Wrap Text
Reviewed condensed consolidated financial results for the year ended 28 February 2015
Value Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06)
ISIN: ZAE000016507
Share code: VLE
REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS
for the year ended 28 February 2015
HIGHLIGHTS
REVENUE
3%
Up 3% to R2 038,4 billion
Feb 15: R2 038,4b
Feb 14: R1 975,3b
HEADLINE EARNINGS PER SHARE
35%
Down 35% to 44,2 cents
Feb 15: 44,2c
Feb 14: 68,2c
EARNINGS PER SHARE
37%
Down 37% to 42,1 cents
Feb 15: 42,1c
Feb 14: 66,9c
NET ASSET VALUE PER SHARE
5%
Up 5% to 458,6 cents
Feb 15: 458,6c
Feb 14: 437,2c
FINAL DIVIDEND PER SHARE
29%
Down 29% to 12 cents
Feb 15: 12c
Feb 14: 17c
CASH GENERATED BY OPERATIONS
8%
Down 8% to R286,5 million
Feb 15: R286,5m
Feb 14: R311,1m
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
% Reviewed Audited
R000's change 2015 2014
Revenue 3 2 038 353 1 975 314
Cost of sales (1 258 868) (1 195 903)
Gross profit 779 485 779 411
Other income 11 403 8 128
Operating expenses (682 191) (620 682)
Operating profit (35) 108 697 166 857
Share of profit of equity-accounted
investees net of taxation 64 21
Investment income 13 511 12 071
Finance costs (30 297) (27 079)
Net profit before taxation 91 975 151 870
Taxation (23 815) (41 200)
Net profit for the year (38) 68 160 110 670
Other comprehensive income net of taxation
Foreign currency translation differences (92) 128
Total comprehensive income for the year 68 068 110 798
Owners: 68 340 110 798
Net profit for the year 68 432 110 670
Other comprehensive income net of taxation (92) 128
Non-controlling interest: (272) -
Net loss for the year (272) -
Other comprehensive income net of taxation - -
68 068 110 798
Earnings per share (cents) (note 2)
Basic (37) 42,1 66,9
Headline (35) 44,2 68,2
Diluted basic 41,7 64,0
Diluted headline 43,9 65,3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
% Reviewed Audited
R000’s change 2015 2014
Assets
Non-current assets 1 052 840 1 031 266
Property, vehicles, plant and equipment 1 022 644 986 896
Intangible assets 25 261 37 568
Loans 1 568 2 050
Equity-accounted investees 234 125
Deferred tax asset 3 133 4 627
Current assets 444 246 473 789
Inventories 51 743 64 890
Trade and other receivables 262 861 240 990
Current tax receivable 2 328 1 270
Cash and cash equivalents 127 314 166 639
Non-current assets held for sale 951 97
Total assets 1 498 037 1 505 152
Equity and liabilities
Total Equity 726 094 715 296
Non-current liabilities 355 447 338 584
Interest-bearing borrowings 181 230 165 383
Deferred tax 174 217 173 201
Current liabilities 416 496 451 272
Trade and other payables 312 706 366 695
Current portion of interest-bearing borrowings 101 973 83 805
Other financial liabilities 317 394
Current tax payable 1 151 88
Shareholders for dividend 349 290
Total equity and liabilities 1 498 037 1 505 152
Net asset value per share (cents) 5 458,6 437,2
CONSOLIDATED STATEMENT OF CASH FLOWS
% Reviewed Audited
R000’s change 2015 2014
Cash flows from operating activities 158 561 265 194
Cash generated by operations before movements in
working capital and proceeds on disposal of
rental assets 211 896 275 858
Proceeds on disposal of rental assets 74 599 35 207
Cash generated by operations (8) 286 495 311 065
Changes in working capital (54 076) 37 523
Net finance costs (16 786) (15 346)
Taxation paid (21 287) (28 314)
Cash available from operating activities 194 346 304 928
Dividends paid (35 785) (39 734)
Cash flows from investing activities (206 868) (195 985)
Cash flows from financing activities 9 020 (34 553)
Net change in cash and cash equivalents (39 287) 34 656
Translation difference on foreign bank accounts (38) 82
Cash and cash equivalents at beginning of year 166 639 131 901
Cash and cash equivalents at end of year 127 314 166 639
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
R000’s 2015 2014
Ordinary share capital and premium 10 841 10 841
A ordinary shares 10 10
Treasury shares (134 777) (109 679)
Balance at beginning of year (109 679) (99 670)
Treasury shares sold 635 545
Treasury shares acquired (25 733) (10 554)
Share-based payment reserve 23 891 20 322
Balance at beginning of year 20 322 16 717
Share-based payment expense 3 569 3 605
Foreign currency translation reserve 16 108
Balance at beginning of year 108 (20)
Foreign currency translation differences (92) 128
Retained income 826 385 793 694
Balance at beginning of year 793 694 722 239
Profit on disposal of treasury shares 103 532
Dividends paid (35 844) (39 747)
Net profit for the year 68 432 110 670
Total capital and reserves attributable to owners 726 366 715 296
Non-controlling interest (272) -
Equity contributed - -
Net loss for the year (272) -
