DGL
02/12/2014 14:00
ADDRESS
NOT PRICE SENSITIVE
REL: 1400 HRS Delegat Group Limited
ADDRESS: DGL: DGL - 2014 Annual Meeting Addresses
Annual Meeting of Shareholders
2pm, Tuesday 2 December 2014
1.Welcome and Introductions
Ladies and Gentlemen, On behalf of the Board, I am pleased to welcome you
here today to the ninth Annual Meeting of Delegat Group Limited since listing
in April 2006. My name is Jim Delegat and I have the privilege of chairing
your Board of Directors. There is a quorum present and given the time is now
2p.m. - I declare the meeting open for business.
(Slide 1)
Let me first introduce you to my fellow Board Members, Rose Delegat, Jane
Freeman (Chair of Remuneration and Nominations Committee), Alan Jackson
(Chair of Audit & Compliance Committee), Bob Wilton and Graeme Lord (Managing
Director). Also on the dais is Murray Annabell, the Group's Chief Financial
Officer, who will act as our minute secretary.
Delegat is a growth company with the strategy to build global super premium
wine company. This strategy necessities the need for strong management and
succession planning.Accordingly throughout the year appointments have been
made to enable the strategy. The appointment of Graeme Lord to the position
of Managing Director. The appointment of myself to the newly created position
of Executive Chairman. Bob Wilton who has been closely associated with the
group for some 28 years has accepted the invitation to remain on the board as
a director. We take this opportunity to acknowledge Bobs contribution over
the many years of his involvement. Thank you Bob. Having acknowledged these
appointments I now also welcome our auditors, Ernst & Young and the Group's
legal counsel, Jones Young to the meeting.
2.Proxies
I can advise the meeting that Directors and others hold proxies and postal
votes for 78,561,533 shares, representing 77.7% of the share capital of the
Company.
3.Apologies
To open, are there any apologies? Thank you - those apologies will be
recorded in the minutes.
4.Notice of Meeting
The notice of meeting has been sent to all shareholders together with the
Annual Report, and I propose that, together with the agenda they be taken as
read.
5.Minutes of Previous Meeting
The minutes of the eighth Annual Meeting held on 5 December 2013 have been
approved by the Directors, and Murray Annabell is holding a copy for
inspection should any shareholder wish to see them.
(Slide 2)
6.Procedure
Firstly, I will address the Annual Report incorporating the Directors Report,
Financial Statements and unqualified Audit Report covering the year to 30
June 2014 and give a brief overview for the balance of the year before
handing the meeting to the Managing Director who will provide a more fulsome
report of operations and achievements and the prospects of the Group.
Following Mr Lord's remarks I will open the floor for discussion on the
Annual Report and Chairman's and Managing Director's presentation before
moving on to the formal business of the resolutions.
Chairman's Address
Slide 3 - Executive Chairman's address
As Executive Chairman my focus is on providing strategic direction and
monitoring performance to ensure successful delivery of Board approved
business plans. I invest a significant amount of my time on capital projects
and growth initiatives.
During the year Graeme Lord was appointed Managing Director. Graeme
originally joined the Group 15 years ago and for the past 6 years has served
as General Manager, Global Sales and Marketing. As Managing Director, Graeme
Lord leads the company with responsibility for developing growth plans,
building a high performing organisation and executing business plans.
In my address I will report on high level performance, our key investment
projects and funding. Graeme will cover 2014 performance in more detail and
the Group's future growth plans.
Your company is one New Zealand's great growth stories. Over the last 6
years we have grown Operating Net Profit After Tax more than threefold to
$31.4 million and we have grown Shareholders Funds (Net Assets) by more than
$100 million to $249 million.
Slide 4 - A Year of Record Performance
On behalf of the Board of Directors of Delegat Group Limited, I am pleased to
report a year of record performance on our journey to build a leading Super
Premium wine company.
Delegat achieved Sales Revenue of $222.5 million on record global case sales
of 2,031,000 in the 2014 year.
The North America region became the Group's largest by sales volume for the
first time. This milestone is the culmination of years of brand development
effort in the United States and Canada, markets that will remain the engine
of growth for your company over the next 5 years.
A record Operating Net Profit After Tax of $31.4 million was generated
compared to $26.3 million last year. The strong growth in operating profit
was primarily due to improved Gross Margin which arose from the Group
achieving economies of scale in grape growing and winemaking.
