DGL
29/08/2014 08:30
FLLYR
REL: 0830 HRS Delegat Group Limited
FLLYR: DGL: DGL - Full Year Results 2014
Results for announcement to the market
Reporting Period 12 months to 30 June 2014
Previous Reporting Period 12 months to 30 June 2013
Amount (000s) Percentage change
Revenue from ordinary activities $231,760 (+1%)
Profit from ordinary activities after tax attributable to shareholders
$42,597 (+3%)
Net profit attributable to shareholders $42,597 (+3%)
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 Full Year Review appended.
Dividends
The Directors have declared a final dividend of 11.0 cents per share. The
dividend will be fully imputed and a supplementary dividend of 1.9412 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 2014 11.0 cents
Imputed Cents per share
- Final Dividend for the year ended 30 June 2014 4.2778 cents
Record date 26 September 2014
Dividend Payment Date 10 October 2014
Net Tangible Assets per share
Current Year Previous corresponding year
Net Tangible Assets per share $2.45 $2.15
DELEGAT GROUP LIMITED
Executive Chairman's Report 2014 - "A year of record performance on our
journey to build a leading global Super Premium wine company".
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 2014.
Performance Highlights
- Record global case sales of 2,031,000.
- Achieved sales revenue of $222.5 million.
- Record operating NPAT of $31.4 million.
- Record harvest of 35,127 tonnes.
- Oyster Bay named One of the World's Most Admired Wine Brands by Drinks
International magazine.
- Oyster Bay Pinot Noir 2013 was awarded a Gold Medal at the San Francisco
International Wine Competition 2014.
- The North America region became the Group's largest by sales volume for the
first time.
The Group presents its financial statements in accordance with the New
Zealand equivalents to International Financial Reporting Standards (NZ IFRS).
The Directors continue to be of the view that the results reported under NZ
IFRS do not provide adequate insight into the Group's underlying operational
performance, primarily due to a number of fair value adjustments that are
required to be reported on.
To better understand the operating performance, the Group has published an
Operating Performance report. This supplementary report eliminates from each
line in the Statement of Financial Performance all fair value adjustments.
Operating Performance
A record operating NPAT of $31.4 million was generated compared to $26.3
million last year. Operating EBIT of $52.3 million is $7.6 million higher
than last year. Operating expenses (before NZ IFRS adjustments) at $83.4
million are $2.3 million higher compared to last year.
'In-market' case price realisations are being maintained in each of the major
markets.
Delegat achieved Sales Revenue of $222.5 million on global case sales of
2,031,000 in the year. Sales Revenue is up $0.5 million on last year, due to
global case sales being 4% higher, which offset the ongoing impact of adverse
foreign exchange rate changes. The adverse foreign exchange rate changes
have resulted in case price realisation of $110, compared with $114 achieved
in 2013.
The Group's case sales performance, case price realisation and foreign
currency rates achieved are detailed below:
NZ IFRS Fair Value adjustments
In accordance with NZ IFRS the Group is required to account for certain of
their 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 three significant
items at the year-end:
- Biological Assets (Vines) - The Group's vineyards have been revalued at the
reporting date, resulting in a higher value attributable to Biological Assets
of $4.4 million in 2014 (2013: $2.9 million);
- Biological Produce (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 2014, the market value of the company grapes
exceeded the costs incurred by $17.6 million. This difference was primarily
due to the increased yields for the 2014 vintage (up 19% year-on-year). This
write-up, plus the impact of prior year's vintages being sold has resulted in
a net write-up of $8.5 million for the year (2013: $14.2 million);
- 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 $2.7 million (2013: $3.5
million);
These together with minor adjustments in respect of share-based payments, net
of taxation, amount to a write-up of $11.2 million.
Cash Flow
The Group generated Cash Flows from Operations of $20.8 million in the
current year, which is a decrease of $18.4 million on the previous year,
primarily due to the investment for the higher 2014 harvest inventory and
other working capital items. A total of $31.9 million was invested in
additional property, plant and equipment during the year, including the
acquisition of bare land vineyards in the Barossa Valley, which will provide
earnings growth into the years ahead. The Group distributed $10.1 million to
shareholders in dividends. Additional borrowings of $22.8 million were drawn
down to fund the increased capital investment during the year.
The Group has Net Debt of $153.7 million, compared to $134.9 million in 2013
- an increase of 14%.
Dividends
The Directors consider that the underlying operational performance and strong
cash flows fully justify the maintenance of dividends. Accordingly, the
Directors are pleased to advise they have approved a fully imputed dividend
payout of 11.0 cents per share. The dividend will be paid on 10 October 2014
to Shareholders on record at 26 September 2014.
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 to build a leading global Super Premium wine company.
Over the past two years the Group has invested $107 million in capital
expenditure and the acquisition of Barossa Valley Estate. The Group plans to
invest a further $86 million in capital expenditure over the coming 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 10,000 tonne capacity Hawke's Bay winery, expansion of the
Marlborough winery, and new vineyard development in Marlborough, Hawke's Bay
and the Barossa Valley. The Group's intention is to fund this capital
expenditure using a combination of retained earnings and debt.
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.
JIM DELEGAT
Executive Chairman
Managing Director's Report 2014 - "We have built the foundations of a leading
global Super Premium wine business. Delegat Group plans to grow sales by 52%
over the next five years".
