value leases, excluding short-term leases of low-value items
Expenses relating to short-term leases
(c) Amounts recognised in statement of cash flows
Total cash out flow for lease liabilities
2022
$m
145.1
32.5
47.7
0.1
2022
$m
86.1
2021
$m
155.5
34.4
36.6
0.1
2021
$m
87.2
(d) Extension options
Some property and vineyard leases contain extension options exercisable by the Group up to the end of the non-
cancellable contract period. These options are used to provide operational flexibility across the Group. The extension
options held are exercisable only by the Group and not the lessors. The Group has estimated that the potential future
lease payments, should it exercise the extension option, would result in an increased lease liability of $869.0 million
(F21: $798.8 million).
(e) Variable lease payments
Certain contractual arrangements may contain both lease and non-lease components. Non-lease components are
distinct elements of a contract that are not related to securing the use of the leased asset, such as inventory, common
area maintenance, and other management costs. The Group has elected to measure the amount disclosed in relation
to variable leases for these arrangements by combining the lease and non-lease components.
Certain leases include variable lease payments, including payments that depend on an index or rate, as well as variable
payments for items such as grapes, labour, property taxes, insurance, maintenance, and other operating expenses
associated with leased assets. Certain grape purchasing arrangements include variable payments based on actual
tonnage and price of grapes that will vary depending on certain factors, including weather, time of harvest, overall market
conditions, and the agricultural practices and location of the vineyard. Such variable lease payments are excluded from
the calculation of the right-of-use asset and are recognised in the period in which the obligation is incurred.
Accounting policies
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group
uses the definition of a lease in AASB 16 Leases.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date
to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end
of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that
case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on
the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced
by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
92 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 11 – RIGHT-OF-USE ASSETS (CONTINUED)
Accounting policies (continued)
Lease payments included in the measurement of the lease liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
• amounts expected to be payable under a residual value guarantee; and
• the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments
in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties
for early termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a change in the
Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes
its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents right-of-use assets as ‘right-of-use assets’ and lease liabilities in ‘borrowings’ in the consolidated
statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases, including IT equipment and oak barrels. The Group recognises the lease payments associated
with these leases as an expense on a straight-line basis over the lease term.
Key estimate and judgement:
Right-of-use assets
The Group has applied judgement in determining the interest rates used in the discount rate and in determining the term
of a lease, which is based on the likelihood of the Group’s ability to renew the lease and having regard for terms
equivalent to those that currently exit.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 93
Notes to the consolidated financial statements:
Operating assets and liabilities
For the year ended 30 June 2022
NOTE 12 – 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
2022
$m
32.9
32.9
33.8
30.8
(33.8)
2.1
32.9
2021
$m
33.8
33.8
34.1
36.0
(34.1)
(2.2)
33.8
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 Valley 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 region.
Key estimate and judgement:
Fair value of grapes
Key to estimating the value of grapes is the following:
• Yield estimates;
• The estimated harvest costs;
• Market prices for grapes; or
• The quality of grapes, including the impacts on harvested grapes of weather, agricultural practices and location
of the vineyard.
94 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 13 – INTANGIBLE ASSETS
Cost
Projects in progress at cost
Accumulated amortisation
and impairment
Brand names
and licences
IT development
costs
Goodwill
2022
$m
2021
$m
1,605.0
1,368.5
–
–
2022
$m
130.5
10.1
2021
$m
117.2
20.8
2022
$m
2021
$m
2022
$m
Total
2021
$m
963.6
898.3
2,699.1
2,384.0
–
–
10.1
20.8
(582.5)
(543.2)
(100.3)
(85.3)
(626.6)
(620.8)
(1,309.4)
(1,249.3)
Carrying amount at end of year
1,022.5
825.3
40.3
52.7
337.0
277.5
1,399.8
1,155.5
Reconciliations
Carrying amount at start of year1
Additions
Business acquisitions
Disposal
(Transfers to)/from other asset classes
Amortisation and impairment expense
Foreign currency translation
825.3
952.4
–
160.1
(0.8)
–
(2.1)
40
0.5
–
–
(21.5)
(65.8)
(40.3)
Carrying amount at end of year
1,022.5
825.3
52.7
9.8
–
–
(8.0)
(14.5)
0.3
40.3
58.4
10.8
–
–
–
(15.1)
(1.4)
52.7
277.5
283.3
1,155.5
1,294.1
–
58.2
–
–
(5.3)
6.6
–
–
–
–
–
(5.8)
9.8
218.3
(0.8)
(8.0)
(21.9)
46.9
11.3
–
(0.8)
(21.5)
(80.9)
(47.5)
337.0
277.5
1,399.8
1,155.5
Goodwill is allocated to the Cash Generating Units (CGUs) or group of CGUs (see note 15 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:
Treasury
Premium Brands
Restated1
2021
$m
2022
$m
Penfolds
Treasury Americas
Restated1
2021
$m
2022
$m
Restated1
2021
$m
2022
$m
Goodwill
Carrying amount at start of year
115.4
114.8
90.4
90.4
Business acquisitions
Impairment
Foreign currency translation
Carrying amount at end of year
Brand names and licences
–
–
(0.9)
114.5
–
–
0.6
115.4
0.8
–
(0.1)
91.1
Carrying amount at start of year
265.8
267.2
221.2
Additions
Disposal
Amortisation and impairment expense
(Transfers to)/from other asset classes
Foreign currency translation
–
(0.8)
(1.6)
–
1.8
–
–
(1.5)
–
0.1
Carrying amount at end of year
265.2
265.8
–
–
–
–
0.1
221.3
–
–
–
90.4
220.7
0.5
–
–
–
–
71.7
57.4
(5.3)
7.6
131.4
338.3
160.1
-
(0.5)
–
38.1
78.1
–
–
(6.4)
71.7
464.5
–
–
(64.3)
(21.5)
(40.4)
Total
Restated1
2021
$m
283.3
–
–
(5.8)
277.5
952.4
0.5
–
(65.8)
(21.5)
(40.3)
2022
$m
277.5
58.2
(5.3)
6.6
337.0
825.3
160.1
(0.8)
(2.1)
–
40
221.2
536.0
338.3
1,022.5
825.3
1. Reported results restated for changes to reporting segments. Refer to note 2.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 95
Notes to the consolidated financial statements:
Operating assets and liabilities
For the year ended 30 June 2022
NOTE 13 – INTANGIBLE ASSETS (CONTINUED)
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.
