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Summarised Audited consolidated financial statements for the year ended 28 February 2015, dividend announcement
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 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 28
FEBRUARY 2015, DIVIDEND ANNOUNCEMENT AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
- Revenue from continuing operations down 2,7% to R415,3 million (2014: R427,0 million – as
restated)
- Profit before tax from continuing operations of R17,0 million (2014: R24,4 million – as restated)
- Profit before tax (excluding the once off BEE unwinding gain in 2014) of R17.0million (2014: R17,1
million)
- Headline earnings of R11,2 million (2014: R17,6 million)
- Basic EPS at 10,4 cents (2014: 17,0 cents)
- Headline EPS at 10,4 cents (2014: 16,9 cents)
- Net asset value per share at 116,8 cents (2014: 110,9 cents)
During the past year, the macroeconomic environment in South Africa remained challenging, given
the continued slowdown in local spending, the disruptions caused by erratic power supply and slow
disposable income growth. The continued depreciation of the Rand against the US Dollar has
negatively impacted local importers for the past three years and this, together with high negotiated
wage settlements, negatively impacted the South African retail sector in general.
The past year can be described as tough with an improved second half performance by the Verimark
team.
The continued focus on margin management, operational efficiencies and the introduction of stringent
cost management systems resulted in the profit before tax of R17,0 million.
During the previous reporting period, a once off gain of R7,3 million was reported upon the unwinding
of Verimark’s BEE structure. If the impact of this once off gain is excluded from the results of the
previous reporting period, the profit before tax for the year ended 28 February 2015 of R17,0 million is
on par with the prior year (R17,1 million).
OVERVIEW
Verimark remained focused on staying competitive in a difficult trading environment and extracting the
maximum efficiencies from our operations. As a result we fared reasonably well under the
circumstances.
The revenue for the year under review decreased by 2,7%. The reduction in revenue during the first
half of the year was 6%, mainly due to the drop in sales volumes resulting from the need to increase
selling prices in February 2014 to compensate for the weakened Rand/US$ exchange rate. This
marked an unprecedented second occurrence of price increases within the preceding twelve-month
period. Various initiatives aimed at increasing revenue in the second half of the year delivered positive
indications for future growth, however the disruption in electricity supply impacted negatively on foot
traffic and shopping patterns in many shopping malls in which Verimark’s products are sold.
Notwithstanding the difficult trading environment and continued depreciation of the Rand, gross
margin ratios were largely similar to those experienced in the previous year. This was achieved
through a combination of price increases, driving efficiencies in the warehouse and distribution
operations, as well as cost reduction along the supply chain. The majority of the group’s merchandise
is imported and acquired on a US$ denomination. The margin has been largely well managed
considering the deterioration in the Rand/US$ exchange rate over this period.
Continued focus on operational efficiencies and the introduction of stringent cost management
systems resulted in a somewhat shielded 1.7% reduction in operating costs within the second half of
the year. This contributed to the full year operational expense growth being limited to only 1%.
The international operation in Singapore, initiated in 2013, did not gain the traction expected and
despite attempts to align expenses to revenue generated, did not meet the objectives set. It has
therefore been decided that Verimark will exit the Singapore market in the coming year and the
segment’s results have therefore has been reported as a discontinued operation in the reported
financial statements. Notwithstanding the losses incurred over the period, a vast amount of
experience was gained that will benefit Verimark’s international strategy.
Certain products were procured earlier than normal in anticipation of the annual Chinese new year,
resulted in an increase in inventory on hand at the end of February 2015 of R13.9 million. This
contributed to the lower cash generated from operations. The inventory levels will return to normal in
the first quarter of the new financial year.
FINAL DIVIDEND
The Board of Directors (‘the Board’) is pleased to announce that a final cash dividend payable from retained
earnings for the financial year ended 28 February 2015, of R5,6 million or 5,21778 cents per share
(2014: R0 million or 0,0 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. 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, 11 June 2015
Trading ex dividend commences Friday, 12 June 2015
Record date Friday, 19 June 2015
Dividend payment date Monday, 22 June 2015
Share certificates may not be dematerialised or re-materialised between Friday, 12 June 2015 and
Friday, 19 June 2015 both days inclusive.
