| Wed 13 Feb 2008, 8:00 | | DAW - Distribution And Warehousing Network - Unaudited Interim Results For |
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DAW
DAW
DAW - Distribution And Warehousing Network - Unaudited Interim Results For
The Six Months Ended 31 December 2007
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
("Dawn" or "the Group" or "the Company")
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
Alpha code: DAW & ISIN: ZAE000018834
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2007
CONDENSED GROUP INCOME STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
% 2007 2006 2007
change R`000 R`000 R`000
Revenue 37 1 930 408 1 413 290 3 002 544
Operating profit 38 222 503 161 260 323 946
Finance income 9 227 2 671 10 476
Finance costs (44 814) (29 500) (72 672)
Share of profit
of associates 9 061 11 871 21 389
Profit before taxation 195 977 146 302 283 139
Income tax expense (52 718) (40 974) (74 663)
Profit for the
period 36 143 259 105 328 208 476
Attributable to:
Equity holders
of the Company 49 137 467 92 018 199 210
Minority interest 5 792 13 310 9 266
143 259 105 328 208 476
Included above:
Depreciation and
amortisation 21 525 13 914 33 615
Operating lease charges 24 264 11 653 37 392
Determination of
headline earnings
Attributable profit 137 467 92 018 199 210
Adjustment for the
after-tax effect of:
- Gain on dilution of
shareholding in subsidiary - - (10 888)
- Profit on disposal of
property, plant and
equipment (923) (61) (426)
Headline earnings 48 136 544 91 957 187 896
Statistics
Number of ordinary
shares (`000)
- in issue 191 464 189 276 189 464
- held in treasury 7 726 7 726 7 726
- Share Incentive Trust 12 967 17 747 12 967
Deferred ordinary shares
in issue (`000) 4 000 6 000 6 000
Weighted average number of
shares (`000)
- for earnings per share 174 771 169 803 170 070
- for diluted earnings per
share* 187 738 187 550 183 037
Headline earnings per
share (cents) 44 78,1 54,2 110,5
Earnings per
share (cents) 45 78,7 54,2 117,1
Diluted earnings
per share (cents)* 49 73,2 49,1 108,8
Operating profit (%) 11,5 11,4 10,8
* Dilutionary impact of shares to be issued in terms of the Share Incentive
Trust.
CONDENSED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2007 2006 2007
R`000 R`000 R`000
Cash generated from
operations 64 163 667 100 000 269 094
Net finance charges paid (31 368) (26 829) (57 327)
Dividends received
- associate - 5 880 15 680
Taxation paid (26 979) (25 210) (42 975)
Cash flow from operating
activities 105 320 53 841 184 472
Cash flow from investing
activities (48 930) (193 458) (177 187)
Cash flow from financing
activities (48 287) 128 522 37 243
Capital distribution - - (28 391)
Increase/(decrease) in
cash resources 8 103 (11 095) 16 137
Cash resources at beginning
of period 21 222 5 085 5 085
Cash resources at end
of period 29 325 (6 010) 21 222
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
6 months 6 months 12 months
31 Dec 31 Dec 30 June
2007 2006 2007
R`000 R`000 R`000
Opening balance 515 864 337 791 337 791
Foreign currency translation
reserve (4 740) (837) (1 313)
Attributable profit 137 467 92 018 199 210
Capital distribution - - (28 391)
Share Incentive Trust (1 838) (9 316) 1 717
Issue of ordinary shares - 9 400 3 118
Share-based payments reserve 6 410 - 3 732
Balance at end of period 653 163 429 056 515 864
CONDENSED GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 Dec 31 Dec 30 June
2007 2006 2007
R`000 R`000 R`000
Assets
Non-current assets 597 978 535 220 580 910
Property, plant and
equipment 261 862 224 384 232 268
Intangible assets 233 458 197 018 223 960
Investment in associates 90 302 79 563 92 605
Deferred tax assets 12 356 34 255 32 077
Current assets 1 607 787 1 206 594 1 403 959
Inventory 712 017 507 057 538 510
Receivables and prepayments 626 865 556 876 591 694
Cash and cash equivalents 268 905 142 661 273 755
Total assets 2 205 765 1 741 814 1 984 869
Equity and liabilities
Capital and reserves 681 890 453 288 539 477
Ordinary shareholders` equity 653 163 429 056 515 864
Minority interest 28 727 24 232 23 613
Non-current liabilities 261 757 341 259 376 848
Interest-bearing liabilities 188 079 231 548 219 550
Non-interest-bearing
liabilities 43 812 103 379 136 109
Deferred tax liabilities 29 866 6 332 21 189
Current liabilities 1 262 118 947 267 1 068 544
Trade and other payables 761 029 612 682 637 140
Current portion of borrowings 214 058 143 398 134 472
Tax liabilities 47 451 42 516 44 399
Bank overdraft 239 580 148 671 252 533
Total equity and
liabilities 2 205 765 1 741 814 1 984 869
Capital commitments 238 513 120 397 266 962
Plant and equipment
- contracted 17 301 - 10 611
- authorised 38 205 32 120 73 498
Land and buildings
- contracted 37 475 35 000 35 000
- authorised 145 532 53 277 147 853
Future commitments
Operating leases 111 293 136 722 115 579
Value per share
Asset value per share
- net asset value (cents) 373,7 252,7 295,2
- net tangible asset
value (cents) 240,2 136,7 167,0
- market price (cents) 1 750 1 256 1 720
Market
capitalisation (R`000) 3 350 620 2 377 307 3 258 785
Net financial gearing
ratio (%)* 37,3 78,9 52,0
Current asset ratio (times) 1,3 1,3 1,3
* Excludes vendor finance from acquisitions.
