Distell still delivers sound results
2006-03-09
DISTELL has boosted sales revenue 11,2% to R3,7bn on a sales volume increase of 5,9% for the six months to December, notwithstanding tough wine trading conditions at home and abroad, where the global wine glut is further squeezing producer margins, said MD Jan Scannell last week.
All figures are stated, for the first time, in accordance with the International Financial Reporting Standards (IFRS) and consequently all comparative figures have been restated.
Headline earnings per share rose 20,7% on a strictly like for like basis, but allowing mostly for the once-off expense of the broad-based BEE ownership transaction entered into last October, showed a drop of 4,2% compared with the same period in 2004.
The deal involved the creation of a consortium comprising Distell employees, a Corporate Social Investment (CSI) Trust and investment group WIPHOLD to acquire an effective 15% investment in Distell, via the group’s wholly-owned sole operating subsidiary
South African Distilleries and Wines (SA) Limited (SADW).
Employees comprise 45% of the consortium, the CSI trust, 15% and WIPHOLD, 40%.
The total cost of the deal amounts to R122,3m, of which R67,3m, relating to the non-employee portion of the consortium, is expensed immediately. The R55,0m relating to the employee portion of the deal is being expensed over eight years at R6,9m per year.
Trading income rose 17,5%, given the higher sales revenue and enhanced efficiencies across various dimensions of the business. Operating margin improved from 13,5% to 14,2%.
Domestic sales volumes increased 4,8%, with spirits and RTD sales continuing their impressive climb, despite aggressive participation in the market by competitor producers.
Spirits volumes rose 2,8%, while the group’s RTD segment accelerated the pace of recent growth, with volumes increasing 11,7%. However, wines sales grew only marginally.
Scannell said this was in the face of the ongoing strength of the rand, which produced an additional influx of wines on the local market, characterised by heavy discounting in pursuit of market share.
“We remain resolute in maintaining a long-range view when it comes to protecting Distell brands. We will not drive volume growth through price-cutting.”
International revenues rose 16,3%, with export volumes, excluding Africa, up 22,0%. Wines showed an impressive growth of 23,2%, and Amarula Cream, 15,0%. Revenue from African sales rose 9,2%.
He said a substantial improvement in cash flow saw net financing costs drop by R13,3m to R21,5m.
A dividend of 68c per share had been declared, representing an increase of 21,4% on the previous year’s interim dividend of 56c per share.
Scannell said that given the anticipated ongoing growth in consumer spending for the second six months and the likelihood that interest levels would remain unchanged, prospects for domestic growth were favourable.
“Nevertheless, we expect trading conditions to remain competitive, resulting in increased marketing investment by industry players.
Distell’s own investment in brands will remain robust and we are simultaneously implementing focused strategies to improve performance across all facets of the business.”
Despite the global oversupply in wine, they plan for further export growth.
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