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Summarised audited group financial information for the year ended 28 February 2014
Verimark Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number: 1998/006957/06
Share Code: VMK
ISIN: ZAE000068011
("Verimark" or "the Group")
SUMMARISED AUDITED GROUP FINANCIAL INFORMATION FOR THE YEAR ENDED 28
FEBRUARY 2014
HIGHLIGHTS
- Revenues down 5,2% to R430,5 million (2013: R454,1 million)
- Profit before tax R23,4 million (2013: R15,3 million)
- Headline earnings R17,6 million (2013: R8,7 million)
- Basic EPS at 17,0 cents (2013: 8,5 cents)
- Headline EPS at 16,9 cents (2013: 8,4 cents)
2013 proved to be a challenging year for importers and retailers and yet another tough year for
consumers. As noted in our previous annual report, the continued depreciation of the Rand will impact
negatively on the retail trade, particularly those businesses that import products. In addition, South
African consumers have experienced, and continue to experience, enormous pressure due to
increased living expenses, which, together with South Africa’s high level of unsecured domestic debt,
has resulted in a contraction in discretionary spend.
That said, and despite the macroeconomic limitations, the Group is starting to see the benefits of the
last 24 months of centralising and consolidation paying off. This has allowed for much better control of
operations and costs, which assisted the Group to manage in a very tough economic environment,
and has put us in a good position to take advantage of future growth opportunities.
Impact of the unwinding of the Verimark BEE structure
As a result of the unwinding of the Verimark BEE structure as noted in the announcement released on
4 March 2014, the results for the year ended 28 February 2014 include a gain in the settlement of the
preference share liability of R 7 293 397. In accordance with IFRS this gain, equivalent to 7,02 cents
per share, is recognised in both the earnings and headline earnings per share of the company.
However, shareholders should note that the gain is of a non-recurring nature.
The 4 000 000 treasury shares held by the BEE structure were transferred to the preference
shareholder as consideration for the redemption of the preference share liability and resulted in an
increase in the group’s share capital and share premium of R13 337 and R10 890 621 respectively.
OVERVIEW
Verimark remained focused on staying competitive in a difficult trading environment and extracting the
maximum efficiencies from our logistics, supply chain and support services, as well as from the
centralisation of our warehousing operations. As a result we fared reasonably well under the
circumstances.
The Group’s revenue dropped 5% to R431 million (2013: R454 million), mainly due to the slowdown in
sales volumes that resulted from increasing our selling prices. This adjustment was unfortunately
necessary, given the continued depreciation of the Rand against the Dollar (approximately 45%
during the two years from 1 March 2012 to 28 February 2014). Even though our cost of product over
this period increased similarly (±45%), we elected not to increase our selling prices to the same
extent, given the impact that it would have had on our sales volumes.
Despite this, gross margins improved to 40,3% (2013: 36,4%) driven largely by the operational
efficiencies and cost savings initiatives. Now that the move to the new warehouse has been
completed, coupled with improved inventory control systems, we have seen marked improvements.
The expected reduction in the gross profit due to the reduced revenue was more than offset by the
improvement in operational efficiencies and cost savings initiatives implemented during the previous
year, resulting in a net increase in gross profit of R8,2 million. If one excludes the increase in
depreciation costs that resulted from the capital investment in our new distribution centre and
additional new stores, together with the costs relating to our expansion into Singapore, our fixed
operating costs increased by only 2%, compared to the previous year.
In addition to the improvements mentioned above, the benefits of the improved efficiencies and
processes have resulted in the strengthening of the Group’s balance sheet. Working capital has
reduced by R13,3 million and the net cash position has improved by R20 million year on year.
FINAL DIVIDEND
In light of the current tough economic environment, the Board has considered it prudent not to declare
a dividend in order to continue to improve the Group’s cash position in anticipation of the seasonal
working capital increase expected in the second half of the year.
REPORTING ENTITY
Verimark Holdings Limited is a company domiciled in South Africa. The summarised group financial
information as at and for the year ended 28 February 2014 comprises the results of Verimark
Holdings Limited and its subsidiaries.
BASIS OF PREPARATION
The summarised consolidated financial statements are prepared in accordance with the requirements
of the JSE Limited Listings Requirements for abridged reports, and the requirements of the
Companies Act applicable to summarised financial statements. The Listings Requirements require
abridged reports to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum,
contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the consolidated financial statements, from
which the summarised consolidated financial statements were derived, are in terms of International
Financial Reporting Standards and are consistent with the accounting policies applied in the
preparation of the previous consolidated annual financial statements.
