| Wed 25 Aug 2010, 12:10 | | DST - Distell Group Limited - Audited results of the group for the year |
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DST - Distell Group Limited - Audited results of the group for the year
ended 30 June 2010 and cash dividend declaration
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST ISIN: ZAE000028668
("Distell", "the Group" or "the company")
AUDITED RESULTS OF THE GROUP FOR THE YEAR ENDED 30 JUNE 2010 AND CASH
DIVIDEND DECLARATION
Salient features
- Total sales volumes up 7,3%
- Total revenue up 8,7%
- Operating profit down 1,2%
- Headline earnings per share down 1,2%
- Annual dividend maintained at 256 cents per share
- Lower operating margin due to unfavourable exchange rate and sales mix
Abridged consolidated statements of financial position
2010 2009
R`000 R`000
Restated
Assets
Non-current assets
Property, plant and equipment 2 157 912 1 773 480
Biological assets 138 915 146 375
Financial assets 89 105 74 281
Investments in associates 44 054 38 487
Intangible assets 205 680 244 685
Retirement benefit assets 49 656 58 150
Deferred income tax assets 47 122 24 861
Total non-current assets 2 732 444 2 360 319
Current assets
Inventories 3 818 661 3 681 022
Trade and other receivables 1 344 701 1 155 381
Current income tax assets 62 187 74 381
Cash and cash equivalents 243 038 178 472
Total current assets 5 468 587 5 089 256
Total assets 8 201 031 7 449 575
Equity and liabilities
Capital and reserves
Capital and reserves 5 237 317 4 807 349
Non-controlling interest 984 2 025
Total equity 5 238 301 4 809 374
Non-current liabilities
Interest-bearing borrowings 422 467 422 386
Retirement benefit obligations 21 099 18 300
Deferred income tax liabilities 230 380 198 288
Total non-current liabilities 673 946 638 974
Current liabilities
Trade and other payables 1 723 966 1 650 532
Provisions 208 625 9 282
Interest-bearing borrowings 336 657 324 267
Current income tax liabilities 19 536 17 146
Total current liabilities 2 288 784 2 001 227
Total equity and liabilities 8 201 031 7 449 575
Abridged consolidated income statements
2010 2009 Change
R`000 R`000 %
Restated
Revenue 11 808 884 10 863 728 8,7
Operating costs (10 413 146) (9 454 968) 10,1
Costs of goods sold (7 974 656) (7 273 020)
Sales and marketing costs (1 398 540) (1 294 589)
Distribution costs (717 755) (652 208)
Administration and other costs (322 195) (235 151)
Other losses (2 821) 1 273
Operating profit 1 392 917 1 410 033 (1,2)
Dividend income 1 493 1 552
Finance income 15 247 30 938
Finance costs (83 899) (54 162)
Share of profit of associates 32 412 30 058
Profit before taxation 1 358 170 1 418 419 (4,2)
Taxation (417 655) (464 707)
Profit for the year 940 515 953 712 (1,4)
Attributable to:
Equity holders of the company 941 556 953 712 (1,3)
Non-controlling interest (1 041) -
940 515 953 712 (1,4)
Per share performance:
Issued number of ordinary shares 201 775 201 092
(`000)
Weighted number of ordinary shares 201 143 200 667
(`000)
Earnings per ordinary share (cents)
- basic earnings basis 468,1 475,3 (1,5)
- diluted earnings basis 444,5 455,4 (2,4)
- headline basis 469,1 474,8 (1,2)
- diluted headline basis 445,4 455,0 (2,1)
Dividends per ordinary share
(cents)
- interim 124,0 124,0 -
- final 132,0 132,0 -
256,0 256,0 -
Reconciliation of headline
earnings:
Net profit attributable to equity 941 556 953 712 (1,3)
holders of the company
Adjusted for (net of taxation):
net other capital losses 2 031 (917)
Headline earnings 943 587 952 795 (1,0)
Abridged consolidated statements of other comprehensive income
2010 2009
R`000 R`000
Restated
Profit for the year 940 515 953 712
Other comprehensive income (net of taxation) (33 805) (81 644)
Fair value adjustments (net of taxation)
- available-for-sale financial assets 2 732 3 419
Currency translation differences (39 155) (56 848)
Actuarial gains and losses 2 618 (28 215)
Total comprehensive income for the year 906 710 872 068
Attributable to:
Equity holders of the company 907 751 872 068
Non-controlling interest (1 041) -
906 710 872 068
Abridged consolidated statements of cash flow
2010 2009
R`000 R`000
Restated
Cash flow from operating activities
Operating profit 1 392 917 1 410 033
Non-cash flow items 301 441 135 065
Working capital changes (139 073) (514 692)
Inventories (140 340) (440 950)
Trade and other receivables (187 572) (224 453)
Trade payables and provisions 188 839 150 711
Cash generated from operations 1 555 285 1 030 406
Net financing costs (69 271) (9 258)
Taxation paid (394 737) (451 523)
Net cash generated from operating activities 1 091 277 569 625
Cash outflow from investment activities (542 516) (591 749)
Cash inflow from financing activities 22 008 423 480
Dividends paid (514 931) (513 727)
Increase in net cash, cash equivalents and bank 55 838 (112 371)
overdrafts
Net cash, cash equivalents and bank overdrafts (144 844) (31 341)
at the beginning of the year
Exchange gains on cash and cash equivalents (3 727) (1 132)
Net cash, cash equivalents and bank overdrafts (92 733) (144 844)
