Stellenbosch - Distell Group on Thursday released its results for the full year ended 30 June 2017, declaring a total dividend of 379 cents per share.
Commenting on the results, Distell’s managing director Richard Ruston, said it delivered solid operational results for the year against a backdrop of recessionary pressure on domestic consumers and a strengthening global competitive landscape.
Its spirits portfolio delivered strong revenue and volume growth, while the wine portfolio was able to grow volumes and revenue despite an increased competitive market environment. The cider and ready-to-drink (RTD) portfolio reflected an improved sales mix as total volumes recovered strongly in the second half of the financial year”.
Group revenue increased by 3.7% to R22.3bn whilst maintaining sales volumes. Commendably, domestic market revenue increased by 7.8% and sales volumes increased by 1.5%. The latter half of the financial year saw improved performance, with total volumes increasing by 5.4% compared to the corresponding period of the previous year.
The strategic and operational refocus, efficiency improvements and cost containment initiatives across the business continue to yield positive results in a tough trading environment. This helped the business lift headline earnings adjusted for pro forma currency movements by 7.4%.
Headline earnings decreased by 3.6% to R1.6bn and HEPS decreased by 3.7% to 708.3 cents; however increasing by 7.4% and 7.2% respectively on a normalised basis.
Net cash generated before financing activities increased by 70.9% to R914.6m, maintaining the group’s strong financial position, with a debt to debt-plus-equity ratio of 25.2% and a debt-equity ratio of 33,8% at the end of the reporting period.
The Group has continued to ramp up its investment on the African continent with its recent acquisition of a further 26.4% in KWA Holdings East Africa Limited (KHEAL), Kenya’s foremost spirits, wine and ready-to-drink manufacturer and distributor, from Centum Investment Company Limited. Distell now owns a majority shareholding in KHEAL of 52.4%.
African markets, outside of South Africa, delivered mixed results amid continued economic uncertainty and lower income from commodities. Revenue was maintained on sales volumes which were down by 5,2% compared to the previous year.
Focus markets in Africa such as Namibia, Kenya, Nigeria and Zimbabwe all recorded strong growth, but our overall performance was again negatively impacted by the tough macro-economic conditions in Angola. The region contributed 50,1% to foreign revenue.
The performance in international markets beyond Africa was resilient amid more challenging trading conditions and consolidation of multinational competitors entrenching their dominant positions.
Some of Distell’s key brands are enjoying success such as Durbanville Hills growing volumes by 76.7% and Amarula growing 11.4% in a declining category. In Taiwan, Scottish Leader’s market share increased in a very competitive whisky market alongside a growing wine portfolio with new local listings.
On 22 June 2017, Distell announced its intention to restructure and simplify its multi-tiered shareholding structure through schemes of arrangement. The rationale is to create one entry point with a larger free-float to increase liquidity and investor appeal to support valuation and M&A potential in future. This process is currently underway and will require shareholder approval later in the year.
Subsequent to year-end, the group announced it had acquired 26,0% of Best Global Brands for $54.6m and entered into an agreement to acquire the remaining 74.0% no earlier than the end of 2019 subject to various operating hurdles being achieved and conditions met.
The transaction gives Distell access to a strong pan-African brand supported by an established trading platform with high quality local production facilities in Angola and Nigeria as well as a solid presence in Kenya and Zambia.
“Looking ahead, we will focus on growth through breakout category and geographic expansion. We will also redouble our efforts to enhance our margins whilst using our assets more efficiently to increase our returns as a company. Leveraging our multi-category portfolio gives us an advantage in an increasing competitive environment and tough trading conditions at a time when consumers are seeking value at every price point” Rushton concluded.
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