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 15).
IT development and software
Other than in relation to Software-as-a-Service (“SaaS”) arrangement, 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.
SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application
software over the contract period. The following outlines the accounting treatment of implementation costs incurred
in relation to SaaS arrangements:
Recognise as an operating expense
over the term of the service contract
• Fee for use of application software
• Customisation costs only when ‘not distinct’
and undertaken by SaaS vendor
Recognise as an operating expense
as the service is received
• Configuration costs
• Data conversion and testing
• Testing costs
• Training costs
Costs incurred for the development of software code that enhances or modifies, or creates additional capability to,
existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised
as intangible IT assets.
96 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 14 – ASSETS AND DISPOSAL GROUPS HELD FOR SALE
Assets and disposal groups held for sale
Total assets and disposal groups classified as held for sale
2022
$m
35.6
35.6
2021
$m
140.2
140.2
Assets held for sale comprise property, plant and equipment identified by the Group to be recovered through sale.
Management are committed to a plan to sell a number of surplus assets in America and Australia, including vineyards
and wine making facilities, related property, plant and equipment and inventory. Accordingly, the vineyards and facilities
have been presented as disposal groups held for sale.
Impairment losses relating to the disposal group
Impairment losses of nil (F21: $6.6 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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 97
Notes to the consolidated financial statements:
Operating assets and liabilities
For the year ended 30 June 2022
NOTE 15 – IMPAIRMENT OF NON-FINANCIAL ASSETS
In F22 the recoverable amounts of cash generating units (CGUs) exceed their carrying values and as a result no impairment
has been recognised (F21: Nil). There were no indications that previously recognised impairment losses should be reversed
(F21: Nil). The recoverable amount was determined through a value in use calculation. The write down of assets disclosed
in note 4 relates to assets for which their valuation was tested independently of the CGUs in accordance with other
accounting policies.
As a result of the change to a brand portfolio led divisional model, new CGUs were identified, they are:
• Penfolds Americas;
• Penfolds ANZ;
• Penfolds EMEA;
• Treasury Americas;
• Treasury Premium Brands ANZ; and
• Treasury Premium Brands EMEA.
Goodwill is tested for impairment at a divisional level which is the level it is monitored at.
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.
98 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 15 – 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 2022. 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 which assume continuity of sourcing and access to fruit.
These estimates, judgements and assumptions are based on forecasts of economic conditions which reflect expectations
and assumptions as at 30 June 2022 about future events that the Directors believe are reasonable in the circumstances.
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% (F21: 2.0% to 3.0%).
Growth rates are specific to individual CGUs and reflect expected future market and economic conditions.
Discount rates
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:
Penfolds Americas
Penfolds ANZ
Penfolds EMEA
Treasury Americas
Treasury Premium Brands ANZ
Treasury Premium Brands EMEA
2022
9.0%
11.1%
10.5%
9.4%
11.1%
10.5%
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 performance, there are no reasonably possible changes to key
assumptions used in the determination of CGU recoverable amounts that would result in an impairment to the Group.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 99
Notes to the consolidated financial statements:
Operating assets and liabilities
For the year ended 30 June 2022
NOTE 16 – PROVISIONS
Current
Employee entitlements
Other
Total current provisions
Other provisions
2022
Carrying amount at start of year
Charged/(credited) to profit or loss
Payments
Foreign currency translation
Carrying amount at end of year
2022
$m
42.8
33.5
76.3
Onerous
contracts
$m
Restructuring
$m
Other
$m
1.8
(0.6)
–
0.3
1.5
10.3
15.5
(21.2)
0.2
4.8
36.7
8.5
(21.2)
3.2
27.2
2021
$m
51.2
48.8
100.0
Total
$m
48.8
23.4
(42.4)
3.7
33.5
Other provisions include $26.2 million (F21: $35.9 million) in relation to estimated repair costs for a winery and vineyards
that were damaged by wildfires in the Americas.
Onerous contract provisions are held for IT infrastructure and service 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).
100 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Notes to the consolidated financial statements:
Capital structure
For the year ended 30 June 2022
NOTE 17 – 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 18 – BORROWINGS
Total borrowings consist of:
Current
Non-current
Total borrowings
2022
$m
2021
$m
161.5
1,512.2
1,673.7
53.1
1,474.7
1,527.8
Details of major arrangements
US Private Placement Notes
US Private Placement (USPP) notes totalling US$325.0 million (unsecured) are outstanding, with maturities ranging from
December 2023 to June 2029. The carrying value of USPP notes at 30 June 2022 is $472.2 million (F21: $432.7 million).
