Watershed Wines is planning to raise $12.1 million for its Margaret River Premium Wine Project, providing yet another example of a managed investment scheme prepared to push ahead with growth plans despite uncertain times in the sector.
Watershed Wines is planning to raise $12.1 million for its Margaret River Premium Wine Project, providing yet another example of a managed investment scheme prepared to push ahead with growth plans despite uncertain times in the sector.
Watershed wants to acquire a new 60 hectare property adjacent to Vasse Felix, with funds sourced from a combination of new and existing investors.
The move follows recent news that Mt Barker-based Ferngrove recently raised $10 million to fund growth and reduce debt at a time when many traditional wine businesses are in trouble amid a glut of grapes.
Watershed has raised a total of $56 million since its first public offer in 2001. In addition, MIS-backed viticulture operations have come under fire for their motives and intentions, with frequent criticism from some quarters suggesting that the schemes were established with tax breaks and the interests of the promoters in mind, rather than creating a viable wine business.
On top of this, there have been renewed murmurings that the tax concessions that have attracted investors to agriculture investment schemes may be the subject of a review by government.
Speculation about MIS rules often sweeps the sector at this time of year – the critical selling period.
Watershed managing director Geoff Barrett said that the key to the success of the project had been the continued focus on quality, and producing premium-end wines.
He also scotched concerns about oversupply.
“Some regions have an oversupply and in Margaret River this is the case for cabernet sauvignon, and this glut may exist for four to five years, but there is strong demand for sauvignon blanc, semillon and chardonnay,” he told WA Business News.
“Also, this year will be a bad vintage, meaning that there is still strong demand for quality product.”
As for the MIS argument, Mr Barrett believes that a properly managed MIS project is an appropriate means of attracting capital for what is a capital intensive business.
“From an industry and investor point of view there is more acceptance now of MISs as part of a well balanced investment portfolio,” he said.
“Product rulings governing tax deductibility and ASIC’s involvement in the industry have helped with this.”
The vineyard has 117 hectares under vines and 194,000 planted vines, and water supply is provided by a purpose built $350,000, 201-mega-litre dam.
Watershed built its facilities in two phases, the first of which included the cellar door and administration centre for $1.1 million.
The second phase included an 800-tonne wine processing facility and, in 2003, its Gold Plate award winning cafe and restaurant. Watershed’s wines are sold through 1,800 outlets Australia wide by a sales team employed by the company, and it exports to 13 countries including the massive Chinese market.
Looking at future growth, listing is one option the company may consider.
It is looking to reach a target of 240 hectares under vines, which would equate to around $20 million in revenue as a benchmark of scale to make listing a possible viable option.