| Wed 17 Aug 2005, 15:25 | | Distell Group Limited - Distell"s Headline Earning |
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Distell Group Limited - Distell`s Headline Earnings Up 34,5%
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST
ISIN: ZAE000028668
DISTELL`S HEADLINE EARNINGS UP 34,5%
Distell has increased headline earnings by 34,5% to R482,2m for the year to June
30, 2005, by extracting an improved performance from all the company`s assets.
This was achieved in a demanding trading environment marked by a global
oversupply of wines and increased consolidation of retailers worldwide, said MD
Jan Scannell.
The growth in headline earnings resulted mainly from a 19,8% increase in trading
income and a substantial reduction in financing costs and foreign currency
conversion losses. This represents a compound annual growth in headline
earnings of 23,5% over the four years since the formation of Distell, the
country`s largest producer of wines and spirits..
Profit before tax increased 38,5% from R485,8m to R672,8m on sales revenue that
was 7,0% higher at R6,0bn (2004: R5,6bn), whereas sales volumes increased by
1,8%. Operating expenses increased just 5,4% to R5,2bn, while net profit
attributable to ordinary shareholders rose 33,7% to R482,2m.
A final dividend of 67c per share had been declared, bringing the total
distribution for the year to 123c (2004: 97c), an increase of 26,8% on last
year. This represents a dividend cover of 2,0 times (2004:1,9 times).
Scannell attributed the increased trading income to improved sales revenue,
margins that grew from 10,7% to 12%, a better domestic sales mix and enhanced
logistics. He said the 1% increase in domestic sales volumes was consistent
with the muted growth experienced by the country`s wine and spirits industries.
`However, the marginal growth in our domestic sales volumes has been more than
compensated for by improved margins, the result of greater cost-efficiencies.`
Domestically, the company`s best-performing categories were ready-to-drink (RTD)
beverages, spirits, liqueurs and fortified and sparkling wines. The pace in RTD
volume growth accelerated, rising 3,7%, in contrast with the previous year`s
sluggish 0,2%. Spirit volumes increased 3,4% with Amarula Cream growing an
impressive 15%. However, sales volumes of natural wines declined 2,6%, given
increased competition amongst local producers who had looked to the local market
when the strengthened rand threatened margins on overseas markets.
Sales revenue derived from Africa increased 3,3%. Export sales volumes,
excluding Africa rose 7,0% but with a stronger rand, international sales revenue
remained unchanged from last year. International volumes of natural wines rose
8,7%, producing a compound annual growth rate of 19,4% for the four years since
the formation of Distell.
Scannell said an exciting development in the latter part of the fiscal year had
been the deal concluded with Brown-Forman Wine Europe to distribute Durbanville
Hills wines in the UK, which was expected to considerably expand the reach of
this drive brand. `Moreover, we have just confirmed that Brown-Forman will also
be representing the brand in the US, along with Amarula Cream which it has been
in its portfolio since 2002. Not only is the strengthened co-operation with
Brown-Forman indicative of our capacity to engage with major players within the
international liquor industry, but it also affords us a valuable springboard for
greater penetration of the US, projected to become the world`s biggest wine
market in terms of consumer spend by 2008.`
He said other notable achievements within the wine portfolio had been the
increased penetration of the multiple grocer channel in the UK; the bedding down
of a distribution agreement in Holland with Vinites, a key player in multiple
grocer distribution; significant volume gains in Scandinavia, with major
breakthroughs in Sweden and Denmark; and greater market share earned for several
brands in Canada.
Internationally, Amarula Cream had fared less well than wines, with export sales
volumes dropping 3,2%.
This was due mainly to a four-month long strike in Quebec, one of the brand`s
biggest markets, where the state-controlled retail monopoly remained closed
during the peak end- of-year holiday trading season. The strike had ended in
February and since then lost ground was being recovered. Despite this setback,
Amarula Cream has still managed to achieve a compound annual growth rate of 5,7%
since 2001.
Scannell said considerable investment had been made in the company`s marketing
and sales capacity. `We have implemented an enhanced management operating
system to further sharpen business focus, while creating a stronger market-
orientation. We have also significantly stepped up resources to enhance our
market presence and the position of our trademarks.`
Net financing costs dropped R42,5m to R52,3m, given an improved cash flow and a
reduction in interest rates. Interest cover (net interest paid in relation to
profit before interest and taxation), improved from 6,1 to 13,2 times.
Total assets increased by R152,5m to R5,0bn, while capital expenditure, focused
primarily on replacement and improving efficiencies, amounted to R92,8m (2004:
R161,2m). Net interest-bearing liabilities reduced from R485,9m last year to
R265,0m at year-end and gearing, from 18,9% to 9,3%.
Looking ahead, Scannell said the trading environment was expected to remain
competitive. `However, we believe our business is appropriately structured,
with a portfolio of reputable brands and an efficient cost base that will allow
us to compete effectively, and to capture opportunities in domestic and foreign
markets.`
DATE AUGUST 17, 2005
FOR DISTELL GROUP LIMITED
ISSUED BY DKC (DE KOCK COMMUNICATIONS)
QUERIES JAN SCANNELL, MD (021) 809 7000, 082 554 8353
MERWE BOTHA, FINANCIAL DIRECTOR (021) 809 7000, 082 7738153
TESSA DE KOCK/PIPPA PRINGLE, DKC (021) 422 2690
Date: 17/08/2005 02:40:04 PM
Produced by the JSE SENS Department