In June 2022 the Group negotiated a USPP issuance totalling US$250 million with tranches of US$175 million maturing
September 2032 and US$75 million maturing September 2034. Funding will be completed in September 2022 and a
portion will be used to repay the syndicated debt facilities maturing in June 2023.
Debt Facilities
During the year $1.4 billion of existing debt facilities were refinanced to include the establishment of Sustainability Linked
Loans, providing a direct link between the Group’s sustainability performance and its cost of capital. The Group established
a further US$240 million syndicated debt facility with US$170 million being repaid and extinguished during the year.
Syndicated debt facilities now total US$420 million with US$70 million maturing June 2023, US$120 million maturing
December 2026 and US$230 million maturing in December 2027 which are fully drawn at 30 June 2022. The carrying
value of the syndicated debt facilities at 30 June 2022 is $610.2 million (F21:$466.0 million). The US$70 million maturing
in June 2023 will be repaid using the proceeds of the new USPP issuance.
The Group has in place several revolving bank debt facilities with maturities staggered through to June 2026.
As at 30 June 2022 there are no amounts drawn under the revolving bank debt facilities (F21: Nil).
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 collars also used to manage interest rate risk. Refer to note 24 for further details.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 101
Notes to the consolidated financial statements:
Capital structure
For the year ended 30 June 2022
NOTE 18 – BORROWINGS (CONTINUED)
Financial guarantees
The Group has issued financial guarantees to other persons of $28.4 million (F21: $23.5 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.
Lease liabilities
The Group enters into Lease arrangements that meet the capitalisation requirements under AASB 16 Leases. Current and
non-current lease liabilities are recognised for the present value of the lease payments due under the lease contracts
and are represented as borrowings.
At 30 June 2022, the Group recognised current lease liabilities of $62.2 million (F21: $54.8 million) and non-current lease
liabilities of $546.8 million (F21: $557.8 million). The Group’s lease arrangements have durations up to 25 years.
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 2022,
nil receivables had been derecognised under this arrangement (F21: nil).
Accounting policies
Borrowings are initially recorded at fair value of the consideration received, net of directly attributable costs.
After initial recognition, borrowings are measured at amortised cost, using the effective interest rate method.
Amortised cost is calculated by considering 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
2021
$m
448.1
0.6
(460.4)
(432.7)
(612.6)
(0.7)
Total cash
flows from
activities
$m
Additions to
Net Debt
$m
Debt
Revaluation
and FX
movements
$m
(25.1)
(0.2)
(100.6)
–
59.8
0.2
–
–
–
–
(8.7)
–
(8.7)
7.5
–
(42.5)
(39.5)
(47.5)
–
2022
$m
430.5
0.4
(603.5)
(472.2)
(609.0)
(0.5)
(1,057.7)
(65.9)
(122.0)
(1,254.3)
1. Loans are stated net of capitalised facility finance costs. At reporting date, the balance of bank loans is $610.2 million (F21: $466.0 million)
against capitalised facility finance costs of $6.7 million (F21: $5.6 million) to be amortised over the facility period.
102 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 19 – CONTRIBUTED EQUITY
Issued and paid-up capital
721,848,176 (F21: 721,848,176) ordinary shares, fully paid
Own shares held
Contributed equity at the beginning of the year
Shares movements:
Nil shares issued under the Dividend reinvestment plan (F21: 699,506)
Nil shares issued for vested Long Term Incentive Plan and Share Cellar plan (F21: 348,319)
Net movement in own shares held
Contributed equity at the end of the year
The shares have no par value.
2022
$m
2021
$m
3,280.7
3,280.7
–
–
3,280.7
3,280.7
3,280.7
3,269.8
–
–
–
7.2
3.7
–
3,280.7
3,280.7
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.
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). There are no treasury shares held
at 30 June 2022 (F21: Nil).
Under this arrangement during the period, the Group purchased 1.4 million shares ($17.3 million) under the third-party
arrangement (F21: 0.3 million shares ($2.8 million)). A total of 0.8 million shares (F21: 0.1 million) purchased under the
third-party arrangement are available at 30 June 2022 (F21: Nil).
NOTE 20 – COMMITMENTS
Details of the Group’s lease commitments are captured in Lease Liabilities disclosed within Borrowings (note 18) and the
impact of short-term and low value leases is captured in note 11.
2022
$m
2021
$m
Capital expenditure and other commitments
The following expenditure has been contracted but not provided for in the financial statements:
Capital expenditure
35.5
37.2
NOTE 21 – RESERVES
Cash flow hedge reserve
Share based payments reserve
Foreign currency translation reserve
Total reserves
2022
$m
30.9
(54.4)
72.2
48.7
2021
$m
(11.8)
(53.8)
(22.4)
(88.0)
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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 103
Notes to the consolidated financial statements:
Capital structure
For the year ended 30 June 2022
NOTE 22 – 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
65,860
114,890
(65,860)
–
114,890
–
711,513
691,048
(221,263)
(358,306)
822,992
–
1,297,784
905,177
-
(366,105)
1,836,856
–
349,040
310,735
(314,734)
(9,166)
335,875
–
310,593
166,926
(141,916)
(45,022)
290,581
–
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.
The F20 – F22 performance rights are subject to TSR and ROCE targets weighted of 25% for TSR and 75% for ROCE over
a performance period of 3 years. The TSR and ROCE measures for the F20 plan were not met in F22 resulting in Nil vesting.
