Australian Vintage Ltd (AVG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the 2021 Annual General Meeting of Australian Vintage Ltd. My name is Richard Davis, Chairman of your company, and I'm pleased to chair today's meeting. This year's meeting is being held online via the Lumi platform, which allows shareholders, proxies and guests to attend the meeting virtually. All the attendees can watch a live webcast of the meeting, and in addition, shareholders and proxies can ask questions and submit votes. Today's meeting is being recorded, and the recording will be made available on our website. The company's secretary has informed me that we have a quorum present. Accordingly, I declare the meeting to be open. Before proceeding with the formal part of the meeting, on behalf of Australian Vintage, I would like to acknowledge the many traditional owners of the land on which we are all located today. For those of us here in the Australian Vintage office in Balmain in Sydney, these are the Gadigal and the Wangal peoples of the Eora Nation. We pay our respects to the elders past, present and emerging of all the traditional owners of all the lands we are on. I would like to now introduce your directors. Here with me in Sydney, I have Naseema Sparks, a Nonexecutive Director and Chairman of the People, Remuneration and Culture Committee; John Davies, a Nonexecutive Director and Chairman of the Audit Committee; Peter Perrin, a Nonexecutive Director and Chairman of the Risk and Sustainability Committee; we have our Chief Executive Officer and Director, Craig Garvin; our Chief Financial Officer, Mike Noack; and Alicia Morris, our General Counsel, Company Secretary. Dialing in from Hong Kong, we have Nonexecutive Director, Jiang Yuan, who we know as Dixon. And joining us from the Australian Vintage office in Adelaide office is Mark Phillips from EY, our lead audit partner. Mark is available to answer questions from shareholders about the conduct of the audit and the preparation and content of the audit report. During today's meeting, online attendees can submit questions at any time. [Operator Instructions]. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. At the same time, I will address any questions that were submitted by shareholders prior to the meeting. Please note that your questions may be moderated if we receive multiple questions on one topic and amalgamated together. For those shareholders who wish to ask a verbal question and audio questions that facility is available during this meeting. [Operator Instructions]. If you have any issues using this system, please return to Lumi platform. We will answer as many questions as we can and close the question time when all questions have been answered or I believe the time provided was adequate to provide a reasonable opportunity for shareholders as a whole to ask questions. We will answer any outstanding questions in due course via e-mail or posting responses on our website. Voting today will be conducted by way of poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and you -- and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare the voting closed. I now declare voting open on all items of business. The voting tab will soon appear. Please submit your votes at any time, and I will give you a warning before I move to close voting. Now moving on to the AGM presentation. I would like to draw your attention into the standard disclaimer we issue before discussing the company's activities. Today, my AGM presentation will cover the company's financial results together with an overview of the industry. Then you will hear from our CEO, Craig Garvin, who will share more detail about the company's financial performance and key strategies going forward. Followed by our CFO, Mike Noack, who will address our financial position. At the completion of this, we will move to the formal proceedings, including responding to shareholder questions. Australian Vintage is well established in the strategic journey of putting the consumer at the heart of everything we do. The company has made real progress in the core capability, and is well placed to deliver growth over the coming years. We have a culture that embraces continuous improvement, and we are a value-based organization. Our people are our greatest assets. Financial year ended June '21 has again been a challenging year globally. The COVID-19 pandemic continues to disrupt the lives of so many with challenging working conditions and the way we all live our lives. In the Australian Wine industry, we have also seen a significant disruption to sales to Mainland China as a result of the tariffs imposed by China. Sales of Australian-made wine to China have basically stopped since the higher tariffs were imposed. Despite these challenges and as a result of our limited reliance on the China market, the company was able to report a 79% improvement in profit. The significant improvement in AVL's core business in Australia and U.K., together with improved production efficiencies enabled AVL to record a profit of $19.6 million. This profit is the highest the company has achieved over the last 10 years. The record result was very pleasing with