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Audited results of the Group for the year ended 30 June 2012 and cash dividend declaration
Distell Group Limited
Registration number 1988/005808/06
JSE share code: DST
ISIN: ZAE000028668
(Distell or the Group or the Company)
Audited results of the Group for the year ended 30 June 2012 and cash
dividend declaration
Salient features
- Sales volumes up 9,9%
- Revenue up 15,0%
- Favourable currency impact
- Operating profit down 1,7%, normalised up 19,0%
- Headline earnings per share up 0,6%, normalised up 22,9%
- Annual dividend up 15,2%
Abridged consolidated statements of financial position
Audited
30 June
2012 2011
R000 R000
Assets
Non-current assets
Property, plant and equipment 2 647 304 2 349 699
Biological assets 122 638 131 827
Financial assets 137 274 118 541
Investments in associates 62 022 47 964
Intangible assets 230 404 221 331
Retirement benefit assets 47 504 42 391
Deferred income tax assets 74 571 74 915
Total non-current assets 3 321 717 2 986 668
Current assets
Inventories 4 489 281 3 961 917
Trade and other receivables 1 436 255 1 242 200
Current income tax assets 145 088 62 945
Cash and cash equivalents 462 429 229 850
Total current assets 6 533 053 5 496 912
Total assets 9 854 770 8 483 580
Equity and liabilities
Capital and reserves
Capital and reserves 6 190 465 5 688 229
Non-controlling interest 15 514 5 780
Total equity 6 205 979 5 694 009
Non-current liabilities
Interest-bearing borrowings 347 932 423 336
Retirement benefit obligations 80 954 73 790
Deferred income tax liabilities 231 067 234 732
Total non-current liabilities 659 953 731 858
Current liabilities
Trade and other payables 2 094 436 1 801 848
Provisions 708 772 240 499
Interest-bearing borrowings 180 501 865
Current income tax liabilities 5 129 14 501
Total current liabilities 2 988 838 2 057 713
Total equity and liabilities 9 854 770 8 483 580
Abridged consolidated income statements
Audited
Year ended 30 June
2012 2011 Change
R000 R000 %
Revenue 14 176 047 12 327 786 15,0
Operating costs (12 762 506) (10 889 439) 17,2
Costs of goods sold (9 557 842) (8 291 871)
Sales and marketing costs (1 830 046) (1 497 260)
Distribution costs (915 905) (820 870)
Administration and other costs (458 713) (279 438)
Other losses (1 216) (1 756)
Operating profit 1 412 325 1 436 591 (1,7)
Dividend income 7 645 5 180
Finance income 21 554 18 011
Finance costs (53 459) (60 595)
Share of profit of associates 37 160 37 950
Profit before taxation 1 425 225 1 437 137 (0,8)
Taxation (454 365) (477 557)
Profit for the year 970 860 959 580 1,2
Attributable to:
Equity holders of the company 969 070 960 673 0,9
Non-controlling interest 1 790 (1 093)
970 860 959 580 1,2
Per share performance:
Issued number of ordinary
shares (000) 202 838 202 396
Weighted number of ordinary
shares (000) 202 185 201 742
Earnings per ordinary share (cents)
basic earnings basis 479,3 476,2 0,7
diluted earnings basis 447,4 448,0 (0,1)
headline basis 479,7 476,8 0,6
diluted headline basis 447,8 448,6 (0,2)
Dividends per ordinary share (cents)
interim 143,0 124,0 15,3
final 152,0 132,0 15,2
295,0 256,0 15,2
Reconciliation of headline earnings:
Net profit attributable to equity
holders of the company 969 070 960 673 0,9
Adjusted for (net of taxation):
net other capital losses 876 1 264
Headline earnings 969 946 961 937 0,8
Adjusted for (net of taxation):
abnormal excise provision 214 388
Normalised headline earnings 1 184 334 961 937 23,1
Abridged consolidated statements of cash flows
Audited
Year ended 30 June
2012 2011
R000 R000
Cash flow from operating activities
Operating profit 1 412 325 1 436 591
Non-cash flow items 769 228 298 278
Working capital changes (443 833) 37 088
Inventories (524 020) (138 891)
Trade and other receivables (205 137) 101 517
Trade payables and provisions 285 324 74 462
Cash generated from operations 1 737 720 1 771 957
Net financing costs (23 999) (37 688)
Taxation paid (558 505) (491 875)
Net cash generated from operating activities 1 155 216 1 242 394
Cash outflow from investment activities (488 704) (410 872)
Cash inflow from financing activities 119 805 21 571
Dividends paid (556 023) (516 304)
Increase in net cash, cash equivalents and bank
overdrafts 230 294 336 789
