Despite tough economic conditions in South Africa, JSE-listed Distribution & Warehousing Network (Dawn) narrowed its loss by 71% to R105-million for the six months to September 30, compared with a loss of R367-million in the first half of the prior financial year.
Dawn CEO Edwin Hewitt commented that, although the interim results were still unacceptable, the group had started to see the benefits of its turnaround plan for each business, the cleaning up of the group structure and the sale of noncore and lossmaking businesses.
Revenue for the six months, including the effect of businesses that were closed or disposed of, decreased by 19.8% to R1.9-billion, while trading revenue decreased by 14% to R1.5-billion.
CFO Chris Booyens pointed out that the revenues of the group’s WHS and Incledon businesses had declined owing to the tougher trading conditions, internal inefficiencies, the impact of lost market share as a result of previous reputational damage with customers and suppliers, as well as supplier underperformance on certain key product categories.
He added that revenue from the company’s manufacturing segment had decreased by 26% to R622-million.
“Revenue from the manufacturing segment, which mainly comprises DPI and Swan Plastics, declined, with DPI Plastics contributing a double-digit decline attributable to a lack of government water infrastructure spend and rightsizing of business,” he said.
Booysen added that most businesses within the group were underperforming owing to the tough economic environment, as well as legacy issues that were still impacting on the businesses after the appointment of new management.
“Growth in the South and Southern African economies remained subdued for the period. The South African growth rate for this year was adversely affected by downgrades in sovereign ratings and political instability, which also impacted on business confidence and made trading conditions extremely challenging,” he noted.
He added that the effect of the ongoing economic situation in the country has put pressure on disposable income, with consumers being more selective on how they spend their money.
The sustained adverse performance in 2016 and 2017 resulted in Dawn having to approach shareholders for a rights issue of R358-million in April. Of that, R200-million was required to repay bridging finance, R75-million to reduce other debt and the balance to fund operations.
The overall focus remains on returning the group to sustainable profitability, stated Booysen.
Hewitt added that the second half of the current financial year would see a “relentless execution” of the group’s turnaround plan.
“Although the turnaround is taking longer than expected, we still expect to be profitable by the 2019 financial year,” he assured shareholders.