| Wed 13 Feb 2008, 13:52 | | DST - Distell Group Limited - Distell navigates demanding markets |
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DST - Distell Group Limited - Distell navigates demanding markets
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST & ISIN: ZAE000028668
DISTELL NAVIGATES DEMANDING MARKETS
An ongoing improvement in business efficiencies, continued investment in brands
and enhanced distribution saw Distell significantly increase its revenue and
sales volumes. For the six months to 31 December 2007, the company deftly
weathered demanding markets to deliver a 12,9% increase in revenue to R4,8
billion on a sales volume growth of 7,6%.
Headline earnings rose 17,9% to R542,3 million, while headline earning per share
increased 17,4%
A dividend of 104 cents per share has been declared, an increase of 19,5% on the
previous year`s interim payment of 87 cents per share.
Trading income grew 17,3% thanks to good revenue growth and the continued
benefits derived from enhanced throughput. MD Jan Scannell said the company`s
ability to keep on raising the performance of its operating units had made it
possible to boost investments in brands and step up marketing and sales support,
while improving the net operating margin from 15,6% to 16,2%.
Domestically, sales volumes increased 5,4%. Cider brands Savanna and Hunter`s,
and other RTDs (ready-to-drink beverages) maintained their impressive growth
trajectory with sales volumes climbing 10,6%, despite a national shortage of
bottles and carbon dioxide (CO2), as well as capacity limitations at Distell`s
own production plants. "Alternative bottle supplies have been sourced in Latin
America and the Middle East, while our pilot carbon dioxide recovery plant in
Paarl is starting to provide us with gas for carbonating our ciders. We have
also successfully commissioned additional facilities to expand production
capacity," Scannell said.
The company`s recovery facility captures the CO2 released during the
fermentation of the ciders and purifies it to food-grade quality for re-use.
He said the solid growth achieved in brown spirits and liqueurs had been
tempered to some extent by the white spirits segment, which remained under
pressure. As a consequence, spirits volumes increased by 2,3% He added that
despite a fragmented and highly price-competitive market, the wine portfolio had
still managed to deliver a profitable volume growth of 1,9%.
"Protection of brand equity remains paramount. We do not chase volumes at the
expense of brand reputation or profitability."
Scannell highlighted the major progress made on international markets (outside
Africa), where revenue had risen 20,7% on a sales volume growth of 17,7%. Both
spirits and wines recorded excellent growth, he said. Spirits volumes were up
11,9%, with good progress made across key markets in Europe, Latin America, Asia
and Canada, while wine sales volumes had reflected a growth of 18,4%. This was
ahead of the rate of volume increases delivered by the local wine industry on
export markets. Distell`s growth in wine volumes, he said, had come from
established as well as newer markets in the Baltic region, Latin America and
Australasia.
Revenue derived from African countries grew 23,8% on a volume growth of 19,7%
with the area beyond the BLNS countries (Botswana, Lesotho, Namibia and
Swaziland) recording revenue growth of 33,3%, to make a significant contribution
to the region. "We are extending our footprint across the continent to
capitalise on the rising disposable income that is being fuelled by a robust
commodities sector, the improvement in infrastructure and increasing tourism.
We are well placed to meet the demands of a new generation of affluent, mobile
Africans who want to be able to consume the same brands they find on their
travels."
Total assets increased 7,2% to R6,4 billion. Capital expenditure amounted to
R252,3 million of which R142,9 million was spent on expanding cider and spirit
production capacity and on the refurbishment of the company`s Wadeville plant.
Investment in net working capital increased R475,8 million to R2,3 billion.
With the increase in spirits stocks kept under maturation in anticipation of
longer-term demand, as well as an additional investment in packaging materials
in the face of erratic supplies from manufacturers worldwide, inventory rose by
R364,5 million.
Cash generated by operating activities amounted to R571,9 million (2006: R877,7
million) with the company remaining in a strong financial position, given its
cash and cash equivalent balance of R173,0 million.
Referring to the prospects for the local market, Scannell said higher fuel and
food prices and increased debt-servicing costs were putting the brakes on
spending but that continued growth was being projected, albeit at a reduced
pace. "The economic fundamentals remain sound and the demand for affordable
luxuries should persist. However, the erratic supply of electricity has already
had a disruptive impact on business and is impacting on Distell`s ability to
meet market demand."
Internationally, trading was expected to remain tough. "Nevertheless our
ability to trade across a wide geographic front with a range of products
spanning a spectrum of beverage categories and price points equips us to respond
to the challenge. We are expecting to show continued growth in revenue and
earnings."
DATE 13 FERUARY 2008
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)
VERNON DE VRIES, GM CORPORATE AFFAIRS: DISTELL (021) 809
8308 or 082 809 2809
TESSA DE KOCK/PIPPA PRINGLE, DKC (021) 422 2690
Date: 13/02/2008 13:52:14 Produced by the JSE SENS Department.
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