Wrap Text
Condensed Unaudited Consolidated Results for the Six Months Ended 31 August 2015
Verimark Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number: 1998/006957/06
Share Code: VMK
ISIN: ZAE000068011
("Verimark" or "the Group")
CONDENSED UNAUDITED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31
AUGUST 2015
SALIENT FEATURES
- Revenue up 0.5% to R183.5 million (2014: R182.6 million)
- Operating loss reduced by 26.5% to R2.98 million (2014: Loss R4.1 million)
- Headline loss per share at (3.6) cents (2014: (3.7) cents)
- Cash position improved by R4.4 million from 28 February 2015 and by R17.9 million from 31
August 2014
- Sales revenue through retail outlets (through the till) showing improvement
- Reduction in operating loss following efficiency gains as well as a reduction in expenses
The first half’s trading conditions remained challenging as consumer confidence weakened further due
higher interest rates, negligible economic growth and disruptions due to erratic power supply as a result
of load shedding.
The continued devaluation of the Rand against the US Dollar again made it necessary to adjust selling
prices. Sales volumes, revenue and profitability have been affected but, pleasingly, the efforts
introduced over the last year to enhance sales are beginning to take effect with the value of products
sold to consumers, through the till, at retail level increasing by nearly 6%. The Group, however,
experienced different levels of sales growth of the various retail chains, with the majority of outlets
showing good growth, whilst one other reported a slowdown. This resulted in the Group’s total sales
increasing by only 0.5%.
As with all other South African importers, Verimark continues to experience the harsh and difficult
effects of the significant devaluation of the South African Rand against the US Dollar. The Rand
devalued by 12.3% over the last six month period; and since March 2011 to the date of this report, it
has lost almost half of its value against the Dollar, moving from R6.87/USD (March 2011) to around
R13.90/USD at the end of September 2015.
Despite the demanding external factors, the Group remains focused on improving those internal factors
over which it has some control, including the implementation of a stringent cost containment process
and improving operating efficiencies. Although this has been managed carefully over the last eighteen
months, the recent acceleration of the currency’s weaknesses resulted in a higher than expected net
foreign exchange loss of R1.5 million, compared to a R212 000 net foreign exchange profit reported in
the same period last year.
OVERVIEW
The Group’s total revenue increased 0.5% to R183.5 million (2014: R182.6 million). Despite the average
cost of product increasing over the period, Verimark has again elected not to increase selling prices to
the same extent, given the impact that it would have had on sales volumes.
Containing costs has proved challenging, but success has been achieved with selling and operating
expenses reducing by 0.8% which is commendable in the current, demanding, operating environment.
It was mentioned during the release of the annual results for the year ended 28 February 2015 that the
inventory levels, at year end, were increased to ensure sufficient cover for the closure of factories during
the Chinese New Year holidays. As expected, the inventory held within the Group has returned to
normal operating levels. Cash generated by the operating activities amounted to R7.3 million (2014:
R16.9 million cash utilised by operating activities).
The operating loss for the six months ended 31 August 2015 reduced significantly by 26.5% to R2.98
million from the R4.1 million reported in the same period last year.
The Group’s headline loss per share reduced marginally to 3.6 cents from 3.7 cents as reported in the
same period last year.
In addition to cost improvement initiatives, Verimark continues to drive improvements in working capital
management in order to strengthen its overall cash position. These efforts ensured that the cash
position improved by R4.4 million since 28 February 2015 and by R17.9 million from 31 August 2014.
The discontinuation of Verimark’s Singapore operation is in progress and should reach completion
within the next few months. The Group remains committed to limit losses during this period. Losses
reported in the current period from this operation amounted to R367 000 and is significantly less than
the R602 000 loss reported in 2014.
REPORTING ENTITY
Verimark Holdings Limited is a company domiciled in South Africa. The condensed group financial
information as at and for the period ended 31 August 2015 comprise the results of Verimark Holdings
Limited and its subsidiaries.
