Distell Group Holdings (JSE:DGH) News - First Quarter Trading Update (FY22): (1 July 2021 to 30 September 2021)

Distell Group Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2016/394974/06)
JSE Share code: DGH
ISIN: ZAE000248811
("Distell" or “the Company” or “the Group”)

FIRST QUARTER TRADING UPDATE (FY22): (1 JULY 2021 TO 30 SEPTEMBER
2021)

Distell entered its new financial year ending 30 June 2022 (FY
2022) with a ban on alcohol sales which was reinstated by the South
African Government on 29 June 2021. The ban was lifted on 25 July
2021, subject to certain trading restrictions which were lifted on
30 September 2021. This environment resulted in a total of 25 days
of lost trading (versus 35 lost trading days in the previous
comparable period).

During the first three months of FY 2022, Distell recorded double-
digit Group revenue and volume improvement in the twenties, as
compared to the corresponding period in the previous financial
year.

In South Africa, revenue moved ahead of volumes and both increased
by double digits, in the thirties. The quarter saw a 28% loss in
trading days due to COVID-19 related trading restrictions,
compared to 39% in the corresponding quarter last year. Category
performance continues to reflect changing consumer trends with
strong growth in the ready-to-drink (RTD’s) category led by
Savanna. Global glass shortages and supply-chain challenges have
affected the Savanna Premium Cider brand specifically, where
volumes have almost doubled in size over the last twelve months.
As announced at the Group’s 2021 financial year results
presentation, R300 million of capex was allocated for the
construction of a dedicated line to grow capacity and to respond
to increased demand. The Group is working with existing and new
suppliers to navigate supply challenges and to grow the brand
further. Consumer preference towards intrinsic quality, trusted
brands and mixed gender occasions supported further growth in
spirits and select mainstream wine brands. The environment remains
competitive as players vie for market share with down trading by
consumers under pressure.

In Africa, excluding BLNE countries (Botswana, Lesotho, Namibia
and Eswatini), the Group recorded a double-digit revenue decline
with single digit volume increases, as compared to the
corresponding period. Given the region’s dependence on exports
from South Africa, port IT issues and social unrest in KwaZulu-
Natal negatively impacted the supply of key brands to the region
during July 2021. This, combined with prolonged on-consumption
channel restrictions due to COVID-19 in Kenya, the region’s largest
market, exacerbated the impact on the region’s performance,
significantly impacting both revenue and volumes. The team
admirably managed to mitigate against these events and recovered
most of the negative impact during August and September trading,
with October looking promising as performance normalises to
expected levels, albeit within the constraints of continued supply
chain disruptions across key markets. Other key markets, such as
Mozambique, Zambia and Nigeria, all maintained strong revenue and
volume performances.

Continued supply chain challenges and lockdown restrictions in key
BLNE markets was less pronounced, with low single-digit revenue
declines alongside single-digit volume improvement. Botswana
experienced the most impact due to alcohol bans, with Namibia
producing a positive single-digit revenue and volume performance.

A combination of global supply chain constraints, on-consumption
restrictions in Taiwan (accounting for a quarter of that business)
and an 11% stronger Rand on average, weighed on the Group’s
international business performance. As a result, comparable
revenues and volumes were down by the teens. Strong momentum on
single malts continues with double-digit revenue growth and sales
through digital channels remaining strong. Recent investments and
upgrades to our manufacturing footprint and Brand homes in the
United Kingdom are contributing positively. Customer demand for
Premium Spirits, including Amarula, remains strong despite the
ongoing challenges with global shipment constraints. The Group
anticipates a measured recovery in the Global Travel Retail (GTR)
channel as global travel restrictions abate.

The Group’s net debt position remains strong, decreasing to R1,9
billion at the end of the first quarter FY22. Its robust ability
to generate cash continues to strengthen its balance sheet as
trading continues into the second quarter FY22.

Outlook

Whilst overall performance is positive, we remain cautious
regarding the economic impact of COVID-19, the varying levels of
risks and the subsequent rates of recovery in the markets in which
we trade. Current global supply chain challenges and currency
fluctuations will continue to affect export markets and the outlook
for economic growth in South Africa, remain key concerns for the
business.

The Group will continue driving the digitisation of its business
resulting in further efficiencies across the value chain while
positively affecting change to its cost base over the long term.
This will be balanced with allocating investments towards
important growth initiatives in key brands, supply-chain
efficiencies,   geographies    and   route-to-market   expansion
programmes.

The Group has sustained a strong balance sheet with robust cash
generation   ability,  reinforced   by   the  consolidation   and
investments into making its production network more efficient.
Our teams continue to respond to the challenges and opportunities
presented, with an agile and solution-driven culture embedded
during the pandemic and with a healthy pipeline of innovations to
leverage consumer trends.

The Group’s diverse portfolio of brands, which service a wide range
of consumer needs, spanning key consumer occasions, price points,
channels and geographies is a key strength that we will continue
to leverage alongside our robust and growing manufacturing and
distribution footprint in Southern Africa and other key African
markets.

The information contained herein does not constitute an earnings
forecast or estimate and has not been reviewed or reported on by
the Company’s external auditors.

Stellenbosch
29 October 2021

Sponsor and Corporate Broker
RAND MERCHANT BANK (A division of FirstRand Bank Limited)

Date: 29-10-2021 12:00:00
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