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DISTRIB. AND WAREHOUSING NETWORK LD - Unaudited interim results for the six months ended 30 September 2015

Release Date: 12/11/2015 08:00
Code(s): DAW     PDF:  
Wrap Text
Unaudited interim results for the six months ended 30 September 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
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 
30 SEPTEMBER 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.
PERIOD UNDER REVIEW
Following the successful partnering in November 2014 of 51% of 
DAWN’s Watertech and Sanware clusters with Grohe Luxemburg Four 
AG, Europe’s largest and the world’s leading single-brand 
manufacturer and supplier of sanitary fittings, DAWN changed its 
year-end to 31 March, resulting in a nine-month reporting period 
for F2015. As per the JSE Listings Requirements, the group is 
required to report on its last published comparative results and 
therefore reports on its results for the six months to 30 
September 2015 (first half F2016) now compared to the six months 
to December 2014 (first half F2015).  
As per the group’s strategy communicated to stakeholders, 
increasing group volumes over the fixed cost base is the group’s 
key goal. Accordingly, structural changes were implemented during 
the period under review to increase volume over fixed cost. These 
are summarised below:
–  1 November 2014 – The Watertech and Sanware clusters became
   associates  
–  1 November 2014 – DAWN Africa Trading (DAT) became a 
   subsidiary   
–  1 December 2014 – Hamilton’s acquired  
–  31 March 2015 – IPS became a subsidiary and were combined with 
   Incledon
–  1 April 2015 – Boutique Baths acquired
–  First quarter F2016 – Pro-Max and Hamilton’s combined into WHS 
   with further consolidation still to be implemented
–  First half F2016 – Distribution rights of the Grass brand 
   attained
–  10 September 2015 – WiiN was sold  
Group earnings for the period under review were therefore as 
follows:
–  Headline earnings per share (HEPS) improved from a loss of
   27,8 cents per share (cps) to a profit of 29,8 cps; and
–  Earnings per share (EPS), when compared to the six months
   ended 31 December 2014, decreased by 88% to 29,6 cps 
   –  The comparative period set an unusually high base as once-
      off net gains amounted to R493,6 million, whilst the income 
      statement in the current period is clean of once-off items. 
The R493,6 million net once-off gains consisted of the R625,0 
million net gain from the Grohe transaction less R131,4 million 
in negative effects of the strike and electricity disruptions, 
impairments and the Grohe transaction in the previous period. 
At the announcement of DAWN’s results in February 2015 and again 
in June 2015, management set firm goals to start turning company 
performance around after a number of successive periods of 
subdued performance. While worsening economic conditions placed 
pressure on operational performance in the period under review, 
management is pleased to report that the short-term aspects of 
these goals have largely been achieved, resulting in the above-
mentioned improvement in HEPS. It is, nevertheless, important to 
note that the process is ongoing. Management has identified 
further goals that must be achieved to ensure a sustainable 
improvement in group earnings and returns. These are discussed 
under the Prospects section at the end of this review.
INCOME STATEMENT
Group revenue for the six months amounted to R2,7 billion, 
growing 10% compared to the six months to December 2014.   
Gross margins decreased to 23,8% from the 24,1% achieved during 
the six months to 31 December 2014, showing resilience in 
competitive market conditions. 
Net operating expenses reduced by a pleasing 9%, reducing the 
sales to expense ratio from 24,7% in H1 F2015 to 20,3% in H1 
F2016.  
Group profit before interest and taxation (PBIT) for the period 
under review, therefore, increased by 98% to R93,2 million 
(December 2014: R47,0 million core). All three business segments 
showed an improvement in PBIT margin. The Building segment margin 
improved to 2,2% (December 2014: 1,9% core), while the 
Infrastructure segment PBIT margin recovered to 4,3% from a loss 
in the comparative period. The Solutions segment margin improved 
to 2,0% from the loss incurred to 31 December 2014. Each 
segment’s results now fall within the group’s stated guidance, 
although the Building segment is still at the lower end of the 
range.  
Net finance costs decreased by 40% to R15,7 million (December 
2014: R26,3 million) due to lower operating expenses, improved 
working capital and improved cash generation.
Income from associates and joint ventures increased by more than 
100% to R24,2 million (December 2014: R11,3 million) as the first 
full six-month contribution from Grohe DAWN Watertech (GDW) came 
through. The Watertech and the Sanware structures’ profit from 
discontinued operations for the four months to 31 October 2014 of 
R27,4 million did not recur as these businesses are now reported 
as part of GDW.
As anticipated, the group’s effective tax rate reverted to the 28 
to 30% range, coming in at 28,6%. The group’s tax rate is higher 
than the South African tax legislated rate due to higher 
legislated tax rates in other African countries where DAWN 
operates.
Non-controlling interests’ share of group earnings increased from 
R1,6 million to R7,9 million, reflecting the strong earnings 
increase from mainly Swan and Ubuntu, largely due to the further 
recent consolidation of the PVC pipe market.
HEPS, therefore, improved from a loss of 27,8 cps for the six 
months to 31 December 2014 to a profit of 29,8 cps for the 
current period.
STATEMENT OF FINANCIAL POSITION
The reduction in net working capital requirements over the six 
months to September 2015 amounted to R42 million and a further 
R100 million reduction is targeted in the second half of F2016.
The group’s net working capital continued to decrease, coming 
down from a high of 65 days in December 2014 to 62 days in March 
2015 and to 57 days by September 2015. The group’s stated target 
mean for working capital is 55 days. Some work therefore remains 
to be done to achieve this goal, most notably getting group stock 
covered by creditors. The table below summarises the group’s 
working capital movements in days, calculated on a rolling 12-
month basis. 
