| Tue 23 Oct 2007, 16:39 | | VLE - Value Group Limited - Unaudited interim fina |
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VLE
VLE
VLE - Value Group Limited - Unaudited interim financial results for the six
months ended 31 august 2007
VALUE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06)
ISIN code: ZAE000016507 & Share code: VLE
THE MEASURABLE LOGISTICS COMPANY
VALUE GROUP LIMITED
RETURN TO PROFIT FOR THE LATEST SIX MONTHS RESULTS
STRONG CASH FLOWS
UNAUDITED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 31 AUGUST 2007
CONSOLIDATED INCOME STATEMENT
Restated Audited
% 31 August 31 August 28 February
R`000`s change 2007 2006 2007
Revenue 10 535 056 485 616 1 033 985
Operating profit before
depreciation,
amortisation and finance (15) 55 589 65 147 102 347
costs
Depreciation and (32 747) (31 720) (69 308)
amortisation
Operating profit 22 842 33 427 33 039
Investment income 11 006 9 099 14 788
Finance costs (19 523) (14 060) (26 039)
Net profit before 14 325 28 466 21 788
taxation
Taxation (4 591) (8 976) (7 428)
Net profit for the period 9 734 19 490 14 360
Earnings per share
(cents) (note 1)
- Basic 4,8 9,8 7,1
- Headline (46) 5,4 10,0 9,6
- Diluted basic 4,7 9,3 6,9
- Diluted headline 5,3 9,4 9,3
CONSOLIDATED BALANCE SHEET
Assets
Non-current assets 616 974 579 502 603 242
Property, vehicles, plant and 601 582 560 590 589 566
equipment
Intangible assets 12 205 16 508 12 167
Deferred tax 3 187 1 424 1 509
Investments - 980 -
Current assets 300 568 277 888 246 946
Inventory 16 474 17 903 17 977
Trade and other receivables 213 917 196 787 173 465
Taxation in advance 10 441 349 10 461
Bank and cash 59 736 62 849 45 043
Non-current assets held for 3 843 6 182 2 493
sale
Total assets 921 385 863 572 852 681
Equity and liabilities
Capital and reserves 371 101 388 183 363 620
Non-current liabilities 225 389 191 666 212 732
Interest-bearing borrowings 138 178 111 606 129 839
Deferred tax 87 211 80 060 82 893
Current liabilities 324 895 283 723 276 329
Trade and other payables 267 323 226 526 221 908
Current portion of interest-
bearing borrowings 54 725 44 659 53 291
Taxation 2 847 12 538 1 130
Total equity and liabilities 921 385 863 572 852 681
Net asset value per share 184,0 191,1 179,8
(cents)
CONSOLIDATED CASH FLOW STATEMENT
Cash flows from operating 55 378 30 022 61 669
activities
Cash generated by operations (9) 60 132 65 751 115 419
Net finance costs (8 517) (4 961) (11 251)
Changes in working capital 3 763 (23 144) (17 657)
Taxation paid - (7 618) (24 842)
Cash available from 55 378 30 028 61 669
operating activities
Dividends paid - (6) -
Cash flows from investing (48 158) (61 783) (118 598)
activities
Cash flows from financing 7 473 40 637 47 999
activities
Net change in cash and cash 14 693 8 876 (8 930)
equivalents
Cash and cash equivalents at
beginning of period 45 043 53 973 53 973
Cash and cash equivalents at 59 736 62 849 45 043
end of period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary
share-
holders`
equity
Share
capital Treasury Retained
and
R000`s premium shares Reserves earnings
Balance at 31 August
2006
(unaudited) 41 439 (2 463) 446 348 761 388 183
Treasury shares sold - 1 218 - - 1 218
Loss on disposal of - - - (522) (522)
treasury shares
Share-based payment - - 84 - 84
Foreign currency - - (161) 158 (3)
translation
differences
Capital distribution (20 210) - - - (20 210)
and share buy back
Net profit for the - - - (5 130) (5 130)
period
Balance at 28
February 2007
(audited) 21 229 (1 245) 369 343 267 363 620
Treasury shares - (2 299) - - (2 299)
acquired
Profit on disposal of - - - 17 17
treasury shares
Share-based payment - - (21) 50 29
Net profit for the - - - 9 734 9 734
period
Balance at 31 August
2007
(unaudited) 21 229 (3 544) 348 353 068 371 101
SEGMENTAL ANALYSIS
General Truck
distri- rental
bution* and other
Niche
distri-
bution
R000`s Head Total
office
Revenue - 2007 359 991 60 262 114 653 150 535 056
Operating 13 028 (2 819) 16 597 (3 964) 22 842
profit/(loss) - 2007
Revenue - 2006 314 596 57 660 113 360 - 485 616
Operating 14 662 1 204 20 897 (3 336) 33 427
profit/(loss) - 2006
*The general distribution segment comprises courier, break-bulk and single party
distribution services.
NOTES
The accounting policies adopted for the purpose of this report comply in all
material respects with International Financial Reporting Standards (IFRS) and
have been consistently applied to all periods presented.
The Group`s interim results have been prepared in accordance with IAS 34:
Interim Financial Reporting. The accounting policies and methods of computation
applied in the preparation of the interim results are consistent with those
applied in the preparation of the annual financial statements for the year ended
28 February 2007.
COMPARATIVE FIGURES
Comparative figures have been reclassified in order to comply with Circular
9/2006 issued by SAICA where clarification was given on the interpretation of
IAS 39: Financial Instruments - Recognition and Measurement, IAS 18: Revenue and
IAS 2: Inventories.