Total Equity 726 094 715 296
SEGMENT INFORMATION
Reviewed Audited
R000’s 2015 2014
Total segment revenue 2 197 901 2 131 048
General distribution 1 658 564 1 634 090
Truck rental and other 417 522 382 761
Head office and other 121 815 114 197
Less: Inter-segment revenue 159 548 155 734
General distribution 5 621 4 991
Truck rental and other 33 374 38 714
Head office and other 120 553 112 029
External segment revenue 2 038 353 1 975 314
General distribution 1 652 943 1 629 099
Truck rental and other 384 148 344 047
Head office and other 1 262 2 168
Business segment results
General distribution 111 727 144 232
Truck rental and other 22 651 36 905
Head office and other (25 681) (14 280)
Operating segment results 108 697 166 857
Share of profit of equity-accounted
investees net of taxation 64 21
Investment income 13 511 12 071
Finance costs (30 297) (27 079)
Net profit before taxation 91 975 151 870
Total segment assets
General distribution 712 899 687 786
Truck rental and other 591 255 574 121
Head office and other 186 620 235 173
Segment assets 1 490 774 1 497 080
Loans 1 568 2 050
Equity-accounted investees 234 125
Deferred tax asset 3 133 4 627
Current tax receivable 2 328 1 270
Total assets 1 498 037 1 505 152
NOTES
1. Statement of compliance
The reviewed condensed consolidated 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 reviewed condensed consolidated financial results are in terms of IFRS and are consistent with those
applied in the previous consolidated annual financial statements. These results have been prepared under the
supervision of the Group Financial Director, Mr CL Sack.
The Group’s auditor, Baker Tilly SVG has reviewed these results.
The auditor’s unqualified review opinion does not necessarily report on all of the information contained in this
announcement. Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the auditor’s engagement they should obtain a copy of the auditor’s report together with the accompanying
financial information from the company’s registered office.
Reviewed Audited
R000’s 2015 2014
2. Headline earnings
2.1 Reconciliation between basic and headline earnings
Basic earnings attributable to owners 68 432 110 670
Loss on disposal of property, vehicles, plant and
equipment less taxation 3 511 2 229
Headline earnings 71 943 112 899
2.2 Number of ordinary shares of R0,001 each in issue
Actual 198 627 386 198 627 386
Weighted average 162 673 657 165 505 874
Diluted 164 028 447 172 797 925
2.3 Number of A ordinary shares of R0,001 each
in issue
Actual 10 429 010 10 429 010
3. Supplementary information
Depreciation 99 318 92 915
Amortisation of intangible assets 16 693 15 972
Depreciation and amortisation 116 011 108 887
4. Fair value measurement of financial instruments
4.1 Financial assets
Loans (Level 2) 1 568 2 050
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.
4.2 Financial liabilities
Foreign currency forward contracts (Level 2) 317 394
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,
forklift and commercial vehicle rental and leasing.
FINANCIAL REVIEW
The first half of 2015 was characterised by extremely challenging trading conditions. Since January 2014, high
unemployment rates, consumer debt exposure coupled with the protracted strike action in various sectors resulted in a further
deterioration in the South African economy. This led to negligible growth rates which had a material impact on first half
volumes and demand for the Group’s services. Rate pressures resulted in reduced annual escalations which were offset by
declining volumes. Trading conditions and the associated revenue from increased activity improved in the second half.
Accordingly, annual revenue increased marginally by 3% from R1,975 billion to R2,038 billion.
Cost increases have escalated disproportionately to revenue. In particular, labour rates increased by 8,25%. In
addition, increased maintenance and shrinkage costs contributed to gross margins reducing from 39,5% to 38,2%. Gross profit of
R779,5 million was generated.
Operating expenses increased by 9,9% driven predominantly by increased staff and training costs with the balance being
attributable to general overhead cost escalations.
Increased debt, mainly for the purposes of capital expenditure, resulted in net finance costs increasing by
R1,8 million.
Tax allowances derived from the extensive learnerships programme undertaken by the Group led to the reduction in the
effective tax rate from 27,1% to 25,9%.
Notwithstanding the 35% reduction in headline earnings to 44,2 cents per share, R74,6 million derived from the proceeds of
sale of rental assets boosted cashflows. Accordingly, cash generated by operations reduced by only 8% to R286,5 million.
