Wrap Text
Summary consolidated financial results for the nine months ended 31 March 2015
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
SUMMARY CONSOLIDATED FINANCIAL RESULTS FOR THE NINE MONTHS ENDED
31 MARCH 2015
COMMENTARY
INTRODUCTION
DAWN 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. The Group has two main operating segments,
namely Building and Infrastructure, both supported by the
Solutions segment.
The successful acquisition of 51% of DAWN’s Watertech Companies
by Grohe Luxemburg Four AG (Grohe), Europe’s largest and the
world’s leading single-brand manufacturer and supplier of
sanitary fittings, effective 14 November 2014, changed the Group
significantly. This business is now known as Grohe DAWN Watertech
(“GDW”) and will grow the group’s core distribution competency,
enhance volume throughput and result in substantial efficiencies,
as well as ensure that DAWN becomes the leading branded products
trader in South Africa for both DAWN brands and brands in which
the Group has no investment.
DAWN has changed its year-end to 31 March, matching the year-end
of GDW, and reports on the conclusion of the nine months ended 31
March 2015 in this report. The impact is that the prior year
amounts for the year ended 30 June 2014 are not comparable.
PERIOD UNDER REVIEW
Group revenue for the nine months amounted to R3,6 billion. Gross
margins at 23,4% reduced somewhat from those achieved during the
first six months to 31 December 2014 (H1 F2015: 24,1%), but is
much more resilient than in the prior year.
As reported for the interim results to December 2014, the results
for the nine-month period were significantly impacted by two key
factors – a NUMSA strike which affected both the Building and
Infrastructure segments directly and indirectly, as well as 37
power interruptions which punitively constrained manufacturing
output.
The severe delays in the implementation of government work in the
Infrastructure segment as noted in the first half report reversed
to some extent, but not to anticipated levels as indicated by the
strength of the Incledon order book in the first half. With the
lack of expansion in mining activity, the Group experienced a
major shortfall in High Density Polyethylene demand. Pleasingly
though, PVC pipe demand improved towards the end of March 2015,
assisted by further consolidation in the PVC market.
These factors, combined with once-off transaction costs and a net
gain relating to the Grohe transaction, resulted in:
- headline earnings per share (HEPS), which includes the
abovementioned Grohe costs, declining by 151% compared to the 12
months ended 30 June 2014. This represents a loss of 25,5 cents
per share;
- core HEPS, excluding the impact of these factors, declining by
64% compared to the 12 months ended 30 June 2014, mainly due to
the effects of the delays in government infrastructure spend; and
- earnings per share (EPS), when compared to the 12 months ended
30 June 2014, increasing by 547% to 204,7 cents per share.
INCOME STATEMENT
Revenue for the nine months was R3,6 billion with the Building
segment’s revenue at R1,8 billion, the Infrastructure segment at
R1,8 billion and the Solutions segment at R380 million. The main
reason for this was the impact of the strike action.
As outlined at interim time, profit before interest and taxation
(PBIT) had a few large impacts. PBIT for the nine months was
R460,1 million (June 2014: R80,5 million) due to:
- R606 million gain on derecognition resulting from the Grohe
transaction and a step-up from 51% to 90% in DAWN’s Africa
expansion programme (DAWN Africa Trading); as well as
- the once-off transaction costs and operating disruptions due to
the strike and power cuts (R117 million impact) and intangible
asset impairments in underperforming business units.
Excluding the abovementioned items, core PBIT amounted to a
disappointing R41,9 million (June 2014: R107,0 million) mainly
due to the delays experienced in the tenders awarded in the civil
infrastructure market. The core margin was 1,2% (June 2014:
2,4%). The Building segment margin amounted to 1,2% (June 2014:
1,7%) while the Infrastructure segment margin was 0,4% (June
2014: 4,4%) and the Solutions segment margin a loss of -0,7%
(June 2014: 2,2%).
Net finance cost amounted to R34,6 million (June 2014: R58,3
million). The proceeds of the Grohe transaction eliminated debt
during November 2014, but R187 million core net working capital
expansion resulted in a net geared situation of R158,9 million
for the period under review.
Income from associates and joint ventures amounted to R10,9
million (June 2014: loss of R18,8 million) due to a strong
performance from Heunis Steel, as well as the first-time
contribution from the new GDW associate. The underperforming
investments in Nigeria and Mauritius have now been closed, with
further action taken on other loss-making associates to avoid a
recurrence of losses during F2016.
EPS was up 547% to 204,7 cents per share (June 2014: 31,6 cents
per share) due to the net gain on the Grohe transaction, as well
as the step-up in the DAWN Africa Trading shareholding.
HEPS was down 151% to a loss of 25,5 cents per share (June 2014:
positive 50,2 cents per share) due to the strike, power
disruptions, the Grohe transaction costs and related IFRS
adjustments.
Core HEPS, which excludes all once-off impacts, was down 43% to
17,9 cents per share (June 2014: 50,1 cents per share).
STATEMENT OF FINANCIAL POSITION
The Group’s net working capital improved marginally to 62 days
(December 2014: 65 days) which, expressed as a percentage of
revenue, was 16,0% above the Group’s targeted mean of 15,0%
(equivalent to 55 days). This has been caused by the mismatch
between inventory turn compared to supplier funding. The
corrective action focused on by management is to increase the
inventory turn to come in line with supplier funding.
Debtors’ days amounted to 49 (December 2014: 46), with strong
credit control discipline being maintained and the book remaining
in good health. Government-related overdues (direct and indirect)
at 31 March 2015 amounted to R62 million (December 2014: R80
million).
