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Results of the Group for the year ended
30 June 2013 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")
Results of the Group for the year ended
30 June 2013 and cash dividend declaration
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%
ABRIDGED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Audited
30 June
2013 2012
R'000 R'000
ASSETS
Non-current assets
Property, plant and equipment 3 547 278 2 647 304
Biological assets 118 446 122 638
Financial assets 156 471 137 274
Investments in associates 48 477 62 022
Intangible assets 1 513 056 230 404
Retirement benefit assets 273 000 47 504
Deferred income tax assets 70 645 74 571
Total non-current assets 5 727 373 3 321 717
Current assets
Inventories 6 338 274 4 489 281
Trade and other receivables 1 805 685 1 436 255
Current income tax assets 33 659 145 088
Cash and cash equivalents 341 495 462 429
Total current assets 8 519 113 6 533 053
Total assets 14 246 486 9 854 770
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 7 250 217 6 190 465
Non-controlling interest 30 333 15 514
Total equity 7 280 550 6 205 979
Non-current liabilities
Interest-bearing borrowings 447 143 347 932
Retirement benefit obligations 22 604 80 954
Deferred income tax liabilities 483 722 231 067
Total non-current liabilities 953 469 659 953
Current liabilities
Trade and other payables 2 926 402 2 094 436
Provisions 295 329 708 772
Interest-bearing borrowings 2 786 773 180 501
Current income tax liabilities 3 963 5 129
Total current liabilities 6 012 467 2 988 838
Total equity and liabilities 14 246 486 9 854 770
ABRIDGED CONSOLIDATED INCOME STATEMENTS
Audited
Year ended
30 June
2013 2012 Change
R'000 R'000 %
Revenue 15 858 158 14 176 047 11,9
Operating costs (14 081 320) (12 762 506) 10,3
Costs of goods sold (10 500 568) (9 557 842)
Sales and marketing costs (2 040 205) (1 830 046)
Distribution costs (989 124) (915 905)
Administration and other costs (551 423) (458 713)
Other gains 10 849 (1 216)
Operating profit 1 787 687 1 412 325 26,6
Dividend income 6 279 7 645
Finance income 22 222 21 554
Finance costs (262 926) (53 459)
Share of profit of associates 57 668 37 160
Profit before taxation 1 610 930 1 425 225 13,0
Taxation (518 356) (454 365)
Profit for the year 1 092 574 970 860 12,5
Attributable to:
Equity holders of the company 1 096 509 969 070 13,2
Non-controlling interest (3 935) 1 790
1 092 574 970 860 12,5
Per share performance:
Issued number of ordinary shares ('000) 203 298 202 838
Weighted number of ordinary shares ('000) 202 752 202 185
Earnings per ordinary share (cents)
- basic earnings basis 540.8 479.3 12,8
- diluted earnings basis 496.1 447.4 10,9
- headline basis 535.7 479.7 11,7
- diluted headline basis 491.4 447.8 9,7
Dividends per ordinary share (cents)
- interim 152.0 143.0 6,3
- final 183,0 152.0 20,4
335,0 295.0 13,6
Reconciliation of headline earnings:
Net profit attributable to equity holders
of the company 1 096 509 969 070 13,2
Adjusted for (net of taxation):
net other capital gains (10 400) 876
Headline earnings 1 086 109 969 946 12,0
Adjusted for (net of taxation):
abnormal excise duty and interest provision 161 709 214 388
impact on new business acquisitions 102 904 -
Normalised headline earnings 1 350 722 1 184 334 14,0
ABRIDGED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Audited
Year ended
30 June
2013 2012
R'000 R'000
Profit for the year 1 092 574 970 860
Other comprehensive income (net of taxation) 532 469 55 212
Items that may be reclassified subsequently
to profit or loss:
Fair value adjustments
- available-for-sale financial assets 8 288 5 123
Currency translation differences 292 604 27 443
Items that will not be reclassified to
profit or loss:
Actuarial gains and losses 231 577 22 646
Total comprehensive income for the year 1 625 043 1 026 072
Attributable to:
Equity holders of the company 1 626 512 1 024 282
Non-controlling interest (1 469) 1 790
1 625 043 1 026 072
