Wrap Text
Condensed Consolidated Unaudited Interim Financial Results for the six months ended 31 August 2017
Value Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06)
ISIN number: ZAE000016507
Share code: VLE
Condensed consolidated unaudited interim financial results
for the six months ended 31 August 2017
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
HIGHLIGHTS
REVENUE R1.228bn UP by 2%
NORMALISED HEADLINE EARNINGS PER SHARE
excluding once-off BEE equity transaction costs 17.8 cents UP by 24%
HEADLINE EARNINGS PER SHARE 5.4 cents DOWN by 63%
EARNINGS PER SHARE 4.8 cents DOWN by 64%
CASH GENERATED BY OPERATIONS R102.8m UP by 4%
NET ASSET VALUE PER SHARE 524.5 cents UP by 8%
INTERIM DIVIDEND PER SHARE 8 cents UP by 33%
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
% August August February
R000’s change 2017 2016 2017
Revenue* 2% 1 228 301 1 204 241 2 468 923
Cost of sales* (851 471) (813 376) (1 653 373)
Gross profit 376 830 390 865 815 550
Other income** 10 853 7 979 25 092
Operating expenses (346 143) (363 401) (697 378)
Operating profit before once-off
BEE equity transaction costs 17% 41 540 35 443 143 264
Once-off BEE equity transaction costs (19 003) - -
Operating profit (36%) 22 537 35 443 143 264
Share of profit of equity-
accounted investees 17 28 44
Fair value adjustment** 813 3 818 (509)
Investment income* 3 083 467 1 594
Finance costs* (9 613) (13 670) (24 046)
Net profit before taxation 16 837 26 086 120 347
Taxation (10 976) (6 043) (36 740)
Net profit for the period (71%) 5 861 20 043 83 607
Other comprehensive income
Foreign currency
translation differences 170 124 (192)
Total comprehensive
income for the period 6 031 20 167 83 415
Owners: 7 546 21 039 88 149
Net profit for the period 7 376 20 915 88 341
Other comprehensive income 170 124 (192)
Non-controlling interest: (1 515) (872) (4 734)
Net loss for the period (1 515) (872) (4 734)
Other comprehensive income - - -
6 031 20 167 83 415
Earnings per share (cents) (note 2)
Basic (64%) 4.8 13.5 57.2
Headline (63%) 5.4 14.4 61.9
Normalised headline 24% 17.8 14.4 61.9
Diluted basic (64%) 4.8 13.5 57.2
Diluted headline (63%) 5.4 14.4 61.9
Normalised diluted headline 24% 17.8 14.4 61.9
*Restated for the application of circular 2/2017 as detailed in note 6.2
**Restated as detailed in note 6.1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
% August August February
R000’s change 2017 2016 2017
Assets
Non-current assets 1 036 346 1 071 850 1 028 466
Property, vehicles,
plant and equipment 997 482 1 015 896 990 573
Intangible assets 10 977 14 668 12 655
Goodwill 20 152 27 231 20 152
Loan receivable 1 472 1 470 1 568
Equity-accounted investees 374 341 357
Deferred tax asset 5 889 12 244 3 161
Current assets 521 993 488 644 502 371
Inventories 77 320 99 600 67 033
Trade and other receivables 330 046 326 195 298 900
Other financial assets 9 247 12 760 8 434
Current tax receivable 2 873 1 738 1 551
Cash and cash equivalents 102 507 48 351 126 453
Non-current assets held for sale 10 753 668 10 701
Total assets 1 569 092 1 561 162 1 541 538
Equity and liabilities
Equity 792 084 744 572 799 598
Non-current liabilities 296 465 339 949 308 336
Interest-bearing borrowings 116 380 151 440 121 341
Non interest-bearing borrowings - 2 535 2 535
Vendor for acquisition - 3 268 3 268
Deferred tax 180 085 182 706 181 192
Current liabilities 480 543 476 641 433 604
Trade and other payables 400 135 371 441 345 291
Bank overdraft - 4 067 -
Current portion of interest-
bearing borrowings 76 061 86 874 77 703
Vendor for acquisition 3 268 9 804 9 804
Other financial liabilities 96 255 123
Current tax payable 401 3 755 161
Shareholders for dividend 582 445 522
Total equity and liabilities 1 569 092 1 561 162 1 541 538
Net asset value per share (cents) 8% 524.5 483.5 522.5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
August August February
R000’s 2017 2016 2017
Ordinary share capital and premium 10 829 10 829 10 829
A ordinary shares 10 10 10
Treasury shares (104 142) (97 021) (97 817)
Balance at beginning of period (97 817) (97 021) (97 021)
Treasury shares acquired (6 597) - (796)
Treasury shares sold 272 - -
Share-based payment reserve 50 897 28 955 30 792
Balance at beginning of period 30 792 27 184 27 184