continued growth in our portfolio of key brands. During the 12-month period, sales of our pillar brands of McGuigan, Tempus Two, Nepenthe and Barossa Valley Wine Company grew by 12% to $195.1 million. Our CEO, Craig Garvin, will provide more detail on the growth of these brands in his presentation. We are committed to our strategic plan, and it is showing positive signs for our future. Earnings per share improved by 79% to $0.07 per share. And the return on capital employed, or ROCE, improved 70% to 7.5%. During the year, we increased our investment in our brands, with marketing spend up 46%, with most of the increased marketing spend occurring in the second half of the financial year ended June '21. What is also pleasing is that because of increased investment in our staff and our continued focus on our customers, the company was awarded the #1 wine supplier to the Australian retail industry by the Advantage Survey. This survey is a comprehensive balance scorecard rating of all suppliers across the marketplace as rated by the customer. On top of that award, we also received the Supply Chain Manager of the Year award at the Drinks Association Australian Drink awards. These awards are a significant achievement for AVL in terms of our market reputation and credibility. Through the outstanding efforts of all our staff, we continued to operate and improve our business. The pandemic is well into its second year and will continue to impact our customers, consumers and our suppliers. In many markets the disruptions caused by COVID-19 will continue into next year despite vaccination programs gaining momentum around the world. Across all our operations, we have supported and encouraged the vaccination rollout recognizing that this is the pathway out of the pandemic. To ensure that we continue to have a safe working place, we have introduced a policy that all our employees be fully vaccinated by the 1st of December '21. Overall, this has been well received by the staff of Australian Vintage Ltd. Our staff are to be commended on how they continue to demonstrate care for each other as well as our consumers, customers and partners. Increased awareness of the threats to our environment and the importance of sustainability are growing the expectations of our consumers, customers and partners around the world. Sustainability is fundamental to AVL as we strive to be world class in water management, renewables and our carbon footprint. As a key step forward, our major wine processing facility in Australia is powered by 100% wind and solar energy sources including an on-site solar farm. In this coming year, we will be focusing on a detailed sustainability study with the aim of setting realistic objectives to be carbon neutral in everything we do. Integral to this study is the development of a climate change policy, which will establish targets, which can be monitored against the actual performance. The company will continue to mitigate climate change risks through ongoing investment towards innovation -- innovative water and power solutions to reduce AVL's environmental footprint and, of course, to save costs; working closely with the Bureau of Meteorology to better understand short and long-term weather patterns and the impacts of AVL; and working with key suppliers to ensure that they are managing climate change in a way that is to measure it with AVL's policy and approach. The company recognizes the good management of our social, environmental and government responsibility is integral to our future growth and prosperity. It is not only important to underpin the reputation and competitive appeal of our brands, but also to evolve our culture and appropriate values. The success of this company is underpinned by being sustainable in everything we do. As a result of our ongoing focus on managing our financial position, the company announced in May of '21, a capital restructure involving a return of capital and share consolidation. This was successfully completed in early July '21 and resulted in all shareholders receiving $0.085 per share and a 10% reduction in shares held. The combined impact of the 2 corporate actions have the same effect as a share buyback of 1 share for every 10 for $0.85. This return was in addition to this year's declared dividend of $0.027 per share. Our business has made a major step change over the last few years, and we are now recognized as a major branded wine business with sustainable strategies that will continue to grow this business. As we grow our branded business, the agricultural risks become a small part of our total business. In recognition of this, the Board has today approved a dividend policy, which will apply to all the future dividends. The policy states that the company will endeavor to maintain a dividend payout ratio of between 50% and 70% of net profit after tax each year, subject, of course, to the recognition of profit and the availability of cash for distribution, funding requirements and operating investment needs to the company. For the year ended September '21, Australian export sales decreased by 24% to $2.4 billion and volume decreased by 17% to 638 million liters. This is a 214 million liter