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Summary consolidated financial results for the year ended 30 June 2014 and dividend declaration
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
(“DAWN” or “the Group” or “the Company”)
Alpha code: DAW
ISIN: ZAE000018834
www.dawnltd.co.za
SUMMARY CONSOLIDATED FINANCIAL RESULTS for the year ended
30 June 2014 and dividend declaration
COMMENTARY
INTRODUCTION
Distribution and Warehousing Network Limited (DAWN) is listed in
the Construction and Materials – Building Materials and Fixtures
sector of the JSE Limited.
The Group manufactures and distributes quality branded hardware,
sanitaryware, plumbing, kitchen, engineering and civil products
through a national, strategically positioned branch network in
South Africa, as well as in selected countries in the rest of
Africa and Mauritius.
DAWN has significant proprietary brands and agency agreements with
prominent suppliers internationally and sources branded products
from a well-established supplier network.
The Group has two main operating segments, namely Building and
Infrastructure, both being supported by the Solutions segment.
STRATEGY OVERVIEW
DAWN’s key strategy is to be a leading force in the distribution
of plumbing, hardware and infrastructure products. To achieve this
goal, it is necessary to also be a leading distributor of products
to ensure maximum volumes of product into the distribution
channel. To have a meaningful influence on the core branded
products traded and distributed by DAWN, the Group acquires
shareholdings in manufacturers of branded products.
As a long-term strategy, it is imperative to be the master
distributor of branded products in the Group’s markets to ensure
cost effectiveness and grow distribution volumes.
Therefore, as outlined in the SENS announcement of 18 August 2014,
during the year the Group continued to refocus its strategy to
ensure the retention of minority stakes in manufacturing brands,
with an increased focus on trading and distribution.
As DAWN’s manufacturing volumes are insufficient to justify the
investment needed in technologically-advanced, high-volume
equipment to internationalise the Group and to ensure
competitiveness, DAWN joined forces with an international
manufacturer, Grohe.
As the largest sanitary fitting and solutions business in the
world, Grohe brings globalisation to DAWN’s South African
factories. The transaction involves all DAWN’s Watertech and
Sanitaryware companies which, with the exception of Exipro and
Apex Valves, were all 100% owned by DAWN prior to the transaction.
For the 51% of Watertech and Sanitaryware sold, DAWN receives a
number of benefits:
1. DAWN retains its existing distribution rights for a minimum of
three years and also obtains the exclusive rights in certain
high-growth African markets to distribute Watertech,
Sanitaryware and the Grohe brand. It will also increase DAWN
volumes to enable full utilisation of excess logistics
capacity over time.
2. DAWN’s returns from the 49% it retains in Watertech and
Sanitaryware (now called Main Street) will increase. Main
Street will receive benefits from the global Grohe group
factories and will have access to a global distribution
network outside Southern Africa for its exports, access to
leading research and development and the ability to source
products and components at better costs, as well as the
opportunity for global production rationalisation.
3. The transaction will result in the utilisation of excess
capacity at Watertech, Libra and Plexicor, thereby improving
recoveries.
The transaction has been approved by the required DAWN
shareholders, with a number of conditions precedent, including
Competition Commission approval, which is still outstanding.
OPERATIONAL OVERVIEW
BUILDING SEGMENT – 44% OF GROUP REVENUE
The building market remained extremely tough.
Although price increases assisted a revenue improvement of 8% to
R2,1 billion, profit before interest and taxation (PBIT) was down
45% to R36,2 million (2013: R66,1 million) and headline earnings
per share down 20%.
The main negative impact on performance was in the second half of
the year, driven by five key factors. The first four of these were
once-off and included the following:
1. The five-month platinum mine strikes which had an indirect
effect on the Group as the rural consumers in these areas,
which are responsible for the cash sales of most of the
Group’s key customers cash, had virtually no disposable
income. This, in turn, affected off-take outside the mining
areas as the miners had no money to send home.
2. Gauteng experienced excessive rainfall in March, which meant a
loss in plumbing groundwork, with the election causing further
disruptions in May.
3. The significant negative currency effect at AST.
4. WiiN, the new upmarket bathroom fittings business, and the new
AST operations in Tanzania and the Democratic Republic of the
Congo posted start-up losses.
Excluding these four factors, the Building segment’s headline
earnings per share would have been down 10% in the second half of
F2014 compared to the actual 80%.
The fifth factor was the slowdown in the economy, where GDP growth
of 2,2% in the first half of F2014 slowed to zero in H2. This put
the already stretched consumer under even more pressure.
Against this, the official buildings completed numbers for the
year were down almost 11%, with the Group’s key markets of
recorded and unrecorded additions and alterations particularly
hard hit.
The Segment’s joint venture in Africa, consisting of AST, was
affected by the negative currency impact. AST also impaired its
Nigerian business by R19,3 million. Heunis Steel, an associate
investment, did extremely well and posted a record result.
Sales increased at both Watertech and Sanitaryware, with
Watertech’s gross contribution slightly down and Sanitaryware
showing an improved contribution. These two clusters are now held-
for-sale in line with the Grohe transaction.
INFRASTRUCTURE SEGMENT – 47% OF GROUP REVENUE
The Infrastructure segment performed relatively well, with revenue
up by 30% to R2,2 billion (2013: R1,7 billion) and PBIT up 69% to
R99,3 million (2013: R58,7 million) and headline earnings per
share up 6% from 19,8 cents per share to 21,1 cents per share.
This performance was achieved despite the R9 million direct impact
on PBIT due to the protracted mining strike in the second half.
Another factor affecting the performance of the Infrastructure
segment was the higher finance charges for acquisitions and
working capital necessary to fund growth. Refer to the financial
overview.
DPI performed very well in the second half, with strong volumes
through sanitation civil engineering contracts won and a 50%
increase in exports to Africa. DPI International also experienced
a solid second half. DPI’s results include the first full-year
contribution from the Swan Plastics and Ubuntu Plastics
acquisitions. PBIT for the year was therefore 133% up and headline
earnings per share up 52%.
Incledon’s second half came off the very high base of the Group’s
R120 million ductile pipe contract in F2013. The business also
experienced delays in project awards after the strong levels of
activity in the run-up to the elections. PBIT for the year was
therefore up 48% and headline earnings per share up 41%.
IPS & Distribution, the Group’s associate start-up business in the
agricultural sector, incurred expected losses. The Group also
incurred a once-off expense on the purchase price of Sangio Pipe
to increase its stake. The remaining associates, mainly Fibrex in
Angola, performed disappointingly.
DAWN SOLUTIONS SEGMENT – 9% OF GROUP REVENUE
DAWN Solutions’ revenue of R433,0 million increased by 18,5% and
PBIT was down 31% from R14,0 million to R9,6 million. This
performance was mainly driven by three major impacts on Logistics,
the largest business’ earnings:
1. In line with the Group’s objective of becoming world-class in
logistics, it is phasing in a new warehouse management system.
Although a big improvement, it has resulted in temporary cost
increases as the old system falls away and the new system
takes over section by section.