Share-based payment expense 20 105 1 771 3 608
Foreign currency translation reserve 349 495 179
Balance at beginning of period 179 371 371
Foreign currency translation differences 170 124 (192)
Retained income 841 396 803 182 861 345
Balance at beginning of period 861 345 800 794 800 794
Dividends paid (27 432) (18 527) (27 790)
Profit on disposal of treasury shares 107 - -
Net profit for the period 7 376 20 915 88 341
Total capital and reserves attributable to owners 799 339 746 450 805 338
Non-controlling interest (7 255) (1 878) (5 740)
Balance at beginning of period (5 740) (1 006) (1 006)
Net loss for the period (1 515) (872) (4 734)
Equity 792 084 744 572 799 598
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
% August August February
R000’s change 2017 2016 2017
Cash flows from operating activities 109% 66 400 31 807 197 435
Cash generated by operations
before movements in working capital
and proceeds on disposal
of rental assets* 91 096 81 714 261 038
Proceeds on disposal of rental assets 11 706 17 040 35 129
Cash generated by operations 4% 102 802 98 754 296 167
Changes in working capital 13 418 (17 506) (14 178)
Net finance costs* (6 530) (13 203) (22 452)
Taxation paid (15 918) (8 023) (34 386)
Cash available from operating activities 93 772 60 022 225 151
Dividends paid (27 372) (28 215) (27 716)
Cash flows from investing activities** (77 591) (52 434) (95 603)
Purchase of property, vehicles,
plant and equipment (68 656) (38 041) (81 027)
Purchase of intangible assets (1 893) (2 613) (5 050)
Proceeds on disposal of property,
vehicles, plant and equipment 2 306 1 935 3 622
Proceeds on disposal of non-current
assets held for sale 256 262 829
Payment of vendor - Core
Logistix acquisition - (3 802) (3 802)
Payment of vendor - Key
Distributors acquisition (9 804) - -
Acquisition of subsidiaries - (10 175) (10 175)
Decrease in loan receivable 200 - -
Cash flows from financing activities (12 821) (26 435) (66 500)
Repayment of loans (6 603) (27 196) (66 467)
Loans raised - 761 761
Treasury shares acquired (6 597) - (794)
Treasury shares sold 379 - -
Net change in cash and cash equivalents (24 012) (47 062) 35 332
Translation difference 66 4 (221)
Cash and cash equivalents
at beginning of period 126 453 91 342 91 342
Cash and cash equivalents at end of period 102 507 44 284 126 453
SEGMENT INFORMATION
Unaudited Unaudited Audited
August August February
R000’s 2017 2016 2017
Total segment revenue* 1 301 086 1 283 727 2 619 187
General distribution 750 357 786 885 1 600 180
Truck rental and other 198 759 195 827 403 487
Retail Logistics 295 977 240 102 500 800
Head office and other 55 993 60 913 114 720
Less: Inter-segment revenue 72 785 79 486 150 264
General distribution 2 228 3 820 6 103
Truck rental and other 15 556 15 307 29 850
Retail Logistics - - -
Head office and other 55 001 60 359 114 311
External segment revenue* 1 228 301 1 204 241 2 468 923
General distribution 748 129 783 065 1 594 077
Truck rental and other 183 203 180 520 373 637
Retail Logistics 295 977 240 102 500 800
Head office and other 992 554 409
Business segment results*
General distribution 25 258 29 697 103 473
- Trading profit 25 258 29 697 110 552
- Goodwill impairment - - (7 079)
Truck rental and other 19 768 14 526 39 611
Retail Logistics 3 571 218 3 484
Head office and other (7 057) (8 998) (3 304)
Operating segment results 41 540 35 443 143 264
Once-off BEE equity transaction costs (19 003) - -
Share of profit of equity-accounted investees 17 28 44
Fair value adjustment** 813 3 818 (509)
Investment income* 3 083 467 1 594
Finance costs* (9 613) (13 670) (24 046)
Net profit before taxation 16 837 26 086 120 347
Total segment assets
General distribution 726 442 749 661 711 629
Truck rental and other 578 074 601 280 585 509
Retail Logistics 103 929 71 112 94 187
Head office and other 140 792 110 556 135 142
Segment assets 1 549 237 1 532 609 1 526 467
Loan receivable 1 472 1 470 1 568
Equity-accounted investees 374 341 357
Deferred tax asset 5 889 12 244 3 161
Other financial assets 9 247 12 760 8 434
Current tax receivable 2 873 1 738 1 551
Total assets 1 569 092 1 561 162 1 541 538
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.
