Strategy and Performance Overview Ana lyst Pre se nta tion F e - - PowerPoint PPT Presentation

Ana lyst Pre se nta tion F e brua ry 2015

Richard Rushton – Managing Director

Strategy and Performance Overview

Stro ng pe rfo rm a nc e in the c o re b usine ss

Despite economic headwinds and a challenging competitor environment, Distell continues to grow its position as South Africa’s leading producer of ciders, wines and spirits with a strong increase in volumes and revenue in our domestic market and in several international markets We are investing at an accelerated pace in our core brands, organisation capability, building Route To Market in Africa, and in owning the ‘last mile’ in Southern Africa To this end we have appointed a number of senior leaders who contribute greatly to the depth of global experience in our leadership team

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Ag e nda

• Market Review
• Salient features of our performance
• Strategy Review & Close

1 2 3

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• Macro Environment
• Key Industry Trends

1 2

Ma rke t Re vie w

• Competitor Performance

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T he Ma c ro - Enviro nm e nt

South Afric a : Slight GDP recovery as oil

price feeds through

• Consumer spending recovering
• Lower inflation outlook
• US$ strength
• Rand volatility set to continue
• SA’s electricity supply challenge
• Investment ratings due in June

0.0 1.0 2.0 3.0 4.0

Q1 2014 Q2 2014 Q3 2014 Q4 2014 f Q1 2015 f Q2 2015 f

% Growth

RSA % Re a l Growth

Consumer spend Real income

Source: BER 5

T he Ma c ro - Enviro nm e nt

Afric a : GDP growth outlook favourable , but slowing

• Nigeria - oil price drop, Boko Haram, election driving uncertainty
• Angola - lower oil prices, Kwanza weakening, import restrictions
• East Africa growing - led by Kenya
• West Africa affected by Ebola – recovery later in 2015
• Kenya, Tanzania set to benefit as net oil importers

Inte rna tiona l: Global projections revised downward

• Increased global geo-political risk – Russia, Middle East
• Slower China growth – at or below 7%
• Russia and Brazil face challenges
• Continued Euro Zone weakness – QE announced

6

0% 10% 20% 30% 40% 50% 60% 70%

United States (241 mn litres) Australia (105 mn litres) South Africa (299 mn litres) United Kingdom (981 mn litres) Global (2177 mn litres)

% Volume Gr

• wth - 2014

L e a ding Cide r Ma rke ts - 80% of Globa l Consumption

Industry T re nds C id e r re m a ins the hig he st g ro wing c a te g o ry

• Growth in global cider

consumption x4 times faster than global alcoholic beverages; and x8 times more than global RTD growth

• SA cider growth

moderating, still fa voura ble

ma rke t funda me nta ls for

future growth

• Growth in global cider

consumption x4 times faster than global alcoholic beverages; and x8 times more than global RTD growth

• SA cider growth

moderating, still fa voura ble

ma rke t funda me nta ls for

future growth

Sources: Euromonitor (2014)

Cider % of Total RTD Volumes

1% 18% 8% 6% 1%

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Industry T re nds Wine b e c o m e s a n e m e rg ing m a rke t p la y

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• Global wine consumption trends in line with total alcoholic beverages growth
• Variable performance geographically: Emerging markets growing faster
• Eurozone widely impacted
• SA wine growth ahead of total alcohol market
• Africa’s wine market remains largely untapped
• Global wine consumption trends in line with total alcoholic beverages growth
• Variable performance geographically: Emerging markets growing faster
• Eurozone widely impacted
• SA wine growth ahead of total alcohol market
• Africa’s wine market remains largely untapped

Sources: Wine intelligence; SAWIS (2014)

• 5%

5% 15% Super Premium (Ave R/litre: R62) Premium (Ave R/litre: R24) Standard Price (Ave R/litre: R15) Total (Ave R/litre:R28)

SA Wine Consumption 2014

% Value Growth % Vol Growth

• 2%

0% 2% 4% 6% 8% Australasia Middle East & Africa Latin America Eastern Europe North America Asia Pacific Western Europe Global

Globa l Wine Consumption Volume Growth % 2014

% Share of Global Wine Consumption 40%

23% 13% 11% 7% 3% 2%

Industry T re nds He a d wind s fo r C o g na c & Sc o tc h Whisky Exp o rts

Source: BNIC, HM Revenue & Customs

• Volumes of Scotch Whisky shipments declined by 1.2%
• Cognac exports (shipment volumes) declined by 1.2%
• Significant slump in sales to Eastern Europe led by Russia
• Austerity measures affect cognac in China
• Volumes of Scotch Whisky shipments declined by 1.2%
• Cognac exports (shipment volumes) declined by 1.2%
• Significant slump in sales to Eastern Europe led by Russia
• Austerity measures affect cognac in China

