DISTRIBUTION AND WAREHOUSING NETWORK LIMITED – Unaudited Interim Results For The Six Months Ended 30 September 2018

2018/12/07 17:32:00
SENS announcement for JSE listed company: DAW
                        

DAW 201812070068A
Unaudited Interim Results For The Six Months Ended 30 September 2018

DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
(‘DAWN’ or ‘the group’ or ‘the company’)
Alpha code: DAW
ISIN: ZAE000018834
E-mail: info@dawnltd.co.za

UNAUDITED INTERIM RESULTS
for the six months ended 30 September 2018

LETTER FROM EDWIN HEWITT TO ALL STAKEHOLDERS

Over the past 14 months I have continually brought to
stakeholders’ attention the risk that the adverse economic
environment imposes to the group’s turnaround and prospects, both
from a timing and implementation perspective. Since year-end,
economic conditions have further deteriorated, and it is
forecasted that the negative environment will prevail in the
current financial year. Accordingly, in response to the continued
decline in revenue as a consequence of the economic reality, the
management team devised a further large-scale cost reduction
plan, approved by the board of directors (‘board’), in an
endeavour to reposition the group for stability and recovery in
line with its three-year turnaround plan.

The revised response measures resulted in the retrenchment and
termination of employment of more than 700 employees and labour
broker staff across the group since the beginning of the
financial year. The terminations were as a result of a variety of
standard business reasons, but the largest portion of the
terminations was based on operational requirements and the trade
unions were engaged throughout the process.

The high fixed costs and legacy issues remain an extensive burden
on the group. We have continued to actively engage with
landlords, infrastructure and support service providers over the
period to re-engineer costs to more affordable levels. From a
lease perspective, further agreements have been entered into
terminating leases, sub-leasing unused properties and outsourcing
excess warehouse capacity. IT and support service agreements
were also renegotiated to lower levels with the support of the
relevant service providers. In addition, my management team has
continued to make progress with legacy issues such as the DPI
Plastics and Sangio Competition Commission legal matter which was
concluded in the group’s favour.

Throughout H1 F2019, the management team and the board have
continued to critically focus on liquidity management and
exploring funding alternatives which has consumed a substantial
portion of our time. The debtors-based funding facility of R140
million, provided by Absa Bank Limited, was successfully
implemented and the overdraft of R100 million has been repaid. We
have also actively engaged with credit insurers and suppliers to
ensure adequate limits were allocated to the company. The support
of these parties through a really challenging period is
appreciated.

In addition to the initiatives at a group level, DAWN has
continued implementing measures to refocus each subsidiary on its
core competencies, as well as actively leverage synergies between
the group’s subsidiaries, particularly its largest subsidiaries.

Wholesale Housing Supplies (‘WHS’), the main sanitaryware and
hardware trading and distribution business in the group, was
restructured further for improved accountability and processes
re-engineered for simplicity. A core focus was consolidation of
functions across the operating divisions.

However, in H1 F2019, WHS was once again severely impacted by
supply inconsistencies partially due to our largest supplier
performance and also due to inadequate trading facilities as a
result of the group’s challenged financial position. Access to
adequate trading facilities and creditor terms are fundamental to
the business model of WHS and therefore this limitation severely
impacted on the results of the group.

From a service delivery perspective, WHS has been successful in
significantly improving its performance to customers over the
last six months through the realisation of benefits from
previously implemented turnaround initiatives. DAWN Logistics has
substantially improved its on-time and in-full delivery
performance capability over the period. Inventory forward demand
planning has shown immense progress with the only remaining
limitations being the trading terms and financing facility
elements. It is believed that WHS will continue to reap further
benefits in terms of revenue and efficiencies as a result of this
improved platform.

Incledon, the group’s specialist water infrastructure trading and
solutions business, continued to focus on delivery in terms of
its turnaround strategy, yielding positive results. The business
has continued its focus on the mining, agriculture and
engineering sectors and its presence in the growth areas of
Bloemfontein, Polokwane, Rustenburg and Steelpoort. A core
priority has been improving the effectiveness of its imports in
order to yield improved margins. Incledon was negatively affected
by the seven-week ongoing strike in the plastics industry during
October to December 2018 which impacted on the availability of
PVC products, mainly pipe. The lack of access to funding for
stock imports in H1 F2019 also severely affected the results for
the six months, however I believe, with their current stock
levels, Incledon is poised for significant growth and
profitability.

My management team and the board focused extensively on DPI, the
group’s pipe manufacturing business, during the reporting period.
DPI’s fundamental decline in sales performance, high levels of
scrap and its prevailing high cost structure, driven to a large
extent by its very outdated and inefficient machinery, have been
major areas of concern. Furthermore, the cut-throat competitor
activity, drove extremely low margins in the reporting period.

The process of curtailing costs in DPI was started in 2017 with
the closure of the Cape Town manufacturing plant. This business
has been facing dire market and operating conditions as a result
of reduced government spending. Added to this, a crippling strike
action, lasting seven weeks so far (the strike is still ongoing
in the plastics industry), placed severe strain on the business
and the group. As an initial response to these conditions and in
an attempt to rescue the business, the DPI management reduced and
refocused its capacity towards its core capability being the
polyvinyl chloride (PVC) pipe and the building fittings market.
The high-density polyethylene (HDPE) plant, which operated in an
extremely competitive market, had to be closed during September
2018. DPI attempted to regain revenue by changing its route to
market strategy through a collaboration with WHS, which provided
a larger platform for the distribution of its products. Despite
these actions, the business continued to be in a substantial
loss-making position and consumed an unbearable level of the
group’s cash flow, placing the sustainability of the group as a
whole at risk. As a result of the financial position, and with
no other viable alternatives, management and the board decided to
proceed with a closure process. Accordingly, DPI is classified
as a discontinued operation and disclosures performed in terms of
IFRS 5 are shown in the enclosed results.

At the group level, management has continued to closely monitor
DAWN’s performance, taking further corrective measures over the
period, as required, in response to the group’s declining
financial and, specifically, its liquidity position. These
measures included exploring and obtaining additional funding via
trade financing, renegotiation of creditors terms, investigating
new revenue sources, enhancing the import strategy, renegotiation
of lease, infrastructure and support agreements, securing third
party logistics contracts to fill excess warehousing and
distribution capacity, enhanced consignment stock initiatives and
a general focus on a more demand-based, higher margin and better
service business model.

The above has positioned the group well for its turnaround but
the lack of access to capital and ongoing cash flow challenges
remain a significant threat to the group’s sustainability over
the interim period.

The cash received by the group through the rights issue and
proceeds from the sale of assets was used to repay the group’s
existing debt and cover the transaction costs leaving little
capital available to invest in the turnaround. Management has
engaged extensively with various levels of financiers to obtain
trade finance. Financiers have been hesitant to offer financing
facilities to DAWN until the turnaround has been manifested,
leaving the group with limited access to further financing
alternatives.

