The KWV Group announced that it would not be declaring a dividend for the year ending June 2001, in spite of increased headline earnings of 22.4%, up to R51.5m (US$5.6m), compared with R42m in 2000.

According to the group's annual report, which has just been released, the growth in headline earnings was directly attributable to an increase in export turnover, as well as improvements in production efficiency and overall cost control.

These countered the declining brandy market and lower grape juice concentrate prices on the international market.

The extensive fiscal discipline also included staff reductions towards the end of the financial year. The retrenchment costs to the group have totalled R2.65m so far. A group of 10 senior staffers are now instituting legal action as a result of these retrenchments, claiming unfair dismissal.

An attributable loss of R3.6mwas incurred, compared with a R47.7m profit in 2000. This decline was blamed on a decrease in earnings of R25m from KWV's associate company Distell.

During the year under review the group's capital expenditure amounted to R39.7m, with main expenditure going on wine maturation barrels, the upgrading of cellar and bottling equipment.

This follows a consolidated cash flow statement that showed a net cash inflow of R36m compared with an outflow of R19.4m in 2000 from operating activities.

The group's consolidated cash statement showed a net inflow of R36m, compared with an outflow of R19.4m in 2000, from operating activities. The improvement was mainly attributable to a R39.6m reduction in inventory, a turn around from the R7.7m increase in 2000, as well as a reduction in taxation paid.

Unfortunately the cash inflow generated from operating activities was, however, not sufficient to finance the expenditure on fixed assets. This accordingly contributed to the slight decline of R3.3m in cash and cash equivalents for the year.

It was against the background of the cash flow situation that the directors decided not to declare a dividend for the year.