Australian Vintage Ltd (AVG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the 2022 Annual General Meeting of Australian Vintage. 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 as a hybrid meeting, in accordance with the company's constitution, providing shareholders with the option to attend online or in person. The online component of the meeting will run via the Computershare meeting platform, which allows shareholders, proxies and guests to attend the meeting virtually. All virtual attendees can watch a live webcast of the meeting, and shareholders and proxies can ask questions and submit votes online. Today's meeting is being recorded, and the recording will be made available on our website. I'm delighted to see that we've got 30 or over 30 shareholders here today. I went to an AGM last week, and we only had 1 shareholder who actually attended. So it is fantastic, and I really appreciate the effort that all of you have made to attend. Should we experience any significant technical difficulties today, online shareholders will be notified via the online platform. The meeting will be adjourned to a time to be confirmed, and we will lodge an announcement on the ASX. The company secretary has informed me that we have a quorum present, and accordingly, I declare the meeting to be opened. Before proceeding with the formal parts 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 in Sydney, these are the Gadigal people 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 now to introduce your directors. Here with me in Sydney, I have Naseema Sparks, Non-Executive Director and Chair of our People Remuneration and Cultural Committee; John Davies, Non-Executive Director and Chairman of the Audit Committee; Peter Perrin, the Non-Executive Director and Chairman of the Risk and Sustainability Committee; Craig Garvin, our Executive Director and Chief Executive Officer; Adam Rigano, our Chief Financial Officer; and Alicia Morris, our General Counsel and Company Secretary. Non-Executive Director, Jiang Yuan or we refer to as Dixon, resigned from the Board in August, and I wish to take this opportunity to thank Dixon for his service and contribution to the Board over the last 5 years. I also wish to thank Mike Noack, our previous CFO, who retired in March following 27 years of loyal service. Also joining us virtually is Mark Phelps 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. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. If you are joining us online and are eligible to vote, once voting opens, press the vote icon and all resolutions will be activated 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 will receive a vote confirmation notification on your screen. You can change your vote up until the time I declare the voting closed. Holders attending in person and eligible to vote have been issued with a blue voting card when registering this morning. On the reverse side of the blue card issued voting paper instructions. I will now go through the procedure for filling in voting papers. Proxy holders have attached to their admission card a summary of proxy votes, which details the voting instructions for business items on the appointment document in your favor. By completing the voting paper, when instructed to vote in a particular way, you are deemed to have voted in accordance with those instructions. In respect of any open votes, a proxy holder may be entitled to cast, you need to mark a box beside the motion to indicate that you wish to cast your vote as open. Shareholders also need to mark a box beside the motion to indicate how you wish to cast your votes. Please ensure you print your name where indicated and sign the voting paper. When you have finished filling in your voting paper, please lodge it in the ballot box to ensure your vote is counted. I now declare voting open on all items of business. During today's meeting, online attendees can submit questions at any time. [Operator Instructions] Please note that while you can submit online questions from now on, I will not address them until the relevant time in the meeting. At the same time, we will address any questions that were submitted by shareholders prior to the meeting as well as questions from in-person attendees. Please note that your questions may be moderated or if we receive multiple questions on a topic, amalgamated together. For those shareholders who wish to ask a verbal question, an audio question facility is available during this meeting. To use this service, please follow the instructions written below the broadcast on the Computershare meeting platform. For in-person attendees, please simply raise your hand during question time, an attendee will bring you a microphone. We will answer as many questions as we can and close question time when all questions have been answered or I believe the time provided was adequate to provide reasonable opportunity for shareholders as a whole to ask questions. We will answer any outstanding questions in due course via e-mail or posting response on our website. Now moving on to the AGM presentation, I would like to draw your attention to 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. At the completion of this, we will move forward to the formal proceedings including responding to shareholder's questions. I'm pleased to report strong global pillar performance, continued premiumization and innovation have led to increased market share in all our geographies despite the commencement of significant global inflationary pressures within the financial year. Inflationary pressures include interest rates rising, increasing energy and fuel prices as well as the war in Ukraine, and sea freight and delivery times remain long and at a high cost. Global demand for wine is softening, and Australian export competitor behavior is becoming more aggressive, driven by the red wine surplus in Australia. This global environment reinforces that our strategic objective of putting the consumer at the heart of everything we do, thereby driving innovation into new revenue streams and increasing market share for our pillar brands is the right strategy direction to follow. At the same time, we are supporting a culture that is values and behavior based, enabling innovation and continuous improvement at a time when the external environment is challenging. We are well placed against our strategic imperative [ whether ] making Australian Vintage a branded consumer business. Our recently released wine and spirits based drink business has been well received providing strong indicators of growth for the future. Our collaboration with Sarah Jessica Parker on mid-strength wine is growing, and we believe our innovative and mid-strength wine will place Australian Vintage in a market-leading position in the same way we are still #1 in zero alcohol brand in the U.K. Collaboration with Meatstock on The Butcher's Cellar range provided a unique offering to the growing barbecue movement across Australia and America. Our investment in pillar brands is being rewarded through increased market share and now represents 78% of our revenue. Our super premium and luxury brands have grown by 20% since 2019, contributing 13% to our overall revenue and are on track to grow by another 20% over the next 3 to 5 years. Our underlying net profit after tax before SGARA was $21.5 million, a 7% increase over the prior year. Our reported net profit after tax of $17.3 million was impacted by one-off costs related to Brexit in the U.K. of $3.7 million and cellar door closure due to COVID lockdowns of $800,000. Earnings per share of $0.069 per share, and the underlying return on capital employed was in line with the previous year at 7.5%. From this result, we are pleased to provide our shareholders' with a $0.034 per share dividend, franked at 60%, an increase of 26% over the prior year and representing a 50% payout. This dividend is additional to the capital return of $0.085 per share completed in July '21. Total shareholders returned from July '19 to June '22 reflects an increase of 80%. Our staff had to be commended on how they continue to demonstrate care for each other as well as our consumers, customers and partners. Sustainability at the impact we have on people, communities and the environment is very important to us. We are proud to have released our sustainability road map, capturing our environment, social and governance strategy in our annual report. We are committed to building a more responsible, sustainable and inclusive organization that allows people and planet to thrive. We aim to be net positive in everything we do with 3 strategic priorities: renewing and regenerating our environment, engaging and nourishing our people and communities, and sharing and growing as an impactful business. Environmentally, Australian Vintage is committed to reducing absolute Scope 1, 2 and 3 emissions by 90% by 2040 from a 2021 base year according to the net zero standard published by the Science Based Targets Initiative. Now to the Australian wine industry. Australia Vintage has been successful in growing market share in all geographies. In the U.K., total market declined by 10%. However, we grew share with a decline of only 5%, half the overall market decline. In Australia, we grew market share by 5%. And in New Zealand, we grew by 9%. In growing geographies, we grew sales by 26% in North America and 18% in Asia, excluding China. For the year ended September '22, total Australian export sales decreased by 1% to $2 billion and volume decreased by 1% to 627 million liters. The decline has been driven by tough market conditions, including global freight challenges, high tariffs on bottle wine imported to Mainland China and the aftermath of a challenging -- changing consumer habits during the COVID-19 pandemic. Export sales held steady in value excluding Mainland China. North America exports were up 26% to 62 million liters partially offset by the decline in the U.K. market, down by 12% to 222 million liters. Worldwide shipping delays have impacted and continue to impact exports over the last 12 months. Australian Vintage has been out and proud over the last couple of years with our ability to ensure the demand is in balance with supply. The current market conditions are such that where there is a large surplus of red wine in Australia, aggressive behavior to reduce the surplus will ensure. We do ensue we do not have the same requirements to move excess bulk wine, allowing us to focus on the continuing to drive the strategic value of our portfolio. The total crush in '22 was 1.7 million tonnes, 13.5% lower than the '21 record crush and 2% below the 10-year average of 1.8 million tonnes. This decline was seen across all regions. The loss of sales to China, which was as high as 176 million liters in 2018 has translated to lower red grade prices. The average wine grade price declined by 10% to $630 with the average red grade price declining by 15% to $707 and the average value of whites increasing by only 2% to $548 per tonne. Australia Vintage's position against a background of oversupply in red wine and reducing red grape prices is sound with wine inventory in balance with demand. Australian Vintage also has flexibility going forward in terms of grape intake. Australia Vintage also believes in ensuring a sustainable supply chain with our growers. We're not directly impacted by what is occurring in the short term across the industry. It is too early to comment on the upcoming vintage, especially considering the abnormal wet weather on the East Coast and the potential impact on flood events across the Murray-Darling and Riverland regions. Flood peaks have occurred and are expected to linger over the coming months. On behalf of the Board, I would like to thank the people of Australian Vintage, led by Craig, for delivering an underlying result that was 7% higher than last year, a year of peak COVID demand while demonstrating resilience in a highly competitive and challenging market. We are proud of our staff who are committed to delivering against our long-term strategy. I will now hand over to Craig to provide a more detailed breakdown of the business performance over the last financial year and our priorities and focus for '22 and beyond.

