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VMK
VMK
VMK - Verimark Holdings Limited - Unaudited interim results for the six months
ended 31 August 2011
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 2011
HIGHLIGHTS
- Revenues down 2.2% to R196,2 million (2010: 200,7 million);
- Profit before tax R13,1 million (2010: 17,0 million);
- Basic EPS at 7,1 cents (2010: 9,8 cents);
- Headline EPS at 7,0 cents (2010: 9,8 cents);
- Number of new products to be launched in the next 6 months tested
exceptionally well;
- Actions to better align infrastructure and costs with turnover underway;
- Market leader position maintained .
Michael Van Straaten CEO of Verimark said:
As previously stated, it is unrealistic to expect that the exceptional growth
recorded by Verimark over the previous two years in revenue (38% and 33%) and
earnings could be maintained. Revenue for the 6 months period under review was
marginally down (2.2%) compared to the same period last year. This was a result
of slightly slower new product launches to the market. However a number of new
products have recently tested very successfully and these will be launched
during the following 6 month period.
The exceptional growth recorded by Verimark in the past, brought about huge
pressure on the Group`s operational infrastructure and the control of some of
its expenses. Although progress was made in better aligning these expenses with
turnover; some increased expenses could take longer to be resolved. (e.g. Our
new Head Office/Distribution Centre - nearly double the size of the existing one
- will only be completed in 12 months time). This, together with normal
inflationary increases on expenses resulted in profit before tax being 23.4%
down compared with the same period last year.
Management is committed to resolving the challenges related to the Group`s
infrastructure and the control of expenses as soon as possible.
FINANCIAL OVERVIEW
OVERVIEW
Headline earnings per share and earnings per share attributable to shareholders
for the six months ended 31 August 2011 were 7,0 cents per share and 7,1 cents
per share respectively, compared with a headline earnings per share and earnings
per share attributable to shareholders of 9,8 cents for the previous comparable
period.
As indicated in the trading statement issued on 6 October 2011, the decrease in
the Group`s earnings is a result of a slight reduction in revenue and an
increase in costs.
Revenue decreased marginally by 2.2% to R196.2 million. The reasons for this
were that new product introductions were slightly slower than anticipated
(partly because of the increased focus on addressing the challenges with the
Group`s infrastructure and the impact thereof on the control of some expenses).
Expenses increased at a higher rate and given the marginal decrease in sales,
profit before tax was reduced by 23.4% to R13,1 million. In summary, the
financial performance of the group over the interim period was down compared
with the previous year. This was primarily the consequence of the business
infrastructure being outgrown as a result of the exceptional growth recorded in
the previous two financial years.
INTERIM DIVIDEND
In light of the overall trading results for the six months ended 31 August 2011
and due to the fact that the Group entering its peak trading period when cash is
required to be retained in the business in order to fund operational needs, the
Board considers it prudent not to declare a dividend.
Dividend payments will be reconsidered in accordance with the existing payout
policy on completion of the current 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 the 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 standards as issued
by the Accounting Practices Board, the Listing Requirements of the JSE Limited
and the Companies Act 71 of 2008.
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
Given the phenomenal growth recorded by Verimark over the previous two years, it
was not unexpected that the business would experience a period of consolidation.
Although the slowdown in sales for the first 6 months was sharper than expected,
the number of new products successfully tested and to be launched over the next
6 months (which includes the Christmas trading period) should reactivate
Verimark`s turnover growth. We are also expecting an increase in the number of
exciting new products undergoing testing during this period.
In addition, continued focus will be placed on resolving the challenges relating
to Verimark`s operational infrastructure and the impact thereof on cost control.
The Group`s prospects for the future remain positive and it is expected that
growth in revenue and profits will continue given Verimark`s growth record over
the last 34 years.
The interim results for the period ended 31 August 2011 have not been reviewed
or audited by the Group`s auditors.