As a result, the board duly and comprehensively investigated the
options in light of the financial position of the group. These
included exploring options to sell the group as a whole,
disposing of entities in the group separately and, at a worst-
case scenario, commencing with business rescue proceedings. The
board’s objective was to ensure the best outcome collectively for
the key stakeholder groupings namely the group’s shareholders,
creditors, 1 250 employees as well as the 4 000 customers and 1
000 suppliers which rely on its continued existence.

The board had to consider the viability of implementing each of
the alternatives within the context of the forward-looking
solvency and liquidity position.

OFFER FOR THE ACQUISITION OF THE GROUP

Notwithstanding progress made with the turnaround strategy and
the creation of a platform from which growth can emanate, DAWN
continues to face liquidity constraints and, unless there is a
material turnaround in the company in the near future, it faces a
looming solvency risk.

As mentioned in previous communications, the core requirements
for a successful DAWN turnaround include:

– Revenue improvement, which is challenged by an overtraded
market and underlying depressed economy;
– Improved supplier agreements/terms, which could be optimised
through further relationship building;
– Access to capital/funding;
– Continued improvement of DAWN’s service levels (which has been
largely achieved);
– Ongoing operational efficiencies and optimisation (again this
has been largely achieved); and
– Further cost restructuring such as onerous leases and high IT
costs amongst others (significant progress has already been
made in this regard).

Against the background of having re-engineered the group for
future growth as well as an understanding of the key importance
of each of the above factors, DAWN received a firm offer from
Polanofield (Pty) Ltd to acquire the entire issued share capital
of DAWN by way of a scheme of arrangement for an aggregate cash
consideration of R5,8 million, as disclosed in more detail in the
SENS announcement published on 3 December 2018. Polanofield’s
share capital is owned by Derek Tod and Luis Baeta. Derek and
Luis have extensive experience and expertise in the wholesale
trading environment and offer a relationship differential that
can strategically take DAWN forward from the base that has been
created by DAWN’s current management. Through long-standing
relationships in the industry, these individuals are well
positioned to negotiate more favourable supply agreements and tap
into solid customer relationships stretching over more than 25
years. This could increase sales volumes and improve related
discounts and rebates.

It was concluded by the board that the offer would facilitate the
required revenue volume growth to cover the high cost base as
well as further improvements to reduce the fixed cost base. It
provides a reasonable prospect of success which cannot be
achieved thought the current structure or through implementing
any of the options that the board has previously considered as
viable alternatives. This option also has the support of DAWN’s
major shareholders through irrevocable undertakings and letters
of support. The company’s bankers, credit insurers and landlords
have also shown their continued support throughout the transition
process.

RESULTS

The results for the half year have been split between continuing
and discontinued operations. Continuing operations, contributing
an attributable loss of R116 million, are mainly attributable to
WHS, head office (no recovery of costs) and Incledon (to a lesser
extent). The other entities performed either at a profit or
breakeven. The discontinued operations of DPI contributed a loss
of R116 million. The group results included R65 million of once-
off costs comprising R11 million in continuing operations,
including retrenchments in WHS and impairments of College of
Production Technology. The balance of R54 million is in
discontinued operations and include a reduction in inventory to
realise stock for cash as well as scrap in excess of the norm
generated, retrenchments, impairments of plant, lease
settlements, site restorations and onerous lease provisions.

The cost reduction resulting from the retrenchment of staff in
WHS will impact in the second half of the year from October 2018
and together with the proposed delisting, savings in head office
costs as well as the proposed reduction in Germiston leases will
save the group in excess of R80 million per year. The group’s
largest property will have a 30% reduction in rent, effective 1
March 2019, which will have a significant impact on the group’s
fixed cost base.

In view of the results disclosed later in this document, the
current net asset value of 12,73 cents per share could further
reduce due to the cyclical nature of DAWN’s business with
December and January being historically slow months.

Taking into consideration the abovementioned, the DAWN board of
directors is of the opinion that the offer is the most suitable
option for the group in the collective interests of DAWN’s
stakeholders. As a result of its reduced size, DAWN is no longer
deemed suitable for listing, combined with the burden of listing
fees and the associated costs of being a listed entity
outweighing any benefits that being listed have, or could bring,
in the foreseeable future. On implementation of the scheme, the
DAWN shares will therefore be delisted from the main board of the
Johannesburg Stock Exchange.

As outlined above, we have been actively addressing the group’s
challenges through appropriate remedial actions. Bearing in mind
that this was only year one of a three-year turnaround, the group
has worked actively to position DAWN for the next phase of
turnaround. For these actions, I thank my management team and all
my colleagues at DAWN for their dedication to resiliently and
tirelessly address the challenges we faced and for their time
invested in the future of DAWN. I thank our bank, Absa, for their
support during difficult times. Our creditors’ and credit
insurers’ backing are greatly valued. I also thank the chairman
and board for their expertise and sound advice as well as our
shareholders for their support.
Regards

Edwin Hewitt
Chief executive officer
7 December 2018

RESULTS COMMENTARY
for the six months ended 30 September 2018

INCOME STATEMENT

Revenue for the six months to 30 September 2018 declined by 21%
to R1,4 billion (H1 F2018: R1,7 billion). The decline was due to
continued subdued economic conditions and a competitive market in
H1 F2019. The business was also negatively affected by supply
disruptions due to lack of liquidity and reduced creditor
funding.

As a results of the decline in revenue, the operational loss
(before impairments and derecognitions) worsened from R27,1
million to R109,5 million compared to H1 2018 and R168,0 million
at the 2018 year-end.

Against this, the group’s continued focus on cost control, which
commenced in 2016, resulted in a pleasing decline in operating
expenses. It should be noted that the current year operating
expenses included the retrenchment and restructuring costs.
However, due to the reduction in revenue levels, expenses as a
proportion of revenue increased from 24,2% in H1 F2018 to 30,4%
in H1 F2019. The benefit of lower costs post retrenchments is
expected to materialise in the third quarter of the financial
year.

Impairments and derecognitions amounted to a net R0,8 million,
comprising impairments of R4,4 million and profit from
derecognitions of R5,3 million.

Income from associates and joint ventures reduced from a profit
of R1,7 million in H1 F2018 to a profit of R0,09 million in H1
F2019.

Most businesses are not in a tax expense position. The group’s
effective tax rate, therefore, moved from 31,1% in H1 F2018 to –
2,8% in H1 F2019.

The loss from discontinued operations, relating to DPI Plastics,
amounted to R115,9 million in H1 F2019 compared to R65,2 million
in H1 F2018 which included a loss of R62,0 million for GDW and
R3,2 million for DPI Plastics.

Non-controlling interest expense included Ubuntu Plastics of R0,3
million in H1 F2019 compared to R6,4 million in H1 F2018. The
prior year comparative period included Swan Plastics, which has
been disposed of in the prior year, as well as Hamilton’s
Brushware, where the group acquired the non-controlling interest.

