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VMK - Verimark - Summarised audited group financial results for the year ended
28 February 2011
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")
SUMMARISED AUDITED GROUP FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY
2011
HIGHLIGHTS
- Revenue increased by 32,8% to R461,7 million (2010: 347,5 million);
- Operating profit before interest increased by 103,9% to R57,7 million
(2010: R28,3 million);
- Profit before tax increased by 144,1% to R49,3 million (2010: 20,2
million);
- Headline earnings increased by 146,3% to R33,5 million (2010: R13,6
million);
- Headline EPS increased by 154,0% to 31,5 cents (2010: 12,4 cents);
- Dividend per share declared increased by 150,0% to 15,0 cents (2010:
6,0 cents);
- The Verimark share showed the fourth best growth on the JSE over a 12-
month period - Business Times survey, 7 November 2010;
- Verimark ranked fourth in the McGregor BFA`s composite index that
compares all companies on the JSE against a number of key performance
criteria - Finweek, 31 March 2011.
Michael van Straaten, Chief Executive Officer of Verimark, said: "The
outstanding growth in sales of 38% in the previous financial year, continued
during the year under review. A further 33% rise in sales this year
resulted in Verimark delivering its best sales performance in its 34 year
history, with sales totalling R461.7 million and a profit before tax of
R49.3 million, which is an increase of 144,1% on the previous year.
This positive growth trend is in line with the new management team`s
commitment to return Verimark to its former levels of sales and
profitability. Verimark`s exceptional growth recorded over the last two
years (more than six times the official Retail sector`s growth as reported
by Statistics SA) vindicates the substantial changes made to management over
the previous three years and further confirms the viability of Verimark`s
entrepreneurial business model.
Financial overview
Both headline earnings per share (HEPS) and basic earnings per share (EPS)
for the year ended 28 February 2011 were 31,5 cents, compared to 12,4 cents
for the previous comparable period.
Revenue for the year grew by 32,8% to R461,7 million and gross profit
increased by 42,2% to R200,1 million. Revenue growth was mainly due to sale
of new products and improved utilisation of trading space. Gross profit
increased mainly due to the increase in revenue and the strengthening of the
Rand versus the US Dollar. Selling expenses grew by 36,9% primarily due to
increased sales and in-store advertising costs. Other operating expenses
were up by 27,2% mainly due to expansion of the business.
Investment of R11,5 million was made in plant and equipment to support the
positive sales growth of the Company and its subsidiary ("the Group").
Inventories and Trade receivables growth was a direct result of the sales
growth.
Bank and cash balances increased by R2,9 million (21,2%) after income
taxation payments of R21,3 million (2010:R3,5k).
Long-term liabilities growth was mainly in line with the increased
investment in plant and equipment.
During the year the Company, through its subsidiary Verimark (Proprietary)
Limited, repurchased 2,98 million of its issued shares for a consideration
of R3,7 million (2010: 3,4 million shares for R1,6 million). These shares
remain under the control of the Company and have been recognised as treasury
shares in the Group accounts.
Final dividend
Due to the level of profitability achieved, the Board of Directors ("the
Board") is pleased to announce that a final dividend for the financial year
ended 28 February 2011, of R17,1 million or 15,0 cents per share (2010:R6,9
million or 6,0 cents per share) has been approved by the Board. This is
consistent with the dividend policy of 50% of profit attributable to owners
of the Company that was approved by the Board in the prior year. This policy
will be reassessed by the Board on an ongoing basis. In accordance with the
settlement procedures of Strate, the following dates will apply to the final
dividend payment:
Last day to trade cum dividend Thursday, 9 June 2011
Trading ex dividend commences Friday, 10 June 2011
Record date Friday, 17 June 2011
Dividend payment date Monday, 20 June 2011
Share certificates may not be dematerialised or re-materialised between
Friday, 10 June 2011 and Friday, 17 June 2011 both days inclusive.
Accounting policies
The summarised audited Group financial statements were extracted from the
audited financial statements of the Group for the year ended 28 February
2011, which 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 as issued by the Accounting Practices
Board and the Companies Act No 61 of 1973. These are consistent with those
of the previous year except for the application of the following revised
standards: the revised IAS 27 Consolidated and Separate Financial Statements
("IAS 27")and, the revised IFRS 3 Business Combinations ("IFRS 3").In
addition, IFRS 2 Share Based Payment ("IFRS 2")which was applied for the
first time in the current year as this is the first year that it became
applicable.
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
operations is 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
It would be unrealistic to expect that the revenue growth rate over the last
two years can be maintained (revenue nearly doubled over this period). While
revenue growth in the last six months of the year under review was beyond
expectations, growth over the first few months of the current financial year
has returned to a more sustainable pattern.
However, given Verimark`s growth record over the last two years, some retail
partners believe that Verimark is still not trading optimally in all their
stores and have expressed an interest in extending the Company`s product
range and space allocation. This, in conjunction with a number of new
Verimark stores scheduled for opening in the year ahead, should assist to
continue growing revenues in excess of that expected for the retail sector
in general. This trend together with a greater focus on expense control,
should allow for above average earnings growth in the year ahead.
Any reference to future financial performance included in this announcement
has not been reviewed or reported on by the Group`s external auditors.
