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DAW - Distribution And Warehousing Network - Unaudited Interim Results For

Release Date: 13/02/2008 08:00
Code(s): DAW
Wrap Text

DAW - Distribution And Warehousing Network - Unaudited Interim Results For The Six Months Ended 31 December 2007 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 2007 CONDENSED GROUP INCOME STATEMENT Unaudited Unaudited Audited 6 months 6 months 12 months 31 Dec 31 Dec 30 June
% 2007 2006 2007 change R`000 R`000 R`000 Revenue 37 1 930 408 1 413 290 3 002 544 Operating profit 38 222 503 161 260 323 946 Finance income 9 227 2 671 10 476 Finance costs (44 814) (29 500) (72 672) Share of profit of associates 9 061 11 871 21 389 Profit before taxation 195 977 146 302 283 139 Income tax expense (52 718) (40 974) (74 663) Profit for the period 36 143 259 105 328 208 476 Attributable to: Equity holders of the Company 49 137 467 92 018 199 210 Minority interest 5 792 13 310 9 266 143 259 105 328 208 476 Included above: Depreciation and amortisation 21 525 13 914 33 615 Operating lease charges 24 264 11 653 37 392 Determination of headline earnings Attributable profit 137 467 92 018 199 210 Adjustment for the after-tax effect of: - Gain on dilution of shareholding in subsidiary - - (10 888) - Profit on disposal of property, plant and equipment (923) (61) (426) Headline earnings 48 136 544 91 957 187 896 Statistics Number of ordinary shares (`000) - in issue 191 464 189 276 189 464 - held in treasury 7 726 7 726 7 726 - Share Incentive Trust 12 967 17 747 12 967 Deferred ordinary shares in issue (`000) 4 000 6 000 6 000 Weighted average number of shares (`000) - for earnings per share 174 771 169 803 170 070 - for diluted earnings per share* 187 738 187 550 183 037 Headline earnings per share (cents) 44 78,1 54,2 110,5 Earnings per share (cents) 45 78,7 54,2 117,1 Diluted earnings per share (cents)* 49 73,2 49,1 108,8 Operating profit (%) 11,5 11,4 10,8 * Dilutionary impact of shares to be issued in terms of the Share Incentive Trust. CONDENSED GROUP CASH FLOW STATEMENT Unaudited Unaudited Audited
6 months 6 months 12 months 31 Dec 31 Dec 30 June 2007 2006 2007 R`000 R`000 R`000
Cash generated from operations 64 163 667 100 000 269 094 Net finance charges paid (31 368) (26 829) (57 327) Dividends received - associate - 5 880 15 680 Taxation paid (26 979) (25 210) (42 975) Cash flow from operating activities 105 320 53 841 184 472 Cash flow from investing activities (48 930) (193 458) (177 187) Cash flow from financing activities (48 287) 128 522 37 243 Capital distribution - - (28 391) Increase/(decrease) in cash resources 8 103 (11 095) 16 137 Cash resources at beginning of period 21 222 5 085 5 085 Cash resources at end of period 29 325 (6 010) 21 222 CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY Unaudited Unaudited Audited 6 months 6 months 12 months 31 Dec 31 Dec 30 June 2007 2006 2007
R`000 R`000 R`000 Opening balance 515 864 337 791 337 791 Foreign currency translation reserve (4 740) (837) (1 313) Attributable profit 137 467 92 018 199 210 Capital distribution - - (28 391) Share Incentive Trust (1 838) (9 316) 1 717 Issue of ordinary shares - 9 400 3 118 Share-based payments reserve 6 410 - 3 732 Balance at end of period 653 163 429 056 515 864 CONDENSED GROUP BALANCE SHEET Unaudited Unaudited Audited
31 Dec 31 Dec 30 June 2007 2006 2007 R`000 R`000 R`000 Assets Non-current assets 597 978 535 220 580 910 Property, plant and equipment 261 862 224 384 232 268 Intangible assets 233 458 197 018 223 960 Investment in associates 90 302 79 563 92 605 Deferred tax assets 12 356 34 255 32 077 Current assets 1 607 787 1 206 594 1 403 959 Inventory 712 017 507 057 538 510 Receivables and prepayments 626 865 556 876 591 694 Cash and cash equivalents 268 905 142 661 273 755 Total assets 2 205 765 1 741 814 1 984 869 Equity and liabilities Capital and reserves 681 890 453 288 539 477 Ordinary shareholders` equity 653 163 429 056 515 864 Minority interest 28 727 24 232 23 613 Non-current liabilities 261 757 341 259 376 848 Interest-bearing liabilities 188 079 231 548 219 550 Non-interest-bearing liabilities 43 812 103 379 136 109 Deferred tax liabilities 29 866 6 332 21 189 Current liabilities 1 262 118 947 267 1 068 544 Trade and other payables 761 029 612 682 637 140 Current portion of borrowings 214 058 143 398 134 472 Tax liabilities 47 451 42 516 44 399 Bank overdraft 239 580 148 671 252 533 Total equity and liabilities 2 205 765 1 741 814 1 984 869 Capital commitments 238 513 120 397 266 962 Plant and equipment - contracted 17 301 - 10 611 - authorised 38 205 32 120 73 498 Land and buildings - contracted 37 475 35 000 35 000 - authorised 145 532 53 277 147 853 Future commitments Operating leases 111 293 136 722 115 579 Value per share Asset value per share - net asset value (cents) 373,7 252,7 295,2 - net tangible asset value (cents) 240,2 136,7 167,0 - market price (cents) 1 750 1 256 1 720 Market capitalisation (R`000) 3 350 620 2 377 307 3 258 785 Net financial gearing ratio (%)* 37,3 78,9 52,0 Current asset ratio (times) 1,3 1,3 1,3 * Excludes vendor finance from acquisitions. SEGMENTAL ANALYSIS Segment Revenue result Assets R`000 R`000 R`000
