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Unaudited Condensed Consolidated Interim Results for the six months ended 31 August 2018
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 2018
HIGHLIGHTS
- Revenue decreased by 1.0% to R207,5 million (2017: R209.7 million).
- Gross Profit increased by 6.9% to R94.7 million (2017: R88.6 million).
The first six months trading has been tough for Verimark as for most import retailers given the
volatility of the rand against foreign currencies. The South African economy is in a technical recession
and consumer confidence has suffered as a result.
Although Verimark’s revenue is marginally down compared to the prior period, the company incurred
a loss before tax as against a profit before tax in the prior period due to certain costs being incurred in
order to improve revenue, which will only reflect the financial benefits in future months.
OVERVIEW
The Group’s total revenue decreased by 1% to R207.5 million (2017: R209.7 million). The decrease is
mainly attributable to the following:
• Lower consumer confidence in the retail environment as a result of the technical recession;
• Most retailers tightening up on stock holding, resulting in lower sales into stores.
Gross profit increased by 6.9% to R94.7 million (2017: R88.6 million). Although revenue is down, gross
profits improved due to fewer promotions and markdowns compared to the prior year. The rand was
less volatile to foreign currencies at the beginning of the year which improved the cost of goods sold.
However over the six month trading period the rand devalued by 33% which will impact the future cost
of goods sold.
Operating costs increased by 12.0% to R98.1 million (2017: R87.6 million). This increase is a result of
the following three factors:
• Increase in sales staff costs in order to improve store presence and improve revenue;
• Increase in delivery expenses due to the petrol price increases;
• Increase in rental costs in line with the increase in Verimark Emporium store count to 92
stores, which is done to improve the customer service functions across South Africa and into
Africa.
Verimark has recorded a loss before taxation of R2.8 million (2017: Profit of R2.2 million). Net finance
charges increased by R0.5 million, which is due to the forex loss recorded as a result of the
devaluation of the rand over the last six months.
REPORTING ENTITY
Verimark is a company incorporated in the Republic of South Africa (“South Africa”). The unaudited
condensed consolidated financial results comprise the unaudited consolidated results of Verimark and
its subsidiaries for the six months ended 31 August 2018 (“interim financial results”).
INTERIM DIVIDEND
No dividends were declared for the six months ended 31 August 2018.
BASIS OF PREPARATION
The condensed consolidated interim financial results 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 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.
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).
CHANGES TO THE BOARD
Mr Mitesh Patel resigned as Board Chairman and Independent Non-Executive Director on Monday 2
April 2018. Ms Simone van Straaten was appointed as Chief Operating Officer as well as an Alternate
Director to Mr MJ van Straaten on Thursday 1 March 2018. Ms NP Gosa and Ms M Kabi were
appointed as Independent Non-executive Directors on Monday 7 May 2018. Ms NP Gosa was
appointed as Board Chairman effective Friday 18 May 2018.
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 2018, 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 R90,4 million outstanding at 31 August 2018 in
respect of current property and other leases.
PROSPECTS
With the South African economy in a technical recession, business confidence in South Africa
continues to decline, resulting in lower consumer spend, which is affecting all retailers. This trend is
expected to continue, resulting in a tougher retail trading environment for the remainder of the 2019
financial year.
Verimark continues to further its footprint into Africa as well as the rest of the world through the
international division. This will continue to be a focus for Verimark especially with the recent volatility
of the rand against foreign currencies.
The Verimark website has been re-launched and continues to gain traction with a growing online
presence on social media. This is not only aimed at improving revenue but also at enhancing the
Verimark brand and its reputable sub brands.
The company has a number of exciting innovative products which will launch in the next six month
period. These new products will be a great addition to our current product range.
Statements contained in this announcement, regarding the prospects of the Group, have not been
reviewed or audited by the Group’s external auditors.
SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
six months six months year ended 28
ended 31 ended 31 February 2018
August 2018 August 2017
R’000 R’000 R’000
Continuing operations
Revenue 207 537 209 702 508 137
Gross profit 94 798 88 648 230 899
Operating (loss)/profit before net finance expense (1 682) 2 787 46 881
Finance income 2 092 805 2 363
Finance expense (3 232) (1 396) (2 558)
(Loss)/profit before taxation (2 822) 2 196 46 686
Income tax credit/(expense) 778 (1 092) (12 988)
(Loss)/profit for the period (2 044) 1 104 33 698
Total comprehensive (loss)/income for the period (2 044) 1 104 33 698
attributable to owners of the Company
Basic and diluted (loss)/earnings per share (2.0) 1.0 31.9
Earnings and diluted (loss)/ earnings per share (2.0) 1.0 31.9
(EPS) – continuing operations
SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited as Unaudited as Audited as at
at 31 August at 31 August 28 February
2018 2017 2018
*Restated
R’000 R’000 R’000
Assets
Plant and equipment 8 219 7 345 8 459
Intangible assets 15 715 14 620 15 750
Deferred taxation asset 5 153 4 097 5 928
Non-current assets 29 087 26 062 30 137
Inventories 103 921 99 363 84 485
Trade and other receivables 71 504 72 417 87 265
Prepayments 1 101 1 358 662
Prepaid taxation 3 991 2 648 0
Cash and cash equivalents 9 944 634 23 818
Current assets 190 461 176 420 196 230
Total assets 219 548 202 482 226 367
Equity and liabilities
Share capital 338 357 338
Share premium 27 422 31 810 27 422
Retained earnings 122 514 107 192 139 786
Equity attributable to the equity holders of the 150 274 139 359 167 546
company
Interest-bearing borrowings 2 674 3 206 3 237
Operating lease accrual 5 896 5 347 5 702
Non-current liabilities 8 570 8 553 8 939
Trade and other payables 33 615 36 871 40 881
Current portion of interest-bearing borrowings 1 698 1 102 2 161
Bank overdraft 25 391 16 597 6 400
Taxation payable 0 0 440
Current liabilities 60 704 54 570 49 882
Total liabilities 69 274 63 123 58 821
Total equity and liabilities 219548 202 482 226 367
* NOTE ON PRIOR PERIOD ERROR
During 2018, the group discovered that the rent straight-lining provision was erroneously disclosed as
a current liability since inception. As a consequence the current liabilities were overstated and the
non- current liabilities understated. The error has been corrected and the prior period restated to
reflect the correction for the six months ended 31 August 2017.
SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Retained Total
Capital Premium earnings
R’000 R’000 R’000 R’000
Balance at 28 February 2017 357 31 810 118 170 150 337
Comprehensive Income
Profit from continuing operations 33 698 33 698
Distributions to shareholders
Repurchase of shares (7) (1 654) (1 661)
Treasury Shares (12) (2 734) (2 746)
Dividends paid (12 082) (12 082)
Balance at 28 February 2018 338 27 422 139 786 167 546
Profit from continuing operations (2 044) (2 044)
Distributions to shareholders
Dividends paid (15 228) (15 228)
Balance at 31 August 2018 338 27 422 122 514 150 274
SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2018 August 2017 2018
R’000 R’000 R’000
Net cash (outflows) from operating activities (29 614) (45 627) (4 418)
Cash (utilised by)/generated from operations(1) (10 369) (30 300) 21 152
Dividends paid (15 228) (12 082) (12 082)
Finance income received 2 092 805 2 363
Finance costs paid (3 232) (1 396) (2 558)
Taxation paid ( 2 877) ( 2 654) (13 293)
Cash outflows from investing activities (2 225) (2 887) (5 971)
Acquisition of plant and equipment (2 012) (2 904) (3 997)
Acquisition of intangible assets (219) (14) (2 006)
Proceeds from disposal of plant and equipment 6 31 32
Cash outflows from financing activities (1 026) (506) (5 250)
Advances in interest-bearing borrowings 0 0 274
Interest-bearing borrowings repaid (1 026) (506) (1 118)
Repurchase of own shares 0 0 (4 406)
Net (decrease) in cash and cash equivalents (32 865) (49 020) (15 369)
Cash and cash equivalents at beginning of period 17 418 33 057 33 057
Cash and cash equivalents at end of period (15 447) (15 963) 17 418
(1) Cash (utilised by)/generated from operations
(Loss)/profit before taxation (2 822) 2 196 46 686
Adjusted for :
depreciation on plant and equipment 2 505 2 122 4 152
amortisation on computer software 0 174 412
profit on disposal of plant and equipment (6) (23) (24)
finance income (2 092) (805) (2 363)
finance costs 3 232 1 396 2 558
Increase/(decrease) in inventory impairment 0 331 (595)
Increase in straight-lining lease accrual 194 564 918
Operating (loss)/profit before changes in working 1 011 5 955 51 744
capital
Note 1
Increase in inventories (19 436) (16 071) (267)
Decrease/(increase) in trade and other receivables 15 761 (26 061) (40 909)
(Decrease)/increase in prepayments (439) (369) 327
(Decrease)/increase in trade and other payables (7 266) 6 246 10 257
Cash (utilised by)/generated from operations (10 369) (30 300) 21 152
DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited twelve
six months six months months ended
ended 31 ended 31 28 February
August 2018 August 2017 2018
R’000 R’000 R’000
Attributable profit (after tax) (2 044) 1 104 33 698
Loss on sale of plant and equipment (6) (23) (24)
Tax on profit/(loss) on disposal of plant and 2 6 7
equipment
Headline earnings (2 048) 1 087 33 681
Shares in issue 112 249 632 114 272 328 112 249 632
Shares held by subsidiary (10 741 599) (7 351 959) (10 741 599)
Number of shares at period end 101 508 033 106 920 369 101 508 033
Basic earnings and diluted earnings per share (2) 1.0 33.2
Headline and diluted headline earnings per share (2) 1.0 33.2
Net asset value per share* 148.0 130.3 165.1
Net tangible asset value per share** 132.5 116.7 149.5
*Net asset value per share
Shareholders’ equity divided by the total number of issued shares at the end of the year less shares
held by the subsidiary. 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 total number of issued shares at the end of
the year less shares held by the subsidiary.
On behalf of the Board
Michael van Straaten
Chief Executive Officer
Johannesburg
22 October 2018
Directors:
NP Gosa (Chairman)* J M Pieterse*, A T Nzimande*, M Kabi*, M J van Straaten (CEO),
B M Groome (FD), S van Straaten(COO)^
*Independent Non-executive
^ Alternate director
Company Secretary:
PremCorp 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: 22/10/2018 07:11:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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