The Group’s objective is to have stock days covered by creditors’
days. The stock days increased to 82 (December 2014: 74 days) due
to high inventory being carried mainly in the Trading businesses
as a result of the strategy deployed post NUMSA strike to
maximise factory recoveries by pulling inventory into the trading
pick-face. This strategy has been trimmed back significantly with
the increased market demand on the PVC factories.
Creditor funding improved to 69 (December 2014: 55 days).
Core net working capital increased over the nine months to March
2015 therefore amounted to R129,4 million.
STATEMENT OF CASH FLOWS
Due to the once-off Grohe transaction costs (R57,9 million) and
the impact of the strike on sales (R59,0 million on PBIT), cash
generated from operating activities before working capital
changes reduced significantly to R57,0 million (June 2014: R334,1
million).
Investing activities include the cash inflows relating to the
Grohe transaction of R880,0 million and amount to a net inflow of
R649,5 million (June 2014: R258,4 outflow). Included in these
investing activities are additions to property, plant and
equipment of R46,4 million, continued implementation of the new
IT system of R29,2 million, business combinations of R76,8
million as well as funding advanced to associates and joint
ventures of R64,2 million.
Financing activities produced an outflow of R565,3 million (June
2014: inflow R381,9 million) and includes a net R726,1 million
repayment of borrowings, further net borrowings advanced to the
Group of R201,3 million and the dividend payment of R40,0
million.
The closing cash balance was R1,4 million (June 2014: R121,8
million).
OPERATIONAL OVERVIEW
Building – 46% of Group revenue
Following the Grohe transaction, the Building segment now
consists of Building Trading and associates and joint ventures.
The Trading businesses include WHS Trading, AST (renamed as DAWN
Africa Trading, “DAT”), Hamilton’s Brushware, Pro-Max group.
Associates and joint ventures include the 49% holding of the
newly-created GDW business, as well as Heunis Steel, DAT Zimbabwe
and DAT Tanzania.
Revenue for Building Trading amounted to R1,8 billion, with the
acquisitions of Hamilton’s, Pro-Max and DAT contributing 13% to
the growth. A marginal improvement in gross margin was achieved.
WHS traded well in a tight market. Volume growth and cost
reductions are being targeted to expand net margin opportunities.
With the closure of Nigeria and Mauritius, DAT is now expected to
be profitable. Operating profit for Trading amounted to R21,1
million. WiiN was closed during the last quarter of F2015 as a
result of continuing underperformance.
Strong performances were seen from the associate companies, with
the first-time contribution from GDW to the Group (since
1 November 2014) and Heunis Steel showing strong earnings growth
with market consolidation in the roof sheeting and rainwater
goods markets.
This resulted in the total Building segment headline earnings
amounting to 25,0 cents per share.
Infrastructure – 44% of Group revenue
This segment consists of the businesses of DPI Plastics, Swan
Plastics, Ubuntu Plastics, Sangio Pipe, Incledon (now including
IPS and ?Distribution as a division of Incledon) and the
associates/joint ventures IPS and Distribution (prior to being
structured as a division of Incledon), Simba, Fibrex and Aqualia.
DAWN acquired 100% control of Sangio Pipe in June 2014 and it
contributed 13% of revenue growth in this period.
As outlined earlier in the commentary, the Infrastructure segment
was severely affected by direct and indirect impacts of the NUMSA
strike and 37 power interruptions. The power outages mainly
affected the manufacturing operations of DPI Plastics, Swan
Plastics, Ubuntu Plastics and Sangio Pipe. The direct impact of
the strike was due to the loss in sales and factory under-
recoveries, whilst the indirect impact included impacts on the
supply-chain and further factory disruptions into August 2014.
This had a R47 million negative impact on operating profit for
this segment.
Against these factors, revenue amounted to R1,8 billion and
operating profit declined to R7,3 million. Headline earnings
declined to a loss of R25,4 million.
Incledon’s performance, despite strong order books, was
disappointing. Activity in this market did, however, recover
somewhat during the last quarter of the current reporting period
from the levels seen during the first half. In terms of the
Group’s associates, IPS and Distribution’s losses continued and
triggered a restructuring of this business whereby costs were
removed and management changed. IPS and Distribution now forms
part of Incledon.
Simba in Tanzania moved into a small loss due to donor funds
being temporarily withdrawn from the country. Fibrex in Angola
underperformed in a slowing economy, mainly driven by US$ oil
price revenues. Aqualia made a fair recovery off a soft base.
Solutions – 10% of Group revenue
Solutions consist of DAWN Logistics, as well as other services,
including marketing, human resources and business systems.
DAWN Logistics, the largest element of the Solutions segment,
experienced two major impacts on its results:
1. Volumes were mainly affected by the reduced activity in the
Infrastructure segment. This was partially offset by income from
servicing new brands like Gardena, Pro-Max and Hamilton’s.
2. A new warehouse management system is in the process of
implementation following the transport management system
implemented in 2011. Although the implementation is now virtually
complete, it resulted in R6 million in non-recurring costs during
the first half of the reporting period.
The other services entities did well to maintain contribution
against reduced activity.
The Solutions segment’s revenue was R380 million and an operating
loss of R2,8 million was incurred.