Hello, everyone, and thank you for joining. As Richard said, pleasure to be here. And thank you to Richard and all our shareholders joining us virtually today. Our strategic direction remains on track with F '22 demonstrating strong global pillar brand performance, premiumization and innovation leading to increased market share and margin improvement. We've delivered a 7% growth in underlying profit despite ongoing global challenges, reinforcing the resilience driven by the execution of our strategic plan. With pillar brand sales representing 78% of our sales revenue and ongoing innovation across the business, we're proud to be able to deliver an underlying gross margin of 35%, well on the way to a sustainable 40% gross margin. Both our underlying EBIT and NPATS were up 7% compared to the prior year, whilst our reported NPAT was $2.3 million lower than last year, impacted by one-off nonrecurring costs, FX and SGARA. Early in the financial year, results were impacted by Brexit transition in the U.K., causing a significant amount of demurrage and stock-outs due to labor unavailability at U.K. ports, impacting EBIT by $3.7 million. In Australia, we're continuing to deal with the COVID pandemic where ongoing lockdowns impacted our cellar doors by a further $0.8 million. These are what we are calling our one-off nonrecurring costs or significant abnormal factors. In the second half of the financial year at the beginning of '22, Russia invaded the Ukraine driving hyperinflation across the globe. Coupled with shipping delays and less ships available, shipping costs increased significantly. These events alone cost $4.6 million of inflationary pressure in their own right in the financial results. These events continue today and have been compounded by increased interest rates and floods in Australia. Our balance sheet remains strong, and as Richard indicated, conservative with net debt at $74.5 million, gearing at 25% and a net debt to EBITDA of 1.5x. We've launched our high margin wine and spirits business with a net positive contribution and intended to increase value through the acquisition of luxury wine brand. Before I provide further insight into '22 and the outlook for '23, I'd like to share with you our vision and values. Firstly, looking at our vision and values. These days are critical as they guide our business with a strong focus on putting the consumer at the heart of everything we do. Our vision is to make us the first choice wine for every occasion of having a portfolio of quality brands that cater for every occasion. To achieve this vision, we must put the consumer at the heart of everything we do, and we must work in a collaborative manner, and we must be innovative, nimble and responsive, and we must be empowered. Underlying these values are our behaviors, which include integrity, respect and trust is the culture of the company and its staff, which has underpinned the ongoing growth and success of our business. These behaviors 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 behaviors. Moving on. Into our balanced 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, markets and customers with targets -- markets to outperform the wine category and improving our business in key markets. People. This involves assessing our staff in terms of regular engagement surveys, investing in our staff and safety. Pleasingly, our staff is considered top quartile at 70%, which is world-class. Sustainability is being net positive in everything we do with our people, communities, stakeholders and environment. Return on assets, as Richard said, this involves leveraging our world-class assets and delivering on all financial metrics. So the balanced scorecard for F '22, how do we go? It shows how we performed as a balanced scorecard. And what I'd like to highlight are the following. Our pillar brands are now 78% of our total business and growing, which is critical. Our underlying gross margin was at 35%, directionally headed towards 40%. Our increased marketing spend has continued since 2019, underpinning our share performance. We've grown market share in all of our key geographies. Staff engagement has lifted from 54% to 70%, which is world-class. And our lost time injury frequency rate has decreased significantly from 17 and in '19 to 9 in '22. We are earning less people. Our ESG journey is very well advanced, and we have announced our intention to reach net zero by 2040, with a cultural mindset of being net positive in everything we do. Our underlying growth, as Richard said, is consistent with the prior year at a healthy 7.5%. As you can see, the company has performed well against the balanced scorecard and our strategic direction. As you'll see from the next slide, investment in pillar brands is vital. The shift in the pillar brand strategy over the last 2 years and increased marketing has resulted in an increased market share across all geographies and strong margin improvement helping to absorb some of the inflationary pressures. Increased investment in our super premium and luxury brands are expected to drive CAGR growth by 20% over the next 3 to 5 years. High-margin product lines are showing significant growth on the prior year including McGuigan Zero at a healthy 55%, Tempus Two at 20%, Nepenthe at 31%. McGuigan did decline at the half, but much less than at the market rate. This has driven an overall 8% increase in CAGR from 2020. Turning on how our segments performed in Australia and New Zealand. AVG achieved market share gains in both Australia and New Zealand growing at 5% and 9%, respectively. Within this market share, we were able to achieve growth in branded sales of a healthy 3%, which was offset by a decrease in the low-margin processing contract. In other words, bulk wine, that doesn't make us any money. All 4 pillar brands grew with Nepenthe at 30%, Tempus Two at 10% and the Barossa Valley Wine Company at 8%, and McGuigan at 3%. Turning towards the U.K. and North America. Despite industry-wide supply chain issues that Richard mentioned post-Brexit, the U.K. continues to grow market share led by McGuigan and Tempus Two. AVG share grew at twice the rate of the overall U.K. wine market, which declined by 10%. The no-and-low category, we are the overall market leader and grew by 11% with AVG products growing by over 50%. McGuigan Zero is now the #1 alcohol-free wine in the U.K. and Australia. Higher-margin Tempus Two is the fastest-growing top 50 brand in the U.K., growing at 75% over the prior period. We have strong partnerships with our global shipping partners that has