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DAW - Dawn - Unaudited interim results for the six months ended 31 December 2006
Distribution and Warehousing Network Limited
("Dawn" or "the Group" or "the Company")
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Alpha code: DAW
ISIN: ZAE000018834
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
Revenue increased by 70%
Operating profit increased by 66%
Headline earnings increased by 60%
Condensed Group income statement
Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
% 2006 2005 2006
change R`000 R`000 R`000
Revenue 70 1 413 290 830 200 1 740 917
Operating profit 66 161 260 97 074 203 370
- Interest income 2 671 1 662 2 876
- Finance costs (29 500) (12 871) (25 681)
- Income from associates 11 871 322 8 657
Profit before taxation 70 146 302 86 187 189 222
Taxation (40 974) (24 857) (46 122)
Profit for the period 72 105 328 61 330 143 100
Allocated as follows:
Equity shareholders of
the Company 92 018 57 515 128 364
Minority interest 13 310 3 815 14 736
105 328 61 330 143 100
Included above:
Depreciation 13 914 7 240 16 783
Operating lease charges 11 653 5 333 14 767
Reconciliation of headline
earnings
Earnings for the period 92 018 57 515 128 364
Adjustment for the after
tax effect of:
- Profit on disposal of
property, plant and
equipment (61) - (3 811)
Headline earnings 60 91 957 57 515 124 553
Statistics
Number of ordinary
shares (`000)
- in issue 189 276 171 013 174 689
- held in treasury 7 726 7 726 7 726
- share incentive scheme 17 747 7 397 5 160
Deferred ordinary shares
in issue (`000) 6 000 8 000 8 000
Weighted average number
of shares (`000)
- for earnings per share 169 803 163 890 165 860
- for fully diluted earnings
per share* 187 550 183 874 183 607
Headline earnings per
share (cents) 54 54,16 35,09 75,11
Earnings per share (cents) 54,19 35,09 77,39
Fully diluted earnings per
share (cents)* 49,06 31,28 69,91
Operating profit (%) 11,4 11,7 11,7
*Dilutionary impact of shares to be issued in terms of the Share Incentive
Scheme
Condensed Group balance sheet
Audited
31 Dec 31 Dec 30 June
2006 2005 2006
R`000 R`000 R`000
Assets
Non-current assets 535 220 148 594 298 330
Property, plant and equipment 224 384 85 011 91 938
Deferred tax assets 34 255 - 26 722
Investment in associates 79 563 25 530 68 370
Intangible assets 197 018 38 053 111 300
Current assets 1 206 594 569 573 842 979
Inventory 507 057 268 260 312 834
Receivables and prepayments 556 876 226 043 421 678
Cash and cash equivalents 142 661 75 270 108 467
Total assets 1 741 814 718 167 1 141 309
Equity and liabilities
Capital and reserves 453 288 264 909 373 250
Ordinary shareholders` equity 429 056 255 762 337 791
Minority interest 24 232 9 147 35 459
Non-current liabilities 341 259 81 262 123 839
Interest-bearing liabilities 231 548 55 431 94 848
Non-interest-bearing
liabilities 103 379 17 939 13 031
Deferred tax liabilities 6 332 7 892 15 960
Current liabilities 947 267 371 996 644 220
Trade and other payables 612 682 235 443 432 357
Current portion of borrowings 143 398 33 184 86 408
Tax liabilities 42 516 40 112 22 073
Bank overdraft 148 671 63 257 103 382
Total equity and liabilities 1 741 814 718 167 1 141 309
Capital commitments 120 397 7 444 115 329
Plant and equipment - authorised 32 120 7 444 26 802
Land and buildings - contracted 35 000 - 35 000
- authorised 53 277 - 53 527
Future commitments 195 944 91 244 97 666
Finance leases 59 222 22 722 22 426
Operating leases 136 722 68 522 75 240
Value per share
Asset value per share
- net asset value (cents) 252,68 164,07 198,93
- net tangible asset
value (cents) 136,65 139,66 133,38
- market price (cents) 1 256 705 850
Market capitalisation (R`000) 2 377 307 1 205 641 1 484 856
Net financial gearing ratio (%) 78,89 26,68 38,54
Current asset ratio (times) 1,27 1,53 1,31
Condensed statement of changes in equity
Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2006 2005 2006
R`000 R`000 R`000
Opening balance 337 791 198 247 198 247
Foreign currency translation
reserve (837) - (2 267)
Attributable earnings 92 018 57 515 128 364
Capital distribution - - (22 232)
Share incentive scheme (9 316) - 1 895
Issue of ordinary shares 9 400 - 33 784
