2013 FINANCIAL RESULTS PRESENTATION 22 August 2013

Transcription

1 2013 FINANCIAL RESULTS PRESENTATION 22 August 2013

2 Contents Business Update Jan Scannell, Managing Director Don Gallow, International Director Wim Bührmann, CEO Southern Africa Financial Results Merwe Botha, Financial Director

3 Distell Group Jan Scannell

4 Distell Group Salient Features Corporate Overview Corporate Sustainability Prospects

5 Distell Slide Group name Salient Features Bullet 1 Sub bullet 2 Sub sub bullet

6 Distell Group Salient Features Sales volumes up 7,2% Revenue up 11,9% Successful acquisition and integration of Burn Stewart Distillers Operating profit up 26,6%, normalised up 8,3% Headline earnings per share up 11,7%, normalised up 13,7% Annual dividend up 13,6%

7 Distell Group Corporate Overview SLIDE HEADING

8 Distell Group 10 Year Corporate Overview Over a ten-year period we have Delivered a total shareholder return of 21.1% CAGR Compared to JSE top 40 index ten-year CAGR of 16.4% Contributed R41,8 billion to the country s economy Distributed R38,6 billion in cash to stakeholders Government received 62.7% or R24,6 billion by way of taxes Employees received 25.6% by way of emoluments Shareholders received R4,1 billion

9 Distell Group Strategic Aspirations Sustain our strong position in the domestic market Increase the contribution of our international operations Institutionalise continuous business improvement More specifically, we want to: Fully capitalise on our strengths in the global cider market Strengthen our status as a profitable and leading exporter of wines Grow the presence and contribution globally of Amarula Cream, Bisquit Cognac and the newly acquired Burn Stewart Distillers whisky brands Lead the spirits industry not only in Southern Africa but across the African continent Address the decline in domestic brandy sales by building new markets

10 Distell Group Progress on Strategic Aspirations Undertook a number of initiatives to build our geographic profile and presence in many emerging markets Burn Stewart Distillers Limited (Scotland) Acquired Burn Stewart Distillers Limited from the Scottish-based CL World Brands Limited and the Trinidad- and Tobago-based Angostura Limited in April 2013 This strengthens our product portfolio, our global reach and our Southern African leadership of the spirits industry in a move that also allows us to benefit from changing consumption patterns The R2,2 billion purchase of the fully integrated producer of both blended scotch and single malt whiskies also allows us to capitalise on the continuing global growth in whisky. Gives us access to scarce blended and single malt stocks from prime whisky-producing regions in Scotland, while also enhancing our global footprint According to Scotch Whisky Association (SWA) data, the global whisky market has been one of the fastest-growing drinks segments and after vodka, is the world's biggest spirit category by volume. Recent SWA figures show that for the ten years from 2002 to 2012, sales values rose by 87% to 4,3 billion (R59.9 billion). Consumption has risen across both developed and emerging markets, notably the UK, the US, Latin America, Eastern Europe, many parts of Asia and key African markets.

11 Distell Group Progress on Strategic Aspirations Burn Stewart Distillers Limited (continued) The transaction includes brands such as Scottish Leader, Black Bottle, the single malts Bunnahabhain, Deanston, Tobermory and Ledaig; three single malt whisky distilleries; a blending and maturation facility; a bottling hall; a dry and finished goods storage site, and the company's in-house marketing and distribution functions. All scotch whisky stocks currently in maturation form part of the deal. A key benefit of the acquisition is the presence of Burn Stewart brands across 60 markets, particularly in developing economies. Scottish Leader, the biggest brand in the stable, is the pre-eminent leader in its blended scotch category in Taiwan, the world's fourth biggest scotch whisky market by volume. The marketing and sales arm that already exists to serve this region also gives us a valuable entrée for a range of other products in our portfolio. The purchase marks the second time in recent years that Distell has invested in a major global spirits acquisition. Since our 2009 purchase of cognac brand Bisquit, the brand has gone on to deliver double-digit volume growth, making good inroads into developing economies. We look forward to building Burn Stewart whiskies in the same way, while introducing other Distell brands into some of its already well-established markets.

12 Distell Group Progress on Strategic Aspirations Cider Production (South Africa) The extraordinary growth of the RTD market in which Distell is a significant player, has necessitated incremental investment in this area to meet the greater demand for ciders. Over the past year, we have expanded our cider production capacity at our primary production plant in Paarl, and our bottling facilities at our secondary production site in Springs. Whisky Production (South Africa) Our locally manufactured whisky brands have gained market share and shown significant consistent volume growth over a number of years. To meet this increased consumer demand for whisky, we are expanding production capacity at our Wellington distillery. This investment is expected to give us a competitive edge in the long-term. In line with this expansion, our three biggest distilleries in Worcester, Wellington and Goudini, have also implemented a number of projects to improve energy efficiency and reduce the amount of coal usage. As an example, at Wellington, hot water rather than steam, is now being used for specific applications.

