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VMK
VMK
VMK - Verimark Holdings Limited - Unaudited interim results for the six months
ended 31 August 2010
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 2010
HIGHLIGHTS
- Revenues up 56% to R200,7 million (2009: 129,0 million);
- Profit before tax R17,0 million (2009: Loss 11,1 million);
- Basic EPS at 9,8 cents (2009: Basic loss per share 10,1 cents);
- Headline EPS at 9,8 cents (2009: Headline loss per share 10,1 cents);
- Continued increase in new product introductions;
- Continued growth in Retail and Verimark Direct footprint and revenues;
- Changes in management showing sustainability of improved trading results;
Michael Van Straaten CEO of Verimark said:
It gives me great pleasure to report the results produced over the last 6
month period. Turnover growth of 56% and a turnaround from a loss before tax
of R11m to a profit before tax of R17m for the same period this year which we
believe is an exceptional achievement.
It is noteworthy that a complete change in the company`s top management
(excluding myself) has re-affirmed Verimark`s position as the market leader in
the "direct response through retail" sector, both locally and internationally.
FINANCIAL OVERVIEW
Headline earnings per share and earnings per share attributable to
shareholders for the six months ended 31 August 2010 were 9,8 cents per share
compared with a headline loss per share and loss per share attributable to
shareholders of 10,1 cents for the previous comparable period.
As indicated in the trading statement issued on 14 October 2010, the
turnaround in the Group`s results was due to the continued positive trend in
trading and profitability reported for the final six months of the previous
financial year.
This excellent performance is a result of improved operational efficiencies
and the re-ignition of Verimark`s entrepreneurial spirit brought about by a
complete overhaul in top management over a three year period.
Turnover growth (56%) was mainly attributable to:
- the continued introduction of new innovative products that complement
Verimark`s existing successful product range;
- increased and significant investment in television and print advertising
and other promotional activities (Verimark was rated as the 4th largest
TV-advertiser in South Africa in a recent AC Nielsen survey);
- the continued improvement in prominence and space utilisation within our
Retail Partner stores as well as growth in the company`s own Verimark
Direct stores.
Gross profit improved on the back of an increase in sales volumes. In
addition, 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. This increase in margin is partly offset by an increase in the cost of
operating these new stores.
Total operating costs increased mainly due to the increased sales volumes.
Overall, operational expenditure has been well controlled and has improved as
a percentage of sales. Foreign exchange losses amounted to R2,2m when compared
to R4,4m for the prior period. These losses were as a result of fair value
adjustments on open FECs and foreign exchange losses due to the strengthening
in the rand over the prior six months and are included in finance costs.
The company entered into a share based payment scheme with certain key
employees during the period under review. The requisite JSE and shareholder
approvals were obtained for this scheme at the Annual General Meeting and
Extraordinary General Meeting on 8th July. This scheme has been treated under
IFRS 2 in the group accounts.
In summary, the financial improvement of the Group over the interim period,
seen in conjunction with the record setting results of the previous six months
(end of financial year February 2010),confirms that a successful and
sustainable turnaround has been achieved by Verimark.
INTERIM DIVIDEND
Despite the improvement in the overall trading results for the six months
ended 31 August 2010, the Board considers it prudent not to declare a
dividend, due to the Group entering its peak trading period when cash is
required to be retained in the business in order to fund the current growth.
Dividend payments will resume in accordance with the existing payout policy
should the current trend continue for the remainder of the financial year.
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, as well as AC 500 as issued by the
Accounting Practices Board, the Listing Requirements of the JSE Limited and
Schedule 4 of the Companies Act 61, 1973 as amended.
SEGMENTAL ANALYSIS
The directors previously considered the implications of IFRS 8 Operating
Segments and are still 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.
CHANGES TO THE BOARD
There have been no changes to the Board of Directors during the period under
review.
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 Group`s prospects for the future look positive and it is expected that the
growth in revenue will continue, but at a lower rate. Over the previous twelve
month period, the new management team not only successfully turned the
business around, but more impressively delivered growth in revenue and
profitability at an exceptional level.
The increased number of new innovative product introductions, further
increases in trading space and prominence and the opening of a number of new
stores; all supported by television advertising and other Verimark promotional
activities, should assist the company in achieving its growth projections for
the current financial year.
Given the gratifying results of the last twelve months, the Group is
committed to and confident in its ability to not only sustain its recent
performance, but to continue its success record that has been built over the
last thirty three years.
