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Condensed consolidated unaudited interim financial results for the six months ended 31 August 2015
Value Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06) ISIN: ZAE000016507 Share code: VLE
Value Group Limited
CONDENSED CONSOLIDATED UNAUDITED INTERIM FINANCIAL RESULTS
for the six months ended 31 August 2015
HIGHLIGHTS
REVENUE
Up 2% to R999,8 million
HEADLINE EARNINGS PER SHARE
Up 124% to 11,0 cents
EARNINGS PER SHARE
Up 189% to 10,1 cents
NET ASSET VALUE PER SHARE
Up 8% to 459,0 cents
CASH GENERATED BY OPERATIONS
Down 5% to R100,8 million
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
% August August February
R000's change 2015 2014 2015
Revenue 2 999 762 984 940 2 038 353
Cost of sales (603 943) (621 123) (1 258 868)
Gross profit 395 819 363 817 779 485
Other income 5 511 7 264 11 403
Operating expenses (373 363) (355 103) (682 191)
Operating profit 75 27 967 15 978 108 697
Share of profit of equity-accounted 50 22 64
investees net of taxation
Investment income 7 493 6 330 13 511
Finance costs (14 884) (15 046) (30 297)
Net profit before taxation 20 626 7 284 91 975
Taxation (5 020) (1 484) (23 815)
Net profit for the period 169 15 606 5 800 68 160
Other comprehensive income net of taxation
Foreign currency translation differences 333 (41) (92)
Total comprehensive income for the period 15 939 5 759 68 068
Owners: 16 160 5 759 68 340
Net profit for the period 15 827 5 800 68 432
Other comprehensive income net of taxation 333 (41) (92)
Non-controlling interest: (221) - (272)
Net loss for the period (221) - (272)
Other comprehensive income net of taxation - - -
15 939 5 759 68 068
Earnings per share (cents) (note 3)
Basic 189 10,1 3,5 42,1
Headline 124 11,0 4,9 44,2
Diluted basic 10,1 3,4 41,7
Diluted headline 11,0 4,7 43,9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
% August August February
R000’s change 2015 2014 2015
Assets
Non-current assets 1 069 133 1 053 554 1 052 840
Property, vehicles, plant
and equipment 1 027 494 1 016 352 1 022 644
Intangible assets 21 795 30 869 25 261
Goodwill 10 685 - -
Loans 1 672 146 1 568
Equity-accounted investees 284 - 234
Deferred tax asset 7 203 6 187 3 133
Current assets 459 233 481 466 444 246
Inventories 69 177 56 909 51 743
Loans - 2 000 -
Trade and other receivables 285 921 290 541 262 861
Other financial assets 1 381 - -
Current tax receivable 6 406 4 938 2 328
Cash and cash equivalents 96 348 127 078 127 314
Non-current assets held for sale 222 2 176 951
Total assets 1 528 588 1 537 196 1 498 037
Equity and liabilities
Equity 708 719 695 012 726 094
Non-current liabilities 341 065 330 718 355 447
Interest-bearing borrowings 168 102 158 782 181 230
Deferred tax 171 189 171 936 174 217
Non interest-bearing borrowings 1 774 - -
Current liabilities 478 804 511 466 416 496
Trade and other payables 368 267 418 594 312 706
Current portion of interest-bearing
borrowings 101 739 90 051 101 973
Vendor for acquisition 3 802 - -
Other financial liabilities - 285 317
Current tax payable 4 582 2 187 1 151
Shareholders for dividend 414 349 349
Total equity and liabilities 1 528 588 1 537 196 1 498 037
Net asset value per share (cents) 8 459,0 424,8 458,6
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
% August August February
R000’s change 2015 2014 2015
Cash flows from operating activities 84 789 81 651 158 561
Cash generated by operations before 74 782 69 529 211 896
movements in working capital and proceeds
on disposal of rental assets
Proceeds on disposal of rental assets 25 992 36 168 74 599
Cash generated by operations (5) 100 774 105 697 286 495
Changes in working capital 22 677 18 294 (54 076)
Net finance costs (7 391) (8 716) (16 786)
Taxation paid (12 809) (5 869) (21 287)
Cash available from operating activities 103 251 109 406 194 346
Dividends paid (18 462) (27 755) (35 785)
Cash flows from investing activities (86 143) (120 842) (206 868)
Cash flows from financing activities (29 802) (355) 9 020
Net change in cash and cash equivalents (31 156) (39 546) (39 287)
Translation difference on foreign bank accounts 190 (15) (38)
