unaudited interim results
for the six months ended 31 August 2013

Michael van Straaten, Chief Executive Officer of Verima...
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Verimark Holdings Ltd HY 2014 results

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Verimark Holdings Ltd HY 2014 results

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Verimark Holdings Ltd HY 2014 results

  1. 1. unaudited interim results for the six months ended 31 August 2013 Michael van Straaten, Chief Executive Officer of Verimark, said… “ In February, we announced that we would focus on three core areas of growth, namely, the improvement of operating efficiencies; improving our product development and marketing capabilities; and looking at potential international opportunities and new markets. I believe we have made good progress on all of these fronts and will continue to do so moving forward. ” • Revenues up 0,4% to R195,2 million (2012: R194,6 million) • Ongoing focus to protect profit margins by aligning selling prices to the weaker exchange rate and controlling of costs • Operating profit R3,2 million (2012: Operating loss R5,1 million) • Operational efficiencies beginning to produce results • Loss before tax R1,2 million (2012: R4,4 million) • Market leader position maintained • Basic EPS at (1,1) cents (2012: (5,1) cents) www.verimark.co.za • Headline EPS at (1,2) cents (2012: (5,2) cents) consolidated Statement of comprehensive income consolidated Statement of cash flows Unaudited six months ended 31 August 2013 R’000 Unaudited six months ended 31 August 2012 R’000 Audited 12 months ended 28 February 2013 R’000 195 291 3 228 194 560 (5 134) 454 091 16 586 229 2 504 6 391 225 2 451 6 322 4 53 69 (4 605) (1 802) (7 732) (2 817) (687) (4 088) Finance income Foreign exchange gains realised Interest income from financial assets Finance expense Foreign exchange losses realised (1 788) (1 115) (3 644) (Loss)/profit before taxation Income tax (1 148) (27) (4 432) (848) 15 245 (6 367) (Loss)/profit for the period Foreign currency translation reserve movement (1 175) (17) (5 280) – 8 878 13 Total comprehensive income for the year attributable to owners of the Company (1 192) (5 280) 8 891 (1,1) (1,2) (5,1) (5,2) 8,5 8,4 Interest expense from financial liabilities Earnings per share (EPS) Headline earnings per share (HEPS) Unaudited six months ended 31 August 2012 R’000 Audited 12 months ended 28 February 2013 R’000 Net cash inflows/(outflows)from operating activities 2 559 (32 752) (23 600) Cash generated/(utilised) by operations Dividends paid Finance income Finance costs Taxation paid 8 008 – 229 (4 028) (1 650) (14 461) (14 025) 2 504 (1 248) (5 522) (1 668) (14 025) 6 391 (6 016) (8 282) Cash outflows from investing activities Acquisition of plant and equipment Acquisition of intangible assets Proceeds from disposal of plant and equipment (2 453) (3 131) (6) 684 (3 136) (3 854) – 718 (10 755) (11 577) (82) 904 Cash inflows/(outflows) from financing activities Interest-bearing liabilities raised Interest-bearing liabilities repaid Preference share liability repaid 7 427 9 329 (1 902) – (2 458) – (1 918) (540) (472) 5 114 (5 046) (540) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period 7 533 (27 010) (38 346) 7 817 (34 827) 7 817 Cash and cash equivalents at end of period Revenue Operating profit /(loss) before net finance expense and taxation Unaudited six months ended 31 August 2013 R’000 (19 477) (30 529) (27 010) Unaudited six months ended 31 August 2013 R’000 Unaudited six months ended 31 August 2012 R’000 Audited 12 months ended 29 February 2013 R’000 (1 175) (104) 29 (1 250) 114 272 328 (4 000 000) (6 380 870) 103 891 458 702 861 104 594 319 (1,1) (1,2) (1,1) (1,2) 82,3 67,9 (5 280) (106) 30 (5 356) 114 272 328 (4 000 000) (6 380 870) 103 891 458 1 877 493 105 768 951 (5,1) (5,2) (5,0) (5,1) 69,1 55,4 8 878 (187) 52 8 743 114 272 328 (4 000 000) (6 380 870) 103 891 458 2 094 538 105 985 996 8,5 8,4 8,4 8,2 84,2 70,3 consolidated Statement of financial position Unaudited six months as at 31 August 2013 R’000 Unaudited six months as at 31 August 2012 R’000 Audited 12 months as at 28 February 2013 R’000 Non-current assets Plant and equipment Intangible assets Deferred taxation asset Current assets Inventories Trade and other receivables Prepayments Prepaid taxation Bank and cash balances 35 063 16 867 14 998 3 198 131 540 