| Tue 29 Aug 2006, 13:03 | | Distell - Audited results of the Group for the yea |
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DST
DST
Distell - Audited results of the Group for the year ended 30 June 2006
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST
ISIN: ZAE000028668
("Distell" or "the Group")
Audited results of the Group for the year ended 30 June 2006
Salient features
Headline earnings per share
- up 8,3%
- excluding non-recurring BEE expense, up 21,9%
Dividends per share increase 24,4%
Total revenue increases 12,6%
Trading income up 23,1%
Total sales volumes grow 8,3%
Abridged consolidated balance sheets
2006 2005
R"000 R"000
Restated
ASSETS
Non-current assets
Property, plant and equipment 1 256 900 1 231 353
Biological assets 104 380 107 170
Financial assets 403 107 291 412
Investment in associates 15 383 16 299
Intangible assets 11 211 6 184
Retirement benefit assets 9 972 -
Deferred income tax assets 35 061 44 118
Total non-current assets 1 836 014 1 696 536
Current assets
Inventories 2 499 217 2 246 268
Trade and other receivables 617 097 552 542
Financial assets 254 640 309 249
Current income tax assets - 51 636
Cash and cash equivalents 227 578 196 989
Total current assets 3 598 532 3 356 684
Total assets 5 434 546 5 053 220
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 3 270 407 2 890 066
Minority interest 2 765 4 182
Total equity 3 273 172 2 894 248
Non-current liabilities
Interest-bearing borrowings 330 646 329 014
Retirement benefit obligations 33 344 21 391
Deferred income tax liabilities 101 838 110 646
Total non-current liabilities 465 828 461 051
Current liabilities
Trade payables and provisions 1 196 201 1 023 333
Interest-bearing borrowings 432 502 674 588
Current income tax liabilities 66 843 -
Total current liabilities 1 695 546 1 697 921
Total equity and liabilities 5 434 546 5 053 220
Abridged consolidated cash flow statements
2006 2005
R"000 R"000
Restated
Trading income 889 395 722 307
Non-cash flow items 185 540 159 783
Working capital changes (174 812) (86 742)
Inventories (252 949) (36 462)
Trade and other receivables (41 870) (34 813)
Trade payables and provisions 120 007 (15 467)
Cash generated from operating activities 900 123 795 348
Net financing costs (74 490) (100 475)
Taxation paid (153 388) (219 980)
Dividends paid (266 788) (209 948)
Cash retained from operating activities 405 457 264 945
Cash outflow from investment activities (164 364) (92 486)
Cash outflow from financing activities (79 301) (84 939)
Increase in net cash and cash equivalents 161 792 87 520
Net short-term borrowings at the beginning
of the year (47 610) (134 714)
Exchange gains on cash and cash equivalents 7 613 (416)
Net cash and cash equivalents at the end of the
year 121 795 (47 610)
Call accounts and bank overdrafts (105 783) (244 599)
Cash and cash equivalents 227 578 196 989
Abridged consolidated statements of changes in equity
2006 2005
R"000 R"000
Restated
Share capital 1 990 1 974
Share premium 590 488 572 098
Treasury shares (4 113) (9 461)
Non-distributable and other reserves 146 723 57 736
Opening balance 57 736 62 625
Hedging reserve 2 433 (4 400)
Fair value adjustments 2 577 1 048
Foreign currency translations 5 720 (4 570)
BEE share-based payment reserve 74 118 -
Employee share option reserve 4 139 3 033
Retained earnings 2 535 319 2 267 719
Opening balance 2 267 719 1 986 014
Net profit attributable to equity holders 534 388 491 653
Dividends (266 788) (209 948)
Minority interest 2 765 4 182
Total equity at the end of the year 3 273 172 2 894 248
Abridged consolidated income statements
2006 2005 Change
R"000 R"000 %
Restated
Sales volumes (litres "000) 342 633 316 445 8,3
Revenue 6 717 210 5 964 003 12,6
Operating expenses (5 827 815) (5 241 696) 11,2
Trading income 889 395 722 307 23,1
BEE share-based payment (67 241) -
Operating profit 822 154 722 307 13,8
Dividend income 1 497 1 210
Finance income 93 483 74 583
Finance costs (120 846) (127 654)
Share of profit of associates 9 856 9 316