The dividend will be subject to dividend withholding tax at a rate of 15%, which will result in a net
dividend of 4,43511 cents to those shareholders who are not exempt in terms of section 64F of the
Income Tax Act. At 28 February 2015, there were 107 891 458 shares in issue, excluding the
6 380 870 treasury shares. Verimark’s tax reference number is 9638138843.
REPORTING ENTITY
Verimark Holdings Limited is a company domiciled in South Africa. The summarised audited
consolidated financial statements as at and for the year ended 28 February 2015 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
consolidated annual financial statements and preparing these summarised consolidated financial
statements.
These summarised consolidated financial statements have been extracted from the audited
consolidated financial statements, but is not itself audited. The audited consolidated financial
statements on which the auditors, KPMG Inc, have expressed an unqualified audit opinion and a copy
of the auditor’s report is available for inspection at the Company’s registered office.
The directors take full responsibility for the preparation of the abridged report and that the financial
information has been correctly extracted from the underlying annual financial statements.
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 2013, 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 2015.
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
Economic conditions are expected to remain challenging in the coming year and South Africa’s GDP
growth is likely to remain subdued due to the infrastructure challenges faced. The South African
consumer environment seems mildly positive but remains quite fragile.
Verimark will continue to place emphasis on increasing the pace of new products introduced;
improving margins that were eroded due to the weakening of the Rand over the last three years;
maximising operational efficiencies; as well as cost containment in the year ahead.
We remain fully committed to our strategy as described on pages 6 and 7 of the Annual Report, which
is summarised as follows:
• Remaining a product-focused and a leading innovative business
• Assessing potential international opportunities whilst ensuring growth in the local operations
and increasing overall profitability
• Recruiting the best talent to complement our existing staff
• Focus on improving the customer experience
• Ensure operational efficiencies and cost containment
We remain confident that the resilience of our business model and the overall talent of our people will
allow us to produce an improved trading performance going forward.
Statements contained in this announcement, regarding the prospects of the group, have not been
reviewed or audited by the group¹s external auditors.
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 28 Year ended 28
February 2015 February 2014
(* Restated)
Audited Audited
R’000 R’000
Continuing operations
Revenue 415 374 427 036
Gross profit 168 872 172 156
Operating profit before net finance expense and taxation 18 108 30 651
Finance income 2 376 4 107
Finance expense (3 480) (10 340)
Profit before taxation (Note 1) 17 004 24 418
Income tax (5 010) (5 791)
Profit for the year (Note 1) 11 994 18 627
Discontinued operations
Loss for the year from discontinued operations (after (736) (966)
tax)
Profit for the year 11 258 17 661
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation reserve movement 1 (181)
Total comprehensive income for the year 11 259 17 481
Earnings per share (EPS) – continuing operations 11,1 17,9
Loss per share (EPS) – discontinued operations (0,7) (0,9)
Diluted earnings per share (EPS) – continuing 11,1 17,9
operations
Diluted loss per share (EPS) – discontinued operations (0,7) (0,9)
Headline earnings (HEPS) 10,4 16,9
* Restated – the results for 28 February 2014 have been restated to separately reflect the impact and
results of the discontinued operation.
