Wrap Text
Unaudited Condensed Consolidated Interim Results for the six months ended 31 August 2016
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 CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED
31 AUGUST 2016
HIGHLIGHTS
- Revenue from continuing operations up 0.5% to R184.4 million (2015: R183.5 million)
- Profit before tax of R3.9 million (2015: loss of R4.8 million)
- Headline earnings per share 2.2 cents per share (2015: loss of 3.6 cents per share)
- Basic earnings per share (“EPS”) at 2.2 cents per share (2015: loss of 3.7 cents per share)
- Net asset value per share at 117.7 cents per share (2015: 107.6 cents per share)
Despite a tough retail environment due to weaker consumer demand, higher interest rates and
negligible economic growth in South Africa, the Group recorded improved profits for the first half of
2017.
As a result of the ongoing depreciation of the Rand against the US Dollar, it became necessary for
Verimark to increase selling prices in mid-February 2016. These price increases were greater than the
prior year’s increase implemented in February 2015, which impacted sales growth, but resulted in
improved gross profit margins.
As with all other South African importers, Verimark continues to experience the negative impact of the
devaluation of the South African Rand against the US Dollar.
Despite demanding external factors, the Group remains focused on improving those internal factors
over which it has control, including the increased rate of new product introductions, the continuation of
stringent cost containment and improving operating efficiencies.
OVERVIEW
The Group’s total revenue increased 0.5% to R184.4 million (2015: R183.5 million). Due to the price
increases in February 2016, sales were largely unchanged with only marginal growth of 0.5%. Gross
profit increased from R70.8 million in 2015 to R80.2 million in 2016, which represents a 13.2% increase.
Variable and indirect expenses increased by 4.9% to R78.2 million (2015: R74.6 million), and these
costs were contained to below inflationary levels.
Profit before taxation improved to R3.9 million (2015: loss of R4.8 million), which is a R8.7 million
improvement compared to the comparable previous first six months trading. Cash management
remains a priority as well as limiting exposure to foreign currencies. This can be seen in the improved
net finance income of R0.4 million in 2016 (2015: expense of R1.8 million).
The discontinuation of Verimark’s Singapore operation is in the final stages and should reach
completion within the next few months. All known disinvestment costs have been provided for.
REPORTING ENTITY
Verimark is a company domiciled in South Africa. The condensed consolidated interim financial
statements as at and for the period ended 31 August 2016 comprises the consolidated results of
Verimark and its subsidiaries.
INTERIM DIVIDEND
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 71 of
2008, as amended. 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 annual financial statements.
These condensed consolidated interim financial results 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, Bryan
Groome CA (SA).
SEGMENTAL ANALYSIS
During 2013, the Group expanded its operations and opened a company in Singapore. Per IFRS 8
Operating Segments the operations of the Group are split between South Africa and Foreign. The
operation in Singapore has been discontinued and is reflected as discontinued operations in the 2017
financial year as well as the prior year.
CHANGES TO THE BOARD
Following the resignation of Mr Shaun Beecroft as Financial Director on 23 March 2016, the Board of
Directors appointed Mr Bryan Groome as Financial Director on 8 August 2016.
Following the retirement of Dr James Motlatsi as Board Chairman and Independent Non-Executive
Director on 6 October 2016, the Board appointed Mr Mitesh Patel as Board Chairman with effect from
the same date.
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
The declining business confidence in South Africa is expected to continue beyond 2016. There are
numerous negative domestic and external economic as well as political issues impacting the
economy, leading in part to continued weakness in the Rand. There remains a real danger that South
Africa’s economy could enter a recession, which is extremely concerning considering this may well
precede an economic downgrade.
Verimark will continue to place emphasis on increasing the pace of new products introduced;
normalising margins that were eroded due to the weakening of the Rand; maximising operational
efficiencies; as well as ongoing cost containment in the 6 months ahead. Given the economic
challenges and the uncertainty around the Rand exchange rate, Verimark is exploring a number of
diversification strategies locally, as well as internationally. In addition Verimark is also testing the
sourcing of locally produced products.
