| Mon 10 May 2010, 7:05 | | VMK - Verimark Holdings Limited - Summarised audited group financial results for |
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VMK
VMK
VMK - Verimark Holdings Limited - Summarised audited group financial results for
the year ended 28 February 2010
VERIMARK HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1998/006957/06
Share Code: VMK
ISIN Code: ZAE000068011
("Verimark" or "the Company" or "the Group")
SUMMARISED AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2010
HIGHLIGHTS
- Revenue increased by 38% to R347,5 million (2009:R252,5 million);
- Profit before tax increased to R20,2 million (2009:R4,2 million loss);
- Profit after tax increased to R13,6 million (2009:R3,7 million loss);
- Basic EPS at 12,4 cents (2009: Basic loss per share 3,3 cents);
- Headline EPS at 12,4 cents (2009: Headline loss per share of 3,4 cents);
- "Normalised" EPS at 19,9 cents (2009: "Normalised" loss per share 2,1
cents);
- Cash inflows from operating activities R38,5 million (2009: Cash outflows
from operating activities R5,8 million);
- Final dividend declared of 6,0 cents per share(2009: nil);
- Sustained increase in new product introductions and
improved trading;
- Continued sales execution and improved space
utilisation;
- New management team settling in well and are
successfully implementing the turnaround.
Michael van Straaten, Chief Executive Officer of Verimark, said: "We are
pleased to announce that Verimark has not only returned to profitability during
the year ended 28 February 2010, but also delivered its best performance in its
33 year history during the last 6 months. Good progress was made in building a
new management team with the necessary entrepreneurial flair to continue our
proud and successful track record."
Financial overview
Headline earnings per share (HEPS) and basic earnings per share (EPS)
attributable to shareholders for the year ended 28 February 2010 is 12,4 cents
and 12,4 cents per share respectively, compared to a headline loss per share and
basic loss per share of 3,4 cents and 3,3 cents, respectively for the previous
comparable period. If the abnormal items mentioned below are excluded then
"normalised" earnings would result in "normalised" earnings per share of 19,9
cents when compared to the prior year "normalised" loss per share of 2,1 cents
on a like for like basis. These once off losses related to the proposed
delisting costs of R1,8m (after taking into account the contribution of 50% from
the Van Straaten Family Trust), legal fees of R1,2m associated with the lost
appeal court case, reversal of R2,9m income recognised in a prior year relating
to the legal case mentioned above 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 R1,2m compared to
R1,4m in the prior period.
To fully comprehend the timing and magnitude of the turnaround, it is important
to point out that trading during the year was made up of two halves with
diametrically opposed outcomes:
The downward trend of the previous 3 years continued during the first half of
the year, resulting in a loss of R11,1m - the worst ever in the history of the
Group;
Trading in the second half of the year resulted in a profit before tax of R31,2m
- the best 6 month period in the Group`s entire history.
As indicated in the trading update on 19 April 2010, the improvement in the
Group`s profitability is due to better than expected sales, which peaked towards
the last few months of year. This was due to the further introduction of new
products and improved space utilisation. In addition, focused cost control added
to the profitability.
Revenue for the year was 38% higher than the previous year (47% higher for the
last 6 months). Gross profit and the gross profit margin also improved. This was
mainly due to the fact that the current year`s gross profit figures include full
year figures for the converted franchise stores, when compared to the previous
year when these stores only reflected for a portion of the year.
Selling expenses increased approximately in line with sales over the period, as
did other operating expenses.
Additional investment in fixed assets was required to support the sales growth,
not only in retail, but also in the Verimark Direct Channel. Inventories
increased during the year mainly as a result of the increased sales activity.
Trade debtors followed a similar trend. The higher level of sales and improved
profitability resulted in the Group repaying its overdraft and finishing the
year with a positive bank balance of R13,7 million (2009: overdraft of R17,4
million).
Long term liabilities reduced as a result of the preference share liability
being reclassified as short term as it was due for repayment on 17 March 2010.
The Van Straaten Family Trust to date has not recalled the preference share
liability as it is still the intention of the Trust to continue with the BBBEE
initiative facilitated by this transaction.
The group generated R38,5 million of cash inflows from operating activities
(2009: cash outflows from operating activities of R5,8 million).
