Wrap Text
Condensed Consolidated Unaudited Interim Financial Results for the six months ended 31 August 2018
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 2018
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 R1,359bn up 11%
Normalised headline earnings per share 31,6 cents up 78%
Headline earnings per share 31,6 cents UP 485%
Earnings per share 30,3 cents UP 531%
Net asset value per share 581,1 cents up 11%
Cash generated by operations R138m up 35%
Interim dividend per share 13 cents up 63%
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
% August August February
R000's change 2018 2017 2018
Revenue 11% 1 358 781 1 228 301 2 513 241
Cost of sales (949 654) (851 471) (1 726 216)
Gross profit 409 127 376 830 787 025
Other income 13 772 10 853 28 364
Operating expenses (351 645) (346 143) (659 951)
Operating profit before once-off BBBEE equity transaction costs 72% 71 254 41 540 155 438
Once-off BBBEE equity transaction costs - (19 003) (19 003)
Operating profit 71 254 22 537 136 435
Share of profit of equity-accounted investees - 17 23
Fair value adjustment (1 429) 813 331
Finance income 1 796 3 083 3 386
Finance costs (8 666) (9 613) (17 553)
Net profit before taxation 62 955 16 837 122 622
Taxation (18 345) (10 976) (40 648)
Net profit for the period 661% 44 610 5 861 81 974
Other comprehensive income
Foreign currency translation differences (2) 170 (75)
Total comprehensive income for the period 44 608 6 031 81 899
Owners: 44 611 7 546 83 331
Net profit for the period 44 613 7 376 83 406
Other comprehensive income (2) 170 (75)
Non-controlling interest: (3) (1 515) (1 432)
Net loss for the period (3) (1 515) (1 432)
Other comprehensive income - - -
44 608 6 031 81 899
Earnings per share (cents) (note 2)
Basic 531% 30,3 4,8 54,8
Headline 485% 31,6 5,4 58,7
Normalised headline 78% 31,6 17,8 71,1
Diluted basic 517% 29,6 4,8 54,8
Diluted headline 472% 30,9 5,4 58,7
Normalised diluted headline 74% 30,9 17,8 71,1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
% August August February
R000's change 2018 2017 2018
Assets
Non-current assets 1 056 503 1 036 346 1 039 072
Property, vehicles, plant and equipment 1 021 851 997 482 1 004 903
Intangible assets 10 369 10 977 10 603
Goodwill 16 561 20 152 16 561
Loan receivable 1 338 1 472 1 575
Equity-accounted investees 380 374 380
Deferred tax asset 6 004 5 889 5 050
Current assets 584 694 521 993 553 514
Inventories 80 787 77 320 66 424
Trade and other receivables 354 091 330 046 335 532
Other financial assets 7 335 9 247 8 765
Current tax receivable 5 434 2 873 3 176
Cash and cash equivalents 137 047 102 507 139 617
Non-current assets held for sale 1 335 10 753 116
Total assets 1 642 532 1 569 092 1 592 702
Equity and liabilities
Equity 836 870 792 084 848 634
Non-current liabilities 317 035 296 465 290 670
Interest-bearing borrowings 138 347 116 380 108 601
Deferred tax liability 178 688 180 085 182 069
Current liabilities 488 627 480 543 453 398
Trade and other payables 415 793 400 135 379 803
Current portion of interest-bearing borrowings 70 709 76 061 69 227
Current portion of non interest-bearing borrowings - 3 268 3 268
Other financial liability 80 96 31
Current tax payable 1 391 401 464
Shareholders for dividend 654 582 605
Total equity and liabilities 1 642 532 1 569 092 1 592 702
Net asset value per share (cents) 11% 581,1 524,5 566,8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
August August February
R000's 2018 2017 2018
Ordinary share capital and premium 10 820 10 829 10 829
Balance at beginning of period 10 829 10 829 10 829
Shares cancelled (9) - -
A ordinary shares 10 10 10
Treasury shares (103 619) (104 142) (113 408)
Balance at beginning of period (113 408) (97 817) (97 817)
Treasury shares acquired (25 614) (6 597) (16 481)
Treasury shares sold 35 403 272 890
Share-based payment reserve 21 677 50 897 20 146
Balance at beginning of period 20 146 30 792 30 792
Share-based payment expense 1 531 20 105 21 591
Transfer to retained income - - (32 237)
