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VALUE GROUP LIMITED - Unaudited Interim Financial Results

Release Date: 16/10/2012 17:16
Code(s): VLE     PDF:  
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Unaudited Interim Financial Results

Value Group Limited 
(Incorporated in the Republic of South Africa) 
(Registration number 1997/002203/06)
ISIN: ZAE000016507  Share code:  VLE

UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2012

Revenue up 10%
Headline earnings per share down 6%
Net asset value per share up 14%
Interim dividend declared up 14%
Cash generated by operations up 8%

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	
			
					Unaudited		Unaudited		Audited
				%	August			August			February
R000s				change	2012			2011			2012
Revenue				10	936 129			847 264			1 798 012
Cost of sales				(550 741)		(496 129)		(1 034 898)
Gross profit 			10	385 388			351 135			763 114
Other income				3 706			3 558			9 022
Operating expenses			(319 350)		(286 938)		(595 149)
Operating profit		3	69 744			67 755			176 987
Share of profit of 
associate net of taxation		20			8			34
Investment income			6 769			10 016			15 222
Finance costs				(20 366)		(19 260)		(38 224)
Net profit before taxation		56 167			58 519			154 019
Taxation (note 2)			(18 803)		(18 184)		(44 517)
Net profit for the period	(7)	37 364			40 335			109 502
Other comprehensive income net 
of taxation										
Total comprehensive income for 
the period				37 364			40 335			109 502
Earnings per share (cents) (note 3)				
 Basic					22,6			24,5			66,4
 Headline			(6)	23,4			25,0			68,0
 Diluted basic				20,0			21,3			58,7
 Diluted headline		(6)	20,6			21,8			60,2


CONSOLIDATED STATEMENT OF FINANCIAL POSITION				
					Unaudited		Unaudited		Audited
				%	August			August			February
R000s			   change	2012			2011			2012
Assets				
Non-current assets			1 011 857		943 380			981 687
Property, vehicles, plant 
and equipment				963 538			906 741			938 715
Intangible assets			40 032			30 440			37 362
Investments and loans			2 570			1 083			2 414
Deferred tax				5 717			5 116			3 196
Current assets				425 473			386 551			397 627
Inventories				61 241			63 241			60 060
Investments and loans			901			2 309			902
Trade and other receivables		284 406			267 847			272 455
Taxation in advance			3 718			3 889			234
Cash and cash equivalents		75 207			49 265			63 976
Non-current assets held for sale	270			256			139
Total assets				1 437 600		1 330 187		1 379 453
Equity and liabilities				
Equity					598 073			524 095			582 728
Non-current liabilities			373 211			354 437			359 932
Interest-bearing borrowings		226 133			228 845			221 346
Deferred tax				147 078			125 592			138 586
Current liabilities			466 316			451 655			436 793
Trade and other payables		363 520			359 556			339 968
Current portion of interest-bearing 
borrowings				99 314			91 955			92 748
Current tax payable			3 249						3 865
Shareholders for dividend		233			144			212
				
Total equity and liabilities		1 437 600		1 330 187		1 379 453
Net asset value 
per share (cents)		14	361,9			317,7			353,0


CONSOLIDATED STATEMENT OF CASH FLOWS				
					Unaudited		Unaudited		Audited
				%	August			August			February
R000s				change	2012			2011			2012
Cash flows from 
operating activities   			83 776			42 376			145 010
Cash generated by operations 
before movements in working 
capital				8	115 472			107 117			262 966
Movements in working capital		22 110			(2 225)			(26 118)
Net finance costs			(13 782)		(9 244)			(23 179)
Taxation paid				(16 932)		(33 476)		(37 375)
Cash available from operating 
activities				106 868			62 172			176 294
Dividends paid				(23 092)		(19 796)		(31 284)
Cash flows from investing activities	(84 266)		(115 082)		(196 571)
Cash flows from financing activities	11 721			41 795			35 361
Net change in cash and cash 
equivalents				11 231			(30 911)		(16 200)
Cash and cash equivalents 
at beginning of period			63 976			80 176			80 176
Cash and cash equivalents at 
end of period				75 207			49 265			63 976


