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DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
RESULTS FROM ONGOING OPERATIONS
TURNOVER - UP BY 26%
OPERATING PROFIT - UP BY 29%
HEADLINE EARNINGS PER SHARE - UP BY 51%
AUDITED GROUP RESULTS FOR THE TWELVE MONTHS ENDED 30 JUNE 2000
GROUP INCOME STATEMENT
AUDITED REVIEWED AUDITED
TWELVE TWELVE EIGHTEEN
MONTHS MONTHS MONTHS
30 JUNE 30 JUNE 30 JUNE
R000 2000 1999 1999
TURNOVER 734 429 659 138 799 107
- CONTINUING OPERATIONS 685 346 26% 544 296 614 611
- DISCONTINUED OPERATIONS 49 083 114 842 184 496
OPERATING PROFIT 49 915 43 331 52 261
- CONTINUING OPERATIONS 49 680 29% 38 603 43 708
- DISCONTINUED OPERATIONS 235 4 728 8 553
NET FINANCE COSTS (4 408) (7 285) (10 360)
PROFIT BEFORE EXCEPTIONAL ITEMS 45 507 26% 36 046 41 901
EXCEPTIONAL ITEMS (11 224) (6 954) (8 789)
PROFIT BEFORE TAXATION 34 283 29 092 33 112
TAXATION (4 673) (4 539) (4 835)
EARNINGS FOR THE YEAR 29 610 21% 24 553 28 277
ADJUSTMENT FOR EXCEPTIONAL ITEMS 11 081 6 954 8 789
HEADLINE EARNINGS 40 691 29% 31 507 37 066
INCLUDED ABOVE:
DEPRECIATION 4 658 4 471 6 267
OPERATING LEASE CHARGES 9 464 11 099 12 967
EXCEPTIONAL ITEMS
- LOSS ON DISCONTINUED OPERATIONS 11 382 6 543 8 669
- PROFIT ON SALE OF OPERATIONS (2 534) - -
- PROVISION FOR LOSS ON INVESTMENT 1 900 - -
- RATIONALISATION EXPENDITURE 476 - 812
- INCOME FROM INVESTMENT - 411 (692)
11 224 6 954 8 789
- TAX RELIEF (143) - -
11 081 6 954 8 789
NUMBER OF SHARES ('000)
- IN ISSUE 277 565 276 702 276 702
- WEIGHTED AVERAGE 277 565 276 702 233 891
HEADLINE EARNINGS PER SHARE (CENT) 14,66 29% 11,39 15,85
HEADLINE EARNINGS PER SHARE FROM
CONTINUING OPERATIONS (CENT) 14,58 51% 9,68 12,19
ATTRIBUTABLE EARNINGS PER SHARE (CENT) 10,67 20% 8,87 12,09
OPERATING PROFIT (%) 6,80 6,57 6,54
GROUP BALANCE SHEET
AUDITED AUDITED
30 JUNE 30 JUNE
R000 2000 1999
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 13 986 21 663
INVESTMENTS 524 524
CURRENT ASSETS 218 904 217 726
INVENTORY 78 283 83 525
RECEIVABLES AND PREPAYMENTS 137 357 133 066
CASH AND CASH EQUIVALENTS 3 264 1 135
233 414 239 913
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
ORDINARY SHAREHOLDERS' EQUITY 87 839 64 412
OUTSIDE SHAREHOLDERS' INTEREST - 129
NON-CURRENT LIABILITIES 13 196 20 078
INTEREST-BEARING LIABILITIES 4 158 4 590
CONVERTIBLE DEBENTURES 4 482 9 931
DEFERRED TAX LIABILITIES 4 556 5 557
CURRENT LIABILITIES 132 379 155 294
TRADE AND OTHER PAYABLES 118 564 153 905
CONVERTIBLE DEBENTURES 5 449 -
CURRENT TAX LIABILITIES 4 648 (922)
CURRENT PORTION OF BORROWINGS 3 718 2 311
