Wrap Text
ended 30 June 2001
(formerly City Investment Holdings Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Audited results for the year ended 30 June 2001
- Turnover from continuing operations up 14%
_ Operating profit from continuing operations up 5%
Group income statement
Audited Audited
12 months 12 months
30 June 30 June
2001 2000
R'000 R'000
Turnover 808 590 734 429
- Continuing operations 783 509 685 346
- Discontinued operations 25 081 49 083
Operating profit 51 025 49 915
- Continuing operations 51 921 49 680
- Discontinued operations (896) 235
Net finance costs (3 332) (4 408)
Profit before exceptional items 47 693 45 507
Exceptional items (17 452) (11 224)
Profit before taxation 30 241 34 283
Taxation (9 987) (4 673)
Earnings for the year 20 254 29 610
Adjustment for exceptional items 14 050 11 081
Headline earnings 34 304 40 691
Included above
Depreciation 6 859 4 658
Operating lease charges 8 364 9 464
Exceptional items
- Loss on sale of business 5 910 11 382
- Rationalisation expenditure 7 688 476
- Profit on sale of subsidiary - (2 534)
- Provision for loss on investment - 1 900
- Provision for onerous obligations in
respect of delay of computer system
implementation 3 654 -
- Amortisation of goodwill 200 -
17 452 11 224
Tax relief (3 402) (143)
14 050 11 081
Statistics
Number of shares ('000)
- in issue 298 627 277 565
- weighted average 291 318 277 565
Headline earnings per share (cents) 11,78 14,66
Headline earnings per share from
continuing operations (cents) 12,08 14,58
Attributable earnings per share (cents) 6,95 10,67
Operating profit (%) 6,31 6,80
Group cash flow statement
Audited Audited
12 months 12 months
30 June 30 June
2001 2000
R'000 R'000
Cash flow from operating activities 14 368 23 379
Cash flow from investing activities (26 090) (20 300)
Cash flow from financing activities (1 464) (175)
Increase/(decrease in cash resources (13 186) 2 904
Cash resources at beginning of year 3 264 360
Cash resources at end of year (9 922) 3 264
Group balance sheet
Audited Audited
30 June 30 June
2001 2000
R'000 R'000
Assets
Non-current assets
Property, plant and equipment 26 986 13 986
Intangible assets 800 -
Investments 524 524
Current assets 248 946 218 904
Inventory 91 246 78 283
Receivables and prepayments 157 700 137 357
Cash and cash equivalents - 3 264
277 256 233 414
Equity and liabilities
Capital and reserves
Ordinary shareholders' equity 108 382 87 840
Non-current liabilities 22 852 13 196
Interest-bearing liabilities 9 990 4 158
Convertible debentures 4 482 4 482
Deferred tax liabilities 8 380 4 556
Current liabilities 146 022 132 378
Trade and other payables 129 328 123 211
Convertible debentures - 5 449
Current portion of borrowings 6 772 3 718
Bank overdraft 9 922 -
277 256 233 414
Future commitments
Finance leases 16 082 6 152
Operating leases 63 258 48 194
79 340 54 346
Value per share
Asset value per share
- Net asset value (cents) 36,29 31,65
- Market price (cents) 45 53
Financial gearing ratio (%) 19,50 12,32
Current asset ratio (times) 1,70 1,65
Statement of changes in equity
Audited Audited
12 months 12 months
30 June 30 June
2001 2000
R'000 R'000
Opening balance 87 840 64 405
Attributable earnings 20 254 29 610
Repayment of share premium (10 323) -
Net shares issued/(redeemed) 10 611 (175)
Goodwill written off - (6 000)
Balance at the end of the year 108 382 87 840
Commentary
Nature of business
Distribution and Warehousing Network Limited ("Dawn"), the leading wholesale
distributor of an extensive range of plumbing, sanitaryware, tools,
hardware, security and do-it-yourself products, is a specialist distribution
and trading group offering a value added service to the retail sector of the
market. Its distribution capabilities offer the market one of the most
extensive networks in the Southern African region.
Business review
The wholesale trading division, which made up 84% of the group's activities
over the review period, continued to grow revenue and earnings. The
division's success is based on the strong relationships with customers and
suppliers, as well as the ongoing support of locally manufactured brands.
The activities of the logistics division were expanded with the allocation
of an internal, national distribution contract by the wholesale trading
division. The implementation of this contract, which will be concluded
during the new financial year, is expected to provide the critical mass and
infrastructure necessary to strengthen this division.
The performance of the fastener distribution business did not meet
expectations, despite the achievement of strong revenue growth. Extensive
corrective actions have, however, been taken and an improved performance, in
line with the potential of this division, is anticipated in the year ahead.
The group embarked on an extensive programme to enhance the capacity of its
information systems and infrastructure in order to facilitate its growth
strategy. The implementation of these improvements had a disruptive effect
on the operations, but the situation has normalised.
Value proposition
Dawn's strategic change in direction during 1998 necessitated the
enhancement of efficiencies, capacities and market coverage. With these
elements now in place, the group, as a vertically integrated distribution
and trading specialist, is well positioned to extract sustainable value from
its niche markets and to deliver improved earnings in the next financial
year.