13 Distell Group Strategic Risks Overview & Context Conducting business in an increasingly complex global environment poses numerous risks, and as such, risk management remains integral in the day-to-day operations of the business Our objective is to generate attractive returns for our shareholders. However, business opportunities often present risks. It is our responsibility to minimise the threat that any given risk presents We have developed a well-structured process for identifying, monitoring and managing the principal risks faced by Distell The Board of Directors reviews these risks on an annual basis. The recent review reveals no significant change in these risks, which pertain to: Trademarks Geographic diversity and international expansion Route to market Regulatory issues Competition Management capacity and talent Procurement and the supply chain.

14 Distell Group Corporate Sustainability SIDE HEADING

15 Distell Group Corporate Sustainability Material Issues: Excise and illicit trade Upholding human rights and economic equity Responses/Actions: Continue to advocate that further increases in excise tax is unlikely to reduce the misuse of alcohol products and may lead to serious unintended consequences Build relationships and work collaboratively to find appropriate solutions to curb both alcohol abuse and illicit trade We remain concerned about exorbitant excise levies that are likely to lead to undesirable consequences. These include dwindling margins for legitimate farmers and an increase in illicit and potentially dangerous alcohol trading Achieve a Level 4 B-BBEE rating by improving our skills development and socio-economic activities. Increase the number of education and skills training opportunities that address unemployment in South Africa Review and align existing socio-economic development projects that were not recognised under the dti Codes Implement our new five-year employment equity plan, that includes strategic recruitment, succession planning, a senior and middle management development and retention strategies Continued to drive ethical trade by advocating WIETA accreditation to all our wine producers Following the introduction of the dti s new B-BBEE compliance targets in February 2012, we have to improve our employment equity, skills development and preferential procurement scores to regain our B-BBEE Level 4 status.

16 Distell Group Corporate Sustainability Material Issues: Preserving our environment Responsible Drinking Responses/Actions: Finalised Distell s resource reduction targets for Expanded our Greenhouse Gas reporting database to include some Scope 3 categories and submitted our second report to the Carbon Disclosure Project (CDP). Continued to implement and embed the use of a site services database for detailed measurement and reporting at all fully owned Distell sites. Established and embedded ISO14001-compliant management structures and systems at three fully owned Distell sites. Piloted and evolved new waste-to-energy technology. Ongoing development of alternative cultivars suited to changing climatic conditions. With the cost of energy escalating, we have to explore all viable opportunities to improve our energy efficiency across our operations. Engage with government departments and other stakeholders and explored co-operative ventures to address alcohol abuse, illicit trade and develop suitable excise policy for South Africa Focused on supporting communities in three areas: children aged four to 11 years, youth aged 12 to 14 years and pregnant women Concern remains around the proposed regulatory and legislative amendments and the future of alcoholic beverage advertising

17 Distell Group Prospects

18 Distell Group - Prospects While there are early signs of economic recovery in the US, 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. In the domestic economy, high unemployment and limited disposable income continue to curtail consumer spending. Therefore, we believe challenging trading conditions will persist in the year ahead. However, we are encouraged by the strength, appeal and diversity of our brands, our enhanced capacity to trade across a spectrum of markets and the security of our financial position. It is these advantages that allow us to continue to pursue our strategic course with confidence and to take advantage of strategic opportunities as they arise.

19 Distell International Don Gallow

20 Distell Group International Markets Global Landscape Key global trends in alcoholic beverages Global volume growth for alcoholic beverages remained moderate at 2% in 2012, with significant variances in performance at a category and regional level. Whiskey is the rising star of the global drinks market, with strong growth coming from Scotch malt category Significant growth in countries adopting super premium vodka, in both developed and developing markets Rapid rise of cider in many markets, supported by the craft premiumisation trend Regional performances Volume growth of alcoholic beverages in developed markets (USA, EU, Japan, Canada, Australia, etc) remained marginally in negative terrain (-1%) during 2012 By comparison volume growth in BRICS countries average 4% in 2012, marked by continued premiumisation arising from robust income growth among middle class consumers

21 Distell s performance in all markets outside South Africa & BLNS Overview Distell 2013 Volume increased by 12.1% Revenue increased by 18.1% EBITDA growth of 56.2%

22 Distell s performance in African markets excluding BLNS Recorded 18.1% volume growth and 17.3% revenue growth Continued marketing investment in drive brands. Marketing spend increased by 19.9% RTD s showed volume growth of 41.5% while Spirits & Wine segments declined with 7.7% and 11.5% respectively.

23 Distell s performance in African markets excluding BLNS (cont.) Have strong presence in several African markets through joint ventures in Tanzania, Zimbabwe, Mauritius and production partnerships in Kenya Tanzania Distilleries Limited 29% revenue growth. African Distillers Ltd in Zimbabwe experienced strong growth with 19% volume growth. Operating profit increased by 43%. Grays Inc Limited - Despite persistently challenging trading conditions, Grays Inc. Ltd managed to grow its turnover by 3.3% for their latest full financial year. Due to three successive excise duty increases, consumer prices on cane based spirits have increased by 70%, leading inevitably to volume shrinkage. This was offset by growth in the non-alcoholic beverages, cosmetic and home care products divisions.