As a result of sustained losses, the group’s attributable loss
worsened by 109% to R232,5 million compared to R111,4 million in
H1 F2018.

STATEMENT OF FINANCIAL POSITION

Property, plant and equipment and intangible assets (mainly
computer software) reduced from R276,3 million to R60,3 million
due to impairments at the end of F2018 and the reclassification
of property, plant and equipment of DPI Plastics to assets of
disposal group classified as held-for-sale.

Net working capital days at the reporting date were 40 days and
comprised debtor days of 39 days and inventory days of 57 days,
offset by creditor days of 56 days. Despite challenging economic
conditions, debtors days improved following an increased focus on
collection and the additional focus brought about by the invoice
discounting facility. The inventory composition is healthier and
more current than in H1 F2018. Extended terms were arranged with
some of the major creditors leading to an increase in creditor
days.

Accounts receivable days remained at 39 days despite a tough
economy. Creditor days reflect the current liquidity position.
Inventory for the group including the disposal group reduced by
R63 million compared to H1 F2018.

The group’s net debt reduced from R169,3 million in H1 F2018 to
R77,3 million at the reporting date The H1 F2018 results recorded
debt facilities of R200 million, which reduced to R140 million in
H1 F2019.

Net gearing deteriorated from 26,5% at the end of H1 F2018 to
94,7% at the end of H1 F2019, due to losses which reduced the
equity value to R81,5 million from R638,6 million in H1 2018.

The group’s net asset value decreased by 87,3% to 12,73 cents per
share at 30 September 2018 compared to 100,27 cents per share at
30 September 2017. Tangible net asset value decreased by 85,8% to
12,73 cents per share at 30 September 2018 compared to 89,88
cents per share at 30 September 2017.

STATEMENT OF CASH FLOWS

Cash utilised in operations was R43,8 million in H1 F2019
compared to an amount of R75,4 million utilised in H1 2018. This
was as a result of trading losses, where cash utilised in
operating activities before working capital changes was R210,7
million compared to R8,7 million in the previous comparative
period. Inflows from working capital amounted to R166,9 million.
Net finance charges and taxation paid amounted to outflows of
R11,4 million, giving rise to a cash utilisation from operating
activities of R55,2 million. Investing and net finance activities
resulted in an inflow of R82,1 million, mainly relating to the
overdraft facility which was included in cash/overdraft in H1
F2018. The overdraft was exchanged for a new debtors financing
facility now classified under short-term borrowings. Investing
activities include the proceeds from the disposal of Namibia
Plastic Converters of R24,3 million and an outflow from capital
expenditure of R24,5 million generated out of working capital.

SIGNIFICANT CORPORATE ACTIVITY

Namibia Plastic Converters Proprietary Limited
During the reporting period, the group disposed of the assets
(mainly plant and equipment) of Namibia Plastic Converters
Proprietary Limited (NPC) and its wholly-owned subsidiary,
Franmore Investments Proprietary Limited, for a consideration of
R24,3 million, effective May 2018. The Namibian Competition
Commission approved the proposed transaction on 17 April 2018. A
gain of R5,3 million was realised on the transaction.

COMPETITION COMMISSION MATTER

DAWN appealed the Competition Tribunal’s decision handed down in
respect of an allegation of market allocation arrangement
affecting DAWN Consolidated Holdings, DPI Plastics and Sangio
Pipe. On 4 May 2018, judgement was handed down in the Competition
Appeal Court. The court upheld DAWN’s appeal and set aside the
decision of the Tribunal, dismissing the complaint with costs. On
25 May 2018, DAWN received notification that the Competition
Commission had applied to the Constitutional Court for leave to
appeal against the decision of the Competition Appeal Court. In
an order dated 29 October 2018, the Constitutional Court
dismissed the Competition Commission’s application for leave to
appeal against the decision of the Competition Appeal Court, with
costs.

RECLASSIFICATIONS

Reclassifications were required in respect of the disposal group,
Grohe DAWN Watertech, as well as in respect of DPI Plastics, the
discontinued operation, both disclosed as assets and liabilities
of disposal group held-for-sale.

PROSPECTS

As outlined in the CEO’s letter, the board and management remain
committed to ensuring a future for the group.

Shareholders are referred to the announcement published on SENS
on 3 December 2018, where they were advised that Polanofield
(Pty) Ltd made a firm intention offer to acquire all of the
issued shares of DAWN. The board believes that the offer received
from Polanofield provides a strategic differentiator which can
bring solvency, increased revenue and volume growth to cover its
cost base and further improvements to reduce the fixed cost base.

The offer has the support of major shareholders through
irrevocable undertakings and letters of support. The company’s
bankers, credit insurers and landlords have also shown their
continued support.

The salient dates pertaining to the scheme will be released on
SENS and published in the press at the time of distribution of
the circular, which is to be distributed to DAWN shareholders on
or about 20 December 2018.

The going concern assessment is included in this condensed
consolidated interim financial results.

Any forward-looking statement has not been reviewed or reported
on by the company’s auditors.

CHANGES TO THE BOARD OF DIRECTORS

During the period under review:

– Steve Naudé was appointed as an independent non-executive
director of the board and member of the audit and risk on
1 August 2018.
– Ms René Roos, executive director and chief of staff,
participated in a voluntary retrenchment process being
undertaken by the company. Her resignation from the board came
into effect on 31 October 2018.
– As part of the head office changes, Chris Booyens, the
financial director of DAWN, retired from the company on
31 August 2018.
– Hanré Bester, the group financial manager and previous acting
chief financial officer, was appointed as financial director
with effect from 1 September 2018.

After the reporting date:

– Charles Boles, the lead independent non-executive director,
resigned from the board with effect from 22 October 2018.
– Dinga Mncube was appointed as lead independent non-executive
director on 13 November 2018.
– Martin Mota was appointed as independent non-executive
director with effect from 13 November 2018. He resigned from
the board with effect from 15 November 2018.
– Ms Nthabeleng Likotsi was appointed as an independent non-
executive director of DAWN effective 27 November 2018.
– Hanré Bester, the DAWN financial director has resigned with
effect from 31 January 2019, but will stay on as a non-
executive director until 28 February 2019.

EVENTS AFTER THE REPORTING DATE
Refer to note 5.

DIVIDEND
No dividend has been proposed or declared.

