| Tue 21 Aug 2001, 0:00 | | Distell Holdings - Results For The Group For The Y |
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Distell Holdings
Registration number 1988/005808/06
Results for the group for the year ended 30 June 2001
Consolidated income statement
2001 2000 Change
R'000 R'000 %
Pro forma
Sales volumes (L '000) 329 568 350 583 (6,0)
Sales revenue 597 916 4 610 292 (0,3)
Operating expenses (4 264 693) (4 218 611)
Trading income 333 223 391 681 (14,9)
Dividend income 75 825 72 784
Financing costs (141 897) (145 889)
Income from associates 5 731 4 347
Profit before exceptional items
and taxation 272 882 322 923 (15,5)
Exceptional items (145 602) 41 840
Profit before taxation 127 280 364 763 (65,1)
Taxation (10 862) (97 629)
Minority interest (283) (266)
Net profit attributable to
ordinary shareholders 116 135 266 868 (56,5)
Adjusted for (net of taxation):
profit on disposal of fixed assets (3 038) (3 795)
exceptional items 95 767 (35 288)
Headline earnings 208 864 227 785 (8,3)
Issued ordinary shares ('000) 195 580 195 580
Earnings per ordinary
share (cents)
attributable earnings basis 59,4 136,4
headline basis 106,8 116,5 (8,3)
Dividends per ordinary
share (cents)
- paid 12,0 20,8
- declared 41,0 41,5
53,0 62,3 (14,9)
Consolidated balance sheet
2001 2000
R'000 R'000
Pro forma
ASSETS
Non-current assets
Property, plant and equipment 1 035 200 1 027 542
Investments and loans 654 551 576 224
Deferred taxation 8 745 1 408
Total non-current assets 1 698 496 1 605 174
Current assets
Inventories 1 600 341 1 620 413
Trade and other receivables 477 079 467 222
Taxation prepaid 25 403 17 171
Cash and cash equivalents 178 227 104 923
Total current assets 2 281 050 2 209 729
Total assets 3 979 546 3 814 903
EQUITY AND LIABILITIES
Capital and reserves 2 051 771 1 958 964
Minority interest 799 786
Total equity 2 052 570 1 959 750
Non-current liabilities
Long-term borrowings 791 347 782 360
Post retirement medical liability 15 592 15 297
Deferred taxation 47 275 73 181
Total non-current liabilities 854 214 870 838
Current liabilities
Trade payables and provisions 562 324 448 937
Short term borrowings 510 438 454 178
Shareholders for dividends - 81 200
Total current liabilities 1 072 762 984 315
Total equity and liabilities 3 979 546 3 814 903
Abridged consolidated cash flow statement
2001 2000
R'000 R'000
Pro forma
2001 2000
R'000 R'000
Pro forma
Trading income 333 223 391 681
Non-cash flow items 193 527 117 350
Working capital changes 82 953 (76 079)
Cash generated from normal
operating activities 609 703 432 952
Net interest paid (151 563) (149 138)
Taxation paid (50 600) (83 831)
Dividends paid (104 670) (119 000)
Cash retained from normal
operating activities 302 870 80 983
Exceptional items (145 602) (20 000)
Cash retained from operating activities 157 268 100 983
Cash outflow from investment activities (148 941) (160 174)
Cash inflow from financing activities 8 717 (5 458)
Net increase in cash resources 17 044 (64 649)
Cash and cash equivalents at the
beginning of the year (349 255) (284 606)
Cash and cash equivalents at the end
of the year (332 211) (349 255)
Consolidated statement of changes in equity
2001 2000
R'000 R'000
Pro forma
Share capital 1 956 73 512
Opening balance:
Distillers Corporation (SA) Ltd 45 036 45 036
Opening balance:
Stellenbosch Farmers' Winery Group Ltd 28 476 28 476
Merger adjustment (28 476) -
Capital reduction (43 636) -
Issue of shares 556 -
Share premium 558 002 -
Opening balance - -
Capital reduction 43 400 -
Issue of shares 514 602 -
Non-distributable reserves 52 774 52 398
Opening balance 52 398 51 754
Capital reduction 236 -
Foreign currency translations 140 644
Retained earnings 1 439 039 1 833 054
Opening balance 1 833 054 1 647 269
Merger adjustment (486 680) -
Goodwill written off - (17 596)
Capital profit realised - 56 785
Net profit attributable to ordinary
shareholders 116 135 266 868
Change in accounting policy - 1 528
Dividends (23 470) (121 800)
Equity at the end of the year 2 051 771 1 958 964
Notes
2001 2000
R'000 R'000
Pro forma
1. Exceptional items
Profit on disposal of interest in
non-alcoholic fruit beverage operations 15 000 -
Repatriation of surplus assets of
disability fund 16 000 -
Merger cost (180 124) -
Profit on disposal of property 3 522 -
Compensation for the cancellation of
exclusive distribution rights - 20 000
Release of reserve for retirement benefits - 21 840
(145 602) 41 840