Mid-term Incentive Plan (MTIP)
The Group awarded an MTIP grant in F21 and F22. 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 F21 and F22 plans have 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%). The ROCE measure for the F21 MTIP Plan
was not met in F22 resulting in Nil vesting.
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 2020 and 2021 plans, 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.
104 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 22 – EMPLOYEE EQUITY PLANS (CONTINUED)
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.
Active share-based payment plans:
Long-term Incentive Plans
The below table outlines the F22 and F21 LTIP plans which have a vesting date post 30 June 2022:
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 F22 and F21 MTIP plans which have a vesting date post 30 June 2022:
Grant date
Grant date share price
Expected dividend yield (%)
Fair value estimate at grant date – ROCE
Fair value estimate time-based – Vesting F22: 2022 (F21: 2021)
Fair value estimate time-based – Vesting F22: 2023 (F21: 2022)
Restricted Equity Plans
Grant date
F20
11-Nov-19
F21
23-Nov-20
F22
1-Oct-21
F22 Plan
1-Dec-21
F21 Plan
23-Nov-20
$11.79
42.0
2.7
0.77
$7.39
$11.00
$10.01
41.0
2.1
0.10
$4.78
$9.48
F22 Plan
1-Oct-21
F21 Plan
23-Nov-20
$12.37
2.7
$11.80
$12.07
$11.75
$10.01
2.1
$9.68
$9.85
$9.65
Grant date share price
$18.14
$10.01
$12.37
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 105
Notes to the consolidated financial statements:
Taxation
For the year ended 30 June 2022
NOTE 23 – 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)/increase in deferred tax assets
(Decrease)/increase 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% (F21: 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:
Property, plant and equipment (including vines)
Right-of-use assets and lease liabilities
Accruals
Provisions
Derivative instruments
Tax losses
Other
Total deferred tax assets
106 – TREASURY WINE ESTATES ANNUAL REPORT 2022
2022
$m
2021
$m
83.2
26.5
109.7
41.6
(15.1)
26.5
109.1
(1.4)
107.7
0.1
(1.5)
(1.4)
418.4
(45.5)
372.9
446.2
(88.5)
357.7
111.9
107.3
3.4
(1.9)
(2.2)
1.0
(7.3)
5.6
(0.8)
109.7
120.2
(10.5)
109.7
0.2
42.9
36.1
23.1
7.9
40.6
12.7
163.5
(3.0)
(0.3)
–
6.2
(2.0)
3.1
(3.6)
107.7
130.1
(22.4)
107.7
11.0
38.8
22.3
27.3
–
67.9
16.4
183.7
NOTE 23 – INCOME TAX (CONTINUED)
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Inventory
Property, plant and equipment (including vines)
Intangibles
Other
Total deferred tax liabilities
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
Business acquisitions
Balance sheet reclassification
Foreign currency translation
Other
Closing balance
Movement in deferred tax liabilities:
Opening balance
(Credited)/charged to profit or loss
Recognised directly in Equity
Business acquisitions
Transfer (to)/from Assets Held for Sale
Foreign currency translation
Balance sheet reclassification
Closing balance
2022
$m
2021
$m
16.5
87.5
221.2
13.5
338.7
183.7
(41.6)
(2.9)
5.1
–
10.9
8.3
163.5
309.6
(15.1)
13.7
6.0
10.0
14.7
(0.2)
338.7
23.6
58.8
224.0
3.2
309.6
193.8
(0.1)
(2.7)
–
(1.8)
(11.9)
6.4
183.7
334.3
(1.5)
–
–
(5.5)
(15.9)
(1.8)
309.6
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
(16.6)
(2.7)
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 $31.9 million (F21: $39.2 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 $113.3 million (F21: $119.7 million) of franking credits available for subsequent
reporting periods.
UK corporation tax rate
Following the substantive enactment of Finance Bill 2021, the Group remeasured the deferred tax assets and liabilities
of its UK operations using the new tax rate and recognised a one-off charge of $6.2 million as of 30 June 2021.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 107
Notes to the consolidated financial statements:
Taxation
For the year ended 30 June 2022
NOTE 23 – INCOME TAX (CONTINUED)
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.
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 probable 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.
108 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Notes to the consolidated financial statements:
Risk
For the year ended 30 June 2022
NOTE 24 – 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:
Net borrowings
Receivables
Other financial assets
Payables
Note
18
9
9
9
Derivative financial assets and liabilities
25, 32
Liquidity
risk
(a)
Interest
rate risk
(b)
Foreign
exchange risk
(c)
Credit
risk
(d)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
(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.
