1. business and industrial
2. company
3. merger and acquisition

UNAUDITED INTERIM FINANCIAL RESULTS
for the six months ended 31 August 2014
FINANCIAL OVERVIEW
4%
81%
86%
HEADLINE
EARNINGS
PER SHARE
REVENUE
5%
44%
INTERIM
DIVIDEND
PER SHARE
NET ASSET
VALUE PER
SHARE
EARNINGS
PER SHARE
26%
CASH
GENERATED BY
OPERATIONS
Up 4% to R984,9 million
Down 81% to 4,9 cents
Down 86% to 3,5 cents
Up 5% to 424,8 cents
Down 44% to 5 cents
Down 26% to R105,7 million
| Aug 14: R984,9m | Aug 13: R946,6m |
| Aug 14: 4,9c | Aug 13: 26,4c |
| Aug 14: 3,5c | Aug 13: 25,4c |
| Aug 14: 424,8c | Aug 13: 404,8c |
| Aug 14: 5c | Aug 13: 9c |
| Aug 14: R105,7m | Aug 13: R142,7m |
R000’s
%
change
Revenue
Cost of sales
4
Gross profit
Other income
Operating expenses
Operating profit
(77)
Share of profit of associate net of taxation
Investment income
Finance costs
Net profit before taxation
Taxation (note 2)
Net profit for the period
Other comprehensive income net of taxation
Foreign currency translation differences
(86)
Unaudited
August
2014
Unaudited
August
2013
Audited
February
2014
984 940
(621 123)
946 598
(566 392)
1 975 314
(1 195 903)
363 817
7 264
(355 103)
380 206
5 497
(315 908)
779 411
8 128
(620 682)
15 978
22
6 330
(15 046)
69 795
17
6 527
(17 141)
166 857
21
12 071
(27 079)
7 284
(1 484)
59 198
(17 103)
151 870
(41 200)
5 800
42 095
110 670
(41)
5 759
Total comprehensive income for the period
SEGMENT INFORMATION
71
128
42 166
110 798
Earnings per share (cents) (note 3)
– Basic
– Headline
– Diluted basic
– Diluted headline
(86)
(81)
3,5
4,9
3,4
4,7
25,4
26,4
24,0
25,0
66,9
68,2
64,0
65,3
Unaudited
August
2014
Unaudited
August
2013
Audited
February
2014
Assets
Non-current assets
1 053 554
1 054 146
1 031 266
Property, vehicles, plant and equipment
Intangible assets
Investments and loans
Deferred tax
1 016 352
30 869
146
6 187
1 005 020
43 257
120
5 749
986 896
37 568
2 175
4 627
Current assets
481 466
461 733
473 789
Inventories
Investments and loans
Trade and other receivables
Taxation in advance
Cash and cash equivalents
56 909
2 000
290 541
4 938
127 078
65 400
3 301
273 432
821
118 779
64 890
—
240 990
1 270
166 639
2 176
97
97
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R000’s
%
change
Non-current assets held for sale
1 537 196
1 515 976
1 505 152
Equity and liabilities
Equity
Non-current liabilities
695 012
330 718
670 320
377 405
715 296
338 584
Interest-bearing borrowings
Deferred tax
158 782
171 936
214 132
163 273
165 383
173 201
Current liabilities
511 466
468 251
451 272
Trade and other payables
Current portion of interest-bearing
borrowings
Other financial liabilities
Current tax payable
Shareholders for dividend
418 594
367 090
366 695
90 051
285
2 187
349
98 586
121
2 161
293
83 805
394
88
290
1 537 196
1 515 976
1 505 152
424,8
404,8
437,2
Total assets
Total equity and liabilities
Net asset value per share (cents)
5
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
August
2014
Unaudited
August
2013
Audited
February
2014
Cash flows from operating activities
81 651
100 841
265 194
Cash generated by operations before
proceeds on disposal of rental assets
Proceeds on disposal of rental assets
69 529
36 168
124 821
17 836
275 858
35 207
105 697
(8 716)
18 294
(5 869)
142 657
(10 808)
6 528
(12 710)
311 065
(15 346)
37 523
(28 314)
109 406
(27 755)
125 667
(24 826)
304 928
(39 734)
(120 842)
(355)
