Distell grows earnings despite alcohol ban


Distell grows earnings despite alcohol ban


Published Date: 2021-02-25 | Source: Stephen Gunnion | Author: Stephen Gunnion

Distell grows earnings despite alcohol ban

The drinks group is holding back on dividends due to uncertainty but will review its position after June.

Distell has reported a good rise in first-half earnings despite the uncertainty and disruption caused by Covid-19 - including bans on the sale of alcohol.

The drinks group said it lost 41 trading days over the six months to end-December due to the second and third sale of alcohol bans by the government. However, it said it was supported by its diverse product portfolio with strong brands - and stockpiling by customers when they were permitted to buy alcohol. Customers veered towards spirits and mainstream wine, driven by in-home consumption of trusted brands and products with longer shelf lives.

Pressure on consumer disposable income also resulted in consumers seeking more value options which it said played well to parts of its mainstream portfolio. Its wine portfolio recorded overall volume increases driven by 4th Street, while revenue remained flat as consumers traded down in the period. Its spirits category grew overall volumes and revenues, led by Gordon's Gin, Bain's, Olof Bergh and Count Pushkin. Savanna was the stand-out performer in its ready-to-drink (RTD) segment with the company gaining share of the segment.

Distell said its international business performed strongly across all markets, with 15.4% revenue growth and big margin improvement as it capitalised on its premium whisky brands and improved online sales channels. Amarula still managed to grow revenue and volumes despite pressure on the global travel retail market. Volumes at its international business declined by 9.1%, as anticipated, as it stopped selling less profitable wine brands and bulk whisky and exited the RTD market.

Group revenue increased by 3.8% in the six months to end-December as it grew volumes by 0.8%. In SA, revenue held steady as volumes declined by 1.8% Outside Southern Africa, it grew revenues and volumes by about 20%, with strong growth in Kenya, Mozambique and Nigeria. Including Botswana, Lesotho, Namibia and eSwatini, its Africa business grew revenue by 12.7%, with volume growth of 11.7%. It also improved its debt position, reducing net debt to EBITDA to 1.2x from 3.1x last June.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 11.2% and were 16.8% higher on a normalised basis after adjustments for foreign exchange fluctuations. Headline earnings grew by 11.5% and were up 24% once normalised and adjusted for forex. Headline earnings per share increased by 11.6% to 612c. It said dividend payments remained suspended for now.

Distell's shares closed 0.6% up at R114 yesterday. The results were released at the close of trade.


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