The group remains’ confident that the resilience of its business model and the overall talent of its
people will bode well for the future.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year ended 29
ended 31 ended 31 February 2016
August 2016 August 2015
R’000 R’000 R’000
Continuing operations
Revenue 184 425 183 514 430 798
Gross profit 80 172 70 798 172 936
Operating profit/(loss) before net finance expense 3 511 (2 976) 17 830
Finance income 2 107 616 1785
Finance expense (1 722) (2 472) (6 467)
Profit/(loss) before taxation 3 896 (4 832) 13 148
Income tax (expense)/credit (1 392) 1 190 (3 883)
Profit /(loss) for the period 2 504 (3 642) 9 265
Discontinued operations
Loss for the period from discontinued operations (155) (367) (801)
(after tax)
Profit /(loss) / for the period 2349 (4009) 8 464
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation reserve movement (8) (245) (157)
Total comprehensive income for the period 2 341 (4 254) 8 307
attributable to owners of the Company
Basic and diluted earnings per share 2.2 (3.7) 7.8
Earnings and diluted earnings per share (EPS) – 2.3 (3.4) 8.6
continuing operations
Loss and diluted loss per share (EPS) – discontinued (0.1) (0.3) (0.7)
operations
Headline earnings/(loss) per share (HEPS) 2.2 (3.6) 8.0
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as Unaudited as Audited as at
at 31 August at 31 August 29 February
2016 2015 2016
R’000 R’000 R’000
Assets
Plant and equipment 7 585 9 836 8 295
Intangible assets 14 252 14 589 14 336
Deferred taxation asset 3 778 6 151 3 305
Non-current assets 25 615 30 576 25 936
Inventories 66 292 70 380 65 581
Trade and other receivables 73 957 61 678 61 970
Prepayments 771 662 463
Prepaid taxation 2 531 498 23
Assets held for sale 0 1 037 164
Cash and cash equivalents 11 838 391 15 651
Current assets 155 389 134 646 143 852
Total assets 181 004 165 222 169 788
Equity and liabilities
Share capital 360 360 360
Share premium 32 269 32 269 32 269
Foreign currency translation deficit (332) (412) (324)
Share based payment reserve 0 0 0
Retained earnings 94 694 83 868 96 341
Equity attributable to the equity holders of the 126 991 116 085 128 646
parent
Interest-bearing borrowings 3 181 3 686 3 367
Non-current liabilities 3 181 3 686 3 367
Trade and other payables 40 780 35 458 25 271
Liabilities directly associated with assets held for 0 83 0
sale
Current portion of interest-bearing borrowings 516 966 702
Bank overdraft 9 536 8 810 9 929
Taxation payable 0 134 1873
Current liabilities 50 832 45 451 37 775
Total liabilities 54 013 49 137 41 142
Total equity and liabilities 181 004 165 222 169 788
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Foreign Retained Total
Capital Premium currency earnings
translation
deficit
R’000 R’000 R’000 R’000 R’000
Balance at 28 February 360 32 269 (167) 93 506 125 968
2015
Comprehensive Income
Profit from continuing 9265 9265
operations
Loss from discontinued (801) (801)
operations
Other comprehensive (157) (157)
income
Distributions to
shareholders
Dividends paid (5 629) (5 629)
Balance at 29 February 360 32 269 (324) 96 341 128 646
2016
Profit from continuing 2 504 2 504
operations
Loss from discontinued (155) (155)
operations
Other comprehensive (8) (8)
income
Distributions to
shareholders
Dividends paid (3 996) (3 996)
Balance at 31 August 360 32 269 (332) 94 694 126 991
2016
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 29 February
August 2016 August 2015 2016
R’000 R’000 R’000
Net cash (outflows)/ inflows from operating activities (1 729) 7 279 20 571
Cash generated from operations 8 128 14 764 30 895
Dividends paid (3 996) (5 629) (5 629)
Finance income received 2 107 616 1 785
Finance costs paid (1 722) (2 472) (6 467)
Taxation paid (6 246) 0 (13)
Cash outflows from investing activities (1460) (1 653) (1 510)
Acquisition of plant and equipment (1 453) (1 622) (2 795)
Acquisition of intangible assets (24) (37) (37)
Movement in assets held for Sale 0 0 1226
Proceeds from disposal of plant and equipment 17 6 96
Cash outflows from financing activities (372) (855) (1 438)
Interest-bearing borrowings repaid (372) (855) (1 438)
Net (decrease)/increase in cash and cash (3 561) 4 771 17 623
equivalents
Cash and cash equivalents at beginning of period 5 722 (12 841) (12 841)
Cash and cash equivalents held for sale at beginning 141 1 081
of the period
Cash and cash equivalents held for sale 0 (349) (141)
Cash and cash equivalents at end of period 2 302 (8 419) 5 722
SEGMENTAL INFORMATION FOR 31 AUGUST 2016
South Africa Foreign Group Elimination Total
R’000 R’000 R’000 R’000
Revenue 184 425 0 0 184 424
Profit/(loss) before tax 3 896 (155) 0 3 741
Profit/(loss) after tax 2 504 (155) 0 2 349
Segment assets 178 471 0 0 178 471
Segment liabilities 48 299 0 0 48 299
SEGMENTAL INFORMATION FOR 31 AUGUST 2015
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 EARNINGS/(LOSS) AND HEADLINE EARNINGS/ (LOSS)
Unaudited Unaudited udited twelve
six months six months months ended
ended 31 ended 31 29 February
August 2016 August 2015 2016
R’000 R’000 R’000
Attributable profit/(loss) (after tax) 2 349 (4 009) 8 464
(Profit)/loss on sale of plant and equipment (9) 138 163
Tax on profit/(loss) on sale of plant and equipment 2 (38) (45)
Headline earnings/(loss) 2 342 (3 909) 8 582
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 earnings/(loss) per share 2.2 (3.7) 7.8
Headline earnings/(loss) per share 2.2 (3.6) 8.0
Net asset value per share 117.7 107.6 119.3
Net tangible asset value per share 104.5 94.1 105.9
*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
Chief Executive Officer
Johannesburg
12 October 2016
Directors:
M M Patel*, (Chairman)*, J M Pieterse*, M J van Straaten (CEO), B M Groome (Financial Director),
*Independent Non-Executive
Company Secretary:
Premium Corporate Consulting Services (Pty) Ltd
Registered office:
50 Clairwood Avenue
Extension 55, Hoogland
Randburg 2194
Postal address:
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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