Balance at end of the period 429 056 255 762 337 791
Condensed Group cash flow statement
Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2006 2005 2006
R`000 R`000 R`000
Cash generated from operations 100 000 81 027 177 830
Net finance charges paid (26 829) (9 393) (21 293)
Dividends received - associate 5 880 1 455 3 085
Taxation paid (25 210) (16 755) (56 457)
Cash flow from operating
activities 53 841 56 334 103 165
Cash flow from investing
activities (193 458) (4 206) (93 830)
Cash flow from financing
activities 128 522 (47 711) 10 386
Capital distribution - - (22 232)
(Decrease)/increase in cash
resources (11 095) 4 417 (2 511)
Cash resources at beginning
of period 5 085 7 596 7 596
Cash resources at end of period (6 010) 12 013 5 085
SEGMENTAL ANALYSIS
Operating
Revenue profit Assets
R`000 R`000 R`000
Dec 2006
Trading Division 1 169 146 98 873 999 838
Manufacturing Division 400 694 60 901 673 527
Other 2 408 1 486 34 195
Intergroup (158 958) - -
1 413 290 161 260 1 707 560
Dec 2005
Trading Division 702 689 53 797 366 319
Manufacturing Division 266 289 42 573 232 297
Other - 704 2 712
Intergroup (138 778) - -
830 200 97 074 601 328
June 2006 (Audited)
Trading Division 1 520 543 119 885 741 565
Manufacturing Division 543 607 85 852 369 518
Other 1 146 (2 367) 3 504
Intergroup (324 379) - -
1 740 917 203 370 1 114 587
Capital
Deprecia- expendi-
tion and ture and
amorti- acqui-
Liabilities sation sitions
R`000 R`000 R`000
Dec 2006
Trading Division 940 904 5 566 12 989
Manufacturing Division 474 520 5 205 11 778
Other 145 808 3 143 52
Intergroup - - -
1 561 232 13 914 24 819
Dec 2005
Trading Division 144 766 4 895 18 117
Manufacturing Division 79 141 2 249 5 264
Other 85 544 96 -
Intergroup - - -
309 451 7 240 23 381
June 2006 (Audited)
Trading Division 334 086 8 953 13 722
Manufacturing Division 231 557 7 770 10 533
Other 164 382 60 229
Intergroup - - -
730 025 16 783 24 484
No secondary segmental information is disclosed as there are no separately
defined segments that will contribute more than 10% of revenue, results or
assets.
COMMENTARY
GROUP PROFILE
The Dawn Group is a manufacturer and distributor of local and international
quality branded hardware, sanitaryware, plumbing, kitchen, engineering and civil
products through a national, strategically positioned branch network, as well as
in select African countries. The Group supplies to the Infrastructure and
Building sectors, as well as offering related products to the industrial,
agricultural and mining sectors of the market.
The Group has two main operating divisions, Manufacturing and Trading, supported
by the Services division that provides central services such as warehousing,
distribution and marketing.
Dawn adds significant value to the distribution channel through its optimised
logistics services, as well as through acquiring leading brand manufacturers to
reduce duplication and enhance efficiencies between the production and
distribution of products.
RESULTS OVERVIEW
Dawn has achieved a significant improvement in operating results for the period
under review due to its comprehensive value-added product portfolio and
efficient distribution service against a strong economy. The Group`s
acquisitions of core manufacturing brands have also significantly strengthened
its status with key customers and have provided the springboard for continued
growth into the future.
Operating review
The Group`s revenue improved by 70% which includes the benefits derived from
organic as well as acquisitive growth. The organic increase in revenue,
excluding acquisitions, was 21%.
Acquisitions
Isca was acquired with effect from 1 September 2006 and Vaal Sanitaryware and
DPI Holdings with effect from 1 October 2006. Vaal and DPI are leading brand
manufacturers of ceramic sanitaryware and PVC pipes and fittings respectively to
the building, construction and infrastructural sectors of the market. Isca is an
established manufacturer of quality taps and mixers.
The addition of these manufacturing brands to the existing brands of Cobra,
Libra and the investment in Lasher, adds significantly to the Group`s offering
of a value-added package of quality products to the industry.