less than the volume of Australian wine exported in 2018. The decline in export sales is due to the decreased sales to Mainland China, following the imposition of a significant import tariffs on Australian wine. Worldwide shipping delays linked to the COVID-19 restrictions and Brexit have also impacted export sales. Exports, excluding Mainland China, increased by 9% in value and 5% in volume. And the U.K. is now the biggest export market by value and volume. The total grape crush for '21 was 2 million tonnes, a record for this industry. The grape crush was 31% above the 2020 harvest and a 17% above the 10-year average. All regions experienced a substantial increase in tonnes. With a record crush and the significant decline in export sales, we are expecting that there will be around 300,000 tonnes of excess wine in the Australian wine industry. Furthermore, with China being predominantly a red wine market, almost all these excesses will be in red wine. As a result of the excess red wine, there will be a downward pressure on all red grape prices. We have already seen this with red grape prices declining by 3% to 23% during the '21 vintage. We expect red grape prices to decline even further in next year's vintage. On the other hand, white grape prices are expected to increase slightly as a result of some shortages of key white variety grapes. In terms of what this company's upcoming vintage is looking like, I can report that the recent storms that passed through the Barossa and the Riverland have not materially impacted our vineyards. However, a frost event early in the growing season has impacted one of our Riverland vineyards. Our CEO will provide further details on this frost event during his presentation. Water availability is very good in the inland regions and as a result the cost of water has reduced. At this stage, we are expecting an average yield from our vineyards. On behalf of the Board, I would like to thank the people of Australian Vintage, led by Craig, for delivering a result that was 79% up on last year, while demonstrating the resilience in a highly competitive and challenging market. We are proud of our staff who have committed to delivering against our long-term strategy. I will now hand over to Craig Garvin to provide a more detailed breakdown of the business performance over the last financial year and our priorities and focus for '22 and beyond.

Thank you, Richard, and welcome to all our shareholders joining us today. Before I provide some detailed insight on the '21 results and the outlook for '22, I'd like to share with you our vision and values and then our internal balance scorecard that we use to measure our business. Firstly, looking at our vision and values. These values are critical as they guide our business approach with a strong focus on being the consumer at the heart of everything we do, as Richard outlined. Our vision is to make us the first-choice wine for every occasion by having a portfolio of quality brands that cater for every occasion. To achieve this vision, we have to put the consumer at the heart of everything we do. We have to be collaborative, must be innovative, nimble and responsive, and we must be empowered. Underlying all these values is our behaviors, which include integrity, respect and trust. It is the culture of the company and staff, which will underpin the ongoing growth and success of our business. These values form an integral part of each person's annual performance plan, which is assessed every 6 months. And I'm glad to report that all of our staff have embraced these values. Moving on to our balance scorecard. This scorecard, which monitors how we are going against our strategic plans, is an all-encompassing view of our business and covers: Consumers and brands in terms of our investment in those brands, innovation and consumer insight; markets and customers with targets to outperform the wine category, improving our business in our key markets; people -- importantly, people, this involves assessing our staff in terms of regular engagement surveys and investing in them in terms of overall staff and safety; sustainability in terms of our carbon footprint, linking with local communities and the renewable priority; return on assets, this involves leveraging our world-class assets and delivering on all financial metrics. Our key balance scorecard shows how we have performed against the balanced scorecard for FY '21. And what I would like to highlight is the following. Our pillar brands are now 71% of our total sales and growing. Our marketing spend has doubled since 2019; and we've upgrown markets where we primarily operate in the U.K. and Australia. Staff engagement has improved from 54% to 65%. And our lost time injury has decreased significantly from 17 in '19 to 5 in '21. Our major wine facility at Buronga is powered, as Richard outlined, by 100% solar and wind energy. And our operating cash flow has doubled our return on assets have grown to 7.5%. As you can see, the company has performed well against that balanced scorecard. The F '21 record result was very pleasing with continued growth in our portfolio of key brands. During the 12-month period, sales of our