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DAWN - Unaudited Interim Results For The Six Months Ended 31 December 2005
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
(Incorporated in the Republic of South Africa)
("DAWN" or "the Group")
Alpha code: DAW & ISIN: ZAE000018834
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2005
Revenue up 25%
Operating profit up 80%
Headline earnings up 55%
GROUP INCOME STATEMENT
6 months 6 months 12 months
31 Dec 31 Dec 30 Jun
% 2005 2004 2005
change R"000 R"000 R"000
Revenue 830 200 677 880 1 357 315
- Continuing operations 25 830 200 662 448 1 340 633
- Discontinued operations - 15 432 16 682
Operating profit 97 074 56 731 139 622
- Continuing operations 80 97 074 53 935 137 262
- Discontinued operations - 2 796 2 360
Net finance costs (11 209) (4 521) (17 344)
Income from associates 322 2 650 607
Profit before taxation 57 86 187 54 860 122 885
Taxation (24 857) (16 875) (32 300)
Profit after taxation 61 330 37 985 90 585
Minority interest (3 815) (49) (4 670)
Attributable earnings 52 57 515 37 936 85 915
Included above:
Depreciation 7 240 4 070 10 124
Operating lease charges 5 333 5 725 11 925
Reconciliation of
headline earnings
Earnings for the period 57 515 37 936 85 915
Adjustment for the after
tax effect of:
- Profit on sale of business - (863) (386)
Headline earnings 55 57 515 37 073 85 529
Statistics
Number of ordinary shares ("000)
- in issue 171 013 169 013 169 013
- held in treasury 7 726 7 726 7 726
- share incentive scheme 7 397 12 323 7 397
Deferred ordinary shares
in issue ("000) 8 000 10 000 10 000
Weighted average number
of shares ("000) 163 890 158 883 161 100
Headline earnings per
share (cents) 50 35,09 23,33 53,09
Attributable earnings per
share (cents) 35,09 23,88 53,33
Operating profit (%) 11,7 8,4 10,3
GROUP CASH FLOW STATEMENT
6 months 6 months 12 months
31 Dec 31 Dec 30 Jun
2005 2004 2005
R"000 R"000 R"000
Cash generated from operations 81 027 25 236 107 509
Net finance charges paid (9 393) (3 376) (15 189)
Dividends received - associate 1 455 - 2 853
Taxation paid (16 755) (13 982) (44 253)
Cash flow from operating activities 56 334 7 878 50 920
Cash flow from investing activities (4 206) (203 914) (163 199)
Cash flow from financing activities (47 711) 163 965 105 456
Capital distribution - - (11 831)
Increase/(decrease) in cash resources 4 417 (32 071) (18 654)
Cash resources at beginning of period 7 596 26 250 26 250
Cash resources at end of period 12 013 (5 821) 7 596
GROUP BALANCE SHEET
31 Dec 31 Dec 30 Jun
2005 2004 2005
R"000 R"000 R"000
Assets
Non-current assets
Property, plant and equipment 85 011 80 882 89 418
Investment in associates 25 530 27 874 25 213
Intangible assets 38 053 34 735 38 054
Current assets 506 316 478 911 497 157
Inventory 268 260 264 483 265 638
Receivables and prepayments 226 043 214 428 223 923
Cash and cash equivalents 12 013 - 7 596
Total assets 654 910 622 402 649 842
Equity and liabilities
Capital and reserves
Ordinary shareholders" equity 255 762 160 070 198 247
Minority interest 9 147 2 617 7 136
Non-current liabilities 81 262 132 137 106 892
Interest-bearing liabilities 55 431 112 812 75 162
Non-interest-bearing liabilities 17 939 14 450 25 841
Deferred tax liabilities 7 892 4 875 5 889
Current liabilities 308 739 327 578 337 567
Trade and other payables 235 443 241 778 247 188
Current portion of borrowings 33 184 30 836 56 365
Tax liabilities 40 112 49 143 34 014
Bank overdraft - 5 821 -
Total equity and liabilities 654 910 622 402 649 842
Capital commitments 7 444 4 108 23 964
Future commitments 91 244 96 533 90 111
Finance leases 22 722 19 777 19 510
Operating leases 68 522 76 756 70 601
Value per share
Asset value per share
- net asset value (cents) 164,07 107,46 128,82
- net tangible asset value (cents) 139,66 84,14 104,10
- market price (cents) 705 550 600
Market capitalisation (R"000) 1 205 641 929 572 1 014 077
Financial gearing ratio (%) 26,68 74,11 38,92
Current asset ratio (times) 1,64 1,46 1,47
STATEMENT OF CHANGES IN EQUITY
6 months 6 months 12 months
31 Dec 31 Dec 30 Jun
2005 2004 2005
R"000 R"000 R"000
Opening balance 198 247 121 889 121 889
Attributable earnings 57 515 37 936 85 915
Capital distribution - - (11 831)
Share incentive scheme - 145 2 174
Issue of deferred ordinary shares - 100 100
Balance at end of period 255 762 160 070 198 247
NOTES
Accounting policies
The condensed financial statements for the six months ended 31 December 2005
were prepared in accordance with IAS34 - Interim Financial Reporting and in
compliance with the Listings Requirements of the JSE Limited. These are the
Group"s first International Financial Reporting Standards ("IFRS") condensed
interim financial statements for part of the period for which annual financial
statements will be prepared under IFRS. IFRS 1 - First-time Adoption of
International Financial Reporting Standards, has been applied and for detail of
the adjustments, refer to the Transitional Report. The condensed consolidated
interim financial statements do not include all the information required by IFRS
for full financial statements. The comparative period in the previous financial
year and for the year ended 30 June 2005 have been restated.