International
Having started the African and Indian Ocean islands expansion ten
years ago, the Group is pleased with the strong progress
achieved. Revenue from this source has increased from less than
R150 million in F2005 to R1,3 billion for nine months to 31 March
2015. Exports from South Africa grew by 19%, the DPI factories in
the rest of Africa grew revenue by 4% on the back of a collapse
in the oil price driving the Angolan economy as well as the
withdrawal of donor funds from Tanzania. These two countries are
large contributors to the DPI African factories’ performance. The
remaining DAT group continued to entrench their African presence
through their trading businesses, showing 7% growth as a result
of the closure of Nigeria and Mauritius operations.
PROSPECTS
Building segment
Looking forward, the year-on-year residential buildings completed
have started to show signs of growth for the first time in six
years. Building plans passed have continued to grow and the gap
between plans passed and plans completed are widening, which
indicates pent-up demand. Although this pipeline of activity is
pleasing, the release into activity is dependent on improvements
in consumers’ disposable income, the economic outlook of the
country and the general confidence levels.
Although the luxury market remains tough, the trading of
traditional plumbing brands, such as Cobra, has shown double-
digit growth.
Core to DAWN’s strategy is securing additional volumes through
existing cost structures. This is being achieved by the addition
of well-known brands such as Gardena, Pro-Max and Hamilton’s. In
further support of the volume-over-cost strategy, the cost
structures have again been reviewed during the last couple of
months and cost structures have been realigned with anticipated
volumes.
In terms of the associates, sales and margins continue to improve
at GDW. A strong focus is on improving the supply-chain,
providing better availability of required product, as well as
removing costs from the supply-chain. Heunis Steel had a record
performance for the nine months and this trend is set to continue
due to an improving market environment in rainwater goods and
roof sheeting.
Management is focused on returning this segment’s operating
performance to within the short term target margin ranges of 2%
to 4% during F2016.
Infrastructure segment
The segment has strong order books in all operations except
Sangio Pipe. The execution of those projects has been
consistently released since March 2015.
Volume increases are crucial and are currently being experienced
in DPI Plastics’ and Swan Plastics’ PVC pipe markets. Swan
Plastics has capitalised on the benefits from new capital
investment made and delivered a record performance to March 2015
on the back of market share growth from consolidation in the
pressure pipe sector. This is expected to benefit DPI Plastics,
Swan Plastics and Incledon during the next period.
At Sangio Pipe, the HDPE business is now consolidated. Market
share gains, productivity and significant cost reductions will
remain a strong focus in F2016. Ubuntu Plastics performed well
and, with its consolidated operations in Gauteng, is expected to
continue its strong growth performance in market share.
Incledon has reviewed its costs structures in a drive to expand
net margins and to return to the strong profitability levels seen
in the recent past. Here too, underperforming branches were
reviewed and costs reduced in line with new expected activity
levels. IPS and Disribution has been added into this business as
a new operating division, which will further underpin the
strategy of additional volumes over existing cost structures. IPS
& Disribution has returned to breakeven post period-end.
Management expects the Infrastructure segment associates to
continue to trade in a tight market (Tanzania and Angola,
specifically). Further action has been taken with the
restructuring of the subsidiaries in Namibia and Botswana, where
the manufacturing facilities have been consolidated and
integrated into DAWN Logistics to service the rest of Africa with
just-in-time, break-bulk delivery.
The segment’s margin target remains 3% to 5% in the short-term.
Solutions segment
The roll-out of the new business systems in DAWN Logistics has
been concluded in Gauteng, with the improved operating system
starting to remove costs and improve on efficiencies.
The further integration of the remaining DAWN Infrastructure
segment manufacturing operations (Swan Plastics, Ubuntu Plastics
and Sangio Pipe) into DAWN Cargo and the distribution of
manufacturing material to the Namibian and Botswana manufacturing
operations will benefit this business in the short term.
The other Solutions segment companies will continue to grow their
non-Group client bases, whilst developing their Africa footprint
in support of DAWN Africa Trading. The focus on improved service
and cost reduction is expected to provide an underpin to the
return to profitability of DAWN Logistics.
International
The Group’s target remains to increase the contribution from
business in Africa to Group revenue from 22% to 30% over time,
assisted by the benefits of the Grohe transaction ,which creates
a strong base for expansion into surrounding regions.
DAT, as the new distribution arm of all DAWN and Grohe product in
Africa, is a huge step change opportunity with a planned roll-out
of logistics services to all the operations outside of South
Africa over a two-year period. The increased volumes into the
logistics system will be further bolstered with the consolidation
of all loads into Africa as from 1 July 2015. The focus at DAT is
also on ensuring profitable operations through the closure of two
loss-making companies (Nigeria and Mauritius), as well as further
targeted cost reduction and restructuring that will add to
profitable growth in Angola and Mozambique. The start-up
Tanzanian entity is receiving brand support to develop the market
further with the establishing of a presence of the Group brands
in the market and ensuring appropriate inventory levels to ensure
profitability during F2016.
Conclusion
DAWN management continued with the firm action implemented based
on the disappointing performance for the period ended
31 December 2014. As indicated, the benefits of these actions
have not yet reflected in the period to 31 March 2015.
As communicated in February 2015, there are three key areas of
focus:
1. Driving additional volumes through the existing infrastructure
by aggressively improving stock turn and volume throughput;
2. Working capital improvement, with a strong focus on improved
stock management, cash extraction and interest cost savings; and
3. Further reducing overheads to expand net margins. The cost
reduction initiatives focus on:
Cost structures
– Simplifying the operating structures of the Group;
– Realigning support function cost structures to the new
operating model of DAWN post the Grohe transaction;
– Consolidation of manufacturing facilities to extract greater
recoveries, and
– Trimming back cost structures in line with lower anticipated
volumes in the current market environment.
