Results for announcement to the market
Reporting Period 12 months to 30 June 2017
Previous Reporting Period 12 months to 30 June 2016
Amount (000s) Percentage change
Revenue from ordinary activities $252,713 (+2%)
Operating Profit from ordinary activities after tax (Operating NPAT) $38,543
(+6%)
Operating Profit from ordinary activities before interest, tax and
depreciation (Operating EBITDA) $81,114 (+11%)
Reported Profit from ordinary activities after tax attributable to
shareholders $40,656 (-15%)
Net profit attributable to shareholders $40,656 (-15%)
Audit The financial statements attached to this report have been audited and
are not subject to a qualification. A copy of the audit report applicable to
the full financial statements is attached to this announcement.
Comments Refer to the Executive Chairman''s Report appended.
The financial statements for the year ended 30 June 2016 have been restated
following the adoption of "Amendments to NZ IAS16: Property, Plant and
Equipment and NZ IAS 41: Agriculture" on 1 July 2016.
Operating Profit is a non-GAAP measure and as such does not have a
standardized meaning prescribed by GAAP. It may therefore not be comparable
to non-GAAP measures presented by other entities.
Dividends
The Directors have declared a final dividend of 13.0 cents per share. The
dividend will be fully imputed and a supplementary dividend of 2.2941 cents
will be paid to overseas shareholders in accordance with Listing Rule 7.12.7.
Cents per share
- Final Dividend for the year ended 30 June 2017 13.0 cents
Imputed Cents per share
- Final Dividend for the year ended 30 June 2017 5.0556 cents
Record date 29 September 2017
Dividend Payment Date 13 October 2017
Net Tangible Assets per share
Current Year Previous corresponding year
Net Tangible Assets per share $3.04; $2.77
Executive Chairman''s Report 2017
On behalf of the Board of Directors of Delegat Group Limited, I am pleased to
present its operating and financial results for the year ended 30 June 2017.
This year''s record global sales and profit is another milestone on our
journey to build a leading global Super Premium wine company.
Performance Highlights
o Record global case sales of 2,656,000, up 10%.
o Record operating NPAT of $38.5 million, up 6%.
o Achieved record cash flows from operations of $59.2 million.
o Record global harvest of 37,355 tonnes from the 2017 vintage.
o Record number of gold medals awarded in major international wine
competitions.
The Group presents its financial statements in accordance with the New
Zealand equivalents to International Financial Reporting Standards (NZ IFRS).
To provide further insight into the Group''s underlying operational
performance, the Group has also included in this report an Operating
Performance Report. This Operating Performance Report excludes the impact of
fair value adjustments required under NZ IFRS for grapes and derivative
instruments. As a fully integrated winemaking and sales operation, Operating
Profit includes the fair value adjustment in respect of grapes when packaged
wine is sold rather than on harvest of the grapes, and the fair value
adjustment on derivative instruments when these foreign exchange contracts
and interest rate swaps are realised.
The Group has included a reconciliation of Operating Profit to Reported
Profit which eliminates from each line in the Statement of Financial
Performance all fair value adjustments1.
Operating Performance
A record operating NPAT of $38.5 million was generated compared to $36.2
million last year. Operating EBIT of $67.3 million is $7.0 million higher
than last year. Operating expenses (before NZ IFRS adjustments) at $66.7
million are $1.3 million higher compared to last year.
Delegat achieved Operating Revenue of $251.3 million on global case sales of
2,656,000 in the year. Revenue is up $8.6 million on last year, primarily
due to a 10% increase in global case sales, partially offset by the
unfavourable impact of foreign exchange rate changes.
