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Audited results of the group for the year ended 30 June 2014 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 2014 AND CASH DIVIDEND DECLARATION
SALIENT FEATURES
- Sales volumes up 3,1%
- Revenue up 12,8%
- Operating profit up 22,9%, normalised up 8,1%
- Headline earnings up 40,4%, normalised up 1,7%
- Final dividend maintained at 183,0 cents per share
ABRIDGED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Audited
30 June
2014 2013
R'000 R'000
Restated
ASSETS
Non-current assets
Property, plant and equipment 3 882 077 3 388 950
Biological assets 104 559 101 287
Loans and receivables 211 288 232 820
Available-for-sale financial assets 91 424 88 694
Investments in associates 77 064 48 477
Investments in joint ventures 137 901 96 506
Intangible assets 1 798 065 1 505 647
Retirement benefit assets 265 293 273 000
Deferred income tax assets 71 210 58 777
Total non-current assets 6 638 881 5 794 158
Current assets
Inventories 6 872 615 6 259 836
Trade and other receivables 1 839 808 1 776 816
Current income tax assets 56 818 33 180
Cash and cash equivalents 451 611 355 575
Total current assets 9 220 852 8 425 407
Total assets 15 859 733 14 219 565
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 8 569 623 7 246 885
Non-controlling interest 31 532 30 650
Total equity 8 601 155 7 277 535
Non-current liabilities
Interest-bearing borrowings 3 114 090 447 143
Retirement benefit obligations 25 176 22 604
Deferred income tax liabilities 584 221 479 226
Total non-current liabilities 3 723 487 948 973
Current liabilities
Trade and other payables 2 567 301 2 907 504
Interest-bearing borrowings 761 761 2 786 771
Provisions 203 038 294 855
Current income tax liabilities 2 991 3 927
Total current liabilities 3 535 091 5 993 057
Total equity and liabilities 15 859 733 14 219 565
ABRIDGED CONSOLIDATED INCOME STATEMENTS
Audited
Year ended
30 June
2014 2013 Change
R'000 R'000 %
Restated
Revenue 17 739 609 15 725 608 12.8
Operating costs (15 744 401) (13 972 438) 12.7
Costs of goods sold (11 610 234) (10 347 745)
Sales and marketing costs (2 501 977) (2 084 367)
Distribution costs (1 063 200) (989 124)
Administration and other costs (568 990) (551 202)
Other gains 172 114 10 649
Operating profit 2 167 322 1 763 819 22.9
Dividend income 6 150 6 279
Finance income 15 082 21 707
Finance costs (232 709) (261 434)
Share of equity accounted earnings 86 266 65 169
Profit before taxation 2 042 111 1 595 540 28.0
Taxation (517 846) (512 409)
Profit for the year 1 524 265 1 083 131 40.7
Attributable to:
Equity holders of the company 1 523 304 1 088 334 40.0
Non-controlling interest 961 (5 203)
1 524 265 1 083 131 40.7
Per share performance:
Issued number of ordinary shares ('000) 221 435 203 298
Weighted number of ordinary shares ('000) 209 881 202 752
Earnings per ordinary share (cents)
- basic earnings basis 725.8 536.8 35.2
- diluted earnings basis 695.6 492.4 41.3
- headline basis 721.3 531.7 35.7
- diluted headline basis 691.3 487.8 41.7
Dividends per ordinary share (cents)
- interim 154.0 152.0 1.3
- final 183.0 183.0 -
337.0 335.0 0.6
Reconciliation of headline earnings:
Net profit attributable to equity holders of the
company 1 523 304 1 088 334 40.0
Adjusted for (net of taxation):
net other capital gains (9 421) (10 256)
Headline earnings 1 513 883 1 078 078 40.4
Adjusted for (net of taxation):
abnormal excise duty and interest provision 11 212 161 709
remeasurement of contingent consideration (159 029) -
impact of new business acquisitions - 102 904
Normalised headline earnings 1 366 066 1 342 691 1.7
ABRIDGED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Audited
Year ended
30 June
2014 2013
R'000 R'000
Restated
Profit for the year 1 524 265 1 083 131
Other comprehensive income (net of taxation) 474 198 537 213
Items that may be reclassified subsequently to profit
or loss:
Fair value adjustments
- available-for-sale financial assets 10 917 8 288
Currency translation differences 465 254 290 753
Items that will not be reclassified to profit or loss:
Actuarial gains and losses 1 215 238 172
Share of other comprehensive income of associates (3 188) -
Total comprehensive income for the year 1 998 463 1 620 344
Attributable to:
Equity holders of the company 1 997 292 1 624 930
Non-controlling interest 1 171 (4 586)
1 998 463 1 620 344
ABRIDGED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Audited
Year ended
30 June
2014 2013
R'000 R'000
Restated
Attributable to equity holders
Opening balance 7 246 885 6 188 715
Comprehensive income
Profit for the period 1 523 304 1 088 334
Other comprehensive income (net of taxation)
Fair value adjustments:
- available-for-sale financial assets 10 917 8 288
Currency translation differences 465 044 290 136
Actuarial loss on post-employment benefits (1 973) 238 172
Total other comprehensive income 473 988 536 596
Total comprehensive income for the year 1 997 292 1 624 930
Transactions with owners
Employee share scheme:
- shares paid and delivered 17 463 30 789
- value of employee services 20 582 11 855
BEE share-based payment - 6 877
Dividends paid (708 049) (616 281)
Changes in ownership interests in subsidiaries that
do not result in a loss of control (4 550) -
Total transactions with owners (674 554) (566 760)
Attributable to equity holders 8 569 623 7 246 885
Non-controlling interest
Opening balance 30 650 13 750
Profit for the period 961 (5 203)
Dividends paid (742) (488)
Currency translation differences 210 617
Effect of changes in accounting policies - 5 955
Contribution by non-controlling interest 8 104 12 982
Transactions with non-controlling interests (7 651) -
Non-controlling interest arising on business
combination - 3 037
Total non-controlling interest 31 532 30 650
Total equity at the end of the year 8 601 155 7 277 535
ABRIDGED CONSOLIDATED STATEMENTS OF CASH FLOWS
Audited
Year ended
30 June
2014 2013
R'000 R'000
Restated
Cash flow from operating activities
Operating profit 2 167 322 1 763 819
Non-cash flow items 148 225 604 125
Working capital changes (755 655) (1 345 268)
Inventories (390 088) (932 007)
Trade and other receivables (41 380) (155 128)
Trade payables and provisions (324 187) (258 133)
Cash generated from operations 1 559 892 1 022 676
Net financing costs (226 245) (179 222)
Taxation paid (459 101) (374 235)
Net cash generated from operating activities 874 546 469 219
Net cash outflow from investment activities (671 770) (2 341 232)
Net cash inflow from financing activities 552 158 1 925 287
Dividends paid (708 049) (616 281)
Increase in net cash, cash equivalents and bank
overdrafts 46 885 (563 007)
Net cash, cash equivalents and bank overdrafts at the
beginning of the year (70 197) 473 161
Exchange gains on cash and cash equivalents 30 647 19 649
Net cash, cash equivalents and bank overdrafts at
the end of the year 7 335 (70 197)
SEGMENTAL ANALYSIS
Audited
Year ended
30 June
2014 2013
R'000 R'000
Restated
Revenue from external customers
Sales of alcoholic beverages
South Africa 12 073 559 11 471 898
International 5 577 014 4 154 202
17 650 573 15 626 100
Other revenue 89 036 99 508
Consolidated 17 739 609 15 725 608
Audited
Year ended
30 June
2014 2013
R'000 R'000
Restated
Operating profit
South Africa 1 796 352 1 832 953
International 886 703 689 700
2 683 055 2 522 653
Corporate services (687 847) (769 483)
1 995 208 1 753 170
Other gains 172 114 10 649
Consolidated 2 167 322 1 763 819
Notes
Audited
30 June
2014 2013
R'000 R'000
Restated
1. Sales volumes (litres '000) 619 608 601 113
2. Net interest-bearing borrowings
Interest-bearing borrowings
Non-current 3 114 090 447 143
Current 761 761 2 786 771
3 875 851 3 233 914
Cash and cash equivalents (451 611) (355 575)
3 424 240 2 878 339
3. Cash outflow from investment activities
Purchases of property, plant and equipment (PPE)
to maintain operations (276 349) (285 034)
Purchases of PPE to expand operations (415 463) (460 561)
Proceeds from sale of PPE 19 286 23 267
Purchases of financial assets (23 939) (17 426)
Proceeds from financial assets 66 486 64 956
Purchases of intangible assets (41 791) (274)
Acquisition of subsidiaries, net of cash acquired - (1 666 160)
(671 770) (2 341 232)
4. Capital commitments
Contracted 196 268 261 179
Authorised, but not contracted 1 181 503 753 144
1 377 771 1 014 323
5. Depreciation of property, plant and equipment 246 870 197 481
6. Net asset value per share (cents) 3 884 3 580
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. Revenue includes excise duty.