2. In an effort to assist Group companies during a tough trading
environment, Solutions took over DPI and Incledon logistics
(which included an extra 24 vehicles) at low prices.
3. The renewal of rentals resulted in a IFRS-required lease
smoothing charge, which negatively impacted earnings in F2014.
The other DAWN Solutions operations maintained results
compared to last year.
FINANCIAL OVERVIEW
INCOME STATEMENT
Group revenue grew by a healthy 18% to R4,4 billion (2013: R3,7
billion). Operating profit improved by 15% from R93,1 million to
R107,0 million before the impact of impairments and gain on de-
recognitions. Unfortunately, due to the persistently tough
building market, the Group had to impair the carrying value of
goodwill on two businesses, DAWN Kitchen Fittings (impaired by
R33,6 million) and AST (impaired by R7,8 million). The Group also
had to account for a once-off gain on Sangio Pipe as part of the
step-up to 100% holding at year-end. Net impairments and de-
recognitions totalled R26,5 million.
After impairments, the Group operating profit amounted to R80,5
million, which was down 13% from the prior year’s R92,4 million.
The Group margin was maintained at 2,4%. Due to tough market
conditions, the Building margin halved to 1,7%, while
Infrastructure’s improved margin of 4,4% was within the target
range guided at the interim stage. Solutions saw a decrease in
margin to 2,2%.
Operating expenses increased by 17,6% including acquisitions.
Excluding acquisitions, operating expenses grew by 10,4%.
Net finance cost increased to R58,3 million. Average net debt for
the period increased to R613 million, mainly as a result of:
1. The substantial R194 million capital expenditure programme, as
outlined in previous results. Refer to the statement of cash
flows.
2. Acquisitions and start-up funding of R71 million.
3. Funding of the working capital expansion of R218 million.
Income from associates and joint ventures performed
disappointingly at a loss of R18,8 million, with poor performances
from both Building and Infrastructure segments, as outlined in the
operational overview.
Earnings per share, mainly as a result of the impairments
outlined, was down 53% from 66,7 cents per share to 31,6 cents per
share and headline earnings per share was down 24% from 66,1 cents
per share to 50,1 cents per share.
STATEMENT OF FINANCIAL POSITION
With the new accounting requirements due to the Grohe transaction,
the businesses held-for-sale are now no longer accounted for in
the respective lines of the statement of financial position.
The Group’s pre-Grohe net working capital amounted to 90 days.
Post the transaction, the remaining subsidiaries’ working capital
no longer has such long lead times and reduced to 50 days.
This has resulted in working capital as a percentage of revenue
improving from 20% to 15%. The Group’s new maximum threshold for
this ratio is 15%.
Although up from last year’s 41 days, the 50 days’ net working
capital in F2014 is within the Group’s new working capital target
of 55 days.
Debtor days were 58 days, slightly above the Group’s 55 days
target due to strong revenue growth.
The Group’s objective is to have stock days covered by creditors’
days. The F2014 stock days increased to 67 days due to the impact
of inflation based on the weakening of the Rand against other
major currencies and due to the stock build-up in Trading as a
result of the erratic second-half building market. Volatile market
conditions make it very difficult to efficiently run a factory,
resulting in the trading companies carrying more inventory than
optimal.
The Group will not be in this position in future on the Building
segment side following the sale of control of the factories to
Grohe.
Creditor funding declined to 75 days, which more than covered
stock days.
STATEMENT OF CASH FLOWS
In line with IFRS requirements, the held-for-sale businesses of
Watertech and Sanitaryware are still accounted for as under the
control of DAWN in the statement of cash flows.
Therefore, cash generated before working capital changes
from all DAWN-controlled operations amounted to R334 million,
up 2% year-on-year. EBITDA amounted to R327 million.
As outlined in the statement of financial position, the Group’s
working capital increased by R218,3 million.
Investing activities included:
1. The acquisition of Swan Plastics and Exipro Manufacturing, the
step-up in holdings in Sangio Pipe and Fibrex and the start-up
ventures of WiiN, IPS & Distribution, AST Tanzania and AST
Democratic Republic of the Congo. All of this totalled R71
million.
2. R194 million of total capital expenditure, of which R153
million was expansionary capital expenditure. Total capital
expenditure included the roll-out of the Group’s new
Enterprise Resource Planning system of R50 million, the
increase in the Group’s logistics capability of R20 million
and the Vaal automation project of R60 million. Benefits from
these projects will flow from the new financial year. The
Group also awaits the pay-out of R30 million of Manufacturing
Competitiveness Enhancement Programme government grants from
the Department of Trade and Industry.
Financing activities include the refinancing of the Group’s
borrowing facilities, as well as raising the required funding for
the planned investing activities.
The closing cash balance was R121,8 million against R116,2 million
last year.
The Group’s policy is to pay dividends once per year, on an
approximately four times cover. This year the cover was
temporarily reduced to twice to maintain a dividend of 16,5 cents
per share. This decision is supported by the R150 million net cash
inflow (R880 million gross) after the Grohe transaction, the
elimination of high capital expenditure and working capital-heavy
businesses as well as the current expansionary capital expenditure
programmes coming to an end over the next six months.
PROSPECTS
In the Group’s Building segment, markets remain tough, with
Building Plans Passed declining and just barely in positive
territory. In addition, Q1 F2015 experienced a R10 million
indirect negative impact on sales from the NUMSA strike in July.
Although the necessary corrective action has been taken at DAWN
Kitchen Fittings, with the business at a break-even position for
Q1 F2015 and well-known brands added to enhance the total Trading
division’s range of products, these factors will unfortunately not
fully compensate for the negatives in the first half of F2015.
The short-term target margin is now set at 2 to 4% and expected to
be at the low-end of the range for the next reporting period
following Watertech and Sanitaryware no longer being part of
DAWN’s PBIT due to the Grohe transaction. The medium-term target
is set at 5 to 7%. As committed, the Group will be adding more
businesses to the Building segment over time, with margins to be
updated accordingly.
In the Infrastructure segment, the upward trend of the DPI order
book is encouraging and after a post-election slump in contracts
awarded, the Incledon order book is now picking up. The effect of
the recent NUMSA strike impacted this segment in July and August
2014 by R28 million at PBIT level. The Group expects to claw this
amount back in the second half of the year.
The closure of the Group’s largest competitor’s PVC pressure pipe
production subsequent to DAWN’s year-end further consolidated the
market and allowed for a good improvement in orders and margins.
The Swan Plastics and Ubuntu Plastics acquisitions have made
further gains in market share.
Margin short-term target remains the same at 3 to 5% and expected
to be at the low-end of the range for the next reporting period,
while the 5 to 8% target margin range is maintained for the
medium-term.
In Solutions, the Group expects growth only from the second half
of F2015 due to DAWN Cargo’s anticipated growth through the
integration of the remaining DAWN Infrastructure manufacturing
operations, whilst still achieving cost savings to those
businesses and the systematic roll-out of the distribution
businesses to cross-border operations.
