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Unaudited Condensed Consolidated Interim Results for the Six Months ended 31 August 2017
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 2017
HIGHLIGHTS
- Revenue from continuing operations increased by 13.7% to R209.7 million (2016: R184.4 million)
- Gross Profit increased by 10.6% to R88.6 million (2016: R80.2 million)
The first six months trading has been tough for most consumer related businesses tough economic
conditions and heightened political instability, both of which resulted in lower consumer confidence
and spend.
Notwithstanding the worsening of the South African economy, Verimark has achieved positive
revenue growth. Profits are down in comparison to the prior year’s six months trading due to an
increase in new products introduced which resulted in higher advertising spend. The financial benefits
of this increase in new product introductions will be seen in the months ahead.
OVERVIEW
The Group’s total revenue increased by 13.7% to R209.7 million (2016: R184.4 million). The increase
is mainly attributable to the following;
- Price decreases in March 2017 compared to the price increases in the prior year;
- Increase in advertising spend, due to the increased number of new products introduced; and
- Additional stores made available by retail partners, given the sales potential.
Gross profit increased by 10.6% to R88.6 million (2016:R80.2 million). This is lower than the 13.7%
increase in revenue, as a result of price decreases and lower gross margins as well as increased
advertising costs. The increased advertising cost’s is a result of the increased number of new products
introductions, which were 85.7% higher than comparative period.
Operating costs increased by 12.1% to R87.7 million (2016: R78.2 million).This increase is directly
correlated to the increase in revenue. Cost containment remains crucial, however as in the past,
certain upfront costs are necessary to ensure future growth.
Profit before taxation decreased to R2.2 million (2016: R3.9 million). Net finance charges increased
by R0.98 million, which is due to changes in working capital, as cash has been utilised to ensure
sufficient inventory levels for the expected sales increases over the festive season as well as
increased inventory levels of the new products introduced during the period under review.
REPORTING ENTITY
Verimark is a company incorporated in the Republic of South Africa (“South Africa”). The unaudited
condensed consolidated financial result comprises the unaudited consolidated results of Verimark and
its subsidiaries for the six months ended 31 August 2017 (“interim financial results”).
INTERIM DIVIDEND
No dividends were declared for the six months ended 31 August 2017.
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 JSE listing requirements as well as the
requirements of 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.
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 to Singapore where a new company was started. In terms of IFRS 8
Operating Segments the operations of the Group are split between South Africa and Foreign.
Operations in Singapore have been discontinued and are reflected as discontinued operations for the
six months ended 31 August 2017 as well as for the corresponding comparative period.
CHANGES TO THE BOARD
No changes to the Board occurred during the six months ended 31 August 2017.
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.
STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE
The only standard as at 31 August 2017, which is in issue but not yet effective and expected to have
any impact on Verimark, is IFRS 16 which is effective 1 January 2019. Once the new standard
becomes effective, property and other leases currently treated as operating leases will have to be
capitalised and reflected as lease assets and lease liabilities on the statement of financial position.
The company had operating lease commitments of R84,4 million outstanding at 31 August 2017 in
respect of current property leases.
PROSPECTS
With the recent downgrade to “Junk Status” business confidence in South Africa continues to decline,
resulting in lower consumer spend, which, is affecting all consumer related retailers. This trend is
expected to continue, resulting in tougher retail trading environment for the remainder of the 2017
year.
Even though the trading environment will remain difficult, Verimark is confident that the increase in
number of new products tested and introduced will have a positive effect on growth moving forward.
As in the past, Verimark will continue to bring the best in innovation through new product
introductions. As with all importers Verimark’s growth and profitability continues to be dependent on
the rand dollar exchange rate. To reduce the impact of currency risk, Verimark will continue to grow
its international division which was re- activated a year ago.
Verimark has increased its inventory levels and its product mix to ensure maximum revenue growth
over the festive season. In the past six months, necessary costs were incurred through higher
inventory levels, increased advertising costs, store setup costs, which has positioned the company
well to deliver an improved second half year performance.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year ended 28
ended 31 ended 31 February 2017
August 2017 August 2016
R’000 R’000 R’000
Continuing operations
Revenue 209 702 184 425 439 119
Gross profit 88 648 80 172 196 320
Operating profit before net finance expense 2 787 3 511 35 832
Finance income 805 2 107 3 637
Finance expense (1 396) (1 722) (2 153)
Profit before taxation 2 196 3 896 37 316
Income tax expense (1 092) (1 392) (11 004)
Profit for the period 1 104 2 504 26 312
Discontinued operations
Loss for the period from discontinued operations 0 (155) (487)
