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Summarised audited consolidated financial statements year ended 28 February 2017, dividend announcement and AGM
Verimark Holdings Limited
(Incorporated in the Republic of South Africa)
Registration Number: 1998/006957/06
Share Code: VMK
ISIN: ZAE000068011
("Verimark" or "the Group" or “the Company”)
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 28
FEBRUARY 2017, DIVIDEND ANNOUNCEMENT AND NOTICE OF ANNUAL GENERAL MEETING
HIGHLIGHTS
- Revenue from continuing operations up 1,9% to R439,1 million (2016: R430,8 million)
- Profit before tax from continuing operations of R37,3 million (2016: R13,1 million)
- Headline earnings of R25,9 million (2016:R8,6 million)
- Basic EPS at 24,0 cents per share (2016: 7,8 cents per share)
- Headline EPS at 24,0 cents per share (2016: 8,0 cents per share)
- Net asset value per share at 139,4 cents per share (2016: 119,3 cents per share)
The South African economy remained challenging with increased interest rates, higher than
anticipated inflation and overall political uncertainty given the down grade to “junk status” for South
African credit ratings. In the reported period, the strengthening of the Rand in the second six
months against foreign currencies has resulted in a positive impact on import related businesses
and retail as a whole.
OVERVIEW
Sales revenue for the year under review was higher by 1.9% at R439.1 million from R430.8 million
in the previous year. As a result of the on-going depreciation of the Rand against the US Dollar
(“USD”) in the prior financial year, it became necessary for Verimark to increase selling prices in
mid-February 2016. The sales price increases, impacted on the sales growth potential, lowering
sales volumes in the first six months of trading. Verimark has produced positive sales growth over
the last two financial years, which given the tough consumer market is positive for the business.
Verimark has reactivated international trade, exhibiting at four international trade shows, the true
potential of export will however only be seen in the next financial year.
The subsequent strengthening of the Rand exchange rate against the USD and other currencies in
the 2017 financial year resulted in improved buying power of our imports in the second half of the
2017 financial year. The combination of the sales price increases and the strengthening of the
Rand resulted in increased gross profits.
Profit before tax increased by 183.8% to R37.3 million from R13.1 million in the previous year. This
is attributable to the following factors:
- the strengthening of the Rand exchange rate over the 2017 financial year, which resulted in
a foreign currency gain of R1.3 million (2016: R3.7 million loss). The spot rate as at 28
February 2017 was R12.94 to the USD (2016: R16.14 to the USD);
- cost containment of fixed and variable expenditure to R163.8 million (2016: R157.5 million)
below inflationary levels. This was achieved through a renewed cost benefit analysis and
elimination of wasteful expenditure; and
- net interest income of R0.2 million (2016: R0.8 million net interest expense), due to
improved cash flow management and utilization of facilities to maximize interest income.
Cash management has been a key highlight for the 2017 financial year with cash holdings
increasing by R27.3 million to R33.1 million, (2016: R5.7 million). This is due to improved profits for
the year, utilization of working capital and overall efficient cash management. Cash generated from
operations improved by R16.5 million to R47.4 million from R30.9 million in the previous financial
year.
FINAL DIVIDEND
Notice is hereby given that a final gross dividend for the financial year ended 28 February 2017, of
R12.9 million or 11,30016 cents per share (2016:R4,2 million or 3,70351 cents per share) has been
declared, payable on Monday 12 June 2017, to shareholders recorded in the register at the close of
business on Friday 9 June 2017. This is consistent with the dividend policy of 50% of profit
attributable to the shareholders 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 date to trade shares cum dividend Tuesday, 6 June 2017
Shares commence trading ex dividend Wednesday, 7 June 2017
Record date Friday, 9 June 2017
Payment date Monday, 12 June 2017
Share certificates may not be dematerialised or re-materialised between Wednesday, 7 June 2017
and Friday, 9 June 2017, both days inclusive.
On Monday 12 June 2017, the final dividend will be electronically transferred into the bank
accounts of all certificated shareholders where this facility is available. Shareholders who hold
dematerialised shares will have their accounts at their CSDP or broker credited on Monday 12 June
2017.
The final dividend will be subject to dividend withholding tax at a rate of 20%, which will result in a
net dividend of 9,04013 cents per share to those shareholders who are not exempt in terms of
section 64F of the Income Tax Act. The final dividend has been declared out of income reserves.
The number of ordinary shares in issue as at the date of this declaration is114 272 328. Verimark’s
income tax reference number is 9638/138/84/3.
REPORTING ENTITY
Verimark is a company domiciled in South Africa. The summarised audited consolidated financial
statements as at and for the year ended 28 February 2017 comprises the consolidated results of
Verimark and its subsidiaries.