BASIS OF PREPARATION, ACCOUNTING POLICY AND COMPARATIVE FIGURES
The abridged consolidated annual financial statements are prepared in accordance with the
JSE Limited Listings Requirements for preliminary reports and the requirements of the
Companies Act applicable to summary financial statements. For the Listings Requirements
preliminary reports must 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, prepared under supervision of the Group financial director,
MJ Botha CA(SA), and the financial information has been correctly extracted from the
underlying annual financial statements.
The accounting policies applied in the preparation of the consolidated annual financial
statements 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 new accounting standards, interpretations and
amendments to IFRS standards that have come into effect and have been adopted by the Group
during the current financial year:
- IAS 19: Employee Benefits (effective 1 January 2013)
- IFRS 10: Consolidated Financial Statements (effective 1 January 2013)
- IFRS 11: Joint Arrangements (effective 1 January 2013)
- IFRS 12: Disclosure of Interest in Other Entities (effective 1 January 2013)
- IFRS 13: Fair Value Measurement (effective 1 January 2013)
- Revised IAS 28: Investments in Associates and Joint Ventures (effective 1 January 2013)
- Revised IAS 27: Separate Financial Statements (effective 1 January 2013)
- Amendments to IFRS 7 Disclosures – Offsetting Financial Assets and Financial Liabilities
(effective 1 January 2013)
- Amendments to IAS 1: Presentation of Financial Statements (effective 1 January 2013)
- Amendments to IAS 16: Property, Plant and Equipment (effective 1 January 2013)
- Amendments to IAS 32: Financial Instruments Presentation (effective 1 January 2013)
Comparative financial statements have been restated, where applicable, to account for the
amendments to and adoption of the following standards:
IAS 19: Employee Benefits requires the immediate recognition of all past service costs; and
interest cost and expected return on plan assets are replaced with a net interest amount that
is calculated by applying the discount rate to the net defined-benefit liability/(asset).
The Group has applied the standard retrospectively in accordance with the transitional provisions
of the standard.
IFRS 10: Consolidated Financial Statements establishes principles for the presentation and
preparation of consolidated financial statements when an entity controls other entities. Based on
these principles, certain entities, previously classified as joint ventures, are now classified
as subsidiaries. The Group has applied the standard retrospectively in accordance with the
transitional provisions of the standard.
IFRS 11: Joint Arrangements require that the Group applies equity accounting for joint ventures
and eliminates the proportionate consolidation option. Previously, the Group proportionately
consolidated its joint ventures, which required that it include its share of assets, liabilities,
income and expenses of joint ventures on a line-for-line basis in the consolidated financial
statements. Under the equity method, the investment in joint ventures is initially recognised
at cost and the carrying amounts are increased or decreased to recognise the Group's share of
profit or loss and movements in other comprehensive income of joint ventures after the acquisition
date. The Group has applied the standard retrospectively in accordance with the transitional
provisions of the standard.
The effect of the restatement on the comparative financial statements is summarised below:
Changes in
Previously accounting Currently
reported policies reported
R'000 R'000 R'000
Income statement
30 June 2013
Revenue 15 858 158 (132 550) 15 725 608
Operating expenses (14 081 320) 108 882 (13 972 438)
Other gains 10 849 (200) 10 649
Finance income 22 222 (515) 21 707
Finance costs (262 926) 1 492 (261 434)
Share of equity accounted earnings 57 668 7 501 65 169
Taxation (518 356) 5 947 (512 409)
Statement of financial position
30 June 2013
ASSETS
Property, plant and equipment 3 547 278 (158 328) 3 388 950
Biological assets 118 446 (17 159) 101 287
Financial assets 156 471 165 043 321 514
Investments in joint ventures - 96 506 96 506
Intangible assets 1 513 056 (7 409) 1 505 647
Deferred income tax assets 70 645 (11 868) 58 777
Inventories 6 338 274 (78 438) 6 259 836
Trade and other receivables 1 805 685 (28 869) 1 776 816
Current income tax assets 33 659 (479) 33 180
Cash and cash equivalents 341 495 14 080 355 575
EQUITY
Non-controlling interest (30 333) (317) (30 650)
LIABILITIES
Deferred income tax liabilities (483 722) 4 496 (479 226)
Trade and other payables (2 926 402) 18 898 (2 907 504)
Interest-bearing borrowings (2 786 773) 2 (2 786 771)
Provisions (295 329) 474 (294 855)
Current income tax liabilities (3 963) 36 (3 927)
The adoption of the other amendments and statements had no material impact on the consolidated results
of either the current or prior periods.
