At a time when the wine industry throughout Australia is feeling a lot of pain, Frankland River producer Ferngrove is awaiting the second part of a recent $10 million capital expansion.
At a time when the wine industry throughout Australia is feeling a lot of pain, Frankland River producer Ferngrove is awaiting the second part of a recent $10 million capital expansion.
In an overproduced environment that has undergone, and will continue to undergo, significant rationalisation, Ferngrove has opted for expansion.
It has sunk big chunks of its latest raising from new and existing shareholders into expanding its winery, marketing and slashing its gearing from 45 per cent to 20 per cent.
In so doing, unlisted core public company Ferngrove Vineyards Ltd has former Goundrey Wines owner and new majority shareholder of the Perth Wildcats basketball team, Jack Bendat, as the second largest of its 450 shareholders with about 17 per cent. This is just behind Ferngrove founder Murray Burton, who holds about 18 per cent.
The first vines at Ferngrove, 360 kilometres south of Perth and west of Mt Barker, were planted in 1998. A big winery and cellar door with a two-storey tower was built the following year, with the first vintage produced in 2000.
Funded under a managed investment scheme that has raised $50 million since 1998, Ferngrove is now the state’s third largest winery in terms of individual production, after Houghton and Evans & Tate.
While many vineyard managed investment schemes have been criticised, and accused of directly contributing to the wine industry’s oversupply situation, Ferngrove CEO Anthony Wilkes said the model could provide a good kick-start to raising funds for the professional development of serious wine operations.
“Nothing stays static and once a business achieves certain milestones, it has to look at its marketing and business plans, the funding and capital structure of the company. If a better way exists, we make changes to maximise our competitiveness,” he told WA Business News.
In this regard, Mr Wilkes did not rule out a future public listing, but said it was not an option at this time, given the company’s liquidity and the general perception of the wine industry.
Previous capital raisings have included convertible notes, reset preference shares and equity raisings via rights issues to existing shareholders “to position the company with a strong balance sheet and relatively low gearing.
“Agribusiness needs competitive models to attract capital. It is an industry we rely on and goes through cycles that require patient funds due to the long lead times to build markets and time lags involved in production,” Mr Wilkes said.
Ferngrove Vineyards owns the recently redesigned brands, winery and a surrounding 153 hectare vineyard. It also buys premium fruit from a number of other vineyards, including nearby investment projects Frankland Valley (70ha) and Karri Oak (135ha), which it manages.
This year’s crush was expected to be up about 500 tonnes to around 5,500t, about 40 per cent of which would go into Ferngrove’s own labels. The rest would be for client specification bottling and contract sales.
The company produces about 85,000 cases a year under the Ferngrove and associated labels, including 25,000 cases under its Margaret River Leaping Lizard brand.
About 60 per cent is sold in Australia and the rest exported – 65 per cent to the UK, 25 per cent to the US and Asia.
Mr Wilkes said sales were currently about 26 per cent up on last year and had posted 20 per cent growth rates in branded sales for each of the past four years.
Part of an expanded marketing plan is a new look, more classic, streamlined logo and branding strategy featuring the singular fern.
“We aim to be in the very top echelon of Australian quality wine producers,” Mr Wilkes said.
“Our point of difference is the Frankland River region.”
• Mark Mentiplay visited Ferngrove as a guest of the company.