Unaudited Unaudited Audited
August August February
R000’s 2017 2016 2017
2. Headline earnings
2.1. Reconciliation between basic
and headline earnings
Basic earnings attributable to owners 7 376 20 915 88 341
Loss on disposal of property, vehicles,
plant and equipment 1 189 1 813 2 100
Less: tax effect of loss on disposal
of property, vehicles plant and equipment (321) (482) (541)
Goodwill impairment - - 7 079
Less: minority interest effect
of goodwill impairment - - (1 416)
Headline earnings 8 244 22 246 95 563
Once-off BEE equity transaction costs 19 003 - -
Normalised headline earnings 27 247 22 246 95 563
2.2. Number of ordinary shares of
R 0.001 each in issue
Shares in issue 186 427 478 186 427 478 186 427 478
Shares in issue excluding treasury shares 152 398 639 154 389 406 154 145 746
Weighted average shares in issue 152 752 260 154 389 406 154 388 749
Diluted shares in issue 152 916 834 154 454 833 154 388 749
2.3. Number of A ordinary shares of
R 0.001 each in issue
Shares in issue 10 429 010 10 429 010 10 429 010
3. Supplementary information
Depreciation 49 200 53 527 99 247
Amortisation of intangible assets 3 571 5 105 9 801
Depreciation and amortisation 52 771 58 632 109 048
4. Fair value measurement of financial instruments
4.1. Financial assets/(liabilities)
Cash and cash equivalents (Level 1) 102 507 44 284 126 453
Due to the short-term nature of cash
and cash equivalents, and the fact that
the Group only deposits cash with reputable
banks with high credit ratings, the face
value of the balances is considered
to reflect its fair value.
Investment in insurance cell captive (Level 2) 9 247 12 760 8 434
The net asset value is used as a
valuation technique where the underlying
assets and liabilities have been assessed
to represent the fair value of the
investment. Due to the nature of the
investment, specifically the significant
composition of the liquid assets and
liabilities, the net asset value is seen
to be the most appropriate representation
of fair value.
Foreign currency forward contracts (Level 2) (96) (255) (123)
Forward exchange contracts are marked
to market at period end. The inputs used in
the calculation are the foreign currency
amounts stated in the contract, the equivalent
Rand amount at the start of the contract and the
Rand revaluation rate at period end.
5. Related party transactions
Significant transactions with related parties
include market related rentals paid to
companies controlled by
Mr. SD Gottschalk, CEO of Value Group Limited. 93 878 87 241 175 993
6. Restatement of prior period reported items / errors
6.1 Insurance cell fair value adjustment
The fair value adjustment for the comparative period has now been separated from other income, in
line with the disclosure treatment in the annual report.
6.2 Application of Circular 2/2017
In prior years the Group applied the guidance in Circular 9/2006 to determine the fair value of
revenue and purchases. It was concluded that revenue, cost of sales and other expenditure included an
interest element which was separately disclosed in investment income and finance costs.
In June 2017 SAICA issued Circular 2/2017 which replaces Circular 9/2006. Circular 2/2017 stipulates
the factors to be considered, at a transaction level, in determining whether a transaction contains a
financing element.
No transactions have been identified which contained a financing element when applying the factors
contained in Circular 2/2017.
