Distell raises a glass to its expected hike in annual earnings

DESPITE a torrid year, with the challenge of lockdowns and bans on the sale of alcohol, brewing and beverage company Distell has raised a glass to expected buoyant annual earnings, while it slashed its debt by more than half.

In a trading statement for the year to June 30 released on Friday, Distell said its headline earnings per share were likely to increase by between 735.6 cents and 782.7c, up 19.9 percent from the previous year, while earnings per share were forecast to rise by 838.1c to 866.5c, an increase of 118.5 percent from the prior year.

The group improved its net debt position compared to pre-Covid-19 levels because of management’s proactive moves to protect the balance sheet during the past 12 months. Its net debt position at June 30 was expected to be less than R2.3 billion, compared to R5.9bn at the end of the prior period, and R3.9bn at end of full-year 2019.

Its operating profit had taken a R30 million hit, or 9.8c per share, after tax, on the prohibition on the sale and distribution of alcohol during the level 4 lockdown.

Distell cautioned that its expected results could be knocked during the current reporting period, because of potential credit loss provisions relating to customers being unable to trade or being restricted from trading, the potential impairment of stock dependent on the effect of the booze restrictions and timings, and the valuation of minority holdings in specific African countries that might also be hit by lockdown measures and challenging economic situations.

In a provisional update on year-to-date trading performance from July 1, 2020 to June 30, the group said despite disruptions due to various alcohol sales bans, the strength of the route-to-market (RTM) in South Africa, alongside improved customer execution, innovations and brand strength had translated into further market share gains across all categories in the period.

This had resulted in the South African business achieving revenue and volume growth of 29.4 percent and 28.7 percent, respectively, compared to the prior period, and a 5.8 percent increase in revenue and a 3.5 percent decline in volume compared to pre-Covid levels for the full-year 2019, despite a 20 percent reduction in trading days in the current reporting period.

Distell’s operations in the Botswana, Lesotho, Namibia and eSwatini (BLNE) performed “admirably” despite specific country bans on alcohol sales. Revenue and volumes improved by 23.6 percent and 22.2 percent, respectively, compared to the prior period, a 6.7 percent increase in revenue with near flat volumes compared to the full-year 2019.

Its Africa business outside of BLNE had continued to perform resiliently, led by Mozambique, Nigeria, Ghana and Zambia, because of continued RTM investments. Comparative revenue and volumes were expected to be up by 22.4 percent and 38.6 percent, respectively. Compared to full year 2019, revenue was expected to increase by 30.5 percent and volumes by 24.5 percent.

Distell said its international operations were knocked early in the onset of the global pandemic.

The group expected to release its annual results on August 26.