Verimark beats retail sector

2011-05-23 08:27

Johannesburg - Direct response retailer Verimark Holdings [JSE:VNK] on Monday reported a 154% leap in headline earnings per share to 31.5 cents for the year ended February 2011.

Turnover was up 32.8% on the previous year to R462m, with operating profit up 104% to R58m and profit before tax up 144% to R49m.

It's the second year running that Verimark has outperformed average retail sector sales by more than six times.

A 15 cents a share final dividend has been declared, which is in line with Verimark's current policy of paying 50% of profit attributable to ordinary shareholders back to shareholders in the form of a dividend.

Says Verimark CEO Mike Van Straaten: "We are very pleased with these results - especially considering that we have grown our revenues by a further 33% on top of the previous year's 38% increase in turnover. That's two phenomenal sales years in a row."

Van Straaten places much of the credit for Verimark's exceptional growth in sales to the dedication of his staff and his senior management team who have worked tirelessly and long hours to ensure that its innovative products hit the store shelves and have the right consumer appeal.

In the past three years the entire Verimark management team, with the exception of Van Straaten himself, has been changed. According to Van Straaten the new team is highly motivated and focused on continuing the company's growth in sales and profitability in line with its 34-year successful track record.

Verimark's strong performance is now receiving accolades from financial commentators across the country. Both the Business Times and McGregor BFA have recently rated Verimark as the fourth best performing share on the Johannesburg Stock Exchange across a range of criteria.

Van Straaten says the company's strong results were essentially driven by the surge in sales. This, he says, was brought about primarily by the sale of innovative new products, which complemented the company's existing product range, as well as the improved utilisation of Verimark's trading space at its many retail selling points.

This, in turn, boosted the company's gross profit line, which was also assisted by the rand strengthening somewhat against the US dollar.

At the same time expenses were up - by some 30.3% - as the company incurred higher costs on warehousing, distribution and advertising expenses as a result of its higher product sales volumes. Van Straaten admits that, under the circumstances, some expenses could have been controlled better but he says a new focus on expenses will allow for improved efficiencies in future.

Going forward Van Straaten feels confident that the momentum in Verimark's sales can be maintained - albeit it at a lower level than previously experienced.

"It would be unrealistic to expect that the phenomenal growth in sales we have experienced over the past two years can be maintained. Verimark's sales revenue over that period nearly doubled. While the growth in sales over the last six months of the previous financial year was beyond our expectations, sales in the first few months of the current financial year have returned to more realistic levels - although they still remain well ahead of those of the retail sector as a whole."

Another positive development is that many of Verimark's retail partners (Verimark pioneered the shop-within-a-shop trading concept in SA and now has free-standing units in the stores of all the major retail chains across the country) have indicated that, in the light of Verimark's current surge in sales, they would like to carry a broader range of Verimark products and some are considering increasing Verimark's in-store space allocation.

"This, in conjunction with a number of new Verimark stores scheduled for opening in the year ahead, together with a greater focus on expense control, should allow Verimark to continue growing sales ahead of those of the retail sector average," Van Straaten maintains.