Foreign currency translation reserve 102 349 104
Balance at beginning of period 104 179 179
Foreign currency translation differences (2) 170 (75)
Retained income 911 213 841 396 934 283
Balance at beginning of period 934 283 861 345 861 345
Dividends paid (32 289) (27 432) (39 573)
Profit on disposal of treasury shares - 107 710
Transfer from share-based payment reserve - - 32 237
Net profit for the period 44 613 7 376 83 406
Shares cancelled (35 394) - -
Non-controlling interest acquired by owners - - (3 842)
Total capital and reserves attributable to owners 840 203 799 339 851 964
Non-controlling interest (3 333) (7 255) (3 330)
Balance at beginning of period (3 330) (5 740) (5 740)
Net loss for the period (3) (1 515) (1 432)
Non-controlling interest acquired by owners - - 3 842
Equity 836 870 792 084 848 634
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
% August August February
R000's change 2018 2017 2018
Cash flows from operating activities 79 711 66 400 194 694
Cash generated by operations before movements in
working capital and proceeds on disposal of rental assets 127 240 91 096 268 848
Proceeds on disposal of rental assets 11 213 11 706 27 370
Cash generated by operations 35% 138 453 102 802 296 218
Changes in working capital 4 389 13 418 (4 895)
Net finance costs (6 870) (6 530) (14 167)
Taxation paid (24 021) (15 918) (42 972)
Cash available from operating activities 19% 111 951 93 772 234 184
Dividends paid (32 240) (27 372) (39 490)
Cash flows from investing activities (23 243) (77 591) (88 928)
Purchase of property, vehicles, plant and equipment (23 139) (68 656) (88 854)
Purchase of intangible assets (2 110) (1 893) (4 851)
Proceeds on disposal of property, vehicles, plant and equipment 533 2 306 2 883
Proceeds on disposal of non-current assets held for sale 1 123 256 11 498
Payment of vendor - Key Distributors acquisition - (9 804) (9 804)
Decrease in loan receivable 350 200 200
Cash flows from financing activities (59 056) (12 821) (92 438)
Repayment of loans (33 442) (6 603) (77 557)
Treasury shares acquired (25 614) (6 597) (16 481)
Proceeds on disposal of treasury shares - 379 1 600
Net change in cash and cash equivalents (2 588) (24 012) 13 328
Translation difference 18 66 (164)
Cash and cash equivalents at beginning of period 139 617 126 453 126 453
Cash and cash equivalents at end of period 137 047 102 507 139 617
SEGMENT INFORMATION
Unaudited Unaudited Audited
August August February
R000's 2018 2017 2018
Total segment revenue 1 439 184 1 301 086 2 663 570
General distribution 839 693 750 357 1 555 912
Truck rental and other 208 025 198 759 414 943
Retail Logistics 334 034 295 977 583 077
Head office and other 57 432 55 993 109 638
Less: Inter-segment revenue 80 403 72 785 150 329
General distribution 2 081 2 228 5 342
Truck rental and other 24 247 15 556 37 747
Retail Logistics - - -
Head office and other 54 075 55 001 107 240
External segment revenue 1 358 781 1 228 301 2 513 241
General distribution 837 612 748 129 1 550 570
Truck rental and other 183 778 183 203 377 196
Retail Logistics 334 034 295 977 583 077
Head office and other 3 357 992 2 398
Business segment results
General distribution 44 722 25 258 98 172
- Trading profit 44 722 25 258 101 763
- Goodwill impairment - - (3 591)
Truck rental and other 30 025 19 768 55 498
Retail Logistics 3 038 3 571 8 011
Head office and other (6 531) (7 057) (6 243)
Operating segment results 71 254 41 540 155 438
Once-off BBBEE equity transaction costs - (19 003) (19 003)
Share of profit of equity-accounted investees - 17 23
Fair value adjustment (1 429) 813 331
Finance income 1 796 3 083 3 386
Finance costs (8 666) (9 613) (17 553)
Net profit before taxation 62 955 16 837 122 622
Total segment assets
General distribution 771 665 726 442 754 677
Truck rental and other 560 877 578 074 578 252
Retail Logistics 89 008 103 929 80 934
Head office and other 200 491 140 792 159 893
Segment assets 1 622 041 1 549 237 1 573 756
Loan receivable 1 338 1 472 1 575
