DGL
05/12/2013 14:00
ADDRESS
REL: 1400 HRS Delegat's Group Limited
ADDRESS: DGL: DGL - 2013 Annual Meeting Managing Director's Address
Slide 9: Holding Slide - Managing Director's Address
Welcome Ladies and Gentlemen, thank you Mr Chairman for presenting the 2013
financial highlights.
Slide 10: A track record of success.
For the last decade the Group's strategic goal has been to establish Oyster
Bay as one of the world's great Super-Premium wine brands and lead New
Zealand category growth.
Oyster Bay is now a leading Super- Premium wine brand in New Zealand,
Australia, the United Kingdom, Ireland, Canada and increasingly in the United
States. As a result, Sales Revenue has grown tenfold over the last decade to
$222.0 million and Operating Net Profit After Tax was $26.3 million for this
year.
Slide 11: It is now time to aim higher.
It is now time to aim higher. Over the next decade the Group's strategic goal
will be to build a leading global Super-Premium wine company. The Group has
taken some important steps on this journey in the year under review. In
particular, the acquisition of Barossa Valley Estate and significant
investment in vineyard purchases stand out as key highlights of the 2013
year.
I will discuss the Group's new strategic goal and the acquisition of Barossa
Valley Estate later in this presentation. Before looking to the future, I
would like to take the opportunity to reflect on what has been achieved in
the year under review.
Slide 12: Operating Performance Highlights 2013
The Group has delivered another year of strong performance achieving global
case sales of 1.946 million cases, 5.2% higher than the previous year. Sales
revenue grew by 3.2% to $222 million as adverse foreign exchange rate changes
resulted in case price realisation declining by 1.9% to $114.10 per case. As
noted previously, Operating Net Profit After Tax was up 2.7% to $26.3
million, a pleasing result given the foreign exchange headwinds encountered.
I will now comment on market performance to highlight some of the drivers
behind the company's profit growth;
The Australia, New Zealand and Asia Pacific region is a combination of both
established and emerging markets. Overall sales declined by 3% from 694,000
to 672,000 cases. This was primarily attributable to the challenging trading
and economic conditions in Australia.
In Australia the Group has established a category leading brand presence.
Oyster Bay Sauvignon Blanc is the number one selling bottled wine by value.
Oyster Bay has achieved leadership in the important Super Premium Chardonnay,
Pinot Noir and Merlot categories.
New Zealand is an established market for the Group and the Oyster Bay brand
continues to achieve stand out market performance as the Super Premium
category leader. In the year in review the Group reintroduced the Delegat
brand to the New Zealand market. As one of New Zealand's most respected wine
brands, the group aims to grow Delegat in select channels of distribution via
its sub regional range of Super-Premium wines.
The Group achieved record sales volumes in the United Arab Emirates and in
Hong Kong, and continued to grow distribution in Singapore, where Oyster Bay
is listed in some of its most iconic venues. The Group has focused on
conducting detailed research in China, Japan and South Korea, with a view to
establishing strategies to support long-term sales growth in these markets.
In the United Kingdom, Ireland and Europe region sales volumes declined by 3%
to 604,000 cases. The Group successfully implemented price increases in the
United Kingdom and Ireland in the second half of the year to improve
profitability.
In the United Kingdom, Oyster Bay has maintained its New Zealand category
leadership position. Oyster Bay Sauvignon Blanc, Chardonnay, Pinot Noir and
Merlot are the top selling wines above 8 Pounds by value in their respective
categories.
The Group continued to achieve strong growth in North America, increasing
sales volumes by 25% to 670,000 cases.
In the United States, the Oyster Bay brand is building upon strong
foundations as a leading Super-Premium Sauvignon Blanc in many of the major
wine consumption States. The Group continues to focus on building
distribution and growing rate of sale across its range of elegant cool
climate wines. In the large Super Premium Chardonnay category, Oyster Bay has
already achieved the distinction of becoming the leading premium imported
Chardonnay above $10.
