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Executive overhaul aids Verimark profit

Oct 19 2010 14:57 Andile Makholwa

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Johannesburg – A complete executive overhaul coupled with the introduction of a range of innovative and new products aided Verimark [JSE:VMK] back into profitability, said the company's CEO Michael van Straaten on Tuesday.

Verimark is a specialist retailer which sources and distributes a range of products including houseware, exercise and fitness  offerings.

Delivering first-half results to end-August 2010, Van Straaten said Verimark has had 17 changes in senior management over the past three years. This has resulted in significant improvements in product ranges and other innovations.  

The results were a 56% rise in revenue to R200.7m, in line with the turnaround trend reported in the year to February 2010. Headline earnings per share were 9.8 cents, compared with a 10.1c loss in the previous corresponding period.

"The improvements we saw in the second half of our last financial year continued into the new year," said Van Straaten. "I'm very pleased we managed to bring the company back to its entrepreneurial spirit in such a very short space of time."

Boosting the performance was an increased and significant investment in television and print advertising as well as other promotional activities. This earned Verimark fourth place in a recent AC Nielsen survey on the largest TV advertisers in South Africa.  
Other improvements include a boost in prominence and trading space volume of Verimark-dedicated retail outlets and the opening of four new stores.

The company plans to open another 10 before Christmas to bring the chain to 76 direct outlets.    

No dividend declared

The company struggled during last year's recession. This prompted an unsuccessful attempt by Van Straaten - who controls the company through a family trust - to delist it from the JSE.

Verimark said despite the improvement in trading, the board considered it prudent not to declare a dividend because the company is entering its peak trading period when it will need cash to fund current growth.

However, the company's cash flow statement shows it is sitting with an overdraft of R16m, largely owing to a 69.9% rise in inventory.

Van Straaten said the sharp rise in inventory was sparked by unfolding growth, plus early stocking for the festive season.

He said he was confident that "Verimark is now fully back to its 33-year growth period", and anticipates a "great" Christmas in 2010.         
The Verimark share has grown from a low base of around 40c over the past 12 months to the current 127c, outperforming both the All-share and Top 40 indices.   

However, Van Straaten expects revenue growth and profitability to continue, albeit at a lower rate, and is confident that  strategic changes made will ensure sustainable improved trading levels.

 - Fin24

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