Net revenue posts modest growth while PBT margin expands: DIST reported net revenue of LKR29.2bn (up 1.6% YoY) in FY14, despite a 2.1% YoY decline in gross revenue. The decline in gross revenue was mainly driven by a 4.2% YoY decline in the beverages segment (84% of FY14 gross revenue), while the telecommunications segment’s revenue declined by 13.0% YoY.
However, solid revenue growth in the diversified segment, up 44.3% YoY, and the plantations segment, up 14.1% YoY, enabled the group to post modest growth in net revenue.
DIST posted a PBT margin expansion of 450bps, to reach 32.6%, driven by a 4.1% YoY decline in cost of sales (primarily attributable to lower raw material costs in the beverages segment), which offset an 8.7% YoY increase in administration expenses related to the group’s restructuring program (as discussed in our initiation report). Furthermore, margin improvement also came on the back of lower net other operating expenses, down 61.2% YoY (due to improved performance from its investment portfolio), and financing costs, down 27.9% YoY, along with an 11.5% YoY increase in associate income (driven mainly by its investments in Aitken Spence PLC). This resulted in net income of LKR6.2bn (up 20.7% YoY) and an EPS of LKR20.68 (vs. LKR17.13 in FY13).