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Reviewed condensed consolidated financial results for the year ended 29 February 2016
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 29 February 2016
HIGHLIGHTS
REVENUE UP 1%
Feb 16: R2,062 billion
Feb 15: R2,038 billion
HEADLINE EARNINGS PER SHARE DOWN 16%
Feb 16: 37,2 cents
Feb 15: 44,2 cents
EARNINGS PER SHARE DOWN 16%
Feb 16: 35,4 cents
Feb 15: 42,1 cents
NET ASSET VALUE PER SHARE UP 5%
Feb 16: 480,8 cents
Feb 15: 458,6 cents
FINAL DIVIDEND PER SHARE UNCHANGED AT 12 CENTS
Feb 16: 12,0 cents
Feb 15: 12,0 cents
CASH FLOWS FROM OPERATING ACTIVITIES UP 11%
Feb 16: R175,7 million
Feb 15: R158,6 million
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
% Reviewed Audited
R000's change 2016 2015
Revenue 1 2 062 413 2 038 353
Cost of sales (1 256 458) (1 258 868)
Gross profit 805 955 779 485
Other income 13 967 11 403
Operating expenses (730 616) (682 191)
Operating profit (18) 89 306 108 697
Share of profit of equity-accounted investees 79 64
Investment income 14 631 13 511
Finance costs (30 932) (30 297)
Net profit before taxation 73 084 91 975
Taxation (18 889) (23 815)
Net profit for the year (20) 54 195 68 160
Other comprehensive income
Foreign currency translation differences 355 (92)
Total comprehensive income for the year 54 550 68 068
Owners: 55 284 68 340
Net profit for the year 54 929 68 432
Other comprehensive income 355 (92)
Non-controlling interest: (734) (272)
Net loss for the year (734) (272)
Other comprehensive income - -
54 550 68 068
Earnings per share (cents) (note 3)
Basic (16) 35,4 42,1
Headline (16) 37,2 44,2
Diluted basic 35,4 41,7
Diluted headline 37,1 43,9
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
% Reviewed Audited
R000’s change 2016 2015
Assets
Non-current assets 1 074 448 1 052 840
Property, vehicles, plant and equipment 1 039 515 1 022 644
Intangible assets 17 415 25 261
Goodwill 10 670 -
Loan receivable 1 776 1 568
Equity-accounted investees 313 234
Deferred tax asset 4 759 3 133
Current assets 440 268 444 246
Inventories 59 993 51 743
Trade and other receivables 276 124 262 861
Other financial assets 41 -
Current tax receivable 2 831 2 328
Cash and cash equivalents 101 279 127 314
Non-current assets held for sale 156 951
Total assets 1 514 872 1 498 037
Equity and liabilities
Equity 741 251 726 094
Non-current liabilities 342 956 355 447
Interest-bearing borrowings 163 346 181 230
Non interest-bearing borrowings 1 774 -
Deferred tax 177 836 174 217
Current liabilities 430 665 416 496
Trade and other payables 325 124 312 706
Current portion of interest-bearing borrowings 101 144 101 973
Vendor for acquisition 3 802 -
Other financial liabilities - 317
Current tax payable 147 1 151
Shareholders for dividend 448 349
Total equity and liabilities 1 514 872 1 498 037
Net asset value per share (cents) 5 480,8 458,6
CONSOLIDATED STATEMENT OF CASH FLOWS
% Reviewed Audited
R000’s change 2016 2015
Cash flows from operating activities 11 175 702 158 561
Cash generated by operations before 187 839 211 896
movements in working capital and proceeds
on disposal of rental assets
Proceeds on disposal of rental assets 52 063 74 599
Cash generated by operations 239 902 286 495
Changes in working capital (3 272) (54 076)
Net finance costs (16 301) (16 786)
Taxation paid (18 479) (21 287)
Cash available from operating activities 201 850 194 346
Dividends paid (26 148) (35 785)
Cash flows from investing activities (166 892) (206 868)
Cash flows from financing activities (35 153) 9 020
Net change in cash and cash equivalents (26 343) (39 287)
Translation difference 308 (38)
Cash and cash equivalents at beginning of year 127 314 166 639
Cash and cash equivalents at end of year 101 279 127 314
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
R000’s 2016 2015
Ordinary share capital and premium 10 829 10 841
Balance at beginning of year 10 841 10 841
