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OBV Oyster Bay Marlborough Vineyards Limited

 

 

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Oyster Bay Marlborough Vineyards Limited

OBV

24 Aug, 2007, 11:37

GENERAL

OBV - Receipt of Legal Proceedings

 

Oyster Bay Marlborough Vineyards Limited ("Oyster Bay") was today served with legal proceedings issued by Peter Yealands Investments Limited ("PYIL") against Oyster Bay and Delegat's Wine Estate Limited ("Delegat's"). These proceedings are an attempt, in a different form, to re-litigate PYIL's complaints about grape supply contracts and grape prices that have already been put to, and dismissed by, NZX and the Takeovers Panel.

PYIL's claim is that as a shareholder it is prejudiced because the affairs of Oyster Bay have been, are being and will likely to continue to be conducted in a manner which is oppressive, unfairly discriminatory and unfairly prejudicial to PYIL. PYIL seeks a number of orders from the court including that the contracts between Oyster Bay and Delegat's on which Oyster Bay was formed be set aside, and that either Oyster Bay and/or Delegat's acquire PYIL's shares in Oyster Bay for an above market price. Ever since it became clear that PYIL's takeover bid for Oyster Bay would fail, PYIL's only real objective has been to seek to have its 4.8% stake in Oyster Bay bought out for an above market price, no matter the cost that it puts Oyster Bay to.

Oyster Bay considers that the claim has no merit whatsoever and will fail. That view is supported by the company's legal counsel.

Oyster Bay chairman, Bill Falconer, advises:

"PYIL has put Oyster Bay to considerable expense over the past two years in a succession of largely unsuccessful complaints to NZX Regulation, the Takeovers Panel, the Securities Commission and the High Court in support of its ultimately unsuccessful offer for a controlling interest in Oyster Bay. Since then PYIL's objective has been to attempt to lever Oyster Bay or Delegat's into acquiring PYIL's shares at a price significantly above market value - commonly known as "green mail". First, PYIL persisted with an unsuccessful appeal to NZX Discipline against the earlier finding of NZX Regulation (which cost Oyster Bay around $175,000 of which only $54,000 was recovered), and now, PYIL has issued these proceedings that have no merit, having first indicated it would not do so if Oyster Bay or Delegat's purchased its shares for a price significantly above market.

Oyster Bay could not buy back shares without shareholder approval, and its directors would not put forward any proposition which preferred one shareholder over, and at the expense of, others.

Oyster Bay's contractual relationship with Delegat's was fully known when PYIL invested, and if PYIL did not like the structure it should not have invested. PYIL stated during its takeover offer that it could not and would not overturn Oyster Bay's contracts with Delegat's if successful, and it is extraordinary that it should now seek court orders to secure that outcome. The company has to conclude that the action is aimed simply, but futilely, at securing leverage to force a buy out of its shares in Oyster Bay .

Oyster Bay's costs claimed against PYIL from the takeover process total around $600,000, which PYIL has declined to pay. Oyster Bay's endeavours to settle this claim have been rebuffed because they have not been accompanied by an offer to purchase PYIL's shares. Oyster Bay will now pursue recovery of this amount in the High Court.

It is tragic for Oyster Bay's shareholders that they will bear substantial further costs from PYIL's latest action, just to prove that it has no merit. In the 2006 and 2007 financial years shareholders had to forfeit around $1,050,000 (12 cents a share) to meet expenses caused by PYIL (some of which Oyster Bay considers to be recoverable) which could otherwise have been distributed as dividend, and it would be regrettable, following this year's reduced harvest, if earnings next year were to be eroded again by legal expenses.

The company would prefer to be allowed to get on with its business of earning profit for shareholders from its vineyards. However, it will not bow to pressure from a dissident shareholder seeking to prefer its position at the expense of other shareholders. It will therefore defend the proceedings. It looks forward to the finality which its expected successful defence will bring."

 

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OYSTER BAY ANNOUNCES 2007 HARVEST RESULT


Oyster Bay Marlborough Vineyards Limited announces that it has concluded negotiations for the sale of its 2007 grape harvest to Delegat's Wine Estate Limited in accordance with the long term Grape Purchase Agreement between the two companies.

The harvest this year totaled 4,206 tonnes, covering production of chardonnay, pinot noir, riesling and sauvignon blanc varieties. This was 10 % lower than the 4,689 tonnes produced last year. Reductions of this order, attributable to cold weather in December, are understood to have been widely experienced by vineyards in Marlborough's Wairau Valley this year.