During the year the Company, through its subsidiary Verimark (Proprietary)
Limited repurchased 3,4 million of its issued shares for a consideration of R1,6
million. These shares remain under the control of the Company and have been
recognised as treasury shares in the Group accounts.
Overall the Group increased its cash and cash equivalents by R30, 5 million
(2009: Decrease of R9, 6 million).
Final dividend
Due to the level of profitability achieved, the Board of Directors ("the Board")
is pleased to announce that a final dividend of R6 808 989 or 6,0 cents per
share has been approved by the board on 7 May 2010.
The Board approved a change in the Dividend Policy from 80% of headline earnings
per share to 50% of profit attributable to shareholders. This policy will be
reassessed by the Board on an ongoing basis as and when dividends become due and
payable. In accordance with the settlement procedures of Strate, the following
dates will apply to the final dividend:
Last day to trade cum dividend Friday 28 May 2010
Trading ex dividend commences Monday 31 May 2010
Record date Friday 4 June 2010
Dividend payment date Monday 7 June 2010
Share certificates may not be dematerialised or re-materialised between Monday
31 May 2010 and Friday 4 June 2010, both days inclusive.
Accounting policies
The summarised audited group financial statements for the year ended 28 February
2010 are extracted from the audited financial statements of the Group for the
year ended 28 February 2010. These have been prepared in accordance with the
recognition and measurement criteria of International Financial Reporting
Standards (IFRS) and the presentation and disclosure requirements of
International Accounting Standard 34(IAS 34), the AC 500 series and the
Companies Act 61 of 1973. These are consistent with those of the previous year
except for
IAS 1 - Presentation of Financial Statements and IFRS 8 - Operating Segments
which became effective 1 January 2009.
Segmental analysis
The directors have considered the implications of IFRS 8 Operating Segments and
are of the opinion that the operations of the Group are substantially similar to
one another and that the risks and returns of these operations are likewise
similar. Resource allocation and the management of the operation are performed
on an aggregated basis and as such the Group is considered to be a single
aggregated business and therefore there is no additional reporting required in
terms of IFRS 8.
Prospects
The Group has successfully turned around the business and the Board looks
forward to an exciting future. The increased level of sales over the last few
months of the financial year has continued into the new financial year.
The impressive growth in retail has ensured that additional space has been
committed to Verimark and further improved trading is expected. This, together
with the expansion plans of the Verimark Direct store concept bodes well for the
future growth of the business.
The difficult phase experienced after the public listing appears to be a thing
of the past. Verimark remains an entrepreneurial business built on successfully
overcoming many challenges in its 33 year history. Verimark is cautiously
optimistic that it is ready to continue its success into the future.
Post balance sheet events
Subsequent to the year end, the preference share liability became due and
payable on 17 March 2010. As indicated above, the Van Straaten Family Trust has
not recalled the preference share liability and has no intention to do so in the
foreseeable future. No other event which is material to the understanding of
this report has occurred between the financial period end and the date of this
report.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 28 February 2010
Group
2010 2009
R`000 R`000
Revenue 347 511 252 511
Cost of sales (206 833) (165 853)
Gross profit 140 678 86 658
Other (impairment)/income (2 196) 943
Selling expenses (36 305) (28 403)
Other operating expenses (73 911) (61 952)
Operating profit/(loss) before 28 266 (2 754)
net finance expense
Finance income 4 268 3 232
Finance expense (12 382) (4 698)
Profit/(loss) before taxation 20 152 (4 220)
Income tax (6 534) 549
Profit/(loss) for the year 13 618 (3 671)
Attributable to shareholders 13 618 (3 671)
Basic earnings/(loss) per share 12,4 (3,3)
(cents)
Diluted earnings/(loss) per share 12,4 (3,3)
(cents)