Mr Shaun Beecroft CA (SA), Financial Director, was responsible for supervising the preparation of the
annual financial statements and preparing these summarised financial statements.
These summarised financial statements have been extracted from the complete set of financial
statements on which the auditors, KPMG Inc, have expressed an unqualified audit opinion. A copy of
the auditor’s report is available for inspection at the Company’s registered office.
To obtain a copy of the annual financial statements that have been summarised in this report, please
go to www.verimark.co.za and click on the Annual Reports hyperlink on the website.
SEGMENTAL ANALYSIS
During the prior year the Group expanded to Singapore where a company was started. Per IFRS 8
Operating Segments the operations of the Group are now split between South Africa and Foreign.
RELATED PARTY TRANSACTIONS
There have been no significant changes in related party relationships and/or transactions since the
prior year, other than in the normal course of business.
CHANGES TO THE BOARD
There were no changes to the board during the year ended 28 February 2014.
SUBSEQUENT EVENTS
No events material to the understanding of this report have occurred in the period between the
reporting date and the date of this report.
PROSPECTS
All indications show that consumer spending is unlikely to show significant growth during the year
ahead.
We will continue on our strategic journey by:
• ensuring that we remain product-focused as a business and defend our position as leading
innovators;
• focusing on our home market and ensuring that the local business grows and increases
profitability;
• assessing potential regions in which the Verimark business model can be replicated in other
international markets;
• recruiting the best available talent to complement our existing management in order to accelerate
growth; and
• continuously improving service levels, operational efficiencies and cost containment through
maximising the benefits of the investments in our core operations.
The Group has made significant investments over the past few years in terms of improved operational
efficiencies, introduction of new systems and investments in our people. We are already reaping the
benefits of these investments and will continue to focus on further optimisation opportunities going
forward.
This has put us in a good position to take advantage of future growth opportunities and improvement
in economic conditions.
Statements contained in this announcement, regarding the prospects of the group, have not been
reviewed or audited by the group¹s external auditors.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
28 February 28 February
2014 2013
R’000 R’000
Revenue 430 473 454 091
Gross profit 173 367 165 171
Operating profit before net finance expense and 29 644 16 587
taxation
Finance income 4 107 6 390
Finance expense (10 340) (7 732)
Profit before taxation 23 411 15 245
Income tax (5 750) (6 367)
Profit for the year 17 661 8 878
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation reserve movement (181) 13
Total comprehensive income for the year 17 480 8 891
Earnings per share (EPS) 17,0 8,5
Diluted earnings per share (EPS) 17,0 8,4
Headline earnings (HEPS) 16,9 8,4
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 28 As at 28
February February
2014 2013
R’000 R’000
Assets
Plant and equipment 13 527 18 578
Intangible assets 14 893 14 426
Deferred taxation asset 3 637 3 208
Non-current assets 32 057 36 212
Inventories 66 280 87 494
Trade and other receivables 60 229 77 810
Prepayments 419 353
Cash and cash equivalents 1 394 1 454
Current assets 128 322 167 111
Total assets 160 379 203 323
Equity and liabilities
Share capital 360 346
Share premium 32 269 21 378
Foreign currency translation (deficit)/reserve (168) 13
Share based payment reserve 468 1 124
Retained earnings 82 248 64 587
Equity attributable to the equity holders of the parent 115 177 87 448
Interest-bearing borrowings 4 384 5 944
Non-current liabilities 4 384 5 944
Trade and other payables 29 454 59 326
Preference share liability 0 17 012
Current portion of interest-bearing borrowings 2 548 3 480
Bank overdraft 8 424 28 463
Taxation payable 392 1 650
Current liabilities 40 818 109 931
Total equity and liabilities 160 379 203 323
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Foreign Share Retained Total
Capital Premium currency based earnings
translation payment
(deficit)/reserve reserve
R’000 R’000 R’000 R’000 R’000 R’000
Balance at 1 March 346 21 378 - 788 69 734 92 246
2012
Total comprehensive
income
Profit for the year - - - - 8 878 8 878
Other comprehensive - - 13 - - 13
income
Transactions with
owners recorded in
equity
IFRS 2 share-based - - - 336 - 336
payment transaction
Contributions by and
distributions to owners