233 414 239 913
FUTURE COMMITMENTS
FINANCE LEASES 6 152 5 509
OPERATING LEASES 48 194 39 192
54 346 44 701
VALUE PER SHARE
- NET ASSET VALUE (CENTS) 31,65 23,28
- MARKET PRICE (CENTS) 53 50
FINANCIAL GEARING RATIO (%) 16,56 24,32
CURRENT ASSET RATIO (TIMES) 1,65 1,40
TOTAL ASSETS 233 414 239 913
STATEMENT OF CHANGES IN EQUITY
OPENING BALANCE 64 412 17 231
ATTRIBUTABLE EARNINGS 29 610 28 277
NET SHARES ISSUED/(REDEEMED) (183) 114 588
GOODWILL WRITTEN OFF (6 000) (95 684)
BALANCE AT THE END OF THE YEAR 87 839 64 412
GROUP CASH FLOW STATEMENT
AUDITED AUDITED
30 JUNE 30 JUNE
R000 2000 1999
CASH GENERATED FROM OPERATIONS 22 435 28 782
NET FINANCING COST (4 408) (10 360)
TAXATION PAID (104) (420)
CASH FLOW FROM OPERATING ACTIVITIES 17 923 18 002
CASH FLOW FROM INVESTING ACTIVITIES (14 844) 4 613
CASH FLOW FROM FINANCING ACTIVITIES (175) (2 028)
INCREASE IN CASH RESOURCES 2 904 20 587
COMMENTARY
THE GROUP ACHIEVED ACCEPTABLE RESULTS FOR THE YEAR UNDER REVIEW TAKING INTO
ACCOUNT THE LACK OF ANY MEANINGFUL ECONOMIC GROWTH. REVENUE FROM ONGOING
OPERATIONS GREW BY 26% TO R685 MILLION OVER THE REPORTING PERIOD, WHICH
TOGETHER WITH IMPROVED MARGINS, CONTRIBUTED TO AN INCREASE IN OPERATING PROFIT
OF 29%.
HEADLINE EARNINGS FROM ONGOING OPERATIONS INCREASED FROM R26,8 MILLION TO R40,5
MILLION. THIS REMARKABLE PERFORMANCE WAS ACHIEVED OVER A DIFFICULT AND HIGHLY
AGGRESSIVE TRADING PERIOD DURING WHICH MARKET SECTOR EARNING EXPECTATIONS WERE
REVISED DOWNWARDS.
THE 2000 FINANCIAL YEAR WAS HIGHLIGHTED BY THE DISPOSAL OF THE REMAINING
NON-CORE OPERATIONS FOR A CASH CONSIDERATION OF APPROXIMATELY R24 MILLION, OF
WHICH R5 MILLION WAS RECEIVED PRIOR TO YEAR-END. AN AMOUNT OF R10 MILLION WAS
RECEIVED IN JULY 2000 WITH THE BALANCE TO BE RECEIVED DURING THE COURSE OF THE
CURRENT FINANCIAL PERIOD.
REVIEW OF RESULTS
THE GROUP REPORTED A MOST SATISFYING GROWTH IN TRADING REVENUE FROM
ONGOINGOPERATIONS FROM R544 MILLION TO R685 MILLION, IN A PERIOD DURING WHICH
CONSUMER MARKETS REMAINED SUBDUED AND THE BUILDING AND CONSTRUCTION INDUSTRY
EXPERIENCED A DRAMATIC DOWNTURN.
ATTRIBUTABLE EARNINGS INCREASED BY 21% FROM R24,5 MILLION TO R29,6 MILLION
AFTER EXCEPTIONAL ITEMS OF R11,2 MILLION WERE TAKEN INTO ACCOUNT. THE GROUP
INCURRED A LOSS OF R11,4 MILLION ON THE DISPOSAL OF NON-CORE OPERATIONS. THIS
SHOULD, HOWEVER, BE VIEWED AGAINST THE BACKGROUND OF THE REMOVAL OF THE
COMPANY9S EXPOSURE TO THE VOLATILITY OF THE MANUFACTURING INDUSTRY AND THE FACT
THAT SHAREHOLDERS CAN NOW LOOK FORWARD TO A STABLE GROWTH ENVIRONMENT.
