The Australian Wine Industry

CONTENT

Title Page

Introduction Ð'- Background & Issues 1 - 2

Financial Analysis 3 Ð'- 8

Summary of Financials 9 - 13

Significant key opportunities and risks for the company 14 - 15

and investors in McGuigan

Other financial and non-financial factors that impact upon 16

McGuigan's performance and attractiveness as an investment

opportunity

Limitations of the analysis & implications of these limitations for 17 - 18

any investment decision

Appendix A: References 19

Background & Issues

The 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.

Percy McGuigan's 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 Australia's 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)

Ð''MGSW is targeting focus on a number of things but in particular costs, costs, costs.' He said he had been Ð''embarrassed' 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 Analysis

The following key financial ratios for MSWL are for the period 2003 to 2005. (MSWL Annual Financial Report 30 June 2005 & 30 June 2003)

Working Capital

2005 ($'000) 2004 ($'000) 2003 ($'000)

377418 Ð'- 124905

= 252,513

332319 - 135304

= 197,015

255854 Ð'- 105775

= 150,079

Profitability

Profit Margin Ratio

2005 ($'000) 2004 ($'000) 2003 ($'000)

45112

368050

= 12.2%

40248

305708

= 13.1%

32204

283450

= 11.3%

Gross Profit Ratio

2005 ($'000) 2004 ($'000) 2003 ($'000)

91111

368050

= 24.7%

88931

305708

= 29%

74096

283450

= 26%

Return on ordinary shareholders equity ratio

2005 ($'000) 2004 ($'000) 2003 ($'000)

35895

(361288 + 332641)/2

35895

346964.5

= 10%

40248

(332641 + 270452)/2

40248

301546.5

= 13%

32204

(270452 + 226093)/2

32204

248272.5

= 12.9%

Return on Assets

2005 ($'000) 2004 ($'000) 2003 ($'000)

35895

(681471 +625006)/2

35895

653238.5

= 5.4%

40248