LARK Distilling Co. Ltd. (LRK) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Lark's Full year 2024 Results Presentation. We are recording this meeting for the benefit of those that cannot attend today, and the webcast will be available on the company's website shortly. Presenting today will be our CEO, Sash Sharma and our CFO, Iain Short. [Operator Instructions] With that, I'll now hand over to Sash.

Good morning, everyone, and thanks for joining us today for our FY '24 results presentation. Joining me today is our CFO, Iain Short, and you've already heard from Peter in Investor Relations. At the conclusion of our presentation today, Iain and I will take your questions submitted through the webinar platform. Moving to slide 2. LARK will be a leader in New World whisky. Our ambition is to make Lark, the leader in New World whisky. You've heard this from me before, and it won't be the last time. This is an ambition the entire Lark energized by, committed to and are progressing with making a reality. Lark will lead Tasmanian whisky, and we're taking the required steps to make this happen as we create and solidify our role on the global stage. We truly believe Tasmania will be the next epicenter of quality whisky following in the footsteps of Scotch and Japanese. There are plenty of reasons that give us this belief. Over 30 years of history, as Australia's and Tasmania's first single malt, our story, providence and incredible climate to create the finest whisky. Our Central Highland's Tasmanian peak bug, which helps contribute to our wonderful house style, access to some of the best casks in the world, which you'll hear more about soon. In addition, we have a great team of experienced executives to execute our next chapter of growth. We have the freedom to innovate and push boundaries. We have the ability to scale now and into the future, underpinned by our whisky bank of stable of assets, and we're already proudly Australia's #1 luxury single malt. In the next section, we will talk about the FY '25 highlights, Seppeltsfield wine partnership and strategic priorities. Moving to slide 5. Net sales revenue was $14 million, in line with our recent trading update and down $3.1 million against FY '23. This was due to cycling of older limited releases and a slowdown in the legacy Chinese indirect export channel, both of which were previously called out to the market as we reset the business with sustainable revenue growth. Pleasingly, we again saw positive performance on the last core signature range, up 11% on FY '23. Gross margins was 68%, down very slightly from FY '23 due to channel and product mix. Importantly, disciplined cost control has delivered savings in operating and overhead costs despite the ongoing inflationary environment in which we operate. Together, this resulted in an operating EBITDA loss of $2.8 million. Moving to our balance sheet, we remain well capitalized with $2.4 million of cash at bank at 30 June. Pro forma cash post the placement will see this increase to approximately $27 million at 30 June, and we continue to have a $15 million undrawn committed bank facility in place to January '28. Our high-quality whisky bank increased slightly to 2.5 million liters, underwriting future sales growth. Very exciting progress was made in Asia with distribution agreements concluded in Indonesia, Singapore, Malaysia and the Philippines with shipments taking place in half 2. Our nascent GTR business achieved sales of $1.1 million in FY '24. I'll cover both these areas of our business in more detail shortly. Moving to slide 6. The importance of casks can't be underestimated in the whisky-making process. As new made spirit is placed in casks, the casks and spirit interact over time with the wood providing flavors, colors and aromas to the whisky while also removing unwanted traits. We believe more than 60% of Lark's whisky product character is influenced by this interaction. The strategic partnership with Seppeltsfield Wines will secure access to premium oak barrels for Lark, providing certainty over Lark's future maturation requirements. Seppeltsfield was established back in 1851; matures over 6,000 barrels of Port & Cherry, including the longest unbroken lineage of single vintage Tawny's in the world, making it the largest repository of premium fortified wine and cask in Australia. It is for this reason, Seppeltsfield is often referred to as Australia's premium fortified house. The continuity of supply of the highest quality casks creates a key competitive advantage for Lark and is one where there are notable precedents internationally, including the #1 single malt in the world, the Macallan. The key terms of our strategic partnership with Seppeltsfield Wine are as follows: a 10-year agreement with a 10-year option for extension by Lark, exclusivity with respect to selected fortified barrels over 5 years old, first right of refusal over all other fortified barrels with no minimum purchase requirements. In addition, we have exclusivity on naming rights and usage in relation to whisky products, joint R&D trials, and we have a [ handsome ] agreement in place with the contract to be signed subject to conditional placement. Moving to slide 7. We announced our equity raise and strategic partnership with Seppeltsfield on 29th of July. The planned equity raising comprises of a $15 million conditional placement, which is subject to shareholder approval at an EGM to be held this Friday. A $6.5 million institutional placement has already successfully concluded and there is also a share purchase plan. Strong demand for the SPP saw almost 5x oversubscription. This resulted in a decision to scale back total demand, however, upsized the original SPP size from $1 million to $3.5 million. Together, this results in an overall raise of $25 million. Proceeds of the raise will provide balance sheet flexibility to be used to invest in brand and facilities. Brand and