Distell aims to double business by 2020

South African drinks group Distell is on track to double the size of its business by 2020 after delivering “impressive growth” across core categories in the first half of its financial year.

Richard Rushton remains “bullish” over Distill’s growth ambitions

Year-on-year revenue grew 11.2% to 12.2bn rand (£551m) in the six months to 31 December 2015, while operating profit increased 16.5% to 1.7bn rand (£77m).

The group said its sales have benefited from an investment programme “designed to enhance competitiveness” as it seeks to double the size of its business over the next four years.

A “stellar performance” in South Africa, where Distell witnessed double-digit growth, as well as “good gains” in other African markets, Northern European and Taiwan, also boosted sales.

Distell identified Scottish Leader as one of its top performers in South Africa, with Viceroy “leading the brandy resurgence” in the market and “impressive gains” made for Bisquit Cognac.

In Taiwan, Scottish Leader “entrenched” its position as the market leader in the Scotch whisky category, while Distell’s single malts and Amarula liqueurs showed “good growth” in Germany and the Nordics.

However, the group faced a global “challenges”, with “weak demand” in Angola, the UK, Russia, China and Latin America. In total, volumes in international markets beyond Africa declined by 15.4%, with revenue rising 4% due to the weak rand.

“The challenging global macroeconomic environment is leading to constrained conditions and subdued consumer spending,” said Richard Rushton, Distell Group MD.

He continued: “Consumers responded positively to our product offerings and promotions especially over the festive season. Our performance also reflects the continued progress we are making in South Africa where we are strengthening our market position with significant improvements in market penetration and customer service.”

Sales volumes declined 7.4% in Angola – the company’s second biggest market in Africa – due to “adverse macroeconomic conditions” that were further compounded by hikes in excise and import duties.

Overall, African markets other than South Africa contribute 55% to Distell’s revenue.

“Our participation in Africa is part of our long-term goal to increase our competitiveness in delivering sustainable revenue and profit growth,” added Rushton. “We are focussed on developing the right mix of brands, human capital and capacity to achieve this goal.”

Distell warned that it expected “tougher trading conditions” in the second half of its financial year.

As such, the company will “moderate the pacing” of its investment plans in some markets, but Ruston said he remains “bullish” about Distell’s strategic direction and brand portfolio that can “grow shareholder value”.

In November last year, Distell announced plans to “substantially boost” the profile of its spirits brands in the US after establishing a 50/50 joint venture business with Terlato Wine Group, called Terlato Artisan Spirits.