Daily ShareChat: Delegat Group

By Jenny Ruth

Thursday 3rd March 2011

Delegat's Group's 14% rise in first-half net profit to $15.8 million was a robust result, coming in above the strong previous year's first-half result, says David Oxley, an analyst at Craigs Investment Partners.

"The group's previously articulated strategy of focusing sales on higher value markets whilst protecting brand equity via material price increases has resulted in less of a volume decline than anticipated," Oxley says.

The 1.126 million case sales in the six months was down just 1% on the previous first-half. As a result, the company has revised its forecast that case sales would be down 8% to just a 3% decline.

"The key reason for the better-than-expected case sales performance to date is that the key 'value growth markets,' notably the UK and Ireland, have seen a far less dramatic decline in case sales in response to higher prices than management expected," Oxley says.

Management had expected case sales to Britain and Ireland might fall by a third this year but the decline was just 13% in the first half.

Case sales in its key growth market of North America grew 24% and Australasian sales volumes were up 9%.

Oxley values the stock at $2.16 and says key risks include the extent to which Delegat's can improve pricing, the exchange rate and its success in expanding sales in North America.

Recommendation: Hold.

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