Distell restructure ushers in a new era
Eyeing geographic expansion
LIQUOR company Distell Group said yesterday that its anticipated restructuring was set to usher in a new era for the business in a move that would make it a serious global player in its chosen markets.
Managing director Richard Rushton said on June 22 Distell announced its intention to restructure and simplify its multi-tiered shareholding structure through schemes of arrangement.
“The rationale is to create one entry point with a larger free-float to increase liquidity and investor appeal to support valuation and mergers and acquisitions potential in future. This process is currently under way and will require shareholder approval later in the year,” Rushton explained.
When the restructuring was completed, it was anticipated that it would be easier for Distell to pursue acquisitions and attract investments. In July Distell announced that it had acquired 26 percent of Best Global Brands for $54.6 million (R710.16m).
It had also entered into an agreement to acquire the remaining 74 percent no earlier than the end of 2019, subject to various operating hurdles being achieved and conditions met.
Rushton added that the transaction gave Distell access to a strong pan-African brand supported by an established trading platform with high quality local production facilities in Angola and Nigeria as well as a solid presence in Kenya and Zambia.
“Looking ahead, we will focus on growth through breakout category and geographic expansion. We will also redouble our efforts to enhance our margins while using our assets more efficiently to increase our returns as a company,” Rushton added.
In the results for the year to end June, Distell reported a 3.7 percent increase in group revenue to R22.3bn, with domestic market revenue increasing by 7.8 percent.
Headline earnings decreased by 3.6 percent to R1.6bn and headline earnings per share declined by 3.7 percent to 708.3 cents a share. However, they increased by 7.4 percent and 7.2 percent respectively on a normalised basis. The group declared a total dividend of 379c a share.
African markets, outside of South Africa, delivered mixed results. Revenue was maintained on sales volumes which were down by 5.2 percent compared to the previous year. Focus markets in Africa such as Namibia, Kenya, Nigeria and Zimbabwe all recorded strong growth, but the overall performance was again negatively impacted by the tough macro-economic conditions in Angola.
The performance in international markets beyond Africa was resilient amid more challenging trading conditions.
Jordan Weir, equities trader at BayHill Capital, said the results were slightly weaker than expected, mainly influenced by negative currency effects as well as a large impairment of assets during the financial year.
“Accounting for roughly 74 percent of the top line, South African sales increased 7.8 percent helping bolster Distell’s revenue for the period. There was a noticeable trend seen in the drop-off in wine sales while spirit sales improved remarkably during the financial year,” Weir said.
He said while Distell had indicated that sales volumes might come under potential stress due to South Africa’s underlying recessionary environment, moderate growth should be expected into the back end of 2018.
Distell shares fell 2.68 percent to close at R138.19 on the JSE yesterday.