| Mon 9 Nov 2009, 7:05 | | VMK - Verimark Holdings Limited - Unaudited interim results for the six months |
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VMK
VMK
VMK - Verimark Holdings Limited - Unaudited interim results for the six months
ended 31 August 2009
Verimark Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number: 1998/006957/06
Share Code: VMK
ISIN: ZAE000068011
("Verimark" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2009
HIGHLIGHTS
- Revenues up 21% to R129,0 million
- Headline loss per share, including once-off items of 10,1 cents per share
- Normalised loss per share of 3,6 cents per share
- Conversion of selected franchises into corporate stores continuing
- Sustained increase in new product introductions and improved trading
- Turnaround strategy gaining momentum
Michael van Straaten, CEO of Verimark, said:
"Although the first six months of the year have been challenging, especially in
the first few months of that period, some progress has been made across the
business, and we are pleased to see that the various corrective actions and
strategies are beginning to produce results.
The combination of sustained increase in the level of new product introductions
and improved trading footprint will continue to positively impact on the overall
performance during the second half of the year. We look forward to seeing the
impact of the new management team on the overall profitability of the business
in the second half."
FINANCIAL OVERVIEW
Headline loss per share and loss per share attributable to shareholders for the
six months ended 31 August 2009 is 10,1 cents per share compared to a headline
loss per share and loss per share attributable to shareholders of 5,2 cents per
share for the previous comparable period.
As indicated in the trading statement issued on 29 October 2009, the reduction
in earnings is due to the impact of some abnormal once-off items not related to
the trading results. These are related to costs of R1,4m associated with the
proposed delisting (the Van Straaten family trust carried the equivalent
amount), reversal of income recognised in a prior year amounting to R3,2m
relating to a legal case which was lost on appeal, and once-off forward exchange
contracts cancellation costs of R2,0m. In addition, the consolidated results
include a cumulative preference dividend, included in finance costs, of R0,6m
compared to R0,7m in the prior period. Excluding the effects of these
adjustments, the "normalised" earnings would result in a normalised loss of 3,6
cents per share when compared to the prior year normalised loss of 4,5 cents per
share (5,2 cents per share as disclosed adjusted for the preference dividend).
This is a clear indication that the turnaround strategy gained some momentum,
particularly towards the latter part of the period under review.
Turnover improved in the first six months due to the continued acquisition of
franchise stores. Notwithstanding this, a negative impact on profitability
occurred as the benefits of the conversion to corporate owned stores in terms of
improved turnover and margins, was offset by the corresponding increase in costs
associated with the daily operations of these stores. It is expected that the
turnaround strategy for these stores will gain momentum in the medium term as
turnovers start to increase and unprofitable stores are replaced with newer,
more profitable ones. In addition, the introduction of new products and improved
prominence and space utilisation within the retail environment also contributed
to the sales growth. This trend has continued into the first two months of the
second half of the year.
Gross profit improved compared to the previous corresponding period mainly due
to the increase in sales volumes. The gross profit margin has also shown
improvement due to a better mix of products and the strengthening of the Rand
against major trading currencies. The increased number of company owned stores
had a positive impact on the overall margin as full retail selling prices are
achieved in these stores.
Operating costs increased compared to the previous period mainly due to the
increased sales volumes and the impact of increased indirect costs resulting
from the increased number of company owned stores compared to the previous
reporting period. Overall, operational expenditure has been well controlled
during the current period. Foreign Exchange losses amounted to R4,4m when
compared to R0,8m for the prior period. This was as result of fair value
adjustments on open FECs and foreign exchange losses due to the strengthening in
the rand over the prior six months.
INTERIM DIVIDEND
Despite the improvement in the overall trading results for the six months ended
31 August 2009, the Board considers it prudent not to declare a dividend due to
the Group still being in a loss situation. Dividend payments will resume in
accordance with the existing payout policy once the turnaround effort has been
fully completed.
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.
SEGMENTAL ANALYSIS
There are no significant identifiable segments and therefore no segmental
information has been disclosed.
CHANGES TO THE BOARD
Shareholders are informed of the following changes to the Board:
Daniel Reichenberg resigned as Financial Director and Company Secretary on 12
May 2009. Siegfried Preller was appointed as Company Secretary on 12 May 2009
and temporarily assumed the role of Financial Director from 2 June 2009 to 21
July 2009 when Mike Warwick, who later resigned on 3 August 2009, was appointed
as the Financial Director.
Jeremy Thomas was appointed as the Financial Director with effect from 1 October
2009 and Siegfried Preller continues to act as the Company Secretary.
DELISTING
Shareholders are referred to the announcement released on SENS on 28 August 2009
regarding the fact that the South Gauteng High Court (Johannesburg) ruled
against the sanctioning of the scheme of arrangement in terms of section 311 of
the companies act. The Van Straaten Family Trust and Verimark will not lodge an
appeal against the court`s ruling and therefore the company will remain listed.
SUBSEQUENT EVENTS
No events material to the understanding of this report have occurred in the
period between the period-end date and the date of this report.
