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DST - Distell - Audited results of the Group for the year ended 30 June 2007
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST ISIN: ZAE000028668
("Distell" or "the Group" or "the company")
Audited results of the Group for the year ended 30 June 2007
Salient features
- Basic earnings per share up 57,3%
- Headline earnings per share up 44,2%
- Headline earnings per share, excluding non-recurring BEE expense in the
previous year, up 28,1%
- Dividend per share up 28,1%
- Total revenue up 18,4%
- Trading income up 25,3%
- Total sales volumes up 14,4%
Abridged consolidated balance sheet
2007 2006
R`000 R`000
ASSETS
Non-current assets
Property, plant and equipment 1 330 516 1 256 900
Biological assets 114 675 104 380
Financial assets 72 822 403 107
Investment in associates 23 270 15 383
Intangible assets 34 060 11 211
Retirement benefit assets 187 052 48 795
Deferred income tax assets 28 762 36 770
Total non-current assets 1 791 157 1 876 546
Current assets
Inventories 2 703 336 2 499 217
Trade and other receivables 809 024 617 097
Financial assets 361 152 254 640
Cash and cash equivalents 332 426 227 578
Total current assets 4 205 938 3 598 532
Total assets 5 997 095 5 475 078
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 3 938 202 3 313 283
Minority interest 2 478 2 765
Total equity 3 940 680 3 316 048
Non-current liabilities
Interest-bearing borrowings 2 629 330 646
Retirement benefit obligations 12 842 12 191
Deferred income tax liabilities 164 033 120 647
Total non-current liabilities 179 504 463 484
Current liabilities
Trade payables and provisions 1 489 940 1 196 201
Interest-bearing borrowings 329 264 432 502
Current income tax liabilities 57 707 66 843
Total current liabilities 1 876 911 1 695 546
Total equity and liabilities 5 997 095 5 475 078
Abridged consolidated income statement
2007 2006 Change
R`000 R`000 %
Sales volumes (litres `000) 391 889 342 633 14,4
Revenue 7 954 602 6 717 210 18,4
Operating expenses (6 839 869) (5 827 815) 17,4
Trading income 1 114 733 889 395 25,3
BEE share-based payment - (67 241)
Net other gains 73 876 -
Operating profit 1 188 609 822 154 44,6
Dividend income 1 284 1 497
Finance income 87 172 93 483
Finance costs (79 203) (120 846)
Share of profit of associates 14 255 9 856
Profit before taxation 1 212 117 806 144 50,4
Taxation (367 243) (271 756)
Profit for the year 844 874 534 388 58,1
Attributable to:
Equity holders of the company 847 853 534 388 58,7
Minority interest (2 979) -
844 874 534 388 58,1
Per share performance:
Issued number of ordinary
shares (`000) 199 760 198 969
Weighted number of ordinary
shares (`000) 199 079 197 414
Earnings per ordinary share (cents)
- basic earnings basis 425,9 270,7 57,3
- diluted earnings basis 396,8 269,3 47,3
- headline basis 391,5 271,5 44,2
- adjusted headline basis 391,5 305,6 28,1
Dividends per ordinary share (cents)
- interim 87,0 68,0 27,9
- final 109,0 85,0 28,2
196,0 153,0 28,1
Reconciliation of headline earnings:
Net profit attributable to equity
holders of the company 847 853 534 388 58,7
Adjusted for (net of taxation):
profit on disposal of property,
plant and equipment - (181)
loss on disposal of interest in
associate - 1 763
net other capital gains (68 559) -
Headline earnings 779 294 535 970 45,4
Adjusted for (net of taxation):
BEE share-based payment - 67 241
Adjusted headline earnings 779 294 603 211 29,2
Abridged consolidated cash flow statement
2007 2006
R`000 R`000
Trading income 1 114 733 889 395
Non-cash flow items 117 539 185 540
Working capital changes (44 171) (174 812)
Inventories (191 065) (252 949)
Trade and other receivables (125 884) (41 870)
Trade payables and provisions 272 778 120 007
Net other gains 11 006 -
Cash generated from operating
activities 1 199 107 900 123
Net financing costs (21 895) (74 490)
Taxation paid (365 380) (153 388)
Dividends paid (342 729) (266 788)
Cash retained from operating activities 469 103 405 457
Cash inflow from investment activities 50 800 (164 364)
Cash outflow from financing activities (309 345) (79 301)
Increase in net cash and cash
equivalents 210 558 161 792
Net cash and cash equivalents at the
beginning of the year 121 795 (47 610)
Exchange losses on cash and cash
equivalents 73 7 613
Net cash and cash equivalents at the
end of the year 332 426 121 795
Call accounts and bank overdrafts - (105 783)
Cash and cash equivalents 332 426 227 578
Abridged consolidated statement of recognised income and expense
2007 2006
R`000 R`000
Fair value adjustments (net of tax):
- cash flow hedges - (649)
- available-for-sale investments 3 093 2 577