Net cash, cash equivalents and bank overdrafts at
the beginning of the year 229 850 (92 733)
Exchange gains on cash and cash equivalents 2 285 (14 206)
Net cash, cash equivalents and bank overdrafts at
the end of the year 462 429 229 850
Abridged consolidated statements of changes in equity
Audited
Year ended 30 June
2012 2011
R000 R000
Attributable to equity holders
Opening balance 5 688 229 5 237 317
Comprehensive income
Profit for the year 969 070 960 673
Other comprehensive income (net of taxation)
Fair value adjustments:
available-for-sale financial assets 5 123 (2 753)
Currency translation differences 27 443 2 660
Actuarial gain on post-employment benefits 22 646 (29 270)
Total other comprehensive income 55 212 (29 363)
Total comprehensive income for the year 1 024 282 931 310
Transactions with owners
Employee share scheme:
shares paid and delivered 15 573 20 723
value of employee services 10 177 8 306
BEE share-based payment 6 877 6 877
Dividends paid (556 023) (516 304)
Changes in ownership interests in subsidiaries
that do not result in a loss of control 1 350
Total transactions with owners (522 046) (480 398)
Attributable to equity holders 6 190 465 5 688 229
Non-controlling interest
Opening balance 5 780 984
Profit for the year 1 790 (1 093)
Changes in ownership interests in subsidiaries
that do not result in a loss of control 7 944
Currency translation differences 5 889
Total non-controlling interest 15 514 5 780
Total equity at the end of the year 6 205 979 5 694 009
Abridged consolidated statements of comprehensive income
Audited
Year ended 30 June
2012 2011
R000 R000
Profit for the year 970 860 959 580
Other comprehensive income (net of taxation) 55 212 (23 474)
Fair value adjustments
available-for-sale financial assets 5 123 (2 753)
Currency translation differences 27 443 8 549
Actuarial gains and losses 22 646 (29 270)
Total comprehensive income for the year 1 026 072 936 106
Attributable to:
Equity holders of the company 1 024 282 931 310
Non-controlling interest 1 790 4 796
1 026 072 936 106
Segmental analysis
Year ended 30 June
2012 2011 Change
Revenue from external customers R000 R000 %
Sales of alcoholic beverages
South Africa 10 598 890 9 317 099 13,8
International 3 448 368 2 848 321 21,1
14 047 258 12 165 420 15,5
Other revenue 128 789 162 366 (20,7)
Consolidated 14 176 047 12 327 786 15,0
Operating profit
South Africa 1 477 847 1 591 478 (7,1)
International 482 789 295 889 63,2
1 960 636 1 887 367 3,9
Corporate services (548 311) (450 776) 21,6
Consolidated 1 412 325 1 436 591 (1,7)
Notes
Audited 30 June
2012 2011
R000 R000
1. Sales volumes (litres 000) 560 815 510 198
2. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 347 932 423 336
Current 180 501 865
528 433 424 201
Cash and cash equivalents (462 429) (229 850)
66 004 194 351
3. Cash outflow from investment activities
Purchases of property, plant and equipment
(PPE) to maintain operations (157 902) (151 861)
Purchases of PPE to expand operations (342 218) (239 983)
Proceeds from sale of PPE 4 768 3 497
Purchases of financial assets (9 262) (38 810)
Proceeds from financial assets 19 516 34 135
Purchases of intangible assets (3 606) (17 850)
(488 704) (410 872)
4. Capital commitments
Contracted 173 205 185 871
Authorised but not contracted 831 140 330 099
1 004 345 515 970
5. Depreciation of property, plant and equipment 194 329 190 218
6. Net asset value per share (cents) 3 060 2 813
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. The Groups
international operations have been aggregated when they demonstrate
similar economic characteristics and when they do not individually
meet the quantitative recognition thresholds in terms of IFRS 8.
Revenue includes excise duty. The basis on which operating segments
report to management was changed during the year and the prior year
figures were restated in line with the new reporting formats.
8. Contingencies
The Group received an assessment from the South African Revenue
Service (SARS) for additional Employees tax amounting to R52,4
million (excluding penalties and interest) relating to the Groups
share incentive scheme. The Group obtained legal and tax specialist
opinions on this matter, which indicated that no provision is
necessary and the Group submitted an objection to this assessment.
