Right. Good morning, everyone, thanks for joining us, as on our results announcement for the half year to December 31st. Delighted to come together and share the performance and the results. Joining me, I've got Riki Maden, who is the CFO, and Riki and I together will present the half year results and then open it up for questions. Let me first open by saying that I'm pleased with the performance achieved to date. One of Delegat's core values centers around aim high and coming to work each day to deliver the very best outcomes for the business and our shareholders, and having a determined focus on overcoming obstacles and challenges that may be put in our way.
You will hear in the presentation that the key factors that have influenced this year's results and shape our outlook, and these include maintaining our price premiumization position in all markets and driving further value growth opportunities. We've reported higher sales, but also improved operating margins in what has been a challenging wine industry environment. We've responded to the imposition of U.S. tariffs in our largest market. We've maintained strict control across the business and respective costs. We've generated strong operating cash flow, and we've used that to repay debt, and we've reduced through rephasing and looking at our capital expenditure. Our strategy remains unchanged. We are building a leading global super premium wine business, and while the category is under pressure, consumers continue to choose fewer but better brands, which directly supports Oyster Bay's positioning.
That dynamic underpins everything you see in the results today. Our specific goal is to make Oyster Bay the leading global super premium wine brand from New Zealand, and to support this, we have invested in high growth varietals, particularly Sauvignon Blanc, and encouraging Pinot Grigio, Chardonnay, and Pinot Noir. The IWSR reports that the total market size for the total premium wine drinkers has increased from last year to 74 million people, up about 2%. North America continues to remain our top priority market, and the U.S., with 50 million premium wine consumers, represents our greatest opportunity for growth. Our advantage comes from these four success factors that you've heard us talk about. Again, in a year like we've been, brand strength, quality at scale, securing supply, and disciplined global distribution has been at the forefront in terms of the performance.
Those world-famous brands have now become very strong, recognizable, and they connect with our consumers around the world. Our wines benefit from cool climate conditions, which produce elegant and vibrant styles that are sought after globally, and we continue to be seen as a benchmark in the category and by most, are widely stocked and promoted by retailers worldwide. We've invested in scientifically managed vineyards and cutting-edge facilities. A lot of that investment is behind us, and that is reflective of why we have curtailed some of our capital expenditure going forward. This quality of vineyards ensures we consistently meet high standards in delivering premium segment wines. Our supply remains similar to a year ago.
We operate large viticulture hectares across prime vineyards in both New Zealand and Australia. It gives us the competitive advantage in producing premium grapes efficiently and at scale. Of course, distribution successfully entering into all of our international markets, where there is strong demand for premium wines. In respect of the year that has been, the highlights, as I said, volumes increased modestly, but margins increased across all measures, and Riki will go into that later. The highlight for me has been that margin improvement on all of those measures. Net profit after tax per case increased 2%, and total net profit rate was higher than this year previously. The company leveraged its market knowledge and its long-standing customer distributor relationships.
As you know, a 15% tariff was introduced into our largest market, the USA, and had the potential to significantly disrupt our business and reduce our profitability. In times like this, you can see how the strength of the Oyster Bay brand as a leading consumer sought brand, has allowed us to navigate that market challenge without destabilizing the company, and in a year that we've delivered that, effectively, we've improved profits. Operating cash flow was impressive at NZD 62 million, and again, allowed us to retire 7% further debt from our June position and 11% from where we were this time last year. We will discuss some of those in depth later. Last year, Delegat took some decisive actions to respond to the changing market conditions.
Those actions helped us to ensure the company positioned itself well, not only for the short, but the long term. It continues to drive value to our shareholders. We've focused on creating value in the present through disciplined management and strategic execution. Those actions we did was implementing price increases in several markets as part of our premiumization strategy. Obviously, those price increases had a disruption as retailers, as distributors adjusted to the price increase. It's been favorable to see the performance. When we get into our sales by regions, you can see that those price increases that were implemented over a year ago have taken effect and not disrupted our sales. We've also expanded further in our global distribution network, securing new points of sale and increasing our market reach. This year, the actions have included further items.
We have paused on further price increases to ensure we have protected our market share. That has supported our volume retention, and with future prices, we consider we need to review that once we consider the market conditions stabilize. In markets where our competitors have been heavily discounting, immediate price increases risk a further loss of market share and an erosion of consumer perception of the brand value and undermines our premium position at Oyster Bay and Barossa Valley Estate. This year, rather than price increases, we have leveraged our market mix, we've improved our vintage yields, and we have achieved packaging cost efficiencies to support margin expansion. We absolutely used our deep understanding of the market, with strong relationships in the U.S. to manage the impact of the tariffs.
