The Distell Group is reaping the benefits of its revised corporate strategy under MD Richard Rushton, making impressive headway at home and encouraging progress in Africa to deliver volume and value growth ahead of many of its global peers.
Weathering largely difficult global markets, South Africa’s leading producer of wines, spirits, cider and other RTDs, succeeded in raising revenue year-on-year by 10,4% to R19,6bn on a sales volume increase of 5,7% for the 12 months to June 30, 2015.
Operating costs rose by 10,9% to R17,5bn for the period, reflecting the company’s stepped up investment in skills, infrastructure, route to market and revenue management capabilities to enhance its competitiveness in key markets, particularly on the African continent. Despite these investments, the group’s normalised EBITDA increased by 8,1% to R2,5bn.
Normalised operating profit grew by 6,5% to R2,1bn. This figure excludes other gains, arising from the remeasurement and reversal of the contingent purchase consideration of R159,0m for Burn Stewart Distillers the previous year. Reported operating profit was 1,8% lower.
Normalised headline earnings rose by 6,5%, while reported headline earnings dropped by 5,2% to R1,4bn.
Distell’s biggest gains since the implementation of its new corporate strategy have been in the domestic market, where revenue increased by 11,8%, and sales volumes, by 6,7%. This was despite an environment of low economic growth and rising living costs that curtailed consumer spending.
Commenting on the local market performance, Rushton said, “We are extending our reach and penetration of the domestic market and we have also implemented more rigorous pricing and promotion strategies across our brand portfolio. These factors, coupled with the growth of our core wines and ready to drink brands, have assisted our performance at home. What we are developing in South Africa can now be selectively applied in other priority markets.”
Its sales force effectiveness programme also saw the company take on 120 additional employees.
He said the local achievement was in line with Distell’s corporate strategy that focused on leading in selected geographies by targeting appropriate channels with its competitive portfolio of optimally positioned brands. Work was currently underway to integrate the supply chain to effectively support the new strategy, and enhance operational and cost efficiencies and asset optimisation.