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Unaudited Interim Financial Results for the six months ended 31 August 2014
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 2014
FINANCIAL OVERVIEW
REVENUE
Up 4% to R984,9 million
| Aug 14: R984,9m | Aug 13: R946,6m |
HEADLINE EARNINGS PER SHARE
Down 81% to 4,9 cents
| Aug 14: 4,9c | Aug 13: 26,4c |
EARNINGS PER SHARE
Down 86% to 3,5 cents
| Aug 14: 3,5c | Aug 13: 25,4c |
NET ASSET VALUE PER SHARE
Up 5% to 424,8 cents
| Aug 14: 424,8c | Aug 13: 404,8c |
INTERIM DIVIDEND PER SHARE
Down 44% to 5 cents
| Aug 14: 5c | Aug 13: 9c |
CASH GENERATED BY OPERATIONS
Down 26% to R105,7 million
| Aug 14: R105,7m | Aug 13: R142,7m |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
% August August February
R000’s change 2014 2013 2014
Revenue 4 984 940 946 598 1 975 314
Cost of sales (621 123) (566 392) (1 195 903)
Gross profit 363 817 380 206 779 411
Other income 7 264 5 497 8 128
Operating expenses (355 103) (315 908) (620 682)
Operating profit (77) 15 978 69 795 166 857
Share of profit of associate net of taxation 22 17 21
Investment income 6 330 6 527 12 071
Finance costs (15 046) (17 141) (27 079)
Net profit before taxation 7 284 59 198 151 870
Taxation (note 2) (1 484) (17 103) (41 200)
Net profit for the period (86) 5 800 42 095 110 670
Other comprehensive income net of taxation
Foreign currency translation differences (41) 71 128
Total comprehensive income for the period 5 759 42 166 110 798
Earnings per share (cents) (note 3)
- Basic (86) 3,5 25,4 66,9
- Headline (81) 4,9 26,4 68,2
- Diluted basic 3,4 24,0 64,0
- Diluted headline 4,7 25,0 65,3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
% August August February
R000’s change 2014 2013 2014
Assets
Non-current assets 1 053 554 1 054 146 1 031 266
Property, vehicles, plant and equipment 1 016 352 1 005 020 986 896
Intangible assets 30 869 43 257 37 568
Investments and loans 146 120 2 175
Deferred tax 6 187 5 749 4 627
Current assets 481 466 461 733 473 789
Inventories 56 909 65 400 64 890
Investments and loans 2 000 3 301 -
Trade and other receivables 290 541 273 432 240 990
Taxation in advance 4 938 821 1 270
Cash and cash equivalents 127 078 118 779 166 639
Non-current assets held for sale 2 176 97 97
Total assets 1 537 196 1 515 976 1 505 152
Equity and liabilities
Equity 695 012 670 320 715 296
Non-current liabilities 330 718 377 405 338 584
Interest-bearing borrowings 158 782 214 132 165 383
Deferred tax 171 936 163 273 173 201
Current liabilities 511 466 468 251 451 272
Trade and other payables 418 594 367 090 366 695
Current portion of interest-bearing borrowings 90 051 98 586 83 805
Other financial liabilities 285 121 394
Current tax payable 2 187 2 161 88
Shareholders for dividend 349 293 290
Total equity and liabilities 1 537 196 1 515 976 1 505 152
Net asset value per share (cents) 5 424,8 404,8 437,2
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
% August August February
R000’s change 2014 2013 2014
Cash flows from operating activities 81 651 100 841 265 194
Cash generated by operations before
proceeds on disposal of rental assets 69 529 124 821 275 858
Proceeds on disposal of rental assets 36 168 17 836 35 207
Cash generated by operations (26) 105 697 142 657 311 065
Net finance costs (8 716) (10 808) (15 346)
Changes in working capital 18 294 6 528 37 523
Taxation paid (5 869) (12 710) (28 314)
Cash available from operating activities 109 406 125 667 304 928
Dividends paid (27 755) (24 826) (39 734)
Cash flows from investing activities (120 842) (153 471) (195 985)
Cash flows from financing activities (355) 39 531 (34 553)
Net change in cash and cash equivalents (39 546) (13 099) 34 656
Translation difference (15) (23) 82
Cash and cash equivalents at beginning of period 166 639 131 901 131 901
Cash and cash equivalents at end of period 127 078 118 779 166 639
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
August August February
R000’s 2014 2013 2014
Ordinary share capital and premium 10 841 10 841 10 841
A ordinary shares 10 10 10
Treasury shares (109 679) (99 125) (109 679)
Balance at beginning of period (109 679) (99 670) (99 670)
Treasury shares sold - 545 545
Treasury shares acquired - - (10 554)
Share-based payment reserve 22 093 18 519 20 322
Balance at beginning of period 20 322 16 717 16 717
Share-based payment expense 1 771 1 802 3 605
Foreign currency translation reserve 67 51 108
Balance at beginning of period 108 (20) (20)
Foreign currency translation differences (41) 71 128
Retained income 771 680 740 024 793 694
Balance at beginning of period 793 694 722 239 722 239
Profit on disposal of treasury shares - 532 532
Dividends paid (27 814) (24 842) (39 747)
Net profit for the period 5 800 42 095 110 670
Total capital and reserves 695 012 670 320 715 296