24 Progress on Recent Joint Ventures Angola/Ghana/Nigeria In Angola, we have established Distell Angola Limitada in which we have a 51% stake. We have also created Distell Ghana Limited, a joint venture with local partners, in which we have a 60% stake. The sales, distribution and manufacturing operation allows us to effectively bring to market some of our key brands, as well as a range of locally produced spirits and RTD products. In Nigeria, we have established Distell Beverages Nigeria Ltd (DBNL) in which we hold a 70% stake. The remaining 30% is held by Nigerian investors. Unfortunately the acquisition of land has hampered progress, but we intend to have local production within the next two years.

25 Africa - New Resourced Structure We are investing significantly to enhance management, operational and in-market capabilities on the continent Corporate HR On going management of global production & export Production Director/GGM Secondary Prod Corporate Affairs HO Strategic/project based resources supporting Africa strategy and development (Business Transformation) NBD BI *Legal *Note JV s require appropriate support from Legal in the setting up phase. Sufficient counsel to be available Managing Director Africa Admin & PA Supply Chain & Production Africa Head of HR Head of Commercial Development Head of Corporate Affairs Head of Finance & IT GM NW Cluster GM NE Cluster GM SE Africa GM SW Cluster Vacant Country Manager Angola HR Business Partner Channel & KAM Manager Sales Capability Manager Head of Trade Marketing Marketing Manager North Marketing Manager South Finance Mgr Finance Mgt Export Development Manager [EDM works across all clusters TBC] HR Admin Market Asst Marketing Execution 11 Existing 12 New Total = 23 *Supply Chain role is not part of Africa Region cost

26 Africa 7 year review Distell volume growth per categories CAGR 72.4% 18% 17.9% Source: Business Information Warehouse

27 Distell s performance Europe & United Kingdom (UK) Sales volumes increased by 3.1% and revenue reflecting the impact of a favourable exchange rate by 16.6%. The regions EBITDA contribution grew by 58.1% In the UK market where we had invested in Brand Phoenix we have improved our SA wine market share from 8.3% to 16.6%, and wine sales volume rose 30%. Overall our wine volume grew 2.8% in an exceptionally tough market for this sector. Spirits grew 1.1%, whilst Savanna volumes rose 9.3%

28 Distell s performance in Asia Pacific EBITDA contribution by this region more than doubled Region achieved volume growth of 39% and revenue growth of 41.5% We increased our share in CJ Wine and Spirit this year after buying 60% share last year. This will allow us to consolidate our management and marketing role in the country. Our Burn Stewart Distillers acquisition and access to a range of whisky brands across the pricing spectrum should also give us improved market penetration in China, as well as other Asian markets, notably Taiwan, the world s fourth biggest Scotch whisky market and where Scottish Leader is a dominant brand.

29 China Map

30 Distell s performance in North America Whilst the region s EBITDA contribution improved by 15,4%, the results in North America were disappointing, considering the potential of the market and the growth we anticipated. In Canada, Nederburg recorded healthy growth, while Amarula Cream sales were flat. The complexity of the three-tier system in the US that largely prohibits direct trade between ourselves and our customers, remains a challenge and we continue to explore different avenues to optimise our performance.

31 Latin America - Regional Outlook deteriorates The growth outlook for Latin America deteriorated again this month, continuing the downward trend observed since June of last year. Latin Focus panelists cut their 2013 regional GDP growth forecast to 2.9%, down 0.1 percentage points over last month. As in the previous four months, the deterioration primarily reflects downward revisions to the growth forecast for Brazil and Mexico. Brazil is a long-established and important market for Amarula Amarula volumes declined by 12.2%, but 7YR CAGR for Amarula 15.2%. Our wine portfolio achieved a 7YR CAGR of 11.1%

32 Distell s performance in Latin America Challenges: Increased consumer pricing for Amarula, due to weakening of BRL. Increased FOB pricing Agency had major change in Route to Market. From To

33 Distell s performance in key international markets Travel Retail Global travel retail liquor sales continued their strong growth in 2012, with spirits again outpacing wines. Wine and spirits sales reached 29.1m cases in 2012, up 4% from 2011, according to the IWSR Duty Free/Travel Retail Summary Report Spirits sales grew 5.2% between 2011 and 2012 to 21.4m cases Overall wine sales were fairly stable with growth of just under 1% in Growth was derived from all regions except Latin America. Consolidation continued in the market, with the top 20 suppliers holding over 70% of the market share and with consumer demand focussing on leading brand names. Growth was derived from all regions, except Latin America. Asia Pacific and Middle East continues to drive growth, particularly on premium brands.

34 Travel Retail (cont.) The addition of Burn Stewart Distillery brands will strengthen the Distell brand portfolio offer, particularly as Scotch is the leading global duty free category. Within this environment: Distell travel retail sales grew by 48%, with spirits leading growth, ahead of category growth levels Amarula was selected for the first time by Dufry (number 2 travel retail operator globally) as its Cream brand for its global promotion Bisquit continued to gain listings in its key Eastern European and Asian Markets, ending the year +68% on history Activity continues to be focussed on visibility, tastings and gifting.