                       Sep    Mar    Dec
                      2015   2015   2014   Comment on working 
                                           capital days
Net working capital     57     62     65   Solid improvement, 
                                           closer to targeted 
                                           mean of 55 days
Debtors                 51     49     46   In line with 
                                           expectations and 
                                           revenue growth; bad 
                                           debts still <0,1% of 
                                           revenue
Stock                   69     82     74   R145 million reduction 
                                           in stock levels; more 
                                           to come
Creditors               63     69     55   Creditor funding 
                                           reduced in line with 
                                           recent stock 
                                           reduction. Stock and 
                                           creditor days should 
                                           be in line with 
                                           creditor funding 
                                           during second half 
                                           F2016
It is pleasing to note that, when expressed as a percentage of 
revenue, the attention paid to stock management and cash 
extraction has resulted in working capital improving to 16% 
(December 2014: 18%). The group’s stated goal for working capital 
as a percentage of revenue is a mean of 15% and further focused 
attention is being paid to stock management.
The group’s net asset value increased to R2,05 million as at 30 
September 2015 compared to R2,00 million at 31 March 2015. 
Compared to the group’s net interest-bearing debt, the financial 
position of the group has improved to a gearing ratio of 4,4% at 
30 September 2015 (7,9% at 31 March 2015).
The current portion of debt, that will fall due over the next 
twelve months, of R208,6 million is aligned with the cash 
generation of the group considering the cash resources of R89,6 
million. Net current portion of debt amounts to R119,0 million 
compared to the cash generated from operating activities of 
R131,3 million.
STATEMENT OF CASH FLOWS
Cash generated from operating activities before working capital 
changes improved to R131,3 million (December 2014: R72,3 million) 
and exceeds EBITDA of R125,7 million (December 2014 core: R77,9 
million).
Working capital showed an inflow of R42,4 million (December 2014: 
outflow of R196,8 million). 
Net finance and tax payments amounted to R27,0 million (December 
2014: R40,4 million).
Investing and financing activities, however, showed a net outflow 
of R195,8 million (December 2014: outflow of R15,1 million). 
Investing activities totaled a R39 million outflow for the 
period. Included in this number are the following:
–  R8 million for the acquisition of Boutique Baths 
–  R31 million in capital expenditure. Of this, R8 million was 
   spent on maintenance capital expenditure and R23 million was 
   spent on expansionary capital expenditure. The capital
   expenditure comprised spend on the software for the new ERP 
   system, capital expenditure on fleet, plant and equipment and 
   an outlay for generators, making the group more resilient to 
   the effects of future power disruptions.  
Financing activities, on the other hand, amounted to a net R157 
million and included:
–  R250 million in debt repayments offset by R124 million in
   receipts from loans to associates and joint ventures;
–  R30 million spent on treasury shares to acquire 5 million DAWN 
   shares in the open market;
–  R2 million government grant received; and
–  R4 million in dividend payments to non-controlling
   shareholders.   
As per IFRS requirements, the R124 million in receipts from loans 
to associates and joint ventures in the financing activities 
above are disclosed as investing activities. The result is a net 
inflow from investing activities of R81 million and a net outflow 
of R277 million from financing activities.
The group closed with a net overdraft position of R47,7 million 
at September 2015 compared to a net cash balance of R1,4 million 
at March 2015.
OPERATIONAL OVERVIEW
Details of the achievements in the current period, based on 
guidance given during the previous two results announcements:
–  Additional volumes through existing infrastructure – achieved
–  Improve working capital – achieved
–  Turn loss-makers around – partially achieved
–  Further reduce overheads – partially achieved
BUILDING – 44% OF GROUP REVENUE
The Building segment consists of Building Trading as well as 
associates and joint ventures. The Building Trading businesses 
include WHS, DAWN Kitchen, DAWN Africa Trading (DAT), Hamiltons 
Brushware, Pro-Max Welding Equipment and Consumables and Business 
Development. Following the Grohe transaction in October 2014, 
DAWN now holds 49% of GDW. The other associates and joint 
ventures are Heunis Steel, DAT Zimbabwe and DAT Tanzania. DAT 
Nigeria and DAT Mauritius have been closed.
Revenue for Building Trading rose by 4% to R1,3 billion (December 
2014: R1,2 billion). Acquisitive growth was achieved with the 
acquisition of Boutique Baths, Hamilton’s and taking control over 
the DAT structure which, in combination, represented 7% of the 
revenue growth. A 5% price increase was achieved, with a modest, 
but pleasing improvement in gross margin. Volumes, however, 
declined by 8%, mainly due to the weak geyser market and the 
decision to exit certain product groupings that did not 
contribute at optimal levels. Other than the pocket of weakness 
in the geyser market, DAWN’s focus on increasing volume over the 
existing cost base was achieved by acquiring the brands of 
Hamilton’s, Grass and Gardena into Building Trading. Boutique 
Baths was acquired with the ultimate aim of combining the brand 
with the GDW marketing package. These additional volumes resulted 
in this business benefiting from economies of scale. There is, 
nevertheless, more room for improvement in Building Trading and 
it remains a focus of management to achieve this.  
Headline earnings increased by 25% to R11,0 million (December 
2014: R8,8 million).
WHS, the largest component of Building Trading, successfully 
implemented cost cutting and higher margins, resulting in a 
significant improvement in headline earnings. Kitchen improved to 
break-even level largely due to the actions of the new management 
team. It also acquired the kitchen brand, Grass, to complete its 
product offering at the top end of the market. The losses at WiiN 
were stemmed in the first half of F2016 and this business was 
disposed of in September 2015. Hamilton’s contributed to earnings 
for the first full reporting period and Pro-Max maintained 
earnings. DAT closed down its Mauritian and Nigerian operations. 
