| Wed 26 Oct 2005, 7:47 | | Results For The Six Months Ended 31 August 2005 |
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Value- Unaudited Interim Results For The Six Months Ended 31 August 2005
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
- REVENUE 20%
- OPERATING INCOME 29%
- HEADLINEEARNINGSPERSHARE 20%
- CASHGENERATEDBYOPERATIONS 26%
UNAUDITED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2005
CONSOLIDATED INCOME STATEMENT
R000"s R000"s R000"s
% 31 August 31 August 28 February
change 2005 2004 2005
Revenue 20 402 502 334 145 718 098
Operating income before
depreciation,
amortisation and finance
costs 57 238 45 304 122 018
Depreciation and
amortisation (22 321) (18 193) (38 326)
Operating income 29 34 917 27 111 83 692
Investment income 609 674 1 458
Finance costs (3 365) (1 584) (4 264)
Net income before
taxation 32 161 26 201 80 886
Taxation (note 1) (11 587) (9 207) (24 134)
Earnings attributable to
ordinary shareholders 21 20 574 16 994 56 752
Earnings per share
(cents) (note 2)
- Basic 10,5 8,7 29,0
- Headline 20 11,0 9,2 30,4
- Diluted basic 9,9 8,0 27,4
- Diluted headline 10,3 8,5 28,6
CONSOLIDATED BALANCE SHEET
Assets
Non-current assets 466 087 366 318 428 840
Property, plant and equipment 449 374 364 745 422 197
Intangible assets 13 728 - -
Deferred tax 2 005 1 568 663
Investments 980 5 5 980
Current assets 208 035 164 642 173 125
Inventories 7 259 13 219 11 499
Trade and other receivables 128 547 87 794 98 637
Non-current assets held for
sale 8 027 - -
Bank and cash 64 202 63 629 62 989
Total assets 674 122 530 960 601 965
Equity and liabilities
Ordinary shareholders" equity 322 560 270 662 310 849
Non-current liabilities 136 460 97 377 119 646
Interest-bearing borrowings 69 778 31 635 54 373
Deferred tax 66 682 65 742 65 273
Current liabilities 215 102 162 921 171 470
Trade and other payables 169 629 124 797 129 378
Current portion of interest-
bearing borrowings 28 266 15 047 20 113
Taxation 17 207 23 077 21 979
Total equity and liabilities 674 122 530 960 601 965
Net tangible asset value
per share (cents) 19 164,0 138,2 158,8
Consolidated cash flow
statement
Cash flows from operating
activities 40 518 62 991 115 503
Cash generated by operations 58 720 46 600 126 093
Net finance costs (2 756) (910) (2 807)
Changes in working capital 13 970 26 139 16 658
Taxation paid (19 591) (1 049) (16 636)
Cash available from operating
activities 50 343 70 780 123 308
Dividends paid (9 825) (7 789) (7 805)
Cash flows from investing
activities (63 938) (32 618) (113 948)
Cash flows from financing
activities 21 513 (8 322) 19 856
Net change in cash and cash
equivalents (1 907) 22 051 21 411
Cash and cash equivalents at
beginning of period 62 989 41 578 41 578
Cash and cash equivalents
acquired 3 029 - -
Translation differences of
foreign cash 91 - -
Cash and cash equivalents at
end of period 64 202 63 629 62 989
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital Ordinary
and Treasury Retained shareholders
Figures in R000"s premium shares Reserves earnings equity
Balance at
29 February 2004
(IFRS restated) 41 439 (7 947) 35 227 786 261 313
Treasury shares
sold - 129 - - 129
Share based
payment - - 48 - 48
Dividends - - - (7 822) (7 822)
Net profit for
the period -
restated - - - 16 994 16 994
Balance at
31 August 2004
(IFRS restated) 41 439 (7 818) 83 236 958 270 662
Treasury shares
sold - 775 - - 775
Share based
payment - - 54 - 54
Net profit for
the period -
restated - - - 39 758 39 758
Loss on disposal
of treasury
shares - - - (400) (400)
Balance at
28 February 2005
(IFRS restated) 41 439 (7 043) 137 276 316 310 849
Treasury shares
sold - 1 327 - - 1 327
Share based
payment - - 157 - 157
Foreign currency
translation
differences - - 125 - 125
Dividends - - - (9 893) (9 893)
Net profit for
the period - - - 20 574 20 574
Loss on disposal
of treasury
shares - - - (579) (579)
Balance at
31 August 2005
(unaudited) 41 439 (5 716) 419 286 418 322 560
NOTES
BASIS OF PREPARATION
The Group has adopted International Financial Reporting Standards (IFRS) for the
year ending 28 February 2006. The interim results have been prepared and
presented in accordance with IAS 34 - Interim financial reporting. The financial
statements for the year ended 28 February 2006 will be the Group"s first
consolidated IFRS-compliant financial statements and hence IFRS 1. First time
adoption of IFRS has been applied in preparing this interim report.