As outlined in the Executive Chairman's report, the Group achieved record
case sales of 2,031,000 cases and record Operating Net Profit After Tax of
$31.4 million in the year to 30 June 2014. These record results were achieved
despite ongoing exchange rate headwinds.
Last year's Annual Report outlined the evolution of the Group's business
strategy to build a leading global Super Premium wine company. During the
year under review the Group has taken some important steps on this growth
strategy. Highlights include investing $31 million in capital expenditure to
support growth, finalising plans for the new Hawke's Bay winery and
developing the brand strategy for Barossa Valley Estate. The Group also made
the decision to rename operating subsidiaries as Delegat in order to create a
cohesive global corporate identity with relevance beyond the New Zealand
category.
New Zealand Wine Industry Review
The New Zealand wine industry remains an international success story,
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 and deliver high quality. The inventory from the 2014 vintage will
support growth in industry exports over the coming year.
Global Sales Performance
The Group achieved record global sales of 2,031,000 cases in the year, 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.
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 and Ireland.
Australia, New Zealand and Asia Pacific
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.
In Australia, the Group has established a category leading brand presence.
Oyster Bay Sauvignon Blanc is the number one selling bottled wine by volume
and value. Oyster Bay has also achieved category leadership in the
Chardonnay, Pinot Noir and Merlot categories over $10. New Zealand is an
established market for the Group and the Oyster Bay brand continues to
achieve stand out 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 which positions the Group well for
growth in these markets.
United Kingdom, Ireland and Europe
The Group's sales volumes in the region declined by 2% to 594,000 cases. This
result was 3% ahead of forecast 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(GBP) in their respective categories. Oyster
Bay Pinot Noir is the top selling Pinot Noir above 9(GBP). During the year
Oyster Bay became the number one selling sparkling wine brand above 10(GBP)
by value.
In Ireland, Oyster Bay continues to lead the New Zealand category and is the
number one Super Premium New Zealand Sauvignon Blanc, Chardonnay, Pinot Noir
and Merlot. The significant duty increases imposed by the Irish Government
during the year are expected to constrain future growth in this market.
North America
The Group continued to achieve strong growth in North America, increasing
sales volumes by 15% to 769,000 cases. The region became the Group's largest
by sales volume for the first time in 2014.
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 $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 Gris has become a
category leader over $15 in both British Columbia and Alberta.
Brands and Communications
The Group is focused on establishing Oyster Bay and Barossa Valley Estate as
two of the world's great Super Premium wine brands.
A significant focus in the year in review has been on the development and
launch 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 step on our journey to become one
of the world's leading Super Premium wine companies. The Barossa Valley
Estate brand is highly complementary to the Group's well defined Super
Premium business model, presenting a valuable growth opportunity in a new
Super Premium segment of the market. Supported by category and consumer
research, packaging and marketing communications development was undertaken
to develop a standout range of elegant red wines to appeal to a growing
number of aspirational wine lovers seeking an authentic regional expression
from the Barossa Valley.
The Oyster Bay brand has created a strong connection in the hearts and minds
of aspirational wine consumers in the major wine markets of the world. 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. In the major markets of the world the Group has continued its focus
on developing consumer awareness and brand connection across the Oyster Bay
range of cool climate varietals. Marketing programmes have been tailored to
each market to encourage consumer trial at the point of purchase and grow
rate of sale across all channels of distribution.
Major Awards and Accolades
The Group's wines continue to receive major awards and accolades from the
world's leading wine commentators and competitions.
- Oyster Bay Sparkling Cuvee Brut was awarded a Gold Medal at the Hong Kong
International Wine & Spirits Competition 2013.
- Oyster Bay Merlot 2013 received a Gold Medal at the Dallas Morning News &
TexSom Wine Competition 2014.
- Oyster Bay Pinot Noir 2013 was awarded a Gold Medal at the San Francisco
International Wine Competition 2014.
- Oyster Bay Sauvignon Blanc 2013 was awarded Premium White Wine of the Year
for the 7th time at the Australian Liquor Industry Awards 2013. In addition,
it also received a Double Gold and Class Champion at the Houston Wine
Competition 2014.
2014 Harvest
The Group's 2014 harvest was 35,127 tonnes. The New Zealand harvest was
34,123 tonnes, which was 18% higher than the prior year's vintage. The
Australia 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 future sales growth in line with the projections
detailed in the Group Outlook.
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.
The Group continues its commitment to its very own 'Global Sustainability
Initiative', designed to provide a coordinated approach to sustainable
practices across its entire business, including the international markets in
which it operates.
Group Outlook
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,
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.
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. Barossa Valley Estate provides the Group with an opportunity
to build a leading Super Premium Shiraz, Cabernet Sauvignon and Grenache
Shiraz and Mourvedre brand globally.
The Group is planning to grow sales from 2,031,000 cases to 3,094,000 cases
over the next five years, which represents growth of 52% 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
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.
Our People
The Group's strategic goal is to build a leading global Super Premium wine
company. To achieve this goal 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 results they have collectively achieved.
GRAEME LORD
Managing Director
For further information please contact
Jim Delegat - Executive Chairman
DDI (09) 359 7301 or Mobile 021 886 698
or
Graeme Lord - Managing Director
DDI (09) 359 7317 or Mobile 021 860 740
End CA:00254556 For:DGL Type:FLLYR Time:2014-08-29 08:30:20