DAT incurred foreign exchange losses in Tanzania as a result of 
election-related disruptions and in Angola and Zambia, mainly as 
a result of oil and copper commodity price movements.  
GDW is in the early stages of integration with the Grohe 
structure and cultures and had to address a number of teething 
problems during the first couple of months. Although the export 
synergies originally agreed with Grohe did not manifest 
immediately, traction is being gained. GDW’s contribution 
declined by 66% on a like-for-like basis.  Heunis Steel produced 
a solid performance, but the earnings decline is off the very 
high base set in the comparative period. The headline earnings 
contribution from associates and joint ventures therefore 
declined by 35%. It should be noted that the Building segment had 
R27,4 million contribution from discontinued operations 
(Watertech and Sanware clusters now part of GDW) during the 
comparative period to 31 December 2014.
Headline earnings for the Building segment as a whole declined by 
40% to R28,5 million (December 2014: R47,1 million).
INFRASTRUCTURE – 46% OF GROUP REVENUE
The Infrastructure segment consists of Infrastructure 
Manufacturing (including DPI, DPI International, Swan, Ubuntu and 
Sangio) and Incledon. The associates and joint ventures include 
Simba, Fibrex and Aqualia. 
Infrastructure performed well off the weak comparable base set in 
the first half of F2015.
Revenue for Infrastructure amounted to R1,4 billion in the six 
months to 30 September 2015 (December 2014: R1,2 billion). 
Revenue rose by 17%, driven by a 15% increase in volumes as the 
PVC pipe market further consolidated. The group’s infrastructure 
markets of water and sewerage reticulation also recovered to some 
extent from the large number of delayed contracts experienced in 
the comparative period. Finally, volumes were boosted by the non-
recurrence of the strike and electricity disruptions that plagued 
the comparative period. The segment now has its own back-up 
power, making it more resilient to power outages. Prices 
increased by 2%.   
Gross margins improved materially. Operating profit for 
Infrastructure increased significantly to R57,9 million (December 
2014: R4,1 million).  This resulted in a total Infrastructure 
segment headline earnings increase of 342% compared to the six 
months to December 2014.
DPI and Swan performed particularly well during the period but 
Sangio, specialising in HDPE piping and previously a strong 
performer, suffered from the substantial reduction in mining 
sector demand. Sangio’s top line was down 40%, which translated 
to a loss at headline earnings level.
Incledon achieved top line growth of 9%. The businesses of 
Incledon and IPS have been combined to achieve both cost savings 
and mutual geographic penetration benefits. Despite a high 
comparative base and weak demand from the mining sector, 
Incledon’s headline earnings increased by 285%.
The contribution from associate, Fibrex, for the period was flat. 
Fibrex is based in Angola, which continues to be a very tough 
trading environment as the economy falters due to its reliance on 
the oil price. Foreign exchange restrictions have been 
implemented in Angola, which impacted negatively on the import of 
raw materials. Simba’s contribution was also flat, due to the 
volatility surrounding the Tanzanian elections and the consequent 
withdrawal of donor funding from the country. The non-recurrence 
of losses in the previous period at IPS, when it was still an 
associate, contributed to the 639% improvement in associate and 
joint venture income.
SOLUTIONS – 10% OF GROUP REVENUE
Solutions consists of DAWN Logistics (comprising DAWN 
Distribution Centres and DAWN Cargo), as well as Other Services, 
including DAWN Human Resources, DAWN Financial Solutions; DAWN 
Projects, DAWN Business Systems (IT) and DAWN Marketing (DMD).
Revenue for Solutions grew by 11% to R282 million in the six 
months to 30 September 2015 (December 2014: R253 million). This 
represents a 6% growth in price and a 5% improvement in volume. 
As per the group’s stated objective, higher volumes were serviced 
through the existing cost structure.
Operating profit for Solutions amounted to R6,2 million (December 
2015: loss of R2,5 million) and Solutions delivered R6,0 million 
in headline earnings (December 2014: loss of R3,5 million).
Logistics, the largest element of the Solutions segment, moved 
from a large loss in the comparative period to a profit in the 
period under review as benefits of the new systems are coming 
through into the results. These new world-class warehouse 
management systems have been successfully implemented and 
resulted in improved efficiencies in fleet management and route 
planning. Furthermore, it has enabled improvements in customer 
service levels and warehouse order-picking efficiencies. 
Additional efficiencies have been realised through a reduction in 
the amount of over-time required. Logistics also felt the benefit 
of the non-recurrence of the once-off R6 million cost related to 
the implementation of the new IT system in the comparative 
period.  
Other Services achieved growth in its non-group client base in 
the period under review. Results were mainly affected by the 
reduction in in-group expenses, which meant lower levels of 
recruitment and training activity.  
Finally the latest addition to the group’s associates, College of 
Production Technology, contributed for the full six months to 
September 2015 compared to only one month during the first half 
F2015.
DAWN AFRICA
DAWN Africa’s constituent parts are incorporated in the Building 
and Infrastructure segmental results, but discussed separately in 
this review to provide additional disclosure for stakeholders.
The weaker Rand exchange rate during the period under review 
provided some cushion to DAWN Africa’s revenues. However, 
economic and  political challenges in Zambia, Tanzania and Angola 
as well as reduced levels of mining activity due to the lower 
commodity prices resulted in DAWN International’s revenue falling 
by 13%.
More specifically, DPI in Africa saw a 23% decline in revenue and 
DAT’s revenue increased by 4%. Exports from South Africa were 
down 11%.  
