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
Date: 12/11/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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