Profit before taxation 806 144 679 762 18,6
Taxation (271 756) (187 265)
Profit for the year 534 388 492 497 8,5
Attributable to:
Equity holders of the company 534 388 491 653 8,7
Minority interest - 844
534 388 492 497 8,5
Per share performance:
Issued number of ordinary shares 198 969 197 347
("000)
Weighted number of ordinary shares
("000) 197 414 196 194
Earnings per ordinary share (cents)
- basic earnings basis 270,7 250,6 8,0
- diluted earnings basis 269,3 250,6 7,5
- headline basis 271,5 250,6 8,3
- adjusted headline basis 305,6 250,6 21,9
Dividends per ordinary share (cents)
- interim 68,0 56,0 21,4
- final 85,0 67,0 26,9
153,0 123,0 24,4
Reconciliation of headline earnings:
Net profit attributable to equity
holders of the company 534 388 491 653 8,7
Adjusted for (net of taxation):
profit on disposal of property, plant
and equipment (181) 2
loss on disposal of interest in
associate 1 763 -
Headline earnings 535 970 491 655 9,0
Adjusted for (net of taxation):
BEE share-based payment 67 241 -
Adjusted headline earnings 603 211 491 655 22,7
Notes
2006 2005
R"000 R"000
Restated
1. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 330 646 329 014
Current 432 502 674 588
763 148 1 003 602
Cash resources 227 578 196 989
535 570 806 613
2. Cash outflow from investment activities
To maintain operations (106 317) (69 584)
To expand operations (58 047) (22 902)
(164 364) (92 486)
3. Directors" valuation of financial assets
Preference shares 590 921 542 297
Other investments and loans 97 360 89 814
688 281 632 111
4. Capital commitments
Contracted 61 387 46 808
Authorised but not contracted 202 143 175 842
263 530 222 650
5. Depreciation of property, plant and equipment 128 866 126 871
6. Net asset value per share (cents) 1 645 1 467
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.
8. Contingencies
In prior years the Group received compensation for relinquishing its
distribution rights to certain trademarks. The South African Revenue
Service has issued revised tax assessments to the value of R29,5
million in terms of which the proceeds of R67 million have been
subjected to income and value added tax. The Group has lodged an appeal
against these assessments and the matter will be heard in the Special
Income Tax Court.
Accounting policy and comparative figures
International Financial Reporting Standards (IFRS)
With effect from 1 July 2005, Distell is required to prepare its consolidated
financial statements in accordance with IFRS. Consequently, the first complete
set of financial statements under IFRS is for the year ended 30 June 2006. As
comparative information is also reported, the date for the transition to IFRS
is effectively 1 July 2004. IFRS 1 "First-time adoption of IFRS" has been
applied and the results for the comparative periods have been restated
accordingly. The detailed IFRS Transition report is featured on the website at
www.distell.co.za.
In October 2005 the Group entered into a broad-based black economic
empowerment (BEE) transaction with a consortium that includes investment group
Wiphold, all Distell"s employees and a Corporate Social Investment Trust. The
cost of this transaction to Distell"s shareholders, calculated by using an
option pricing model, equates to R122,3 million. Based on IFRIC 8 "Scope of
IFRS 2" issued in January 2006, IFRS 2 "Share-based payments" will apply to
the non-employee portion of the BEE transaction. Earlier application of this
interpretation is being adopted, resulting in a non-recurring expense of R67,2
million, disclosed separately in the income statement, and a corresponding
increase in equity. No further measurement or adjustments are required as it
is presumed that the BEE credentials are received upfront. The R55,0 million
relating to the employee portion of the BEE transaction is being expensed over
a vesting period of eight years in terms of IFRS 2 at an amount of R6,9
million per year, commencing from the current financial year and is included
in the operating expenses.
