Value Group has reported improved margins after the logistics company applied strict cost controls in the 1st half of its financial year. Gross profit margins increased from 43% to 45% in the 6 months to end-August 2009. Operating margins rose from 8.7% to 9.5% during the same period. As a result, operating profit was more or less unchanged at R60.5-mn from the previous year, in spite of revenue falling 9% year-on-year to R635.6-mn.
Value said that the improvement in margins was also as a result of market share gains and an increase in customers. "We have restructured our business and it is sustainable. When things pick up, and they will, we will stand to benefit." Value has declared a maiden interim dividend of 6c/share as a result of "management's confidence of earnings sustainability going forward".
Value offers supply chain services in the Southern African region, including distribution, transport, fleet management and commercial vehicle rental. The company's biggest division is distribution, which made up 74% of total revenue in the most recent interim results. This unit focuses on moving goods in the chemicals, telecoms, electronics, textiles and food sectors. The company is experiencing an increase in activity in the electronics and chemical sectors. Value's truck rental division has been one of the hardest hit by the economic downturn. Revenue in this division fell 23% to R21.4-mn compared to the same period last year. "From a customer perspective, this is the easiest part of the supply chain to cut out. Trucks are rented for overflow and there is not much overflow in the recession."
Value expects to report comparable earnings at its year-end in February 2010.
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