ABRIDGED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Audited
Year ended
30 June
2013 2012
R'000 R'000
Attributable to equity holders
Opening balance 6 190 465 5 688 229
Comprehensive income
Profit for the year 1 096 509 969 070
Other comprehensive income (net of taxation)
Fair value adjustments:
- available-for-sale financial assets 8 288 5 123
Currency translation differences 290 138 27 443
Actuarial gain on post-employment benefits 231 577 22 646
Total other comprehensive income 530 003 55 212
Total comprehensive income for the year 1 626 512 1 024 282
Transactions with owners
Employee share scheme:
- shares paid and delivered 30 789 15 573
- value of employee services 11 855 10 177
BEE share-based payment 6 877 6 877
Dividends paid (616 281) (556 023)
Changes in ownership interests in subsidiaries
that do not result in a loss of control - 1 350
Total transactions with owners (566 760) (522 046)
Attributable to equity holders 7 250 217 6 190 465
Non-controlling interest
Opening balance 15 514 5 780
Loss for the year (3 935) 1 790
Currency translation differences 2 466 -
Changes in ownership interests in subsidiaries
that do not result in a loss of control 269 7 944
Contribution by non-controlling interest 12 982 -
Non-controlling interest arising on
business combination 3 037 -
Total non-controlling interest 30 333 15 514
Total equity at the end of the year 7 280 550 6 205 979
ABRIDGED CONSOLIDATED STATEMENTS OF CASH FLOWS
Audited
Year ended
30 June
2013 2012
R'000 R'000
Cash flow from operating activities
Operating profit 1 787 687 1 412 325
Non-cash flow items 599 541 759 934
Working capital changes (1 367 044) (443 833)
Inventories (948 435) (524 020)
Trade and other receivables (156 873) (205 137)
Trade payables and provisions (261 736) 285 324
Cash generated from operations 1 020 184 1 728 426
Net financing costs (180 199) (23 999)
Taxation paid (377 446) (558 505)
Net cash generated from operating activities 462 539 1 145 922
Net cash outflow from investment activities (2 337 902) (479 410)
Net cash inflow from financing activities 1 925 287 119 805
Dividends paid (616 281) (556 023)
Decrease in net cash, cash equivalents and
bank overdrafts (566 357) 230 294
Net cash, cash equivalents and bank overdrafts
at the beginning of the year 462 429 229 850
Exchange gains on cash and cash equivalents 19 649 2 285
Net cash, cash equivalents and bank overdrafts
at the end of the year (84 279) 462 429
Segmental analysis
Audited
Year ended
30 June
2013 2012
Revenue from external customers R'000 R'000
Sales of alcoholic beverages
South Africa 11 505 916 10 598 890
International 4 244 593 3 448 368
15 750 509 14 047 258
Other revenue 107 649 128 789
Consolidated 15 858 158 14 176 047
Audited
year ended
30 June
2013 2012
Operating profit R'000 R'000
South Africa 1 833 857 1 477 847
International 738 595 482 789
2 572 452 1 960 636
Corporate services (784 765) (548 311)
Consolidated 1 787 687 1 412 325
Notes
Audited
30 June
2013 2012
R'000 R'000
1. Sales volumes (litres '000) 601 113 560 815
2. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 447 143 347 932
Current 2 786 773 180 501
3 233 916 528 433
Cash and cash equivalents (341 495) (462 429)
2 892 421 66 004
3. Cash outflow from investment activities
Purchases of property, plant and equipment
(PPE)to maintain operations (277 447) (157 902)
Purchases of PPE to expand operations (464 608) (332 924)
Proceeds from sale of PPE 24 327 4 768
Purchases of financial assets (11 287) (9 262)
Proceeds from financial assets 64 956 19 516
Purchases of intangible assets (7 683) (3 606)
Acquisition of subsidiaries, net of cash
acquired (1 666 160) -
(2 337 902) (479 410)
4. Capital commitments
Contracted 269 216 173 205
Authorised but not contracted 760 216 831 140
1 029 432 1 004 345
5. Depreciation of property, plant
and equipment 203 021 194 329
6. Net asset value per share (cents) 3 581 3 060
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 Group's 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.