An explanation of how the transition of IFRS has affected the previously
reported financial position and performance of the Group is provided below.
31 August 31 August 28 February
Figures in R000"s 2005 2004 2005
1. Taxation
Taxation includes secondary
tax on companies 1 297 1 038 1 038
2. Earnings per share
2.1 Reconciliation between
basic and headline earnings
Basic earnings 20 574 16 994 56 752
Loss on disposal of property,
plant and equipment less
taxation 974 960 2 648
Headline earnings 21 548 17 954 59 400
2.2 Number of ordinary shares
in issue
- Actual 207 599 040 207 599 040 207 599 040
- Weighted average 196 582 022 195 829 491 195 656 096
- Diluted 208 251 941 211 682 884 207 354 393
SIGNIFICANT CHANGES TO THE GROUP"S ACCOUNTING POLICIES AS A RESULT OF THE
ADOPTION OF IFRS AND APPLICATION OF IAS 17
1. GOODWILL
All business combinations are accounted for by applying the "purchase method".
Goodwill represents amounts arising on acquisition of subsidiaries and
associates. In respect of business combinations that have occurred since the
IFRS transition date, 1 March 2004, goodwill represents the difference between
the cost of the acquisition and the fair value of the net identifiable assets
and contingent liablities acquired.
The Group has made an election in terms of IFRS 1 that IFRS 3 will only be
applied from 1 March 2004. In respect of acquisitions prior to this date,
goodwill is included as at 1 March 2004 at the amount previously recorded under
SA GAAP. The classification and accounting treatment of business combinations
that occurred prior to 1March 2004 has not been reconsidered in preparing the
Group"s opening balance sheet at 1 March 2004.
2. Share-based payment transactions
The fair value of share options and deferred delivery shares granted to
employees is recognised as an employee expense with a corresponding increase in
equity. The fair value is measured at grant date and expended over the period
during which the employee becomes unconditionally entitled to the equity
instuments (the vesting period). The fair value of the instruments granted is
measured using the Black Scholes valuation technique, taking into account the
terms and conditions upon which the instruments are granted. This accounting
policy has been applied to all equity instruments granted after 7 November 2002
that had not yet vested at 1 January 2005. The fair value of share-based
payments was not recognised under the Group"s previous accounting policies.
3. Restatement in respect of IAS 17
Following circular 7/2005 issued by SAICA on 2 August 2005, there has been
clarification of the reinterpretation of IAS 17-Leases. As a result leases are
now recognised on a straight-line basis over the lease term. Previously lease
income and expenses were recognised on a basis which reflected the cash flows
during that period. Comparative figures have been restated.
RECONCILIATION OF EQUITY
28 February 31 August 1 March
Figures in R000"s 2005 2004 2004
Equity previously reported
under SA GAAP (audited) 241 308 207 010 201 339
Adjustment for IAS 17 and
adoption of IFRS 69 541 63 652 59 974
Equity reported under IFRS 310 849 270 662 261 313
Equity adjustments
Retained earnings:
Expensing of share based
payments (137) (83) (35)
Operating leases (4 187) (3 792) (3 269)
Depreciation on property,
plant and equipment 74 752 66 481 60 009
Profit and loss on disposal
of property, plant and
equipment (1 024) 963 3 234
Share-based payment reserve 137 83 35
69 541 63 652 59 974
Assets and liabilities
adjustments
Property, plant and equipment 101 639 92 885 85 728
Inventory 2 204 3 463 4 619
Deferred tax liability (28 320) (27 279) (25 703)
Trade and other receivables 57 59 96
Trade and other payables (6 039) (5 476) (4 766)
69 541 63 652 59 974
RECONCILIATION OF PROFIT FOR THE YEAR ENDED 28 FEBRUARY 2005
Figures in R000"s Previously Adjustments GAAP Effect
stated for IAS 17 restated of IFRS IFRS
Revenue 718 137 (39) 718 098 - 718 098
Operating income
before depreciation,
amortisation
and finance costs 129 475 (1 312) 128 163 (6 145) 122 018
Depreciation and
amortisation (57 864) - (57 864) 19 538 (38 326)
Operating income 71 611 (1 312) 70 299 13 393 83 692
Investment income 1 458 - 1 458 - 1 458
Finance costs (4 264) - (4 264) - (4 264)
Net income before
taxation 68 805 (1 312) 67 493 13 393 80 886
Taxation (21 517) 394 (21 123) (3 011) (24 134)
Earnings
attributable to
ordinary
shareholders 47 288 (918) 46 370 10 382 56 752
RECONCILIATION OF PROFIT FOR THE PERIOD ENDED 31 AUGUST 2004
Figures in R000"s Previously Adjustments GAAP Effect