For and on behalf of the board of directors

Theunis de Bruyn Edwin Hewitt
Non-executive chairman Chief executive officer

Hanré Bester
Financial director

Germiston
7 December 2018

CONDENSED consolidated INCOME STATEMENT
for the six months ended 30 September 2018
Restated* Restated*
Unaudited Unaudited Unaudited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2018 2017 2018
R’000 R’000 R’000
Continued operations
Revenue 1 359 176 1 717 396 3 087 210
Cost of sales (1 055 760) (1 329 122) (2 411 365)
Gross profit 303 416 388 274 675 845
Net operating expenses
before derecognition
of investments
and impairments (412 929) (415 349) (843 774)
Operating loss before
derecognition of
investments and
impairments (109 513) (27 075) (167 929)
Net gain on
derecognition of
subsidiaries and
associates 5 335 12 615 25 178
Impairments (4 460) (1 370) (54 224)
Operating loss (108 638) (15 830) (196 975)
Finance income 1 273 1 395 3 118
Finance expense (12 513) (17 138) (32 748)
Loss after net
financing costs (119 878) (31 573) (226 605)
Share of profit in
investments accounted
for using the equity
method 90 1 669 5 488
Loss before taxation (119 788) (29 904) (221 117)
Income tax (income)/expense 3 467 (9 847) (10 816)
Loss from continuing
operations (116 321) (39 751) (231 933)
Loss from discontinued
operations (115 873) (65 229) (194 529)
Loss for the period (232 194) (104 980) (426 462)
Loss attributable to: –
Owners of the parent (232 522) (111 386) (431 967)
Non-controlling interest 328 6 406 5 505
Loss for the period (232 194) (104 980) (426 462)
Loss per share (cents) (39,63) (19,45) (74,51)
Loss per share from
continuing operations (19,88) (8,06) (40,95)
Loss per share from
discontinued operations (19,75) (11,39) (33,56)
Diluted loss per
share (cents) (39,63) (19,45) (74,51)
Loss per share from
continuing operations (19,88) (8,06) (40,95)
Loss per share from
discontinued operations (19,75) (11,39) (33,56)
* Restatement relates to the reclassification of DPI Plastics as
an asset held-for-sale (refer note 2).

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2018
Restated* Restated*
Unaudited Unaudited Unaudited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2018 2017 2018
R’000 R’000 R’000
Loss for the period (232 194) (104 980) (426 462)
Other comprehensive income:
Items that will not be
reclassified to profit
or loss:
– Effects of retirement
benefit obligations – – 82
– Taxation related
to components – – (23)
– – 59
Items that may be
subsequently
reclassified to profit
or loss:
– Exchange differences
recycled through the
income statement – (2 479) (2 479)
– Exchange differences
on translating
foreign operations 772 (1 299) (1 229)
– Cash flow hedging
reserve – 165 (1 084)
– Tax-related components (93) (46) 320
679 (3 659) (4 472)
Total other comprehensive
(loss)/income 679 (3 659) (4 413)
Total comprehensive loss (231 515) (108 639) (430 875)
Total comprehensive
(loss)/income
attributable to:
Owners of the parent (231 843) (115 045) (436 380)
Non-controlling interest 328 6 406 5 505
(231 515) (108 639) (430 875)
Total comprehensive
(loss)/income
attributable to equity
holders arising from:
Continuing operations (115 642) (43 409) (236 347)
Discontinued operations (115 873) (65 230) (194 528)
(231 515) (108 639) (430 875)
Included above:
Depreciation and
amortisation 9 281 25 256 46 948
Operating lease rentals 39 725 42 849 81 724
* Restatement relates to the reclassification of DPI Plastics as
an asset held-for-sale (refer note 2).

CONDENSED consolidated STATEMENT OF FINANCIAL POSITION
as at 30 September 2018
Unaudited Unaudited Unaudited
30 September 30 September 31 March
2018 2017 2018
R’000 R’000 R’000
ASSETS
Non-current assets 62 154 346 054 85 952
Property, plant and
equipment 60 381 215 368 79 103
Intangible assets – 60 952 –
Investments in
associates and joint
ventures 1 000 5 982 5 756
Deferred tax assets 773 63 752 1 093
Current assets 835 004 1 282 292 1 107 933
Inventories 375 504 518 805 478 040
Trade and other
receivables 419 219 656 998 515 145
Cash and cash equivalents 37 511 98 335 113 960
Derivative financial
instruments 164 1 472 –
Current tax assets 2 606 6 682 788
Assets of disposal group
classified as
held-for-sale 147 380 271 328 28 380
Total assets 1 044 538 1 899 674 1 222 265
EQUITY AND LIABILITIES
Equity
Capital and reserves 81 550 638 609 313 065
Equity attributable to
equity holders of the
company 74 706 588 344 306 556
Non-controlling interest 6 844 50 265 6 509
Non-current liabilities 119 875 282 898 148 950
Borrowings 10 979 53 976 23 768
Derivative financial
instruments – 72 217 –
Deferred profit 20 761 26 087 23 422
Deferred tax liabilities 2 502 19 803 2 543
Retirement benefit
obligation – 5 066 4 895
Share-based payment
liabilities – 6 298 –
Operating lease
liabilities 85 633 99 451 94 322
Current liabilities 679 975 978 167 754 554
Trade and other payables 540 542 739 762 608 403
Borrowings 107 444 128 213 25 010
Operating lease
liabilities 11 182 7 503 9 606
Derivative financial
instruments 14 107 192 4 223
Bank overdraft – 90 321 94 342
Deferred profit 5 327 5 327 5 327
Current tax liabilities 1 373 6 849 7 643
Liabilities of disposal
group classified as
held-for-sale 163 138 – 5 696
Total liabilities 962 988 1 261 065 909 200
Total equity and
liabilities 1 044 538 1 899 674 1 222 265

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2018 2017 2018
R’000 R’000 R’000
Balance at beginning
of the period 313 065 423 122 394 676
Total loss for the period (232 194) (104 980) (426 462)
Other comprehensive
profit/(loss) 679 (3 659) (4 413)
Rights issue proceeds – 338 615 338 615
Changes in ownership
interest – control
not lost – (3 455) –
Transactions with
non-controlling interest – (4 672) (6 000)
Share-based payment charge
and vesting of options – 1 786 (2 994)
Treasury shares acquired
and delivered – (8 148) (8 148)
Put option released through
sale of Swan Plastics – – 72 217
Derecognition through
disposal of subsidiaries – – (44 420)
Dividends paid to
non-controlling interest
holders – – (6)
Balance at end of period 81 550 638 609 313 065

