Distell Group revenue up 12 per cent, declare dividend - CNBC Africa

Distell Group revenue up 12 per cent, declare dividend

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The Group recorded an increase in revenue of 11. 9 per cent to 15.9 billion rand on a sales volume increase of 7.2 per cent for the year to June 2013. This the company said was despite exceptionally tough trading conditions, marked by a global slowdown in economic growth, contracted disposable income and reduced consumer spending in many of the regions where it markets its range of spirits, wines and ciders and RTDs.

Headline earnings rose 12 per cent to 1.1 billion rand while operating profit increased 26.6 per cent to 1.8 billion rand. Normalised headline earnings and operating profit, excluding the impact of an additional excise duty provision of the previous year, as well as the interest provision and the full impact of the Burn Stewart Distillers Limited acquisition in the current year, increased by 14 per cent and 8.3 per cent respectively.

Group MD Jan Scannell said the results had been favourably impacted both by good sales and the weaker rand.

"Steep increases in excise duties and marketing expenses were partially offset by foreign currency conversion gains.  However, we also saw the benefits of improved efficiencies in the business and the normalisation of certain raw material input costs."

He said operating expenses had increased by 10.3 per cent. Excluding the previous year's provision for additional excise duty, operating expenses had risen 13.1 per cent, compared to revenue growth of 11.9 per cent. Consequently, net operating margin contracted to 11.2 per cent from 12.1 per cent.

RTDs and ciders in particular had once again delivered excellent growth, not only domestically, but across a number of African markets. Scannell said that the new distribution partners for Savanna had been appointed in the UK, enhancing its route to market.

"We have also recently outsourced Savanna production off-shore to Belgium to better service the UK, an important market for us."

Sales outside South Africa rose by 10.2 per cent with revenue rising 23.1 per cent. Sub-Saharan African markets, excluding South Africa, driven primarily by strong cider growth, had contributed 55.6 per cent to foreign revenue.

The managing director said the company was building a well-resourced business unit in Africa to further unlock opportunities on the continent.

"We also continue to partner in joint ventures with local players in appropriate markets as far as possible to enhance our price-competitiveness, at the same time countering high import costs and government tariffs. To this end, we have made good progress in the key markets of Angola, Ghana and Kenya."

Domestic revenue increased by 8.6 per cent and sales volumes by 6.1 per cent with ciders recording the strongest increases. While volumes for wine sales were largely flat, good profit gains had been achieved, all the more noteworthy, he said, given the highly contested nature of the local market, characterised by aggressive discounting.

The performance of the spirits portfolio had been hampered by the disappointing sales of brandy that had been most vulnerable to excise duty hikes but investment in the category to reverse the decline was beginning to show encouraging results.

"As the market leader, we continue our long-term commitment to revive the entire category.  We are doing so by developing leading offers that are continually rewarded with accolades for excellence on international competitive platforms. We support the Brandy Fusion showcases in Johannesburg and Cape Town and we continue to access new consumers through celebrity endorsements and sports sponsorships."

At the super-premium level, brandy, cognac and whisky brands had grown by almost 50 per cent in volume, helped by a growing awareness of quality credentials, as well as by successful consumer engagement initiatives and innovative gifting solutions, he confirmed.

A dividend of 183 cents per share was declared. This represents a total dividend of 335 cents for the year and a dividend cover of 1.6 times by headline earnings.

Scannell said challenging trading conditions were expected to persist.

"There have been some tentative signs of economic recovery in the US, but the countries in the eurozone remain in recession.  Emerging and developing countries, hit by the sluggish economies of their developed trading partners and lower commodity prices, are also growing at a slower rate than in the past. Domestically, high unemployment and limited disposable income continue to curtail consumer spending.”

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