Underperforming businesses
– Restructuring of underperforming business units; and
– Closures of loss-making business units with no short term
expectation of returning to profits.
Rewards reviewed
– Forgoing share incentives in the short term by senior
management until such time as business performance rewarding
shareholders in line with expectation; and
– Reviewing staff structure and reward schemes in all
businesses.
Driving productivity where investments has been made in the
recent past (i.e. in warehousing).
Reducing operating lease costs.
Against this, a number of risks remain. Any possible future
delays in water and sanitation spend will have a negative impact
on DAWN’s Infrastructure segment. Pressure on economic growth
from Eskom load-shedding could reduce South Africa’s GDP by a
material margin in calendar 2015. The commissioning of the 20
generators by the Group by September 2015 will minimise the
impact of power outages.
Management is taking the necessary steps to ensure improvements.
It is therefore expected that the full benefits of the Grohe
transaction, cost cutting, an improved Statement of Financial
Position and internal restructuring measures will flow through
from the first half of F2016.
This specific forecast has not been reviewed nor reported on by
the Company’s auditors.
BOARD OF DIRECTORS
On 13 February 2015, Mr OS Arbee resigned as independent non-
executive director. The Board would like to thank Mr Arbee for
his valuable contribution during his tenure as a director of
DAWN.
On 31 March 2015, Mr RL Hiemstra announced his retirement as
independent non-executive director and Chairman of the Board of
Directors of DAWN, effective no later than 30 June 2015.
On 29 May 2015, Mr S Mayet was appointed as independent non-
executive director and Chairman of the Audit and Risk Committees.
On 2 June 2015, as announced on SENS, Mr DJ Fouché was appointed
as non-executive director and Chairman of the Board of Directors
with effect from 1 November 2015. Accordingly, Mr RL Hiemstra has
postponed his retirement until 31 October 2015.
The Board welcomes the new directors and looks forward to working
with them.
Mr RL Hiemstra has been with DAWN since its inception and over
this time his unstinting efforts an strategic guidance were
invaluable and the Board of Directors wishes him well in his
future endeavours.
Signed for and on behalf of the Board
RL Hiemstra DA Tod JAI Ferreira
Chairman Chief Executive Officer Chief Financial Officer
Germiston
25 June 2015
CONSOLIDATED INCOME STATEMENT
for the 9 months ended 31 March 2015
9 months 12 months
ended ended
31 March 30 June
% 2015 2014
change R’000 R’000
Revenue 3 616 640 4 435 948
Cost of sales (2 771 312) (3 413 417)
Gross profit 845 328 1 022 531
Operating expenses (939 836) (929 835)
Administrative and
selling expenses (546 906) (528 777)
Distribution and warehousing
expenses (346 856) (395 396)
Other operating expenses (46 074) (5 662)
Other operating income 20 179 14 347
Operating (loss)/profit before
derecognition and
rerecognition of investments (74 329) 107 043
Net gain on derecognition and
rerecognition of previously
held interests 637 370 14 842
Impairment of intangible assets (102 982) (41 424)
Operating profit 460 059 80 461
Finance income 15 710 8 795
Finance expenses (50 266) (67 073)
Profit after net financing costs 425 503 22 183
Share of profit/(loss) in investments
accounted for using the equity method 10 877 (18 763)
Profit before taxation 436 380 3 420
Income tax income/(expense) 21 782 (14 760)
Profit/(loss) from continuing
operations 458 162 (11 340)
Profit from discontinued operations
(attributable to owners of
the parent) 27 438 92 859
Profit for the period 485 600 81 519
Profit attributable to:
Owners of the parent 485 238 74 135
Non-controlling interests 362 7 384
Profit for the period 485 600 81 519
Earnings per share (cents) 547 204,69 31,62
From continuing operations 193,12 (7,98)
From discontinued operations 11,57 39,60
Headline earnings per
share (cents) (151) (25,48) 50,15
From continuing operations (37,05) 10,75
From discontinued operations 11,57 39,40
Fully diluted earnings per
share (cents) 556 202,81 30,90
From continuing operations 191,34 (7,81)
From discontinued operations 11,47 38,71
Consolidated statement OF COMPREHENSIVE INCOME
for the 9 months ended 31 March 2015
9 months 12 months
ended ended
31 March 30 June
% 2015 2014
change R’000 R’000
Profit for the year 485 600 81 519
Other comprehensive income – to
be subsequently reclassified
to profit or loss:
Exchange differences recycled
through profit/loss (2 972) –
Exchange differences on
translating foreign operations 277 3 686
Effects of cash flow hedges
recycled through profit/(loss) – 4 095
Effects of retirement benefit
obligations (43) (280)
Tax related to components of
other comprehensive income 12 (1 191)
Total other comprehensive income (2 726) 6 310
Total comprehensive income 482 874 87 829
Total comprehensive income
attributable to:
Owners of the parent 482 512 80 445
Non-controlling interests 362 7 384
482 874 87 829
Total comprehensive income
attributable to equity shareholders
arising from:
Continuing operations 455 074 (12 414)
Discontinued operations 27 438 92 859
482 512 80 445
Reconciliation of headline
earnings (R’000)
Headline earnings (R’000)
Attributable earnings 485 238 74 135
Adjustment for the after-tax and
non-controlling interest effects of:
