| Tue 26 Oct 2004, 17:55 | | Interim Report |
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Value Group Limited - Interim Report
Value Group Limited
THE MEASURABLE LOGISTICS COMPANY
(Incorporated in the Republic of South Africa)
(Registration number 1997/002203/06)
ISIN: ZAE000016507
Share Code: VLE
- 34% increase in revenue
- 17% increase in headline earnings per share
- R63 million operating cash flow
INTERIM REPORT
for the six months ended 31 August 2004
Consolidated income statement
Unaudited Unaudited Audited
6 months 6 months 12 months
August August February
Figures in R`000s % change 2004 2003 2004
Revenue 34 334 182 249 548 555 534
Operating income
before depreciation
and finance costs 49 343 47 946 119 854
Depreciation (27 437) (24 849) (51 844)
Operating income 21 906 23 097 68 010
Investment income 674 388 777
Finance costs (1 584) (5 523) (9 331)
Net income before
taxation 20 996 17 962 59 456
Taxation (note 2) (7 631) (6 594) (19 693)
Earnings attributable
to ordinary
shareholders 18 13 365 11 368 39 763
Earnings per share
(cents) (note 3)
- Basic 6,8 5,8 20,4
- Headline 17 6,1 5,2 19,2
- Diluted basic 6,3 5,4 18,7
- Diluted headline 5,7 4,8 17,6
CONSOLIDATED BALANCE SHEET
Assets
Non-current assets 273 433 278 122 265 348
Property, vehicles, plant
and equipment 271 860 276 984 264 730
Deferred tax 1 568 1 133 613
Investment 5 5 5
Current assets 161 120 123 175 142 418
Inventory 9 756 14 701 10 514
Trade and other receivables 87 735 73 688 90 326
Bank and cash 63 629 34 786 41 578
Total assets 434 553 401 297 407 766
Equity and liabilities
Capital and reserves 207 010 172 509 201 338
Non-current liabilities 70 098 107 363 75 513
Interest bearing borrowings 31 635 69 951 37 038
Deferred tax 38 463 37 412 38 475
Current liabilities 157 445 121 425 130 915
Trade and other payables 119 321 89 224 97 292
Current portion of interest
bearing borrowings 15 047 28 192 18 096
Taxation 23 077 4 009 15 527
Total equity and liabilities 434 553 401 297 407 766
Net tangible asset value
per share (cents) 103,5 87,1 100,8
Debt: Equity ratio (%) 22,6 56,9 27,4
CONSOLIDATED CASH FLOW STATEMENT
Cash flows from operating
activities 62 993 29 253 96 072
Cash flows from investing
activities (32 618) (68 553) (85 527)
Cash flows from financing
activities (8 322) 34 079 (8 883)
Net change in cash and cash
equivalents 22 053 (5 221) 1 662
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital 208 208 208
Share premium 41 231 41 231 41 231
Accumulated profits 173 389 139 451 167 846
Balance at beginning of year 167 846 133 925 133 925
Earnings attributable to
ordinary shareholders 13 365 11 368 39 763
Dividend paid (7 822) (5 842) (5 842)
Treasury shares (7 818) (8 381) (7 947)
Total capital and reserves 207 010 172 509 201 338
Notes
1. Accounting policies
The results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice.
The accounting policies adopted for this report are consistent with those
applied at 29 February 2004.
In February 2004 the JSE Securities Exchange of South Africa (`JSE`) issued
guidance on consolidation of share trusts and the Value Group Share Trust was
accordingly consolidated in the financial statements of the Group at 29 February
2004, but not at 31 August 2003.
The unaudited figures at 31 August 2003 have been restated in accordance with
AC103 to take account of this change.
2. Taxation
Taxation includes secondary
taxation on companies 1 038 778 778
3. Earnings per share
3.1 Reconciliation between
basic and headline earnings
Basic earnings 13 365 11 368 39 763
Profit on disposal of property,
vehicles, plant and equipment
less taxation (1 310) (1 157) (2 447)
Headline earnings 12 055 10 211 37 316
3.2 Number of ordinary shares
in issue
- Actual 207 599 040 207 599 040 207 599 040
- Weighted average 195 829 491 194 742 884 194 851 096
- Diluted 211 682 884 211 357 884 212 107 884
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 distribution services, warehouse and fleet
management, forklift and commercial vehicle rental and leasing.
FINANCIAL OVERVIEW
The Board is pleased to announce a 17% increase in headline earnings for the six
month period ended 31 August 2004, from 5,2 to 6,1 cents per share. Earnings
attributable to ordinary shareholders increased by 18% from R11,4 million to
R13,4 million.
A 34% increase in turnover from R249,5 million to R334,2 million exceeded
expectations. This was attributable to growth in customers and volumes, and the
acquisition of a customer base from Rennies Technology Logistics in December
2003.
Larger infrastructure was necessary to service the increased level of
operational activities. This additional cost base has resulted in operating
income after depreciation decreasing by R1,2 million from R23,1 million to R21,9
million. The infrastructure is now in place to service a higher level of
turnover with minor increase in infrastructural costs.
Over the past 12 months, interest bearing borrowings were reduced by R51,5
million, and this, combined with the favourable interest rate environment,
contributed to the R4 million reduction in finance costs over the comparative
period.
Cash flows from operating activities improved substantially and increased by
115% from R29,3 million to R63 million, which increased cash balances to R63,6
million from R34,5 million.
OPERATIONAL REVIEW
The profitability of the logistics division was below budget, which was largely
a direct consequence of the required increased infrastructure and cost base to
service turnover levels. Management is committed to optimise efficiencies to
restore margins to historic levels, and is confident that it will do so in the
short to medium term.
Growth in Freightpak`s turnover and the prior year replacement of its fleet
contributed to improved profitability of this niche chemical distribution
division.
The truck rental division performed according to expectation and contributed
meaningfully to headline earnings.
In order to provide customers with enhanced logistical solutions throughout
Southern Africa, new distribution branches in East London and Harrismith were
opened. Plans to open a depot in Botswana are at an advanced stage.
The Group is pleased to report the establishment of the Value Car Rental
division. Operations commenced in July 2004 in Johannesburg, Durban, Cape Town
and Bloemfontein and is performing according to expectation.
CAPITAL COMMITMENTS
The growth of the Group and the favourable interest rate environment has
necessitated a substantial investment in new vehicles. Subsequent to August
2004, the Group committed itself to capital expenditure amounting to R74,3
million for the replacement and expansion of its fleet. The new fleet will be
financed out of a combination of interest bearing borrowings and cash flow. This
material investment positions the Group for further organic growth.
PROSPECTS
Construction of the new 90000 m2 warehouse and distribution facility commenced
in January 2004. This world-class facility in Tunney, Germiston will be
completed in July 2005. The Group will benefit from enhanced operational
efficiencies and capacity throughput.
The Group`s ability to generate cash has confirmed the significant decision to
invest in upgrading the fleet. This, in conjunction with the already established
increased infrastructure and customer base bodes well for revenue and earnings
growth in the following financial years.
Traditionally, demand for the Group`s services increase significantly in the
second half of the financial year. The Board is therefore confident that in the
absence of unforeseen circumstances, the increase in headline earnings for the
2005 financial year will at least be in line with inflation.
DIVIDENDS
The Group declared and paid a dividend of 4 cents per share in July 2004. It is
the Group`s policy to pay a single dividend annually. Accordingly, no interim
dividend has been declared.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Officer
Johannesburg
26 October 2004
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), D C Marais, B E Goldie,
C L Sack, G J Igesund, I M Groves*, N M Phosa *Non-executive director