35 Bucharest Airport Tasting Bar May 2013

36 Dufry Moscow Domodedovo April 2013 Shop 1 Shop 2

37 Nederburg Heritage Heroes DFS Singapore - May 2013

38 International 7 year review Distell volume growth per categories CAGR 5.1% 17.8% 37.5% Source: Business Information Warehouse

39 Distell Southern Africa Wim Bührmann

40 Distell Southern Africa Distell s performance in South Africa (excluding BLNS) Market Overview: Tough local economic conditions show no signs of abating. Private consumption expenditure on non-durables, including alcohol, slowed substantially, with real growth for the 12 months to March 2013, declining to 2,3% from 3% the year before Annual excise duty increases continued to exceed inflation Alcoholic beverage market recorded 1.6% increase in sales volume and 9.2% in value (AC Nielsen) Our Performance: Domestic sales volumes grew by 6.1% Revenue rose 9.5% to R12,3 billion Pressure on disposable consumer income saw volume growth driven largely by lower-priced products, leading to a less favourable sales mix Cider and ready-to-drink (RTDs) brands delivered another strong performance with double-digit growth, while wine and spirit brands showed mixed results

41 DISTELL HAS STRONG AND DIVERSIFIED BRAND PRESENCE IN TOP LIQUOR BRANDS NIELSEN 1.3% 1.2% 1.2% 1.1% 0.9% 0.8% 0.8% 0.8% 0.7% 0.6% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 0.4% 2.4% 2.2% 1.9% 1.9% 3.3% 3.1% 3.9% 5.5% 5.1% 12.5% 9.2% 8.5% 14.0% 12.0% 10.0% RTD s Spirits Wines Top 40 Value Brands RSA 15 RTD s (2 Distell) 18 Spirits (7 Distell) 7 Wines (4 Distell) 33% of the top 40 brands are Distell (13) 8.0% 6.0% 4.0% 2.0% 0.4% 0.0% OLOF BERGH CARLING BLACK LABEL HANSA PILSENER CASTLE LAGER CASTLE LITE HUNTERS AMSTEL SMIRNOFF HEINEKEN CASTLE MILK STOUT SAVANNA WINDHOEK DRAUGHT JOHNNIE WALKER BELLS REDDS RED SQUARE KLIPDRIFT RICHELIEU J & B JAMESONS WINDHOEK LAGER NAMAQUA BRUTAL FRUIT AMARULA ROBERTSONS BLACK & WHITE THREE SHIPS KWV AUTUMN HARVEST CAPTAIN MORGAN SEDGWICKS JACK DANIELS DROSTDY HOF FIRSTWATCH WELLINGTON FOUR COUSINS ORIGINAL PAARL PERLE VICEROY GORDONS STRONGBOW Distell Brands Market Share Percentage Value

42 RSA & BLNS 7 - year review Distell volume growth per category CAGR 12.39% 0.71% (2.74%) Source: Business Information Warehouse

43 RSA & BLNS 7 -year review Distell volume growth per Spirit sub-categories Source: Business Information Warehouse

44 Distell Southern Africa Spirits Tough market conditions affected our spirits brands more than other categories. This was aggravated by further high excise duty hikes Brandy (our biggest category) was affected the most. Nevertheless, leading brandy brands, Richelieu and Klipdrift, delivered reasonable performances in a declining brandy category. As the market leader, we continue our long-term commitment to revive the entire category, through Focus on the super-premium sector to build image. This delivered very healthy growth. Volume increases were almost 50%, helped by a growing awareness of quality credentials, as well as by successful consumer engagement initiatives and innovative gifting solutions. Product excellence. Most of our brandies are continually rewarded with accolades on international competitive platforms. Van Ryn's 12 year brought home both the 2012 International Wine & Spirit Competition's Worldwide Best Brandy and the 2012 International Spirits Challenge Best Brandy titles - a first for any single brandy. Events, such as the Brandy Fusion showcases in Johannesburg and Cape Town. Celebrity endorsements and sponsorships, such as Jamie Foxx and the Springboks Product innovation. Exiting new launches include Richelieu 10 year old

45 Distell Southern Africa Spirits The acquisition of Burn Stewart Distillers places us in an even better position to expand our share of this lucrative segment. South Africa is now the sixth largest market by volume and seventh by value for scotch whisky. At the same time, there is a growing demand for locally produced whisky brands. Three Ships whisky, awarded the title of World's Best Blended Whisky title in 2012, maintained its very positive growth trajectory, as did Bain s Cape Mountain Whisky, judged the World s Best Grain Whisky at this year's World Whisky Awards Amarula Cream, in the top ten list of most popular liqueur brands (Drinks International), also delivered a sterling performance, building volumes and strengthening equity

46 RSA & BLNS 7 -year review Distell volume growth per Wine sub-categories Source: Business Information Warehouse

47 Distell Southern Africa Wine According to SAWIS, domestic natural wine volume sales increased by 1% for the period June 2012 to May Despite mostly flat volumes across our wine portfolio, we made good profit gains. This achievement is noteworthy in a highly contested market, characterised by aggressive discounting. We are also pleased to report several highlights: 4 th Street almost doubled its volumes and has become a significant player. Its unique positioning, sweet taste profile, intensive activation programme and innovative pack offerings have all helped to build the brand. Nederburg consistently performed well judged South Africa's top producer at the 2012 IWSC competition in London further raised its profile as the official wine sponsor of MasterChef South Africa, now in its second season. Cellar master, Razvan Macici, awarded Diners Club Winemaker of the year.