pillar brands of McGuigan, Tempus Two, Nepenthe and BVWC grew by 12% to $195.1 million. These pillar brands, as I outlined, now represents 71% of our total sales compared to 56% in F '17. And our total revenue grew by 3% to $274 million. Our earnings before interest and tax grew by 59% to $30.4 million, and our net profit after tax improved by 79% to $19.6 million Pleasingly, our operating cash flow was a record of $45 million. And in line with our improved results, our earnings per share increased to $0.07 per share. And as our capital employed, return on capital employed was 7.5%. As you can see from the graph, we've seen a step change to the business in '21. This step change has been achieved through a 46% increase investment in our brands, efficiencies gained from our capital investments in our production assets and a real focus on our vision and values and increased investment in our staff. Whilst it's difficult to calculate the impact of COVID-19 on the business [Audio Gap] increased distribution, innovation and consumer engagement is key to this growth. And we have seen this in our Australia and U.K. business, particularly where we are working hard with our customer partners to drive our portfolio. The McGuigan Zero range has been an outstanding success for us and demonstrated the importance of innovation to the portfolio for the long term. This together with the benefits from production efficiencies is sustainable for the long time -- long-term future and not COVID-19 dependent. Turning to the Australia and New Zealand business. It's performed very well with contribution up 48% [Audio Gap] 3% mainly to the performance of the McGuigan Zero, which is outperforming expectations, and grew sales by over $5 million. Tempus Two continues in growth with sales up 15%, Nepenthe's up by 8% and Barossa Valley Wine Company grew by an impressive 19%. The direct to consumer division, which includes our cellar doors and clubs, increased contribution by and $1.3 million as a result of the company's investment in technology and the refurbishment of the McGuigan and Tempus Two Hunter Valley cellar doors. In the next 12 months, the company will be undertaking a major upgrade to the Adelaide Hills Nepenthe brand from the South Australian government to help with this major upgrade. The New Zealand division result decreased [Audio Gap] in sending wine to New Zealand. This problem is ongoing and will provide challenges for the next year. Turning to the U.K., Europe and Americas. It performed exceptionally well, up 55% to $17.2 million. This is despite a $0.5 million negative impact due to the unfavorable exchange rate when compared to the prior period. The McGuigan brand continues to grow. Sales were up 17% compared to prior period. The Zero brand, like Australia, has been a significant success with sales growing $5 million over the prior period. This brand now represents 5% of all the McGuigan brand sales into this segment and is market-leading. As a result of increased investment in distribution in Tempus Two brand, sales of this brand have increased by 82% from a relatively low base. Growth in the U.K. market is not finished, with the company increasing its footprint and brand investment in the U.K. long term. America remains a challenge, with this division reporting a slight loss for the period, but an improvement on the prior year. With changes to the leadership structure of the Americas division and a change in strategy, we expect this to improve over the coming 12 months. Now moving into Asia. The company's direct exposure to China has been small, with less than 1% of sales going into China prior to the increase in tariff [Audio Gap] have almost stopped. Sales to other regions within Asia have been pleasing, with sales up 6% and more to come. Whilst the Asian segment contribution decreased during the year, the impact was not material. The company remains committed to the China market with support from our major China-based distribution company, and we are currently examining several options to continue the sale of our pillar brands into China, which remains a long-term focus for us. Whilst sales in the Australia, North America Bulk and Processing segment declined by $4.7 million, contribution actually increased by $2 million due to the expired loss-making bulk wine sales contracts and the improved performance of our overall Austflavor business. Turning to vineyards. Vineyards' contribution improved by $1 million due to our improved SGARA result. This is due to the increased yield from our vineyards, offset marginally by reduced red grape prices. So turning to the outlook. The record result for '21 is very, very pleasing, considering the many challenges that the pandemic imposed on the company. We continue to leverage the past asset investments and combined with our ongoing investment in those pillar brands and people, we remain confident that we will continue to not only grow sales, but improve the mix of our business and drive an improved balanced scorecard over long term. The company's ROCE has grown by 70% to 7.5%. And in the medium term, we expect to achieve high single-digit return on capital employed. Whilst COVID-19 appears to