The Group also achieved a record reported Net Profit After Tax of $42.6
million in accordance with the New Zealand equivalents to International
Financial Reporting Standards (IFRS).
The Group achieved a record harvest of 35,127 tonnes in the 2014 vintage. The
New Zealand harvest was 34,123 tonnes, which was 18% higher than the prior
year's vintage. The Australian harvest for Barossa Valley Estate amounted to
1,004 tonnes in the first vintage since acquisition in June 2013. The 2014
vintage delivered excellent quality in all regions and has provided the Group
with appropriate inventories to achieve our sales growth plans.
Your Board, being cognisant of both dividends to reward shareholders and the
need for reinvestment for a growth company, declared a fully imputed dividend
of 11 cents per share which was paid to shareholders on 10 October 2014.
Slide 5 - Investing for Growth
The record results achieved in 2014 are testament to the strength of the
Group's business model. Delegat Group is well positioned to pursue its
strategic goal of building a leading global Super Premium wine company.
Your company has embarked upon a significant capital expenditure programme to
deliver upon its growth strategy and provide earnings growth into the years
ahead. In 2014 the Group invested $32 million in capital expenditure.
The Group plans to invest a further $86 million in capital expenditure in the
current year to support future sales growth and to achieve sustainable
competitive advantage in terms of both quality and supply.
The capital expenditure plan includes building a Hawke's Bay winery,
expansion of the Marlborough winery, and new vineyard development in
Marlborough, Hawke's Bay and the Barossa Valley.
Slide 6 - Hawke's Bay Winery
The Group's new Hawke's Bay winery will have a long term capacity of 10,000
tonnes. This state of the art facility will be purpose built for the
production of Super Premium Merlot, Pinot Gris and Sparkling wine. Phase 1
will be completed in time for the 2016 vintage.
Slide 7 - Marlborough Winery Expansion
The Marlborough winery is being expanded to a capacity of 28,000 tonnes for
the 2015 vintage. Work is well underway and with building works complete and
the tanks required for the 2015 vintage are being installed.
Slide 8 - New Zealand Vineyard Development
The Group planted 78 hectares of new vineyard in Marlborough and Hawkes Bay
in 2014 and owns additional land that will enable the planting of another 272
hectares in 2015 and beyond.
The Group has now secured viticultural land in the prime areas of New
Zealand's leading wine regions that will enable supply of the 2019 Oyster Bay
sales projection of 2,834,000 million cases and allow for further growth
beyond this period.
Slide 9 - Barossa Valley Vineyard Development
The Group has 51 hectares of new vineyards in Barossa Valley in 2014 and owns
additional land that will enable the planting of another 93 hectares in 2015
and beyond. This land acquisition, together with an expanding grower
programme, has the Group well positioned to achieve sustainable long term
growth of the Barossa Valley Estate brand.
Slide 10 - Funding Growth
The Group intends to fund its growth plan through retained earnings and bank
debt. In the year under review Net Debt increased by 14% to $154 million.
Your Board is pleased to announce that today it has approved five year
syndicated bank debt facilities that will fund the Group's growth plan. The
Group's long term bankers Westpac are the lead bank in the syndicated
facilities with new banking relationships being established with both the
Bank of New Zealand and ASB. The syndicated facility is for $250 million in
the current financial year increasing to $350 million thereafter.
Slide 11 - Executive Chairman Concluding Remarks
The record results achieved in the year under review are testament to the
strength of the Group's business model. 2014 was a year of record performance
on our journey to build a leading Super Premium wine company. I am delighted
to advise that at the recent Deloitte Top 200 Company Awards, the Company was
the winner of the 'Best Growth Strategy" award. I personally am as excited
about your company's performance, strategy and growth plans as I have ever
been. On behalf of the Board I would like to take this opportunity to
acknowledge our Delegat Great Wine People around the world. Our multinational
team has once again worked powerfully together to achieve extraordinary
results.
I would also like to take this opportunity to thank the Board for their
contribution to the Group's ongoing success.
Managing Director's Address
Slide 12 - Managing Director's address
Good afternoon Ladies and Gentleman, it is a privilege to meet with you today
to discuss the performance and growth plans of your company.
In this address I will report on 2014 performance, the development of our
global business and the Group's future growth plans.
Slide 13 - New Zealand Wine Industry Growth
The New Zealand wine industry remains an international success story; it is
recognised as a leading producer of elegant, cool climate wines. New Zealand
wine exports grew 9% to a record $1.33 billion. A significant portion of
industry growth came from North America, with the United States and Canada
growing 12% and 9% respectively.