Cash and cash equivalents at beginning of period 127 314 166 639 166 639
Cash and cash equivalents at end of period 96 348 127 078 127 314
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
August August February
R000’s 2015 2014 2015
Ordinary share capital and premium 10 829 10 841 10 841
Balance at beginning of period 10 841 10 841 10 841
Shares cancelled (12) - -
A ordinary shares 10 10 10
Treasury shares (97 021) (109 679) (134 777)
Balance at beginning of period (134 777) (109 679) (109 679)
Treasury shares acquired (16 440) - (25 733)
Treasury shares sold - - 635
Treasury shares cancelled 54 196 - -
Share-based payment reserve 25 544 22 093 23 891
Balance at beginning of period 23 891 20 322 20 322
Share-based payment expense 1 653 1 771 3 569
Foreign currency translation reserve 349 67 16
Balance at beginning of period 16 108 108
Foreign currency translation differences 333 (41) (92)
Retained income 769 501 771 680 826 385
Balance at beginning of period 826 385 793 694 793 694
Profit on disposal of treasury shares - - 103
Dividends paid (18 527) (27 814) (35 844)
Shares cancelled (54 184) - -
Net profit for the period 15 827 5 800 68 432
Total capital and reserves attributable to owners 709 212 695 012 726 366
Non-controlling interest (493) - (272)
Balance at beginning of period (272) - -
Net loss for the period (221) - (272)
Equity 708 719 695 012 726 094
SEGMENT INFORMATION
Unaudited Unaudited Audited
August August February
R000’s 2015 2014 2015
Total segment revenue 1 083 000 1 064 137 2 197 901
General distribution 818 917 809 782 1 658 564
Truck rental and other 198 628 193 579 417 522
Head office and other 65 455 60 776 121 815
Less: Inter-segment revenue 83 238 79 197 159 548
General distribution 3 325 2 510 5 621
Truck rental and other 17 457 16 515 33 374
Head office and other 62 456 60 172 120 553
External segment revenue 999 762 984 940 2 038 353
General distribution 815 592 807 272 1 652 943
Truck rental and other 181 171 177 064 384 148
Head office and other 2 999 604 1 262
Business segment results
General distribution 43 460 32 073 111 727
Truck rental and other (997) (3 572) 22 651
Head office and other (14 496) (12 523) (25 681)
Operating segment results 27 967 15 978 108 697
Share of profit of equity-accounted
investees net of taxation 50 22 64
Investment income 7 493 6 330 13 511
Finance costs (14 884) (15 046) (30 297)
Net profit before taxation 20 626 7 284 91 975
Segment assets
General distribution 732 229 683 542 712 899
Truck rental and other 606 312 587 815 591 255
Head office and other 173 101 252 568 186 620
Segment assets 1 511 642 1 523 925 1 490 774
Loans 1 672 2 146 1 568
Equity-accounted investees 284 - 234
Deferred tax asset 7 203 6 187 3 133
Other financial assets 1 381 - -
Current tax receivable 6 406 4 938 2 328
Total assets 1 528 588 1 537 196 1 498 037
NOTES
1. Basis of preparation
The condensed consolidated interim financial results are prepared in accordance with IAS 34
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, Financial Pronouncements as issued by Financial Reporting Standards Council
and the requirements of the Companies Act of South Africa. The accounting policies applied in
the preparation of these condensed consolidated interim financial results are in terms of
International Financial Reporting Standards and are consistent with those applied in the previous
consolidated annual financial statements. The condensed consolidated interim financial results
have been prepared under the supervision of the Group Financial Director, Mr CL Sack. These
condensed consolidated interim financial results have not been audited nor reviewed by the
Group’s auditor.
2. Business combination concluded during the reporting period
On 1 March 2015, the Group acquired a majority stake, amounting to an 80% ownership interest, in
the business of Nucleus Chain Stores (Pty) Ltd. The goodwill that has been recognised is attributable
mainly to the strong management and operational team and the synergies that are expected to be
realised within the various divisions.
