Wrap Text
Reviewed condensed consolidated financial results
for the year ended 28 February 2019
Value Group Limited
(Incorporated in the Republic of South Africa)
Registration number 1997/002203/06)
ISIN number: ZAE000016507 Share code: VLE
Reviewed condensed consolidated financial results
for the year ended 28 February 2019
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 R2,780bn up 11%
Normalised headline earnings per share 89,2 cents up 25%
Headline earnings per share 89,2 cents up 52%
Earnings per share 86,8 cents up 58%
Net asset value per share 624,8 cents up 10%
Cash generated by operations after changes in working capital R322m up 11%
Final dividend per share 27 cents up 23%
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
% Reviewed Audited
R000's change 2019 2018
Revenue 11% 2 779 675 2 513 241
Cost of sales (1 945 020) (1 726 216)
Gross profit 834 655 787 025
Other income 30 191 28 364
Operating expenses (672 830) (659 951)
Operating profit before once-off
BBBEE equity transaction costs 24% 192 016 155 438
Once-off BBBEE equity transaction costs - (19 003)
Operating profit 192 016 136 435
Share of profit of equity-accounted investees (13) 23
Fair value adjustment (2 625) 331
Finance income 4 293 3 386
Finance costs (18 508) (17 553)
Net profit before taxation 175 163 122 622
Taxation (45 722) (40 648)
Net profit for the year 58% 129 441 81 974
Other comprehensive income to be reclassified
to profit and loss in subsequent periods
Foreign currency translation differences (104) (75)
Total comprehensive income for the year 129 337 81 899
Owners: 126 007 83 331
Net profit for the year 126 111 83 406
Other comprehensive income (104) (75)
Non-controlling interest: 3 330 (1 432)
Net profit/(loss) for the year 3 330 (1 432)
Other comprehensive income - -
129 337 81 899
Earnings per ordinary share (cents) (note 2)
Basic 58% 86.8 54.8
Headline 52% 89.2 58.7
Normalised headline 25% 89.2 71.1
Diluted basic 53% 83.7 54.8
Diluted headline 47% 86.0 58.7
Normalised diluted headline 21% 86.0 71.1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
% Reviewed Audited
R000's change 2019 2018
Assets
Non-current assets 1 039 216 1 039 072
Property, vehicles, plant and equipment 1 003 231 1 004 903
Intangible assets 10 981 10 603
Goodwill 16 561 16 561
Loan receivable 3 001 1 575
Equity-accounted investees 77 380
Deferred tax asset 5 365 5 050
Current assets 599 564 553 514
Inventories 103 457 66 424
Trade and other receivables 313 110 335 532
Other financial asset 6 140 8 765
Current tax receivable 913 3 176
Cash and cash equivalents 175 944 139 617
Non-current assets held for sale 797 116
Total assets 1 639 577 1 592 702
Equity and liabilities
Equity 895 798 848 634
Non-current liabilities 304 905 290 670
Interest-bearing borrowings 125 475 108 601
Deferred tax liability 179 430 182 069
Current liabilities 438 874 453 398
Trade and other payables 380 205 379 803
Current portion of interest-bearing borrowings 57 219 69 227
Current portion of non interest-bearing borrowings - 3 268
Other financial liability - 31
Current tax payable 757 464
Shareholders for dividend 693 605
Total equity and liabilities 1 639 577 1 592 702
Net asset value per share (cents) 10% 624.8 566.8
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
% Reviewed Audited
R000's change 2019 2018
Ordinary share capital and premium 10 816 10 829
Balance at beginning of year 10 829 10 829
Shares cancelled (13) -
A ordinary shares 10 10
Treasury shares (91 433) (113 408)
Balance at beginning of year (113 408) (97 817)
Treasury shares acquired (34 314) (16 481)
Treasury shares sold 882 890
Treasury shares cancelled 55 407 -
Share-based payment reserve 22 108 20 146
Balance at beginning of year 20 146 30 792
Share-based payment expense 1 962 21 591
Transfer to retained income - (32 237)