48 Distell Southern Africa Wine Established brands, such as Drostdy-Hof, Paarl Perlé, Autumn Harvest Crackling, Tassenberg, Sedgwick Old Brown and Overmeer all managed to hold their own. However, wine aperitifs continued their decline in the face of the particularly high excise duty hikes To better exploit opportunities for the super and ultra-premium wines, we recently strengthened our Cape Legends portfolio and structures. Early results in both on and off-consumption are encouraging. Innovation: Two Oceans has successfully introduced a low-alcohol 5,5% range (Quay 5), benefitting from the demand for low alcohol alternatives JC le Roux's La Domaine Non Alcoholic exceeded all expectations since its launch, clearly demonstrating the demand for non-alcoholic beverages with the taste and image of their alcoholic counterparts. It fulfils the needs of consumers who elect not to consume alcohol in an environment where alcoholic beverages are normally consumed.

49 RSA & BLNS 7 - year review Distell volume growth RTD s Source: Business Information Warehouse

50 Distell Southern Africa Ciders & RTDs Both Hunter's and Savanna were able to maintain an already strong growth momentum, thanks to highly successful communications campaigns, augmented by on going pack innovations. Hunter's, which celebrates its 25th anniversary this year, not only outperformed the fruit alcoholic beverages (FAB) category but its growth contrasted dramatically with the premium beer category's virtually flat year-onyear growth. Both brands benefited from successful pack innovations Hunter s new 440ml can offering was very well received by the market, whilst Savanna's performance was boosted by the launch of 500ml bottle and 330ml can formats. Production capacity created to supply increased demand and innovation Primary and Secondary (bottling line in 2011, canning line in 2012 and 2013) Hunter s 25 year Birthday pack

51 Distell Southern Africa BLNS (Botswana, Lesotho, Namibia & Swaziland) The four countries bordering South Africa remain important markets for us. This year, they collectively delivered a sales volume increase of 2.2% and revenue growth of 6.9% In Namibia, the biggest of the four, we performed well with 7.9% volume growth, driven mostly by our cider brands. Our business in Lesotho reflected good growth across a range of product categories In Swaziland, our ciders delivered marginal volume growth. However, performance across other categories was generally impeded by poor economic conditions and a volatile tax regime In Botswana the already high alcohol levy, raised to 45% last October, continued to deter consumer spending

52 Growth enablers: Capabilities: Marketing and Sales Capability improvements for Competitive Advantage: Channel strategy planning with brand and customer alignment 1:1 CRM (Strategic build across touch points by individual brand), also investing in technology and skills for a modern trading environment Step-up in activation levels (main stream on-con for wine and spirits) Strengthen GWL capabilities Premium Events and gifting Training focus and development plans Efficiencies: Cost reduction initiatives and margin management Effective control of route to market cost in order to support income generation (15-20% increase p.a. on Advertising and Promotions for the past 3 years)

53 Conclusion Strive for balanced performance Real profit growth Investment and capability building aimed at positioning Distell for future growth and improving market shares Focus areas in line with corporate strategy Invest in these growth areas Build enabling capabilities Improve efficiencies to fund and assist growth

54 Financial Results Merwe Botha

55 Quality of Earnings Reconciliation of operating profit Trend Operating profit Reported 1, , Excise duty provision (13.9) , , Burn Stewart impact Operating profit (29.0) New business development expenses 67.0 Gain on previously held interest (9.2) Forex expense 50.0 Normalised 1, ,

56 Quality of earnings Reconciliation of headline earnings Trend Headline earnings Reported 1, Excise duty provision (after tax) (10.0) Interest on excise provision (after tax) , , Burn Stewart impact Interest on bridge finance 21.0 Headline earnings contribution (21.1) Forex expense (after tax) , , New business development expenses (after tax) 67.0 Normalised 1, ,

57 Economic profit distortion Trends Distell BSD Group Group Incl BSD Excl BSD Rm Rm Rm Rm Net assets 8, , , , Plus: Accumulated depr 1, , , Net assets at cost 9, , , , WACC 10.2% 10.2% 10.2% 10.2% Capital charge 1, , Normalised Normalised Profit before tax 1, , , Add: Depreciation EBITDA 2, , , % (581.3) (17.4) (598.7) (567.9) EBITDA after tax 1, , , Capital charge 1, , Economic profit (211.6)