GROUP PROSPECTS
The over-riding objective for the group is to become the master 
distributor in each of its addressed markets, i.e. capturing a 
greater market share of each supplier and customer in the DAWN 
supply-chain. This will contribute to the group objective of 
increasing volume throughput over the existing cost base. The 
results for the first six months to September 2015 have already 
shown benefits from this initiative in all three operating 
segments and management is focusing on extracting more such 
benefits in the immediate future. The key in the short-term is to 
consolidate group market share and further reduce the expense 
base. 
In the medium-term DAWN’s target is to simplify the group to 
become world class through:
–  securing increased volumes from suppliers to improve 
   procurement and the inbound supply chain 
–  further consolidating group businesses for cost reductions and
–  utilising cross-selling across the group to improve stock
   alignment with customer requirements.
A further reduction in net debt was achieved in the half-year to 
30 September 2015, bringing the net debt to equity ratio down to 
4,4%. The group’s objective is to be entirely cash positive, on a 
net debt basis, by March 2016. This will bolster DAWN’s financial 
position in an uncertain market environment.
Other short-term objectives for the group include the release of 
a further R100 million cash from working capital.
BUILDING SEGMENT
Building will focus on securing additional volumes through 
extending the group’s position as a master distributor. A first 
step is to bring all the remaining Building Trading businesses 
under one scaled-up umbrella to access economies of scale and 
reduce costs.  
Other short-term hurdles that have to be met include improving 
gross margins across the board, focusing on cash extraction from 
stock. In the case of GDW, improving margins through good factory 
loadings can be obtained through accessing more Grohe export 
orders.
INFRASTRUCTURE SEGMENT 
Order books at Infrastructure Manufacturing remain strong, 
although the seasonality of its markets dictates that the second 
half of the year will deliver a weaker earnings performance than 
the first half. In addition, Sangio is unlikely to break even in 
the second half of the year, due to the tough market conditions 
in which it is operating. The Incledon market also remains slow. 
Solutions segment
Management will continue to further reduce costs in the second 
half of F2016. However, the seasonality of group activity in the 
second half leads management to anticipate a softer second half 
contribution.   
DAWN AFRICA 
DPI in the rest of Africa is expected to experience a very tough 
period to March 2016. The low oil price and resulting economic 
challenges in Angola will make it hard for Fibrex to earn a 
profit in the second half of F2016.  Simba is likely to 
experience further economic and political challenges, but is 
expected to recover. Although the Namibian market is cooling 
down, the group plans to consolidate its Botswana and Namibian 
operations for better volumes through one cost base.
CONCLUSION
DAWN management continues with the firm actions implemented in 
the first half of F2016. The benefits of these actions are being 
felt across the business.  
An analysis of the group’s prospects would, however, not be 
complete without acknowledging possible risks to group guidance. 
In management’s estimation, these risks would include any 
meaningful delays in government water and sanitation spend, the 
weakening South African economy and further pressure on 
consumers, possibly exacerbated by interest rate increases. The 
occurrence of any of these issues could extend the timeframe of 
the group’s delivery on the abovementioned targets.
Despite the achievements in the first half of the year, there are 
other areas of the business that still require attention. The 
most important are: 
–  a further R100 million to be realised in working capital 
   improvements, with a strong focus on improved stock management 
   and cash extraction to ensure a cash positive position by 31 
   March 2016;
–  a strong focus on gross margins, to improve net margins; 
–  bringing the remaining loss-makers, DAT, Pro-Max and Sangio, 
   back to profit; and
–  driving productivity where investments have been made, for 
   example in Warehousing.
Management continues to take firm steps to ensure improvements in 
performance.  
This specific forecast has not been reviewed nor reported on by 
the company’s auditors.
NOTICE ON PAYBACK OF BONUSES
Shareholders are advised that the board of directors of DAWN and 
the relevant individuals have reached agreement that bonuses to 
the value of R7 million in total will be refunded to the group. 
These bonuses were paid in 2014 to the CEO, Mr Derek Tod and the 
CFO, Mr Dries Ferreira following the successful conclusion of the 
Grohe transaction in October 2014. Unfortunately the DAWN group 
did not perform according to expectations for the full year ended 
31 March 2015 and it was deemed appropriate to reverse the 
bonuses concerned. Management's approach and positive attitude in 
relation to the repayment of the bonuses are commendable and 
underline their commitment to the group. The board wishes to 
express their gratitude to them. The board also expresses their 
appreciation for the shareholders’ direct input on this matter, 
which provided an opportunity to professionally address this 
matter as stakeholders, in the interests of the DAWN group. The 
timing of the implementation of this arrangement is being 
formalised to ensure that statutory and regulatory implications 
are appropriately addressed.
CHANGES TO THE BOARD AND MANAGEMENT TEAM
The following changes have recently taken place at board level at 
DAWN and are summarised in the table below.
DEPARTURES                   ARRIVALS
Tak Hiemstra, chairman       Diederik Fouché, chairman  
                             –  Retired senior partner at PwC,
                                PwC Africa board member and 
                                industry leader for southern
                                Africa in the retail, consumer 
                                and manufacturing industries 
                               (CIPS), EMEA CIPS committee member
Osman Arbee,                 Saleh Mayet, audit committee
audit committee chair        chair 
                             –  Was acting group head of
                                Anglo American SA
                             –  Head of Finance at Anglo American
                                SA
Mohammed Akoojee,            George Nakos, non-executive director
non-executive director       (effective 12 November 2015)
(effective 11 November 2015) –  Imperial group executive 
                                committee member and group 
                                corporate finance executive
                             –  Previously corporate finance 
                                executive at Investec Bank 
Collin Bishop, 
chief operating officer 
(prescribed officer) 
The board appreciates and wishes to thank the outgoing board and 
management members for their valuable contributions to DAWN over 
the years and welcomes the new board members who have already 
started making a contribution to the group.