(153 471)
39 531
(195 985)
(34 553)
R000’s
%
change
Cash generated by operations
Net finance costs
Changes in working capital
Taxation paid
(26)
Cash available from operating activities
Dividends paid
Cash flows from investing activities
Cash flows from financing activities
Net change in cash and cash equivalents
Translation difference
Cash and cash equivalents at beginning
of period
(39 546)
(15)
(13 099)
(23)
34 656
82
166 639
131 901
131 901
Cash and cash equivalents at end of period
127 078
118 779
166 639
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R000’s
Ordinary share capital and premium
A ordinary shares
Unaudited
August
2014
Unaudited
August
2013
Audited
February
2014
10 841
10 841
10 841
10
10
10
Treasury shares
(109 679)
(99 125)
(109 679)
Balance at beginning of period
Treasury shares sold
Treasury shares acquired
(109 679)
—
—
(99 670)
545
—
(99 670)
545
(10 554)
Share-based payment reserve
22 093
18 519
20 322
Balance at beginning of period
Share-based payment expense
20 322
1 771
16 717
1 802
16 717
3 605
67
51
108
108
(41)
(20)
71
(20)
128
Foreign currency translation reserve
Balance at beginning of period
Foreign currency translation differences
Retained income
771 680
740 024
793 694
Balance at beginning of period
Profit on disposal of treasury shares
Dividends paid
Net profit for the period
793 694
—
(27 814)
5 800
722 239
532
(24 842)
42 095
722 239
532
(39 747)
110 670
Total capital and reserves
695 012
670 320
715 296
COMMENTARY (continued)
R000’s
Unaudited
August
2014
Unaudited
August
2013
Audited
February
2014
Total segment revenue
1 064 137
1 023 543
2 131 048
809 782
193 579
60 776
788 183
178 948
56 412
1 634 090
382 761
114 197
Less: Inter-segment revenue
79 197
76 945
155 734
General distribution
Truck rental and other
Head office and other
2 510
16 515
60 172
3 577
16 969
56 399
4 991
38 714
112 029
External segment revenue
984 940
946 598
1 975 314
General distribution
Truck rental and other
Head office and other
807 272
177 064
604
784 606
161 979
13
1 629 099
344 047
2 168
General distribution
Truck rental and other
Head office and other
Business segment results
General distribution
Truck rental and other
Head office and other
32 073
(3 572)
(12 523)
61 204
11 947
(3 356)
144 232
36 905
(14 280)
Operating segment results
Share of profit of associate net of taxation
Investment income
Finance costs
15 978
22
6 330
(15 046)
69 795
17
6 527
(17 141)
166 857
21
12 071
(27 079)
7 284
59 198
151 870
General distribution
Truck rental and other
Head office and other
683 542
587 815
252 568
703 099
562 102
240 784
687 786
574 121
235 173
Segment assets
Investments and loans
Deferred tax
Taxation in advance
1 523 925
2 146
6 187
4 938
1 505 985
3 421
5 749
821
1 497 080
2 175
4 627
1 270
Total assets
1 537 196
1 515 976
1 505 152
Net profit before taxation
Total segment assets
NOTES
1.
Statement of compliance
The unaudited interim 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 IAS34 Interim Financial Reporting. The accounting policies
applied in the preparation of the unaudited interim financial results are in terms of IFRS and are
consistent with those applied in the consolidated annual financial statements for the year ended
28 February 2014.The interim financial results have been prepared under the supervision of the
Group Financial Director, Mr CL Sack.
R000’s
2.