2022
$m
2021
$m
1,909.8
(1,082.5)
827.3
1,692.7
(898.7)
794.0
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 109
Notes to the consolidated financial statements:
Risk
For the year ended 30 June 2022
NOTE 24 – 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 and 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:
2022
Non-derivative financial liabilities
Bank loans1
Lease liabilities
Other loans
US Private Placement Notes
Trade Payables
Other Payables
Derivative financial liabilities
Foreign exchange contracts
Interest rate and cross currency swaps
10.6
40.4
–
9.7
314.9
432.3
2.1
2.0
114.8
46.4
–
9.7
–
–
1.0
6.8
18.3
89.7
0.5
197.1
–
–
4.1
17.8
243.9
250.5
–
247.4
–
–
2.5
34.9
342.1
385.1
–
78.2
–
–
–
2.7
729.7
812.1
0.5
542.1
314.9
432.3
9.7
64.2
603.5
609.0
0.5
472.2
314.9
432.3
9.7
11.3
Total financial liabilities
812.0
178.7
327.5
779.2
808.1
2,905.5
2,453.4
2021
Non-derivative financial liabilities
Bank loans1
Lease liabilities
Other loans
US Private Placement Notes
Trade payables
Other Payables
Derivative financial liabilities
Foreign exchange contracts
Interest rate and cross currency swaps
3.7
38.1
–
9.9
322.1
381.5
0.1
6.5
3.8
43.3
–
9.3
–
–
0.1
7.3
Total financial liabilities
761.9
63.8
8.4
84.3
0.6
18.5
–
–
0.4
13.5
125.7
184.8
234.6
–
319.6
413.1
–
269.0
233.2
–
–
–
31.8
720.2
–
–
–
5.6
971.5
520.3
813.4
0.6
539.9
322.1
381.5
460.4
612.6
0.6
432.7
322.1
381.5
0.6
64.7
0.6
25.0
2,643.1
2,235.5
1. Loans are stated net of capitalised facility finance costs. At reporting date, the balance of bank loans is $610.2 million (F21: $466.0 million)
against capitalised facility finance costs of $6.7 million (F21: $5.6 million) to be amortised over the facility period.
(b) Interest rate risk
Nature of the risk
The Group is exposed to interest rate risk principally from floating rate bank borrowings. 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 have been exchanged to obtain the desired ratio of fixed and floating interest rates.
At 30 June 2022, interest rate swap contracts were in use to exchange fixed interest rates to floating rates on $363.2 million
(US$250.0 million) of US Private Placement notes. A combination of floating to fixed interest rate swaps and fixed interest rate
caps have been used to exchange the floating rates to fixed on all US Private Placement notes (US$325 million). The swaps
mature in December 2023, June 2027 and June 2029. Cross currency interest rate swaps are 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 December 2026. Please refer note 24(a) for the profile and timing of cash flows over the next five years.
110 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)
(b) Interest rate risk (continued)
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.
2022
$m
2021
$m
430.5
430.5
–
101.7
101.7
448.1
448.1
–
199.7
199.7
Sensitivity analysis
The table below shows the impact by currency denomination if the Group’s weighted average floating interest rates
change from the year-end rates of 0.80% (F21: 0.20%) with all other variables held constant.
Currency
USD
AUD
GBP
Sensitivity
2022
2021
+ / – 25bp
+ / – 25bp
+ / – 25bp
+ / – 25bp
+ / – 25bp
+ / – 25bp
2022
-$m
(0.3)
(0.3)
(0.1)
Pre-tax impact on profit
+$m
(0.1)
0.6
0.1
2021
-$m
0.1
(0.6)
(0.1)
+$m
0.3
0.3
0.1
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.
(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 2022 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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 111
Notes to the consolidated financial statements:
Risk
For the year ended 30 June 2022
NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Foreign exchange risk (continued)
Details of the Group’s open hedges at balance sheet date are shown below.
Open foreign currency hedges at 30 June 2022
Currency
AUD/USD
AUD/GBP
Hedge type
Forwards
Options
Total
Forwards
Options
Total
Hedge value
(notional AUD)
$m
Average
hedge rate
60.0
185.5
245.5
33.0
107.0
140.0
0.7296
0.7558
0.5273
0.5637
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
2022
Net debt
Cash and cash equivalents
Loan receivable
Bank loans2
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)
2021
Net debt
Cash and cash equivalents
Loan receivable
Bank loans2
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
120.9
–
1.7
–
(89.3)
(0.5)
32.8
208.7
17.3
(384.9)
(158.9)
220.4
0.6
1.7
–
(97.9)
(0.7)
124.1
202.7
4.2
(320.9)
(114.0)
228.4
0.4
(605.2)
(472.2)
(499.6)
–
(1,348.2)
86.2
75.5
(259.0)
(97.3)
151.6
–
(462.1)
(432.7)
(492.4)
–
(1,235.6)
128.7
59.7
(244.5)
(56.1)
36.1
45.1
–
–
–
(2.0)
–
34.1
88.8
-
(69.9)
18.9
18.7
–
–
–
(2.1)
–
16.6
95.5
–
(55.7)
39.8
–
–
–
(18.1)
–
27.0
36.2
2.4
(33.4)
5.2
57.4
–
–
–
(20.2)
–
37.2
50.7
3.5
(82.5)
(28.3)
430.5
0.4
(603.5)
(472.2)
(609.0)
(0.5)
(1,254.3)
419.9
95.2
(747.2)
(232.1)
448.1
0.6
(460.4)
(432.7)
(612.6)
(0.7)
(1,057.7)
477.6
67.4
(703.6)
(158.6)
2. Includes capitalised borrowing costs of $6.7 million (F21: $5.6 million).
112 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)
(c) Foreign exchange risk (continued)
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
assumption3
2022
2021
12.6%
10.0%
10.7%
9.1%
6.3%
9.0%
7.4%
7.2%
6.7%
4.9%
Pre-tax impact on profit
$m
Impact on equity
$m
2022
-
(0.1)
0.7
0.1
2.4
0.0
+
0.1
(0.5)
(0.1)
(2.0)
0.0
2021
-
0.2
(0.1)
(0.2)
1.7
–
+
(36.8)
(26.7)
(2.3)
2.2
(7.5)
2022
-
57.7
35.4
3.9
(2.6)
8.5
+
(0.2)
0.1
0.2
(1.5)
–
2021
-
82.2
21.1
4.5
(1.7)
9.0
+
(61.0)
(17.0)
(3.7)
1.5
(8.1)
3. Australian dollar versus individual currencies. Implied one-year currency volatility at reporting date (Source: Bloomberg).
