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Unaudited interim results for the six months ended 31 August 2013
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 2013
HIGHLIGHTS
- Revenues up 0.4% to R195,2 million (2012: R194,6 million)
- Operating profit R3.2 million (2012: Operating loss R5,1 million)
- Loss before tax R1,2 million (2012: R4,4 million)
- Basic EPS at (1,1) cents (2012: (5,1) cents)
- Headline EPS at (1,2) cents (2012: (5,2) cents)
- On-going focus to protect profit margins by aligning selling prices to the weaker exchange rate and
controlling of costs
- Operational efficiencies beginning to produce results
- Market leader position maintained
OVERVIEW
The trading environment has continued to be challenging over the present period. A negative impact
on sales and product margins was brought about largely by the Rand’s further depreciation against
the Dollar; which impacted the cost of purchasing and procuring of inventory. The operational
efficiencies that resulted from consolidating the head office and warehousing operations into a single,
larger premises, are beginning to bear fruit and contributed, during the period, towards an
improvement in the group’s operating profit.
Revenue for the six month period under review was up 0.4% compared to the same period last year.
This was mainly due to the negative volume impact that resulted from the increase in selling prices of
a number of key products.
Despite the selling price increases which were implemented during the second half of the previous
year, the cost of imports of new products and components was negatively impacted by the ongoing
depreciation of the Rand against the US Dollar resulting in a decrease in product margins.
The improvement in the operating profits is as a result of the efficiencies generated from operating out
of one consolidated premises, together with the introduction of new warehouse information systems,
and various cost improvement initiatives. This improvement was achieved despite additional
expenses incurred due to the capital investments made in the prior year (for example, increased
depreciation, rent straight lining charges) together with the cost of expansion initiatives, including the
international expansion.
The volatility and devaluation of the Rand exchange rate resulted in a foreign exchange loss of R2,7
million being reported (2012: R1,7 million foreign exchange profit) in the current period. Together with
the higher utilisation of overdraft facilities during the earlier part of the current reporting period, this
resulted in higher finance expenses being reported.
Management’s efforts to reduce inventory levels as at the end of February, together with the
improvement in profitability have resulted in positive cash generated from operations of R8.0 million
(2012:- R14.5 million cash utilised).
To further increase and improve the level of new product development and introductions, as well as a
strategy to expand internationally; additional staff and managers were appointed during the period,
and further skills will be sought in the future.
“In February, we announced that we would focus on three core areas of growth, namely, the
improvement of operating efficiencies; improving our product development and marketing capabilities;
and looking at potential international opportunities and new markets. I believe we have made good
progress on all of these fronts and will continue to do so moving forward,” Michael Van Straaten CEO
of Verimark said.
INTERIM DIVIDEND
In light of the overall trading results for the six months ended 31 August 2013 the Board has
considered it prudent not to declare a dividend.
Dividend payments will be reconsidered in accordance with the existing pay-out policy on completion
of the current financial year.
BASIS OF PREPARATION
These summarised financial statements have been prepared in accordance with the measurement
and recognition requirements of IFRS, the presentation and disclosure requirements of IAS 34 Interim
Financial Reporting, the SAICA Financial Reporting Guides issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards
Council, the Listing Requirements of the JSE Limited and the Companies Act of South Africa.
The accounting policies used to prepare this report are consistent with those used in the previous
annual financial statements except for any new standards and interpretations that became effective.
The adoption of these standards has had no material effect on the results for the period nor has it
required the restatement of any prior year amounts. The summarised group financial information has
been presented on the historical cost basis, except for financial instruments and share based
payments carried at fair value, and are presented in Rand thousands which is Verimark’s functional
and presentation currency.
The interim results as reported herein have been prepared by Verimark’s Financial Director, Shaun
Beecroft CA (SA).
SEGMENTAL ANALYSIS
During the prior year the Group expanded to Singapore where a company was registered. Per IFRS
8, the reporting of operating segments as part of Group’s operations are now split between South
Africa and Foreign.
CHANGES TO THE BOARD
There were no changes to the board.
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
Verimark is committed to further entrench its position as the leading innovator, improving operational
efficiencies, increasing product development & management capability and expanding internationally.
To mitigate the impact of a volatile currency, selling prices will regularly be adjusted to ensure gross
margins are better aligned with the continuous increase in product costs over the previous two years.
The focus on the operating efficiency and business performance initiatives remain priority and are
expected to continue to bear fruit in the future.
Based on the actions noted above, the Board is confident that the medium- and long-term prospects
of Verimark remain positive.