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY				
					Unaudited		Unaudited		Audited
					August			August			February
R000s					2012			2011			2012
Ordinary share capital and premium	10 841			10 841			10 841
A ordinary shares			10			10			10
Treasury shares				(99 785)		(100 325)		(100 086)
Balance at beginning of period		(100 086)		(100 325)		(100 325)
Treasury shares sold			301						239
Share-based payment reserve		15 881			14 405			15 155
Balance at beginning of period		15 155			13 623			13 623
Share-based payment expense		726			782			1 532
Retained income				671 126			599 164			656 808
Balance at beginning of period		656 808			578 625			578 625
Profit on disposal of treasury shares	67						33
Dividends paid				(23 113)		(19 796)		(31 352)
Total comprehensive income 
for the period				37 364			40 335			109 502
Total capital and reserves		598 073			524 095			582 728



SEGMENT INFORMATION			
					Unaudited		Unaudited		Audited
					August			August			February 
R000s					2012			2011			2012
Total segment revenue			1 015 998		915 866 		1 941 589
General distribution			763 232			674 485 		1 473 993
Truck rental and other			195 074	 		194 926 		370 280
Head office and other			57 692	 		46 455 			97 316
Less: Inter-segment revenue		79 869	 		68 602 			143 577
General distribution			5 966			4 232 			9 994
Truck rental and other			16 898			17 915 			37 205
Head office and other			57 005			46 455 			96 378
External segment revenue		936 129	 		847 264 		1 798 012
General distribution			757 266	 		670 253 		1 463 999
Truck rental and other			178 176			177 011 		333 075
Head office and other			687						938
Business segment results			
General distribution			62 582	 		62 084 			138 015
Truck rental and other			16 414	 		10 013 			46 526
Head office and other			(9 252)			(4 342)			(7 554)
Business segment results		69 744	 		67 755 			176 987
Share of profit of associate 
net of taxation				20	 		8 			34
Investment income			6 769			10 016 			15 222
Finance costs				(20 366)	 	(19 260)		(38 224)
Net profit before taxation		56 167	 		58 519			154 019
Total segment assets			
General distribution			646 729	 		594 899 		646 470
Truck rental and other			596 212	 		614 096 		596 383
Head office and other			181 753	 		108 795 		129 854
Segment assets				1 424 694	 	1 317 790 		1 372 707
Investments and loans			3 471	 		3 392 			3 316
Deferred tax				5 717	 		5 116 			3 196
Taxation in advance			3 718	 		3 889 			234
Total assets				1 437 600		1 330 187		1 379 453


NOTES			
1. Statement of compliance			
The financial results have been prepared in accordance with International Financial Reporting Standards and in the manner required by the 
Companies Act of South Africa and are presented in accordance with IAS 34: Interim Financial Reporting.			
The basis for the preparation of the financial results is consistent with that applied in the preparation of the annual financial statements 
for the year ended 29 February 2012. 
The interim results have been prepared under the supervision of the financial director, Mr C L Sack.

			
					Unaudited		Unaudited		Audited
					August			August			February
R000s					2012			2011			2012
2. Taxation				2 056			1 736			3 244
Secondary tax on companies included 
in taxation			
3. Headline earnings			
3.1 Reconciliation between basic 			
and headline earnings			
Basic earnings				37 364			40 335			109 502
Loss on disposal of property,  
vehicles, plant and equipment 
less taxation				1 227			838			2 746
Headline earnings			38 591			41 173			112 248
3.2 Number of ordinary shares 			
of R0,001 each in issue			
Actual					198 627 386		198 627 386		198 627 386
Weighted average			165 129 994		164 962 874		164 991 563
Diluted					189 328 493		189 220 691		187 903 103
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				41 911			37 042			77 351
Amortisation of intangible assets	6 857			4 757			10 511
Depreciation and amortisation		48 768			41 799			87 862

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 of normal 
and abnormal loads, clearing and forwarding, warehousing, container and fleet management, forklift and commercial vehicle rental and leasing.

