Verimark expects improved profits

Johannesburg - Verimark [JSE:VMK] says despite a tough retail environment due to a weaker consumer demand, higher interest rates and negligible economic growth in South Africa, the group expects improved profits for the financial year ended 28 February 2017.

As a result of the ongoing depreciation of the rand against the dollar in the prior financial year, it became necessary for Verimark to increase selling prices in mid-February 2016. Although these price increases were greater than the increases in the prior years, they still do not reflect the total depreciation of the rand against its import currencies over the last five and a half years.

As in the past, the price increases impacted negatively on sales and resulted in lower than expected sales growth. The subsequent strengthening of the rand to the dollar and other currencies in the 2017 financial year resulted in improved buying power of its imports.

The combination of the sales price increases and the strengthening of the rand resulted in an increase in gross profits. A major focus on reduction and containment of costs helped to produce favourable results. This was achieved through a renewed cost benefit analysis and elimination of wasteful expenditure.

The on-going improvement resulted in cost increase being contained to below inflationary levels.

Shareholders are advised that the board of directors of the company is reasonably certain that, when compared to the audited results for the year ended 28 February 2016 the Company will record a profit before taxation of between R33.7m and R41.2m, an increase of between 157% and 214% on the R13.1m for the comparative period.

Headline earnings per share is expected to be in the range of 22.1 cents and 27 cents per share being an increase of between 176% and 238% compared to the 8 cents for the comparative period.

The financial information on which this trading statement is based has not been reviewed and reported on by the company's external auditors. The Company`s financial results for the 2017 financial year are expected to be published on or about 23 May 2017.