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VALUE GROUP LIMITED - Reviewed Consolidated Financial Results for the year ended 28 February 2021 and Updated Opinion and Recommendation
2021/05/04 13:26:00Download PDF Stock report
Reviewed Consolidated Financial Results for the year ended 28 February 2021 and Updated Opinion and Recommendation Value Group Limited (Incorporated in the Republic of South Africa) Registration number 1997/002203/06 ISIN number: ZAE000016507 Share code: VLE REVIEWED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2021 AND UPDATED OPINION AND RECOMMENDATION STATEMENT IN RESPECT OF THE SCHEME OF ARRANGEMENT AND GENERAL OFFER Directors: C D Stein* (Chairman), S D Gottschalk (CEO), C L Sack, N M Phosa*, M Padiyachy, V W Mcobothi*, B Bulo* *Non-executive director Sponsor: Investec Bank Limited Company Secretary: Fluidrock Advisory (Pty) Ltd Transfer secretary: Computershare Investor Services (Pty) Ltd Registered office: 49 Brewery Road, Isando, 1600, PO Box 778, Isando, 1600, Tel: (011) 570 2000 www.value.co.za Highlights Revenue UP 2% R2,94bn Headline earnings per share UP 11% 102,4 cents Earnings per share UP 12% 99,9 cents Net asset value per share up 11% 627,9 cents Cash generated by operations UP 4% R621m Value Group Limited and its subsidiaries ('the Group') provide a comprehensive range of tailored logistical solutions throughout southern Africa. On 1 May 2021, the Group celebrated its 40th year anniversary milestone since its early beginnings of providing truck rental services. FINANCIAL REVIEW The Group has had to navigate its way as a result of challenges brought about by the poor economic climate and the imposition of the initial highly restrictive lockdowns in order to contain the spread of the COVID-19 pandemic. In particular, the implementation of level 5 lockdown from 27 March 2020 to 30 April 2020, resulted in a material reduction in revenue. The Group was designated as an essential service provider and was permitted to provide services to a limited number of customers supplying essential goods. Accordingly, April 2020 revenue was 32,6 % below that of April 2019. As lockdown restrictions eased to level 4 in May 2020, more of the Group's customers were permitted to trade which resulted in a material increase in revenue compared to April 2020. As a result, revenue in May 2020 was 5.3% less than that in May 2019. From 1 June 2020 onwards, with the shift to less restrictive lockdown levels, the Group eventually returned to normal operational capacity. Despite these challenges, the Group (and particularly the retail logistics division) has been successful in growing its customer base by on boarding a number of new customers during this unprecedented time. In addition, the Group experienced an unprecedented extended peak period in December 2020 and into January 2021 where volumes were extraordinarily high resulting from the availability of products that were previously unavailable during the restrictive lockdown periods and thereafter. This tempered the reduction in revenue during the lockdown periods with revenue increasing by 2% from R2,88 billion to R2,94 billion. The combination of the extended peak period, together with improvements in trading and various cost saving initiatives, contributed to gross profit margins being maintained at 33% with gross profit increasing by R24,5 million to R972,3 million. In addition, these measures resulted in substantial savings with operating expenses increasing by only 2,9% or R21 million to R739,8 million. The effect of reduced other income and increased operating costs were insufficient to improve operating profits which reduced by 3% from R257,7 million to R249,5 million. Net profit before tax however increased mainly due to a R14,4 million net finance cost reduction which arose due to reductions in asset base funding costs and IFRS 16 (lease) funding costs. The Group also benefitted from a reduction in the effective tax rate from 24,3% to 23,3%. The board is thus pleased to advise that the Group produced an 11% increase in headline earnings for the year ended February 2021 from 92,2 cents to 102,4 cents per share. Increases in goods and vehicles for sale inventory levels in addition to increases in receivable balances from growth in the customer base have been offset by increased payables. In addition, continued focus on working capital management yielded improved cash flow results. Notwithstanding the financial difficulties that affected many businesses during this extraordinary period, collections were better than expected. In addition, proceeds on disposal of rental assets were very high with disposals generating R76,6 million. Consequently, cash generated by operations increased by 4% to R620,9 million. OFFER TO MINORITY SHAREHOLDERS AND POSSIBLE DELISTING FROM THE JSE Shareholders are referred to the Firm Intention Announcement released on SENS on Friday, 26 February 2021 and the Offer Circular distributed to Shareholders on Thursday 25 March 2021 pertaining to: - An offer by Value Group Ltd to Eligible Shareholders to repurchase by way of a Scheme of Arrangement ('the scheme') all their shares in Value Group Ltd for a cash consideration of R6.75 per share ('the Scheme Consideration'); and - Separate but concurrently with the scheme, a conditional General Offer by Value Group Ltd to Eligible Shareholders ('the general offer'), to repurchase all of their shares in Value Group Ltd for a cash consideration of R6.75 per share ('the General Offer Consideration'). The general offer will only be implemented should the scheme fail; and - The subsequent delisting of all of Value Group Ltd's Ordinary Shares from the JSE, in terms of paragraph 1.17(b) of the Listings Requirements, pursuant to the implementation of the scheme or, if the scheme fails, pursuant to the implementation of the general offer subject to the required delisting resolution being approved. Shareholders are reminded of the salient dates and times as contained in the SENS announcement dated 25 March 2021 and the Offer Circular. The salient dates for Shareholders to vote on the above-mentioned corporate actions are as follows: Last day to trade to be eligible to vote Tuesday, 18 May 2021 Record date Friday, 21 May 2021 General meeting convened electronically Thursday, 27 May 2021 at 11:00 UPDATED OPINION AND RECOMMENDATION The Independent Expert, Mazars Corporate Finance (Pty) Ltd, has considered the contents of these Reviewed Results and have confirmed there is no change to its opinion that the Scheme Consideration and General Offer Consideration are fair and reasonable to Eligible Shareholders. The full substance of the Independent Expert's report in connection with the scheme and general offer is set out in the Offer Circular. The Independent Board, taking into account the above confirmation and the contents of the Reviewed Results, has unanimously confirmed there is no change to their opinion that the terms and conditions of the scheme and the general offer are fair and reasonable to Shareholders and, accordingly, unanimously recommends that Shareholders vote in favour of the Resolutions to be tabled at the general meeting. FINAL DIVIDEND No final dividend has been recommended or declared due to the pending cash outflows required to fund the offer to minority shareholders. ABOUT THIS ANNOUNCEMENT This short form announcement is the responsibility of the directors and is only a summary of the information in the full announcement. The full announcement was released on SENS at https://senspdf.jse.co.za/documents/2021/jse/isse/VLE/YE21.pdf on 4 May 2021 and is also available on the Group's website at www.value.co.za. The Group's auditor, SVG has reviewed the full announcement. Copies of the full announcement and the unmodified review report of the auditors are available for inspection and may be requested at the company's registered office, at no charge, during office hours. Any investment decision must be based on the full announcement published. For and on behalf of the board C D Stein S D Gottschalk Chairman Chief Executive Officer Johannesburg 4 May 2021 Date: 04-05-2021 01:26:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.