| Tue 29 Aug 2006, 13:05 | | Distell Group Limited - Distell delivers sparkling |
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DST
DST
Distell Group Limited - Distell delivers sparkling results
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST
ISIN: ZAE000028668
("Distell" or "the company")
Distell delivers sparkling results
Distell has delivered an impressive set of results, capitalising on buoyant
spending amongst South African consumers and establishing a stronger global
footprint on the back of improved production and operational efficiencies,
according to MD Jan Scannell.
For the 12 months to 30 June 2006, revenue rose 12,6% to R6,7bn on a sales
volume increase of 8,3%, fuelled by the increased consumption of premium
brands. "We have placed our customers and consumers at the centre of our
thinking, driving us to deliver continually improved products, matched by
world-class service and fair prices that represent good value, while
retaining margins at responsible levels," Scannell said. He stressed that
chasing volumes at the expense of sustainability was not Distell policy.
Headline earnings grew 9%. Adjusted headline earnings, excluding the non-
recurring cost of the company"s widely praised broad-based BEE deal
concluded last September, grew 22,7% to R603,2 million. The cost to
shareholders of this transaction was R122,3 million, of which R74,1 million
has been recognised as an expense in the 2005/6 fiscal year. The non-
recurring portion of the expense, which is R67,2 million, is disclosed
separately in the income statement.
Scannell said the increase of 23,1% in trading income was driven largely by
increased revenue, benefits derived from improved throughput and ongoing
initiatives to enhance efficiencies across the business, particularly in
production. Consequently, the operating margin improved from 12,1% to
13,2%.
Domestically, sales volumes increased 7,2%, compared with the 2% growth of
the entire alcoholic beverage sector. He said Distell"s performance was the
result of excellent growth from the company"s RTD (ready to drink) and
spirits portfolios. Elevated by cider brands such as Hunter"s and Savanna,
sales volumes of RTD"s rose 16,9%, despite a highly competitive market
(2005: 3,7%), while spirits volumes, including brandy, increased 3,2%
(2005: 3,4%), with brands such as Klipdrift and Flight of the Fish Eagle
contributing to growth.
Wine sales volumes, even though they did increase 1,9% (2005: 2.6%
decline), were "hampered by increased competition exacerbated by a global
oversupply and a strong rand that saw many producers return to the domestic
market".
However, both Durbanville Hills and Sedgwick Old Brown Sherry had shown
exceptional growth, he said.
International sales volumes, excluding Africa, increased 18,7%. Total
international revenue rose 14,8%. Defying the global trend that saw wine
brands fight to retain position in an environment of protracted oversupply,
the company produced a remarkable growth in wine sales volumes of 20,3%,
comfortably outpacing the South African wine industry growth rate for the
period.
"Good growth came from Canada, the Netherlands, Ireland and the US, led by
brands such as Drostdy-Hof, Two Oceans, Nederburg and Durbanville Hills.
Although we did not do as well as we hoped in the UK, there have been
several very encouraging developments in recent months. These include the
appointment of a new distributor for several drive brands, including
Nederburg, now listed by Morrisons and Waitrose supermarket chains."
Amarula, Distell"s biggest spirits brand and also South Africa"s most
widely distributed alcoholic beverage, recorded a growth of 12,1%. "This
was thanks to a robust performance in Germany, where Amarula is the fastest-
growing cream liqueur, as well as excellent sales in Canada, the US and
Brazil, where it is the market leader."
Scannell said Savanna was also beginning to build an off-shore presence,
notable in the UK and several European countries. The brand was stocked by
Tesco as well as an increasing range of on-consumption outlets.
Revenue derived from African countries increased 12,8% on a sales volume
growth of 8,3%. Significant growth came from partnerships in Tanzania,
Mauritius and Kenya, while even a joint venture in Zimbabwe managed to show
profits, notwithstanding the country"s economic crisis.
Net financing costs declined by R25,7m to R27,4m, mainly as a result of a
substantial improvement in cash flow.
Total assets increased 7,5% to R5,4bn. Capital expenditure, focused mainly
on replacement of assets, amounted to R164,4m. Investment in working
capital increased 10,2% to R2,0bn. Cash generated by operating activities
amounted to R900,1m (2005: R798,3m), and net interest-bearing borrowings
decreased by R271,0m (2005: R172,5m), leaving the company in a net cash
position at the end of the year.
A dividend of 85 cents per share has been declared, (2005: 67 cents),
bringing the total distribution for the year to 153 cents (2005: 123
cents), an increase of 24,4%.
The group expects to continue to reflect growth in revenue and headline
earnings excluding the BEE share-based payment, although growth is unlikely
to be at the same levels experienced in recent years.
Scannell said that while business conditions in the domestic market
remained favourable, increased interest rates and rising inflation would
make it unlikely that growth rates achieved in recent years could be
sustained. "We do expect growth but at more modest levels than we have seen
over the past few years and look forward to the impact of several new
advertising campaigns, as well as investment in customer and consumer
management strategies that allow us to engage more directly with these key
stakeholder groups."
He said that similarly, further international growth was being anticipated
despite the likely rise in fuel prices and its inflationary impact. "We
have concluded distribution deals with new partners in North America,
Australia and Spain and believe these relationships, together with
established agency agreements, should boost sales volumes."
DATE 29 AUGUST 2006
FOR DISTELL GROUP LIMITED
ISSUED BY DKC (DE KOCK COMMUNICATIONS)
QUERIES JAN SCANNELL, MD (021) 809 7000 or (021) 809 8102 (direct)
MERWE BOTHA, FINANCIAL DIRECTOR (021) 809 7000 or (021) 809 8100 (direct)
SONIA JAMOULLE, COMMUNICATIONS MANAGER, (021) 809 8005 or 076 474 0715
TESSA DE KOCK/THELMA HARRIS, DKC (021) 422 2690
Note to editors
Last September, Distell entered into a broad-based BEE transaction which
saw a consortium comprising Distell employees, a corporate social
investment (CSI) trust and women"s empowerment group, WIPHOLD, acquire an
effective 15% investment in the company via the company"s wholly-owned,
sole operating subsidiary, South African Distilleries and Wines (SA)
Limited (SADW). The deal has boosted Distell"s BEE compliance rating to
amongst the top 20% of JSE-listed companies.
Date: 29/08/2006 01:05:06 PM Produced by the JSE SENS Department