Foreign currency translation reserve - 104
Balance at beginning of year 104 179
Foreign currency translation differences (104) (75)
Retained income 954 297 934 283
Balance at beginning of year 934 283 861 345
Dividends paid (50 934) (39 573)
Shares cancelled (55 394) -
Profit on disposal of treasury shares 231 710
Transfer from share-based payment reserve - 32 237
Net profit for the year 126 111 83 406
Non-controlling interest acquired by owners - (3 842)
Total capital and reserves attributable to owners 895 798 851 964
Non-controlling interest - (3 330)
Balance at beginning of year (3 330) (5 740)
Net profit/(loss) for the year 3 330 (1 432)
Non-controlling interest acquired by owners - 3 842
Equity 895 798 848 634
CONSOLIDATED STATEMENT OF CASH FLOWS
% Reviewed Audited
R000's change 2019 2018
Cash flows from operating activities 211 257 194 694
Cash generated by operations after
changes in working capital 11% 322 438 291 323
Finance Income 4 293 3 386
Finance costs (18 508) (17 553)
Taxation paid (46 120) (42 972)
Cash available from operating activities 11% 262 103 234 184
Dividends paid (50 846) (39 490)
Cash flows from investing activities (56 990) (88 928)
Purchase of property, vehicles,
plant and equipment (51 247) (88 854)
Purchase of intangible assets (5 072) (4 851)
Proceeds on disposal of property,
vehicles, plant and equipment 2 091 2 883
Proceeds on disposal of non-current
assets held for sale 1 834 11 498
Payment of vendor - Key Distributors acquisition (3 268) (9 804)
Dividend received from equity accounted investees 290 -
(Increase) / decrease in loan receivable (1 618) 200
Cash flows from financing activities (117 940) (92 438)
Repayment of loans (84 739) (77 557)
Treasury shares acquired (34 314) (16 481)
Proceeds on disposal of treasury shares 1 113 1 600
Net change in cash and cash equivalents 36 327 13 328
Translation difference - (164)
Cash and cash equivalents at beginning of year 139 617 126 453
Cash and cash equivalents at end of year 175 944 139 617
SEGMENT INFORMATION
Reviewed Audited
R000's 2019 2018
Total segment revenue 2 937 535 2 663 570
General distribution 1 740 618 1 555 912
Truck rental and other 419 992 414 943
Retail Logistics 660 245 583 077
Head office and other 116 680 109 638
Less: Inter-segment revenue 157 860 150 329
General distribution 3 683 5 342
Truck rental and other 45 512 37 747
Retail Logistics - -
Head office and other 108 665 107 240
External segment revenue 2 779 675 2 513 241
General distribution 1 736 935 1 550 570
Truck rental and other 374 480 377 196
Retail Logistics 660 245 583 077
Head office and other 8 015 2 398
Business segment results
General distribution 128 256 98 172
- Trading profit 128 256 101 763
- Goodwill impairment - (3 591)
Truck rental and other 56 817 55 498
Retail Logistics 12 706 8 011
Head office and other (5 763) (6 243)
Operating segment results 192 016 155 438
Once-off BBBEE equity transaction costs - (19 003)
Share of profit of equity-accounted investees (13) 23
Fair value adjustment (2 625) 331
Finance income 4 293 3 386
Finance costs (18 508) (17 553)
Net profit before taxation 175 163 122 622
Total segment assets
General distribution 748 097 754 677
Truck rental and other 567 052 578 252
Retail Logistics 111 539 80 934
Head office and other 197 393 159 893
Segment assets 1 624 081 1 573 756
Loan receivable 3 001 1 575
Equity-accounted investees 77 380
Deferred tax asset 5 365 5 050
Other financial assets 6 140 8 765
Current tax receivable 913 3 176
Total assets 1 639 577 1 592 702
Revenue on an IFRS 15 basis is further disaggregated by timing and nature below:
General Truck Rental Retail Head office Reviewed
R000's Distribution & other Logistics and other 2019
Recognised over time 1 726 015 249 495 - - 1 975 510
Services rendered 1 726 015 249 495 - - 1 975 510
Recognised at a point in time 10 920 45 625 660 245 8 015 724 805
