Lines company slashes dividend to consumers

Marlborough Lines appears to be hinting that its wine business, Yealands, may be about to start selling land, as it slashed the dividend to a trust owned by the region’s power consumers.

The Blenheim-headquartered electricity network yesterday reported a 33 per cent fall in net profit after tax to $5.6 million for the year to June 30, as revenue fell 3 per cent to $147.8m.

Dividends paid to the company’s owner, the Marlborough Electric Power Trust (MEPT), fell by 92 per cent to $500,000, which the report indicated was likely to mean no dividend for its tens of thousands of consumers.

After each of the last two financial years the trust’s beneficiaries, electricity account holders in Marlborough, have been paid $200.

As well as owning the region’s electricity network company and a share of the Nelson network, Marlborough Lines owns Yealands Wine Group, a major wine exporter which it paid more than $100m to buy.

When it first announced the purchase of Yealands, Marlborough Lines said the purchase was aimed at increasing dividend payments.

The report of chairman David Dew said financial results for both the lines and wine business were strong in the first half of the year, but were hit by Covid-19 in the second half.

A downturn in profitability led to a decision for Yealands to not pay a dividend, Dew wrote, due to the need to preserve cash and strengthen its balance sheet. “The directors remain firmly of the view that the investment in the wine industry is sound and that the medium to long-term outlook is bright,” Dew added, pointing to the increase in Yealands’ book value since 2015 as a result of rising values of its vineyard assets.

Elsewhere in the report, Marlborough Lines appeared to hint that Yealands may soon begin selling its land assets to reduce debt.

“Returns from the investment in Yealands Wine Group have primarily been from unrealised capital gains on the vineyards,” the report said.

“In future years, Yealands Wine Group will be looking to consolidate its vineyard holdings, optimise its capital structure and execute a premiumisation strategy through operations, sales and brand building.”

Marlborough Lines’ annual report of 2019 said that increases in the holdings of its lands were part of a strategy to increase profitability.

“As the recently developed vineyards come into production over the next few years the volume of grapes produced within the company will further increase the company’s profitability.”

No one from Marlborough Lines responded to a request for comment.

The report confirmed that Marlborough Lines loaned Yealands $15m during the year, reducing the debts of the wine business to $115.5m, mostly owed to ASB.

Directors’ fees rose 12 per cent to $735,000.

The trustees of the MEPT and Marlborough Lines recently went to the High Court to prevent the plaintiff in a civil case disclosing the contents of meeting minutes which it supplied him but failed to properly redact.

The plaintiff, Blenheim business adviser David Taylor, claims Marlborough Lines paid too much for Yealands when it began purchasing it in 2015, and that the wine company has not generated the profits expected from a company of Yealands’ size.