marketing investment targeted at restaging the brand to drive increased cut-through as a differentiated luxury whisky brand, along with upweighted investment in key markets and channels. Capital investment will be allocated for further development of the Pontville site, which will see increased production and storage capacity along with an enhancement to Lark's Cellar Door offerings in Hobart. Finally, working capital for general corporate costs includes future inventory laydown through to cash flow breakeven in FY '27. I'm excited by the position we will find ourselves post the conclusion of the equity to raise. We have had a clear signal from our shareholders, they back our strategy, our team and our ambition to become a leader in New World whisky. We can now get on with executing and accelerating this vision. Moving to slide 8. We shared our strategic priorities with the market at our Investor Day in Hobart in October '23. They remain core to our ongoing growth plans, and I'm pleased with the progress we've made against each of these strategic priorities. Our first strategic priority is to create long-term brand value by establishing Lark as a globally recognized and differentiated luxury whisky brand. Today, you'll hear about some of the great awards we've picked up, our brand partnerships and the success of Dark Lark's activations. I'll also cover off our portfolio restage and the employment of our creative design agency partner. Our second strategic priority is to create international sales momentum and cement our domestic leadership position by creating repeatable, diversified revenue streams across markets and channels. We've made tangible and exciting progress with the execution of 4 Asian distribution agreements and sales have taken place to these in-market distributors in half 2. We continue to see strong growth in GTR and domestically, our core range continues to perform. We've appointed Spirits Platform, Australia's leading independent spirits distributor as our exclusive domestic partner. Our third strategic priority is cash and capital discipline as we prioritize cash generation and ensure we're measured in our capital deployment decisions. We've now embedded cost and capital disciplines within our business, and we'll deploy new capital against targeted and value-accretive work streams. We will speak to the clear road map with respect to our stable of assets shortly. Importantly, all of these strategic priorities will create long-term and sustainable shareholder value. Moving into each of these in detail. Building long-term brand value. Lark continues to make progress as it takes its place as a leader in New World whisky, reinforcing our luxury and quality credentials with strong performance at the recent Global Spirits Masters competition. Lark Classic Cask, Tasmanian Peated, Chinotto Citrus Cask and Dark Lark 24, each took home gold medals. In the World Whisky awards, Lark again took home category wins in Australia's best blended malt whisky and Australia's best single malt whisky. These accolades continue to elevate our position in the global landscape, reinforcing Lark's reputation for unparalleled quality and innovation. Our relationship with Peter Gilmore, award-winning chef at Quay and Bennelong restaurants continues. The partnership is currently being activated through the Quay gifting period of Father's Day, so probably a timely reminder, pick up dad a special Lark for Father's Day or alternatively treat yourself. The investment continues to build long-term brand value, providing fame and appeal to a broader audience who are being exposed to our brand. And more recently, we've embarked on new partnerships. With Millie Tang, Australia's Bartender of the Year for the launch of Dark Lark, appealing to bartenders nationwide, building credibility in the on-trade for the Lark brand and appealing to a younger consumer base. We have become the Australian spirit of choice throughout all Qantas first-class flights and first-class lounges providing access to higher net worth individuals and driving trial and visibility. Further, we've recently partnered with Archibald winning artist, Del Kathryn Barton, to further tap into one of the passion points of our target audience and again, accessing new consumers. What you can see from these partnerships is that they help to raise the profile and awareness of Lark while also driving relevance and including new audiences. Our limited and seasonal release, Dark Lark, launched in May, inspired by the aurora of the Tasmanian Sky, the Aurora Australis became the inspiration for an extraordinary After Dark Single Malt. With notes of bright honeycomb, light spiced oak and caramelized pineapple, the role of Dark Lark in the portfolio is to recruit new consumers while engaging our base with exciting releases. A fun fact, 60% of Dark Lark consumers are new to our brand and more skewed towards females. Limited releases are positioned to celebrations and gifting and for those eager to be part of the Lark franchise. These highlights included the involvement of Millie Tang, doubling the sales in e-commerce versus last year and increased sales in GTR due to our high impact visibility in Sydney airport. And I'd get an earful from our marketing team if I didn't mention that we were able to secure the season's first Aurora display on the day of launch. Well done guys. Our second priority, international sales momentum and domestic market leadership. Growing Lark in international markets is a key strategic priority, and we're setting ourselves up to drive international sales momentum by creating repeatable and diversified revenue streams with appropriate foundations. We've made good progress in half 2 with Southeast Asian distributors now in place in Singapore, Indonesia, Malaysia and the Philippines. Pleasingly, our stock has cleared customs in all 4 markets with direct export sales of $0.9 million in half 2. As part of our