Cog na c E xport Volume Growth: Ke y Bisquit Ma rke ts July-De c e mbe r

2014 vs. Histor y

Sc otc h Whisky: Volume Growth of E xports

June -Nove mbe r 2014 vs. Histor y

• 1%
• 12%

65%

• 9%

32%

• 41%
• 3%

5% 16%

• 80%
• 30%

20% 70% Belgium South Africa Taïwan France USA

• 76%
• 11%
• 4%
• 2%

3% 3% 4% 15%

• 100% -70%
• 40%
• 10%

20% Eastern Europe Central & South… Australasia Other Europe North America Africa Asia Middle East

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C o m pe tito r Pe rfo rm a nc e Diste ll a he a d o f c o m p e tito rs

10 Source: Companies’ latest published trading results Data note: Net sales revenue excludes excise duties

• Distell performed well, outpacing leading competitors’ revenue growth

− Emerging market footprint − Diverse brand portfolio (product and category mix) − Capability investment showing early benefits

• Competitors impacted by slowdown in Europe, China, Brazil and Russia.

Be e r Spirits Wine Cide r, Wine & Spirits Compa ny

SABMiller Heineken Pernod Ricard Diageo Treasury Wine Estates Vina Concha Y Toro

Diste ll L td (Norma lise d) Diste ll L td (Infla tion a djuste d)

Re porte d NSV Growth

1.5% 0.1% 1.0%

• 0.1%

3.6% 10.0%

10.5%

5.2%

• Corporate
• RSA

1 2

Sa lie nt fe a ture s of

• ur

pe rforma nc e

• Africa

3

• International

4

Ke y De c e m b e r 2014 YT D m e tric s

R10.997 bn 369m litre s R1.473 bn R1 bn

reported revenue – up 10.5% on history sold - up 3.7 % on prior ye a r normalised operating profit – an increase of 7.0% on history normalised headline earnings - up 9.5% on prior ye a r

Inve stme nts in c a pa bility a c c e le ra te d for: Expanding African structures, Revenue

Management, SA Sales Force Effectiveness , Supply Chain Excellence, Brand innovation, Strengthening People Capability

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Stro ng re sults fro m o ur c o re So uth Afric a n o pe ra tio ns!

• Volume growth of 6%
• Ciders continue to grow – innovation underway
• Wine -strong double digit volume/value growth
• 4th Street volume up 166%
• Brandy bottoming out-premiums growing
• SA whisky story emerging – Bains revenue +61%

R evenue

% Diste ll

RSA

12.9% 72.3%

Rev growth against history 13

SA Bra ndy showe d e a rly sig ns of sta bilising

Brandy grew 1.7% - first growth period in many years

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T he c ide rs g ro wth sto ry

200 400 600 800 1000 1200 1400 1600 1800 2000 2,000 2,002 2,004 2,006 2,008 2,010 2,012 2,014

Re ve nue Inde x

Cide r Re ve nue Total Cider

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Afric a g ro wing b ut Ang o la im pa c te d b y shipm e nts… .

* Incl. BNLS, all reported against history

Ang ola : Timing of shipments, PY sell-in ahead

• f duty increases.

In- market sales up 18%

Ke nya : KHEAL 26% stake - growth Gha na : In-market sales 11%,

In country bottling facility

Zimba bwe & T a nza nia : Strong in-market

performances via SABMiller JV’s Equity income up > 30%

Nig e ria : Currently seeding brands,

normalising stocks and building RTM

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Re ve nue % Diste ll

Afric a *

4.1% 15.4%

Afric a * (e xc l Ang o la )

7.2%

% Afr ic a

BNL S

10.4% 53.6%

Ang ola

• 4.5%

21.1%

Za mbia

76.2% 5.5%

Moza mbique

70.7% 5.0%

Kenya

12.5% 2.7%

G ha na

21.3% 2.0%

Zimba bwe

18.9% 1.9%

Nig eria

• 69.7%

1.9%

Slug g ish inte rna tio na l g ro wth – ke y m a rke ts und e r p re ssure

R e ve nue

Inte rna tiona l

9.3% 12.2%

%Cont Distell

• European weakness :

− Russia (spirits), UK (cider) and Sweden (wine)

• Latin America buoyant-Amarula growth
• North America revenue +12% without IBC RTM transaction
• Taiwan value +69% - favorable product mix
• BSD & Bisquit face headwinds despite lift in December