Commentary
Basis of preparation, accounting policy and comparative figures
The annual financial statements are prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards (IFRS); including IAS 34: Interim Financial Reporting,
and in accordance with the requirements of the South African Companies Act
71 of 2008, as amended; and the Listings Requirements of the JSE Limited.
The annual financial statements were prepared under supervision of the
financial director, MJ Botha CA(SA).
These financial statements incorporate accounting policies and methods of
computation that are consistent with those adopted for the previous annual
financial reporting period, with the exception of the implementation of
the following new accounting standards, amendments and circulars:
- Amendments to IAS 24: Related Party Disclosures (effective 1 January
2011)
- Improvements to IFRSs 2010 (effective 1 January 2011)
- Amendments to IFRIC 14: Prepayments of a Minimum Funding Requirement
(effective 1 January 2011)
- Revision to AC 504: IAS 19 (AC 116) The Limit on a Defined Benefit
Asset, Minimum Funding Requirements and their Interaction in the South
African Pension Fund Environment (effective 1 January 2011)
The adoption of these new accounting standards, interpretations or
amendments to IFRS has had no material impact on the consolidated results
of either the current or prior periods.
Operating performance
Reported headline earnings rose 0,8% to R969,9 million, while operating
profit decreased 1,7% to R1,41 billion.
Normalised headline earnings and operating profit, which excludes the
impact of an additional excise duty provision, discussed in more detail
below, increased by 23,1% and 19,0% respectively.
Revenue grew 15,0% to R14,2 billion on a sales volume increase of 9,9%.
Domestic revenue increased 13,8% and sales volumes by 9,6%, despite a
challenging economic environment which continued to impact adversely on
consumer demand. Distells cider and RTD (ready-to-drink) brands continued
their strong performance. Sales volumes in the companys spirits portfolio
showed reasonable growth, driven by the performance of key brands
competing in the faster-growing market categories such as cognac and
whisky. The wine portfolio delivered modest volume growth.
International sales volumes, including Africa, increased by 10,7%, while
revenue improved 21,1%, benefiting from a weaker rand and a more
favourable sales mix. Ciders and RTDs, as well as spirit brands, delivered
strong volume growth. Wine volumes showed satisfactory growth, but with a
less profitable sales mix.
Sub-Saharan African markets, in particular, delivered another year of
strong growth, contributing 60,8% to foreign revenue.
The financial results for the year, boosted by strong sales volume growth,
also benefited from a weaker rand. Steep increases in the cost of certain
raw materials and excise duties, as well as increased sales and marketing
expenses, were offset by foreign currency conversion gains and the
benefits from improved efficiencies in the business.
Operating expenses increased by 17,2%. Operating expenses, excluding the
additional provision for excise duty, increased by 14,5% compared to
revenue growth of 15,0%, reflecting an improvement in net operating margin
from 11,7% to 12,1%.
Net financing costs decreased from R42,6 million to R31,9 million due to
lower average borrowings during the year.
The effective tax rate reduced from 33,2% to 31,9%.
Additional excise duty provision
Wine aperitifs, launched almost 40 years ago, are produced by adding
flavourants, water and distilled spirit to a deflavoured wine base. The
final alcohol content of these products varies between 18% and 23% by
volume (ABV). In the past, wine and fermented beverages, with a 23% ABV or
below, were considered fermented products, while all those with a higher
alcohol level were regarded as spirit products.
In 2007, South African Revenue Service (SARS) determined that wine
aperitifs should be reclassified and included under the higher duty tariff
category known as spirituous beverages. Distells view, that the
products should remain classifiable under the tariff heading for
fortified fermented beverages, as it has been since the inception of
this category, was supported by legal opinion. The matter was heard by the
Supreme Court of Appeal (SCA) in May 2012. The Court held that these wine
aperitifs should be classified as spirituous beverages.
As a result of this ruling, Distell has had to provide for additional duty
of R297,8 million in respect of all periods up to February 2011.
In response to representations from both Distell and the South African
Liquor Brandowners Association, SARS, with effect from 23 February 2011,
announced and implemented specific duty rate bands for products with an
alcohol content between 15% and 23% ABV. These tariffs are considerably
lower than those pertaining to spirituous beverages.
Investment and funding
Total assets increased by 16,2% to R9,9 billion.
Capital expenditure amounted to R500,1 million, of which R157,9 million
was spent on the replacement of assets. A further R342,2 million was
directed to the expansion of capacity, mainly at the companys cider
production facilities.
Investment in net working capital decreased by 1,2% to R3,1 billion.
