The bottom line was lower because of adjustments required under international accounting rules. This required a write-down in the value of grapes held as inventory, an item that turns to credit in future years as wine is sold.
Sales for the six months ended December 31 were 1.446 million cases, a solid lift on the 1.267m sold at the same time a year earlier. Revenues were $135.8m, from $128.6m, and the increase would have been greater but for adverse foreign exchange movements, executive chairman Jim Delegat said.
Delegats’ after-tax trading profit was $24.7m, up from $21.1m.
However, the harvest (grape) write-down was $8.3m, compared with $4.8m previously. After favourable one-off items, including currency holdings, the net write-down was $5.6m. The same time a year earlier had a marginal write-up in values.
This meant the bottom line was a $19.1m profit, down from $21.5m. The results under accounting rules don’t provide adequate insight into the group’s underlying operational performance, Delegat said.
A good guide to a company’s performance is operating cashflow, which rose to $24.9m for the period, up from $15.1m, reflecting greater wine sales. The trading profit was helped by the high-yielding 2016 vintage, reducing costs on a per-case basis, and the strong kiwi dollar also helped lower off-shore expenses.
Delegats was well-positioned to pursue its strategic goal of being a leading global premium wine company, he said. Oyster Bay won a New York-based wine award for the seventh year in a row.
The group was on target for full-year wine case sales of 2.63 million, which would be a 9% lift on last year.
Exchange rate volatility made financial forecasts difficult, but an operating profit in line with last year’s $37m record level was expected, Delegat said.
North America remained the main first-half export destination though growth was lower in percentage terms than that achieved in other markets. Sales rose 9% to 518,000 cases ‑ the United Kingdom, Ireland and Europe rose 17% to 449,000, and Australia, New Zealand, and the Asia-Pacific region was 18% ahead at 479,000 cases.
Delegats invested $23m during the half-year on vineyard and winery development in NZ and at Barossa Valley in Australia.
Total assets at balance date were $651.9m, with equity of $285.7m, a ratio of 43.8%. Borrowings totalled $297m. Interest costs of $6.8m were covered nearly five times by the Ebit earnings figure.