activation plans, we sent Bill to support key trade launches in Singapore and Indonesia during July, winning hearts and minds. The fantastic moments are captured in the pictures of this slide. In FY '25, the team will be focused on executing joint activation plans designed to build brand awareness and drive depletions and repeat orders. The recent equity raise provides additional capacity to upgrade investment in the brand, driving fame, awareness and conversion. Pleasingly, in the first quarter of FY '25, we delivered a planned re-order to Indonesia. Moving to slide 16. Global Travel Retail acts as an amazing shop window, providing an opportunity to engage with a target consumer as they dwell, explore and discover. This creates the ability to establish our brand, build increased awareness and consideration and ultimately deliver conversion and loyalty. We view GTR as a vital channel, and we firmly believe in our ability to cut through as Australia's #1 luxury Single Malt Whisky. This same belief has been echoed by the 2 biggest Australian airport retailers, Heinemann in Sydney and Lotte in Melbourne. During FY '24, we grew Lark's presence in key Australian airports and the team have been very active with our GTR partners developing joint plans with a focus on building visibility and activations, typically supported by brand ambassadors. Walking through Australian airports, you would have seen Christmas Cask and Lunar New Year in the first half and more recently, the channel exclusive Chinotto launched in March '24. In addition to the major activation supporting Dark Lark, which you can see pictured in these slides, this will continue to be activated throughout the month of August and September, so drop by and check it out. These have and continue to drive wins for our consumers, customers and indeed us at Lark. Pleasingly, through this activity and partnership, our GTR business is showing good operating momentum, achieving net sales of $1.1 million in FY '24, the first full year in the channel. Turning to slide 17. Before I talk about our new domestic distribution partner, Spirits Platform, let me cover off our other domestic business channels. Our hospitality venues like many around the country have been hit with lower footfalls and consumers impacted by the cost of living and consumer confidence generally. Our team have responded well, creating new plans to win consumers and delight them when they enter our venues. Lark's e-commerce channels saw strong growth in the fourth quarter through a channel-exclusive single-class program as well as strong sales from Dark Lark. Personalized Classic Cask continued to perform strongly. Together, this saw the channel returning to growth on a full year basis. Following on from an extensive internal review to consider our best go-to-market domestic sales model, a decision was made in June to a point spirits platform as our B2B domestic distribution partner for Lark and Forty Spotted Gin from the 1st of August '24. Spirits Platform are the domestic market leader in ultra-premium and above single malt. Lark and Forty Spotted are a strong portfolio fit as the only Australian brands alongside prominent global brands such as the Macallan and Rmy Martin. The partnership with Spirits Platform provides us with access to a commercial team, more than 5x larger than Lark's previous team, providing increased coverage, particularly in the independence channel. The move to Spirits Platform will see improved channel performance, namely EBITDA and cash. This is despite the distribution margin being included in selling price. The partnership provides a catalyst for domestic growth over the initial 5-year term and beyond solidifying and building last leadership position as Australia's #1 luxury single malt right here at home. Lark will continue to internally manage domestic hospitality, e-commerce and GTR channels post the transition. Our third strategic priority is cash and capital discipline. Our disciplined cost control actions are continuing to drive a reduction in net cash used in operating activities. We achieved an overall improvement of $1.2 million for FY '24. Whisky continues to be laid down for maturation while balancing our working capital requirements. Our [ NAV ] 15 million committed debt facility continues to be available to January '28. And excitingly, our pro forma cash post equity raise will be $27 million. The equity raise provides an opportunity for upgraded investment. We've now embedded cost and capital disciplines within our business, and we'll deploy new capital against targeted and value-accretive work streams, providing high confidence of positive operating cash flows during FY '27. Moving to slide 20. We will move to Pontville making it the focus of our operations and our new home, one which is reflective of Australia's #1 luxury single malt whisky and a future global whisky icon. Pontville is a site which we can grow into, and we will be making modest but important improvements to future-proof Lark. We will see increased distilling, bottling and maturation capacity at Pontville at a site we can delight consumers, trade partners and distributors. The stage development will be modular to allow long-term delivery of the full site master plan in the future. This will see us vibrating away from Cambridge as our primary production facility as we set ourselves up for the next stage of growth. However, transition from Cambridge will see key equipment and processes transferred, providing continuity of new make house style for our award-winning whisky. Our Bothwell distillery is surplus to requirements and will be divested at the right value. These measured decisions will see increased focus, efficiency, effectiveness and collaboration with everything under one roof in time and a site fitting the ambition we have set ourselves. With that, I'll now pass over to Iain to take us through the full year financial results.