Net (profit)/loss on disposal of
property, plant and equipment (1 051) (1 331)
Impairment of intangible assets 96 915 41 424
Impairment of property, plant and
equipment 720 –
Impairment of assets held-for-sale 5 347 –
Tax effect on disposal of property,
plant and equipment and impairment
of intangible assets (trademarks) (9 498) (367)
Non-controlling interest (919) 1
Net profit on derecognition and
rerecognition of previously
held interest (637 370) (14 842)
Headline earnings adjustments related
to associates and joint ventures 233 19 043
Headline earnings adjustments
related to disposal group (4) (456)
(60 390) 117 606
Statistics
Weighted average shares (’000)
For earnings per share 237 057 234 517
For fully diluted earnings per share 239 263 239 890
Shares in issue (’000) 242 243 241 843
Shares held in treasury (’000) – 6 733
Deferred ordinary shares (’000) – 400
Market capitalisation (R’000) 1 574 579 2 636 088
Market price (cents) 650 1 090
Asset value per share (cents)
Net asset value 31 845,42 647,25
Net tangible asset value 37 782,54 572,49
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2015
9 months 12 months
ended ended
31 March 30 June
2015 2014
R’000 R’000
Assets
Non-current assets
Property, plant and equipment 252 379 208 621
Intangible assets 149 060 175 326
Investments in joint ventures 29 276 50 357
Investments in associates 884 359 91 526
Derivative financial instruments 3 950 –
Deferred tax assets 71 101 39 560
1 390 125 565 390
Current assets
Inventories 930 543 665 107
Trade and other receivables 1 144 320 1 007 731
Cash and cash equivalents 197 770 154 123
Derivative financial instruments 44 223
Current tax assets 3 880 7 988
2 276 557 1 835 172
Assets of disposal group classified as
held-for-sale 34 337 1 212 274
Total assets 3 701 019 3 612 836
Equity and liabilities
Equity
Capital and reserves attributable
to equity holders of the Company
Share capital 2 422 2 422
Share premium 373 748 373 748
Retained income 1 533 177 1 093 315
Treasury shares – (6 733)
Share-based payment reserve 69 695 40 256
Foreign currency translation reserve (282) 2 413
Change in ownership reserve (8 378) (17 989)
Retirement benefit obligation reserve (233) (202)
Share capital and reserves 1 970 149 1 487 230
Non-controlling interests 33 974 35 756
Total equity 2 004 123 1 522 986
Liabilities
Non-current liabilities
Borrowings 65 471 447 090
Deferred profit 16 013 18 425
Deferred tax liabilities 17 969 22 804
Retirement benefit obligation 6 035 5 820
105 488 494 139
Current liabilities
Trade and other payables 1 053 210 986 574
Borrowings 501 605 303 943
Derivative financial instruments – 23
Deferred profit 5 793 5 393
Current tax liabilities 12 463 2 872
1 573 071 1 298 805
Liabilities directly associated with
assets held-for-sale 18 337 296 906
Total liabilities 1 696 896 1 792 944
Total equity and liabilities 3 701 019 3 612 836
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the 9 months ended 31 March 2015
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 2013
(Restated) 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 – – – –
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 2013
(Restated) (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 – – (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 interests Total
R’000 R’000 R’000 R’000
Balance at
1 July 2013
(Restated) 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 – (903) – (903)
Business combinations – – 18 918 18 918
Balance at
30 June 2014 1 093 315 1 487 230 35 756 1 522 986
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 2014 2 422 373 748 (6 733) 40 256
Total comprehensive
income for the
period – – – –
Profit for the
period – – – –
– Continuing
operations – – – –
– Discontinued
operations – – – –
Other comprehensive
income for the period – – – –
Dividends paid – – – –
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity – – 6 733 29 439
Share-based payment
charge for the period – – – 22 608
Share-based payment
– vesting of options – – 6 733 (6 733)
Dividends paid to
non-controlling
interests – – – –
Transactions with
non-controlling
interests – – – –
Business
combinations – – – –
Tax impact in
equity – – – –
Transfer from
liabilities – – – 13 340
Derecognition of
subsidiary – – – 224
Derecognition of
joint venture – – – –
Foreign currency
translation reserve – – – –
Balance at
31 March 2015 2 422 373 748 – 69 695
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 2014 – 2 413 (17 989) (202)
Total comprehensive
income for the
period – (2 695) – (31)
Profit for the
period – – – –
– Continuing
operations – – – –
– Discontinued
operations – – – –
Other comprehensive
income for the period – (2 695) – (31)
Dividends paid – – – –
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity – – 9 611 –
Share-based payment
charge for the period – – – –
Share-based payment
– vesting of options – – – –
Dividends paid to
non-controlling
interests – – – –
Transactions with
non-controlling
interests – – (8 057) –
Business
combinations – – – –
Tax impact in
equity – – – –
Transfer from
liabilities – – – –
Derecognition of
subsidiary – – 17 172 –
Derecognition of
joint venture – – 496 –
Foreign currency
translation reserve – – – –
Balance at
31 March 2015 – (282) (8 378) (233)
Attributable to
owners of the parent
Equity Non-
attribu- control-
Retained table to ling
earnings Company interests Total
R’000 R’000 R’000 R’000
Balance at
