Treasury Wine Estates (TWE) has provided more reasons why it was right to reject the opportunistic moves by private equity groups to try and grab control of the company on the cheap.
Several private equity groups (Kohlberg Kravis Roberts and CO (KKR), with junior partner Rhone Capital, and TPG Capital) tried to grab TWE last year and the year before at an indicative price of $5.20 a year or thereabouts.
TWE directors rejected those attempts as undervaluing the company.
Yesterday’s close of $6.25, up 13.4% confirms the rightness of that rejection (you won’t read much about that from many in the media who had written the company off as a basket case).
Treasury said that the statutory net profit after tax $77.6 million was up $178.5 million on the prior year.
Net sales revenue was up 8.4% to $1.848 billion.
The shares jumped sharply after the 2014-15 results revealed a sharp improvement in sales into the tough China market.
Treasury, whose major brands include Penfolds, Wolf Blass, Rosemount and Lindemans wines, revealed a 53.2% jump in profits in Asia, with earnings from the region reaching $73.1 million in the year to June.
Volume growth in China was up 36% and profit margins hit a tasty 36.5% in Asia, compared with 14.4% in the company’s Australian business.
CEO Mike Clarke said in the report that the improved result paves the way for potential capital management steps because of the firm’s robust cash position.
“TWE concluded the fiscal 2015 year with a very robust cash position. Management and the Board are keen to deploy this capital in a careful and Earnings Per Share accretive manner.
"We are therefore evaluating all our capital management options and we will update the market by no later than our interim 2016 result announcement,” Mr Clarke said in yesterday’s statement.
In Australia, profit grew at a more modest rate of 12.4% to $84.4 million and sales revenue rose 4.3% to $586 million.
Mr Clarke said the “concentrated retail environment” (which is code for Woolworths and Coles wielding too much power in liquor retailing) hurt profits.
He said an oversupply of wine and intense competition also had an impact in the domestic market.
The company will pay an unfranked final dividend of 8 cents a share, to be paid on October 2.
The total dividend for the year was 14 cents, 1 cent higher than last year’s payout.