IMPROVED DEBT LEVELS AND LOWER INTEREST RATES CONTRIBUTED TO A R2,9 MILLION
REDUCTION IN FINANCE COST OVER THE COMPARATIVE PERIOD. HEAVY RAINS DURING THE
FIRST QUARTER OF 2000 TOGETHER WITH RETAIL PRE-STOCKING IN ANTICIPATION OF AN
ECONOMIC UPSWING, RESULTED IN THE COMPANY9S TRADING LEVELS BEING BELOW
EXPECTATION. THIS CONSEQUENTLY CAUSED THE COMPANY9S STOCK LEVELS TO BUILD UP
OVER THIS QUARTER, WHICH TOGETHER WITH THE DIFFICULT COLLECTION PERIOD AS A
RESULT OF THE LIQUIDITY CRISIS IN THE INDUSTRY, RESULTED IN SIGNIFICANT CASH
UTILISATION TO FUND WORKING CAPITAL, WHICH ALSO CONTRIBUTED NEGATIVELY TOWARD
FINANCE COSTS. THE SITUATION WAS, HOWEVER, RECTIFIED BEFORE YEAR-END. THE
BALANCE SHEET REMAINS HEALTHY WITH GEARING AT 17% AND CASH FLOW POSITIVE AT
R3,3 MILLION. SHAREHOLDERS9 FUNDS INCREASED BY 36% OVER THE COMPARATIVE PERIOD
WITH A RETURN ON EQUITY OF 33,7%.
BUSINESS REVIEW
OPERATING LEVELS REMAINED UNDER PRESSURE DURING THE FINANCIAL YEAR WITH THE
EXCEPTION OF THE SECOND QUARTER. INDICATIONS OF AN IMPROVING ECONOMY TOWARDS
THE LAST QUARTER OF 1999 DID NOT MATERIALISE AS EXPECTED, WITH ADVERSE WEATHER
CONDITIONS CONTRIBUTING TO ENORMOUS DISRUPTIONS IN THE CONSTRUCTION INDUSTRY
DURING THE FIRST QUARTER OF 2000.
NEGLIGIBLE GROWTH IN GDP IMPACTED NEGATIVELY ON THE BUILDING AND CONSTRUCTION
INDUSTRY. THE LACK OF MAJOR PROJECTS AND INFRASTRUCTURAL DEVELOPMENT, RESULTED
IN A WEAK DEMAND AND ENSURED THAT TRADING CONDITIONS WERE SUBJECT TO FIERCE
COMPETITION. DESPITE THESE DIFFICULT CONDITIONS THE GROUP MANAGED, THROUGH A
DEDICATED STRATEGY OF MARGIN FOCUS, TO IMPROVE OPERATING MARGINS IN CONTINUING
OPERATIONS TO OVER 7%. MANAGEMENT IS CONFIDENT THAT THE TURNING POINT HAS BEEN
REACHED FOR A SUSTAINABLE ECONOMIC UPTURN IN THE SHORT TO MEDIUM TERM.
THE PROCESS OF IMPLEMENTATION OF NEW INFORMATION SYSTEMS IN THE WHOLESALE
TRADING DIVISION HAS TAKEN LONGER THAN ANTICIPATED, BUT IS EXPECTED TO BE FULLY
OPERATIONAL BY THE END OF 2000. WHILE THE NATIONALLY INTEGRATED NETWORK AS WELL
AS SELECTED MODULES ARE FULLY OPERATIONAL, THE BENEFITS FROM INVENTORY
OPTIMISATION AND ELECTRONIC TRADING ARE ONLY EXPECTED TO MATERIALISE TOWARD THE
LATTER PART OF THE FINANCIAL YEAR. MANAGEMENT REMAIN OPTIMISTIC THAT THE
INVESTMENT IN NEW INFORMATION SYSTEMS WILL PROVIDE THE COMPETITIVE EDGE AND
IMPROVE EFFICIENCIES IN ORDER TO ESTABLISH THE COMPANY AS A MARKET SECTOR
LEADER.