INTERIM DIVIDEND
In light of the overall trading results for the six months ended 31 August 2015 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
The condensed consolidated interim financial statements are prepared in accordance with
International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements
as issued by Financial Reporting Standards Council and the requirements of the Companies Act of
South Africa. The accounting policies applied in the preparation of these interim financial statements
are in terms of International Financial Reporting Standards and are consistent with those applied in
the previous annual financial statements.
The condensed consolidated financial information has been presented on the historical cost basis,
except for financial instruments 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
Per IFRS 8 Operating Segments the operations of the Group are split between South Africa and
Foreign.
CHANGES TO THE BOARD
There were no changes to the board during the period ended 31 August 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
While the economic environment is expected to remain challenging over the next 18 months,
Verimark’s continued focus and proven record of expanding its innovative product range should
benefit its sales growth.
Efforts to improve the Group’s performance are becoming evident with the increased rate of new
product introductions, containment of supply chain and operating costs, strengthening in the cash
position and focus on making the business more efficient. The Board is therefore confident that the
medium- and long-term prospects of Verimark remain positive.
RESULTS
The interim results for the period ended 31 August 2015, together with the statements regarding the
prospects of the Group, have not been reviewed or audited 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 2015 August 2014 2015
(Restated)
R’000 R’000 R’000
Continuing operations
Revenue 183 514 182 640 415 374
Operating (loss) / profit before net finance expense (2 976) (4 047) 18 108
and taxation
Finance income 616 1 063 2 376
Foreign exchange gains realised 515 1 054 2 365
Interest income from financial assets 101 9 11
Finance expense (2 472) (1 288) (3 480)
Foreign exchange losses realised (2 055) (842) (1 935)
Interest expense from financial liabilities (417) (446) (1 545)
(Loss) / profit before taxation (4 832) (4 272) 17 004
Tax credit / (expense) 1 190 899 (5 010)
(Loss) / profit for the period (3 642) (3 373) 11 994
Discontinued operations
Loss for the period from discontinued operations (367) (602) (736)
(after tax)
(Loss) / profit for the period (4 009) (3 975) 11 258
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation reserve movement (245) 51 1
Total comprehensive income for the period (4 254) (3 924) 11 259
attributable to owners of the Company
(Loss) / earnings per share (EPS) – continuing (3,4) (3,1) 11.1
operations
(Loss) / earnings per share (EPS) – discontinued (0,3) (0,6) (0.7)
operations
Headline (loss) / earnings per share (HEPS) (3.6) (3,7) 10.4
Headline (loss) / earnings per share (EPS) – (3,3) (3,1) 11.1
continuing operations
Headline (loss) / earnings per share (EPS) – (0,3) (0,6) (0.7)
discontinued operations
* Restated – the results for 31 August 2015 have been restated to separately reflect the impact and
results of the discontinued operation.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as audited as Audited as at
at 31 August at 31 August 28 February
2015 2014 2015
(Restated)
R’000 R’000 R’000
Assets
Plant and equipment 9 836 11 517 11 264
Intangible assets 14 589 14 798 14 623
Deferred taxation asset 6 151 4 535 4 961
Non-current assets 30 576 30 850 30 848
Inventories 70 380 78 552 79 531
Trade and other receivables 61 678 67 744 64 073
Prepayments 662 618 496
Prepaid taxation 498 672 498
Assets held for sale 1 037 2 555 2 632
Cash and cash equivalents 391 373 444
Current assets 134 646 150 514 147 674
Total assets 165 222 181 364 178 522
Equity and liabilities
Share capital 360 360 360
Share premium 32 269 32 269 32 269
Foreign currency translation deficit (412) (117) (167)