The purchase price for the business was R12,7 million. R7,1 million was paid in cash and the
remaining R5,6 million has been raised as loan accounts in favour of the vendor.
Unaudited Unaudited Audited
August August February
R000’s 2015 2014 2015
As part of the business combination,
the following assets were recognised
at the acquisition date:
- Goodwill 10 685 - -
- Property, plant and equipment 1 088 - -
- Cash and cash equivalents 900 - -
Summary financial information of Core Logistix (Pty) Ltd for the six months
ended 31 August 2015:
- Revenue 25 488 - -
- Net profit before tax 1 138 - -
3. Headline earnings
3.1 Reconciliation between basic and headline earnings
Basic earnings attributable to owners 15 827 5 800 68 432
Loss on disposal of property, vehicles, plant and equipment less taxation 1 381 2 221 3 511
Headline earnings 17 208 8 021 71 943
3.2 Number of ordinary shares of R0,001 each in issue
Actual 186 427 478 198 627 386 198 627 386
Weighted average 156 034 937 163 613 294 162 673 657
Diluted 156 949 040 171 411 563 164 028 447
3.3 Number of A ordinary shares of R0,001 each in issue
Actual 10 429 010 10 429 010 10 429 010
4. Supplementary information
Depreciation 51 850 48 856 99 318
Amortisation of intangible assets 6 113 9 253 16 693
Depreciation and amortisation 57 963 58 109 116 011
5. Fair value measurement of financial instruments
5.1 Financial assets/(liabilities)
- Loans (Level 2) 1 672 2 146 1 568
The fair value of loans are estimated
using a discounted cash flow approach, which discounts cash flows using discount
rates derived from observable market interest rates for similar risk loans.
- Foreign currency forward contracts 1 381 (285) (317)
(Level 2)
The Group's foreign currency forward contracts are not traded on active markets.
These have been fair valued using observable forward exchange
rates corresponding to the maturity of the contracts.
COMMENTARY
INTRODUCTION
Value Group Limited (“the Group”) and its subsidiaries provide a comprehensive range of tailored logistical solutions
throughout southern Africa. The operating divisions specialise in providing a diversified range of supply chain
services, which encompass distribution, transport, clearing and forwarding, warehousing, container and fleet management
and forklift and commercial vehicle rental and leasing.
FINANCIAL REVIEW
The Group’s strategy to grow the blue chip customer base is yielding positive results. Various additional services have
been sold to existing customers. Trading conditions however, continue to be extremely challenging. The South African
economy has deteriorated further with negative growth reported in the second quarter which has had a material impact on
volumes and demand for the Group’s services. Once again, annual escalations were offset by declining volumes. The
termination of non-profitable contracts in the previous financial year affected current revenue. Consequently, revenue
increased marginally by 2% from R984,9 million to R999,8 million.
In the prior year, the Group implemented a number of ongoing sustainable cost saving initiatives. These consisted
primarily of the following:
- Restructuring of the workshop facilities under new management. Maintenance costs incurred were reduced through
improved processes and cost evaluation. Various IT initiatives will be implemented to further streamline processes
and reduce this cost. Additional savings were realised as a result of the ongoing defleeting of older vehicles.
- Implementation of planning and routing tools which optimised load building to increase vehicle space utilisation.
This was achieved through the redesign and rollout of amended delivery frequencies.
- Ongoing automation of manual processes throughout the operation and administration.
- A number of new fuel efficient vehicles were procured to align the reduced volume requirements of the customer
base.
- Improved productivity in the distribution operations by streamlining resource allocation
to volumes.
- Overhead expenditure line items are subject to repricing to reduce costs.
These initiatives resulted in labour, fuel and maintenance savings which contributed to gross profits increasing by
R32 million to R395,8 million with gross margins improving from 36,9% to 39,6%.
Operating expenses were partially contained and increased by 5,1% driven predominantly by increased employment costs
with the balance being attributable to general overhead cost escalations. Accordingly, operating profit improved by
75% from R16 million to R28 million.
The effective tax rate has increased from 20,4% to 24,3% as a result of the low profitability base in the previous
year. The reduced effective tax rates are due to the tax allowance derived from learnerships.
Comprehensive income for the period increased by 177% to R15,9 million with headline earnings per share increasing
by 124% from 4,9 cents to 11 cents per share.