ACQUISITIONS AND DISPOSALS
MANAGEMENT IS PLEASED TO ANNOUNCE THAT THE REFOCUSING OF THE GROUP IS NOW
COMPLETED WITH THE DISPOSAL OF THE REMAINING MANUFACTURING OPERATIONS. THE
PLASTIC EXTRUSION BUSINESS WAS SOLD FOR A CASH CONSIDERATION OF R8,5 MILLION,
EFFECTIVE FROM 31 DECEMBER 1999. THE ALUMINIUM EXTRUSION BUSINESS OF ALMAR WAS
SOLD FOR A CASH CONSIDERATION OF R15,5 MILLION EFFECTIVE FROM 1 JUNE 2000. THE
COLLECTION OF DEBTORS AND PAYMENT OF CREDITORS REMAINED THE COMPANY9S
RESPONSIBILITY, WHICH SHOULD BE COMPLETED BY THE END OF SEPTEMBER 2000.
CASH FLOWS GENERATED FROM THESE DISPOSALS WILL BE UTILISED FOR STRATEGIC
ACQUISITIONS WITH A SPECIFIC OBJECTIVE TO IMPROVE CRITICAL MASS IN CERTAIN
GEOGRAPHICAL REGIONS OF THE WHOLESALE DIVISION AS WELL AS TO IMPROVE THE
SERVICE LEVELS THROUGH THE EXPANSION OF THE NATIONAL DISTRIBUTION
INFRASTRUCTURE.
IN LINE WITH THESE OBJECTIVES, THE GROUP HAS TAKEN INITIATIVES TO EXPAND ITS
VALUE-ADDED CAPABILITIES THROUGH THE ACQUISITION OF A MAJORITY INTEREST IN
UNITED EXPRESS (PTY) LTD, A FAST-GROWING LOGISTICS OPERATION, WHICH WILL BE
INTEGRATED WITH THE GROUP9S EXISTING DISTRIBUTION NETWORK. ANTICIPATED BENEFITS
FROM THE PROPOSED INTEGRATION INCLUDE:
* IMPROVED DELIVERY SERVICE TO EXISTING CUSTOMER BASE THROUGH INCREASED
FREQUENCY AND THE OFFERING OF AN INTERNAL EXPRESS SERVICE
* IMPROVED FLEET UTILISATION AND COST EFFICIENCY AND
* INCREASED ABILITY TO COMPETE FOR NEW BUSINESS AS A RESULT OF AVAILABLE
CAPACITY, COST EFFECTIVENESS AND CRITICAL MASS.
SUBSEQUENT TO YEAR-END THE GROUP EXPANDED ITS MARKET SHARE THROUGH THE
ACQUISITION OF THE STOCK AND CERTAIN ASSETS OF WINDOOR (PTY) LTD, A FOCUSED
HARDWARE AND TOOL WHOLESALER, WHICH CEASED TRADING ON 31 JULY 2000, FOR A CASH
CONSIDERATION OF APPROXIMATELY R8,8 MILLION. THIS ACQUISITION PROVIDED CRITICAL
MASS TO THE EXISTING GAUTENG HARDWARE AND TOOL WHOLESALE OPERATION WHICH WILL
IMPROVE OPERATING MARGINS, AND CONTRIBUTE TO IMPROVED NATIONAL FOCUS ON THE
REVENUE OPPORTUNITIES FROM THE SMALLER RETAIL CUSTOMER BASE.