8. Business combinations
8.1 Acquisition of subsidiary
On 12 April 2013, the Group acquired 100% of the issued share capital of Burn Stewart
Distillers Limited (Burn Stewart) for R1,9 billion, of which R137,0 million is contingent
upon the company achieving certain EBITDA (earnings before interest, tax, depreciation
and amortisation) targets.
The acquisition provides the Group access to the highly attractive and growing Scotch
whisky category and also fills a category gap in Distell's product portfolio. It will
allow the Group to offer its customers an even broader range of products. Burn Stewart's
strong presence in the United Kingdom, Taiwan and other countries provides Distell with
enhanced sales capability and route-to-market opportunities. As a result of the
acquisition, the Group is also expected to increase its presence in the markets where
Burn Stewart operates as well as to reduce costs through economies of scale. The
goodwill of R717,0 million arising from the acquisition is attributable to the acquired
customer base, stock and economies of scale expected from combining the
operations of the Group and Burn Stewart. None of the goodwill recognised is expected to
be deductible for income tax purposes.
The following table summarises the consideration paid for Burn Stewart, the fair value
of assets aquired,liabilities assumed and the non-controlling interest at the
acquisition date.
2013
R '000
Consideration
Cash 1 634 171
Contingent Consideration 136 998
Shareholders loan 90 605
Total consideration transferred 1 861 774
Fair value of equity interest in
Burn Stewart Distillers Group held before
the business combination 9 247
Total consideration 1 871 021
Recognised amounts of identifiable assets
acquired and liabilities assumed
Cash and Cash Equivalents 49 320
Trade and Other receivables 156 560
Trademarks, trade names and customer
relationships (included in intangibles) 392 910
Inventories 900 030
Property, plant and equipment 345 715
Available-for-Sale financial assets 2 982
Deferred income tax liabilities (119 039)
Trade and other payables (173 202)
Interest-bearing borrowings (398 193)
Total identifiable net assets 1 157 083
Non-controlling interest (3 068)
Goodwill 717 006
Total 1 871 021
Acquisition-related cost of R34,9 million have been charged to administrative expenses
in the consolidated income statement for the year ended 30 June 2013.
The contingent consideration is payable in cash to the former owners of Burn Stewart,
within 12 months of the closing of the transaction, subject to Burn Stewart achieving
a specified EBITDA target for the year to 31 December 2013. The full amount for the
contingent consideration was provided for at 30 June 2013. The potential undiscounted
amount of all future payments that the Group could be required to make under this
arrangement is between US$0 and US$15,2 million.
The fair value of the acquired identifiable assets is provisional pending receipt of the
final valuations for those assets.
The Group recognised a gain of R9,2 million as a result of measuring at fair value its
50% equity interest in Scotch Whisky Sub-Sahara LLP, a joint venture with Burn Stewart,
held before the business combination. The gain is included in other gains in the
consolidated income statement for the year ended 30 June 2013.
The revenue of Burn Stewart included in the consolidated income statement since 12 April
2013 was R200,8 million and the company contributed profit of R22,0 million over the same
period.
8.2 Acquisition of controlling interest in subsidiary
On 1 July 2012, the group aquired 60% of the share capital of Distell (Hong Kong) Ltd for
RMB5,72 million.
As a result of the acquisition, the Group is expected to increase its presence in the
Chinese market. It also expects to reduce distribution cost. The goodwill of R7.5million
arising from the acquisition is attributable to the expected decrease in distribution cost
and the acquired customer base. None of the goodwill recognised is expected to be
deductible for income tax purposes.