In Canada, the Group has again achieved strong growth. In only 4 years, since
the Group established its own in-market sales team, sales have more than
doubled in Canada. Sales continue to grow in all Provinces, with Quebec
showing noteworthy progress.
Slide 13: Major Awards and Accolades
The Group's wines continue to receive major awards and accolades from the
world's leading wine commentators and competitions. Wine quality is an
enduring key success factor for our business that is underpinned by the
Group's investment in world-class vineyards and purpose built Super Premium
wineries. I would like to acknowledge the commitment and talent of our
viticultural and winemaking teams, who consistently produce the outstanding
wines that enable us to succeed in global markets.
Slide 14: 2013 Vintage
The Group's 2013 harvest was 28,884 tonnes, which was 4% up on target yields
and an increase of 42% compared to the 2012 vintage. Quality was excellent
for all regions and varieties. The Group has closely managed its inventory
throughout the 2013 financial year. The higher 2013 harvest has allowed the
Group to rebuild the depleted carry-forward inventory levels.
Slide 15: Investing in New Zealand Supply Growth
During the year under review and the 2014 year to date, to support future
sales growth, the Group has acquired prime viticultural land and producing
vineyards that will provide more than 400 additional planted hectares of
vineyards in New Zealand's leading wine regions.
In the Marlborough region, the Group has purchased land that provides for an
additional 371 planted hectares of vineyards, including the fully productive
102 hectare Kaituna vineyard. Two of the acquired vineyard sites are
contiguous with the Group's Dashwood vineyard.
The Group has also increased its holdings in Hawke's Bay's Gimblett Gravels
to 166 hectares, which represents 20% of the area of this famed sub region.
Slide 16: Barossa Valley Estate
In June the Group acquired the assets of Barossa Valley Estate which is
proudly recognised as an icon winery of Australia. The company's E&E Black
Pepper Shiraz is one of Australia's finest and most renowned collectible
wines, recognised as one of Australia's top 25 Benchmark wines by Wine
Spectator, and classified as outstanding by Langton's since 2005.
Located on 80 hectares in Marananga, Barossa Valley, the modern 5,000 tonne
winery and 41 hectare vineyard are right in the heart of one of the world's
most celebrated Shiraz and Cabernet Sauvignon regions. These wine styles are
complementary to the Group's current business and provide an opportunity for
substantial future sales growth globally.
The Group's long-term goal is to establish Barossa Valley Estate as a leading
Super-Premium Barossa Shiraz and Cabernet Sauvignon brand in global markets.
The Group has acquired an additional productive vineyard of 14 hectares and
entered into agreements to purchase 70 hectares of development land in the
Barossa Valley region.
Slide 17: Barossa Valley Estate Vineyard
Slide 18: Barossa Valley Estate Winery
Slide 19: Strategic Goal
As noted earlier, the Group has achieved tremendous success over the last
decade. The Group now has a leading global Super Premium wine brand in
Oyster Bay and a powerful distribution platform including 150 people
globally. The Group also has supply from more than 2,600 hectares of New
Zealand's finest vineyards and plus vineyards recently acquired in the world
renowned Barossa Valley.
It is now time to aim higher. Over the next decade the Group's strategic goal
will be to build a leading global Super-Premium wine company. The Group will
build global brands from world leading regions, focusing on the wine styles
for which those regions are internationally renowned. The Group will own a
significant proportion of vineyards on the best sites, work closely with our
grower partners, and invest in purpose-built wineries dedicated to
Super-Premium wine production. The Group will build enduring mutually
rewarding relationships with customers and target Super-Premium category
leadership in key global markets.
To pursue its strategic goal, the Group will focus on establishing Oyster Bay
and Barossa Valley Estate as two of the world's great Super-Premium wine
brands.
Slide 20: Sales Growth - 2013 to 2019
In accordance with the guidance provided in the Annual Report, the Group
plans to grow case sales from 1,946,000 million cases in 2013 to 3,070,000
cases by 2019, representing growth of 58% over the six year period. This
planned growth will be primarily driven by continuing to drive sales growth
in North America and through development of the Barossa Valley Estate brands.