Services rendered - 20 519 - - 20 519
Sale of goods - 9 596 660 245 5 224 675 065
Sale of assets held for rental 10 920 15 510 - 738 27 168
Insurance commissions - - - 2 053 2 053
Full maintenance leases* - 79 360 - - 79 360
Services rendered - 79 360 - - 79 360
Revenue 1 736 935 374 480 660 245 8 015 2 779 675
General Truck Rental Retail Head office Audited
R000's Distribution & other Logistics and other 2018
Recognised over time 1 538 070 247 976 - - 1 786 046
Services rendered 1 538 070 247 976 - - 1 786 046
Recognised at a point in time 12 500 47 981 583 077 2 398 645 956
Services rendered - 21 572 - - 21 572
Sale of goods 2 712 9 269 583 077 - 595 058
Sale of assets held for rental 9 788 17 140 - 442 27 370
Insurance commissions - - - 1 956 1 956
Full maintenance leases * - 81 239 - - 81 239
Services rendered - 81 239 - - 81 239
Revenue 1 550 570 377 196 583 077 2 398 2 513 241
* Lease contracts within the scope of IAS17: Leases
NOTES
1. Basis of preparation
The reviewed condensed consolidated financial results are prepared in accordance with the framework concepts, IAS 34
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies
Act of South Africa. The accounting policies applied in the preparation of these reviewed condensed consolidated
financial results are in terms of International Financial Reporting Standards. Other than the adoption of IFRS 9:
Financial Instruments and IFRS 15: Revenue from Contracts with Customer detailed in note 6 below, the accounting
standards applied are consistent with those applied in the previous consolidated financial statements. These
results have been prepared under the supervision of the Group Financial Director, CL Sack.
The Group's auditor, SVG has reviewed these results. A copy of their unmodified review report is available for
inspection at the Company's registered office.
Reviewed Audited
R000's 2019 2018
2. Headline earnings
2.1. Reconciliation between basic and
headline earnings
Basic earnings attributable to owners 126 111 83 406
Loss on disposal of property, vehicles,
plant and equipment 4 809 3 063
Less: tax effect of loss on disposal of
property, vehicles,
plant and equipment (1 339) (787)
Goodwill impairment - 3 591
Headline earnings 129 581 89 273
Once-off BEE equity transaction costs - 19 003
Normalised headline earnings 129 581 108 276
2.2. Number of ordinary shares of
R 0.001 each in issue
Shares in issue 172 635 000 186 427 478
Shares in issue excluding treasury shares 143 364 180 150 302 979
Weighted average shares in issue 145 284 191 152 191 958
Diluted shares in issue 150 670 275 152 191 958
2.3. Number of A ordinary shares of R 0.001 each in issue
Shares in issue 10 429 010 10 429 010
3. Supplementary information
Depreciation 96 538 96 148
Amortisation of intangible assets 4 685 6 976
Depreciation and amortisation 101 223 103 124
Reviewed Audited
R000's 2019 2018
4. Fair value measurement of financial instruments
4.1. Financial assets/(liabilities)
Investment in insurance cell captive (Level 2) 6 140 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) - (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 SD Gottschalk,
CEO of Value Group Limited. 199 619 190 050
6. Changes in significant accounting policies
The Group has adopted IFRS 15: Revenue from Contracts with Customers and IFRS 9: Financial Instruments from 1 March
2018.
The adoption of these standards had no material impact on the amounts previously reported hence no restatement of
comparative information is required.
IFRS 15: Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining how and when revenue is recognised. Under IFRS 15, the
Group recognises revenue upon satisfaction of performance obligations i.e. when a customer obtains control of the
goods or services, either at a point in time or over a period of time.
