Distell full year diluted HEPS up 21.2%

Revenue rose 14.7% to R9.4 billion on a sales volume increase of 6,9%. Basic earnings grew 11.8%. Headline earnings were up 20.9% to R941.9 million and headline earnings per share by 20.3% to 471 cents.

Diluted headline earnings per share increased 21.2% from 364.7 cents to 44.2 cents. A dividend of 132 cents per share has been declared, an increase of 21.1% on last year's final dividend, bringing the total to 236 cents per share (2007: 196 cents). The total dividend represents a dividend cover of 2.0 times by headline earnings, and is 20.4% higher than in the previous year.

Trading income lifted 19.7%, thanks to the good revenue growth achieved, as well as the benefits derived from improved throughput and continued advances made to enhance efficiencies across the business, said MD Jan Scannell.

The group's ability to constantly raise the performance of operating units had also improved net operating margin from last year's 13.6% to 14.2%. Scannell said despite the tough global trading environment, Distell had continued to make significant progress in building the contribution of international business to total revenue.

International business now represented 20% of total revenue, up from 18% the previous year, with the company trading, in addition to established markets, in developing countries in Africa, Asia and Latin America, while fast building the profile of its products in the travel retail duty-free channel.

Domestically, sales volumes increased 4,0%. Cider brands Savanna and Hunter's and RTDs (ready-to-drinks) were the stars of the portfolio, pushing up sales volumes 6.7% in a market characterised by contracting disposable income.

This performance, said Scannell, was all the more gratifying in that it had been achieved despite production constraints resulting from the national shortage in supplies of packaging and carbon dioxide affecting the entire beverage industry, as well as initial capacity limitations at Distell's own production sites, since addressed by commissioning additional plant.

Spirit volumes increased 2.1%, largely because of growth in liqueurs, key brandy brands, and whiskies. "Amarula further entrenched its position as category leader. Among the brandies, notable performers were Richelieu and Klipdrift, with our connoisseur potstill, Klipdrift Gold, in particular, showing impressive gains."

He said the company had also succeeded in further penetrating the fast-growing whisky category with very promising gains achieved amongst local and imported brands. These included Distell-owned products Harrier, Knights, and Three Ships, as well as Scottish Leader and Black Bottle, owned jointly with Burn Stewart Distillers of Scotland.

"We are well positioned in the brown spirits segment to simultaneously take advantage of the growing appetite for whisky and for gourmet brandies. We also offer a basket of products across the pricing continuum to suit a range of consumer budgets."

He noted that while the entire white spirits market had remained under pressure, Distell brands had been able to hold their own, retaining market share. Despite the highly fragmented and price-competitive nature of the domestic wine market, the wine portfolio had still been able to deliver profitable volume growth of 2.0%, he said.

International sales volumes, excluding Africa, increased 13,4%. Spirit volumes grew 10,8%, thanks to solid performances in most key markets. Wine sales volumes also showed a healthy increase, rising 12.6%, and ciders 35.2%, albeit off a low base. As a result, international revenue grew 23.9%.

Revenue derived from African countries rose 27.7% on a volume growth of 24.5%, fuelled by continued growth in major developing economies, increased capital inflows, a buoyant commodities sector and improved economic stability in many countries on the continent. African countries outside the BLNS region (Botswana, Lesotho, Namibia and Swaziland) were starting to make a significant contribution, delivering revenue growth of 43.5 %.

"We were particularly encouraged by the gains achieved by JC Le Roux and Drostdy-Hof on the continent, while cider as a beverage category is taking root in many African countries, which we see as an exciting development," added Scannell.

The newly repackaged Nederburg had succeeded in garnering greater consumer support in Germany, its biggest market after South Africa, and was now one of the top 10 wine brands in the non-discount retail sector in that country.

In Scandinavian countries, Distell brands held a commanding market share and healthy progress was being made with wines and liqueurs in Eastern Europe, particularly Russia and Romania, as well as in Korea, Japan, the United Arab Emirates and Australasia. Two Oceans and Obikwa had delivered good growth in Canada to retain their leadership of the South African wine category.

Total assets increased 7.4% to R6.4 billion. Capital expenditure amounted to R385.9 million, of which R178 million was spent on the replacement of assets. A further R207.8 million had been directed to the expansion of cider and spirit production capacity, as well as the refurbishment of the Wadeville plant, partially destroyed by fire during the previous reporting period.

The group remained in a strong financial position with interest-bearing debt, net of cash and cash equivalents at R31.3 million at year-end. Turning to the current trading environment, Scannell said that in a climate of declining disposable income, it would be the strongest brands, supported by investment in infrastructure, marketing and service levels that would prevail.

"We are appropriately structured to compete effectively and we shall continue to seek ways of enhancing our cost-efficiencies and quality levels so our brands, many of them household names for South Africans, remain the first choice for consumers.

"We are also encouraged by opportunities on the international front and on the African continent where we have established strong networks and trading and distribution alliances with key partners." He said the group expected to reflect continued growth in revenue and earnings, albeit at more modest levels."

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