Corporate Objectives & Governance
OBJECTIVES
To maximise returns to shareholders while at the same time conserving adequate funds to provide the necessary working capital for the continued operation and growth of the Company.
Information relating to dividend payments and financial gearing is available in our Key Ratio Analysis which is provided for the last 10 years.
This document can be downloaded here.
To expand the distribution base of Peter Lehmann Wines products in both the domestic and export markets.
PLW's strategy of moving more of the wine made into the value-added bottled wine segment has been very successful.
Progress can be reviewed in the Discussion of Financial Result section, under Investors>Latest Annual Report.
To maintain the reputation of the Peter Lehmann Winery business as a producer of premium wines.
PLW, located in the renowned Barossa Valley, has a strong regional focus and a commitment to excellence in winemaking. This is evidenced by awards received in international and domestic wine shows.
To acquire top quality fruit by developing further the strong relationship between the Peter Lehmann Winery and Barossa grape growers.
PLW places great emphasis on working with the independent growers. Grape intake data is included in the Operations section, under Our Winery.
Provide a safe workplace for employees.
Workplace management and injury statistics are provided in the OHSW Management section, under Annual Report.
Use resources in an environmentally sustainable way.
We believe it is our responsibility to ensure available resources are used efficiently, the effects of the winery operations on the environment are minimised, and materials are recycled wherever possible. Information on our environmental initiatives is included in the Environment section.
Be a good corporate citizen both socially and environmentally.
PLW strives to maintain its reputation as a responsible corporate citizen by:
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providing employment
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buying locally wherever possible
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paying taxes
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distributing dividends
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controlling its impact on the environment
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supporting local community groups
GOVERNANCE
The directors set out to develop a transparent and accountable framework from the time of the Company’s formation in 1993. This direction and attitude have shaped the policies, practices and culture of PLW.
Board of Directors & its committees
Role of the Board
The directors have the overall obligations to act in the best interests of the shareholders and to protect the shareholders’ investment.
Download the Board Charter here.
Responsibilities of the Board
The board is responsible for the strategic direction of the business, establishing goals for management and monitoring the achievement of goals directly and through its committees. the operation and administration is delegated to executive management.
Matters considered by the Board
The board charter defines the purpose, responsibilities and operation of the board. Issues of substance affecting PLW are considered by the full board of directors, with advice from appropriate committees and external advisers as required.
Specific matters reserved for the Board -
- Review and approval of the business strategies and governance developed by management
- Approval of financial and other reporting
- Review and approval of the operating budget and capital expenditure projects
- Monitoring the financial performance and capital management of the business
- Reviewing the risk management system and ensuring the integrity of internal controls and management information systems including adherence to the codes of conduct and legal compliance program
- Monitoring senior management’s performance and implementation of the business strategy
- Setting remuneration and appointing, removing and creating succession policies for directors and senior executives.
Composition
The Constitution requires a minimum of three and a maximum of ten directors. Up to five directors may be executive directors.
All directors are subject to election by shareholders at the first opportunity after their appointment. By rotation one third of the directors are required to be re-elected at each annual general meeting. New directors appointed by the board are required to seek election at the first general meeting of shareholders following their appointment.
The ownership of the Company whereby two shareholders control 96% of the issued shares has determined the board structure. It is not considered appropriate to set a maximum term of office for individual directors.
Process
The board generally schedules one meeting each year at the winery and this provides directors with the opportunity to visit the production facilities and for contact with a wider group of employees. Other meetings may be convened at other venues or conducted by conference calls.
To assist in the execution of its responsibilities the board has established an audit committee and a remuneration committee. Following each audit committee meeting the board is given a verbal report by the committee chairman.
Each director has the right to seek independent professional advice at the Company’s expense after first obtaining the chairman’s approval. A copy of the advice received by the director is made available to all other members of the board. The chairman has the discretion to approve expenditure without prior reference to the board or to refer the request to the board.
