Operating profit unaudited results Reported 15,8 16,8 17,8 ...
Transcript of Operating profit unaudited results Reported 15,8 16,8 17,8 ...
Sales volumes
+7,7%Revenue
+11,2%
Interim dividend of
165,0cents per share
Headline earnings
Normalised
+16,8%Reported
+17,8%
Operating profit
Normalised
+15,8%Reported
+16,5%
Salient features
of the group for the six months ended 31 December 2015
Condensed unaudited results
Registration number: 1988/005808/06 | JSE Share Code: DST | ISIN: ZAE000028668All products mentioned in these condensed consolidated interim financial statements are not for sale to persons under the age of 18 years. Enjoy our products responsibly.
OPERATING PERFORMANCEGroup revenue grew by 11,2% to R12,2 billion on a sales volume increase of 7,7%.
Domestic market revenue increased by a very pleasing 14,6%, with sales volumes up by 13,3%. This was despite a persistently challenging economy and a trading environment of curtailed consumer spending. The strong performance across all product categories reflects enhanced in-market execution, appropriate stock levels to meet demand, and stepped-up service delivery to our customers flowing from our sales force effectiveness investment. We also benefitted from some trade buy-in due to our decision to increase prices selectively in January rather than in February. The Group’s wine portfolio maintained its strong double-digit growth, while cider and RTD (ready-to-drink) brands accelerated volume growth. The spirits portfolio showed resilience, with a strong volume increase in several major categories.
Sub-Saharan African markets, outside South Africa, delivered mixed results amid slower economic growth in the region. Revenue grew 1,2% on a sales volume decline of 7,4%. Focus markets in Africa such as Namibia, Mozambique, Nigeria, Ghana and Zambia all recorded strong growth, but our overall performance was impacted by the challenging macroeconomic conditions in Angola. The region contributed 55,2% to foreign revenue.
Revenue derived from the sale of the Group’s brands in international markets beyond Africa grew 4,0%, mainly as a result of a weaker rand and an improved sales mix. Volumes declined 15,4% given the continuing tough trading conditions in many of the markets where Distell operates. The spirits portfolio delivered revenue growth of 12,4%. Revenue of the wine portfolio declined by 7,0% on 14,8% lower volumes due to lost summer promotional slots in some European markets following our limited trade recall in May last year.
The financial results for the period, supported by strong overall revenue growth and efficiency improvements across the business, also benefitted from a substantially weaker rand against the major currencies in which Distell trades. Operating expenses rose by 10,4% due to the continued investment in key strategic initiatives and selected markets where we see growth opportunities. The operating profit margin increased from 13,3% to 14,0%.
Net finance costs declined from R126,7 million to R123,9 million.
The effective tax rate decreased marginally to 28,5%.
Normalised headline earnings and operating profit, excluding other losses of R8,9 million arising from the remeasurement of the contingent purchase consideration for Burn Stewart Distillers (BSD) the previous year, increased by 16,8% and 15,8% respectively.
Reported headline earnings increased by 17,8% to R1,2 billion and headline earnings per share increased by 17,7% to 531,5 cents. Operating profit increased 16,5% to R1,7 billion.
INVESTMENT AND FUNDINGTotal assets increased by 21,0% to R21,6 billion.
Investment in net working capital increased by 31,5% to R7,2 billion, driven to a large extent by the conversion of foreign assets to the reporting currency. Inventory increased by 21,2% to R8,0 billion. If foreign currency movements are excluded, inventory increased by 12,3%. Of this, bulk spirits in maturation, planned in accordance with the Group’s longer-term demand projections, grew 8,8% to R3,2 billion. Bottled stock and packaging materials reflect an increase of 12,5% on the previous year.
Capital expenditure for the period amounted to R411,6 million (2014: R305,7 million) of which R172,0 million was spent on the replacement of assets. A further R239,6 million was directed to the expansion of capacity, mainly in relation to the Group’s cider manufacturing facilities.
Cash retained for the six months amounted to R360,2 million (2014: R1,1 billion). The Group remains in a strong financial position, as shown by a debt to debt-plus-equity ratio of 23,7% (2014: 21,1%) and a debt-equity ratio of 31,1% (2014: 26,8%) at the end of the reporting period.