The Group’s international businesses are set to increase the
contribution from business in Africa to Group revenue from 20% to
33% over time, assisted by the benefits of the Grohe transaction
and creating a strong base for expansion into surrounding regions.
Exports into Africa are a major focus, DPI in Africa is looking at
increasing growth, including acquisitions, and AST will now be the
distribution arm of all DAWN and Grohe products in Africa, a
significant step-change opportunity.
In summary, the Group is experiencing healthy growth at the top
line and are likely to maintain gross margins at both the Building
and Infrastructure segments before once-off costs. Expansionary
capital expenditure will comparatively be much lower than the
first half of F2014. There is an aggressive focus on cutting
costs, the losses at DAWN Kitchen Fittings have been stemmed and
the working capital cycle will become more normalised now that the
Watertech and Sanitaryware manufacturing businesses are no longer
controlled. These businesses should also provide an improvement in
performance from associates.
Unfortunately these positives, however, will be more than negated
by the R18 million once-off Grohe transaction costs, the R38
million PBIT impact of the five-week NUMSA strike in July and
August and the under-recoveries related to this strike, as well as
high finance costs in the first half.
The Group therefore expects the first half headline earnings of
F2015 to be substantially down on the high base of the first half
of F2014.
However, due to lower finance costs, as well as the benefits of
cost cuts and the significant upside of the Grohe transaction,
earnings are expected to increase from the second half as the
benefits of the additional trading and distribution volumes come
into play.
This specific forecast has not been reviewed nor reported on by
the Company’s auditors.
DIVIDEND
The Board declared a final gross dividend of 16,5 cents per
ordinary share, from income reserves, for the year ended 30 June
2014 (2013: 16,5 cents).
The dividend will be subject to the new Dividends Tax that was
introduced with effect from 1 April 2012. In accordance with
paragraphs 11.17(a)(i) and (x) and 11.17(c) of the JSE Listings
Requirements the following additional information is disclosed:
– The dividend has been declared out of income reserves;
– The local Dividend Tax rate is 15% (fifteen per centum);
– The net local dividend amount is 14,025 cents per ordinary
share for shareholders liable to pay the Dividend Tax;
– No Secondary Tax on Companies (STC) credits will be utilised;
– DAWN has 242 242 904 ordinary shares in issue (which includes
7 726 146 treasury shares); and
– DAWN's income tax reference number is 9375171718.
In compliance with the requirements of Strate the following dates
are applicable:
Last date to trade “CUM” dividend Friday, 21 November 2014
Trading “EX” dividend commences Monday, 24 November 2014
Record date Friday, 28 November 2014
Dividend payment date Monday, 1 December 2014
No dematerialisation or rematerialisation of share certificates
will be allowed during the period Monday, 24 November 2014 to
Friday, 28 November 2014, both days inclusive.
On behalf of the Board
RL Hiemstra DA Tod
Independent Non-Executive Chairman Chief Executive Officer
Johannesburg
14 October 2014
The presentation to investors is available on the DAWN website
www.dawnltd.co.za.
CONSOLIDATED INCOME STATEMENT
for the year ended 30 June
Audited
Audited Restated^
% 2014 2013
change R’000 R’000
Continuing operations
Revenue 18 4 435 948 3 763 476
Cost of sales (3 413 417) (2 891 692)
Gross profit 1 022 531 871 784
Operating expenses (929 835) (797 872)
Administrative and
selling expenses (528 777) (460 682)
Distribution and warehousing
expenses (395 396) (330 337)
Other operating expenses (5 662) (6 853)
Other operating income 14 347 19 156
Operating profit before
impairments and derecognition
of investments 15 107 043 93 068
Impairment of intangible assets (41 424) –
Net gain/(loss) on derecognition
of previously held interests 14 842 (677)
Operating profit 80 461 92 391
Finance income 8 795 20 028
Finance expense (67 073) (47 460)
Profit after net financing costs 22 183 64 959
Share of (loss)/profit in
investments accounted for using
the equity method (18 763) 17 763
Profit before taxation 3 420 82 722
Income tax expense (14 760) (17 244)
(Loss)/profit from continuing
operations (11 340) 65 478
Profit from discontinued
operations (attributable to
owners of the parent) 92 859 93 535
Profit for the year 81 519 159 013
Profit attributable to:
Owners of the parent 74 135 156 296
Non-controlling interests 7 384 2 717
81 519 159 013
^ Refer note 2 on pages 12 to 14.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June
Audited
Audited Restated^
% 2014 2013
change R’000 R’000
Profit for the year 81 519 159 013
Other comprehensive income
– to be subsequently
reclassified to profit
or loss:
Exchange differences on
translating foreign operations 3 686 3 517
Effects of cash flow hedges 4 095 906
Hedge movement through equity – 106
Recycling of hedge through
profit/(loss) 4 095 800
Effects of retirement
benefit obligations (280) –
Taxation related to components
of other comprehensive income (1 191) (254)
Total other comprehensive income 6 310 4 169
Total comprehensive income 87 829 163 182
Total comprehensive income
attributable to:
Owners of the parent 80 445 160 465
Non-controlling interests 7 384 2 717
87 829 163 182
Total comprehensive income
attributable to equity
shareholders arising from:
Continuing operations (12 414) 66 930
Discontinued operations 92 859 93 535
80 445 160 465
RECONCILIATION OF HEADLINE
EARNINGS (R’000)
Earnings attributable to owners
of the parent 74 135 156 296
Adjustment for the after-tax
and non-controlling interest
effects of:
Net (profit)/loss on disposal of
property, plant and equipment (1 331) 117
Impairment of intangible assets 41 424 –
Tax effect on disposal of
property, plant and equipment
and impairment of intangible
assets (customer relationships) (367) (22)
Net (profit)/loss on derecognition
of previously held interest (14 842) 677
Headline earnings adjustments
related to associates and
joint ventures 19 043 (1 772)
Headline earnings adjustments
related to disposal group (456) (291)
117 606 155 005
STATISTICS
Number of ordinary shares (’000)
– in issue 241 843 241 443
– held in treasury (7 726) (7 726)
Deferred ordinary shares
in issue (’000) 400 800
Weighted average number
of shares (’000)
– for earnings per share 234 517 234 517
– for diluted earnings
per share 241 497 237 875
Earnings per share (cents) (53) 31,62 66,65
Headline earnings per
share (cents) (24) 50,15 66,10
Diluted earnings per share (cents) (53) 30,70 65,70
Diluted headline earnings
per share (cents) (25) 48,70 65,16
Operating profit (%) 1,8 2,5
^ Refer note 2 on pages 12 to 14.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June
Audited Audited
Audited Restated^ Restated^
% 2014 2013 2012
change R’000 R’000 R’000
ASSETS