The principal policies used in the preparation of the results for the period
ended 31 December 2005 are consistent with those applied for the restated year
ended 30 June 2005 and for the restated six months ended 31 December 2004 in
terms of IFRS.
Goodwill and Trademarks
An annual impairment test on the balance of goodwill and trademarks has been
performed at 30 June 2005. No impairment loss has occurred.
Basis of preparation
The board acknowledges its responsibility for the preparation of the condensed
consolidated interim financial statements in accordance with IFRS and JSE
Limited Listings Requirements. The Group"s first published IFRS results is the
interim results for the six months ended 31 December 2005. The Group"s first
published full set of financial statements under IFRS will be for the period
ending 30 June 2006.
In order to explain how DAWN"s reported performance and financial position are
impacted by IFRS, the Group has restated information previously published under
SA GAAP to the equivalent basis under IFRS.
TRANSITIONAL REPORT
Transitional arrangements
The date of transition to IFRS for the Group is 1 July 2004. The key principle
of IFRS 1 - First-time Adoption of International Financial Reporting Standards
is full retrospective application of these standards. IFRS 1 however provides
exemptions from retrospective application in certain instances due to cost and
practical considerations.
The Group"s transitional elections are set out below:
Business combinations
The Group adopted IFRS 3 - Business Combinations, from 1 July 2004 and therefore
no adjustments are required. The exemptions available allows the Group not to
apply the principles of IFRS 3 retrospectively. This exemption was exercised.
Property, plant and equipment
A first-time adopter may elect to use the fair value of individual property,
plant and equipment at transition date as the deemed cost. The Group is not
making use of this transitional exemption and elects to measure individual items
of property, plant and equipment at original cost.
Share-based payments
The Group is electing not to apply IFRS 2 - Share-based Payments to equity
settled transactions prior to 7 November 2002 or to the same granted after that
date but which had vested prior to 1 January 2005 and has therefore taken the
available exemption.
There are no changes to estimates made under previous SA GAAP for transition to
IFRS. Where estimates have previously been made under SA GAAP, consistent
estimates (after adjustments to reflect any difference in accounting policies)
have been made for the same date.
Adjustments implemented with effect from 1 July 2004
Note 1: IAS16 - Revision of estimated useful lives of property, plant and
equipment.
Previously property, plant and equipment were depreciated on a straight-line
basis to their estimated residual values. These residual values were fixed at
the time of acquisition and not reassessed annually.
Under IFRS significant parts of property, plant and equipment are identified
separately and residual values of these components are now redetermined on each
balance sheet date. Depreciation ceases when the carrying value of the assets
equal its residual values.
This more robust assessment has resulted in an increase in estimated useful
lives of property, plant and equipment. The depreciation previously recognised
in the income statement has accordingly been reduced.
Note 2: IAS38 - Intangible assets
Computer software, previously classified as property, plant and equipment, is
now classified as intangible assets.
Further developments in IFRS reporting
The information has been prepared on the basis of the Group"s expectation of the
standards that will be applicable as at 30 June 2006. IFRS information at year-
end may differ from the information contained herein for the following reasons:
* Further standards and interpretations may be issued that are applicable for
2006 reporting or which are applicable to later accounting periods but with an
option to adopt for earlier periods.