Signed for and on behalf of the board
Diederik Fouché                      Derek Tod        
Chairman                             Chief executive officer        
Dries Ferreira
Chief financial officer
Germiston
12 November 2015
SUMMARY CONSOLIDATED INCOME STATEMENT
                           Unaudited    Unaudited      Audited
                            6 months     6 months     9 months
                        30 September  31 December     31 March
                                2015         2014         2015
                               R’000        R’000        R’000
Revenue                    2 667 934    2 427 423    3 616 640
Cost of sales             (2 032 432)  (1 841 804)  (2 771 312)
Gross profit                 635 502      585 619      845 328
Net operating expenses 
 before derecognition 
 and re-recognition 
 of investments and 
 impairments                (541 606)    (655 590)    (919 657) 
Operating profit/(loss) 
 before derecognition 
 and re-recognition 
 of investments and 
 impairments                  93 896      (69 971)     (74 329)
Net (loss)/gain on 
 derecognition and 
 re-recognition of 
 previously held interest
 and impairment of 
 other assets                   (693)     640 042      637 370 
Impairment of 
 intangible assets                 –      (29 468)    (102 982)
Operating profit              93 203      540 603      460 059
Finance income                 2 421        6 112       15 710
Finance expense              (18 163)     (32 367)     (50 266)
Profit after net 
 financing costs              77 461      514 348      425 503
Share of profit in 
 investments accounted 
 for using the 
 equity method                24 160       11 338       10 877
Profit before taxation       101 621      525 686      436 380
Income tax (expense)/income  (22 167)      (6 265)      21 782
Profit from continuing 
 operations                   79 454      519 421      458 162
Profit from discontinued 
 operations (attributable to 
  owners of the parent)            –       27 438       27 438
Profit for the period         79 454      546 859      485 600
Profit attributable to:
Owners of the parent          71 584      545 255      485 238
Non-controlling interest       7 870        1 604          362
Profit for the period         79 454      546 859      485 600
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                           Unaudited    Unaudited      Audited
                            6 months     6 months     9 months
                        30 September  31 December     31 March
                    %           2015         2014         2015
               change          R’000        R’000        R’000
Profit for 
  the period                  79 454      546 859      485 600
Other 
 comprehensive 
 income:
Exchange 
 differences on 
 translating 
 foreign 
 operations                  (10 623)       1 378          277
Exchange 
 differences 
 recycled 
 through 
 profit/loss                       –            –       (2 972)
Effects of 
 retirement 
 benefit 
 obligation                        –            –          (43)
Taxation 
 related to 
 components of 
 other 
 comprehensive 
 income                             –            –           12
Other comprehensive 
 income for 
 the period 
 net of taxation             (10 623)       1 378       (2 726)
Total comprehensive 
 income for 
 the period                   68 831      548 237      482 874
Total comprehensive 
 income 
 attributable to:
Owners of the 
 parent                       60 961      546 633      482 512
Non-controlling 
 interest                      7 870        1 604          362
                              68 831      548 237      482 874
Included above:
Depreciation and 
 amortisation                 32 455       31 111       48 321
Operating lease 
 rentals                      69 318       63 828       99 890
Determination 
 of headline 
 earnings (R’000)
Attributable 
 earnings                     71 584      545 255      485 238
Adjustment for 
 the after-tax 
 and non-
 controlling 
 interest 
 effect of: 
Net profit/(loss) 
 on disposal of 
 property, plant 
 and equipment                   (96)        (502)      (1 051)
Non-controlling 
 interest                          6           35         (919)
Impairment of 
 assets 
 held-for-sale                 3 500            –        5 347
Tax effect on 
 disposal of 
 property, plant 
 and equipment 
 and impairment 
 of intangible 
 assets (customer 
 relationships)                   24          134       (9 498)
Net profit on 
 derecognition 
 of previously 
 held interest                (2 807)           –     (637 370)
Headline earnings 
 adjustments 
 relating to 
 associates and 
 joint ventures                  (18)         302          233
Impairment of 
 intangible 
 assets                            –       29 468       96 915
Impairment of 
 property, 
 plant and 
 equipment                         –            –          720
Headline earnings 
 adjustments 
 relating to 
 disposal group                    –          (65)          (4)
Net gain on 
 derecognition and 
 re-recognition of 
 Watertech group                   –     (624 997)           –
Net gain on 
 derecognition 
 and re-recognition 
 of AST group                      –      (15 045)           –
Headline earnings             72 193      (65 415)     (60 390)
Statistics
Number of ordinary 
 shares (’000)
–  in issue                  242 243      242 243      242 243
Weighted average 
 number of 
 shares (’000)
–  for earnings 
    per share                242 041      235 152      237 057
–  for diluted 
    earnings per 
    share                    246 009      235 152      239 263
Earnings per 
 share (cents)     (87)        29,58       231,87       204,69
Headline earnings 
 per share 
 (cents)           207         29,83       (27,82)      (25,48)
Diluted earnings 
 per share (cents) (87)        29,10       231,87       202,81
Diluted headline 
 earnings 
 per share (cents) 205         29,35       (27,82)      (25,24)
Operating profit (%)             3,5         22,3         12,7
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                           Unaudited    Unaudited      Audited
                        30 September  31 December     31 March
                                2015         2014         2015
                               R’000        R’000        R’000

ASSETS
Non-current assets         1 427 480    1 419 836    1 390 125
Property, plant and 
 equipment                   256 315      251 833      252 379
Intangible assets            162 167      215 147      149 060
Investments in associates    905 208      871 788      884 359
Investments in joint 
 ventures                     31 137       30 479       29 276
Derivative financial assets    3 950            –        3 950
Deferred tax assets           68 703       50 589       71 101
Current assets             1 948 312    1 994 218    2 276 557
Inventories                  788 968      841 893      930 543
Trade and other 
 receivables               1 059 416    1 081 337    1 144 320
Cash and cash equivalents     89 645       65 776      197 770
Derivative financial 