NZ IFRS Fair Value adjustments
In accordance with NZ IFRS the Group is required to account for certain
assets at ''fair value'' rather than at historic cost. All movements in these
fair values are reflected in and impact the Statement of Financial
Performance. The Group records adjustments in respect of two significant
items at the year-end.
o Harvest Provision Release (Grapes) - Inventory is valued at market value,
rather than costs incurred, at harvest. Any fair value adjustment is
excluded from Operating Performance for the year, by creating a Harvest
Provision. This Harvest Provision is then released through Cost of Sales
when inventory is sold in subsequent years. This represents the reversal of
prior periods'' fair value adjustments in respect of biological produce as
finished wine is sold in subsequent years. In 2017, the market value of the
company grapes exceeded the costs incurred by $17.0 million (2016: $19.6
million). This write-up is lower than last year due to lower grape prices
for the 2017 vintage. This write-up, less the impact of prior years'' vintages
being sold has resulted in a net write-up of $1.6 million for the year (2016:
write-up of $11.8 million);
o Derivative Instruments held to hedge the Group''s foreign currency and
interest rate exposure. The mark-to-market movement of these instruments at
balance date resulted in a fair value write-up of $1.4 million (2016:
write-up of $4.7 million);
These adjustments, net of taxation, amount to a write-up of $2.2 million for
the year (2016: write-down of $11.9 million).
Reconciliation of Reporting to Operating Performance
Accounting for all fair value adjustments under NZ IFRS, the Group''s reported
audited financial performance for the year ended 30 June 2017 is reconciled
to operating profit.
Cash Flow
The Group generated record Cash Flows from Operations of $59.2 million in the
current year, which is an increase of $16.8 million on the previous year,
primarily due to higher receipts from customers from higher case sales. A
total of $41.4 million was paid for additional property, plant and equipment
during the year, including vineyard and winery developments. The Group
distributed $12.1 million to shareholders in dividends. A net repayment of
$5.5 million was made to reduce borrowings during the year.
The Group having secured a $350.0 million syndicate senior debt facility in
2014 is well positioned to fund both its current operations as well as future
capital investment in both New Zealand and Australia. The Group''s net debt
at 30 June 2017 amounted to $278.0 million, a decrease of 2% compared to last
year.
Dividends
The directors consider that the underlying operational performance and strong
cash flows justify an Increase in dividends this year. Accordingly, the
Directors are pleased to advise they have approved a fully imputed dividend
payout of 13.0 cents per share. The dividend will be paid on 13 October 2017
to Shareholders on record at 29 September 2017.
Investing for Growth
The record results achieved in 2017 are testament to the strength of the
Group''s business model as we continue to invest for growth. Delegat is
investing for growth to support its strategic goal to build a leading global
Super Premium wine company. During the year under review $40.5 million was
invested in growth assets including development of the Group''s wineries, land
acquisition and vineyard development in New Zealand and the Barossa Valley.
Delegat will invest an additional $46.2 million in 2018 to provide earnings
growth in the years ahead. This capital investment supports the Group''s plan
to grow sales to 3,685,000 cases by 2022 and will provide for further growth
beyond that period.
Our Great Wine People
The Board would like to take this opportunity to acknowledge our Delegat
Great Wine People around the world. Our global team have once again shown
great resolve and set new performance records on our journey to build a
leading global Super Premium wine company. It is inspiring to work with such
a talented team who are committed to winning together.
JIM DELEGAT
Executive Chairman
Managing Director''s Report 2017
2017 was another year of record performance and continuing to build the
foundations for long-term growth. As outlined in the Executive Chairman''s
report, the Group achieved record Operating Net Profit after Tax of $38.5
million, record global case sales and record net cash flows from operations.
Global Sales Performance
The Group achieved record global case sales of 2,656,000 cases in the year,
which is 10% higher than the previous year. Sales continue to be well
diversified by market with 43% in North America, 30% in the Australia, New
Zealand and Asia Pacific region, and 28% in Europe including the United
Kingdom.
The Group has continued to invest in the development of its own in-market
distribution channels to drive long-term growth. The Group''s Sales and
Marketing division has in-market sales teams in New Zealand, Australia, the
United Kingdom, Ireland, the United States, Canada, Singapore and China.
Australia, New Zealand and Asia Pacific
Case sales in the Australia, New Zealand and Asia Pacific grew by 11% to
785,000 cases.
In the established New Zealand and Australia markets Oyster Bay continued to
perform strongly as a category leading Super Premium wine brand. In New
Zealand, Oyster Bay was voted most trusted wine brand by consumers in the
Reader''s Digest 2017 awards. In Australia, Oyster Bay Sauvignon Blanc
continues to lead the category as the top selling Sauvignon Blanc and bottled
white wine by value. The ongoing growth of Oyster Bay Sparkling Cuvee in both
markets was a notable highlight of the year. Significant distribution and
sales growth was achieved with the Barossa Valley Estate brand in the
Australia market.