Shares cancelled (12) -
A ordinary shares 10 10
Treasury shares (97 021) (134 777)
Balance at beginning of year (134 777) (109 679)
Treasury shares acquired (16 440) (25 733)
Treasury shares sold - 635
Treasury shares cancelled 54 196 -
Share-based payment reserve 27 184 23 891
Balance at beginning of year 23 891 20 322
Share-based payment expense 3 293 3 569
Foreign currency translation reserve 371 16
Balance at beginning of period 16 108
Foreign currency translation differences 355 (92)
Retained income 800 884 826 385
Balance at beginning of year 826 385 793 694
Profit on disposal of treasury shares - 103
Dividends paid (26 246) (35 844)
Shares cancelled (54 184) -
Net profit for the period 54 929 68 432
Total capital and reserves attributable to owners 742 257 726 366
Non-controlling interest (1 006) (272)
Balance at beginning of period (272) -
Net loss for the period (734) (272)
Equity 741 251 726 094
SEGMENT INFORMATION
Reviewed Audited
R000’s 2016 2015
Total segment revenue 2 232 688 2 197 901
General distribution 1 688 100 1 658 564
Truck rental and other 418 617 417 522
Head office and other 125 971 121 815
Less: Inter-segment revenue 170 275 159 548
General distribution 8 582 5 621
Truck rental and other 40 974 33 374
Head office and other 120 719 120 553
External segment revenue 2 062 413 2 038 353
General distribution 1 679 518 1 652 943
Truck rental and other 377 643 384 148
Head office and other 5 252 1 262
Business segment results
General distribution 91 271 111 727
Truck rental and other 22 931 22 651
Head office and other (24 896) (25 681)
Operating segment results 89 306 108 697
Share of profit of equity-accounted investees 79 64
Investment income 14 631 13 511
Finance costs (30 932) (30 297)
Net profit before taxation 73 084 91 975
Total Segment assets
General distribution 746 175 712 899
Truck rental and other 622 887 591 255
Head office and other 136 090 186 620
Segment assets 1 505 152 1 490 774
Loan receivable 1 776 1 568
Equity-accounted investees 313 234
Deferred tax asset 4 759 3 133
Other financial assets 41 -
Current tax receivable 2 831 2 328
Total assets 1 514 872 1 498 037
NOTES
1. Basis of preparation
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 IAS 34 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. A copy of their unmodified review report is
available for inspection at the Company’s registered office.
2. Business combinations
2.1 Business combination effected after the reporting date
The Group acquired 100% of the ordinary share capital of Key Distributors (Pty) Ltd (Key), the effective
date for the transaction being 1 March 2016. Key carries on the business of warehousing, distributing and
wholesaling a variety of fast moving consumer goods (FMCG) into the formal and informal trade, including
independent traders, fuel forecourts and small retailers. The acquisition offers the Group sought after
access into the informal market and will facilitate the opportunity for the Group to diversify its
business.
The cash consideration for the acquisition is R 32.7 million, payable in three tranches. The second and
third payments are subject to Key achieving certain profit warranties.
As part of the business combination, the following assets and liabilities were recognised at the acquisition
date:
Reviewed Audited
R000’s 2016 2015
- Goodwill 16 561 -
- Property, plant and equipment 14 034 -
- Inventories 36 816 -
- Other current assets 24 169 -
- Total liabilities 58 900 -
2.2 Business combination effected during the reporting period
On 1 March 2015, the Group acquired a majority stake, amounting to an 80% ownership interest in Core Logistix
(Pty) Ltd (“Core”) which acquired 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 R 12,7 million. R 7,1 million was paid in cash and the remaining
R5,6 million has been raised as loan accounts in favour of the vendor.