Total revenue of $9.554 million was correspondingly 10 % down on last year's $10.668 million. The average price of $2,272 per tonne, across all varieties, was comparable to the $2,275 per tonne achieved last year.

The independent directors are certifying, and the company's independent viticultural consultant, Dr David Jordan, is providing a report, to NZX that they consider the prices received to be commercial, and fair to the minority shareholders.

The independent directors are further certifying to NZX that the negotiations were conducted on an arm's length basis. Given the related party nature of the contract between Oyster Bay and Delegat's, the independent directors are satisfied that their procedures were robust and met the requirement for independence on their part.

The settlement of grape prices is a complex process addressing a wide range of viticultural variables as well as the different situations of buyers and sellers, and market dynamics may change as the season progresses. Inevitably, this may result in the negotiating period extending well into the season or, as was the case this year and last, beyond the harvest, to allow the accumulation of fullest available intelligence on market trends.

 

Chairman's report

 

SUMMARY OF PRELIMINARY FULL YEAR ANNOUNCEMENT Name of Listed

Issuer: Oyster Bay Marlborough Vineyards Limited

Results for announcement to the market

Reporting Period: 12 months to 30 June 2007

Previous Reporting Period: 12 months to 30 June 2006 This report has been prepared in a manner which complies with generally accepted accounting practice and gives a true and fair view of the matters to which the report relates.

The financial statements attached to this report have been audited by PricewaterhouseCoopers and are not subject to a qualification. A copy of the audit report applicable to the full financial statements is attached to this announcement.

The company has a formally constituted Audit Committee of the Board of Directors. CONSOLIDATED OPERATING STATEMENT Current Full Year NZ$'000; Up/Down %; Previous Corresponding Full Year NZ$'000 OPERATING REVENUE: Trading revenue: $9,554; down 10%; $10,668

Other revenue:
$35; up 1,650%; $2
Total Operating revenue:
$9,589; down 10%; $10,670
OPERATING SURPLUS BEFORE TAX: $363; down 84%; $2,224 Less tax on operating profit: $(31); down 104%; $745
Non-recurring costs/(recovery) after tax $(52); down 109%; $559
Net Surplus attributable to minority interests:
$0; $0
NET SURPLUS AFTER TAX ATTRIBUTABLE TO SHAREHOLDERS OF LISTED ISSUER: $446; down 52%; $920
Earnings per share: 5.0 cps; down 51%; 10.2 cps
Net tangible assets per share:
$2.00; down 2%; $2.05
Final Dividend 5.0 cps; Record Date: 2 November 2007 Date Payable: 15 November 2007

Appendix 4 is attached.
Detailed information: The Preliminary Full Year Announcement is attached

Oyster Bay Marlborough Vineyards announces that it recorded a profit after tax for the year ending 30 June 2007 of $446,000, compared with $920,000 recorded in the previous year. This was attributable to a 10.3 percent reduction in harvest levels resulting from cool spring and early summer weather conditions which reduced fruit set in three vineyards, but also to higher frost protection costs and increased vineyard lease costs.
As previously reported, Oyster Bay's total production for the year was 4,206 tonnes compared with 4,689 tonnes last year, generating revenue of $9,554,000 compared with $10,668,000 last year. Average revenue per tonne was $2,272.

Operating expenses were $7,426,000, an 11.0 percent increase on last year's $6,691,000. The principal contributors were higher frost protection costs ($305,000); lease costs ($388,000); and depreciation charges ($261,000). Small reductions were registered for administration costs, replanting and vineyard materials.
Legal costs associated with takeover related matters during the year totaled $276,000 compared with $835,000 last year, and were offset by insurance and cost recoveries of $354,000 relating to certain of the legal costs incurred last year.

Consistent with the company's policy of distributing available surpluses, the Directors have declared a dividend of 5 cents a share for the year ended 30 June 2007. The record date for the dividend will be 2 November 2007, and the dividend will be paid on 15 November 2007.

The Directors are disappointed that the aftermath of the takeover action in 2005 is still with us. We have endeavored,
unsuccessfully, to settle with Peter Yealands Investment Limited the outstanding cost and compensation claims which are before the Court. These claims will now proceed to litigation.

We are disappointed too, that the weather should have been adverse at a time when we expected the Company to demonstrate its full earning potential. It is no solace that much of the province experienced similar production declines.

However, the vineyards are healthy and well managed, our replanting programme is now complete, the demand for Marlborough wines continues to grow in international markets, and we can look forward to a better harvest next year. We welcome the appointment of Sandy Maier to the Board to strengthen the independent director representation.

Any enquiries please contact Hon. Ruth Richardson on 03-3479146

Director's Report

 

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