Non-current assets
Property, plant
and equipment 208 621 423 455 367 837
Intangible assets 175 326 271 354 238 574
Investments in
joint ventures 50 357 52 246 41 386
Investments in
associates 91 526 103 526 93 771
Deferred taxation
assets 39 560 52 210 56 964
565 390 902 791 798 532
Current assets
Inventories 665 107 929 631 786 219
Trade and other
receivables 1 007 731 909 867 807 219
Cash and cash
equivalents 154 123 269 579 228 581
Derivative financial
instruments 223 5 338 644
Current taxation assets 7 988 389 1 540
1 835 172 2 114 804 1 824 203
Assets of disposal
group classified as
held-for-sale 1 212 274 – –
Total assets 3 612 836 3 017 595 2 622 735
EQUITY AND LIABILITIES
EQUITY
Capital and reserves
attributable to equity
holders of the Company
Share capital 2 422 2 422 2 422
Share premium 373 748 373 748 373 748
Retained income 1 093 315 1 057 932 901 636
Treasury shares (6 733) (6 733) (6 733)
Share-based payment
reserve 40 256 49 593 23 677
Hedging reserve – (2 826) (3 478)
Foreign currency
translation reserve 2 413 (1 273) (4 718)
Change in ownership
reserve (17 989) (17 086) (16 564)
Retirement benefit
obligation reserve (202) – –
Share capital and
reserves 1 487 230 1 455 777 1 269 990
Non-controlling
interests 35 756 11 400 2 099
Total equity 1 522 986 1 467 177 1 272 089
LIABILITIES
Non-current liabilities
Borrowings 447 090 215 745 154 425
Deferred profit 18 425 26 150 31 943
Deferred tax liabilities 22 804 22 684 24 519
Retirement benefit
obligation 5 820 5 462 6 141
Derivative financial
instruments – 3 080 7 008
494 139 273 121 224 036
Current liabilities
Trade and other payables 986 574 1 060 653 849 997
Borrowings 303 943 195 866 258 578
Derivative financial
instruments 23 93 928
Deferred profit 5 393 5 793 5 793
Current tax liabilities 2 872 14 892 11 314
1 298 805 1 277 297 1 126 610
Total liabilities 1 792 944 1 550 418 1 350 646
Liabilities of disposal
group classified as
held-for-sale 296 906 – –
Total equity and
liabilities 3 612 836 3 017 595 2 622 735
Capital commitments 36 046 126 205
Future commitments
Operating leases 464 142 449 628
Net cash 121 765 116 225
Net debt 494 310 127 157
Value per share
Asset value per share
– net asset
value (cents) 4 649,41 625,62
– net tangible
asset value (cents) 13 574,65 509,91
– market price (cents) 1 090 762
Market capitalisation
(R’000) 2 636 088 1 839 795
Financial gearing
ratio (%)* 32,5 8,7
Current asset ratio
(times) 1,4 1,7
* Includes cash and cash equivalents.
^ Refer note 2 on pages 12 to 14.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
Attributable to owners of the parent
Share-
based
Share Share Treasury payment
capital premium shares reserve
R’000 R’000 R’000 R’000
Balance at
1 July 2012 2 422 373 748 (6 733) 23 677
Total comprehensive
income for
the year – – – –
Profit for the
year – – – –
– Continuing
operations – – – –
– Discontinued
operations – – – –
Other comprehensive
income – – – –
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity – – – 25 916
Share-based
payment charge – – – 25 916
Dividends paid to
non-controlling
interests – – – –
Change in
ownership reserve
– control not lost – – – –
Business
combinations – – – –
Balance at
30 June 2013
(Restated) 2 422 373 748 (6 733) 49 593
Balance at
1 July 2013 2 422 373 748 (6 733) 49 593
Total comprehensive
income for the
year – – – –
Profit for the year – – – –
– Continuing
operations – – – –
– Discontinued
operations – – – –
Other comprehensive
income – – – –
Dividends paid – – – –
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity – – – (9 337)
Share-based
payment charge – – – 3 351
Share-based payment
– vesting of options – – – (12 688)
Dividends paid
to non-controlling
interests – – – –
Change in ownership
reserve – control
not lost – – – –
Business combinations – – – –
Balance at
30 June 2014 2 422 373 748 (6 733) 40 256
Attributable to owners of the parent
Foreign Change Retire-
currency in ment
trans- owner- benefit
Hedging lation ship obligation
reserve reserve reserve reserve
R’000 R’000 R’000 R’000
Balance at
1 July 2012 (3 478) (4 718) (16 564) –
Total comprehensive
income for
the year 652 3 445 – –
Profit for the
year – – – –
– Continuing
operations – – – –
– Discontinued
operations – – – –
Other comprehensive
income 652 3 445 – –
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity – – (522) –
Share-based
payment charge – – – –
Dividends paid to
non-controlling
interests – – – –
Change in
ownership reserve
– control not lost – – (522) –
Business
combinations – – – –
Balance at
30 June 2013
(Restated) (2 826) (1 273) (17 086) –
Balance at
1 July 2013 (2 826) (1 273) (17 086) –
Total comprehensive
income for the
year 2 826 3 686 – (202)
Profit for the year – – – –
– Continuing
operations – – – –
– Discontinued
operations – – – –
Other comprehensive
income 2 826 3 686 – (202)
Dividends paid – – – –
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity – – (903) –
Share-based
payment charge – – – –
Share-based payment
– vesting of options – – – –
Dividends paid
to non-controlling
interests – – – –
Change in ownership
reserve – control
not lost – – (903) –
Business combinations – – – –
Balance at
30 June 2014 – 2 413 (17 989) (202)
Attributable to owners
of the parent
Equity Non-
attribu- control-
Retained table to ling
earnings Company interest Total
R’000 R’000 R’000 R’000
Balance at
1 July 2012 901 636 1 269 990 2 099 1 272 089
Total
comprehensive
income for
the year 156 296 160 393 2 955 163 348
Profit for the
year 156 296 156 296 2 955 159 251
– Continuing
operations 62 761 62 761 2 717 65 478
– Discontinued
operations 93 535 93 535 238 93 773
Other comprehensive
income – 4 097 – 4 097
Total contributions
by and
distributions
to owners of the
Company recognised
directly in equity – 25 394 6 346 31 740
Share-based
payment charge – 25 916 – 25 916
Dividends paid to
non-controlling
interests – – (1 430) (1 430)
Change in
ownership reserve
– control not lost – (522) – (522)
Business
combinations – – 7 776 7 776
Balance at
30 June 2013
(Restated) 1 057 932 1 455 777 11 400 1 467 177
Balance at
1 July 2013 1 057 932 1 455 777 11 400 1 467 177
Total
comprehensive
income for the
year 74 135 80 445 8 469 88 914
Profit for the
year 74 135 74 135 8 469 82 604
– Continuing
operations (18 724) (18 724) 7 384 (11 340)
– Discontinued
operations 92 859 92 859 1 085 93 944
Other comprehensive
income – 6 310 – 6 310
Dividends paid (38 752) (38 752) – (38 752)
Total
contributions
by and
distributions
to owners of the
Company recognised
directly in equity – (10 240) 15 887 5 647
Share-based
payment charge – 3 351 – 3 351
Share-based payment
– vesting of options – (12 688) – (12 688)
Dividends paid
to non-controlling
interests – – (3 031) (3 031)
Change in ownership
reserve – control
not lost – (903) – (903)
Business
combinations – – 18 918 18 918
Balance at
30 June 2014 1 093 315 1 487 230 35 756 1 522 986
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June
Audited
Audited Restated^
% 2014 2013
change R’000 R’000
Cash flows from operating
