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Verimark earnings down 18%

May 28 2012 12:13
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Johannesburg - Direct response retailer Verimark Holdings [JSE:VMK] has reported an 18% decline in headline earnings per share to 25.8 cents a share for the year ended February 2012 from 31.5 cents a share last year as the sluggish economy and lacklustre consumer spending hampered the company's growth.

The final dividend was 10% lower at 13.5c a share.

The company said that after two years of ratcheting up record growth in sales of above 30% in 2010 and 2011 the group's rate of sales growth has begun to slow.

Turnover for the year to end February declined by 2.3% to R451m from last year's turnover of R462m and operating profit similarly declined by 15% to R42m from R49m.

CEO Mike van Straaten said it was expected that given the phenomenal growth in sales of 84% achieved over the last two years that the business would enter a consolidation phase.

"Although revenue was down by 2.3% the exceptional sales growth achieved in the past two years resulted in Verimark literally outgrowing its infrastructure which brought about huge pressure on the business and management team. The challenges related to the need to upgrade our infrastructure inevitably distracted from the focus required to grow sales and contain costs."

However Van Straaten said good progress has now been made in upgrading the company's infrastructure and Verimark is busy moving into a new custom-built double the size of the current facility warehouse/head office later this year.

Van Straaten noted that the weakening the Rand in the second half of the year also impacted the company's gross profit.

On the positive side he noted the pick up in sales noticed at the end of last year has continued into the current year.

"This and the new product introductions since the year end have allowed for positive growth to be recorded in the first two months of the current year. The anticipated improvement in sales and the realisation of better operation efficiencies and costs controls augur well for sustainable earnings growth for the company going forward" he said.

verimark holdings



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