When receivables or payables are raised, IAS 39 requires that the receivable or
payable be initially recognised at its fair value. As a result, the effect of
the time value of money in receivables and payables with extended terms have
been reflected.
The effects of the reclassification are as follows:
Previously Fair value Restated
stated
R000`s 31 August adjustment 31 August
2006 2006
Revenue 494 424 (8 808) 485 616
Operating profit before
depreciation,
amortisation and finance costs 65 559 (412) 65 147
Depreciation and amortisation (31 720) - (31 720)
Operating profit 33 839 (412) 33 427
Investment income 291 8 808 9 099
Finance costs (5 664) (8 396) (14 060)
Net profit before taxation 28 466 - 28 466
Taxation (8 976) - (8 976)
Net profit for the period 19 490 - 19 490
Restated Audited
31 August 31 August 28 February
R000`s 2007 2006 2007
1. Headline earnings
1.1 Reconciliation between
basic and
headline earnings
Basic earnings 9 734 19 490 14 360
Loss on disposal of
property, vehicles,
plant and equipment 1 283 373 1 572
less taxation
Impairment of - - 3 442
intangible asset
Headline earnings 11 017 19 863 19 374
1.2 Number of ordinary
shares in issue
- Actual 205 599 040 207 599 040 207 599 040
- Weighted average 202 661 311 199 321 286 201 495 411
- Diluted 207 350 559 210 205 822 208 402 942
COMMENTARY
Introduction
Value Group Limited and its subsidiaries provide a comprehensive range of
tailored logistical solutions throughout southern Africa. The major operating
divisions specialise in providing a diversified range of distribution services,
warehousing, fleet management, forklift and commercial vehicle rental and
leasing.
Financial and operational review
Turnover increased by 10% from R485,6 million to R535,1 million. This increase
arose mainly from rate increases and organic growth of new customers in the
latter half of the prior financial year. The commencement of the National Credit
Act had a negative impact on vehicle utilisation and freight volumes in June and
July 2007. Volumes were below May 2007 and that of the 2006 comparative months.
As a result, volume growth over the period was marginal.
As mentioned in the 2007 year-end press release, management expected reduced
interim profits in comparison to the previous interim period. Rate pricing
pressures and increased costs reduced earnings. The operational costs of the
provision of logistics services, is far exceeding inflation. In particular, wage
rates have increased by 11% in the current year and similarly in the prior year.
As a result, operating margins before depreciation decreased from 13,4% to
10,4%, and operating profit after depreciation was reduced by R10,6 million from
R33,4 million to R22,8 million.
Increased debt levels coupled with escalating interest rates contributed to net
interest costs growing by R3,6 million, to R8,5 million. Headline earnings per
share declined by 46% from 10,0 cents to 5,4 cents per share.
Notwithstanding the reduction in headline earnings, cash generated by operations
remained strong and was reduced by 9% from R65,8 million to R60,1 million.
Strict working capital management remains a key focus. Excluding the trade
receivables of the clearing and forwarding division, trade debtors days at 31
August 2007 amounted to 49.
Management has, and continues to devote substantial time, effort and resources
on improving the profitability levels of the Group. This has encompassed the
following:
- Re-pricing of various customers` rates. Certain rates were found to be
inadequate for the services rendered and rates were adjusted accordingly, albeit
not to management`s satisfaction. A large portion of customers accepted
increases whereas others moved to new service providers. Rate pressure within
the Group`s customer base is highly evident as a result of retailers imposing
heavy margin pressures on our customers.
- In collaboration with certain customers, various provisions of supply chain
services have been remodeled to limit rate increases by improving efficiencies
and at the same time, reducing costs.
- Management has renewed its focus on improving truck rental vehicle
utilisations and margins. New contracted revenue has been secured which will
increase utilisations and margins. A programme of defleeting older vehicles will
commence in January 2008.
Information technology
The Group has invested in improving its operational IT systems to facilitate
further reporting and customer integration. The financial modules of the
integrated IT solution are functional, yet have not yielded the anticipated
benefits. The system has been externally evaluated and a decision regarding the
direction thereof will be made shortly.
Capital commitments
Subsequent to August 2007, the Group was committed to additional vehicle capital
expenditure amounting to R54,3 million. Vehicles were purchased to expand and
replace the car and truck rental fleet and in addition, to fulfill contracted
orders. These commitments will be funded out of borrowings.
Prospects
The recent increase in prime overdraft rates will increase borrowing costs and
may curb consumer Christmas spending. Management`s initiatives to address the
pricing and cost pressures, have improved the earnings of the Group when
comparing these results to those achieved in the second half of the 2007
financial year. The improvement however, is far short of what is required.
Despite this, increased volumes from the expanded customer base in conjunction
with the corrective action undertaken should result in the Group reporting
improved earnings for the 2008 financial year.
Acknowledgements
The Board is pleased to announce the appointment of Mr Mano Padiyachy as an
executive director effective July 2007. Mr Padiyachy is extensively involved in
the operations of the Group and brings with him a wealth of operational
knowledge to the Board and the business.
Dividends
Due to the material reduction in earnings and the capital expenditure
commitment, it is considered prudent that no interim dividend be declared.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
23 October 2007
VALUE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06)
ISIN code: ZAE000016507 Share code: VLE
Directors: C D Stein* (Chairman), S D Gottschalk (CEO), C L Sack, G J Igesund, I
M Groves*, N M Phosa, D A Todd, M Padiyachy
*Non-executive director
Sponsor: Investec Bank Limited
Date: 23/10/2007 16:39:01 Produced by the JSE SENS Department.
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