Audit Committee
A documented Charter detailing the role, membership, responsibilities and reporting has been determined. The role of the audit committee is to oversee and enhance the credibility of the financial reporting process of PLW.
The objectives of the committee include:
- assessing the risk and control environment, reviewing accounting policies, internal controls, practices and disclosures to assist the board in making informed decisions;
- overseeing the financial reporting to ensure it complies with Australian Accounting Standards (AASBs), is of a high quality and appropriate prior to recommending adoption of the financial statements by the board for release to shareholders; and
- evaluating the audit process, particularly the scope, effectiveness and outcome.
The audit committee is comprised of non-executive directors. Committee members are financially literate, that is, have the ability to read and understand financial reports including income statements, balance sheets and statements of cash flow. The committee chairman has financial experience, is knowledgeable about financial and auditing processes and is responsible for the planning and conduct of meetings and overseeing the reporting to the board.
The audit committee meets at least twice a year to coincide with the production of published financial statements and the assessment of external audit reports. The external auditor, the chief executive officer and chief financial officer & company secretary are invited to audit committee meetings. The committee members consult directly with the external auditor as required. This consultation may be independent of management in order to provide an opportunity for the auditor to discuss any contentious issues or raise concerns.
The audit committee reviews the performance of the external auditors on an annual basis and normally discusses with them the external audit, identify any significant changes which are likely to impact on the financial statements and review the fees proposed for the audit work to be performed. The audit committee provides advice to the board in respect of whether the provision of non-audit services by the external auditor is compatible with the general standard of independence of auditors imposed by the Corporations Act 2001. The external audit firm was appointed in 1993 and the audit engagement partner was last rotated in 2009. Each reporting period the external auditor provides an independence declaration in relation to the audit or review. The audit committee addresses any matters outstanding with auditors, Australian Taxation Office, Australian Securities and Investments Commission and the Company’s bank.
The Company is subject to legal and regulatory compliance with the audit committee responsible for reviewing the legal compliance program regularly. Procedures are in place to ensure compliance with continuous disclosure, occupational health and safety, environment, label integrity, export, trademarks and liquor licence requirements. The Company is cognisant of its responsibilities in relation to food safety, efficient use of resources, effective lifecycle management of packaging and paper products, and the hazard analysis critical control point methodology as applied to the wine industry.
The chief executive officer and chief financial officer complete a detailed questionnaire regarding the financial reports and underlying internal controls and risk management system. They provide a written statement that, in all material respects, the financial reports present a true and fair view of the Company’s financial condition and operational results and are in accordance with relevant accounting standards. This statement is made at half yearly intervals. The audit committee assesses management processes which support external reporting.
Remuneration Committee
A documented Charter detailing the role, membership, responsibilities and reporting has been determined.
The committee reviews and makes recommendations to the board on the remuneration packages of directors and senior executives. It is also responsible for incentive performance policies, superannuation entitlements, retirement and termination entitlement, and fringe benefits policies.
Ethical Standards
All directors and employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.
PLW has codes of conduct for directors and staff and finance officers.
Risk Management
The board as a whole considers the major risks affecting the business. It is not intended to eliminate risk. The risk management system encompasses all financial, operational and compliance controls and is subject to regular review.
The chief executive officer and the chief financial officer have declared, in writing to the board that the financial reporting, risk management and associated compliance and controls have been assessed to be operating effectively and efficiently. All risk assessments covered the whole financial year and the period up to the signing of the annual financial report for all material operations in the Group and joint ventures.
PLW has a simple business model with these features:
- sourcing of grapes from 139 independent growers who bear the agricultural risks
- a single processing site
- the winery operations are subject to South Australian Environment Protection Authority (EPA) requirements with regular monitoring of licence requirements reported to the EPA as required
- stable workforce
- packaging work outsourced
- wine is sold through independent distributors in Australia and overseas markets except for the USA
- wine is sold to a commonly controlled company in the USA
- distribution in the UK was through a joint venture until February 2012
- retail sales through the Cellar Door
- operates in a market subject to rapid changes in consumer preferences
- affected by potential government policy changes regarding the taxing and regulation of the alcohol industry
Major business risks have been identified as the sourcing of grapes, the impact of exchange rate movements on sales, interest rate variations, actions by competitors and government policy changes. Procedures have been developed to minimise the effect of these risks wherever possible.