activities
Cash receipts from customers 5 678 491 4 359 773
Cash paid to suppliers
and employees (5 562 729) (4 065 262)
Cash generated from operations (64) 115 762 294 511
Finance income 8 498 10 170
Finance expense (92 727) (54 723)
Income tax paid (69 975) (46 402)
Net cash (utilised in)/generated
from operating activities (38 442) 203 556
Cash flows from investing
activities
Additions to property, plant
and equipment (148 658) (95 696)
Additions and development
of intangible assets (45 417) (28 120)
Proceeds on disposals of property,
plant and equipment 16 338 7 153
Acquisition of businesses (37 160) (6 901)
Treasury shares purchased (12 688) –
Loan repayments received from
joint ventures and associates 28 823 6 430
Loan advances granted to joint
ventures and associates (59 646) (8 981)
Proceeds from sale of investment
in DPI Ichweba – 1 000
Net cash utilised in
investing activities (258 408) (125 115)
Cash flows from financing
activities
Proceeds from borrowings 607 995 2 084
Repayment of borrowings (167 087) (17 910)
Government grants received 11 216 –
Instalment sale payments (17 161) (18 238)
Finance lease payments (11 304) (8 152)
Transactions with non-controlling
interest holders – (522)
Dividends paid to non-controlling
interest holders (3 031) (1 430)
Dividends paid (38 752) –
Net cash generated from/(utilised in)
financing activities 381 876 (44 168)
Total cash movement for the year 85 026 34 273
Translation effects on foreign
cash and cash equivalents
balances 577 1 087
Cash and cash equivalents of
disposal group held-for-sale
at end of the year (80 063) –
Cash and cash equivalents at
beginning of the year 116 225 80 865
Cash and cash equivalents
at end of the year 5 121 765 116 225
^ Refer note 2 on pages 12 to 14.
Included in the above consolidated statement of cash flows is the
cash movement associated with the disposal group (Watertech
companies).
CASH FLOWS OF DISPOSAL GROUP HELD-FOR-SALE
Operating cash flows 128 761 50 631
Investing cash flows (69 945) (56 286)
Financing cash flows (25 587) (9 032)
Total cash flows 33 229 (14 687)
CONSOLIDATED SEGMENTAL ANALYSIS
for the year ended 30 June
Building
Discon-(3)
Continuing tinued
operations operations Total
R’000 R’000 R’000
2014 (Audited)
Revenue 2 129 568 756 280 2 885 848
Depreciation and
amortisation (4 979) (26 733) (31 712)
Operating profit/(loss)
before impairments
and derecognitions 36 210 124 444 160 654
Impairments and
derecognitions (41 424) – (41 424)
Operating profit/(loss)
after impairments and
derecognitions (5 214) 124 444 119 230
Net finance income/
(expense) (12 907) (41 608) (54 515)
Share of profit/(losses) of
associates (including
impairment of associate) (21 599) 384 (21 215)
Tax expense (5 793) (16 983) (22 776)
Profit/(loss) after tax from
continuing operations (45 515) – (45 515)
Profit after tax from
discontinued operations – 65 150 65 150
Assets 1 110 968 1 212 274 2 323 242
Liabilities 1 026 514 296 906 1 323 420
Capital expenditure (2) 9 762 107 494 117 256
2013 (Audited Restated)
Revenue 1 974 384 683 711 2 658 095
Depreciation and
amortisation (4 310) (31 164) (35 474)
Operating profit/(loss)
before impairments and
derecognitions 66 081 141 135 207 216
Impairments and
derecognitions – – –
Operating profit/(loss) after
impairments and
derecognitions 66 081 141 135 207 216
Net finance income/(expense) (11 461) (22 501) (33 962)
Share of profit/(losses) of
associates (including
impairment of associate) 4 086 829 4 915
Tax expense (15 395) (33 960) (49 355)
Profit/(loss) after tax from
continuing operations 43 311 – 43 311
Profit after tax from
discontinued operations – 85 265 85 265
Assets 2 184 405 – 2 184 405
Liabilities 1 468 106 – 1 468 106
Capital expenditure (2) 76 756 – 76 756
Head
Office (1)
and other
Infra- DAWN reconciling
structure Solutions items
R’000 R’000 R’000
2014 (Audited)
Revenue 2 248 705 432 996 (375 321)
Depreciation and
amortisation (25 370) (18 447) (521)
Operating profit/(loss)
before impairments
and derecognitions 99 343 9 616 (19 178)
Impairments and
derecognitions – – 14 842
Operating profit/(loss)
after impairments and
derecognitions 99 343 9 616 (4 336)
Net finance income/
(expense) (24 632) (4 136) 2 932
Share of profit/(losses) of
associates (including
impairment of associate) 2 836 – –
Tax expense (21 046) (1 722) 3 025
Profit/(loss) after tax from
continuing operations 56 502 3 758 (26 085)
Profit after tax from
discontinued operations – – 27 709
Assets 1 183 195 571 925 (465 526)
Liabilities 726 457 583 472 (543 499)
Capital expenditure 32 821 39 331 –
2013 (Audited Restated)
Revenue 1 731 121 365 421 (307 450)
Depreciation and
amortisation (20 951) (15 848) (1 335)
Operating profit/(loss)
before impairments and
derecognitions 59 342 14 036 (36 135)
Impairments and
derecognitions (677) – –
Operating profit/(loss) after
impairments and
derecognitions 58 665 14 036 (46 391)
Net finance income/(expense) (11 652) (2 183) (2 136)
Share of profit/(losses) of
associates (including
impairment of associate) 13 677 – –
Tax expense (14 815) (3 393) 14 373
Profit/(loss) after tax from
continuing operations 45 875 8 460 (32 168)
Profit after tax from
discontinued operations – – 8 270
Assets 869 508 499 956 (536 274)
Liabilities 530 577 508 813 (957 078)
Capital expenditure (2) 22 484 53 778 –
Discon-(3)
tinued
operations Total
R’000 R’000
2014 (Audited)
Revenue (756 280) 4 435 948
Depreciation and
amortisation 26 733 (49 317)
Operating profit/(loss)
before impairments
and derecognitions (143 392) 107 043
Impairments and
derecognitions – (26 582)
Operating profit/(loss)
after impairments and
derecognitions (143 392) 80 461
Net finance income/
(expense) 22 073 (58 278)
Share of profit/(losses) of
associates (including
impairment of associate) (384) (18 763)
Tax expense 27 759 (14 760)
Profit/(loss) after tax from
continuing operations – (11 340)
Profit after tax from
discontinued operations – 92 859
Assets – 3 612 836
Liabilities – 2 089 850
Capital expenditure (2) (107 494) 81 914
2013 (Audited Restated)
Revenue (683 711) 3 763 476
Depreciation and
amortisation 31 164 (42 444)
Operating profit/(loss)
before impairments and
derecognitions (151 391) 93 068
Impairments and
derecognitions – (677)
Operating profit/(loss) after
impairments and
derecognitions (151 391) 92 391
Net finance income/(expense) 22 501 (27 432)
Share of profit/(losses) of
associates (including
impairment of associate) (829) 17 763
Tax expense 35 946 (17 244)
Profit/(loss) after tax from
continuing operations – 65 478
Profit after tax from
discontinued operations – 93 535
Assets – 3 017 595
Liabilities – 1 550 418
Capital expenditure (2) – 153 018
(1) Other reconciling items consist of corporate and consolidation
adjustments. These predominantly include elimination of
intergroup sales, profits, losses and intergroup receivables
and payables and other unallocated assets and liabilities
contained within the vertically integrated Group. Head Office
and other reconciling items is not considered to be an
operating segment.