SEGMENTAL ANALYSIS
Segment
Revenue result Assets
R`000 R`000 R`000
Dec 2007
Manufacturing Division 908 900 120 421 1 039 882
Trading Division 1 439 529 116 566 1 137 192
Other 6 239 4 951 16 335
Consolidation and
unallocated (424 260) (19 435) 12 356
1 930 408 222 503 2 205 765
Dec 2006
Manufacturing Division 400 694 60 901 673 527
Trading Division 1 169 146 98 873 999 838
Other 2 408 1 486 34 195
Consolidation and
unallocated (158 958) - -
1 413 290 161 260 1 707 560
June 2007 (Audited)
Manufacturing Division 1 206 051 148 216 886 894
Trading Division 2 410 894 196 182 1 052 832
Other 6 434 (4 728) 13 066
Consolidation and
unallocated (620 835) (15 724) 32 077
3 002 544 323 946 1 984 869
SEGMENTAL ANALYSIS (continued)
Deprecia-
Capital tion and
expendi- amorti-
Liabilities ture sation
R`000 R`000 R`000
Dec 2007
Manufacturing Division 737 758 33 160 15 218
Trading Division 480 765 14 571 6 058
Other 228 035 61 249
Consolidation and
unallocated 77 317 - -
1 523 875 47 792 21 525
Dec 2006
Manufacturing Division 474 520 11 778 5 205
Trading Division 940 904 12 989 5 566
Other 145 808 52 3 143
Consolidation and
unallocated - - -
1 561 232 24 819 13 914
June 2007 (Audited)
Manufacturing Division 862 958 37 343 21 398
Trading Division 401 761 15 646 11 789
Other 115 084 385 428
Consolidation and
unallocated 65 589 - -
1 445 392 53 374 33 615
No secondary segmental information is disclosed as there are no separately
defined segments that will contribute more than 10% of revenue, results or
assets.
COMMENTARY
GROUP PROFILE
The Dawn Group is a manufacturer and distributor of local and international
quality branded hardware, sanitaryware, plumbing, kitchen, engineering, mining
and civil products through a national, strategically positioned branch network,
as well as in select African countries and Mauritius. The Group supplies
products and services to the infrastructure and building sectors, as well as
related products to the industrial, agricultural and mining sectors of the
market.
The Group has two main operating divisions, Manufacturing (39% of revenue) and
Trading (61% of revenue), assisted by the Support Services division that
provides central services such as warehousing, distribution and marketing. The
Group will be reporting on this division at year-end.
Dawn adds significant value to the distribution channel through its optimised
logistics services, as well as through its leading brand manufacturers which
reduce duplication and enhance efficiencies between the production and
distribution of products.
OVERVIEW
Dawn`s strong performance is largely attributable to organic revenue growth of
19%, resulting in organic operating profit growth of 23%.
The results reflect the benefit derived from the Group`s strategy of acquiring
manufacturing companies with strongly branded, locally produced products, which
are distributed through its well-established distribution centres. The results
also include the benefits derived from bedding down the recent acquisitions.
The management team believes there are still further improvement possibilities
within these acquisitions and these are being pro-actively pursued. In addition,
the Group has expanded its presence in the high growth infrastructural
development market this year, as well as in agriculture and mining.
The recent establishment of the Group`s central distribution centre in
Germiston, where the warehouses of the Gauteng businesses are being
consolidated, augurs well for the future in terms of improved service levels at
a reduced cost.
FINANCIAL RESULTS
The Group once again achieved a significant improvement
in results for the period under review. Revenue increased by 37% to R1,9 billion
(2006: R1,4 billion). A significant portion of the revenue of the Manufacturing
division is inter-group and is eliminated on consolidation.
Operating profit increased by 38% to R223 million (2006: R161 million).
Attributable profit to equity holders of the Company of R137 million (2006: R92
million) is 49% higher, whereas earnings per share of 78,7 cents (2006: 54,2
cents) increased by 45%. The increased contribution from the higher margin
Manufacturing division to operating profit resulted in the Group maintaining the
operating margin against an increased base of innately lower margin operations.