Working capital, however, was negatively affected by the loss of a substantial prefunded clearing and forwarding account.
Consequently cash available from operating activities reduced by 36% to R194,3 million.
Total capital expenditure amounted to R213 million and comprised R135,6 million for vehicles, R29,1 million for
forklifts, R17,2 million for IT hardware and software, R27,2 million for plant and equipment and the balance of R3,9 million
for various other assets. This expenditure was funded mainly by internal cash resources with the balance of R34 million
being funded by interest bearing debt. In addition R25,7 million was spent on share repurchases.
Debt funding of the Group remains low with the Debt:Equity ratio of 39% being marginally below the target range.
The balance sheet remains sound with the asset base, cash flows and facilities being adequate to sustain the
operations of the Group.
OPERATIONAL REVIEW
General distribution segment
Annual rate increases were offset by reduced activity which contributed to revenue increasing only marginally from
R1,63 billion to R1,65 billion. Revenue was further affected by rate pressures. Increased subcontractor, shrinkage and
labour costs resulted in a 22,5% reduction in operating profits from R144,2 million to R111,7 million.
Truck rental and other segments
Improved turnover in the materials handling and truck rental divisions contributed to a 11,7% increase in revenue from
R344 million to R384,1million. The truck rental division, however, performed below expectation in the first half. In
addition, increased maintenance costs were incurred. Consequently, the segment’s operating profits reduced from
R36,9 million to R22,7 million.
Head office
Head office costs were negatively affected by increased staff, training and recruitment costs. In addition, the Group
embarked on an above-the-line marketing campaign which increased advertising costs.
INITIATIVES TO IMPROVE PROFITABILITY
Various initiatives commenced early in 2014 to address the low revenue growth rates and reduce operating and overhead
costs. These initiatives consist of the following:
- The sales team has been realigned under new management. The focus will be on growing new revenue streams from
existing and new customers.
- The acquisition strategy has been accelerated to diversify and grow revenue streams.
- Non profitable contracts have been terminated.
- A number of senior appointments have been made in key operational positions to further manage and streamline
processes and reduce associated costs.
- Older vehicles which were costly to maintain and operate continue to be disposed of.
- 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 which improves efficiencies.
- The Group has extended the functionality and quantity of dimensioners deployed in the Logistics division, which
further streamlines processes and improves billing accuracy.
- 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.
- Improved planning and routing tools have been implemented.
- All divisions have and will continue to undergo further in-depth operational analysis to consolidate and reduce
costs where possible.
CAPITAL EXPENDITURE
Capital expenditure for 2016 financial year will be materially reduced. Budgeted capital expenditure of R155,5 million
will be funded by a combination of internally generated cash flows and interest-bearing debt.
ACQUISITION
Effective 1 March 2015, Value Group acquired a majority stake in the business of Nucleus Chain Stores (Pty) Ltd. This
subsidiary focusses on both chain store and front door deliveries which is complimentary to that of the Group. The
acquisition encompasses a strong management and operational team. It is the Group’s intention to grow the business through
infrastructure, funding and IT support, in addition to leveraging synergies within the various divisions.
SHARE REPURCHASES
The Board considers the Group’s shares to be undervalued and accordingly embarked on a share repurchase programme. To date,
6,7 million shares were repurchased at a cost of R30,7 million. In March 2015 a quantity of 9,05 million shares were cancelled.
PROSPECTS
The new Cato Ridge facility in Durban and Joostenbergvlakte facility in Cape Town are now fully operational. The
investment in this infrastructure is expected to bode well for the Group’s future profitability.
New business has been procured, which will roll out in May and July 2015.
The trading environment is not expected to show a marked improvement. Projected economic growth of 2% does not bode
well to an already over-extended consumer. Consequently, the Group expects the challenging trading conditions to continue
in the new financial year.
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.
DECLARATION OF FINAL DIVIDEND (NUMBER 17)
Notwithstanding the drop in profitability, cash from operations remains sound. Cash resources and facilities are adequate to fund
future capital expenditure. Accordingly, the Board declared a gross final dividend of 12 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 189 573 786. The dividend will
be subject to a dividend withholding tax of 15% which amounts to 1,8 cents per share. This will result in a net dividend of 10,2 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 Wednesday, 13 May 2015
Last day to trade cum dividend Friday, 26 June 2015
Trading ex dividend commences Monday, 29 June 2015
Record date Friday, 3 July 2015
Payment date Monday, 6 July 2015
Share certificates may not be dematerialised or rematerialised between Monday, 29 June 2015 and Friday, 3 July 2015
both days inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
13 May 2015
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: 13/05/2015 03:54:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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