at the end of the year
Abridged consolidated statements of changes in equity
2010 2009
R`000 R`000
Restated
Share capital 2 018 2 011
Opening balance 2 011 2 007
Issue of shares 7 4
Share premium 651 419 628 017
Opening balance 628 017 615 800
Issue of shares 23 402 12 217
Treasury shares (10 453) (9 036)
Opening balance (9 036) (909)
Issue of shares (23 409) (12 221)
Shares paid and delivered - share scheme 21 992 4 094
Non-distributable and other reserves 184 486 203 135
Opening balance 203 135 270 040
Fair value adjustments 2 732 3 419
Currency translation differences (39 155) (56 848)
BEE share-based payment reserve 6 877 6 877
Employee share scheme reserve 8 279 7 862
Actuarial gains and losses 2 618 (28 215)
Retained earnings 4 409 847 3 983 222
Opening balance 3 983 222 3 543 237
Net profit attributable to equity holders 941 556 953 712
Dividends (514 931) (513 727)
Non-controlling interest 984 2 025
Total equity at the end of the year 5 238 301 4 809 374
Segmental analysis
Revenue
2010 2009 Change %
R`000 R`000 %
Sales of alcoholic beverages
South Africa 8 660 070 7 933 261 9,2
International 2 926 693 2 540 713 15,2
11 586 763 10 473 974 10,6
Other non-alcoholic items 222 121 389 754 (43,0)
Consolidated 11 808 884 10 863 728 8,7
Operating profit
2010 2009 Change
R`000 R`000 %
South Africa 1 532 863 1 377 160 11,3
International 389 742 483 390 (19,4)
1 922 605 1 860 550 3,3
Corporate services (529 688) (450 517) 17,6
Consolidated 1 392 917 1 410 033 (1,2)
Notes
2010 2009
R`000 R`000
Restated
1. Sales volumes (litres `000) 498 094 464 119
2. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 422 467 422 386
Current 336 657 324 267
759 124 746 653
Cash resources (243 038) (178 472)
516 086 568 181
3. Cash outflow from investment activities
Purchases of property, plant and equipment (184 599) (99 966)
(PPE) to maintain operations
Purchases of PPE to expand operations (365 476) (282 142)
Proceeds from sale of PPE 3 704 5 279
Proceeds from financial assets disposed 10 109 27 475
Purchases of intangible assets (6 254) (242 395)
(542 516) (591 749)
4. Directors` valuation of financial assets
and associates
Other investments and loans 89 105 74 281
Associates 375 224 304 785
464 329 379 066
5. Capital commitments
Contracted 49 860 254 836
Authorised but not contracted 386 487 551 567
436 347 806 403
6. Depreciation of property, plant and 172 793 144 080
equipment
7. Net asset value per share (cents) 2 596 2 392
8 Segment report
The basis for reporting segmental financial information has been
changed in accordance with the requirements of IFRS 8: Operating
Segments. Previously, the Group regarded its integrated activities
of production, marketing and distribution of alcoholic beverages as
a single primary business segment. With the implementation of IFRS
8, operating segments were identified based on financial
information reviewed regularly by management for the purpose of
assessing performance and allocating resources to these segments.
The Group`s international operations have been aggregated when they
demonstrate similar economic characteristics and when they do not
individually meet the quantitative recognition thresholds in terms
of IFRS 8. Revenue includes excise duty.
9. 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.
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), including IAS 34: Interim Financial
Reporting; the requirements of the South African Companies Act of 1973,
as amended; and the Listings Requirements of the JSE Limited.
These financial statements incorporate accounting policies and methods
of computation consistent with those adopted for the previous annual
financial reporting period, with the exception of the implementation of
the following new accounting standards, amendments and circulars:
- IFRS 8: Operating Segments (effective 1 January 2009)
- IAS 1 (revised): Presentation of Financial Statements (effective 1
January 2009)
- IAS 38 (amended): Intangible Assets (effective 1 January 2009)
- Circular 3/2009 "Headline Earnings" (effective for all financial
periods ending on or after 31 August 2009)
The adoption of IFRS 8 and IAS 1 (revised) has had no impact on the
results of either the current or prior years, but has introduced certain
disclosure requirements. The amendment to IFRS 8, which makes provision
for non-disclosure of segmental assets in instances where management
does not review results in that format, was adopted early.
Comparative financial statements have been restated to account for the
amendment to IAS 38: Intangible Assets. Previously, merchandising and
promotional stock items were included in inventory and expensed to the
income statement when utilised. In accordance with the amendment in IAS
38: Intangible Assets, the Group has expensed all merchandising and
promotional items upon gaining access to such items, regardless of when
these items are utilised.
The effect of the restatement on the comparative financial statements is
summarised below.
