H1 2017 Investor Booklet November 2016
Agenda Overview of Results Financial Review Outlook 2
Overview In the F2016 results presentation (14 July 2016) we said: Dawn board had approved a plan to stop losses In the medium term we were aiming for operating profit margins of 5% in Trading & 12% in Manufacturing Working capital reductions a priority In a market update on 31 August 2016 we said: Sales were still on a downward trend; marked declines in June & July 2016 Curtailed access to currency in the Group s rest of Africa operations impacted sales Supplementary actions were to be taken to adjust the business to the new sales reality Once-off restructuring costs associated with these further actions would be accounted for in the results for H1 F2017 Segmental Review 3
Overview What happened at Dawn in H1 2017? Management changes Revenue Downsizing for new sales reality Segmental Review Group CEO, CFO & M&A executive left (3 of 4 executive directors) New CEO from 1 June; new CFO from 1 November Sales fell precipitously in June & July & stayed down Working capital Strong improvement Inventory by R78m Overdue debtors by R25m WHS national stocking points from 8 to 4 (3 of remaining 4 will be reduced in size in due course) Incledon no. of branches from 17 to 10; appointed regionally-based independent businesses as Incledon agents Sangio KZN plant closed & profitable HDPE lines consolidated into DPI factory. Western Cape DPI factory in size. Pipex Botswana closed DAT & DPI International have closed operations in Angola, DRC, Mozambique & Tanzania; downscaled presence in Zimbabwe 4
Overview The costs of implementing this: WHS: closing 4 stocking points, onerous leases, retrenchments, stock & debtor impairments 87 Incledon: restructure, onerous leases, retrenchments, closing 7 branches, stock & debtor impairments 43 Sangio: closure, retrenchments, stock & debtor impairments, DPI CT part closure, retrenchments, stock & debtor impairments 32 DAT & DPI International: withdrawal from Africa, onerous leases, retrenchments, stock & debtor impairments 64 Heunis Steel, Hamiltons, Boutique Baths: impairments of investments 28 GDW: roof repairs & general 32 286 Less tax (31) Total 255 Segmental Review Rm 5
Overview So where are we now? 3 large wholly owned businesses: WHS - A low margin, high fixed cost business with good market position Incledon DPI - Strain on consumer due to economy - Negotiating power with suppliers & customers has been eroded & is now being strengthened - Low margin, high fixed cost business which lost market share in last 2 years - Still a strong brand - Government spending & skills drain - Has a good market position 3 large partly owned businesses: GDW - (49%) has stabilised with strong intervention from Lixil Japan Swan Plastics - (51%) a good profit earner Heunis Plastics - (49%) a good profit earner A few smaller businesses: DAT/DPI International Kitchen, Hamiltons & Ubuntu - Restructured & combined - Contributing Conclusion: Bleeding has stopped 6
Overview Business Model: To be the Master Distributor in targeted industry sectors Market characteristics: Disposable income & population distribution is wide Thus high cost of distribution to reach customers Competitive advantages: Dawn has 100% coverage of South African market - routine deliveries to all customers ( milk-run principle) including rest of Africa Break-bulk and JIT service - traditional carriers not geared for break bulk storage & distribution Barrier to entry already established 7
Overview Route to market LOCAL SUPPLIERS (summary only) MANUFACTURING through DAWN model to market DIRECT to market ~50% DIRECT ~50% TRADING CHANNELS: 1) INDEPENDENTS 2) BUYING GROUPS 3) CORPORATES 4) END USERS OWN IMPORTS 5) Various OEM s 8
Overview Unaudited Unaudited sults for results the six for months the 6 months ended ended 30 30 September 2015 2016 Building Segment (Rm) H1 F2017 % ch H1 F2016 Revenue 1 240.0-4% 1 295.1 PBIT (173.6) -703% 28.8 Core PBIT* (16.0) -156% 28.8 Core PBIT %* -1.3% 1.1% * Core numbers exclude R157.6m restructuring costs, impairments & write-downs in 6 months to Sept 2016 Infrastructure Segment (Rm) H1 F2017 % ch H1 F2016 Revenue 1 139.2-16% 1 350.0 PBIT (109.5) -289% 57.9 Core PBIT* (29.9) -152% 57.9 Core PBIT %* -2.6% 4.3% *Core numbers exclude R79.6m restructuring costs, impairments and write-downs in 6 months to Sept 2016 9