58 Investment in net operating assets increased substantially due to BSD acquisition Trends Distell BSD Group Group Incl BSD Excl BSD Fixed and intangible assets 3, , , , Net working capital 4, , , Inventory 5, , , , Accounts receivable 1, , , Accounts payable (2,558.9) (367.5) (2,926.4) (2,094.4) Provisions (295.3) - (295.3) (708.8) Net operating assets 7, , , , Financial assets Total net assets 8, , , ,

59 Managing the underlying drivers of shareholders value as reported 59

60 Managing the underlying drivers of shareholders value normalised (excl. excise provision and BSD) 60

61 Improving Shareholder Value over 7 year period adjusted headline earnings CAGR = 12.1% % % % % % 13.3% Net Operating margin 14,9% 14,3% 13,0% 11,8% 11,7% 12.1% % adjusted equity CAGR =12.5% 7,545 3,940 4,432 4,809 5,238 5,694 6, return on equity

62 Rewarding shareholders Total return to shareholders 7 Year CAGR 15.5% Dividend DY 2.9% 295c c c c c c c 71.5 Share price

63 Benefiting all stakeholders Cash value added (2004 to 2013): R 41.8bn Employees, 23.6% Retained to fund grow th, 9.9% Government, 58.8% Shareholders' dividends, 7.7% Employees are also shareholders

64 Salient features of our performance 2012/13 Sales volume up 7,2%, normalised 7,0% Revenue up 11,9%, normalised 10.4% Rand/liter revenue up 4,4%, normalised up 3,2% Favourable currency impact on international revenue Operating profit up 26,6%, normalised up 8,3% Operating expenses up 10,3%, normalised up 10,7% Headline earnings up 12,0%, normalised up 14,0% Forex gains reported R62,5m, normalised R112,5m Other gains R10,8m, normalised R1,6m Finance cost R234,4m, normalised R34,3m Gross margin 31,8%, normalised 33,2% (2012: 33,9% normalised) Net margin 10,0%, normalised 11,8% (2012: 12.1% normalised) Annual dividend up 13.6%

65 Reported headline earnings impacted by once off excise duty provision relating to prior years and BSD acquisition Operating profit % Rm Reported Headline earnings % / /12 Net financing cost/ Dividend Income % / /12 Associates % / /12 Taxation % 454 Reported HLE up 12.0% Reported operating profit up 26.6% Net cash outflow of R2492m Reported finance cost of R240.7m (2012: R31.9m) Increase in effective tax rate to 32.2% (2012: 31.9%) Normal rate 28.0% Effective rate 32.2% Permanent diff 4.2% Previous year adjustments Non-deductable expenses 2012/ /12 Profit&Loss on assets % 2012/ /12

66 Growth in operating profit driven by strong volume and revenue growth and a gross margin improvement Normalised Results (incl. BSD) Reported Operating profit % Sales revenue Rm Operating expenses Rm % 11.9% Overall sales volumes up 7.2% compared to: total revenue growth of 11.9% (Rand per litre 4.4%) Operating expenses increase 10.3% (R/l 2.8%) Gross margin increased from 31.8% to 33.4% Non manufacturing overheads increase 13.7% Operating margins increased from 10.0% to 11.3% Operating profit increased 26.6% Other losses % Abnormal items distort operating profit Currency translation profit of R62.5m (2012:R110.8m profit) Excise duty reversed R14.0m (2012: R297.8m) NBD expenses R67.0m Gain on JV R9.2m 1

67 Normalised headline earnings excluding once off excise duty provision relating to prior years and BSD acquisition Normalised Operating profit % Rm 2012/ /12 Normalised excludes: Normalised Headline earnings Net financing cost/ Dividend Income Full BSD impact Excise provision % / % /12 Interest on excise Tax impact of above 2012/ /12 Associates / % /12 Normalised earnings up 14.0% (excl. excise and BSD) Normalised operating profit up 8.3% Taxation % 538 Normalised finance cost of R40.1m (2012: R31.9m) 2012/ /12 Effective tax rate 28.6% (2012: 31.2%) Profit&Loss on assets % 2012/ /12

68 Growth in operating profit driven by strong volume and revenue growth and a gross margin improvement Normalised Results (incl. BSD) Sales revenue Rm % Normalised Operating profit 8.3% Operating expenses Rm % Excluding BSD Revenue (R201m) Expenses R172m Operating profit (R 29m) Transaction expenses R 67m Profit JV (R 9m) Currency translation R 50m R 79 m Excluding excise provision 2013 (R 14m) 2012 R 298m Other losses % Gross margin deteriorated from 33.8% to 33.2% Operating margins deteriorated from 12.1% to 11.8% Operating profit increased 8.3% 1

69 Exchange rates CUR Contr 2012/ /12 Change GBP 14% % EUR 39% % USD 21% % CAD 12% % Weighted average weakening in value of Rand of 12.4%