The 2014 New Zealand industry harvest was a record 445,000 tonnes which was
29% ahead of the prior year. This record industry harvest was primarily
driven by an excellent growing season which resulted in higher than normal
yields for Marlborough Sauvignon Blanc. Quality orientated growers and
companies, including Delegat, were careful to manage vineyards to moderate
yields in order to deliver high quality. The inventory from the 2014 vintage
will support growth in industry exports over the coming year.
Slide 14 - Global Sales Performance
The Group achieved record global sales of 2,031,000 cases in the year, which
is 4% higher than the previous year. The Group's sales are well diversified
by market with 38% in North America, 33% in the Australia, New Zealand and
Asia Pacific region, and 29% in Europe including the United Kingdom. Adverse
foreign exchange rates resulted in case price realisation of $110, compared
with the $114 achieved in 2013. This was despite in-market case price
realisations being maintained in each of the major markets.
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 team now comprises 158 people, of whom 139 are based offshore in
Australia, the United Kingdom, the United States, Canada, Singapore, Hong
Kong, Ireland and Japan.
The Australia, New Zealand and Asia Pacific region is a combination of
established and emerging markets. Overall sales in the region declined by 1%
to 668,000 cases. This result was ahead of the 621,000 forecast in last
year's Annual Report as sales in Australia were more resilient than expected,
despite challenging trading and economic conditions during the year.
Australia and New Zealand are established markets for the Group and the
Oyster Bay brand continues to achieve standout market performance as a Super
Premium category leader across all varietals.
The Group achieved record sales volumes in other markets in the region,
including Hong Kong and Singapore. During the year, distributors were
appointed in Japan,
Cambodia and Thailand; this positions the Group well for growth in these
markets.
In the United Kingdom, Ireland and Europe region, sales volumes were 3% ahead
of forecast at 594,000 cases after price increases were implemented in the
second half of 2013.
In the United Kingdom, 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. Oyster Bay
Pinot Noir is the top selling Pinot Noir above 9. During the year, Oyster Bay
became the number one selling sparkling wine brand above 10 by value with
considerable further growth potential.
The Group continued to achieve strong growth in North America, increasing
sales volumes by 15% to 769,000 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 state distributors. Oyster Bay is the leading
Sauvignon Blanc over US$10 in key markets including New York, Miami and
Southern California. Strong sales growth was achieved with Oyster Bay
Sauvignon Blanc, arising from both increased distribution and greater rate of
sale per point of distribution. Oyster Bay Chardonnay and Pinot Noir are
earlier in their respective growth curves and represent significant long-term
expansion opportunities.
In Canada, sales continue to grow in all provinces. Oyster Bay Chardonnay is
the top selling Chardonnay above $15 in Canada. Pinot Grigio has quickly
become a category leader over $15 in both British Columbia and Alberta.
Slide 15 - Major Awards and Accolades
The Group's wines continue to receive major awards and accolades from the
world's
leading wine commentators and competitions.
Our very first vintage of Barossa Valley Estate Grenache Shiraz Mourvdre
(2012) was awarded a Blue Gold Medal at the Sydney International Wine
Competition.
Oyster Bay Hawke's Bay Merlot 2013 was awarded Top 100 and a Blue Gold Medal
at the Sydney International Wine Competition.
Oyster Bay Pinot Noir 2013 was awarded a Gold Medal and 91 points at the San
Francisco International Wine Competition 2014.
Oyster Bay Sparkling Cuvee Rose was awarded 90/100 Points by Canada'a most
acclaimed wine writer, Natalie MacLean.
Oyster Bay Sauvignon Blanc was awarded Premium White Wine of the Year for the
eighth time at the Australian Liquor Industry Awards 2014.
Slide 16 - Focus
As outlined at last year's Annual Meeting the Group's strategic goal is to
build a leading global Super Premium wine company. The Group will build
global brands from world leading regions, concentrating on the wine styles
for which those regions are internationally renowned.
To pursue its strategic goal, the Group is focused on establishing Oyster Bay
and Barossa Valley Estate as two of the world's great Super Premium wine
brands.
Slide 17 - Oyster Bay
For the third year running, Oyster Bay was named 'One of the World's Most
Admired Wine Brands' by Drinks International magazine and, in addition,
received the 'Hot Brand' award for the fourth consecutive year from New
York's Impact Magazine.
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.