Post-balance sheet events
No event which is material to the understanding of this report has occurred
between the financial period end and the date of this report.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 28
February 2011
Group
2011 2010
R`000 R`000
Revenue 461 654 347 511
Cost of sales (261 567) (206 833)
Gross profit 200 087 140 678
Other income/(expense) 1 312 (2 183)
Selling expenses (49 655) (36 305)
Other operating expenses (94 006) (73 924)
Operating profit before finance income and 57 738 28 266
finance expense
Finance income 2 966 4 268
Finance expense (11 387) (12 382)
Profit before taxation 49 317 20 152
Income tax (15 834) (6 534)
Profit for the year 33 483 13 618
Other comprehensive income - -
Total comprehensive income attributable to 33 483 13 618
owners of the Company
Basic earnings per share (cents) 31,5 12,4
Diluted basic earnings per share (cents) 31,3 12,4
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Group
2011 2010
R`000 R`000 R`000 R`000
Gross Net Gross Net
Attributable profit to owners - 33 483 - 13 618
Profit on sale of assets (29) (22) (13) (9)
Headline earnings 33 461 13 609
Weighted average shares
reconciliation
Shares in issue at beginning 114 272 114 272
of year 328 328
Treasury Shares - VEET (4 000 (4 000
000) 000)
Treasury Shares - Verimark (4 064 (734 374)
(Proprietary) Limited 304)
Weighted Average Shares 106 208 109 537
024 954
Share options dilution 611 983
Diluted weighted average 106 820 109 537
shares 007 954
Basic earnings per share 31,5 12,4
(cents)
Headline earnings per share 31,5 12,4
(cents)
Diluted basic earnings per 31,3 12,4
share (cents)
Diluted headline earnings per 31,3 12,4
share (cents)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 28 February 2011
Group
2011 2010
R`000 R`000
ASSETS
Non-current assets 31 185 25 931
Plant and equipment 14 200 9 263
Intangible assets 14 342 14 286
Deferred taxation asset 2 643 2 382
Current assets 139 988 111 565
Inventories 60 274 45 202
Trade and other receivables 62 543 51 966
Prepayments 268 191
Loans receivable 234 466
Bank and cash balances 16 669 13 740
Total assets 171 173 137 496
EQUITY AND LIABILITIES
Equity attributable to owners of the company 80 626 56 899
Share capital 346 356
Share premium 21 378 25 104
Share based payment reserve 393 -
Retained earnings 58 509 31 439
Non-current liabilities 7 905 6 632
Interest-bearing liabilities 7 905 6 632
Current liabilities 82 642 73 965
Preference share liability 15 371 14 491
Trade and other payables 61 100 50 138
Shareholders for dividend - 42
Short-term portion of interest-bearing 3 783 1 733
liabilities
Taxation payable 2 388 7 561
Total equity and liabilities 171 173 137 496
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 28 February
2011
Share Share Share Retained Total
Capital premium based earnings
payment
reserve
R`000 R`000 R`000 R`000 R`000
Group
Balance at 1 March 2009 368 26 730 - 17 821 44 919
Total comprehensive income
for the year
Profit for the year - - - 13 618 13 618
Transactions with owners
recorded in equity
Treasury shares held by (12) (1 626) - - (1 638)
Verimark (Proprietary)
Limited
Balance at 28 February 2010 356 25 104 - 31 439 56 899
Total comprehensive income
for the year
Profit for the year - - - 33 483 33 483
Transactions with owners
recorded in equity
Treasury shares held by (10) (3 726) - - (3 736)
Verimark (Proprietary)
Limited
IFRS 2 share based payment - - 393 - 393
transaction
Contributions to and
distributions to owners of
the Company
Dividend paid to owners - - - (6 413) (6 413)
Balance at 28 February 2011 346 21 378 393 58 509 80 626
CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 28 February 2011
Group
2011 2010
R`000 R`000
Cash flows from operating activities
Cash generated by operations 49 515 45 593
Finance income 2 966 3 981
Finance costs (9 970) (11 103)
Income tax paid (21 267) (3)
Dividend paid (6 455) -
Net cash inflows from operating activities 14 789 38 468
Cash outflows from investing activities (11 420) (8 255)
Acquisitions of plant and equipment (11 552) (7 996)
Acquisitions of intangible assets (233) (288)
Proceeds from disposal of plant and equipment 365 29
Cash (outflows)/inflows from financing (440) 321
activities
Decrease in loans receivable 232 232
Interest-bearing liabilities repaid (2 590) (1 125)
Interest-bearing liabilities raised 5 894 2 851
Repurchase of own shares (3 736) (1 637)
Preference share liability repaid (240) -
Net increase in cash and cash equivalents 2 929 30 534
Cash and cash equivalents at beginning of year 13 740 (16 794)
Cash and cash equivalents at end of year 16 669 13 740
KPMG Inc. has audited the financial statements from which the financial
information set out in this report has been derived. Their audit report on
the financial statements is not modified and 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
23 May 2011
Directors:
M J van Straaten (Chief Executive Officer), S J Preller (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
Website: www.verimark.co.za
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
Auditors:
KPMG Inc.
Sponsor:
Grindrod Bank Limited
Date: 23/05/2011 07:05:29 Supplied by www.sharenet.co.za
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