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE
EARNINGS
Group
2010 2009
R`000 R`000
Attributable profit/(loss) to 13 618 (3 671)
ordinary shareholders
Profit on sale of assets (13) (84)
Tax effect 4 24
Headline earnings 13 609 (3 731)
Weighted average shares
reconciliation
Shares in Issue 114 272 328 114 272 328
Treasury Shares - VEET (4 000 000) (4 000 000)
Treasury Shares - Verimark (734 374) -
(Proprietary) Limited
Weighted Average Shares 109 537 954 110 272 328
Basic earnings/(loss) per share 12,4 (3,3)
Headline earnings/(loss) per 12,4 (3,4)
share
Diluted basic earnings/(loss) per 12,4 (3,3)
share
Diluted headline earnings/(loss) 12,4 (3,4)
per share
STATEMENT OF FINANCIAL POSITION
at 28 February 2010
Group
2010 2009
R`000 R`000
ASSETS
Non-current assets 25 931 24 450
Plant and equipment 9 263 5 521
Intangible assets 14 286 14 140
Loans receivable - 239
Other receivables - 2 908
Deferred taxation asset 2 382 1 642
Current assets 111 565 81 320
Inventories 45 202 39 676
Trade and other receivables 51 966 40 156
Prepayments 191 394
Short term portion of loans 466 459
receivable
Bank and cash balances 13 740 635
Total assets 137 496 105 770
EQUITY AND LIABILITIES
Equity attributable to equity 56 899 44 919
holders of the parent
Share capital 356 368
Share premium 25 104 26 730
Retained earnings 31 439 17 821
Non-current liabilities 6 632 18 671
Preference share liability - 13 281
Interest-bearing liabilities 6 632 5 390
Current liabilities 73 965 42 180
Preference share liability 14 491 -
Trade and other payables 50 138 23 241
Shareholders for dividend 42 42
Short-term portion of interest- 1 733 1 178
bearing liabilities
Bank overdraft - 17 429
Taxation payable 7 561 290
Total equity and liabilities 137 496 105 770
STATEMENT OF CHANGES IN EQUITY
for the year ended 28 February 2010
Share Share Retained Total
capital premium earnings
Group R`000 R`000 R`000 R`000
Balance at 1 March 2008 368 26 730 21 492 48 589
Total comprehensive loss - - (3 671) (3 671)
for the year
Balance at 28 February 368 26 730 17 821 44 919
2009
Total comprehensive income - - 13 618 13 618
for the year
Treasury shares held by (12) (1 626) - (1 638)
Verimark (Proprietary)
Limited
Balance at 28 February 356 25 104 31 439 56 899
2010
STATEMENT OF CASH FLOWS
for the year ended 28 February 2010
Group
2010 2009
R`000 R`000
Cash flows from operating
activities
Cash generated/(utilised) by 45 593 (5 204)
operations
Finance income 3 981 3 232
Finance costs (11 103) (3 238)
Income tax paid (3) (622)
Net cash inflows/(outflows) from 38 468 (5 832)
operating activities
Cash outflows from investing (9 892) (4 454)
activities
Acquisitions of plant and (7 503) (4 186)
equipment to maintain operations
Replacement of plant & equipment (493) (330)
Acquisitions of intangible assets (288) (40)
to maintain operations
Proceeds from disposal of plant 29 102
and equipment
Repurchase of own shares (1 637) -
Cash inflows/(outflows) from 1 958 662
financing activities
Decrease in loans receivable 232 -
Interest-bearing liabilities (1 125) (200)
repaid
Interest-bearing liabilities 2 851 862
raised
Interest-free liabilities raised - 2 000
Interest-free liabilities repaid - (2 000)
Net increase/(decrease) in cash 30 534 (9 624)
and cash equivalents
Cash and cash equivalents at (16 794) (7 170)
beginning of year
Cash and cash equivalents at end 13 740 (16 794)
of year
Audit opinion
KPMG Inc. has audited the financial statements from which the financial
information set out in this report has been derived. Their unqualified audit
report on the financial statements is available for inspection at the Group`s
registered office.
On behalf of the Board
Michael van Straaten Dr J T Motlatsi
Chief Executive Officer Chairman
Randburg
10 May 2010
Directors:
M J van Straaten (Chief Executive Officer), J E Thomas (Financial Director), Dr
J T Motlatsi*, J M Pieterse*
*Independent Non-Executive
Company Secretary:
S J Preller
Registered office:
67 CR Swart Drive, Corner CR Swart Drive and Freda Road, Bromhof 48, Randburg,
2154
Postal address:
Verimark Holdings Limited
PO Box 78260, Sandton 2146
Email address: investors@verimark.co.za
Website: www.verimark.co.za
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Auditors: KPMG Incorporated
Sponsor: Grindrod Bank Limited
Date: 10/05/2010 07:05:07 Produced by the JSE SENS Department.
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