Previously Currently
reported reported Difference
R`000 R`000 R`000
Income statement
30 June 2009
Operating expenses (9 453 995) (9 454 968) (973)
Taxation (464 994) (464 707) 287
Profit for the year 954 398 953 712 (686)
Headline earnings 953 481 952 795 (686)
Statement of financial position
30 June 2009
Inventories 3 714 655 3 681 022 (33 633)
Capital and reserves 4 831 501 4 807 349 (24 152)
Deferred income tax liability 207 769 198 288 (9 481)
Operating performance
Revenue grew 8,7% to R11,8 billion on a sales volume increase of 7,3%.
Domestic sales volumes increased by 4,6% and revenue by 9,2%. In an
extremely challenging trading environment, with consumers seeking lower-
priced options, Distell succeeded in maintaining its share of consumer
spend in most key categories. Cider and RTD (ready-to-drink) brands
continued their strong performance whereas spend across the company`s
spirits portfolio showed a marginal drop. Distell`s value share of wines
showed some decline, mostly in the mid- to lower-priced ranges.
International sales volumes, including Africa, increased 15,8%. Spirit
volumes showed encouraging growth. Since the acquisition of the Bisquit
cognac business last year, it has become fully operational with its
performance in established markets exceeding expectations. Ciders and
RTDs continued their upward trajectory, although off a smaller base.
Growth in wine exports was significant and far outpaced that of the
industry. However, a stronger rand against all major currencies limited
international revenue growth to 15,2%.
Africa, in particular, delivered exceptional growth, to contribute 57,1%
to foreign revenue.
Although reasonable sales volume growth was achieved, this year`s
results were significantly impacted by adverse exchange rates, and to a
lesser extent, a less favourable sales mix. Benefits derived from
improved throughput and better operating efficiencies were thus
insufficient to protect margins and profitability. Consequently,
operating profit declined 1,2% and net operating margin deteriorated to
11,8% (2009: 13,0%).
Net financing costs increased from R23,2 million to R68,7 million due to
higher average borrowings during the period.
Headline earnings declined 1,0% to R943,6 million and headline earnings
per share declined 1,2%.
Investment and funding
Total assets increased by 10,1% to R8,2 billion.
Capital expenditure amounted to R550,1 million, of which R184,6 million
was spent on the replacement of assets. A further R365,5 million was
directed to capacity expansion, primarily to increase production
capability in ciders, RTDs, whisky and sparkling wine and to expand
warehousing.
Investment in net working capital increased 1,7% to R3,2 billion.
Inventory was 3,7% higher at R3,8 billion. Investment in bulk stock in
maturation, planned in accordance with the Group`s longer-term view of
consumer demand of its spirit brands, was re-evaluated in view of the
recent decline in sales volumes.
Cash generated from operating activities, net of cash outflows relating
to investment activities, amounted to R548,8 million (2009: R22,1
million outflow). The Group remains in a strong financial position, with
net interest-bearing debt of R516,1 million, and a debt/equity ratio of
only 9,9% as at 30 June 2010.
Prospects
Although there were some early signs of a global economic recovery in
the latter part of the financial year under review, the high levels of
unemployment and limited disposable income are likely to continue to
impact adversely on consumer spending. The trading environment is
expected to remain extremely competitive, both domestically and
internationally.
However, Distell`s business is appropriately structured with a
diversified and exciting range of well-priced, quality brands in
spirits, ciders and RTDs and wines, to enable the Group to compete
effectively and to continue to maximise trading opportunities and
profitability.
Directorate
Smartie Genade will retire as director at the end of August this year
and we thank him for his valuable contribution.
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.
Cash dividend declaration
The directors have resolved to declare cash dividend number 44 of 132
cents (2009: 132 cents) per share for the year ended 30 June 2010. This
represents a total dividend of 256 cents (2009: 256 cents) for the year
and a dividend cover of 1,8 times (2009: 1,9 times) by headline
earnings.
The salient dates of this dividend distribution are:
Last day to trade cum dividend Friday, 10 September 2010
Shares commence trading ex dividend
from commencement of business on Monday, 13 September 2010
Record date Friday, 17 September 2010
Payment date Monday, 20 September 2010
Share certificates may not be dematerialised or rematerialised between
Monday, 13 September 2010 and Friday, 17 September 2010, both days
inclusive.
Signed on behalf of the board
DM Nurek JJ Scannell
Chairman Managing director
Stellenbosch
25 August 2010
Directors:
DM Nurek (Chairman), FC Bayly, PM Bester, PE Beyers, MJ Botha,
JG Carinus, GP Dingaan, SJ Genade, E de la H Hertzog, MJ Madungandaba,
LM Mojela, AC Parker, JJ Scannell (Managing director),
CE Sevillano-Barredo, BJ van der Ross, MH Visser
Company secretary: CJ Cronje
Registered office: Aan-de-Wagenweg, Stellenbosch 7600
Transfer secretaries: Computershare Investor Services (Proprietary)
Limited, PO Box 61051, Marshalltown 2107
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
www.distell.co.za
Date: 25/08/2010 12:10:07 Produced by the JSE SENS Department.
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