Taxation 49 835 (6 552)
(95 767) 35 288
2 Net interest-bearing borrowings
Interest bearing debt
Non-current 791 347 782 360
Current 510 438 454 178
1 301 785 1 236 538
Cash resources 178 227 104 923
Net interest-bearing borrowings 1 123 558 1 131 615
3. Directors' valuation of unlisted
investments
Preference shares 626 283 551 076
Other investments and loans 43 672 44 764
669 955 595 840
4. Capital commitments - ordinary activities
Contracted 656 51 571
Authorised but not contracted 65 606 123 241
66 262 174 812
Estimated capital commitments - merger
Contracted 22 440 -
Authorised but not contracted 216 764 -
239 204 -
Depreciation of property, plant
and machinery 124 502 110 792
6. Net asset value per share (cents) 1 049 1 002
7. Segment report
The group is engaged in the manufacturing, 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.
highlights
- Sales volume growth in second half of financial year
- Foundation for merger successfully laid
- Merger benefits expected to realise during the budget year leading
to real growth in earnings
Commentary
The shareholders of both Distillers Corporation (SA) Limited ("Distillers")
and Stellenbosch Farmers' Winery Group Limited ("SFW") approved the merger
of operations of the respective groups at general meetings on 10 November
2000. The effective date of the merger was 1 July 2000. The combined group
changed its name to Distell Group Limited during March 2001.
In terms of the transaction, Distillers acquired the assets and liabilities
of SFW for a purchase consideration of R515,2 million, discharged by the
allotment of 55,6 million shares in the share capital of Distillers and
increasing the issued share capital from 140,0 million to 195,6 million. The
merger, uniting the interests of Distillers and SFW, has been accounted for
by means of the "predecessor accounting" method.
This profit announcement should be read in conjunction with the pro forma
statements as contained in the circular to shareholders, dated 19 October
2000.
accounting policy and comparative figures
The accounting policies and methods of computation, disclosed in the group's
annual financial statements for the year under review, are in all material
respects consistent with those applied by the individual groups in the
previous financial year. To achieve this, certain subsidiaries changed their
accounting policies as follows, on 1 July 2000:
- Capitalisation of qualifying financing costs.
Financing costs on construction projects are accounted for against income
when incurred.
- Valuation of promotional material.
Promotional material stock is valued at the lower of cost, determined on
the FIFO valuation method, or net realisable value. The cost of this stock
is accounted for against income when it is used.
The accounting policy of the group regarding the treatment of goodwill has
been changed to comply with the new Statement of GAAP (AC 131). Goodwill
arising before 1 July 2000 has already been written off in full against
reserves in prior years and comparative figures for the year ended 30 June
2000 have not been restated.
The comparative pro forma figures for the year ended 30 June 2000 have been
based on the audited financial statements. These figures have been restated
to achieve consistency in the presentation of line items and to consolidate
the results of the group's retail interests, previously accounted for as an
associate by the respective groups. The effect of these changes is not
material.
Comparative figures for earnings and dividends per share have been
recalculated on the basis of 195,6 million issued shares.
Operating performance
Results
Both local and international trading conditions have been difficult due to
reduced domestic spending on alcoholic beverages and an economic slowdown in
export markets.
Sales revenue for the year remained unchanged. After an unsatisfactory first
six months, during which sales volumes declined by approximately 8%,
encouraging growth was experienced during the second half of the financial
year, bringing down the decline in total volumes for the year to 6%. This is
an indication that refocused marketing and sales initiatives are starting to
bear fruit. Although sales revenue during the second half of the year is
traditionally lower than during the first six months, improved sales
performance during the latter part of the year enabled the group to maintain
sales revenue at the same levels as the previous year.