OPERATING PERFORMANCE
Reported headline earnings rose 40,4% to R1,5 billion and headline earnings per share increased 35,7%.
Operating profit increased 22,9% to R2,2 billion.
In April 2013, the Group acquired Burn Stewart Distillers Limited (BSD). The results of this entity for
the full year and the remeasurement and reversal of the contingent purchase consideration of R159,0 million
payable on the BSD acquisition are included in earnings.
Normalised headline earnings and operating profit, excluding the remeasurement of the contingent
purchase consideration for BSD and additional interest provision on excise duty in the current period
and the full impact of new business acquisition costs and the interest provision on excise duty in the
previous year, increased by 1,7% and 8,1% respectively.
Revenue grew 12,8% to R17,7 billion on a sales volume increase of 3,1%.
Domestic revenue increased by 5,2% and sales volumes by 2,6% in a challenging economic environment
which continued to curtail consumer demand. Distell’s cider and RTD (ready-to-drink) brands reflected
good growth albeit at a slower pace than in previous years. The spirits portfolio showed a volume
decline, primarily as a result of the depressed performance of South Africa’s brandy category. Sales
volumes of the wine portfolio reflected modest growth.
International sales volumes, including Africa, rose by 4,5% while revenue improved 34,2%, benefiting
from a weaker rand and the inclusion of the BSD brand portfolio for a full year. The cider and RTD and
spirits portfolios delivered volume growth of 4,9% and 19,2% respectively, while the wine category
showed a marginal volume increase.
Sub-Saharan African markets, outside South Africa, continued to deliver strong results with volume
growth across all categories. The region contributed 49,6% to foreign revenue.
The financial results for the period, supported by satisfactory overall revenue growth, were positively
influenced by a weaker rand. Steep increases in excise duties and marketing expenses were partially
offset by foreign currency gains, the benefits of improved efficiencies in the business and the
normalisation of certain raw material input costs.
Net finance costs decreased from R239,7 million to R217,6 million. Net finance costs, excluding
the provision for interest on excise duty in the current and previous years, increased from
R68,0 million to R206,4 million.
The effective tax rate decreased from 32,1% to 25,4%, due to non-taxable gains relating to the
remeasurement of the BSD contingent purchase consideration in the current year and non-deductible
expenses in the prior year.
INVESTMENT AND FUNDING
Total assets increased by 11,5% to R15,9 billion.
Investment in net working capital increased by 22,9% to R5,9 billion and inventory by 9,8% to
R6,9 billion. Of this, bulk spirits in maturation, planned in accordance with the Group’s longer-term
demand projections, grew 28,2%. Bottled stock and packaging materials reflect a decrease of 13,0% on
the previous year.
Capital expenditure for the year amounted to R691,8 million, of which R276,3 million was spent on the
replacement of assets. A further R415,5 million was directed to the expansion of capacity, mainly in
relation to the Group’s cider and whisky manufacturing facilities and its operations in sub-Saharan
Africa.
Cash retained for the year amounted to R46,9 million (2013: R563,0 million consumed). The Group
remains in a strong financial position, as shown by a debt to debt-plus-equity ratio of 28,5% and a
debt-equity ratio of 39,8% at the end of the reporting period.
IMPACT OF RESTRUCTURED BEE TRANSACTION
As disclosed in a circular to shareholders on 17 December 2013, Distell’s original BEE transaction was
restructured on 17 January 2014. The 17,7 million additional shares, issued to members of the BEE
Consortium in terms of the transaction, increased the weighted average number of shares in issue to
209,9 million (2013: 202,3 million) and, therefore, impacted earnings and headline earnings per share for
the year. As a result, normalised headline earnings per share declined by 1,7%.
The transaction enhances the financial sustainability of the Distell Development Trust (CSI trust),
enabling it to effectively fund its corporate social investment programme. This BEE ownership initiative
has created significant value for all its stakeholders, including more than 4100 employees.