In the second half Delegat opened a flagship store selling Oyster Bay and
Barossa Valley Estate on the Tmall online market place in China. The store
enables aspirational consumers throughout China to purchase the Group''s
brands directly from Delegat. Whilst it will take time to build awareness and
develop a significant customer base, this is a promising venture in a growth
market for imported Super Premium wine.
North America
The Group again delivered strong growth In North America, increasing sales
volumes by 12% to a record 1,135,000 cases.
In the United States, the Oyster Bay brand continued its strong growth as
consumers are increasingly embracing elegant, cool climate wine styles. The
Group''s success is underpinned by its well-established in-market sales team
working effectively with leading distributors, retailers and on premise
venues. Oyster Bay Sauvignon Blanc is a top 5 white wine over US$10 by value.
Significant distribution and sales growth was achieved with the Barossa
Valley Estate brand, with the Group continuing its efforts to expand
distribution channels for this range.
Towards the end of the year, the Group expanded its distribution arrangements
with Southern Glazer''s Wines and Spirits, North America''s largest wine and
spirits distributor. Delegat has worked very successfully with Southern
Glazer''s over the past decade. Southern Glazer''s is now the Group''s exclusive
distributor partner in 32 markets which collectively account for
approximately 70% of wine consumption in the United States. Extending our
relationship with Southern Glazer''s will provide a powerful distribution
platform to realise the significant growth potential of Oyster Bay and
Barossa Valley Estate in the United States.
In Canada, a strong base of distribution has been established in each of the
major provinces and significant sales growth was achieved. Oyster Bay has
grown to become one of the most powerful Super Premium wine brands in the
market, with success being achieved across the range including number one
Chardonnay in Canada above C$12. Highlights include Barossa Valley Estate
continuing to grow consumer awareness, distribution and sales.
United Kingdom, Ireland and Europe
Another year of growth was delivered in the United Kingdom, Ireland & Europe
region, with sales volumes increasing 6% to 736,000 cases.
In the United Kingdom a price increase was implemented during the year in
response to significant and ongoing weakness in the pound sterling. Oyster
Bay has maintained its Super Premium category leadership position. Oyster
Bay Sauvignon Blanc, Chardonnay and Merlot are the top selling wines above ?8
in their respective categories irrespective of origin. Oyster Bay Pinot Noir
is the top selling Pinot Noir above ?9. Barossa Valley Estate has established
quality distribution with leading National Account customers and this
distribution platform provides significant consumer reach and opportunity to
grow the brand over the long-term.
In Ireland, Oyster Bay has maintained its Super Premium category leadership
position. Oyster Bay Sauvignon Blanc, Chardonnay, Merlot and Pinot Noir are
the top selling New Zealand wines in their respective varietal categories
above EUR10. Barossa Valley Estate Shiraz and Grenache Shiraz Mourvedre are
the top selling Australian wines in their respective varietal categories
above EUR12.
Brands and Communications
The Group''s goal is to establish Oyster Bay and Barossa Valley Estate as
leading brands in the Super Premium wine category globally.
Marketing programmes are designed to grow consumer awareness, support
distribution and rate of sale growth per point of distribution. Marketing
activities are focused on the specific needs of the market and phases of
brand development. The group works closely with its retail partners to
activate high impact in-store activation. In the consumer environment, the
Group uses a mix of media channels both online and offline to recruit and
engage consumers and build its brands.
In recognition of its market performance and reputation, Oyster Bay was
awarded ''Hot Brand'' for the seventh consecutive year by New York''s Impact
Magazine, and named ''One of the World''s Most Admired Wine Brands'' for the
fifth consecutive year by Drinks International Magazine UK.
