DGL - Delegats Wines

[Ferg]

Delegat Wines released their HY result today:
https://www.nzx.com/announcements/468314
https://www.nzx.com/announcements/468312

I just listened to their investor presentation.  Very happy holder.

The highlights:
 ~ Volumes up 3%
 ~ Sales value at $179.6m for the HY was up 1% on last year
 ~ Sales value was impacted by a combination of competitive pricing action and the USA tariffs
 ~ Operating Gross Profit was 49% of sales, up on last HY of 48% which was helped by the bumper harvest in 2025 {for context FY25 GM was 45.3%}
 ~ Operating NPAT at $29.7m was up on last year's $28.3m
 ~ We are yet to see the impact of reversing the massive harvest provision in 2024 (which impacts reported NPAT, but is irrelevant for operating NPAT)

Full year guidance for operating profit of $50-$55m was re-affirmed.  Given the modest movement in sales away from H1 into H2 due to USA tariff disruptions and the timing of deliveries into the USA, Delegat Wines should deliver on forecast case sales of 3.3m or thereabouts.  Assuming margins and cost savings are maintained, I see Delegat Wines landing at the upper end of that guidance operating NPAT for FY26

$50m operating NPAT will be 49.4c EPS
$55m operating NPAT will be 54.4c SPS
Midpoint of 51.9c puts DGL on a forward P/E ratio of 8.2.

What is pleasing to see is the growth in local sales for NZ & Oz, plus large gains in China as well as the UK & Ireland.  Gains in sales here have offset the decline in USA sales....the market there is still in a state of flux but still remains a priority and focus for DGL.  Interestingly Canada is a big opportunity for DGL given changes to local licencing laws and the collapse of USA wines being imported into Canada.  What is working for Delegat Wines is the premiumisation strategy and their relationship with buyers in the local markets....the super premium category continues to see strength relative to other wine segments and Oyster Bay is a strong brand in that category.

[Mos]

Apparently DGL hosted an investor day on Monday (nothing posted to NZX). Craigs notes from the day are below...

DGL – Rob Morrison is busy fine tuning modelling assumptions for Delegat Wines following Monday's Investor Day in Marlborough. Meanwhile DGL is busy harvesting its Sauvignon Blanc this month for shipment in June given the lack of barrel ageing for the bulk of the wine. The Investor Day impressed from a Supply perspective with DGL now benefitting from a heavy 4-year investment period to expand its production facilities and the purchase more land and vineyards to ensure self-sufficiency as a vertically integrated business. Whilst the supply of 'super-premium' Sav Blanc looks assured DGL provided less insight on the Demand picture which appears to be a key issue for the market currently given a softer US market driven by Tariff issues and a demographic shift that is seeing the younger 'Gen Z' millennial generation drink c20% less wine. DGL's goal is not to make Oyster Bay the #1 Sauvignon Blanc in the US but to cement a top #2-3 position – which is enough to generate leverage with customers and secure shelf space. DGL think they are effectively fully penetrated in the Sauvignon Blanc category in the US now and see Pinot Gris is seen as DGL's next major opportunity. DGL shares are currently trading at a historic low on a PE of c8x and net yield of 4.6%. Leverage looks set to peak in FY26 at $300m (c2.5x) before falling from FY27 as capex falls from $180m over FY23-25 to $90m over FY26-28. CIP currently has an Overweight on the shares.