IFRS 9: Financial Instruments
IFRS 9 sets out the requirements for recognising and measuring financial assets, financial liabilities and some
contracts to buy non-financial items.
IFRS 9 replaced the 'incurred loss' model in IAS 39 with a forward looking 'expected credit loss' (ECL) model. Trade
receivables ECLs were measured on the simplified approach.
7. Standards issued but not yet effective: IFRS 16: Leases
IFRS 16 introduces a single, on-balance sheet lease accounting methodology for lessees. A lessee recognises a right-
of-use asset representing its right to use the underlying asset and a corresponding lease liability representing its
obligation to make lease payments, with certain exemptions for short-term leases or leases of low-value assets.
The Group is required to adopt IFRS 16 from 1 March 2019. The Group has performed an initial assessment of the
estimated impact that the application of IFRS 16 will have on its consolidated financial results. The actual impact of
adopting this standard on 1 March 2019 may change as the Group has not finalised its assessment of the lease
calculations. The full impact of this standard however, will be disclosed in more detail in the 2019 integrated annual
report.
Leases in which the Group is a lessee
The Group will recognise right-of-use assets and associated liabilities for its operating leases of premises. The
nature of expenses related to those leases will change as the Group will recognise a depreciation charge for the
right-of-use assets and interest expense on the lease liabilities. Previously, the Group recognised operating lease
expenses on a straight-line basis over the term of the leases.
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 report that the Group produced an improved set of results for the year ended 28 February 2019.
Although the trading environment continues to be very challenging, the strategic focus to grow the top line has
resulted in revenue increasing by 11% from R2,51 billion to R2,78 billion. This increase arose from organic growth in
the customer base and volume increases.
Even though fuel price changes are fully recovered, the significant increase in this cost was partially offset by
other variable cost savings which has resulted in the gross profit percentage reducing slightly from 31,3 % to 30%.
Nevertheless, gross profit increased by 6% to R834,7 million.
The previous years' initiatives to reduce operating costs and ongoing stringent cost controls have resulted in the
containment of operating expenses which escalated by only 2% to R672,8 million. This change, together with improved
gross profits, contributed to operating profit margins improving from 6,2% to 6,9% and operating profit (before the
corresponding period's once-off BBBEE transaction costs) increasing by 24% to R192 million.
During the course of the year, interest earned on higher positive cash balances offset increased funding costs
resulting in net finance costs remaining static at R14,2 million.
The Group increased its expenditure on unemployed learnerships resulting in increased learnership allowances which had
the effect of reducing the effective tax rate to 26,1%.
The combined effects of the above has contributed to net profit and earnings per share increasing by 58% to R129,4
million and 86,8 cents per share respectively. Excluding the corresponding period's R19 million once-off BBBEE
transaction costs, normalised headline earnings increased by 25% from 71,1 cents to 89,2 cents per share.
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 after working capital changes improving by 11% from R291,3 million
to R322,4 million. Increased inventory levels pertaining to procurement of product prior to supplier price escalations
and transfer of vehicles earmarked for disposal was partially funded by the significant improvement in collections of
receivables. In addition, working capital requirements increased due to the accelerated payment cycle arising from the
conversion of a portion of labour broker staff to permanent employees. The associated additional net outflow combined
with increased taxation and dividend payments resulted in cash flows from operating activities
improving by 9% to R211,3 million.
Capital expenditure incurred during the year amounted to R146 million and comprised R120,3 million for vehicles, R6,7
million for materials handling equipment, R9,7 million for plant and equipment and accessories and R9,3 million for IT
hardware and software. This expenditure, in addition to the settlement of the final instalment pertaining to the
acquisition of Key Distributors (Pty) Ltd, was funded by internally generated cash flows and R4,9 million in interest
bearing debt. Although positive cash balances were utilised to fund the R34,3 million expenditure on share
repurchases, cash resources on hand at year end increased by R36,3 million to R175,9 million.