1 July 2014 1 093 315 1 487 230 35 756 1 522 986
Total comprehensive
income for the
period 485 238 482 512 377 482 889
Profit for the
period 485 238 485 238 377 485 615
– Continuing
operations 457 800 457 800 362 458 162
– Discontinued
operations 27 438 27 438 15 27 453
Other comprehensive
income for the
period – (2 726) – (2 726)
Dividends paid (40 017) (40 017) – (40 017)
Total contributions
by and distributions
to owners of the
Company recognised
directly in equity (5 359) 40 424 (2 159) 38 265
Share-based payment
charge for the
period – 22 608 – 22 608
Share-based payment
– vesting of options – – – –
Dividends paid to
non-controlling
interests – – (447) (447)
Transactions with
non-controlling
interests – (8 057) (2 538) (10 595)
Business
combinations – – 727 727
Tax impact in
equity (5 359) (5 359) – (5 359)
Transfer from
liabilities – 13 340 – 13 340
Derecognition of
subsidiary – 17 396 – 17 396
Derecognition of
joint venture – 496 – 496
Foreign currency
translation reserve – – 99 99
Balance at
31 March 2015 1 533 177 1 970 149 33 974 2 004 123
CONSOLIDATED STATEMENT OF CASH FLOWS
for the 9 months ended 31 March 2015
9 months 12 months
ended ended
31 March 30 June
2015 2014
R’000 R’000
Cash flows from operating activities
Cash generated from operations (240 910) 115 762
Finance income received 11 839 8 498
Finance expense paid (52 403) (92 727)
Income tax paid (18 453) (69 975)
Net cash (utilised in)/ generated
from operating activities (299 927) (38 442)
Cash flows from investing activities
Additions to property, plant
and equipment (46 414) (148 658)
Additions and development of
intangible assets (29 200) (45 417)
Proceeds on disposals of property,
plant and equipment 14 182 16 338
Acquisition of businesses through
business combinations (43 642) (37 160)
Acquisition of interest in associates (20 982) –
Acquisition of non-controlling interest (12 168) –
Treasury shares purchased (7 984) (12 688)
Proceeds from joint ventures and
associates – 28 823
Loan advances granted to joint
ventures and associates (64 204) (59 646)
Proceeds on derecognition of investment
in Grohe DAWN Watertech 880 000 –
Net cash generated by/(utilised in)
investing activities 669 588 (258 408)
Cash flows from financing activities
Proceeds from borrowings 235 852 607 995
Repayment of borrowings (726 051) (167 087)
Government grants received – 11 216
Instalment sale payments (24 865) (17 161)
Finance lease payments (9 733) (11 304)
Dividends paid to non-controlling
interest holders (447) (3 031)
Dividends paid (40 017) (38 752)
Net cash (utilised in)/generated by
financing activities (565 261) 381 876
Total cash movement for the year (195 600) 85 026
Translation effects on foreign cash
and cash equivalents balances (518) 577
Cash and cash equivalents of
held-for-sale group derecognised (4 282) –
Cash and cash equivalents of disposal
group held-for-sale at beginning of
the period derecognised 80 063 –
Cash and cash equivalents of disposal
group held-for-sale at end of the period – (80 063)
Cash and cash equivalents at beginning
of the period 121 765 116 225
Cash and cash equivalents at end of
the period 1 428 121 765
CONSOLIDATED SEGMENTAL ANALYSIS
Building
Discon-(3)
Continuing tinued Infra-
operations operations Total structure
R’000 R’000 R’000 R’000
9 months ended
31 March 2015
Revenue 1 826 897 334 681 2 161 578 1 751 379
Depreciation and
amortisation (9 544) (9 660) (19 204) (25 232)
Operating
profit/(loss)
before impairments
and derecognition
and rerecognition
of investments 30 750 37 521 68 271 8 044
Impairments and
derecognitions (9 606) – (9 606) (720)
Operating profit/
(loss) after
impairments and
derecognitions and
rerecognition of
investments 21 144 37 521 58 665 7 324
Net finance income/
(expense) (20 318) (3 077) (23 395) (20 600)
Share of profit/
(losses) from
associates and
joint ventures
(including
impairment of
associate) 18 751 1 214 19 965 (8 079)
Tax expense (3 633) (9 731) (13 364) 3 125
Net profit/(loss)
after tax from
continuing
operations 15 944 – 15 944 (18 230)
Net profit after
tax from
discontinued
operations – 25 913 25 913 –
Assets 1 591 137 – 1 591 137 1 250 276
Liabilities 1 344 514 – 1 344 514 838 975
Capital
expenditure(2) 10 674 – 10 674 50 409
Corporate
Office(1)
and other Discon-(3)
DAWN reconciling tinued
Solutions items operations Total(4)
R’000 R’000 R’000 R’000
9 months ended
31 March 2015
Revenue 380 061 (341 697) (334 681) 3 616 640
Depreciation and
amortisation (13 365) (180) 9 660 (48 321)
Operating
profit/(loss)
before impairments
and derecognition
and rerecognition
of investments (2 847) (108 159) (39 638) (74 329)
Impairments and
derecognitions – 544 714 – 534 388
Operating profit/
(loss) after
impairments and
derecognitions and
rerecognition of
investments (2 847) 436 555 (39 638) 460 059
Net finance income/
(expense) (2 047) 8 409 3 077 (34 556)
Share of profit/
(losses) from
associates and
joint ventures
(including
impairment of
associate) 205 – (1 214) 10 877
Tax expense 1 269 20 429 10 324 21 782
Net profit/(loss)
after tax from
continuing
operations (3 421) 463 869 – 458 162
Net profit after
tax from
discontinued
operations – 1 525 – 27 438
Assets 592 332 267 274 – 3 701 019
Liabilities 612 051 (1 098 644) – 1 696 896
Capital
expenditure(2) 34 722 18 522 – 114 327
CONSOLIDATED SEGMENTAL ANALYSIS continued
Building
Discon-(3)
Continuing tinued Infra-
operations operations Total structure
R’000 R’000 R’000 R’000