maintained an industry-leading service levels despite very challenging global supply and significant cost issues. Strong recovery continues in Canada for AVG brands and long-standing partnerships, generating growth of 26% in packaged wine over the period. Asia, pleasingly sales within this segment have improved 18% over the prior period, really driven by 3 markets: Taiwan, Malaysia and Singapore. Pillar brand performance was led by Tempus Two at plus 19%, McGuigan, plus 6%, driving a significant increase in the contribution from Asia over the prior period. AVG has also launched wines to the world, broadening sales channels across Asia whilst remaining committed to the China market through a strategic partnership with COFCO. China is AVG's China-based importer and distributor. We see Asia as a major growth platform for the future and a great market for our premium brands. AVG is also taking steps to increase sales of our portfolio in Southeast Asia whilst building long-term partnerships for China growth over the coming years. Austflavour is a unique position for AVG, leverages our world leading technology to access markets not traditionally available to a wine company. There are significant global opportunities for this high margin, high-value business. AVG's juice and concentrate division provides unique grape derived products for confectionery, soft drinks, winemaking products, and de-alcoholized wines, utilizing world-leading technology. We've been supplying grape derived products for over 20 years through long-term partnerships in Australia, Japan and North America. The global ingredient markets across India, China, Australia, Europe and the rest of Asia is a large market that AVG is actively pursuing. Over F '22, Austflavour delivered an improved margin percentage contribution, despite lower revenue after exiting from a low-margin bulk processing arrangement. We are well positioned with capability and know how to leverage global demand, and we'll continue to do so as we focus on high-margin business. We will be disappointed if contribution from this division did not double within the next 5 years from our existing asset base with no further investment, further enhancing ROCE. 2022 financial performance, the result was very pleasing with continued growth in our portfolio of key brands, especially on the back of 2021, representing a peak year in sales driven by COVID. As you can see from the graphs up there, pillar brands now represent 78% of total sales compared to 58% in '18. Our total revenue has grown to $260 million. Our underlying earnings before interest and tax grew by 7% to $33 million after absorbing a further $4.5 million in inflationary costs. Our underlying net profit after tax improved by 7%. As you can see from the graph, we have sustained a step change achieved in F '21. This step change has been achieved through increased marketing investment in our key brands, innovation, operating efficiencies and a focus on our vision and values of increased investment in our staff. The McGuigan Zero range has been an outstanding success and demonstrated the importance of innovation to the portfolio for the long term. We're looking to back up this success with our new drinks and spirit range and collaboration. What are the underlying trends? We utilize consumer research in everything we do to put the consumer at the heart of everything we do. Our research informs us that even in a highly disruptive environment, there are tailwinds, premiumization. Even in a world of hyperinflation where we would expect consumers to be driven towards value. The trends indicate consumers are still willing to buy at higher price points, reinforcing our investment in the premium part of our portfolio. Better for me products, the focus on modernization, lower alcohol content, health and wellness is being driven by millennials and Gen Z or basically younger people. As the investors in AVG will continue to be the leaders in this category. And better for the world, ESG is at the forefront of every conversation with our customers, consumers, key stakeholders and investors. AVG is proud to have released our ESG road map that will undertake with a cultural mindset of being net positive in everything we do. On-premise. On-premise remains challenging, and it's still not fully recovered post-COVID. Learned behaviors during this coupled with high interest rates and higher cost of living are driving consumers to home consumption. This is driving the growth in the RTD category and our new Mr Stubbs range pitched directly hit the home consumption trend. Digital, e-commerce is a core part of how consumers are making their purchasing decisions. Premium, fast-growing categories tend to cover -- tend to over-index online sales with e-commerce an important component of the value pool. AVG has some work to undertake in this space. However, we are investing to assure our digital performance generates consumer cut through. 3 years ago, when I commenced with AVG, I set out to achieve 6 execution imperatives, namely driving the portfolio, including potential brand acquisition, driving people engagement, driving safety and sustainability, driving market share and driving margin accretion and importantly, driving innovation. I'm pleased to say that as a team at AVG, we have delivered on all of these imperatives, excluding additional brands. Acquisition values have been too high. However, we are seeing opportunities in this space as we speak. We've increased the portfolio by increasing our revenue and gross margin from our 4 pillar brands. We've also expanded our portfolio with our collaborations and drinks business. We have increased people engagement from a low engagement score of 54% to employer of choice at 70%. We have decreased our safety LTIFR into low single digits and released our ESG road map, including our aspiration to achieve Net Zero by 2040. Despite aggressive competitive behavior, we continue to rank highly in our customer relationship survey supporting our growing market share. With our drive towards pillar brands, we have improved margins to 35%, well on our way to a sustainable 40%. This has driven improved profitability for the business in total. And we are driving innovation importantly. We were the first movers and market leaders in zero alcohol wine. We're driving the low category and have innovated with the release of our drinks range. We now offer a broader portfolio to our customers and consumers, all led by consumer insight. Now let's have a quick look at some of the things that are happening. [Presentation]