The comparative figures in respect of 6.1 and 6.2 have therefore been restated as follows:
Impact of change August 2016:
R000’s Previously Impact
stated of
change Restated
Effect on statement of comprehensive income
Revenue 1 197 936 6 305 1 204 241
Cost of sales (810 948) (2 428) (813 376)
Other income 11 797 (3 818) 7 979
Fair value adjustment - 3 818 3 818
Investment income 6 772 (6 305) 467
Finance costs (16 098) 2 428 (13 670)
Effect on statement of cash flows
Cash generated by operations before
movements in working capital and
proceeds on disposal of rental assets 81 655 59 81 714
Net finance costs (9 326) (3 877) (13 203)
Cash flows from investing activities (56 252) 3 818 (52 434)
Impact of change February 2017
R000’s Previously Impact
stated of
change Restated
Effect on statement of comprehensive income
Revenue 2 452 766 16 157 2 468 923
Cost of sales (1 645 066) (8 307) (1 653 373)
Investment income 17 751 (16 157) 1 594
Finance costs (32 353) 8 307 (24 046)
Effect on statement of cash flows
Cash generated by operations before
movements in working capital and
proceeds on disposal of rental assets 253 188 7 850 261 038
Net finance costs (14 602) (7 850) (22 452)
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, fleet management, as well as materials handling and commercial vehicle
rental and leasing. The Group’s retail segment supplies FMCG products into the convenience, formal
and informal market.
FINANCIAL REVIEW
The Board is pleased to announce an improvement in the Group’s pre BEE equity transaction earnings
notwithstanding the economic and political conditions which continues to impact the local
environment. These market conditions affected Group revenue which increased by a marginal 2% to
R1,228 billion. The challenges encountered necessitated a proactive and innovative approach by the
management team to undertake an ongoing extensive restructuring exercise where operational
efficiencies were improved whilst simultaneously saving costs. Although savings were realised,
reduction in revenue in the breakbulk operations of the general distribution segment contributed to
gross profits reducing from R390,9 million to R376,8 million. The Group has successfully reduced its
overhead cost base. Accordingly, operating costs reduced by R17,3 million from R363,4 million to
R346,1 million which resulted in operating profits for the period increasing by 17% to R41,5 million.
Subsequent to shareholders’ approval of an extension of the Group’s BBBEE ownership transaction, a
once off IFRS 2 non cash flow share based payment charge of R18,2 million was incurred. This charge,
in addition to the R0,8 million transaction costs, resulted in a once-off R19 million BEE transaction
cost which has reduced operating profit by 36% from R35,4 million to R22,5 million.
Reduction in average debt levels, improvements in working capital management and cash generated
contributed to cash flows from operating activities increasing by 109% to R66,4 million. As a result,
net finance costs decreased from R13,2 million to R6,5 million. This significant saving was achieved
notwithstanding the Group’s R70,6 million investment in capital expenditure.
The effective tax rate has increased from 23,2% to 65,2% primarily due to the BEE transaction costs
which are not tax deductible. Accordingly, net profit after tax attributable to the Group reduced by
71% to R5,9 million resulting in basic earnings per share reducing by 64% to 4,8 cents per share and
headline earnings per share reducing by 63% to 5,4 cents per share. Excluding the BEE transaction
costs, normalised headline earnings improved by 24% from 14,4 cents to 17,8 cents per share.
Capital expenditure incurred during the period increased by R29,9 million to R70,6 million and
comprised R55,7 million for vehicles, R2,9 million for materials handling equipment, R5,7 million for
plant and equipment, R3,5 million for IT hardware and software and the balance of R2,8 million for
various other assets. This expenditure, in addition to the settlement of an instalment pertaining to
the acquisition of Key Distributors (Pty) Ltd (Key), was funded by R14,3 million realised on the
disposal of assets, internally generated cash flows and positive cash balances. Positive cash
balances were also utilised to reduce interest bearing borrowings by R6,6 million to R192,4 million.
The Group’s debt:equity ratio remains low at 25,3%.
OPERATIONAL REVIEW
General distribution segment
Poor GDP growth and customer and competitor rate pressures in the segment have resulted in a decrease
in volumes and revenue in the breakbulk operations. Accordingly, revenue reduced by 5% from R783,1
million to R748,1 million. This was partly counteracted by the extensive ongoing restructuring
exercise which yielded sustainable overhead and operating cost savings. Pricing pressures and reduced
activity, however, contributed to an under recovery of infrastructure costs. Accordingly, operating
profit reduced by R4,4 million to R25,3 million. Further restructuring is underway.
