Distell Group Limited Registration number: 1988/005808/06 JSE share code: DST ISIN: ZAE ('Distell' or 'the Group' or 'the Company')

Transcription

1 Distell Group Limited Registration number: 1988/005808/06 JSE share code: DST ISIN: ZAE ('Distell' or 'the Group' or 'the Company') CONDENSED UNAUDITED RESULTS OF THE GROUP FOR THE SIX MONTHS ENDED 31 DECEMBER 2015 AND CASH DIVIDEND DECLARATION SALIENT FEATURES * Sales volumes up 7,7% * Revenue up 11,2% * Operating profit - Normalised up 15,8% - Reported up 16,5% * Headline earnings - Normalised up 16,8% - Reported up 17,8% * Interim dividend of 165,0 cents per share CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ASSETS Non-current assets Property, plant and equipment Biological assets Loans and receivables Available-for-sale financial assets Investments in associates Investments in joint ventures Intangible assets Retirement benefit assets Deferred income tax assets Total non-current assets Current assets Inventories Trade and other receivables Current income tax assets Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Capital and reserves Capital and reserves Non-controlling interest Total equity Non-current liabilities Interest-bearing borrowings Retirement benefit obligations Deferred income tax liabilities Total non-current liabilities Current liabilities Trade and other payables Interest-bearing borrowings

2 Provisions Current income tax liabilities Total current liabilities Total equity and liabilities CONDENSED CONSOLIDATED INCOME STATEMENTS Change 2015 R'000 R'000 % R'000 Revenue Operating costs ( ) ( ) 10.4 ( ) Costs of goods sold ( ) ( ) ( ) Sales and marketing costs ( ) ( ) ( ) Distribution costs ( ) ( ) ( ) Administration and other costs ( ) ( ) ( ) Other losses (433) (4 884) (5 315) Operating profit Dividend income Finance income Finance costs ( ) ( ) ( ) Share of equity-accounted earnings Profit before taxation Taxation ( ) ( ) ( ) Profit for the period Attributable to: Equity holders of the company Non-controlling interest (3 005) (5 998) (17 475) Per share performance: Issued number of ordinary shares ('000) Weighted number of ordinary shares ('000) Earnings per ordinary share (cents) - basic earnings basis diluted earnings basis headline basis diluted headline basis Dividend per ordinary share (cents) - interim final Reconciliation of headline earnings: Net profit attributable to equity holders of the company Adjusted for (net of taxation): net other capital losses 312 (2 885) (2 575) Headline earnings Adjusted for (net of taxation): remeasurement of contingent consideration Normalised headline earnings CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Profit for the period Other comprehensive income (net of taxation) (1 991)

3 Items that may be reclassified subsequently to profit or loss: Fair value adjustments - available-for-sale financial assets Currency translation differences Items that will not be reclassified to profit or loss: Remeasurements of post-employment benefits (9 537) Share of other comprehensive income of associates - - (194) Total comprehensive income for the period Attributable to: Equity holders of the company Non-controlling interest (3 160) (6 287) (18 672) CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Attributable to equity holders Opening balance Comprehensive income Profit for the period Other comprehensive income (net of taxation) Fair value adjustments: - available-for-sale financial assets Currency translation differences Remeasurements of post-employment benefits (9 537) Share of other comprehensive income of associates - - (194) Total other comprehensive income (1 702) Total comprehensive income for the period Transactions with owners Employee share scheme: - shares paid and delivered value of employee services Dividends paid ( ) ( ) ( ) Changes in ownership interests in subsidiaries that do not result in a loss of control - - (14 684) Total transactions with owners ( ) ( ) ( ) Attributable to equity holders Non-controlling interest Opening balance 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) Total non-controlling interest Total equity at the end of the period CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Cash flows from operating activities Operating profit Non-cash flow items Working capital changes ( ) ( ) Inventories ( ) Trade and other receivables ( ) ( ) ( )

4 Trade payables and provisions Cash generated from operations Net financing costs ( ) (86 591) ( ) Taxation paid ( ) ( ) ( ) Net cash generated from operating activities Net cash outflow from investment activities ( ) ( ) ( ) Net cash inflow from financing activities Dividends paid ( ) ( ) ( ) Increase in net cash, cash equivalents and bank overdrafts Net cash, cash equivalents and bank overdrafts at the beginning of the period Exchange gains on cash and cash equivalents Net cash, cash equivalents and bank overdrafts at the end of the period SEGMENTAL ANALYSIS Change 2015 Revenue from external customers R'000 R'000 % R'000 Sales of alcoholic beverages Republic of South Africa International Other non-alcoholic items Consolidated revenue Change 2015 Operating profit R'000 R'000 % R'000 Republic of South Africa International (11.2) Corporate services ( ) ( ) 0.3 ( ) Other losses (433) (4 884) (91.1) (5 315) Consolidated operating profit NOTES 1. Sales volumes (litres '000) Net interest-bearing borrowings Interest-bearing borrowings Non-current Current Cash and cash equivalents ( ) ( ) ( ) 3. Cash outflow from investment activities Purchases of property, plant and equipment (PPE) to maintain operations ( ) ( ) ( ) Purchases of PPE to expand operations ( ) ( ) ( ) Proceeds from sale of PPE Purchases of financial assets and associates - ( ) ( ) Proceeds from financial assets Purchases of intangible assets (14 041) (2 925) (13 120) Acquisition of subsidiaries, net of cash acquired - (7 971) (7 430) ( ) ( ) ( )

5 4. Capital commitments Contracted Authorised, but not contracted Depreciation of property, plant and equipment Net asset value per share (cents) 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. 8. Financial risk management and financial instruments Financial risk factors The 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 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 Fair value estimation Items 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 The fair values of all other financial assets and liabilities approximate their carrying amounts. OPERATING PERFORMANCE Group 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 benefited 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.

6 INVESTMENT AND FUNDING Total 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. PROSPECTS The 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. DIRECTORATE Ms 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 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 Dr E de la H Hertzog resigned as non-executive director with effect from 17 February CASH DIVIDEND DECLARATION The 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 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 (2015: ) ordinary shares. The company's income tax reference number is The dividend will be payable to shareholders on record on Friday, 18 March 2016, and will be paid on Tuesday, 22 March The last day to trade cum dividend will be on Friday, 11 March 2016, and shares commence trading ex-dividend from Monday, 14 March 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 FIGURES The 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 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 Chairman Stellenbosch 17 February 2016 Directors: Company secretary: RM Rushton Managing director 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) L Malan

7 Registered office: Aan-de-Wagenweg, Stellenbosch 7600 Transfer secretaries: Sponsor: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, PO Box 61051, Marshalltown 2107 RAND MERCHANT BANK (A division of FirstRand Bank Limited) Hunter's, the biggest cider brand in South Africa, launched Hunter s Extreme Bold with an exciting #GOBOLD campaign in July 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 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.