JSE-listed Distribution and Warehousing Network (Dawn) on Monday reported that its revenue for the six months ended December 31 had increased by 9% year-on-year to R2.4-billion, despite the negative impact of a strike in the building and infrastructure segments.

The group’s results were in line with guidance. The building segment’s revenue increased by 16%, the infrastructure segment’s revenue by 4% and the solutions segment’s revenue by 16%. This was also bolstered by acquisitive revenue growth of 11%.

Speaking at a presentation of the group’s results, in Johannesburg, Dawn CEO Derek Tod attributed the increase in revenue mainly to a R611-million gain on derecognition, resulting from its joint venture transaction with Grohe and a step-up in Dawn’s Africa expansion programme (AST).

Also included in its profit before interest and taxes (PBIT), which increased by 479% to R540.6-million, was the one-off transaction costs relating to the Grohe transaction and operating disruptions owing to the strike and power cuts of R117-million.

Excluding these, core PBIT decreased by 50% to R47-million, compared with a core PBIT of R93.4-million in the six months ended December 2013.

Meanwhile, the group reported that its earnings a share were 461% higher year-on-year at 231.9c, owing to the net gain on the Grohe transaction, as well as the step-up in shareholding in AST.

However, it reported a loss of 27.8c on its headline earnings, down 168% from the 41.1c in the comparative period, owing to the strike in the metals and engineering sector, power disruptions and the Grohe transaction costs and related International Financial Reporting Standards adjustments.

Excluding the impact of these factors, core headline earnings a share were down 61% to 15.9c, mainly as a result of the effects of the delays in government’s infrastructure spend.

“Management is taking firm action against the disappointing performance, with three key areas of focus. We will be driving additional volumes through the existing infrastructure by aggressively improving stock turn and volume throughput, further reducing overheads to expand net margins. Cash flow extraction from better working capital management will be achieved with a strong focus on improved stock management, resulting in strong interest cost savings,” Tod noted.

“Over the short term, the group should benefit from the nonrecurrence of one-off transaction and strike costs and further cost reductions to counter sustained market weakness. We have embarked on [a] third round of cost cutting since 2009,” he added.

AFRICA ASPECTS
Tod told Engineering News Online that, although the group started expanding its operations to the rest of the continent nine years ago, it was always looking to expand its footprint.

Revenue from its African and Indian Ocean Islands sector had increased from less than R150-million in 2005 to R1.6-billion in the 2014 financial year.

In the first half of the current financial year, exports from South Africa grew by 20%, while the DPI factories in the rest of Africa grew revenue by 10%. The AST group continued to entrench its African presence through its trading businesses, showing 5% growth.

Dawn COO Collin Bishop noted that growth in Africa remained a key strategy for the group, although its Angola-based associate Fibrex recorded a loss in headline earnings.

Fibrex was, however, set to benefit from the Angola government’s move to ensure that local manufacturing companies received priority in the allocation of public projects.

The company also expected DPI’s operations in Africa to improve from the slow start in the first half of this year.

Bishop noted that Dawn’s solutions-based companies, excluding Swan, Ubuntu and Sangio, would continue to grow their non-grouped client base, while developing their Africa footprint in support of Dawn Africa Trading.

The group added that it was looking to convert its Nigeria presence into an infrastructure outlet.

Dawn Africa operations and manufacturing CEO Gerhard Kotzee told Engineering News Online that: “the more successful we are in the growth economies in Africa, [the more] it benefits our local manufacturing [base]”.