The interim results for the period ended 31 August 2010 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 2010 August 2009 February
2010
R`000 R`000 R`000
Revenue 200 732 129 033 347 511
Operating profit/(loss) 21 216 (4 346) 28 266
before net finance
expense and taxation
Finance income 12 1 4 268
Finance expense (4 182) (6 820) (12 382)
Profit/(loss)before tax 17 046 (11 165) 20 152
Income tax (6 520) - (6 534)
Profit/(loss) for the 10 526 (11 165) 13 618
period
Other comprehensive - - -
income
Total comprehensive 10 526 (11 165) 13 618
income attributable to
owners of the company
Earnings per share 9,8 (10,1) 12,4
(cents)
Headline EPS (cents) 9,8 (10,1) 12,4
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
Assets August 2010 August 2009 February
2010
Plant and equipment 12 105 7 792 9 263
Intangible assets 14 264 14 313 14 286
Loans receivable 312 239 -
Other receivable - - -
Deferred taxation asset 2 382 1 642 2 382
Non-current assets 29 063 23 986 25 931
Inventories 67 285 39 661 45 202
Trade and other 51 448 56 481 51 966
receivables
Prepayments 684 366 191
Short-term portion of 466 459 466
loans receivable
Prepaid taxation - - -
Bank and cash balances 440 408 13 740
Current assets 120 323 97 375 111 565
Total assets 149 386 121 361 137 496
Equity and liabilities
Share capital 356 368 356
Share premium 25 104 26 730 25 104
Share Based Payment 196 - -
Reserve
Retained earnings 35 553 6 656 31 439
Equity Attributable to 61 209 33 754 56 899
the equity holders of the
parent
Preference share -
liability 13 916 -
Interest-bearing 6 906 6 478 6 632
liabilities
Non-current liabilities 6 906 20 394 6 632
Trade and other payables 45 893 31 635 50 138
Preference share 14 832 - 14 491
liability
Shareholders for dividend - 42 42
Short-term portion of 1 997 1 864 1 733
interest bearing
liabilities
Bank overdraft 17 341 33 385 -
Taxation payable 1 208 287 7 561
Current liabilities 81 271 67 213 73 965
Total equity and 149 386 121 361 137 496
liabilities
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained Share
based
payment
Capital premium earnings Reserve Total
R`000 R`000 R`000 R`000 R`000
Balance at 1 March 2008 368 26 730 21 492 - 48 590
Total comprehensive loss - - (3 671) - (3 671)
for the year
Balance at 28 February 368 26 730 17 821 - 44 919
2009
Total comprehensive - - 13 618 - 13 618
income for the year
Transactions with owners
recorded in equity -
Treasury Shares held by
Verimark (Pty) Ltd (12) (1 626) - - (1 638)
Balance at 28 February 356 25 104 31 439 - 56 899
2010
Total comprehensive - - 10 526 - 10 526
income for the period
Transactions with owners - - - 196 196
recorded in equity -
Employee share scheme -
share based payment
transaction
Dividend Paid - - (6 412) - (6 412)
Balance at 31 August 356 25 104 35 553 196 61 209
2010
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended Ended
August 2010 August 2009 February
2010
R`000 R`000 R`000
Net cash (outflows) / (25 213) (16 530) 38 468
inflows from operating
activities
Cash (utilised) / (2 340) (10 343) 45 593
generated by operations
Dividends paid (6 412) - -
Finance income 12 1 3 981
Finance costs (3 601) (6 185) (11 103)
Taxation paid (12 872) (3) (3)
Cash outflows from (5 653) (4 335) (9 892)
investing activities
Acquisition of plant and (5 606) (4 118) (7 503)
equipment to maintain
operations
Replacement of plant and - - (493)
equipment
Acquisition of intangible (54) (228) (288)
assets to maintain
operations
Repurchase of own shares - - (1 637)
Proceeds from disposal of 7 11 29
plant and equipment
Cash inflows from 225 4 682 1 958
financing activities
(Increase)/Decrease in (312) 2 908 232
loans receivable
Interest-bearing 1 288 2 048 2 851
liabilities raised
Interest-bearing (751) (274) (1 125)
liabilities repaid
Net (decrease)/increase (30 641) (16 183) 30 534
in cash and cash
equivalents
Cash and cash equivalents 13 740 (16 794) (16 794)
at beginning of year
Cash and cash equivalents (16 901) (32 977) 13 740
at end of period
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2010 August 2009 February
2010
R`000 R`000 R`000
Attributable 10 526 (11,165) 13 618
profit/(loss)(after tax)
Loss/(profit) on sale of 36 (8) (13)
fixed assets
Headline earnings / 10 562 (11,173) 13 605
(loss)
Shares in issue 114 272 328 114 272 328 114 272 328
Treasury shares - VEET (4 000 000) (4 000 000) (4 000 000)
Shares held by subsidiary (3 400 000) - (3 400 000)
Number of shares at 106 872 328 110 272 328 106 872 328
period end
Basic earnings/(loss) per 9,8 (10,1) 12,4
share
Headline earnings/(loss) 9,8 (10,1) 12,4
per share
Diluted basic 9,7 (10,1) 12,4
earnings/(loss) per share
Diluted headline earnings 9,7 (10,1) 12,4
per share
On behalf of the Board
Michael van Straaten Jeremy Thomas
Chief Executive Officer Financial Director
Johannesburg
19 October 2010
Directors:
Dr J T Motlatsi (Chairman)*, M J van Straaten (CEO), J E Thomas, 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 Extension 48
Randburg 2194
Postal address:
Verimark Holdings Limited
PO Box 78260, Sandton 2146
Email address:
investors@verimark.co.za
www.verimark.co.za
Transfer Secretaries:
Computershare Investor Services (Pty) Limited
Auditors:
KPMG Incorporated
Sponsor:
Grindrod Bank Limited
Date: 19/10/2010 07:05:01 Produced by the JSE SENS Department.
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