SEGMENT INFORMATION
Unaudited Unaudited Audited
August August February
R000’s 2014 2013 2014
Total segment revenue 1 064 137 1 023 543 2 131 048
General distribution 809 782 788 183 1 634 090
Truck rental and other 193 579 178 948 382 761
Head office and other 60 776 56 412 114 197
Less: Inter-segment revenue 79 197 76 945 155 734
General distribution 2 510 3 577 4 991
Truck rental and other 16 515 16 969 38 714
Head office and other 60 172 56 399 112 029
External segment revenue 984 940 946 598 1 975 314
General distribution 807 272 784 606 1 629 099
Truck rental and other 177 064 161 979 344 047
Head office and other 604 13 2 168
Business segment results
General distribution 32 073 61 204 144 232
Truck rental and other (3 572) 11 947 36 905
Head office and other (12 523) (3 356) (14 280)
Operating segment results 15 978 69 795 166 857
Share of profit of associate net of taxation 22 17 21
Investment income 6 330 6 527 12 071
Finance costs (15 046) (17 141) (27 079)
Net profit before taxation 7 284 59 198 151 870
Total segment assets
General distribution 683 542 703 099 687 786
Truck rental and other 587 815 562 102 574 121
Head office and other 252 568 240 784 235 173
Segment assets 1 523 925 1 505 985 1 497 080
Investments and loans 2 146 3 421 2 175
Deferred tax 6 187 5 749 4 627
Taxation in advance 4 938 821 1 270
Total assets 1 537 196 1 515 976 1 505 152
NOTES
1. Statement of compliance
The unaudited interim financial results are prepared in accordance with the requirements of the JSE Limited
Listings Requirements for provisional reports and the requirements of the Companies Act of South Africa.
The Listings Requirements require provisional reports to be prepared in accordance with the framework
concepts and the measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and to also, as a minimum, contain the
information required by IAS34 Interim Financial Reporting. The accounting policies applied in the preparation
of the unaudited interim financial results are in terms of IFRS and are consistent with those applied in the
consolidated annual financial statements for the year ended 28 February 2014. The interim financial results
have been prepared under the supervision of the Group Financial Director, Mr CL Sack.
Unaudited Unaudited Audited
August August February
R000’s 2014 2013 2014
2. Taxation
Dividend withholding tax included in taxation 28 24 39
3. Headline earnings
3.1 Reconciliation between basic and headline earnings
Basic earnings 5 800 42 095 110 670
Loss on disposal of property, vehicles, plant and
equipment less taxation 2 221 1 638 2 229
Headline earnings 8 021 43 733 112 899
3.2 Number of ordinary shares of R0,001 each in issue
Actual 198 627 386 198 627 386 198 627 386
Weighted average 163 613 294 165 430 685 165 505 874
Diluted 171 411 563 175 108 247 172 797 925
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 48 856 45 318 92 915
Amortisation of intangible assets 9 253 8 056 15 972
Depreciation and amortisation 58 109 53 374 108 887
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,
forklift and commercial vehicle rental and leasing.
FINANCIAL REVIEW
Trading conditions have proven to be extremely challenging. Since January 2014, high unemployment rates, consumer debt
exposure coupled with the protracted strike action in various sectors has resulted in a further deterioration in the
South African economy. This has led to negligible growth rates which have had a material impact on volumes and demand for
the Group’s services. Consequently, revenue increased marginally by 4% from R946,6 million to R984,9 million. Rate
pressures resulted in reduced annual escalations which were offset by declining volumes. New business growth net of lost
business was negligible.
Statutory and inflationary cost increases have escalated disproportionately to revenue. Labour increased by 8% with
fuel increasing on average by 10% throughout the period. In addition, increased maintenance, shortages, wages and
subcontractor costs contributed to gross profits declining by R16,4 million to R363,8 million with gross margins reducing from
40,2% to 36,9%.
Operating expenses increased by 12,4% driven predominantly by increased employment and training costs with the balance
being attributable to general overhead cost escalations.
Reduced average debt levels throughout the period contributed to net finance costs reducing by R2,1 million. The
effective tax rate has reduced from 28,9% to 20,4% due to the tax allowance derived from the learnerships. Comprehensive
income for the period decreased by 86% to R5,8 million with headline earnings per share reducing by 81% from 26,4 cents to
4,9 cents per share.
The poor trading results and the end of the interim period falling on a Sunday led to a 19% reduction in cash flows.