BASIS OF PREPARATION
The summary consolidated financial statements are prepared in accordance with the requirements
of the JSE Limited Listings Requirements (“Listings Requirements”) for abridged reports, and the
requirements of the Companies Act of South Africa,(“Companies Act”), applicable to summary
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 summary consolidated financial statements were derived, are in terms of IFRS and are
consistent with the accounting policies applied in the preparation of the previous consolidated
annual financial statements.
Mr Bryan Groome CA (SA), Financial Director, was responsible for supervising the preparation of
the consolidated annual financial statements and preparing these summary consolidated financial
statements.
These summary 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 Board 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.
The Group has no assets or liabilities measured at fair value, by valuation methodwhich requires
fair value hierarchy disclosures. The carrying values of financial assets and financial liabilities as
requested in the statement of financial position approximate their fair values at the reporting date.
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 split between South Africa and Foreign. Operations in
Singapore have been discontinued and is reflected as discontinued operations in the 2017 financial
year as well as the prior year.
RELATED PARTY TRANSACTIONS
The only change recorded in the 2017 financial year is the liquidation of VEET and Selcovest.
CHANGES TO THE BOARD
The Board appointed Mr Mitesh Patel as Independent Board Chairman on 6 October 2016
following the retirement of Dr James Motlatsi. Mr Shaun Beecroft resigned as an Executive Director
and Financial Director and was replaced by Mr Bryan Groome as Executive Director and Acting
Financial Director on 23 March 2016. Bryan was then appointed as Financial Director on 8 August
2016. Ms Thandi Nzimande was appointed as an Independent Non-Executive Director on 1
November 2016.
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
Declining business confidence in South Africa is expected to continue beyond 2017, given the
downgrade to “junk” status, which has created economic uncertainty. Analysts are predicting
higher interest rates, the weakening of the Rand to foreign currencies, and lower consumer spend
as a result of an expected rise in inflation. These factors will have a negative impact on the retail
environment, especially on retailers who import.
Given the volatility of the Rand, Verimark will focus on growing its international sales division. This
will act as a hedge against the risk of further depreciation of the Rand. It will also over time
contribute to the company’s (group’s) revenue and profitability. Verimark intends to exhibit at
various international trade shows and expects the results to start showing within the 2018 financial
year.
Sourcing new innovative products remains key for our success in the forthcoming years. Verimark
has 40 years’ experience in this field and as in the past, will continue to bring the best quality,
innovative products to consumers, locally and in the future internationally.
Verimark has a vast distribution network that includes virtually all the retail chains in southern
Africa. Our intention is to continue our expansion into the SADC regions, which has shown
potential growth opportunities in recent years.
The Group remains confident that the resilience of its business model and the overall talent of its
people will bode well for the future.
Statements contained in this announcement, regarding the prospects of the Group, have not been
reviewed or audited by the Group’s external auditors.
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 28 Year ended 29
February 2017 February 2016
Audited Audited
R’000 R’000
Continuing operations
Revenue 439 119 430 798
Gross profit 196 320 172 936
Operating profit before net finance expense 35 832 17 830
Finance income 3 637 1785
Finance expense (2 153) (6 467)
Profit before taxation 37 316 13 148
Income tax (11 004) (3 883)
Profit for the year 26 312 9 265
Discontinued operations
Loss for the year from discontinued operations (after (487) (801)
tax)
Profit for the year 25 825 8 464
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation reserve movement 324 (157)
Total comprehensive income for the year 26 149 8 307
Basic and diluted earnings per share 24,0 7,8
Earnings and diluted earnings per share (EPS) – 24,4 8,6
continuing operations
Loss and diluted loss per share (EPS) – discontinued (0,5) (0,7)
operations
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 28 At 29
February February
2017 2016
Audited Audited
R’000 R’000
Assets
Plant and equipment 7 195 8 295
Intangible assets 14 157 14 336
Deferred taxation asset 4 392 3 305
Non-current assets 25 744 25 936
Inventories 83 623 65 581
Trade and other receivables 46 356 61 970
Prepayments 989 463
Prepaid taxation 790 23
Asset held for sale 0 164
Cash and cash equivalents 34 072 15 651
Current assets 165 830 143 852
Total assets 191 574 169 788
Equity and liabilities
Share capital 357 360
