DESPITE stellar annual results delivered by Distell, its shareholders' noses were out of joint after the South African wine and spirits maker placed its dividend on ice again, which saw its share price tank 3 percent in intra-day trade.
The shares in Distell, which houses brands such as Amarula, Savanna, Hunter's Dry, Durbanville Hills and Nederburg, closed the day 1.69 percent lower at R170.01 on the JSE yesterday.
For the 12 months ended June, headline earnings and headline earnings per share – a gauge of profitability in South Africa – increased by a staggering 227.3 percent to R1.7 billion and by 227.1 percent to 769.6 cents, respectively, while its group revenue increased by 26.3 percent to R28.3bn, this on the back of a 26.3 percent rise in volumes.
Reported earnings before interest, taxes, depreciation, and amortisation increased by 99.8 percent to R3.8bn, while net debt at the end of the reporting period was more than halved from R5.9bn in 2020 to R2.2bn, better than pre-pandemic levels. Cash generated from operations recovered and grew 144 percent to R4.6bn.
Commenting on the results, Distell's chief executive, Richard Rushton, said: “The strength of our diverse portfolio of trusted brands has continued to play well to changing income and occasions due to lockdown conditions. Our growing RTM (route-to-market) investment in our Africa platform and focused premium spirits businesses are delivering results based on previous investment decisions we made to diversify our revenue streams.”
Distell said it had held the dividend pending the outcome of its takeover talks with Heineken, the world's second-largest brewer, but that it would conclude takeover talks by the end of next month.
However, in the event that discussions were terminated, “the board intends to declare a dividend in respect of the financial year ended June 30, 2021. Although discussions have progressed, there is no certainty that the remaining aspects will be successfully resolved and agreed.
“The board believes it will be able to provide more detailed information to shareholders on the potential transaction before the end of Q3 (third quarter) 2021,“it said.
Last year Distell shareholders also did not receive a final dividend pay-out due in part to uncertainty caused by alcohol bans on the back of the Covid-19.
Distell's operating costs for the year ended June 30, however, increased by 21.2 percent.
In Distell's largest market, South Africa, revenue grew by 29.4 percent, with volumes up by 28.7 percent.
However, Rushton said: “The impact of the Covid-19 pandemic and alcohol sales bans in South Africa continued to test the resilience and agility of our South African business, which has shown a tremendous recovery, despite a 20 percent reduction in trading days.”
The Africa region contributed 63.6 percent to Distell's foreign revenue, with its contribution to group revenue comprising 17.2 percent in the period, while revenue in Distell's international markets outside Africa grew by 10 percent “alongside an expected volume decline of 10.8 percent, attributable to the cessation of sales of non-core wine brands, bulk whisky and the exit from the ready-to-drinks business.”
Distell says strong international premium spirits growth continued, led by single malts in all its major markets and its export portfolio showed signs of resiliency despite Covid-19 disruption.
Going forward, the group said that it would have to manage volatility around commodity costs, foreign currency headwinds, and global shipping prices in relation to exporting to international markets, which was likely to add margin pressure going into the first half of the 2022 financial year.
BUSINESS REPORT