PROSPECTSThe macroeconomic outlook for the remainder of the financial year remains very challenging amid volatile trading conditions in many of our key markets. While a modest recovery is expected in the developed world, emerging economies continue to show slow growth. On the domestic front, consumer spending will be adversely impacted by expected higher inflation, the hikes in interest rates and rising food prices. Tougher trading conditions are therefore expected in the second half of the financial year.
The Group nevertheless continues to pursue its long-term strategy to grow shareholder value, but we are reviewing the sequencing and the pace of investment due to the sharp slowdown of growth in certain markets.
We remain well-positioned to take early advantage of any improvements in the economic conditions of the markets where we operate, given our versatile portfolio of strong, appealing and diverse brands, our capacity to trade across a spectrum of markets at a range of price points, and the security of our financial position.
DIRECTORATEMs EG Matenge-Sebesho and Dr DP du Plessis have been appointed as non-executive directors with effect from 25 November 2015, and Mr JG Carinus resigned as non-executive director with effect from 28 October 2015. Mr LC Verwey has been appointed as Group finance director with effect from 1 September 2015, and as executive director with effect from 25 January 2016 to succeed Mr MJ Botha who retired at the end of December 2015. Dr E de la H Hertzog resigned as non-executive director with effect from 17 February 2016.
CASH DIVIDEND DECLARATIONThe directors have resolved to declare a gross cash dividend, number 55, of 165,0 cents (2014: 158,0 cents) per share for the interim period ended 31 December 2015.
The dividend has been declared from income reserves. The dividend withholding tax, levied at 15%, will amount to 24,75 cents per ordinary share. As a result, ordinary shareholders who are liable to pay dividends tax will receive a net dividend amount of 140,25 cents per share. Shareholders exempt from paying dividends tax will receive 165,0 cents per share. The issued ordinary share capital as at 17 February 2016 is 222 109 356 (2015: 221 737 356) ordinary shares. The company’s income tax reference number is 9115001712.
The dividend will be payable to shareholders on record on Friday, 18 March 2016, and will be paid on Tuesday, 22 March 2016. The last day to trade cum dividend will be on Friday, 11 March 2016, and shares commence trading ex-dividend from Monday, 14 March 2016. Share certificates may not be dematerialised or rematerialised between Monday, 14 March 2016, and Friday, 18 March 2016, both days inclusive.
BASIS OF PREPARATION, ACCOUNTING POLICY AND COMPARATIVE FIGURESThe condensed consolidated interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and the JSE Limited (JSE) Listings Requirements. The directors are responsible for the preparation of the interim financial statements, prepared under supervision of the Group finance director, LC Verwey CA(SA), CFA.
The accounting policies applied in the preparation of the interim financial statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements.
The Group has adopted all new and amended accounting pronouncements issued by the International Accounting Standards Board (IASB) that are effective for financial years commencing 1 July 2015. None of the new or amended accounting pronouncements that are effective for the financial year commencing 1 July 2015 has a material impact on the consolidated results of the Group.
Signed on behalf of the board
DM Nurek RM RushtonChairman Managing director
Stellenbosch17 February 2016
HUNTER’S, the biggest cider brand in South Africa, launched Hunter’s Extreme Bold with an exciting #GOBOLD campaign in July 2015. This natural energy alternative delivers the refreshing taste of apple with a bold kick of Guarana. The new premium black 440 ml can also offers better value to consumers. The Hunter’s Extreme brand doubled in volume over the last 12 months, making it the most popular alcoholic energy drink in South Africa.
4TH STREET is a range of easy-to-drink, naturally sweet wines for younger consumers who aspire to the sophistication of drinking wine, but without its daunting complexity. Since it was launched in 2009, the range has been a resounding success and exceeded all expectations when it was named South Africa’s biggest wine brand in November 2015. The 4th Street range includes sweet rosé, red and white varietals which are available in a 750 ml bottle, three and five litre bags in boxes (BIBs), as well as an innovative 330 ml single serve.
SEDGWICK’S Original Old Brown is celebrating a century of rich heritage, character and tradition. Since it was launched in 1916 as the first ‘old brown’ to be produced in South Africa, this legendary fortified wine has been enjoyed by many generations. Affectionately known as “Obies”, Sedgwick’s is still made according to the original recipe, and continues to play a role in creating memories and stories of great moments shared.