It's a different company. Innovation continues to be fundamental to our strategic success. Australian Vintage is world-leading in no-and-low alcohol McGuigan Zero reaching #1 in the U.K. and Australia. The recent launch of our new wine spirits-based drinks business creates a tremendous global opportunity for high margin revenue growth and leverages our operational know-how and assets. We've been able to add new revenue streams, as you saw there, with minimal capital, which is very important for ROCE, generating a positive contribution, net of investment further supporting our double-digit ROCE ambitions. Most importantly, these innovations are aligned to the fastest-growing consumer demand globally, not just thought bubbles. Here, you can see a sample of some of our exciting new drinks ranges, including Mr Stubbs. Tempus Two Gins, Rescued range of gins and Gelato style Italian drinks, no one could accuses of lack of innovation. We are having a crack. Sustainability is paramount to our success in the future. It's a critical issue but also one of the biggest opportunities of our time. Our approach to sustainability is a balanced one, encompassing our responsibilities across environment, social and government or ESG. AVG's 3 strategic priorities are: renew and regenerate our environment, engage and nourish our people and communities, share and grow as an impactful business. During '22, AVG utilized globally recognized frameworks and partnerships to design a business fit for the future. We're proud to be taking a science-based approach to environmental sustainability, a human-centric approach to social impact by harnessing the power of partnerships to drive progress and authenticity. This is real. It is more than a social license to operate. It's a value creator and key driver for innovation. It's not just a nice thing to do. Consumers want to support brands and businesses to put people and planet first. And we are seeing this in the purchasing decisions of our customers. We're undertaking world-class initiatives and embedding sustainability into our DNA with an ambition to be net positive in everything we do. In an effort to take action around climate, we're proud to have announced our ambitious target to achieve net zero by 2040 across our entire value chain, taking a science-based approach to reduce emissions across scopes 1, 2 and 3 to be validated by science-based targets. In F '22, AVG undertook a detailed greenhouse gas assessment measuring emissions across scopes 1, 2 and 3 from a base year of '21. This best practice climate science approach following guidelines of the Science Based Targets Initiative has informed the setting of high-level targets and emissions interventions across material impacts. If you didn't get the message, a lot of science, a lot of targets, a lot of real stuff. On the journey to achieving our targets, AVG has set a near-term target to reduce absolute Scope 1, 2 emissions by 42% by 2030 and Scope 3 emissions by 52% within the same time frame. This is not just talk and not just presentations. This is real action. So as I turn to trading update and outlook. And that's water not gin that Richard put in my glass, which is great. We expect EBIT to be consistent with F '22, subject to FX, further agricultural risk and planned asset sales. This is after absorbing an expected $17 million in inflation in F '23, highlighting the growth and resilience of the core underlying business. Global conditions have continued to worsen with softer trading conditions driven by hyperinflation, higher interest rates and aggressive Australian export behavior due to the red wine surplus that Richard mentioned earlier. These trading conditions are driving volumes that are in line with last year and revenue approximately 3% lower. However, we are continuing to grow market share. Whilst ANZ is maintaining share, the U.K., Asia and North America are growing share as we are a global business. The global hyperinflationary environment and the ongoing war in the Ukraine is continuing to impact our operating business. Energy, fuel and other input costs are continuing to increase. And we have not seen a reduction in sea freight delivery times or costs on the shipping routes we operate in. Inflationary pressures are predominantly impacted by sea freight costs and represents an EBIT impact of $17 million. Over 2 years, the business will absorb over $26 million in inflationary costs. We are not alone in this journey. The industry expects that the soft market dynamics and hyperinflation pressures, predominantly impacted by sea freight, will ease towards the end of '24 and '25. However, in the interim, the impact of the environment we're operating in -- within is delivering a softer reported gross margin of approximately 30%. These outcomes are not expected to change unless an easing of the environmental factors occurs. You see freight was to go back, for example, to pre-'22 levels, gross margin will be back at a healthy 35%. Therefore, our underlying business and strategy is healthy and on track. This reinforces our focus on growing share so that once the inflationary pressure ease, AVG will be well placed to deliver our expected underlying profit of [ over ] $25 million per annum. Given the environmental considerations, we remain especially committed to our strategic plan as that commitment has demonstrated historically, we can generate high returns. We are maintaining our strategic intent to place the consumer at the heart of everything we do as we look to drive the business towards a sustainable ROCE in the double digits by continuing to invest in marketing, innovation, premiumization, product awareness and consumer satisfaction. AVG has been able to offset inflationary pressures through price increases and is proposing to utilize planned sale of noncore assets to offset some of the hyperinflation pressure, thereby maintaining EBIT and dividends in FY '23. Any funds received will be utilized for execution of our strategic plan and reducing debt. I would like to thank our staff, contractors, stakeholders, shareholders and Board for their ongoing support. I will now hand back to Richard Davis. Thank you very much.