(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 based on risk.
In F22 the Group, as part of its normal monitoring of the credit quality of trade receivables, continued frequent telephone
contact and engagement with customers to understand customer trading and credit circumstances, and supporting
them through any short-term challenges identified. The Group also continued to monitor customer credit risk
assessments across the entire customer portfolio.
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 2022 in respect of derivative financial instruments was
$22.0 million (F21: $4.5 million) and in respect of cash and cash equivalents was $186.2 million (F21: $125.0 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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 113
Notes to the consolidated financial statements:
Risk
For the year ended 30 June 2022
NOTE 24 – FINANCIAL RISK MANAGEMENT (CONTINUED)
(d) Credit risk (continued)
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
2022
$m
387.7
25.4
4.3
2.5
419.9
2021
$m
459.5
10.9
1.8
5.4
477.6
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.
NOTE 25 – DERIVATIVE FINANCIAL INSTRUMENTS
At reporting date, there were $385.4 million (Australian dollar equivalent) net face value of outstanding foreign exchange
contracts at contract rates (F21: $324.0 million), interest rate swaps of $857.2 million (F21: $665.7 million) and cross currency
interest rate swaps of $174.4 million (F21: $159.8 million) and interest rate collars of $203.4 million (F21: $146.5 million).
These instruments are regarded as Level 2 under AASB’s Fair Value measurement hierarchy.
NOTE 26 – FAIR VALUES
The fair value of the US Private Placement Notes is $484.1 million (F21: $492.8 million) and the fair value of the syndicated
debt facility is $644.3 million (F21: $500.0 million). The fair values of cash and cash equivalents, financial assets and other
financial liabilities approximate their carrying value. 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.
114 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Notes to the consolidated financial statements:
Group composition
For the year ended 30 June 2022
NOTE 27 – SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries:
Entity name
Equity holding of 100% (F21: 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
Cuppa Cup Vineyards Pty. Ltd.
Devil’s Lair Pty. Ltd.
Ewines Pty. Ltd.
FBL Holdings Limited
Frank Family Vineyards LLC
Il Cavaliere del Castello di Gabbiano S.r.l.
Interbev Pty. Ltd.*
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 Australia Pty Ltd (formerly known as Treasury Logistics Pty Ltd)*
Penfolds Wines International Limited (formerly known as Coldstream Australasia Limited)*
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.*
Société Civile de la Gironville
Société Civile d’Exploitation Agricole Cambon La Pelouse
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 Pty. Ltd.*
Southcorp XUK Limited
T’Gallant Winemakers Pty. Ltd.
The Rothbury Estate Pty. Ltd.*
Country of incorporation
Australia
Australia
Italy
Italy
Chile
UK
Australia
Australia
UK
UK
Australia
Australia
Australia
UK
USA
Italy
Australia
Australia
Australia
Australia
Australia
Australia
Australia
USA
Australia
Australia
Australia
Netherlands
USA
Australia
Australia
Australia
Australia
Australia
Australia
France
France
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
UK
Australia
Australia
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 115
Notes to the consolidated financial statements:
Group composition
For the year ended 30 June 2022
NOTE 27 – SUBSIDIARIES (CONTINUED)
Entity name
Tolley Scott & Tolley Limited*
Treasury Americas Inc
Treasury Chateau & Estates LLC
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 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
Australia
USA
USA
Australia
New Zealand
Australia
China
Australia
USA
Singapore
Australia
Australia
Australia
Canada
Denmark
UK
France
Hong Kong SAR, China
USA
Japan
Netherlands
Norway
Sweden
UK
Australia
Australia
UK
Singapore
Australia
Australia
USA
USA
Australia
Australia
Australia
Australia
* Entity is a member of the Closed Group under the Deed of Cross Guarantee (refer to note 29) and relieved from the requirement to prepare
audited financial statements by ASIC Corporations (Wholly owned Companies) Instrument 2016/785.
Entity name
Country of incorporation
2022
2021
% of holding
Equity holding of less than 100%
Fiddlesticks LLC
Graymoor Estate Joint Venture
Graymoor Estate Pty. Ltd.
Graymoor Estate Unit Trust
North Para Environment Control Pty. Ltd.
116 – TREASURY WINE ESTATES ANNUAL REPORT 2022
USA
Australia
Australia
Australia
Australia
0.0
48.8
48.8
48.8
69.9
50.0
48.8
48.8
48.8
69.9
NOTE 28 – 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
2022
$m
2021
$m
1,356.8
9,462.8
5,617.6
5,617.6
3,845.2
846.4
8,953.3
5,453.0
5,453.0
3,500.3
3,280.7
3,280.7
(55.1)
619.6
(53.7)
273.3
3,845.2
3,500.3
548.1
548.1
–
–
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 18 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 (F21: nil).
NOTE 29 – DEED OF CROSS GUARANTEE
Under the terms of ASIC Corporations (Wholly owned Companies) Instrument 2016/785, certain wholly owned controlled
entities have been granted relief from the requirement to prepare audited 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 27.