In the major markets of the world, the Group continues its focus on
developing consumer awareness and brand connection across the Oyster Bay
range of cool climate varietals.
Slide 18 - Barossa Valley Estate
A significant focus in the year in review has been on the development of the
Barossa Valley Estate brand and range of Super Premium wines. The launch of
Barossa Valley Estate to key markets around the world, subsequent to
year-end, marks a significant milestone on our journey to build one of the
world's leading Super Premium wine companies.
Barossa Valley Estate evocatively represents one of the world's most
celebrated wine regions. Its powerful identity and standout range of elegant
red wines are made to appeal to aspirational wine lovers seeking a modern
expression of the wines that made the Barossa great: Shiraz, Cabernet
Sauvignon and Grenache Shiraz Mourvdre.
We will have the opportunity to experience the Barossa Valley Estate range of
wines following the conclusion of the meeting.
Slide 19 - Sales Growth 2014 to 2019
Delegat Group plans to grow sales by 52% to 3,094,000 cases over the next
five years. The planned growth will be primarily driven through sales growth
in North America and development of the Barossa Valley Estate brand.
In the Australia, New Zealand and Asia Pacific region, sales volume is
projected to grow by 44% to 964,000 cases by 2019. Growth in Asia and from
Barossa Valley Estate underpins projected growth in the region. Since
year-end the Group has established an in-market sales subsidiary in Japan.
The Delegat Japan team will work alongside the appointed distributor to
establish and grow the Group's brands in the market. In the 2015 year, the
Group will also establish an in-market sales operation in China.
Sales volume in the United Kingdom, Ireland and Europe region is expected to
grow by 18% to 703,000 cases over the next five years. The resumption of
growth in the sales plan for the region is driven by targeted distribution
growth and the development of new markets in continental Europe.
North America is the largest Super Premium wine market in the world and will
be the key growth region for the Group over the next five years, with strong
growth projected to continue in both the United States and Canada. The Group
plans to increase sales volume in the region by 86% to 1,427,000 cases by
2019. Achieving this plan will provide in-market distribution scale benefits
and sustainable earnings growth.
Slide 20 - Forecast 2015
The Board is confident that the investment in growth will deliver strong
returns for Shareholders and expects to achieve sales growth of 9% to achieve
record sales of 2,205,000 cases in the 2015 year.
Based on prevailing currency exchange rates, the Group is on track to achieve
a forecast Operating NPAT of $34 million which is in line with consensus and
8% higher than last year.
Slide 21 - Summary
We have built the foundations for a leading global Super Premium wine
business. Delegat Group plans to grow sales by 52% to cases over the next
five years.
To achieve this we must build one of the highest performing organisations in
the global wine industry. This is a challenge that our teams throughout our
company accept with relish. Our people aim high, work hard, focus on
attention to detail and support each other in high performing teams. I wish
to personally thank each of our Great Wine People for their commitment to our
business and the results they have collectively achieved. Thank you.
Slide 22 - Thank you
Thank you, Graeme for a very comprehensive presentation.
Shareholder's Questions and Discussion
Are there any questions in respect of the Annual Report, my Chairman's
presentation or the Managing Director's presentation? Thank you - I will
record that the 2014 Annual Report has been received and considered.
Now we will proceed to the Ordinary Business on the Agenda.
The Resolutions numbered Agenda Items 2 & 3 are both ordinary resolutions.
Election of Directors
At this time it is appropriate to hand the meeting to Bob Wilton to carry out
this part of the process. Thank you, Bob.
Agenda item 2
Re-election of Jim Delegat
In accordance with the rotation provision of the constitution Jim Delegat
retires from office and being eligible offers himself for re-election.
Jim will now briefly address the meeting.
Re-election of Dr. Alan Jackson as Director
In accordance with the rotation provision of the constitution Dr. Alan
Jackson retires from office and being eligible offers himself for
re-election.
Alan will now briefly address the meeting.
Agenda item B: General Business
I now look to the final item on the agenda: General Business.
Are there any items of General Business? Is there any discussion? Thank you.
At the conclusion of the meeting the Board invites you all to stay for canaps
and to taste a selection of your company's fine products, including the
Barossa Valley Estate range. It is also a time to mix and mingle with your
fellow shareholders, board members and senior management.
I will declare the meeting closed and thank you for the interest you have
shown in the company.
End CA:00258411 For:DGL Type:ADDRESS Time:2014-12-02 14:00:11