PROSPECTS
THE RECENT DIFFICULT ECONOMIC CLIMATE FORCED THE GROUP TO FOCUS AGGRESSIVELY ON
INTERNAL EFFICIENCY AND COST CONTROL, AND MANAGEMENT BELIEVES THAT THIS SHOULD
CONTRIBUTE TO IMPROVED EARNINGS AGAINST THE BACKGROUND OF AN ANTICIPATED
SUSTAINABLE ECONOMIC UPTURN IN THE SHORT TO MEDIUM TERM.
ALL ECONOMIC INDICATORS SHOW AN IMPROVEMENT IN THE PROSPECTS FOR THE BUILDING
AND CONSTRUCTION INDUSTRY AND IMPROVEMENT IN TRADING CONDITIONS IN THIS
INDUSTRY IS EXPECTED TOWARDS THE LAST QUARTER OF 2000. THE GROUP WILL CONTINUE
TO PURSUE NEW OPPORTUNITIES IN SELECTED NEIGHBOURING COUNTRIES WHERE
INFRASTRUCTURAL INITIATIVES ARE BEING SUPPORTED BY INTERNATIONAL AID AGENCIES.
THE BENEFITS OF ELECTRONIC TRADING TOGETHER WITH AN IMPROVED DISTRIBUTION
CAPABILITY WILL STRENGTHEN THE GROUP9S MARKET POSITION AND IMPROVE THE RELIANCE
ON THE WHOLESALER AS A JUST-IN-TIME SUPPLIER TO THE RETAIL INDUSTRY.
THE CREATION OF A FOCUSED DISTRIBUTION AND LOGISTICS DIVISION WILL ENHANCE THE
SERVICE FOCUS OF THE GROUP. IT IS ALSO ANTICIPATED THAT THIS DIVISION, THROUGH
THE OPTIMISING OF OPPORTUNITIES AND UTILISATION OF ECONOMIES OF SCALE, WILL
GROW AGGRESSIVELY AND CONTRIBUTE POSITIVELY TO GROUP EARNINGS.
MANAGEMENT REMAINS CONFIDENT THAT THE GROUP IS WELL POSITIONED FOR CONTINUED
EARNINGS GROWTH IN EXCESS OF MARKET SECTOR EXPECTATIONS.
NOTICE OF REPAYMENT OF SHARE PREMIUM
NOTICE IS HEREBY GIVEN THAT, SUBJECT TO THE PASSING OF THE NECESSARY SPECIAL
RESOLUTIONS AT THE ANNUAL GENERAL MEETING TO BE HELD ON 14 NOVEMBER 2000 THE
COMPANY WILL REPAY TO SHAREHOLDERS REGISTERED AT THE CLOSE OF BUSINESS ON 10
OCTOBER 2000 THE SUM OF R10 323 064 FROM ITS SHARE PREMIUM ACCOUNT, THE
EQUIVALENT OF 3,5 CENTS PER SHARE. PAYMENT WILL BE MADE ON OR ABOUT 24 NOVEMBER
2000 OR THE DATE ON WHICH THE SPECIAL RESOLUTIONS ARE REGISTERED BY THE
REGISTRAR OF COMPANIES, WHICHEVER IS THE LATER DATE.
ON BEHALF OF THE BOARD
CPJ VAN DER MERWE DA TOD
CHAIRMAN CHIEF EXECUTIVE OFFICER
JOHANNESBURG
5 SEPTEMBER 2000
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA REG NO 1984/008265/06
(FORMERLY CITY INVESTMENT HOLDINGS LIMITED)
REGISTERED OFFICE
2 KEEROM ROAD HERIOTDALE EXT 10 CLEVELAND JOHANNESBURG
DIRECTORS
CPJ VAN DER MERWE* (CHAIRMAN) DA TOD (CHIEF EXECUTIVE OFFICER)
JA BEUKES RL HIEMSTRA* NM INGLEDEW*
* NON-EXECUTIVE
E-MAIL INFO@DAWNLTD.CO.ZA
WEBSITE WWW.DAWNLTD.CO.ZA
JUST-IN-TIME DISTRIBUTION
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