We did implement a retail price increase following the 10% tariff announcement, and that was implemented at the start of this year. Given the well-documented global industry oversupply position, we also set up for a deliberate reduction in the year's harvest that we are going through at the moment as a way of rebalancing supply and, more importantly, reducing growing costs at the outset of the growing year. Delegat's has always been recognized for our active inventory management to ensure we do not have aged inventory that may lead to issues in later years. We've continued to pursue operational efficiencies. We've moved to a shift to the lighter weight and domestic supply glass, which not only reduce costs, but supports our sustainability commitments. We definitely continue to focus on cost savings through careful financial management, and as we said in the earlier slide, reduced our CapEx.
Encouragingly, recent data shows that Gen Z is beginning to engage with the wine category. Premiumization has been noted it has slowed as consumers focus on their spending on essentials. White wine is expected to perform better than any other category, aligning with long-term trends towards lighter, refreshing drinks enjoyed at home. New Zealand is well positioned to benefit from these trends due to its natural advantages, its unique wine styles, and its strong connection with engaged consumers. If we look at the performance by market, in the United Kingdom, Oyster Bay continues to do exactly what we want it to do. We've protected price, and we've delivered EBIT improvement in a heavily discounted market.
Where the broader wine market has declined, we maintained our position as a top three New Zealand wine brand, with the highest average bottle price in the top 20 selling still wines in the United Kingdom. Despite modest volume pressure, profitability improved, supported by strong national account execution. Oyster Bay remains the top two premium New Zealand wine brands in the market, and it's ranked number 12 still wine brand, irrespective of country or price. Our average selling price is GBP 9.37 per bottle, which is 18% higher on average compared to the other New Zealand category, and a staggering 38% higher than the total U.K. wine market. In Ireland, it's been a great trading period for Oyster Bay. We've traded over 30% higher than the prior year.
Oyster Bay remains a strong category position with four of our top varietals in the New Zealand wines in Ireland, being Sauvignon Blanc, Chardonnay, Merlot, and Pinot Noir. Oyster Bay increased in both volume and value against an overall market decline, and relationships with our key retailers remain positive. Oyster Bay brand is ranked the number eight still wine brand, irrespective of country or price, and has the second highest average selling price in that market at EUR 12.18 per bottle. Turning to North America, Canada, we've had a very good period in Canada. Overall, again, the wine market remains in negative territory. That was influenced in part by industrial strike action this year in British Columbia and Western Canada. The New Zealand category reflects the geopolitical issues arising from the U.S.-Canadian trade issues.
Canada was the largest export market for the U.S. wine, and this is largely being removed from sale across Canada now. At a national level, Oyster Bay remains healthy, with a 2.5% growth, and Barossa Valley Estate over 4% over the last 52 weeks. We are also excited that Ontario is overhauling its alcohol distribution system so that the Liquor Control Board of Ontario now becomes the exclusive wholesaler to all retail channels, including grocery, convenience, bottle, bars, and restaurants. This is quite a departure from the current model, where private retailers cannot buy via the Liquor Board.
This new reform supports the province's expansion of alcohol sales into more retail outlets. With Delegat having a strong relationship with the LCB, we see this as a huge opportunity for Oyster Bay. It highlights that we show strength in retail channels in many of our other overseas markets. The United States. Clearly, the United States is our largest, and it's our most important market for future growth. We continue to see challenges in terms of economic conditions, consumer preferences, and tariffs impacting on the wine market there. Oyster Bay remains a New Zealand leading wine brand, with Sauvignon Blanc ranked in the top five white wines by value and holding the number two spot in the Sauvignon Blanc category. Pinot Grigio, again, is coming along well. We are now among the top 10 premium global brands and showing good, healthy growth.
Our discussions with our major distributor, Southern Glazer's Wine & Spirits leadership, confirmed their support for our brand and our pricing strategy. They praised Oyster Bay's performance and encouraged further growth initiatives, noting we were, for them, one of only a few brands to show growth. Overall, you may have read that the U.S. wine market continues a downward trend, with wine market down 9% on a MAT basis or 11% for this fiscal year to date. Delegat volumes are in line with that market reduction, which is a solid result given the price increase for the tariff recovery that was implemented in the year. Market data shows that Oyster Bay sales on an annual basis is down 1.9%, which outperforms the U.S. market, which has declined 6.8%.