Overview Unaudited Unaudited sults for results the six for months the 6 months ended ended 30 30 September 2015 2016 Solutions Segment (Rm) H1 F2017 % ch H1 F2016 Revenue 304.0 8% 282.2 PBIT (10.4) -267% 6.2 Core PBIT* 6.9 12% 6.2 Core PBIT %* 2.3% 2.2% * Core numbers exclude R17.3m restructuring costs, impairments and write-downs in 6 months to Sept 2016 Head Office & consolidation (Rm) H1 F2017 % ch H1 F2016 PBIT (44.7) >100% (2.1) Core PBIT* (13.1) 374% (2.8) * Core numbers exclude R31.6m restructuring costs, impairments and write-downs in 6 months to Sept 2016 10
Overview Summarised income statement (Rm) H1 F2017 % ch H1 F2016 Unaudited Unaudited sults for results the six for months the 6 months ended ended 30 30 September 2015 2016 Revenue 2 402.8-10% 2 667.9 PBIT (338.1) -475% 90.2 Core PBIT* (52.1) -157% 90.9 Core PBIT%* -2.2% 3.4% * Core numbers exclude R286 million restructuring costs, impairments and write-downs in 6 months to Sept 2016 11
Financials 12
Financials Income statement analysis - Restatement Rm H1 F2016 Restatement H1 F2016 Reported change Restated^ Revenue 2 667.9-2 667.9 PBIT 93.2 (3.0) 90.2 PBIT % 3.5% 3.4% Net finance cost 15.7 (17.0) 32.7 Income from associates & joint ventures 24.2-24.2 Tax expense 22.2 0.8 21.3 Effective tax rate 28.6% 37.1% Minority interests 7.9-7.9 Attributable earnings 71.6 (19.2) 52.4 EPS 29.58 (7.9) 21.66 HEPS 29.83 (7.9) 21.91 ^ Restatements due to reportable irregularities identified after F2016 year end (operating lease smoothing, deferred profit & SWAN written PUT) 13
Financials Income statement analysis Rm H1 F2017 Change H1 F2016^ Revenue 2 402.8-10% 2 667.9 Core PBIT* (52.1) -157% 90.9 Core PBIT %* -2.2% 3.4% Core operating expenses increased by 2% Core expenses to revenue up from 21,5% to 22,8% due to greater reduction in sales * Core numbers exclude R286 million restructuring costs, impairments & write-downs in 6 months to Sept 2016 ^ Restated due to reportable irregularities identified after F2016 year end (operating lease smoothing, deferred profit & SWAN written PUT) 14
Financials Income statement analysis Rm H1 F2017 Change H1 F2016^ Revenue 2 402.8-10% 2 667.9 Core PBIT* (52.1) 90.9 Core PBIT %* -2.2% 3.4% Net finance cost 29.2 32.7 Income from associates & joint ventures (19.7) 24.2 Tax expense # (20.2) 21.3 Effective tax rate 5.5% 37.1% Minority interests 2.3 7.9 Attributable earnings - Core (114.0) -318% 52.4 Attributable earnings (369.1) -804% 52.4 EPS * (cps) (155.88) -820% 21.66 HEPS * (cps) (136.73) -724% 21.91 Core HEPS * (cps) (48.17) -319% 21.91 * Core numbers exclude R286 million restructuring costs, impairments & write-downs in 6 months to Sept 2016 # Tax impact due to losses not raised & expenses not deductible ^ Restated due to reportable irregularities identified after F2016 year end (operating lease smoothing, deferred profit & SWAN written PUT) 15
Financials Restructuring, impairments & write-downs H1 F2017 impact H1 F2017 (Rm) cps ATTRIBUTABLE LOSS 369.1 155.9 Net impairments & other HEPS add-backs - controlled entities 16.0 6.8 Net impairments & other HEPS add-backs - Associates & Joint Ventures 29.4 12.4 HEADLINE LOSS 323.7 136.7 Further write-down undertaken (not qualifying for HEPS add-back - controlled entities 209.7 88.6 CORE HEADLINE LOSS 114.0 89.0 16
Income statement analysis Financials Income Statement analysis Rm H1 F2017 Core Impairments & Write-downs H1 F2017 Reported Revenue 2 402.8-2 402.8 PBIT (52.1) 286.0 (338.1) PBIT % (2,2%) - (14,1%) Net finance cost (29.2) - (29.2) Income from associates & joint ventures (19.7) - (19.7) Tax expense (10.8) (31.0) 20.2 Effective tax rate % (13,3%) - 5,5% Minority interests (2.3) - (2.3) Attributable earnings (114.0) 255.0 (369.0) EPS (cps) (48.2) 107.7 (155.9) HEPS (cps) - - (136.7) 17