Thanks, Sash, and good morning, everyone. In this section, I'll take you through our FY '24 financials and our whisky bank. I'm on slide 22. As Sash outlined earlier, our reported net sales revenue, that is revenues after excise was $14 million for the year, down $3.1 million against FY '23. The reduction in net sales reflects the foreseen impacts of the slowdown in the Chinese indirect export channel and the lower sales of old one-off releases in other channels than the prior year as well as softer trading conditions in domestic B2B and hospitality. Pleasingly, this was partially offset by positive performance in direct export, global travel retail and e-commerce. Direct exports under distribution agreements commenced to Singapore, Indonesia, Malaysia and the Philippines with initial shipments to these new launch markets in half 2, delivering net sales of $0.9 million. As Sash outlined, our GTR presence continues to grow in key Australian airports with net sales of $1.1 million for FY '24. Our gross profit margins remained strong at 68%. This was down slightly from last year with whisky net sales per liter reducing from $280 to $255. The decline in net sales per liter was impacted by product and channel mix and a lower relative contribution from hospitality venues where we sell direct to consumer. As outlined in our Investor Day in October 2023, as we expand into and see growth from new direct export markets, we can expect lower net sales per liter as we will be servicing these new markets through in-market distribution partners and, therefore, [ paring ] a distribution margin in the value chain. This will allow us to scale absolute dollar net sales and gross margin, but we'll see [ decretion ] in net sales per liter and percentage gross margin. Noting, however, that by working with distributor partners and using their sales and marketing teams, we will not require significant overhead expansion as we grow internationally. Lower gross margin percentages are expected from FY '25 for domestic Australia B2B, following the route-to-market change to Spirit's Platform on the 1st of August 2024. This impact will be offset by lower overheads as we will no longer need our own domestic sales team, but will instead be using the significantly bigger sales team of Spirit's Platform, increasing our commercial coverage and delivering a platform for future growth domestically. We've included a slide in the appendix that sets out some illustrative unit economics of this route-to-market change for Australia. Marketing investments shown as selling and distribution expenses was broadly maintained in absolute terms and increasing as a percentage of net sales from 18% to 21% year-on-year as we continue to build long-term brand equity to support both domestic sales and provide a strong platform for international market expansion. The change in domestic sales model resulted in a nonrecurring $0.2 million restructuring provision in FY '24. Moving to slide 23. The balance sheet and capital position is strong, providing Lark with important financial flexibility. Lark ended FY '24 with a cash balance of $2.4 million. And following the equity raise Sash discussed earlier, we expect a pro forma 30 June cash balance of approximately $27 million, which will be deployed against growing brand equity and commercial growth. In addition, we have an ongoing relationship with a top-tier partner in NAV and have a further 15 million undrawn committed bank facility with this available to be drawn to January 2028. There is strong asset backing on the balance sheet with total inventory recorded at cost of $64 million. And this inventory, which underpins future growth was up $2.2 million or 3.6% versus June '23. Looking at this in more detail, of this balance, maturing inventory and barrel, $57.7 million at cost, which was up 3.8% versus prior year, with the balance of inventory being finished goods and work in progress. Our property plant and equipment of $15.6 million includes assets across 3 production sites of Pontville, Bothwell and Cambridge and the reduction in both right-of-use assets and financial liabilities versus last year reflects the cancellation of a Bond Store Lease subsequently replaced by a new lease in FY '24. Moving to slide 24. Focus on cash and capital discipline saw a year-on-year improvement in net cash outflows from operating activities and we're projecting positive operating cash flows during FY '27. Operating cash flows for FY '24 reflected lower receipts from customers of $5 million versus FY '23, primarily due to the foreseen lower limited release and indirect export sales I outlined earlier. This was more than offset by one-off staff admin and corporate costs in the comparatives of $1.2 million, and savings in other operating and production cash flows of $5 million versus FY '23. This was achieved through a renewed focus on cost control and exercising capital discipline on production levels. Investing cash flows included $0.3 million Tasmanian tourism innovation grant for Pontville. Turning to slide 25. The size and quality of our whisky bank is a competitive advantage for Lark, supporting long-term growth plans by underwriting future sales. Lark's whisky under maturation at year-end was 2.5 million liters at 43% ABV, with a book value at cost of $57.7 million. As previously outlined, given the scale of our whisky bank, has allowed us to optimize production over FY '24 and more closely aligned to current sales, with the size of the bank increasing only modestly year-on-year. When looking at the profile of the whisky bank, it's important for us to consider various factors in our stock model, including ensuring continuity of supply of different whisky profiles to support our planned growth. We have a varied age profile within the whisky bank. And while we have older stocks, the more significant volume is of younger age and maturing to support future growth. This profile of the whisky bank means we have sufficient volume of mature whisky in the short term to meet our growth aspirations. We have future availability of maturing whisky to support planned acceleration of export growth, and we have flexibility to consider age statements in time. As Sash will touch on in the next section, we've got a lot of work ongoing in relation to the brand restage. This forms a critical part of our stock modeling to align current and future inventory against current and future portfolio to ensure continuity as well as optimal commercialization of the whisky bank as we deliver against our strategic brand and sales priorities. With that, I'll now hand back to Sash.

