| Tue 16 May 2006, 17:56 | | Value Group Limited - Reviewed results for the yea |
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VLE
VLE
Value Group Limited - Reviewed results for the year ended 28 February 2006
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
REVIEWED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2006
New world class distribution and warehouse facility operational
- REVENUE UP 23%
- OPERATING PROFIT UP 21%
- HEADLINE EARNINGS PER SHARE UP 12%
- CASH GENERATED BY OPERATIONS UP 22%
CONSOLIDATED INCOME STATEMENT
% Reviewed Restated
R000"s change 2006 2005
Revenue 23 885 861 718 098
Operating profit before depreciation,
amortisation and finance costs 150 307 122 306
Depreciation and amortisation (47 693) (37 587)
Operating profit 21 102 614 84 719
Investment income 1 377 1 458
Finance costs (8 033) (4 264)
Net profit before taxation 95 958 81 913
Taxation (note 1) (31 263) (24 476)
Net profit for the year 64 695 57 437
Earnings per share (cents) (note 2)
- Basic 32,7 29,4
- Headline 12 34,3 30,7
- Diluted basic 30,9 27,7
- Diluted headline 32,5 29,0
CONSOLIDATED BALANCE SHEET
% Reviewed Restated
R000"s change 2006 2005
Assets
Non-current assets 549 326 432 000
Property, plant and equipment 532 249 425 357
Intangible assets 15 313 -
Deferred tax 784 663
Investments 980 5 980
Current assets 213 431 172 978
Inventory 5 970 11 350
Trade and other receivables 144 120 98 639
Non-current assets held for sale 8 949 -
Taxation in advance 419 -
Bank and cash 53 973 62 989
Total assets 762 757 604 978
Equity and liabilities
Capital and reserves 367 309 311 175
Non-current liabilities 157 181 119 865
Interest-bearing borrowings 81 546 54 373
Deferred tax 75 635 65 492
Current liabilities 238 267 173 938
Trade and other payables 187 845 131 846
Current portion of interest-bearing
borrowings 35 387 20 113
Taxation 15 035 21 979
Total equity and liabilities 762 757 604 978
Net asset value per share (cents) 16 184,3 158,2
Consolidated cash flow statement
% Reviewed Restated
R000"s change 2006 2005
CASH FLOWS FROM OPERATING ACTIVITIES 123 482 115 503
CASH GENERATED BY OPERATIONS 22 154 867 126 093
NET FINANCE COSTS (6 656) (2 807)
CHANGES IN WORKING CAPITAL 17 127 16 321
TAXATION PAID (31 989) (16 636)
CASH AVAILABLE FROM OPERATING
ACTIVITIES 133 349 123 308
DIVIDENDS PAID (9 867) (7 805)
CASH FLOWS FROM INVESTING ACTIVITIES (176 014) (113 948)
CASH FLOWS FROM FINANCING ACTIVITIES 40 487 19 856
NET CHANGE IN CASH AND CASH
EQUIVALENTS (12 045) 21 411
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 62 989 41 578
CASH AND CASH EQUIVALENTS ACQUIRED 3 029 -
CASH AND CASH EQUIVALENTS AT END
OF YEAR 53 973 62 989
Consolidated statement of changes in equity
SHARE ORDINARY
CAPITAL AND TREASURY RETAINED SHAREHOLDERS"
R000"S PREMIUM SHARES RESERVES EARNINGS EQUITY
BALANCE AT
29 FEBRUARY
2004 (IFRS
RESTATED) 41 439 (7 947) 14 227 509 261 015
TREASURY
SHARES SOLD - 904 - - 904
LOSS ON
DISPOSAL OF
TREASURY
SHARES - - - (400) (400)
SHARE-BASED
PAYMENT - - 41 - 41
DIVIDENDS - - - (7 822) (7 822)
NET PROFIT
FOR THE YEAR - - - 57 437 57 437
BALANCE AT
28 FEBRUARY
2005 (IFRS
RESTATED) 41 439 (7 043) 55 276 724 311 175
TREASURY
SHARES SOLD - 1 829 - - 1 829
LOSS ON
DISPOSAL OF
TREASURY
SHARES - - - (810) (810)
SHARE-BASED
PAYMENT - - 147 - 147
FOREIGN
CURRENCY
TRANSLATION
DIFFERENCES - - 166 - 166
DIVIDENDS - - - (9 893) (9 893)
NET PROFIT
FOR THE YEAR - - - 64 695 64 695
BALANCE AT
28 FEBRUARY
2006 41 439 (5 214) 368 330 716 367 309
SEGMENTAL ANALYSIS
GENERAL NICHE TRUCK RENTAL
R000"S DISTRIBUTION DISTRIBUTION AND OTHER TOTAL
REVENUE - 2006 538 305 97 242 250 314 885 861
OPERATING PROFIT
- 2006 41 426 5 990 55 198 102 614
REVENUE - 2005 435 359 86 817 195 922 718 098
OPERATING PROFIT
- 2005 31 363 6 033 47 323 84 719
Notes
Basis of preparation
The Group has adopted International Financial Reporting Standards (IFRS) for the
year ended 28 February 2006. The financial statements have been prepared on the
basis of IFRS and interpretation statements, in issue and effective at 28
February 2006, and in compliance with the Listings Requirements of the JSE
Limited. The financial statements for the year ended 28 February 2006 are the
Group"s first consolidated IFRS-compliant financial statements and hence IFRS 1
(First-time adoption of IFRS) has been applied in preparing this financial
report.
