UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2018

Transcription

1 Verimark Holdings Limited (Incorporated in the Republic of South Africa) Registration Number: 1998/006957/06 Share Code: VMK ISIN: ZAE ("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 BASIS OF PREPARATION 1 P a g e

2 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 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 Ms NP Gosa and Ms M Kabi were appointed as Independent Non-executive Directors on Monday 7 May Ms NP Gosa was appointed as Board Chairman effective Friday 18 May 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 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. 2 P a g e

3 SUMMARY CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited Unaudited six months six months ended 31 ended 31 August 2018 August 2017 Audited year ended 28 February 2018 R 000 R 000 R 000 Continuing operations Revenue Gross profit Operating (loss)/profit before net finance expense (1 682) Finance income Finance expense (3 232) (1 396) (2 558) (Loss)/profit before taxation (2 822) Income tax credit/(expense) 778 (1 092) (12 988) (Loss)/profit for the period (2 044) Total comprehensive (loss)/income for the period (2 044) attributable to owners of the Company Basic and diluted (loss)/earnings per share (2.0) Earnings and diluted (loss)/ earnings per share (EPS) continuing operations (2.0) P a g e

4 SUMMARY CONSOLIDATED STATEMENT OF FINANCIAL POSITION Unaudited as Unaudited as at 31 August at 31 August *Restated Audited as at 28 February 2018 R 000 R 000 R 000 Assets Plant and equipment Intangible assets Deferred taxation asset Non-current assets Inventories Trade and other receivables Prepayments Prepaid taxation Cash and cash equivalents Current assets Total assets Equity and liabilities Share capital Share premium Retained earnings Equity attributable to the equity holders of the company Interest-bearing borrowings Operating lease accrual Non-current liabilities Trade and other payables Current portion of interest-bearing borrowings Bank overdraft Taxation payable Current liabilities Total liabilities Total equity and liabilities * 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 P a g e

5 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 Comprehensive Income Profit from continuing operations 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 Profit from continuing operations (2 044) (2 044) Distributions to shareholders Dividends paid (15 228) (15 228) Balance at 31 August P a g e

6 SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited six months ended 31 August 2018 Unaudited six months ended 31 August 2017 Audited twelve months ended 28 February 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) Dividends paid (15 228) (12 082) (12 082) Finance income received 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 Cash outflows from financing activities (1 026) (506) (5 250) Advances in interest-bearing borrowings 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 Cash and cash equivalents at end of period (15 447) (15 963) (1) Cash (utilised by)/generated from operations (Loss)/profit before taxation (2 822) Adjusted for : depreciation on plant and equipment amortisation on computer software profit on disposal of plant and equipment (6) (23) (24) finance income (2 092) (805) (2 363) finance costs Increase/(decrease) in inventory impairment (595) Increase in straight-lining lease accrual Operating (loss)/profit before changes in working capital Note 1 Increase in inventories (19 436) (16 071) (267) Decrease/(increase) in trade and other receivables (26 061) (40 909) (Decrease)/increase in prepayments (439) (369) 327 (Decrease)/increase in trade and other payables (7 266) Cash (utilised by)/generated from operations (10 369) (30 300) P a g e

7 DETERMINATION OF ATTRIBUTABLE EARNINGS AND HEADLINE EARNINGS Unaudited Unaudited six months six months ended 31 ended 31 August 2018 August 2017 Audited twelve months ended 28 February 2018 R 000 R 000 R 000 Attributable profit (after tax) (2 044) Loss on sale of plant and equipment (6) (23) (24) Tax on profit/(loss) on disposal of plant and equipment Headline earnings (2 048) Shares in issue Shares held by subsidiary ( ) ( ) ( ) Number of shares at period end Basic earnings and diluted earnings per share (2) Headline and diluted headline earnings per share (2) Net asset value per share* Net tangible asset value per share** *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. 7 P a g e

8 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 address: investors@verimark.co.za Transfer Secretaries: Computershare Investor Services (Pty) Limited Auditors: KPMG Incorporated Sponsor: Grindrod Bank Limited 8 P a g e