Thank you, Craig. This afternoon, we have 3 items of business, including a review of the accounts and 2 resolutions, which require a shareholder vote. But first, I will outline some procedural matters. Voting will occur by a 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 discussion and the results will be made available by the ASX as soon as possible following the close of voting. A reminder, the poll is currently open, and you can submit your votes at any time. I'll now move to the formal items of business. The first item is to consider and receive the financial report, the Directors' report and Auditors' Report of the company for the year ended 30 June '22. This item does not require a resolution but does provide an opportunity for discussion. As I mentioned earlier, the company's Auditor, Mark Phelps, is presently online and available to answer any questions, which will be addressed after all items of business have been introduced. I will now introduce John Davies to introduce the next item of business.

Thank you, Richard, and good morning to you all. I would like to see you all here today. The next item is resolution 1, the reelection of Richard Davis as a Non-Executive Director. I hasten to point out that he's a Davis, and I'm Davies. So I'm not asking you to vote for my dad, okay? Just want to make that clear. Richard retires in accordance with the constitution and being eligible offers himself for reelection. Richard has been a Non-Executive Director of the company since 2009 and currently holds the position of Chairman of the Board, a member of the Audit Committee, a member of the People, Remuneration & Culture Committee, and a member of the Risk and Sustainability Committee. Busy fellow. Having had regard to the ASX Corporate Governance principles and recommendations, the Board considers Richard to be an independent director. Richard is also Chairman of Monash IVF Group Limited and a Non-Executive Director of InvoCare, where he spent almost 20 years growing in managing the business. Richard holds a Bachelor of Economics. His background includes -- he has a background in venture capital, was an accounting partner in a leading national accounting firm. During Richard's -- the last 3 years of Richard's term as Chairman, he together with Craig has transformed this company by introducing a behavioral-led high-performing culture. This has meant that the company has become more resilient and therefore, produce more sustainable and higher earnings. Over the last 3 years, the net profit after tax is double than what it was for the previous 3 years, which I think is at the heart of why this company has been performing so well over that time. Richard is an outstanding chair, and the Board with Richard abstaining were unanimous in recommending the reelection of Richard Davis.