stated for IAS 17 restated of IFRS IFRS
Revenue 334 182 (37) 334 145 - 334 145
Operating income
before depreciation,
amortisation
and finance costs 49 343 (747) 48 596 (3 292) 45 304
Depreciation and
amortisation (27 437) - (27 437) 9 244 (18 193)
Operating income 21 906 (747) 21 159 5 952 27 111
Investment income 674 - 674 - 674
Finance costs (1 584) - (1 584) - (1 584)
Net income before
taxation 20 996 (747) 20 249 5 952 26 201
Taxation (7 631) 224 (7 407) (1 800) (9 207)
Earnings
attributable
to ordinary
shareholders 13 365 (523) 12 842 4 152 16 994
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 REVIEW
The Board is pleased to report a 20% increase in headline earnings for the six
months ended 31 August 2005, from 9,2 cents to 11 cents per share. Earnings
attributable to ordinary shareholders increased by 21% from R17 million to R20,6
million.
The 20% increase in turnover from R334,1 million to R402,5 million was in line
with expectations. This growth was predominantly organic and attributable to
customer and volume throughput increases, with a small contribution arising from
the acquisition of Countrywide Footwear Carriers (Pty) Limited (CFC) in April
2005.
Management"s ongoing focus on cost control has resulted in a R7,8 million
increase in operating income from R27,1 million to R34,9 million. Operating
margins after depreciation have improved from 8,1% to 8,7%.
The growth in operating activities of the Group necessitated significant
investment in new fleet, which has had the effect of increasing debt levels by
R23,6 million. Consequently, financing costs increased by R1,8 million to R3,4
million.
The current period"s effective rate of taxation has increased due to the
permanent difference arising from the amortisation of intangible assets.
Taxation increased by 26% from R9,2 million to R11,6 million.
Cash generated by operations increased by 26% from R46,6 million to R58,7
million. Cash flows from operating activities amounting to R40,5 million were
utilised to fund R17,5 million balance due for the CFC acquisition and R23
million of the Group"s investment in capital expenditure.
ADOPTION OF IFRS
The Group"s adoption of IFRS has had a positive impact on earnings and net asset
values, principally due to the reduction in depreciation charges as required by
IAS 16. The net tangible asset value per share at 1 March 2004 has been restated
from 103 cents to 135,8 cents per share.
OPERATIONAL REVIEW
The focus to reduce costs in the Group"s divisions has yielded positive results,
notwithstanding CFC"s bad debt write-off amounting to R5,3 million. The major
operating divisions margins have improved, and the growth in volumes in the
Logistics division continues to fuel the Truck Rental division. All other
divisions performed satisfactorily.
CAPITAL COMMITMENTS
The rapid growth of the Group has necessitated a substantial investment in new
assets and infrastructure. Subsequent to August 2005, the Group committed itself
to vehicle capital expenditure amounting to R81,2 million. In addition, R17,7
million has been allocated to the Group"s new IT infrastructure, which is
expected to go live in March 2006. R20,4 million will be invested in plant and
materials handling equipment for the new warehouse and distribution facility.
This total capital investment will be funded out of a combination of debt and
cash flows.
PROSPECTS
Consolidation of the various decentralised warehouses in Gauteng into the new
90000 m2 facility commenced in September 2005 and is expected to be completed by
February 2006. Consequently, the full benefit of the new facility will be
realised in the 2007 financial year.
The Group acquired a 30% interest in a newly established BEE company,Value SA
(Pty) Limited. Value SA has been awarded a parastatal contract, the commencement
date of which will be 1 November 2005.
Traditionally demand for the Group"s services increase significantly in the
second half of the financial year. The once-off relocation costs of the
consolidation of the various facilities will impact headline earnings for the
remainder of the financial year. Nevertheless, expected bouyant trading
conditions will contribute to an increase in annual headline earnings which, in
the absence of unforeseen circumstances, should exceed inflation.
DIVIDENDS
The Group declared and paid a dividend of 5 cents per share in July 2005. 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 Director
Johannesburg
25 October 2005
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
Date: 26/10/2005 07:47:36 AM Produced by the JSE SENS Department