Share based payment reserve 0 436 0
Retained earnings 83 868 78 274 93 506
Equity attributable to the equity holders of the parent 116 085 111 222 125 968
Interest-bearing borrowings 3 686 4 210 4 085
Non-current liabilities 3 686 4 210 4 085
Trade and other payables 35 458 35 983 33 327
Liabilities directly associated with assets held for 83 285 301
sale
Current portion of interest-bearing borrowings 966 1 706 1 422
Bank overdraft 8 810 27 934 13 285
Taxation payable 134 24 134
Current liabilities 45 451 65 932 48 469
Total liabilities 49 137 70 142 52 554
Total equity and liabilities 165 222 181 364 178 522
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Foreign Share Retained Total
Capital Premium currency based earnings
translation payment
reserve / reserve
(deficit)
R’000 R’000 R’000 R’000 R’000 R’000
Balance at 1 March 2013 346 21 378 13 1 124 64 587 87 448
Comprehensive Income
Profit from continuing 18 627 18 627
operations
Loss from discontinued (966) (966)
operations
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
Balance at 28 February 360 32 269 (168) 468 82 248 115 177
2014
Comprehensive Income
Profit from continuing 11 994 11 994
operations
Loss from discontinued (736) (736)
operations
Other comprehensive 1 1
income
Transactions with
owners recorded in
equity
IFRS 2 share-based (468) (468)
payment reversal
Balance at 28 February 360 32 269 (167) 0 93 506 125 968
2015
Comprehensive Income
Loss from continuing (3 642) (3 642)
operations
Loss from discontinued (367) (367)
operations
Other comprehensive (245) (245)
income
Distributions to
shareholders
Dividends paid (5 629) (5 629)
Balance at 31 August 360 32 269 (412) 0 83 868 116 085
2015
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2015 August 2014 2015
R’000 R’000 R’000
Net cash inflows / (outflows) from operating activities 7 279 (16 887) 486
Cash generated / (utilised by) from operations 14 764 (15 622) 8 679
Dividends paid (5 629) 0 0
Finance income received 616 1 064 2 378
Finance costs paid (2 472) (1 290) (3 480)
Taxation paid 0 (1 039) (7 091)
Cash outflows from investing activities (1 653) (1 403) (3 791)
Acquisition of plant and equipment (1 622) (1 284) (3 690)
Acquisition of intangible assets (37) (181) (181)
Proceeds from disposal of plant and equipment 6 62 80
Cash outflows from financing activities (855) (1 016) (1 425)
Interest-bearing borrowings repaid (855) (1 016) (1 425)
Net increase / (decrease) in cash and cash 4 771 (19 306) (4 730)
equivalents
Cash and cash equivalents at beginning of period (12 841) (7 030) (7 030)
Cash and cash equivalents held for sale (349) 0 (1 081)
Cash and cash equivalents at end of period (8 419) (26 336) (12 841)
SEGMENTAL INFORMATION
South Africa Foreign Group Elimination Total
R’000 R’000 R’000 R’000
Revenue 183 092 422 0 183 514
Loss before tax (4 832) (367) 0 (5 199)
Loss after tax (3 642) (367) 0 (4 009)
Segment assets 164 185 1 037 0 165 222
Segment liabilities (49 220) (3 271) 3 188 (49 137)
DETERMINATION OF ATTRIBUTABLE (LOSS) / EARNINGS AND HEADLINE (LOSS) / EARNINGS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2015 August 2014 2015
R’000 R’000 R’000
Attributable (loss) / profit (after tax) (4 009) (3 975) 11 258
Loss / (profit) on sale of plant and equipment 138 2 (14)
Tax on (loss) / profit on sale of plant and equipment (38) (1) 4
Headline (loss) / earnings (3 909) (3 974) 11 248
Shares in issue 114 272 328 114 272 328 114 272 328
Shares held by subsidiary (6 380 870) (6 380 870) (6 380 870)
Number of shares at period end 107 891 458 107 891 458 107 891 458
Basic (loss) / earnings per share (3.7) (3,7) 10,4
Headline (loss) / earnings per share (3.6) (3,7) 10,4
Net asset value per share 107,6 103,1 116,8
Net tangible asset value per share 94,1 89,4 103,2
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.
On behalf of the Board
Michael van Straaten Shaun Beecroft
Chief Executive Officer Financial Director
Johannesburg
12 October 2015
Directors:
Dr J T Motlatsi (Chairman)*, J M Pieterse*, M J van Straaten (CEO), S R Beecroft, 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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