As part of the business combination, the following assets were recognised at the acquisition date:
- Goodwill 10 670 -
- Property, plant and equipment 1 103 -
- Cash and cash equivalents 900 -
Summary financial information for the year ended 29 February 2016:
- Revenue 54 609 -
- Net profit before tax 1 230 -
3. Headline earnings
3.1 Reconciliation between basic and headline earnings
Basic earnings attributable to owners 54 929 68 432
Loss on disposal of property, vehicles, plant and equipment less taxation 2 777 3 511
Headline earnings 57 706 71 943
3.2 Number of ordinary shares of R0,001 each in issue
Shares in issue 186 427 478 198 627 386
Shares in issue excluding treasury shares 154 389 406 158 322 055
Weighted average shares in issue 155 216 667 162 673 657
Diluted shares in issue 155 356 074 164 028 447
3.3 Number of A ordinary shares of R0,001 each in issue
Shares in issue, all held as treasury shares 10 429 010 10 429 010
4. Supplementary information
Depreciation 102 911 99 318
Amortisation of intangible assets 11 618 16 693
Depreciation and amortisation 114 529 116 011
5. Fair value measurement of financial instruments
5.1 Financial assets/(liabilities)
- Loans (Level 2) 1 776 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 (Level 2) 41 (317)
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
Over the last year, volumes in the logistics industry have declined to such an extent that the sector can be
classified as being in a recession. The effects thereof are evident in the Group’s 2016 year end results. Trading conditions
in the second half of the financial year proved to be very difficult. Peak volumes associated with the Christmas season did
not materialise with the result that year-to-date volumes were substantially less than that of the comparative period.
New business and annual escalations were offset by the volume decline with the result that revenue increased by a
marginal 1% from R2,038 billion to R2,062 billion.
Ongoing cost saving initiatives resulted in a reduction in labour, maintenance and fuel costs which contributed
positively to gross profit percentages improving from 38,2% to 39,1% with actual gross profit increasing by R26,5 million
to R806 million.
Operating expenses however, increased by 7,1% to R730,6 million, resulting in an 18% reduction in operating profit
from R108,7 million to R89,3 million.
An effective tax rate of 25,8% was maintained due to the ongoing tax allowance derived from learnerships.
Net profit for the year decreased by 20% to R54,2 million. Basic and headline earnings per share declined by 16% to
35,4 and 37,2 cents per share respectively.
Cash flows from operating activities improved by 11% from R158,6 million to R175,7 million. Although working capital
management improved, it was negatively affected by the late payment of certain large accounts. Positive cash balances
funded the R16,4 million spent on share buy backs in addition to the reduction of R18,7 million in interest-bearing debt
which reduced from R283,2 million to R264,5 million. The Group’s debt: equity ratio remains low at 37% which is well
within the guidelines set by the Group.
Total capital expenditure amounted to R165 million and comprised R54,5 million for vehicles, R59,7 million for
forklifts, R26,8 million for plant and equipment, R18,6 million for IT hardware and software and the balance of
R5,4 million for various other assets. This expenditure was funded by R55,3 million realised on the disposal of assets
and the remainder via internally generated cash flows.
OPERATIONAL REVIEW
General distribution segment
Revenue increased by R26,6 million to R1,68 billion mostly as a result of the inclusion of Core effective 1 March
2015. Excluding Core, revenue reduced due to a significant decline in volumes particularly over the Christmas period
and into 2016. This decline in the Logistics and Freightpak operations, together with the associated increased costs,
contributed to reducing the segment’s operating profits by 18,3% to R91,3 million.