Thanks, Iain. In the next area, we'll talk to strategic priorities, brand restage and growth plans. I'm now on slide 27. We'll continue to come back to and track our progress against strategic priorities. I'll cover progress against our strategic priorities for phase 1 of our growth plan shortly. Importantly, we believe that these strategic priorities will create long-term and sustainable shareholder value. The executive team and the Board are focused on positioning Lark for sustainable long-term growth. And with that, let's turn to slide 28, where I'll share an update on the exciting brand restage, a critical component on building long-term brand value. We first talked about our Lark brand restage at our Investor Day in October, the delivery at the end of FY '25. This is a significant amount of work, and I wanted to give you an insight into what's been happening in the background. I don't plan to go into the details, however, great brands don't materially change year-on-year. The foundations must be done right and done once, meaning this will be one of the most significant steps in brand evolution we take in the history of this company. Working with our creative partner, the highly credentialed team at Love Design, our restage has 6 key phases, which I'll talk you through over the next 2 slides. Moving to slide 29. Positioning. We're building a globally differentiated luxury brand, proud of our past but excited by the possibilities of the future. To date, we have been a domestic brand, and we need to start appealing to a global audience. Under the heading of positioning, we are unpacking the key attributes and hooks that will resonate with this global audience. Portfolio. This means creating an easy-to-navigate portfolio for consumers. With the absence of age statements, we must allow consumers the ability to understand how to go up and down our spine of products as well as ensuring that they are clear and suitable for consumer occasions across markets. In addition, we believe we have to have a clear innovation pipeline, which is accretive to the master brand. Under products, to complement our portfolio thinking, price points will be considered as part of our hierarchy. We will transition to 700 mls initially to export markets. Our oak program supported by our Seppeltsfield partnership will create a competitive advantage, allowing a clear and repeatable portfolio of products. We will be able to assess our aging needs into the long term. Moving to the next slide. Brand identity impact. We'll create a clear brand identity, which represents Lark as a modern leader in luxury whisky. This will include our tone of voice, our aesthetic and design principles and our distinctive brand assets. Under range, pricing and phasing, there is consideration of entering new markets, which is our priority. Our domestic market will take time to transition as we time our phasing of our new portfolio with our current end market partners. We will also have a clear global travel retail range, which provides differentiation and excitement. Finally, under tools and assets. This provides the guardrails to our partners and teams about how we show up, the tools that will be required to tackle key brand challenges such as driving awareness, increasing distribution and promoting trial. We can expect to see our brand restaged live at the conclusion of FY '25, as outlined in our milestones previously. Let's move to the next slide, which outlines our growth plans. This was outlined at our Investor Day last year and is broken into 3 key phases. To recap, in the first phase, which we have already commenced executing against, and I will cover in detail in the next slide, represents the next 3 to 4 years. We will establish our [ breach ] heads. In the second phase, it's all about building on and embedding these foundations. As we look to phase III, this is where we will accelerate revenue and continue to build increased brand equity. Together, this growth brand will see Lark achieve its ambition of becoming a leader in New World whisky. This next slide talks to our scorecard for phase 1. For FY '24, we've added a column on the far right-hand side to capture and report against our KPIs. For our first strategic priority, building long-term brand value, the last brand restage has commenced and is on track for launch by the conclusion of FY '25. Against our second strategic priority of international sales momentum and domestic market leadership, we have taken positive steps and there is good momentum against all KPIs. 4 Southeast Asian distributors are in place with sales of $0.9 million in half 2, and we have activation in place to drive depletions in market for FY '25. Global Travel Retail has delivered sales of $1.1 million in FY '24. Domestically, we're transitioning our B2B business to Spirits Platform. Against, our third strategic priority of cash and capital discipline, our $50 million NAV facility remains in place, undrawn and available to January '28. We've made the decision to divest the Bothwell distillery. We've increased balance sheet flexibility from the equity raise to be completed by the end of the week, and we remain committed to positive operating cash flows during FY '27. Finally, I'd like to talk to you about our perspectives for FY '25. As we look ahead to FY '25, this will be set against the backdrop of an ongoing challenging trading environment where consumers remain cautious. However, we remain focused on executing against our strategic priorities. We are exiting FY '24 with good momentum, making tangible progress against our KPIs. When doing what we said we would, we're walking the walk as we execute our strategy to build the correct foundations to generate long-term brand value. For our first strategic pillar, building long-term brand value, our portfolio and positioning development through our restage will be delivered by the end of FY '25. We will increase investment in advertising and promotion in the short term to greater than 30% to support the Asia export business and build brand awareness. We'll also make enhancements to Lark's Cellar Door offerings in Hobart. Against our second strategic priority, international sales momentum and domestic market leadership, net sales growth is projected in FY '25, despite the shift in our domestic distribution model. FY '25 growth is weighted to half 2, including expansion through export, Global Travel Retail, direct-to-consumer sales and the Whisky Club. We remain focused on driving awareness and depletions in newly launched markets while readying further market expansion with the brand restage. Finally, against our third pillar, cash and capital discipline, as I mentioned earlier, we will divest Bothwell with a sales campaign to commence in spring. We'll undertake modest developments to our Pontville site as we transition this site to be Lark's long-term home. And we will continue to exercise cash and capital discipline while utilizing the proceeds from the equity raising. With that, I'd like to thank you for your ongoing commitment to last, and I'll now open to questions.