The 2025 Silicon Valley Bank report, which was released last month, had some key soundbites, which I'd like to share with you. In that they said, "Consumption remains under pressure. That said, there is some good news on the steepest part of the downturn, and it's appearing to be waning. Our analysis suggests we're entering into a new phase in the correction. Yes, 2026 will be a challenging year, but the industry is at least approaching a point of stabilization. The recovery that follows will favor those already executing outward-facing, consumer-driven strategies. The next phase of this correction will reward wineries that plan with clarity, engage with purpose, and adapt with discipline." We think the steepest part of the downturn is behind us, but we're not out of the woods yet.
2026 and 2027 will still be challenging. However, the demographic drag will lessen as the large 30 to 45-year-old cohort moves into more wine-friendly life stages and the impact of the older consumer sunset. In our opinion, New Zealand's cool climate, viticulture, elegant and assertive wines with glorious fruit flavors, favorable consumer trends globally, and particularly in the United States. Oyster Bay's brand and offering positions us well to meet those emerging consumer trends, particularly with Sauvignon Blanc, Pinot Grigio, Chardonnay, and Pinot Noir. Turning now to Australia, New Zealand, and Asia Pacific markets. Australia is a tough market. It's dominated by two large retailers, as you will be aware. The premium wine category in Australia did grow 2.4% in volume, an outlier relative to some of the other markets. Oyster Bay, however, declined 2.7%.
That was due to the price increases that were not matched by our competitors as they looked to again continue with their deep discounting strategy. Despite this, Oyster Bay Sauvignon Blanc remains the top-selling wine by value, and other varietals like Merlot, Chardonnay, and Pinot Grigio also performed strongly. The Australian wine category globally has been under pressure for some time, and those challenges are well known. Barossa Valley Estate outperformed the premium Australian red wine category, and in this first half of this year, BVE has grown 7%, with new distribution across New Zealand, Australia, Canada, U.K., and China. We continue to see opportunities to grow premium Australian wine from the Barossa Valley, which is one of the world's leading wine regions. Turning to home, to New Zealand, you will have read that the New Zealand domestic wine is in significant decline.
We have had a very strong quarter two, where we were 23% above the premium sector, which was down 3.2%. December sales, actually, for this month, was our highest since December 2021, which is really encouraging. Oyster Bay remains the category leader, with other varietals also ranking in the top five. Pleasingly, Oyster Bay leads brand affinity, which is brand aware, feeling the brand is right for them, at 59%. Our business in China continues to grow strongly. That's been evidenced by this first half, where we've grown 66% from the year before. Oyster Bay is the leading wine brand in China, having secured that number one slot a couple of years ago.
We continue to seek growth opportunities in China and we have made long-term investments in distribution in China to ensure we're best placed to capture that growth. The Asia-Pacific region continues to offer long-term growth opportunities, especially in Southeast Asia. I'll now turn to Riki to take you through the financial drivers.
Morning, everyone. I trust you have all had the opportunity to review the group's half year 2025 results, which we released on the NZX this morning. In terms of the financial performance highlights, really speaks for itself, really positive to see all key metrics up on last year, especially operating EBITDA at NZD 65.6 million, 6% higher, and operating NPAT at NZD 29.7 million, 5% higher than the last half year. We've had strong cash flow from operations of NZD 62.3 million, which has helped reduce our net debt to NZD 307 million on December 31, 2025, which is NZD 21.6 million or 7% lower than June 30, 2025. Our volumes overall have increased and FX is supportive, and we have maintained pricing discipline despite market pressure.
Compared to the previous year, global case sales are up by 54,000 cases or 3%. As Murray mentioned earlier, last year, we implemented price increases in most of the markets outside of the United States. To see all of our regions up on last year reflects the strength of our brands. We've not seen many other New Zealand wine brands increase their prices, instead continuing to aggressively discount. The North American market was down in line with the market being down. We expected volume to be down because of the continuing market decline, but also because of the impact of the U.S. tariff introduction and the retail price increase implemented in Q1 to recover the 10% tariff. We see this as a creditable outcome. Currency movements provide a tailwind with favorable foreign exchange rates across the major currencies.
One of the key highlights of this year's, this half year's results is the performance of sales revenue. At the New Zealand dollar level, total sales revenue reached NZD 179 million. This is a 1% improvement compared to last year. Volume increase was offset by a lower value driver, primarily associated with the accepted position that in order to protect sales volumes against aggressive discounting from others, we would need to invest more in promotional support, as well as fund the additional 5% U.S. tariff that was increased in August 2025. These have impacted on our sales revenue per case, being NZD 2.40 lower than last year, with the U.S. tariff alone accounting for NZD 2.10 per case. This slide presents operating performance against last year.