Cash flow Financials Cash flow (Rm) H1 F2017 H1 F2016 Opening cash balance 69.9 1.4 Cash generated from ops* (19.7) 130.5 Working capital changes 102.3 43.2 Net finance charges (23.5) (17.2) Tax Paid (9.5) (9.8) Investing activities (13.7) (64.7) Net financing activities & other (55.4) (131.1) Closing cash balance 50.4 (47.7) *EBITDA loss R20m 18
Closing working capital analysis Financials 25% 15% 5% -5% Working capital analysis 3.4 3.8 4.1 13% 12% 14*% 15% 5.1 4.4 4.6 4.8 5.0 18% 17% 16% 16% 4.7 11% Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Mar 15 Sep 15 Mar 16 Sep 16 Sep 16 Mar 16 Sep 15 Mar 15 Rbn 6.0 4.5 3.0 1.5 Comment on working capital days Net W.C. 39 59 57 62 Strong improvement Debtors 38 45 51 49 Reduction in overdues - Revenue (rolling 12 months) - RHS Working capital ratio - LHS Targeted mean of 15% - LHS Stock 54 71 69 82 R78m reduction in 6 months Creditors 53 57 63 69 Creditor funding increased; objective is for stock & creditor days to contra. 19
Financials Capital Expenditure Segment (Rm) Actual H1 F2017 Actual H1 F2016 Building 1.5 3.6 Infrastructure* 15.9 15.3 Solutions^ 15.6 18.6 Total 31.9 37.5 * Replacement capex in manufacturing ^ New ERP system of R11m in H1 F2016 20
Gearing Financials Gearing Rm 500 400 300 200 100 - Net interest-bearing debt (LHS) Net gearing % (RHS) 341 201 179 151 15.7% 13.0% 10.3% 21.9% Dec 13 Jun 13 Dec 12 Jun 12 508 33.4% Jun 14 66 158 142 3.2% 7.7% 4.4% Sep 15 Mar 15 Dec 14 312 308 30.5% 44.1% Sep 16 Mar 16 100% 80% 60% 40% 20% 0% GEARING Bank facilities currently being re-negotiated 21
Outlook Segmental Review 22
Outlook F2017 Difficult economic conditions Group restructured to current revenue levels December/January are loss making Plan to extract further cash from working capital Bank facilities to be geared to working capital requirements Reduce staff turnover and improve morale Further steps to be taken to improve operational performance MEDIUM TERM Improve operating profit margins in Trading and Manufacturing Eliminate remaining duplicated activities, products; introduce exclusive brands Continue to challenge central services costs Investments in non-core businesses and joint venture arrangements to be reviewed. Sales proceeds to be used to repay funding required for working capital Segmental Review 23
Disclaimer Certain statements in this presentation may be defined as forward looking statements within the meaning of the United States Securities legislation. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the company to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements may be identified by words such as expect, believe, anticipate, plan, estimate, intend, project, target, predict, outlook and words of similar meaning. Forward looking statements are not statements of fact but statements by the management of Dawn Limited based on its current estimates, projections, beliefs, assumptions and expectations regarding the group s future performance. No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements. The risks and uncertainties inherent in the forward-looking statements contained in this presentation include, but are not limited to: domestic and international business and market conditions; changes in the domestic or international regulatory and legislative environment in the countries in which the Group operates or intends to operate; changes to domestic and international operational, economic, political and social risks; changes to IFRS and the interpretations, applications and practices subject thereto as they apply to past, present and future periods; and the effects of both current and future litigation. The company undertakes no obligation to update publically or release any revisions to these forward-looking statements contained in this presentation and does not assume responsibility for any loss or damage whatsoever and howsoever arising as a result of the reliance of any party thereon, including, but not limited to, loss of earnings, profits, or consequential loss or damage. Segmental Review 24
For more information please contact: Stephen Connelly Chief Executive Officer Telephone: 011 323 0450 Email: stephen.connelly@dawnltd.co.za David Austin Chief Financial Officer Telephone: 011 323 0450 Email: david.austin@dawnltd.co.za Segmental Review www.dawnltd.co.za 25