The first question comes from [indiscernible] Finch. Can you talk through the Asia distribution strategy? How will you invest in each market? And what are the key success drivers in building brand momentum as you've seen them?

So the Asia distribution strategy, which neatly is aligned to our general distribution strategy, we are wholly and exclusively going through a distributor model, i.e., using the expertise of distributors with strong portfolios as we go into market. Initially, our priorities are about building awareness, but equally, what we are trying to do is ensure that we build distribution, i.e., making our product available for sale, after which we then need to start activating those distribution points to build that momentum. Our first port of call is obviously to drive those key attributes of Lark, why a consumer should enter our franchise, why they should explore whisky from the New World, and we have to give them the reasons to make sure that they include Lark in their repertoire of consumption. So the success drivers about building brand momentum are: first, to create those hooks that we talked about as we undertake that restage for a global audience, but equally work with our distributor partners and their strong portfolios to drive growth in each of those markets and channels.

The next question comes from Martin [indiscernible]. Previously, North America and North Asia have been mentioned as export markets. Can you please speak to plans to enter these markets?

Yes, absolutely. I mean, it's no surprise that those 2 areas of the world are key whisky consumption, let's call it hotspots. North America and North Asia are firmly in our plans. We would look to enter both of those areas with our restage, i.e., entering those markets with the right formats, the right proposition, the right brand identity. All of those are firmly in play. We are talking to distributors as we speak. And the hope is that as we enter -- well, as we conclude our restage, we enter those markets quickly after.

