Dawn recovery under way but will take time
Distribution and Warehousing Network’s (Dawn’s) new management team says it has pulled the struggling company back on track in the six months to end-September, but much needs to be done before the group gets a clean bill of health.
The manufacturer and distributor of hardware, sanitaryware, plumbing, kitchen, engineering and civil products reported a headline earnings per share loss of 13.7c in the first half of financial 2018, compared with a headline earnings per share loss of 98.1c in 2017.
"We have done a lot. It’s early days, I don’t want to be overly optimistic, but we are working hard to turn around this business," CEO Edwin Hewitt said on Monday.
Revenue dived 19.8% to R1.9bn compared with R2.4bn in the same period in 2017, including the effects of businesses closed and disposed of.
The group’s plastic water reticulation and drainage pipe manufacturing operations had been hit by poor government spending in the water and sanitation sector, Hewitt said.
A turnaround in these businesses would take longer than thought as Dawn did not have working capital amid a shortage of work, he said. To this end, it was retrenching 300 more people to "rightsize the company".
"We are solvent and liquid for the next 12 months," Hewitt said. This had been helped by the disposal of the remaining 49% Dawn held in sanitaryware and kitchen products maker Grohe Dawn Watertech to Japan’s Lixil Corporation for R324.5m. "This will pay off all debt and we will have working capital left."
Dawn’s interim results gave a mixed signal, Anthony Clark, an analyst at Vunani Securities, said. Much had been done to rightsize the business and to extinguish debt, he said.
However, it was "troubling" that the recovery would take longer than envisaged, Clark said. This had knocked the stock 3.41% down in late trade to 85c.