Few cheers for Delegat's share price

JOHN SELKIRK/Dominion Post

GLASS HALF EMPTY: Investors at Delegat's annual meeting were frustrated by the wine producer's less-than-sparkling share price.

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Delegat's managing director Jim Delegat is disappointed by the wine exporter's subdued share price performance, despite the group's continued export success and profit increases.

Speaking at yesterday's annual meeting in Auckland, Mr Delegat seemed as frustrated by the share price as quizzical shareholders.

"We've made more money this year than Air New Zealand, more money than Michael Hill, more money than Rakon and yet the share price is where it is because people see it [Delegat's Group] as agriculture".

Mr Delegat said what might be seen as the wine industry's agricultural risk was well managed, and the product was firmly in the fast-moving consumer goods (FMCG) market.

Delegat's Oyster Bay brand is New Zealand's leading wine label in Britain – its merlot offering topped sales of the variety in the 5 and above (NZ$11.40) category – and for the first time became a top 10 imported wine brand in the United States in the US$10 (NZ$13.75) and over category.

The brand remains the biggest-selling New Zealand wine in Australia and Canada by volume and value.

"We're packaged branded goods and our product delivers more than 55 percent gross profit margin; we're delivering in excess of 20 percent ebit (earnings before interest and tax growth), we've got high-quality sustainable earnings, but a lot of people say it's agriculture and they write it off," Mr Delegat said.

Delegat's shares closed up six cents at $2.51 yesterday.

They began the year at $2.02 and have traded between $1.90 and $2.62 over the past 12 months. Earlier this year the firm announced a record net annual profit of $30 million, a 57 percent jump on the June 2008 year.

Mr Delegat also said the lacklustre share price may be a result of a lack of available shares, with about 15 per cent being held by Fisher Funds Management, the New Zealand Superannuation Fund and ACC. Mr Delegat himself owns 33 percent of the company with another third owned between his sister and executive director Rosemari Delegat and chairman Bob Wilton. Mr Delegat's parents founded the company after emigrating from Croatia in the 1930s. It floated on the sharemarket in April 2006, raising $45m through the sale of 32 million shares at $1.40 each.

Meanwhile, Mr Delegat said he expected a wine glut to persist for a further two or three years although his company had been largely unaffected by increased levels of discounting and bulk wine sales by producers with less-established sales and marketing infrastructure.

There had been increased levels of discounting by lesser-known labels due to supply exceeding demand. New Zealand wine exports totalled $992m for the year to June, up 24 per cent from last year.

Delegat's was, however, at the mercy of volatile and unfavourable foreign exchange rates. But Mr Delegat reiterated the company's forecast that it would expect to achieve continued sales growth and profit in line with last year's record performance.

- © Fairfax NZ News