SCOTTISH LEADER, the modern, award-winning blended Scotch whisky, defies convention with the ‘new perspective’ it brings to whisky consumers. Scottish Leader is carefully crafted by a forward-thinking and creative blending team with over 300 years of combined experience. It boasts new, more contemporary packaging for both the smoother and more accessible Original varietal, as well as the recently launched, smoky Signature variety – a unique offering which is taking the brand to new heights.
NEDERBURG is the leading brand in Distell’s premium wine portfolio, and is sold in 80 countries. To maintain its dynamism and relevance, it continues to pioneer new wine-growing areas, wine styles and ways of communicating with consumers. Its enticingly different above and below-the-line campaign steps outside the mainstream, inspiring curiosity while accenting the sensory. The fresh new packaging emphasises Nederburg’s pedigree and its progressiveness.
ZONNEBLOEM is testimony that classic craftsmanship endures. The brand produces wines of elegance with great ageing potential. The grapes from which the wine is crafted are sourced from trusted Stellenbosch growers, many of whom have been delivering to its cellars for generations.
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited31 December
Audited30 June
2015R’000
2014R’000
2015R’000
ASSETS
Non-current assets
Property, plant and equipment 4 752 495 4 025 672 4 351 965
Biological assets 99 966 105 079 105 914
Loans and receivables 186 800 193 742 191 159
Available-for-sale financial assets 119 321 98 050 99 754
Investments in associates 217 480 199 780 233 685
Investments in joint ventures 174 206 149 852 160 423
Intangible assets 2 256 788 1 789 866 1 879 680
Retirement benefit assets 304 915 241 492 310 985
Deferred income tax assets 101 730 73 959 101 686
Total non-current assets 8 213 701 6 877 492 7 435 251
Current assets
Inventories 7 998 771 6 598 445 7 509 937
Trade and other receivables 4 006 539 3 175 262 2 223 009
Current income tax assets 35 697 39 189 20 204
Cash and cash equivalents 1 301 132 1 160 157 619 367
Total current assets 13 342 139 10 973 053 10 372 517
Total assets 21 555 840 17 850 545 17 807 768
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 11 081 219 9 179 072 9 537 114
Non-controlling interest 15 184 20 613 19 283
Total equity 11 096 403 9 199 685 9 556 397
Non-current liabilities
Interest-bearing borrowings 3 494 691 3 143 095 3 323 446
Retirement benefit obligations 25 876 26 432 24 243
Deferred income tax liabilities 747 932 646 268 627 983
Total non-current liabilities 4 268 499 3 815 795 3 975 672
Current liabilities
Trade and other payables 4 437 014 4 011 997 3 017 128
Interest-bearing borrowings 1 255 386 479 357 870 378
Provisions 348 272 271 331 331 655
Current income tax liabilities 150 266 72 380 56 538
Total current liabilities 6 190 938 4 835 065 4 275 699
Total equity and liabilities 21 555 840 17 850 545 17 807 768
CONDENSED CONSOLIDATED INCOME STATEMENTS
UnauditedSix months ended
31 December
AuditedYear ended
30 June
2015R’000
2014R’000
Change %
2015R’000
Revenue 12 222 913 10 996 674 11,2 19 588 970Operating costs (10 517 268) (9 527 515) 10,4 (17 454 599)
Costs of goods sold (7 804 675) (7 202 351) (12 813 730)Sales and marketing costs (1 561 573) (1 267 330) (2 699 733)Distribution costs (651 632) (612 405) (1 120 368)Administration and other costs (499 388) (445 429) (820 768)
Other losses (433) (4 884) (5 315)Operating profit 1 705 212 1 464 275 16,5 2 129 056Dividend income 3 583 362 6 698Finance income 6 342 11 497 23 241Finance costs (130 268) (138 246) (259 711)Share of equity-accounted earnings 39 152 41 143 89 401Profit before taxation 1 624 021 1 379 031 17,8 1 988 685Taxation (463 702) (394 733) (569 024)Profit for the period 1 160 319 984 298 17,9 1 419 661
Attributable to: Equity holders of the company 1 163 324 990 296 17,5 1 437 136Non-controlling interest (3 005) (5 998) (17 475)
1 160 319 984 298 17,9 1 419 661
Per share performance: Issued number of ordinary
shares (’000) 222 109 221 737 221 737Weighted number of ordinary
shares (’000) 218 920 218 619 218 621Earnings per ordinary share