Equity-accounted investees 380 374 380
Deferred tax asset 6 004 5 889 5 050
Other financial assets 7 335 9 247 8 765
Current tax receivable 5 434 2 873 3 176
Total assets 1 642 532 1 569 092 1 592 702
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. The Group adopted the following standards in the current year:
IFRS 9: Financial instruments and IFRS 15: Revenue from contracts with customers, neither of which had a material impact on figures previously
reported. Accordingly, no restatement of previously reported results was required. Other than the adoption of IFRS 9 and IFRS 15, the accounting
standards applied 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 2018 2017 2018
2. Headline earnings
2.1. Reconciliation between basic and headline earnings
Basic earnings attributable to owners 44 613 7 376 83 406
Loss on disposal of property, vehicles, plant and equipment 2 585 1 189 3 063
Less: tax effect of loss on disposal of property,
vehicles plant and equipment (675) (321) (787)
Goodwill impairment - - 3 591
Headline earnings 46 523 8 244 89 273
Once-off BBBEE equity transaction costs - 19 003 19 003
Normalised headline earnings 46 523 27 247 108 276
2.2. Number of ordinary shares of R 0.001 each in issue
Shares in issue 176 809 100 186 427 478 186 427 478
Shares in issue excluding treasury shares 144 598 341 152 398 639 150 302 979
Weighted average shares in issue 147 093 770 152 752 260 152 191 958
Diluted shares in issue 150 486 222 152 916 834 152 191 958
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 48 170 49 200 96 148
Amortisation of intangible assets 2 350 3 571 6 976
Depreciation and amortisation 50 520 52 771 103 124
4. Fair value measurement of financial instruments
4.1. Financial assets/(liabilities)
Cash and cash equivalents (Level 1) 137 047 102 507 139 617
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) 7 335 9 247 8 765
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) (80) (96) (31)
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 comprise of
market related rentals paid to companies controlled by
Mr. SD Gottschalk, CEO of Value Group Limited. 98 290 93 878 190 050
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, materials handling and commercial vehicle rental and full maintenance leasing. The Group's retail
segment supplies FMCG products into the convenience, formal and informal market.
FINANCIAL REVIEW
The Board is pleased to announce that the Group reported a record set of interim results. Although the trading environment is tough, annual
increases and growth of the Group's customer base has resulted in revenue increasing by 11% from R1,228 billion to R1,359 billion.
Although fully recovered, the significant increase in the cost of fuel and pricing pressure within the retail logistics segment has offset
certain variable costs savings resulting in gross margins reducing slightly from 30,7% to 30,1%. Nevertheless, gross profit increased by 9% to
R409,1 million.
The previous years' initiatives to reduce operating costs and ongoing stringent cost controls has resulted in operating costs increasing by only
1,6% to R351,6 million. This minor change has contributed to operating profit margins improving from 3,4% to 5,2% and operating profit before the
corresponding period's once-off BBBEE transaction costs, increasing by 72% to R71,3 million.
Net finance costs have remained relatively static at R6,9 million. The effective tax rate has reduced to 29,1% due to the corresponding periods
BBBEE transaction costs which were not tax deductible.
Excluding the corresponding period's BBBEE costs, normalised headline earnings per share increased by 78% from 17,8 cents to 31,6 cents per
share.
Capital expenditure incurred during the period reduced by R57,6 million to R89,9 million. This expenditure comprised R76,6 million for vehicles,
R2,6 million for materials handling equipment, R5,8 million for plant, equipment and accessories and R4,9 million for IT hardware and software.
