Verimark achieves revenue and gross profit growth
Issued by Aprio - Oct 12th 2017, 10:08
South Africa’s market-leading direct retail group, Verimark, has achieved positive revenue growth. The Group’s total revenue from continuing operations increased by 13.7% to R209.7 million (2016: R184.4 million).
Michael Van Straaten, Verimark’s CEO said, “The increase is mainly attributable to the price decreases, which occurred in March 2017 compared to the price increases in the prior year, higher advertising spend which resulted from the increased number of new products introduced, and additional stores made available by retail partners.”
Gross profit increased 10.6% to R88.6 million (2016: R80.2 million). This is lower than the 13.7% increase in revenue, which is attributed to price decreases and lower gross margins together with increased advertising costs following the introduction of several new products. These were 85.7% higher over the last six months, compared to the previous comparative period.
Operating costs increased by 12.1% to R87.7 million (2016: R78.2 million) and is directly correlated to the increase in revenue. Cost containment remains crucial, however, upfront costs are necessary to ensure future growth.
Profit before taxation decreased to R2.2 million (2016: R3.9 million). Profits are down in comparison to the prior year’s six months trading due to increased products introduced, which resulted in the higher advertising spend. Verimark, however, expects to reap the financial benefits of the introduction of new products in the months ahead.
“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, and store setup costs, which has positioned the company well to deliver an improved second half-year performance,” Van Straaten said.
Net finances 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, and for the new products introduced.
While the economic environment is expected to remain challenging, Verimark continues its focus on expanding its innovative product range. The company will also continue to grow its international division, which has been re-activated and re-focused.
“With South Africa’s recent ratings downgrade, business confidence continues to decline, resulting in lower consumer spend, which is affecting all consumer related retailers. We anticipate this trend to continue and will result in a tougher retail trading environment for the remainder of 2017. Verimark is, however, confident that the increase in the number of new products tested and introduced will have a positive effect on the company’s future growth and profitability,” Van Straaten concluded.
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