| Tue 19 Aug 2003, 8:47 | | Results of the group for the year ended 30 Jun 03 |
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DST
Distell Group Limited - Results of the group for the year ended 30 June 2003
Distell Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1988/005808/06)
JSE share code: DST ISIN: ZAE000028668
Results of the group for the year ended 30 June 2003
Salient features
Increase of 11,5% in comparable sales revenue
International sales revenue up by 14,7%
31,1% growth in trading income
Unfavourable foreign currency impact on earnings of R66,8 million
Headline earnings up 25,8% on a restated basis
Headline earnings, prior to the restatement, declined by 2,0%
Accounting policy and comparative figures
The accounting policy of the group has been changed in order to comply with the
new South African Statement of Generally Accepted Accounting Practice (GAAP)
dealing with "Financial instruments: recognition and measurement" (AC 133). The
effect of this change in accounting policy is not material.
The calculation of headline earnings has also been changed to include merger
costs, in line with Circular 7/2002 "Headline Earnings" issued by The South
African Institute of Chartered Accountants. Comparative figures have therefore
been restated. This change had no effect on the current reporting period. The
effect of this change is as follows:
Headline earnings Headline earnings per
share
30 June 2002 30 June 2002
R `000 Cents
Previously reported 277 205 141,7
Merger costs (net of taxation) (61 196) (31,3)
Restated 216 009 110,4
The accounting policies and methods of computation are in all other respects
consistent with those applied in the previous financial year and are in
compliance with GAAP.
A subsidiary company, Western Province Cellars Group Limited, was sold with
effect from 1 July 2002. As a result, certain line items in the financial
statements are not comparable.
Operating performance
Sales revenue grew 5,8% to R5,2 billion. However, after excluding retail sales
of the Western Province Cellars Group Limited, sales revenue rose by 11,5%.
Sales volumes in the domestic markets reflect a favourable sales mix at improved
margins. Sales volume growth and market share improvements were achieved for
most major brands, with spirit brands growing 4,0%, and wines, boosted by a
strong performance of more profitable premium brands and sparkling wines, by
3,8%. Sales volumes of flavoured alcoholic beverages, however, continued to
suffer under increased competitive pressure. Domestic sales revenue improved by
11,5% (excluding Western Province Cellars).
International sales volumes, excluding Africa, increased by 17,9%. Amarula Cream
achieved volume growth of 8,1%. Natural wines showed strong volume growth of
19,3%. The substantial appreciation of the rand from early 2003 onwards impacted
unfavourably on international sales revenues, which, as a consequence, grew by
only 14,7%.
Sales revenue derived from African countries increased by 5,1%.
The increase of 31,1% in trading income was driven largely by increased sales
revenue, a favourable sales mix and improved production efficiencies. This is
reflected in the improvement in net margin.
Headline earnings for the period reflect an increase of 25,8% to R271,8 million
over the restated amount of the previous year.
Headline earnings, prior to the restatement of the amount reported in the
previous year, declined by 2,0%. This deterioration in headline earnings is
mainly due to foreign currency losses of R66,8 million for the current year,
compared to the R68,2 million gain of the previous year.
Exceptional items
This represents:
Profit on the sale of a subsidiary company - R5,0 million
Compensation for the termination of distribution rights for the Martell
trademark - R46,5 million
Investment and funding
Total assets increased by R288,3 million to R4,7 billion.
Capital expenditure amounted to R195,8 million. Of this R40,4 million was spent
on expanding and upgrading the Nederburg cellar in Paarl to support the
continued growth of the brand domestically and internationally. A further R46,1
million was devoted to restructuring the production plant in Epping and
distribution centres in Namibia.
Investment in working capital increased by 15,1% to R1,8 billion, mainly as a
result of an increase in bulk wines and spirits. The nature of the group"s
activities necessitates a long-term view of consumer demand for its products and
the investment in bulk inventories under maturation is planned accordingly.
Management"s focus on the systematic reduction in working capital is reflected
in a reduction in bottled stock in real terms and a 14,5% decline in accounts
receivable.
Legal and regulatory issues resolved
Earlier this year, the Competition Tribunal approved the merger, subject to the
resolution of its concerns regarding competition in the medium priced spirits
segment. The Tribunal"s final ruling ordered Distell to relinquish its
distribution rights to the Martell and KWV 10 and 20 year-old brandies.