A follow-up question from [ Max MosaFinch ]. Any comments just on domestic consumer sentiment and demand? Is this continuing to come under pressure?

Yes, absolutely. I think you've heard from me before, Lark at its price point is resilient [indiscernible] immune from the general consumer sentiment that's out there. What we have is a fantastic brand and the equity that's been built over 32 years. So what we've got is sentiment, yes, but we also have [indiscernible] an amazing loyal base. And we also are really pleased with the change in our distribution model, which means that our product is going to be in more places in front of more consumers, in front of the trade, expanding our footprint past where we've been to date. So I'm excited about the growth that we're about to see with our spirits platform partner. They are an incredibly credentialed group. And I think they're excited, which is really important to see what they can do with our brands within their portfolio. So yes, we are exposed to the domestic trading pressures, but we also have plenty of growth opportunities past where we've been today.

A question on the Tasmanian peated industry. Can you speak to how defensible this profile is? How difficult is it for competitors to access Tasmanian peat?

Yes. So there are other distilleries in Tas, producing using some peated whisky. The majority of this is from Scottish Peated Malt, and there is a bit of private land with peat that's found its way into whisky, but a very, very small scale. Lark originally took an existing mining license on an existing site and we think to get a new mining license for a new site would be very challenging to have as a competitor at scale. So that's the actual getting the peat probably to note, it's not just the peat itself, it is the peat combined with our peat-smoking system, which gives a different flavor profile from the peat smoke itself. So we think all of that combined gives us a competitive advantage. It isn't just the peat-smoking process, however, it's the access to barrels, including barrels Seppeltsfield partnership, the quality and process of the new make itself, will contribute to that award-winning whisky the blenders produced, which we're exceptionally proud of.

Thanks, Iain. And another question for you. What are the expectations for Bothwell sale proceeds?

So we -- as we've outlined, and Sash touched on, we've appointed an agent just last month to explore sales and marketing of the Bothwell site. It's a difficult one to put a firm figure on simply because it is such a unique and history asset within Tasmania and indeed the world. So it's something we're exploring through. As Sash outlined, we will divest at the right price. We just need to go through that process to understand that to make sure we're making the absolute best decision on our assets.

At this stage, there are no more questions. [Operator Instructions] One last one from Max. How should we think about channel fill in the coming quarters, so we know what to expect in coming quarters?

I think it's important that we call out a few things. As we go to new markets, we will sell-in, and the idea there is that we will sell into those distributors to ensure that they've got enough stock. That initial sell-in has taken place. So we are now looking at demand signals. We're at a very, very, very early stage of understanding what the markets that we've entered will provide in terms of demand signals. You can imagine when you get to a level of maturity, such as Australia and global travel retail, that becomes a little bit easier to predict. But equally, in Australia, we've gone through a distributor model. And hopefully, what we start seeing is an uptick in that. But as we talk through the next little while, we'll be starting to look at those initial depletions, which will, again, form our opinion about what the next sell-ins will be, but export markets, generally, we'll see chunks of selling as opposed to replenishments, which you'd expect to see in Australia.

We have a question related to insurance, probably one for you, Iain. The inventory makes up a very large component of the balance sheet. What insurance policies does Lark have place to protect this asset?

Yes, good questions. I think, yes, insurance is one element. But given as the question right point, so it is a very large component, and it's critical to underwrite our future growth. So we've got multiple controls and processes around our inventory, including spreading over different sites across Tasmania that insurance is born part of that policy. We do have appropriate coverage in place, but that's just one portion of the controls and processes we have around protecting our inventory and making sure we've got the right audit sampling to make sure it is really fulfilling that future growth requirements.

That was the last question. Thank you, Sash, over to you.

Yes. Thank you, everyone, for joining and making time in your schedules. I'm sure today is a busy day for everybody. But I appreciate all of the ongoing support. And for those shareholders that have been part of the capital raise and the SPP, we'll be coming back to you guys shortly. And we do have an AGM on Friday that we're very positive about. So once again, thank you for your continued support of Lark, and we look forward to sharing more news about the exciting developments that we're all working on to make us a leader in New World whisky. Have a good day.