Operating performance
During the period under review, the Trading division contributed 74% to Group
revenue. The benefits of the Group`s strategy of providing a comprehensive,
value-added package to customers flowed through strongly in this division. All
the businesses performed above expectation due to robust volume growth and
increased efficiencies, resulting in improved margins.
The contribution from the increased stake in Incledon, which has been
reorganised into an effective national network, also impacted positively on the
Trading division`s results.
The Manufacturing division contributed 25% to Group revenue (excluding
intergroup sales of R159 million) and posted a very pleasing result. This was
mainly due to improved factory efficiencies and better integration and co-
ordination with the Trading division, resulting in enhanced planning and
loading. As outlined above, the inclusion of the new acquisitions also assisted
in the improved performance in this division. Isca contributed four months to
the period under review, while DPI and Vaal were included in the Group for three
of the six months.
The Libra results are included for the for the first time for the six-month
period. The existing business, Cobra, produced a record performance due to
improved factory efficiencies supported by an unprecedented order book during
the period under review.
The Services division has been strengthened to ensure effective support for the
enlarged Group. The division will assist Dawn to increase its future capacity,
to continue improving its service to customers and to eliminate duplication
within the Group. The Group has structured the Services division as stand-alone
profit centres, which will result in an increasing contribution from this
division in the future.
Financial review
Group revenue increased to R1,4 billion, a 70% increase on the comparative six-
month period. A significant portion of the turnover of the Manufacturing
division is intergroup and is therefore eliminated on consolidation.
Operating profit increased by 66% from R97 million to R161 million. The increase
in operating profit excluding acquisitions was 23%. Profit after tax of R105
million was 72% higher than the comparative period. Although the operating
margins of the Group`s historical businesses rose from 11,7% to 12,3%, the
overall Group margin declined slightly to 11,4%, largely due to the effect of
acquisitions. However, all acquisitions are profitable and further improvements
in the performance of both Vaal and DPI are anticipated.
Earnings per share of 54,19 cents and headline earnings per share of 54,16 cents
(2005: 35,09 cents) increased by 54%. Net asset value increased by 54% from
164,07 cents per share to 252,7 cents per share.
As a result of the recent acquisitions, gearing increased from 38,5% to 78,9%.
Management is comfortable that, due to the cash generative nature of the
business, the Group will return to historical gearing levels in the medium-term.
In the period under review, the Group generated cash from operations of R100
million (2005: R81 million).
ACCOUNTING POLICIES
The results have been prepared in accordance with International Financial
Reporting Standards. The accounting policies used are consistent with those used
in the preparation of the annual financial statements for the year ended 30 June
2006.
Business combinations
The financial impact of business combinations during the period under review was
determined provisionally by independent valuation experts. In accordance with
IFRS 3 these will be finalised within twelve months of the respective
acquisition dates. The board considered the preliminary report from the
valuation experts and is of the view that any adjustments which may be required
upon finalisation thereof will not materially affect the results of business
combinations as reported.
PROSPECTS
The Group expects the strong demand in the industry to continue for the
foreseeable future, even though the growth in the residential sector will be at
a lower and more sustainable rate. This is mainly due to increased activity in
the commercial property sector, the anticipated municipal, civil and industrial
infrastructural upgrading and development, the demand for lower and middle
income housing and spending on the refurbishment of homes.
The repositioning of Libra is almost complete, whilst good progress is being
made at both Vaal and DPI to bring them in line with the Group`s performance
expectations. Further improvements in these businesses will enhance future
results.
The acquisition of branded manufacturers over the past two years has allowed
Dawn to re-energise key brands, improve factory throughput and unlock
efficiencies both in Manufacturing and Trading.
The Dawn management team is confident that, barring unforeseen circumstances,
the Group will continue to achieve outstanding earnings growth in the medium-
term.
Distribution to shareholders
As it is the Group`s policy to declare a distribution to shareholders at the
financial year-end, no interim distribution will be declared.
On behalf of the Board
LM Alberts DA Tod Johannesburg
Chairman Chief Executive 8 February 2007
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*,
AN Kendal*, VJ Mokoena* *Non-executive
E-mail: info@dawnltd.co.za Alpha code: DAW
ISIN: ZAE000018834
Date: 08/02/2007 14:49:45 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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