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 2022
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
2022
$m
2021
$m
252.3
(67.4)
184.9
172.6
(202.1)
155.4
365.8
(100.2)
265.6
72.9
(165.9)
172.6
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 117
Notes to the consolidated financial statements:
Group composition
For the year ended 30 June 2022
NOTE 29 – 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
Right-of-use assets
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
2022
$m
2021
$m
115.1
315.2
380.7
1.9
12.3
20.8
846.0
686.6
2,257.5
672.8
77.5
542.8
35.8
38.4
4,311.4
5,157.4
383.8
584.1
10.1
34.3
16.8
215.9
250.1
432.3
1.9
8.1
8.3
916.6
650.8
2,257.5
629.9
86.9
547.0
44.8
1.9
4,218.8
5,135.4
326.4
655.1
22.7
46.4
5.4
1,029.0
1,056.0
581.4
123.8
9.8
715.0
1,744.0
3,413.4
547.5
121.7
21.2
690.4
1,746.4
3,389.0
3,280.7
3,281.3
(22.7)
155.4
(64.9)
172.6
3,413.4
3,389.0
Current borrowings include balances with other entities within the Group. These balances will not be called within the
next 12 months.
118 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Notes to the consolidated financial statements:
Other
For the year ended 30 June 2022
NOTE 30 – RELATED PARTY DISCLOSURES
Ownership interests in related parties
All material ownership interests in related parties are disclosed in note 27 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
2022
$
2021
$
5,019,492
4,760,936
70,704
1,624,796
65,916
457,187
6,714,992
5,284,039
Additionally, compensation paid to non-executive directors was $2,002,965 (F21: $2,113,997).
NOTE 31 – REMUNERATION OF AUDITORS
The Audit and Risk Committee has completed an evaluation of the overall effectiveness and independence of the
external auditor, KPMG. As part of this process, the external auditor has provided a written statement that no professional
engagement with the Group has been carried out which would impair their independence as auditor. The Chairman of
the Audit and Risk Committee has advised the Board that the Committee’s assessment is that the auditor is independent.
During the year, the following fees were paid or payable for services provided by the auditor of the Group, and its
related practices:
Audit and review of 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
2022
$
2021
$
1,534,555
537,206
–
2,071,761
170,371
1,426,128
493,530
–
1,919,658
439,280
2,242,132
2,358,938
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 2022, other non-audit services included fees in respect to the provision of advisory and taxation services.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 119
Notes to the consolidated financial statements:
Other
For the year ended 30 June 2022
NOTE 32 – OTHER ACCOUNTING POLICIES
New accounting standards and interpretations
Since 30 June 2021, the Group has adopted the following new and amended accounting standards.
Reference
Title
AASB 4, AASB 7, AASB 9,
AASB 16 & AASB 139
Amendments to Australian Accounting Standards –
Interest Rate Benchmark Reform – Phase 2
AASB 4 & AASB 17
AASB 2020-9
Amendments to Australian Accounting
Standards – Insurance Contracts
Amendments to Australian Accounting Standards –
Tier 2 Disclosure: Interest rate benchmark reform (phase 2)
and other amendments
IFRIC agenda decision
Costs necessary to sell inventories
Application
1 January 2021
1 January 2021
1 January 2021
June 2021
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 1, AASB 3, AASB 9,
AASB 116, AASB 137 & AASB 141
Annual Improvements 2018–2020 and Other Amendments
AASB 101
AASB 101
AASB 17
AASB 2021-5
AASB 2021-2
Classification of Liabilities as Current or Non-current
Classification of Liabilities as Current or non-current –
deferral of effective date
Insurance Contracts
Initial applicable of AASB 17 and AASB 9 – Comparative Information
Deferred Tax related to Assets and Liabilities arising from a single transaction
1 January 2023
Disclosure of accounting policies and definition of accounting estimates
1 January 2023
Application
1 January 2022
1 January 2023
1 January 2023
1 January 2023
These standards are not expected to have a material impact on the Group’s financial position or its performance.
120 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)
Other accounting policies
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.
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.
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 121
Notes to the consolidated financial statements:
Other
For the year ended 30 June 2022
NOTE 32 – OTHER ACCOUNTING POLICIES (CONTINUED)
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.
NOTE 33 – CONTINGENT LIABILITIES
From time to time, Companies within the Group are party to various legal actions as well as inquiries from regulators and
government bodies that have arisen in the normal course of business. The Directors have given consideration to such
matters which are or may be subject to claims or litigation at year end and are of the opinion that any liabilities arising
over and above already provided in the financial statements from such action would not have a material effect on the
Group’s financial performance.
It is not practical to estimate the potential effect of these matters however the Group believe that it is not probable that
a significant liability will arise.
Class actions
An Australian shareholder class action has been commenced against TWE Limited.
One action was served on 2 April 2020 by Slater & Gordon (S&G) acting for Brett Stallard as trustee for the Stallard
superannuation fund. A second action was served on 1 May 2020 by Maurice Blackburn (MB) acting for Steven Napier.
The class in both proceedings comprise shareholders who purchased shares between 30 June 2018 and 28 January
2020.Both proceedings allege that the Company breached its continuous disclosure obligations under the ASX Listing
Rules and the Corporations Act and that it engaged in misleading or deceptive conduct in contravention of the
Corporations Act and the ASIC Act. The two actions were consolidated into a single action on 15 October 2020.
With regard to claims, the Company strongly denies any and all allegations made against it and is vigorously defending
the proceedings.
Based on the information currently available, the Company does not know the quantum of the class action. No provision
has been recognised at 30 June 2022 in respect of the claim.
