| Wed 22 Aug 2007, 13:20 | | DST - Distell - Profitable Growth for Distell in t |
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DST
DST
DST - Distell - Profitable Growth for Distell in tough home and export markets
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST
ISIN: ZAE000028668
("Distell" or "the Group")
PROFITABLE GROWTH FOR DISTELL IN TOUGH HOME AND EXPORT MARKETS
Distell`s focus on achieving profitable sales growth in increasingly competitive
local and global markets saw the company grow revenue 18,4% to R8,0 billion on a
sales volume increase of 14,4%.
For the year to June 30, 2007, trading income increased 25,3% to R1,1 billion,
the result not only of strong revenue growth, but also of Distell`s capacity to
extract an ever better performance from company assets, according to MD Jan
Scannell. He said the ability to continue improving throughput and operating
efficiencies had made it possible to significantly increase brand investment and
step up marketing and sales support while growing net operating margin from
13,2% to 14,0%.
Basic earnings rose by 57,3% per share. Headline earnings increased 44,2% per
share, while headline earnings excluding the non-recurring BEE expense of the
previous year, were up 28,1% per share, to achieve compound annual growth of
18,9 % over a seven-year period. Over the same period, net operating assets
(i.e. fixed assets, inventory and accounts receivable, less accounts payable)
reflected a compound annual growth of 3,3 %.
Scannell said the company`s diligent attention to brand building had continued
to pay off, notwithstanding heightened trading pressures in the domestic market
and the ongoing impact of the global oversupply of wine in international
markets. An attractive product mix, greater market investment and the focus on
intrinsic and packaging quality standards had resulted in greater consumer
support across all product categories.
Locally, sales volumes increased 15,6%. He said brands in the ready-to-drink
(RTD) category, notably Savanna and Hunter`s ciders, had done exceptionally
well. Spirit volumes had also grown, with brown spirits and liqueurs benefiting
most. Wine volumes grew ahead of the market, despite the ever-increasing number
of players in a highly price-competitive market.
He said domestically the ongoing trend amongst consumers to trade up to
distinctively packaged alcoholic beverages that denote a sense of luxury, had
impacted positively on the company. However, it had also lead to increased
interest in the South African market. "Newly affluent black middle-class
consumers have grown dramatically in number and spending power, with all the
beverage producers vying for their disposable income, which has resulted in
intensified competition."
In addition to the ciders, other star local brand performers were Klipdrift and
Richelieu brandies, Amarula Cream and wine trademarks Durbanville Hills and Two
Oceans.
International business contributed 18% of total revenue, he said, with export
volumes growing 9,8%. Spirit volumes grew 23,2%, thanks to solid performances in
all key markets. Drive wine brands showed an impressive 12,6% volume growth
despite the worldwide oversupply and the contracting market share experienced by
many players. Two Oceans, for example, was now one of the top ten retail wine
labels in Canada. However, the total volume of wine exported increased just
3,3%, because of a decline in the sales of the company`s non-drive brands.
Scannell said Distell had performed better than the South African wine industry
in foreign markets, growing its share of bottled wine exports. Earnings from
wine exports had also "significantly increased."
To underpin its international activities, the company had been actively engaged
in establishing strategic alliances with trading partners, concluding several
important agency agreements intended to bolster its presence in Europe, while
strengthening ties in North America, Europe and Asia Pacific. He said there had
also been encouraging growth, although off a small base, in developing markets
such as Russia, China, Vietnam and South Korea.
Turning to the African continent, he said revenue derived from African countries
had grown 20,0% on a volume growth of 11,8%. African countries outside the BLNS
region (Botswana, Lesotho, Namibia and Swaziland) delivered revenue growth of
31,5%, although off a still relatively small base.
Total assets increased 9,5% to R6,0 billion. Capital expenditure amounted to
R224,5 million of which R123,2 million was spent on the replacement of assets. A
further R101,3 million was directed to the refurbishment of the Wadeville plant,
which had been partially destroyed by fire, and the expansion of capacity at the
cider and spirits production facilities.
.
Cash generated by operating activities amounted to R1,2 billion (2006: R900,1
million), and Distell remained in a strong financial position, with a positive
cash and cash equivalent balance of R332,4 million at year end (2006: R121,8
million).
A dividend of 109 cents (2006: 85 cents) per share has been declared,
representing a total dividend of 196 cents (2006: 153 cents) for the year and a
dividend cover of 2,0 times (2006: 2,0 times) based on adjusted headline
earnings.
Scannell said although local business conditions were expected to remain
relatively good, the tightening in credit availability and higher interest rates
would probably curb consumer spending to some extent. This could have a
negative impact on consumer expenditure on alcoholic beverages. He added that
globally, the impact of higher energy prices and interest rates could also put
the breaks on consumer spending and that the effects of the global oversupply of
wine were not yet over.
"Nevertheless, the business is appropriately structured, with a portfolio of
compelling brands and an efficient cost base that should allow us to compete
effectively, and to continue to capture opportunities in key markets while still
providing continued growth in revenue and earnings."
DATE: AUGUST 22, 2007
FOR: DISTELL GROUP LIMITED
ISSUED BY: DKC (DE KOCK COMMUNICATIONS)
QUERIES: JAN SCANNELL, MD (021) 809 7000 or (021) 809 8102 (direct)
MERWE BOTHA, FINANCIAL DIRECTOR (021) 809 7000 or (021) 809 8100 (direct)
SONIA JAMOULLE, COMMUNICATIONS MANAGER, (021) 809 8005 or 076 474 0715
TESSA DE KOCK/PIPPA PRINGLE, DKC (021) 422 2690
Date: 22/08/2007 13:20:05 Produced by the JSE SENS Department.
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