The remaining operations comprising a significant portion of the segment, being warehousing,
dedicated distribution and express, performed satisfactorily
Truck rental and other segments
Revenue increased by 2% from R180,5 million to R183,2 million. The increase was driven by revenue
growth in the truck rental and material handling divisions. In the previous financial year, the truck
rental footprint was reviewed and necessitated the closure of smaller non-viable depots. In addition,
staff reductions and the disposal of older vehicles has resulted in reduced overheads and containment
of maintenance costs. Accordingly, operating margins improved from 8% to 10,8% with operating profit
increasing by 37% from R14,5 million to R19,8 million.
Retail logistics segment
Key was acquired effective 1 March 2016. The business undertakes the warehousing, distribution and
wholesaling of a variety of FMCG products into the convenience, formal and informal sector,
consisting primarily of independent traders, fuel forecourts, and small retailers. Key operates in
the Gauteng, Polokwane, Nelspruit, Bloemfontein and Western Cape areas. In March 2017, the business’s
core operations moved into Value’s facility in Johannesburg which provides the infrastructure
necessary to grow its revenue and footprint. Key’s management continues to drive and grow the
business and outperform expectations. Revenue increased by 23% to R296 million.
Notwithstanding reduced losses in existing wholesaling initiatives and the additional expansionary
costs incurred by Key, segmental operating profit increased from R0,2 million to R3,6 million.
SHARE REPURCHASES
During the current period 1,9 million shares were acquired and are currently held in treasury. Total
share repurchase costs incurred to date amounts to R6,6 million. The Group will continue to
repurchase shares as the opportunities arise.
BEE
The BEE ownership transactions which were concluded seven years ago matured in the current financial
year. Due to the depressed share price, the BEE entities’ funding liabilities exceeded the equity
values. Consequently, the Board proposed a 5 year extension to the transactions which was approved by
shareholders on 21 July 2017.
FUTURE CAPITAL EXPENDITURE
Capital expenditure for the remainder of the 2018 financial year is forecast to approximate R50
million, consisting primarily of materials handling equipment and vehicle additions. This capital
expenditure will be funded by internally generated cash flows and interest bearing debt.
PROSPECTS
South Africa’s economic and political challenges continue to hamper GDP recovery. Consumers are
financially stressed. This does not bode well for an improvement in the economy in the short term.
Traditionally, the Group’s earnings in the second half improve due to increased volumes and activity
over the festive season. The anticipated procurement of new accounts in the second half is expected
to offset the volume decline in the breakbulk operations. Management is actively pursuing further
revenue growth opportunities to counteract the negative volume trend. The other divisions of Value
are operating in accordance with expectation. Additional restructuring opportunities are being
pursued to extract savings in operational and overhead costs. The Group’s reduced cost base positions
it favourably to benefit from any increases in revenue. With the increase in activity in the second
half, cash flows are expected to remain robust.
The incorporation of Key’s core operations into Value’s Johannesburg facility has enabled the rapid
expansion of Key’s business. Now that the business is settled, management will focus on extracting
synergies and cost savings. In addition, plans are in progress to expand the business into areas
currently not serviced.
The Group continues to pursue acquisition opportunities that will complement and improve revenue
streams in the existing divisions.
DECLARATION OF DIVIDEND (NUMBER 22)
The Board resolved to declare a gross interim dividend for the six months ended 31 August 2017, of 8
cents per ordinary share which will be paid out of distributable reserves. The dividend is covered
2.2 times by normalised headline earnings (prior to BEE transaction costs). 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 20% which amounts to 1.6 cents per share. This will result in a net
dividend of 6.4 cents per share payable 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, 18 October 2017
Last day to trade cum dividend Tuesday, 16 January 2018
Trading ex-dividend commences Wednesday, 17 January 2018
Record date Friday, 19 January 2018
Payment date Monday, 22 January 2018
Share certificates may not be
dematerialised or rematerialized between
Wednesday, 17 January 2018 and Friday,
19 January 2018, both days inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
18 October 2017
Date: 18/10/2017 04:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