Customer rate pressures and the ongoing reduction in volumes over the past few years have therefore necessitated an
extensive and detailed restructuring exercise in the Logistics and Freightpak breakbulk operations which changes will
encompass the following:
- All customer’s distribution profiles and associated rates are being recosted and adjusted where required.
- Right sizing of the various branch operations in line with the reductions in activity and volumes.
- Fleet and delivery frequencies are being re-assessed.
- Re-structuring of various activities and distribution methodologies.
The outcome of this restructuring will be a possible downscaling of the Logistics and Freightpak operations, whilst
simultaneously reducing costs and improving profitability. The restructuring is expected to be completed by the end
of the third quarter. Further restructuring may be required based on future prevailing market conditions.
The remaining operations comprising warehousing, dedicated distribution and express performed positively.
Truck rental and other segments
Revenue reduced marginally by R6,5 million to R377,6 million. Demand for truck rental and other services in the second
half was below that of the prior year. Notwithstanding this, the clearing and forwarding and truck rental operations
performed positively. Operating profit improved marginally to R22,9 million as a result of reduced maintenance and
various other cost reductions.
POST YEAR END ACQUISITION
Effective 1 March 2016, Value Group acquired 100% of the issued share capital of Key Distributors (Pty) Ltd (“Key”).
Key undertakes the warehousing, distribution and wholesaling of a variety of FMCG products into the formal and informal
sector, consisting of independent traders, fuel forecourts, and small retailers. Key currently operates in the Gauteng,
Polokwane, Nelspruit and Bloemfontein areas.
The acquisition includes a skilled, hands on and competent management team. Management will remain in the business for
a minimum of 4 years subsequent to the effective date.
As Key wholesales and delivers into the informal market, it offers Value vertical integration into this dynamic and
enterprising market. This acquisition will facilitate the opportunity for Value to diversify its business, whilst
leveraging off its core national infrastructure in its general distribution business. The transaction will enable Value
to own, expand and control its FMCG volumes. The Value infrastructure will provide Key with the opportunity to grow its
business nationally which will compliment certain of Value’s customers’ requirements to sell product into this
enterprising segment of the market.
PROSPECTS
The current economic environment is not expected to improve in the 2017 financial year. Increased interest rates, poor
projected growth and a depreciated exchange rate does not bode well for inflation nor consumer spend. These factors
will contribute to cost escalations, reduce consumption and compound pressure on existing volumes. However, to counter
these adverse market factors, it is anticipated that the restructuring and resizing of the Logistics and Freightpak
operations will contribute positively in the future. In addition, capital expenditure for the 2017 financial year will
be materially reduced. This will facilitate a reduction in interest bearing debt.
The Group continues to pursue acquisition opportunities that will compliment and improve revenue streams in the
existing divisions. The acquisition of Key Distributors (Pty) Ltd will open up new markets and opportunities for the
Group.
Key’s current food products and related goods will be expanded nationally by leveraging off its successful formula,
know-how and skills base. Synergies with Value’s infrastructure are expected to materialise. It is expected that Key
will contribute positively to the Group. These forecasts have not been audited nor reviewed by the Group’s auditors.
DECLARATION OF FINAL DIVIDEND (NUMBER 19)
The Group’s cashflows are expected to remain positive. Accordingly, the Board resolved to maintain and declare a
gross final dividend of 12 cents per ordinary share which will be paid out of distributable reserves for the year ended
29 February 2016. The number of ordinary shares in issue at the date of this declaration is 186 427 478. The dividend
will be subject to 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 9319054715. The dividend is payable to shareholders as follows:
Declaration date Wednesday, 11 May 2016
Last day to trade cum dividend Friday, 24 June 2016
Trading ex-dividend commences Monday, 27 June 2016
Record date Friday, 1 July 2016
Payment date Monday, 4 July 2016
Share certificates may not be dematerialised or rematerialized between Monday 27 June 2016 and Friday 1 July 2016,
both days inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
11 May 2016
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: 11/05/2016 05:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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