The interim results for the period ended 31 August 2013 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 twelve
six months six months months ended
ended 31 ended 31 28 February
August 2013 August 2012 2013
R’000 R’000 R’000
Revenue 195 291 194 560 454 091
Operating profit / (loss) before net finance expense 3 228 (5 134) 16 586
and taxation
Finance income 229 2 504 6 391
Foreign exchange gains realised 225 2 451 6 322
Interest income from financial assets 4 53 69
Finance expense (4 605) (1 802) (7 732)
Foreign exchange losses realised (2 817) (687) (4 088)
Interest expense from financial liabilities (1 788) (1 115) (3 644)
(Loss)/ profit before taxation (1 148) (4 432) 15 245
Income tax (27) (848) (6 367)
(Loss) / profit for the period (1 175) (5 280) 8 878
Foreign currency translation reserve movement (17) - 13
Total comprehensive income for the year attributable (1 192) (5 280) 8 891
to owners of the Company
Earnings per share (EPS) (1,1) (5,1) 8,5
Headline Earnings per share (HEPS) (1,2) (5,2) 8,4
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited twelve
six months six months months as at
as at 31 as at 31 28 February
August 2013 August 2012 2013
R’000 R’000 R’000
Assets
Plant and equipment 16 867 14 353 18 578
Intangible assets 14 998 14 503 14 426
Deferred taxation asset 3 198 2 914 3 208
Non-current assets 35 063 31 770 36 212
Inventories 60 862 61 250 87 494
Trade and other receivables 69 320 72 768 77 810
Prepayments 363 206 353
Prepaid taxation - 1 404 -
Bank and cash balances 995 463 1 454
Current assets 131 540 136 091 167 111
Total assets 166 603 167 861 203 323
Equity and liabilities
Share capital 346 346 346
Share premium 21 378 21 378 21 378
Share Based Payment Reserve 409 985 1 124
Foreign Currency Translation Reserve (4) 13
Retained earnings 63 412 50 429 64 587
Equity Attributable to the equity holders of the 85 541 73 138 87 448
parent
Interest-bearing liabilities 5 147 4 918 5 944
Non-current liabilities 5 147 4 918 5 944
Trade and other payables 26 119 40 442 59 326
Preference share liability 17 589 15 872 17 012
Short-term portion of interest bearing liabilities 11 704 2 499 3 480
Bank overdraft 20 472 30 992 28 463
Taxation payable 31 - 1 650
Current liabilities 75 915 89 805 109 931
Total equity and liabilities 166 603 167 861 203 323
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Foreign Retained Share Total
Capital Premium currenc earnings based
translation payment
reserve reserve
R’000 R’000 R’000 R’000 R’000 R’000
Balance at 28 February 346 21 378 - 393 58 509 80 626
2011
Comprehensive Income
Profit for the year - - - - 26 808 26 808
Transactions with
owners recorded in
equity
IFRS 2 share-based - - - 395 - 395
payment transaction
Contributions by and
distributions to owners
of the Company
Dividend paid to equity - - - - (15 583) (15 583)
owners
Balance at 29 February 346 21 378 - 788 69 734 92 246
2012
Comprehensive Income
Profit for the year - - - - 8 878 8 878
Foreign currency - - 13 - - 13
translation reserve
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 equity - - - - (14 025) (14 025)
owners
Balance at 28 February 346 21 378 13 1 124 64 587 87 448
2013
Comprehensive Income
Loss for the period - - - (1 175) (1 175)
Foreign currency - - (17) - - (17)
translation reserve
Transactions with
owners recorded in
equity
IFRS 2 share-based - - - (715) - (715)
payment transaction
Balance at 31 August 346 21 378 (4) 409 63 412 85 541
2013
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2013 August 2012 2013
R’000 R’000 R’000
Net cash inflows / (outflows)from operating activities 2 559 (32 752) (23 600)
Cash generated / (utilised) by operations 8 008 (14 461) (1 668)
Dividends paid - (14 025) (14 025)
Finance income 229 2 504 6 391
Finance costs (4 028) (1 248) (6 016)
Taxation paid (1 650) (5 522) (8 282)
Cash outflows from investing activities (2 453) (3 136) (10 755)
Acquisition of plant and equipment (3 131) (3 854) (11 577)
Acquisition of intangible assets (6) - (82)
Proceeds from disposal of plant and equipment 684 718 904
Cash inflows / (outflows) from financing activities 7 427 (2 458) (472)
Interest-bearing liabilities raised 9 329 - 5 114
Interest-bearing liabilities repaid (1 902) (1 918) (5 046)
Preference share liability repaid - (540) (540)
Net increase / (decrease) in cash and cash 7 533 (38 346) (34 827)
equivalents
Cash and cash equivalents at beginning of period (27 010) 7 817 7 817
Cash and cash equivalents at end of period (19 477) (30 529) (27 010)
SEGMENTAL INFORMATION
South Africa Foreign Group Elimination Total
R’000 R’000 R’000 R’000
Revenue 194 728 563 - 195 291
Loss before tax (410) (685) (53) (1 148)
Loss after tax (410) (726) (39) (1 175)
Segment Assets 166 954 2 493 (2 844) 166 603
Segment Liabilities 80 885 3 021 (2 844) 81 062
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2013 August 2012 2013
R’000 R’000 R’000
Attributable (loss)/profit (after tax) (1 175) (5 280) 8 878
Profit on sale of plant and equipment (104) (106) (187)
Tax on profit on sale of plant and equipment 29 30 52
Headline (loss) / earnings (1 250) (5 356) 8 743
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) (6 380 870) (6 380 870)
Number of shares at period end 103 891 458 103 891 458 103 891 458
Share options dilutive portion 702 861 1 877 493 2 094 538
Diluted weighted average shares 104 594 319 105 768 951 105 985 996
Basic earnings per share (1,1) (5,1) 8,5
Headline earnings per share (1,2) (5,2) 8,4
Diluted basic earnings per share (1,1) (5,0) 8,4
Diluted headline earnings per share (1,2) (5,1) 8,2
Net asset value per share 82,3 69,1 84,2
Net tangible asset value per share 67,9 55,4 70,3
On behalf of the Board
Michael van Straaten Shaun Beecroft
Chief Executive Officer Financial Director
Johannesburg
10 October 2013
Directors:
Dr J T Motlatsi (Chairman)*, J M Pieterse*, M J van Straaten (CEO), S RBeecroft, M Patel*
*Independent Non-executive
Company Secretary:
Premium Corporate Consulting Services (Pty) Ltd
Registered office:
50 Clairwood Avenue
Hoogland Ext 55,
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
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