70 Feb 07 Jul 06 The Rand vs. US dollar Dec 12 May 12 Oct 11 Mar 11 Aug 10 Jan 10 Jun 09 Nov 08 Apr 08 Sep 07 Dec 05 May 05 Oct 04 Mar 04 Aug 03 Jan 03 Jun 02 Nov 01 Apr 01 Sep 00 Feb 00 Jul 99 Dec 98 May 98 Oct 97 Mar 97 Aug 96 Jan 96 Jun 95 Nov 94 Apr 94 Sep 93 Feb 93 Jul 92 Dec 91 May 91 Oct 90 Mar 90 Aug 89 Jan USDZAR Purchasing Power Parity Levels USDZAR (actual) USDZAR (PPP)

71 The Rand vs. Euro Jan 89 Sep 89 May 90 Jan 91 Sep 91 May 92 Jan 93 Sep 93 May 94 Jan 95 Sep 95 May 96 Jan 97 Sep 97 Jan 99 Sep 99 May 00 Jan 01 Sep 01 May 02 Jan 03 Sep 03 May 04 Jan 05 Sep 05 May 06 Jan 07 Sep 07 May 08 Jan 09 May 98 Sep 09 May 10 Jan 11 Sep 11 May 12 Jan 13 EURZAR Purchasing Power Parity Levels EURZAR (actual) EURZAR (PPP)

72 Revenue growth driven by a strong performance from all regions except BLNS Higher growth in second 6 months. Total Distell Revenue Rm 11.9% Volume lm % Domestic Gross Revenue Rm 9.5% International Gross Revenue Rm 41.3% Africa Gross Revenue Rm 9.9% Volume lm 6.1% Volume lm 14.7% Volume lm 8.0% Sales volumes in domestic market grew 6.1%, driven by growth in cider brands International revenue includes BSD for 3 months (R201m). International revenue positively impacted by weaker Rand, but a less favourable sales mix Rand exchange rate average deterioration of 12.4% Revenue growth from Sub- Saharan African (excl BLNS) countries 16.8% up. Sales outside RSA 26.2% (2012: 25.5%) on NDP basis Consolidation entries R625m (2012: R481m) Discounts R889m (2012: R712m) 2012/ /12

73 Domestic revenue and volume growth driven by cider brands Domestic Gross Revenue Rm 9.5% Sales volume growth declined in second 6 months 1 st six months 6.7% 2 nd six months 5.5% Full year 6.1% Volume lm 6.1% Spirits 33.3% Gross Revenue Volume Rm lm -8.8% 2.2% RTDs 42.3% Gross Revenue Volume Rm 18.7% lm Wines 24.3% Gross Revenue Volume Rm 5.6% lm 0.1% % Brandy sales under pressure Liqueurs and cognac showed strong growth. Decrease in fortified wines (2.5%), but increase in natural wines by 0.7% RTDs showed strong volume growth of 12.6%, ahead of the market (2012: 16.1%) Rand per liter sales revenue improved by 3.2% (reflecting sales mix effect) Other sales revenue of R3 m (2012: R2 m)

74 Challenging trading conditions in international regions (especially Europe and UK), revenue positively impacted by weaker Rand Sales volumes increased, weak Rand against all major currencies, less favourable sales mix International Gross Revenue Rm 11.4% 41.3% Volume lm 14.7% Spirits 42.9% Gross Revenue Rm 88.6% Wine 50% Gross Revenue Rm 16.0% Volume lm Volume lm % 4.3% 36.2 International revenue Includes: BSD R201m Bulk brandy R159m Decrease in Amarula sales of 5.3% Moderate increase in wines sales of 4.3%. (less favourable sales mix) Overall revenue increase 41.3%, positively impacted by average weaker exchange rate (12.4%) Average revenue per liter increased by 23.2% Positive exchange rate Less favourable mix effect Bulk brandy sales & BSD whisky contribution Other sales revenue of R139m (2012: R97m) ( incl. RTDs)

75 Growth in Sub-Saharan African markets continued, at a slower rate than 2012 Africa Gross Revenue Rm 9.9% Sales in BLNS countries impacted by increased levy on alcohol in Botswana during Volume lm % 95.0 Spirits 18% Gross Revenue Volume Rm lm 0.3% -7.8% Wines 41% Gross Revenue Volume Rm 2.4% lm -5.6% Spirits volumes showed 7.8% decline (2012: 15.1% growth) Africa accounts for 19.7% of total Amarula sales volumes Wine volumes decreased 5.6% (2012: increase of 8.1%) RTDs showed growth of 21.8% (2012: 21.1%) Countries outside BLNS showed growth in revenue of 16.8% (2012: 34.4%) RTDs 41% Gross Revenue Rm 23.9% Volume lm % 47.2 Other sales revenue of R3m (2012: R1 m)