Thank you, John. I'll now move to resolution 2, 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. The resolution is advisory only and does not bind the directors of the company. However, FY '22 Australian Vintage has continued to ensure we have an aligned executive pay structure, which illustrates the importance of achieving our long-term strategy, enhancing our cultural alignment and ensuring consistency and commitment to employee engagement and diversity. Consistency and performance is measured through our balanced scorecard approach. Our scorecard is an executive KPI measure, which aligns directly to our long-term strategy and putting the consumer at the heart of everything we do. This KPI balance scorecard comprises of specific performance measures on behaviors and engagement, safety, EBITs, ROCE and branded growth and innovation. Australian Vintage behavioral framework is an integral part of the remuneration structure for all employees. Australian Vintage's behaviors are ingrained through the organization and set a standard for the way in which all employees operate and behave daily. This framework forms part of the annual performance review and behaviors are a gateway to any salary or bonus payment. Australian Vintage is committed to driving and achieving balanced culture with all results in continued growth, enhanced business performance and better aligned executive initiatives and shareholder returns. The Board unanimously recommends that shareholders vote in favor of the resolution. We will now move to shareholder questions. I will first address questions submitted prior to the meeting, followed by text and audio questions submitted online during the meeting and then move to questions from in-person attendees. If you wish to ask an audio question, please do so. Now I will ask the Company Secretary to read the questions.

