JSE-listed Distribution and Warehousing Network (Dawn) will implement a large-scale cost reduction plan to position the company for recovery.
It said on Tuesday that the plan will entail a significant cost reduction in terms of the company's head office, through a staff reduction and reduced expenditure on support services and infrastructure.
As part of this, Dawn's FD Chris Booyens will retire from the company, effective August 31.
Group financial manager Hanré Bester has been appointed FD, effective September 1.
Besides the cost reduction initiatives at group level, Dawn will implement further structural changes to refocus each subsidiary on its core competencies, as well as actively leverage synergies between the group’s subsidiaries, particularly its three largest subsidiaries – Wholesale Housing Supplies (WHS), Incledon and DPI Plastics.
WHS, the main sanitaryware and hardware trading and distribution business in the group, will be restructured for improved accountability and its processes re-engineered for simplicity.
"This entails flattened and realigned reporting structures and more streamlined functions across operating divisions. WHS has been successful in significantly improving its delivery performance to its customers over the last six months through previously implemented turnaround initiatives. This business will continue to reap the benefits from its improved capability through further efficiencies and sales performance," Dawn stated.
Further, the group's specialist water infrastructure trading business Incledon will continue to focus on delivering its turnaround strategy.
"This has already yielded positive results. The business has expanded its markets and presence to tap into growth areas such as Bloemfontein and Polokwane and is developing a presence in the mining sector by expansion into Rustenburg and Steelpoort. A core focus has been improving the effectiveness of its imports, in order to yield improved margins. The group has also refocused its strategy on the mining, agriculture and engineering sectors," Dawn said.
The group’s pipe manufacturing business, DPI, is reducing and refocusing its capacity towards its core capability and higher-margin markets, polyvinyl chloride pipe and the building fittings market. The high-density polyethylene plant will be mothballed until such time as the market shows signs of recovery at a more sustainable margin level.
Dawn said the revised turnaround measures will result in the retrenchment and termination of the contracts of employment of more than 700 employees and labour broker staff across the group.
The trade unions have been engaged throughout the process and notices have been issued in terms of Section 189(a) of the Labour Relations Act, it added.
Dawn added that 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.