12 months ended
31 June 2014
Revenue 2 129 568 756 280 2 885 848 2 248 705
Depreciation and
amortisation (4 979) (26 733) (31 712) (25 370)
Operating profit/
(loss) before
impairments
and derecognitions 36 210 124 444 160 654 99 343
Impairments and
derecognitions (41 424) – (41 424) –
Operating profit/
(loss) after
impairments and
derecognitions (5 214) 124 444 119 230 99 343
Net finance income/
(expense) (12 907) (41 608) (54 515) (24 632)
Share of profit/
(losses) of
associates
(including
impairment of
associate) (21 599) 384 (21 215) 2 836
Tax expense (5 793) (16 983) (22 776) (21 046)
Profit/(loss)
after tax from
continuing
operations (45 515) – (45 515) 56 502
Profit after tax
from discontinued
operations – 65 150 65 150 –
Assets 1 110 968 1 212 274 2 323 242 1 183 195
Liabilities 1 026 514 296 906 1 323 420 726 457
Capital
expenditure(2) 9 762 107 494 117 256 32 821
Corporate
Office(1)
and other Discon-(3)
DAWN reconciling tinued
Solutions items operations Total(4)
R’000 R’000 R’000 R’000
12 months ended
31 June 2014
Revenue 432 996 (375 321) (756 280) 4 435 948
Depreciation and
amortisation (18 447) (521) 26 733 (49 317)
Operating profit/
(loss) before
impairments
and derecognitions 9 616 (19 178) (143 392) 107 043
Impairments and
derecognitions – 14 842 – (26 582)
Operating profit/
(loss) after
impairments and
derecognitions 9 616 (4 336) (143 392) 80 461
Net finance income/
(expense) (4 136) 2 932 22 073 (58 278)
Share of profit/
(losses) of
associates
(including
impairment of
associate) – – (384) (18 763)
Tax expense (1 722) 3 025 27 759 (14 760)
Profit/(loss)
after tax from
continuing
operations 3 758 (26 085) – (11 340)
Profit after tax
from discontinued
operations – 27 709 – 92 859
Assets 571 925 (465 526) – 3 612 836
Liabilities 583 472 (543 499) – 2 089 850
Capital
expenditure(2) 39 331 – (107 494) 81 914
(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.
Corporate 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.
(4) ‘Total’ excludes the Building segment’s discontinued
operations amount.
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 nine months ended 31 March 2015 that was
approved by the Board on 24 June 2015.
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. 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. BUSINESS COMBINATIONS
31 March 2015
Pro-Max group (Pro-Max)
A 60% share was acquired in Pro-Max (Pro-Max Welding
Consumables Proprietary Limited and Weld-D Proprietary
Limited) for a provisional cash consideration of R8,4
million. The cash consideration to be paid was dependent on
Pro-Max meeting certain targets as set out in the sale of
shares agreement between the Group and Pro-Max. Pro-Max did
not achieve the targets and the acquisition vendor of R8,4
million was reversed through profit and loss. Pro-Max
specialises in the manufacturing and distribution of welding
equipment and consumables. The effective date of the
transaction was 1 July 2014.
Pro-Max contributed operating profit of R3,6 million and
revenue of R125,9 million since the acquisition date.
The amount of net liabilities acquired amounted to R6,9
million and non-controlling interests of R0,9 million was
recognised.
The total fair value of identified intangible assets is R9,1
million. Goodwill recognised on this acquisition amounts to
R9,6 million.
A further 14,16% was acquired during February 2015 for a cash
consideration of R2,5 million. This was accounted for as a
transaction with non-controlling interest and charged to the
changes in ownership reserve.
Hamilton’s Brushware SA Proprietary Limited (Hamilton’s)
On 1 December 2014 the Group acquired a 69% share in
Hamilton’s Brushware SA Proprietary Limited for a cash
consideration of R10 million. Hamilton’s specialises in the
manufacturing and retail distribution of brushware.
Hamilton’s contributed operating profit of R0,97 million and
revenue of R18,4 million since the acquisition date. If the
acquisition had occurred on 1 July 2014, Group revenue would
have been R28,1 million more, and operating profit for the
period would have increased by R1,4 million. The amount of
net assets acquired amounted to R0,9 million and non-
controlling interests of R2,3 million was recognised. Total
fair value of intangibles recognised are R6,6 million,
comprising customer relationships and tradenames.
The total goodwill attributed to this transaction amounts to
R2,1 million.
Apex Valves (South Africa) Proprietary Limited (Apex Valves)
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 was paid on 31
October 2014.
Africa Saffer Trading Proprietary Limited (AST)
The Group acquired an additional 39% shareholding in AST as
at 31 October 2014 for a cash consideration of R17,7 million.
The 51% interest disclosed as an Investment in Joint Venture
was derecognised. Subsequently, AST was rerecognised as a
subsidiary.
The Group realised a net gain of R15,0 million on this
transaction, consisting of a R5,0 million loss on
derecognition of the joint venture and a R20,0 million gain
on rerecognition as a subsidiary.
The total goodwill attributed to this transaction amounts to
R29,5 million and was impaired.
The AST group contributed an operating loss of R14,8 million
and revenue of R61,6 million since the acquisition date.
If the acquisition had occurred on 1 July 2014, Group revenue
would have been R62,4 million more, and operating profit for
the period would have decreased by R1,0 million.