The accounting policies as set out in the 2005 annual report have been
consistently applied in preparing this financial report, except for those which
have arisen due to the adoption of IFRS as detailed below. Comparative figures
have been restated where applicable as required by IFRS.
Reviewed Restated
R000"s 2006 2005
1. Taxation
Taxation includes secondary tax on companies 1 297 1 038
2. Earnings per share
2.1 Reconciliation between basic and headline
earnings
Basic earnings 64 695 57 437
Loss on disposal of property, plant and
equipment less taxation 2 439 2 626
Impairment of intangible asset 811 -
Headline earnings 67 945 60 063
2.2 Number of ordinary shares in issue
- Actual 207 599 040 207 599 040
- Weighted average 198 117 402 195 656 096
- Diluted 209 113 128 207 354 393
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 liabilities 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 1 March 2004 has not been reconsidered in preparing the
Group"s opening balance sheet at 1 March 2004.
2. Property, plant and equipment
The Group has restated the comparative information for the effect of adopting
IAS 16 - Property, plant and equipment. This material restatement is reflected
in the reconciliation of equity below.
3. 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
instruments (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.
4. Straight-lining of operating lease payments
Payments due under operating leases are recognised in the income statement on a
straight- line basis over the term of the lease.
The Group"s past practice was to expend operating lease payments on a payments
basis, which was based on an interpretation that was generally used by entities
in South Africa. The adjustment has been made as required, with the necessary
restatement of comparative results.
RECONCILIATION OF EQUITY
28 February 1 March
R000"s 2005 2004
Equity previously reported under
SA GAAP (audited) 241 308 201 338
Adjustment for IAS 17 and adoption of IFRS 69 867 59 677
Equity reported under IFRS 311 175 261 015
Equity adjustments
Retained earnings:
Expensing of share-based payments (54) (14)
Operating leases (5 915) (5 160)
Depreciation on property, plant and equipment 76 902 61 722
Profit and loss on disposal of property, plant
and equipment (1 120) 3 115
Share-based payment reserve 54 14
69 867 59 677
Assets and liabilities adjustments
Property, plant and equipment 104 799 88 175
Inventory 2 055 4 450
Deferred tax liability (28 538) (25 576)
Trade and other receivables 58 96
Trade and other payables (8 507) (7 468)
69 867 59 677
RECONCILIATION OF PROFIT FOR THE YEAR ENDED 28 FEBRUARY 2005
Previously Adjustments GAAP Effect
R000"s stated for IAS 17 restated of IFRS IFRS
Revenue 718 137 (39) 718 098 - 718 098
Operating
profit before
depreciation,
amortisation
and finance
costs 129 475 (1 079) 128 396 (6 090) 122 306
Depreciation
and amortisa-
tion (57 864) - (57 864) 20 277 (37 587)
Operating
profit 71 611 (1 079) 70 532 14 187 84 719
Investment
income 1 458 - 1 458 - 1 458
Finance
costs (4 264) - (4 264) - (4 264)
Net income
before
taxation 68 805 (1 079) 67 726 14 187 81 913
Taxation (21 517) 240 (21 277) (3 199) (24 476)
Net profit
for the
year 47 288 (839) 46 449 10 988 57 437
COMMENTARY
INTRODUCTION
Value Group Limited and its subsidiaries provide a comprehensive range of
tailored logistical solutions throughout Southern Africa. The major operating
divisions provide distribution services, warehouse and fleet management and
forklift and commercial vehicle rental and leasing.
