Let's raise a glass to Distell's cautiously ambitious plans
Much of the growth impetus at top and bottom line will come from its endeavours in Africa, says the company
Liquor giant Distell, which is controlled by investment group Remgro, is still pursuing an ambitious target of doubling revenue and profits in five years.
Speaking at the release of interim results on Friday, Distell CEO Richard Rushton said much of the growth impetus at top and bottom line would come from the company’s endeavours in African markets.
Rushton was particularly pleased with the showing of Best Global Brands (BGB), which operates in Angola and Nigeria and posted sales volume and profits that were above expectations.
Distell acquired a 26% stake in BGB for $54.6-million last year and has an option to acquire the remaining 76% interest.
Distell’s share of BGB’s profits was about R42m.Rushton said BGB’s Angolan operations were set to reach 33 million litres at year end and Nigeria another 10 million litres, with expansion plans into Kenya, Zambia and Mozambique on the cards.Distell financial director Lucas Verwey reckoned that if Distell acquired the remaining tranche of shares in BGB the company had the potential to add as much as R800m to EBITDA (earnings before interest, tax, depreciation and amortisation).
“BGB has significant expansion potential ... it offers a platform to build a scale pan-African business.”Aside from accelerating the African thrust, Distell also plans to expand into one international market.
Rushton said acquisitions would not be rushed and would be carefully considered.
“We are not wildly chasing a number. We recently had an opportunity (in an emerging market) that we looked at and decided not to pursue. There are more opportunities out there ... if the right deal comes along we will pursue it.”
Sales volumes up
In the interim period Distell – which owns brands such as Nederburg, Savanna, Hunters, Bernini, Amarula, Viceroy, Klipdrift, Fleur du Cap, 4th Street and Durbanville Hills – reported a 3.6% gain in sales volumes for the six months to end December. This translated into a 9.1% gain in revenue to R13.65bn with EBIDTA coming in 11% higher at almost R2.1bn.
Encouragingly, net cash from operations climbed more than 15% to R1.76bn.
Rushton said Distell registered growth in 12 out of its top 15 largest brands by revenue, with cider brand Savanna achieving double-digit volume and revenue growth.
He said Distell’s brandy brands, led by Viceroy, also managed double-digit volume and revenue growth.
Gin also continued a run of strong double-digit growth of 21%.Top tipple pays off
Rushton said mainstream wine growth was muted by increased competition and a “trading up” trend.
He said Distell’s premium wines, including Nederburg, Durbanville Hills and Fleur du Cap, showed strong growth.
Rushton reported that Distell’s premium RTD (ready-to-drink) range continued to perform well, with grape-based brand Bernini managing a 41% volume gain and a 55% surge in value.
“Bernini is SA’s fastest-growing grape RTD.”
On global markets, Rushton noted that liqueur Amarula was growing in its top five markets, while there was also market share growth in 17 international markets for South African bottled export wines.