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 September 2018
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
2018 2017 2018
R’000 R’000 R’000
Cash flows from
operating activities
Cash utilised in
operations (43 831) (75 390) (265 361)
Finance income received 1 502 1 563 3 230
Finance expense paid (10 439) (25 439) (43 461)
Income tax paid (2 447) (8 694) (15 393)
Net cash utilised in
operating activities (55 215) (107 960) (320 985)
Cash flows from
investing activities
Additions to property,
plant and equipment (23 685) (914) (20 736)
Additions and development
of intangible assets – (2 009) (2 975)
Proceeds on disposal of
property, plant and
equipment 344 7 641 11 429
Proceeds on disposal of
interest in associate
– Fibrex – 10 456 10 456
Dividends received from
associates/joint ventures
– College of Production
Technology 329 – 600
Proceeds from disposal of
investment in Namibia
Plastic converters 24 361 – –
Proceeds from disposal
of investment in
Boutique Baths – 3 000 3 000
Proceeds from disposal
of investment in
Swan Plastics – – 35 000
Proceeds from disposal
of Grohe DAWN Watertech – – 324 500
Net cash generated by
investing activities 1 349 18 174 361 274
Cash flows from
financing activities
Proceeds from borrowings 95 309 – –
Proceeds from rights offer – 358 130 358 130
Costs associated with
rights offer – (19 514) (19 514)
Repayment of bridging
finance facility
– Investec – (200 000) (200 000)
Repayment of borrowings (5 712) (4 734) (4 578)
Repayment of Absa facility – (75 000) (175 000)
Repayment of trade
finance facilities – (31 958) (31 958)
Instalment sale payments (859) (6 605) (10 469)
Finance lease payments (8 003) (16 104) (15 163)
Dividends paid to
non-controlling interest
holders – – (6)
Treasury shares acquired – (8 148) (8 148)
Acquisition of
non-controlling interest – (6 000) (6 000)
Net cash generated from/
(utilised in) financing
activities 80 735 (9 933) (112 706)
Total cash movement for
the period 26 869 (99 719) (72 417)
Translation effects on
foreign cash and cash
equivalents balances (354) (960) (195)
Cash and cash equivalents
derecognised on disposal
of subsidiaries – – (16 463)
Cash and cash equivalents
derecognised in
held-for-sale group (8 622) – –
Cash and cash equivalents
at beginning of the period 19 618 108 693 108 693
Cash and cash equivalents
at end of the period 37 511 8 014 19 618

ADDITIONAL DISCLOSURE
Unaudited Unaudited Audited
6 months 6 months 12 months
ended ended ended
30 September 30 September 31 March
% 2018 2017 2018
change R’000 R’000 R’000

DETERMINATION OF
HEADLINE EARNINGS
Attributable
earnings (232 522) (111 386) (431 967)
Adjustment for
the after-tax
and non-
controlling
interest effect
of:
Net profit on
disposal of
property, plant
and equipment (136) (3 399) (7 433)
Impairment of
intangible assets – – 50 527
Impairment of
property, plant
and equipment 6 101 3 349 81 891
Impairment of
available-for-
sale assets – 43 961 –
Impairment of
other assets –
Investment in
College of
Production
Technology 4 517 – –
Impairment of
other assets 2 143 1 377 –
Loss from
disposal of
discontinued
operation – – 44 206
Tax effect on
disposal of
property, plant
and equipment
and impairment
of intangible
assets (trademarks) 19 64 (34)
Non-controlling
interest 20 34 58
Net profit on
derecognition of
previously held
interest (5 335) (12 615) (25 178)
Headline earnings (225 193) (78 615) (287 930)
Statistics
Number of
ordinary
shares (’000)
– in issue 600 372 600 372 600 372
– held in treasury (13 629) (13 629) (13 629)
Number of shares
for net asset
value calcu-
lation (’000) 586 743 586 743 586 743
Weighted average
number of
shares (’000)
– for earnings
per share 586 743 572 713 579 709
– for diluted
earnings per
share 586 743 572 713 579 709
Earnings per
share (cents) (104) (39,63) (19,45) (74,51)
Headline earnings
per share
(cents) (180) (38,38) (13,73) (49,67)
Diluted earnings
per share
(cents) (104) (39,63) (19,45) (74,51)
Diluted headline
earnings per
share (cents) (180) (38,38) (13,73) (49,67)
Operating
profit (%) (7,99) (0,92) (6,38)

Unaudited Unaudited Audited
30 September 30 September 31 March
% 2018 2017 2018
change R’000 R’000 R’000

FUTURE
COMMITMENTS
Capital
commitments 3 562 6 940 15 468
Operating leases 464 608 543 766 539 574
Net cash
(including
discontinued
operations) 46 133 8 014 19 618
Net debt
(including
discontinued
operations) (77 253) (169 335) (24 404)
Value per share
Asset value
per share
– net asset
value (cents) (87) 12,73 100,27 52,88
– net tangible
asset value
(cents) (86) 12,73 89,88 52,88
– market price
(cents) 9,00 112,00 78,00
Market
capitalisation
(R’000) 54 034 672 417 468 291
Financial gearing
ratio (%) ^ 94,7 26,50 7,80
Current asset
ratio (times) 1,2 1,3 1,5
^ Includes cash and cash equivalents

CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
for the six months ended 30 September 2018

The operating segments are based on reports reviewed by the
executive committee who makes the strategic decision of the
group, and who is therefore the chief operating decision-making
body of the group.

6 months – 30 September 2018 (Unaudited)
Head
office
and other
recon-
Manu- ciling
Trading facturing items(1) Total
R’000 R’000 R’000 R’000
Revenue 1 301 338 380 501 (86 454) 1 595 385
Depreciation
and amorti-
sation (6 880) (1 888) (515) (9 283)
Operating
(loss)/profit
before impair-
ments and
derecognition
and re-recog-
nition of
investments (71 247) (115 274) (30 735) (217 256)
Impairments
and
derecognition – (2 966) (4 460) (7 426)
Operating loss
after impair-
ments and
derecognitions
and re-recog-
nition of
investments (71 247) (118 240) (35 195) (224 682)
Net finance
(expense)/
income (7 507) (5 397) 1 835 (11 069)
Share of profit
from associates
and joint
ventures – – 90 90
Tax expense/
(income) (156) (290) 3 913 3 467
Net loss after
tax from
continuing
operations (78 910) (123 927) (29 357) (232 194)
Net loss after
tax from
discontinued
operations – (115 873) 115 873 –
Net loss after
tax (78 910) (239 800) 86 516 (232 194)
Assets 753 053 223 689 67 796 1 044 538
Liabilities 757 637 305 213 (99 862) 962 988
Capital
expendi-
ture(2) 5 390 19 082 29 24 501

Discon-
tinued
opera-
tions Total
R’000 R’000
Revenue (236 209) 1 359 176
Depreciation and amortisation 1 017 (8 266)
Operating (loss)/profit before
impairments and derecognition and
re-recognition of investments 107 743 (109 513)
Impairments and derecognition 8 301 875
Operating loss after impairments and
derecognitions and re-recognition of
investments 116 044 (108 638)
Net finance (expense)/income (171) (11 240)
Share of profit from associates and
joint ventures – 90
Tax expense/(income) – 3 467
Net loss after tax from continuing
operations 115 873 (116 321)
Net loss after tax from discontinued
operations (115 873) (115 873)
Net loss after tax – (232 194)
Assets (147 380) 897 158
Liabilities (163 138) 799 850
Capital expenditure(2) (17 707) 6 794

(1) Other reconciling items consist of corporate and
consolidation adjustments. These predominantly include
elimination of intergroup sales, profits, losses and
intergroup receivables and payables and other unallocated
assets and liabilities contained within the vertically
integrated group. Head office and other reconciling items is
not considered to be an operating segment.
(2) Includes expenditure on property, plant and equipment and
intangibles.

