Distilled progress

It’s taken a few years, but shareholders in liquor conglomerate Distell can surely now taste just how much CEO Richard Rushton — a former Sabmiller executive, appointed in 2013 — is fortifying the business model. The standout slide in the company’s recent investment presentation covering the six months to December displayed Distell’s success in pushing through above-average price increases on its best-selling brands, which include top-selling ciders and ready-todrink beverages (RTDS) like Savanna, Hunter’s and Bernini.

The bulk of the increase of about R1bn in interim turnover to R14.4bn came from price increases — an achievement, considering the prolonged economic hangover. It also testifies to the strength of Distell’s array of brands. Ciders and RTDS reported a 1.2% volume increase, but managed to grow revenue a sprightly 8.3%. Wine dropped 4.2% in volumes, but this was offset by a 4.4% gain in revenue.

The recent decision to pack the premium wine brands into a standalone company called Libertas should help margins further. Distell is also showing cheery growth in its mainstream wine brands such as Drostdy-hof, 4th Street and Paarl Perlé. A 3.1% volume gain in the spirits segment was transformed into a 9.2% gain revenue.

Obviously, better times locally and in key African markets could have a profound push on volumes. With pricing power intact, Distell could be one to slowly start sipping on.

High points

Caxton, one of the JSE’S more conservatively run empires, rarely seems too enthusiastic about marketing its prospects to the wider investment community. In any event, most punters would probably prefer to steer clear of the austere Caxton, as its main markets are not likely to turn vibrant soon.

Deep-value and patient investors, however, might take note of directors’ specific highlighting of a “strong” debtfree balance sheet, as well as a reference to being “well-positioned to invest in any strategic acquisition opportunities that may arise”. Directors also made a point of disclosing that the value of Caxton’s properties and cash on hand is roughly equivalent to the group’s current market capitalisation.

(Yet) another guise

I see Purple Group, the niche financial services provider, is changing its name to Easy Investment Holdings. This is, if I remember correctly, the fourth name change in less than 15 years for the company. It was first known as Avasa, then Purple Capital and most recently Purple Group.

The name change reflects the longer-term prospects for 70%-owned Easyequities, the low-cost investment platform, and an effort to rebrand other wealth-creation and trading hubs under the “Easy” banner. I certainly appreciate — personally and on a broader philosophical basis — the effort to make investing more accessible, especially the buying of fractional shares. This helps enormously in tapping small savings into big price-tag shares like Naspers, BAT and some resource giants.

Noble though the pitch is, however, Purple has struggled for sustained profits. In the year to August there were applause-worthy achievements at Easyequities — with revenue up 68%, platform assets increasing 144% to R3.5bn and funded investment accounts swelling by 77% to 68,739 — but revenue of about R16m was unceremoniously snuffed out by operating expenses of R42m. Management advised that various initiatives are under way to contain or cut expenses.

The issue really is that the Easyequities platform will need many more clients, investing and trading much more capital, to secure sustained profitability. This seems unlikely any time soon, as the prevailing mood in the market (albeit slightly more upbeat than last year) is not conducive to exuberant retail investor participation. The next 18 months will not be an easy stretch.

I certainly appreciate the effort to make investing more accessible, especially the buying of fractional shares