Comparative figures
Comparative figures for the year ended 30 June 2005 have been restated to
reflect the changes relating to the adoption of IFRS.
Adjustments which reflect the major differences between South African
Statements of Generally Accepted Accounting Practice (SA GAAP) and IFRS are
noted below. The adjustments are shown net of taxation where applicable.
Share-based payments
In accordance with the requirements of IFRS 2, the fair value of outstanding
employee share options granted since 7 November 2002 to participants under the
Distell Group Share Trust, has been recognised as an expense in the income
statement over the vesting period, with a corresponding credit to equity.
Property, plant and equipment
Past interpretation of SA GAAP did not provide for the reassessment of an
asset"s useful life and residual value annually. The revised statement version
of IAS 16 "Property, plant and equipment" requires useful lives and residual
values of assets to be reviewed at least at each financial year-end. This
resulted in an increase in distributable reserves, property, plant and
equipment and deferred tax liabilities.
Foreign currency transactions
In accordance with IAS 21 "The Effects of Changes in Foreign Exchange Rates",
no distinction is made between integral foreign operations and foreign
entities and all assets and liabilities of foreign operations must be
translated from their respective functional currencies into the Group"s
presentation currency using the year-end exchange rates, and their income and
expenses using the average exchange rates. Gains or losses resulting from
translation of functional currencies to the presentation currency must be
reflected as a separate component of shareholders" equity. The foreign
currency translation reserve was reset to zero on 1 July 2004 and had no
effect on equity.
Proportionate consolidation of Afdis Holdings (Private) Ltd (50%)
Afdis Holdings (Private) Limited (Afdis Holdings), a company registered in
Zimbabwe, was not previously consolidated under SA GAAP due to the severe
currency and long-term restrictions which significantly impaired its ability
to transfer funds to its shareholders.
In terms of IFRS, this exemption is prohibited and as a result this entity is
now required to be proportionately consolidated in accordance with IAS 31
"Interest in Joint Ventures".
Reconciliation of assets, liabilities and equity
30 June 1 July
2005 2004
R"000 R"000
Assets
As previously reported under SA GAAP 4 985 350 4 832 890
IFRS adjustments:
Property, plant and equipment 61 141 54 694
Consolidation of Afdis Holdings 6 729 7 133
As reported under IFRS 5 053 220 4 894 717
Liabilities
As previously reported under SA GAAP 2 143 013 2 260 799
IFRS adjustments:
Deferred income tax - Property, plant and
equipment 14 654 13 991
Consolidation of Afdis Holdings 1 305 2 362
As reported under IFRS 2 158 972 2 277 152
Equity
As previously reported under SA GAAP 2 842 337 2 572 091
IFRS adjustments:
Property, plant and equipment 46 487 40 703
Consolidation of Afdis Holdings 5 424 4 771
As reported under IFRS 2 894 248 2 617 565
Reconciliation of income statements
Year ended
30 June
2005
R"000
Profit for the year
As previously reported under SA GAAP 482 571
IFRS adjustments:
Property, plant and equipment (IAS 16) 5 783
Share-based payments (IFRS 2) (3 033)
Foreign currency differences (IAS 21) 5 120
Consolidation of Afdis Holdings (IAS 31) 2 056
As reported under IFRS 492 497
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 IFRS, the requirements of the South African Companies Act 1973
as amended and the Listings Requirements of the JSE Limited (JSE).
Operating performance
Revenue grew 12,6% to R6,7 billion on a sales volume increase of 8,3%.
Locally, sales volumes increased 7,2%, with growth accelerating significantly
during the second six months. Our trademarks in the spirit and ready-to-drink
(RTD) categories continued to perform better than those in the wine category.
Spirit volumes, including brandy, rose 3,2% (2005: 3,4%). RTD sales volumes
grew 16,9% (2005: 3,7%) in an extremely competitive market. Despite extremely
challenging conditions, including increased competition and pressure on
margins, compounded by a global oversupply and a strong rand that saw many
producers return to the domestic market, sales volumes of natural wine
increased 1,9%, (2005: 2,6% decline).