Taxation
Dividend withholding tax included in
taxation
3. Headline earnings
3.1 Reconciliation between basic and
headline earnings
Basic earnings
Loss on disposal of property, vehicles,
plant and equipment less taxation
Headline earnings
3.2 Number of ordinary shares of
R0,001 each in issue
Actual
Weighted average
Diluted
3.3 Number of A ordinary shares of
R0,001 each in issue
Actual
4.
Unaudited
August
2014
Unaudited
August
2013
Audited
February
2014
28
24
39
5 800
42 095
110 670
2 221
1 638
2 229
8 021
43 733
112 899
198 627 386
163 613 294
171 411 563
198 627 386
165 430 685
175 108 247
198 627 386
165 505 874
172 797 925
10 429 010
10 429 010
10 429 010
Supplementary information
Depreciation
Amortisation of intangible assets
48 856
9 253
45 318
8 056
92 915
15 972
Depreciation and amortisation
58 109
53 374
108 887
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
Trading conditions have proven to be extremely challenging. Since January 2014, high
unemployment rates, consumer debt exposure coupled with the protracted strike
action in various sectors has resulted in a further deterioration in the South African
economy. This has led to negligible growth rates which have had a material impact on
volumes and demand for the Group’s services. Consequently, revenue increased
marginally by 4% from R946,6 million to R984,9 million. Rate pressures resulted in
reduced annual escalations which were offset by declining volumes. New business
growth net of lost business was negligible.
Statutory and inflationary cost increases have escalated disproportionately to revenue.
Labour increased by 8% with fuel increasing on average by 10% throughout the period.
In addition, increased maintenance, shortages, wages and subcontractor costs
contributed to gross profits declining by R16,4 million to R363,8 million with gross
margins reducing from 40,2% to 36,9%.
Operating expenses increased by 12,4% driven predominantly by increased employment
and training costs with the balance being attributable to general overhead cost
escalations.
Reduced average debt levels throughout the period contributed to net finance costs
reducing by R2,1 million. The effective tax rate has reduced from 28,9% to 20,4% due
to the tax allowance derived from the learnerships. Comprehensive income for the
period decreased by 86% to R5,8 million with headline earnings per share reducing
by 81% from 26,4 cents to 4,9 cents per share.
The poor trading results and the end of the interim period falling on a Sunday led to
a 19% reduction in cash flows. Cash flows, however, remained solid with collections
exceeding expectation. Total capital expenditure amounted to R123 million and
comprised R90,1 million for vehicles, R13,2 million for forklifts, R10,1 million for IT
hardware and software, R6,5 million for plant and equipment and the balance of
R3,1 million for various other assets. This expenditure was effectively fully funded
by cash flows and cash balances.
Interest-bearing debt remained unchanged in comparison to February 2014. The
balance sheet remains sound with the asset base, cash flows and facilities being
adequate to sustain the operations of the Group.
ONGOING INITIATIVES
Various ongoing initiatives commenced early in 2014 to address the low revenue
growth rates and reduce operating and overhead costs. These consist of the
following:
– The state of the economy has made it very difficult to grow revenue particularly
in view of reducing volumes. The sales team is being realigned across the board.
The focus will be on growing new revenue streams from existing and new
customers.
– Non-profitable business has either been terminated or rates adjusted in
accordance with activity requirements.
– A number of senior appointments have been made in key operational positions
to further manage and streamline processes and associated costs.
– Reduced activity over the last few years has resulted in the accelerated disposal
of older vehicles which have been costly to maintain and operate.
– A number of IT and mobile initiatives have been implemented in the Logistics
division. This has resulted in further control and visibility in the movement of
freight. In addition, the Group has extended the functionality and quantity of
dimensioners deployed in the Logistics division, which further streamlines
processes and improves accuracy of billing.
– Various operations and divisions are being restructured. Certain smaller
branches which house a number of business units have been consolidated under
one operation. Support divisions have been tasked to reduce their cost base.