IPS and Distribution Proprietary Limited (IPS)
An additional 51% was purchased in IPS as at 1 January 2015
for a cash consideration of R51. The 49% disclosed as an
investment in associate was derecognised. Subsequently, IPS
was rerecognised as a 100% owned subsidiary.
The total goodwill attributed to this transaction amounts to
R2,3 million.
IPS contributed an operating loss of R2,7 million and revenue
of R30,8 million since the acquisition date.
Saffer Union (West Africa) Limited (SUWA)
The Group acquired an additional 50% shareholding in SUWA as
at 31 March 2015 for a cash consideration of R5,2 million.
This resulted in the Group obtaining 100% control over SUWA
and recognised it as a subsidiary. SUWA is part of the AST
group. If the acquisition occurred on 1 July 2014, Group
revenue would have been R5,5 million more and operating
profit for the period would have decreased by R21,8 million.
The amount of net assets acquired amounted to R1 million. No
identifiable intangibles were recognised. Total goodwill
attributed to this transaction amounts to R4,3 million and
was subsequently impaired.
The fair value of assets acquired, liabilities assumed,
intangibles assets and the non-controlling interest at the
acquisition date are set out below.
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.
2. BUSINESS COMBINATIONS continued
The fair value of assets acquired, liabilities assumed,
intangibles assets and the non-controlling interest at the
acquisition date are set out below.
Hamiltons Africa IPS and
Brush- Saffer Saffer Distri-
ware SA Trading Union bution
Proprie- Proprie- (West Proprie-
Pro-Max tary tary Africa) tary
group Limited Limited Limited Limited Total
R’000 R’000 R’000 R’000 R’000 R’000
Conside-
ration
at acqui-
sition
date
Cash – 10 000 17 658 5 220 – 32 878
Fair value
of
previously
held
interest – – 20 080 – – 20 080
Loan amount
acquired
as part of
acquisition – (4 521) – – – (4 521)
Contingent
conside-
ration (acqui-
sition
vendor) 8 359 – – – – 8 359
Total
purchase
conside-
ration 8 359 5 479 37 738 5 220 – 56 796
Recog-
nised
amounts
of identi-
fiable
assets
acquired
and lia-
bilities
assumed:
Fair Fair Fair Fair Fair Fair
value value value value value value
R’000 R’000 R’000 R’000 R’000 R’000
Property,
plant
and
equip-
ment 8 008 2 100 7 064 201 1 129 18 502
Trade-
marks 5 139 3 275 – – – 8 414
Customer
relation-
ships 3 974 3 409 – – – 7 383
Invest-
ments in
joint
ventures
– equity
accounted – – 8 305 – – 8 305
Deferred
taxation 219 222 560 – 6 417 7 418
Inven-
tory 30 623 12 875 54 385 3 719 26 386 127 988
Trade
and
other
receiv-
ables 35 727 12 126 50 747 14 11 861 110 475
Cash
and
cash
equi-
valents 26 4 845 4 504 447 5 986 15 808
Assets 83 716 38 852 125 565 4 381 51 779 304 293
Borrow-
ings (3 780) (14 337) (35 630) – (20 711) (74 458)
Trade
and
other
pay-
ables (50 730) (15 428) (58 786) (1 924) (32 178) (159 047)
Current
tax
lia-
bili-
ties (3 442) (591) (2 981) – – (7 014)
Deferred
tax
liabi-
lities (2 552) (1 859) (494) – – (4 905)
Bank
over-
draft (22 514) – (4 058) – – (26 572)
Provi-
sions
and
accruals(1 081) (912) (17 833) (1 500) (1 139) (22 465)
Liabili-
ties (84 099) (33 127)(119 782) (3 424) (54 029) (294 461)
Total
iden-
tifi-
able
net
assets (383) 5 725 5 783 957 (2 250) 9 832
Less:
Non-
control-
ling
interest (867) (2 351) 2 491 – – (727)
Goodwill 9 609 2 105 29 464 4 263 2 250 47 691
Purchase
consi-
dera-
tion 8 359 5 479 37 738 5 220 – 56 796
Cash
flow
from
acqui-
sitions
Total
purchase
conside-
ration 8 359 5 479 37 738 5 220 – 56 796
Less:
Cash and
cash equi-
valents
ac-
quired 22 488 (4 845) (446) (447) (5 986) 10 764
Less:
Loan
amount
acquired
as part
of acqui-
sition – 4 521 – – – 4 521
Less: Fair
value of
previously
held
interest – – (20 080) – – (20 080)
Less:
Contingent
conside-
ration (8 359) – – – – (8 359)
Total
cash
outflow/
(inflow)
from
acquisi-
tions 22 488 5 155 17 212 4 773 (5 986) 43 642
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,
intangibles 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)
Current tax liabilities (3 163) (266) (3 429)
Deferred tax liabilities (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
3. Events after the reporting date
Boutique Baths Proprietary Limited
On 1 April 2015 the Group acquired a 76% share in Boutique
Baths Proprietary Limited (Boutique Baths), a manufacturer of
free-standing, skirted and solid cast baths with matching
basin sets, for a provisional cash consideration of R6,1
million. The cash consideration is dependent on Boutique
Baths meeting certain targets as set out in the shareholders’
agreement.
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
Registered office:
Cnr Barlow Road and Cavaleros Drive, Jupiter Ext 3, Germiston,
1401
Directors:
RL Hiemstra^ (Chairman), DA Tod (Chief Executive Officer), LM
Alberts^, M Akoojee*,
JA Beukes, JAI Ferreira, GD Kotzee, S Mayet ^, 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: 25/06/2015 12:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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