The following table summarises the consideration paid for Distell (Hong Kong), the
fair value of assets aquired, liabilities assumed and the non-controlling interest
at the acquisition date.
2013
R'000
Consideration
Cash 3 718
Contingent Consideration 3 745
Total Consideration 7 463
Recognised amounts of identifiable assets
acquired and liabilities assumed
Cash and Cash Equivalents 13 014
Trade and other receivables 8 457
Inventories 19 402
Property, plant and equipment 151
Deferred income tax assets 17
Current income tax assets (1 192)
Trade and other payables (39 927)
Total identifiable net assets (78)
Non-controlling interest 31
Goodwill 7 510
Total 7 463
The contingent consideration arrangement requires that if 75% or more of each of the first
two year's profit targets are achieved, the additional consideration payable per year will
be RMB1,43 million multiplied by the percentage of that year's target achieved. At 30 June
2013 it was estimated that the contingent consideration will not be payable and the full
amount was reversed and it is included in operating expenses in the consolidated income
statement.
The revenue included in the consolidated statement of comprehensive income since 1 July
2012 contributed by the group was R53,7 million. The Distell (Hong Kong) group
contributed a loss of R8,2 million over the same period.
BASIS OF PREPARATION, ACCOUNTING POLICY AND COMPARATIVE FIGURES
The abridged consolidated annual financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for preliminary reports and the
requirements of the Companies Act applicable to summary financial statements. The Listings
Requirements require preliminary reports to be prepared in accordance with the framework
concepts, the measurement and recognition requirements of International Financial Reporting
Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and must also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting. The directors are responsible for the preparation of the abridged
consolidated annual financial statements and were prepared under supervision of Group
financial director, MJ Botha CA(SA).
The accounting policies applied in the preparation of the consolidated annual financial
statements from which the abridged consolidated annual financial statements were derived
are in terms of IFRS and are consistent with the accounting policies applied in the
preparation of the previous consolidated annual financial statements, with the exception of
the implementation of the following amendments:
- Amendments to IAS 1 Presentation of Financial Statements (effective 1 July 2012)
- Amendments to IAS 12 Income taxes (effective 1 January 2012)
The adoption of these amendments has had no material impact on the consolidated results of
either the current or prior periods.
OPERATING PERFORMANCE
Reported headline earnings rose 12,0% to R1,1 billion, while operating profit increased
26,6% to R1,8 billion.
In the previous financial year, the Group provided R297,8 million for additional excise
duty on wine aperitifs, which resulted from changes to tariff classifications. This year,
provision has been made for interest payable on the duty, amounting to R171,7 million.
In April 2013, the Group acquired Burn Stewart Distillers Limited. The results of
this entity, as well as once-off business acquisition expenses, are included in earnings.
Normalised headline earnings and operating profit, which excludes the impact of the
additional excise duty provision the previous year, as well as the interest provision and
the full impact of the new business acquisitions in the current year, increased by 14,0%
and 8,3% respectively.
Revenue grew 11,9% to R15,9 billion on a sales volume increase of 7,2%.
Domestic revenue increased by 8,6% and sales volumes by 6,1%, despite a challenging economic
environment which continued to impact consumer demand adversely. Distell's cider and RTD
(ready-to-drink) brands continued their strong performance. The spirits portfolio showed a
volume decline, mostly as a result of the disappointing performance of the brandy category.
The wine portfolio maintained volumes achieved in the previous year.
International sales volumes, including Africa, rose by 10,2% while revenue improved 23,1%,
benefiting from a weaker rand. Ciders and RTDs once again delivered strong volume growth.
Our wine and spirit portfolios maintained previous year volumes.
Sub-Saharan African markets, outside South Africa, also delivered strong growth, primarily
driven by the solid performance of the cider and RTD portfolio. The region contributed 55,6%
to foreign revenue.