Cash generated by operations declined by 5% to R100,8 million. This was negatively affected by the loss of a
substantial prefunded clearing and forwarding account at the end of February 2015.
Net interest-bearing debt reduced by R13,4 million to R269,8 million. Total capital expenditure of R81,8 million
which comprised R33,2 million for vehicles, R22,3 million for forklifts, R12 million for IT hardware and software,
R12 million for plant and equipment and R2,3 million for various other assets were effectively funded by cash
flows and cash balances. In addition, R16,4 million was spent on share buybacks. Approximately 12,2 million ordinary
shares were cancelled during the period.
OPERATIONAL REVIEW
General distribution segment
The customer base has grown organically and additional services were sold to existing customers. Annual increases,
however, were offset by both rate pressures and reduced volumes which resulted in revenue increasing by a marginal
1% from R807,3 million to R815,6 million. Revenue was further affected by the termination of non-profitable contracts
in the previous financial year. Reduced operating costs resulted in operating profits increasing from R32,1 million
to R43,5 million with operating margin improving from 4% to 5,3%.
Truck rental and other segments
Turnover increased by R4,1 million to R181,2 million. Demand for truck rental and other services continue to be muted.
Maintenance costs savings resulted in an improvement in the operating results from a loss of R3,6 million to a loss
of R1 million.
Head office
Head office costs were negatively affected by increased employment costs.
FUTURE CAPITAL EXPENDITURE
Capital expenditure for the remainder of the 2016 financial year is expected to be approximately R65,6 million
consisting primarily of forklift and vehicle additions. This will be funded by a combination of internally
generated cash flows and interest-bearing debt. Capital expenditure in the 2017 financial year is expected to be
reduced.
PROSPECTS
Given the current economic environment characterised by poor growth, the decline in the currency’s exchange rate,
increased interest rates and the resultant drop in consumer sentiment, the Group does not expect volume growth from
its existing customer base. Due to seasonality of trading activity and the procurement of new customers, volumes
are expected to increase over the remaining 6 month period. In addition, cost saving initiatives, highlighted above,
are bearing positive results. This forecast has not been audited nor reviewed by the Group’s auditors.
On 1 March 2015, the Group acquired a majority stake, amounting to an 80% ownership interest, in the business of Nucleus
Chain Stores (Pty) Ltd. This business has been renamed in the current period to Core Logistix (Pty) Ltd. This subsidiary
focusses on both chain store and front door deliveries which are complimentary to that of the Group. Together with the
strong management and operational team, synergies are expected to be realised within the various divisions of the Group.
Through its acquisitive growth strategy, the Group aims to increase its volumes by consolidating the logistics requirements
of the acquired businesses into its existing infrastructure. The Group seeks to invest not only in businesses that
complement existing divisions, but also in those that will diversify risk and grow revenue streams in various industry
verticals. A number of acquisition opportunities are currently being evaluated and actively pursued.
DECLARATION OF INTERIM DIVIDEND (NUMBER 18)
Consistent with the comparative prior period, the Board resolved to declare a gross interim dividend of 5 cents
per ordinary share which will be paid out of distributable reserves.
The number of ordinary shares in issue at the date of this declaration is 186 427 478. The dividend will be
subject to a dividend withholding tax of 15% which amounts to 0,75 cents per share. This will result in a net
dividend of 4,25 cents per share to those shareholders who are not exempt from paying dividend withholding tax.
The tax reference number of Value Group Limited is 9319054715. The dividend is payable to shareholders as
follows:
Declaration date Wednesday, 21 October 2015
Last day to trade cum dividend Friday, 8 January 2016
Trading ex dividend commences Monday, 11 January 2016
Record date Friday, 15 January 2016
Payment date Monday, 18 January 2016
Share certificates may not be dematerialised or rematerialised between Monday, 11 January 2016 and Friday,
15 January 2016, both days inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
21 October 2015
Value Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06) ISIN: ZAE000016507 Share code: VLE
Directors: C D Stein* (Chairman), S D Gottschalk (CEO), C L Sack, I M Groves*, N M Phosa*,
M Padiyachy, V W Mcobothi*
*Non-executive director
Sponsor: Investec Bank Limited
Date: 21/10/2015 05:06:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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