76 The benefits derived from efficiency improvements in operations, reinvested in market and consumer facing activities Rm Cost of goods sold % Reported results Reaping the benefits of a structured approach to improve business processes Reported Operating Expenses Rm % / /12 Normalised Operating Expenses Rm % / /12 Sales, Marketing & Advertising % Distribution costs % 896 Service centres % 339 Depreciation % 55 Costs of Goods Sold 9.3% vs volumes 7.2% and revenue 11.9% Sales mix Steep increase in excise duty Optimization benefits R176m Gross margin increased % to 33.4% Normalised excludes full BSD and excise impact R13.9m (2012:R297.8m) Sales overheads up 9.0% Marketing overheads increased 23.0% Advertising costs were up 13.8% International operations overheads rose 3.5% Distribution increase driven by Increased volumes R/l 1.0% Improved service levels Transport contractors & fuel cost Redistribution costs Export Logistics Forex gains R62.5m (2012: R110.8m gain) Bisquit opex (R24.3m) NBD Expense R67m BPI Expenses R 6m

77 Incremental cash generated through operating profit largely reinvested in working capital and plant capacity expansion Rm Cash generated from operating activities Cash generated and retained from operating activities down R682m Cash from operating profit R2387.2m up 9.9% Cash utilized / /12 Working capital invested R1367.0m cash (2012:R443.8m) Excise duty paid R537m Cash flow from investment activities (Capex) Re-evaluated spirits in maturation Investment activities / / Dividends Capex for replacement R277m (2012:R157.9m) Depreciation R203m Expanding cider production capacity, project freeze, whisky maturation, marketing fridges and Africa production R464.6m (2012:R332.9m) Computer software R7.7m BSD acquisition R1,7 bn Higher effective tax rate Annual dividends increased 13.6% (cover by HLE 1.6 times)

78 Net Operating Assets increased by 24.4% (excl. BSD) compared to revenue growth of 7.2% Fixed and Biological assets % 18.6% Rm Property, plant & equipment increased by 18.6% (excl. BSD) Growth in net operating assets 24.4% (excl. BSD) and 65% (incl. BSD) Operating assets Jun 13 ( incl. BSD 65.0% % Jun 13 (excl. BSD) Jun 12 Jun 13 (incl. BSD) Jun 13 (excl. BSD) Inventory 6338 Jun 13 (incl. BSD) 41.2% 5283 Accounts receivable % Jun 13 (excl. BSD) Jun 13 (incl. BSD) Jun 13 (excl. BSD) Accounts payable & provisions % % Jun % Jun % Jun Total capex of R742.1 m (2012:R490.8m) Revaluation of vineyards in line with AC % increase in inventory (excl. BSD) Longer term demand for maturation stock Bulk up 14.0% Bottle stock and packaging up 25.0% Cost push Receivables Within target Intangible assets Trademarks R691m Goodwill R809m Software R 12m Jun 13 (incl. BSD) Jun 13 (excl. BSD) Intangible assets % % Jun Jun 13 (incl. BSD)Jun 13 (excl. BSD) Jun 12

79 Drive to reduce inventory levels without compromising on customer service levels Rm Bulk inventory % % Inventory June 13 (incl. BSD) 41.2% June 13 (excl. BSD) 17.7% June 12 June 13 (incl. BSD) Excise duty / % Bottled stock % June 13 (excl. BSD) / % June June 13 (incl. June 13 (excl. June 12 BSD) BSD) Packaging material 25.1% % June 13 (incl. June 13 (excl. June 12 BSD) BSD) Joint Ventures and Subsidiaries % 108 Investment in bulk inventory planned according to longer term demand Whisky and cognac increased Surplus wines managed down RTD bulk increased Increased production of grain spirits Excise duty included in stock - similar amount included in accounts payable Packaging material and bottle stock cover increased Other % / /12

80 Cash Outflow and Funding Medium-term borrowings R447m: Euro denominated Debt/equity ratio 39.7% Short-term borrowing R350m: Fixed rate Short-term borrowing R1 820m: Bridge financing Floating rate Treasury shares Other Zero Working capital Distributions (fin cost, tax & dividend) Net borrowing position Operating profit Capex& Intangibles Subsidiary 379 Debt at acquisition of subsidiary Net borrowing position

81 Net Cash surplus Rm Trading income (cash basis) % Net cash generated/(consumed) Working capital % / /12 Distributions (Fin costs, tax, dividends) 3.1% / /12 Capex & Intangibles R214.9m additional cash generated from operations R923m movement in investment in working capital Distributions Taxation difference in timing of payments Higher effective tax rate Capital expenditure mainly on replacement (R277,4m) and expanding(r464,6m) on cider, whiskey maturation stores and BSD / % /12

82 Calculation of Net Cash Position and borrowing capacity Rm Long term Loans Net borrowing position Net short term loans and cash Sufficient borrowing capacity R4.0 billion Net borrowings of R2892m Gearing of only 39.7% Equity

83 Thank you Questions? This presentation contains forward-looking statements about the company s operations, production activities and financial conditions. They are based on Distell Limited s best estimates and information at the time of writing. They are nonetheless subject to significant uncertainties and contingencies many of which are beyond the control of the company. Unanticipated events will occur and actual future events may differ materially from current expectations due to explorations results, new business opportunities, changes in priorities by the company or its joint ventures as well as other factors. Any of these factors may materially affect the company s future business activities and its ongoing financial results.

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