60 862 69 320 363 – 995 31 770 14 353 14 503 2 914 136 091 61 250 72 768 206 1 404 463 36 212 18 578 14 426 3 208 167 111 87 494 77 810 353 – 1 454 Total assets 166 603 167 861 203 323 73 138 346 21 378 985 – 50 429 4 918 4 918 89 805 40 442 15 872 2 499 30 992 – 87 448 346 21 378 1 124 13 64 587 5 944 5 944 109 931 59 326 17 012 3 480 28 463 1 650 167 861 203 323 determination of attributable earnings and headline earnings ASSETS EQUITY AND LIABILITIES Equity attributable to the equity holders of the parent Share capital Share premium Share-based payment reserve Foreign currency translation reserve Retained earnings Non-current liabilities Interest-bearing liabilities Current liabilities Trade and other payables Preference share liability Short-term portion of interest-bearing liabilities Bank overdraft Taxation payable 85 541 346 21 378 409 (4) 63 412 5 147 5 147 75 915 26 119 17 589 11 704 20 472 31 Total equity and liabilities 166 603 Attributable (loss)/profit (after tax) Profit on sale of plant and equipment Tax on profit on sale of plant and equipment Headline (loss) / earnings Shares in issue Treasury shares - VEET Shares held by subsidiary Number of shares at period end Share options dilutive portion Diluted weighted average shares Basic earnings per share Headline earnings per share Diluted basic earnings per share Diluted headline earnings per share Net asset value per share Net tangible asset value per share overview The trading environment has continued to be challenging over the present period. A negative impact on sales and product margins was brought about largely by the Rand’s further depreciation against the Dollar; which impacted the cost of purchasing and procuring of inventory. The operational efficiencies that resulted from consolidating the head office and warehousing operations into a single, larger premises, are beginning to bear fruit and contributed, during the period, towards an improvement in the Group’s operating profit. Revenue for the six month period under review was up 0,4% compared to the same period last year. This was mainly due to the negative volume impact that resulted from the increase in selling prices of a number of key products. Despite the selling price increases which were implemented during the second half of the previous year, the cost of imports of new products and components was negatively impacted by the ongoing depreciation of the Rand against the US Dollar resulting in a decrease in product margins. The improvement in the operating profits is as a result of the efficiencies generated from operating out of one consolidated premises, together with the introduction of new warehouse information systems, and various cost improvement initiatives. This improvement was achieved despite additional expenses incurred due to the capital investments made in the prior year (for example, increased depreciation, rent straight-lining charges) together with the cost of expansion initiatives, including the international expansion. consolidated Statement of changes in equity Share capital R’000 Share premium R’000 Foreign currency translation reserve R’000 Balance at 28 February 2011 Profit for the year Transactions with owners recorded in equity IFRS 2 share-based payment transaction Contributions by and distributions to owners of the Company Dividend paid to equity owners 346 – 21 378 – – – 393 – 58 509 26 808 80 626 26 808 – – – 395 – 395 – – – – (15 583) (15 583) Balance at 29 February 2012 Comprehensive income Profit for the year Foreign currency translation reserve Transactions with owners recorded in equity IFRS 2 share-based payment transaction Contributions by and distributions to owners of the Company Dividend paid to equity owners 346 21 378 – 788 69 734 92 246 – – – – 8 878 8 878 – – 13 – – 13 – – – 336 – 336 – – – – (14 025) (14 025) Balance at 28 February 2013 Comprehensive income Loss for the period Foreign currency translation reserve Transactions with owners recorded in equity IFRS 2 share-based payment transaction 346 21 378 13 1 124 64 587 87 448 During the prior year the Group expanded to Singapore where a company was registered. Per IFRS 8, the reporting of operating segments as part of the Group’s operations are now split between South Africa and Foreign. – – – – (1 175) (1 175) CHANGES TO THE BOARD – – (17) – – – Balance at 31 August 2013 346 21 378 Retained earnings R’000 