have had an overall positive impact on our business, a significant portion of the growth has actually come from long-term sustainable strategies, especially innovation, people capability and improved consumer trading technology [Audio Gap] and of course, we have the underlying [Audio Gap] pillar brands, margins and market share are expected to be on up [Audio Gap] strategies are right. Year-to-date, we are outperforming our competition and growing share. Global logistics are affecting our industry plus many others. Our logistic costs are estimated at $4.5 million above the prior year. Most of this actually occurring in the first 6 months of our U.K. business. As we predicted this situation, we took a proactive decision to increase our U.K. inventory, which is already showing positive results in the market. The first half has also been affected by the closure of 2 cellar doors due to COVID-19 and are now open. As a result and assuming no material change in current [Audio Gap] F '22 EBITs is estimated to be 5% to 7% lower [Audio Gap] last year. Had we not had [Audio Gap]. This is a positive result and demonstrates our base business [Audio Gap]. As such, we expect logistics [Audio Gap] these issues are temporary and returning to normality in the U.K. [Technical Difficulty] Apologies to everyone on the call. We had a small technical issue, and this is Craig Garvin, and I'm picking up from our outlook, as previously presented. The record results for F '21 is very pleased in considering the many challenges that the pandemic has imposed on this company. We continue to leverage the past asset investments and combined with our ongoing investment in our pillar brands and people capability. We remain confident that we will continue to not only grow sales, but improve the mix of sales and drive an improved balanced scorecard for the long term. Pleasingly, the company's ROCE has grown by 70% to 7.5%. And in the medium term, we expect to achieve high single-digit return on capital employed. Whilst COVID appears to have an overall positive impact on our business, significant portion of the growth has come from long-term sustainable strategy, such as innovation, people capability and improved consumer trading technology and, of course, supported by improved production efficiencies. In our latest full view, our pillar brand sales, margins and market share are expected to be up. This confirms that our strategies are right. Year-to-date, we are outperforming our competition and growing share. Global logistics are affecting our industry, however, and many others. Our logistics costs are estimated at $4.5 million above the prior year, with most of this occurring in the first 6 months of our U.K. business. As we predicted this situation, we did take proactive action and increased our U.K. inventory, which is already showing positive results in the market. The first half has also been affected by the closure of 2 cellar doors due to COVID, and they are now open. As a result, and assuming no material change in FX, F '22 EBITs is expected to be 5% to 7% below that of last year. Have we not had these increased logistics costs, we would have been forecasting an 8% growth this year over last year. This is really a positive result. It demonstrates our base business is very strong. As such, we expect positive branded growth in the second half and full year as the logistics issues are temporary, and as we speak, returning to normal in the U.K. This year's first half forecast also includes a $2.3 million increase in marketing, which is successfully underpinning our branded strategy. On a normalized basis, excluding the increased logistics and marketing costs and the closure of the Hunter Valley cellar doors, first half will be approximately in line with last year and very pleasing given the increased retail sales that the COVID lockdown generated in the prior year. Marketing continues at the same level in the second half as that of last year, and it demonstrates how committed we are to our strategic plan. In conclusion, our business is in a more robust position to absorb one-off market issues, such as the current logistics costs, especially in the U.K. In late October, one of our vineyards, located in the Riverland region, was impacted by frost. And as a result, based off very early estimates, we are expecting to lose about 1,500 tonnes from this vineyard. This will negatively impact our SGARA profit for the financial year. In addition, higher-than-expected decrease in red grape prices will also negatively impact the forecast on SGARA. Whilst the impact of the reduced grape prices will improve gross margin in future years, SGARA income is expected to be down by about $1 million when compared to the prior year. At this early stage, we're not providing any net profit after tax guidance until we have a clearer picture of next year's vintage. We remain confident that we will not only grow sales, but will improve the mix of our business and our sales to drive an improved balanced scorecard in the long term. I'll now hand over to our CFO, Mike Noack, who will provide further details on our financial position, including cash flow and return on capital employed.

