August 29, 2008

Annual Net Profit Lifts to $19.1m; DELEGAT’s GROUP

By WOOD, Alan

Delegat's Group has increased its annual net profit 77 per cent to $19.1 million, from the 2007 year, driven by a record year of wine cases out of its Marlborough vineyards.

The result was achieved on turnover up 22.6% at $165.3m and earnings before interest, tax, depreciation and amortisation rose 46 per cent to $55.4m. A final fully imputed dividend of 7c is recommended, the only payout for the year.

The company which has most of its operations in the South Island was still in an acquisitive stage regarding potential land purchases, managing director Jim Delegat said.

"Delegat's will continue their programme of acquiring land and developing vineyards to

meet the needs and also we see real opportunity to continue to grow our independent grape grower base . . . we are a growth stock and we will take every opportunity to grow our business incrementally," he said.

A strong result had been driven by Delegat's selling "all its wine at a very good price", and the idea was to keep growing the Oyster Bay branded model that had been established globally over the last decade, he said.

"When you get onto retail shelves and you return a (high) rate of sale . . . big retailers embrace you because you're the brand that generates them the most gross profit margin," he said. Consumers were creatures of habit, and increasingly relying on standout brands for their retail choices. They were favouring quality brands, for example, drinking beers like Heineken or Beck's, he said.

The company agreed with market forecasts that net profit in 2009 would be in the order of $23m to $25m, with production likely to be up in the order of 20%. That forecast did not take into account a depreciating kiwi dollar which would help export sales although it had to work through hedging positions.

Hamilton Hindin Greene director Grant Williamson said all things being equal and with a lower currency the group would do better ahead. "It's all looking extremely good for the company."

The group achieved global sales of 1,449,000 cases up from 1,237,000 cases in the year to June 30, 2007, with 88% of the cases sold offshore.

Delegat's agreed with market forecasts of 1.8m cases in 2009, with heavy winter rain in Marlborough having refilled important aquifers to help the harvest next year, he said. Delegat's shares yesterday closed up 12c at 235c, off a peak of 240, helped by a result ahead of expectations and the view the wine producer is making inroads into the important US retail market, a sharebroker said.

Cashflow from operations jumped to $8.3 million, from a $400,000 outflow. The net tangible asset backing rose from 128c to 143c.



Year to June 2008 2007

$m $m

Revenue 165.3 134.8

Ebitda 55.4 38.0

Pre-tax profit 31.3 16.4

After-tax profit 19.1 10.8

Final dividend 6c

Div. paid: October 24


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