Verimark delivers excellent growth performance
Issued by Aprio - May 23rd 2018, 08:36
South Africa’s market-leading direct retail group, Verimark, today announced that notwithstanding the challenging economic environment in South Africa, the company has delivered one of its best performances to date, as reflected by growth in sales and profitability for the year ended 28 February 2018.
Sales for the year increased by 15,7% to R508,1 million (2017: R439,1 million). The increase in the last six months of the financial year, compared to the same period in the previous year, was 17,2%. The number of new and innovative products introduced as well as the ranging and management of stock levels across most of Verimark’s retail partners were the main contributors to this increase.
The uncertain economic outlook increased rand volatility against foreign currencies. Although the rand strengthened by 10.1% between the beginning and end of Verimark’s 2018 financial year, the average exchange rate for the current year of R13.08, compared with the previous financial year’s R14.26, improved by only 8.2%.
The strengthening of the average rand/dollar exchange rate, effectively reversing the trend of previous years, enabled Verimark to not have to increase selling prices and even reduce certain product prices. This resulted in a positive impact on sales volumes.
“Another key component to our exceptional growth is the trust in and credibility of the Verimark brand as well as our sub-brands like Bauer, Floorwiz, Genesis, I-Play, Maxxus, Twista and Shogun. These brands were built and established over many years,” explained Michael van Straaten, Verimark’s CEO.
Verimark’s impressive growth to record levels confirms the Company’s business model and proven ability to continuously source and develop the latest, top quality innovations. These products are then marketed through television and other channels.
Profit before tax increased by 25.1% to R46,7 million (2017: R37,3 million). The significant increase in profits is a result of both the improved sales as well as strict cost containment throughout the business. During the financial year, the Company introduced eleven new Verimark Emporium Stores to further expand the servicing function as well as improve customer care reach across South Africa. While costs have been incurred, the anticipated financial benefits will only be seen in the coming financial years.
Verimark’s financial position is robust, being highly liquid with little debt as well as positive cash reserves. Improved stock management and stock optimisation at retail outlets, to avoid out-of-stock levels, have also assisted revenue growth.
Given the healthy state of Verimark’s financial position and its shares trading below net asset value, the Board utilised the general authority obtained at the annual general meeting held on 3 August 2017 and announced on 30 November 2017 that Verimark (Pty) Limited, a 100% owned subsidiary had bought back 3 389 640 ordinary shares which are held as treasury shares by the subsidiary company. On 3 January 2018, the Board used the same general authority and the Company repurchased a further 2 022 696 ordinary shares, which were subsequently cancelled and delisted, thereby reducing the number of issued shares to 112 249 632. The total number of treasury shares held by subsidiary companies are 10 741 499.
The South African economic environment remained challenging, exacerbated by an uncertain political environment over the past year. This all contributed to a recessionary environment with GDP declining 0.7% in the first quarter of 2017, impacting negatively on consumer confidence and resulting in lower spend in the retail market.
The challenges in the South African economy have, as usual, kept Verimark focused on its core business. Uncontrollable factors, like the change in South Africa’s political leadership, not being downgraded by Moody’s rating agency, also interest rate cuts of 25 basis points, were “positives”. But as in the past, there were also “negatives”, such as the recent 1% increase in the VAT rate.
“However,” said van Straaten, “Verimark decided not to transfer the VAT increase onto our valued customers, but rather absorbed the cost internally.”
Verimark has also reactivated its international market strategy, which will take some time to re-establish itself and produce satisfactory results. Verimark’s website (www.verimark.co.za) has been revamped and upgraded allowing the company to participate meaningfully in the e-commerce space. Additionally, this multipurpose offering will aid in establishing closer interactions with customers, while also ensuring that Verimark’s customer service remains at the highest level.
Training and development of staff is, and always will be, a key focus for the Company. Verimark has participated in youth employment for the last 41 years and will continue to assist in reducing the unemployment rate for youth and previously disadvantaged individuals. Verimark will pursue further learnerships and partnerships to ensure they can continue employing the best possible candidates and assist in ongoing career development.
Over the next financial year, the company will as always continue to focus on bringing the best innovation to the South African market as well as remain the number one direct response TV/retail selling company in the country.
“Verimark’s future is promising and we are well-positioned for future growth. Our new and established products and brands are gaining market share and we are assessing various growth and expansion possibilities both locally and internationally,” concluded van Straaten.
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