Oyster Bay is an established leader within the Super-Premium Sauvignon Blanc,
Chardonnay, Pinot Noir and Merlot categories. There are significant global
growth opportunities with these varietals together with Pinot Gris and
Sparkling wine. The Group plans to grow sales of Oyster Bay by 43% to
2,777,000 cases by 2019.
The Group plans to grow sales of Barossa Valley Estate brands to 293,000
cases by 2019, which will represent almost 10% of the Group's planned sales
in that year.
In Australia, New Zealand and the Asia Pacific region, sales volume is
projected to decline by 8% in 2014 primarily due to lower sales in Australia
where economic conditions are weak. Sales volumes are expected to return to
growth in 2015 and 2016. Longer term sales growth in Asia and from Barossa
Valley Estate underpins projected growth in the region. In the 2014 year the
Group will establish in-market sales operations in China and Japan.
Sales volume in the United Kingdom, Ireland and Europe region is expected to
be stable over the next three years with modest growth targeted longer term.
The 2014 year will be the first full year since price increases were
successfully implemented in the second half of the prior year. The sales plan
reflects the enduring strength of the Oyster Bay brand in these markets.
North America will be the key growth region for the Group over the next six
years with strong growth projected to continue in both the United States and
Canada. The region will become the Group's largest by sales volume in 2014.
The Group plans to increase sales volume in the region to 1.01 million cases
by 2016 and 1.39 million cases by 2019. This growth will provide in-market
distribution scale benefits.
Slide 21: Investing in Growth
The Group is investing in significant capital expenditure to support its
growth plan and to achieve sustainable competitive advantage in terms of both
quality and supply. In 2013 the Group invested $47.4 million in capital
expenditure in New Zealand and $28.6 million on the acquisition of Barossa
Valley Estate.
The Group will invest a further $132 million in capital expenditure over
three years to support the sales growth plan through until 2019. The capital
expenditure plan includes building a 10,000 tonne capacity Hawke's Bay
winery, expansion of the Marlborough winery and vineyard development. The
Group's intention is to fund this capital expenditure using a combination of
retained earnings and debt.
Slide 22: Forecast 2014
Sales for the first five months to November are in line with 2014 forecast.
The Group continues to actively manage its currency exposure; however
currency movements have the potential to impact on earnings. The New Zealand
dollar has continued to remain at higher levels than the forecast foreign
exchange rates for the first five months of this financial year. That said,
the Group is on track to achieve a forecast Operating NPAT of $29 million in
2014 which is in line with consensus and 10% higher than last year.
Slide 23: Summary
The Group has achieved tenfold growth over the last decade and is now aiming
higher, with its strategic goal to build a leading global Super-Premium wine
company. The Group will focus on establishing Oyster Bay and Barossa Valley
Estate as two of the world's great Super-Premium wine brands. The Group is
planning to grow sales from 1.95 million cases to 3.07 million cases over the
next six years, which represents growth of 57% over the period. This planned
growth will be primarily driven by continuing to drive sales growth in North
America and through development of the Barossa Valley Estate brands.
The Group continues to develop its strong distribution platform and is
investing in high quality assets to support growth. The Group has a strong
business model and is focused on building a leading global Super-Premium wine
company that delivers sustainable earnings growth.
Delegat's is a vertically integrated, multinational organisation with
talented teams in major wine producing regions and markets around the world.
They manage some of the world's most highly regarded wineries, vineyards, and
brands along with a powerful global supply chain and distribution
infrastructure. They come from different countries and cultures but all share
a common goal of best in class performance and impeccable delivery of the
Group's strategic plan. I wish to personally thank each of our Great Wine
People for their commitment to our business and results they have
collectively achieved.
I would also like to take this opportunity to thank the Board for their
contribution to the Group's ongoing success.
Thank you.
Slide 24: Thank you.
End CA:00244785 For:DGL Type:ADDRESS Time:2013-12-05 14:00:10
