The New Zealand Wine Company

Foley Family Wines Limited – Half Yearly Report 31 December 2014

Highlights: Sales $15.6m, 13.5% above prior year Underlying earnings $661,000, 788.5% above prior year EBITDA $2.85m, 95% above prior year Major capital projects completed. Wines continue to win accolades. Mark Turnbull, Chief Executive Officer of Foley Family Wines Limited announced today that the company’s unaudited half year result for the six months ended 31 December 2014 was a profit after tax of $400,000 compared with $1,036,000 for the same period last year. Underlying earnings of $661,000 was $757,000 higher than for the same period last year. The Directors believe the result demonstrates the company is on the right track towards long-term profit improvement, although there is some way to go to meet the company’s potential. The Directors concur with other industry participants that financial statements prepared in accordance with NZ IFRS do not give a clear insight into the Group’s underlying operational performance. In particular, the fair value adjustment for the realised gain on harvested grapes (which represents the reversal of the prior period’s unrealised gain on grapes harvested), has resulted in a write down of $169,000 (2013: $892,000 write up). Revenue for the 31 December 2014 half year was up by $1,861,000 (13.5%) on the same period last year. Martinborough Vineyards revenue contributed $611,000 for the six months which was disappointing, but reflected transition of distribution arrangements in Australia. New distribution arrangements are now in place and the company is optimistic about getting Martinborough Vineyard sales back on track. The recent Decanter Magazine article that rated its Chardonnay as the best in the world outside Burgundy has been a catalyst for renewed interest in the brand. Case sales were flat at 177,000 dozen however, the increase revenue is due to a higher case sale realization. This is attributable to our changing product mix to higher value brands. Last year, we stated the company was concerned with the large pending harvest. These concerns were well founded given significant discounting in the market and the price of bulk Sauvignon Blanc trading below $3 per litre. Exchange rates continue to be volatile. Exporters have had some relief against the USD, however the AUD and the Euro continues to provide a headwind. Bulk wine sales were the equivalent 13,557 cases, up 8,218 from 2013. In January, our warehousing project at Grove Mill was completed, which has enabled the company to bottle and warehouse on site. The new warehouse means some significant cost savings and efficiency gains. Previously the company utilised warehouses at 5 different locations around the country meaning loading mixed containers to markets was both time consuming and expensive. All wine from the wineries are now bottled on site and in the coming months all inventory will be consolidated at Grove Mill. With the warehouse now completed the major capital expenditure projects have come to the end and the company will move to a maintenance level of expenditure for the existing business. The Directors are pleased with the continued strength of the company’s balance sheet and improvement in equity from $95,283,000 in December 2013 to $112,742,000 in December 2014. This represents an increase of $4,605,000 after taking into account shares issued as a result of the Martinborough Vineyards takeover and capital raising. This puts the company in a strong position financially to take advantage of opportunities that may arise in the market. Authorised for public release. For further information please contact: Mark Turnbull CEO, Foley Family Wines Limited PO Box 67, Renwick, 7243, Marlborough Tel: +64 21 714 885 Email: mark@ffw.co.nz