How Treasury Wine defied the cynics

Michael Clarke has more than delivered on expectations since Treasury Wine rebutted KKR’s bid.

In March the TWE board added $500,000 to chief Michael Clarke’s fixed pay. Picture: The Australian.

Treasury Wine Estate’s stock price is edging towards double the value it was when it rejected the $3.4 billion, or $5.20 a share, offer from KKR back in September 2014.

The stock was trading around the $4.80 a share market and all the talk was KKR actually wanted to lower its price when the board formally rejected the bid.

The company has more than delivered on expectations since then, helped in part by the falling Australian dollar which has boosted the value of exports of its top brands like Penfolds.

The stock has traded up from its near-term low of $7.64 in January this year.

It was trading up two cents at $10.33 a share in late morning trade (TWE).

In March the board added $500,000 to chief Michael Clarke’s fixed pay, which now stands at $2.2 million, and awarded him 44,455 performance rights worth around $453,000.

The rights are subject to performance hurdles which he has more than met so far.

Earnings fell from $216m in 2013 to $184m in 2014 but are expected to hit $340m this year and, according to BAM, as much as $618m in 2018.

Revenue has increased from $1.7bn in 2014 to $2.4bn this year.

The company last year paid $754m for Diaggeo’s US wine business to boost its production potential in the US.

Since taking the reins in 2014 Clarke has taken costs out, increased spending on marketing the key brands and move the Penfolds release date from May to October, to better match sales potential.

The rule of thumb says it is worth shorting a stock after the CEO gets a big stock award but so far Clarke has proved the sceptics wrong. And with the stock up 93 per cent in the past year shareholders are reaping the benefits.