Wrap Text
Distell Group Holdings Limited
REGISTRATION NUMBER: 2016/394974/06
JSE share code: DGH
ISIN: ZAE000248811
("Distell" or "the Group" or "the Company")
Trading update and voluntary trading statement for the 6 months ended 31
December 2020
The board and management of Distell wish to update shareholders and the market
on the Company's business and performance ahead of the publication of its
2020/2021 interim financial results, for the six months ended 31 December 2020
('current period').
Trading conditions across the Group's operating areas continue to be impacted
in various ways as governments deal with the challenges of the COVID-19
pandemic ('the pandemic').
South Africa, our largest market by revenue, has seen the Government imposing
further restrictions on the trading of alcoholic beverages, reducing the
trading period by 22%. Other markets in Africa and international countries,
which we operate in and export to, still have active off-consumption channels
whilst international travel restrictions have adversely affected the global
travel retail (GTR) market.
Notwithstanding these challenges, the Group's agility and previous investments
in route-to-market (RTM) and optimisation of its production network,
particularly in markets outside of South Africa, have enabled it to capture
growth and productivity opportunities. This is evidenced by foreign based
revenues improving by double-digits and earnings before interest and tax (EBIT)
growth having a positive material effect in the period to offset the effects of
the ban of alcohol sales in South Africa. These actions have improved the
positioning of the Company for a long-term recovery as trading normalises in
all markets.
TRADING UPDATE
Group performance
- Group revenue increased by 3.8% alongside volume expansion of 0.8%
compared to the previous 6 months ended 31 December 2019 ('prior period').
- In South Africa, although 41 trading days were lost due to the alcohol ban
in the current period, the business was able to recover and achieve near
flat revenues and a 1.4% volume decline. Category performance continues to
reflect preferences towards spirits and mainstream wine, driven by in-home
consumption and stockpiling in fear of unexpected alcohol bans in South
Africa. Select premium ready-to-drink (RTD) brands also continue to
perform well with gains in market share.
- In the rest of Africa, excluding BLNE countries (Botswana, Lesotho,
Namibia and Eswatini), the Group recorded an impressive performance with
increased revenues and volumes of about 20% compared to the prior period.
This was largely driven by Kenya (+17% Revenue, +9.8% Volume growth),
Mozambique (+33.3% Revenue, +15% Volume growth) and Nigeria (+22.9%
Revenue, +20.3% Volume growth) as a result of our continuous RTM
investments.
- The Africa business, including BLNE countries, also performed well with a
revenue increase of 12.7% supported by 11.7% growth in volumes, driven by
a recovery in trading following the easing of border closures and no
further bans on alcohol sales.
- The international business performed strongly across all markets, with
15.4% revenue growth and significant margin improvement as the business
capitalises on its premium whisky brands, improved online sales channels
and historical investments in aged stock. Amarula delivered strong revenue
and volume growth despite the current pressure on the GTR market due to
international travel restrictions. Volumes declined by 9.1% as
anticipated, given the cessation of sales of less profitable wine brands,
bulk whisky and the exit of the RTD business.
- Group EBIT shows strong growth and EBIT margin improved by single digits.
The Group's net debt position has improved since June 2020. The South African
net debt to EBITDA covenant, which is one of the Group's primary debt
covenants, has improved to approximately 1.2x as of 31 December 2020 compared
to 3.1x for 30 June 2020. The sale of Alto premium wine farm fell within the
current period. We anticipate the sale of Plaisir de Merle to be completed in
the second half of the financial year ending 30 June 2021.
Whilst overall performance and cash generation are ahead of expectations, the
Group remains cautious as it trades into the second half of the current
reporting period where a full month's trading has already been lost, and
potential implementation of future alcohol bans in South Africa remain
unpredictable. The current surplus of wine in South Africa created by previous
bans is also a major concern to the Group which may bring long-term structural
challenges to the wine industry.
Apart from a resilient South African business, Distell's businesses in both
African and international markets are performing well by capitalising on
previous investments and focused execution. As part of the Group's
diversification strategy, we will continue our measured investment behind key
markets and brands to pursue strategic growth opportunities.
The Group is confident in its ability to generate cash, the appeal of its
diverse portfolio of brands, superior customer execution, production
efficiencies resulting from past investments and sufficient liquidity headroom
to navigate any short-term challenges in the current environment.
We remain committed to protecting the lives of our staff, livelihoods within
our industry and to serving our customers efficiently while creating
shareholder value over the long-term.
Voluntary trading statement
In terms of the Listings Requirements of the JSE Limited, companies are
required to publish a trading statement as soon as they become reasonably
certain that the financial results for the period to be reported on next will
differ by more than 20% from the financial results reported in the previous
corresponding period.
While management does not anticipate that the financial results will differ by
more than 20% from those reported in the prior period, the Company wishes to
update stakeholders on its trading and the expected impact of the pandemic on
the business.
Accordingly, a review by management of the financial results for the six months
ended 31 December 2020 has indicated the following:
Expected Reported % Change
(Current period) (Prior period)
(cents) (cents)
Earnings per share (EPS) 622.5 ' 650.0 550.3 13.1% - 18.1%
Headline earnings per share (HEPS) 595.5 ' 623.0 548.6 8.6% - 13.6%
Leading as a trusted partner in responsible trading
Distell continues to play a positive role within the industry to ensure safe
and responsible trading alongside Government's own efforts to contain the
effects of the pandemic.
The Group has invested significantly behind a number of responsible alcohol
initiatives and compliance in partnership with various Government departments
and Provincial Liquor Boards.
Distell will also actively support the roll-out of approved vaccines as soon as
these become available to its own employees, employees' families and to
affected vulnerable communities in which it operates.
As the only large South African manufacturer of alcoholic beverages, Distell
sees itself as a trusted partner in helping to shift societal behaviour whilst
protecting and creating jobs in the industry to offset inequality and poverty,
exacerbated by the pandemic and related bans on alcohol sales.
Distell is committed to playing an active role within an industry collective to
proactively engage Government and key stakeholders and to monitor alcohol
policy trends. We will continue to work with decision makers through a formal
task team and on a regular basis in order to gain appropriate alignment on
promoting responsible alcohol consumption while tackling alcohol harm through
targeted interventions where society, industry and Government all play a role
in fostering a more prosperous and healthy South Africa.
INVESTOR CONFERENCE CALL
The Group's interim financial results for the six months ended 31 December 2020
will be released on the Stock Exchange News Service on or about 25 February
2021. Management will be hosting a conference call after the release of the
Group's interim results.
Participants are requested to register in advance by navigating to:
www.diamondpass.net/1002494
Any forecast or estimate financial information contained herein has not been
reviewed and reported on by the Group's external auditors.
Stellenbosch
03 February 2021
Sponsor and Corporate Broker
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 03-02-2021 07:05:00
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