– A number of new fuel efficient vehicles have been procured to match the
reduced volume requirements of the customer base. In addition, improved
planning and routing tools have been implemented.
– All divisions have and will continue to undergo in depth operational analysis to
consolidate and reduce costs where possible.
OPERATIONAL REVIEW
General distribution segment
Annual increases were offset by reduced activity which contributed to revenue
increasing by 2,9% from R784,6 million to R807,3 million. Revenue was further
affected by rates pressures. Increased subcontractor, shortages and labour costs
resulted in a 48% reduction in operating profits from R61,2 million to R32,1 million.
Truck Rental and other segments
Improved turnover in the Materials Handling division contributed to a 9,3%
increase in revenue from R162 million to R177,1 million. The Truck Rental division,
however, performed well below expectation due to a further reduction for truck
rental services. In addition, increased maintenance costs were incurred. Consequently,
the segment incurred a loss of R3,6 million.
Head office
Head office costs were negatively affected by increased employment, training and
recruitment costs. In addition, the Group has embarked on an above-the-line
marketing campaign which increased advertising costs.
CAPITAL EXPENDITURE
Capital expenditure for the remainder of the 2015 financial year is expected to be
approximately R62,9 million. This will be funded by a combination of internally
generated cash flows and interest-bearing debt. Capital expenditure in 2016 is
expected to be materially less than that incurred for the 2015 financial year.
PROSPECTS
Consumer confidence fell in the third quarter driven by the economy’s poor
growth prospects, increasing interest rates and inflationary pressures. It is expected
that the associated financial burdens will continue to impact consumption
which does not bode well for the economy nor the Group’s ability to grow its
volume base.
Due to cyclicality of trading activity, in the second half, volumes are expected to
increase over the Christmas period, however, the extent of the increase is unknown.
Initiatives highlighted above are bearing positive results albeit not at the required
pace. Consequently, the difficult trading conditions experienced are expected to
improve for the remainder of the financial year. This forecast has not been audited
nor reviewed by the Group’s auditors.
The Group remains committed to its acquisitive growth strategy by leveraging off
its intellectual property, infrastructure, low gearing, positive cash balances and
strong cash flows.The Group seeks to invest not only in businesses that complement
existing divisions, but also in those that will diversify and grow new revenue
streams. Various acquisition opportunities continue to be evaluated and actively
pursued both in South Africa and its neighbouring countries.
DECLARATION OF INTERIM DIVIDEND (NUMBER 16)
Notwithstanding the poor results, cash from operations remains strong. Cash
resources and facilities are adequate to fund future capital expenditure.
Accordingly, the Board declared a gross interim dividend of 5 cents per ordinary
share which will be paid out of distributable reserves. The total STC credits utilised
as part of this declaration amount to R316,94. The number of ordinary shares in
issue at the date of this declaration is 198 627 386 and consequently the STC
credits utilised per share amounts to 0,00016 cents per share. The dividend will be
subject to a dividend withholding tax of 15% which amounts to 0,74998 cents per
share. This will result in a net dividend of 4,25002 cents per share to those
shareholders who are not exempt from paying dividend withholding tax. The tax
reference number of Value Group Limited is 9319/054/71/5. The dividend is payable
to shareholders as follows:
Declaration date
Tuesday, 14 October 2014
Last day to trade cum dividend
Friday, 9 January 2015
Trading ex-dividend commences
Monday, 12 January 2015
Record date
Friday, 16 January 2015
Payment date
Monday, 19 January 2015
Share certificates may not be dematerialised or rematerialised between Monday,
12 January 2015 and Friday, 16 January 2015 both days inclusive.
For and on behalf of the Board
C D Stein
Chairman Johannesburg
14 October 2014
Value Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06) ISIN: ZAE000016507 Share code: VLE
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
S D Gottschalk
Chief Executive Officer
Ogilvy PR 144317
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME