| Wed 20 Aug 2008, 12:13 | | DST - Distell Shows Resilience To Tough Markets |
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DST
DST
DST - Distell Shows Resilience To Tough Markets
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST & ISIN: ZAE000028668
("Distell" "or "the Group" or "the company")
DISTELL SHOWS RESILIENCE TO TOUGH MARKETS
Bolstered by a well-balanced and well-protected suite of compelling brands
across the pricing spectrum and broader and stronger global distribution
networks in developed and developing markets, Distell has once again shown
its resilience to a global contraction in spending to report solid revenue
and earnings growth for the year to June 30, 2008.
Revenue rose 14,7% to R9,4 billion on a sales volume increase of 6,9%. Basic
earnings grew 11,8%. Headline earnings were up 20,9% to R941,9 million and
headline earnings per share, by 20,3%.
Trading income lifted 19,7%, thanks to the good revenue growth achieved, as
well as the benefits derived from improved throughput and continued advances
made to enhance efficiencies across the business, said MD Jan Scannell. The
group`s ability to constantly raise the performance of operating units had
also improved net operating margin from last year`s 13,6% to 14,2%.
Scannell said despite the tough global trading environment, Distell had
continued to make significant progress in building the contribution of
international business to total revenue. International business now
represented 20% of total revenue, up from 18% the previous year, with the
company trading, in addition to established markets, in developing countries
in Africa, Asia and Latin America, while fast building the profile of its
products in the travel retail duty-free channel.
Domestically, sales volumes increased 4,0%. Cider brands Savanna and Hunter`s
and RTDs (ready-to-drinks) were the stars of the portfolio, pushing up sales
volumes 6,7% in a market characterised by contracting disposable income. This
performance, said Scannell, was all the more gratifying in that it had been
achieved despite production constraints resulting from the national shortage
in supplies of packaging and carbon dioxide affecting the entire beverage
industry, as well as initial capacity limitations at Distell`s own production
sites, since addressed by commissioning additional plant.
Spirit volumes increased 2,1%, largely because of growth in liqueurs, key
brandy brands, and whiskies. "Amarula further entrenched its position as
category leader. Amongst the brandies, notable performers were Richelieu and
Klipdrift, with our connoisseur potstill, Klipdrift Gold, in particular,
showing impressive gains."
He said the company had also succeeded in further penetrating the fast-
growing whisky category with very promising gains achieved amongst local and
imported brands. These included Distell-owned products Harrier, Knights, and
Three Ships, as well as Scottish Leader and Black Bottle, owned jointly with
Burn Stewart Distillers of Scotland.
"We are well positioned in the brown spirits segment to simultaneously take
advantage of the growing appetite for whisky and for gourmet brandies. We
also offer a basket of products across the pricing continuum to suit a range
of consumer budgets."
He noted that while the entire white spirits market had remained under
pressure, Distell brands had been able to hold their own, retaining market
share.
Despite the highly fragmented and price-competitive nature of the domestic
wine market, the wine portfolio had still been able to deliver profitable
volume growth of 2,0%, he said.
International sales volumes, excluding Africa, increased 13,4%. Spirit
volumes grew 10,8%, thanks to solid performances in most key markets. Wine
sales volumes also showed a healthy increase, rising 12,6%, and ciders 35,2%,
albeit off a low base. As a result, international revenue grew 23,9%.
Revenue derived from African countries rose 27,7% on a volume growth of
24,5%, fuelled by continued growth in major developing economies, increased
capital inflows, a buoyant commodities sector and improved economic stability
in many countries on the continent. African countries outside the BLNS region
(Botswana, Lesotho, Namibia and Swaziland) were starting to make a
significant contribution, delivering revenue growth of 43,5 %.
"We were particularly encouraged by the gains achieved by JC Le Roux and
Drostdy-Hof on the continent, while cider as a beverage category is taking
root in many African countries, which we see as an exciting development,"
added Scannell.
The newly repackaged Nederburg had succeeded in garnering greater consumer
support in Germany, its biggest market after South Africa, and was now one of
the top 10 wine brands in the non-discount retail sector in that country. In
Scandinavian countries, Distell brands held a commanding market share and
healthy progress was being made with wines and liqueurs in Eastern Europe,
particularly Russia and Romania, as well as in Korea, Japan, the United Arab
Emirates and Australasia. Two Oceans and Obikwa had delivered good growth in
Canada to retain their leadership of the South African wine category.
Total assets increased 7,4% to R6,4 billion. Capital expenditure amounted to
R385,9 million, of which R178,0 million was spent on the replacement of
assets. A further R207,8 million had been directed to the expansion of cider
and spirit production capacity, as well as the refurbishment of the Wadeville
plant, partially destroyed by fire during the previous reporting period.
The group remained in a strong financial position with interest-bearing debt,
net of cash and cash equivalents at R31,3 million at year-end.
A dividend of 132 cents per share has been declared, an increase of 21,1% on
last year`s final dividend, bringing the total to 236 cents per share (2007:
196 cents). The total dividend represents a dividend cover of 2,0 times by
headline earnings, and is 20,4% higher than in the previous year.
Turning to the current trading environment, Scannell said that in a climate
of declining disposable income, it would be the strongest brands, supported
by investment in infrastructure, marketing and service levels that would
prevail. "We are appropriately structured to compete effectively and we shall
continue to seek ways of enhancing our cost-efficiencies and quality levels
so our brands, many of them household names for South Africans, remain the
first choice for consumers. We are also encouraged by opportunities on the
international front and on the African continent where we have established
strong networks and trading and distribution alliances with key partners."
He said the group expected to reflect continued growth in revenue and
earnings, albeit at more modest levels.
DATE AUGUST 20, 2008
FOR DISTELL GROUP LIMITED
ISSUED BY DKC (DE KOCK COMMUNICATIONS)
QUERIES JAN SCANNELL, MD, (021) 809 7000 or (021) 809 8101
MERWE BOTHA, FINANCIAL DIRECTOR (021) 809 7000 or
(021) 809 8155
HEIDI BARTIS, COMMUNICATIONS MANAGER, (021) 809 8005 or 082 8858520
TESSA DE KOCK/MARLISE POTGIETER, DKC (021) 422 2690
Date: 20/08/2008 12:13:41 Produced by the JSE SENS Department.
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