Inventory increased 13,3% to R4,5 billion. Investment in bulk spirits in
maturation, planned in accordance with the Groups longer-term view of
consumer demand for its products, grew 19,6%. Bottled stock and packaging
material reflected an increase of 5,5% on the previous year, with a
further improvement in stock duration.
Cash retained amounted to R230,3 million (2011: R336,8 million), and the
Group remains in a strong financial position, as shown by the positive
cash and cash equivalent balance of R462,4 million (2011: R229,9 million)
at the end of the reporting period.
Prospects
Continued uncertainty about the global macro-economic environment makes it
difficult to predict trends in consumer demand. However, we do believe
challenging trading conditions will persist in the year ahead, with
unemployment and limited disposable income likely to continue to curtail
consumer spending, both domestically and internationally.
Our underlying financial position remains strong. We are confident that
the business is appropriately structured with a diversified and attractive
range of high quality and well-priced brands that equip us to compete
effectively and to continue to maximise trading opportunities.
Directorate
Jannie Durand was appointed as non-executive director with effect from
1 July 2012 in the place of Thys Visser who passed away on 26 April 2012.
Peter Bester retired as an independent non-executive director on 30 June
2012.
Auditors report
The consolidated annual financial statements have been audited by
PricewaterhouseCoopers Inc. and their unqualified auditors report is
available for inspection at the registered office of the company.
Cash dividend declaration
The directors have resolved to declare a final gross cash dividend, number
48 of 152 cents (2011: 132 cents) per share for the period ended 30 June
2012. This presents a total dividend of 295 cents (2011: 256 cents) for
the year and a dividend cover of 1,6 times (2011: 1,9 times) by headline
earnings.
The dividend has been declared from income reserves. There are no STC
credits available for utilisation. Dividend tax will amount to 22,8 cents
per ordinary share. As a result, ordinary shareholders will receive a net
dividend amount of 129,2 cents per share. The issued ordinary share
capital as at 22 August 2012 is 202 838 012 ordinary shares. The companys
income tax reference number is 9115001712.
The dividend will be payable to shareholders on record on Friday,
14 September 2012, and will be paid on Monday, 17 September 2012. The last
day to trade cum dividend will be on Friday, 7 September 2012, and shares
commence trading ex dividend from Monday, 10 September 2012. Share
certificates may not be dematerialised or rematerialised between Monday,
10 September 2012, and Friday, 14 September 2012, both days inclusive.
Signed on behalf of the board
DM Nurek JJ Scannell
Chairman Managing director
Stellenbosch
22 August 2012
Directors DM Nurek (Chairman), FC Bayly, PE Beyers, MJ Botha, JG Carinus,
GP Dingaan, JJ Durand, E de la H Hertzog, MJ Madungandaba, LM Mojela,
CA Otto, AC Parker, JJ Scannell (Managing director), CE Sevillano-Barredo,
BJ van der Ross
Company secretary CJ Cronjé
Registered office Aan-de-Wagenweg, Stellenbosch 7600
Transfer secretaries Computershare Investor Services (Pty) Limited,
PO Box 61051, Marshalltown 2107
Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Brand highlights
Amarula
Amarula was named a key contender by the Spirits Business survey, Reigning
Supreme: Brand Champions 2012. Amarula is one of eight liqueur brand
champions identified worldwide and is hailed for its exceptional
performance last year, delivering double-digit sales volume growth. The
Spirit of Africa, as the drink is known to many, was recently voted South
Africas second most favourite spirit brand in the Sunday Times Top Brands
for 2012.
Klipdrift
Klipdrift signed a sponsorship deal with the South African Rugby Union to
become the official brandy of the Springboks. The sponsorship marks
Klipdrifts first involvement with a leading national team and sees two
iconic brands unite to embody optimism, strong tradition and proud South
African heritage.
Fleur Du Cap
Fleur du Cap wines received four major international awards, namely a
grand gold at the Michelangelo International Wine Awards, a double gold at
the Five Nations Wine Challenge, gold at the International Wine and Spirit
Competition and a trophy at the Decanter World Wine Awards. The wines also
excelled at two local competitions with a Veritas double gold and the
selection as one of the best in the FNB Sauvignon Blanc Top 10
competition.
Hunters
Hunters, a popular cider worldwide, has been honoured for strategic
communications excellence, winning a Grand Prix and a gold Apex Award
recently. The Hunters Global Cooling campaign was acknowledged for a
winning combination of creativity and effective contribution to brand
profitability. Over a three-year period, from 2009 when the global cooling
concept was first launched to 2012, Hunters saw sales volumes increase
by 90%.
www.distell.co.za
Date: 22/08/2012 02:54:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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