Thank you, Chairman and hello to our shareholders today. The first question, which was received prior to the AGM is from Mr. John Appleby, who was asked, why is there a need for nonexecutive? What's the reason stopping him becoming a straight out executive?

Thank you, Mr. Appleby. For your question, which I have interpreted to relate to the difference between a nonexecutive and an executive director. An executive director is usually an employee of the company, who undertakes executive functions like a CEO in the management and administration of the company. Non-Executive Directors are independent of the corporate management and are encouraged for good corporate governance. The Australian Vintage Board consists of 4 nonexecutive directors and 1 executive director being Craig.

I'm moving to online text and verbal questions. We have not received any verbal questions, so we'll move to online text questions. We have received 7 questions from shareholder, Bettina Diem. Chairman, in order to provide the full context I'll read those out in full. Some of them are quite long, so bear with me. The first question is, why is it necessary for people who earn humongous salaries and perks to give them even more money and options, every time there is an AGM? Why is there always this push to get more and more and more? You think with the amount of money you receive, you have such brilliant people that companies who never go bust, you would never dismiss employees, but that is not the case. What do they say again, bigger peanuts, bigger monkeys? What justifies these increases and you have seen high amounts board members receive?

Well, I don't know whether to take that as a comment, but I'll try and address it or answer it in the best way possible. If you want to have good people to run your business, then you have to pay them accordingly, and there's a lot of competition going out there for good people. Now from a shareholder point of view, you just don't want to pay the more cash up front. You want to make sure that they are rewarded in a way that is aligned with shareholders. So the way you do that, you give them incentives, remuneration which is at risk based on performance. If it's a short term incentive, or if it's a long-term incentive, performance over a period of time. So in this case, our company rewards Craig and the executives on an EPS CAGR rate, which is the earnings over a period of time per share. And the other one is on a return on assets, the ROCE, which Craig was talking about. And I think you can see the results over the last couple of years. You can then align it directly to the remuneration of the directors -- not the directors -- the executives. And you can see they haven't achieved all their targeted KPIs. And accordingly, they haven't been paid the full amount that was on the table before them.

