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VMK
VMK
VMK - Verimark Holdings - Unaudited interim results for the period ended
31 August 2008
Verimark Holdings Limited
Registration number 1998/006957/06
Incorporated in the Republic of South Africa
Share code: VMK
ISIN: ZAE000068011
("Verimark" or "the group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2008
HIGHLIGHTS
- Revenues down 12% to R106,7 million
- Headline loss per share of 5,18 cents
- New product introductions level maintained
- Progress on the turnaround strategy continues
- Overall costs remain under control
Michael van Straaten, CEO of Verimark, said:
"Although the financial results are disappointing, we believe that progress is
being made on a number of fronts and that the corrective actions and strategies
in place will bear fruit in due course.
"Most notably, the combination of recent management changes, sustained increase
in the level of new product introductions and enhanced trading footprint will
ultimately result in an improved trading performance."
FINANCIAL OVERVIEW
Headline loss per share and loss per share attributable to shareholders for the
six months ended 31 August 2008 is 5,18 cents per share compared to a headline
profit per share and profit per share attributable to shareholders of 1,24 cents
per share for the previous comparable period.
As indicated in the trading statement issued on 7 November 2008, the reason for
the disappointing reduction in earnings is due to the lower level of turnover
and resultant gross profit.
Turnover has continued to be under pressure and is down 12% to R106,7 million
compared to the previous corresponding period. This is as a result of the
continued `lag` effect caused by the slower rate of product introductions in
prior reporting periods and the reconfiguration of some space and positioning
with certain retailers. These issues continue to be addressed and progress has
been made that will ultimately result in an improved trading performance.
Notwithstanding the reduction in sales of old products due to the reasons
mentioned, new product introductions have performed well. Sales of new products
continue to meet management expectations. This bodes well for future trading.
Gross profit is down 11% compared to the previous corresponding period. The
gross profit margin has shown improvement due to a better mix of products,
improvements in achieved selling prices on existing products and the
introduction of new products at acceptable margins. The increased number of
company managed stores has also benefited the overall margin as we are able to
achieve full retail selling prices.
The much higher than expected decline in the net profit is due to the
operational gearing of the business. Although it may appear that operating costs
have increased compared to the previous corresponding period, indirect costs
have been impacted by the increased number of company managed stores as compared
to the previous reporting period. Overall expenses of the business have been
controlled and excluding the additional costs incurred for the company managed
stores, increases have been contained to below inflation.
INTERIM DIVIDEND
Given the lower level of profitability and ongoing recovery strategy, the Board
considered it prudent not to declare a dividend for the six months ended 31
August 2008. We expect that dividend payments will resume in accordance with the
existing payout policy once the turnaround has been effected.
ACCOUNTING POLICIES
The accounting policies applied for the six months are consistent, in all
material respects, with those used in the Annual Financial Statements of the
prior periods, and have been prepared in accordance with recognition and
measurement criteria of International Financial Reporting Standards (IFRS) and
the presentation and disclosure requirements of International Accounting
Standards 34, Interim Financial Reporting, the Listing Requirements of the JSE
Limited and Schedule 4 of the Companies Act 61, 1973 as amended.
PROSPECTS
Despite the reduction in sales and profitability, we are pleased with the
continued increased rate of new product introductions. The `lag` resulting from
the limited new product introductions during the 2007 financial year is still
being felt, but will decrease each year as sustained new product introductions
continue. Although the `turnaround` strategy currently underway continues to
take longer than initially expected we are positive about the progress made to
date and remain confident that it will result in Verimark`s ability to make a
full recovery and continue its long-term success track record.
