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DISTELL GROUP HOLDINGS LIMITED - First quarter trading update (1 July 2019 to 30 September 2019)

Release Date: 23/10/2019 11:30
Code(s): DGH     PDF:  
Wrap Text
First quarter trading update (1 July 2019 to 30 September 2019)

Distell Group Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2016/394974/06)
Share code: DGH
ISIN: ZAE000248811
("Distell" or “the Company” or “the Group”)


During the first three months (1 July 2019 - 30 September 2019)
of the new financial year ending 30 June 2020 (FY 2020), Distell
recorded single-digit Group revenue growth with single-digit
volume decline, compared to the corresponding period in the
previous financial year.

In South Africa, tough trading conditions persist where consumer
spending remains subdued resulting in an adverse effect on the
broader retail sector.   Low single-digit volumes declines were
recorded alongside single-digit revenue improvement.     Revenue
growth in the ready-to-drink (RTD) segment continues to take
share from beer which we will continue to leverage and drive
focused investment and customer execution.    Our wine portfolio
experienced overall flat revenue growth due to increased grape
and wine prices being passed through to the consumer, due to the
drought effects on the 2018 and 2019 harvests.    However select
mainstream and premium wine brands continued commendable revenue
growth despite this.      Revenues from spirits also recorded
incremental revenue growth as consumers trade across the
portfolio seeking value.     We will continue to capitalise on
trends in the segment and our strong position in brandy and
whisky, whilst we build on our white spirits performance.     We
continue to leverage and invest behind core brands and execution
to deliver an increased customer footprint and defend market
share gains made in FY2019.

In the rest of Africa, we achieved single-digit revenue growth
off a high comparative period. The previous period included
stronger sales revenues from both Namibia and Zimbabwe which
have since been affected by varying levels of challenging
economic conditions.    Key markets such as Kenya, Botswana,
Zambia and Mozambique continue to grow double-digit revenues and
volumes. The mainstream spirits category continues to record
double-digit revenue growth off a high base alongside growth in
RTD’s across the continent. Comparable Volume and market share
performance in Best Global Brands (BGB) continues to improve
whilst further currency devaluation and constrained consumer
spending marginally affecting Revenues.   We remain committed to
the potential of the Angolan business coupled with a newly
implemented VAT and excise regime in Q2 FY 2020 which may result
in market improvements.   Our Kenyan operations are expected to
deliver on previous trends whilst our new production facility in
Nigeria is demonstrating early, commendable performance.      We
will continue with a measured investment approach behind our
local production and distribution footprint in Africa, alongside
select inorganic opportunities.

In   the    international   markets,   overall   revenues   were
incrementally lower with improved constant currency earnings as
planned. Our venture business continues to focus its portfolio
on higher margin premium spirits which grew revenue by double-
digits. Strategic brands such as Bunnahabhain, Scottish Leader,
Amarula and Deanston all recorded revenue growth.         Whilst
premium wines recorded overall lower comparable revenue due to
its business recalibration, key brands showed higher revenue and
volume growth in influential markets such the Netherlands,
Germany and Nordic countries. We will continue to implement our
new operating model and portfolio in select regions whilst we
also position the business for partnerships to grow its route-
to-market (RTM).

The outlook for economic growth remains mixed with varying
levels of political and economic risks in many of the markets in
which Distell trades. Whilst the Group has ensured future cost
savings through efficiencies and an improved operating model,
this needs to be balanced with maintaining market share and
growing revenues.   The Group will continue to defend and grow
its domestic market share, invest responsibly behind the
expansion of its African RTM while creating a more agile and
efficient business which aims to enhance margins going forward.

The abovementioned information does not constitute an earnings
forecast and has not been reviewed and reported on by the
Company’s external auditors.

23 October 2019

RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 23/10/2019 11:30:00
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