 instruments                   1 878        4 355           44
Current tax assets             8 405          857        3 880
Assets of disposal group 
 classified as 
 held-for-sale                16 000            –       34 337
Total assets               3 391 792    3 414 054    3 701 019
EQUITY AND LIABILITIES
Capital and reserves       2 044 690    2 073 663    2 004 123
Equity attributable to 
 equity holders of 
 the company               2 001 505    2 038 723    1 970 149
Non-controlling interest      43 185       34 940       33 974
Non-current liabilities      100 406      110 579      105 488
Borrowings                    62 974       59 214       65 471
Deferred profit               13 117       17 462       16 013
Deferred tax liabilities      18 280       28 329       17 969
Retirement benefit 
 obligation                    6 035        5 574        6 035
Current liabilities        1 246 696    1 229 812    1 573 071
Trade and other payables   1 004 871      949 023    1 053 210
Borrowings                   208 599      259 891      501 605
Derivative financial 
 instruments                      20           13            –
Deferred profit                5 793        5 793        5 793
Current tax liabilities       27 413       15 092       12 463
Liabilities of disposal 
 group classified as 
 held-for-sale                     –            –       18 337
Total equity and 
 liabilities               3 391 792    3 414 054    3 701 019
Future commitments 
Capital commitments           10 655       11 364       13 595
Operating leases             380 045      439 244      392 620
Net (overdraft)/cash         (47 734)      17 750        1 428
Net debt                      89 338       66 365      158 866
Value per share
Asset value per share
–  net asset value (cents)    826,24       853,78       845,42
–  net tangible asset 
    value (cents)             777,12       766,82       782,54
–  market price (cents)          540          700          650
Market capitalisation 
 (R’000)                   1 308 112    1 695 700    1 574 579
Financial gearing 
 ratio (%)*                      4,4          3,2          7,9
Current asset ratio (times)      1,6          1,6          1,4
* Includes cash and cash equivalents.
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                           Unaudited    Unaudited      Audited
                            6 months     6 months     9 months
                        30 September  31 December     31 March
                                2015         2014         2015
                               R’000        R’000        R’000

Balance at beginning 
 of period                 2 004 123    1 522 986    1 522 986
Total comprehensive 
 income for the period 
 – continuing operations      79 454      519 421      458 162
Total comprehensive 
 income for the period 
 – discontinued operations         –       27 438       27 438
Total comprehensive income 
 for the period 
 – discontinued operations 
 (non-controlling interest)        –           15           15
Other comprehensive income   (10 623)       1 378       (2 726)
Changes in ownership 
 interest – control not lost     241       (2 507)      (7 561)
Changes in ownership 
 interest – derecognition          –       17 789       17 172
Non-controlling interest 
 acquired in business 
 combinations                  1 924        6 262          727
Tax impact in equity               –            –       (5 260)
Transactions with 
 non-controlling interest       (583)      (8 504)      (2 538)
Share-based payment charge 
 and vesting of options       (5 992)      28 540       29 439
Treasury shares acquired 
 and delivered               (20 052)         816        6 733
Dividends paid to 
 non-controlling interest     (3 802)           –         (447)
Dividends paid                     –      (39 970)     (40 017)
Balance at end of period   2 044 690    2 073 663    2 004 123
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS 
                           Unaudited    Unaudited      Audited
                            6 months     6 months     9 months
                        30 September  31 December     31 March
                                2015         2014         2015
                               R’000        R’000        R’000
Cash generated from 
 operations before 
 working capital changes     130 471       72 283       56 621
Working capital changes       43 561     (196 792)    (297 531)
Net finance costs paid       (17 242)     (31 063)     (40 564)
Net income tax paid           (9 818)      (9 274)     (18 453)
Net cash generated from/
 (utilised in) operating 
 activities                  146 972     (164 846)    (299 927)
Net cash generated by/
 (utilised in) investing 
 activities                   80 678     (214 431)     669 588
Net cash (utilised in)/
 generated from financing 
 activities                 (276 449)     199 054     (565 261)
Decrease in cash resources   (48 799)    (180 223)    (195 600)
Cash resources at beginning 
 of the period of disposal 
 group held-for-sale               –      121 765      121 765
Cash resources at beginning 
 of the period of 
 continuing operations         1 428       80 063       80 063
Translation effects on 
 foreign cash and cash 
 equivalents balances           (364)         340         (518)
Cash and cash equivalents of 
 disposal group held-for-sale 
 at end of year                    –            –            –
Cash and cash equivalents 
 of disposal group 
 held-for-sale derecognised        –       (4 195)      (4 282)
Cash resources at end 
 of period                   (47 735)      17 750        1 428
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
                                         BUILDING
                                           Discon-
                          Continuing       tinued(3)
                          operations   operations        Total
                               R’000        R’000        R’000
6 months ended 
30 September 2015
(Unaudited)
Revenue                    1 295 134            –    1 295 134
Depreciation and 
 amortisation                 (5 754)           –       (5 754)
Operating profit before 
 impairments and 
 derecognition and 
 re-recognition of 
 investments                  28 805            –       28 805
Impairments and 
 derecognition                     –            –            –
Operating profit after 
 impairments and 
 derecognitions and 
 re-recognition of 
 investments                  28 805            –       28 805
Net finance (expense)
 /income                     (13 490)           –      (13 490)
Share of profit from 
 associates and joint 
 ventures (including 
 impairment of associate)     17 459            –       17 459
Tax expense                   (6 704)           –       (6 704)
Net profit after tax 
 from continuing operations   26 070            –       26 070
Assets                     1 608 409            –    1 608 409
Liabilities                1 338 641            –    1 338 641
Capital expenditure(2)         3 703            –        3 703
                                                     Corporate
                                                        Office(1)