The group succeeded in improving its domestic market share in all important
product categories, with the exception of alcoholic fruit beverages, where
market shares came under pressure as a result of increased competition.
While the South African brandy market showed volume decline for most of the
year, there are encouraging signs that this market is on the road to
recovery. The group gained market share and managed to maintain its volumes
during the latter part of the year under review.
Sales volumes in the international market remained unchanged. The redesign
of organisational structures and a re-assessment of agencies representing
the group's products are in the process of being completed and management is
confident the group will be better positioned to resume growth in export
markets and to satisfy consumer demand for the group's products which is
continually improving.
The reduction in the group's operating margin is attributable primarily to
disappointing sales during the first six months of the financial year. While
initiatives to reduce operating expenditure remained a priority, management
began implementing redesigned marketing and sales strategies. The planned
merger benefits, through cost reduction initiatives, are expected to
commence in the new financial year and will be fully realised during the two
years thereafter.
After adjustment for exceptional items (see note 1), being primarily merger
costs in the current year, headline earnings of R208,8 million were 8% below
the previous year.
Taxation
The current year's effective tax rate, before the effect of differences
arising from exceptional items, decreased to 21,8% from last year's 24,4%.
The taxation impact of exceptional items further reduced the effective tax
rate to 8,6%.
INVESTMENT AND FUNDING
Total assets increased by 4,3% to R4,0 billion. Capital expenditure to
expand operations amounted to R155,7 million. Of this, R43,0 million was
incurred to restructure the merged operations within the group. The
estimated future capital expenditure to complete the merger programme
amounts to R239,2 million and will be funded from existing resources. This
investment is expected to create shareholder value by increasing returns on
invested capital over the medium and longer tem. Other capital expenditure
was limited to the replacement of essential assets.
While the efficient management of operating capital during the year enabled
the group to improve cash flow from operations by R83,0 million, inventory
levels increased towards the year-end. The rationalisation and consolidation
of a number of plants during this period, and the need to ensure product
availability during this disruptive phase, necessitated the temporary build-
up of stock. The process has been well managed and a reduction in inventory
levels is foreseen for the period subsequent to the change-over.
The merging of activities will result in a significant reduction in total
assets, through the sale of surplus assets and a decrease in inventories.
PROSPECTS
The directors are satisfied that the merger process is proceeding according
to plan and that it will be completed during the next financial year.
Estimated future merger operating expenditure amounts to R23,0 million.
Management is confident that the pre-determined merger objectives will be
met. Marketing and sales functions have been restructured and refocused to
bring the group closer to consumer preferences, while serving customers more
efficiently.
As a result of these steps, together with a significant reduction in the
group's cost base, and on the assumption that consumer spending will not
deteriorate further, the group has budgeted for a substantial growth in
earnings.
DIVIDENDS
The board has proposed a final dividend of 41 cents per share, making a
total dividend of 53 cents per share for the year. This compares with a
total dividend of 62,3 cents per share in the previous year and represents a
dividend cover ratio of 2,0 times by headline earnings (2000: 1,9 times pro
forma).
Since the final dividend will be declared subsequent to year-end, and to
comply with the changed Statement of GAAP (AC 107), it has not been provided
for in the annual financial statements.
This dividend will be paid on Monday, 17 September 2001. The last date to
trade ("CUM" to dividend) in order to participate in the dividend will be
Friday, 7 September 2001. The share of Distell will commence trading "EX"
the dividend from the commencement of business on Monday, 10 September 2001
and the record date will be Friday, 14 September 2001.
Signed on behalf of the board
D M Nurek J J Scannell
Chairman Chief executive officer
Stellenbosch
20 August 2001
Directors: D M Nurek (Chairman), F C Bayly, W J Barnard, P E Beyers,
J G Carinus, S J Genade, E de la H Hertzog, L N Jonker, L B Kriel,
M J Madungandaba, W S MacFarlane, J J Scannell (Chief executive officer),
P E I Swartz, M H Visser
Company secretary: C J Cronje
Registered office: Aan-de-Wagen Road, Stellenbosch, 7600
Transfer secretaries: Computershare Services Ltd, PO Box 61051, Marshalltown
2107