ABRIDGED CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2008 August 2007 February 2008
R`000 R`000 R`000
Revenue 106 784 121 900 253 031
Operating loss/profit (2 880) 5 175 13 538
before finance costs
Finance income 5 28 266
Finance costs (2 839) (1 945) (5 316)
Loss/profit for the period (5 714) 3 258 8 488
Income tax expense - (1 837) (4 014)
Loss/profit for the period (5 714) 1 421 4 474
Attributable to (5 714) 1 421 4 474
shareholders
Loss/earnings per share (5,18) 1,24 4,10
(cents)
Diluted loss/earnings per (5,18) 1,24 4,10
share (cents)
ABRIDGED CONSOLIDATED BALANCE SHEET
Unaudited Unaudited Audited
August 2008 August 2007 February
2008
R`000 R`000 R`000
Assets
Plant and equipment 3 550 4 057 3 648
Intangible assets 14 234 14 511 14 317
Loans receivable 459 459 459
Other receivable 2 908 - 2 908
Deferred taxation asset 621 671 621
Non-current assets 21 772 19 698 21 953
Inventories 40 657 44 087 39 363
Trade and other 47 403 40 979 40 641
receivables
Prepayments 637 683 133
Short-term portion of 239 239 239
loans receivable
Prepaid taxation 37 37 37
Bank and cash balances 501 922 409
Current assets 89 474 86 947 80 822
Total assets 111 246 106 645 102 775
Equity and liabilities
Share capital 368 381 368
Share premium 26 730 37 621 26 730
Retained earnings 15 778 18 439 21 492
Equity attributable to 42 876 56 441 48 590
equity holders of the
parent
Preference share liability 12 528 - 11 821
Interest-bearing - 8 -
liabilities
Non-current liabilities 12 528 8 11 821
Trade and other payables 26 693 28 218 28 359
Shareholders for dividend 42 43 42
Short-term portion of 5 805 5 975 5 907
interest bearing
liabilities
Bank overdraft 22 825 14 908 7 579
Taxation payable 477 1 052 477
Current liabilities 55 842 50 196 42 364
Total equity and 111 246 106 645 102 775
liabilities
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained
capital premium earnings Total
R`000 R`000 R`000 R`000
Balance at 28 February 381 37 621 34 026 72 028
2006
Profit for the year - - 13 274 13 274
Total recognised income 381 37 621 47 300 85 302
and expenses for the year
Dividend declared - - (23 997) (23 997)
Balance at 28 February 381 37 621 23 303 61 305
2007
Profit for the year - - 4 474 4 474
Total recognised income 381 37 621 27 777 65 779
and expenses for the year
Dividend paid - - (6 285) (6 285)
Treasury shares held by (13) (10 891) - (10 904)
VEET
Balance at 29 February 368 26 730 21 492 48 590
2008
Loss for the period - - (5 714) (5 714)
Balance at 31 August 2008 368 26 730 15 778 42 876
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2008 August 2007 February 2008
R`000 R`000 R`000
Cash flows from operating (13 878) (3 183) 7 239
activities
Cash absorbed/generated by (11 751) 5 654 20 994
operations
Dividend paid - (6 285) (6 285)
Finance income 5 28 266
Finance costs (2 132) (1 945) (4 399)
Taxation paid - (635) (3 337)
Cash (outflows) from (1 174) (1 371) (1 992)
investing activities
Acquisition of plant and (1 157) (1 174) (1 864)
equipment to maintain
operations
Acquisition of intangible (17) (221) (152)
assets to maintain
operations
Proceeds from disposal of - 24 24
plant and equipment
Cash inflows from (102) 70 (2 915)
financing activities
Repurchase of own shares - - (10 904)
(treasury shares)
Proceeds from issue of - - 10 904
redeemable preference
shares
Decrease in loans - 239 239
receivable
Other receivable raised - - (2 908)
Interest-bearing (102) (168) (6 023)
liabilities repaid
Interest-bearing - - 5 778
liabilities raised
Interest-free borrowings - (1) (16)
repaid
Interest-free borrowings - - 15
raised
Net (decrease)/increase in (15 154) (4 484) 2 332
cash and cash equivalents
Cash and cash equivalents (7 170) (9 502) (9 502)
at beginning of year
Cash and cash equivalents (22 324) (13 986) (7 170)
at end of period
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2008 August 2007 February 2008
R`000 R`000 R`000
Attributable loss/income (5 714) 1 421 4 474
to ordinary shareholders
Profit on sale of fixed - (6) (7)
assets
Headline loss/earnings (5 714) 1 415 4 467
Shares in issue 114 272 328 114 272 328 114 272 328
Treasury shares (4 000 000) - (4 000 000)
Number of shares at year 110 272 328 114 272 328 110 272 328
end
Basic loss/earnings per (5,18) 1,24 4,10
share
Headline loss/earnings per (5,18) 1,24 4,10
share
On behalf of the Board
Michael van Straaten Daniel Reichenberg
Chief Executive Officer Financial Director
Johannesburg
13 November 2008
Directors:
M J van Straaten (CEO), D N Reichenberg, Dr J T Motlatsi*, J M Pieterse*
*Independent Non-executive
Company Secretary:
Daniel Reichenberg
Registered office:
67 CR Swart Drive
Corner CR Swart Drive and Freda Road Bromhof Extension 48
Randburg 2194
Postal address:
Verimark Holdings Limited
PO Box 78260, Sandton 2146
Email address:
investors@verimark.co.za
Transfer secretaries:
Computershare Investor Services (Pty) Limited
Auditors:
KPMG Incorporated
Sponsor:
PSG Capital (Pty) Limited
www.verimark.co.za
Date: 13/11/2008 16:10:01 Produced by the JSE SENS Department.
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