The trademark owner of Gordon"s Gin last year gave notice of its intention to
terminate Distell"s production and distribution rights for this product. Distell
took appropriate steps to protect its rights in terms of the licensing agreement
and the Pretoria High Court recently ruled in Distell"s favour.
Prospects
The major legal and regulatory challenges that faced the group have largely been
resolved. The removal of uncertainty allows Distell to continue with business
planning initiatives, focusing on revenue growth and performance improvement.
The local market is likely to remain intensely competitive over the next few
years. However, the general expectation is that the domestic economy, measured
in terms of household consumption expenditure, will grow by approximately 3% in
the year ahead. This, together with the decline in interest rates, should also
benefit consumer demand for alcoholic beverages. The global economic outlook
remains uncertain. Success in the international market, key to our medium and
long-term growth, will therefore require a strong focus on reducing costs in
order to be competitive.
The group believes that it is well placed to identify and capture opportunities
in domestic and foreign markets and expects to continue to reflect real growth
in trading income.
General
Messrs WS MacFarlane, LN Jonker and Dr WJ Barnard resigned from the board of
directors during the year. We thank them for their valuable contribution over
the years. Mr D Prins has been appointed with effect from 1 March 2003.
The annual financial statements have been audited by PricewaterhouseCoopers Inc.
and their unqualified auditor"s report is available for inspection at the
registered office of the company.
Dividends
The directors have resolved to declare dividend number 30 of 35 cents (2002: 35
cents) per share, making a total dividend of 75 cents per share for the year
ended 30 June 2003. This dividend represents a dividend cover of 1,9 times
(2002: 1,6 times) by headline earnings.
Last day to trade "cum" the dividend Friday, 5 September 2003
Shares commence trading "ex" the dividend
from commencement of business on Monday, 8 September 2003
Record date Friday, 12 September 2003
Payment date Monday, 15 September 2003
Share certificates may not be dematerialised or rematerialised between Monday, 8
September 2003, and Friday, 12 September 2003, both days inclusive.
Signed on behalf of the board
DM Nurek
Chairman
JJ Scannell
Managing director
Stellenbosch
18 August 2003
Directors: DM Nurek (Chairman), FC Bayly, PE Beyers, JG Carinus, SJ Genade, E de
la H Hertzog, MJ Madungandaba, D Prins, JJ Scannell (Managing director), PEI
Swartz, M Visser
Company secretary: CJ Cronje
Registered office:
Aan-de-Wagen Road, Stellenbosch, 7600
Transfer secretaries:
Computershare Ltd
PO Box 61051, Marshalltown, 2107
Sponsor:
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
CORPORATE FINANCE
www.distell.co.za
Consolidated balance sheets
2003 2002
R"000 R"000
Audited Audited
Assets
Non-current assets
Property, plant and equipment 1 221 020 1 139 182
Investments and loans 306 755 557 904
Intangible assets 6 952 7 304
Deferred taxation 19 402 16 789
Total non-current assets 1 554 129 1 721 179
Current assets
Inventories 2 074 364 1 651 076
Trade and other receivables 529 192 581 978
Short-term investments 324 106 195 452
Taxation prepaid 31 864 29 741
Cash and cash equivalents 139 304 185 221
Total current assets 3 098 830 2 643 468
4 652 959 4 364 647
Total assets
Equity and liabilities
Capital and reserves
Capital and reserves 2 315 057 2 126 717
Minority interest 799 799
Total equity 2 315 856 2 127 516
Non-current liabilities
Non-current interest-bearing liabilities 424 130 598 791
Post-retirement medical liability 15 297 15 297
Deferred taxation 80 991 80 959
Total non-current liabilities 520 418 695 047
Current liabilities
Trade payables and provisions 791 961 673 844
Short-term portion of non-current 421 221 205 320
liabilities
Current interest-bearing liabilities 603 503 662 920
Total current liabilities 1 816 685 1 542 084
4 652 959 4 364 647