Sharebased payment reserve R’000 Total R’000 Management’s efforts to reduce inventory levels as at the end of February, together with the improvement in profitability have resulted in positive cash generated from operations of R8,0 million (2012: R14,5 million cash utilised). To further increase and improve the level of new product development and introductions, as well as a strategy to expand internationally; additional staff and managers were appointed during the period, and further skills will be sought in the future. INTERIM DIVIDEND In light of the overall trading results for the six months ended 31 August 2013 the Board has considered it prudent not to declare a dividend. Dividend payments will be reconsidered in accordance with the existing pay-out policy on completion of the current financial year. BASIS OF PREPARATION These summarised financial statements have been prepared in accordance with the measurement and recognition requirements of IFRS, the presentation and disclosure requirements of IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council, the Listing Requirements of the JSE Limited and the Companies Act of South Africa. The accounting policies used to prepare this report are consistent with those used in the previous annual financial statements except for any new standards and interpretations that became effective. The adoption of these standards has had no material effect on the results for the period nor has it required the restatement of any prior year amounts. The summarised Group financial information has been presented on the historical cost basis, except for financial instruments and share based payments 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, Shaun Beecroft CA (SA). – (17) SEGMENTAL ANALYSIS There were no changes to the Board. 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. – (715) (4) 409 – 63 412 (715) 85 541 PROSPECTS Verimark is committed to further entrench its position as the leading innovator, improving operational efficiencies, increasing product development and management capability and expanding internationally. To mitigate the impact of a volatile currency, selling prices will regularly be adjusted to ensure gross margins are better aligned with the continuous increase in product costs over the previous two years. The focus on the operating efficiency and business performance initiatives remain priority and are expected to continue to bear fruit in the future. SEGMENTAL INFORMATION South Africa R’000 Revenue Loss before tax Loss after tax Segment assets Segment liabilities The volatility and devaluation of the Rand exchange rate resulted in a foreign exchange loss of R2,7 million being reported (2012: R1,7 million foreign exchange profit) in the current period. Together with the higher utilisation of overdraft facilities during the earlier part of the current reporting period, this resulted in higher finance expenses being reported. 194 728 (410) (410) 166 954 80 885 Foreign R’000 Group elimination R’000 Total R’000 563 (685) (726) 2 493 3 021 – (53) (39) (2 844) (2 844) 195 291 (1 148) (1 175) 166 603 81 062 Based on the actions noted above, the Board is confident that the medium- and long-term prospects of Verimark remain positive. The interim results for the period ended 31 August 2013 have not been reviewed or audited by the Group’s auditors. Statements regarding the future prospects of performance of the Group have not been reviewed or reported on by the Group’s auditors. On behalf of the Board MJ van Straaten Chief Executive Officer SR Beecroft Financial Director Johannesburg 10 October 2013 Verimark Holdings Limited Incorporated in the Republic of South Africa | Registration number: 1998/006957/06 | Share code: VMK | ISIN: ZAE000068011 | “Verimark” or “the Group” Directors: Dr JT Motlatsi (Chairman)*, MJ van Straaten (Chief Executive Officer), SR Beecroft (Financial Director), M Patel*, JM Pieterse* *Independent Non-Executive | Company Secretary: Premium Corporate Consulting Services Proprietary Limited Registered office: 50 Clairwood Avenue, Hoogland Ext 55, Randburg 2194 | Postal address: Verimark Holdings Limited, PO Box 78260, Sandton 2146 | E-mail address: investors@verimark.co.za Transfer secretaries: Computershare Investor Services Proprietary Limited | Auditors: KPMG Inc. | Sponsor: Grindrod Bank Limited

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