Just trying to put some earnings impact to these comments. From...

Just trying to put some earnings impact to these comments. From brokers estimates I have seen and my research, here are AVG's FY16F earnings for its UK operations:
Sales ~A$100m (or in GBP49.5m)
COGS ~A$70m
Other Op Costs ~A$24m
EBIT ~A$6m
On this basis, the UK EBIT will represent ~35% of AVG's group EBIT for FY16F.

The average AUD/GBP = 0.495 in FY16. However, looking into FY17, if we assume the current AUD/GBP of 0.55 is maintained, then UK sales will fall to ~A$90m (ceteris paribus).

The problem for AVG is that most of the COGS are sourced and priced in A$ (ie the grapes and associated production costs are largely local), so the cost line will not be repriced for the weaker GBP. As a result, a large % of the $10m squeeze on the revenue line will flow through to EBIT.

That is, it is foreseeable that the UK EBIT could be sub A$0 in FY17F ... which would imply AVG's Group EBIT would fall from ~A$18m to ~A$11m. Clearly a major impact!!

One mitigating factor is that AVG does hedge the FX of at least 50% of forward production/sales, so this earnings impact will not be fully reflected in FY17 earnings. Although, if you are forecasting a weaker GBP for longer, eventually this earnings impact will flow through to AVG's earnings.

In summary, if the current exchange rate is maintained, it is going to create some serious head winds for AVG's earnings profile and could well offset the benefit of the onerous lease expiry in the next few years. Disappointing, as I really like this story, but I think we will be looking at some serious earnings downgrades.