Flat, or veri good and get­ting bet­ter

Finweek English Edition - - Companies & markets - SHAUN HAR­RIS

THERE’S BEEN SOME firm­ing in the share price re­cently, but di­rect re­sponse and store re­tailer Ver­i­mark Hold­ings’ share price has ba­si­cally been flat lin­ing since Au­gust last year af­ter it put out a dras­tic profit warn­ing on de­clin­ing earn­ings. Be­low R2/share there may be po­ten­tial for in­vestors with a spec­u­la­tive bent, but they must de­cide: Is Ver­i­mark’s TV-cum-re­tail store model still vi­able; and more broadly are the days of di­rect TV mar­ket­ing gone for­ever?

That said, it looks like Ver­i­mark is adapt­ing its busi­ness model to pro­mote on­line shop­ping. It’s not sur­pris­ing as CEO Michael van Straaten closely ob­serves the US mar­ket for re­tail shop­ping trends. And he’s busy – when Fin­week first tried to con­tact him he was in a meet­ing with Bruce Fordyce. There will prob­a­bly be some­thing big around the Com­rades Marathon.

Ver­i­mark went through a bad patch last year when it couldn’t source the orig­i­nal and ex­cit­ing prod­ucts that, at the risk of be­ing la­belled sex­ist, ex­cite women and se­ri­ously over-ex­tend men’s credit cards.

But apart from what Van Straaten called this “un­usual dearth” of new prod­ucts to launch, he also ad­mit­ted he’d been a bit dis­tracted around the launch of Ver­i­mark on the JSE.

Which raises the con­cern, de­nied by Van Straaten, though he says it may have ap­plied ear­lier, that this busi­ness is very de­pen­dent on its CEO, also one of the ma­jor share­hold­ers. He did prom­ise, how­ever, that new prod­ucts would be com­ing through in the new fi­nan­cial year and that prof­itabil­ity would im­prove.

With a Fe­bru­ary year-end, Van Straaten must al­ready have a good idea of the num­bers and in­vestors will know in a few months’ time. A trad­ing state­ment has again been is­sued say­ing earn­ings im­proved over the first half, but late prod­uct launches and the weaker rand still kept a bit of a lid on prof­its.

If his word is good, next fi­nan­cial year should see Ver­i­mark start to re­turn to its 30-year record, so now could be a time to look at the share, at 186c/share way be­low its high for the year of 420c/share.

But is di­rect TV mar­ket­ing, though it only ac­counts for a frac­tion of sales but pulls con­sumers into the re­tail out­lets, still Ver­i­mark­able? We think it might be – the share’s spec­u­la­tive but promis­ing.

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