After a trying financial year, JSE-listed engineering and civil products manufacturer Distribution and Warehousing Network (Dawn) turned a small profit in October for the first time in the past 12 months.

Speaking at the company’s half year results on Wednesday, CEO Stephen Connelly noted that “the bleeding has stopped”.

Dawn previously reported a loss before taxes, interest, impairments and derecognitions of R23.9-million for the year ended March 31.

“We will, in the second half of the current financial year, focus on improving the operating performances of all businesses in the group, after reporting significant losses for the first half of the year,” said Connelly.
He noted that sales fell in June and July and stayed down in the remaining months of the period.

“We lost the group CEO, CFO and [mergers and acquisitions] executives this year, which has been very disruptive,” Connelly added. 
He noted, however, that the introduction of new management in key operational positions, was expected to bring greater stability.

Revenue for the six months to September 30 fell 10% year-on-year to R2.4-billion.

Headline earnings a share for the period amounted to a loss of 136.7c, while earnings a share amounted to a loss of 155.9c.

Gross margins decreased to 21% from the 23.4% reported for the six months to September 30, 2015, while net operating expenses increased by 2% to R556.7-million.

Dawn reported a loss before interest and taxation of R52-million and a net loss of R369-million for the six months under review, as a result of impairments and write-downs.

The group plans to sell its noncore businesses, including joint-venture arrangements, and will use the proceeds to lower future funding requirements for working capital.

Duplicated activities will continue to be eliminated and central services costs challenged.

The group’s net asset value decreased to R698-million as at September 30, compared with R1 056-million as at March 31, stemming mainly from the R255-million net impairments during the period.

The financial position deteriorated to a gearing ratio of 44.1% by September 30, compared with 29.5% recorded at March 31.

Short-term debt amounted to R356-million, with current facilities comprising mainly term loans. 

“However, negotiations are in progress to structure new facilities that are better aligned with Dawn's requirements to finance,” said Connelly.

The group anticipates that economic conditions in South Africa and neighbouring countries will remain difficult for some time.

“Lossmaking businesses are being restructured to reduce costs in line with lower sales levels, which are expected to prevail for some time,” concluded the CEO.