Dawn to lay off 700 employees
Distribution and Warehousing Network (Dawn) will retrench more than 700 of its employees as part of a cost-cutting strategy.
Distribution and Warehousing Network (Dawn) will retrench more than 700 of its employees as part of a cost-cutting strategy that is aimed at saving the ailing business from collapse.
Dawn said on Tuesday economic conditions had deteriorated over the past five months such that a turnaround plan it had published in July 2018 was no longer adequate. It does not expect conditions to improve in the current financial year.
In July 2018, Dawn reported a 19.1% drop in revenue to R3.5bn for the full year to March 2018, for which it blamed a lack of new infrastructure work and antiquated operating systems, among other things.
Dawn, which makes and distributes hardware, sanitaryware, plumbing, kitchen, engineering and civil products, said its large-scale cost reduction plan would position it for recovery “in line with its turnaround plan”. It also aims to curtail losses over the next 12 months.
In addition to the retrenchments, Dawn will reduce expenditure on support services and infrastructure. “This will result in a small, but appropriate head office structure,” it said.
Dawn said it would implement structural changes to refocus each subsidiary on its core competencies, and to “leverage synergies” between the group’s subsidiaries, particularly its three largest subsidiaries, Wholesale Housing Supplies, Incledon and DPI Plastics.
“Legacy high fixed costs, such as lease costs, remain a burden on the business and the company is evaluating all alternatives to manage or further reduce costs, where possible,” Dawn said. It said it continues to focus on the “vital task” of improving working capital and actively managing cash flow. It has set up a debtors-based funding facility with Absa.
Vunani Securities analyst Anthony Clark said Dawn’s share price had collapsed to 14c over the past two months and that the restructuring was probably the “final roll of the dice” for the group.
“At 14c, the company probably has little choice but to implement an emergency and farreaching restructuring of its key operations to actually stem any further losses,” he said.
Clark said even though Dawn now had a paltry market value of R84m, it would unlikely go out of business just yet.
Hong Kong-based insurer FWD Group has agreed to buy HSBC Holdings’s stake in a Malaysian insurance joint venture as part of a plan to expand its presence in Asia, three people familiar with the matter said.
FWD, owned by tycoon Richard Li, is acquiring the British lender’s 49% stake in HSBC Amanah Takaful (Malaysia) initially, with plans to ultimately own a majority by buying some shares from the existing partners, they said.
The deal shows that foreign insurers are keen on Malaysia, drawn by its strong economic growth, rising middle-class income and low insurance penetration, despite lingering regulatory uncertainty over foreign ownership rules.
The exact value of the deal is not immediately clear, with one of the people putting it at less than $100m. It is expected to be completed by the end of 2018, subject to approval by Bank Negara Malaysia (BNM).
A foray into the Southeast Asian country by FWD will add to its Asian market footprint that already covers Indonesia, Japan, Singapore, the Philippines, Thailand and Vietnam. HSBC has been looking to exit the Malaysian insurance joint venture in the past year to focus on its core banking offerings, two of the people said.
In 2017, the Malaysian unit of German insurer Allianz said it had discontinued talks with the shareholders of HSBC Amanah Takaful to acquire up to 100% stake in the company.
Malaysia’s JAB Capital owns 31% in the venture, while Employees Provident Fund Board of Malaysia (EPF) controls 20%, according to HSBC Amanah Takaful’s website.
FWD and HSBC declined to comment. A spokesperson for BNM, which is also the country’s central bank, said it does not comment on individual firms, while JAB Capital and Malaysia’s largest pension fund, EPF, did not reply to requests for comment. The people declined to be named as the deal is not public.
Foreign insurers were caught off guard in 2017 when BNM said it would enforce its 2009 rule setting a 70% cap on foreign ownership of local insurance businesses.
A FORAY INTO MALAYSIA WILL ALLOW FWD TO ADD TO ITS ASIAN MARKET FOOTPRINT... IT’S IN SIX STATES ALREADY
The directive sent several foreign insurers in Malaysia scrambling to sell down their stakes. It is not clear if or when the rule will be enforced.
Takaful refers to Islamic insurance products. In financial dealings, takaful firms follow religious guidelines, including bans on interest and monetary speculation and a ban on investing in alcohol and gambling.
Growth in the takaful business in Malaysia, the world’s second-largest Islamic insurance market, is outpacing that of the conventional sector, a Fitch Ratings report said in January.