Cash flow hedge realised to income 256 3 082
Currency translation differences (7 893) 5 720
Actuarial gains and losses 98 689 42 876
Net income recognised directly in equity 94 145 53 606
Profit for the year 844 874 534 388
Total recognised income for the year 939 019 587 994
Attributable to:
Equity holders of the company 941 998 587 994
Minority interest (2 979) -
939 019 587 994
Notes
2007 2006
R`000 R`000
1. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 2 629 330 646
Current 329 264 432 502
331 893 763 148
Cash resources 332 426 227 578
(533) 535 570
2. Cash inflow from investment activities
To maintain operations (123 212) (106 317)
To expand operations (89 960) (58 047)
Preference shares redeemed 275 277 -
Investment in associates (11 305) -
50 800 (164 364)
3. Directors` valuation of financial assets
and associates
Preference shares 361 152 590 921
Other investments and loans 73 107 66 826
Associates 162 046 30 534
596 305 688 281
4. Capital commitments
Contracted 155 772 61 387
Authorised but not contracted 371 260 202 143
527 032 263 530
5. Depreciation of property, plant
and equipment 126 637 128 866
6. Net asset value per share (cents) 1 973 1 673
7. Segment report
The Group is engaged in the production, marketing and distribution
of alcoholic beverages. As these activities comprise an integrated
operation, the Group regards this as a single primary business
segment, on which all information is disclosed in this profit
announcement.
8. Contingencies
In prior years the Group received compensation for relinquishing
its distribution rights to certain trademarks. The South African
Revenue Service has issued revised tax assessments to the value of
R29,5 million in terms of which the proceeds of R67 million have
been subjected to income tax and value added tax. The Group has
lodged an appeal against these assessments and the matter will be
heard in the Special Income Tax Court.
9. Retirement benefits
The surplus apportionment within the Distell Retirement Fund has
been approved by the Financial Services Board. An asset of R33,4
million, with a corresponding increase in equity, was recognised at
balance sheet date in this regard.
Accounting policy and comparative figures
The annual financial statements are prepared in accordance with the recognition
and measurement principles of International Financial Reporting Standards
(IFRS), the requirements of the South African Companies Act of 1973, as amended,
and the Listing Requirements of the JSE Limited.
The accounting policies and methods of computation are consistent with those
adopted in the previous period, with the exception of the following new
accounting standards, interpretations and amendments to IFRS:
- IFRS 4 (Amendment): Financial Guarantee Contracts
- IFRIC 4: Determining whether an Arrangement Contains a Lease
- IFRIC 7: Applying the Restatement Approach under IAS 29: Financial Reporting
in Hyperinflationary Economies
- IFRIC 9: Reassessment of Embedded Derivatives
- IFRIC 11: IFRS 2 - Group and Treasury Share Transactions (effective 1 March
2007), adopted early
- Amendments to IAS 19: Employee Benefits
- Amendments to IAS 21: Effects of Changes in Foreign Exchange Rates
- Amendments to IAS 39: Financial Instruments - Recognition and Measurement
The Group changed its accounting policy on 1 July 2006 by adopting the option in
the amended statement of IFRS dealing with Employee Benefits (IAS 19), to
recognise all actuarial gains and losses in retirement benefit obligations
outside profit and loss in the period in which they occur in the Statement of
Recognised Income and Expense (SoRIE). This change in policy requires the Group
to present the SoRIE as a primary statement in place of the Statement of Changes
in Equity.
This change in accounting policy has been accounted for retrospectively and the
comparative financial statements for 30 June 2006 have been restated. The effect
of the change on 30 June 2006 is as follows:
R`000
Income statement
Increase in profit before taxation -
Increase in deferred taxation -
Balance sheet
Increase in retirement benefit assets 64 859
Increase in deferred income tax assets 1 709
Increase in retirement benefit liabilities 4 883
Increase in deferred income tax liabilities 18 809
Increase in non-distributable and other reserves 42 876
Except for where indicated above, the adoption of these new accounting
standards, interpretations or amendments to IFRS had no material impact on the
consolidated results of either the current or prior periods.
Operating performance
Revenue grew 18,4% to R8,0 billion on a sales volume increase of 14,4%.
