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Distribution And Warehousing Network Limited - Audited Results For The Year
Ended 30 June 2005
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
("DAWN" or "the Group") (Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Share code: DAW ISIN: ZAE000018834
Audited results for the year ended 30 June 2005
- Revenue from ongoing operations up 32,9% to R1,341 billion
- Operating profit up 116,9% to R137,2 million
- Attributable earnings up 87,1% to R84,2 million
- Headline earnings per share up 72,8% to 52,05 cents
- Operating margin up to 10,1% from 6,0%
- Free cash flow generated of R50,9 million
"We are pleased with the Group"s strong performance over the reported period.
Our strategic initiatives coupled with a solid empowerment profile are producing
excellent results whilst we continue to focus on revenue generation and
operating efficiencies. Going forward, we are perfectly positioned to benefit
fully from the favourable climate in the market segments in which the company
operates."
Derek Tod, Chief Executive Officer.
Group income statement
Audited Audited
12 months 12 months
30 June 30 June
% 2005 2004
change R"000 R"000
Revenue 29,6 1 357 315 1 047 417
- Continuing operations 32,9 1 340 633 1 008 829
- Discontinued operations 16 682 38 588
Operating profit 116,9 137 263 63 274
- Continuing operations 134 903 59 993
- Discontinued operations 2 360 3 281
Net finance costs (17 344) (5 813)
Income from associates 607 3 707
Profit before taxation 97,0 120 526 61 168
Taxation (31 616) (17 656)
Profit after taxation 88 910 43 512
Minority interest (4 670) 1 501
Attributable earnings 87,1 84 240 45 013
Included above:
Depreciation 12 483 9 199
Operating lease charges 11 925 10 046
Reconciliation of headline earnings
Earnings for the year 84 240 45 013
Adjustment for the after tax effect of:
- Profit on sale of business (386) -
Headline earnings 86,3 83 854 45 013
Statistics
Number of ordinary shares ("000)
- in issue 169 013 169 013
- held in treasury 7 726 7 726
- share incentive scheme 7 397 12 807
Deferred ordinary shares in issue (`000) 10 000 -
Weighted average number of shares (`000) 161 100 149 445
Headline earnings per share (cents) 72,8 52,05 30,12
Attributable earnings per share (cents) 52,29 30,12
Operating profit (%) 10,1 6,0
Group balance sheet
Audited Audited
30 June 30 June
2005 2004
R"000 R"000
Assets
Non-current assets
Property, plant and equipment 82 609 21 456
Investment in associates 25 213 23 023
Intangible assets 38 054 -
Current assets 497 157 326 643
Inventory 265 638 132 566
Receivables and prepayments 223 923 167 827
Cash and cash equivalents 7 596 26 250
Total assets 643 033 371 122
Equity and liabilities
Capital and reserves
Ordinary shareholders" equity 193 413 118 730
Minority interest 7 136 12
Non-current liabilities 104 917 35 067
Interest-bearing borrowings 75 162 22 133
Non-interest-bearing borrowings 25 841 12 310
Deferred tax liabilities 3 914 624
Current liabilities 337 567 217 313
Trade and other payables 247 188 186 461
Current portion of borrowings 56 365 15 224
Tax liability 34 014 15 628
Total equity and liabilities 643 033 371 122
Capital commitments 23 964 14 589
Future commitments 90 111 92 391
Finance leases 19 510 14 511
Operating leases 70 601 77 880
Value per share
- net asset value (cents) 125,68 79,96
- net tangible asset value (cents) 100,95 79,96
- market price (cents) 600 240
Market capitalisation at year-end (R"000) 1 014 077 405 631
Net financial gearing ratio (%) 39,89 26,32
Current asset ratio (times) 1,47 1,50
Group cash flow statement
Audited Audited
12 months 12 months
30 June 30 June
2005 2004
R"000 R"000
Cash generated from operations 107 509 52 488
Net finance charges paid (15 189) (4 061)
Dividends received - associate 2 853 1 448
Taxation paid (44 253) (16 623)
Cash flow from operating activities 50 920 33 252
Cash flow from investing activities (163 199) (26 364)
Cash flow from financing activities 105 456 19 666
Capital distribution (11 831) (7 169)
Shares repurchased - (7 509)
Increase/(decrease) in cash resources (18 654) 11 876
Cash resources at beginning of year 26 250 14 374
Cash resources at end of year 7 596 26 250
Statement of changes in equity
Audited Audited
12 months 12 months
30 June 30 June
2005 2004
R"000 R"000
Opening balance 118 730 92 286
Attributable earnings 84 240 45 013
Capital distribution (11 831) (7 169)
Share incentive scheme 2 174 1 548
Issue of deferred ordinary shares 100 -
Change in accounting policy on treatment
of leases - (5 439)
Treasury shares acquired - (7 509)
Balance at the end of the year 193 413 118 730
Commentary
Group Profile
The DAWN Group is a leading manufacturer and distributor of quality plumbing,
hardware and related materials to the residential and non-residential sectors of
the building and construction industries. In addition, the Group also supplies
related products into the petrochemical, agricultural and mining sectors of the
market, as well as into infrastructural development, both locally and in
selected African countries.