of the Company
Dividend paid to - - - - (14 025) (14 025)
shareholders
Balance at 28 February 346 21 378 13 1 124 64 587 87 448
2013
Total comprehensive
income
Profit for the year 17 661 17 661
Other comprehensive (181) (181)
income
Transactions with
owners recorded in
equity
IFRS 2 share-based (656) (656)
payment transaction
Treasury shares 14 10 891 10 905
transferred on
settlement of preference
share liability (note 1)
Contributions by and
distributions to owners
of the Company
Dividend paid to - - - - - -
shareholders
Balance at 28 February 360 32 269 (168) 468 82 248 115 177
2014
(Note 1) – As a result of the BBBEEE unwinding transaction. See further explanation in the
‘Highlights’ section of this announcement
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
28 February 28 February
2014 2013
R’000 R’000
Net cash inflows/(outflows) from operating activities 26 733 (23 600)
Cash generated from/(utilised by) operations 39 194 (1 668)
Dividends paid 0 (14 025)
Finance income 4 107 6 391
Finance costs (9 132) (6 016)
Taxation paid (7 436) (8 282)
Cash outflows from investing activities (4 238) (10 755)
Acquisition of plant and equipment to expand (5 407) (11 577)
operations
Acquisition of intangible assets to maintain 0 (82)
operations
Proceeds from disposal of plant and equipment 1 169 904
Cash outflows from financing activities (2 515) (472)
Interest-bearing borrowings raised 484 5 115
Interest-bearing borrowings repaid (2 999) (5 047)
Preference share liability repaid 0 (540)
Net increase/(decrease) in cash and cash 19 980 (34 827)
equivalents
Cash and cash equivalents at beginning of year (27 010) 7 817
Cash and cash equivalents at end of year (7 030) (27 010)
SEGMENTAL INFORMATION
South Africa Foreign Group Total
elimination
R’000 R’000 R’000 R’000
Revenue 427 333 3 437 (297) 430 473
Profit / (loss) before tax 24 447 (1 007) (29) 23 411
Profit / (loss) after tax 18 648 (966) (21) 17 661
Segment assets 157 125 3 283 (29) 160 379
Segment liabilities 44 605 4 168 (3 571) 45 202
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Year ended Year ended
28 February 28 February
2014 2013
R’000 R’000
Attributable profit (after tax) 17 661 8 878
Profit on sale of plant and equipment (100) (187)
Tax on profit on sale of plant and equipment 28 52
Headline earnings 17 589 8 743
Shares in issue 114 272 328 114 272 328
Treasury shares - VEET (3 989 041) (4 000 000)
Shares held by subsidiary (6 380 870) (6 380 870)
Number of shares at period end 103 902 417 103 891 458
Share options dilutive portion 9 986 2 094 538
Diluted weighted average shares 103 912 403 105 985 996
Basic earnings per share 17,0 8,5
Headline earnings per share 16,9 8,4
Diluted basic earnings per share 17,0 8,4
Diluted headline earnings per share 16,9 8,2
Net asset value per share 110,9 84,2
Net tangible asset value per share 96,5 70,3
Net asset value per share
Shareholders’ equity divided by the weighted average number of shares in issue at the end of the
year. Shareholders’ equity is the equity attributable to equity holders of the parent (which is basically
total assets less total liabilities).
Net tangible asset value per share
The net asset value of the tangible assets divided by the weighted average number of shares in issue
at the end of the year.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the company will be held in the boardroom
at the offices of Verimark, 50 Clairwood Avenue, Hoogland Ext 55, Randburg, on Thursday 7 August
2014 at 10h00, to transact business as stated in the notice of the annual general meeting. The notice
of annual general meeting forms part of the full integrated annual report which is available on the
company website www.verimark.co.za and the abridged annual report which will be posted to
shareholders on 28 May 2014.
The record date for purposes of determining which shareholders are entitled to receive the notice of
annual general meeting was Friday, 23 May 2014. The record date for shareholders to be recorded in
the register of shareholders of the Company in order to be able to attend, participate and vote at the
annual general meeting is Friday, 1 August 2014. Accordingly, the last date to trade in order to be
registered in the Company`s register of shareholders is Friday, 25 July 2014.
On behalf of the Board
Michael van Straaten Shaun Beecroft
Chief Executive Officer Financial Director
Johannesburg
27 May 2014
Directors:
Dr J T Motlatsi (Chairman)*, J M Pieterse*, M J van Straaten (CEO), S R Beecroft, M M Patel*
*Independent Non-executive
Company Secretary:
Premium Corporate Consulting Services (Pty) Ltd
Registered office:
50 Clairwood Avenue
Extension 55, Hoogland
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: 27/05/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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