Major Awards and Accolades
The Group was awarded a record number of gold medals and received outstanding
acclaim in major international wine competitions, showcasing the world-class
quality of its wines and significance within the Super Premium wine category.
o Oyster Bay Marlborough Sauvignon Blanc 2015 was awarded a double gold medal
at the San Francisco International wine competition, USA.
o Delegat Crownthorpe Terraces Chardonnay was awarded a gold medal at the New
World Wine Awards, New Zealand, The New Zealand International Wine Show, and
Decanter New World Wine Awards, United Kingdom.
o Delegat Awatere Valley Sauvignon Blanc 2015 was awarded a Gold Medal at the
San Francisco International Wine competition, USA.
o Barossa Valley Estate Cabernet Sauvignon 2015 was awarded a Gold Medal at
the Sydney International Wine Competition, Australia.
o Oyster Bay Chardonnay 2016 was awarded a gold medal and 90 Points at the
San Francisco International wine competition, USA.
o Oyster Bay Marlborough Pinot Noir 2015 was awarded a Double Gold Medal at
the San Francisco International wine competition, USA.
2017 Harvest
The Group achieved a record global harvest of 37,355 tonnes from the 2017
vintage. The New Zealand harvest was 34,595 tonnes, up 4% on the 2016
vintage. The Australia harvest for Barossa Valley Estate was 2,760 tonnes,
which is up 6% on last year. The New Zealand harvest is of very good quality
albeit that the onset of harvest was delayed due to late season rains. The
Barossa Valley harvest is one of the best of recent times. Delegat''s
investment in world-class vineyard and winery assets was evident in the
quality outcomes achieved in the 2017 vintage. The Group has appropriate
inventories to achieve the future sales growth goals outlined in this report.
Sustainability
Recognition and respect for the environment are reflected in the strong
leadership role the Group plays in the practice and promotion of sustainable
wine growing and wine production. As a leader in the New Zealand wine
industry and as a founding member of Sustainable Winegrowing New Zealand
(SWNZ) since 2002, the Group takes its responsibilities to respect and
protect the environment very seriously. The Group''s New Zealand vineyards and
wineries are 100% accredited by the independently audited SWNZ Sustainability
Programme.
Group Outlook
The Group''s strategic goal is to build a leading global Super Premium wine
company. The Group will build leading global brands from world leading
regions, focusing on the wine styles for which those regions are
internationally renowned. Delegat plans to grow sales by 39% to 3,685,000
cases over the next five years. The primary drivers of planned growth are
Oyster Bay sales in North America and Barossa Valley Estate sales globally.
In the Australia, New Zealand and Asia Pacific region, sales volume is
projected to grow by 16% to 913,000 cases by 2022. Growth in the region will
be driven by expanding distribution of products in the Oyster Bay range,
increasing sales of Barossa Valley Estate and market development in Asia.
Sales volume in the United Kingdom, Ireland and Europe region is planned to
decrease by 2% to 725,000 cases by 2022. The Group expects a sales decline
of 8% in 2018 due to the price increase implemented in the second half of
2017 and ongoing weakness in the United Kingdom economy as the Brexit process
unfolds. Despite this, Delegat is focused on maintaining and enhancing its
Super Premium category leadership in this important region.
North America is the largest Super Premium wine market in the world and will
continue to be the key growth region for the Group over the next five years.
Delegat plans to increase sales volume in the region by 80% to 2,047,000
cases by 2022. The growth in the region will be driven by rising wine
consumption per capita, consumers trading up to Super Premium wines, the
increasing popularity of Marlborough Sauvignon Blanc and the strength of the
Group''s brands.
The Group is well positioned to grow sales and achieve sustainable earnings
growth in the years ahead. With respect to the 2018 year, Delegat plans to
grow sales by 5% to 2,782,000 cases.
The Group faces exchange rate volatility which makes it difficult to
accurately forecast financial performance. Based on budget exchange rates,
the Group forecasts a 2018 operating profit result at least in line with this
year''s record performance.
Our People
It is our people that bring our plans to life and make a difference. I wish
to personally thank each of our Great Wine People for their efforts to aim
high, pursue mastery and win together. Our teams have achieved another year
of record performance in 2017 and have positioned Delegat to deliver enduring
success.
GRAEME LORD
Managing Director
End CA:00306261 For:DGL Type:FLLYR Time:2017-08-28 12:14:52