As Murray mentioned earlier, it's encouraging to see all key metrics improved against last year. This slide highlights the key drivers behind our half-year operating net profit after tax. In the first half of the year, our operating profit is NZD 29.7 million, which we expect to have been achieved from 51% of our annual case volumes. Operating NPAT is up 5% compared to the previous half year. Margin is favorable, NZD 2.5 million on the higher case sales and lower Cost of Goods Sold. As expected, Cost of Goods Sold per case was expected to be down on last half year. We have achieved a 5% per case reduction from NZD 56.60 per case to NZD 53.80 in the first half.
The main contributors to the lower cost of goods in FY26 were lower fruit costs on the 2025 vintage, lower packaging costs, primarily on lighter weight bottles, which are now sourced domestically in New Zealand, and stabilized freight costs. The impact of the U.S. tariff on the business associated with the tariff change to 15% and additional promotional investment in the markets accounts for NZD 2.5 million adverse for the first half. It was positive to see the events over the weekend, where the U.S. Supreme Court found in favor of the Court of International Trade, deeming the tariffs imposed since April 2025 unlawful. The U.S. administration have responded by enacting Section 122 of the Trade Act and launching a Section 301 investigation into unfair trade practices.
We're continually working with U.S. Customs and our advisors to understand how this will impact on New Zealand wine going into the U.S. The group has managed costs well. This has been supported by debt repayments and the lower official cash rates, which has led to some interest savings. This slide explains how fair value adjustments have impacted our reported profit for the half year. After accounting for fair value items, our operating profit of NZD 29.7 million has been reduced by NZD 6.9 million, resulting in a reported NPAT of NZD 22.8 million for the half year. This is NZD 10.3 million higher than last half year. As discussed in previous meetings, ideally, fair value adjustments remain consistent year to year. This helps reduce volatility in earnings and avoids unnecessary distractions.
Reported profit for this year is up 82% compared to last half year because the fair value movements are significantly lower. The key fair value components were in relation to biological produce, and grapes must be valued at market prices at the time of harvest, and we believe profit should be recognized when the wine is sold, not when the grapes are harvested. At the interim results, this year's fair value adjustments represents the profit on prior year vintages as the wine has been sold. Derivative instruments, we've got a movement against last year of NZD 11.6 million. We recorded a NZD 5.2 million loss from interest rate swaps last half year. This half year, it's nil.
We recorded a lower fair value loss on foreign exchange contracts of NZD 6.4 million compared to last half year. We've included a waterfall chart to show the year-on-year movement in reported profit, which was stated as NZD 10.3 million, or 82% higher than last half year. Effectively, it's our underlying favorable operating NPAT, which is NZD 1.4 million higher, lower fair value loss on interest rate swaps, which you can see in the interest line, and a lower loss on foreign exchange contracts of NZD 4.6 million, which you can see in the FX line. Compared to last year, obviously, more positive. In terms of the balance sheet, Delegat's total assets are NZD 1.1 billion, very similar to June 2025 and consistent with our December 2024 position.
Shareholders' equity has increased to NZD 592 million. Cash generation has allowed further debt reduction, strengthening an already solid balance sheet. The group has taken deliberate steps to improve collections, reduce costs, and scale back capital expenditure. This graph shows, explains the changes in our net debt since the last balance date. As of today, Delegat has approximately 30% in available headroom, which gives us strong flexibility to finance the business. We continue to operate well within all of our banking covenants and have strong support from our syndicate of lenders. For FY 2026, we continue to expect capital expenditure to be around NZD 26 million, around half of what we spent last year. Last year, our reported ratios were significantly impacted. This year, we have achieved an operating return on capital employed of 9.4%, which is above our cost of capital.
This is a strong indicator that Delegat continues to deliver value to shareholders. In respect of our full year guidance, we are maintaining our previous guidance of operating NPAT of NZD 50 million-NZD 55 million. I'll hand back to Murray to conclude the presentation.
Thanks, Riki. Look, I'm hopeful that, again, we've answered many questions as we've gone through the presentation. At this point in time, that concludes, I guess, our formal part of the presentation. We're very happy to take questions, at this point, and, yeah, we'd open the floor up for that. If you could, just introduce yourself when you ask the question, that would be helpful, and we will take it from here. Thanks very much. Thank you. You can go for it, Rob.
Cool. Morning, guys. Rob Morrison from Craigs Investment Partners here. Thank you for having me.
Hi, Rob.
Kicking off on volumes, are you guys still guiding to 3.3 million case sales for the financial year?
Correct, that's unchanged.
I think that implies a 4% year-on-year volume growth in the second half, and that's a bit of an acceleration from the 3% delivered in the first half. Where's that coming from?
