DGL – 2017 Interim Results 31 Dec-16

DELEGAT GROUP LIMITED Results for announcement to the market Reporting Period 6 months to 31 December 2016 Previous Reporting Period 6 months to 31 December 2015 Amount (000s) Percentage change Revenue from ordinary activities $136,374 (+2%) Operating Profit from ordinary activities after tax (Operating NPAT) $24,693 (+17%) Operating Profit from ordinary activities before interest, tax and depreciation (Operating EBITDA) $48,519 (+19%) Reported profit from ordinary activities after tax attributable to shareholders (Reported NPAT) $19,141 (-11%) Net profit attributable to shareholders $19,141 (-11%) Audit: The financial statements attached to this report have not been audited. Comments: Refer to the Executive Chairman's Report appended. The financial statements for the 6 months to 31 December 2015 have been restated following the adoption of "Amendments to NZ IAS 16: Property, Plant and Equipment and NZ IAS 41: Agriculture: on 1 July 2016. Interim Dividend Cents per share Cents per share (imputed) Not Applicable Not Applicable Net Tangible Assets per share Current Year Previous corresponding year Net Tangible Assets per share $2.82 (Last Year $2.52) Executive Chairman's Interim Report 2017 On behalf of the Board of Directors of Delegat Group Limited, I am pleased to present its operating and financial results for the six months ended 31 December 2016. Performance Highlights - Record Global Case Sales of 1,446,000. - Record Operating NPAT of $24.7 million. - Capital investment of $21.9 million in growth assets including vineyard development and the Hawke's Bay and Marlborough Wineries. - Oyster Bay received the 'Hot Brand' award from New York's highly regarded Impact Magazine for a seventh consecutive year. - Barossa Valley Estate Shiraz 2014 and Grenache Shiraz Mourvedre 2014 were both awarded 90 Points by James Halliday, Australia's leading wine writer. - Delegat Crownthorpe Terraces Chardonnay 2015 received a Gold Medal at the New Zealand International Wine Show 2016. 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 and reconciliation of Operating Profit to Reported Profit. This reconciliation eliminates from each line in the Statement of Financial Performance all fair value adjustments. Operating Performance A record Operating NPAT of $24.7 million was generated compared to $21.1 million for the same period the previous year. Operating EBIT of $41.4 million is $7.6 million higher than for the same period the previous year. Delegat achieved Operating Revenue of $135.8 million on global case sales of 1,446,000 in the six month period. Revenue is up $7.2 million on the same period last year due to a 14% increase in global case sales, partially offset by the unfavourable impact of foreign exchange rate changes. Operating Gross Margin is up 6% on the same period last year and is impacted by lower cost of goods per case arising from the higher yielding 2016 vintage. Operating Expenses at $35.3 million are $2.9 million lower than the same period last year. This is due to the impact of a stronger New Zealand currency on the translation of off-shore expenditure. 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 two significant items at the half-year reporting date: o Harvest Provision Release (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. The adjustment provides a write-down of $8.3 million (December 2015: $4.8 million); o 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 $0.6 million (December 2015: $5.4 million). These together with minor adjustments in respect of share-based payments, net of taxation, amount to a write-down of $5.6 million (December 2015: write-up of $0.4 million). Cash Flow The Group generated Cash Flows from Operations of $24.9 million in the current half-year, which is an increase of $9.8 million on the same period last year. This increase is primarily due to higher receipts from customers due to the higher cases sales. A total of $23.0 million was invested in additional property, plant and equipment during the period, including vineyard development in New Zealand and the Barossa Valley, and development of the Hawke's Bay and Marlborough wineries, which will provide earnings growth into the years ahead. The Group distributed $12.1 million to shareholders in dividends. Additional borrowings of $10.3 million were drawn down to fund the increased capital investment during the six months. The Group has Net Debt of $292.0 million, compared to $282.7 million at 30 June 2016 - an increase of 3% and well within the Group's long term bank debt facilities. Looking Forward The results achieved in the six months to December 2016 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.. The Group is on target to achieve global case sales for the full year of 2,632,000, up 9% on last year. The Group continues to face risks in the form of exchange rate volatility, which makes it difficult to forecast financial performance. Based on the prevailing exchange rates, the Group forecasts a 2017 operating profit result in line with last year's record performance. JIM DELEGAT Executive Chairman For further information please contact Graeme Lord - Managing Director DDI (09)359 7317 or Mobile 021 860 740 End CA:00297447 For:DGL Type:HALFYR Time:2017-02-27 08:58:48