POST BALANCE SHEET EVENT
Subsequent to the financial year-end, Distell has entered into a definitive agreement to acquire a 26%
share of KWA Holdings East Africa Limited (KHEAL)for approximately R105,0 million. KHEAL is Kenya’s
leading spirits manufacturer, bottler and distributor, with strong and established local mainstream
brands. The transaction enables Distell to expand its production and distribution footprint in leading
East African markets.
PROSPECTS
Global economic activity has broadly strengthened, but conditions are expected to remain volatile.
The balance of risks has improved, but remains on the downside.
In the domestic economy high unemployment and moderate growth in disposable income continue to curtail
consumer spending and tough trading conditions are expected to persist.
The strength, appeal and diversity of Distell’s portfolio of brands, as well as our broad geographic
footprint across a range of economies and regions, provide us with opportunities to further unlock real
stakeholder value in a trading environment which is en route to recovery, albeit at modest levels.
DIRECTORATE
Mr Lucas Verwey stepped down as non-executive director from 5 May 2014 and has joined the executive
management team.
AUDITORS’ REPORT
The abridged consolidated annual financial statements are extracted from audited information, but
are not themselves 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 52, of 183,0 cents (2013: 183,0 cents)
per share for the year ended 30 June 2014. This represents a total dividend of 337,0 cents (2013: 335,0 cents)
for the year and a dividend cover of 2,1 times (2013: 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%. Dividends 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 25 August 2014 is 221 435 026 (2013: 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, 19 September 2014, and will be paid
on Monday, 22 September 2014. The last day to trade cum dividend will be on Friday, 12 September 2014,
and shares commence trading ex-dividend from Monday, 15 September 2014. Share certificates may not be
dematerialised or rematerialised between Monday, 15 September 2014, and Friday, 19 September 2014, both
days inclusive.
Signed on behalf of the board
DM Nurek RM Rushton
Chairman Managing Director
Stellenbosch
25 August 2014
Directors: DM Nurek (Chairman), PE Beyers, MJ Botha, JG Carinus, GP Dingaan,
JJ Durand, E de la H Hertzog, MJ Madungandaba, LM Mojela, CA Otto,
AC Parker, RM Rushton (Managing Director), CE Sevillano-Barredo,
BJ van der Ross
Company secretary: L Malan
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
Bunnahabhain
The core range for Bunnahabhain consists of 12, 18 and 25 year old malts and, like all our malts,
they are un-chillfiltered and natural in colour. The brand has developed a strong following of
South African aficionados, partially because of its relative rarity and singular flavour. Because
of its superior quality, Bunnahabhain consistently wins top awards at international competitions.
Nederburg
South Africa’s most awarded wine estate continues to add to its winning status. Nederburg was
awarded a regional Decanter World Wine Awards trophy in London as well as the South African Sweet
Chenin Blanc Trophy at the 2014 International Wine Challenge. As a brand that also gives back,
Nederburg recognises the need to conserve and sustain our physical heritage, and for its conservation
efforts Nederburg was granted Biodiversity & Wine Initiative membership in 2011.
Hunter’s
Hunter’s is the world’s second largest cider by volume and is available in over 35 countries globally.
The brand has consistently seen double-digit volume growth since 2009 and is now a significant
contributor to Distell’s profits. Hunter’s celebrated 25 years in 2013.
Bain’s Cape Mountain Whisky
Inspired by the Cape Mountains and its natural beauty, Bain’s Cape Mountain Whisky is South Africa’s
first single-grain whisky. It is crafted at the James Sedgwick’s Distillery in Wellington. The brand
has won a sixth consecutive gold medal at the 2014 International Wine and Spirits Competition.
Savanna Dry
Savanna Dry is a clear 100% apple cider made from the juice of crushed Elgin apples. The magic of
transforming humble apple juice into sublime cider is all in the fermentation process. Launched in 1996,
Savanna was the first cider in South Africa to be packaged in glass, and while the rest have since caught up,
compared to other ciders, our bottle has a very unique "dumpy" shape.
Amarula Gold.
This vibrant new addition to the Amarula family is made to be mixed and enjoyed. Just like Amarula Cream,
Amarula Gold is made from hand-harvested marula fruit, double distilled and aged in oak for 24 months to
enhance its aromatic, fruity flavour, but unlike it, no cream is added. Amarula Gold is packaged in a clear
bottle to show off its rich, golden colour and sports a black version of the brand's signature neck tassel.
Date: 25/08/2014 01:47:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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