Grape Intake
81% of the 2012 grape intake was from contracted growers. Crop levels vary with seasonal events and restrictions on water allocations have the potential to constrain yields.
Occupational Health & Safety
Occupational health and safety standards and management systems are monitored and reviewed by the board to assess performance and compliance with regulations. The Company recorded a serious injury in February 2012 and received three improvement notices from the regulatory body SafeWork SA. The incident did not result in a safety prosecution.
Environmental Impact
The Company’s operation has the potential to impose environmental risks through chemical storage and handling and winery wastewater. Winery wastewater is treated onsite and then piped to a nearby operator where it is further processed before being returned for irrigation on lawns and gardens at Cellar Door. The Company voluntarily reports emissions to the National Pollutant Inventory and is a member of the Australian Packaging Covenant which seeks to reduce packaging materials entering the waste stream. PLW is signatory to the South Australian wine industry sector agreement which seeks to record and reduce carbon emissions. PLW uses the Australian Wine Industry Carbon Calculator to measure the emissions of greenhouse gases and is a preliminary member of the Wine Federation of Australia’s EntWine program which addresses sustainability issues.
Wine Quality
Winemakers, laboratory, cellar and maintenance staff are trained to ensure PLW complies with the highest production standards. The hazard analysis critical control point program (HACCP program) has been implemented to ensure food safety issues are addressed with PLW granted accreditation in 2011. The accreditation is subject to annual audit with PLW being granted renewed accreditation in May 2012. The contract bottler is HACCP and ISO 9001 accredited.
Channels to Market
PLW works closely with a range of buyers including distributors, wholesalers, retailers, mail order businesses, duty free operators and the restaurant trade.
Competitor Activity
The Australian wine industry is dominated by three large producers and their marketing and selling programs, particularly with large retail chains, influence trading conditions in many markets.
Exchange Rate Movements
PLW transacts export sales in Australian dollars, Euros, US dollars and Canadian dollars and has developed a treasury management policy to ensure personnel do not engage in unauthorised trading positions.
Interest Rate Movements
Interest rate risk emanates from changes in market interest rates impacting on the Company’s short and long term debt. This exposure is managed by combining fixed interest rate swaps with floating rate arrangements.
Communication with Shareholders
The directors ensure shareholders are informed of all major developments affecting the Company.
- The half yearly report contains summarised financial information about the operations during the period. The half-year reviewed financial report is lodged with the Australian Securities and Investments Commission (ASIC), published on the Company’s website and sent to any shareholder who requests it.
- A summary of the half-year result is sent to all shareholders in March each year.
- PLW prepares full financial statements which are made available as soon as they are approved by the board and by no later than the end of September each year on the Company’s website. The Company also sends a copy to any shareholder who requests a copy.
- The annual report and other relevant information about the operations during the financial year, changes in the state of affairs and details of future developments are made available on the Company’s website. The annual report is sent to any shareholder who requests a copy.
- Shareholders, who elect to do so, receive promotional information in the form of newsletters which are usually circulated twice a year.
- Shareholders may also join the electronic mailing list and receive notices of the winery’s activities and promotional information.
- All announcements, financial statements and other relevant reports are made available on the Company’s website within a day of public release.
- Announcements, annual reports and financial statements are archived on the Company’s website.
The board encourages full participation of shareholders at the annual general meeting (AGM). The shareholders are requested to vote on the appointment and aggregate remuneration of directors and changes to the Constitution. The audit engagement partner attends the AGM and is available to answer questions about the conduct of the audit and the preparation and content of the auditor’s report.