Cash flows, however, remained solid with collections exceeding expectation. Total capital expenditure amounted to R123
million and comprised R90,1 million for vehicles, R13,2 million for forklifts, R10,1 million for IT hardware and software,
R6,5 million for plant and equipment and the balance of R3,1 million for various other assets. This expenditure was
effectively fully funded by cash flows and cash balances.
Interest-bearing debt remained unchanged in comparison to February 2014. The balance sheet remains sound with the
asset base, cash flows and facilities being adequate to sustain the operations of the Group.
ONGOING INITIATIVES
Various ongoing initiatives commenced early in 2014 to address the low revenue growth rates and reduce operating and
overhead costs. These consist of the following:
- The state of the economy has made it very difficult to grow revenue particularly in view of reducing volumes. The
sales team is being realigned across the board. The focus will be on growing new revenue streams from existing and new
customers.
- Non-profitable business has either been terminated or rates adjusted in accordance with activity requirements.
- A number of senior appointments have been made in key operational positions to further manage and streamline
processes and associated costs.
- Reduced activity over the last few years has resulted in the accelerated disposal of older vehicles which have been
costly to maintain and operate.
- A number of IT and mobile initiatives have been implemented in the Logistics division. This has resulted in further
control and visibility in the movement of freight. In addition, the Group has extended the functionality and quantity
of dimensioners deployed in the Logistics division, which further streamlines processes and improves accuracy of billing.
- Various operations and divisions are being restructured. Certain smaller branches which house a number of business
units have been consolidated under one operation. Support divisions have been tasked to reduce their cost base.
- A number of new fuel efficient vehicles have been procured to match the reduced volume requirements of the customer
base. In addition, improved planning and routing tools have been implemented.
- All divisions have and will continue to undergo in depth operational analysis to consolidate and reduce costs where
possible.
OPERATIONAL REVIEW
General distribution segment
Annual increases were offset by reduced activity which contributed to revenue increasing by 2,9% from R784,6 million
to R807,3 million. Revenue was further affected by rates pressures. Increased subcontractor, shortages and labour costs
resulted in a 48% reduction in operating profits from R61,2 million to R32,1 million.
Truck Rental and other segments
Improved turnover in the Materials Handling division contributed to a 9,3% increase in revenue from R162 million to
R177,1 million. The Truck Rental division, however, performed well below expectation due to a further reduction for truck
rental services. In addition, increased maintenance costs were incurred. Consequently, the segment incurred a loss of
R3,6 million.
Head office
Head office costs were negatively affected by increased employment, training and recruitment costs. In addition, the
Group has embarked on an above-the-line marketing campaign which increased advertising costs.
CAPITAL EXPENDITURE
Capital expenditure for the remainder of the 2015 financial year is expected to be approximately R62,9 million. This
will be funded by a combination of internally generated cash flows and interest-bearing debt. Capital expenditure in 2016
is expected to be materially less than that incurred for the 2015 financial year.
PROSPECTS
Consumer confidence fell in the third quarter driven by the economy’s poor growth prospects, increasing interest rates
and inflationary pressures. It is expected that the associated financial burdens will continue to impact consumption
which does not bode well for the economy nor the Group’s ability to grow its volume base.
Due to cyclicality of trading activity, in the second half, volumes are expected to increase over the Christmas period,
however, the extent of the increase is unknown. Initiatives highlighted above are bearing positive results albeit not
at the required pace. Consequently, the difficult trading conditions experienced are expected to improve for the
remainder of the financial year. This forecast has not been audited nor reviewed by the Group’s auditors.
The Group remains committed to its acquisitive growth strategy by leveraging off its intellectual property,
infrastructure, low gearing, positive cash balances and strong cash flows. The Group seeks to invest not only in businesses
that complement existing divisions, but also in those that will diversify and grow new revenue streams. Various acquisition
opportunities continue to be evaluated and actively pursued both in South Africa and its neighbouring countries.
DECLARATION OF INTERIM DIVIDEND (NUMBER 16)
Notwithstanding the poor results, cash from operations remains strong. Cash resources and facilities are adequate to
fund future capital expenditure. Accordingly, the Board declared a gross interim dividend of 5 cents per ordinary share
which will be paid out of distributable reserves. The total STC credits utilised as part of this declaration amount to
R316,94. 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 0,00016 cents per share. The dividend will be subject to a dividend withholding tax
of 15% which amounts to 0,74998 cents per share. This will result in a net dividend of 4,25002 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 dividend is payable to shareholders as follows:
Declaration date Tuesday, 14 October 2014
Last day to trade cum dividend Friday, 9 January 2015
Trading ex-dividend commences Monday, 12 January 2015
Record date Friday, 16 January 2015
Payment date Monday, 19 January 2015
Share certificates may not be dematerialised or rematerialised between Monday, 12 January 2015 and Friday, 16 January 2015
both days inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
14 October 2014
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: 14/10/2014 03:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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