                                                     and other
                              Infra-         DAWN  reconciling
                           structure    Solutions        items
                               R’000        R’000        R’000
Revenue                    1 349 965      282 234     (259 399)
Depreciation and 
 amortisation                (16 399)     (10 167)        (135)
Operating profit before 
 impairments and 
 derecognition and 
 re-recognition of 
 investments                  57 919        6 212          960
Impairments and 
 derecognition                     –            –         (693)
Operating profit after 
 impairments and 
 derecognitions and 
 re-recognition of 
 investments                  57 919        6 212          267
Net finance (expense)
 /income                     (15 215)         225       12 738
Share of profit from 
 associates and joint 
 ventures (including 
 impairment of associate)     5 570         1 131            –
Tax expense                 (12 187)       (1 569)      (1 707)
Net profit after tax 
 from continuing operations  36 087         5 999       11 298
Assets                    1 215 783       611 931      (44 331)
Liabilities                 734 452       627 605   (1 353 596)
Capital expenditure(2)       15 201        18 176          458
                                           Discon-
                                           tinued(3)
                                       operations        Total(4)
                                            R’000        R’000
Revenue                                         –    2 667 934
Depreciation and 
 amortisation                                   –      (32 455)
Operating profit before 
 impairments and 
 derecognition and 
 re-recognition of 
 investments                                    –       93 896
Impairments and 
 derecognition                                  –         (693)
Operating profit after 
 impairments and 
 derecognitions and 
 re-recognition of 
 investments                                    –       93 203
Net finance (expense)
 /income                                        –      (15 742)
Share of profit from 
 associates and joint 
 ventures (including 
 impairment of associate)                       –       24 160
Tax expense                                     –      (22 167)
Net profit after tax 
 from continuing operations                     –       79 454
Assets                                          –    3 391 792
Liabilities                                     –    1 347 102
Capital expenditure(2)                          –       37 538
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS (continued)
                                         BUILDING
                                           Discon-
                          Continuing       tinued(3)
                          operations   operations        Total
                               R’000        R’000        R’000
6 months ended 
31 December 2014
(Unaudited)
Revenue                    1 247 794      334 681    1 582 475
Depreciation and 
 amortisation                 (5 289)      (9 660)     (14 949)
Operating (loss)/profit 
 before impairments and
 derecognition and 
 re-recognition of 
 investments                  24 871       37 521       62 392
Impairments and 
 derecognition                     –            –            –
Operating profit/(loss) 
 after impairments and 
 derecognitions and 
 re-recognition of 
 investments                  24 871       37 521       62 392
Net finance (expense)
 /income                     (11 199)      (3 077)     (14 276)
Share of profit/(loss) 
 from associates and 
  joint ventures 
 (including impairment 
 of associate)                12 378        1 214       13 592
Tax expense                   (7 218)      (9 731)     (16 949)
Net profit/(loss) after 
 tax from continuing 
 operations                   18 832            –       18 832
Net profit after tax 
 from discontinued 
 operations                        –       25 913       25 913
Assets                     1 553 538            –    1 553 538
Liabilities                1 284 617            –    1 284 617
Capital expenditure(2)         4 890            –        4 890
                                                     Corporate
                                                        Office(1)
                                                     and other
                              Infra-         DAWN  reconciling
                           structure    Solutions        items
                               R’000        R’000        R’000
Revenue                    1 151 244      253 187     (224 802)
Depreciation and 
 amortisation               (17 066)       (8 633)        (123)
Operating (loss)/profit      
 before impairments and
 derecognition and 
 re-recognition of 
 investments                  4 101        (2 483)     (94 343)
Impairments and 
 derecognition                    –             –      610 575
Operating profit/(loss) 
 after impairments and 
 derecognitions and 
 re-recognition of 
 investments                  4 101        (2 483)     516 232
Net finance (expense)
 /income                    (13 040)       (1 371)        (645)
Share of profit/(loss) 
 from associates and 
  joint ventures 
 (including impairment 
 of associate)               (1 040)            –            –
Tax expense                   2 215         1 125       (2 980)
Net profit/(loss) after 
 tax from continuing 
 operations                  (7 764)       (2 727)     511 080
Net profit after tax 
 from discontinued 
 operations                       –             –        1 525
Assets                    1 117 895       585 121      157 500
Liabilities                 655 133       598 897   (1 198 256)
Capital expenditure(2)       29 073        20 890       18 500
                                           Discon-
                                           tinued(3)
                                       operations        Total(4)
                                            R’000        R’000
Revenue                                  (334 681)   2 427 423
Depreciation and 
 amortisation                              (9 660      (31 111)
Operating (loss)/profit      
 before impairments and
 derecognition and 
 re-recognition of 
 investments                              (39 638)     (69 971)
Impairments and 
 derecognition                                  –      610 575
Operating profit/(loss) 
 after impairments and 
 derecognitions and 
 re-recognition of 
 investments                              (39 638)     540 604
Net finance (expense)
 /income                                    3 077      (26 255)
Share of profit/(loss) 
 from associates and 
  joint ventures 
 (including impairment 
 of associate)                             (1 214)      11 338
Tax expense                                10 324       (6 265)
Net profit/(loss) after 
 tax from continuing 
 operations                                     –      519 421
Net profit after tax 
 from discontinued 
 operations                                     –       27 438
Assets                                          –    3 414 054
Liabilities                                     –    1 340 391
