AUSTRALIAN VINTAGE LTD — Earnings Release 2012

Aug 21, 2012

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ABN 79 052 179 32

ASX RELEASE 22nd August, 2012

AUSTRALIAN VINTAGE IMPROVES PROFIT, REDUCES DEBT 2.6 CENTS DIVIDEND DECLARED

Key points

• S ales up 2.1 % to $228.0 million with a strong per f ormance fr o m the UK / E urope

• N et Profit up 8% to $7.1 m illion  C ash Flow fr o m operatin g activities a t $10.6 milli o n compared to $1.3 mill i on last year  N et debt red u ced by $31 . 9 million to $ 129.1 milli o n  D ividend of 2 .6 cents per ordinary sh a re fully franked, payabl e 19 Novem b er 2012

Australi a n Vintage ( A SX: AVG) today report e d a full yea r net profit (after significa n t items) of $ 7.1 million, a nd significantly reduce d borrowings .

Australi a n Vintage chief executi v e Neil McG u igan said: “ In February our Chairm a n said that the Compa n y intended t o focus on r e ducing deb t and tightly managing o u r working c a pital. We have made g o od progres s in these ar e as and furt h er strength e ned the Co m pany’s financial positio n .

“Cash fl o w from operating activities was up $ 9.3 million t o $10.6 milli o n due in pa r t to reduce d bulk wine pu r chases during the year. Net debt is down to $1 2 9.1 million, c ompared t o $161 millio n as at June 2011 as a res u lt of the sal e of Loxton W inery in Au g ust 2011 to TWG Austr a lia II Pty Lt d .

“Our str e ngthened capital mana g ement posi t ion follows a sset sales a nd costs re d uction prog r ams over th e past few years and buil d s on our mi s sion state m ent of maki n g quality wi n es and buil d ing brands t hat our cust o mers know and love.

“We we r e honoured to be name d for the sec o nd time in three years a s Internatio n al Wine Maker of the Yea r at the 2011 Internation a l Wine and S pirits Com p etition, where McGuiga n was also named Australi a n Producer of the Year, and as pro d ucing the b e st Semillon in the world. The McGu i gan brand a g ain jumped in popularit y and dema n d, with volu m es worldwi d e increasin g by 17% to 2.4 million c ases.

“The Australian doll a r’s continued strength, t h e economi c uncertainty in our majo r markets and the ongoing grape and w ine oversu p ply conditio n s in the ind u stry contin u e to challen g e the Com p any.

“The qu a lity from thi s year’s vint a ge is excell e nt and our w inemakers say 2012 h a s potential to be a stand-o u t vintage like 2004. It is expected t h at the total A ustralian in d ustry yield f rom this ye a r’s vintage w ill be arou n d 1.66 milli o n tonnes w h ich is highe r than previous years de s pite some r e gions reportin g lower yields. Overall, p roduction is in line with s ales but we see some d anger signs for oversupply if higher yielding vint a ges contin u e.

“The full year result demonstrates that we are meeting the ongoing challenges facing our industry.

“Most rewarding is the fact that we can pay our shareholders an increased dividend of 2.6 cents per share.”

Sales

Overall, sales in the period were steady, 2.1% above last year in dollar terms and 6.1% in volume terms.

Australasia/ North America packaged sales were slightly below last year due to reduced lower margin cask sales.

UK/Europe sales were up 1%. This is an outstanding result given the record high dollar and depressed and uncertain economic conditions in the region and is the result of brand development and marketing effort.

Australasia/North America bulk wine and processing sales grew 20% due to a significant increase in bulk wine sold to the US.

Vineyard revenue improved 9% due to increased vineyard management income. Cellar door revenue remained steady. The Company believes further growth in this segment is possible over time based on stronger tourism and marketing initiatives.

Our brands continue to deliver very strong growth and this remains a key focus in our strategic direction. Overall the McGuigan brand grew 23% in Australia and 12% in export markets which is an outstanding result and builds on the momentum of 2011. Tempus Two also grew and Nepenthe maintained sales. Our premium brands have development and grown on the back of the awards won and targeted marketing focus in 2012. This is something that the business intends to extend in the coming year. Some lower margin cask and private label sales declined during the year.