− Scottish Leader re-launched November − Black Bottle launched in France, Germany and South Africa

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• Our Aspirations
• Strategy and Initiatives

1 2

Stra te g y Re vie w

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A Re m inde r o f o ur Aspira tio ns

• A dominant re g iona l alcoholic beverage bra nd and RT

M owne r −

#1 Cide r company g loba lly

−

#2 Alcoholic beverages company in SA

−

L e a ding player in core markets of Afric a

− Presence in at least one ma jor

inte r na tiona l ma r ke t/ g e og r a phy

−

Sc a le positions established in c ore ma rke ts

• Inte g ra te BSD a c quisition
• A diffe re ntia te d pla ye r

− Core ciders, wines and spirits resonating across different consumer occasions

• Enhance ope ra ting ma rg ins, c ost and working c a pita l e ffic ie nc y
• Unloc k va lue from our wine assets

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L E AD

SELECTED EMERGING MARKETS

OWN THE

LAST MILE

SCAL E UP

EXCELLENCE

CAREAND CONT RIBUT E SHAPETHE

FUTURE

CRAF T DIST INCT IVE & COMPE L L ING

BRANDS

C o rpo ra te Stra te g y- Initia tive s a nd Upda te

Stra te g ic Aspira tion: Double revenue and profit by 2020! Ke y initia tive s:

• Grow and win in RSA
• Expand into Africa & one

major international market

• Leverage core brand portfolio
• Build scale positions in core

markets and segments

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L E AD SE L E CT E D MAR KE T S!

Or gani c Gr

• wt

h – T

OP 10 mar ket s

• SA pe rforms!
• Distell brands competitive in key Afric a n ma rke ts
• Focused investment in Gha na & Ke nya
• Nig e ria & Ang ola - RTM alternatives advanced
• Nordic s – down with SA wine-RTM and portfolio focus
• T

a iwa n holds promise!

• Bra zil rev +78%

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CR AF T DI ST I NCT I VE & COMP E L L I NG B R AND P OR T F OL I OS

• Ac c e ssible powe r bra nds deliver solid

performances - Richelieu, 3 Ships, Hunter's, AH Crackling & 4th Street

• Ac c e ssible wine s: revenue up 13%
• SA wine growth in all segments
• Pursuing new c ide r g rowth
• Positive value growth in “luxury bra nds”
• Ne w Bla c k Bottle launch underway-

select markets, Revenue+13%

• Bisquit shows strong SA growth,

underperforms in China

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Ca teg ory YT D Dec 2014

R ev Gr

• wth

Contr ibution Distell

Ac c essible Power Bra nds

9% 87.0%

"L uxury" Bra nds

17% 8.0%

Vineya rds & E sta tes

6% 4.0%

OWN T HE L AST MI L E – COMP

E T E I N T H E S T R E E T !

• SA Sa le s F
• rc e E

ffe c tive ne ss -increased coverage and service − YTD: 5 688 mainstream outlets, 60 sales people − Embedding execution standards - hard work ahead − Exceeding targets and ROI

• Afric a n RT

M capability build continues − Detailed portfolio/RTM plans completed - Nigeria & Angola − Detailed brand & channel activity grids rolled out in selected markets − Ghana SFA pilot success − Angola to commence − 230 in-country sales people trained

• T

a iwa n RT M expansion – deploy people and bulk up portfolio

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SCAL E UP E XCE L L E NCE

• Supply Chain re lia bility & Customer se rvic e a major priority!

− Expansion of Springs c a pa c ity on track − Freeze plant grows e ffic ie nc y levels

• Supply Cha in capability strengthened with senior appointments
• Ne twork Optimiza tion project underway
• Ce ntra lise d Proc ure me nt - implement in waves
• Re ve nue Ma na g e me nt - exceeding targets

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SHAP E T HE F UT UR E !

• Senior appointments strengthen le a de rship te a m
• HR le a de rship in place, succession plan completed
• HR / T

a le nt syste ms scoped & preferred ICT solution identified

• Cha ng e e na ble me nt capability build commenced
• Corporate stra te g y a lig nme nt process on track
• ICT

architecture reviewed, strategy developed & approved

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CAR E AND CONT R I B UT E

• Role of c orpora te bra nd clarified
• Localised a pple c onc e ntra te sourc ing project formally commenced
• T

ra nsforma tion stra te g y developed to guide BBBEE progress

• Wine value unlocking strategy commenced
• Role of Diste ll De ve lopme nt T

rust agreed

• Align and prioritise CSI opportunitie s
• Ste p c ha ng e initiatives aimed at addressing BBBEE