In line with the Group`s strategy and stated commitment to decrease its
debt:equity ratio, the financial gearing ratio decreased from 79% recorded at
the end of December 2006 to 37% at 31 December 2007 (30 June 2007: 52%), once
again proving the Group`s ability to swiftly integrate acquisitions and generate
strong cash flow. The cash generated from operations increased by 64% (2006:
23%). The financial gearing ratio measures the interest-bearing debt of the
Group as a percentage of the shareholders equity and excludes non-interest-
bearing acquisition vendors.
ACCOUNTING POLICIES
The principal policies used in the preparation of the results for the six months
ended 31 December 2007 are consistent with those applied for the year ended 30
June 2007 in terms of International Financial Reporting Standards.
BASIS OF PREPARATION
The Board acknowledges its responsibility for the preparation of the condensed
consolidated interim financial statements in accordance with the Companies Act
in South Africa, 1973, as amended, International Accounting Standard 34 (IAS 34)
and the JSE Limited Listings Requirements.
GOODWILL AND INTANGIBLE ASSETS
An annual impairment test on the balance of goodwill and indefinite life
trademarks at the beginning of the reporting year has been performed at 30 June
2007. No impairment loss has occurred.
BUSINESS COMBINATIONS
The financial impact of business combinations during the period under review was
determined provisionally by independent valuation experts. In accordance with
IFRS 3 these valuations have to be finalised within 12 months of the respective
acquisition dates. The valuation process for the acquisitions done during the
prior financial year has not been finalised and is therefore reported as
provisional values. The financial impact of these valuations on the various
business combinations will be reported on as final in the Group`s audited year-
end results for 30 June 2008.
The Board considered the current status of the valuation process on the
acquisitions performed during the prior financial year (namely Vaal
Sanitaryware, Isca and DPI Holdings) and is of the view that allocations from
goodwill to intangible assets will not materially affect the results of the
business combinations as reported. Reallocation from goodwill to other
intangible assets is, however, likely.
The Group acquired Saffer East London (Pty) Limited on 1 July 2007 and Waterlinx
Industrial and Irrigation (Pty) Limited on 1 August 2007 for R6,5 million and
R16 million, respectively. These acquisitions have been funded through debt.
SAFFER EAST LONDON (PTY) LIMITED
The acquired business contributed revenue of R23,7 million and operating profit
of R1 million for the six months ended 31 December 2007, and its assets and
liabilities at 31 December 2007 were R25,3 million and R15,4 million,
respectively.
WATERLINX INDUSTRIAL AND IRRIGATION (PTY) LIMITED
The acquired business contributed revenue of R40,2 million and operating profit
of R1,5 million for the six months ended
31 December 2007, and its assets and liabilities at 31 December 2007 were R29
million and R12 million respectively. If the acquisition had occurred on 1 July
2007, the Group revenue would have been R7 million more, and operating profit
would have been
R0,4 million more.
PROSPECTS
The Group remains positive about its long-term prospects, as it has a balanced
exposure across different industries, which include the building,
infrastructure, plumbing, petrochemical, agricultural and mining sectors.
Although the Group expects earnings growth to slow down in the second half of
the financial year due to the market tightening following higher interest rates
and slower GDP growth, earnings growth is expected to remain at above the
industry average.
In the absence of a substantial deterioration of these exogenous factors, the
Board remains positive for the following reasons:
* Since the Group mainly supplies locally produced products, the depreciation of
the Rand opens opportunities for import substitution, at a time when imports are
at historically high levels. Furthermore, the weakening of the currency will
open export opportunities for the Group.
* During periods of high interest rates, the Group`s just-in-time package
becomes more attractive to retailers and hence the Group captures market share
from the local and overseas suppliers.
* The Group`s future organic growth will also be enhanced through further
increasing efficiencies and outputs in the manufacturing operations as well as
with its new central distribution centre.
* Product ranges will continue to be selectively expanded to enable the Group to
render a complete solution, in line with its strategic objective.
The directors therefore remain confident about achieving earnings growth for the
remainder of the financial year, albeit at a slower rate.
DISTRIBUTION TO SHAREHOLDERS
As it is the Group`s policy to declare a distribution to shareholders at the
financial year-end, no interim distribution will be declared.
On behalf of the Board
Lm Alberts DA Tod Johannesburg
Chairman Chief Executive 13 February 2008
DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
Registered office: 2 Eton Road, Parktown 2193, Johannesburg
Transfer secretaries: Computershare Investor Services 2004
(Pty) Limited, 70 Marshall Street, Marshalltown 2001
PO Box 61051, Marshalltown 2107
Directors: LM Alberts* (Chairman), DA Tod (Chief Executive Officer), OS Arbee*,
JA Beukes, AS Boynton-Lee*, JAI Ferreira, GL Geldenhuis, RL Hiemstra*, AN
Kendal*, VJ Mokoena*
*Non-executive
Company secretary: JAI Ferreira
E-mail: info@dawnltd.co.za
www.dawnltd.co.za
Date: 13/02/2008 08:00:01 Produced by the JSE SENS Department.
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