Thank you, Craig, and hello to all our shareholders. What I will be covering this afternoon are 3 key metrics that show how our business has improved over the last 6 years. They are cash flow from operating activities, total net borrowings and return on capital employed. As you can see from the slide, our reported cash flow from operating activities has improved over the last 6 years from $6.5 million to $45 million in FY '21. In fact, the operating cash flow from FY '21 was more than double the FY '20 operating cash flow. Since 2016, we have consistently achieved well over $20 million in operating cash flow. This shows that our strategy of building a branded business with a key focus on our 4-pillar brands through increased distribution, innovation and consumer engagement has transformed this business. For this coming year, we are expecting our working capital to increase as we build our stock to not only deal with the ongoing logistic issues, but to service future increased sales. We are currently forecasting an operating cash flow of around $25 million to $27 million for this coming financial year. Managing our cash flow has been a key focus for this business and will continue to be so. Over the last 5 years, our net borrowings have increased -- have decreased from a high of $101.4 million as at 30th of June 2016 to $42.8 million as at 30th of June 2021. That is a decrease of $58.6 million or 58% over the period. Whilst the decline in borrowings was assisted by a $18.4 million share placement back in 2017, we did spend $68 million on capital and $19.5 million on paying dividends after taking into account the dividend investment plan. Key debt-related financial ratios that assess the financial wellbeing of our business have all been improving. The leverage ratio, which is a good indicator of our ability to repay our borrowings, has dropped from a high of 4.3 to 1.3. And the net debt-to-equity ratio has decreased from 38% to 14%. In May 2021, the company announced a capital restructure involving our return of capital and share consolidation. As the Chairman has said, this was successfully completed in early July this year and resulted in a payment of $24 million to all shareholders. This payment, together with the expected increase in our working capital will see our net debt increase to around $70 million by 30th of June 2022. This debt level is still within the comfortable range. And finally, to one of the key metrics that we use to drive our business, return on capital employed. This ratio is used to assess the company's profitability and capital efficiency, and it is really important for a capital-intensive business, like the wine industry. Over the last 6 years, we have seen our return on capital average around 4.7% with the last 2 years, averaging 6%. This year, we achieved a return on capital of 7.5%. This -- the company has spent significant amounts on capital over the last 3 to 4 years. And subject to normal agricultural risk, we expect the benefits from these investments to continue to flow through over the next few years. Our medium term is high single-digit returns. Getting our business to where it is now has been a long journey, built up from sustainable long-term strategies. Our business is in a very sound financial position. Thank you for listening. And now back to the Chairman.

Thanks, Craig, Mike. This afternoon, we have 4 items of business, including a review of the accounts and 3 resolutions, which require a shareholder vote. But first, I will outline some procedural matters. Voting will occur via poll. I will introduce each item of business and then answer questions all together. Where appropriate, any undirected proxies that have been directed to me as Chairman, will be voted in favor of each resolution. Details of the proxy results recorded will be displayed at the conclusion of the discussions. And the results will be made available by the ASX as soon as possible following the close of business. A reminder that the poll is currently open, and you can submit your votes at any time. I will now move to the formal items of business. First item is to consider and receive the financial report, the directors' report and the auditor report of the company for the year ended 30th of June '21. This item does not require a resolution, but does provide an opportunity for discussion. As mentioned earlier, the company's auditor, Mark Phillips, is present and available to answer any questions, which will be addressed after all items of business have been introduced. The next item is resolution 1, the reelection of Naseema Sparks as an independent Non-Executive Director. Naseema retires in accordance with the constitution and being eligible offers herself for reelection, offering the Board expertise in vast growth consumer-facing businesses. Naseema has strong experience both operational and board level in marketing, branding and customer targeting with her most recent executive career as a Managing Director and Global Partner at M&C Saatchi in Australia. Naseema has been a professional Non-Executive Director since 2007, serving on board on a diverse range of companies, including ASX listed and private companies, government statutory authorities, non-for-profit arts, health and education forms. Naseema is Chair of the OpenMarkets Group Limited and a Director of Knight Frank Australia and the Murray River Organics. She is also Chair of Sydney Living Museum. Naseema's qualifications included MBA from the University of Melbourne, and she is a fellow of the Australian Institute of Director. Naseema is Chair of the People, Remuneration and Culture Committee and a member of the Audit Committee. The Board, with Naseema abstaining, unanimously recommend the reelection of Naseema Sparks. Naseema, would you like to say a few words?

