Chairman's Report 2004

On behalf of your Board I am delighted to report that for the year ended 30 June 2004, the company has produced earnings before tax of $783,030 and a tax paid profit of $540,046. The earnings before tax are made up of an operating surplus from grape growing of $986,819 and a reduction in the revaluation of vines of $203,789, resulting from the current stage of the replanting programme. As a result, the Board has declared a gross dividend of 15 cents per share. This will be paid as a fully imputed net dividend at 10.05 cents per share on 7^th December 2004.

Vintage 2004

Despite having commenced the replanting programme in July 2003, suffering some early frosts in October 2003 and the wettest and windiest February since records began, a record crop of 917 tonnes was harvested against a budgeted 525 tonnes. Whilst the Marlborough region overall enjoyed a bumper crop this vintage, Seddon Vineyards? result was exceptional. The Board acknowledges the outstanding work performed by vineyard manager Carl Jackson and his team in achieving this result.

Under normal growing conditions, and having just completed the second stage of the replanting programme, it is expected that the 2005 harvest will be in the vicinity of 560 tonnes. 

Replanting Programme

A total of 49,400 plants have now been replaced with grafted vines and the final 25,000 plants are due for replanting after the 2005 harvest. The vines planted in 2003 should crop at approximately 25 percent in 2005 and will reach full production in 2007. The vines planted to date are showing good growth rates and are in a healthy condition.

Vineyard Valuation

The property was again valued in accordance with our accounting policy. The valuer, Hadley & Lyall Limited of Blenheim, has ascribed an unchanged current market value of $9,000,000 (2003 $9,000,000) to the property. This value has been incorporated into the financial accounts. This has effectively resulted in an amount equivalent to the replanting costs incurred during the year being taken up in the Equity Account.

Dividend Policy

The Directors? policy in regards to dividends is that they only be paid when it is financially prudent to do so. Given the company?s strong balance sheet and higher level of profitability for the current year, the Directors have resolved to pay the Company?s second dividend at 15 cents gross per share, in December 2004.

Share Trading

The Board has placed Seddon Vineyards Ltd on the ?Unlisted? shares website (www.unlisted.co.nz) to provide a trading platform for shareholders. A list of participating brokers is available on the web site. For advice on trading your shares I recommend that you consult your financial advisor or sharebroker.

Web Site

We have recently launched our own Web Site (www.seddonvineyards.co.nz). This is intended to be an information source for existing and potential shareholders. I encourage you to view the site and make use of this convenient method of communication.

Directorship(s)

The Board has met regularly throughout the year to deal with issues such as; 

•  annual budgets
•  the vineyard management plan
•  the replanting program
•  monitoring financial performance
•  negotiation of grape prices.

This year Andrew Pearson comes up for re-election and has indicated that he is available for re-election.

I personally wish to thank my fellow directors, Ian Montgomerie and Andrew Pearson, for their contribution and assistance over the last twelve months. I also wish to record my thanks to Alan O?Sullivan, the Company Secretary for the efficient way in which he manages the operation of the Board, our financial affairs, the shareholders correspondence, our shareholder register and the company affairs in general.

Conclusion

A major part of the business is the operation of the Management and Supply agreement that we have with Villa Maria. They are nothing but supportive in their role as vineyard managers with Seddon Vineyards. I wish to thank George Fistonich and his team for their enthusiastic and professional support in assisting the company in its record year of production. It has been a milestone year for the vineyard and as much as we would like this to continue, we look forward with caution. We are conscious of the effect of the high exchange rate on the wine industry and are aware that the world outlook for wine prices is not overly optimistic. However, the 2004 vintage will go down as exceptional in terms of both the quantity of grapes harvested and the dollar return achieved.

Joe Ferraby
Chairman,
Seddon Vineyards of Marlborough Limited

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