International sales volumes, excluding Africa, increased 18,7%. Natural wines
showed volume growth of 20,3% and Amarula Cream growth of 12,1%. As a result,
total international revenue rose 14,8%.
Revenue derived from African countries increased 12,8% on a sales volume
growth of 8,3%. African countries outside the BLNS region (Botswana, Lesotho,
Namibia and Swaziland) showed exceptional revenue growth of 54%, although off
a relatively small base.
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.
Operating margin, as a result, improved from 12,1% to 13,2%.
Net financing costs declined by R25,7 million to R27,4 million, mainly as a
result of a substantial improvement in cash flow.
Headline earnings for the period, excluding the BEE expense, reflect an
increase of 22,7% to R603,2 million.
Investment and funding
Total assets increased 7,5% to R5,4 billion.
Capital expenditure, focused mainly on replacement of assets, amounted to
R164,4 million.
Investment in working capital, compared to the corresponding period of the
previous year, increased by 10,2% to R2,0 billion. An increase in the
production of bulk wines and spirits was necessitated by the Group"s long-term
view of consumer demand for its products. Process and systems enhancement
enabled management to further improve on average duration of bottled stock and
packaging material.
Cash generated by operating activities amounted to R900,1 million
(2005: R798,3 million), and net interest-bearing borrowings decreased by
R271,0 million (2005: R172,5 million). At the end of the reporting period the
Group was in a net cash position.
Prospects
On the domestic front, growth in consumer spending is expected to continue,
albeit at a slower pace. There are indications that interest rates could
increase still further which could have an adverse impact on consumer spending
in the months ahead. Further growth in consumer demand, together with the
ongoing expansion in the domestic economy, should continue to benefit sales in
the alcoholic beverage industry.
Global economic growth appears to be strong, but there are concerns about the
persistently high level of fuel prices and the consequent upward pressure on
inflation and interest rates. Distell participates across a broad geographical
front, which reduces our exposure to volatility in any single market.
Moreover, our wide spectrum of products across a range of categories makes us
well placed to capitalise on changes in consumption patterns.
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.
Directorate
Louisa Mojela and Gugu Mthethwa were appointed to the board of directors with
effect from 13 October 2005.
Auditors" report
The consolidated annual financial statements have been audited by
PricewaterhouseCoopers Inc. and their unqualified auditors" report is
available for inspection at the registered office of the company.
Dividends
The directors have resolved to declare dividend number 36 of 85 cents (2005:
67 cents) per share for the year ended 30 June 2006. This represents a total
dividend of 153 cents (2005: 123 cents) for the year and a dividend cover of
2,0 times (2005: 2,0 times) by adjusted headline earnings.
Last day to trade "cum" the dividend Friday, 15 September 2006
Shares commence trading "ex"
the dividend from commencement of
business on Monday, 18 September 2006
Record date Friday, 22 September 2006
Payment date Tuesday, 26 September 2006
Share certificates may not be dematerialised or rematerialised between Monday,
18 September 2006, and Friday, 22 September 2006, both days inclusive.
Signed on behalf of the board
DM Nurek JJ Scannell
Chairman Managing director
Stellenbosch, 29 August 2006
Directors
DM Nurek (Chairman), FC Bayly, PM Bester, PE Beyers, MJ Botha, JG Carinus, SJ
Genade, GJ Gerwel, E de la H Hertzog, MJ Madungandaba, LM Mojela, GP Mthethwa,
D Prins, JJ Scannell (Managing director), PEI Swartz, MH Visser
Company secretary
CJ Cronje
Registered office
Aan-de-Wagenweg, Stellenbosch 7600
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
PO Box 61051, Marshalltown 2107
Sponsor
RAND MERCHANT BANK
(A division of FirstRand Bank Limited)
Date: 29/08/2006 01:03:28 PM Produced by the JSE SENS Department