Capital expenditure(2)                          –       73 353
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS (continued)
                                         BUILDING
                                           Discon-
                          Continuing       tinued(3)
                          operations   operations        Total
                               R’000        R’000        R’000
9 months ended 
31 March 2015 
(Audited)
Revenue                    1 826 897      334 681    2 161 578
Depreciation and 
 amortisation                 (9 544)      (9 660)     (19 204)
Operating (loss)/profit 
 before impairments and 
  derecognition and 
 re-recognition of 
 investments                  30 750       37 521       68 271
Impairments and 
 derecognitions               (9 606)           –       (9 606)
Operating profit/(loss) 
 after impairments and 
  derecognitions and 
 re-recognition of 
 investments                  21 144       37 521       58 665
Net finance (expense)
 /income                     (20 318)      (3 077)     (23 395)
Share of profit/(loss) 
 from associates and 
 joint ventures 
 (including impairment 
 of associate)                18 751        1 214       19 965
Tax income/(expense)          (3 633)      (9 731)     (13 364)
Net profit/(loss) 
 after tax from 
 continuing operations        15 944            –       15 944
Net profit after tax from 
 discontinued operations           –       25 913       25 913
Assets                     1 591 137            –    1 591 137
Liabilities                1 344 514            –    1 344 514
Capital expenditure(2)         8 325       35 917       44 242
                                                     Corporate
                                                        Office(1)
                                                     and other
                              Infra-         DAWN  reconciling
                           structure    Solutions        items
                               R’000        R’000        R’000
Revenue                    1 751 379      380 061     (341 697) 
Depreciation and 
 amortisation                (25 232)     (13 365)        (180)
Operating (loss)/profit 
 before impairments and 
  derecognition and 
 re-recognition of 
 investments                   8 044       (2 847)    (108 158)
Impairments and 
 derecognitions                 (720)           –      544 714
Operating profit/(loss) 
 after impairments and 
  derecognitions and 
 re-recognition of 
 investments                   7 324       (2 847)     436 555
Net finance (expense)
 /income                     (20 600)      (2 047)       8 409
Share of profit/(loss) 
 from associates and 
 joint ventures 
 (including impairment 
 of associate)                (8 079)         205            –
Tax income/(expense)           3 125        1 269       20 428
Net profit/(loss) 
 after tax from 
 continuing operations       (18 230)      (3 421)     463 869
Net profit after tax from 
 discontinued operations           –            –        1 525
Assets                     1 250 276      592 332      267 274
Liabilities                  838 975      612 051   (1 098 644)
Capital expenditure(2)        50 442       34 722           22
                                           Discon-
                                           tinued(3)
                                       operations        Total(4)
                                            R’000        R’000
Revenue                                  (334 681)   3 616 640
Depreciation and 
 amortisation                               9 660      (48 321)
Operating (loss)/profit 
 before impairments and 
  derecognition and 
 re-recognition of 
 investments                              (39 638)     (74 329)
Impairments and 
 derecognitions                                 –      534 388
Operating profit/(loss) 
 after impairments and 
  derecognitions and 
 re-recognition of 
 investments                              (39 638)     460 059
Net finance (expense)
 /income                                    3 077      (34 556)
Share of profit/(loss) 
 from associates and 
 joint ventures 
 (including impairment 
 of associate)                             (1 214)      10 877
Tax income/(expense)                       10 324       21 782
Net profit/(loss) 
 after tax from 
 continuing operations                          –      458 162
Net profit after tax from 
 discontinued operations                        –       27 438
Assets                                          –    3 701 019
Liabilities                                     –    1 696 896
Capital expenditure(2)                    (35 917)      93 511
(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 unaudited summary consolidated interim financial 
    statements for the six months ended 30 September 2015 was 
    approved by the board on 11 November 2015.
    The summary consolidated interim financial statements are 
    prepared in accordance with the requirements of the JSE 
    Limited’s (JSE) Listings Requirements for interim financial 
    statements and the requirements of the Companies Act 
    applicable to interim financial statements. The JSE requires 
    interim 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, Financial Pronouncements as 
    issued by the Financial Reporting Standards Council 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 summary consolidated 
    interim financial statements are in terms of IFRS and are 
    consistent with the accounting policies applied in the 
    preparation of the consolidated annual financial statements 
    for the year ended 31 March 2015, except for the effects of 
    IFRS 5 as outlined in note 2 below. The preparation of the 
    interim summary consolidated financial statements has been 
    supervised by the chief financial officer, Dries Ferreira 
    CA(SA).
    The directors take full responsibility for the preparation of 
    the summary interim consolidated financial statements.
2.  BUSINESS COMBINATIONS
    BOUTIQUE BATHS (PTY) LTD
    A 76% share was acquired in Boutique Baths (Pty) Ltd for a 
    consideration of R7 million. Boutique Baths specialises 
    in the manufacturing and distribution of unique, luxury 
    baths. The effective date of the transaction was 1 April 
    2015.
    Boutique Baths contributed operating profit of R0,9 million 
    and revenue of R6,7 million since the acquisition date.
    The amount of net assets acquired amounted to R8,0 million 
    and non-controlling interests of R1,9 million was 
    recognised. Goodwill recognised on this acquisition amounts 
    to R6,4 million.
3.  EVENTS AFTER THE REPORTING DATE 
    Management is not aware of any 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 year-end.
4.  DIVIDENDS
    The group has a policy not to pay a dividend at the interim 
    stage.
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
REGISTERED OFFICE: Cnr Barlow Road and Cavaleros Drive, Jupiter 
Ext 3, Germiston, 1401
DIRECTORS: DJ Fouché* (Chairman), DA Tod (Chief executive 
officer), LM Alberts^, G Nakos*, 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

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