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Distell interim results (Released February 2003)

Distell interim results (Released February 2003). Jan Scannell, Managing Director. Contents - overview. Global trends in Alcoholic Beverage (AB) market SA industry Distell’s performance Locally Into Africa Internationally Financially Prospects. Global trends in AB market. Producers

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Distell interim results (Released February 2003)

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  1. Distell interim results (Released February 2003) Jan Scannell, Managing Director

  2. Contents - overview • Global trends in Alcoholic Beverage (AB) market • SA industry • Distell’s performance • Locally • Into Africa • Internationally • Financially • Prospects

  3. Global trends in AB market • Producers • Consolidation • Profit warnings • Oversupply • Retailers • Multiples increasingly powerful • Consumption trends • ABs (including FABs) under pressure • New world wines growing

  4. Global consumption trends Change in alcohol consumption by world region (% change 1990 – 2001) (Excluding FABs)

  5. Role of brands in international AB market • Brand building • Spirits • Beers • FABs • Wines

  6. SA industry in a global context • Growth of wine exports • Tourism • Availability of raw material (imports/exports)

  7. The AB market in RSA Source: Excise

  8. Distell’s domestic sales portfolio December 2002 (Gross income level)

  9. Distell’s top performing local brands (% growth v 2001) Paarl Perle Savanna Richelieu Nederburg Amarula Fish Eagle Klipdrift Overmeer Oude Meester Hunters

  10. Distell’s drive into Africa • Volume growth of 14% year on year until end December • Increased investment • Building brands • Grow Africa Project

  11. Distell in the rest of the world London Bonn New York Singapore Sydney São Paulo Stellenbosch

  12. Progress of Amarula since 1994 (’000 9-litre cases)

  13. International wine strategy – progress

  14. Distell interim results (Released February 2003) Merwe Botha, Financial Director

  15. Sales revenue • Disposal of retail interests • Comparable sales revenue growth 15,7% • Domestic sales volumes unchanged – Favourable mix • Sales volumes of LP wines and FABs under pressure • International sales volumes up 23,7% • Increased international sales revenue contribution (50,8% growth) • Overall market mix favourable • Exchange rate deterioration of 20% compared to previous 6 months

  16. Operating expenses • Containment of production overheads • Focus on waste management • Benefits of restructured operations realised • Focussed marketing and advertising continued

  17. Trading income • Strong growth of 52,3% • Improvement in net operating margin from 9,5% to 13,3% • Result of growth in sales revenue, a favourable sales mix, efficiencies in production and other restructuring benefits

  18. Net financing costs • Net total of dividend income and interest paid • Increase as a result of previous year capex and exceptional item – increase in interest rates • Working capital management improved

  19. Foreign currency differences • Arising from conversion of foreign currency balances to rand values at period end spot rate • Turnaround of previous year favourable impact • Substantial appreciation in the value of the rand towards end of December 2002 • R45,6 million of R53,2 million unrealised

  20. Exceptional items • Previous period primarily merger costs • This year represents profit on disposal of interest in subsidiary

  21. Headline earnings • New definition of headline earnings – GAAP • Comparative figures restated • Headline earnings up 22,1%

  22. Salient features – balance sheet R’000 2002 2001 % change Total non-current assets 1 793 713 1 835 434 (2,3) Inventories 1 545 499 1 505 637 2,6 Trade and other receivables 778 281 786 818 (1,1) Short-term investments and cash 447 101 265 158 68,6 Total non-current liabilities (942 039) (856 075) 10,0 Trade payables and provisions (644 881) (755 959) (14,7) Short-term borrowings (704 150) (648 861) 8,5 Total equity 2 273 524 2 132 152 6,6

  23. Total non-current assets • Capex spent of R85,1 million • Nederburg Cellar • Epping Bottling Plant • Include investments ito structured finance transaction (R540,1 million)

  24. Current assets • Significant improvement in customer service levels • New logistical planning system implemented and infrastructure stabilised • Real reduction in investments and accounts receivable • Short-term investments include R206,4 million in respect of short-term portion of preference shares

  25. Utilisation of assets • Trading income for six months as a percentage of operating assets improved significantly from 7,5% to 11,1%

  26. Cash flow statement R’000 2002 2001 Trading income 389 575 255 779 Working capital changes (103 304) 24 737 Cash generated from normal operating activities 281 940 323 978 Cash retained from normal operating activities 42 609 153 252 Dividends paid (68 453) (80 188) Capex (85 062) (152 638)

  27. Working capital changes • Seasonality of business • Increased working capital requirements in December • Timing differences in month-end creditors payments (R88,6 million)

  28. Distell interim results (Released February 2003) Jan Scannell, Managing Director

  29. Prospects • Trading prospects • Excise increase • Illegal products • Proposed labelling legislation • Competition Tribunal

  30. Thank you www.distell.co.za • Questions?

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