Financial review
Critical mass was achieved in all operations and turnover from continuing
operations increased by 14% to R784,0 million (2000: R685,3 million).
Operating profit from continuing operations increased by 4,5% to R51,9
million. Operating profit for the second six months have, however, declined
by R5,7 million compared to those achieved in the first six months, which
can be attributed to disruptions and non-recurring expenses related to:
- the implementation and streamlining of the improved information systems;
- the phasing in of the logistics division; and
- streamlining of accounting procedures consistent with the new systems in
use.
Taxation absorbed R9,987 million (2000: R4,673 million), which is equivalent
to an effective tax rate of 33% (2000: 13,6%). The increase in the effective
tax rate mainly resulted from the utilisation of available tax losses and
other non-taxable income in the prior year.
Headline earnings decreased by R6,39 million over the comparative period
mainly as a result of the current year increase in the taxation charge. The
tax charge in the comparative period was however distorted by the
utilisation of the benefits of tax losses and other permanent differences as
indicated above. If a notional tax rate of 28% (current year tax rate on
headline earnings) had been applied on headline earnings in the comparative
period, the headline earnings for that year would have amounted to R32,7
million, compared to headline earnings of R34,3 million for the period under
review. Headline earnings per share for the period under review amounted to
11,78 cents per share compared to prior year headline earnings per share of
11,79 cents per share as restated for notional tax.
Included in accounts receivable in the balance sheet is an amount of R6,8
million in respect of the estimated recoverable amount on a preferential
claim lodged after the final liquidation of the purchaser of the aluminium
extrusion division. This claim has not yet been formally approved at a
meeting of creditors, but based on advice by the company's professional
advisors to date, the board is of the firm belief that this amount will be
recovered.
Further rationalisation of the product range at the fastener distribution
business resulted in a cost of R3,155 million, which is disclosed as an
exceptional item. Provision for potential exposures on the liquidation of
the purchaser of the aluminium extrusion division was increased by R700 000,
which, together with goodwill amortisation as well as the stock
rationalisation mentioned above, resulted in an increase of R3,95 million in
exceptional items as reported in the interim profit announcement dated 8
March 2001.
Capital expenditure over the review period amounted to R18,9 million (2000:
R5,5 million). Working capital expansion in the amount of R18,6 million,
together with cash acquisitions of R7,2 million, contributed to an increase
in gearing to 19,5% (2000: 12,3%). Cash flow was also affected by the
disbursement to shareholders of approximately R9,7 million.
The financial statements comply with South African Statements of Generally
Accepted Accounting Practice and the accounting policies used are consistent
in all material respects with those used for the June 2000 financial
statements.
PricewaterhouseCoopers issued an unqualified audit report on the financial
position of the group at 30 June 2001 and the results of its operations and
cash flows for the year then ended.
Post balance sheet events
Agreement was reached for the disposal of the business of Sheerline
Aluminium Systems (Pty) Limited ("Sheerline"), subject to certain suspensive
conditions, for an aggregate effective consideration of R24 million with
effect from 28 July 2001. Sheerline is involved in the design and supply of
engineered aluminium structures to the construction industry.
The disposal was concluded in line with the group's decision to eliminate
its exposure to the aluminium industry. Shareholders are referred to the
announcement dated 11 September 2001 containing full details of the
disposal.
Prospects
Several growth opportunities are being pursued and explored in order to
capitalise on Dawn's expertise and improved capabilities in the fields of
distribution and trading.
The group is further investigating opportunities to expand its product range
through increased trading in well-known brands as well as through strategic
acquisitions.
The year ahead will be challenging, but management remain confident that the
benefits of the initiatives undertaken during the review period will improve
profitability and continue the delivery of sustainable shareholder value.
Dividend
Dawn will pursue the opportunities of a share repurchase at appropriate
price levels and it has therefore been decided not to pay dividends until
the repurchasing of shares has been completed.
Shareholders are referred to the press announcement and circular dated 5
September 2001, which contain details of an agreement reached for the
specific repurchase of 11,1 million shares subject to shareholder approval.
Board of directors
The board is pleased to announce the appointment of Mr Lou Alberts as non-
executive director with effect from 30 August 2001. Mr Alberts has extensive
experience in industries allied to Dawn and will make a valuable
contribution to the board.
Mr Charl van der Merwe will be retiring from the board at the forthcoming
annual general meeting. The board extends its sincere appreciation for his
contribution as chairman over a challenging period during which the company
successfully underwent a significant restructuring and was steered to
profitability. His valuable input in the implementation of sound corporate
governance policies has laid the foundation for proper control and good
business practices. The board wishes him all success and a deserved
retirement.
On behalf of the board
DA Tod
Chief executive officer
MJ Woods
Non-executive director
Chairman of the audit committee
Johannesburg
14 September 2001
Registered office
2 Keerom Road, Heriotdale Ext 10, Cleveland, Johannesburg 2000
Directors
CPJ van der Merwe* (Chairman), DA Tod (Chief executive officer) RL
Hiemstra*, MJ Woods*, LM Alberts*, JABeukes
*Non-executive
E-mail: info@dawnltd.co.za
Website: www.dawnltd.co.za
Alpha code: DAW
ISIN number: ZAE 0000 18834
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