Dec 2007 Manufacturing Division 908 900 120 421 1 039 882 Trading Division 1 439 529 116 566 1 137 192 Other 6 239 4 951 16 335 Consolidation and unallocated (424 260) (19 435) 12 356 1 930 408 222 503 2 205 765 Dec 2006 Manufacturing Division 400 694 60 901 673 527 Trading Division 1 169 146 98 873 999 838 Other 2 408 1 486 34 195 Consolidation and unallocated (158 958) - - 1 413 290 161 260 1 707 560 June 2007 (Audited) Manufacturing Division 1 206 051 148 216 886 894 Trading Division 2 410 894 196 182 1 052 832 Other 6 434 (4 728) 13 066 Consolidation and unallocated (620 835) (15 724) 32 077 3 002 544 323 946 1 984 869 SEGMENTAL ANALYSIS (continued) Deprecia- Capital tion and
expendi- amorti- Liabilities ture sation R`000 R`000 R`000 Dec 2007 Manufacturing Division 737 758 33 160 15 218 Trading Division 480 765 14 571 6 058 Other 228 035 61 249 Consolidation and unallocated 77 317 - - 1 523 875 47 792 21 525 Dec 2006 Manufacturing Division 474 520 11 778 5 205 Trading Division 940 904 12 989 5 566 Other 145 808 52 3 143 Consolidation and unallocated - - - 1 561 232 24 819 13 914 June 2007 (Audited) Manufacturing Division 862 958 37 343 21 398 Trading Division 401 761 15 646 11 789 Other 115 084 385 428 Consolidation and unallocated 65 589 - - 1 445 392 53 374 33 615
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, mining and civil products through a national, strategically positioned branch network, as well as in select African countries and Mauritius. The Group supplies products and services to the infrastructure and building sectors, as well as related products to the industrial, agricultural and mining sectors of the market. The Group has two main operating divisions, Manufacturing (39% of revenue) and Trading (61% of revenue), assisted by the Support Services division that provides central services such as warehousing, distribution and marketing. The Group will be reporting on this division at year-end. Dawn adds significant value to the distribution channel through its optimised logistics services, as well as through its leading brand manufacturers which reduce duplication and enhance efficiencies between the production and distribution of products. OVERVIEW Dawn`s strong performance is largely attributable to organic revenue growth of 19%, resulting in organic operating profit growth of 23%. The results reflect the benefit derived from the Group`s strategy of acquiring manufacturing companies with strongly branded, locally produced products, which are distributed through its well-established distribution centres. The results also include the benefits derived from bedding down the recent acquisitions. The management team believes there are still further improvement possibilities within these acquisitions and these are being pro-actively pursued. In addition, the Group has expanded its presence in the high growth infrastructural development market this year, as well as in agriculture and mining. The recent establishment of the Group`s central distribution centre in Germiston, where the warehouses of the Gauteng businesses are being consolidated, augurs well for the future in terms of improved service levels at a reduced cost. FINANCIAL RESULTS The Group once again achieved a significant improvement in results for the period under review. Revenue increased by 37% to R1,9 billion (2006: R1,4 billion). A significant portion of the revenue of the Manufacturing division is inter-group and is eliminated on consolidation. Operating profit increased by 38% to R223 million (2006: R161 million). Attributable profit to equity holders of the Company of R137 million (2006: R92 million) is 49% higher, whereas earnings per share of 78,7 cents (2006: 54,2 cents) increased by 45%. The increased contribution from the higher margin Manufacturing division to operating profit resulted in the Group maintaining the operating margin against an increased base of innately lower margin operations. In line with the Group`s strategy and stated commitment to decrease its debt:equity ratio, the financial gearing ratio decreased from 79% recorded at the end of December 2006 to 37% at 31 December 2007 (30 June 2007: 52%), once again proving the Group`s ability to swiftly integrate acquisitions and generate strong cash flow. The cash generated from operations