The Group's debt:equity ratio (net of intangibles) remains very low at 21% in comparison to the Group's 40% to 60%
maximum acceptable debt:equity level.
OPERATIONAL REVIEW
General distribution segment
The poor economic climate continues to impact a large portion of the customer base and volumes. This is exacerbated by
competitor and customer rate pressures. However, management's focus on restructuring costs in the freightpak and
logistics divisions, improving operational efficiencies and procuring new customers in the warehousing, dedicated
distribution and logistics divisions has yielded positive benefits with volumes increasing. Consequently, revenue
increased by 12% from R1,55 billion to R1,74 billion. Excluding goodwill impairments in the prior year, operational
savings and improved efficiencies contributed to operating profit increasing by 26% from R101,8 million to R128,3
million and operating margins improving from 6,6% to 7,4%.
Truck rental and other segments
Tough trading conditions impacted by a very competitive environment hampered revenue growth which reduced marginally
from R377,2 million to R374,5 million. Strategic changes in various divisions reduced costs and contributed to a
small improvement in the segment's performance. Accordingly, operating margins improved from 14,7% to 15,2% with
operating profit increasing to R56,8 million.
Retail logistics segment
Although trading conditions remain challenging with protest actions having an effect on revenue, management's
strategic initiatives in growing the customer base and areas serviced has resulted in revenue increasing by 13% from
R583,1 million to R660,2 million. Increased revenue and the resultant economics of scale offset product pricing
pressures resulting in an improvement in operating margins to 1,9% with operating profit increasing by 59% to R12,7
million.
SHARE REPURCHASES
During the current period 7 319 867 shares were acquired at a cost of R34,3 million. Subsequent to 28 February 2019,
330 708 shares were repurchased at a cost of R1,98 million. The effective average acquisition cost per share amounts
to R4,74 per share. On 8 May 2018, a total of 9 618 378 treasury shares were cancelled against reserves and delisted.
On 17 January 2019, a total of 4 174 100 treasury shares were cancelled against reserves and delisted. Pursuant to
these cancellations, the number of ordinary shares currently in issue amounts to 172 635 000 ordinary shares. The
Group's subsidiary currently holds 7 350 304 ordinary shares in treasury which represents 4,26% of ordinary shares in
issue. The Group will continue to repurchase shares as opportunities arise.
FUTURE CAPITAL EXPENDITURE
Budgeted capital expenditure for the 2020 financial year is anticipated to amount to approximately R170,6 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 continue
to constrain consumer disposable income and associated demand in the period ahead. Despite these economic
difficulties, it is anticipated that the customer base and the service offerings in all three segments should continue
to expand in the new financial year. In addition, ongoing focus on cost controls remains a priority particularly in
view of ongoing rate and margin pressures. These initiatives should mitigate the current economic challenges and
provide a platform for ongoing sustainable growth. Accordingly, the Board anticipates that on a comparable accounting
basis, earnings will at least be maintained in the 2020 financial year. Any reference to future financial performance
included in this announcement has not been reviewed nor reported on by the Group's auditors.
In addition, the Group's solid balance sheet characterised by low debt levels provides funding capacity for further
organic and acquisitive growth.
DECLARATION OF DIVIDEND (NUMBER 25)
The Board resolved to declare a gross final dividend for the six months ended 28 February 2019, of 27 cents per
ordinary share which will be paid out of distributable reserves. The dividend is covered 2,1 times by second half
headline earnings. The number of ordinary shares in issue at the date of this declaration is 172 635 000. The
dividend will be subject to dividend withholding tax of 20% which amounts to 5,4 cents per share. This will result in
a net dividend of 21,6 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 Friday, 10 May 2019
Last day to trade cum dividend Tuesday, 25 June 2019
Trading ex-dividend commences Wednesday, 26 June 2019
Record date Friday, 28 June 2019
Payment date Monday, 1 July 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 26 June 2019 and Friday, 28 June
2019, both days inclusive.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
10 May 2019
Date: 10/05/2019 04:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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