6 months – 30 September 2017 (Unaudited)
Head
office
and other
recon-
Manu- ciling
Trading facturing items(1) Total
R’000 R’000 R’000 R’000
Revenue 1 507 938 622 179 (202 492) 1 927 625
Depreciation
and amorti-
sation (8 408) (12 758) (4 090) (25 256)
Operating loss
before
impairments
and derecog-
nition and
re-recognition
of investments (5 640) (64 996) (18 111) (88 747)
Impairments
and
derecognition – 8 216 (320) 7 896
Operating loss
after impair-
ments and
derecognitions
and re-recog-
nition of
investments (5 640) (56 780) (18 431) (80 851)
Net finance
(expense)/
income (23 958) (13 643) 21 703 (15 898)
Share of
profit from
associates and
joint ventures – 1 376 293 1 669
Tax expense/
(income) (2 259) (3 918) (3 733) (9 910)
Net loss after
tax from
continuing
operations (31 857) (72 955) (168) (104 980)
Net loss after
tax from
discontinued
operations – 65 229 (65 229) –
Net loss
after tax (31 857) (7 726) (65 397) (104 980)
Assets 1 159 551 88 771 651 352 1 899 674
Liabilities 1 214 727 569 279 (522 941) 1 261 065
Capital
expendi-
ture(2) 8 372 13 100 157 21 629

Discon-
tinued
opera-
tions Total
R’000 R’000
Revenue (210 229) 1 717 396
Depreciation and amortisation – (25 256)
Operating loss before impairments and
derecognition and re-recognition of
investments 61 672 (27 075)
Impairments and derecognition 3 349 11 245
Operating loss after impairments and
derecognitions and re-recognition of
investments 65 021 (15 830)
Net finance (expense)/income 155 (15 743)
Share of profit from associates and
joint ventures – 1 669
Tax expense/(income) 53 (9 857)
Net loss after tax from continuing
operations 65 229 (39 751)
Net loss after tax from discontinued
operations (65 229) (65 229)
Net loss after tax – (104 980)
Assets – 1 899 674
Liabilities – 1 261 065
Capital expenditure(2) – 21 629

(1) Other reconciling items consist of corporate and
consolidation adjustments. These predominantly include
elimination of intergroup sales, profits, losses and
intergroup receivables and payables and other unallocated
assets and liabilities contained within the vertically
integrated group. Head office and other reconciling items is
not considered to be an operating segment.
(2) Includes expenditure on property, plant and equipment and
intangibles.

12 months ended 31 March 2018 (Audited)
Head
office
and other
recon-
Manu- ciling
Trading facturing items(1) Total
R’000 R’000 R’000 R’000
Revenue 2 799 482 977 163 (298 019) 3 478 626
Depreciation
and amorti-
sation (16 060) (22 693) (8 196) (46 949)
Operating loss
before
impairments
and derecog-
nition and
re-recognition
of
investments (97 418) (86 189) (37 069) (220 676)
Impairments
and derecog-
nition (2 720) (70 333) (34 187) (107 240)
Operating loss
after
impairments
and derecog-
nitions and
re-recognition
of
investments (100 138) (156 522) (71 256) (327 916)
Net finance
(expense)/
income (50 658) (24 751) 44 851 (30 558)
Share of
(losses)/
profit from
associates
and joint
ventures – 4 822 666 5 488
Tax expense/
(income) (69 524) (67 010) 63 058 (73 476)
Net loss
after tax
from
continuing
operations (220 320) (243 461) 37 319 (426 462)
Net loss
after tax
from discon-
tinued
operations – 194 529 (194 529) –
Net loss
after tax (220 320) 48 932 (157 210) (426 462)
Assets 809 371 292 701 120 194 1 222 266
Liabilities 733 119 251 037 (74 957) 909 199
Capital expen-
diture(2) 10 135 21 165 326 31 626

Discon-
tinued
opera-
tions Total
R’000 R’000
Revenue (391 416) 3 087 210
Depreciation and amortisation 15 040 (31 909)
Operating loss before impairments and
derecognition and re-recognition of
investments 52 747 (167 929)
Impairments and derecognition 78 194 (29 046)
Operating loss after impairments and
derecognitions and re-recognition of
investments 130 941 (196 975)
Net finance (expense)/income 928 (29 630)
Share of (losses)/profit from associates
and joint ventures – 5 488
Tax expense/(income) 62 660 (10 816)
Net loss after tax from continuing
operations 194 529 (231 933)
Net loss after tax from discontinued
operations (194 529) (194 529)
Net loss after tax – (426 462)
Assets – 1 222 266
Liabilities – 909 199
Capital expenditure(2) – 31 626

(1) Other reconciling items consist of corporate and
consolidation adjustments. These predominantly include
elimination of intergroup sales, profits, losses and
intergroup receivables and payables and other unallocated
assets and liabilities contained within the vertically
integrated group. Head office and other reconciling items is
not considered to be an operating segment.
(2) Includes expenditure on property, plant and equipment and
intangibles.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PREPARATION
These unaudited interim condensed consolidated financial
statements for the six months ended 30 September 2018 was
approved by the board on 4 December 2018.

The interim condensed consolidated financial statements are
prepared in accordance with the requirements of the JSE
Limited’s (JSE) requirements for interim financial statements
and the requirements of the Companies Act applicable to
interim financial statements. The JSE requires interim
financial statements to be prepared in accordance with the
framework concepts, the measurement and recognition
requirements of International Financial Reporting Standards
(IFRS) as well as the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Reporting
Standards Council and must also, as a minimum, contain the
information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the
interim condensed consolidated financial statements are in
terms of IFRS and are consistent with the accounting policies
applied in the preparation of the consolidated annual
financial statements for the year ended 31 March 2018.

The preparation of the interim condensed consolidated
financial statements by Tintswalo Mohlakoana (CA(SA)), group
financial accountant, has been supervised by the financial
director, Hanré Bester (CA(SA)).

The directors take full responsibility for the preparation of
the interim condensed consolidated financial statements.

GOING CONCERN ASSESSMENT

In determining the appropriate basis of preparation of the
interim financial statements, the directors are required to
consider whether the group can continue to operate as a going
concern for the foreseeable future, which is for the 12 months
following the date on which the interim financial statements
are signed.

DAWN posted losses for the six months ended 30 September 2017
and for the year ended 31 March 2018 of R111,4 million and
R432,0 million respectively, and for the period ended
30 September 2018, DAWN reported an attributable loss of
R232,5 million.

Management has performed an assessment of DAWN’s ability to
continue as a going concern.

In this regard –

(1) Management prepared cash flows for each of the
subsidiaries and the corporate head office. These were
subjected to sensitivity tests and included the estimated
intra-month peak funding requirements. The cash flow
forecasts were compared to available facilities.