(2) Includes expenditure on property, plant and equipment and
intangibles. Government grants received are deducted from the
capital expenditure amount.
(3) Discontinued operations include results from the Watertech
group of companies as well as consolidation and elimination
adjustments related to the Watertech group of companies.
NOTES TO THE SUMMARY CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
These consolidated annual financial statements comprise a
summary of the audited consolidated financial statements of
the Group for the year ended 30 June 2014 that was approved by
the Board on 13 October 2014.
The summary consolidated financial statements are prepared in
accordance with the requirements of the JSE Limited’s (JSE)
Listings Requirements for summary financial statements and the
requirements of the Companies Act applicable to summary
financial statements. The JSE requires summary financial
statements to be prepared in accordance with the framework
concepts, the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting
Practices Committee and must also, as a minimum, contain the
information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the
consolidated financial statements from which the summary
consolidated financial statements were derived are in terms of
IFRS and are consistent with the accounting policies applied
in the preparation of the previous consolidated annual
financial statements, except for the effects of IFRS 11 and
IFRS 5 as outlined in note 2 below. The preparation of the
summary consolidated annual financial statements has been
supervised by the Chief Financial Officer, JAI Ferreira
CA(SA).
This summarised report is extracted from audited information,
but is not itself audited. The annual financial statements
were audited by PricewaterhouseCoopers Inc., who expressed an
unmodified opinion thereon. The audited annual financial
statements and the auditor’s report thereon are available for
inspection at the Company’s registered office.
The directors take full responsibility for the preparation of
the provisional report and that the financial information has
been correctly extracted from the underlying annual financial
statements.
2. RESTATEMENTS
RESTATEMENT – ADOPTION OF IFRS 11
On 1 July 2013, the accounting policy for joint ventures was
changed to be in line with the requirements of IFRS 11.
Previously, investments in joint ventures were proportionately
consolidated by the Group. In terms of IFRS 11, proportionate
consolidation is no longer allowed. The equity method of
accounting for investments in joint ventures has been adopted
by the Group and comparative results have been restated
accordingly. The effects of the change in accounting policy on
the consolidated income statements, statements of financial
position and Cash Flow Statements for the comparative periods
are disclosed below:
IMPACT ON STATEMENT OF FINANCIAL POSITION
Previously Increase/
reported Restated (decrease)
June June June
2013 2013 2013
R’000 R’000 R’000
ASSETS
Property, plant and
equipment 440 214 423 455 (16 759)
Intangible assets 279 954 271 354 (8 600)
Investments in joint
ventures – 52 246 52 246
Investments in associates 107 746 103 526 (4 220)
Deferred tax assets 52 940 52 210 (730)
Inventories 978 366 929 631 (48 735)
Trade and other
receivables 942 484 909 867 (32 617)
Cash and cash
equivalents 275 510 269 579 (5 931)
Derivative financial
instruments 5 338 5 338 –
Current tax assets 389 389 –
EQUITY
Equity attributable to
equity holders of the
Company 1 455 777 1 455 777 –
Non-controlling interest 11 608 11 400 (208)
LIABILITIES
Borrowings 224 324 215 745 (8 579)
Deferred profit 26 150 26 150 –
Deferred liabilities 24 569 22 684 (1 885)
Retirement benefit
obligation 5 518 5 462 (56)
Derivative financial
instruments 3 080 3 080 –
Trade and other
payables 1 088 948 1 060 653 (28 295)
Current portion of
borrowings 219 613 195 866 (23 747)
Derivative financial
instruments 93 93 –
Deferred profit 5 793 5 793 –
Current tax liabilities 17 468 14 892 (2 576)
IMPACT ON INCOME STATEMENT
Previously Increase/
reported Restated (decrease)
June June June
2013 2013 2013
R’000 R’000 R’000
Revenue 4 588 344 4 447 187 (141 157)
Cost of sales (3 396 154) (3 294 538) 101 616
Gross profit 1 192 190 1 152 649 (39 541)
Net operating expenses (939 530) (908 867) 30 663
Operating profit 252 660 243 782 (8 878)
Finance income 10 465 10 517 52
Finance expense (62 916) (60 451) 2 465
Profit after net
financing costs 200 209 193 848 (6 361)
Share of profit from
associates and
joint ventures 16 491 18 592 2 101
Profit before taxation 216 700 212 440 (4 260)
Income tax expense (57 465) (53 188) 4 277
Profit for the year 159 235 159 252 17
Profit attributable to:
Owners of the parent 156 296 156 296 –
Non-controlling interest 2 939 2 956 17
159 235 159 252 17
IMPACT ON STATEMENT OF CASH FLOWS
Previously Increase/
reported Restated (decrease)
June June June
2013 2013 2013
R’000 R’000 R’000
Cash generated from
operations before
working capital changes 341 219 327 712 (13 507)
Working capital changes (29 358) (33 201) (3 843)
Net finance costs paid (46 914) (44 553) 2 361
Net income tax paid (50 312) (46 402) 3 910
Net cash generated from
operating activities 214 635 203 556 (11 079)
Net cash utilised in
investing activities (130 091) (125 115) 4 976
Net cash utilised in
financing activities (41 092) (44 168) (3 076)
Increase in
cash resources 43 452 34 273 (9 179)
Cash resources at
beginning of the year 61 909 80 865 18 956
Exchange gains/(losses)
on cash and cash
equivalents (1 739) 1 087 2 826
Cash resources at
end of year 103 622 116 225 12 603
RESTATEMENT – DISPOSAL GROUP HELD-FOR-SALE DISCLOSED AS
DISCONTINUED OPERATIONS
On 30 June 2014, Grohe Luxembourg Four AG (Grohe) and
Distribution and Warehousing Network Limited (DAWN) entered
into an agreement whereby Grohe would acquire a 51% interest
in the Watertech Group of companies consisting of Cobra
Watertech Proprietary Limited, ISCA Proprietary Limited, Vaal
Sanitaryware Proprietary Limited, Libra Bathrooms Proprietary
Limited, Apex Valves South Africa Proprietary Limited and
Exipro Manufacturing Proprietary Limited. As part of the
preparatory steps, The Watertech Companies were transferred
from DAWN to Main Street 1254 Proprietary Limited ("Main
Street 1254) on 31 July 2014. Grohe will acquire 51% of the
shares of Main Street 1254 on the effective date which is
expected to be 31 October 2014 or on a date as agreed between
Grohe and DAWN, but not later than 30 April 2015.
