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Unaudited interim financial results for the six months ended 31 August 2020
Value Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1997/002203/06
ISIN number: ZAE000016507 Share code: VLE
Unaudited interim financial results for the six months ended 31
August 2020
Directors: C D Stein* (Chairman), S D Gottschalk (CEO), C L Sack,
N M Phosa*, M Padiyachy, V W Mcobothi*,B Bulo*
*Non-executive director
Sponsor: Investec Bank Limited
Revenue Down 3%
R1,36bn
Headline earnings per share up 11%
35,4 cents
Earnings per share up 13%
34,9 cents
Net asset value per share up 11%
579,6 cents
Cash generated by operations UP 12%
R270m
INTERIM DIVIDEND PER SHARE up 13%
18 cents
Value Group Limited and its subsidiaries ("the Group") provide a
comprehensive range of tailored logistical solutions throughout
southern Africa.
FINANCIAL REVIEW
The Group has had to navigate its way as a result of challenges
brought about by the ongoing recession and the imposition of the
initial highly restrictive lockdowns in order to contain the spread
of the COVID-19 pandemic.
Despite these challenges, the Group has been successful in growing
its customer base by on boarding a number of new customers during
this unprecedented time. This growth partly tempered the reduction in
revenue, with revenue reducing by only 3% from R1,404 billion to
R1,36 billion.
Aside from preventing the spread of the virus through the
implementation of a number of SHEQ procedures to ensure the health,
wellbeing and safety of its employees, extensive focus has been
applied in safeguarding the sustainability and operations of the
Group. In this regard, the Group implemented the following measures
to preserve cash balances:
- Immediate reduction of fixed and variable costs to align to trading
activity where possible.
- The application for government assistance in the form of the
Temporary Employer Relief Scheme (TERS) in order to compensate
employees who were on unpaid leave.
- Deferral of the payment of the final dividend to August 2020 which
was pending due to the requirement to assess trading and cash flow
outcomes during level 5 and level 4 lockdowns.
These initiatives, together with improvements in trading (subsequent
to level 4 lockdown) and planning, contributed to partial containment
of gross profit reduction. Consequently, gross profit margins reduced
from 33,3% to 32,9% with gross profit reducing by R20,3 million to
R447,7 million. In addition, these savings measures resulted in
operating expenses reducing by R23,2 million. This was however
partially offset by a R7,6 million increase in the Expected Credit
Loss '(ECL)' provision which was required due to the perceived
increase in COVID-19 related credit risk. Accordingly, operating
expenses reduced from R372,9 million to R357,3 million. Reduced gross
profit, reduced other income and operating costs savings were
insufficient to improve operating profits which reduced by 7% from
R106,2 million to R98,6 million.
Net profit before tax however increased mainly due to a R9,2 million
finance cost reduction which arose due to a reduction in asset base
funding costs due to reductions in prime interest rates and delays in
delivery of vehicles earmarked for funding, and a reduction in IFRS16
(lease) funding costs due to reduced outstanding capital balance on
lease liabilities.
The Group also benefitted from a reduction in the effective tax rate
from 22,8% to 20,7% due to the receipt in the current period of an
increased allowance for energy efficiency savings.
The Board is thus pleased to advise that the Group produced an 11%
increase in headline earnings for the 6 months ended 31 August 2020
from 31,8 cents to 35,4 cents per share.
Continued focus on working capital management yielded improved cash
flow results. Given the financial difficulties that affected many
businesses during this interim period, collections were better than
expected. Consequently, cash generated by operations increased by 12%
to R270,2 million.
PERFORMANCE DURING COVID-19 AND THE REQUIREMENT FOR IMPAIRMENTS
The Group continues to deal with these challenges noting the
following:
- There have been no significant decline in customer collections as
customers have generally continued to pay in accordance with agreed
credit terms. The Group has successfully engaged with those customers
where payments were delayed. The ECL provision was however increased
as highlighted above.
- Trade creditors have been settled without any extension of terms.
In addition, the Group's tax returns have been submitted and paid on
time in accordance with regular business practice without requiring
any form of financial assistance, either from financial institutions
or government relief.
- Subsequent to the commencement of level 3 lockdown, the market for
the acquisition of the Group's assets, which are designated for
disposal, has been buoyant with proceeds realised for assets being
similar to that achieved in the previous financial year. Accordingly,
no material impairments to these assets are currently required as a
result of the COVID-19 lockdown measures.
PROSPECTS
The Group's business characterized by a low asset based debt:equity
ratio of 24% and the ability to generate positive cash flows will
ensure its sustainability into the foreseeable future. The challenges
associated with the impact of COVID-19 are partially negated due to
the Group's robust business model, whereby logistics services across
multiple divisions are supplied to a diverse range of customers
within various industrial sectors. In addition, its retail segment
supplies essential goods to an enlarged customer base. During these
most challenging times, the Group has demonstrated its ability to
adapt to the changing environment, grow its customer base and
continue providing world class logistics services. Any reference to
future financial performance included in this announcement has not
been reviewed nor reported on by the Group's auditors.
DECLARATION OF DIVIDEND (NUMBER 28)
The Group's net cash position is positive with access to adequate
banking facilities should the need arise. Accordingly, the Group has
sufficient cash balances to increase its interim dividend and
therefore resolved to declare a 13% increase in the gross interim
dividend for the 6 months ended 31 August 2020 of 18 cents per
ordinary share which will be paid out of distributable reserves. This
dividend is covered 2 times by first half headline earnings. The
number of ordinary shares in issue at the date of this declaration is
165 636 864. The dividend will be subject to dividend withholding tax
of 20% which amounts to 3,6 cents per share. This will result in a
net dividend of 14,4 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. This dividend
is payable to shareholders as follows:
Declaration date Tuesday, 27 October 2020
Last day to trade cum dividend Tuesday, 12 January 2021
Trading ex-dividend commences Wednesday, 13 January 2021
Record date Friday, 15 January 2021
Payment date Monday, 18 January 2021
Share certificates may not be dematerialised or rematerialised
between Wednesday, 13 January 2021 and Friday, 15 January 2021, both
days inclusive.
ABOUT THIS ANNOUNCEMENT
This short form announcement is the responsibility of the directors
and is only a summary of the information in the full announcement.
The full announcement was released on SENS at
https://senspdf.jse.co.za/documents/2020/jse/isse/VLE/Interims.pdf on
27 October 2020 and is also available on the Group's website at
www.value.co.za. Copies of the full announcement may also be
requested at the company's registered office, at no charge, during
office hours. Any investment decision must be based on the full
announcement published.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
27 October 2020
Sponsor: Investec Bank Limited
Company Secretary: Fluidrock Advisory (Pty) Ltd
Transfer secretary: Computershare Investor Services (Pty) Ltd
Registered office: 49 Brewery Road,
Isando,
1600,
PO Box 778,
Isando, 1600,
Tel: (011) 570 2000
www.value.co.za
Date: 27-10-2020 03:35:00
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