Distell CEO hails 'pretty strong performance'

South African-based global drinks company Distell Group delivered solid revenue growth in all three of its main categories, namely ready-to-drink (RTDs), spirits and wine, CEO Richard Rushton told Fin24 on Wednesday.

"I think we had a pretty strong performance given the conditions in market," he said.

The group released its results for the financial year ended June 30, 2019. According to Rushton there was strong top line growth in 12 of its 15 top brands.

African markets outside of South Africa contributed 59.6% to foreign revenue growing its overall contribution to group revenue to 15.5% in the period.

"The rest of Africa has been a standout performance for us, led by Kenya as well as Zambia, Mozambique and Nigeria," said Rushton.

Trading conditions in Angola and Zimbabwe, however, remained challenging with currency devaluations and liquidity restrictions in tough economic conditions impacting operating performance.

As for South Africa, Rushton said the tough economic environment for consumers is probably Distell's most critical challenge.

Volumes in international markets outside Africa declined by 10.6% with comparable revenue remaining constant. This was in line with expectations as the focus shifted from lower margin wine and RTD categories to the higher margin premium wine and spirits portfolio. Strong sales of single malts were recorded in all major markets.

During the financial year, Distell's overall group earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 22.8%. Normalised EBITDA, excluding foreign currency translation movements, increased by 7.5%.
Headline earnings, including discontinued operations of the prior year, declined by 1.7% to R1.4bn and headline earnings per share declined by 1.8% to 656.4 cents.

Excluding factors like the foreign currency translation movements and once-off group retrenchment and restructuring costs, headline earnings increased by 7%. Earnings per share declined by 45.6% to 408.4 cents.
Total assets increased by 6.4% to R23.5bn. The group's level of gearing was 32.5% at year-end.

A gross cash dividend of 249 cents per share (up by 7% compared to the previous period) was declared.

"We are confident that the changes we have made to the business this year will embed our consumer-centric approach. Our diversified portfolio of brands together with increased momentum from our business transformation programmes will enable us to capture medium-term growth opportunities," said Rushton.  

As for consumer trends, he said premiumisation is a strong trend.

"In SA our business has a wide span. We still see pockets of growth, especially in RTDs. We are also growing strongly among more affluent, and therefore more resilient, consumers, while at the mainstream we see clients trading down and having less frequent consumption due to economic pressure. We don't see that changing soon," he said.

In the rest of Africa rapid urbanising remains a growing trend, leading to increased interest in wine, spirits and RTD ciders.

As for the international market, the trend is towards premium spirits and there are pockets of growth in premium wine.

Going forward, he said Distell is ready to build momentum in the rest of Africa and will continue with prudent portfolio investments.

"In SA we are confidently exploiting every occasion for growing consumer share. The focus in SA will remain on containment, productivity and network operations as well as prudent investment in brands. Containment of margins in all areas must be delivered in SA," he said.

"We are also proud of our sustainability efforts and our strong agricultural programme plays a constructive part in the economy and the social transformation in SA."

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