increased by 64% (2006: 23%). The financial gearing ratio measures the interest-bearing debt of the Group as a percentage of the shareholders equity and excludes non-interest- bearing acquisition vendors. ACCOUNTING POLICIES The principal policies used in the preparation of the results for the six months ended 31 December 2007 are consistent with those applied for the year ended 30 June 2007 in terms of International Financial Reporting Standards. BASIS OF PREPARATION The Board acknowledges its responsibility for the preparation of the condensed consolidated interim financial statements in accordance with the Companies Act in South Africa, 1973, as amended, International Accounting Standard 34 (IAS 34) and the JSE Limited Listings Requirements. GOODWILL AND INTANGIBLE ASSETS An annual impairment test on the balance of goodwill and indefinite life trademarks at the beginning of the reporting year has been performed at 30 June 2007. No impairment loss has occurred. 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 valuations have to be finalised within 12 months of the respective acquisition dates. The valuation process for the acquisitions done during the prior financial year has not been finalised and is therefore reported as provisional values. The financial impact of these valuations on the various business combinations will be reported on as final in the Group`s audited year- end results for 30 June 2008. The Board considered the current status of the valuation process on the acquisitions performed during the prior financial year (namely Vaal Sanitaryware, Isca and DPI Holdings) and is of the view that allocations from goodwill to intangible assets will not materially affect the results of the business combinations as reported. Reallocation from goodwill to other intangible assets is, however, likely. The Group acquired Saffer East London (Pty) Limited on 1 July 2007 and Waterlinx Industrial and Irrigation (Pty) Limited on 1 August 2007 for R6,5 million and R16 million, respectively. These acquisitions have been funded through debt. SAFFER EAST LONDON (PTY) LIMITED The acquired business contributed revenue of R23,7 million and operating profit of R1 million for the six months ended 31 December 2007, and its assets and liabilities at 31 December 2007 were R25,3 million and R15,4 million, respectively. WATERLINX INDUSTRIAL AND IRRIGATION (PTY) LIMITED The acquired business contributed revenue of R40,2 million and operating profit of R1,5 million for the six months ended 31 December 2007, and its assets and liabilities at 31 December 2007 were R29 million and R12 million respectively. If the acquisition had occurred on 1 July 2007, the Group revenue would have been R7 million more, and operating profit would have been R0,4 million more. PROSPECTS The Group remains positive about its long-term prospects, as it has a balanced exposure across different industries, which include the building, infrastructure, plumbing, petrochemical, agricultural and mining sectors. Although the Group expects earnings growth to slow down in the second half of the financial year due to the market tightening following higher interest rates and slower GDP growth, earnings growth is expected to remain at above the industry average. In the absence of a substantial deterioration of these exogenous factors, the Board remains positive for the following reasons: * Since the Group mainly supplies locally produced products, the depreciation of the Rand opens opportunities for import substitution, at a time when imports are at historically high levels. Furthermore, the weakening of the currency will open export opportunities for the Group. * During periods of high interest rates, the Group`s just-in-time package becomes more attractive to retailers and hence the Group captures market share from the local and overseas suppliers. * The Group`s future organic growth will also be enhanced through further increasing efficiencies and outputs in the manufacturing operations as well as with its new central distribution centre. * Product ranges will continue to be selectively expanded to enable the Group to render a complete solution, in line with its strategic objective. The directors therefore remain confident about achieving earnings growth for the remainder of the financial year, albeit at a slower rate. 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 13 February 2008 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*, JAI Ferreira, GL Geldenhuis, RL Hiemstra*, AN Kendal*, VJ Mokoena* *Non-executive Company secretary: JAI Ferreira E-mail: info@dawnltd.co.za www.dawnltd.co.za Date: 13/02/2008 08:00:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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