(after tax)
Profit for the period 1 104 2 349 25 825
Other comprehensive income
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation reserve movement 0 (8) 324
Total comprehensive income for the period 1 104 2 341 26 149
attributable to owners of the Company
Basic and diluted earnings per share 1.0 2.2 24.0
Earnings and diluted earnings per share (EPS) – 1.0 2.3 24.4
continuing operations
Loss and diluted loss per share (EPS) – discontinued 0 (0.1) (0.5)
operations
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as Unaudited as Audited as at
at 31 August at 31 August 28 February
2017 2016 2017
R’000 R’000 R’000
Assets
Plant and equipment 7 345 7 585 7 195
Intangible assets 14 620 14 252 14 157
Deferred taxation asset 4 097 3 778 4 392
Non-current assets 26 062 25 615 25 744
Inventories 99 363 66 292 83 623
Trade and other receivables 72 417 73 957 46 356
Prepayments 1 358 771 989
Prepaid taxation 2 648 2 531 790
Cash and cash equivalents 634 11 838 34 072
Current assets 176 420 155 389 165 830
Total assets 202 482 181 004 191 574
Equity and liabilities
Share capital 357 360 357
Share premium 31 809 32 269 31 810
Foreign currency translation deficit 0 (332) 0
Retained earnings 107 193 94 694 118 170
Equity attributable to the equity holders of the 139 359 126 991 150 337
parent
Interest-bearing borrowings 3 206 3 181 3 774
Non-current liabilities 3 206 3 181 3 774
Trade and other payables 42 218 40 780 35 409
Current portion of interest-bearing borrowings 1 102 516 1 039
Bank overdraft 16 597 9 536 1 015
Taxation payable 0 0 0
Current liabilities 59 917 50 832 37 463
Total liabilities 63 123 54 013 41 237
Total equity and liabilities 202 482 181 004 191 574
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 29 February 360 32 269 (323) 96 340 128 646
2016
Comprehensive Income
Profit from continuing 26 313 26 313
operations
Loss from discontinued (487) (487)
operations
Other comprehensive 323 323
income
Distributions to
shareholders
Repurchase of shares (3) (459) (462)
Dividends paid (3 996) (3 996)
Balance at 28 February 357 31 810 0 118 170 150 337
2017
Profit from continuing 1 104 1 104
operations
Distributions to
shareholders
Dividends paid (12 082) (12 082)
Balance at 31 August 357 31 810 0 107 192 139 359
2017
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2017 August 2016 2017
R’000 R’000 R’000
Net cash (outflows)/ inflows from operating activities (45 627) (1 729) 30 132
Cash generated from operations(1) (30 300) 8 128 47 375
Dividends paid (12 082) (3 996) (3 996)
Finance income received 805 2 107 3 637
Finance costs paid (1 396) (1 722) (2 153)
Taxation paid ( 2 654) (6 246) (14 731)
Cash outflows from investing activities (2 887) (1 460) (3 220)
Acquisition of plant and equipment (2 904) (1 453) (3 242)
Acquisition of intangible assets (14) (24) (24)
Movement in assets held for Sale 0 0 23
Proceeds from disposal of plant and equipment 31 17 23
Cash outflows from financing activities (506) (372) 282
Interest-bearing borrowings repaid (506) (372) 744
Repurchase of own shares 0 0 (462)
Net (decrease)/increase in cash and cash (49 020) (3 561) 27 194
equivalents
Cash and cash equivalents at beginning of period 33 057 5 722 5 722
Cash and cash equivalents held for sale at beginning 0 141 141
of the period
Cash and cash equivalents held for sale 0 0 0
Cash and cash equivalents at end of period (15 963) 2 302 33 057
(1) Cash generated from operations
Profit before taxation 2 196 3 741 37 316
Loss before taxation from discontinued operations 0 0 (487)
Adjusted for :
depreciation on plant and equipment 2 122 2 156 4 278
amortisation on computer software 174 107 202
(profit)/loss on disposal of plant and equipment (23) (10) 41
finance income (805) (2 107) (3 637)
finance costs 1 396 1 722 2 153
Increase/(decrease) in inventory impairment 331 (195) (1 159)
Increase/(decrease) in straight-lining accrual 564 (852) 1 564
foreign currency translation movement 0 (8) 323
Operating profit before changes in working capital 5 955 4 554 40 594
Increase in inventories (16 071) (515) (16 882)
(Increase)/decrease in trade and other receivables (26 061) (11 986) 15 615
Increase in prepayments (369) (285) (526)
Increase in accounts payable and accruals 6 246 16 360 8 574
(30 300) 8 128 47 375
SEGMENTAL INFORMATION FOR 31 AUGUST 2017
South Africa Foreign Group Elimination Total
R’000 R’000 R’000 R’000
Revenue 209 702 0 0 209 702
Profit before tax 2 196 0 0 2 196
Profit after tax 1 104 0 0 1 104
Segment assets 202 482 0 0 202 482
Segment liabilities 63 123 0 0 63 123
SEGMENTAL INFORMATION FOR 31 AUGUST 2016
South Africa Foreign Group Elimination Total
R’000 R’000 R’000 R’000
Revenue 184 425 0 0 184 425
Profit before tax 3 896 (155) 0 3 741
Profit after tax 2 504 (155) 0 2 349
Segment assets 178 471 0 0 178 471
Segment liabilities 48 299 0 0 48 299
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2017 August 2016 2017
R’000 R’000 R’000
Attributable profit (after tax) 1 104 2 349 25 825
(Profit)/loss on sale of plant and equipment (23) (9) 41
Tax on profit/(loss) on sale of plant and equipment 6 2 (11)
Headline earnings 1 088 2 342 25 855
Shares in issue 114 272 328 114 272 328 114 272 328
Shares held by subsidiary (7 351 959) (6 380 870) (6 489 958)
Number of shares at period end 106 920 369 107 891 458 107 782 370
Basic earnings and diluted earnings per share 1.0 2.2 24.0
Headline and diluted headline earnings per share 1.0 2.2 24.0
Net asset value per share* 130.3 117.7 139,4
Net tangible asset value per share** 116.7 104.5 126,3
*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 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
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: 12/10/2017 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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