(2) The board considered the business’ ability to meet its
financial obligations as and when they fall due for the
12 months following the approval of the interim financial
statements. This analysis considered –

a. the current challenging market conditions, which are
negatively affecting the performance of the DAWN
group;

b. the ability of management’s turnaround plan to be
executed in the required manner and timing, including
the realisation of further cost reductions and
optimisation of working capital;

c. available options for the further disposal of
investments and other assets; and

d. alternative strategic options including the injection
of capital by financiers and investors.

Whilst management has relentlessly executed its turnaround
plans and aggressively reduced costs, including large scale
retrenchments with a resultant positive cash flow impact, it
remains exposed to subdued market conditions and a high fixed
and legacy cost structure which is not aligned to current
activity and revenue levels. The resultant losses have
impacted the group’s solvency negatively.

Liquidity was impacted positively by the invoice discounting
facility as well as support from creditors and suppliers
through the reported period. Liquidity constraints, however,
continue to persist due to inadequate capital funding, and
reduced negotiating power as a result thereof. Subsequent to
year-end, a further R25 million was made available through the
existing invoice discounting facility (see Events after the
reporting period note).

Other strategic options, such as disposal of investments,
require time and liquidity to implement successfully and the
board is of the view that this cannot be realised timeously
with the remaining solvency and liquidity levels.

There is insufficient time and capital available to fully
realise the benefits of management’s turnaround plans in the
context of a slow economic recovery or a further deterioration
in the economic outlook of South Africa.

The factors outlined above thus present a material risk to
DAWN remaining as a going concern.

Management refers to the offer by Polanofield Proprietary
Limited to acquire all of the issued shares of DAWN pursuant
to a scheme of arrangement (‘Offer’). On the basis that
management views the Offer to be able to be successfully
implemented timeously in accordance with its terms (as a
result of minimal conditions other than regulatory conditions
and the provision of a bridge), management is of the view that
the resultant business post implementation of the Offer, with
its enhanced business plan as developed by the offeror, will
present a value-enhancing option for all stakeholders and one
which preserves the going concern nature of the business for
the benefit of the group’s employees, suppliers and customers.

As a condition to the posting of the circular in the Offer, a
bridge of R25 million was required. Absa provided a facility
of R25 million in the context of the Offer (see Events after
the reporting period). The bridge is intended to cover
liquidity constraints until the implementation date of the
Offer. In addition, it is believed that a delisting from the
Johannesburg Stock Exchange will benefit DAWN both from a
cost-saving and operational focus perspective.

At 30 September 2018, DAWN’s assets, fairly valued, exceeded
its liabilities, fairly valued. The forecast to December 2019
also projects that the group will be solvent, only if the
Offer is implemented on the basis of the enhanced business
plan being met. The benefits of the Offer include an enhanced
revenue capability as a result of improved trading due to
supply agreements being implemented with improved terms or
improved volumes, further reduced costs and capital
investment.

Accordingly, based on the assumptions used in the forecasts,
the Offer being timeously implemented and the enhanced
business plan being achieved whilst the funding facilities
remain intact, the directors are reasonably of the opinion
that the group would be able to continue to operate as a going
concern for the foreseeable future, which is for the 12 months
following the date on which the interim financial statements
are signed.

These matters indicate that there is a material uncertainty
related to events or conditions that may cast significant
doubt about the group’s ability to continue as a going concern
and, therefore, that it may be unable to realise its assets
and discharge its liabilities in the normal course of
business.

2. DISPOSAL GROUP AND OTHER ASSETS HELD-FOR-SALE

2018
DAWN disposed of its investment in Grohe DAWN Watertech (GDW)
as at 19 December 2017 for a consideration of R324,5 million,
which consisted of R293,1 million of investment and R31,4
million of loans.

The GDW group has been treated as an assets held-for-sale
since July 2017, and has subsequently, on 21 December 2017,
been derecognised as such.

2019
The board of directors of DAWN noted that by 30 September 2018
‘DPI had become a non-viable business’ and that Edwin Hewitt,
the chief executive officer of DAWN, be mandated to
investigate the necessary measures to potentially wind up the
business of DPI Plastics.

CASH FLOW OF DISPOSAL GROUP

DPI Plastics

30 Sep 30 Sep 31 Mar
2018 2017 2018
R’000 R’000 R’000
Operating cash flows (68 512) (20 495) (54 961)
Investing cash flows (15 707) (3 674) (17 401)
Financing cash flows 74 638 48 454 90 564
Total cash flows (9 581) 24 285 18 202

Grohe DAWN Watertech

30 Sep 30 Sep 31 Mar
2018 2017 2018
R’000 R’000 R’000
(a) Assets of disposal
group classified as
held-for-sale
Property, plant and
equipment – – –
Intangible assets – – –
Other non-current assets – – –
Investment in associate – 271 328 –
Investment in joint venture – – –
Inventory – – –
Cash and cash equivalents – – –
Other current assets – – –
Total – 271 328 –

(b) Liabilities of disposal
group classified as
held-for-sale
Non-current liabilities – – –
Trade and other payables – – –
Other current liabilities – – –
Total – – –

An analysis of the result
of discontinued operations,
and the result recognised on
the re-measurement of assets
or disposal group, is as
follows:

Revenue – – –
Net operating expenses – (62 313) 1 882
Operating loss of
discontinued operations – (62 313) 1 882
Net financing costs – 191 1 693
Loss/(profit) before
tax of discontinued
operations – (62 122) 3 575
Income tax expense – (53) (65 612)
Loss after tax of
discontinued operations – (62 175) (62 037)
Attributable to:
Owners of the parent – (62 175) (62 037)
Non-controlling interests – – –
– (62 175) (62 037)

DPI Plastics

30 Sep 30 Sep 31 Mar
2018 2017 2018
R’000 R’000 R’000
(a) Assets of disposal group
classified as held-for-sale
Property, plant
and equipment 27 574 – –
Intangible assets – – –
Other non-current assets – – –
Investment in associate – – –
Investment in joint
venture – – –
Inventory 55 695 – –
Cash and cash
equivalents 8 622 – –
Other current assets 50 856 – –
Total 142 747 – –
(b) Liabilities of disposal
group classified as
held-for-sale
Non-current liabilities 9 630 – –
Trade and other
payables 144 620 – –
Other current
liabilities 8 888 – –
Total 163 138 – –

An analysis of the
result of discontinued
operations, and the
result recognised on the
re-measurement of assets
or disposal group, is as
follows:

Revenue 236 209 210 229 391 416
Net operating expenses (352 253) (212 937) (524 238)
Operating loss of
discontinued
operations (116 044) (2 708) (132 822)
Net financing costs 171 (346) (2 621)
Loss/(profit) before
tax of discontinued
operations (115 873) (3 054) (135 443)
Income tax expense – – 2 952
Loss after tax of
discontinued
operations (115 873) (3 054) (132 491)
Attributable to:
Owners of the parent (115 873) (3 054) (132 491)
Non-controlling
interests – – –
(115 873) (3 054) (132 491)