Primarily coming from just overall, the market, performance we've had. We still consider that we're gonna have good performance out of it, the U.K. and Australia, Pacific and China markets. I guess slightly seeing a situation where the shipments, which we time, which is challenging, 'cause shipments effectively is how revenue is recognized for the U.S., was more phased last year to the first half, whereas this second this year, because of the tariff and positions, we've seen that sort of reverse. We think we have sold about or shipped, sorry, about 45% in the first half of this year and 55% in the second half, which effectively then is supporting that slight increase that you're referring to.
Oh, that's great. Thank you. Okay. Liberation Day last year, I believe it saw a pause in orders from U.S. customers. Are you seeing something similar, given the tariff changes announced last week?
Really too early for that. I think, to be honest, I think like everyone, trying to keep up with what's going on. It continues to change. I think from our perspective and hopefully our distributors' perspective, last year we were also dealing with, they took a position immediately to reduce inventories because they were higher of what they were holding, whereas it's more balanced this year. Yeah, at this stage, really early around that, we've already got forward purchase orders and bookings for March and April shipments. From that perspective, I guess we're probably not seeing quite the same reaction as what happened a year ago.
Okay, that's great. Thank you. I think currency has moved against you in the second half. Is this gonna feed through or is there some hedging in place?
Do you want to take that one, Riki?
No, we maintain our hedging in line with our treasury policy. The FX cover that we have in place will maintain stability in relation to our foreign currency exposures in the short to medium term.
To be clear, maybe a tailwind in the second half, not a headwind from currency?
I think the big movement has probably been on the U.S. dollar, which has been probably the most volatile. If you look at Australia, Sterling, they are all below the long-term seven-year averages. From that perspective, we do look forward to, I guess, there being more tailwind rather than headwind.
Cool. Thank you. It'd be helpful to get a bit of a steer on margins, if that's okay, 'cause the half on half has been a bit volatile over the past few years, but at a high level. You delivered 25.5% underlying EBIT margins in FY 2025, and you've got a bit better COGS. Therefore, could we expect FY 2026 to be up a little bit year on year?
Yeah, I think we, Rob, we signaled that at the full year announcement, that particularly with the impact of the 2025 vintage versus the 2024, that will deliver a better cost of goods per case, which will deliver through to the gross margin. I guess the kick in the guts really was the tariff and position really, which then sort of mutes some of that. Definitely gross margin improvement is driven very much by cost of goods, as well as seeing now the annualized impact where we may put price increases progressively through what was the 2025 year.
Wonderful. Thank you. There was the some NZD 2.5 million EBIT impact from U.S. tariffs in the first half. Let's, you know, 'cause things are obviously complex with the tariff changes last week, but let's say they remained in place. Will we just assume another NZD 2.5 million headwind from the, you know, heightened level of marketing or whatever it was in the second half?
Probably, as you would expect, there may have been quite a lot of inventory that had landed into the country before the tariff was imposed, so that would have washed through the system. It's probably likely that it's a higher impact in terms of six months, but as you say, it's a bit fluid at the moment around what that looks like. I guess, yeah, I guess we're continuing to work through. Obviously, we haven't reduced our overall profit guidance, so that kind of indicates hopefully to you that we feel we're still gonna manage to the commitments we've given.
Cool. Wonderful. One final one, if I may?
Go through.
Thank you. Just wondering how to think about longer-term CapEx. Obviously, I think past four-year average has been about NZD 50 million.
Yeah.
You know, fairly significant drop to NZD 26 million this year. How should I be thinking about, you know, the mid to long-term CapEx? Is it kind of gonna go back up to that NZD 50 million, or is that too high?
I think again, last time when I talked about it, when we look at it, particularly, we believe that we've got the viticulture and winery expansion in place to deliver us case sales in our outlook guidance. As a result of that capital expenditure that we've been incurring over the last three or four years to get to us to where we are today, would not need to be incurred going forward. We should probably revert more to a mindset of replacement CapEx, which could be in sort of the NZD 10 million-NZD 15 million range, and as well as looking for other opportunities where we may be replacing equipment that's coming up for that over the next, you know, period of time.
I think, yeah, NZD 50 million would sounds too high, probably for your average. This year's NZD 26 million probably is a bit lower, as a result of just making some real, strict decisions around it. Somewhere probably in the, in between over the next three years is probably a good average.
Okay. Okay, that's great. Hey, thank you, guys, very much for your time.
Not a problem. Anyone else have any questions for Riki and I at this stage? I'll take that as a no. Again, thank you very much for your interest in the stock and support of Delegat's. Again, we look forward to continuing focusing on all the things that we've got to do, we will update, obviously, in a few months' time. Thanks very much, have a good day.
Thanks, guys.