Statements regarding the future prospects of performance of the Group have not
been reviewed or reported on by the Group`s auditors.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2011 August 2010 February
2011
R`000 R`000 R`000
Revenue 196 224 200 732 461 654
Operating profit 15 555 21 216 57 738
before net finance
expense and taxation
Finance income 1 055 12 2 966
Finance expense (3 553) (4 182) (11 387)
Profit before tax 13 057 17 046 49 317
Income tax (5 618) (6 520) (15 834)
Profit for the period 7 439 10 526 33 483
Other comprehensive - - -
income
Total comprehensive 7 439 10 526 33 483
income attributable to
owners of the company
Earnings per share 7,1 9,8 31,5
(cents)
Headline EPS (cents) 7,0 9,8 31,3
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
Assets August 2011 August 2010 February
2011
Plant and equipment 15 177 12 105 14 200
Intangible assets 14 316 14 264 14 342
Loans receivable - 312 -
Deferred taxation asset 2 643 2 382 2 643
Non-current assets 32 136 29 063 31 185
Inventories 53 860 67 285 60 274
Trade and other 58 392 51 448 62 543
receivables
Prepayments 431 684 268
Prepaid taxation 380
Short-term portion of 234 466 234
loans receivable
Bank and cash balances 1 055 440 16 669
Current assets 114 352 120 323 139 988
Total assets 146 488 149 386 171 173
Equity and liabilities
Share capital 346 356 346
Share premium 21 378 25 104 21 378
Share Based Payment 590 196 393
Reserve
Retained earnings 50 366 35 553 58 509
Equity Attributable to 72 680 61 209 80 626
the equity holders of the
parent
Interest-bearing 7 105 6 906 7 905
liabilities
Non-current liabilities 7 105 6 906 7 905
Trade and other payables 38 381 45 893 61 100
Preference share 15 917 14 832 15 371
liability
Short-term portion of 4 183 1 997 3 783
interest bearing
liabilities
Bank overdraft 8 222 17 341 -
Taxation payable - 1 208 2 388
Current liabilities 66 703 81 271 82 642
Total equity and 146 488 149 386 171 173
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 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
income for the year - - 33 483 - 33 483
Transactions with owners
Recorded in equity -
Treasury shares held by
Verimark (Pty) Ltd (10) (3 726) - - (3 736)
IFRS 2 share based
Payment transaction - - - 393 393
Dividend paid - - (6 411) (6 411)
Balance at 28 February
2011 346 21 378 58 509 393 80 626
Total comprehensive - - 7 439 - 7 439
income for the period
Transactions with owners
recorded in equity
IFRS 2 share based
Payment transaction 197 197
Dividend Paid - - (15 582) - (15 582)
Balance at 31 August 346 21 378 50 366 590 72 680
2011
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months six months 12 months
ended ended Ended
August 2011 August 2010 February
2011
R`000 R`000 R`000
Net cash (outflows)/ (18 410) (25 213) 14 789
inflows from operating
activities
Cash generated / 7 510 (2 340) 49 515
(utilised) by operations
Dividends paid (15 582) (6 412) (6 455)
Finance income 1 055 12 2 966
Finance costs (3 007) (3 601) (9 970)
Taxation paid (8 386) (12 872) (21 267)
Cash outflows from (5 026) (5 653) (11 419)
investing activities
Acquisition of plant and (5 115) (5 606) (11 552)
equipment
Acquisition of intangible (71) (54) (233)
assets to maintain
operations
Proceeds from disposal of 160 7 366
plant and equipment
Cash (outflows)/ (400) 225 (441)
inflows from financing
activities
Loans receivable - (312) 232
collected
Interest-bearing 643 1 288 5 894
liabilities raised
Interest-bearing (1043) (751) (2 591)
liabilities repaid
Repurchase of own shares - - (3 736)
Preference share
liability repaid - - (240)
Net (decrease)/increase (23 836) (30 641) 2 929
in cash and cash
equivalents
Cash and cash equivalents 16 669 13 740 13 740
at beginning of year
Cash and cash equivalents (7 167) (16 901) 16 669
at end of period
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
six months six months 12 months
ended ended ended
August 2011 August 2010 February
2011
R`000 R`000 R`000
Attributable 7 439 10 526 33 483
profit(after tax)
(Loss)/Profit on sale of (74) 36 (22)
fixed assets (after tax)
Headline earnings 7 365 10 562 33 461
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 (6 380 870) (3 400 000) (4 064 304)
Number of shares at 103 891 458 106 872 328 106 208 024
period end
Basic earnings per share 7,1 9,8 31,5
Headline earnings 7,0 9,8 31,5
per share
Diluted basic earnings 7,0 9,7 31,3
per share
Diluted headline earnings 6,9 9,7 31,3
per share
On behalf of the Board
Michael van Straaten Siegfried Preller
Chief Executive Officer Financial Director
Johannesburg
11 October 2011
Directors:
Dr J T Motlatsi (Chairman)*, M J van Straaten (CEO), S J Preller,
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: 11/10/2011 08:00:01 Produced by the JSE SENS Department.
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