This expenditure, in addition to the settlement of the final instalment of R3,2 million pertaining to the acquisition of Key Distributors (Pty)
Ltd, was funded by internally generated cash flows and R64,4 million in interest bearing debt. R33,4 million of this interest bearing debt was
repaid in the interim period. Positive cash balances were utilised to fund R26,1 million spent on share repurchases. The Group's debt:equity
ratio (net of intangibles) remains low at 25,8%.
Management's ongoing focus on conversion of profits into sustainable cash flows remains a priority and has yielded positive results with cash
generated by operations improving by 35% from R102,8 million to R138,5 million. Notwithstanding increased tax and dividend cash outflows, an
improvement in working capital management resulted in cash flows from operating activities increasing by 20% to R79,7 million.
OPERATIONAL REVIEW
General distribution segment
Poor economic growth continues to impact a large portion of the customer base which places pressure on rates and volumes. Management's focus,
however, on improving the operations and procuring new customers in the warehousing and breakbulk operations has yielded positive benefits with
volumes increasing. As a result, revenue increased by 12% from R748,1 million to R837,6 million. In addition, operational savings and improved
efficiencies contributed to operating profit increasing by 77% from R25,3 million to R44,7 million. The remaining operations comprising a
significant portion of this segment, being dedicated distribution and express, performed to expectation.
Truck rental and other segments
Tough trading conditions hampered revenue growth which remained static at R183,8 million. Clearing and forwarding as well as linehaul performed
to expectation. Strategic changes in the materials handling division contributed to a significant improvement in this segment's performance.
Accordingly, operating margins improved from 10,8% to 16,3% with operating profit increasing by 52% from R19,8 million to R30 million.
Retail logistics segment
Trading conditions remain challenging with protest actions on delivery routes having an effect on revenue. Nevertheless, management's focus on
growing the revenue base and areas serviced has resulted in revenue increasing by 13% to R334 million. Margins, however, have been negatively
affected by the competitive environment and supplier changes in rebate and incentive structures. Consequently, operating profit reduced from R3,6
million to R3 million.
SHARE REPURCHASES
During the current period 5,7 million shares were acquired at a cost of R26,1 million. Subsequent to 31 August 2018, 1,4 million shares were
repurchased at a cost of R6,8 million. The effective average acquisition cost per share amounts to R4,63 per share. On 8 May 2018, 9 618 378
treasury shares were cancelled and delisted. Pursuant to this cancellation, the number of ordinary shares currently in issue is 176 809 100. The
Group's subsidiaries currently hold 12,7 million ordinary shares in treasury which represents 7,2% of ordinary shares in issue. The Group will
continue to repurchase shares as the opportunities arise.
FUTURE CAPITAL EXPENDITURE
Capital expenditure for the remainder of the financial year is anticipated to amount to approximately R76,1 million and consists primarily of
vehicle and forklift additions and replacements. This capital expenditure will be funded by internally generated cash flows and interest bearing
debt.
PROSPECTS
It is expected that poor growth and high unemployment rates coupled with the recent hikes in fuel prices will constrain consumer disposable
income and associated demand over the festive season. Despite these economic difficulties, management has implemented a range of initiatives to
mitigate these challenges. In addition, these challenges should be offset by the growth in the customer base. Accordingly, the Board anticipates
that second half earnings will at least be maintained resulting in an improvement in earnings for the 2019 financial year. Any reference to
future financial performance included in this announcement has not been reviewed nor reported on by the Group's auditors.
The Group continues to pursue acquisition opportunities that will complement and improve revenue streams in the existing divisions.
DECLARATION OF DIVIDEND (NUMBER 24)
The Board resolved to declare a gross interim dividend for the six months ended 31 August 2018, of 13 cents per ordinary share which will be paid
out of distributable reserves. The dividend is covered 2,4 times by headline earnings. The number of ordinary shares in issue at the date of this
declaration is 176 809 100. The dividend will be subject to dividend withholding tax of 20% which amounts to 2,6 cents per share. This will
result in a net dividend of 10,4 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, 24 October 2018
Last day to trade cum dividend Tuesday, 15 January 2019
Trading ex-dividend commences Wednesday, 16 January 2019
Record date Friday, 18 January 2019
Payment date Monday, 21 January 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 16 January 2019 and Friday, 18 January 2019, both days
inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
24 October 2018
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