The financial results for the year, supported by satisfactory revenue growth, were positively
influenced by a weaker rand. Steep increases in excise duties and marketing expenses, as well
as once-off business acquisition expenses were partially offset by foreign currency conversion
gains, the benefits from improved efficiencies in the business and the normalisation of certain
raw material input costs.
Operating expenses increased by 10,3%. Operating expenses, excluding the provision for
additional excise duty of the previous year, increased by 13,0%, compared to revenue growth
of 11,9%. Net operating margin, as a result, contracted from 12,1% to 11,2%.
Net finance costs increased from R31,9 million to R240,7 million, mainly as a result of
the provision for interest payable on the additional excise duty.
The effective tax rate increased from 31,9% to 32,2%, due to non-deductible expenses.
INVESTMENT AND FUNDING
Total assets increased by 44,6% to R14,2 billion. Total assets, excluding new business
acquisitions, grew 15,2% to R11,3 billion. Investment in the acquisition of subsidiaries
amounted to R1,9 billion.Capital expenditure amounted to R742,1 million, of which R277,5
million was spent on the replacement of assets. A further R464,6 million was directed to
the expansion of capacity, mainly at cider and whisky manufacturing facilities.
Investment in net working capital, excluding working capital increases as a result of new
business acquisitions, increased by 29,7% to R4,0 billion. Inventory, on this basis increased
17,7% to R5,3 billion. Investment in bulk spirits in maturation, planned in accordance
with the Groups longer-term view of consumer demand for our products, grew 14,1%.
Bottled stock and packaging material reflect an increase of 25,0% on the previous year.
Net cash consumed by normal operations, excluding the investment to acquire subsidiaries,
amounted to R209,2 million (2012: R666,5 million cash generated). The Group remains in a
strong financial position, as shown by a debt to debt plus equity ratio of 28,4% and a
debt equity ratio of 39,7% at the end of the reporting period.
PROSPECTS
We believe challenging trading conditions will persist in the year ahead. However, 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 will allow us to continue
pursuing our strategic course.
DIRECTORATE
Lucas Verwey was appointed as non-executive director with effect from 1 March 2013.
Jan Scannell will retire as managing director with effect from 31 December 2013.
Richard Rushton has been appointed as executive director to the board, with effect from
1 November 2013 with the intention that he assumes the position of managing director.
AUDITORS REPORT
The abridged consolidated annual financial statements are extracted from audited
information but is not itself audited. 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 gross cash dividend, number 50, of 183,0 cents
(2012: 152,0 cents) per share for the year ended 30 June 2013. This represents a total
dividend of 335,0 cents (2012: 295,0 cents) for the year and a dividend cover of 1,6 times
(2012: 1,6 times) by headline earnings.
The dividend has been declared from income reserves. There are no STC credits available
for utilisation and the dividends tax rate is 15%. Dividend tax will amount to 27,45 cents
per Ordinary share. As a result, ordinary shareholders who are liable to pay dividends tax
will receive a net dividend amount of 155,55 cents per share. Shareholders exempt from paying
dividends tax will receive 183,0 cents per share. The issued ordinary share capital as at
21 August 2013 is 203 298 301 ordinary shares. The company's income tax reference number
is 9115001712.
The dividend will be payable to shareholders on record on Friday, 13 September 2013, and
will be paid on Monday, 16 September 2013. The last day to trade cum dividend will be on
Friday, 6 September 2013, and shares commence trading ex dividend from Monday, 9 September
2013. Share certificates may not be dematerialised or rematerialised between Monday,
9 September 2013, and Friday, 13 September 2013, both days inclusive.
Signed on behalf of the board
DM Nurek JJ Scannell
Chairman Managing director
Stellenbosch
21 August 2013
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, LC Verwey
Company secretary: CJ Cronjé
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)
www.distell.co.za
Date: 21/08/2013 01:21:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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