FINANCIAL REVIEW
Despite tough trading conditions which have manifested in volume decline and pricing pressures, annual escalations in conjunction with increased 
fuel recoveries and an extended customer base contributed to Group revenue growing by 10% to R936,1 million. Reduced utilisation of external 
subcontractors offset escalating fuel, maintenance and labour costs. Accordingly, gross profit margins were maintained. Gross profit improved 
by 10% from R351,1 million to R385,4 million. Headline earnings, however, reduced by 6% from 25 cents per share to 23,4 cents per share. 
Earnings were impacted by increased sales staff employment costs and additional STC charges which pushed up the effective tax rate to 33,5%. 
Net finance costs increased from R9,2 million to R13,6 million predominantly due to the notional fair value adjustment made to revenue and 
expenditure. Notwithstanding a small reduction in headline earnings, cash generated by operations improved by 8% to R115,5 million. 
Cash flows of the Group remain resilient with ongoing focus on working capital management. Capital expenditure amounted to R104,3 million 
and consisted of R63,4 million for vehicles, R21,9 million for IT hardware and software, R10,5 million for materials handling equipment and 
the balance of R8,5 million for plant, equipment and accessories. R92,9 million of this expenditure was funded by internally generated cash 
flows with the balance of R11,4 million being funded by interest-bearing debt. Cash balances improved from R64 million to R75 million. 
The Group remains adequately capitalised with interest-bearing debt levels well within the debt:equity target of 40% to 60%. Net asset value 
per share increased by 14% from 317,7 cents per share to 361,9 cents per share. 

OPERATIONAL REVIEW
General distribution segment
Annual price adjustments and fuel recoveries contributed to the segments revenue increasing by 13% from R670,3 million to R757,3 million. 
Although additional business from new and existing customers contributed to revenue growth, overall volumes throughout the period declined. 
Consequently, operating costs were reduced where possible. Notwithstanding the reduction in operating margins from 9,3% to 8,3%, operating 
profits increased marginally from R62,1 million to R62,6 million. 

Truck rental and other segment
Despite the extremely competitive market conditions, operating profits increased from R10 million to R16,4 million. The turnaround of 
previous loss making divisions, fleet realignment and additional truck rental business contributed to operating profit margins improving 
from 5,7% to 9,2%. 

FUTURE CAPITAL EXPENDITURE 
Approved capital expenditure of approximately R35,7 million will be incurred in the remaining six months of the financial year. This 
expenditure will be funded out of a combination of existing interest-bearing debt facilities and cash flows. The expenditure consists 
of R20,3 million for vehicles, R8,9 million for various IT hardware and software projects and R6,5 million for plant and equipment. 

PROSPECTS
In light of the quality of the existing infrastructure, capital expenditure has been materially reduced. This will enable the Group to 
continue to reduce debt and utilise its consistent positive cash flows to build up its cash resources which over the next five years, 
will be earmarked for expansion opportunities into the rest of Africa. The Group aims to benefit from the substantially higher growth 
rates achieved across the continent. This expansion will enable the Group to service the growth requirements of its customers, penetrate 
new markets and increase its overall volume base.   Although sustainable cost reduction initiatives have been and continue to be 
implemented, an improvement in the current trading environment is not expected. Notwithstanding the take-on of new customers, the volume 
decline trend continued in September 2012. This was further exacerbated by the protracted transport sector strike towards the end of 
September and into October 2012. This strike will have an effect on profitability. Nevertheless, in the absence of any unforeseen 
circumstances, the Board anticipates headline earnings to be similar to the previous year. This forecast has not been reviewed nor 
reported on by the Groups auditors. 

DECLARATION OF INTERIM DIVIDEND (NUMBER 12)
Generation of additional positive cash flows has enabled the Board to declare a 14% increase in the gross interim dividend to 8 cents 
per ordinary share which will be paid out of distributable reserves. The total STC credits utilised as part of this declaration amount 
to R446 943,17. The number of ordinary shares in issue at the date of this declaration is 198 627 386 and consequently the STC credits
 utilised per share amounts to 0,22502 cents per share. The dividend will be subject to a dividend withholding tax of 15% which amounts 
to 1,16625 cents per share. This will result in a net dividend of 6,83375 cents per share to those shareholders who are not exempt from 
paying dividend withholding tax. The tax reference number of Value Group Limited is 9319/054/71/5. The gross dividend is covered 2,9 times
by interim headline earnings and is payable to shareholders as follows: 
 
Declaration date                                Tuesday, 16 October 2012
Last day to trade cum dividend			Friday, 11 January 2013
Trading ex-dividend commences			Monday, 14 January 2013
Record date					Friday, 18 January 2013
Payment date					Monday, 21 January 2013 
Share certificates may not be dematerialised or rematerialised between Monday, 14 January 2013 and Friday, 18 January 2013, both days inclusive.



For and on behalf of the Board

C D Stein                       	S D Gottschalk
Chairman                         	Chief Executive Officer

Johannesburg
16 October 2012

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

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