Delegat lifts first half profit, sees annual profit in line with last year's result

Winemaker Delegat Group, lifted operating profit 17% in the first half and is predicting annual profit to be in line with last year.

Profit excluding one-time movements in asset valuations rose to $24.7 million in the six months ended December, from $21.1 million a year earlier.

Operating earnings before tax rose 22% to $41.4 million, on a 6% gain in operating revenue to $135.8 million.

Global case sales rose 14%, with the gain partly offset by unfavourable foreign exchange movements.

Delegat says the numbers reported under conventional financial reporting standards "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."

Net profit fell to $19.1 million from $21.5 million a year earlier as the company's grapes and derivative financial instruments were written down by $7.7 million, with total write-downs of $5.66 million net of tax.

The company forecast full-year operating profit to be in line with last year’s record $37 million, based on current exchange rates, although it says forex volatility makes it difficult to forecast financial performance.

"The results achieved in the six months are testament to the strength of the group's business model," it says.

"Delegat Group is well positioned to pursue its strategic goal to build a leading global super-premium wine company. The group is on target to achieve global case sales for the full year of 2,632,000, up 9% on last year."

Delegat invested $23 million in vineyard development in New Zealand and the Barossa Valley and development of wineries in Hawke's Bay and Marlborough. It borrowed $10.3 million in the period, taking net debt to $292 million, up 3% from June 30, 2016.

The bulk of Delegat's sales came from its distribution in its New Zealand, Canada, Asia and Pacific segment, with a 4.4% lift to $144.2 million in revenue though a 25% drop in segment profit to $14.5 million.

The Australian segment lifted revenue 13.9% to $46.3 million and profit rose to $809,000 from $487,000 a year earlier, while revenues dropped 9.9% in Europe to $39.1 million and profit fell 33% to $780,000. US revenues rose 3.2% to $41.9 million, and profit rose 6.6% to $629,000.

The shares last traded at $6.15 and have gained 4.2% in the past 12 months.

(BusinessDesk)