Verimark, has released its full year results for the period ended 28 February 2014. Verimark has seen declines based on a dulled consumer environment, paired with adverse exchange rate effects. Verimark holds a current mark cap of R86 million with a PE ratio of 6.05, its share price is down by just under 17% on the year which follows a downward trend over the last 3 years.
Highlights:
- Revenues down 5.2% to R430,5 million (2013:R454,1)
- Operating profit R29,6 million* (2013: R 16,6 million)
- Profit before tax R23,4 million (2013: R15,3million)
- Basic EPS at 17,0 cents (2013: (8,5) cents)
- Headline EPS at 16,9 cents (2013: (8,4) cents)
- Improved net cash position of R20 million
- Cost containment initiatives continue to position the group for future growth
- No dividend declared
- Market leader position maintained
An extract from Verimark’s press release is included below.
VERIMARK DEMONSTRATES RESILIENCE IN LIGHT OF NEGATIVE RETAIL-IMPORT CLIMATEÂ
27 May 2014 [Johannesburg] South Africa’s leading listed direct-sales retail group Verimark [VMK] today reported a comparative improvement in the restated operating profit of 34,3% to R22,3 million*, for the 12 months ended 28 February 2014 – as operating efficiencies continue to deliver strong results.
“Despite ongoing pressure on importers resulting from a further weakening of the South African rand, we are pleased with the results of our cost-containment initiatives and believe that the Verimark group is well-positioned to take advantage of a future improvement in the local economy,” said Verimark’s CEO Michael van Straaten.
The group recorded a decrease in revenues of 5,2%Â R430,5 million (2013: R454,1 million) due to the necessary increase of retail selling prices across certain of its high-volume products. These measures were unable to fully offset the exchange rate impact and resulted in a negative impact on sales volumes and margins.
Despite the weakening of the exchange rate, the group is starting to see the benefits of the last 24-months of centralising and consolidation efforts paying off. This has allowed for much better control of operations and costs, which resulted in the operating profit improvement.
These initiatives had a direct impact on the management of working capital, which in turn, resulted in significant improvements in the group’s cash flow.
During the course of the year, over 3,5 million products were delivered to Verimark customers with over 85Â 000 deliveries from the new 13Â 000m2 head office and centralised warehouse north of Johannesburg.
Van Straaten said that uncertainty in the economic outlook is likely to continue to place pressure on retailers over the short term, adding that Verimark remains confident that it will comfortably maintain its position as a market leader in its industry, as it has over the past 37 years.
Despite the improvements noted above, the board considered it prudent, in light of the uncertain economic conditions, not to declare a final dividend in order to continue to improve the group’s cash position ahead of the anticipated seasonal working capital increases in the second half of the year.
“Despite the present exchange rate challenges, we are structurally and operationally in a much better position to capitalise on an improvement in economic conditions and will be very well placed to take advantage of local and international opportunities,” van Straaten concluded.
*As noted in previous announcements, the unwinding of the Verimark BEE structure resulted in a once-off gain due to the settlement of the preference share liability. Restated operating profit for the financial year ended 28 February 2014, which excludes the impact of the unwinding exercise, was R22.3 million. Including this impact, the operating profit for the period was R29,6 million.
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