FINANCIAL REVIEW
The Board is pleased to report a 23% increase in turnover from R718,1 million to
R885,9 million. This increase was predominantly organic and attributable to the
additional customer base and increased volumes. Operating profit increased by
21% from R84,7 million to R102,6 million.
Net finance costs increased by R3,8 million due to additional interest-bearing
debt raised to fund asset acquisitions. Furthermore, the effective rate of
taxation increased from 29,9% to 32,6%, resulting in an additional R2,6 million
tax cost. This increase arose from the permanent difference pertaining to the
amortisation and impairment of the intangible asset and the benefit from the
deferred tax rate adjustment effected in the previous year. Consequently,
headline earnings grew by 12% from 30,7 cents to 34,3 cents per share.
Cash flows remained strong throughout the year. Cash generated by operations
increased by 22% from R126,4 million to R154,9 million. Operating cash flows
amounting to R123,5 million were utilised to fund the major portion of the
Group"s significant investment in its IT, warehouse and vehicle asset
infrastructure. The Group"s ability to fund this extraordinary expenditure to
grow capacity, bodes favourably to increase future free cash flows.
The Group"s net asset value increased by 16% from 158,2 cents to 184,3 cents per
share.
OPERATIONAL REVIEW
The consolidation of the various decentralised warehouses in Gauteng into the
new 90000m2 facility was successfully completed in February 2006, and is now
fully operational. The realisation of this notable achievement allows management
to concentrate on extracting efficiency benefits in the year ahead. The focus on
growing volumes and curtailing costs in the General Distribution division has
resulted in the operational margin increasing to 7,7% from 7,2%.
Rate and volume pressures reduced margins in Freightpak, the niche distributor
of hazardous chemicals. Pricing of the distribution requirements of the chemical
industry remained extremely competitive. This division has the capacity to
manage additional throughput without substantial operational investment in
vehicles and costs. Accordingly there is a drive to grow turnover in this
division, which to date, has yielded satisfactory results.
Turnover growth of 28% in the Truck Rental division was achieved by re-aligning
rates, and further marketing of the truck rental services. However, margins were
reduced due to vehicle utilisation in the last quarter of the financial year
being below that experienced in the previous period. Subsequently, operating
margins have improved.
INFORMATION TECHNOLOGY
The Group"s new IT infrastructure is nearing completion. The rollout of this
will commence in June 2006 and should be completed by February 2007. The new
integrated systems will facilitate the transaction processing and management
reporting requirements necessary to enable and manage the future growth of the
Group.
CAPITAL COMMITMENTS
Budgeted capital expenditure for the 2006/2007 financial year amounts to
R146,6 million, R115,9 million of which relates to the investment in vehicles.
The anticipated capital expenditure in the forthcoming financial year is less
than that spent in the 2006 financial year.
PROSPECTS
The Group"s substantial investment in its vehicles, resources and distribution
facilities over the past two to three years has now provided a platform for
sustained long-term organic growth in all divisions. It is anticipated that a
buoyant economy with a stable interest rate and diesel price will contribute to
an increase in headline earnings for the 2007 financial year at least in line
with inflation.
ACKNOWLEDGEMENTS
Mr. Danny Marais, an executive director, resigned effective 31 March 2006. Mr.
Marais played an active part in growing the Group from its early beginnings in
Pretoria. The Board thanks him for his many years of dedicated service and his
valued contribution to the Group and wishes him success in his future
endeavours.
AUDIT OPINION
Charles Orbach & Company has reviewed these results. Their unqualified review
opinion is available for inspection at the company"s registered office.
DECLARATION OF DISTRIBUTION IN LIEU OF DIVIDEND
The Group"s generation of positive cash flows will be sufficient to cover future
operational and reduced capital expenditure. Accordingly, the Board has resolved
to pay a cash distribution of 7 cents per ordinary share payable out of share
premium, in lieu of a final dividend ("the distribution") for the year ended 28
February 2006, subject to shareholder approval to be obtained at the Annual
General Meeting to be held on or about 15 August 2006. The distribution will be
payable according to a timetable complying with the Listing Requirements of the
JSE Limited and, of which further details will be published in the press within
due course.
For and on behalf of the Board
C D Stein S D Gottschalk
Chairman Chief Executive Director
Johannesburg
16 May 2006
Directors: C D Stein* (Chairman), S D Gottschalk (CEO), B E Goldie*, C L Sack, G
J Igesund, I M Groves*, N M Phosa
*Non-executive director
Date: 16/05/2006 05:57:06 PM Produced by the JSE SENS Department