Locally, sales volumes increased 15,6%, with growth accelerating significantly
during the second six months. Brands in the RTD category continued their
exceptional performance, while spirit volumes were also up, with brandy and
liqueurs benefiting most. Continued focus on brand building also saw Distell`s
wine segment reflect profitable volume growth, notwithstanding the ever-
increasing number of players in a highly price-competitive market.
International sales volumes, excluding Africa, increased 7,2%. International
revenue, also benefiting from a favourable exchange rate and a good sales mix,
increased 32,0%. Spirit volumes grew 23,2%, thanks to solid performances in all
key markets. Although natural wine sales volumes rose 3,3%, drive brands
performed impressively, growing 12,6%.
Revenue derived from African countries grew 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.
The increase of 25,3% in trading income was the result of strong revenue growth,
benefits derived from improved throughput and further advances made to enhance
efficiencies across the business. The Group`s ability to raise the performance
of its operating units not only allowed for significantly greater brand
investment, sales support and representation, as well as stepped-up marketing
activities, but also further improved net operating margin from 13,2% to 14,0%.
In November 2006, a fire at the company`s production facility in Wadeville,
Johannesburg, caused partial damage to some buildings and machinery. However,
production was diverted to other sites until normal activities could be resumed.
The portion of the insurance claim which relates to the replacement of assets
has been settled between the Group and its insurers. An amount of R63,6 million
is disclosed separately in the income statement and is included in net other
gains.
The Group generated net cash flow of R244,6 million before financing activities,
which resulted in net financing income of R8,0 million, compared to net
financing costs of R27,4 million the previous year.
Headline earnings, excluding the BEE expense of the previous year, reflect a
29,2% increase to R779,3 million.
Investment and funding
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 and the expansion of capacity at the cider
and spirits production facilities.
Investment in net working capital rose 5,3% to R2,0 billion. Inventory increased
8,2% to R2,7 billion. Although an increase in the production of spirits under
maturation was necessitated by the Group`s long-term view of consumer demand for
its products, the continued focus on working capital management resulted in a
further improvement in overall stock management.
Cash generated by operating activities amounted to R1,2 billion (2006: R900,1
million), and the Group remains in a strong financial position, as shown by the
positive cash and cash equivalent balance of R332,4 million at year-end (2006:
R121,8 million).
Prospects
Business conditions in South Africa remain favourable. Although the tightening
in credit availability and higher interest rates may have an adverse impact on
consumer spending in the short term, the board is expecting growth in consumer
demand to continue, albeit at a slower pace, still benefiting our markets.
The global economic outlook remains positive, but there are concerns about the
short-term impact of higher energy prices and higher interest rates.
The trading environment is expected to remain competitive with increased
marketing investment by most industry players. The wine industry in particular
continues to pose challenges globally. Nevertheless, the Group believes the
business is appropriately structured, with a portfolio of compelling brands and
an efficient cost base that will allow it to compete effectively, and to
continue to capture opportunities in key markets.
Distell expects to reflect continued growth in revenue and earnings.
Directorate
Daan Prins resigned as director during the course of the year and we thank him
for his valuable contribution. Robert Lumb was appointed to the board of
directors with effect from 19 October 2006.
Auditors` report
The consolidated annual financial statements have been audited by
PricewaterhouseCoopers Inc. and their unqualified auditors` report is available
for inspection at the registered office of the company.
Dividends
The directors have resolved to declare dividend number 38 of 109 cents (2006: 85
cents) per share for the year ended 30 June 2007. This represents a total
dividend of 196 cents (2006: 153 cents) for the year and a dividend cover of 2,0
times (2006: 2,0 times) by adjusted headline earnings.
The salient dates of this dividend distribution are:
Last day to trade cum dividend Friday, 14 September 2007
Shares commence trading ex dividend
from commencement of business on Monday, 17 September 2007
Record date Friday, 21 September 2007
Payment date Tuesday, 25 September 2007
Share certificates may not be dematerialised or rematerialised between Monday,
17 September 2007, and Friday, 21 September 2007, both days inclusive.
Signed on behalf of the board
DM Nurek JJ Scannell
Chairman Managing director
Stellenbosch
22 August 2007
Directors
DM Nurek (Chairman), FC Bayly, PM Bester, PE Beyers, MJ Botha, JG Carinus, SJ
Genade, GJ Gerwel, E de la H Hertzog, R Lumb,
MJ Madungandaba, LM Mojela, GP Mthethwa, JJ Scannell (Managing director), PEI
Swartz, MH Visser
Company secretary
CJ Cronje
Registered office
Aan-de-Wagenweg, Stellenbosch 7600
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
PO Box 61051, Marshalltown 2107
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Website: www.distell co.za
Date: 22/08/2007 13:19:01 Produced by the JSE SENS Department.
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