Thank you, Richard, and hello, shareholders. It's a great pity we can't be all in the same room together. I hope you and your families have stayed safe in the past 2 years during COVID. Your company is reaching a very exciting stage in its existence with the timely and very necessary pivot to customer and to marketing and particularly also to new product development. Craig and his team work closely with the Board and utilize our respective skill sets very well. And I feel that this current focus on pillar brands and innovation, marketing and growth, is very suited to my particular skill set, not only to assist management in their plans, but also to oversight marketing activities and investments at Board level. And really, this journey is just beginning. I feel very privileged to be on the AVG Board. The culture of this company is one of the best I have experienced in my Board career, which is really very good news for shareholders, and I look forward to serving your company for the next term.

Thanks, Naseema. The second resolution is the reelection of John Davies as an independent Non-Executive Director. John retires in accordance with the constitution and being eligible offers himself for reelection. Offering the Board both industry and financial experience, john is a fellow of the Institute of Chartered Accountants and has had a 36-year career with Ernst & Young. John was elected to Ernst & Young's Asia Pacific Board of Partners for a 6-year period until his retirement from the firm in 2011. During his career, John provided professional services to many Australian leading wine companies, and he also owns a 150-acre vineyard in Heathcote, Victoria. John is Chairman of the Audit Committee and a member of the Risk and Sustainability Committee. The Board, with John abstaining, unanimously recommends the reelection of John Davies. John, would you like to say a few words?

Thank you, Richard. Hello, dear shareholders. And I echo in Naseema's comments about sending our best wishes to you through the COVID periods and struggle for everyone. Here at AVL, I've been delighted to work with a very talented Board and Management team, and we are [indiscernible] behind the execution of our strategy. And in my opinion, the Board and the Management team are a high-performing seamless group that are really driving great results for this company. The growth in our share price and total shareholder returns validates that our strategy is right. But the job is not done. There's tremendous opportunities for continued growth in this company. And I think our focus on our strategy will continue to deliver to you, our shareholders. And I look forward to continue to make contribution towards this outcome. Thank you, Richard.

Thanks, John. I move now to resolution 3, which is to consider and adopt the remuneration report of the company. Details of the remuneration report are set out in the company's annual report. This resolution is advisory only and does not bind the directors of the company. Over FY '21, Australian Vintage has aligned the executive pay structure to illustrate the importance of achieving long-term strategy, enhancing culture alignment and ensuring consistency and commitment to employee engagement and diversity. These changes have been implemented through 4 actionable strategies, including the balanced scorecard, which Craig talked about. It's a creation of an executive KPI measure using a balanced scorecard, which aligns directly to our long-term strategy and putting the consumer at the heart of everything we do. This KPI balance scorecard comprises specific performance measures on behaviors and engagement, safety, EBITs, ROCE and branded growth and innovation. Our second one is gender diversity. AVL has implemented a 5-year gender diversity strategy, which aims to increase female representation across all levels of the business. The third is employee engagement. The investment has been made into 5-year employee engagement strategy. AVL has an ambitious strategy to build an employee engagement of a 5-year period with the aim of becoming a global best employer. And fourth, behavioral framework. As of FY '21, AVL has launched and introduced new behavioral framework, which is integral through the annual remuneration process. AVL is committed to driving an achievement-based culture, which will result in continued growth, enhanced business performance and better aligned executive incentives with shareholder returns. The Board unanimously recommends that shareholders vote in favor of the remuneration report. I'll now move to shareholders' questions. I will first address questions submitted prior to the meeting, followed by text questions submitted during the meeting and then audio questions. [Operator Instructions]. I will ask the Company Secretary to read the questions.

Chairman, the first question is from Mr. John [ Appleby ], who has asked, are you involved in any negotiations with Chinese importers with regards to communication with the officials of government?

Thanks, Alicia. To the best of my knowledge, [ Mr. Appleby ], we are not. We do remain committed through the China market, as Craig said, and are working with our distribution partner in examining several options to continue the sale of our pillar brands into that market.