Strategic Overview
An important aspect of the Group"s success was the benefit derived from its
strategy to selectively acquire leading brand suppliers in the industry. The
results include the benefits derived from the acquisitions of Cobra Watertech
(Pty) Ltd (Cobra) for seven months, as well as that of Amalgamated Fasteners and
Fittings Group (Pty) Ltd (AFF) for the full year.
The Group has call options during the next five and two years to acquire the
balance of the shareholdings of 22% and 24% in Cobra and AFF respectively, and
it is the Group"s intention to exercise these options at the appropriate times.
The closer ties and cooperation with these manufacturers minimise duplication of
resources and enhance efficiencies. Further opportunities in this regard are
being selectively pursued.
Financial Results
The Group achieved a significant improvement in results for the year under
review, even though the residential market has experienced a slight correction
from the buoyant conditions of the recent past. Turnover increased to R1,357
billion, resulting in a 33% increase on continuing operations. Turnover from
trading operations, excluding acquisitions and disposals, increased by 15% to
R1,156 billion.
Operating profit increased by 117%, from R63 million to R137 million, whilst
profit before tax of R120 million is 97% higher. Operating profit from trading
operations, excluding acquisitions and disposals, increased by 36% to R85,8
million.
Headline earnings of R83,8 million were achieved, an increase of 86%, whereas
earnings per share and headline earnings per share of 52 cents increased by 73%.
Net asset value of 125 cents per share is 57% higher, whilst free cash flow
generated increased from R33,3 million to R50,9 million. The debt ratio
increased from 26,3% to 39,9% at year-end.
Accounting Policies
The results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice. The accounting policies used are
consistent with those used in the comparative period for the year ended
30 June 2004, except for the adoption of IFRS3 - Business Combinations, as well
as a change in accounting policy on treatment of leases in terms of IAS17. The
Group previously accounted for operating leases by recognising the lease expense
or lease income in the year in which the financial obligation or benefit arose.
Due to the change in the interpretation of the accounting standard regarding
leases, lease payments or receipts under operating leases are now recognised as
an expense or income on a straight-line basis over the lease term unless another
systematic basis is more representative of the time pattern of the user"s
benefit.
The impact of this change on retained earnings at the beginning of the year was
a reduction of R6,058 million (after tax of R2,59 million) which was accounted
for as a restatement of comparative figures of R0,6 million and an adjustment in
the statement of changes in equity of R5,4 million in respect of periods prior
to 1 July 2003.
In terms of the JSE Listings Requirements, compliance with IFRS is required for
financial years beginning on or after 1 January 2005. Accordingly, the Group is
required to produce IFRS compliant financial interim results for the six months
ending 31 December 2005 and compliant financial statements for the year ending
30 June 2006 as well as restated comparatives. To this end the Group has
initiated an IFRS conversion project, which is on track to meet the required
deadlines. No material adjustments are envisaged to comply with IFRS.
These financial statements have been audited by the Group"s auditors,
PricewaterhouseCoopers Inc, and their unqualified report is available for
inspection at the Group"s registered office.
Black Economic Empowerment
Ukhamba Holdings (Pty) Ltd (Ukhamba) acquired 33,4% of the DAWN Group, effective
8 December 2004. In addition, the Group issued 10 million deferred ordinary
shares to Ukhamba which will vest in equal amounts over the next four years.
This will bring the effective BEE shareholding in DAWN by Ukhamba to 38,8%.
Prospects
A slowdown in the pace of growth in the housing sector is expected in line with
the levelling out of the interest rate cycle. However, the Group anticipates
the building industry to continue its momentum in the foreseeable future,
especially in view of the continuing demand for housing, mainly supported by the
emergent black middle class and the latest increase in building plans passed on
an annualised basis. The ever decreasing gap between the price of existing and
newly built homes will also have a positive effect on growth. The demand for non
residential construction as well as the increased focus on delivery of
infrastructural development will also benefit the Group. In addition, benefits
from the abovementioned strategic action plans should also become more evident
during the year ahead.
Distribution to Shareholders
In keeping with the Group"s dividend policy of four times cover, the board has
recommended a capital distribution of 13 cents per share, subject to
shareholders" approval. A further announcement in this regard will be made in
due course.
On behalf of the board
LM Alberts DA Tod Johannesburg
Chairman Chief executive officer 18 August 2005
Registered office: 2 Eton Road, Parktown 2193, Johannesburg
Transfer secretaries: Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Marshalltown 2001 (PO Box 61051, Marshalltown 2107)
Directors: LM Alberts* (Chairman), DA Tod (Chief executive officer), OS Arbee*,
JA Beukes, AS Boynton-Lee*, ML Field, RL Hiemstra*, VJ Mokoena*,
*Non-executive
E-mail:info@dawnltd.co.za Alpha code:DAW ISIN:ZAE000018834
Date: 18/08/2005 01:15:09 PM Supplied by www.sharenet.co.za
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