OYSTER BAY MARLBROUGH VINEYARDS LIMITED
CHAIRMAN''S REPORT FOR THE YEAR ENDED 30 JUNE 2008
It gives me much pleasure to report that the company made a profit after tax
for the year ended 30 June 2008 of $2,813,000, compared with the $1,306,000
made last year, equating to 31.26 cents a share.
This resulted from an excellent growing season in which the company produced
a total of 7,193 tonnes of grapes across all varieties - an increase of 71
per cent on last year. Average grape prices were $2,175 per tonne, a
decrease of 4.3 per cent on the prior year, but producing total revenue of
$15,647,000, an increase of 64 per cent over last year.
Total operating expenses were $8,885,000, an increase of 24 per cent over the
prior year, reflecting principally increased labour, contactor and frost
protection costs, and increased rentals for the company''s leasehold
properties.
Interest expense increased by 10 per cent to $1,972,000, but tax expenses
amounted to $2,150,000 compared with the tax credit of $1,037,000 recorded
last year. Legal costs of the matters still before the courts totalled
$104,000 for the year.
Overall the year was most satisfactory, though it must be said that due to
heavy spring flowering, vine yields were abnormally high. After excellent
summer growing conditions, adverse weather in late March and early April
caused lower than expected fruit maturity and crop condition, which took the
edge off prices.
In the circumstances directors decided to distribute a dividend of 20 cents a
share - a total of $1.8 million - compared with 5 cents a share last year.
This was paid on 14 November to shareholders appearing on the record on 31
October 2008.
Given the company''s history of distributing near the full amount of its
surplus in previous years, let me explain the rationale behind this decision.
At the Annual General Meeting last year I talked about the objective of
Oyster Bay growing so that it continues to be one of the major vineyards in
New Zealand. I referred to several factors which make this a valid objective
for the company - its sustained excellence in viticultural practice, its
competitive cost structure, and the capital support for future growth it may
expect from its major shareholder, Delegat''s Wine Estate.
This year''s out turn confirms that our vineyards have excellent yield
potential and are managed well. Good properties in Marlborough have been
coming on to the market during the course of this year, though prices have
not been at levels which would promise good investment returns. The company
has no proposition to place before shareholders at this time, nor will the
directors bring an investment to shareholders unless they believe that it
represents good value.
The Directors concluded however, that it would be prudent for the company to
retain about a third of the year''s profits and move forward with a small
capital reserve rather than none, not just to cover the possibility of a
further investment, but also in recognition of the totally uncertain
conditions which confront the New Zealand economy at the present time.
We have already invested some of the reserve in frost protection windmills in
our most exposed areas, but we expect this to be more than offset by savings
in frost protection costs, which totalled $888,000 last year.
I must say that it is exceptionally annoying that much of the reserve may be
eaten away by the legal costs we are continuing to incur in relation to the
several matters before the Courts between the company and Peter Yealands
Investments Limited. The outstanding costs and compensation issues could and
should have been resolved over a year ago. The claim that the company has
acted in a manner oppressive to the minorities is ill-founded. Mr Yealands
was quoted in the media a couple of months ago as saying that all he wants
from the Court proceedings is the truth, then it will be over. He can have
the truth anytime, for free, without needing the company to spend your money,
or to spend his own on lawyers.
As to the future, the world is facing economic conditions of unprecedented
severity, and the only thing we can be certain of is that the future is
uncertain. No-one knows what will happen next. Everyone is waiting for a
signal as to whether things will get better or worse, and most are doing
nothing in the interim.
Your directors do not have any insights except to say that the industry of
which we form part is pretty hardy, and seems to endure most economic
downturns. The surplus production which resulted from last year''s bumper
vintage seems to be working its way through the system, but there will likely
be some further rationalisation within the industry. Our company is
fortunate that its total production is contracted to Delegat''s. This is not
the time to be on the spot market. And we are fortunate that the Oyster Bay
brand is well established on international markets as well as at home. So
our winemaker and we are in that segment of the market which is best placed
to survive, and maybe even flourish in different circumstances.
We will contribute to this by ensuring that our manager continues to manage
the vineyards to the highest standards, and to keep a rigorous control over
costs and quality.
May I conclude by thanking our managers for a job well done, our independent
adviser, Dr David Jordan, and my colleagues on the Board for their unfailing
attention to the company''s affairs.
ENDS
Announcement authorised by:
Bill Falconer
Chairman
For further information please contact:
Bill Falconer
09 302 1860
End CA:00173388 For:OBV Type:MEETING Time:2008-11-26:13:31:11