Total equity and liabilities
Consolidated income statements
2003 2002 Change
R"000 R"000 %
Audited Audited
Sales volume (l"000) 309 566 312 091 (0,8)
5 188 422 4 903 843 5,8
Sales revenue
Operating expenses (4 647 385) (4 491 252)
Trading income 541 037 412 591 31,1
Dividend income 70 208 81 639
Net interest paid (188 342) (169 303)
Foreign currency adjustments (66 767) 68 188
Income from associates 12 723 13 387
Profit before exceptional
items and taxation 368 859 406 502 (9,3)
Exceptional items 51 462 (73 175)
Profit before taxation 420 321 333 327 26,1
Taxation (90 205) (96 575)
Minority interest (315) (266)
Net profit attributable to
ordinary shareholders 329 801 236 486 39,5
Net profit attributable to
ordinary shareholders 329 801 236 486 39,5
Adjusted for (net of taxation):
profit on disposal of fixed
assets and goodwill
amortisation (9 287) (15 065)
exceptional items (48 762) (5 412)
Headline earnings 271 752 216 009 25,8
195 580 195 580
Issued ordinary shares ("000)
Earnings per ordinary
share (cents)
attributable earnings basis 168,6 120,9 39,5
headline basis 138,9 110,4 25,8
Dividends per ordinary
share (cents)
- interim 40,0 35,0
- final 35,0 35,0
75,0 70,0 7,1
Notes
2003 2002
R"000 R"000
Audited Audited
1. Exceptional items
Compensation for cancellation of
exclusive distribution rights 46 500 -
Repatriation of surplus assets of
disability fund - 2 994
Merger costs - (78 587)
Profit on disposal of property - 2 418
Profit on sale of subsidiary 4 962 -
51 462 (73 175)
Taxation (2 700) 23 489
48 762 (49 686)
2. Net interest-bearing liabilities
Interest-bearing debt
Non-current 424 130 598 791
Current 1 024 724 868 240
1 448 854 1 467 031
Cash resources 139 304 185 221
1 309 550 1 281 810
3. Cash inflow from investment activities
To maintain operations (95 838) 23 936
To expand operations (94 103) (243 465)
Preference shares redeemed 199 782 -
Investment in associate - (10 099)
9 841 (229 628)
4. Directors" valuation of unlisted
investments
Preference shares 575 650 706 146
Other investments and loans 76 836 68 160
652 486 774 306
5. Capital commitments
Contracted 35 074 50 304
Authorised but not contracted 191 012 251 457
226 086 301 761
6. Depreciation of property, plant and
equipment 127 705 115 046
7. Net asset value per share (cents) 1 184 1 088
8. 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.
Abridged consolidated cash flow statements
2003 2002
R"000 R"000
Audited Audited
Trading income 541 037 412 591
Non-cash flow items 60 037 98 414
Working capital changes (192 296) (14 295)
Inventories (423 288) (50 735)
Trade and other receivables 102 901 (109 230)
Trade payables and provisions 128 091 145 670
Cash generated from normal operating
activities 408 778 496 710
Net financing cost (187 420) (167 527)
Foreign currency differences realised (25 886) 35 567
Taxation paid (91 015) (71 292)
Dividends paid (146 685) (148,641)
Cash utilised by normal
operating activities (42 228) 144 817
Exceptional items 4 962 (73 175)
Cash utilised by operating activities (37 266) 71 642
Cash inflow from investment activities 9 841 (229 628)
Cash inflow from financing activities 40 925 12 498
Decrease in net short-term borrowings 13 500 (145 488)
Net short-term borrowings at the beginning of
the year (477 699) (332 211)
Net short-term borrowings at the end
of the year (464 199) (477 699)
Current interest-bearing liabilities (603 503) (662 920)
Cash and cash equivalents 139 304 185 221
Consolidated statements of changes in equity
2003 2002
R"000 R"000
Audited Audited
Share capital 1 956 1 956
Share premium 558 002 558 002
Non-distributable and other reserves 58 127 52 633
Opening balance 52 633 52 774
Hedging reserve (221) -
Fair value adjustments 5 005 -
Foreign currency translations 710 (141)
Retained earnings 1 696 972 1 514 126
Opening balance 1 514 126 1 426 281
Change in accounting policy (270) -
Net profit attributable to ordinary 329 801 236 486
shareholders
Dividends (146 685) (148 641)
Equity at the end of the year 2 315 057 2 126 717
Date: 19/08/2003 07:30:27 AM Produced by the JSE SENS Department