DPI Simba DPI Fleet NPC

30 Sep 31 Mar 31 Mar 31 Mar
2018 2018 2018 2018
R’000 R’000 R’000 R’000
(a) Assets of disposal
group classified as
held-for-sale
Property, plant and
equipment – – 4 200 16 478
Intangible assets – – – –
Other non-current assets – – – –
Investment in associate – – – –
Investment in joint
venture 4 633 4 323 – –
Inventory – – – 3 208
Cash and cash
equivalents – – – 88
Other current assets – – – 83
Total 4 633 4 323 4 200 19 857
(b) Liabilities of
disposal group
classified as
held-for-sale
Non-current liabilities – – – 4 221
Trade and other
payables – – – 88
Other current
liabilities – – – 1 387
Total – – – 5 696

3. NET GAIN ON DERECOGNITION OF INVESTMENT IN ASSOCIATES AND
SUBSIDIARIES
30 September
Date of 2018
recognition R’000
Carrying amount of
net asset value 14 569
Gain on the derecognition
of associates, joint
ventures and subsidiaries 5 335
Net gain on derecognition
of investment in Namibia
Plastic Converters
Proprietary
Limited (NPC) Subsidiary April 2018 5 335

4. CONTINGENCIES
The group has contingent liabilities in respect of bank and
other guarantees and other matters arising in the ordinary
course of business. It is not anticipated that any material
liabilities will arise from the contingent liabilities.

COMPETITION COMMISSION MATTER
On 23 March 2017, the Competition Tribunal (‘the Tribunal’)
handed down a decision in which it determined that DAWN
Consolidated Holdings Proprietary Limited (‘DCH’), a
subsidiary of DAWN, through the wholly-owned subsidiary DPI
Plastics Proprietary Limited of DCH, engaged in a market
allocation arrangement with Sangio Pipe Proprietary Limited
(‘Sangio’), in which DCH had a 49% interest at the time.

DAWN appealed the Competition Tribunal’s decision handed down
in respect of an allegation of market allocation arrangement
affecting DAWN Consolidated Holdings, DPI Plastics and Sangio
Pipe.

On 4 May 2018, judgment was handed down in the Competition
Appeal Court. The court upheld DAWN’s appeal and set aside
the decision of the Tribunal, dismissing the complaint with
costs. On 25 May 2018, DAWN received notification that the
Competition Commission had applied to the Constitutional
Court for leave to appeal against the decision of the
Competition Appeal Court.

As published on SENS on 5 November 2018, DAWN shareholders
were advised that the Constitutional Court has, in an order
dated 29 October 2018, dismissed the Competition Commission’s
application for leave to appeal against the decision of the
Competition Appeal Court, with costs.

5. EVENTS AFTER THE REPORTING DATE

CHANGES TO THE BOARD OF DIRECTORS
Subsequent to the reporting date the following changes in the
board of directors occurred:

– Charles Boles, the lead independent non-executive director
of DAWN, resigned as a director with effect from
22 October 2018.

– Martin Mota was appointed as independent non-executive
director with effect from 13 November 2018. He resigned
from the board with effect from 15 November 2018.

– Ms Nthabeleng Likotsi was appointed as an independent non-
executive director of DAWN effective 27 November 2018.

– Hanré Bester, the DAWN financial director has resigned
with effect from 31 January 2019, but will stay on as a
non-executive director until 28 February 2019.

BORROWINGS – INVOICE DISCOUNTING (DEBTORS) FACILITY AND
BRIDGING FINANCE

During July 2018, the ABSA overdraft facility of R100 million
was repaid and replaced by an ABSA Invoice Discounting
Facility, subject to standard terms, to the value of R140
million. This facility is secured by a cession of insured
book debtors as well as further security in the form of
guarantees and notarial bonds. There are no financial
covenants applicable to the facility.

Subsequent to the reporting period in October 2018, an
additional R25 million was provided by ABSA under the Invoice
Discounting Facility, subject to enhanced security provided.

In lieu of the offer received by the group for the purchase
of the share capital of the listed entity, the group received
subsequent to the reporting period, a further R25 million
bridge financing facility under the Invoice Discounting
Facility from ABSA, subject to certain conditions being met,
including maintaining a debtors cover ratio of 1,7 times,
realisation of the offer, achievement of the cash flow
forecasts presented as well as additional security provided.
The bridge’s repayment due date is the earlier of the date of
cancellation or failure (if applicable) of the offer or
31 March 2019. At the time of this announcement ABSA is in
the process of finalising the formal facility letter. The
expectation is that the bridge proceeds will become available
in December 2018.

FIRM INTENTION ANNOUNCEMENT

Shareholders are referred to the announcement published on
SENS on 3 December 2018, being the joint announcement of a
firm intention offer by Polanofield (Pty) Ltd (‘the offeror’)
to acquire all of the issued shares of DAWN excluding shared
held by the offeror, its related and inter-related persons
and persons acting in concert with any of them and any
treasury shares, for a cash consideration of R5 758 760,49.

The offeror believes that DAWN will benefit from the
transaction by curtailing certain liquidity and solvency
risks of DAWN who disclosed certain excessive and onerous
liabilities that DAWN currently face. In addition, the
offeror believes a delisting from the Johannesburg Stock
Exchange will benefit DAWN both from a cost saving and
operational focus perspective.

Subject to the fulfilment or waiver of certain suspensive
conditions by 7 December 2018, as outlined in the
announcement, DAWN and the offeror will issue the circular
to DAWN shareholders, setting out the full terms and
conditions of the scheme of arrangement (‘the scheme’) and
including the notice convening the scheme meeting, the form
of proxy in respect of the scheme meeting, and the form of
surrender and transfer for use by certificated DAWN
shareholders.

The salient dates pertaining to the scheme will be released
on SENS and published in the press at the time of
distribution of the circular. The circular is to be
distributed to DAWN shareholders on or about 20 December
2018.

DISTRIBUTION AND WAREHOUSING NETWORK LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1984/008265/06)
(‘DAWN’ or ‘the group’ or ‘the company’)
Alpha code: DAW
ISIN: ZAE000018834
E-mail: info@dawnltd.co.za

REGISTERED OFFICE:
Cnr Barlow Road and Cavaleros Drive, Jupiter Ext 3, Germiston,
1401

DIRECTORS:
Theunis de Bruyn (chairman)*, Edwin Hewitt (chief executive
officer), Hanré Bester (financial director), Ms Nthabeleng
Likotsi ^, Dinga Mncube ^, Steve Naudé ^, George Nakos*

* Non-executive ^ Independent non-executive

PREPARER:
Prepared by Tintswalo Mohlakoana (CA(SA)), group financial
accountant, under the supervision of Hanré Bester (CA(SA)),
financial director

COMPANY SECRETARY:
Vanessa White (chief governance officer)

TRANSFER SECRETARIES:
Computershare Investor Services (Pty) Ltd, Rosebank Towers, 15
Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)

SPONSOR:
Deloitte & Touche Sponsor Services (Pty) Ltd

www.dawnltd.co.za

Date: 07/12/2018 05:32:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.

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