Note 1 – the results for the prior year include a R7,3 million once off gain from the unwinding of the
BEE structure in 2014.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 28 At 28
February February
2015 2014
Audited Audited
R’000 R’000
Assets
Plant and equipment 11 264 13 527
Intangible assets 14 623 14 893
Deferred taxation asset 4 961 3 637
Non-current assets 30 848 32 057
Inventories 79 531 66 280
Trade and other receivables 64 073 60 229
Prepayments 496 419
Prepaid taxation 498 0
Asset held for sale 2 632 0
Cash and cash equivalents 444 1 394
Current assets 147 674 128 322
Total assets 178 522 160 379
Equity and liabilities
Share capital 360 360
Share premium 32 269 32 269
Foreign currency translation deficit (167) (168)
Share based payment reserve 0 468
Retained earnings 93 506 82 248
Equity attributable to the equity holders of the parent 125 968 115 177
Interest-bearing borrowings 4 085 4 384
Non-current liabilities 4 085 4 384
Trade and other payables 33 326 29 454
Liabilities directly associated with assets held for 301 0
sale
Current portion of interest-bearing borrowings 1 422 2 548
Bank overdraft 13 285 8 424
Taxation payable 134 392
Current liabilities 48 468 40 818
Total liabilities 52 554 45 202
Total equity and liabilities 178 522 160 379
SUMMARISED 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 13 1 124 64 587 87 448
2013
Total comprehensive
income
Profit for the year – 18 627 18 627
continuing operations
Loss for the year – (966) (966)
discontinued operations
Other comprehensive (181) (181)
income
Transactions with
owners recorded in
equity
IFRS 2 share-based (656) (656)
payment transaction
credit
Treasury shares 14 10 891 10 905
transferred on
settlement of preference
share liability
Balance at 28 February 360 32 269 (168) 468 82 248 115 177
2014
Total comprehensive
income
Profit for the year – 11 994 11 994
continuing operations
Loss for the year – (736) (736)
discontinued operations
Other comprehensive 1 1
income
Transactions with
owners recorded in
equity
IFRS 2 share-based (468) (468)
payment transaction
credit
Balance at 28 February 360 32 269 (167) 0 93 506 125 968
2015
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended Year ended
28 February 28 February
2015 2014
Audited Audited
R’000 R’000
Net cash inflows from operating activities 486 26 733
Cash generated from operations 8 679 39 194
Finance income received 2 378 4 107
Finance costs paid (3 480) (9 132)
Taxation paid (7 091) (7 436)
Cash outflows from investing activities (3 791) (4 238)
Acquisition of plant and equipment to expand (3 690) (5 407)
operations
Acquisition of intangible assets to maintain (181) 0
operation
Proceeds from disposal of plant and equipment 80 1 169
Cash outflows from financing activities (1 425) (2 515)
Interest-bearing borrowings raised 0 484
Interest-bearing borrowings repaid (1 425) (2 999)
Net (decrease) / increase in cash and cash (4 730) 19 980
equivalents
Cash and cash equivalents at beginning of year (7 030) (27 010)
Cash and cash equivalents held for sale (1 081) -
Cash and cash equivalents at end of year (12 841) (7 030)
SEGMENTAL INFORMATION – for the year ended 28 February 2015
South Africa Foreign Group Total
(Discontinued) elimination
R’000 R’000 R’000 R’000
Revenue 415 697 2 312 (323) 417 686
Profit / (loss) before tax 17 022 (736) (18) 16 268
Profit / (loss) after tax 12 007 (736) (13) 11 258
Segment assets 175 877 2 663 (18) 178 522
Segment liabilities (52 252) (4 253) 3 952 (52 554)
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Year ended Year ended
28 February 28 February
2015 2014
Audited Audited
R’000 R’000
Attributable profit (after tax) 11 258 17 661
Profit on sale of plant and equipment (14) (100)
Tax on profit on sale of plant and equipment 4 28
Headline earnings 11 248 17 589
Shares in issue 114 272 328 114 272 328
Treasury shares - VEET 0 (3 989 041)
Shares held by subsidiary (6 380 870) (6 380 870)
Weighted average shares for the period 107 891 458 103 902 417
Share options dilutive portion 0 9 986
Diluted weighted average shares 107 891 458 103 912 403
Earnings per share 10,4 17,0
Headline earnings per share 10,4 16,9
Diluted earnings per share 10,4 17,0
Diluted headline earnings per share 10,4 16,9
Net asset value per share 116,8 110,9
Net tangible asset value per share 103,2 96,5
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
during 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 6 August
2015 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 27 May 2015.
The record date for purposes of determining which shareholders are entitled to receive the notice of
annual general meeting was Friday, 22 May 2015. 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, 31 July 2015. Accordingly, the last date to trade in order to be
registered in the Company`s register of shareholders is Friday, 24 July 2015.
On behalf of the Board
Michael van Straaten Shaun Beecroft
Chief Executive Officer Financial Director
Johannesburg
21 May 2015
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: 25/05/2015 08:37:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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