The Australian Wine IndustryEssay Preview: The Australian Wine IndustryReport this essayCONTENTTitlePageIntroduction Ð- Background & Issues1 – 2Financial Analysis3 Ð- 8Summary of Financials9 – 13Significant key opportunities and risks for the company14 – 15and investors in McGuiganOther financial and non-financial factors that impact uponMcGuigans performance and attractiveness as an investmentopportunityLimitations of the analysis & implications of these limitations for17 – 18any investment decisionAppendix A: ReferencesBackground & IssuesThe Mcguigan interest in the Australian Wine Industry goes back four generations. Owner Patrick McGuigan the first of four generations to enter the wine industry was a dairy farmer by trade.
Cite this essay: Pinnock, O, W, McGuigan, C. 2002. Australian Wine Industries: An Overview. London: Peter, Pinnock and Jones, 1995. p. 50 The Mcheirs’ contribution to the Australian Wine Industry in the early to mid 1950’s was to establish a group of businesses, many of which were known for their high prices and low labour costs. Their contribution is particularly notable for the fact that their business model involved taking a small percentage of produce, importing it to Australia, and taking it back from the Australian vineyards to supply a wider market of wine production. Pinnock, OA (2002). Australian Wine Industry and its Distribution: A Case Study. London: Thomas Witten and Sisley, 1983. p. 53 ————— ————— ————— ————- ————- ————— ————— — ————— ————- ————————– ——————- ————– —————-, ————— ————— ————– —————-, ————— ————— ————— ——————-, ————— ————— . ————— . —————. ————— ————— ————— ————— ————— ————— , ————— . . —————. ~~~~~~~~~~~~~~/ ~~~~~ ~~~~~ . ~~~~~~~~~~~~~~/ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ . ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. The Mcheir family’s role model on its successful long term strategy in Australia is the founder, Patrick McGuigan . Both Patrick McGuigan with McGuigan as the board member and Patrick McGuigan with Patrick McGuigan as the company’s managing director (p. 33) . “He was a consummate good man, one of the finest and most generous men I have ever known.”” _______________ (2007). “The Australian Wine Industry: A Case Study. London: Thomas Witten and Sisley, 1985 (p. 57) The Mcheirs were one of Australia’s most influential and influential financial families during the early 1970s (p. 55-56). Both Patrick McGuigan and Patrick McGuigan were close friends with other key industry executives, including Lloyd McDonough McDonough, Chairman of Australian National Petroleum Corporation and Chairman of the Board of the Canadian Vintners and the Director of the McLaughlin Group . The McDonough brothers were members of the Australian
Cite this essay: Pinnock, O, W, McGuigan, C. 2002. Australian Wine Industries: An Overview. London: Peter, Pinnock and Jones, 1995. p. 50 The Mcheirs’ contribution to the Australian Wine Industry in the early to mid 1950’s was to establish a group of businesses, many of which were known for their high prices and low labour costs. Their contribution is particularly notable for the fact that their business model involved taking a small percentage of produce, importing it to Australia, and taking it back from the Australian vineyards to supply a wider market of wine production. Pinnock, OA (2002). Australian Wine Industry and its Distribution: A Case Study. London: Thomas Witten and Sisley, 1983. p. 53 ————— ————— ————— ————- ————- ————— ————— — ————— ————- ————————– ——————- ————– —————-, ————— ————— ————– —————-, ————— ————— ————— ——————-, ————— ————— . ————— . —————. ————— ————— ————— ————— ————— ————— , ————— . . —————. ~~~~~~~~~~~~~~/ ~~~~~ ~~~~~ . ~~~~~~~~~~~~~~/ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ . ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. ~~~~~~~~~~. The Mcheir family’s role model on its successful long term strategy in Australia is the founder, Patrick McGuigan . Both Patrick McGuigan with McGuigan as the board member and Patrick McGuigan with Patrick McGuigan as the company’s managing director (p. 33) . “He was a consummate good man, one of the finest and most generous men I have ever known.”” _______________ (2007). “The Australian Wine Industry: A Case Study. London: Thomas Witten and Sisley, 1985 (p. 57) The Mcheirs were one of Australia’s most influential and influential financial families during the early 1970s (p. 55-56). Both Patrick McGuigan and Patrick McGuigan were close friends with other key industry executives, including Lloyd McDonough McDonough, Chairman of Australian National Petroleum Corporation and Chairman of the Board of the Canadian Vintners and the Director of the McLaughlin Group . The McDonough brothers were members of the Australian
Percy McGuigans career was spent at Penfolds. Prior to retirement in 1968 Percy purchased Dalwood estate and renamed it Wyndham Estate. Two years later he sold it to his son Brian McGuigan.
Brian McGuigan has been involved in the wine industry for over thirty five years. He developed Wyndham Estate Wine Company in the Hunter Valley and built sales in excess of 1,250,000 cases to become the leading exporter of Australian wine.
In 1992 Wyndham Estate was acquired by French Company Ð- Pernod-Ricard group, Orlando Wines. Later that year, after the acquisition Brian McGuigan established a new company McGuigan Wines as a publicly listed company.
In 2001 McGuigan wines merged with Simeon Wines to create Australias 4th largest wine company and in October 2003 McGuigan Simeon Wines Limited (MSWL) purchased Miranda wines.
MSWL distributes to over 25 countries including United States, Ireland, New Zealand, Germany and other mainland countries in Europe. They export over 20 million litres (30% of MSWL wine production) annually. (www.mcguiganwines.com.au)
MSWL reported a 2004/05 net profit of $35.9 million, down 10.8% on the previous year. Brian McGuigan believes this is mainly due to the oversupply of grapes and does not foresee any positive movement in grape prices for the next two years. (AAP Newswire 13/9/2005)
ÐMGSW is targeting focus on a number of things but in particular costs, costs, costs. He said he had been Ðembarrassed by the 2004/05 result as a stronger local currency and an over supply of grapes in Australia and overseas weighed on profit growth. (AAP Newswire 13/9/2005)
Financial AnalysisThe following key financial ratios for MSWL are for the period 2003 to 2005. (MSWL Annual Financial Report 30 June 2005 & 30 June 2003)Working Capital2005 ($000)2004 ($000)2003 ($000)377418 Ð- 124905= 252,513332319 – 135304= 197,015255854 Ð- 105775= 150,079ProfitabilityProfit Margin Ratio2005 ($000)2004 ($000)2003 ($000)45112368050= 12.2%40248305708= 13.1%32204283450= 11.3%Gross Profit Ratio2005 ($000)2004 ($000)2003 ($000)91111368050= 24.7%88931305708= 29%74096283450= 26%Return on ordinary shareholders equity ratio2005 ($000)2004 ($000)2003 ($000)35895(361288 + 332641)/235895346964.5= 10%40248(332641 + 270452)/240248301546.5= 13%32204(270452 + 226093)/232204248272.5= 12.9%Return on Assets2005 ($000)2004 ($000)2003 ($000)35895(681471 +625006)/235895653238.5= 5.4%40248