Our investment in marketing wine in Asia and China continues as a long term market development strategy.

	Year ended	Year ended
	30/06/2012	30/06/2011
	$000	$000	%
Sales by segment
Australasia/North America packaged	79,371	82,033	(3)
UK/Europe packaged & bulk	97,302	96,811	1
Cellar door	6,913	6,975	(1)
Australasia/North America bulk & processing	40,550	33,876	20
Vineyards	3,826	3,522	9
Total	227,962	223,217	2

EBIT and Net profit

EBIT declined by $5.9 million due mainly to below average crops from our owned vineyards resulting in a $4.1 million reduction in the fair value of grapes picked. In addition the contribution from the Australasia/Nth America Bulk and Processing segment was down due to lower processing margins, higher costs of running Austflavour from the Loxton Winery and one off costs associated with the sale of the Loxton winery. The Austflavour business has now been re located to the Buronga winery. Australasia/North America EBIT improved $0.7 million on the back of increased branded sales.

Our brand and marketing effort has seen UK EBIT grow by 32% even after allowing for the unfavourable movement in foreign currency. This growth has been achieved by retaining our sales base and extending our range of products into higher priced categories. Total export sales in GBP now represent more than 60% of total exports. The high AUD continues to dampen our results negatively impacting EBIT by $2.2 million. The Company maintains a conservative hedging policy on forward sales.

Our cellar door contribution was disappointing reflecting reduced visitor numbers and lower margin sales identifying a need for increased attention and improvement.

Net profit improved by 8% to $7.1 million due to the $3.6 million of significant items (after tax) incurred in 2010/2011.

Net profit

Net profit
	Year ended	Year ended	Variation
	30/6/2012	30/6/2011
	$000	$000	$000	%
Australasia/North America packaged	6,353	5,694	659	12
UK / Europe packaged & bulk	7,098	5,366	1,732	32
Cellar door	885	1,219	(334)	(27)
Australasia / North America Bulk &
processing	7,562	11,762	(4,200)	(36)
Vineyards	1,466	5,238	(3,772)	(72)
EBIT	23,364	29,279	(5,915)	(20)
Unallocated (mainly finance cost)	(14,426)	(15,953)	1,527	10
Significant Items	-	(6,677)	6,677	N/A
Profit before expenses	8,938	6,649	2,289	34
Income Tax (expense)/benefit	(1,871)	(3,106)	(1,235)	40
Income tax on Significant Items	-	3,021	(3,021)	N/A
Profit	7,067	6,564	503	8

Outlook

Australian Vintage Chairman, Ian Ferrier, said “The business is lean, in it’s assets and in it’s costs. However the Company has built and enhanced its brands and continues to deliver great wine. There is a real momentum that has seen the Company perform in the most competitive markets and at a time when the industry is facing difficult challenges and global restructuring.

The UK market will remain fragile and will impact global markets and we do not expect any change in conditions for the foreseeable future. In Australia the industry and competition is tough. In our current financial year, ending June 2013, we will face volatility and uncertainty which will continue to impact on export sales and profitability.

During the year we renewed funding for the next two years.

“The Board resolved to pay a fully franked dividend of 2.6 cents per share, payable on 19 November 2012. The Record Date to establish shareholder dividend entitlements is 22 October 2012. The Company’s Dividend Reinvestment Plan (DRP) will operate for the dividend payable on 19 November 2012. Shares issued under the DRP will be at a 2.5% discount to the weighted average market price of all Company shares sold on the ASX during the 5 business days after the Record Date.

“I would like to acknowledge Neil McGuigan, his management team and all of the staff of Australian Vintage who continue to face the challenges with innovation and effort. They remain passionate about making great quality wine that has been recognised with a significant haul of international and national awards which is extending brand recognition, increasing sales and delivering bottom line benefits.

“We do not see any significant profit growth given the market and industry conditions in the next year. However the Company is well positioned and continues to meet the challenges it faces.

ENDS

Further information

Neil McGuigan Chief Executive Officer 02 4998 7400

Mike Noack Chief Financial Officer 08 8172 8333