* Different practice may develop with regard to interpretation and application
of the standards.
RECONCILIATION OF PREVIOUS SA GAAP TO IFRS
IFRS 6 months 12 months
transition ended ended
1 Jul 2004 31 Dec 2004 30 Jun 2005
Note R"000 R"000 R"000
Reconciliation of equity
Equity previously reported
under SA GAAP 118 730 156 154* 193 413
Property, plant and equipment 1 4 450 5 516 6 809
Deferred tax on PPE adjustment (1 291) (1 600) (1 975)
Equity restated under IFRS 121 889 160 070 198 247
Reconciliation of
attributable earnings
Attributable earnings as
previously reported 45 013 37 180* 84 240
Property, plant and equipment 1 4 450 1 065 2 359
Deferred tax on PPE adjustment (1 291) (309) (684)
Attributable earnings restated
under IFRS 48 172 37 936 85 915
Reconciliation of assets
As previously reported under
SA GAAP 371 122 616 886 643 033
Property, plant and equipment 1 4 450 5 516 6 809
Assets restated under IFRS 375 572 622 402 649 842
Reconciliation of non-current
liabilities
As previously reported under
SA GAAP 35 067 130 537 104 917
Deferred tax on PPE adjustment 1 1 291 1 600 1 975
Non-current liabilities restated
under IFRS 36 358 132 137 106 892
* Restated from R162,551 million to R156,154 million for IAS17 interpretation
change of accounting for leases. 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 changes in the interpretation of
the accounting standard regarding operating 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.
COMMENTARY
Group profile
The DAWN Group is a focused manufacturer and distributor of leading brand
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
The Group"s results include the benefit derived from its recent acquisition of
Cobra Watertech (Pty) Limited ("Cobra") for the full period under review. It
continues to selectively search for similar opportunities to acquire leading
brand manufacturers in the markets it is serving.
The closer ties and cooperation with such manufacturers minimise duplication of
resources and enhance efficiencies.
Financial results
The Group once again achieved a significant improvement in results for the
period under review. Turnover for the six months increased to R830,2 million,
resulting in a 25% increase on continuing operations. The increase in turnover
from the operations excluding Cobra of 12% was achieved in a little to no
selling price inflationary environment.
Operating profit increased by 80%, from R54 million to R97 million, whilst
profit after tax of R61,3 million is 61% higher. The increase in profit after
tax from the operations excluding Cobra was 15%.
Attributable earnings of R57,5 million were achieved, an increase of 52%,
whereas HEPS of 35,1 cents (2004: 23,3 cents) increased by 50%.
Net asset value of 164 cents per share is 53% higher, whilst free cash flow
generated increased by R41 milion over the comparative period.
The debt ratio decreased from 74% to 27% at end December, mainly as a result of
good asset management and the resultant strong cash flow.
Post Balance Sheet Events
The Group acquired a 49% interest in Halsted Investments (Pty) Limited, a
manufacturer and distributor of branded tools under the Lasher trademark, for a
cash purchase consideration of R60,8 million, subject to certain conditions and
expected to be effective by 1 March 2006.
Agreement has been reached to increase the shareholding in Incledon (Pty)
Limited ("Incledon") from 30,4% to 100%, subject to Competition Commission
approval, at a maximum purchase consideration of R56 million to be settled
through the issue of new shares to the black shareholders of Incledon at the 30-
day average market price prior to the effective date.
The Group has acquired two acrylic bath manufacturers based in Cape Town, Amanzi
Bath Works (Pty) Limited and Libra Bathroomware SA (Pty) Limited at a combined
cash cost of R21 million for 79%.
Prospects
The Group remains optimistic about demand in the building industry and expects
to see further growth in this market, albeit at a more sustainable rate. The
Group will also benefit from any infrastructural development as well as
expansion in the mining sector. Several acquisition opportunities are also being
pursued.
As a result the directors remain positive about DAWN"s future earnings growth.
Distribution to Shareholders
In keeping with the Group"s policy, the distribution to shareholders is only
considered at year-end.
On behalf of the Board
Lm Alberts DA Tod Johannesburg
Chairman Chief Executive 9 February 2006
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
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*, RL Hiemstra*, VJ Mokoena*,
*Non-executive
E-mail: info@dawnltd.co.za * Alpha code: DAW * ISIN: ZAE000018834
Date: 09/02/2006 02:43:19 PM Supplied by www.sharenet.co.za
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