Share premium 31 810 32 269
Foreign currency translation deficit 0 (324)
Retained earnings 118 170 96 341
Equity attributable to the equity holders of the parent 150 337 128 646
Interest-bearing borrowings 3 774 3 367
Non-current liabilities 3 774 3 367
Trade and other payables 35 409 25 271
Current portion of interest-bearing borrowings 1 039 702
Bank overdraft 1 015 9 929
Taxation payable 0 1 873
Current liabilities 37 463 37 775
Total liabilities 41 237 41 142
Total equity and liabilities 191 574 169 788
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Capital Share Foreign Retained Total
Premium currency earnings
translation
deficit
R’000 R’000 R’000 R’000 R’000
Balance at 28 360 32 269 (167) 93 506 125 968
February 2015
Total comprehensive
income
Profit for the year – 9 265 9 265
continuing operations
Loss for the year – (801) (801)
discontinued operations
Other comprehensive (157) (157)
income
Transactions with
owners recorded in
equity
Dividends paid (5 629) (5 629)
Balance at 29 360 32 269 (324) 96 341 128 646
February 2016
Total comprehensive
income
Profit for the year – 26 312 26 312
continuing operations
Loss for the year – (487) (487)
discontinued operations
Other comprehensive 324 324
income
Transactions with
owners recorded in
equity
Repurchase of shares (3) (459) (462)
Dividends paid (3 996) (3 996)
Balance at 28 357 31 810 0 118 170 150 337
February 2017
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 28 Year ended 29
February 2017 February 2016
Audited Audited
R’000 R’000
Net cash inflows from operating activities 30 132 20 571
Cash generated from operations 47 375 30 895
Dividends paid (3 996) (5 629)
Finance income received 3 637 1 785
Finance costs paid (2 153) (6 467)
Taxation paid (14 731) (13)
Cash outflows from investing activities (3 220) (1 510)
Acquisition of plant and equipment to expand (3 242) (2 795)
operations
Acquisition of intangible assets to maintain (24) (37)
operations
Proceeds on sale of assets held for sale 23 1 226
Proceeds from disposal of plant and equipment 23 96
Cash inflow/(outflows) from financing activities 282 (1 438)
Interest-bearing borrowings raised/(repaid) 744 (1 438)
Repurchase of own shares (462) 0
Net increase in cash and cash equivalents 27 194 17 623
Cash and cash equivalents at beginning of year 5 722 (12 841)
Cash and cash equivalents held for sale at beginning 141 1 081
of the year
Cash and cash equivalents held for sale 0 (141)
Cash and cash equivalents at end of year 33 057 5 722
SEGMENTAL INFORMATION – for the year ended 28 February 2017
South Africa Foreign Group Total
(Discontinued) elimination
R’000 R’000 R’000 R’000
Revenue 439 119 0 0 439 119
Profit before tax 37 316 (487) 0 36 829
Profit after tax 26 312 (487) 0 25 825
Segment assets 191 574 0 0 191 574
Segment liabilities (41 237) 0 0 (41 237)
SEGMENTAL INFORMATION – for the year ended 29 February 2016
South Africa Foreign Group Total
(Discontinued) elimination
R’000 R’000 R’000 R’000
Revenue 430 798 1 112 431 910
Profit before tax 13 148 1 941 (2 742) 12 347
Profit after tax 9 265 1 941 (2 742) 8 464
Segment assets 169 624 164 0 169 788
Segment liabilities (41 142) 0 0 (41 142)
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Year ended Year ended
28 February 29 February
2017 2016
Audited Audited
R’000 R’000
Attributable profit (after tax) 25 825 8 464
Loss on sale of plant and equipment 41 163
Tax on loss on sale of plant and equipment (11) (45)
Headline earnings 25 855 8 582
Shares in issue 114 272 328 114 272 328
Shares held by subsidiary (6 489 958) (6 380 870)
Weighted average shares for the period 107 782 370 107 891 458
Diluted weighted average shares Share options 107 782 370 107 891 458
dilutive portion
Basic earnings and diluted earnings per share 24,0 7,8
Headline and diluted headline earnings per share 24,0 8,0
Net asset value per share* 139,4 119,3
Net tangible asset value per share** 126,3 105,9
*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
during the year.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of the Company will be held at the Company,
in the Boardroom, 50 Clairwood Avenue, Hoogland Ext 55, Randburg, on Thursday 3 August 2017 at
10h00, to transact business as stated in the Notice of the Annual General Meeting, issued together
with the Integrated Annual Report, which will be distributed to shareholders and made available on
the Company website (www.verimark.co.za), on or about Friday, 26 May 2017.
The record date in terms of section 59(1) (b) of the Companies Act for shareholders to participate in
and vote at the Annual General Meeting is Friday 28 July 2017.
Accordingly, the last date to trade in the Company’s shares on the JSE Limited in order to be eligible
to participate in and vote at this Annual General Meeting is Tuesday, 25 July 2017.
On behalf of the Board
Michael van Straaten
Chief Executive Officer
Johannesburg
23 May 2017
Directors:
M M Patel (Chairman)*, J M Pieterse*, AT Nzimande *, M J van Straaten (CEO), B M Groome,
*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
Date: 23/05/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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