Thank you, Chairman. The next question from Ms. Diem is in contrast with the remuneration of Board members attending shareholders used to get 2 bottles of wine then 1. Do attending shareholders still receive their remuneration, where we're getting the impression that you wanted to get rid of this and no longer do this. I still remember 1 shareholder saying that they considered this was their dividends. What about their attending partner or their attending proxy holder? It is sad if this no longer happens and Board members receive increase after increase, and they're 1 or 2 bottles of wine for attending shareholders disappears. I always gave the bottle of wine to my friends to introduce them to your wines, which could mean that they enjoyed them, then they might start buying your wine, for your consideration.

Again, I think it's a good point. I can understand that a lot of people valued the wine that was given to them when they attended the meeting. But now we're living at a time where people attend the meeting, which is done virtually or online, they can listen to it on their phone. And here, we've got 2 classes the people that actually come here and those wouldn't do it virtually. And it's just not practical for us to give wine to everybody that listens, whether it's virtually or in present every time we have an AGM, but we have rewarded those that have come here today. I think there's 2 bottles that's going on. And those 2 bottles instead of picking it up, we've decided that we'd post it to you to make it easier for some of you, you're commuting by train or bus and we thought that was the easier way to do it.

The next question along the same lines is, do you still provide tasting of wine at your AGM?

Well, it's difficult to have a tasting when you're in a professional office. So we're not doing that.

Can I just make a comment based on the second half of the previous question [indiscernible] -- The shareholder asked that, I made a comment that Board Directors received increase after increase. Board directors have received no increase with the exception of the chair, which was an unanimous suggestion and support from the rest of the Board, given the amount, a huge amount of work that Richard puts in to this company and to the executive. So I think that -- just to set that particular point straight. Sorry, Richard. Thank you.

Thank you, Naseema. The next question from Ms. Diem is, I would really appreciate a minimum of 2 women on your Board. More of a statement. Did you want to make a comment?

Well, I'll take it as a statement. But I'll also point out that, if you look at the composition of the Board, a number of us have been on there for a period of time. We went through this a number of years ago where we had some rotation. So I think over the next few years, there will be changes at the Board level. And obviously, we'll take diversity into account when that accounts.

Just I know it's not directly about the Board, but the executive team has a number of senior women and a 40% makeup of women on that team. So we are very aware of it.

Thank you, Craig. The next question is, why do you need to provide a proxy by 21 November what if you're sick after that date and want to provide a proxy? Other companies do not make it that difficult. The same applies to having to register by e-mail before attending? Why -- I simply detest these extra barriers to attending the meeting having a proxy. The Chairman, I can take that question. Okay. So in terms of the 48 hours to provide a proxy, that's a Corporations Act requirement, and it is a standard process for most companies. In terms of having to register via e-mail before attending simply so that we could get numbers to provide the appropriate room for today. It certainly was not a barrier to any shareholders attending today. Okay. So we now move on to the final question from Ms. Diem, which is, will you be CO2-neutral ASAP? Climate change is the most serious issue facing us, and we all need to do our utmost as quickly as possible. If you do not see the urgency of this, then I suggest you educate yourself on the urgency of climate change, please.

I'd like to think that we've addressed that both in my presentation and Craig's.

Yes. We actually have targets that are at the forefront globally, [ Bighope ] certification and world recognized targets, scopes 1, 2 and 3 when many companies are only doing scopes 1 and 2. Scope 3 is comprehensive, and it is leading-edge as any company in the country.

Thank you. There were some additional comments made by the same shareholder, but we'll take those on notice and respond privately as they do not relate to our business. Okay. So we will now move to questions from shareholders attending in person. Please raise your hands and we'll bring you a microphone.

Peter Donaldson of Lynnfield. I ask whether offer of -- well, a dozen bottles to shareholders could be made occasionally as has been the case in the past.

We'll consider it, but I've been on the Board since 2009, and I don't recall a dozen bottles ever being offered to shareholders, but I can check that. There are, I think, shareholder benefits. Am I right in saying that [indiscernible]...

Yes, we have a shareholder 1 offer, which is just located at the back of the room as per previous AGMs.