NOTE 34 – BUSINESS ACQUISITIONS
Frank Family Vineyards
On 14 December 2021, the Company acquired 100% of the ordinary shares of Frank Family Vineyards LLC (‘FFV’), a Company
incorporated in the US. FFV is highly acclaimed luxury wine business based in the Napa Valley, California. comprising two
vineyards, a single winery, and a highly renowned tasting room and direct to consumer wine club model.
The cash consideration of US$316.9 million was funded by a combination of cash resources (including proceeds from
recent US asset divestments) and utilising the Group’s cash and debt facilities.
122 – TREASURY WINE ESTATES ANNUAL REPORT 2022
NOTE 34 – BUSINESS ACQUISITIONS (CONTINUED)
From the date of acquisition, FFV contributed $61.0 million revenue and $14.2 million profit before tax from continuing
operations of the Group. Estimated F22 EBITS from the acquired entities that would have been earned if the acquisition
had occurred at the commencement of the financial year was $28.5 million. Additionally, information relating to the fair
value of assets acquired is not available to accurately determine any purchase price accounting adjustments that would
have been recognised had the acquisition taken place on 1 July 2021. Transaction and integration costs of $12.8 million
were expensed and are included in administration expenses, refer to Note 5 for further detail.
Assets acquired and liabilities assumed
The value of the identifiable assets and liabilities of FFV at the date of acquisition were:
Value recognised on
acquisition (provisional)
$m
Assets
Cash
Receivables
Inventories
Property, plant and equipment
Brand names
Licenses
Deferred tax asset
Liabilities
Trade and other payables
Employee entitlement provisions
Deferred tax liabilities
Total identifiable net assets at fair value
Goodwill and intangible assets arising on acquisition
Purchase consideration
Analysis of cash flows on acquisition
Cash consideration paid
Cash acquired as part of the acquisition
Net cash flow outflow on acquisition (included in cash flows from investing activities)
9.6
8.1
62.4
148.1
151.3
8.8
5.0
393.3
9.9
0.2
5.0
15.1
378.2
57.4
435.6
435.6
9.6
426.0
These amounts have been measured on a provisional basis. If new information obtained within one year of the date
of acquisition about facts and circumstances that existed at the date of the acquisition identifies adjustments to the
above amounts, or any additional provisions that existed at the date of acquisition, the accounting for the acquisition
will be revised.
Other business acquisition
During the year the Group acquired production and vineyard assets in the Bordeaux region of France to expand its French
country-of-origin portfolio, centered on the Penfolds brand. Cash consideration of $8.0 million was paid to acquire 100%
of Société Civile de la Gironville the owner of these assets.
NOTE 35 – SUBSEQUENT EVENTS
Since the end of the financial year, the Directors approved a final 100% franked dividend of 16.0 cents per share.
This dividend has not been recognised as a liability in the consolidated financial statements at 30 June 2022.
On 1 July 2022 the Group purchased a number of vineyard assets in America for US$73 million that were previously subject
to long term lease arrangements. These assets have been acquired with a view to resale in F23 as part of the ongoing
restructure of supply assets in America.
In July 2022 the Group agreed to acquire a 78.6% stake in Chateau Lanessan, including its production and vineyard
assets in the Bordeaux region of France. The cash outflow associated with the acquisition is expected to be approximately
A$60 million, including a capital injection to fund winery and vineyard development. Completion is expected in
October 2022, subject to satisfaction of conditions precedent.
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 2022 – 123
Directors’ declaration
For the year ended 30 June 2022
In accordance with a resolution of the Directors of Treasury Wine Estates Limited, the Directors declare that:
(a) I n the Directors’ opinion, the financial statements and notes 1 to 35 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 2022 and of its performance
for the financial year ended on that date.
(b) In the Directors’ opinion, 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.
(c) There are reasonable grounds to believe that members of the Closed Group identified in note 27 will be able to meet
any liabilities to which they are or may become, subject because of the Deed of Cross Guarantee described in note
29.
(d) Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board.
(e) 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.
Paul Rayner
Chairman
Tim Ford
Managing Director and Chief Executive Officer
18 August 2022
Melbourne, Australia
124 – TREASURY WINE ESTATES ANNUAL REPORT 2022
Independent auditor’s report
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 125
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
126 – TREASURY WINE ESTATES ANNUAL REPORT 2022
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 127
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
128 – TREASURY WINE ESTATES ANNUAL REPORT 2022
TREASURY WINE ESTATES ANNUAL REPORT 2022 – 129
Details of shareholders, shareholdings
and top 20 shareholders
DETAILS OF SHAREHOLDERS AND SHAREHOLDINGS
Holding of securities
LISTED SECURITIES 11 JULY 2022
Fully paid ordinary shares
Size of holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
No. of
holders
No. of
shares
% held by
top 20
83,760
721,848,176
84.06
No. of
holders
59,100
21,616
2,101
879
64
83,760
Total %
held
3.21
6.27
2.03
2.67
85.82
100
As at 11 July 2022, 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 $11.36 per share, is 1,646.
TWENTY LARGEST SHAREHOLDERS – 11 JULY 2022
Rank
Shareholder
No. of fully paid
ordinary shares
% of fully paid
ordinary shares
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
HSBC Custody Nominees
J P Morgan Nominees Australia
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Merrill Lynch (Australia) Nominees Pty Limited
Argo Investments Limited
HSBC Custody Nominees (Australia) Limited
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