The effect of this transaction is that the Watertech Group of
companies is accounted for as a disposal group held-for-sale.
In line with the requirements of IFRS 5 par 38, the
Consolidated Income statement for June 2013 has been restated
to account for the Watertech Group of companies as a disposal
group held-for-sale. In terms of IFRS 5 par 40, the
Consolidated Statement of Financial position for June 2013 was
not restated to reflect the held-for-sale classification.
IMPACT ON CONSOLIDATED INCOME STATEMENT
Increase/
Restated* Restated^ (decrease)
June June June
2013 2013 2013
R’000 R’000 R’000
Revenue 4 447 187 3 763 476 (683 711)
Cost of sales (3 294 538) (2 891 692) 402 846
Gross profit 1 152 649 871 784 (280 865)
Net operating expenses (908 867) (779 393) 129 474
Operating profit 243 782 92 391 (151 391)
Finance income 10 517 20 028 9 511
Finance expense (60 451) (47 460) 12 991
Profit after net
financing costs 193 848 64 959 (128 889)
Share of profit from
associates and joint
ventures 18 592 17 763 (829)
Profit before taxation 212 440 82 722 (129 718)
Income tax expense (53 188) (17 244) 35 944
Profit for the year 159 252 65 478 (93 774)
Profit from discontinued
operations (attributable
to owners of the parent) – 93 535 93 535
Profit for the year 159 252 159 013 (239)
Profit attributable to:
Owners of the parent 156 296 156 296 –
Non-controlling interest 2 956 2 717 (239)
159 252 159 013 (239)
There has been no impact on previously reported earnings per
share and attributable earnings to equity holders of the
Company.
* Restatement in terms of IFRS 11
^ Restatement in terms of IFRS 5
3. BUSINESS COMBINATIONS
30 June 2014
SWAN PLASTICS PROPRIETARY LIMITED
On 1 August 2013 the Group acquired a 51% interest in Swan
Plastics Proprietary Limited for a total consideration of R20
million. Swan Plastics Proprietary Limited is principally
involved in the manufacturing of PVC products and water waste
systems.
Goodwill of R1,2 million arose from the acquisition, largely
consisting of the synergies and economies of scale expected
from the acquisition.
Swan Plastics Proprietary Limited contributed an operating
profit of R13,6 million and revenue of R256,8 million since
the acquisition date. If the acquisition had occurred on
1 July 2013, Group revenue would have been R27,3 million more,
and operating profit for the period would have increased by
R2,2 million. These amounts have been calculated based on
consistent application of the Group’s accounting policies.
The amount of net assets acquired amounted to R35,5 million
and non-controlling interests of R16,7 million was recognised.
Acquisition-related costs amounted to R1,7 million, and have
been recognised as part of operating expenses in profit and
loss. Trade receivables with a fair value of R45 million has
been included and none of these are considered to be doubtful.
Non-controlling interest has been calculated based on the fair
value of net assets. The goodwill and other intangible assets
arising from the business combination are not expected to be
deducted for income tax purposes.
SANGIO PIPE PROPRIETARY LIMITED
On 1 June 2014 Sangio Pipe Proprietary Limited repurchased its
shares held by the majority shareholder (51%). This resulted
in the Group obtaining 100% of the share capital of Sangio
Pipe Proprietary Limited, previously an associate.
Goodwill of R19,0 million arose from the acquisition, largely
consisting of the synergies and economics of scale expected
from the acquisition and a net gain of R14,8 million was
recognised as a result of measuring at fair value the Group’s
49% equity interest held before the business combination.
Sangio Pipe Proprietary Limited contributed an operating
profit of R0,9 million and revenue of R33,1 million since the
acquisition date. If the acquisition had occurred on 1 July
2013, Group revenue would have been R330,1 million more, and
operating profit for the period would have increased by R12,1
million. These amounts have been calculated based on
consistent application of the Group’s accounting policies.
The amount of net assets acquired amounted to R16,5 million.
Acquisition-related costs amounted to R1,8 million and have
been recognised as part of operating expenses in profit and
loss. Trade receivables with a fair value of R34,6 million has
been included and R1,0 million has been provided for as
doubtful. The goodwill and other intangible assets arising
from the business combination are not expected to be deducted
for income tax purposes.
The fair value of assets acquired, liabilities assumed,
intangible assets and the non-controlling interest at the
acquisition date are set out below.
Swan Plastics Sangio Pipe
Proprietary Proprietary
Consideration at Limited Limited Total
acquisition date: R’000 R’000 R’000
Cash 20 000 – 20 000
Fair value of previously
held interest – 35 507 35 507
Total purchase
consideration 20 000 35 507 55 507
Recognised amounts of
identifiable assets Fair Fair Fair
acquired and liabilities value value value
assumed: R’000 R’000 R’000
Property, plant and
equipment 6 939 21 301 28 240
Trademarks 8 182 13 088 21 270
Customer relationships 12 110 17 850 29 960
Inventory 13 618 39 078 52 696
Trade and other
receivables 46 121 64 941 111 062
Cash and cash equivalents 1 487 588 2 075
Assets 88 457 156 846 245 303
Borrowings (1 762) (51 250) (53 012)
Trade and other payables (38 163) (77 102) (115 265)
Taxation payable (3 163) (266) (3 429)
Deferred taxation (6 537) (8 306) (14 843)
Provisions (3 354) (3 380) (6 734)
Liabilities (52 979) (140 304) (193 283)
Total identifiable net
assets 35 478 16 542 52 020
Less: Non-controlling
interest (16 709) – (16 709)
Goodwill 1 231 18 965 20 196
Purchase consideration 20 000 35 507 55 507
Cash flow from acquisitions
Total purchase
consideration 20 000 35 507 55 507
Less: Cash and cash
equivalents acquired (1 487) (588) (2 075)
Less: Fair value of
previously held interest – (35 507) (35 507)
Total cash outflow/(inflow)
from acquisitions 18 513 (588) 17 925
30 June 2013 (Restated)
APEX VALVES (SOUTH AFRICA) PROPRIETARY LIMITED
On 1 February 2013 the Group acquired an additional 11,4%
interest in Apex Valves (South Africa) Proprietary Limited
which resulted in the Group obtaining control over Apex Valves
(South Africa) Proprietary Limited, previously an
associate. The total consideration transferred amounted to R10
million, including the fair value of previously held
interest of R7,8 million.
Provisional goodwill of R4,4 million arose from the
acquisition, largely consisting of the synergies and economics
of scale expected from the acquisition and a gain of R1,7
million was recognised as a result of measuring at fair value
the Group’s 49% equity interest held before the business
combination.