(cents) – basic earnings basis 531,4 453,0 17,3 657,4– diluted earnings basis 529,6 451,6 17,3 654,9– headline basis 531,5 451,7 17,7 656,2– diluted headline basis 529,7 450,3 17,6 653,7Dividend per ordinary share
(cents)– interim 165,0 158,0 4,4 158,0– final – – – 188,0
165,0 158,0 4,4 346,0
Reconciliation of headline earnings:
Net profit attributable to equity holders of the company 1 163 324 990 296 17,5 1 437 136
Adjusted for (net of taxation): net other capital gains 312 (2 885) (2 575)
Headline earnings 1 163 636 987 411 17,8 1 434 561Adjusted for (net of taxation):
remeasurement of contingent consideration – 8 891 8 891
Normalised headline earnings 1 163 636 996 302 16,8 1 443 452
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UnauditedSix months ended
31 December
AuditedYear ended
30 June
2015R’000
2014R’000
2015R’000
Profit for the period 1 160 319 984 298 1 419 661
Other comprehensive income (net of taxation) 770 502 (1 991) 244 821
Items that may be reclassified subsequently to profit or loss:
Fair value adjustments
– available-for-sale financial assets 19 559 4 853 5 692
Currency translation differences 721 654 2 693 178 460
Items that will not be reclassified to profit or loss:
Remeasurements of post-employment benefits 29 289 (9 537) 60 863
Share of other comprehensive income of associates – – (194)
Total comprehensive income for the period 1 930 821 982 307 1 664 482
Attributable to:
Equity holders of the company 1 933 981 988 594 1 683 154
Non-controlling interest (3 160) (6 287) (18 672)
1 930 821 982 307 1 664 482
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Unaudited Six months ended
31 December
AuditedYear ended
30 June
2015R’000
2014R’000
2015R’000
Attributable to equity holders
Opening balance 9 537 114 8 569 623 8 569 623
Comprehensive income
Profit for the period 1 163 324 990 296 1 437 136
Other comprehensive income (net of taxation)
Fair value adjustments:
– available-for-sale financial assets 19 559 4 853 5 692
Currency translation differences 721 809 2 982 179 657
Remeasurements of post-employment benefits 29 289 (9 537) 60 863
Share of other comprehensive income of associates – – (194)
Total other comprehensive income 770 657 (1 702) 246 018
Total comprehensive income for the period 1 933 981 988 594 1 683 154
Transactions with owners
Employee share scheme:
– shares paid and delivered 5 508 8 176 13 436
– value of employee services 16 169 12 562 31 265
Dividends paid (411 553) (399 883) (745 680)
Changes in ownership interests in subsidiaries that do not result in a loss of control – – (14 684)
Total transactions with owners (389 876) (379 145) (715 663)
Attributable to equity holders 11 081 219 9 179 072 9 537 114
Non-controlling interest
Opening balance 19 283 31 532 31 532
Loss for the period (3 005) (5 998) (17 475)
Dividends paid (939) (831) (831)
Currency translation differences (155) (289) (1 197)
Transactions with non-controlling interests – (3 801) 7 254
Total non-controlling interest 15 184 20 613 19 283
Total equity at the end of the period 11 096 403 9 199 685 9 556 397
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UnauditedSix months ended
31 December
AuditedYear ended
30 June
2015R’000
2014R’000
2015R’000
Cash flow from operating activities
Operating profit 1 705 212 1 464 275 2 129 056
Non-cash flow items 352 214 209 612 512 207
Working capital changes (498 946) 360 287 (529 325)
Inventories 23 683 264 254 (580 136)
Trade and other receivables (1 724 957) (1 317 924) (363 624)
Trade payables and provisions 1 202 328 1 413 957 414 435
Cash generated from operations 1 558 480 2 034 174 2 111 938
Net financing costs (118 981) (86 591) (190 380)
Taxation paid (297 054) (243 896) (504 671)
Net cash generated from operating activities 1 142 445 1 703 687 1 416 887
Net cash outflow from investment activities (374 432) (382 684) (841 650)
Net cash inflow from financing activities 3 768 215 984 369 797
Dividends paid (411 553) (399 883) (745 680)
Increase in net cash, cash equivalents and bank overdrafts 360 228 1 137 104 199 354
Net cash, cash equivalents and bank overdrafts at the beginning of the period 230 868 7 335 7 335
Exchange gains on cash and cash equivalents 40 036 15 718 24 179
Net cash, cash equivalents and bank overdrafts at the end of the period 631 132 1 160 157 230 868
