| Mon 16 Aug 2004, 13:31 | | Distell shows good growth in a highly competitive |
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Distell shows good growth in a highly competitive environment
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST ISIN: ZAE000028668
(`Distell`)
Distell shows good growth in a highly competitive environment
Distell, South Africa`s leading wine and spirits group, boosted headline
earnings for the year by 41,0% to R358,6 million. A final dividend of 51 cents
per share (2003: 35cps) was declared, bringing the total dividend for the year
to 97 cents per share (2003: 75cps).
Jan Scannell, Managing Director of Distell, says: `The solid increase in
headline earnings is attributable to a rise in trading income of 14,4% and a
focused reduction in financing costs and foreign currency conversion losses for
the year`.
Despite tough competition in both the domestic and international markets, total
sales revenue reflected an increase of 10,7% to R5,7 billion on a sales volume
increase of 1,9% for the year. Excluding Africa, international operations
delivered exceptional growth reflecting a 30,2% increase in sales volumes.
However, international sales revenues only grew by 4,3%, due to the stronger
rand.
Says Scannell: `Our international results are well in excess of the robust
targets we set for ourselves. However, revenues and margins came under pressure
from the appreciation of the rand, which strengthened on average by 16,4%
against the currencies in which we trade.`
Local sales volumes grew marginally by 0,4% and reflected a more favourable
sales mix. According to Scannell, the strength of the rand caused muted growth
throughout the highly competitive domestic liquor industry, partly due to the
emergence of new entrants in the market, as the stronger rand allowed for
cheaper imports. There was also much consolidation amongst local players in an
effort to maintain a presence in international markets.
`Domestically, our brands in the important and more profitable spirits category
performed better than our other categories. Despite relinquishing the rights to
distribute Martell brandies at the beginning of the financial year, local spirit
volumes still showed growth of 2,0%. If Martell sales are excluded, spirit
volumes grew by 7,4%, with brandy reflecting an increase of 7,9%`, adds
Scannell.
Notwithstanding the unfavourable impact of the stronger rand on export margins,
the operating margin improved from 10,0% to 10,4% due to enhanced efficiencies
and cost containment throughout the Group. In constant currency terms, this
would have increased to 11,9%.
Says Scannell: `To compensate for tough market conditions, we have tightened our
belts by reducing costs and ensuring that all investments are more efficient.
This year our focus on a systematic reduction in working capital resulted in a
R215,0 million improvement in cash flow. With the exception of spending a
further R37,0 million to complete the final phase of the Nederburg cellar
upgrade, we limited capital expenditure, which dropped to R161,2 million, down
from R195,8 million in the previous year. At the same time, our total assets
increased by 2,3% to R4,8 billion.`
`This year we moved from being a cash absorber to a cash generator. Cash
generated by normal operating activities amounted to R298,4 million, while net
short-term borrowings decreased by R329,0 million`, adds Scannell.
With past legal issues resolved and a stronger cash position, Scannell believes
that Distell is in a strong position to deliver on its strategic objectives of
growing its international business, capturing the true potential of its brands
in the domestic market and continuing to improve processes in order to reduce
its cost base and become more competitive wherever it trades.
Says Scannell: `Our medium to longer-term outlook for the South African economy
is favourable. The recent announcement of a further 0.5% cut in prime interest
rates, along with lower inflation, should strengthen the demand for alcoholic
beverages. However, we still expect the local market to remain extremely
competitive`.
On future prospects for Distell, Scannell says: `We will continue to invest in
key international markets to build our brands as part of a profitable growth
strategy. With the global economy showing signs of improvement, we can look
forward to increased sales. We are well positioned to capture opportunities in
both the domestic and foreign markets and expect that the Group will continue to
deliver real growth in earnings.`
Stellenbosch
16 August 2004
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
CORPORATE FINANCE
Date: 16/08/2004 01:24:02 PM Produced by the JSE SENS Department