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Thank you

Me rwe Bo tha – F inanc ial Dire c to r

1

Fina nc ia l Re sults

Ind e x

2

Salie nt fe ature s De live ring value Ope rating c o sts E arning s and pro fit pe rfo rmanc e I nve stme nt in o pe rating asse ts Cash flo w and financ ing

A B C D E F

De live ring va lue

3

Ope rating pro fit Salie nt fe ature s

1 2 3

He adline e arning s

4

Reported Normalised Sales volumes up 3.7% 3.7% Revenue up 10.5% 10.5% EBITDA

• 1.0%

9.9% Operating profit

• 4.6%

7.0% Headline earnings

• 7.6%

9.5% Growth in total assets 10.6%

Sa lie nt fe a ture s o f o ur pe rfo rm a nc e to De c e m b e r 2014

5

6

De live ring va lue

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Manag ing the unde rlying drive rs o f share ho lde r value Co ntributio n pe r re g io n Co ntributio n pe r c ate g o ry

1 2 3

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Rm Rm Trend Trend 2014/15 Report Normal 2013/14 9.0% 10.8% 990.3 1,071.8 92.4 109.5 9.1% 9.2% Reported Normalised 5.55% 6.64% 10,997 9,948 110.5 5.60% 5.65% 0.62 0.62 17,851 16,147 110.6 10.8% 12.6% 17,851 16,147 110.6 Gearing 1.94 1.90 9,200 8,487 108.4 Equity and liabilities Total equity Return on Equity (ROE) Revenue Net Profit after Tax (NPAT) Total assets NPAT% Return on assets (ROA) Asset turn

Ma na g ing the und e rlying d rive rs o f sha re ho ld e r va lue

2013/14 Full year: 15.9% (normalised)

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O p e ra ting c o sts

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Ope rating e xpe nse s

1

12

13

Ea rning s a nd p ro fit p e rfo rma nc e

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Marg in manag e me nt Gro wth in o pe rating pro fit He adline e arning s

1 2 3

15

16

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Inve stme nt in o p e ra ting a sse ts

Ne t o pe rating asse ts

1

18

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C a sh flo w a nd fina nc ing

Cash o utflo w and funding Ne t c ash po sitio n and bo rro wing c apac ity

1 2

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21

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Summa ry

1

23

Summary o f pe rfo rmanc e

Summa ry

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Satisfac to ry but une ve n to pline g ro wth unde r c halle ng ing trading

c o nditio ns

E

ffic ie nc y g ains re inve ste d in building c apac ity and c apability to suppo rt future g ro wth

Ste e p inc re ase s in e xc ise dutie s impac t marg ins Gro ss marg ins impro ve s marg inally Ope rating marg in c o ntrac te d fro m 13.8% to 13.4% Disc ipline d inve stme nt and maintaining asse t turn Stro ng c ash g e ne ratio n

T ha nk yo u

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Que stions?

• T

his pre se ntatio n c o ntains ‘ fo rward-lo o king ’ state me nts, inc luding spe c ific a lly all state me nts that e xpre ss marke t fo re c asts; Diste ll’ s c o mme ntary o n mac ro and industry re late d marke t tre nds; and pro je c tio ns re late d to Diste ll’ s busine ss strate g y.

• All fo rwa rd-lo o king sta te me nts c o nta ine d in this pre se nta tio n invo lve risk and unc e rtainty sinc e

the y are de pe nde nt o n assumptio ns o f c irc umstanc e s that will o c c ur in the future . T he re are multiple variable s whic h c o uld c ause ac tual re sults to diffe r fro m the fo rward-lo o king state me nts whic h are no t within Diste ll’ s manag e me nt c o ntro l. Suc h variable s inc lude , but are no t limite d to , po litic al, ma c ro and so c io -e c o no mic c hang e s; le g al and re g ulato ry c ha ng e s; litig atio n de ve lo pme nts; te c hno lo g ic al c hang e s; e nviro nme ntal risks and c hang e s in c o nsume r tre nds, amo ng o the rs.

• As suc h, yo u are c autio ne d no t to plac e undue re lianc e o n the fo rward-lo o king state me nts

c o ntaine d he re in, as the y apply o nly as at the date o f this pre se ntatio n.

• T

he re is no o blig atio n o n Diste ll in the future to pro vide update s o n fo rward-lo o king state me nts c o ntaine d in this pre se ntatio n to re fle c t any c hang e s in Diste ll’ s pro je c tio ns with re g ard the re to

• rany c hang e s in e ve nts o runde rlying assumptio ns o n whic h any suc h state me nt is base d.