SEGMENTAL ANALYSIS
UnauditedSix months ended
31 December
AuditedYear ended
30 June
Revenue from external customers
2015R’000
2014R’000
Change %
2015R’000
Sales of alcoholic beverages
Republic of South Africa 9 012 835 7 862 606 14,6 13 499 183
International 3 162 443 3 086 867 2,4 6 002 238
12 175 278 10 949 473 11,2 19 501 421
Other non-alcoholic items 47 635 47 201 0,9 87 549
Consolidated revenue 12 222 913 10 996 674 11,2 19 588 970
UnauditedSix months ended
31 December
Audited Year ended
30 June
Operating profit2015
R’0002014
R’000Change
%2015
R’000
Republic of South Africa 1 719 161 1 418 577 21,2 2 216 159
International 497 996 560 803 (11,2) 843 913
2 217 157 1 979 380 12,0 3 060 072
Corporate services (511 512) (510 221) 0,3 (925 701)
1 705 645 1 469 159 16,1 2 134 371
Other losses (433) (4 884) (91,1) (5 315)
Consolidated operating profit 1 705 212 1 464 275 16,5 2 129 056
NOTES
UnauditedSix months ended
31 December
AuditedYear ended
30 June
2015R’000
2014R’000
2015R’000
1. Sales volumes (litres ’000) 397 668 369 223 653 670
2. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 3 494 691 3 143 095 3 323 446
Current 1 255 386 479 357 870 378
4 750 077 3 622 452 4 193 824
Cash and cash equivalents (1 301 132) (1 160 157) (619 367)
3 448 945 2 462 295 3 574 457
3. Cash outflow from investment activities
Purchases of property, plant and equipment (PPE) to maintain operations (172 025) (165 814) (321 801)
Purchases of PPE to expand operations (239 600) (139 926) (446 580)
Proceeds from sale of PPE 3 460 6 842 14 550
Purchases of financial assets and associates – (111 338) (111 428)
Proceeds from financial assets 47 774 38 448 44 159
Purchases of intangible assets (14 041) (2 925) (13 120)
Acquisition of subsidiaries, net of cash acquired – (7 971) (7 430)
(374 432) (382 684) (841 650)
4. Capital commitments
Contracted 641 354 340 456 411 334
Authorised, but not contracted 698 007 951 634 1 052 387
1 339 361 1 292 090 1 463 721
5. Depreciation of property, plant and equipment 155 963 148 023 290 335
6. Net asset value per share (cents) 4 996 4 149 4 310
7. Segment report
Operating segments were identified based on financial information reviewed regularly by management for the purpose of assessing performance and allocating resources to these segments. Revenue includes excise duty.
GREYMATTER & FINCH # 10344
8. Financial risk management and financial instruments
Financial risk factorsThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group’s annual financial statements as at 30 June 2015. There have been no material changes in the Group’s credit, liquidity and market risk or key inputs in measuring fair value since 30 June 2015.
Fair value estimationItems carried at fair value are classified according to the fair value hierarchy, by valuation method. The different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: Inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
Available-for-sale financial assets are classified as level 1, 2 or 3, derivative financial assets and liabilities are classified as level 2 and biological assets are classified as level 3.
The fair value of non-current borrowings is calculated using cash flows discounted at a borrowings rate and this is classified as level 2. The fair value of current borrowings equals their carrying amount.
There have been no transfers between level 1, 2 or 3 during the period, nor were there any significant changes to the valuation techniques and inputs used to determine fair values since 30 June 2015.
The fair values of all other financial assets and liabilities approximate their carrying amounts.
DISTELL GROUP LIMITED
DIRECTORS: DM Nurek (Chairman), PE Beyers, GP Dingaan, JJ Durand, DP du Plessis, E de la H Hertzog, MJ Madungandaba, EG Matenge-Sebesho, LM Mojela, CA Otto, AC Parker, RM Rushton (Managing director), CE Sevillano-Barredo, BJ van der Ross, LC Verwey (Finance director)
COMPANY SECRETARY: L Malan
REGISTERED OFFICE: Aan-de-Wagenweg, Stellenbosch 7600
TRANSFER SECRETARIES: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, PO Box 61051, Marshalltown 2107
SPONSOR: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
WEBSITE: www.distell.co.za