Apex Valves (South Africa) Proprietary Limited contributed an
operating profit of R0,7 million and revenue of R16,9
million since the acquisition date. If the acquisition had
occurred on 1 July 2012, Group revenue would have been R25,5
million more, and operating profit for the period would have
increased by R2,6 million. These amounts have been calculated
based on consistent application of the Group’s accounting
policies.
The fair value of assets acquired and liabilities assumed will
be finalised within the next financial year. The provisional
amount of net assets acquired amounted to R9,2 million and
non-controlling interests of R3,6 million was recognised.
Acquisition related costs amounted to R0,3 million and have
been recognised as part of operating expenses in profit and
loss. Trade receivables with a fair value of R3,9 million has
been included and R0,2 million has been provided for as
doubtful.
UBUNTU PLASTICS PROPRIETARY LIMITED
On 1 March 2013 the Group acquired a 51% interest in Ubuntu
Plastics Proprietary Limited for a total consideration of R7,4
million. Ubuntu Plastics Proprietary Limited is principally
involved in the fabrication of pipe and pipe fittings.
A provisional goodwill allocation of R5,9 million arising from
the acquisition largely consists of the synergies and
economies of scale expected from the acquisition.
Ubuntu Plastics Proprietary Limited contributed an operating
profit of R0,7 million and revenue of R14,7 million since the
acquisition date. If the acquisition had occurred on 1 July
2012, Group revenue would have been R29,4 million more, and
operating profit for the period would have increased by R2,9
million. These amounts have been calculated based on
consistent application of the Group’s accounting policies.
The fair value of the assets acquired and liabilities assumed
will be finalised within the next financial year. The
provisional amount of net assets acquired amounted to R5,7
million and non-controlling interests of R4,2 million was
recognised. Trade receivables with a fair value of R8,9
million has been included and none of these are considered
to be doubtful. A contingent consideration of R2,4 million was
raised at fair value and paid on 8 July 2013. The
contingent consideration was based on net asset value. Non-
controlling interest has been calculated based on the
proportionate share in net assets. The goodwill is not
expected to be deducted for income tax purposes.
The fair value of these assets, liabilities and intangible
assets are set out below.
Apex Valves Ubuntu
(South Africa) Plastics
Proprietary Proprietary
Consideration at Limited Limited Total
acquisition date: R’000 R’000 R’000
Cash 2 230 4 999 7 229
Fair value of previously
held interest 7 812 – 7 812
Contingent consideration
(Acquisition vendor) – 2 393 2 393
Total purchase
consideration 10 042 7 392 17 434
Recognised amounts of
identifiable assets
acquired Fair Fair Fair
and liabilities value value value
assumed: R’000 R’000 R’000
Property, plant and
equipment 1 487 1 881 3 368
Inventory 7 660 2 265 9 925
Trade and other
receivables 3 958 9 056 13 014
Cash and cash equivalents 201 127 328
Assets 13 306 13 329 26 635
Borrowings – (1 415) (1 415)
Trade and other payables (3 867) (6 150) (10 017)
Taxation payable (97) (70) (167)
Deferred taxation (80) – (80)
Provisions (70) (38) (108)
Liabilities (4 114) (7 673) (11 787)
Total identifiable net
assets 9 192 5 656 14 848
Less: Non-controlling
interest (3 554) (4 222) (7 776)
Provisional goodwill 4 404 5 958 10 362
Purchase consideration 10 042 7 392 17 434
Cash flow from acquisitions:
Total purchase
consideration 10 042 7 392 17 434
Less: Cash and cash
equivalents acquired (201) (127) (328)
Less: Fair value of
previously held interest (7 812) – (7 812)
Less: Contingent
consideration – (2 393) (2 393)
Total cash flow from
acquisitions 2 029 4 872 6 901
4. EVENTS AFTER THE REPORTING DATE
PRO-MAX WELDING PROPRIETARY LIMITED
A 60% share was acquired in Pro-Max Welding Consumables
Proprietary Limited (Pro-Max) for a provisional cash
consideration of R5,9 million. The cash consideration to be
paid is dependent on Pro-Max meeting certain targets as set
out in the sale of shares agreement between the Group and Pro-
Max. Pro-Max specialises in the manufacturing and distribution
of welding equipment and consumables. The effective date of
the transaction was 1 July 2014. The provisional amount of net
assets acquired amounted to R2,9 million.
APEX VALVES (SOUTH AFRICA) PROPRIETARY LIMITED
An additional 39,53% shareholding was acquired in Apex Valves
(South Africa) Proprietary Limited (Apex Valves) on 30 July
2014 in addition to the 60,47% previously owned. This resulted
in the Group obtaining 100% control over Apex Valves. A cash
consideration of R6 million is to be paid on 31 October 2014.
WATERTECH COMPANIES
Shareholders are referred to a notice of general meeting
announcement dated 18 August 2014 in relation to a category 1
acquisition of a 51% indirect interest in the building
manufacturing companies of DAWN (“the Watertech Companies”) by
Grohe Luxembourg Four S.A. (“Grohe”), together with a call
option in favour of Grohe to acquire an additional 24,1%
indirect shareholding in the Watertech Companies from DAWN
after a 10-year period, and if such option is exercised by
Grohe, or if Grohe's indirect shareholding has otherwise
increased to 75,1%, the option for DAWN to sell its remaining
24,9% indirect interest in the Watertech Companies to Grohe.
The general meeting of DAWN shareholders was held on Monday,
15 September 2014. The special resolution and the ordinary
resolution, as set out in the notice of general meeting to
shareholders, dated 18 August 2014, were unanimously approved
by shareholders present or represented and voting at the
meeting.
Shareholders will be notified when all conditions precedent
have been met.
DIVIDEND
The Board declared a dividend of 16,5 cents per ordinary
share, from income reserves, in respect of the year ended
30 June 2014 (2013: 16,5 cents per ordinary share). The
dividend was declared on 9 October 2014.
OTHER
Management is not aware of any other material events that
occurred subsequent to the end of the reporting period. There
has been no material change in the Group’s contingent
liabilities since the year-end.
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
(“DAWN” or “the Group” or “the Company”)
Alpha code: DAW
ISIN: ZAE000018834
E-mail: info@dawnltd.co.za
Registered office: Cnr Barlow Road and Caveleros Drive, Jupiter
Ext 3, Germiston, 1401
Directors: RL Hiemstra^ (Chairman), DA Tod (Chief Executive
Officer), LM Alberts^, M Akoojee*, OS Arbee^, JA Beukes, JAI
Ferreira, DM Mncube ^, VJ Mokoena*, RD Roos
* Non-executive ^ Independent non-executive
Company secretary: iThemba Governance and Statutory Solutions
(Pty) Ltd
Transfer secretaries: Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Marshalltown, 2001
(PO Box 61051, Marshalltown, 2107)
Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
www.dawnltd.co.za
Date: 14/10/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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