PROSPECTS
The continued focus on the turnaround strategy has resulted in higher sales,
improved gross margins and better cost control during the period and it is
anticipated that these efforts will gather further momentum during the second
half of the financial year. The rate of new product introductions remains high
and increased retail space and prominence has been achieved. The Board expects
that these factors coupled with the re-energised sales and marketing strategy
will continue to positively impact on the overall profitability of the business.
The interim results for the period ended 31 August 2009 have not been reviewed
or audited by the company`s auditors.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2009 August 2008 February
2009
R`000 R`000 R`000
Revenue 129,033 106 784 252 511
Operating (loss)/profit (4,346) (2 880) (2 754)
Finance income 1 5 3 232
Finance costs (6,820) (2 839) (4 698)
Loss for the period before (11,165) (5 714) (4 220)
tax
Income tax expense - - 549
Loss for the period after (11,165) (5 714) (3 671)
tax
Attributable to (11,165) (5 714) (3 671)
shareholders
Loss per share (cents) (10,1) (5,2) (3,3)
Diluted loss per share (10,1) (5,2) (3,3)
(cents)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
August 2009 August 2008 February
2009
R`000 R`000 R`000
Assets
Plant and equipment 7 792 3 550 5 521
Intangible assets 14 313 14 234 14 140
Loans receivable 239 459 239
Other receivable - 2 908 2 909
Deferred taxation asset 1 642 621 1 641
Non-current assets 23 986 21 772 24 450
Inventories 39 661 40 657 39 676
Trade and other 56 481 47 403 40 156
receivables
Prepayments 366 637 394
Short-term portion of 459 239 459
loans receivable
Prepaid taxation - 37 -
Bank and cash balances 408 501 635
Current assets 97 375 89 474 81 320
Total assets 121 361 111 246 105 770
Equity and liabilities
Share capital 368 368 368
Share premium 26 730 26 730 26 730
Retained earnings 6 656 15 778 17 821
Equity attributable to 33 754 42 876 44 919
equity holders of the
parent
Preference share liability 13 916 12 528 13 281
Interest-bearing 6 478 - 5 390
liabilities
Non-current liabilities 20 394 12 528 18 671
Trade and other payables 31 635 26 693 23 241
Shareholders for dividend 42 42 42
Short-term portion of 1 864 5 805 1 178
interest bearing
liabilities
Bank overdraft 33 385 22 825 17 429
Taxation payable 287 477 290
Current liabilities 67 213 55 842 42 180
Total equity and 121 361 111 246 105 770
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 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 year - - (3 671) (3 671)
Balance at 28 February 368 26 730 17 821 44 919
2009
Loss for the Period - - (11 165) (11 165)
Balance at 31 August 368 26 730 6 656 33 754
2009
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2009 August 2008 February
2009
R`000 R`000 R`000
Cash flows from operating (16 530) (13 878) (5 832)
activities
Cash utilised by (10 343) (11 751) (5 204)
operations
Finance income 1 5 3 232
Finance costs (6 185) (2 132) (3 238)
Taxation paid (3) - (622)
Cash (outflows) from (4 335) (1 174) (4 454)
investing activities
Acquisition of plant and (4 118) (1 157) (4 516)
equipment to maintain
operations
Acquisition of intangible (227) (17) (40)
assets to maintain
operations
Proceeds from disposal of 10 - 102
plant and equipment
Cash inflows from 4 682 (102) 662
financing activities
Decrease in loans 2 908 - -
receivable
Interest-bearing (274) (102) (200)
liabilities repaid
Interest-bearing 2 048 - 862
liabilities raised
Interest-free borrowings - - (2 000)
repaid
Interest-free borrowings - - 2 000
raised
Net (decrease)/increase (16 183) (15 154) (9 624)
in cash and cash
equivalents
Cash and cash equivalents (16 794) (7 170) (7 170)
at beginning of year
Cash and cash equivalents (32 977) (22 324) (16 794)
at end of period
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2009 August 2008 February
2009
R`000 R`000 R`000
Attributable (loss)/income (11,165) (5 714) (3,671)
to ordinary shareholders
Profit on sale of fixed (8) - (84)
assets
Headline (loss)/earnings (11,173) (5 714) (3,755)
Shares in issue 114 272 328 114 272 328 114 272 328
Treasury shares (4 000 000) (4 000 000) (4 000 000)
Number of shares at period 110 272 328 110 272 328 110 272 328
end
Basic (loss)/earnings per (10,1) (5,2) (3,3)
share
Headline (loss)/earnings (10,1) (5,2) (3,4)
per share
On behalf of the Board
Michael van Straaten Jeremy Thomas
Chief Executive Officer Financial Director
Johannesburg
9 November 2009
Directors:
Dr J T Motlatsi (Chairman)*, M J van Straaten (CEO), J E Thomas, J M Pieterse*
*Independent Non-executive
Company Secretary:
Siegfried Preller
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: 09/11/2009 07:05:01 Produced by the JSE SENS Department.
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